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 Com-
mission 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
Watson Wyatt & Company
(Name of Registrant as Specified in Its Charter)
Watson Wyatt & Company
(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)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
DEFINITIVE COPIES
[GRAPHIC OMITTED]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
November 20, 1997
Seattle, Washington
The Fifty-first Annual Meeting of Shareholders of Watson Wyatt & Company (the
"Company" or "Watson Wyatt") will be held on Thursday, November 20, 1997, at
8:30 a.m., Pacific Time, at the Four Seasons Olympic Hotel, 411 University
Street, Seattle, Washington, for the following purposes:
I. To elect directors of the Company to hold office until the next Annual
Meeting of Shareholders or until the election and qualification of
their successors.
II. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on October 30, 1997, has been fixed as the record date for
the determination of shareholders entitled to notice of and to vote at the
meeting.
WE STRONGLY URGE YOU TO REVIEW THIS PROXY STATEMENT AND TO COMPLETE AND
RETURN THE ENCLOSED PROXY BALLOT AS SOON AS POSSIBLE. YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN. VOTING YOUR SHARES IMMEDIATELY WILL HELP
TO AVOID COSTLY FOLLOW-UP E-MAIL AND TELEPHONE SOLICITATION.
TO ASSURE THAT YOUR SHARES WILL BE VOTED AT THE MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY BALLOT PROMPTLY AND DELIVER IT TO YOUR OFFICE
ADMINISTRATOR IN THE ENCLOSED ENVELOPE. OFFICE ADMINISTRATORS WILL FORWARD THE
SEALED ENVELOPES TO PRICE WATERHOUSE LLP IN WASHINGTON, D.C.
By Order of the Board of Directors
Walter W. Bardenwerper, Secretary
Bethesda, Maryland
October 31, 1997
<PAGE>
[GRAPHIC OMITTED]
P R O X Y S T A T E M E N T
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 20, 1997
This Proxy Statement and the attached Proxy are being furnished to shareholders
("Shareholders") of Watson Wyatt & Company (the "Company" or "Watson Wyatt") on
or about October 31, 1997, in connection with the Annual Meeting of Shareholders
of the Company to be held on November 20, 1997, at the time and place and for
the purposes set forth in the accompanying notice of the meeting.
The accompanying Proxy is solicited on behalf of the management of the Company.
Shareholders who execute proxies retain the right to revoke them at any time
prior to the voting thereof by giving notice to the Company in writing or in
person at the meeting. All shares of the Company's common stock ("Common Stock")
represented by properly executed and unrevoked proxies received in time for the
Annual Meeting will be voted.
FINANCIAL DATA AND OTHER INFORMATION
A copy of the Annual Report to Shareholders of the Company for the fiscal year
ended June 30, 1997 accompanies this Proxy Statement. The Annual Report includes
descriptions of the operations of the Company and presents the Company's audited
financial statements.
OUTSTANDING STOCK ENTITLED TO VOTE
Each holder of record of Common Stock at the close of business on October 30,
1997 is entitled to one vote per share on each matter to come before the Annual
Meeting. At the close of business on October 20, 1997, 17,704,328 shares of
Common Stock were outstanding and entitled to vote. Shares representing a
majority of all of the outstanding shares of the Company must be represented at
the meeting in person or by Proxy in order to conduct business at the meeting.
A list of Shareholders will be available for inspection at least ten days prior
to the Annual Meeting at the Office of the Secretary, 6707 Democracy Boulevard,
Suite 800, Bethesda, Maryland 20817.
I. ELECTION OF DIRECTORS
The Board of Directors has nominated the sixteen individuals listed below for
election to the Board of Directors. Subject to prior resignation or removal,
each Director elected will hold office until the next Annual Meeting or until
his/her successor is elected and qualified. The election of any individual
Nominee to the Board requires the affirmative vote of a majority of the
outstanding shares present in person, or by Proxy at the Annual Meeting. For
purposes of determining the existence of a quorum, votes to withhold authority
and to abstain will be counted as present and will have the same effect as "no"
votes for purposes of determining whether the required vote has been obtained.
<PAGE>
If any nominee for a directorship is unable to serve as a Director at the time
of the Annual Meeting, the proxies may be voted for a substitute nominee
selected by the Board of Directors. Management has no reason to believe, at this
time, that any of the nominees listed below will be unable to serve.
Although the Company's Bylaws permit a maximum of twenty-five directors, the
Bylaws give the Board of Directors the authority to determine the actual number
of directors within that limit. The Board of Directors has set the size of the
Board at sixteen. The Board of Directors recommends that the Shareholders vote
FOR each of the sixteen nominees listed below.
BIOGRAPHICAL INFORMATION FOR NOMINEES TO THE BOARD
Charles A. Clemens (Age - 55): Vice President, Director and a member of the
Board of Directors of Watson Wyatt Investment Consulting, Inc. In 1968, Mr.
Clemens became a consultant with J.H. Daoust & Co., a business acquired
by the Company in 1973. Mr. Clemens is Chair of the Executive Committee and is
a member of the Compensation and Stock and Executive Pay Committees of the
Board and has been a Director since 1992. Mr. Clemens formerly managed
the Cleveland office and the Midwest Region. Mr. Clemens is the brother-in-law
of Mr. Daoust.
