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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] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined.):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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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 1997 Annual Meeting of
Stockholders, which will be held on Monday, October 27, 1997, 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,
/s/ Alan C. Greenberg
----------------------------
Alan C. Greenberg
Chairman of the Board
October 6, 1997
<PAGE>
THE BEAR STEARNS COMPANIES INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10167
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 27, 1997
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 27,
1997, 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 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 1998 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 amendments to 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 22, 1997, 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
/s/ Kenneth L. Edlow
------------------
Kenneth L. Edlow,
Secretary
October 6, 1997
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 27, 1997
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 1997 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 27, 1997, 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 October 6, 1997, to holders
of record on September 22, 1997, 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 1998 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 (as amended and restated as of January 22, 1997) (the "Capital
Accumulation Plan") as described herein; FOR the approval of amendments to 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>
The Board of Directors of the Company has determined to reduce the size
of the Company's Board from 37 members to nine members. Of the nine members,
only two will be members of the Company's management. Of the non-management
directors, six are incumbent directors and one is new to the Board. The decision
to streamline the Board was made in order to create a smaller body of
predominantly non-management directors. For a further discussion regarding the
change in the composition of the Board of Directors, see "Election of
Directors."
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
22, 1997, 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 22, 1997, 118,407,143 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 1998
performance goals under, and an amendment to, the Management Compensation Plan,
the approval of the amendments to the Capital Accumulation Plan and the approval
of the amendments to 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 of Common Stock, but only in the same proportion as the shares
represented by votes cast by all other record holders 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
2
<PAGE>
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.
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 2, 1997:
Percentage of
Name and address of Number of shares Outstanding
Beneficial Owner of Common Stock Common Stock
---------------- -------------
Mellon Bank Corporation (1) 6,362,000 5.4%
One Mellon Bank Center, Room 4340
Pittsburgh, PA 15258
- ----------------
(1) Mellon Bank Corporation's direct and indirect subsidiaries hold such
shares in various fiduciary capacities as trustee, agent or investment
advisor for client accounts.
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
2, 1997. 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.............. 27,757 (4) -- (4)
Denis A. Bovin..................... -- (4) 501,536 (4)
James E. Cayne (5)................. 3,796,208 3.21% 2,243,192 3.98%
Peter D. Cherasia.................. 61,300 (4) 399,158 (4)
Ralph R. Cioffi.................... 10,239 (4) 195,235 (4)
Barry J. Cohen..................... 127,546 (4) 244,049 (4)
Wendy L. de Monchaux............... -- (4) 328,476 (4)
Bruce E. Geismar (6)............... 97,508 (4) 181,079 (4)
Carl D. Glickman (7)............... 353,895 (4) -- (4)
Thomas R. Green.................... 58,591 (4) -- (4)
Alan C. Greenberg.................. 778,308 (4) 1,160,322 1.28%
Donald J. Harrington............... 242 (4) -- (4)
Richard Harriton................... 227,653 (4) 215,556 (4)
Daniel L. Keating (8).............. 161,795 (4) 160,904 (4)
Mark E. Lehman (9)................. 82,843 (4) 207,775 (4)
David A. Liebowitz................. 23,371 (4) 970,018 (4)
Bruce M. Lisman.................... 181,414 (4) 274,863 (4)
Roland N. Livney................... 10,218 (4) 291,107 (4)
William L. Mack.................... -- (4) -- (4)
Michael Minikes (10)............... 403,429 (4) 636,881 (4)
William J. Montgoris............... 302,159 (4) 289,335 (4)
Donald R. Mullen Jr................ 5,699 (4) 439,748 (4)
Frank T. Nickell................... 30,387 (4) -- (4)
Craig M. Overlander................ 8,225 (4) 412,938 (4)
Stephen E. Raphael................. 2,250 (4) 164,826 (4)
E. John Rosenwald Jr. (11)......... 281,175 (4) 6,025 (4)
Lewis A. Sachs..................... 2,189 (4) 295,638 (4)
Richard Sachs ..................... -- (4) 56,930 (4)
Frederic V. Salerno................ 365 (4) -- (4)
Alan D. Schwartz................... 876,171 (4) 1,420,800 1.52%
David M. Solomon................... 151 (4) 311,830 (4)
Warren J. Spector (12)............. 191,157 (4) 2,638,663 1.87%
Robert M. Steinberg (13)........... 1,299,470 1.10% 354,667 1.09%
Michael L. Tarnopol................ 842,947 (4) 603,512 (4)
Vincent Tese....................... -- (4) -- (4)
Michael J. Urfirer ................ -- (4) 517,182 (4)
Fred Wilpon........................ 1,214 (4) -- (4)
Uzi Zucker......................... 336,899 (4) 39,900 (4)
All directors, nominees and
executive officers as a
group (39 individuals)........... 10,584,310 8.94% 15,590,245 17.27%
(Footnotes on following page)
4
<PAGE>
<FN>
(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 13,009 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 the following number of
shares distributed on September 11, 1997 to the following persons:
Mr. Cayne - 47,602; Mr. Cherasia - 6,836; Mr. Cioffi - 9,817; Mr.
Cohen - 2,402; Mr. Geismar - 3,462; Mr. Greenberg - 28,308; Mr.
Harriton - 49,379; Mr. Keating - 4,911; Mr. Lehman - 4,001; Mr.
Lisman - 6,016; Mr. Livney - 8,258; Mr. Minikes - 10,628; Mr.
Montgoris - 6,406; Mr. Mullen - 5,699; Mr. Overlander - 5,986; Mr.
Rosenwald - 11,175; Mr. L. Sachs - 1,486; Mr. Schwartz - 28,735;
Mr. Spector - 39,561; Mr. Steinberg - 7,542; Mr. Tarnopol -
155,390; and Mr. Zucker - 4,531.
(4) Less than one percent.
(5) Does not include 41,424 shares of Common Stock owned by Mr.
Cayne's wife, as to which shares Mr. Cayne disclaims beneficial
ownership. Does not include 230,703 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 7,300
shares of Common Stock owned by a child of Mr. Cayne, as to which
shares Mr. Cayne disclaims beneficial ownership.
(6) Does not include 924 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 15,221 shares
of Common Stock.
(7) Does not include 3,109 shares of Common Stock owned by Mr.
Glickman's wife, as to which shares Mr. Glickman disclaims
beneficial ownership.
(8) Includes 1,962 shares of Common Stock held by Mr. Keating as
custodian for his children.
(9) Does not include 29,632 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 1,616 shares of Common Stock owned by Mr.
Minikes' wife, as to which shares Mr. Minikes disclaims beneficial
ownership.
(11) Does not include 970 shares of Common Stock owned by Mr.
Rosenwald's wife, as to which shares Mr. Rosenwald disclaims
beneficial ownership.
(12) Does not include 551 shares of Common Stock owned by Mr.
Spector's wife, as to which shares Mr. Spector disclaims
beneficial ownership.
(13) Does not include 70,394 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.
