<PAGE> 1
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. )
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 Energy Group Inc.
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(Name of Registrant as Specified in Its Charter)
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(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:
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(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):
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date filed:
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<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Letter from the Chairman.................................... 3
Notice of 1998 Annual Meeting of Shareholders............... 4
Proxy Statement............................................. 5
- - Proposal 1 -- Election of Directors....................... 5
Committees of the MCN Board............................... 10
Beneficial Security Ownership of Directors, Nominees and
Executive Officers........................................ 11
- Executive Stock Ownership Guidelines.................... 12
Security Ownership of Certain Beneficial Owners........... 12
Compensation of Directors and Executive Officers.......... 12
- Directors' Compensation................................. 12
- Executives' Compensation................................ 13
- Other Compensation Matters.............................. 14
Report of the Compensation Committee of The Board of
Directors on Executive Compensation..................... 18
Performance Graphs........................................ 23
- - Proposal 2 -- Amendment to the MCN Energy Group Inc.
Articles of Incorporation to increase the number of
authorized shares of MCN Common Stock, of the par value of
$.01 per share, from 100 million to 250 million........... 25
- - Proposal 3 -- Amendment to the MCN Energy Group Inc.
Articles of Incorporation to change the number of
directors of the Company from "not fewer than seven, nor
more than ten" to "not fewer than nine, nor more than
twelve"................................................... 25
- - Proposal 4 -- Selection of Auditors....................... 25
Other Proxy Matters......................................... 26
</TABLE>
- -------------------------
- - Denotes items to be voted on at the meeting.
<PAGE> 3
MCN ENERGY GROUP INC. LOGO
<TABLE>
<S> <C>
ALFRED R. GLANCY III 500 Griswold Street
Chairman, President and Detroit, Michigan 48226
Chief Executive Officer
</TABLE>
February 27, 1998
To our Shareholders:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders
of MCN Energy Group Inc. This year's meeting will be held at the Company's
headquarters in Detroit, Michigan on Wednesday, April 22, 1998 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 ENSURE YOUR SHARES ARE REPRESENTED AT THE MEETING BY PROMPTLY
COMPLETING, SIGNING, DATING AND RETURNING YOUR PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
I would like to thank Dale Johnson for his contributions during his years
on the MCN Board and to welcome Jim Berges, Vice Chairman of Emerson Electric
Company, who has been nominated to fill Mr. Johnson's seat on the board. Mr.
Berges comes to us with an extensive background in international operations.
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,
/s/ALFRED R. GLANCY III
3
<PAGE> 4
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS OF MCN ENERGY GROUP, INC.
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1:00 p.m., April 22, 1998
Guardian Building, 32nd Floor Auditorium
500 Griswold St.
Detroit, Michigan 48226
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February 27, 1998
To our Shareholders:
The 1998 Annual Meeting of Shareholders of MCN Energy Group Inc. will be
held at the Company's headquarters in the Guardian Building, 32nd Floor
Auditorium, 500 Griswold Street, Detroit, Michigan on Wednesday, April 22, 1998
at 1:00 p.m., Eastern Daylight-Saving Time. Shareholders will act on the
following matters:
(1) ELECTION OF FOUR DIRECTORS TO SERVE FOR TERMS OF THREE YEARS;
(2) APPROVAL OF AN AMENDMENT TO THE ARTICLES OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF MCN COMMON STOCK, OF THE PAR VALUE
OF $.01 PER SHARE, FROM 100 MILLION TO 250 MILLION;
(3) APPROVAL OF AN AMENDMENT TO THE ARTICLES OF INCORPORATION TO CHANGE THE
NUMBER OF DIRECTORS OF THE COMPANY FROM "NOT FEWER THAN SEVEN, NOR MORE
THAN TEN" TO "NOT FEWER THAN NINE, NOR MORE THAN TWELVE";
(4) RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT
AUDITORS FOR THE YEAR ENDING DECEMBER 31, 1998; AND
(5) 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 25, 1998 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
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<PAGE> 5
[MCN ENERGY GROUP INC. LOGO]
PROXY STATEMENT
The Board of Directors of MCN Energy Group Inc. (the "MCN Board") solicits
your proxy for use at the Annual Meeting of Shareholders of MCN Energy Group
Inc. ("MCN" or the "Company") to be held on Wednesday, April 22, 1998 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, 1998.
In the following pages, you will find information on your Board of
Directors, both the candidates proposed for election and continuing Directors,
and additional proposals to increase the number of authorized shares of MCN
Common Stock, to change the number of directors of the Company from "not fewer
than seven, nor more than ten" to "not fewer than nine, nor more than twelve",
and for ratification of the appointment of auditors, all 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 to help you decide
how to vote.
As of February 25, 1998, the record date for determination of shareholders
entitled to notice of and to vote at the Annual Meeting, there were 78,718,473
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.
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 currently 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 James G. Berges, Thomas H. Jeffs II, William K.
McCrackin and Bill M. Thompson to three-year terms as directors. With the
exception of Mr. Berges, each of the nominees is a current member of the MCN
Board. Mr. Berges is recommended for election to the MCN Board to fill the
position vacated by Dale A. Johnson, who has decided not to seek re-election.