Paul R. Daoust (Age - 49): Executive Vice President, Chief Operating Officer
and Director, as well as an officer and director of various subsidiaries of
the Company. In 1970, Mr. Daoust joined J.H. Daoust & Co., a business
acquired by the Company in 1973. Mr. Daoust is a member of the
Executive and the Compensation and Stock Committees of the Board and has
been a Director since 1989. Mr. Daoust is a Director of Watson Wyatt
Holdings (Europe) Limited. Mr. Daoust formerly managed the Boston and New
York offices. Mr. Daoust is the brother-in-law of Mr. Clemens.
Paula A. DeLisle (Age - 43): Managing Consultant, Hong Kong. Ms. DeLisle has
been with the Company since 1982 and has served as a consultant in the Hong
Kong office, rendering compensation and human resources management consulting
services to multinational firms throughout Asia. Ms. DeLisle is also
responsible for the Asia-Pacific operations of Watson Wyatt Data Services.
David B. Friend (Age - 41): Northeast Regional Manager. Dr. Friend has been
with the Company since 1995 and formerly held the position of Practice Director
of the Company's Group & Health Care Practice. Prior to joining the Company,
Dr. Friend served on the medical staff at Malden Hospital for one year and
prior thereto, he was completing his medical education at the University of
Connecticut. Prior to attending medical school, Dr. Friend held the position
of Executive Vice President of High Voltage Engineering.
John J. Gabarro (Age - 58): Director. Mr. Gabarro has served as the UPS
Foundation Professor of Human Resource Management at the Harvard Business
School since 1990. Mr. Gabarro joined the Harvard faculty as an assistant
professor in 1972, and became a full professor in 1979. Mr. Gabarro has served
as faculty chairman of Harvard's International Senior Management Program and as
Chairman of its Organizational Behavior and Human Resources Management faculty.
Mr. Gabarro has worked as a consultant on organizational change and executive
transitions. He also serves as trustee of the American Institute for Managing
Diversity and of the Worcester Polytechnic Institute. Mr. Gabarro is a member
of the Audit and Executive Pay Committees of the Board and has been a Director
since 1995.
<PAGE>
John J. Haley (Age - 47): Vice President, Retirement Practice Director and
Director. Mr. Haley joined the Company in 1977 as a consulting actuary, and
continues to render services in the retirement field. Mr. Haley is a member of
the Executive Committee and Chair of the Finance Committee of the Board and has
been a Director since 1992. Mr. Haley is a member of the Management Committee
of Watson Wyatt Partners ("Watsons"), and is on the Board of Managers of
Wellspring Resources, LLC ("Wellspring"). Mr. Haley formerly managed the
Washington, D.C. office.
Gary T. Hallenbeck (Age - 54): Vice President of Corporate Strategy and
Development and Director. Mr. Hallenbeck joined the Company in 1993. From 1970
to 1993, Mr. Hallenbeck was with the management consulting firm of Towers
Perrin in a series of positions, including Vice President and Manager-Employee
Benefit Consulting Services from 1987 to 1990, and Vice President and Manager
of the New York office from 1990 to 1993. From 1988 to 1991, Mr. Hallenbeck was
a Director of Towers Perrin. Mr. Hallenbeck is a member of the Compensation and
Stock Committee of the Board and has been a Director since 1995. Mr. Hallenbeck
formerly managed the New York office and the Company's Northeast Region.
Ira T. Kay (Age - 47): Vice President, Practice Director of the Company's
Compensation Practice and Director. Mr. Kay has been with the Company since
1993. Prior to his tenure with the Company, Mr. Kay was a Managing Director and
served on the Partnership Management Committee of The Hay Group. Prior to his
association with Hay, Mr. Kay was a Managing Director in the Human Resources
Department of Kidder Peabody. Mr. Kay is a member of the Compensation and Stock
Committee of the Board and has been a member of the Board since 1996.
Brian E. Kennedy (Age - 54): Vice President, Managing Director, Canada,
Managing Consultant, Toronto and Director. Mr. Kennedy joined the Company in
1995. Prior to joining the Company, Mr. Kennedy was with the Alexander
Consulting Group for 18 years, most recently as Chairman and Chief Executive
Officer of Alexander Clay, their U.K. and European operations. Beginning in
1986, Mr. Kennedy served on the Board of Directors of several Alexander
Consulting Group companies. Mr. Kennedy is a member of the Audit Committee of
the Board and has been a member of the Board since 1996.
Robert D. Masding (Age - 53): Senior Partner, Watsons, and Director. Mr.
Masding has been engaged in the actuarial consulting business since 1969 and
has been a partner of Watsons, which is a U.K. partnership, since 1972. Mr.
Masding has been a member of the Board since March 1995, subsequent to the
formation of the alliance between the Company and Watsons.
R. Michael McCullough (Age - 58): Director. Mr. McCullough is the retired
Chairman of Booz, Allen & Hamilton. Mr. McCullough was elected to this position
in 1984. He joined Booz, Allen & Hamilton in 1965 as a consultant, and was
elected a Partner in the firm in 1971. In 1978, he became Managing Partner of
the firm's Technology Center. Mr. McCullough is a member of the Boards of
Interstate Hotels, O'Sullivan Corporation and Host Marriott Services. Mr.
McCullough is Chairman of the Executive Pay Committee and a member of the Audit
Committee of the Board, and has been a member of the Board since July 1996,
when he was appointed to fill a vacancy.
