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>
FINAL COPIES
WATSON WYATT & COMPANY
[GRAPHIC OMITTED]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
November 19, 1998
Tokyo, Japan
The Fifty-Second Annual Meeting of Shareholders of Watson Wyatt & Company (the
"Company" or "Watson Wyatt") will be held on Thursday, November 19, 1998, at
8:30 a.m., at The Four Seasons Hotel, 10-8 Sekiguchi 2-chome, Bunkyo-ku, Tokyo,
Japan 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 approve an amendment to Section 9.4 of the Company's Bylaws
to more specifically describe permitted liens arising in
connection with loan programs established by the Board of
Directors (the "Bylaw Amendment Proposal").
III. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The close of business on October 27, 1998, 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 ATTACHED 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 ATTACHED PROXY BALLOT PROMPTLY AND DELIVER IT TO YOUR OFFICE
ADMINISTRATOR IN A SEALED ENVELOPE. OFFICE ADMINISTRATORS WILL FORWARD THE
SEALED ENVELOPES TO PRICEWATERHOUSECOOPERS LLP IN WASHINGTON, D.C.
By Order of the Board of Directors
/s/ Walter W. Bardenwerper
Walter W. Bardenwerper, Secretary
Bethesda, Maryland
October 28, 1998
<PAGE>
[GRAPHIC OMITTED]
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 19, 1998
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 28, 1998, in connection with the Annual Meeting of Shareholders
of the Company to be held on November 19, 1998, 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, 1998 has been delivered to each shareholder contemporaneously
with 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 27,
1998 is entitled to one vote per share on each matter to come before the Annual
Meeting. At the close of business on October 27, 1998, 14,683,417.24 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.
ELECTION OF DIRECTORS
The Board of Directors has nominated the fourteen 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.
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 fourteen. The Board of Directors, however, has begun a search for a new
outside Director. At such time as an appropriate candidate is selected, the
Board of Directors intends to increase the size of the Board to fifteen and
appoint a new outside Director to the Board. The Board of Directors recommends
that the Shareholders vote FOR each of the fourteen nominees listed below:
BIOGRAPHICAL INFORMATION FOR NOMINEES TO THE BOARD
Thomas W. Barratt (Age - 56): Vice President and Central Regional Manager. Mr.
Barratt originally joined Watson Wyatt in 1976 as a Retirement Consultant. He
joined Towers Perrin in 1987, and while there, was Managing Consultant of their
Detroit Area Office. He returned to Watson Wyatt in 1994 as the Managing
Consultant of the Michigan Offices and was named the Regional Manager of the
Central Region in 1997. Mr. Barratt is a member of the Compensation and Stock
Committee of the Board.
Paula A. DeLisle (Age - 44): Vice President, Director and 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. Ms. DeLisle has been a Director since 1997.
David B. Friend, M.D. (Age - 42): Vice President, Director and Eastern 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. Dr.
Friend is a member of the Executive and the Finance Committees of the Board and
has been a Director since 1997.
John J. Haley (Age - 48): Vice President, President and Chief Executive
Officer-Elect 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 President's Pay Committee of the Board, Chair 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"). Mr. Haley formerly managed the Washington, D.C.
office and was the Director of the Company's Retirement Practice.
Ira T. Kay (Age - 48): Vice President, Global Practice Director of the Company's
Human Capital Group 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 the Chair of the Compensation and Stock
Committee of the Board and a member of the President's Pay and the Executive
Committees of the Board and has been a member of the Board since 1996.
Brian E. Kennedy (Age - 55): 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 Executive Committee and is Chair of the Audit
Committee of the Board, a Director of Watson Wyatt Holdings (Europe) Limited and
has been a member of the Board since 1996.
Eric P. Lofgren (Age - 47): Director, Retirement Practice. Mr. Lofgren joined
the Company in 1989. Mr. Lofgren previously spent seven years with a large
consulting firm and seven years at Mutual of New York. Mr. Lofgren is the
primary consultant for several of Watson Wyatt's major clients. He is a
nationally known actuary and consultant with extensive experience in the areas
of retirement plan design, having developed the Pension Equity design family,
and asset liability management.
Robert D. Masding (Age - 54): Senior Partner, Watson Wyatt Partners, and
Director. Mr. Masding has been engaged in the actuarial consulting business
since 1969 and has been a partner of R Watson & Sons, 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 - 59): Director. Mr. McCullough is the retired
Chairman of Booz, Allen & Hamilton. 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, and was elected to the
position of Chairman in 1984. Mr. McCullough is a member of the Boards of
Capital Auto Real Estate Investment Trust, O'Sullivan Corporation and Host
Marriott Services. Mr. McCullough is Chair of the President's Pay Committee and
a member of the Audit Committee of the Board, and has been a member of the Board
since 1996.
Gail E. McKee (Age - 39): Vice President, Director and Managing Consultant for
Southern California. Ms. McKee joined the Company in 1992. From April 1996
through January 1997, Ms. McKee worked for Wellspring Resources, LLC,
principally as Vice President of Client Services. 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. Ms. McKee
has been a Director since 1997, and is Chair of the Human Resources Committee.
Paul V. Mee (Age - 52): Vice President, Director and Western Regional Manager.
Mr. Mee joined the Company in 1994. From 1990 to 1994, Mr. Mee was a Managing
Director of the Alexander Consulting Group. Prior to that position, he was a
Principal and Practice Leader with Towers Perrin. Mr. Mee is a member of the
Audit Committee of the Board and has been a Director since 1997.
A. W. "Pete" Smith, Jr. (Age - 54): 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 also a Director of Watson Wyatt Holdings (Europe) Limited. 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.