Mr. Jeffs and Mr. McCrackin have served the previous full term, while Mr.
Thompson has served the last two years filling the position vacated by Arthur L.
Johnson, who retired from the Board. 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 four directors nominated for a term of three
years and the six continuing MCN Board members is set forth on pages 6 through
9.
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<PAGE> 6
NOMINEES FOR ELECTION AS DIRECTORS FOR THREE-YEAR TERMS TO EXPIRE IN 2001
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JAMES G. BERGES PHOTO
JAMES G. BERGES, 50
Mr. Berges has been Vice Chairman of Emerson Electric Co., a
manufacturer of electrical, electromechanical, and electronic
products and systems, since April 1997. He was previously
Executive Vice President from 1990 through March 1997. Mr.
Berges is also Chairman of F.G. Wilson, a joint venture with
Caterpillar and EGS Electrical Group, a joint venture with
General Signal. He is a Director of Emerson Electric and Astec
(BSR) Plc.
Mr. Berges is a Board Member of the St. Louis Regional Housing
Alliance and has been active in various roles with the United
Way of Greater St. Louis.
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THOMAS H. JEFFS II PHOTO
THOMAS H. JEFFS II, 59, DIRECTOR SINCE 1991
Attendance: 100% of Board and Committee Meetings
Mr. Jeffs assumed his current duties as Vice Chairman of First
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 First Chicago NBD Corporation and NBD Bank Michigan.
He is Chairman of New Detroit, Inc. and a Director of The
Economic Club of Detroit, Detroit Renaissance, Inc. and Local
Initiatives Support Corporation of New York, New York. He is also a Director of
Intermet Corporation. 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 Director 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.
6
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NOMINEES FOR ELECTION AS DIRECTORS FOR THREE-YEAR TERMS TO EXPIRE IN 2001
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WILLIAM K. MCCRACKIN PHOTO
WILLIAM K. MCCRACKIN, 64, 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
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 MCN Investment Corporation ("MCNIC") since 1988 and a
Director of MichCon since 1984.
Mr. McCrackin is Chairman of Junior Achievement of Southeastern
Michigan and a member of the Finance Committee of United Way
Community Services. Mr. McCrackin has also served as a Director of Mercy Health
Services.
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BILL M. THOMPSON PHOTO
BILL M. THOMPSON, 65, DIRECTOR SINCE 1996
Attendance: 100% of Board and Committee Meetings
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 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 of Phillips Petroleum Company in 1988.
Mr. Thompson serves on the Board of Directors of The University of Texas College
of Engineering Foundation Advisory Council, Chapelwood United Methodist Church
in Houston, Texas. 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 JAMES G. BERGES,
THOMAS H. JEFFS II, WILLIAM K. MCCRACKIN AND BILL M. THOMPSON TO THE BOARD OF
DIRECTORS.
7
<PAGE> 8
CONTINUING DIRECTORS WHOSE TERM EXPIRES IN 1999
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STEPHEN E. EWING PHOTO
STEPHEN E. EWING, 54, 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
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 Chairman of the Detroit Economic Growth
Corporation, the National Gas Vehicle Coalition and Oakwood
Healthcare, Inc.. He is past Chairman of the 1997 United Way
Community Services Torch Drive, Greater Detroit Area Health Council,
Metropolitan Affairs Corporation and the Midwest Gas Association. He is a board
member of the Michigan Jobs Commission, Detroit Renaissance, Michigan Opera
Theater, Institute of Gas Technology 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.
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ROGER FRIDHOLM PHOTO
ROGER FRIDHOLM, 57, 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
President of IPG Services Corporation, both of which are
staffing 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-Michigan, and MascoTech, Inc.
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HELEN O. PETRAUSKAS PHOTO
HELEN O. PETRAUSKAS, 54, DIRECTOR SINCE 1990
Attendance: 93% of Board and Committee Meetings
Ms. Petrauskas has been Vice President for Environmental and
Safety Engineering with Ford Motor Company since 1983.
Ms. Petrauskas is a Director of The Sherwin-Williams Company, a
member of the Board of Governors of Argonne National Laboratory
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.
8
<PAGE> 9
CONTINUING DIRECTORS WHOSE TERM EXPIRES IN 2000
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ALFRED R. GLANCY III PHOTO
ALFRED R. GLANCY III, 60, DIRECTOR SINCE 1988
Attendance: 100% of Board Meetings
Mr. Glancy has been Chairman and Chief Executive Officer of MCN
since August 1988 and President since September 1992. He has
been Chairman of 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 the Executive Committee of Detroit
Renaissance, Inc., Chairman of Detroit Symphony Orchestra Hall,
Inc., and past Chairman of The Detroit Medical Center, Detroit
Renaissance, Detroit Economic Growth Corporation and New Detroit, Inc. He is a
Director of the Detroit Institute of Arts, United Way Community Services,
Community Foundation for Southeastern Michigan, NBD Bank Michigan, Morton
Industrial Group, Citizens Research Council of Michigan, Greater Downtown
Partnership, Greater Detroit Chamber of Commerce and the Hudson-Webber
Foundation. He is the Vice-Chairman of UNICO Investment in Seattle, Washington.
