<PAGE> 1
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. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
MCN CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
MCN CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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:
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(4) Date filed:
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<PAGE> 2
[MCN CORPORATION LOGO]
NOTICE OF 1996
ANNUAL MEETING
AND
PROXY STATEMENT
<PAGE> 3
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Letter from the Chairman............................................................. 3
Notice of 1996 Annual Meeting of Shareholders........................................ 4
Proxy Statement...................................................................... 5
* Proposal 1 -- Election of Directors 5
Committees of the MCN Board........................................................ 11
Beneficial Security Ownership of Directors, Nominees and Executive Officers........ 12
- Executive Stock Ownership Guidelines............................................. 13
Compensation of Directors and Executive Officers................................... 13
- Directors' Compensation.......................................................... 13
- Executives' Compensation......................................................... 14
- Other Compensation Matters....................................................... 15
Report of the Compensation Committee of The Board of Directors on Executive
Compensation.................................................................... 19
Performance Graph.................................................................. 24
* Proposal 2 -- Selection of Auditors................................................ 25
Other Proxy Matters.................................................................. 25
</TABLE>
- -------------------------
* Denotes items to be voted on at the meeting.
<PAGE> 4
[MCN CORPORATION LOGO]
ALFRED R. GLANCY III 500 Griswold Street
Chairman, President and Detroit, Michigan 48226
Chief Executive Officer
February 29, 1996
To our Shareholders:
You are cordially invited to attend the 1996 Annual
Meeting of Shareholders of MCN Corporation. This year's
meeting will be held at the Company's headquarters in
Detroit, Michigan on Thursday, April 25, 1996 at 1:00
p.m. Eastern Daylight Saving Time. The business items to
be acted on during the Annual Meeting are listed in the
Notice of Annual Meeting and are described more fully in
the Proxy Statement.
If you plan to attend the Annual Meeting, please
mark the appropriate box on the proxy card to request an
attendance card. WHETHER OR NOT YOU PLAN TO ATTEND, YOU
CAN BE SURE YOUR SHARES ARE REPRESENTED AT THE MEETING
BY PROMPTLY COMPLETING, SIGNING, DATING AND RETURNING
YOUR PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Along with the other members of the Board of
Directors, I look forward to the opportunity of greeting
personally those shareholders who are able to attend the
Annual Meeting.
Sincerely,
A. R. Glancy III
3
<PAGE> 5
NOTICE OF MCN CORPORATION'S 1996 ANNUAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
1:00 p.m., April 25, 1996
Guardian Building, 32nd Floor Auditorium
500 Griswold St.
Detroit, Michigan 48226
- --------------------------------------------------------------------------------
February 29, 1996
To our Shareholders:
MCN Corporation's 1996 Annual Meeting of shareholders will be held at the
Company's headquarters in the Guardian Building, 32nd Floor Auditorium, 500
Griswold Street, Detroit, Michigan on Thursday, April 25, 1996 at 1:00 p.m.,
Eastern Daylight Saving Time. Shareholders will act on the following matters:
(1) ELECTION OF THREE DIRECTORS TO SERVE FOR TERMS OF THREE YEARS AND ONE
DIRECTOR TO SERVE FOR A TERM OF TWO YEARS;
(2) RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT
AUDITORS FOR THE YEAR ENDING DECEMBER 31, 1996; AND
(3) TRANSACTION OF SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING, OR ANY ADJOURNMENTS.
Shareholders of record at the close of business on February 26, 1996 are
entitled to receive notice of and to vote at the Annual Meeting.
You are invited to attend the Annual Meeting in person. REGARDLESS OF
WHETHER YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOUR BOARD OF
DIRECTORS URGES YOU TO VOTE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
By Order of the Board of Directors,
Daniel L. Schiffer
DANIEL L. SCHIFFER
Senior Vice President,
General Counsel and Secretary
4
<PAGE> 6
[MCN LOGO]
PROXY STATEMENT
The Board of Directors of MCN Corporation (the "MCN Board") solicits your
proxy for use at the Annual Meeting of Shareholders of MCN Corporation ("MCN" or
the "Company") to be held on Thursday, April 25, 1996 at 1:00 p.m., and at any
adjournments. This Proxy Statement and a proxy card are scheduled to be mailed
to shareholders beginning on March 4, 1996.
In the following pages, you will find information on your Board of
Directors, both the candidates proposed for election and continuing Directors,
and an additional proposal for ratification of the appointment of auditors to be
voted upon at the Annual Meeting of Stockholders or any adjournment of that
meeting. The information in this Proxy Statement has been supplied to you at the
request of the Board of Directors to help you decide how to vote.
As of February 26, 1996, the record date for determination of shareholders
entitled to notice of and to vote at the Annual Meeting, there were 66,776,428
outstanding shares of MCN common stock, $.01 par value ("MCN Common Stock").
Each outstanding share is entitled to one vote on all matters which may come
before the Annual Meeting. To the best of the Company's knowledge, there are no
beneficial owners of 5% or more of MCN Common Stock.
You can ensure that your shares are voted at the Annual Meeting by
completing, signing, dating and returning the accompanying proxy card in the
enclosed postage-paid envelope. Sending in a signed proxy will not affect your
right to attend the Annual Meeting and vote. A shareholder who gives a proxy may
revoke it at any time before it is exercised by notifying the Secretary of MCN
in writing before the proxy is exercised, or by delivering to the Secretary of
MCN a proxy bearing a later date, or by attending the Annual Meeting and voting
in person.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The MCN Board consists of ten members divided into three classes, with the
term of each director expiring at the Annual Meeting of MCN in the year
indicated on the following pages. Generally, one-third of the MCN Board is
elected each year.
Unless otherwise instructed on the proxy card, the proxy holders intend to
vote for the election of Stephen E. Ewing, Roger Fridholm and Helen O.
Petrauskas to three-year terms as directors, and Bill M. Thompson to a two-year
term. With the exception of Mr. Thompson, each of the nominees is a current
member of the MCN Board and served the previous full term. Mr. Thompson is
recommended for election to the MCN Board to fill the position vacated by Arthur
L. Johnson, who, in accordance with MCN's mandatory retirement policy for
directors, will retire from the Board effective with the 1996 Annual Meeting.
The MCN Board believes that, if elected, each nominee will be able and willing
to serve. However, if any nominee should be unable or unwilling to serve as a
director, the MCN Board may select a substitute nominee and, in that event, the
proxy will be voted for the person so selected. The remaining six directors will
continue to serve in accordance with their previous elections.
Information concerning the three directors nominated for a term of three
years, the director nominated for a term of two years, and the six continuing
MCN Board members is set forth on pages 6 through 9.
5
<PAGE> 7
NOMINEES FOR ELECTION AS DIRECTORS FOR THREE-YEAR TERMS TO EXPIRE IN 1999
- --------------------------------------------------------------------------------
STEPHEN E. EWING, 52, DIRECTOR SINCE 1988
Attendance: 100% of Board Meetings
Mr. Ewing has been President of Michigan Consolidated Gas
Company ("MichCon") since 1985, Chief Executive Officer since
[PHOTO] September 1992 and Chief Operating Officer from 1985 to
September 1992. He previously served as President and Chief
Operating Officer of MCN from August 1988 to September 1992. Mr.
Ewing has been a Director of MichCon since 1984.
