To: All U.S. and Canadian Associates
From: Pete Smith
Date: March 19, 1998
Subject: "Year 2000" Memo from "Share Wyatt"
Yesterday you were mailed a memo complaining about management, the Board, and
our strategies from an anonymous writer.
I understand that some associates are angry about the failure of our Wellspring
investment -- we all are -- and the writer clearly has a laundry list of other
complaints, ranging from our paid time off program to the matrix structure to
our decision to continue to consult in areas other than actuarial services.
We have been very open about the changes in the firm, the problems with our
outsourcing investments, and our strategies going forward. We have met
personally with senior associates throughout the firm in a series of regional
meetings and opened the lines of communication through e-mail, local office
meetings, etc. We have encouraged everyone to ask us the tough questions -- and
we have answered those questions honestly. And we will continue to encourage
communications on these issues and to discuss them with anyone who expresses his
or her concerns openly, as many of you have.
Unlike the anonymous writer, the vast majority of our associates have expressed
strong support for our new, focused strategy. People close to the Wellspring
investment understand its purpose and complexity and the reasons for its
failure, which are not as simple as the writer of the "year 2000" memo suggests.
And, over the past five years, the Board's decisions have resulted in nearly
quadrupling our consulting profits, while we have steadily divested costly
investments that were entered into many years ago by people who have since left
the firm.
The writer also makes the erroneous suggestion that the Wellspring write-downs
will reduce bonuses going forward. This is highly misleading -- instead of
having to absorb substantial Wellspring costs going forward (an investment that
cost us $24 million in fiscal 1997 alone), we will pay only a small incremental
interest charge for the next few years ($3 million or less) and then be free of
these costs for the future. If our consulting operations continue to perform as
well as they have for the past three years (and we expect them to improve), our
stock price will continue to grow and bonuses will be much higher. (This is
discussed more fully in the proxy statement.)
Should the anonymous memo raise any concerns or questions that have not been
addressed to your satisfaction, I or other members of the Board or your Managing
Consultant will be glad to discuss them with you personally.
In the meantime, keep in mind that our consulting profits are continuing to
improve and that we have had substantial business development success during
this fiscal year, far better than in any previous year.
We encourage you to endorse the proposal concerning the modified stock valuation
method -- it is the best solution for you and your Company -- and to turn your
attention fully to serving our clients.
Pete