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FRANK M. HENNESSEY PHOTO
FRANK M. HENNESSEY, 59, DIRECTOR SINCE 1988
Attendance: 94% of Board and Committee Meetings
Mr. Hennessey has been Vice Chairman and Chief Executive Officer
of MascoTech, Inc. since January 1998. He was formerly Executive
Vice President of Masco Corporation. Mr. Hennessey is the
Chairman of 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 of the Hudson-Webber Foundation and a Director of New
Detroit, Inc. He is a Director and Treasurer of United Way Community Services,
and Trustee of the Citizens Research Council of Michigan, as well as, Chairman
of the Greater Detroit and Windsor Japan American Society.
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HOWARD F. SIMS PHOTO
HOWARD F. SIMS, 64, DIRECTOR SINCE 1988
Attendance: 100% of Board and Committee Meetings
Mr. Sims is Chairman and Chief Executive Officer of Sims-Varner
& Associates, PLLC, an architecture, engineering and planning
firm, and has been a practicing architect since 1963. He also
serves as Chairman of The SVA Group and SV Associates, LLC, both
engaged in architecture and planning.
Mr. Sims is a Director of Comerica Incorporated, NICO Ventures,
Citizens Research Council of Michigan, Greater Detroit Area
Health Council and United Way Community Services. He is a
Trustee of the Kellogg Foundation, Karmanos Cancer Institute,
The Community Foundation of Southeast Michigan and WTVS. Mr. Sims is a member of
the Executive Board of the Detroit Area Council, Boy Scouts of America.
9
<PAGE> 10
COMMITTEES OF THE MCN BOARD
The MCN Board held ten regular meetings and one special meeting during
1997. 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 25, 1998 is identified below.
AUDIT COMMITTEE
Frank M. Hennessey, Chairman
Dale A. Johnson
Bill M. Thompson
- - Recommends the selection of the Company's independent auditors;
- - Reviews the scope of audit procedures, the results of the respective audits,
and audit 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 1997
COMPENSATION COMMITTEE
Thomas H. Jeffs II, Chairman
Roger Fridholm
Dale A. Johnson
Howard Sims
- - 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.
1 meeting in 1997
FINANCE COMMITTEE
Helen O. Petrauskas, Chairman
Roger Fridholm
Frank M. Hennessey
Thomas H. Jeffs II
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 1997
CORPORATE GOVERNANCE AND
NOMINATING COMMITTEE
Bill M. Thompson, Chairman
Helen O. Petrauskas
Howard F. Sims
- - Screens and recommends candidates for the Company's Board of Directors;
- - Reviews matters of corporate governance to ensure continued alignment with
shareholder interests;
- - Reviews efforts of the Company to meet responsibilities to non-owner
stakeholders;
- - Makes recommendations regarding the effectiveness of the Board and the duties
of the committees; and
- - Consults with management regarding community involvement and philanthropic
contributions from the Company and its subsidiaries and foundations.
2 meetings in 1997
10
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BENEFICIAL SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table includes MCN Common Stock and stock-based holdings, as
of February 25, 1998, of the Company's chief executive officer and its four most
highly-compensated executive officers in 1997 (collectively, the "Named
Executive Officers") and its directors and nominees.
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COMMON STOCK AND TOTAL STOCK-BASED HOLDINGS
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<TABLE>
<CAPTION>
COMMON STOCK
OWNERSHIP
---------------------- STOCK
NAME AMOUNT(1) PERCENT EQUIVALENTS(2) TOTAL
---- --------- ------- -------------- ---------
<S> <C> <C> <C> <C>
Alfred R. Glancy III.......................... 254,402(3) .3% 304,542 558,944
Rai P. K. Bhargava............................ 123,528(3) .2% 90,749 214,277
Stephen E. Ewing.............................. 41,920(3) .1% 110,979 152,899
William K. McCrackin.......................... 45,552(3) .1% 109,146 154,698
Daniel L. Schiffer............................ 40,280(3) .1% 28,780 69,060
James G. Berges............................... 100 * -- 100
Roger Fridholm................................ 10,300(4) * 2,742 13,042
Frank M. Hennessey............................ 10,905 * 2,851 13,756
Thomas H. Jeffs II............................ 5,000 * 2,844 7,844
Dale A. Johnson............................... 6,490 * 2,872 9,362
Helen O. Petrauskas........................... 3,019 * 2,565 5,584
Howard F. Sims................................ 2,944 * 3,063 6,007
Bill M. Thompson.............................. 3,400 * 2,050 5,450
Directors, nominees and executive officers
as a group.................................... 547,840 .7% 663,183 1,211,023
</TABLE>
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* 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 granted or deferred under the MCN Energy Group Inc. Stock
Incentive Plan, deferred stock units under the MCN Energy Group Inc.