</FN>
</TABLE>
5
<PAGE>
I. ELECTION OF DIRECTORS
The Board of Directors is currently comprised of 37 directors. On September 22,
1997, the Board of Directors reduced the number of directors constituting the
entire Board of Directors to nine effective as of the date of the Annual
Meeting.
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 Mr. Mack.
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>
ELECTED TO
AGE AS OF SERVE AS
SEPTEMBER 15, PRINCIPAL OCCUPATION DIRECTOR OF
NAME 1997 AND DIRECTORSHIPS HELD THE COMPANY
- ---- ------ ---------------------- -----------
<S> <C> <C> <C>
James E. Cayne..................... 63 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)
Carl D. Glickman................... 71 Private Investor; In the United States, 1985
Director, 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.
Alan C. Greenberg.................. 70 Chairman of the Board of the 1985
Company and Bear Stearns and
Chairman of the Executive Committee
Donald J. Harrington............... 51 President, St. John's University; 1993
Director, The Reserve Fund, Reserve
Institutional Trust, Reserve Tax-
Exempt Trust, Reserve New York
Tax-Exempt Trust and Reserve Special
Portfolios Trust
6
<PAGE>
ELECTED TO
AGE AS OF SERVE AS
SEPTEMBER 15, PRINCIPAL OCCUPATION DIRECTOR OF
NAME 1997 AND DIRECTORSHIPS HELD THE COMPANY
- ---- ------ ---------------------- -----------
William L. Mack.................... 57 Senior Managing Partner, The Mack Nominee
Company; Founding Principal, Apollo
Real Estate Advisors, L.P.; General
Partner, The Apollo Real Estate
Investment Funds; Chairman of the
Board of Metropolis Realty Trust,
Inc.; Director, Koger Equity, Inc. and
Vail Resorts, Inc.
Frank T. Nickell................... 50 President, Kelso & Company; 1993
Director, Earle M. Jorgensen
Company and Peebles Inc.
Frederic V. Salerno................ 54 Senior Executive Vice President, 1992
CFO/Strategy and Director of Bell
Atlantic Corporation; Director, Avnet,
Inc., Orange & Rockland Utilities,
Inc. and Viacom, Inc.
Vincent Tese....................... 54 Chairman, Wireless Cable 1994
International Inc.; Director, Angram,
Inc., Cablevision International, Quintel
Entertainment Inc., Bowne & Co.,
Inc. and Allied Waste Industries Inc.
Fred Wilpon........................ 61 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
</TABLE>
7
<PAGE>
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. Glickman has been a private investor for more than the past five
years. Mr. Glickman is also currently Chairman of the Compensation Committee of
the Board of Directors of the Company.
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. John's University for
more than the past five years.
Mr. Mack has been Senior Managing Partner of The Mack Company
(a national owner, developer and investor in office and industrial buildings and
other real estate investments) for more than the past five years, and a Founding
Principal of Apollo Real Estate Advisors, L.P. (a manager of real estate
investment funds), the General Partner of the Apollo Real Estate Investment
Funds, since April 1993. Mr. Mack is also Chairman of the Board of Metropolis
Realty Trust, Inc. (the owner of high rise office buildings).
Mr. Nickell has been President of Kelso & Company, a privately held
merchant banking firm, for more than the past five years.
Mr. Salerno is the Senior Executive Vice President, CFO/Strategy of
Bell Atlantic Corporation ("Bell Atlantic"). Prior to the merger of NYNEX Corp.
("NYNEX") and Bell Atlantic, Mr. Salerno was the Vice Chairman of the Board of
NYNEX for more than the past five years.
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 and a 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. 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.
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.
8
<PAGE>
Over the years, the Company has encouraged employee participation in
the ultimate management and direction of the Company by nominating to the Board
of Directors those employees who have made significant contributions to the
Company. This employee participation has served the Company well as demonstrated
by continued growth in earnings and stockholder value but, with the growth of
the Company, has resulted in the Board of Directors increasing to 37 members in
fiscal year 1997. The Board of Directors has determined that continued increases
in the size of the Board would be inefficient. However, the Board believes that
employee participation in the management of the Company is important and intends
to continue employee participation in management, in part through service on the
Board of Directors of Bear Stearns, the Company's principal operating
subsidiary. By having such participation, the Board of Bear Stearns will be able
to serve the Company's Board in an advisory capacity, allowing the Board of the
Company to draw upon the vast knowledge and expertise of the subsidiary's Board.
Accordingly, the Company intends, following the Annual Meeting, to elect to the
Board of Directors of Bear Stearns the following individuals (all of whom are
Senior Managing Directors of Bear Stearns and hold such other positions and are
responsible for such areas of the Company's operations as are indicated):
<TABLE>
<S> <C>
Alan C. Greenberg - Chairman of the Board David A. Liebowitz - Convertible Securities
James E. Cayne - President and Chief Executive Officer Bruce M. Lisman - Institutional Equities
Mark E. Lehman - Executive Vice President Roland N. Livney - Fixed Income Sales
Alan D. Schwartz - Executive Vice President Jeffrey Mayer - Mortgages
Warren J. Spector - Executive Vice President Gary M. McLoughlin - Government Bonds
Michael Minikes - Treasurer Donald R. Mullen Jr. - High Yield
Samuel L. Molinaro Jr. - Senior Vice President-Finance Fares D. Noujaim - Debt Capital Markets
and Chief Financial Officer Craig M. Overlander - Fixed Income Sales
William J. Montgoris-Chief Operating Officer Stephen E. Raphael - Private Client Services
Pierce J. Roberts Jr. - Investment Banking
Denis A. Bovin - Investment Banking E. John Rosenwald Jr. - Investment Banking
Peter D. Cherasia - Financial Analytics and Lewis A. Sachs - Global Debt Capital Markets
Structural Transactions Richard B. Sachs - Private Client Services
Ralph R. Cioffi - Fixed Income Sales David M. Solomon - Investment Banking
Barry J. Cohen - Risk Arbitrage Robert M. Steinberg - Equities
Wendy L. de Monchaux - Derivatives Donald W. Tang - Asia Pacific
Bruce E. Geismar - Operations Michael L. Tarnopol - Investment Banking
Richard Harriton - President of BSSC Michael J. Urfirer - Investment Banking
Daniel L. Keating - Municipal Bond and Public Finance Eli Wachtel - Strategic Structuring and Transactions
John Knight - Bear, Stearns International Limited Michael Winchell - Risk Management
Curtis S. Lane - Investment Banking Uzi Zucker - Investment Banking
</TABLE>
The interests of these individuals are aligned with stockholder
interests through the ownership of 27,554,284 shares of Common Stock and CAP
Units combined, representing approximately 18.2% of the Company's Common Stock
and CAP Units combined.
9
<PAGE>
BOARD AND COMMITTEE MEETINGS
The Board of Directors held six 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 Ms. de Monchaux and Messrs. Overlander,
Rosenwald, Schwartz and Tarnopol 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, Schwartz and Spector, who also currently constitute five of the six
members of the Board of Directors of Bear Stearns. It meets once each week and
more frequently as required and held 51 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 Messrs. Bewkes, Green, Salerno, Tese (Chairman)
and Wilpon. The Audit Committee also included Grace J. Fippinger until her
untimely passing in January 1997. 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 six
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, Nickell and Tese. The Compensation Committee also
included John W. Kluge until his resignation from the Board of Directors on
September 5, 1997. 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 administers 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 certain aspects of the Capital
Accumulation Plan. The Compensation Committee held seven meetings during the
preceding fiscal year.