Mr. Ewing is the Senior Vice Chairman of the Greater Detroit
Area Health Council and Vice Chairman of United Way Community
Services, also serving as Chairman of their Capital Fund Committee and member of
their Community Leaders Council. He is past Chairman of the Metropolitan Affairs
Corporation and the Midwest Gas Association. He is a board member of the
Michigan First, Michigan Opera Theater, Oakwood Healthcare Systems, Inc. and the
Skillman Foundation. Mr. Ewing is also a member of the Detroit Institute of
Arts' Corporate Relations Committee, Leadership Detroit, and Boy Scouts of
America's Detroit Area Advisory Council.
- --------------------------------------------------------------------------------
ROGER FRIDHOLM, 55, DIRECTOR SINCE 1988
Attendance: 100% of Board and Committee Meetings
Mr. Fridholm has been President of the St. Clair Group, a
private investment company, since 1991. He has been Chairman of
Ad Hoc Legal Resources, LLC since 1995 and in 1996 became
[PHOTO] President of IPG Services Corporation, both of which are staff
service companies. He previously served as President and Chief
Executive Officer of Of Counsel, Enterprises, Inc. from February
through July 1994 and as Senior Vice President of Corporate
Development of Kelly Services, Inc. from March 1992 through
January 1994. He was President and Chief Operating Officer of The Stroh Brewery
Company from 1979 to 1991.
Mr. Fridholm serves as a Director of The Stroh Brewery Company, Comerica
Bank-Detroit, and the Dana Corporation. He is also a Trustee of the Henry Ford
Health System and member of the Quality Committee.
- --------------------------------------------------------------------------------
HELEN O. PETRAUSKAS, 52, DIRECTOR SINCE 1990
Attendance: 85% of Board and Committee Meetings
Ms. Petrauskas has been Vice President for Environmental and
Safety Engineering with Ford Motor Company since 1983.
[PHOTO]
Ms. Petrauskas is a Director of The Sherwin-Williams Company and
the International Institute of Detroit and a member of the
Society of Automotive Engineers. Ms. Petrauskas is also on the
Advisory Boards of the Center for Risk Analysis, Harvard School
of Public Health, and Resources for the Future in Washington,
D.C.
6
<PAGE> 8
NOMINEE FOR ELECTION AS DIRECTOR FOR TWO-YEAR TERM TO EXPIRE IN 1998
- --------------------------------------------------------------------------------
BILL M. THOMPSON, 63
Mr. Thompson retired from Phillips Petroleum Company in
December, 1992 after 38 years of service. He was Chairman of the
Board, President and Chief Executive Officer of GPM Gas
[PHOTO] Corporation, a wholly owned subsidiary of Phillips Petroleum
Company, from February 1992 until December 1992. He had been
Vice Chairman of Phillips Petroleum Company from his election in
December 1991 until February 1992. Prior to that, he was
Executive Vice President of Phillips' downstream operations from
September 1988 until December 1991. He was elected a member of
the Board of Directors in 1988.
Mr. Thompson serves on the Board of Directors of Noble Drilling Corporation, The
University of Texas College of Engineering Foundation Advisory Council,
Chapelwood United Methodist Church in Houston, Texas and Country Club of the
Rockies in Edwards, Colorado. He is a past member of the Board of Directors of
the American Petroleum Institute, The National Association of Manufacturers, and
The Chemical Manufacturers Association.
THE MCN BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF STEPHEN E. EWING,
ROGER FRIDHOLM, HELEN O. PETRAUSKAS AND BILL M. THOMPSON TO THE BOARD OF
DIRECTORS.
7
<PAGE> 9
CONTINUING DIRECTORS WHOSE TERM EXPIRES IN 1997
- --------------------------------------------------------------------------------
ALFRED R. GLANCY III, 58, DIRECTOR SINCE 1988
Attendance: 100% of Board Meetings
Mr. Glancy has been Chairman and Chief Executive Officer of MCN
[PHOTO] since August 1988 and President since September 1992. He has
been Chairman of MCN Investment Corporation ("MCNIC") since
1988. Mr. Glancy has been Chairman of MichCon since 1984 and
served as its Chief Executive Officer from 1984 until September
1992. He has been a Director of MichCon since 1981.
Mr. Glancy is Chairman of Detroit Renaissance, Inc., Detroit Symphony Orchestra
Hall, Inc., and past Chairman of The Detroit Medical Center. He is a Trustee of
the Founders Society of the Detroit Institute of Arts. He is also a Director of
United Way Community Services, Detroit Economic Growth Corporation, Community
Foundation for Southeastern Michigan, MLX Corp., NBD Bank Michigan, New Detroit,
Inc., Citizens Research Council of Michigan, Greater Detroit Chamber of
Commerce, Karmanos Cancer Institute and the Hudson-Webber Foundation. He is Vice
Chairman of UNICO Investment in Seattle, Washington.
- --------------------------------------------------------------------------------
FRANK M. HENNESSEY, 57, DIRECTOR SINCE 1988
Attendance: 100% of Board and Committee Meetings
Mr. Hennessey became Executive Vice President of Masco
Corporation in September 1995, as well as CEO and Chairman of
[PHOTO] Emco Limited, a leading Canadian manufacturer and distributor of
plumbing-related products, roofing and other building products.
He was previously Vice President for Strategic Planning at Masco
Corporation, and President, Chief Executive Officer and Director
of Emco Limited from December 1990 through August 1995. In
addition, Mr. Hennessey is the former President, Chief Executive
Officer and Director of the Handleman Company, having served as President and
Director from 1981 to December 1989 and Chief Executive Officer from March 1988
to December 1989.
Mr. Hennessey is a Trustee and Committee Member of the Hudson-Webber Foundation
and a Director of New Detroit, Inc. He is a Director and Member of the Finance
Committee of United Way Community Services, and Trustee of the Citizens Research
Council of Michigan as well as a member of the Board and Treasurer of the
Greater Detroit and Windsor Japan American Society. He also served as a Director
of Habitat for Humanity, Canada in 1995.
- --------------------------------------------------------------------------------
HOWARD F. SIMS, 62, DIRECTOR SINCE 1988
Attendance: 100% of Board and Committee Meetings
Mr. Sims is Chairman and Chief Executive Officer of Sims-Varner
[PHOTO] & Associates, Inc., an architecture, engineering and planning
firm, and has been a practicing architect since 1963.
Mr. Sims is a Director of Comerica Incorporated, NICO Ventures,
Citizens Research Council of Michigan, Greater Detroit Area
Health Council, Detroit Economic Growth Corporation and United
Way Community Services. He is a Trustee of the Kellogg Foundation, Karmanos
Cancer Institute, Oakland University and WTVS. Mr. Sims is a member of the
Executive Board of the Detroit Area Council, Boy Scouts of America.
8
<PAGE> 10
CONTINUING DIRECTORS WHOSE TERM EXPIRES IN 1998
- --------------------------------------------------------------------------------
THOMAS H. JEFFS II, 57, DIRECTOR SINCE 1991
Attendance: 82% of Board and Committee Meetings
Mr. Jeffs assumed his current duties as Vice Chairman of First
[PHOTO] Chicago NBD Corporation and First National Bank of Chicago in
December 1995. Mr. Jeffs has been President and Chief Operating
Officer of its subsidiary, NBD Bank Michigan, since January
1994. He previously served as Vice Chairman of NBD Bancorp, Inc.
and NBD Bank from 1985 through December 1993. Mr. Jeffs is a
Director of NBD Bank Michigan.
He is a Director of New Detroit, Inc. and The Economic Club of Detroit. Mr.
Jeffs serves as Vice Chairman and a member of the Executive Committee of the
Detroit Symphony Orchestra Hall, Inc., and Vice Chairman of the Greater Detroit
Chamber of Commerce. He is a Trustee of the Founders Society of the Detroit
Institute of Arts. Mr. Jeffs is a member of the Visiting Committee of the
University of Michigan, School of Business Administration and The Bankers'
Roundtable.