Mandatory Deferred Compensation Plan, and performance shares under the MCN
Energy Group Inc. Nonemployee Directors' Compensation Plan.
(3) Includes shares held in the MCN Energy Group 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 2,100 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.
11
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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. In 1998, those
guidelines were amended to require larger share ownership. This change was made
to align further the interests of each executive and external director to that
of the shareholders. Current guidelines require the Chairman & CEO to own stock
with a value at least eight times annual salary. Other executive and director
stock ownership guidelines range from one to five 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 25,
1998, 100% of the Named Executive Officers and directors meet or exceed the
guidelines. All MCN, MichCon and MCNIC officers other than two recently hired,
meet or exceed guidelines. The average stockholdings at February 25, 1998 for
the Named Executive Officers and directors as a multiple of salary or retainer
fee is 12.8 times. The comparable relationship for all MCN, MichCon and MCNIC
officers and directors is 8.6 times at February 25, 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Based on a Schedule 13G for the year ended December 31, 1997, filed with
the Securities and Exchange Commission, the information set forth below with
respect to the beneficial owners of more than five percent of MCN Common Stock.
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS SHARES PERCENT OF CLASS
---------------- --------- ----------------
<S> <C> <C>
The Capital Group Companies, Inc. .......... 4,006,000(1) 5.1%
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
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(1) As reflected in a statement on Schedule 13G dated February 10, 1998, The
Capital Group Companies, Inc., does not have investment power or voting
power over any of the securities reported in Schedule 13G; however, The
Capital Group Companies, Inc. may be deemed to "beneficially own" such
securities by virtue of Rule 13d-3 under the Securities Exchange Act of
1934.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS' COMPENSATION
As of April 1, 1997 Non-officer Directors receive an annual fee of $30,000.
Additionally, each year Non-officer Directors receive performance shares worth
approximately $30,000, calculated at the beginning of the fiscal year and
rounded to the nearest 100 shares. Non-officer Directors are permitted to defer
all or a portion of their cash retainer fee in performance shares. The
performance shares will be credited to deferral accounts established for each
Non-officer Director. The value of the performance shares held in each
Non-officer Directors' account will increase/decrease as the value of the
underlying MCN Common Stock increases/decreases and the account will be credited
with dividend equivalents equal to one-half of the common stock dividend rate.
Upon the Non-officer Director's death or retirement, the value of the
performance shares will be paid out in shares of MCN Common Stock over a period
of one to fifteen years as elected by the Non-officer Director. Based on the
elections of the Non-officer Directors, 100% of their compensation will be in
the form of performance shares, further aligning the interests of each
Non-officer Director and shareholders by tying compensation to the value of MCN
Common Stock.
12
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EXECUTIVES' COMPENSATION
The following table sets forth the aggregate compensation paid or awarded
for performance from 1995 through 1997 to the Named Executive Officers of MCN.
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SUMMARY COMPENSATION TABLE
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<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL -----------------------------
COMPENSATION(1) RESTRICTED ALL OTHER
----------------------- STOCK LTIP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(2) AWARD($)(3) PAYOUT($)(1)(4) ($)(5)
--------------------------- ---- --------- ----------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
A. R. GLANCY III................ 1997 620,833 500,000 -- 2,382,016 37,541
Chairman, President, & Chief 1996 575,000 520,000 -- 1,984,000 34,500
Executive Officer 1995 543,750 500,000 -- 1,504,800 32,625
S. E. EWING..................... 1997 356,667 240,000 -- 1,339,884 20,802
President & Chief Executive 1996 335,625 136,000 -- 1,240,000 20,138
Officer, MichCon 1995 322,500 170,000 -- 940,500 17,738
W. K. MCCRACKIN................. 1997 335,833 260,000 -- 1,191,008 20,307
Vice Chairman & Chief 1996 306,875 210,000 -- 1,240,000 18,413
Financial Officer 1995 282,500 175,000 -- 808,830 16,950
R. P. K. BHARGAVA............... 1997 322,500 325,000 770,383 1,042,132 13,852
President & Chief Executive 1996 273,750 350,000 490,200 1,240,000 12,188
Officer, MCNIC 1995 227,500 260,000 379,022 413,820 10,375
D. L. SCHIFFER.................. 1997 237,500 150,000 -- 744,380 11,217
Senior Vice President, General 1996 220,000 109,000 -- 620,000 10,600
Counsel & Secretary 1995 195,575 90,000 -- 376,200 9,629
</TABLE>
- -------------------------
(1) Includes amounts received or deferred.
(2) Amounts under the MCN Energy Group Inc. 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) Beginning with the 1992 performance year, the Company revised its Stock
Incentive Plan replacing restricted stock awards with performance units. The
Company's current use of restricted stock is limited to Mr. Bhargava's
Special Retention Agreement described on page 15, and special situations,
such as the retention of newly hired executives. As of December 31, 1997,
the aggregate restricted stock holdings of Mr. Bhargava consisted of 31,094
shares worth $1,255,420. Regular dividends are paid on the restricted stock.