Management and Compensation Committee. The Management and Compensation
-------------------------------------
Committee of the Board of Directors consists of Messrs. Cayne (Chairman),
Harriton, Lisman, Montgoris, Mullen, Schwartz, Spector and Steinberg. 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 60 meetings during the preceding fiscal
year.
The Board of Directors does not have a nominating committee.
10
<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, and the salary
and bonus compensation of certain other executive officers is determined by the
operation of the Performance Compensation Plan, which plans have been adopted
and are administered by the Compensation Committee and have been approved by the
stockholders. The fiscal year 1997 salaries and bonuses of employee directors
and other executive officers, to the extent not determined by the Management
Compensation Plan or the Performance 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,
and the Performance Compensation Plan, which was adopted in 1996, are 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 which 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). 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 receive a base salary of
$200,000 per annum and a share of a performance-based bonus fund.
The Company's compensation practice with respect to other executive
officers and Senior Managing Directors has been designed to link individual
compensation with performance. Accordingly, the base salary of other 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.
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 alignment of
management and stockholder interests, by increasing management employee
ownership of the Company's Common Stock. During fiscal year 1997, 95% of the
more than 300 Senior Managing Directors participated in the Capital Accumulation
Plan, and all employee directors and executive officers of the Company
participated.
11
<PAGE>
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, Dean Witter, Discover &
Co., 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 OMITTED (1)]
<TABLE>
<CAPTION>
June 30,
----------------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
The Bear Stearns Companies Inc. 48.8% 38.7% 21.6% 43.5% 46.0%
Peer Group(1) 33.4% 26.9% 9.8% 37.5% 32.8%
<FN>
(1) As a result of the merger of Morgan Stanley Group Inc. and Dean Witter,
Discover & Co. in June 1997, the pre-tax return on equity for the
twelve months ended June 30, 1997 is based on the results of Morgan
Stanley, Dean Witter, Discover & Co. and all prior periods only
included the results of Morgan Stanley Group Inc.
</FN>
</TABLE>
12
<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 1997 was 46.3%, resulting in
a bonus fund of $76,122,000. If the Company's fiscal year 1997 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 1996 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 1996.
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.
PERFORMANCE COMPENSATION PLAN
The Compensation Committee also administers the Performance
Compensation Plan. All of the Company's 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 to participate in the Performance
Compensation Plan by the Compensation Committee within 90 days after the
beginning of each fiscal year (the "Designated Executives") is determined by the
Performance Compensation Plan. Under the Performance Compensation Plan, each of
the Designated Executives receives a base salary of $200,000 per annum and
shares in a performance-based bonus fund. For each fiscal year, the formula for
calculating the bonus fund is determined by the Compensation Committee based
upon one or more of the following criteria, individually or in combination,
adjusted in such manner as the Compensation 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
13
<PAGE>
stockholders. The Compensation Committee has adopted amendments to the
Performance Compensation Plan relating to participation in such Plan to be
effective commencing in fiscal year 1998, subject to approval of stockholders at
the 1997 Annual Meeting. See "Approval of Amendments to the Performance
Compensation Plan."
The share of the bonus fund to be allocated to each Designated
Executive in any fiscal year is determined by the Compensation Committee, based
upon the recommendation of the Management and Compensation Committee, which may
allocate up to 100% of the entire bonus fund in any fiscal year. The
Compensation Committee, in its sole discretion, may determine that the amount of
the bonus of any participant be below that which is otherwise allocable under
the bonus fund. The maximum bonus that may be allocated to a participant in any
fiscal year is $12 million.
For fiscal year 1997 the Compensation Committee selected four executive
officers of the Company as Designated Executives. The Committee also established
a formula for calculating the bonus fund for fiscal year 1997 and the share for
each Designated Executive based upon a combination of factors including
departmental pre-tax profits and the "Adjusted Pre-Tax Return on Equity" of the
Company (which term has essentially the same meaning as under the Management
Compensation Plan). The total bonus fund resulting from the application of the
formula for fiscal year 1997 was $34,958,000 of which the Compensation
Committee, based on the recommendation of the Management and Compensation
Committee, determined that bonuses aggregating $16,800,000 would be paid to the
Designated Executives.
The Compensation Committee has concluded that the Performance
Compensation Plan 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 Designated Executives.
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 and the
Performance Compensation Plan have been established and maintained 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 1997 Mr. Cayne received a base salary of
$200,000 and shared in a bonus fund based on the Company's fiscal year 1997 ROE.
Mr. Cayne's share of the fiscal year 1997 bonus fund (as well as that of the
other members of the Executive Committee) was determined by the Compensation
Committee in September 1996, 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 1996.
Mr. Cayne's total salary and bonus compensation increased by 13.7% from
fiscal 1996, which reflect both the Company's improved financial performance and
the allocation of the bonus fund. Of the total fiscal year 1997 compensation of
Mr. Cayne, approximately 48.1% 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.
14
<PAGE>
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 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 8.84% of the outstanding Common Stock
and CAP Units combined while all directors, nominees and executive officers as a
group beneficially own approximately 17.27% of the outstanding Common Stock and
CAP Units combined as of September 2, 1997.
The Capital Accumulation Plan has been and will continue to be a major
contributor to equity ownership by senior executives. During fiscal year 1997,
95% of the more than 300 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 1995, 1996 and 1997 participants
in the Capital Accumulation Plan have deferred a total of approximately
$403,300,000 in compensation. Furthermore, for fiscal year 1997, 48.9% 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 44.1% of such compensation was
deferred by all executive officers and employee directors. 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. At June 30, 1997,
participants held 33,968,056 CAP Units which represented 22.41% of the
outstanding Common Stock and CAP Units combined. 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
Frank T. Nickell
Vincent Tese
o o o
15
<PAGE>
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, 1997:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
Long-Term
Compensation
Annual Compensation Awards
-------------------- ------
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............... 1997 $200,000 $10,175,750 $9,616,250 $3,223,209
CEO and President 1996 200,000 8,972,750 8,413,250 2,060,125
1995 200,000 4,030,066 3,470,827 770,630
Alan C. Greenberg............ 1997 200,000 14,132,375 4,707,625 1,685,120
Chairman of the Board 1996 200,000 13,039,500 4,346,500 1,080,728
1995 200,000 5,627,980 1,872,913 401,924
Alan D. Schwartz............. 1997 200,000 8,002,250 7,412,750 1,981,791
Executive Vice President 1996 200,000 6,693,666 6,117,334 1,200,713
1995 200,000 2,332,229 1,772,990 460,603
Warren J. Spector............ 1997 200,000 4,204,500 14,635,500 3,523,924
Executive Vice President 1996 200,000 4,194,750 12,276,250 2,093,489
1995 200,000 3,725,976 3,166,737 813,143
Mark E. Lehman............... 1997 200,000 1,892,500 1,342,500 278,866
Executive Vice President 1996 200,000 1,647,500 1,097,500 152,710
1995 200,000 815,000 385,000 49,595
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.
