SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
240.14a-11(c) or 240.14a-12
The Reader's Digest Association, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Investment Company Act Rule 20a-1(c).
[ ]$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:
[ ]Fee paid previously with preliminary materials.
[ ]Check the box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
[RDA Logo]
September 28, 1995
Dear Stockholder:
You are cordially invited to attend the Annual
Meeting of Stockholders of The Reader's Digest
Association, Inc. to be held at 10:00 a.m. on Friday,
November 10, 1995, at the Company's DeWitt Wallace
Auditorium, Reader's Digest Road, Chappaqua, New York.
Driving directions and a map showing how to reach the
Wallace Auditorium appear on the last page of the
accompanying Proxy Statement.
The accompanying Notice of Meeting and Proxy
Statement describe the matters to be considered and voted
upon at the Meeting. In addition to consideration of
these matters, there will be a report to stockholders on
the affairs of the Company, and stockholders will have an
opportunity to discuss matters of interest concerning the
Company.
Although only holders of the Company's Class B Voting
Common Stock are entitled to vote at the Meeting, we
invite all stockholders of the Company, including the
holders of the Company's Class A Nonvoting Common Stock,
to attend.
If you are entitled to vote at the Meeting, it is
important that your shares be represented, whether or not
you plan to attend the Meeting personally. To ensure that
your vote will be received and counted, please promptly
complete, date and return your proxy in the enclosed
return envelope, whether or not you plan to attend the
meeting in person.
Sincerely yours,
JAMES P. SCHADT
James P. Schadt
Chairman and Chief Executive
Officer
[RDA Logo]
NOTICE OF 1995 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The Annual Meeting of Stockholders of The Reader's
Digest Association, Inc. (the "Company") will be held at the
Company's DeWitt Wallace Auditorium, Reader's Digest Road,
Chappaqua, New York, on Friday, November 10, 1995 at 10:00
a.m., New York time, to consider and take action on the
following matters:
(a) election of Directors of the Company;
(b) a proposal to approve the business
criteria, maximum amount and eligible employees
for performance-based restricted stock under
The Reader's Digest Association, Inc. 1994 Key
Employee Long Term Incentive Plan; and
(c) transaction of such other business as may
properly come before the Meeting.
Only holders of record of the Company's Class B Voting
Common Stock at the close of business on September 18, 1995
are entitled to notice of, to attend and to vote at, the
Meeting. Holders of the Company's Class A Nonvoting Common
Stock on the record date are also welcome to attend the
Meeting.
By Order of the Board of
Directors:
PAUL A. SODEN
Paul A. Soden
Vice President, General
Counsel and Corporate
Secretary
September 28, 1995
PROXY STATEMENT
GENERAL INFORMATION
Annual Meeting Time and Location
The Annual Meeting of Stockholders of The Reader's Digest
Association, Inc. (the "Company") will be held at the Company's
DeWitt Wallace Auditorium, Reader's Digest Road, Chappaqua, New
York, on Friday, November 10, 1995 at 10:00 a.m., New York time.
Driving directions and a map showing how to reach the Wallace
Auditorium appear on the last page of this Proxy Statement.
Principal Executive Offices of the Company
The principal mailing address of the executive offices of
the Company is Pleasantville, New York 10570.
Meeting Admittance Procedures
Attendance at the Meeting will be limited to stockholders of
record on the record date (as described below), or their duly
appointed proxy holders (not to exceed one per stockholder). If
you or your proxy holder plans to attend the Meeting, please
return the longer portion of the enclosed admission card. Your
name will then be placed on an admission list held at the
entrance to the Meeting. Please save the shorter portion of the
admission card. You will have to present the shorter portion of
the admission card to gain entrance to the Meeting.
If you plan to attend the Meeting and vote your shares in
person, but your shares are held in the name of a broker, trust,
bank or other nominee, you should also bring with you a proxy or
letter from the broker, trustee, bank or nominee confirming your
beneficial ownership of the shares.
Securities Entitled to be Voted at the Meeting; Record Date
The only securities entitled to be voted at the Meeting are
shares of the Company's Class B Voting Common Stock (the "Class B
Voting Common Stock"), and only holders of record at the close of
business on September 18, 1995 (the record date) are entitled to
vote. The Class B Voting Common Stock is entitled to one vote
per share. On September 18, 1995, 21,716,057 shares of Class B
Voting Common Stock were outstanding.
The Class A Nonvoting Common Stock is not entitled to be
voted at the Meeting. Holders of Class A Nonvoting Common Stock
are receiving this Proxy Statement for information purposes only
and will not receive a proxy card.
Proxies Solicited by the Board of Directors
This Proxy Statement, and the proxy card that accompanies
the Proxy Statement to the holders of the Class B Voting Common
Stock, are first being sent or given to stockholders on or about
September 28, 1995.
The accompanying proxy card is solicited by the Board of
Directors of the Company. It may be revoked by written notice
given to the Corporate Secretary of the Company at any time
before being voted. Proxies in this form, properly executed,
duly returned to the Company and not revoked, will be voted in
favor of the election of Directors (except to the extent that
authority therefor is withheld) and in favor of any management
proposals in accordance with the instructions in the proxy.
Presence at the meeting does not of itself revoke the proxy.
The Company will bear the cost of the solicitation of
proxies pursuant to this Proxy Statement, including reimbursement
of brokers and other persons holding stock in their names, or in
the names of nominees, at approved rates, for their expenses for
sending proxy material to principals and obtaining their proxies.
The Company has retained Morrow & Co., Inc. to solicit proxies on
behalf of management for an estimated fee of $3,500, plus
reimbursement of reasonable out-of-pocket expenses. In addition,
proxies may be solicited personally, or by mail, telephone or
electronic transmission, by regular employees of the Company
without additional compensation.
Vote Tabulation
Abstentions and "non-votes" are counted as present in
determining whether the quorum requirement is satisfied.
Abstentions and "non-votes" have the same effect as votes against
proposals presented to stockholders other than election of
directors. A "non-vote" occurs when a nominee holding shares for
a beneficial owner votes on one proposal, but does not vote on
another proposal because the nominee does not have discretionary
voting power and has not received instructions from the
beneficial owner.
As a matter of Company practice, the tabulation of
stockholder votes at the Annual Meeting of Stockholders is to be
made on a confidential basis by independent third parties and
certain employees of the Company involved in the tabulation
process. Each stockholder proxy card, ballot and the votes
specified thereon are to be kept confidential until the final
vote is tabulated, except that disclosure may be made as required
by applicable law, in the case of proxy cards containing a
stockholder comment or question, and in the event of a contested
proxy solicitation.
ELECTION OF DIRECTORS
Nominees
The Board of Directors consists of ten members who are
elected annually to hold office until the next Annual Meeting or
until their successors are duly elected and qualified. The
election of directors is shown on the accompanying proxy as
Proposal 1. The affirmative vote of a plurality of the votes
cast by the holders of the Class B Voting Common Stock present in
person or represented by proxy and entitled to vote thereon is
necessary to elect a Director. If no contrary indication is made,
proxy cards in the accompanying form are to be voted for the
nominees named below or, in the event any such nominee is not a
candidate or is unable to serve as a Director at the time of the
election (which is not now expected), for any nominee who shall
be designated by the Board of Directors to fill such vacancy.
In connection with his retirement as Chairman of the Board
of the Company, George V. Grune resigned as a Director effective
August 1, 1995 and will not stand for reelection. All nominees
named below are incumbent members of the Board of Directors.
Set forth below opposite the name and age of each nominee
are the nominee's present positions and offices with the Company,
the year in which the nominee was first elected a Director of the
Company and the nominee's principal occupations during the past
five years.
Positions and Offices With the Company and
Name and Age Principal Occupations During the Past Five
Years
James P. Schadt (57) Mr. Schadt is Chairman and Chief Executive
Officer of the Company. He became Chairman on
August 1, 1995 and became Chief Executive
Officer on August 1, 1994. He joined the
Company as President and Chief Operating
Officer and was elected to the Board of
Directors of the Company in September 1991.
He served as President of the Company until
September 8, 1995. He was a member of the
board of directors of Cadbury Schweppes plc of
London and Chief Executive Officer of its
worldwide beverage business, Cadbury
Beverages, Inc., from 1986 through July 1991.