Gail E. McKee (Age - 38): Account Manager and Director of Account Management for
the Western Region. Ms. McKee joined the Company in 1992. From April 1996
through January 1997, Ms. McKee worked for Wellspring, and was Vice President of
Client Services from June 1996 through January 1997. Prior to joining the
Company, Ms. McKee was with the Walt Disney Company, most recently as the
Manager of International Compensation and Benefits. She began her career with
Hewitt Associates, where she was an Account Manager for nearly eight years.
<PAGE>
Paul V. Mee (Age - 51): Vice President, Western Regional Manager, and Managing
Consultant, Southern California. Mr. Mee joined the Company in 1994, and is on
the Board of Managers of Wellspring. From 1990 to 1994, Mr. Mee was a Managing
Director of Alexander Consulting Group, a human resources and benefits
consulting firm. Prior to that position, he was a Principal and Practice
Leader with Towers Perrin.
A. W. "Pete" Smith, Jr. (Age - 53): President, Chief Executive Officer and
Director, as well as an officer and director of various subsidiaries of the
Company. Mr. Smith joined Cole Surveys, a subsidiary of the Company, in 1968.
Mr. Smith is a member of the Executive Committee of the Board and has been a
Director since 1986. Mr. Smith is also a Director of Watson Wyatt Holdings
(Europe) Limited and is on the Board of Managers of Wellspring. From 1985 to
1992, Mr. Smith was Manager of the Company's San Francisco office;
subsequently, he was Manager of the Washington, D.C. office from 1992 to 1993.
John A. Steinbrunner (Age - 47): Vice President, Midwest Region Retirement
Practice Leader, Senior Retirement Consultant in Watson Wyatt's Cleveland
office and Director. Mr. Steinbrunner has been with the Company since 1974 and
was formerly the Retirement Practice Director. Mr. Steinbrunner is a member of
the Audit Committee of the Board and has been a Director since 1996.
A. Grahame Stott (Age - 43): Vice President, Managing Director, Asia-Pacific
Region and Director. Mr. Stott has been with the Company since 1982, has served
as a consultant in and manager of the Hong Kong office and is a member of the
Finance Committee and Chair of the Asia-Pacific Retirement Committee. Mr. Stott
has been a Director since November 1995, when he was appointed to fill a
vacancy.
STANDING COMMITTEES OF THE BOARD
Executive Committee
Walter W. Bardenwerper
Charles A. Clemens - Chair
Paul R. Daoust
John J. Haley
A.W. Smith, Jr.
The Executive Committee oversees and reviews the Company's long-range corporate
and strategic planning. Additionally, it meets throughout the year between
meetings of the Board of Directors to review, consider and make decisions
affecting general management policies of the Company, to approve significant
business decisions not requiring full Board approval and to make recommendations
to the executive officers and the Board. The Committee held nine meetings during
fiscal year 1997.
Compensation and Stock Committee
Charles A. Clemens
Paul R. Daoust
Gary T. Hallenbeck
Ira T. Kay
Robert J. Webb - Chair (non-director member)
<PAGE>
The Compensation and Stock Committee oversees general compensation policies and
practices, and makes recommendations and certain decisions regarding the
administration of Common Stock transactions. The Compensation and Stock
Committee does not, however, establish the compensation of the President, which
is set by the Executive Pay Committee. The Committee held six meetings during
fiscal year 1997.
Executive Pay Committee
Charles A. Clemens
John J. Gabarro
R. Michael McCullough - Chair
Robert J. Webb (non-director member)
The Executive Pay Committee determines the compensation of the CEO and, based on
the recommendation of the CEO, reviews and approves the compensation of the COO.
The Committee held two meetings during fiscal year 1997.
Audit Committee
John J. Gabarro
Brian E. Kennedy
R. Michael McCullough
Sylvester J. Schieber - Chair (non-director member)
John A. Steinbrunner
The Audit Committee assesses and monitors the control of financial transactions
and oversees financial reporting to Shareholders and others. It also reviews (in
cooperation with the Company's internal auditors, independent accountants and
management) the Company's internal accounting procedures and controls, and the
adequacy of the accounting services provided by the Company's Finance and
Administration office. The Committee held three meetings during fiscal year
1997.
Finance Committee
Walter W. Bardenwerper
John J. Haley - Chair
Barbara L. Landes (non-director member)
A. Grahame Stott
The Finance Committee reviews and considers issues relating to the capital
structure of the Company. This includes strategic determinations regarding the
financing of the Company's future growth and development. The Committee held
nine meetings during fiscal year 1997.
Note: The Board of Directors does not have a nominating committee or a
committee performing similar functions.