<FN>
(1) REPRESENTS THE PORTION OF THE NAMED EXECUTIVE OFFICER'S BONUS 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, 1997, THE FOLLOWING NUMBER OF CAP UNITS WERE CREDITED TO SUCH
PERSONS' CAPITAL ACCUMULATION ACCOUNTS AS A RESULT OF THEIR FISCAL YEAR
1997 DEFERRALS: MR. CAYNE - 270,241; MR. GREENBERG - 132,296; MR.
SCHWARTZ - 208,317; MR. SPECTOR - 411,295; AND MR. LEHMAN - 37,727.
(2) AS OF JUNE 30, 1997, 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 - $78,316,519 (2,290,794 UNITS); MR. GREENBERG - $40,636,288
(1,188,630 UNITS); MR. SCHWARTZ - $49,556,012 (1,449,536 UNITS); MR.
SPECTOR - $91,561,783 (2,678,224 UNITS); AND MR.
LEHMAN - $7,240,092 (211,776 UNITS).
(3) REPRESENTS PREFERENTIAL EARNINGS PAID ON, AND IN THE FORM OF, CAP UNITS
PURSUANT TO THE CAPITAL ACCUMULATION PLAN IN EXCESS OF THE AMOUNTS OF
CASH DIVIDENDS PAID ON SHARES OF COMMON STOCK. FOR A DESCRIPTION OF THE
CAPITAL ACCUMULATION PLAN, SEE "APPROVAL OF AMENDMENTS TO THE CAPITAL
ACCUMULATION PLAN."
</FN>
</TABLE>
16
<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, Dean
Witter, Discover & Co., 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, 1992 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 OMITTED (2)]
<TABLE>
<CAPTION>
Assumes $100 invested on June 30, 1992
in the Company's Common Stock, S&P 500
Index, S&P Financial Miscellaneous
Index and Peer Group
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
The Bear Stearns Companies Inc. 100 155 127 173 206 320
S & P 500 Index 100 114 115 145 183 247
S & P Financial Miscellaneous Index 100 145 143 179 238 354
Peer Group (1) 100 145 136 181 224 368
<FN>
(1) Peer group calculation assumes conversion of Morgan Stanley Group Inc.
shares into newly formed company, Morgan Stanley, Dean Witter,
Discovery & Co., in June 1997.
</FN>
</TABLE>
17
<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
CERTAIN 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, 1997, the
maximum aggregate amount of month-end loans against commissions and other
compensation was approximately $6,928,983.
The Company has formed a limited partnership, The BSC Employee Fund,
L.P. (the "Fund"), which provides a unique investment opportunity for the
Company's Senior Managing and Managing Directors. The Fund has committed to
invest $53,000,000 in a diversified group of closed-end acquisitions and
leverage buyout funds which are managed by highly regarded private equity firms.
As of June 30, 1997, 337 participants in the Fund have purchased a total of
1,202 limited partnership interests. Each limited partnership interest
represents a commitment by the participant to invest $50,000 of which $25,000 is
funded by the participant and $25,000 is in the form of a non-recourse,
interest-bearing loan from the Company to the participant of the Fund. The loans
bear interest at the London Interbank Offering Rate plus 1.0%. The initial
capital call took place on June 12, 1997 for approximately 30% of each
participant's equity commitment. The total amount loaned to the participants of
the Fund at June 30, 1997 was $10,940,604. At such date, loans in excess of
$60,000 were outstanding to the following directors or officers in the aggregate
dollar amount set forth after each of their respective names: Dennis A. Bovin
($182,040), James E. Cayne ($182,040), Barry J. Cohen ($72,816), Donald R.
Mullen Jr. ($182,040), Alan D. Schwartz ($182,040), David M. Solomon ($182,040),
Warren J. Spector ($728,160), Robert M. Steinberg ($91,020), Michael J. Urfirer
($182,040), and Kenneth L. Edlow ($364,080). The aggregate amount of the loans
outstanding to all directors and executive officers as a group on such date was
$2,694,192.
18
<PAGE>
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.
Sterling BSC Inc. ("Sterling BSC") and Hines Interests Limited
Partnership ("Hines"), as a joint venture (the "Joint Venture"), are acting as a
consultant to the Company on certain real estate matters. In December 1996, the
Company paid the Joint Venture $225,000 for consulting services provided to the
Company. Fred Wilpon, a director of the Company, is Chairman of Sterling BSC and
the owner of a substantial portion of the outstanding common stock of Sterling
BSC, which has a majority interest in the Joint Venture.
Bear Stearns served as underwriter in several debt and equity offerings
by Universal Outdoor in calendar year 1996 and in connection therewith was paid
an aggregate of approximately $8.8 million. Such amount represented more than
10% of Universal Outdoor's gross revenues for the fiscal year ended December 31,
1996. As of August 15, 1997, KIA V and KEP V owned an aggregate of 2,999,650
shares of common stock of Universal Outdoor (representing approximately 12.4% of
Universal Outdoor's outstanding shares). By virtue of his status as one of the
general partners of the general partner of KIA V and one of the general partners
of KEP V, Frank T. Nickell, a director of the Company, may be deemed to have
beneficial ownership of the shares owned by KIA V and KEP V. In addition, as of
August 15, 1997, Mr. Nickell directly owned 135,229 shares of Universal Outdoor
common stock (representing approximately .6% of Universal Outdoor's total
outstanding shares). On August 21, 1997, KIA V, KEP V and Mr. Nickell sold their
interests in Universal Outdoor.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's Compensation Committee are Messrs.
Glickman, Harrington, Nickell and Tese, none of whom is or has been an officer
or employee of the Company. Except as noted below, there were no "Compensation
Committee Interlocks" during fiscal year 1997.
As noted above, in 1996 Bear Stearns served as underwriter in several
debt and equity offerings by Universal Outdoor a company in which Mr. Nickell
may be deemed to have had a beneficial interest, and in connection therewith
Bear Stearns was paid an aggregate of approximately $8.8 million. See "Certain
Transactions."
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 1997 fiscal year all Section 16(a) filing requirements were
complied with, except that one report for one transaction was filed late by E.
John Rosenwald Jr.
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II. APPROVAL OF THE FISCAL YEAR 1998 PERFORMANCE GOALS UNDER, AND AN
AMENDMENT TO, THE MANAGEMENT COMPENSATION PLAN
The Board of Directors proposes that the stockholders approve the
fiscal year 1998 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 1998 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 1998 PERFORMANCE GOALS
The salary and bonus compensation of the CEO and other members of the
Executive Committee is determined by the Management Compensation Plan. Under the
Management Compensation Plan, each of the members of the Executive Committee
will receive a base salary of $200,000 per annum and will share in a bonus fund
established pursuant to the Management Compensation Plan.