Kenneth A. Gordon (58) Mr. Gordon was elected President and Chief
Operating Officer of the Company and a member
of the Board of Directors on September 8,
1995. He has been President, Reader's Digest
U.S.A since July 1993. Mr. Gordon was an
Executive Vice President of the Company from
April 1995 to September 1995, a Senior Vice
President from January 1994 to April 1995 and
a Vice President prior thereto. In addition,
Mr. Gordon was President, International Group
from October 1989 to June 1993. He joined the
Company in 1960.
Melvin R. Laird (73) Mr. Laird has been a member of the Board of
Directors of the Company since 1990. He has
served as Senior Counsellor since 1974 and was
elected to the additional position of Vice
President in 1989. Mr. Laird joined the
Company in 1974. Mr. Laird also serves as
Chairman of the Board of Directors of COMSAT
Corporation.
William G. Bowen (61) Dr. Bowen has been a member of the Board of
Directors of the Company since 1985. He has
been the President of The Andrew W. Mellon
Foundation since 1988 and was President of
Princeton University from 1972 to 1988. Dr.
Bowen also serves on the boards of directors
of American Express Company and Merck & Co.,
Inc.
Lynne V. Cheney (54) Dr. Cheney joined the Board of Directors in
1993. She has been W.H. Brady, Jr.
Distinguished Fellow of the American
Enterprise Institute for Public Policy
Research since January 1993, and served as
Chairman of the National Endowment for the
Humanities from May 1986 to January 1993. Dr.
Cheney is also a director of FPL Group, Inc.
(parent of Florida Power & Light Company), IDS
Mutual Fund Group, The Interpublic Group of
Companies, Inc. and Lockheed-Martin
Corporation.
M. Christine DeVita (45) Ms. DeVita has been a member of the Board of
Directors of the Company since 1993. She has
been President of the DeWitt Wallace-Reader's
Digest Fund, Inc. and the Lila Wallace-
Reader's Digest Fund, Inc. since June 1989,
having served as executive director from 1987.
From 1984 to 1987, Ms. DeVita was a deputy
general counsel of the Company.
Positions and Offices With the Company and
Name and Age Principal Occupations During the Past Five
Years
James E. Preston (62) Mr. Preston has been a member of the Board of
Directors of the Company since 1994. He
became Chairman of the Board of Avon Products,
Inc. (beauty and related products) in January
1989 and has been Chief Executive Officer
since 1988, holding the additional position of
President from 1988 until November 1993. Mr.
Preston also serves on the boards of directors
of Aramark, Inc. and Woolworth Corporation.
Robert G. Schwartz (67) Mr. Schwartz has been a member of the Board of
Directors of the Company since 1989. He
retired in April 1993 as Chairman of the
Board, President and Chief Executive Officer
of Metropolitan Life Insurance Company, having
served in that position since September 1989.
Mr. Schwartz also serves on the boards of
directors of COMSAT Corporation, Consolidated
Edison Co. of New York, Inc., CS First Boston,
Inc., Lone Star Industries, Inc., Lowe's
Companies, Inc., Mobil Corporation and
Potlatch Corporation.
Walter V. Shipley (59) Mr. Shipley has been a member of the Board of
Directors of the Company since 1989. He
became Chairman and Chief Executive Officer of
Chemical Banking Corporation in January 1994,
having served as its President since its
merger with Manufacturers Hanover Corporation
in December 1991. He had been Chairman of the
Board and Chief Executive Officer of Chemical
Banking Corporation since 1983. Mr. Shipley
also serves on the boards of directors of
Champion International Corporation and NYNEX
Corporation.
C.J. Silas (63) Mr. Silas has been a member of the Board of
Directors of the Company since 1992. He
retired in May 1994 as Chairman and Chief
Executive Officer of Phillips Petroleum
Company, positions he had held since 1985.
Mr. Silas is a Director of COMSAT Corporation
and Halliburton Company.
Board of Directors and Committees
During the Company's fiscal year ended June 30, 1995, its
Board of Directors held 12 meetings. The Board of Directors of
the Company has an Audit Committee, a Compensation & Nominating
Committee, a Finance Committee and a Public Policy Committee.
The Audit Committee, which met three times during the 1995
fiscal year, is comprised of Mr. Shipley (Chairman), Ms. DeVita
and Messrs. Preston and Schwartz. Prior to the November 1994
annual meeting of the Board, the Audit Committee was comprised of
Drs. Bowen (Chairman) and Cheney, Ms. DeVita and Mr. Shipley.
Its functions include recommending annually to the Board of
Directors a firm of independent accountants to audit and review
the Company's books and records and approving the scope of such
firm's audit; reviewing the adequacy
of the Company's internal controls and auditing procedures;
reviewing the appropriateness of and effect of changes in the
Company's accounting principles and auditing procedures;
reviewing the Company's ethics policies and procedures; and
reviewing, approving and recommending to the Board the Company's
annual financial statements.
The Compensation & Nominating Committee, which met three
times during the last fiscal year, consists of Drs. Bowen
(Chairman) and Cheney, Mr. Shipley and Mr. Silas. Prior to
November 1994, the Compensation & Nominating Committee consisted
of Mr. Schwartz (Chairman), Dr. Bowen and Mr. Silas. Its
functions include administering certain employee benefit plans;
recommending the amount and form of any contribution to The
Reader's Digest Employees Profit-Sharing Plan; reviewing the
compensation levels and programs for officers and key personnel
and determining incentive compensation for employees of the
Company and its subsidiaries; and reviewing and recommending
candidates and nominees for election to the Board of Directors.
The Finance Committee, which met twice during the 1995
fiscal year, is comprised of Messrs. Silas (Chairman), Laird,
Preston and Schwartz. Prior to November 1994, the Finance
Committee was comprised of Messrs. Silas (Chairman), Laird and
Shipley. The Finance Committee's functions include overseeing
the financial affairs of the Company, such as the Company's
investment policies and programs and those of its employee
benefit plans; and advising the Board with respect to corporate
financial policies and procedures, dividend policy, financing
plans and budgets, foreign exchange management, tax planning and
insurance coverage.
The Public Policy Committee, which met twice during the last
fiscal year, consists of Drs. Cheney (Chairman) and Bowen, Ms.
DeVita and Mr. Laird. Prior to November 1994, the Public Policy
Committee consisted of Dr. Cheney (Chairman), Ms. DeVita and Mr.
Schwartz. Its functions include advising the Board and
management on matters of public and social policy affecting the
Company; reviewing and monitoring regulations governing
employment practices and policies; reviewing material litigation;
reviewing the Company's philanthropic activities; and reviewing
investor relations, public relations, and consumer and government
affairs matters.
Each Director who is not an officer or employee of the
Company or of one of its subsidiaries receives an annual retainer
of $32,000 each fiscal year for services as a Director. In
addition, such Directors receive a fee of $1,000 for each Board
or Committee meeting attended in person or by telephone ($1,500
for the Chairman of the Committee) and are reimbursed for their
reasonable expenses of attending such meetings and otherwise in
connection with their duties as Directors. Each such Director
who serves for more than five years will, upon retirement from
the Board, continue to receive annually compensation in the
amount of the Director's retainer in effect at the time of
retirement.
Under the Deferred Compensation Plan for Non-Employee
Directors of The Reader's Digest Association, Inc., non-employee
Directors are eligible to defer payment of 50%, 75% or 100% of
their annual retainer for certain established deferral periods.
Deferred annual retainers are credited to an unfunded account for
each participant, on which interest accrues at a rate determined
by a committee comprised of employee Directors. Payment of the
deferred annual retainer will be made, at the election of the
participant, in a lump sum or in annual installments of from one
to 10 years.
EQUITY SECURITY OWNERSHIP
Principal Stockholders
The following table shows, based on information reported to
the Company by or on behalf of such persons, the ownership, as of
September 18, 1995, of the Company's voting securities by the
only persons known to the Company to be the beneficial owners of
more than five percent of the Class B Voting Common Stock, the
only class of voting securities of the Company outstanding:
Amount and nature
Name and address of beneficial owner of beneficial Percent of
ownership class
DeWitt Wallace-Reader's Digest Fund, Inc. 7,750,000 35.69%
Two Park Avenue shares
New York, NY 10016 (1) (sole voting
and investment
power)
Lila Wallace-Reader's Digest Fund, Inc. 7,750,000 35.69%
Two Park Avenue shares
New York, NY 10016 (1) (sole voting
and investment
power)
___________
(1) As of September 18, 1995, the DeWitt Wallace-Reader's Digest
Fund, Inc. also owned 6,117,240 shares of Class A Nonvoting
Common Stock, which, together with its holding of Class B Voting
Common Stock, represented 12.93% of the total outstanding
common stock of the Company. The Lila Wallace-Reader's Digest
Fund, Inc. also owned 2,439,558 shares of Class A Nonvoting
Common Stock, which, together with its holding of Class B Voting
Common Stock, represented 9.43% of the total outstanding common
stock of the Company.