<PAGE>
DIRECTORS' MEETINGS
The Board of Directors conducted five meetings during fiscal year 1997. All
directors attended more than 75% of the meetings of the Board and the Committees
on which they served. All of the current Directors who are associates of the
Company are not compensated separately for their services as directors or as
members of any Committee of the Board. The Bylaws of the Company, however, do
not prohibit directors who are not active associates from receiving
compensation. Outside Directors in fiscal 1997 were paid a quarterly retainer of
$6,250 plus $1,500 per day for Board meetings, $1,000 per day for regular
Committee meetings ($750 if held in conjunction with a Board meeting), and
$2,000 per day for Committee meetings if the outside Director chaired that
Committee ($1,000 if held in conjunction with a Board meeting). Telephone
meetings of less than four hours duration were compensated at 50% of the
applicable per day fee. These fees are paid in shares of the Company's Common
Stock (up to 7,500 shares), and the balance is paid in cash. The Company has
established the Voluntary Deferred Compensation Plan to enable outside
directors, at their election, to defer receipt of any or all of their director's
fees until they are no longer serving as a Director of the Company. The Company
intends to continue to similarly compensate outside directors for services
rendered. The Company's Restated Certificate of Incorporation and its Bylaws
provide that a Director need not be a shareholder of the Company.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of October 20, 1997. The
figures below include shares owned through the Company's Stock Purchase Plan and
the Stock Ownership Plan. Information is given below on an individual basis for
all current Directors and Nominees to the Board and the five most highly
compensated Executive Officers of the Company, and for all of the Company's
Executive Officers and Directors as a group.
<TABLE>
<CAPTION>
Number of Outstanding Shares
of Common Stock Beneficially
Name and Principal Owned on October 20, 1997
Occupation with the Company (Percentage of Total Shares)
<S> <C>
Walter W. Bardenwerper+ 106,936 (*)
Vice President; General Counsel
and Secretary
Charles A. Clemens 301,200 (1.70%)
Vice President
Paul R. Daoust 301,318 (1.70%)
Executive Vice President
and Chief Operating Officer
<FN>
*Beneficial ownership of 1% or less of all of the outstanding Common Stock is
indicated with an asterisk.
+Not standing for re-election to the Board of Directors.
</FN>
<PAGE>
Number of Outstanding Shares
of Common Stock Beneficially
Name and Principal Owned on October 20, 1997
Occupation with the Company (Percentage of Total Shares)
<S> <C>
Paula A. DeLisle 44,900 (*)
Managing Consultant,
Hong Kong
David B. Friend 46,000 (*)
Northeast Regional Manager
John J. Gabarro 7,500 (*)
Director
John J. Haley 227,749 (1.29%)
Vice President; Retirement
Practice Director
Gary T. Hallenbeck 122,500 (*)
Vice President of Corporate
Strategy and Development
Ira T. Kay 60,900 (*)
Vice President; Practice
Director, Compensation
Practice
Brian E. Kennedy 35,000 (*)
Vice President; Managing
Director, Canada; Managing
Consultant, Toronto
Robert D. Masding 01
Senior Partner,
Watson Wyatt Partners
R. Michael McCullough 7,500 (*)
Director
Gail E. McKee 4,500 (*)
Account Manager; Director of Account
Management, Western Region
<FN>
* Beneficial ownership of 1% or less of all of the outstanding Common Stock is
indicated with an asterisk.
1 Watson Wyatt Holdings Limited, which is wholly owned by Watson Wyatt Partners,
in which Mr. Masding is a senior partner, owns 359,000 shares of the Company's
Common Stock.
</FN>
<PAGE>
Number of Outstanding Shares
of Common Stock Beneficially
Name and Principal Owned on October 20, 1997
Occupation with the Company (Percentage of Total Shares)
<S> <C>
Paul V. Mee 88,600 (*)
Vice President; Western Regional
Manager; Managing Consultant,
Southern California
A. W. Smith, Jr. 276,342 (1.56%)
President and Chief
Executive Officer
John A. Steinbrunner 103,191 (*)
Vice President; Midwest Region
Retirement Practice Leader
A. Grahame Stott 129,000 (*)
Vice President; Managing
Director, Asia-Pacific Region
All current directors and executive officers 2,424,618 (13.70%)
as a group (19)
<FN>
* Beneficial ownership of 1% or less of all of the outstanding Common Stock is
indicated with an asterisk.
</FN>
</TABLE>
COMMON STOCK PURCHASE ARRANGEMENTS
To encourage ownership of Common Stock by associates, the Company maintains a
Stock Purchase Plan ("SPP"). The Company regularly sells Common Stock to
associates in March of each year pursuant to the SPP. Historically, ownership of
the Common Stock has been spread widely among associates, with no individual
shareholder owning more than 2% of the total number of shares outstanding. Until
recently, it had been the Company's policy not to sell shares to shareholders
who, as a result of such sales, would have purchased more than 300,000 shares
under the SPP. The Company reduced this number to 200,000 in 1996.
Many transfers of Common Stock occur each year among associates and the Company
because the Company's Bylaws require that associates who leave the Company must
offer to resell their shares of Common Stock to the Company or to other
associates. It is unlikely, however, that more than 25% of the Company's
outstanding shares would be transferred in any particular year. Moreover,
because such transfers occur among many individuals, they are unlikely to result
in any change in control of the Company. The SPP permits associates to borrow up
to the full amount of the purchase price of the Common Stock from the Company's
lenders and the Company guarantees all such loans. As of October 20, 1997,
5,316,204 shares of Common Stock were pledged to the Company's lenders to secure
loans to shareholders, representing approximately 30.03% of the outstanding
shares of Common Stock. Few shareholders have ever defaulted on their loans, and
no lender has ever obtained (or even attempted to obtain) ownership of pledged
shares. The Company believes it is unlikely that financing arrangements under
the SPP would result in any change in control of the Company.