On September 10, 1997, the Compensation Committee established a new
formula for computing the bonus fund for fiscal 1998, 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 1998 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 6.655% of
Adjusted Annual Pre-Tax Income when the Company's fiscal year 1998 ROE exceeds
30%. In fiscal year 1997, the bonus fund ranged up to a maximum of 7.258% of
Adjusted Annual Pre-Tax Income when the Company's fiscal year 1997 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 1998 from that in effect for fiscal year 1997 is that the Company
must generate more Adjusted Annual Pre-Tax Income in fiscal year 1998 than in
the previous year in order to produce the same bonus fund as in fiscal year
1997. However, if the Company generates the same level of ROE in fiscal year
1998 as it did in fiscal year 1997, the bonus fund would increase in fiscal year
1998 over the bonus fund in fiscal year 1997. 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 1998 was revised to further reduce the
bonus fund at lower levels of ROE.
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.
20
<PAGE>
Since the amounts payable under the Management Compensation Plan will
be based on future performance, such amounts are not determinable at the present
time. However, the following table reflects the amounts that would have been
paid for the fiscal year ended June 30, 1997 if the fiscal year 1998 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................................ 18,048,039
Alan C. Greenberg,
Chairman of the Board............................. 17,180,345
Warren J. Spector,
Executive Vice President.......................... 17,180,345
Alan D. Schwartz
Executive Vice President.......................... 14,056,645
Mark E. Lehman
Executive Vice President......................... 2,950,160
Executive Group..................................... 69,415,534
Non-Executive Director Group........................ 0
Other Employee Group(3)............................. 0
- -------------------------
(1) This calculation (i) utilizes the fiscal year 1997 Adjusted Annual
Pre-Tax Income and the Consolidated Common Stockholders' Equity as of
June 30, 1997, 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 1997.
(2) Includes amounts that would have been deferred pursuant to the Capital
Accumulation Plan. See "Summary Compensation Table."
(3) Excluding those employees included in the categories entitled
"Executive Group" and "Non-executive Director Group."
PROPOSED AMENDMENT
On September 18, 1997, the Compensation Committee adopted an amendment to the
Management Compensation Plan, subject to stockholder approval at the 1997 Annual
Meeting, which would clarify the eligibility requirements for participation in
the Management Compensation Plan. The definition of "Participants" would be
changed from the voting members of the Executive Committee of the Board of
Directors to the voting members of the Executive Committee of the Company. It is
currently contemplated that in connection with the change in the composition of
the Board of Directors of the Company (discussed above) the Executive Committee
will include individuals who are not members of the Board of Directors.
Therefore, the Executive Committee would no longer be a committee of the Board
of Directors. The amendment will be effective upon the formation of the new
Executive Committee. It is presently contemplated that the members of the new
Executive Committee initially will be the current members of the Executive
Committee of the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
PERFORMANCE STANDARDS CONTAINED IN, AND AMENDMENT TO, THE MANAGEMENT
COMPENSATION PLAN.
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III. APPROVAL OF 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 January
18, 1996 and approved by stockholders on October 28, 1996, as reflected in the
Exhibits to the Company's Annual Report on Form 10-K for fiscal year 1996.
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, the duration of the Capital Accumulation Plan is extended, thereby
permitting existing Participants to defer compensation for an additional fiscal
year or years.
All of the Senior Managing Directors (including employee directors and
executive officers of the Company) are eligible to participate in the Capital
Accumulation Plan. During fiscal year 1997, 95% of the more than 300 Senior
Managing Directors participated in the Capital Accumulation Plan, including all
of the employee directors and executive officers. 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 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
22
<PAGE>
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 and the Compensation Committee designated such shares for such use under
the Capital Accumulation Plan, it will credit at the end of each fiscal quarter
a number of CAP Units corresponding to such shares. 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 the Participant's 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 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.
23
<PAGE>
AMENDMENTS TO PLAN
The text of the proposed amendments (marked to show changes from the
provisions of the Capital Accumulation Plan prior to the amendments where
applicable) is set forth in Annex A hereto. The descriptions of the amendments
are qualified in their entirety by reference to Annex A.
I. The following amendments to the Capital Accumulation Plan were approved by
the Compensation Committee on January 22, 1997, effective December 1, 1996,
subject to stockholder approval at the 1997 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, 1996.
1. Special Elections. The Deferral Periods for compensation deferred
-----------------
under the Capital Accumulation Plan generally is five years after the end of the
fiscal year for which the compensation was payable to the Participant. Although
the Plan already contained provisions whereby Participants could extend the
Deferral Period and continue to obtain the benefits of the Plan for compensation
previously deferred, the ability to extend the Deferral Period beyond five years
contained various limitations. In order to provide flexibility to the
Appropriate Committee, a new Section 4.6 was added to the Plan granting the
Appropriate Committee the right, in its sole discretion, to permit a Participant
to execute and file a Special Plan Election in form provided by the Company,
electing to extend the Deferral Period previously selected with respect to any
Required Deferral Amount and/or Additional Deferral Amount for such periods and
in such proportions as shall be determined by the Appropriate Committee. The
Deferral Period being extended must terminate no earlier than the end of the
fiscal year following the fiscal year in which the Special Plan Election is
made, except that any election with respect to the Deferral Period ending on
June 30, 1997 was required to be made on or before December 31, 1996. The
amendment also provides that the Earnings Adjustment with respect to each Plan
Year in any Additional Deferral Period would be calculated in accordance with
the provisions of Section 5.4 of the Plan applicable to Participants who elected
to defer any Required Deferral Amount for more than five fiscal years.
In connection with the foregoing amendment, a definition of "Special
Plan Election" was added to the Plan and the definition of "Deferral Period" was
amended to include the Additional Deferral Period referred to in new Section
4.6.
2. Disability/Termination of Employment. Section 6.2(b) of the Capital
------------------------------------
Accumulation Plan had provided that if a Participant suffered a Disability, he
would be treated in the same manner as a Participant whose employment had
terminated other than by reason of Disability. In such event, unless the
Appropriate Committee exercises its discretion 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, the Participant would
remain subject to the Capital Accumulation Plan, but in lieu of an Earnings
Adjustment would receive credits to his or her Capital Accumulation Account
based on 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). In order to provide
greater flexibility to the Appropriate Committee for a Participant who suffers a
Disability, subparagraph (i) of section 6.2(b) of the Plan was amended to permit
the Appropriate Committee, in its sole discretion, to treat a Participant who
has suffered a Disability as (a) a participant in all respects under the Plan as
if his or her employment had not terminated, (b) as a Participant entitled to
continue to receive Earnings Adjustments on Cap Units but not entitled to make
deferrals of compensation under the Plan, or (c) as a Participant whose
employment had terminated, and at any time to change from one such alternative
to another.
In connection with the foregoing amendment, the definition of
"Disability" was amended by deleting the provision that would treat Disability
as an event resulting in a deemed termination of employment of a Participant for
purposes of the Plan.