(4) Amounts shown in this column represent the dollar value of final payouts of
previous awards pursuant to the Long-Term Incentive Plan for the 6 year
periods 1990 through 1995, 1991 through 1996, and 1992 through 1997,
respectively. See page 20 for a detailed description of the plan.
(5) Amounts shown in this column represent the Company's contributions to
defined contribution plans.
13
<PAGE> 14
Beginning with the 1992 performance year, the Company adopted a Performance
Unit Plan pursuant to the Long-Term 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 25, 1998 for the 1995 to 1997 performance period to the Named Executive
Officers are indicated in the table below.
- --------------------------------------------------------------------------------
LONG-TERM INCENTIVE PLAN AWARDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
OR OTHER NON-STOCK PRICE-BASED PLANS
PERIOD UNTIL -------------------------------
NUMBER OF MATURATION THRESHOLD TARGET MAXIMUM
NAME UNITS(#) OR PAYOUT (#) (#) (#)
---- --------- ------------ --------- ------ -------
<S> <C> <C> <C> <C> <C>
A. R. Glancy III...... 39,600 3 years 0 39,600 79,200
S. E. Ewing........... 14,250 3 years 0 14,250 28,500
W. K. McCrackin....... 15,750 3 years 0 15,750 31,500
R. P. K. Bhargava..... 22,500 3 years 0 22,500 45,000
D. L. Schiffer........ 4,800 3 years 0 4,800 9,600
</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 21) 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 21.) The final award, which will be payable in MCN
Common Stock, will range from zero to 200% of the initial grant. Alternatively,
participants are provided with the option of deferring their awards until their
employment terminates. The deferrals are in the form of common stock equivalents
that earn dividend equivalents equal to one-half of the common stock dividend.
Final awards are included as Long-Term Incentive Payouts in the Summary
Compensation Table on page 13 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 later of the change of control or the consummation of a
change of control transaction. The agreements 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 16, the Supplemental
Death Benefit and Retirement Income Plan discussed on page 16 and the
14
<PAGE> 15
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 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. The threshold and target ROE levels will be 11% and 13%,
respectively for 1998. 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
$848,612, including interest, during 1997. A balance of $718,792, including
interest, was outstanding as of December 31, 1997. The loan is secured by
169,628 shares of MCN Common Stock with a year-end market value of $6,848,731.
15
<PAGE> 16
RETIREMENT PLANS
- --------------------------------------------------------------------------------
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RETIREMENT BENEFIT FOR YEARS OF SERVICE
--------------------------------------------------------------------
FINAL AVERAGE 20 25 30 35 40 45
ANNUAL EARNINGS YEARS YEARS YEARS YEARS YEARS YEARS
- --------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$150,000.................... $ 54,700 $ 68,400 $ 82,100 $ 95,700 $105,700 $115,600
200,000.................... 73,000 91,300 109,500 127,800 141,000 154,300
250,000.................... 91,300 114,100 137,000 159,800 176,400 193,000
300,000.................... 109,600 137,000 164,400 191,800 211,700 231,600
350,000.................... 127,900 159,900 191,900 223,800 247,100 270,300
400,000.................... 146,200 182,800 219,300 255,900 282,400 309,000
450,000.................... 164,500 205,600 246,800 287,900 317,800 347,700
500,000.................... 182,800 228,500 274,200 319,900 353,100 386,300
550,000.................... 241,800 276,100 301,600 351,900 388,500 425,000
600,000.................... 263,800 301,300 329,100 383,900 423,800 463,700
650,000.................... 285,800 326,400 356,500 415,900 459,100 502,400
700,000.................... 307,800 351,500 384,000 447,900 494,500 541,000
</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, 1997, the credited years of service (rounded to the
nearest whole year) for the Named Executive Officers are as follows: Mr. Glancy,
35 years; Mr. Ewing, 26 years; Mr. McCrackin, 42 years; Mr. Bhargava, 23 years
and Mr. Schiffer, 21 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
16
<PAGE> 17
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 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. Thomas H. Jeffs II, Mr. Roger Fridholm, Mr. Dale A. Johnson, and Mr.
Howard Sims 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.
17
<PAGE> 18
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.
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.
- 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
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 methodology used to determine market competitiveness is an annual
survey of comparable companies as well as analysis of national and industry
executive compensation data. Three separate sets of comparable companies have
been identified to best match the three distinct business environments of MCN,
MichCon, and MCNIC.
- 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 and individual
objectives.
- Long-term incentives relate to providing a competitive total return
to shareholders.
- Variable ("incentive") compensation opportunities are set at levels to
put a significant percentage of executive compensation at risk relative
to Company performance, thus linking executive and shareholder interests.
At target payout projections, the short-term and long-term incentive
programs put nearly 80% of the Chairman & CEO's total direct 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 paid out 100% in MCN
Common Stock or common stock equivalents.
- All components of executive compensation programs are communicated to
participating employees annually to insure they understand the
opportunity (and the risks) available based on performance, thus
increasing the motivational impact of the plans. The status of actual
performance relative to the targets is communicated throughout the year
to maintain focus on the targets.