- --------------------------------------------------------------------------------
DALE A. JOHNSON, 58, DIRECTOR SINCE 1992
Attendance: 100% of Board and Committee Meetings
Mr. Johnson retired after serving as Chairman and Chief
Executive Officer of SPX Corporation from 1991 through June
[PHOTO] 1995. He was President and Chief Executive Officer of SPX
Corporation from 1990 to 1991, and its President and Chief
Operating Officer from 1988 to 1990. SPX Corporation designs,
manufactures and markets specialty service tools and engineered
components for the global motor vehicle industry.
Mr. Johnson is a Director of Douglas & Lomason Company and past Chairman of the
Motor Equipment Manufacturing Association and the Michigan Manufacturing
Association.
- --------------------------------------------------------------------------------
WILLIAM K. MCCRACKIN, 62, DIRECTOR SINCE 1988
Attendance: 100% of Board Meetings
Mr. McCrackin has been Vice Chairman and Chief Financial Officer
of MCN since August 1988 and Treasurer from August 1988 to
[PHOTO] September 1992. Mr. McCrackin served as Vice Chairman of MichCon
from 1986 until September 1992 and as Chief Financial Officer of
MichCon from 1985 until September 1992. He has been a Director
of MCNIC since 1988 and a Director of MichCon since 1984.
Mr. McCrackin is Chairman of the Detroit Science Center. He is a
Director and Vice Chairman of Junior Achievement of Southeastern
Michigan. Mr. McCrackin is also a Director of the Greater Detroit Capital
Corporation, Mercy Health Services, and a member of the Finance Committee of
United Way Community Services.
9
<PAGE> 11
RETIRING DIRECTOR
- --------------------------------------------------------------------------------
ARTHUR L. JOHNSON
[PHOTO] Mr. Arthur L. Johnson will retire from the MCN Board effective
with the 1996 Annual Meeting. MCN Corporation wishes to express
its appreciation to Mr. Johnson for his contributions during
years of dedicated service as a director of MCN.
10
<PAGE> 12
COMMITTEES OF THE MCN BOARD
The MCN Board held eight regular meetings during 1995. A majority of
directors attended all meetings of the Board. The MCN Board has the following
standing committees. Committee membership as of the record date of February 26,
1996 is identified below.
AUDIT COMMITTEE
Frank M. Hennessey, Chairman
Roger Fridholm
Arthur L. Johnson
Helen O. Petrauskas
- - Recommends the selection of the Company's independent auditors;
- - Reviews the scope of audit procedures, the results of the respective audits,
and recommendations to management;
- - Reviews auditors' fees, annual financial statements, adequacy of internal
audit procedures and results of those procedures; and
- - Reviews MCN's policies relating to business conduct.
3 meetings in 1995
COMPENSATION COMMITTEE
Dale A. Johnson, Chairman
Thomas H. Jeffs II
Helen O. Petrauskas
- - Reviews and recommends to the MCN Board salary and incentive compensation for
officers of MCN, MichCon and MCNIC; and
- - Reviews the salary policies for other officers, management and supervisory
personnel.
2 meetings in 1995
FINANCE COMMITTEE
Roger Fridholm, Chairman
Frank M. Hennessey
Dale A. Johnson
Howard F. Sims
Reviews and makes recommendations to the MCN Board regarding:
- - Financial plans;
- - Timing and amount of securities to be issued; and
- - Investment policies of the trusteed benefit plans and other corporate funds.
2 meetings in 1995
CORPORATE RESPONSIBILITY COMMITTEE
Howard F. Sims, Chairman
Thomas H. Jeffs II
Arthur L. Johnson
- - Consults with management regarding corporate contributions and contributions
from the MichCon Foundation;
- - Reviews and recommends to the MCN Board an annual corporate contribution
budget; and
- - Reviews programs to assure that MCN and its subsidiaries carry out their
respective corporate responsibilities on a broad basis in an effective and
efficient manner.
1 meeting in 1995
11
<PAGE> 13
BENEFICIAL SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table includes MCN Common Stock and stock-based holdings, as
of February 26, 1996, of the Company's chief executive officer and its four most
highly-compensated executive officers in 1995 (collectively, the "Named
Executive Officers") and its directors and nominees.
- --------------------------------------------------------------------------------
COMMON STOCK AND TOTAL STOCK-BASED HOLDINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK
OWNERSHIP
--------------------- STOCK
NAME AMOUNT(1) PERCENT EQUIVALENTS(2) TOTAL
- ------------------------------------------------ --------- ------- -------------- -------
<S> <C> <C> <C> <C>
Alfred R. Glancy III............................ 269,670(3) .4% 181,295 450,965
Rai P. K. Bhargava.............................. 49,013(3) .1% 48,430 97,443
Stephen E. Ewing................................ 40,002(3) .1% 74,590 114,592
William K. McCrackin............................ 41,345(3) .1% 64,269 105,614
Daniel L. Schiffer.............................. 24,491(3) * 26,630 51,121
Roger Fridholm.................................. 10,900(4) * -- 10,900
Frank M. Hennessey.............................. 9,842 * -- 9,842
Thomas H. Jeffs II.............................. 3,600 * -- 3,600
Arthur L. Johnson............................... 1,706 * -- 1,706
Dale A. Johnson................................. 4,457 * -- 4,457
Helen O. Petrauskas............................. 1,515 * -- 1,515
Howard F. Sims.................................. 2,571 * -- 2,571
Bill M. Thompson................................ 1,000 * -- 1,000
Directors, nominees and executive officers
as a group...................................... 460,112 .7% 395,214 855,326
</TABLE>
- -------------------------
* Less than 0.1%
(1) This column lists voting securities, including shares of restricted stock in
which the beneficial owners have voting power but do not have investment
power until the shares vest. In many instances, voting power and investment
power are shared with another as joint tenants.
(2) This column includes the non-voting common stock equivalents, such as
performance units and deferred stock units under the MCN Corporation
Mandatory Deferred Compensation Plan.
(3) Includes shares held in the MichCon Savings and Stock Ownership Plan (the
"Savings Plan"). The beneficial owners of the shares have sole voting power
on all shares. Beneficial owners have investment power on all shares except
those purchased by MCN and held as restricted under provisions of the
Savings Plan.
(4) Includes 3,100 shares held in the St. Clair Charitable Trust, of which Roger
Fridholm is a Trustee. Mr. Fridholm has shared voting and investment power
on these shares.
12
<PAGE> 14
EXECUTIVE STOCK OWNERSHIP GUIDELINES
In 1995, the Compensation Committee of the MCN Board approved stock
ownership guidelines for all executives and external directors to formalize its
policy of encouraging share ownership by officers and directors. The guidelines
require the Chairman & CEO to own stock with a value at least five times annual
salary. Other executive and director stock ownership guidelines range from one
to three times salary or retainer fee, depending on their level, with the
expectation that the shares required to at least minimally meet the guidelines
will be acquired over a period of five years from when an individual becomes
subject to such guidelines. At February 26, 1996, 83% of the Named Executive
Officers and directors meet or exceed the guidelines. The comparable percentage
for all MCN, MichCon and MCNIC officers and directors is 91%. The average
stockholdings at February 26, 1996 for the Named Executive Officers and
directors as a multiple of salary or retainer fee is 8.0 times. The comparable
relationship for all MCN, MichCon and MCNIC officers and directors is 6.1 times
at February 26, 1996.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS' COMPENSATION
Officers of MCN or its subsidiaries who serve on the MCN Board do not
receive any additional compensation for service as directors. However, directors
of MCN who are not employees of MCN or its subsidiaries ("Non-officer
Directors") receive an annual fee of $18,000. In addition, MCN's Non-officer
Directors receive 400 restricted shares of MCN Common Stock annually.