3. Managing Director Emeritus. Section 6.2(b)(i) of the Plan had
--------------------------
provided discretion to the Appropriate Committee to treat a Participant whose
employment had terminated but who had become a Special Associate Director as if
his or her employment had not terminated, as a result of which such Participant
would continue to be treated in all respects as a Participant under the Plan. In
order to provide greater flexibility to the Appropriate Committee as to
Participants who had become Special Associate Directors, Section 6.2(b) and
Section
24
<PAGE>
6.2(b)(i) were amended to permit the Appropriate Committee to treat such
Participants in any of the ways permitted for Participants who had suffered a
Disability as described in Paragraph 2 above. In addition, since the designation
of "Special Associate Director" had been changed to "Managing Director
Emeritus," all references in the Plan to "Special Associate Director" were
appropriately amended.
II. The following amendments to the Capital Accumulation Plan were approved by
the Compensation Committee on September 10, 1997, effective July 1, 1997,
subject to stockholder approval at the 1997 Annual Meeting.
Application of Cash Balances; Available Shares. As noted under
----------------------------------------------
"General" above, when insufficient shares of Common Stock have been purchased
for the Plan during a specified period, the amount of compensation for which no
Cap Units were credited will be credited instead to a "Cash Balance Account."
The provisions of Section 5.3 of the Plan and the definition of "Available
Shares" have been interpreted to require that shares purchased thereafter be
credited to the Capital Accumulation Account of the Participant at the end of
the fiscal quarter in which the shares were purchased at the Average Cost Per
Share during such quarterly period. The amendments to both Section 5.3 of the
Plan and the definition of "Available Shares" have been adopted in order to
provide flexibility to the Compensation Committee in designating the period for
which shares are purchased and the period as to which the Average Price Per
Share is calculated (for example, an annual period rather than a quarterly
period).
THE FOREGOING AMENDMENTS DISCUSSED UNDER SECTIONS I AND II ABOVE WOULD
NOT HAVE PROVIDED DETERMINABLE BENEFITS TO PARTICIPANTS IF THEY HAD BEEN IN
EFFECT FOR THE ENTIRE FISCAL YEAR 1997, AND THE AMOUNT OF BENEFITS IN FUTURE
YEARS, IF ANY, ARE NOT DETERMINABLE AT THE PRESENT TIME.
III. The following amendments to the Capital Accumulation Plan were approved by
the Compensation Committee on September 10, 1997, effective July 1, 1997,
subject to stockholder approval at the 1997 Annual Meeting.
Net Earnings Adjustment; Book Value Adjustment. As noted above under
----------------------------------------------
"General," each CAP Unit credited to a Participant's Capital Accumulation
Account entitles the Participant to receive, on an annual basis, a Net Earnings
Adjustment generally equal to the Company's pre-tax earnings per share for such
fiscal year, after adjustments that include a reduction for changes in the
Company's Adjusted Book Value Per Share during such year resulting from
increases in the Company's retained earnings attributable to net income. The Net
Earnings Adjustment generally is credited to the Participant's Capital
Accumulation Account in the form of additional CAP Units. The Book Value
Adjustment as presently calculated is based on a formula which reflects the
percentage change in Book Value Per Share during the applicable fiscal year and
applies such percentage change as a reduction of CAP Units outstanding at the
end of the period. The current formula results in a Book Value Adjustment in CAP
Units which are valued at the Average Cost Per Share of Available Shares for
purposes of the Net Earnings Adjustment. In practice, the effect of calculating
the Book Value Adjustment as a reduction in CAP Units in the above manner was to
reduce disproportionately the amounts that would otherwise be payable on CAP
Units whenever the Average Cost Per Share was at a multiple of book value in
excess of one. Accordingly, at certain price multiples of book value, the
Participants would receive no benefit from the Net Earnings Adjustment under the
Capital Accumulation Plan which would disadvantage the Participants in relation
to the Company's common stockholders. In order to correct this situation,
Sections 5.4(g), 5.5 and 5.10(a) relating to the Book Value Adjustment and the
New Earnings Adjustment have been amended to reflect the dollar change in
Adjusted Book Value Per Share rather than the percentage change. As a result of
the proposed amendments, the Book Value Adjustment will appropriately capture
increases in retained earnings attributable to net income and accomplish its
intended affect which was to prevent the Capital Accumulation Plan from diluting
the interests of common stockholders.
25
<PAGE>
Since the benefits under the Capital Accumulation Plan resulting from
the amendments discussed in this Section III are based upon future performance,
such benefits are not determinable at the present time. However, the following
table reflects the amounts (i) that would have been credited to Participants for
the fiscal year ended June 30, 1997 had the amendments to the Net Earnings
Adjustment and the Book Value Adjustment been in effect for such year, and (ii)
that were actually credited to Participants for the fiscal year ended June 30,
1997 as Net Earnings Adjustments.
CAPITAL ACCUMULATION PLAN
NAME AND POSITION DOLLARVALUE ($)
- ----------------- ---------------
AS AMENDED(1) ACTUAL(1)
---------- ---------
James E. Cayne, 5,315,887 3,223,209
CEO and President....................
Alan C. Greenberg,
Chairman of the Board................ 2,779,112 1,685,120
Warren J. Spector,
Executive Vice President............. 5,957,664 3,523,924
Alan D. Schwartz,
Executive Vice President............. 3,265,340 1,981,791
Mark E. Lehman,
Executive Vice President............. 457,775 278,866
Executive Group.......................... 18,513,693 11,141,314
Non-Executive Director Group(2).......... -0- -0-
Other Employee Group(3).................. 48,017,140 29,789,287
(1) The amounts include the value of the preferential earnings credited as
CAP Units under the Capital Accumulation Plan, but do not include the
dividend equivalents on the related CAP Units. Dividend equivalents
paid were the following amounts: Cayne ($1,074,021); Greenberg
($561,492); Spector ($1,206,979); Schwartz ($659,729); Lehman
($92,488); Executive Group ($3,743,797); and Other Employee Group
($10,096,010). See "Compensation Tables And Other Information - Summary
Compensation Table - All Other Compensation."
(2) Gives effect to election of directors at this Annual Meeting.
(3) Excluding those employees included in the categories entitled
"Executive Group" and "Non-executive Director Group."
The Company believes that the Capital Accumulation Plan is an important
element in aligning the interests of management with those of the Company's
stockholders. The amendments previously discussed will permit the Capital
Accumulation Plan to function properly. While the amount of benefit provided for
under the Capital Accumulation Plan, as amended, will increase in certain
circumstances, the Capital Accumulation Plan will not result in any substantial
dilution to either earnings per share or book value per common share.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENTS TO THE CAPITAL ACCUMULATION PLAN.
26
<PAGE>
IV. APPROVAL OF AMENDMENTS TO THE PERFORMANCE COMPENSATION PLAN
GENERAL
The Performance Compensation Plan was adopted by the Compensation
Committee on September 10, 1996 and was approved by stockholders at the 1996
Annual Meeting.