18
<PAGE> 19
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, along with MCN's executive
compensation staff, utilized Hewitt Associates to assist in this process.
SPECIFIC DISCUSSION ON THE COMPONENTS OF EXECUTIVE COMPENSATION:
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.
The Committee, in developing its recommendations, reviewed not only the
market data 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.
For 1998, the Committee found, using the market data developed by Hewitt
Associates, that Mr. Glancy's base salary was slightly below the 50th percentile
of the diversified energy company market. Therefore, the Committee determined to
increase Mr. Glancy's base salary to $675,000 (7.1% increase). Mr. Glancy's base
salary was last increased on March 1, 1997. Using the same methodology, the
committee determined that 24 other officers of MCN, MichCon, and MCNIC should
receive base salary increases averaging 11.9%. Eleven other officers did not
receive any increase in base salary.
SHORT-TERM INCENTIVES ("THE ANNUAL PERFORMANCE PLAN") -- Payout under the
Company's annual performance plan is funded based on the performance of the
Company as measured against goals established by the Committee prior to the
start of the fiscal year. For 1997 the goals were defined as Return on Equity
for MCNIC and MichCon. For 1998 the goals will also include a factor for growth
in earnings per share if such growth exceeds an average of 12% per year over the
most recent three-year period. Individual payouts are determined based on each
executive's performance.
In 1997 the target award opportunity for the Chairman & CEO was 60% of base
salary. Target awards for all other executives ranged from 15% to 55%. The
adjusted award could be more or less than the target award depending on the
achievement of the Company's performance. 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 assessment to measure specific accomplishments and
results, and
- leadership abilities and the executive's fiscal responsibility.
MichCon's performance in 1997 resulted in a calculated award fund equal to
138% of the target payout. The award fund calculated for MCNIC based on the
original ROE goal was 134%. However, in the course of the committee's
deliberations it was determined that the mechanical application of the plan
formula produced payouts that were inconsistent with the Corporation's record
performance. During the year, the Company's decision to sell common stock and
thereby reduce leverage in the long-term interest of shareholders had an
unintended negative consequence on the short-term
19
<PAGE> 20
incentive plan which, as noted above, is based on return on equity. If the 1996
capital structure were used in the bonus calculation, rather than the actual
1997 capital structure, MCNIC's incentive award fund would have exceeded 200%.
In light of the above, the Committee approved an adjusted incentive award fund
equal to 175% of the target payout for MCNIC. The weighted performance of these
two MCN subsidiaries resulted in an MCN adjusted incentive award fund equal to
153% of the target award. Mr. Glancy's actual award was $500,000, or 101% of the
funded incentive award calculated without adjustment for MCNIC referred to
above.
As a result of the overall compensation review of the market, the
Committee, for 1998, increased the target award opportunity for the President &
CEO of MichCon from 45% to 50%. The target awards for all other executives,
including the Chairman & CEO of MCN at 60% of base salary, remain unchanged.
LONG-TERM INCENTIVES ("PERFORMANCE UNIT PLAN") -- This program annually
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, is paid 100% in MCN Common Stock or
may be deferred in common stock equivalents. One half of any shares not deferred
may be sold to satisfy tax withholding obligations. The remaining shares must be
retained until the recipient meets or exceeds specified stock ownership
guidelines, retires, or terminates employment with the Company. Both the initial
grant and the final award are based on MCN's performance ranking within its peer
group using the following parameters:
<TABLE>
<CAPTION>
PERFORMANCE
RANKING PERCENT OF
(QUARTILE) AWARD
----------- ----------
<S> <C> <C>
First....................................... 125% - 200%
Second...................................... 75% - 150%
Third....................................... 25% - 100%
Fourth...................................... 0% - 50%
</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. The target award
levels, which are expressed as a percentage of the 50th percentile base salary,
are reviewed annually as part of the overall compensation survey analysis. The
1997 executive compensation survey and review clearly indicated that MCN's
target award levels for executives significantly lagged the marketplace. The lag
from the marketplace primarily reflects two factors. First, while MCN adjusts
the target award levels to reflect changes in the Company's stock price, stock
option award levels used by peer companies are typically not adjusted to reflect
stock price appreciation. Second, the growth in the size of the company relative
to its peers and the need to adjust award levels to be consistent with the
Company's stated compensation objective of targeting long-term incentives to the
65th percentile. As a result, the standard award for the Chairman & CEO was
increased from 85% to 160% of base salary. In 1998 this equated to 26,400
performance units (based on an average stock price of $38.28 for the period
December 17, 1997 through January 15, 1998) for Mr. Glancy. Standard awards for
other executives were also significantly increased.
In 1996 the Committee approved the use of a new peer group to recognize
MCN's transition to a diversified energy company; however, the old peer group
was used as the basis for issuing final awards for performance units initially
granted in 1995. The new peer group will be used as the basis
20
<PAGE> 21
for final awards for performance units granted in 1996 and subsequent years. The
companies currently included in the respective peer groups are identified below:
<TABLE>
<CAPTION>
OLD PEER GROUP NEW PEER GROUP
-------------- --------------
<S> <C>
Atlanta Gas Light Company Brooklyn Union Gas Company
Brooklyn Union Gas Company CMS Energy Corporation
CMS Energy Corporation Coastal Corporation
Columbia Gas System, Inc. Columbia Gas System, Inc.