Non-officer Directors are also paid a fee of $750 for attendance at each MCN
Board and committee meeting. In 1996 MCN increased the number of regularly
scheduled Board meetings from eight to ten. Non-officer Directors are eligible
to participate in a plan which provides for deferral of all or part of their
annual fee, with interest accrued on amounts deferred. The deferral plan also
includes a pre-retirement survivor benefit which provides the participant's
beneficiary with a payment equal to the present value of any deferrals that
would have been made prior to normal retirement. It is anticipated that future
increases in Non-officer Director compensation will be primarily through
additional restricted shares of MCN Common Stock.
Non-officer Directors also participate in the Supplemental Death Benefit
and Retirement Income Plan. Under the plan, if a Non-officer Director dies while
in office, the director's surviving spouse is entitled to a lump-sum payment of
$100,000. This plan also provides that in the event a Non-officer Director holds
office until reaching age 65 and thereafter ceases to hold office, the director
can elect to receive either (i) a supplemental retirement benefit of $10,000
annually for each of the ten years following the date the director ceased to
hold office, or (ii) a postretirement death benefit of $100,000 payable solely
to the director's surviving spouse upon the director's death.
13
<PAGE> 15
EXECUTIVES' COMPENSATION
The following table sets forth the aggregate compensation paid or awarded
for performance from 1993 through 1995 to the Named Executive Officers of MCN.
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION(1) ------------------------------
RESTRICTED ALL OTHER
------------------------ STOCK LTIP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(2) AWARD($)(3) PAYOUT($)(1)(4) ($)(5)
- --------------------------------- ---- --------- ----------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
A. R. GLANCY III................. 1995 543,750 500,000 -- 1,504,800 32,625
Chairman, President, & Chief 1994 445,000 268,000 -- -- 26,700
Executive Officer 1993 430,000 166,900 -- -- 22,933
S. E. EWING...................... 1995 322,500 170,000 -- 940,500 17,738
President & Chief 1994 319,375 112,000 -- -- 15,969
Executive Officer, MichCon 1993 310,000 104,900 -- -- 15,500
W. K. MCCRACKIN.................. 1995 282,500 175,000 -- 808,830 16,950
Vice Chairman & 1994 280,625 130,000 -- -- 16,837
Chief Financial Officer 1993 275,000 91,500 -- -- 14,666
R. P. K. BHARGAVA................ 1995 227,500 260,000 379,022 413,820 10,375
President & Chief 1994 190,000 175,000 -- -- 8,750
Executive Officer, MCNIC 1993 164,000 61,000 -- -- 7,721
D. L. SCHIFFER................... 1995 195,575 90,000 -- 376,200 9,629
Senior Vice President, 1994 165,525 65,000 -- -- 8,712
General Counsel & Secretary 1993 158,650 44,400 -- -- 7,901
</TABLE>
- -------------------------
(1) Includes amounts received or deferred.
(2) Amounts under the MCN Corporation Annual Performance Plan are shown for the
year upon which performance is measured. They are paid in February or March
of the subsequent year.
(3) The following table reflects the aggregate restricted stock holdings, from
previous years' awards under the MCN Corporation Stock Incentive Plan, for
the Named Executive Officers, the value of the aggregate shares as of the
date of grant and as of December 31, 1995, and the number of shares that
vested in 1995. Beginning with the 1992 performance year, the Company
revised its Stock Incentive Plan replacing restricted stock awards with
performance units. The Company currently has no plans to issue additional
restricted stock other than that issued to Mr. Bhargava under the Special
Retention Agreement described on page 16. The table below does not include
the performance units awarded under the MCN Corporation Long-Term Incentive
Performance Unit Plan ("Performance Unit Plan") described on page 21.
<TABLE>
<CAPTION>
NON-VESTED SHARES AT
DECEMBER 31, 1995
-------------------------------------
VALUE -- VALUE -- SHARES(#)
AGGREGATE DATE OF DECEMBER 31, VESTED
SHARES(#) GRANT($) 1995($) IN 1995
--------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C>
A. R. Glancy III................. 20,000 219,375 465,000 19,000
S. E. Ewing...................... 14,000 153,563 325,500 13,300
W. K. McCrackin.................. 13,200 144,788 306,900 12,540
R. P. K. Bhargava................ 4,000 43,875 93,000 3,800
D. L. Schiffer................... 4,000 43,875 93,000 3,800
Executive officers as a group.... 55,200 605,476 1,283,400 52,440
</TABLE>
(4) Amounts shown in this column represent the dollar value of payouts of the
1993 awards pursuant to the Performance Unit Plan based upon performance for
the 6 year period 1990 through 1995. See page 21 for a detailed description
of the plan.
(5) Amounts shown in this column represent the Company's contributions to
defined contribution plans.
14
<PAGE> 16
Beginning with the 1992 performance year, the Company adopted a Performance
Unit Plan pursuant to the Stock Incentive Plan approved by its shareholders.
Performance units are granted in February subsequent to the three year period
upon which performance is measured. Performance units granted February 22, 1996
for the 1993 to 1995 performance period to the Named Executive Officers are
indicated in the table below.
- --------------------------------------------------------------------------------
LONG-TERM INCENTIVE PLAN -- AWARDS FOR THE YEAR 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
PERIOD NON-STOCK PRICE-BASED PLANS
UNTIL ------------------------------
NUMBER OF MATURATION THRESHOLD TARGET MAXIMUM
NAME UNITS(#) OR PAYOUT (#) (#) (#)
---------------------- --------- ----------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
A. R. Glancy III...... 36,368 3 years 0 36,368 72,736
S. E. Ewing........... 15,600 3 years 0 15,600 31,200
W. K. McCrackin....... 13,650 3 years 0 13,650 27,300
R. P. K. Bhargava..... 14,430 3 years 0 14,430 28,860
D. L. Schiffer........ 6,630 3 years 0 6,630 13,260
</TABLE>
Each performance unit is equivalent to a share of MCN Common Stock. The number
of performance units initially granted is based on MCN's total shareholder
return for the previous three years compared to the total shareholder return for
a group of peer companies (identified in the Compensation Committee Report on
page 22) over the same period. Once initially granted, regular dividend
equivalents are paid on performance units. The initial grants are adjusted
upward or downward after a three year period based on MCN's total shareholder
return for this subsequent period compared to the total shareholder return for a
group of peer companies over the same period. (See the discussion of peer groups
and award periods on page 22.) The final award, which is expected to be paid 50%
in cash and 50% in MCN Common Stock, will range from zero to 200% of the initial
grant and the stock must be held, except for extraordinary circumstances, so
long as the recipient is employed by the Company. Final awards are included as
Long-Term Incentive Payouts in the Summary Compensation Table on page 14 in the
year they are paid out.