<PAGE>
BIOGRAPHICAL INFORMATION FOR OTHER EXECUTIVE OFFICERS OF THE COMPANY
Walter W. Bardenwerper (Age - 46): Vice President, General Counsel, Secretary
and Director, as well as an officer and director of various subsidiaries of the
Company, Mr. Bardenwerper joined the Company in 1987 as General Counsel and
Assistant Secretary. He is a member of the Executive and Finance Committees of
the Board and has been a Director since 1992. Mr. Bardenwerper is also a
Director of Watson Wyatt Investment Consulting, Inc.
Robert J. Ellis (Age - 51): Vice President and Director of Marketing, Mr. Ellis
joined the Company in 1980 as a consultant in the area of employee
communications and has previously served as Chair of the Communications
Practice. Mr. Ellis was a Director from 1992 to 1993.
Barbara L. Landes (Age - 47): Vice President, Finance and Chief Financial
Officer, Ms. Landes joined the Company in 1994. From 1989 to 1993, Ms. Landes
served as the Senior Vice President, Finance & Operations of WWOR-TV, Inc., a
company primarily engaged in the media and entertainment business. Within that
time period, Ms. Landes also held the positions of Vice President, Chief
Financial Officer and Treasurer of Pinelands, Inc. which was the parent company
of WWOR-TV, Inc. Ms. Landes is a member of the Finance Committee of the Board.
Gary M. Lawson (Age - 45): Vice President, Southeast Regional Manager, and
Managing Consultant, Atlanta, Mr. Lawson joined the Company in 1988 as a
compensation consultant and previously served as Chair of the Compensation
Practice. Mr. Lawson was a Director from 1992 to 1993.
Sylvester J. Schieber (Age - 51): Vice President and Director of the Research
and Information Center, Mr. Schieber joined the Company in 1983. Mr. Schieber
consults in the area of health care and retirement policies. Mr. Schieber is
Chair of the Audit Committee of the Board and was a Director from 1989 to 1996.
Robert J. Webb (Age - 54): Vice President, Southwest Regional Manager and
Managing Consultant, Dallas, Mr. Webb joined the Company in 1964 and became
Manager of the Dallas office in 1987. Mr. Webb is Chair of the Compensation and
Stock Committee and serves on the Executive Pay Committee of the Board. Mr.
Webb was a member of the Board from 1987 to 1996.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth annual compensation for services rendered to the
Company in all capacities for the fiscal years ended June 30, 1997, 1996 and
1995 by those persons who were, on June 30, 1997, the Chief Executive
Officer/President and the other four most highly compensated Executive Officers
of the Company:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE*
(U.S. Dollars)
Annual Compensation
Total Other All
Salary/ Annual Other
Name and Principal Fiscal year Salary Bonus1 Bonus Comp- Comp-
Position ensation2 ensation3
<S> <C> <C> <C> <C> <C> <C>
A.W. Smith, Jr. 1997 591,232 330,000 921,232 0 23,950
President, CEO 1996 559,300 300,000 859,300 20,000 0
and Director 1995 534,300 128,000 662,300 25,000 0
Paul R. Daoust 1997 529,508 290,000 819,508 0 19,942
Executive Vice 1996 507,800 275,000 782,800 10,000 0
President, 1995 483,600 116,000 599,600 15,000 0
COO and Director
Charles A. Clemens 1997 433,750 260,000 693,750 0 21,550
Vice President 1996 413,700 300,000 713,700 12,100 0
and Director 1995 390,900 200,000 590,900 29,600 0
Gary T. Hallenbeck 1997 451,344 175,000 626,344 10,000 11,138
Vice President of 1996 443,100 200,000 643,100 40,000 0
Corporate 1995 415,000 200,000 615,000 32,500 0
Strategy and
Development
and Director
John J. Haley 1997 403,787 215,000 618,787 0 17,350
Vice President, 1996 385,700 225,000 610,700 30,000 0
Retirement 1995 352,000 150,000 502,000 19,500 0
Practice Director
and
Director
<FN>
*(See footnotes on following page.)
</FN>
<PAGE>
<FN>
1 The Company's compensation system establishes target bonuses for all
bonus-eligible associates based on their compensation band level. After the
end of the Company's fiscal year, bonus-eligible associates are allocated a
percentage of their target bonus based on individual and Company
performance. Target bonuses for the CEO and COO were increased at the
beginning of FY97 by the Board of Directors, upon the recommendation of the
Executive Pay Committee. (For more information regarding this decision,
please refer to the Report of the Executive Pay Committee/Compensation and
Stock Committee on Executive Compensation which appears on page 13.)
The following table indicates, for each named executive officer, the
percentage of target bonus received for each of the three most recent fiscal
years:
Percent of Target Received
Smith 1997 79%
1996 106%
1995 47%
Daoust 1997 90%
1996 107%
1995 47%
Clemens 1997 118%
1996 145%
1995 101%
Hallenbeck 1997 77%
1996 91%
1995 95%
Haley 1997 105%
1996 117%
1995 83%
2 "Other Annual Compensation" consists of a cash bonus of $1 per share for
each share purchased in 1996 and 1995 and a cash bonus of $.50 per share for
each share purchased in 1997 under the Stock Purchase Plan. Mr. Hallenbeck
was the only named executive officer purchasing shares in 1997 since all
others are above the 200,000 share maximum. These bonuses were also
available to all participating associates.