Each of the DeWitt Wallace-Reader's Digest Fund, Inc. and
the Lila Wallace-Reader's Digest Fund, Inc. (collectively, the
"Funds") has seven members and a board consisting of seven
directors. Dr. Bowen, Messrs. Laird, Shipley and Silas and Ms.
DeVita, who are Directors of the Company, are also members and
directors of each of the Funds.
It has been the intention of the Company to make annual
contributions to The Reader's Digest Employees Profit-Sharing
Plan of previously unissued Class B Voting Common Stock at the
rate of approximately 2% of the Class B Voting Common Stock per
year. The Company's objective is that the plan would hold up to
20% of the Class B Voting Common Stock, or approximately 4% of
the equity in common stock of the Company, if contributions were
to continue through fiscal 1999. As of September 18, 1995, after
giving effect to six annual contributions, approximately 7.90% of
the outstanding Class B Voting Common Stock is held by the plan.
In order to avoid the imposition of excise taxes, commencing
in the year 2000 the Funds together may not own more than 50% of
the voting stock or value of the Company. Accordingly, the Funds
must reduce their aggregate holdings of Class B Voting Common
Stock to 50% by the year 2000. The Funds presently own
approximately 71% of the outstanding Class B Voting Common Stock.
If 20% of the total Class B Voting Common Stock were issued to
The Reader's Digest Employees Profit-Sharing Plan, the Funds
would be required to dispose of 3,000,000 shares of Class B
Voting Common Stock by the year 2000, in order to avoid the
imposition of excise taxes. No determination has been made at
this time as to the manner in which further reductions in
ownership of Class B Voting Common Stock will be effected. The
Funds intend to retain 50% of the Class B Voting Common Stock as
long-term investors.
Directors, Nominees and Officers
The following table shows, as to the current Directors and
nominees individually, the Named Executive Officers (as listed in
the Summary Compensation Table) and the current Directors and
officers of the Company as a group, the equity securities of the
Company and its subsidiaries that were beneficially owned by them
as of September 18, 1995.
Shares of
Class A
Name of beneficial Nonvoting
owner(1)(2) Common
Stock
James P. Schadt 104,570(3)
Kenneth A. Gordon 81,925(4)
Melvin R. Laird 1,000(5)
William G. Bowen 1,550(6)
Lynne V. Cheney 1,180
M. Christine DeVita 1,000
James E. Preston 1,000
Robert G. Schwartz 2,000
Walter V. Shipley 3,000
C.J. Silas 1,000
George V. Grune 240,100(7)
Joseph M. Grecky 44,821(4)
Thomas M. Kenney 44,489(4)
Martin J. Pearson 21,475(4)
Kenneth Y. Tomlinson 25,125(4)
Anthony W. Ruggiero 57,541(4)
All Directors, nominees and
officers 837,907(3)(4)(5)(6)(7)
as a group (30 persons)
______________
(1) "Beneficial ownership" has been determined in accordance
with rule 13d-3 under the Securities Exchange Act of 1934.
Each Director, nominee or officer had voting and investment
power over the shares shown, except as noted below. Each
Director, nominee or Named Executive Officer individually,
and the Directors and officers as a group, beneficially
owned less than one percent of the total issued and
outstanding shares of Class A Nonvoting Common Stock.
(2) Other than as indicated in footnote 4 below, no Director,
nominee or officer holds any shares of Class B Voting Common
Stock or any shares of preferred stock of the Company.
Messrs. Grune, Laird, Bowen, Shipley and Silas and Ms.
DeVita are members and directors of the Funds, which
together beneficially own 9.90% of the Class A Nonvoting
Common Stock and 71.38% of the outstanding Class B Voting
Common Stock. See Principal Stockholders.
(3) Includes with respect to Mr. Schadt 51,347 shares of
restricted stock granted by the Company, with respect to
which the restrictions have not yet lapsed. Includes with
respect to the group 60,347 shares of restricted stock
granted by the Company, with respect to which the
restrictions have not yet lapsed.
(4) Includes shares of Class A Nonvoting Common Stock underlying
presently exercisable stock options as follows: Mr. Gordon,
59,750; Mr. Grecky, 26,375; Mr. Kenney, 33,750; Mr. Pearson,
21,475, Mr. Tomlinson, 25,125; Mr. Ruggiero, 47,500; all
Directors, nominees and officers, 325,575. Does not include
39,277 shares of Class B Voting Common Stock over which
members of the group have voting authority as a result of
their participation in The Reader's Digest Employees Profit-
Sharing Plan.
(5) Does not include 10,000 shares previously beneficially owned
by Mr. Laird that have been placed in trusts for the benefit
of Mr. Laird's grandchildren.
(6) Includes 1,050 shares held by a charitable trust, as to
which Mr. Bowen disclaims beneficial ownership.
(7) Does not include 1,000 shares owned by Mr. Grune's wife, as
to which Mr. Grune disclaims beneficial ownership.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information for each of the
fiscal years ended June 30, 1995, 1994 and 1993 concerning the
compensation of the individuals whose compensation is required to
be disclosed pursuant to Securities and Exchange Commission
regulations (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
Annual compensation Long-term compensation
Awards<F1> Payouts
Fiscal All
year Restricted other
ended stock Options/ LTIP compen-
Name and principal June 30 Salary Bonus Other award SARs payouts sation<F2>
position
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George V. Grune 1995 $560,096 $375,000 $205,989<F4> - - $2,432,329<F5> $7,000
Chairman of the 1994 $887,308 $650,000 $632,421<F4> 42,000 $872,800 $30,000
Board <F3> 1993 $822,693 $500,000 $384,959<F4> 42,000 $896,250 $26,136
James P. Schadt 1995 $740,866 $235,000<F7> $73,584<F8> (9) <F10> $954,244<F11> $7,000
President and Chief 1994 $583,846 $475,000 210,000<F10> $490,950 $30,000
Executive Officer <F6> 1993 $530,768 $325,000 25,000 $358,500 $26,136
Kenneth A. Gordon 1995 $441,154 $325,000 16,000<F10> $230,913 $7,000
President, Reader's 1994 $388,077 $300,000 85,000<F10> $290,934 $30,000
Digest U.S.A., and 1993 $348,192 $240,000 14,000 $274,850 $26,136
Executive Vice
President <F12>
Martin J. Pearson 1995 $257,346 $200,000 <F10> $109,330 $7,000
President, Reader's 1994 $197,780 $150,000 55,000<F10> $147,285 $22,788
Digest Pacific and
Vice President <F13>
Joseph M. Grecky 1995 $277,808 $155,000 6,000<F10> $107,445 $7,000
Senior Vice President, 1994 $250,346 $140,000 37,500<F10> $133,648 $30,000
Human Resources <F14> 1993 $230,154 $ 90,000 7,500 $119,500 $26,136
Kenneth Y. Tomlinson 1995 $296,154 $135,000 6,000<F10> $111,215 $7,000
Senior Vice President 1994 $266,269 $ 90,000 37,500<F10> $147,285 $30,000
and Editor-in-Chief, 1993 $249,846 $105,000 7,500 $149,375 $26,136
Reader's Digest
Magazine <F15>
Thomas M. Kenney 1995 $379,038 $192,000 <F10> $196,040 $7,000
President, U.S. 1994 $365,000 $175,000 45,000<F10> $272,750 $30,000
Magazine Publishing, 1993 $349,615 $155,000 14,000 $274,850 $26,136
and Vice President
Anthony W. Ruggiero 1995 $399,231 $173,000 <F10> $158,340 $7,000
Former Senior Vice 1994 $360,385 $180,000 55,000<F10> $218,200 $30,000
President and Chief 1993 $333,078 $155,000 11,000 $227,050 $26,136
Financial Officer <F16>
<FN>
<F1> All awards are made in or with respect to shares of Class
A Nonvoting Common Stock.
<F2> Represents amounts contributed by the Company to The
Reader's Digest Employees Profit-Sharing Plan (the "Profit-
Sharing Plan") for the accounts of the Named Executive
Officers.