The Performance Compensation Plan is effective as of July 1, 1996 and
is applicable for the five fiscal years of the Company ending June 30, 2001. All
of the Company's executive officers (other than the voting members of the
Company's Executive Committee) presently are eligible to participate in the
Performance Compensation Plan. The Company presently has seven executive
officers. The total compensation of those executive officers of the Company
designated to participate in the Performance Compensation Plan by the
Compensation Committee within 90 days following the beginning of each fiscal
year (the "Designated Executives") is determined in all material respects by the
Performance Compensation Plan. Under the Performance Compensation Plan, each of
the Designated Executives receives a base salary of $200,000 per annum, and
shares in a performance-based bonus fund. For each fiscal year, the formula for
calculating the bonus fund is 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 is determined by the Compensation Committee, based
upon the recommendation of the Management and 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.
PROPOSED AMENDMENTS TO PLAN
On September 10, 1997, the Compensation Committee adopted amendments to
the Performance Compensation Plan to be effective in fiscal year 1998, subject
to approval of stockholders at the 1997 Annual Meeting.
The proposed amendments to the Performance Compensation Plan would
change the eligibility requirements for participation in the Performance
Compensation Plan from the Company's executive officers (other than voting
members of the Company's Executive Committee) to all Senior Managing Directors
of Bear Stearns (other than participants in the Management Compensation Plan).
Bear Stearns currently has approximately 300 Senior Managing Directors. The
amendments to the Performance Compensation Plan 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 for Senior Managing
Directors who may become executive officers covered by Section 162(m) in the
future. (See "Executive Compensation-Compensation Committee Report-Performance
Compensation Plan" for a discussion of Section 162(m) of the Internal Revenue
Code.)
The foregoing amendments would not have provided determinable benefits
to Designated Executives if they had been in effect for fiscal year 1997, and
the amount of benefits in future years, if any, are not determinable at the
present time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENTS TO THE PERFORMANCE COMPENSATION PLAN.
27
<PAGE>
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, 1998. 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 1998
Annual Meeting must do so no later than May 30, 1998.
In addition, in accordance with Article VI, Section 2 of the
Certificate of Incorporation, in order to be properly brought before the 1998
Annual Meeting, a matter must have been (i) specified in a written notice of
such meeting (or any supplement thereto) given to the 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 or 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 1998 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, 1997, 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
October 6, 1997
28
<PAGE>
ANNEX A
-------
AMENDMENTS TO CAPITAL ACCUMULATION PLAN
---------------------------------------
[Marked to show changes from existing text where applicable]
1. Amendments Approved on January 22, 1997
---------------------------------------
1. The following new Section 4.6 shall be added:
"4.6 Special Elections. The Appropriate Committee shall have
-----------------
the right in its sole discretion to permit a Participant to
execute and file with the Appropriate Committee, at such times
and on such terms and conditions as the Appropriate Committee
shall determine, a Plan Election (a "Special Plan Election")
in form provided by the Company, electing to extend the
Deferral Period previously selected with respect to any
Required Deferral Amount and/or Additional Deferral Amount for
such periods and in such proportions as shall be determined by
the Appropriate Committee, provided that the Deferral Period
being extended shall terminate no earlier than the end of the
Fiscal Year following the Fiscal Year in which the Special
Plan Election is made, except that any election with respect
to the Deferral Period ending on June 30, 1997 shall be made
on or before December 31, 1996. The Earnings Adjustment with
respect to each Plan Year in any such additional Deferral
Period shall be calculated in accordance with Section 5.4
(a)(v)."
2. The following definition of "Special Plan Election" shall be
added to Section 2.1:
"Special Plan Election" has the meaning assigned to it in
Section 4.6.
3. The first sentence of the definition of "Deferral Period" in
Section 2.1 shall be amended to read as follows:
"Deferral Period means the period of five Fiscal Years
---------------
commencing on the first day of the Fiscal Year following the
Plan Year for which a Participant's compensation being
deferred pursuant to this Plan was payable, or such greater or
lesser number of whole Fiscal Years as the Appropriate
Committee may approve pursuant to Section 4.1, 4.3, 4.5 or
4.6."
4. The initial portion of the first sentence of paragraph (b) of
Section 6.2 is hereby amended to read as follows:
"(b) If a Participant's employment with the Company and
its Affiliates shall be terminated for any reason
prior to the end of all of his Deferral Periods
(other than by reason of death^), or if such
----------
Participant shall suffer a Disability or shall become
-----------------------------------------------------
a Managing Director Emeritus of Bear Stearns, then
--------------------------------------------
such Participant (or his Beneficiary) shall, unless
otherwise determined by the Appropriate Committee as
hereinafter provided, continue to be bound by, and to
be subject to, all the terms and provisions of this
Plan, except that . . ."
5. Subparagraph (i) of paragraph (b) of Section 6.2 is
hereby amended to read as follows:
"(i) the Appropriate Committee shall have the right in its
sole discretion (A) to treat a Participant who has
----------------------------------
suffered a Disability or who has become a Managing
--------------------------------------------------
Director Emeritus of Bear Stearns, as a Participant
---------------------------------------------------
(1) in all respects under this Plan, (2) to whom the
----------------------------------------------------
provisions of Section 5.4(a) but not the provisions
---------------------------------------------------
of Section 4.1 shall apply,
---------------------------
A-1
<PAGE>
or (3) whose employment with the Company and its
------------------------------------------------
Affiliates has terminated and to whom the foregoing
---------------------------------------------------
provisions of this paragraph (b) shall apply, and (B)
-----------------------------------------------------
at any time or from time to time, to change any such
----------------------------------------------------
treatment with respect to any such Participant to any
-----------------------------------------------------
other such treatment."
----------------------
6. The definition of "Disability" in Section 2.1 shall be amended
by deleting the following clause at the end thereof: ". . . in
which event the employment of the Participant shall be deemed
to have terminated for purposes of this Plan."
7. Paragraph (b) of Section 5.4 shall be deleted in its entirety.
8. The parenthetical clause beginning on the second line of the
second full paragraph of Section 9 shall be amended to read as
follows:
". . . (or who is a Participant who has suffered a
------------------------------
Disability or who has become a Managing Director
------------------------------------------------
Emeritus of Bear Stearns and whom the Appropriate
----------------------------
Committee shall have determined^ to treat in the
---------------
manner specified in clause (1) or (2) of
----------------------------------------
subparagraph (i) of Section 6.2(b)). . . "
------------------------------------------
2. Amendments Approved on September 10, 1997 with respect to Section 5.3
---------------------------------------------------------------------
and the definition of "Available Shares".
-----------------------------------------
1. Section 5.3 shall be amended to read as follows:
5.3 Quarterly Credits in Respect of Cash Balances. If there
----------------------------------------------
shall exist a Cash Balance in the Cash Balance Account of any
Participant on the last day of any fiscal quarter of the
Company, including the last day of a Plan Year (a "Quarter End
-------------------------------------
Date"), the Company shall credit the Capital Accumulation
Account of each such Participant, as of such Quarter End Date,
with a number of additional CAP Units determined by dividing
such Cash Balance by the Average Cost Per Share of the
Available Shares acquired by the Company and designated by the
---------------------
Board Committee as being allocated to such period. If the
--------------------------------------------------
aggregate number of CAP Units required to be credited to the
Capital Accumulation Accounts of all such Participants
pursuant to the preceding sentence would exceed the number of
Available Shares, then the aggregate number of CAP Units to be
credited shall be limited to the number of Available Shares
and such CAP Units shall be allocated on a pro rata basis,
based on the respective Cash Balances of each Participant. In
connection with any crediting of CAP Units pursuant to this
Section 5.3, the Cash Balance of each such Participant shall
be reduced by debiting to his Cash Balance Account an amount
equal to the product of the number of CAP Units credited to
his Capital Accumulation Account and the Average Cost Per
Share of the Available Shares acquired by the Company during
------
the annual or quarterly period specified by the Board
-----------------------------------------------------
Committee.