OTHER COMPENSATION MATTERS
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
MCN has entered into Change of Control Employment Agreements with its Named
Executive Officers and certain other officers of MCN and its two principal
subsidiaries. Change of control is defined in the agreements as any of the
following: (1) the acquisition of beneficial ownership of 20% or more of the
outstanding voting securities of the Company, (2) the appointment or election of
new directors to the Company's Board which causes the existing directors to no
longer constitute at least a majority of the Company's Board, (3) a
reorganization, merger or consolidation in which the beneficial owners of the
outstanding voting securities have a beneficial interest of less than 60% of the
common stock or outstanding voting securities of the corporation resulting from
such reorganization, merger or consolidation, or (4) a complete liquidation or
dissolution of the Company. The agreements generally have a term of three years
beginning with the change of control, obligate the officer to continue to serve
MCN in the officer's then current capacity, require MCN to compensate the
officer in an amount at least equal to the officer's base salary plus the
average annual bonus paid to the officer during the preceding three years and
provide for the vesting of various unfunded benefits. These unfunded benefits
include the Supplemental Retirement Plan discussed on page 17, the Supplemental
Death Benefit and Retirement Income Plan discussed on page 17 and the
Supplemental Savings Plan, which permits certain key executives to defer income
and be credited with matching contributions to the extent that would otherwise
be permitted under the Savings Plan
15
<PAGE> 17
but for limitations imposed by Federal tax law on tax-qualified savings plans.
The agreements also provide for the grossed-up payment of any Federal excise
taxes due from the executive as a result of any payments received under the
agreement and provide three years of continued participation in MCN's benefit
and retirement programs. MCN's obligations to the officer, including the
obligation to pay base salary and any bonuses, can only be extinguished if the
officer's employment is terminated by MCN for "good cause" or by the officer
without "good reason" both as defined in the agreements, or by death or
disability.
SPECIAL RETENTION AGREEMENT
Early in 1995, the MCN Board authorized an eight year retention agreement
with Mr. Bhargava, the President and Chief Executive Officer of MCNIC. Mr.
Bhargava is the executive officer who is expected to manage and grow the
Company's diversified business ("Diversified Energy") in order to produce a
significant portion of the growth in shareholder value inherent in the Company's
strategic direction. The retention agreement is intended to encourage the
attainment of short-term and long-term financial goals and discourage
alternative offers of employment. Recognizing the entrepreneurial nature of the
Diversified Energy group, the agreement is also intended to provide Mr. Bhargava
with the economic equivalent of an equity stake in its affairs.
Specifically, Mr. Bhargava will receive annual restricted stock awards
equivalent to 5% of the net income of MCNIC that is in excess of the threshold
return on equity ("ROE"), but less than the target ROE, plus 3% of net income in
excess of the target ROE. If earnings are below the threshold ROE levels, then
no award is paid. In 1995, the threshold and target ROE levels were 11% and 14%,
respectively. For 1996 and thereafter the threshold and target levels will be
12% and 15%, respectively. Annual awards are limited to 1.5% of net income and
total awards payable under the agreement are limited to $4,000,000, subject to
increase at the discretion of the MCN Board. Dividends will be paid on the
shares of restricted stock awarded and the shares will vest on December 31,
2002, the end of the contract term.
The awards of restricted stock are generally forfeitable if Mr. Bhargava
leaves the Company prior to the end of the contract term. The restricted shares
awarded immediately vest under specified circumstances, including Mr. Bhargava's
death, permanent disability, or involuntary termination without cause.
INDEBTEDNESS OF MANAGEMENT
In order to encourage executives to maintain their holdings in shares
purchased under the MCN Stock Option Plan, which was replaced by the MCN Stock
Incentive Plan in May 1989, the Company provided loans at an interest rate in
accordance with IRS guidelines based on the market yield of U.S. short-term
marketable securities. Pursuant to this provision, Mr. Glancy initiated a loan
in 1992 at an interest rate of 4.43%, which was renewed in 1995 at the then
current interest rate of 5.65%. The loan covered a maximum outstanding amount of
$1,060,621, including interest, during 1995. A balance of $950,066, including
interest, was outstanding as of December 31, 1995. The loan is secured by
169,628 shares of MCN Common Stock with a year-end market value of $3,943,851.
16
<PAGE> 18
RETIREMENT PLANS
- --------------------------------------------------------------------------------
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RETIREMENT BENEFIT FOR YEARS OF SERVICE
--------------------------------------------------------------------
FINAL AVERAGE 15 20 25 30 35 40
ANNUAL EARNINGS YEARS YEARS YEARS YEARS YEARS YEARS
- --------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$150,000.................... $ 41,000 $ 54,700 $ 68,400 $ 82,100 $ 95,700 $105,700
200,000.................... 54,800 73,000 91,300 109,500 127,800 141,000
250,000.................... 68,500 91,300 114,100 137,000 159,800 176,400
300,000.................... 82,200 109,600 137,000 164,400 191,800 211,700
350,000.................... 95,900 127,900 159,900 191,900 223,800 247,100
400,000.................... 109,700 146,200 182,800 219,300 255,900 282,400
450,000.................... 123,400 164,500 205,600 246,800 287,900 317,800
500,000.................... 137,100 182,800 228,500 274,200 319,900 353,100
550,000.................... 181,300 241,800 276,100 301,600 351,900 388,500
600,000.................... 197,800 263,800 301,300 329,100 383,900 423,800
</TABLE>
RETIREMENT PLANS. All salaried employees of MCN and certain of its
subsidiaries (the "Participating Companies") participate in a noncontributory,
defined benefit retirement plan (the "Retirement Plan"). Under the Retirement
Plan, the monthly pension at normal retirement (age 65) is calculated using a
formula providing a single life monthly benefit equal to (1) 1.33% of final
average monthly earnings multiplied by the number of total years of credited
service with the Participating Companies; plus (2) 0.5% of final average monthly
earnings which exceed a 35 year average social security wage base multiplied by
the number of years of credited service up to 35 years. Early retirement
benefits (at a reduced benefit if such retirement is before the participant
attains age 62) are permitted under the plan, (1) on or after the date a
participant attains age 55, if the participant's age plus years of credited
service (as defined in the plan) equals or exceeds 70, or (2) when the
participant has attained 30 years of credited service. An employee's final
average monthly earnings is defined as his or her highest average monthly
earnings for a consecutive 60-month period during the participant's last 15
years of employment. Average monthly earnings are calculated based on an
individual's base salary only. An employee is not vested under the Retirement
Plan until he or she has completed five years of credited service or has
attained age 65.
The Supplemental Retirement Plan is also maintained which provides for the
payment of benefits that would otherwise be payable under the Retirement Plan
but for limitations imposed by Federal tax law on benefits paid by qualified
plans.
The table above illustrates the total estimated annual normal retirement
pension benefits including the Supplemental Retirement Plan amounts, if
applicable, that will be payable upon normal retirement at age 65 to
participants for the specified remuneration and years of credited service
classifications. Retirement benefits are not subject to any deduction for social
security or other offset amounts. The table does not reflect any reductions in
retirement benefits that would result from the selection of one of various
available survivorship options or the election to retire prior to age 62.
Benefit amounts are computed on a straight life annuity basis.
As of December 31, 1995, the credited years of service (rounded to the
nearest whole year) for the Named Executive Officers are as follows: Mr. Glancy,
33 years; Mr. Ewing, 24 years; Mr. McCrackin, 40 years; Mr. Bhargava, 21 years
and Mr. Schiffer, 19 years.