Consolidated Natural Gas Company Consolidated Natural Gas Company
DTE Energy Company (Detroit Edison) Enron Corporation
Equitable Resources, Inc. Equitable Resources, Inc.
Laclede Gas Company KN Energy, Inc.
National Fuel Gas Company National Fuel Gas Company
NICOR Inc. ONEOK Inc.
ONEOK Inc. Questar Corporation
Peoples Energy Corporation Sonat Inc.
Southwest Gas Corporation Southwestern Energy Company
Washington Gas Light Company The Williams Companies
WICOR, Inc. WICOR, Inc.
</TABLE>
For the three-year period 1995-1997, MCN's total return to shareholders was
144%, which placed the Company fifth in the new peer group. Using the program
guidelines above, and considering MCN's ranking, the Committee granted 1998
performance units at 150% of the standard award level. For Mr. Glancy the
Committee granted 39,600 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 1998-2000 period.
The Performance Units initially granted in February 1995 vested in February
1998. The Company finished third in the old peer group for the 1995-1997 period;
however, for the entire 1992-1997 performance cycle MCN finished second in the
peer group with a total shareholder return of 336%. During this same six year
period, MCN's total market capitalization increased by approximately $2.3
billion (357%) and shareholder value, based on the number of shares outstanding
on December 31, 1991, increased by approximately $1.5 billion (231%). Based on
that performance, the Committee adjusted the initial units granted by 200% to
determine the final awards.
TREATMENT OF INDIVIDUAL EXECUTIVE WITH 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.
21
<PAGE> 22
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
Thomas H. Jeffs II, Chairman
Roger Fridholm
Dale A. Johnson
Howard F. Sims
22
<PAGE> 23
PERFORMANCE GRAPHS
COMPARISON OF $100 INVESTED IN MCN STOCK
SINCE DECEMBER 1992
WITH DIVIDENDS REINVESTED
[LINE GRAPH]
<TABLE>
<CAPTION>
OLD NEW
DATE MCN S&P 500 PEER GROUP PEER GROUP
<S> <C> <C> <C> <C>
12/92 $100.00 $100.00 $100.00 $100.00
12/93 $118.42 $110.04 $113.97 $125.54
12/94 $128.34 $111.48 $102.05 $123.41
12/95 $173.65 $153.33 $142.87 $173.08
12/96 $223.57 $188.51 $172.31 $221.40
12/97 $322.37 $251.39 $213.29 $270.56
</TABLE>
- -------------------------
(1) The above graph compares the performance of MCN with that of a broad equity
market index, the S&P 500 Composite. Also included is the performance of the
old peer group of companies which is used in connection with the payout for
the vesting of Performance units initially granted in 1995. In 1996, the
Company changed 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 21.)
(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.
23
<PAGE> 24
COMPARISON OF $100 INVESTED IN MCN STOCK
SINCE JUNE 1988(1)
WITH DIVIDENDS REINVESTED
[LINE GRAPH]
<TABLE>
<CAPTION>
OLD NEW
DATE MCN S&P 500 PEER GROUP PEER GROUP
<S> <C> <C> <C> <C>
6/88 $100.00 $100.00 $100.00 $100.00
12/88 $100.94 $108.17 $120.88 $109.36
12/89 $137.34 $142.37 $177.61 $167.27
12/90 $136.30 $137.96 $173.70 $160.42
12/91 $166.53 $179.90 $185.44 $160.93
12/92 $225.47 $193.59 $213.18 $199.30
12/93 $267.00 $213.02 $242.97 $250.21
12/94 $289.38 $215.82 $217.56 $245.97
12/95 $391.53 $296.83 $304.56 $344.95
12/96 $504.09 $364.94 $367.34 $441.26
12/97 $726.85 $486.66 $454.69 $539.24
</TABLE>
- -------------------------
(1) The above graph compares the performance of MCN, since June 1988, when MCN
stock began trading publicly subsequent to a spin-off from Primark
Corporation, with that of a broad equity market index, the S&P 500
Composite, and a peer group of companies.
24
<PAGE> 25
PROPOSAL 2 -- INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Company currently is authorized by its Articles of Incorporation to
issue 100 million shares of MCN Common Stock. As of December 31, 1997, MCN has
issued and outstanding 78,231,889 shares of MCN Common Stock, leaving 21,768,111
shares unissued and reserved for issuance. Approval of Proposal 2 would amend
the Company's Articles of Incorporation by increasing the authorized number of
shares of MCN Common Stock to 250 million and the unissued and reserved shares
to 171,768,111. This proposal is intended to increase the Company's financial
flexibility by increasing the number of shares of MCN Common Stock that can be
issued without the necessity for further shareholder approval. The MCN Board
believes that the increased flexibility provided by the amendment will enable
the Company to respond promptly and appropriately to future financing needs,
stock splits and other business opportunities. This proposal will be adopted
upon receiving the affirmative vote of a majority of the outstanding shares of
MCN Common Stock.