3 "All Other Compensation" consists of the following: (i) a one-time
non-compete bonus equal to 5% of each named executive's fiscal year 1996
bonus; (ii) company matching contributions under the Savings Plan of 50% of
the first 6% of total compensation contributed as a 401(k) salary deferral
by the named executive up to the IRS maximum of $9,500; and (iii) an
additional company matching contribution under the Deferred Savings Plan of
3% of total compensation above the IRS compensation limit of $160,000 if
individual 401(k) contributions equal the IRS $9,500 maximum. All of these
amounts were similarly available to all qualifying associates.
</FN>
</TABLE>
<PAGE>
DEFINED BENEFIT PLANS
Pension Plan for U.S. Associates. The following table sets forth the estimated
annual benefits payable on a five-year certain and life basis (excluding Social
Security) under the Company's qualified pension plan and non-qualified excess
pension plans to a U.S. associate who qualifies for normal retirement in 1997
with the specified average compensation equal to the average of the highest 36
consecutive months of compensation prior to retirement and the specified years
of continuous service:
Annual Benefit Amounts1:
<TABLE>
<CAPTION>
Average Annual Compensation Years of Continuous Service
for 36 Consecutive Months
with the Highest Average
Preceding Retirement 10 15 20 25
<S> <C> <C> <C> <C>
$ 150,000 $ 30,328 $ 45,492 $ 60,656 $75,820
250,000* 51,328 76,992 102,656 128,320
350,000* 72,328 108,492 144,656 180,820
450,000* 93,328 139,992 186,656 233,320
550,000* 114,328 171,492 228,656 285,820
650,000* 135,328 202,992 270,656 338,320
750,000* 156,328 234,492 312,656 390,820
850,000* 177,328 265,992 354,656 443,320
950,000* 198,328 297,492 396,656 495,820
1,050,000* 219,328 328,992 438,656 548,320
<FN>
1 The annual benefit at normal retirement (age 65) under the qualified
plan is equal to 1.7% times the associate's average compensation for the
36 consecutive months with the highest compensation plus .4% times the
associate's average compensation for the 36 consecutive months with the
highest compensation that exceeds Social Security Covered Compensation,
all times the number of completed years and months of continuous service
up to 25 years.
* As required by Section 415 of the IRC, qualified plan payments may not
provide annual benefits exceeding a maximum amount, currently $125,000.
For those associates who are covered under the excess plans, amounts
above this maximum will be paid under the terms of the excess plans, up
to the amounts shown in the table above. Pursuant to Section 401(a)(17)
of the IRC, annual compensation in excess of $160,000 cannot be taken
into account in determining qualified plan benefits.
</FN>
</TABLE>
The years of credited service for the associates named in the cash compensation
table as of June 30, 1997 are: Mr. Smith - 28.5 years; Mr. Daoust - 27.1 years;
Mr. Clemens - 29.1 years, Mr. Hallenbeck - 3.7 years and Mr. Haley - 20.2 years.
Benefits are based solely on the compensation shown in the "Total Salary/Bonus"
column of the Summary Compensation Table.
Supplemental Retirement Program for U.S. Associates. This non-qualified program
provides additional retirement benefits to eligible associates who retire from
active employment with the Company. Prior to January 1, 1997, the qualified
pension plan recognized base pay only, with this Supplemental Retirement Program
("SRP") recognizing total pay. Associates eligible for benefits under this
program were those who had total annual average compensation in excess of a
minimum compensation level ($117,956 as of June 30, 1997 and indexed in the
future) and who had attained age 50 with 10 or more years of service.
Effective January 1, 1997, the qualified pension plan was amended to recognize
total pay; therefore, the SRP will be phased out over a transition period that
will extend for five years through December 31, 2001. Associates eligible for
transition benefits must meet all of the following criteria: total pay exceeds
the minimum compensation level described previously; age 45 or older with 10
years or more of service as of
<PAGE>
December 31, 1996; 60 or more "points" as of December 31, 1996 (sum of age
and service is 60 or greater) and retirement after attaining age 50.
For purposes of the SRP, annual compensation refers to compensation amounts
shown in the "Total Salary/Bonus" column of the Summary Compensation Table.
Transition benefits will equal the amount of total retirement benefits that
would have been paid under the qualified plan and SRP formulas in effect prior
to January 1, 1997, less any benefits paid under the qualified plan in effect
after that date. Prior to January 1, 1997, the qualified plan provided a benefit
equal to 2.5% times the participant's average salary (base pay only) for the
three consecutive years with the highest annual salaries for each completed year
and month of continuous service up to 20 years, plus 2% of such compensation for
each completed year and month of continuous service over 20 years, up to a
maximum of 8-1/3 years, less 30/17% of the participant's estimated Social
Security benefit for each completed year and month of continuous service, up to
a maximum of 28-1/3 years. Prior to January 1, 1997, the SRP formula was
approximately the same as the qualified plan, except bonus compensation was also
recognized. For determining benefits under the prior plans, no pay increases
after December 31, 1996 will be recognized. Benefits under the SRP are paid from
the retirement date until the eligible associate reaches age 65. Any pension
effect related to this program has not been considered in the preceding table
which assumes normal retirement (age 65).
Other Pension Plans. The Company also has other pension plans which have been
established in various countries for the benefit of eligible associates in those
jurisdictions.