SUPPLEMENTAL DEATH BENEFIT AND RETIREMENT INCOME PLAN. The Company's Named
Executive Officers and certain other officers of the Participating Companies
currently participate in a Supplemental Death Benefit and Retirement Income
Plan. Under this plan, the pre-retirement death benefits payable to an
employee's surviving spouse are 50% of the employee's final salary until such
17
<PAGE> 19
time as the employee would have reached age 65; thereafter, payments are 20% of
salary until the employee would have reached age 75. At retirement an employee
may elect to receive (1) annual supplemental retirement income equal to 20% of
the employee's final annual salary payable for a period of ten years after age
62; or (2) other available post retirement benefits which are actuarially
equivalent to the ten-year payment option.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Dale A. Johnson, Mr. Thomas H. Jeffs II and Ms. Helen O. Petrauskas
serve on the Compensation Committee of MCN. Mr. Jeffs is an executive officer of
NBD Bank Michigan. Mr. Alfred R. Glancy III, Chairman, President and Chief
Executive Officer of MCN, serves as a Director of NBD Bank Michigan.
MCN prohibits an officer-director of MCN from serving on the compensation
committee of an unaffiliated corporation if an officer-director of the
unaffiliated corporation serves on the MCN Compensation Committee. Also, no
director of MCN can serve on the MCN Compensation Committee if he or she is an
officer-director of an unaffiliated corporation on whose Compensation Committee
one or more officer-directors of MCN serve. Mr. Jeffs' service on the MCN
Compensation Committee and Mr. Glancy's service as a Director of NBD Bank
Michigan, are consistent with the MCN policy.
18
<PAGE> 20
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") establishes MCN's strategic
compensation objectives. The Committee then monitors and evaluates the design
and effectiveness of MCN's executive pay programs against those objectives.
Under Committee review, MCN's executive compensation programs are administered
to link executive pay with MCN's strategic direction and business objectives. As
the company continues its transition from a utility to a diversified energy
company, the Committee felt it was necessary to identify three separate sets of
comparable companies for compensation purposes to better match the three
distinct business environments of MichCon, MCNIC, and MCN.
OBJECTIVE:
The primary and overriding objective is to provide a total compensation
package that allows MCN to attract, retain and motivate executive employees. In
doing so,
- MCN establishes total compensation opportunity (base salary, annual
incentive, and long-term incentive) at competitive levels.
+Base salary levels are generally set between the 40th and 65th
percentile for each individual position within the three distinct
sets of comparable companies.
+Total cash compensation (base salary and annual incentive) is
targeted for the 65th percentile with the opportunity to exceed
that level when warranted by company and individual performance.
Company performance is measured against established financial and
operating targets.
+Long-term incentives are also targeted for the 65th percentile with
the opportunity to exceed that level when MCN performance warrants.
Performance is defined in terms of total shareholder return
relative to a peer group of companies for establishing the level of
long-term incentives granted.
METHODOLOGY:
The traditional methodology used to determine market competitiveness is an
annual survey of comparable companies as well as analysis of national and
industry executive compensation data.
- Performance, both Company and individual, drive total compensation
levels.
+The relationship of an executive's current salary in relation to
the specific marketplace data, along with an assessment of the
individual's performance against a set of objectives, determines
base pay increases.
+Annual incentives relate to attaining financial, operating, and
individual objectives.
+Long-term incentives relate to creating shareholder value.
- Variable ("incentive") compensation opportunity is set at levels to put a
significant percentage of executive compensation at risk relative to
Company performance, thus linking executive and shareholder interests.
Current programs put approximately 57% of Chairman & CEO's compensation
at-risk.
- Program design encourages and increases stock ownership by executives to
better align their interests with those of shareholders. Currently, any
final awards under the long-term incentive plan are to be paid out 50%
in stock with a requirement, except for extraordinary circumstances,
that the executives retain ownership while employed by the Company or
any of its affiliates.
- All components of executive compensation programs are communicated to
participating executives to insure they understand the opportunity (and
the risks) available based on performance, thus increasing the
motivational impact of the plans.
19
<PAGE> 21
ROLE OF THE COMMITTEE:
The Committee makes recommendations to the Board of Directors on the
compensation levels of all officers of MCN, MCNIC, and MichCon and reviews the
aggregate recommendations for base pay, annual incentive awards and long-term
incentive awards for the other senior executives of the Company. In addition,
the Committee has oversight responsibility for all the Company's compensation
programs to ensure that they are aligned with the strategic direction and
objectives of the Company.
In fulfilling these responsibilities, the Committee utilizes the Company's
internal compensation function and outside consultants to research and summarize
pay and incentive practices of comparable companies, industry averages and other
benchmarks. This year, the Committee through MCN's executive compensation staff,
again utilized Hewitt Associates to assist in this process.
SPECIFIC DISCUSSION ON THE COMPONENTS OF EXECUTIVE COMPENSATION:
The components of an MCN executive's direct compensation consist of base
salary, short-term incentives, and long-term incentives. These are discussed
below:
BASE SALARY -- The base salary of an executive is established when
entering the position based on the individual's experience in relation to
external market comparisons for that position. Annually, each executive's
salary is reviewed relative to the specific marketplace data and
adjustments are made with consideration of the individual's level of
performance.
For 1996 the Committee found, using the market data developed by
Hewitt Associates, that Mr. Glancy's base salary was at the 51st percentile
of the diversified energy company market. Therefore, the Committee
determined not to increase the base salary of Mr. Glancy. Four additional
MCN, MichCon, and MCNIC officers did not receive increases in base salary
for 1996. Twenty-two other MCN, MichCon, and MCNIC officers did receive
base salary increases for 1996 based on the same market data.
The Committee, in developing these recommendations, reviewed not only
the market for these increases, but also considered the scope and role of
the executive within the organization. In addition, the Committee factored
in the executives' contribution and results. Finally, the Committee
reviewed the base salary and incentive compensation to total compensation
levels in the marketplace.
SHORT-TERM INCENTIVES ("THE ANNUAL PERFORMANCE PLAN") -- Payout under
the Company's annual performance plan is based on the performance of the
Company and the individual executive's performance, as measured against
goals established by the Committee prior to the start of the fiscal year.
In 1995, the measures of Company performance used in determining
annual incentive awards were as follows:
- For MichCon executives, the achievement of combined financial and
operating goals. Specifically for 1995:
Return on Equity -- weighted 70%.
Customer Satisfaction -- weighted 20% (measured through
point-of-service survey).
Employee Satisfaction -- weighted 10% (measured through an annual
employee survey).
- for MCNIC, the achievement of targeted return on equity.
- for MCN, the weighted combination of MichCon and MCNIC results.
Weighting is determined annually by the Committee prior to the start
of the fiscal year. For 1995 the
20
<PAGE> 22
weighting was 70% MichCon and 30% MCNIC for most MCN employees and
75% MCNIC and 25% MichCon for those MCN employees who devote a large
majority of their time directly supporting MCNIC. For 1996 the
weighting has been established at 60% MichCon and 40% MCNIC based on
the expected financial contribution by each company in the coming
years. The weighting for MCNIC support employees was not changed.
In 1995, the target award opportunity for the Chairman & CEO was 55%
of base salary. Target awards for the 100 other executives ranged from 15%
to 50%. The adjusted award could be more or less than the target award
depending on the achievement of the Company's performance measures
discussed above. Actual payout of the award is based on individual
performance and may vary from 0% to 125% of the adjusted award amount.
Individual performance is measured using a combination of sources
including:
- the performance appraisal to measure specific accomplishments and
results, and
- leadership abilities and the executive's fiscal responsibility.
MichCon's performance in 1995, using the above measures, resulted in
an adjusted incentive award fund equal to 116% of the target payout.
MCNIC's performance in 1995, using the above measure, resulted in an
adjusted incentive award fund equal to 186% of the target payout. The
weighted performance of these two MCN subsidiaries resulted in an MCN
adjusted incentive award fund equal to 137% (70/30 weighting) of the target
award. Mr. Glancy's actual award, based on his and the Company's
performance, was $500,000 or 87% of his 1995 base salary.