<F3> Mr. Grune retired as Chief Executive Officer effective
August 1, 1994 upon reaching age 65 and retired as
Chairman of the Board effective August 1, 1995.
<F4> Includes $428,598 and $324,073 paid to offset tax
liability resulting from the vesting in fiscal 1994 and
1993, respectively, of restricted stock previously awarded
to Mr. Grune. Includes for fiscal 1995 and 1994,
respectively, $81,863 and $116,332 of dividend equivalent
payments with respect to restricted share units held by
Mr. Grune.
<F5> In addition to payment of performance units for the 1993-
1995 performance period, Mr. Grune's LTIP payout includes
$1,791,430, the value of 43,086 restricted share units
that vested on July 31, 1994.
<F6> Mr. Schadt served as President and Chief Operating Officer
of the Company until August 1994, as President and Chief
Executive Officer thereafter until August 1995, as
Chairman, President and Chief Executive Officer thereafter
until September 1995, and is currently Chairman and Chief
Executive Officer.
<F7> Mr. Schadt's annual bonus reflects the fact that a
significant portion of his target annual bonus has been
granted as performance-based restricted stock. In fiscal
1996, Mr. Schadt was awarded shares of performance-based
restricted stock under the 1994 Key Employee Long Term
Incentive Plan. 20% of the shares granted vested on
September 15, 1995 and an additional 20% will vest on each
successive anniversary of that date, subject to the
satisfaction of Company performance conditions. See
footnote 11 below and see "Report of the Compensation &
Nominating Committee."
<F8> Includes $31,073 for personal use of corporate
transportation.
<F9> As of June 30, 1995, Mr. Schadt held an aggregate of
14,400 shares of restricted stock, valued at $635,400,
based on the closing price of the Class A Nonvoting Common
Stock on the NYSE on that date. As of September 15, 1995,
Mr. Schadt held an aggregate of 48,278 shares of
restricted stock, valued at $2,250,962, based on the
closing price of the Class A Nonvoting Common Stock on the
NYSE on that date.
<F10> The grants for 1994 represent options or SARs equivalent
to five annual grants. Consistent with these multiple-
year grants, no options or SARs were awarded to these
individuals in 1995 other than grants in connection with
promotions. See "Report of the Compensation & Nominating
Committee."
<F11> In addition to payment of performance units for the 1993-
1995 performance period, Mr. Schadt's LTIP payouts include
$478,792 representing the value of shares of performance-
based restricted stock that vested on September 15, 1995
after certification of the attainment of the Company
performance goal relating to fiscal 1995. The value of
the vested shares reported is based on the closing market
price of the Class A Nonvoting Common Stock on the NYSE on
that date. See "Report of the Compensation & Nominating
Committee."
<F12> Mr. Gordon was a Vice President of the Company until
January 1994, a Senior Vice President thereafter until
April 1995 and an Executive Vice President thereafter
until September 1995. He is currently President and Chief
Operating Officer of the Company.
<F13> Pursuant to SEC regulations, information is provided only
for the period from July 1993, when Mr. Pearson became an
executive officer.
<F14> Mr. Grecky became a Senior Vice President of the Company
in January 1994. He was a Vice President prior thereto.
<F15> Mr. Tomlinson became a Senior Vice President of the
Company in April 1995. He was a Vice President prior
thereto.
<F16> Mr. Ruggiero, who left the Company on July 31, 1995, was a
Senior Vice President of the Company from January 1994
until his resignation from that office in March 1995 and
was a Vice President prior thereto. See "Miscellaneous."
</FN>
</TABLE>
Stock Options and SARs Granted in Last Fiscal Year
The following table sets forth information concerning stock
options and stock appreciation rights granted during the fiscal
year ended June 30, 1995 to the Named Executive Officers.
<TABLE>
<CAPTION>
Individual grants
Potential realizable
Percent value at assumed annual rates of stock price
of total appreciation for option/SAR term <F2>
options/
Options/ SARs Exercise
SARs granted or Expira-
granted to base tion
Name (#)<F1> employees price date 0% 5%<F3> 10%<F4>
in fiscal ($/sh)
year
<S> <C> <C> <C> <C> <C> <C> <C>
George V. Grune -- -- -- -- -- -- --
James P. Schadt -- -- -- -- -- -- --
Kenneth A. Gordon 16,000 1.26% 46.94 3/9/05 $0 $472,325 $1,196,964
Martin J. Pearson -- -- -- -- -- -- --
Joseph M. Grecky 6,000 0.47% 46.94 3/9/05 $0 177,122 448,862
Kenneth Y. Tomlinson 6,000 0.47% 46.94 3/9/05 $0 177,122 448,862
Thomas M. Kenney -- -- -- -- -- -- --
Anthony W. Ruggiero -- -- -- -- -- -- --
All Common Stockholders -- -- -- -- $0 $3,194,209,597<F5> $8,094,754,263<F5>
<FN>
<F1> All options and SARs are granted with respect to Class A
Nonvoting Common Stock. In fiscal 1994, the Named
Executive Officers (with the exception of Mr. Grune, whose
retirement was expected) received grants representing
options or SARs equivalent to five annual grants. Those
grants vest with respect to 5%, 10%, 15%, 20% and 50% of
the total related shares on each respective successive
anniversary of the date of grant. Consistent with this
multiple-year grant, no options or SARs were awarded to
these individuals in fiscal 1995 other than incremental
four-year grants in connection with promotions. See
"Report of the Compensation & Nominating Committee."
<F2> The values shown are based on the assumed hypothetical
compound annual appreciation rates of 5% and 10%
prescribed by Securities and Exchange Commission rules.
These hypothetical rates are not intended to forecast
either the future appreciation, if any, of the price of
Class A Nonvoting Common Stock or the values, if any, that
may actually be realized upon such appreciation, and there
can be no assurance that the hypothetical rates will be
achieved. The actual value realized upon exercise of an
option or SAR will be measured by the difference between
the price of the Class A Nonvoting Common Stock and the
exercise price on the date the option or SAR is exercised.
<F3> For the values stated in this column to be realized, the
price of the Class A Nonvoting Common Stock would have to
appreciate to $76.46 during the 10-year option/SAR term.
<F4> For the values stated in this column to be realized, the
price of the Class A Nonvoting Common Stock would have to
appreciate to $121.75 during the 10-year option/SAR term.
<F5> For "All Common Stockholders," the potential realizable
values have been calculated on the basis of the same price
at which stock options and SARs were granted to the Named
Executive Officers and on the basis of the total number of
shares of Class A Nonvoting Common Stock and Class B
Voting Common Stock outstanding on June 30, 1995. An
increase in the price of the Class A Nonvoting Common
Stock will benefit all holders of such stock and all
option holders commensurately.
</FN>
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Values
The following table sets forth information concerning stock
options and SARs exercised during the fiscal year ended June 30,
1995 and the fiscal year-end value of unexercised options and
SARs for the Named Executive Officers.
<TABLE>
<CAPTION>
Number of unexercised Value of unexercised
options/SARs at fiscal in-the-money options/SARs
Shares year end at fiscal year end
acquired on Value
Name exercise realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
George V. Grune -- -- 105,000 63,000 $644,333 $82,688
James P. Schadt -- -- 41,750 218,250 $27,563 $523,688
Kenneth A. Gordon -- -- 59,750 107,250 $795,746 $211,969
Martin J. Pearson -- -- 21,475 55,925 $269,238 $137,156
Joseph M. Grecky -- -- 26,375 46,125 $358,407 $93,516
Kenneth Y. Tomlinson -- -- 25,125 47,250 $321,956 $93,516
Thomas M. Kenney 43,000 $1,080,375 33,750 53,250 $211,496 $112,219
Anthony W. Ruggiero -- -- 47,500 60,500 $527,504 $137,156
</TABLE>
Long-Term Incentive Plans - Awards in Last Fiscal Year
The following table sets forth information concerning long-
term incentive plan ("LTIP") awards during the fiscal year ended
June 30, 1995 to each of the Named Executive Officers.