REPORT OF THE EXECUTIVE PAY COMMITTEE/COMPENSATION AND STOCK COMMITTEE
ON EXECUTIVE COMPENSATION
Compensation Philosophy. The Company's compensation program is designed to
attract, motivate and retain quality associates by providing competitive total
compensation based on individual and Company performance factors. In addition,
the program is designed to be flexible in order to permit adjustments
necessitated by general economic conditions or individual circumstances. The
Company's compensation philosophy applies to all associates, including executive
officers, and is administered by the Compensation and Stock Committee, with the
exception of the compensation of the CEO and COO, which is determined as
described below. Specifically, the compensation program is designed to:
1. Create a performance-oriented environment with variable compensation based
upon achievement of annual and long-term results;
2. Focus management on maximizing shareholder value while at the same time
adequately compensating all associates; and
3. Provide compensation that reflects the Company's performance relative to
its key competitors and changes in its own performance over time.
For the fiscal year ended June 30, 1997 the compensation of the Company's
executive officers (and all other bonus-eligible associates) was comprised
primarily of three elements: Base salary, fiscal year-end bonuses and cash
bonuses related to Stock Purchase Plan allocations. The Company's compensation
system establishes target bonuses for all bonus-eligible associates based on
their compensation band level. After the end of the Company's fiscal year,
bonus-eligible associates are allocated a percentage of their target bonus based
on individual and Company performance.
<PAGE>
Determination of Compensation of the CEO and COO. The base compensation of the
CEO for fiscal year 1997 was established by the Executive Pay Committee, which
currently consists of the Company's two outside directors and the Chairs of the
Executive and the Compensation and Stock Committees, and was then approved by
the Board of Directors. The Committee's decision took into account the
following:
1. The CEO's level of base compensation received in fiscal year
1996.
2. Annual increases based upon progress made by the CEO in
improving the Company's financial performance as well as
achieving other key objectives and comparative annual
increases granted to other associates within the Company.
3. Information regarding compensation levels of CEOs of companies
in similar industries. In 1996, the Executive Pay Committee
conducted a study that indicated that the CEO's and COO's base
salary and targeted cash compensation were below competitive
levels.
Based on the analysis of competitive market compensation levels, the Executive
Pay Committee recommended, and the Board of Directors approved at its August
1996 meeting, increasing the CEO's target bonus to 70% of his base salary and
increasing the COO's target bonus to 60% of his base salary. The fiscal year-end
bonus of the CEO was then primarily determined by a formula that related to the
Net Operating Income (NOI) of the Company. NOI was defined to be the Company's
net income before income taxes and discretionary payments such as bonuses,
profit sharing and dividends. The formula bonus was then adjusted according to
other factors the Executive Pay Committee deemed relevant based on the
Performance Development Plan established for the CEO at the beginning of the
fiscal year. Based on these factors, the CEO received 79% of his target bonus.
At the recommendation of the CEO, and with the agreement of the Executive Pay
Committee, the COO received 90% of his target bonus.1
1 For FY97, the Company-wide bonus pool was funded, on average, at 96% of
target, although each eligible associate's bonus varied based on individual
performance.
Determination of Compensation of Other Executive Officers. The base compensation
and fiscal year-end bonuses of the Company's other Executive Officers are
determined by the CEO and COO (except with respect to the COO's own
compensation, which is determined by the CEO after consultation with the
Executive Pay Committee, as described above) consistent with the factors
described above and also taking into account the performance of the business
units managed by these individuals.
Executive Pay Committee Compensation and Stock Committee
Charles A. Clemens Charles A. Clemens
John J. Gabarro Paul R. Daoust
R. Michael McCullough - Chair Gary T. Hallenbeck
Robert J. Webb (non-director member) Ira T. Kay
Robert J. Webb - Chair (non-
director member)
COMPENSATION AND STOCK COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
The members of the Company's Compensation and Stock Committee, as of June 30,
1997, were Charles A. Clemens, Paul R. Daoust, Gary T. Hallenbeck, Ira T. Kay,
and Robert J. Webb. All are officers of the Company. The Committee members do
not participate in decisions regarding their own compensation.
<PAGE>
SHAREHOLDER RETURN GRAPH
The graph set forth below depicts total cumulative shareholder return and
assumes $100 invested on July 1, 1992 in the Company's Common Stock, the New
York Stock Exchange Broad Market Index, and an independently compiled industry
peer group index comprised of the common stock of companies within the
management consulting services standard industrial classification code. The
graph assumes reinvestment of dividends. Please note that returns on the
Company's Common Stock are calculated using stock prices determined in
accordance with the Company's Bylaws, whereas the returns shown for the indices
are based on the value of shares traded on an open market.
The independently compiled peer group index was utilized because the Company's
most direct competitors do not make their financial information publicly
available.