In 1994, the Annual Performance Plan for executives was expanded to
include all MCN Corporate staff and MCNIC employees. Employees are eligible
to receive awards using the same funding criteria as executives. MichCon
non-executive employees including a majority of those covered by Collective
Bargaining Agreements continue to participate in the MichCon Employee
Incentive Program introduced in 1993. Awards under this program are paid on
the basis of overall Company financial and operating performance.
As a result of the overall compensation review of the market, the
Committee, in 1996, adjusted the target award opportunity for the Chairman
& CEO to 60% of base salary. Target awards for other MCN and MCNIC
executives were also raised five percentage points and range from 20% to
55% of base salary.
LONG-TERM INCENTIVES ("PERFORMANCE UNIT PLAN") -- In late 1992, the
Company redesigned its Long-Term Incentive Program to encourage a more
strategic focus on long-term performance from a shareholder perspective, to
place a larger portion of long-term incentives at-risk and increase the
retention of stock issued under the plan.
This program awards performance units to executives based on total
shareholder return covering a six-year period, as compared to a peer group
of companies. This period is divided into two parts. The first three years
determines the initial grant of performance units. Participants receive
dividend equivalents on the performance units during the subsequent
three-year period. The initial grant is adjusted upward or downward based
upon performance over the subsequent three-year period. The final award, if
any, will be paid 50% in cash and 50% in stock that must be retained,
except for extraordinary circumstances, while the participant is an
21
<PAGE> 23
employee of the Company. Both the initial grant and the final award are
based on MCN's performance ranking within its peer group using the
following:
<TABLE>
<CAPTION>
PERFORMANCE
RANKING PERCENT OF
(QUARTILE) AWARD
----------- --------------
<S> <C>
125% - 200%
First.............................
75% - 150%
Second............................
25% - 100%
Third.............................
0% - 50%
Fourth............................
</TABLE>
Individual standard awards are based on the impact of the executive's
position to corporate success and to the size of the standard grant (at
current market value) compared to base salary to achieve an appropriate
market-based relationship between base pay and incentive opportunity. In
1996, the standard award levels for executives were adjusted to focus on
the value of the award as percent of pay versus a standard range of units.
This change was necessary because the increasing value of Company stock did
not provide an appropriate match between the standard units and the
marketplace for long-term awards. The standard award for the Chairman & CEO
is now set at 75% of base pay. In 1996 this equated to 18,650 Performance
Units for Mr. Glancy.
Because of MCN's continuing transition to a diversified energy company
the Committee approved a change in the companies comprising the peer group.
Seven companies which derive most of their operating revenues from
regulated utility operations were replaced with companies that have a
business mix more closely aligned with MCN's. The old peer group will
continue to be used as the basis for issuing final awards for Performance
Units initially granted in 1994 and 1995. The new peer group will be used
as the basis for issuing final awards for Performance Units initially
granted in 1996 and after. The companies included in the respective peer
groups are identified below:
<TABLE>
<S> <C>
OLD PEER GROUP NEW PEER GROUP
-------------- --------------
Atlanta Gas Light Brooklyn Union Gas Company
Brooklyn Union Gas Company CMS Energy Corp.
CMS Energy Corp. Columbia Gas System
Columbia Gas System Consolidated Natural Gas
Consolidated Natural Gas Enron Corporation
DTE Energy Company (Detroit Edison) Enserch Corporation
Equitable Resources Equitable Resources
Laclede Gas Company K N Energy
National Fuel Gas National Fuel Gas
NICOR Inc. NorAm Energy Corp. (Arkla)
NorAm Energy Corp. (Arkla) PanEnergy Corp.
Peoples Energy Company Questar Corporation
Southwest Gas Corp. Southwestern Energy Co.
Washington Gas Light The Williams Companies
WICOR Inc. WICOR Inc.
</TABLE>
For the three-year period 1993-1995, MCN's total return to
shareholders was 82.5% which placed the Company second in the existing peer
group (third in the new peer group). Using the program guidelines above and
considering MCN's ranking, the Committee granted awards at 195% of the
standard award level. For Mr. Glancy the Committee granted 36,368
performance units. These units may as much as double or be forfeited
completely based on how MCN's total shareholder return compares to peer
companies using the above scale for the 1996-1998 period.
22
<PAGE> 24
The Performance Units initially granted in February 1993 vested in
February 1996. Although the Company finished second in the existing peer
group for the 1993-1995 period, for the entire 1990-1995 performance cycle
MCN finished first in the peer group with a total shareholder return of
185.6%. This was over 77 percentage points higher than the next closest
company. During this same six year period, MCN's total market
capitalization increased by more than $1 billion (184%). Based on that
performance, the Committee adjusted the initial units granted by 200% to
determine the final awards. The final awards were paid out 50% in cash and
50% in shares of MCN stock.
TREATMENT OF INDIVIDUAL EXECUTIVE'S COMPENSATION EXCEEDING $1 MILLION ANNUALLY
In 1994, the Company adopted a plan requiring covered executives whose
total compensation in any calendar year exceeded the $1 million limitation on
deductibility set forth on Section 162(m) of the Internal Revenue Code of 1986
to defer the excess until he or she leaves the Company. This excess amount is
placed in an account in which the value is adjusted in terms of MCN Common Stock
at prevailing market prices. Executives receive dividend equivalents on 50% of
the common stock units deferred.
CONCLUSION
We believe that MCN's Executive Compensation programs closely align each
executive's total compensation potential with individual and Company performance
as well as shareholder returns, while providing a balanced compensation mix
between base pay and incentives that is based on market and performance factors.
We believe these compensation programs will allow MCN to attract, retain and
motivate executive employees. It is the Compensation Committee's intent to
ensure that this alignment continues into the future and to review and refine
the Company's pay and incentive programs to reflect this objective.
THE COMPENSATION COMMITTEE
Dale A. Johnson, Chairman
Thomas H. Jeffs II
Helen O. Petrauskas
23
<PAGE> 25
PERFORMANCE GRAPH
COMPARISON OF $100 INVESTED IN MCN STOCK
SINCE DECEMBER 1990
WITH DIVIDENDS REINVESTED
[GRAPH CHART]
<TABLE>
<CAPTION>
OLD NEW
DATE MCN S&P 500 S&P UTILITY PEER GROUP PEER GROUP
- ---- --- ------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
12/90 $100.00 $100.00 $100.00 $100.00 $100.00
12/91 $122.18 $130.47 $114.73 $102.34 $102.50
12/92 $165.42 $140.41 $124.08 $115.56 $123.73
12/93 $195.89 $154.57 $142.02 $130.83 $157.42
12/94 $212.31 $156.61 $130.65 $116.02 $150.85
12/95 $287.25 $215.46 $185.35 $163.86 $213.37
</TABLE>
- -------------------------
(1) The above graph compares the performance of MCN Corporation with that of a
broad equity market index, the S&P 500 Composite, and a published industry
specific index, the S&P Utilities Composite. Also included is the
performance of the old peer group of companies currently used in connection
with the Company's Performance Unit Plan. In 1996, the Company will change
to the new peer group of companies to be used in connection with its
Performance Unit Plan to better reflect its current business mix. (See the
discussion of peer groups and award periods on page 22.)
In addition, due to the Company's business mix, it will no longer compare
itself to the S&P Utilities Composite after this year.
(2) The returns for each company included in the peer group are weighted
according to the company's stock market capitalization at the beginning of
each month.