<TABLE>
<CAPTION>
Performance Estimated future payouts under non-stock
Number of or other price-based plans
shares, period until
units maturation or
Name or other payout Threshold<F2> Target<F2> Maximum<F2>
rights<F1>
<S> <C> <C> <C> <C> <C>
George V. Grune 500,000 7/1/94 - 6/30/97 $350,000 $500,000 $750,000
James P. Schadt 950,000 7/1/94 - 6/30/97 $665,000 $950,000 $1,425,000
Kenneth A. Gordon 360,000 7/1/94 - 6/30/97 $252,000 $360,000 $540,000
Martin J. Pearson 240,000 7/1/94 - 6/30/97 $168,000 $240,000 $360,000
Joseph M. Grecky 160,000 7/1/94 - 6/30/97 $112,000 $160,000 $240,000
Kenneth Y. Tomlinson 160,000 7/1/94 - 6/30/97 $112,000 $160,000 $240,000
Thomas M. Kenney 195,000 7/1/94 - 6/30/97 $136,500 $195,000 $292,500
Anthony W. Ruggiero 240,000 7/1/94 - 6/30/97 $168,000 $240,000 $360,000
<FN>
<F1> Each unit entitles the participant to one dollar at the
end of the performance cycle, if performance target is
met. Payment of performance units may be made, as
determined by the Compensation & Nominating Committee, in
any combination of cash and shares of Class A Nonvoting
Common Stock valued at their fair market value on the date
of payment.
<F2> Threshold, target and maximum amounts are based on the
Company's earnings during the performance period.
</FN>
</TABLE>
Retirement Plans
The following table shows the estimated annual retirement
benefit to employees in specified compensation and years of
service classifications under The Reader's Digest Association,
Inc. Retirement Plan (the "Qualified Retirement Plan") based on
the retirement formula effective July 1, 1992. Amounts
calculated under the retirement formula which exceed the limits
under the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), will be paid under the Excess Benefit
Retirement Plan of The Reader's Digest Association, Inc. (the
"Excess Benefit Plan") from the Company's assets and are included
in the amounts shown below.
Highest Estimated Annual Retirement Benefit for
Consecutive Representative Years of Credited Service
Three Year Average
Compensation 15 20 25 30 35
$ 200,000 60,683 80,911 101,139 121,366 141,594
$ 250,000 76,326 101,768 127,210 152,652 178,094
$ 350,000 107,612 143,482 179,353 215,223 251,094
$ 450,000 138,897 185,197 231,496 277,795 324,094
$ 550,000 170,183 226,911 283,639 340,366 397,094
$ 600,000 185,826 247,768 309,710 371,652 433,594
$ 700,000 217,111 289,483 361,853 434,224 506,594
$ 800,000 248,397 331,197 413,996 496,795 579,594
$ 900,000 279,683 372,911 466,139 559,366 652,594
Compensation covered by the Qualified Retirement Plan is
based on salary. At June 30, 1995, the Named Executive Officers
were credited with approximately the following years of service
under the Qualified Retirement Plan: Mr. Grune, 36; Mr. Schadt,
4; Mr. Gordon, 22; Mr. Pearson, 22; Mr. Grecky, 8; Mr. Tomlinson,
25; Mr. Kenney, 6; and Mr. Ruggiero, 5. The amounts shown in the
table reflect the effect of social security integration. The
estimated amounts in the table are based on the assumption that
payments under the Qualified Retirement Plan and the Excess
Benefit Plan will commence upon retirement at age 65, that the
Qualified Retirement Plan and the Excess Benefit Plan will
continue in force in their present form and that benefits will be
paid in the form of a single life annuity.
Effective July 1, 1992, the Company adopted The Reader's
Digest Executive Retirement Plan (the "1992 Executive Retirement
Plan"). Benefits under the 1992 Executive Retirement Plan are
based on compensation (consisting of salary and bonus) and years
of service. Benefits are reduced by benefits payable under the
Qualified Retirement Plan, the Excess Benefit Retirement Plan and
certain other Company-provided retirement benefits. Because of
the nature of the interdependency among the 1992 Executive
Retirement Plan, the Qualified Retirement Plan and the Excess
Benefit Plan, it is not possible to present estimated benefits
under the 1992 Executive Retirement Plan in tabular format.
Benefits payable under the 1992 Executive Retirement Plan, after
the reductions for benefits payable under other plans, will be
$206,304 for Mr. Grune, and are currently estimated at $372,374
for Mr. Schadt, $133,702 for Mr. Gordon, $0 for Mr. Pearson,
$36,534 for Mr. Grecky, $0 for Mr. Tomlinson, $89,159 for Mr.
Kenney and $108,790 for Mr. Ruggiero. These amounts are based on
the assumption that payment under the 1992 Executive Retirement
Plan will commence upon retirement at age 65, that the 1992
Executive Retirement Plan will continue in force in its present
form and that benefits will be paid in the form of a single life
annuity. Mr. Grune's benefit is based on the commencement of
payment in connection with his retirement as Chairman of the
Board on August 1, 1995 at age 66.
The Company is a party to supplemental retirement benefit
agreements with those senior officers, senior management and
certain key employees who have elected to enter into such
agreements, pursuant to which the participating employees may
defer currently a certain amount of their income to fund
supplemental retirement benefits. Each of the Named Executive
Officers entered into such an agreement with the Company. The
Company has agreed to pay death benefits under such agreements
regardless of whether the supplemental retirement benefits have
yet been fully funded by the employees.
In addition, pursuant to a separate Supplemental Retirement
Agreement (the "Agreement") between the Company and Mr. Grune,
Mr. Grune has begun to receive upon his retirement a supplemental
retirement benefit of $68,500 per year for 15 years or until he
dies, if earlier. The Agreement also provides for certain death
and disability benefits.
Severance Arrangements
Under The Reader's Digest Association, Inc. Severance Plan
for Senior Management (the "Severance Plan"), senior officers and
key executives of the Company, including the Named Executive
Officers, whose employment is terminated by the Company other
than for "cause" (as defined in the Severance Plan) or for
reasons of death, disability or sale by the Company of the
division which employs the employee (provided a comparable
position is offered to the employee by the new owner), will be
entitled to receive severance payments computed at a rate of one
month of base annual salary at the time of termination for each
year of service, but in any event, no less than 12 and no more
than 24 months' pay. A participant will also be entitled to
receive certain additional benefits, including a supplemental
payment in an amount equal to the difference between the
participant's monthly retirement benefits under the Qualified
Retirement Plan, the Excess Benefit Plan and the 1992 Executive
Retirement Plan and the amounts that would have been payable if
the participant's credited service under such plans had included
the number of months of severance payments made under the
Severance Plan. In addition, a participant will be entitled to
receive credited service equal to the severance period for
purposes of certain welfare benefits.
The Company has approved agreements with Messrs. Schadt,
Gordon, Pearson, Grecky and Tomlinson and certain other key
employees of the Company. Generally, under each agreement, if
the employee's employment is terminated by the employee for "good
reason" or by the Company except for "cause" (as such terms are
defined in the agreement), the employee will be entitled to
receive for two years from termination (1) bi-weekly severance
payments at the rate of the employee's highest annual base salary
within 12 months plus the higher of the highest annual bonus
within three years of termination or the current annual bonus
target and (2) benefits equivalent to continued participation in
the Profit-Sharing Plan and all non-cash employee benefit plans.
Each agreement also provides for the inclusion of the severance
period for purposes of credited service and age under the
Qualified Retirement Plan, the Excess Benefit Retirement Plan and
the Executive Retirement Plan and for the continued vesting of
stock option, stock appreciation rights, restricted stock,
performance units and other awards under the Company's long-term
incentive plans during the severance period, exercisability of
options and stock appreciation rights thereafter consistent with
termination by mutual agreement or retirement, and prorated
performance unit payments based on service through the end of the
severance period. Benefits paid under the Severance Plan and
under the Income Continuation Plan discussed below will be
credited against benefits payable under each agreement.