Comparitive 5-Year Cumulative Total Return
Among Watson Wyatt, Peer Group, and Broad Index
<TABLE>
<CAPTION>
[GRAPHIC OMITTED]
YEAR 1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Watson Wyatt Common Stock
100.00 97.16 104.96 106.62 116.78 125.30
Peer Group Index
100.00 96.47 94.32 108.71 182.49 130.27
NYSE Broad Market Index
100.00 113.41 117.36 140.09 175.27 228.94
</TABLE>
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 1, 1995, the Company transferred its United Kingdom operations to R
Watson & Sons (subsequently renamed Watson Wyatt Partners) and received a
beneficial interest and a 10% interest in a defined profit pool of the
partnership. The Company also transferred its Continental European operations to
a newly formed holding company owned by the Company and Watson Wyatt Partners in
exchange for 50.1% of its shares. Mr. Robert D. Masding, a senior partner of
Watson Wyatt Partners, is a member of the Company's Board of Directors. Watson
Wyatt Partners and the Company provide various services to and on behalf of each
other in the ordinary course of business.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's executive officers and directors to file certain reports with the
Securities and Exchange Commission relating to their ownership of, and
transactions in, the Company's Common Stock. To the Company's knowledge, based
on review of the copies of such filed reports, the Company complied with all
Section 16(a) filing requirements applicable to such officers and directors.
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee, pursuant to the authority delegated to it by the Board,
selects the independent public accountants to audit the financial statements of
the Company. Price Waterhouse LLP acted as the Company's independent public
accountants for the fiscal year ended June 30, 1997. Price Waterhouse LLP will
continue to provide this service to the Company for the fiscal year ended June
30, 1998. Representatives of Price Waterhouse LLP are not expected to attend the
Annual Meeting; however, Price Waterhouse LLP will report to the Secretary of
the Company the results of the Proxy vote tally immediately prior to the Annual
Meeting.
MANNER IN WHICH THE PROXIES WILL BE SOLICITED AND VOTED
The cost of soliciting proxies will be borne by the Company. In addition to the
distribution of the proxies by Office Administrators, proxies may be solicited
with the assistance of associates of the Company personally, by telephone,
electronically or by facsimile.
All properly executed proxies received by Management will be voted. In the
absence of contrary direction, Management proposes to vote the proxies FOR the
election of each of the above-named Nominees to the Board.
Management knows of no other matter which may come up for action at the meeting.
However, if any other matter properly comes before the meeting, the proxies
named on the Proxy form enclosed will vote in accordance with their judgment
upon such matter. Individual proxies will be counted by Price Waterhouse LLP in
an effort to ensure the confidentiality and anonymity of each shareholder's
votes. Whether or not you expect to be present at the meeting, you are urged to
sign, date and promptly return the enclosed Proxy to your office administrator
by November 14, 1997 for forwarding to Price Waterhouse LLP. Please return your
Proxy in accordance with the directions on the bottom of the Proxy form.
<PAGE>
SHAREHOLDER PROPOSALS
Any shareholder wishing to present a proposal at the 1998 Annual Meeting of the
Company, currently expected to be held on November 19, 1998, may submit such
proposal in writing to Watson Wyatt & Company, Office of the Secretary, 6707
Democracy Boulevard, Suite 800, Bethesda, Maryland 20817. Such proposals must be
received no later than June 30, 1998.
By Order of the Board of Directors,
-----------------------------------------
Walter W. Bardenwerper, Secretary
Bethesda, Maryland
October 31, 1997
<PAGE>
MANAGEMENT PROXY WATSON WYATT & COMPANY
The undersigned hereby appoints A. W. Smith, Jr., Paul R. Daoust and Walter W.
Bardenwerper, and each of them, as his or her proxies, each with full power of
substitution, to vote all of the undersigned's shares of capital stock of the
Company at the Annual Meeting of Shareholders of Watson Wyatt & Company to be
held on Thursday, November 20, 1997, and at any adjournments thereof, with the
same authority as if the undersigned were personally present, as specified
below
THE DIRECTORS OF THE COMPANY RECOMMEND A VOTE "FOR" ALL NOMINEES BELOW
I. [ ] FOR all sixteen Nominees listed below (except as otherwise directed
below);
[ ] WITHHOLD AUTHORITY TO VOTE FOR all sixteen nominees listed below:
Charles A. Clemens Brian E. Kennedy
Paul R. Daoust Robert D. Masding
Paula A. DeLisle R. Michael McCullough
David B. Friend Gail E. McKee
John J. Gabarro Paul V. Mee
John J. Haley A. W. Smith, Jr.
Gary T. Hallenbeck John A. Steinbrunner
Ira T. Kay A. Grahame Stott
INSTRUCTIONS: To withhold authority to vote for any individual
nominee(s), write the individual(s) name(s) on the following blank line:
II. In their discretion, the proxies are authorized to consider and act
upon all other matters that may properly come before the meeting or
any and all postponements or adjournments thereof.
UNLESS A CONTRARY SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NAMED NOMINEES FOR DIRECTORS OF THE COMPANY. THE UNDERSIGNED
HEREBY REVOKES ANY PROXY HERETOFORE GIVEN AND ACKNOWLEDGES RECEIPT OF THE NOTICE
AND PROXY STATEMENT FOR THE ANNUAL MEETING.
When signing in any representative capacity, please insert your title and attach
papers showing your authority unless already on file with the Company.
Signature of Shareholder Watson Wyatt Office
Please Print Shareholder Name (Legibly) Date Signed
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. Shareholders must
deliver their signed Proxy (in the envelope provided) to their Office
Administrator for forwarding to Price Waterhouse LLP, 1301 K Street, N.W., Suite
800 West, Washington, DC 20005-3333 (Attn: P. Akins). Please mark, sign, date
and return this Proxy to your Office Administrator on or before November 14,
1997.