24
<PAGE> 26
PROPOSAL 2 -- SELECTION OF AUDITORS
The MCN Board has selected Deloitte & Touche LLP as independent auditors to
audit the financial statements of MCN and its subsidiaries for the year ending
December 31, 1996 and is submitting its choice for ratification by shareholders.
Deloitte & Touche LLP, or its predecessors, has served as MCN's auditors since
1988 and MichCon's auditors since 1986. A representative of Deloitte & Touche
LLP will be present at the Annual Meeting of Shareholders and will have an
opportunity to make a statement and respond to appropriate questions. If the
appointment is not ratified, the MCN Board will appoint another firm as the
independent auditors for the year ending December 31, 1996.
THE MCN BOARD OF DIRECTORS RECOMMENDS THE RATIFICATION OF DELOITTE & TOUCHE
LLP AS INDEPENDENT AUDITORS, TO AUDIT THE FINANCIAL STATEMENTS OF THE
CORPORATION AND ITS SUBSIDIARIES FOR THE YEAR ENDING DECEMBER 31, 1996.
OTHER PROXY MATTERS
VOTING
Michigan law and the Company's bylaws require the presence of a quorum for
the annual meeting, defined here as a majority of the votes entitled to be cast
at the meeting. Votes withheld from director nominees and abstentions will be
counted in determining whether a quorum has been reached.
Assuming a quorum has been reached, a determination must be made as to the
results of the vote on each matter submitted for shareholders approval. The
director nominees must receive a plurality of the votes cast at the meeting;
therefore, abstentions will not affect the election of directors. The selection
of the Company's auditors must be approved by a majority of the votes cast at
the meeting; therefore, abstentions will not affect the selection of the
Company's auditors.
Under the rules of the New York Stock Exchange ("NYSE"), brokers who hold
shares on behalf of their customers (shares held in street name), have the
authority to vote on certain items when they have not received instructions from
beneficial owners. However, brokers are not authorized to vote on "non-routine"
matters if they do not receive instructions from beneficial owners ("Broker
Non-votes"). Under NYSE rules, all the matters presently before the meeting are
"routine" matters, therefore brokers holding shares in street name for their
customers may vote, in their discretion, on behalf of any customer who does not
furnish voting instructions. If a "non-routine" matter comes before the meeting,
Broker Non-votes will not be treated as votes cast in determining the outcome of
the vote.
COST OF SOLICITATION OF PROXIES
The cost of soliciting Proxies will be borne by MCN and the solicitation
will be made by use of the mails, personally or by telephone or telegraph by
officers, directors and regular employees of MCN and its subsidiaries who will
not be additionally compensated therefor. The firm of Corporate Investor
Communications, Inc. has been retained to assist with the solicitation of broker
and nominee Proxies at a cost of approximately $6,000. MCN will also reimburse
banks, brokers, nominees and other fiduciaries for reasonable expenses incurred
by them in forwarding the Proxy material to the beneficial owners of MCN Common
Stock.
FILINGS UNDER SECTION 16(A)
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, chief financial officer, chief accounting officer and
directors to file reports with the Securities and Exchange Commission ("SEC") of
ownership and changes in ownership of the
25
<PAGE> 27
Company's equity securities. Patrick Zurlinden was named Chief Accounting
Officer of MCN on June 24, 1993. The aforementioned reports for Mr. Zurlinden
were not filed in a timely manner. Subsequently, reports for Mr. Zurlinden's
initial holdings, along with all his purchases, which were limited to those made
through the Company's Savings Plan and its Dividend Reinvestment Plan, of 370
shares in 1993 and 685 shares in 1994, were filed in May 1995.
SHAREHOLDER PROPOSALS
Shareholder proposals to be considered for inclusion in MCN's 1997 proxy
statement for presentation at the 1997 Annual Meeting of Shareholders must be
received by the Secretary of MCN at 500 Griswold Street, Detroit, Michigan
48226, no later than November 4, 1996. Other shareholder proposals concerning
business to be conducted at MCN's annual meeting must be received by the
Secretary of MCN at 500 Griswold Street, Detroit, Michigan 48226 not earlier
than January 25, 1997 nor later than February 24, 1997.
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<PAGE> 28
500 Griswold Street
Detroit, Michigan 48226
<PAGE> 29
/X/ Please mark your votes as in this example. 4769
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted "FOR" all of the
Board of Directors' nominees and "FOR" proposal 2.
The Board of Directors recommends a vote FOR Proposals 1 and 2.
1. Election of Directors FOR WITHHELD FOR ALL EXCEPT
/ / / / / /
NOMINEES:
STEPHEN E. EWING, ROGER FRIDHOLM, HELEN O. PETRAUSKAS AND BILL M. THOMPSON
IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR NOMINEE, MARK THE "FOR
ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NOMINEE(S) NAME. YOUR SHARES WILL
BE VOTED FOR THE REMAINING NOMINEE(S).
2. Ratification of appointment of Deloitte FOR AGAINST ABSTAIN
& Touche LLP as independent auditors / / / / / /
for the year ending December 31, 1996.
3. In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting or adjournments.
Mark box at right to request that an Attendance Card to the / /
Annual Meeting be sent to you.
Mark box at right if comments have been noted on the / /
reverse side of this card.
Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
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SIGNATURE(S) DATE
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FOLD AND DETACH HERE
[MCN LOGO]
500 GRISWOLD
DETROIT, MICHIGAN 48226
Dear Shareholder:
Your vote is very important to the successful conduct of the company's
business. I strongly encourage you to exercise your right to vote your shares.
We must receive your vote prior to the Annual Meeting of Shareholders on April
25, 1996.
Please mark the boxes on the proxy card to indicate how you wish to vote your
shares. Then sign, date and detach the card and return it in the enclosed
postage-paid envelope. If you expect to attend the Annual Meeting, please mark
the appropriate box above and an Attendance Card will be mailed to you prior to
the meeting.
We look forward to meeting you if you are able to attend the Annual Meeting and
thank you for promptly returning your proxy card.
Sincerely,
A. R. Glancy III
Alfred R. Glancy III
Chairman, President
& Chief Executive Officer
<PAGE> 30
PROXY
[MCN CORPORATION LOGO]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MCN CORPORATION
The undersigned, having received the proxy soliciting material relative to the
Annual Meeting, hereby (i) appoints Alfred R. Glancy III, William K. McCrackin
and Daniel L. Schiffer, or any one of them, as Proxies with full power of
substitution, for and in the name of the undersigned, to vote all shares of
Common Stock of MCN Corporation owned of record by the undersigned, and (ii)
directs Putnam Fiduciary Trust Company, Trustee under the MichCon Savings and
Stock Ownership Plan and Trustee under the MichCon Investment and Stock
Ownership Plan, to vote in person or by proxy all shares of Common Stock of MCN
Corporation allocated to any accounts of the undersigned under such Plans, and
which the undersigned is entitled to vote, in each case, on all matters which
may come before the 1996 Annual Meeting of Shareholders to be held at the
Company's Headquarters in the Guardian Building, 32nd Floor Auditorium, 500
Griswold, Detroit, Michigan on April 25, 1996 at 1:00 p.m. Eastern Daylight
Savings Time, and any adjournments, unless otherwise specified herein. The
Proxies, in their discretion, are further authorized to vote for the election
of a person to the Board of Directors if any nominee named herein becomes
unable to serve or for good cause will not serve, are further authorized to
vote on matters which the Board of Directors does not know a reasonable time
before making the proxy solicitation will be presented at the meeting, and are
further authorized to vote on other matters which may properly come before the
1996 Annual Meeting and any adjournments.
DO YOU HAVE ANY COMMENTS?
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