Although the MCN Board will authorize the issuance of additional shares
only when it considers doing so to be in the best interests of shareholders, the
issuance of additional MCN Common Stock may, among other things, have a dilutive
effect on earnings and equity per share, and on the voting rights of holders of
shares of MCN Common Stock.
In addition to the Company's authorization to issue MCN Common Stock, the
Company is also authorized to issue 25 million shares of Preferred Stock, no par
value, of which no shares are currently outstanding.
THE MCN BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND APPROVAL OF THE
AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
PROPOSAL 3 -- APPROVAL TO AMEND THE MCN ENERGY GROUP INC. ARTICLES OF
INCORPORATION TO CHANGE THE NUMBER OF DIRECTORS OF THE COMPANY
The MCN Board proposes an amendment to the MCN Energy Group Inc. Articles
of Incorporation to change the number of directors of the Company from "not
fewer than seven, nor more than ten" to "not fewer than nine, nor more than
twelve". The change will permit the MCN Board to evolve the skills and
experience of its members to that required for a global energy company. The
number of directors will be fixed from time to time by resolution adopted by the
affirmative vote of a majority of the entire MCN Board.
THE MCN BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND APPROVAL OF THE
AMENDMENT OF THE MCN ENERGY GROUP INC. ARTICLES OF INCORPORATION TO CHANGE THE
NUMBER OF DIRECTORS OF THE COMPANY.
PROPOSAL 4 -- 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, 1998 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, 1998.
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, 1998.
25
<PAGE> 26
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. Both the
approval of the amendment of the Company's Articles of Incorporation to increase
the number of authorized shares of MCN Common Stock and the amendment to change
the number of directors of the Company must be approved by a majority of the
votes outstanding and not merely the votes cast. Therefore, abstentions will
have the same legal effect as votes against these matters. 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 therefore. The firm of D.F. King & Co., Inc. has
been retained to assist with the solicitation of broker and nominee Proxies at a
cost of approximately $7,500. 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.
SHAREHOLDER PROPOSALS
Shareholder proposals to be considered for inclusion in MCN's 1999 proxy
statement for presentation at the 1999 Annual Meeting of Shareholders must be
received no later than November 6, 1998. Other shareholder proposals concerning
business to be conducted at MCN's annual meeting must be received not earlier
than January 22, 1999 nor later than February 21, 1999. The Corporate Governance
and Nominating Committee will consider suggestions from shareholders for
nominees to the Company's Board of Directors. Such suggestions should include
appropriate biographical information.
All Shareholder proposals and nominations for the Company's Board of
Directors must be received by the Secretary of MCN at 500 Griswold Street,
Detroit, Michigan 48226.
26
<PAGE> 27
<TABLE>
<CAPTION>
500 Griswold Street
Detroit, Michigan 48226
/X/ PLEASE MARK YOUR 4769
VOTES AS IN THIS EXAMPLE.
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" PROPOSALS 2, 3 AND 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4.
<S> <C> <C>
1. Election of FOR WITHHELD FOR ALL 2. Approval to amend the FOR AGAINST ABSTAIN 3. Approval to FOR AGAINST ABSTAIN
Directors EXCEPT MCN Articles of / / / / / / amend the MCN / / / / / /
/ / / / / / Incorporation to increase Articles of Incorporation
the number of authorized to change the number of
shares of MCN Common directors of the Company.
Stock .
NOMINEES:
JAMES G. BERGES, THOMAS H. JEFFS II, WILLIAM K. MCCRACKIN 4. Ratification of FOR AGAINST ABSTAIN
AND BILL M. THOMPSON appointment of / / / / / /
Deloitte & Touche LLP as independent
IF YOU DO NOT WISH YOUR SHARES auditors for the
VOTED "FOR" A PARTICULAR NOMINEE, year ending
MARK THE "FOR ALL EXCEPT" BOX December 31, 1998.
AND STRIKE A LINE THROUGH THE
NOMINEE(S) NAME. YOUR SHARES
WILL BE VOTED FOR THE REMAINING 5. In their
NOMINEE(S). 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.
SIGNATURE(S) DATE
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FOLD AND DETACH HERE
</TABLE>
<PAGE> 28
[MCN ENERGY GROUP INC. 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 22, 1998.
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,
/S/ ALFRED R. GLANCY III
Alfred R. Glancy III
Chairman, President
& Chief Executive Officer
[MCN ENERGY GROUP INC. LOGO]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MCN ENERGY GROUP
INC.
P
R
O
X
Y
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 Energy Group Inc. owned of record by the
undersigned, and (ii) directs Putnam Fiduciary Trust Company, Trustee under
the MCN Energy Group 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 Energy Group Inc. 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
1998 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 22, 1998 at 1:00 p.m. Eastern Daylight-Saving
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 1998 Annual Meeting and any adjournments.
DO YOU HAVE ANY COMMENTS?
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FOLD AND DETACH HERE