Income Continuation Plan
Under The Reader's Digest Association, Inc. Income
Continuation Plan for Senior Management (the "Income Continuation
Plan"), certain officers and key employees of the Company,
including the Named Executive Officers, whose employment is
terminated involuntarily (other than for cause, disability,
retirement or death) within 24 months following a change in
control of the Company, or who terminates employment within 90
days following constructive termination and within 24 months
following a change in control of the Company, will be entitled to
receive a payment of three full years' base annual salary in
effect immediately prior to termination or, if higher,
immediately prior to the change in control. Any benefits payable
under the Income Continuation Plan will be reduced by any
payments made under the Severance Plan and any monthly retirement
benefit actually paid under the Qualified Retirement Plan. A
participant will also be entitled to certain additional benefits,
including a supplemental payment equal to the difference between
the participant's monthly retirement benefits under the Qualified
Retirement Plan, the Excess Benefit Plan and the 1992 Executive
Retirement Plan and the amounts that would have been payable if
the participant's credited service under such plans had included
the number of months of benefit payments under the Income
Continuation Plan (reduced by any months of benefit under the
Severance Plan ). In addition, the participant will be entitled
to receive a lump-sum payment equal to three times the average of
the three highest of the five preceding annual cash bonuses
awarded to the participant. Benefits under the Income
Continuation Plan will be reduced to the extent necessary to
prevent any portion of such benefits from being considered
"excess parachute payments" under Section 280G of the Internal
Revenue Code, when considered alone or in combination with any
payments otherwise payable to the participant upon a change in
control.
Stock options, SARs, performance units, restricted stock and
other awards under The Reader's Digest Association, Inc. Key
Employee Long Term Incentive Plans also generally become
immediately vested upon a change in control.
Miscellaneous
On July 31, 1995, Mr. Grune retired as Chairman of the Board
of the Company. Mr. Grune had been with the Company for more
than 35 years, including 10 years as Chief Executive Officer. In
connection with Mr. Grune's retirement, a total of 43,086
restricted share units held by Mr. Grune were vested and paid.
Vesting and payment of 21,543 of these units, which would
otherwise have been forfeited, were accelerated from July 31,
1996 pursuant to discretionary authority granted to the Board
under the terms of Mr. Grune's restricted share unit grant. In
accordance with the terms of the grant, each unit was valued at
$45.197, the average fair market value of a share of Class A
Nonvoting Common Stock during the 20-business day period ending
on July 31, 1995, resulting in a payment of $1,947,358. Also in
connection with his retirement, and in recognition of his long
and valuable services to the Company and its stockholders, Mr.
Grune received as compensation a furnished apartment owned by the
Company and previously utilized by Mr. Grune, which had an
appraised value of $811,292, an automobile previously utilized by
Mr. Grune, which had an appraised value of $14,600, and certain
artworks displayed in Mr. Grune's office, which had an appraised
value of $24,000.
Mr. Ruggiero resigned from the Company, effective July 31,
1995. In connection with his resignation, the Company entered
into an agreement with Mr. Ruggiero, effective February 17, 1995,
to provide continuity of management to the Company. Pursuant to
the terms of the agreement, Mr. Ruggiero agreed to remain an
employee of the Company until July 31, 1995 and to forbear from
certain activities detrimental to the Company, and the Company
agreed to provide Mr. Ruggiero the following: (1) payments at his
salary rate through July 31, 1996, (2) benefits equivalent to
continued participation in the Company's medical, dental and
group term insurance plans through July 31, 1996; (3) payments of
$173,000 in lieu of annual incentive compensation for fiscal 1995
and 1996; (4) financial counseling through July 31, 1996 and
certain company car and club membership perquisites; (5) prorated
performance unit payments based on service through July 31, 1996,
to be paid in accordance with the schedule under the applicable
plan; (6) payment of an amount equal to any Profit-Sharing Plan
contribution due to the account of a participant for the 1996
plan year; (7) vesting of outstanding stock options on July 31,
1996 and exercisability thereafter as if he retired on that date;
and (8) payments in an amount equal to the difference between his
monthly retirement benefits under the Qualified Retirement Plan,
the Excess Benefit Plan and the 1992 Executive Retirement Plan
and the amounts that would have been payable if his age and
credited service under such plans included the period through
July 31, 1996.
In connection with Mr. Pearson's relocation to the United
States, the Company has guaranteed a bank residential financing
loan to Mr. Pearson in the amount of $304,000.
REPORT OF THE COMPENSATION & NOMINATING COMMITTEE
Executive Compensation Philosophy
The Company's executive compensation program is designed to
offer market competitive compensation opportunities which are
tied to individual, financial and stock performance. The
purposes of the program are to:
Continue to retain and attract high caliber executive
talent critical to the success of the Company.
Direct executive attention on
performance measures that are important to stockholders,
such as earnings-per-share growth and stock price
appreciation.
Reward executives for successful
strategic management, growth in earnings and customers,
and increases in return to stockholders.
Promote stock ownership to foster
commonality of interests between executives and
stockholders.
The Company's executive compensation philosophy is to
provide compensation at levels competitive with those provided in
the markets in which the Company competes for business and for
executive resources. The Company is committed to placing a
majority of total compensation at risk by linking incentives to
stock performance and to the achievement of operational and
strategic goals including earnings per share growth, operating
profit growth and customer growth. In addition, the program
attempts to recognize and reward exceptional individual
contributions.
The Company's incentive compensation programs for executive
officers are designed to reward participants on the basis of
individual and corporate performance that benefit the Company and
its stockholders. The Committee believes that it is desirable
for executive compensation to be deductible for federal income
tax purposes, but only to the extent that achieving deductibility
is practicable, consistent with the Company's overall
compensation objectives, and in the best interests of the Company
and its stockholders. Accordingly, although the Committee
retains discretion to provide compensation programs intended to
achieve corporate goals regardless of tax deductibility, the
Committee may from time to time take appropriate action intended
to qualify compensation as "performance based" for tax
deductibility as within the meaning of Section 162(m) of the
Internal Revenue Code. This action included stockholder approval
of the Company's 1994 Key Employee Long Term Incentive Plan and
the material terms of performance goals applicable to various
awards under that Plan.
Compensation Components
The executive compensation program consists of three
elements: base salary, annual incentive bonus and long-term
incentive compensation. The Company annually reports to the
Compensation & Nominating Committee (the "Committee") on the
competitiveness of the level and structure of total annual
executive compensation, specifically, as it compares to that of a
selected group of peer companies with which the Company competes
for business and for executive talent. These peer companies
include but are not limited to those media and publishing
companies reflected in the performance graph appearing elsewhere
in this Proxy Statement, and in addition, selected consumer
product and direct marketing companies. The Company regularly
receives advice from an independent compensation consultant in
structuring compensation plans and setting compensation levels.
Periodically, the Committee meets with an outside consultant to
independently assess the competitiveness of the executive
compensation program and its effectiveness in linking pay to
total stockholder return.
Base salaries are targeted at the 50th percentile of
competitive market data. Salary opportunities are set by annual
comparison to external rates of pay for comparable positions
within competitive companies. The Committee reviews and approves
individual salary adjustments for corporate officers and senior
group executives earning $200,000 or more, generally every 12 to
24 months, based on individual performance, and changes in
responsibility, as well as general movement in external salary
levels. Decisions regarding salary adjustments for executive
officers and senior management are consistent with the salary
increase guidelines in effect for all employees which are
established each year by the Company, and which are consistent
with competitive salary management practices.
In fiscal 1995, the Committee approved salary increases for
executive officers which were in accordance with the Company's
fiscal 1995 salary increase guidelines established for all
employees.
Annual incentive bonus targets are set at the 50th
percentile of competitive practice of peer companies. Annual
bonus targets vary by position and level of responsibility. The
purpose of these awards is to deliver competitive compensation
for the attainment of Company financial objectives and individual
performance goals, which the Committee believes are primary
determinants of share price over time. The Committee establishes
an annual incentive pool equal to the sum of all individual
target awards. The amount available for the purpose of funding
the incentive pool is determined after consideration of the
Company's annual performance measured against the operating
profit goal (on a currency neutral basis) established by the
Committee at the start of the fiscal year. Beginning in fiscal
1996, the Company is introducing customer growth as an additional
performance goal for purposes of funding the annual incentive
pool. If the Company and individual business units achieve or
exceed the goals, the incentive pool increases up to 130% of the
sum of the individual target awards. If Company and individual
business unit performance fall below 85% of target performance,
no pool of funds is available for awards. Once the overall pool
is determined, individual awards are decided based upon a review
of individual performance against annual goals which include
financial, operational and strategic management objectives.
Individual awards may range from 0% - 150% of targeted levels and
are made in the sole discretion of the Committee. At the close
of fiscal 1995, the Committee, upon assessing the Company's and
business units' performance against the goals established for the
year, approved annual incentive awards for executive officers
reflecting Company performance which, overall, was slightly
below targeted levels.