----------
2. The definition of "Available Shares" shall be amended to read
as follows:
"Available Shares" means, with respect to any Fiscal Year or
portion thereof, the sum of (a) the number of shares of Common
Stock purchased by the Company in the open market or in
private transactions or otherwise during such period that have
not been previously allocated under the Plan and designated by
the Board Committee at the time of purchase as having been
purchased for issuance under the Plan with respect to the
-------------------
Fiscal Year or portion thereof specified by the Board
-----------------------------------------------------
Committee and (b) shares of Common Stock purchased prior to
---------
such period that were designated as Available Shares but were
not allocated under the Plan which the Company makes available
to the Plan subsequent to the period in which such shares were
purchased and the
A-2
<PAGE>
Board Committee thereafter designates as Available Shares for
issuance under the Plan with respect to the Fiscal Year or
----------------------------------
portion thereof specified by the Board Committee.
-------------------------------------------------
3. Amendments approved on September 10, 1997 with respect to the
-------------------------------------------------------------
Book Value Adjustment.
----------------------
1. Section 5.5 shall be amended to read as follows:
"5.5 Book Value Adjustment. For purposes of calculating the
---------------------
Net Earnings Adjustment with respect to any Deferral Year
pursuant to Section 5.10, the ^ Book Value Adjustment shall
equal the sum of (1) the amount maintained in the Book Value
Adjustment Carry Forward Account pursuant to Section 5.10(a),
if any, and (2) the product of (a) the total number of CAP
----------------------------------------------------------
Units credited to the Capital Accumulation Account of each
----------------------------------------------------------
Participant as of the last day of such Deferral Year but
--------------------------------------------------------
without including any CAP Units credited on such date pursuant
--------------------------------------------------------------
to Sections 5.1, 5.3 and 5.10 multiplied by (b) the difference
--------------------------------------------------------------
between Adjusted Book Value Per Share as of the last day of
the Deferral Year and Adjusted Book Value Per Share as of the
-------------------------------------------------------------
last day of the preceding Deferral Year."
-----------------------------------------
2. Section 5.4(g) shall be amended to read as follows:
"(g) finally, (i) if the sum (or net amount) of the amounts
determined for a Participant in subparagraphs (a), (b) and (c)
above is a positive number and such sum (or net amount)
exceeds the aggregate of the charges, if any, determined for
such Participant pursuant to subparagraphs (d), (e) and (f)
above, then the Earnings Adjustment shall equal^ such sum (or
------------
net amount), as determined for purposes of this Section 5.4,
------------
or (ii) if the net amount of the amounts determined for a
Participant in subparagraphs (a), (b) and (c) less the
aggregate of the charges, if any, determined pursuant to
subparagraphs (d), (e) and (f) is a negative number (an
"Earnings Charge") and such Participant has a positive Cash
Balance, then (A) such Cash Balance first shall be reduced by
an amount equal to such Earnings Charge (provided that no such
reduction shall be made to the extent the Earnings Charge
relates to a negative result from sub-paragraph (b) or (c))
and (B) if, after reducing such Cash Balance to zero, any
amount determined in accordance with the preceding clause (ii)
(A) remains unapplied, or if such Participant has no Cash
Balance, then the Earnings Adjustment shall be zero."
3. Section 5.10(a) shall be amended to read as follows:
"(a) After making any credits to the Capital Accumulation
Accounts of the Participants in respect of the fourth fiscal
quarter of such Deferral Year pursuant to Section 5.3, each
Participant's Account ^ shall be adjusted, effective as of the
last day of such Deferral Year, as provided in this Section
5.10(a). The Company shall credit the Capital Accumulation
Account of each Participant with an additional number of CAP
Units (a "Net Earnings Adjustment") equal to the quotient of
---------------
(i) the difference between the Earnings Adjustment calculated
---
in accordance with Section 5.4 and the Book Value Adjustment
calculated in accordance with Section 5.5 for such Deferral
Year, divided by (ii) the Average Cost Per Share of the
-------------------------------------------------
Available Shares acquired by the Company and designated by the
--------------------------------------------------------------
Board Committee as being allocated to such period.
--------------------------------------------------
Notwithstanding the foregoing, however, if (i) the Earnings
Adjustment is a negative number or (ii) the Book Value
Adjustment exceeds the Earnings Adjustment then no CAP Units
shall be credited to the Accounts of any Participants and the
amounts of each of such Book Value Adjustment and Earnings
Adjustment shall be disregarded and shall not be taken into
account for purposes of the Plan in any subsequent Deferral
Year."
<PAGE>
THE BEAR STEARNS COMPANIES INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR ANNUAL MEETING OF STOCKHOLDERS - OCTOBER 27, 1997, AT 5:00 P.M.
The undersigned stockholder of The Bear Stearns Companies Inc. (the
"Company") hereby appoints Alan C. Greenberg and James E. Cayne, 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 27, 1997, 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 22, 1997, 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES
NAMED HEREIN, "FOR" APPROVAL OF THE FISCAL YEAR 1998 PERFORMANCE GOALS UNDER,
AND AN AMENDMENT TO, THE MANAGEMENT COMPENSATION PLAN, "FOR" APPROVAL OF
AMENDMENTS TO THE CAPITAL ACCUMULATION PLAN AND "FOR" APPROVAL OF AMENDMENTS TO
THE PERFORMANCE COMPENSATION PLAN.
<PAGE>
Item 1. ELECTION OF DIRECTORS:
[ ] FOR ALL NOMINEES LISTED [ ] WITHHOLD AUTHORITY TO VOTE FOR ALL
BELOW (except as NOMINEES LISTED BELOW
marked to the contrary
below)
Nominees for Directors: James E. Cayne, Carl D. Glickman, Alan C. Greenberg,
Donald J. Harrington, William
L. Mack, Frank T. Nickell, Frederic V. Salerno, Vincent Tese and Fred Wilpon.
(INSTRUCTION: To withhold authority to vote for an individual nominee named
above, strike a line through that nominee's name)
Item 2. APPROVAL OF THE FISCAL YEAR 1998 PERFORMANCE GOALS UNDER, AND
AN AMENDMENT TO, THE MANAGEMENT COMPENSATION PLAN:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Item 3. APPROVAL OF AMENDMENTS TO THE CAPITAL ACCUMULATION PLAN:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Item 4. APPROVAL OF AMENDMENTS TO THE PERFORMANCE COMPENSATION PLAN:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
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): _____________________________________________
(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.)
Dated ______________________________ , 1997
<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.