Long-term incentive compensation consists of an annual grant
of stock options or stock appreciation rights, and performance
units which are typically based on earnings-per-share growth over
a three-year performance cycle. The amounts of individual grants
are based on position and level of responsibility. Participation
in the long-term incentive program is limited to those executives
who are responsible for implementing operational plans designed
to achieve the Company's long-term strategic objectives as
approved by the Board of Directors. Guidelines for annual grants
are set by regular comparison to general industry long-term
incentive competitive practices, and are as recommended by an
independent compensation consultant. The purpose of the long-
term incentive component is to tie compensation to the long-term
financial performance of the Company and to align the long-term
interests of executives with those of stockholders by providing
executives with an equity interest in the Company. The long-term
incentive compensation program is designed to deliver to
executives the majority of long-term incentive through stock
options or stock appreciation rights in order to closely align
the executive's interests with stockholder interests. The
combination of stock options or stock appreciation rights and
performance units is designed to deliver long-term incentive
compensation competitive with the 75th percentile of the long-
term compensation at peer companies when superior financial
performance is achieved.
Stock option and stock appreciation rights grant guidelines
were established in 1990 at the time of the Company's initial
public offering, and were based on a review of competitive long-
term incentive values and were recommended by an independent
compensation consultant. The guidelines for grants to executive
officers are reviewed annually by an independent compensation
consultant. Under these guidelines the actual number of
underlying shares granted annually to executive officers has
remained unchanged since 1991. The number of stock options or
stock appreciation rights awarded to executives varies by
position and level of responsibility. Neither the number, nor
the value of stock options or stock appreciation rights held by
an executive is considered when determining individual awards.
In fiscal 1994, executive officers received the equivalent
of five annual stock option/stock appreciation rights grants,
intended to replace annual grants for a five-year period.
Individuals who in fiscal 1995 were hired as or promoted to the
level of executive officer were awarded first-time or incremental
four-year stock option grants, in lieu of four subsequent annual
grants, designed to conclude vesting concurrently with the
special five-year grant awarded in fiscal 1994. The 1995 stock
option or stock appreciation rights grant guidelines continue to
be consistent with the fixed share grant guidelines established
in 1991.
The performance unit program generally pays cash awards at
the end of three-year performance cycles, with a new cycle
beginning each year. Performance targets are based on cumulative
earnings-per-share growth (determined before the effect of
accounting changes and special or extraordinary charges). Cash
awards range from 0% - 150% of individual target awards, and are
based on earnings-per-share growth (determined before the effect
of accounting changes and special or extraordinary charges)
relative to the growth goal established by the Committee at the
start of the cycle. If cumulative growth is below 60% of the
targeted growth goal, then no awards are paid. If the targeted
growth is achieved, then 100% of the target awards are paid. If
performance exceeds goal by as much as 15%, up to 150% of the
target awards may be paid.
At the commencement of fiscal 1995, the Committee
established the earnings-per-share growth goal for the 1995-1997
performance cycle and approved the 1995-1997 performance unit
target awards for participants. After evaluating the Company's
earnings-per-share growth (determined before the effect of
accounting changes and special charges) over the 1993-1995
period, which fell below the targeted growth goal determined by
the Committee at the beginning of fiscal 1993, the Committee
approved the payment of 1993-1995 performance unit awards at
75.4% of target.
The Company can also grant restricted stock, performance
shares and other equity-based awards as long-term incentive
compensation.
Fiscal 1995 Chief Executive Officer Compensation
Chief Executive Officer compensation is based on the same
factors as compensation for other executive officers. In setting
the Chief Executive Officer's target annual compensation, the
Committee seeks to be competitive with Chief Executive Officer
compensation in peer companies, and to place at least 60% of
Chief Executive Officer compensation at risk by linking pay to
the achievement of the Company's annual - and long-term financial
and operating goals and the performance of the Company's Class A
Nonvoting Common Stock.
In anticipation of Mr. Schadt assuming the role of Chief
Executive Officer upon Mr. Grune's retirement as Chief Executive
Officer on July 31, 1994, the Committee approved a salary
increase for Mr. Schadt which took effect on August 1, 1994. The
increase was consistent with the Company's salary increase
guidelines for promotions. The Committee also approved an
increase to Mr. Schadt's annual incentive bonus target beginning
with fiscal 1995, to reflect his additional responsibilities as
Chief Executive Officer, and which is consistent with median
annual bonus targets for Chief Executive Officers within the
Company's competitive peer group.
The Company believes in and promotes employee stock
ownership through a number of savings, investment, and
compensation programs currently in place including the Employees
Profit-Sharing Plan, the Employee Stock Purchase Plan, and the
stock option program. Within the spirit of the Company's stock
ownership philosophy, the Company has determined that the Chief
Executive Officer will receive part of his annual bonus target,
previously paid totally in cash, in the form of performance-based
restricted stock. In September 1995, Mr. Schadt received a
grant, under the 1994 Key Employee Long Term Incentive Plan, of
51,347 shares of performance-based restricted stock, which
represents a significant portion of the next five years' worth of
annual bonus targets divided by the fair market value of the
Class A Nonvoting Common Stock on the date of grant. Twenty
percent of these shares vest on September 15 of each year
beginning in 1995, contingent on the Company's achieving the pre-
established performance goal, which is consistent with the
performance criteria used for funding the Company's annual
incentive bonus pool. Continued employment is also a condition
of vesting. The Committee will certify the attainment of the
performance threshold after each fiscal year as a condition to
the annual vesting of shares. In the event the Company does not
achieve the threshold, the shares due to vest will be entirely
forfeited. The remainder of any annual bonus, which will be in
the form of a cash payment, will be awarded at the discretion of
the Committee, based on Mr. Schadt's performance against the
goals established for each fiscal year.
Mr. Schadt's fiscal 1995 annual incentive bonus award was
based on the Committee's assessment of Mr. Schadt's performance
measured against the performance goals established in writing
prior to the commencement of the fiscal year. Specifically, the
Committee considered Mr. Schadt's efforts in effecting a
successful top management transition; Mr. Schadt's initiative and
involvement in identifying avenues and opportunities for long-
range strategic growth; the coordination of the organizational
resources necessary to achieve the Company's strategic objectives
for growth in customers, product offerings and markets; the
establishment of a centralized purchasing organization to capture
the benefits of the Company's global operations; the rebuilding
of the U.S. Books and Home Entertainment products business, which
has led to the achievement of stated growth and profitability
objectives, as well as the prompt decisive actions taken by Mr.
Schadt to correct the problems within the Company's European
operations.
The fiscal 1993-1995 performance unit awards approved by the
Committee for Messrs. Schadt and Grune reflected earnings-per-
share growth (determined before the effect of accounting changes
and special charges), which fell below the targeted growth goals.
The Compensation & Nominating
Committee:
William G. Bowen, Chairman
Lynne V. Cheney
Walter V. Shipley
C. J. Silas
Compensation Committee Interlocks and Insider Participation
During fiscal 1995, Mr. Grune served as a member of the
compensation committee of Avon Products, Inc. and Mr. Preston is
an executive officer of Avon Products, Inc. Also during fiscal
1995, Mr. Grune served as a director of Chemical Banking
Corporation and Mr. Shipley is an executive officer of Chemical
Banking Corporation who served on the Company's Compensation &
Nominating Committee.
PERFORMANCE GRAPH
The following graph compares the total return to
stockholders (stock price plus reinvested dividends) on a $100
investment in each of the following: the Company's Class A
Nonvoting Common Stock, the S& P 500 Stock Index and the Dow
Jones Media-Publishing Group Index, from June 30, 1990, through
June 30, 1995.
Comparison of Cumulative Total Return: The Reader's Digest
Association, Inc.
vs. S&P 500 and Dow Jones Media-Publishing Group
[Performance Graph Here]
<TABLE>
<CAPTION>
June 30, June 30, June 30, June 30, June 30, June 30,
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
The Reader's Digest Association, 100.00 137.99 187.80 175.12 178.11 195.91
Inc.
Dow Jones Media-Publishing Group 100.00 107.78 126.20 133.83 139.88 159.63
S&P 500 100.00 107.40 121.80 138.40 140.35 176.94
</TABLE>
PROPOSAL NO. 2--APPROVAL OF BUSINESS CRITERIA, MAXIMUM AMOUNT AND
ELIGIBLE EMPLOYEES FOR PERFORMANCE-BASED RESTRICTED STOCK UNDER
THE 1994 KEY EMPLOYEE LONG TERM INCENTIVE PLAN
On September 7, 1995, the Compensation & Nominating
Committee approved the material terms of the performance goals
applicable to Performance-Based Restricted Stock awarded under
The Reader's Digest Association, Inc. 1994 Key Employee Long Term
Incentive Plan (the "1994 Long Term Incentive Plan"). The 1994
Long Term Incentive Plan was approved by the Board of Directors
and the stockholders of the Company on November 11, 1994.
Performance-Based Restricted Stock are shares of Class A
Nonvoting Common Stock awarded under the 1994 Long Term Incentive
Plan subject to such transferability restrictions and other terms
and conditions as the Committee may determine, including purchase
price (if any), restriction period, vesting schedule (including
whether restrictions lapse upon termination of employment). The
award of or the lapse of restrictions on Performance-Based
Restricted Stock is subject to the attainment of performance
goals. The recipient of an award of Performance-Based Restricted
Stock has all the rights of a stockholder with respect to those
shares, including the right to receive dividends.
Performance-Based Restricted Stock is an integral part of
the Company's executive compensation program, designed to
attract, retain and reward those employees based on corporate and
individual performance. The material terms of the performance
goals applicable to Performance-Based Restricted Stock are the
following:
1. Business Criteria. The performance
goal shall be based on any one or more of the following business
criteria relating to the Company or any subsidiary, division or
other unit of the Company: revenue, net income, net income per
share, operating profit, operating profit per share, earnings per
share, return on assets, return on equity, return on investment,
or any one or more of the foregoing before the effect of
acquisitions, divestitures, accounting changes, restructuring and
special charges, or foreign currency effects.
2. Maximum Amount. The maximum amount
of compensation that any employee may receive in the form of
Performance-Based Restricted Stock under the 1994 Long Term
Incentive Plan is 600,000 shares; however, in any fiscal year, no
more than 100,000 shares will be granted to, or will vest with
respect to, any employee.
3. Eligible Employees. The employees
eligible to receive Awards of Performance-Based Restricted Stock
under the 1994 Long Term Incentive Plan shall be the executive
officers of the Company and such other key employees of the
Company and its designated subsidiaries as shall be determined by
the Committee.
Approximately 50 executive officers and other key employees
of the Company are eligible to receive awards of Performance-
Based Restricted Stock. A total of 51,347 shares of Performance-
Based Restricted Stock have been awarded under the 1994 Long Term
Incentive Plan to Mr. Schadt. 20% of such shares vest annually
upon attainment of the relevant performance goals for each of the
1995-1999 fiscal years of the Company. Accordingly, 10,269
shares vested on September 15, 1995 upon certification of his
attainment of the performance goals for fiscal 1995.
Vote Required for Approval
The affirmative vote of a majority of the shares of Class B
Voting Common Stock present in person or represented by proxy and
entitled to vote on Proposal No. 2 at the Meeting is required for
approval of Proposal
No. 2.
Stockholder approval of the material terms of Performance-
Based Restricted Stock is being sought in order to qualify
certain compensation thereunder as "performance based" under
Section 162(m) of the Internal Revenue Code. Section 162(m)
generally disallows a federal income tax deduction to any
publicly held corporation for compensation paid in excess of $1
million in any taxable year to the chief executive officer or any
of the four other most highly compensated executive officers who
are employed by the Company on the last day of the taxable year,
but does not disallow a deduction for qualified "performance-
based compensation" the material terms of which are disclosed to
and approved by stockholders. If Proposal No. 2 is not approved
by stockholders, the Company will consider whether to implement
the material terms without the benefit of such qualification.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE APPROVAL OF PROPOSAL NO. 2.
SUBMISSION OF STOCKHOLDER PROPOSALS AND NOMINATIONS
Pursuant to Securities and Exchange Commission rules and the
Company's By-Laws, proposals of stockholders intended to be
submitted at the 1996 Annual Meeting of Stockholders must be
received by the Company at its principal executive offices on or
before May 28, 1996 to be eligible for inclusion in the Company's
notice of meeting, proxy statement and accompanying proxy card
for such meeting or to be introduced from the floor at such
meeting.
The Company's By-Laws also provide that notice of proposed
stockholder nominations for election of directors must be given
to the Corporate Secretary of the Company not less than 14 or
more than 50 days prior to a meeting called to elect directors.
Such notice must contain certain information about each proposed
nominee including age, business and residence addresses,
principal employment, number of shares of Class B Voting Common
Stock beneficially owned (with evidence of such ownership) and
such other information as would be required in a proxy statement
soliciting proxies for the election of such proposed nominee, and
a signed consent of the nominee to serve as a director if
elected.
MISCELLANEOUS
The Board of Directors is not aware at the date hereof of
any matter proposed to be presented at the Meeting other than the
election of Directors nominated in the Proxy Statement. If any
other matter is properly presented, the persons named in the
accompanying proxy card will have discretionary authority to vote
thereon according to their best judgment.
It is expected that a member of KPMG Peat Marwick LLP, the
Company's independent auditors, will attend the Annual Meeting to
respond to any appropriate questions that may be asked by
stockholders.
The Company's Annual Report to Stockholders is being mailed
with this Proxy Statement. It is not to be deemed a part of the
proxy solicitation material and is not incorporated herein by
reference.
A copy of the Company's 1995 annual report on Form 10-K
filed with the Securities and Exchange Commission (without
exhibits) will be made available to stockholders without charge
upon written request to the Vice President, Investor Relations,
The Reader's Digest Association, Inc., Pleasantville, NY 10570-
7000.
By Order of the Board of
Directors:
PAUL A. SODEN
Paul A. Soden
Senior Vice President, General
Counsel and Corporate Secretary
September 28, 1995
Driving Directions to Reader's Digest Global Headquarters
From Manhattan
From East Side, take I-87 north (Major Deegan Thruway) into
Yonkers to exit 5, "Central Park Avenue, Route 100." Proceed on
Route 100 north for 1 mile to entrance to Sprain Brook Parkway
(left turn). Continue on Sprain Brook Parkway north
approximately 12 miles to exit for Saw Mill River Parkway north.
Take Saw Mill River Parkway north approximately 7 miles to the
traffic light at the Reader's Digest Road exit. Turn right at
the exit and bear right to the top of the hill proceeding around
the Reader's Digest headquarters. At the traffic light, turn
left onto Route 117 and make another immediate left into the
Reader's Digest main entrance.
From West Side, take the West Side Highway north to the Henry
Hudson Parkway north to the Saw Mill River Parkway north.
Continue on the Saw Mill River Parkway north approximately 20
miles to the traffic light at the Reader's Digest Road exit.
Turn right at the exit and bear right to the top of the hill
proceeding around the Reader's Digest headquarters. At the
traffic light, turn left onto Route 117 and make another
immediate left into the Reader's Digest main entrance.
From Dutchess or Putnam County
Take I-84 south to the I-684 south approximately 10 miles to Saw
Mill River Parkway south. Bear right onto Exit 5 entering Saw
Mill River Parkway south and continue approximately 7 miles to
traffic light at Reader's Digest Road exit. Turn left at exit
and bear right to top of hill proceeding around the Reader's
Digest headquarters. At the traffic light, turn left onto Route
117 and make another immediate left into the Reader's Digest main
entrance.
From New Jersey
Take the I-287 east (Tappan Zee Bridge) to Exit 1 for Saw Mill
River Parkway north. Take Saw Mill River Parkway north
approximately 7 miles to the traffic light at the Reader's Digest
Road exit. Turn right at the exit and bear right to the top of
the hill proceeding around the Reader's Digest headquarters. At
the traffic light, turn left onto Route 117 and make another
immediate left into the Reader's Digest main entrance.
From Connecticut
Take I-95 south to Exit 21 to I-287. Proceed on I-287 to Exit 3
for Sprain Brook Parkway north. Take Sprain Brook Parkway north
approximately 4 miles to exit for Saw Mill River Parkway north.
Take Saw Mill River Parkway north approximately 7 miles to the
traffic light at the Reader's Digest Road exit. Turn right at
the exit and bear right to the top of the hill proceeding around
the Reader's Digest headquarters. At the traffic light, turn
left onto Route 117 and make another immediate left into the
Reader's Digest main entrance.
[Map of route and driving directions to Wallace Auditorium, RDA
Global Headquarters]
Reader's Digest and the Pegasus logo are registered trademarks of
The Reader's Digest Association, Inc.
[Logo] Printed on recycled paper.