Mr. Smith is a member of the Executive Committee of the Board. He has been a
Director since 1986, and has been President and CEO since 1993. Mr. Smith has
announced that he will be retiring from the Company effective June 30, 1999.
John A. Steinbrunner (Age - 48): Vice President, Central 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
Compensation and Stock and Audit Committees of the Board and has been a Director
since 1996. Mr. Steinbrunner is also Chair of the U.S. Retirement Committee.
A. Grahame Stott (Age - 44): Vice President, Managing Director, Asia-Pacific
Region and Director. Mr. Stott has been with the Company since 1982. He has
served as a consultant in and manager of the Hong Kong office, is a member of
the Executive and Finance Committees of the Board and is Chair of the
Asia-Pacific Retirement Committee. Mr. Stott has been a Director since 1995.
STANDING COMMITTEES OF THE BOARD
Executive Committee
John J. Haley - Chair
David B. Friend, M.D.
Ira T. Kay
Brian E. Kennedy
A.W. Smith, Jr.
A. Grahame Stott
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 ten meetings during
fiscal year 1998.
Compensation and Stock Committee
Ira T. Kay - Chair
Thomas W. Barratt 1
Gary T. Hallenbeck 2
John A. Steinbrunner
Robert J. Webb 1
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 President's Pay Committee. The Committee held ten meetings during
fiscal year 1998.
1 Non-director member.
2 Mr. Hallenbeck has announced his retirement from the Company, effective
November 1, 1998.
<PAGE>
President's Pay Committee
R. Michael McCullough - Chair
John J. Haley
Ira T. Kay
The President's Pay Committee recommends, for Board of Director approval, the
compensation of the President and Chief Executive Officer. The Committee held
four meetings during fiscal year 1998.
Audit Committee
Brian E. Kennedy - Chair
R. Michael McCullough
Paul V. Mee
Sylvester J. Schieber 1
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
1998.
Finance Committee
John J. Haley - Chair
Walter W. Bardenwerper 1
Elizabeth M. Caflisch 1
David B. Friend, M.D.
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
eleven meetings during fiscal year 1998.
1 Non-director member.
<PAGE>
Human Resources Committee
Gail E. McKee - Chair
Sally G. Egan 1
Eric P. Lofgren 1
Marcia W. Marsh 1
John Philip Singson Orbeta 1
Charles P. Wood, Jr. 1
The Human Resources Committee reviews and considers issues relating to the human
resources of the Company. This includes working with the Vice President of Human
Resources to review strategy and set priorities for obtaining, managing and
developing the best available resources in our industry. The Committee held five
meetings during fiscal year 1998.
Note: The Board of Directors does not have a nominating committee.
DIRECTORS' MEETINGS
The Board of Directors conducted eight meetings during fiscal year 1998. All
Directors attended more than 75% of the meetings of the Board and the Committees
on which they served. None of the current Directors who are associates of the
Company are 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 1998 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.
1 Non-director member.
<PAGE>
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 27, 1998. 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 27, 1998
Occupation with the Company (Percentage of Total Shares)
<S> <C>
Thomas W. Barratt 71,600 (*)
Vice President and Central Regional Manager
Charles A. Clemens 7,500 (*)
Director
Paula A. DeLisle 44,900 (*)
Vice President and Managing Consultant, Hong Kong
David B. Friend, M.D. 46,000 (*)
Vice President and Eastern Regional Manager
John J. Haley 227,749 (1.55%)
Vice President, President and Chief Executive Officer-Elect
Gary T. Hallenbeck 122,500 (*)
Vice President of Corporate Strategy & Development
Ira T. Kay 60,900 (*)
Vice President and Global Practice Director,
Human Capital Group
Brian E. Kennedy 35,000 (*)
Vice President, Managing Director, Canada and Managing
Consultant, Toronto
Eric P. Lofgren 99,765 (*)
Director, Retirement Practice
Robert D. Masding 0 1
Senior Partner, Watson Wyatt Partners
R. Michael McCullough 7,500 (*)
Director
Gail E. McKee 20,000 (*)
Vice President and Managing Consultant, Southern California
Paul V. Mee 88,600 (*)
Vice President and Western Regional Manager
A.W. Smith, Jr. 276,342 (1.88%)
President and Chief Executive Officer
John A. Steinbrunner 103,191 (*)
Vice President and Central Region Retirement Practice Leader
A. Grahame Stott 129,000 (*)
Vice President and Managing Director, Asia-Pacific Region
All current Directors and executive officers as a group (18) 1,362,418 (9.28%)
<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 361,000 shares of the Company's Common Stock.
</FN>
</TABLE>
<PAGE>
BIOGRAPHICAL INFORMATION FOR OTHER EXECUTIVE OFFICERS OF THE COMPANY
Walter W. Bardenwerper (Age - 47): Vice President, General Counsel and
Secretary, 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 Finance Committee of the Board and
was a Director from 1992 to 1997, and a member of the Executive Committee of the
Board from 1995 to 1997.
Carl D. Mautz (Age - 51): Controller and acting Chief Financial Officer. Mr.
Mautz joined the Company in 1997, overseeing the Accounting and Reporting and
the Accounting Operations functions of the Company. From April 1996 to February
1997, he served as the Controller for Tactical Defense Systems, a division of
Lockheed Martin Corporation. Mr. Mautz worked as the Group Controller for Loral
Defense Systems from May 1995 to April 1996 when Loral Corporation was purchased
by Lockheed Martin. From 1990 to 1995, he was the Controller for Unisys
Government Systems. Mr. Mautz is a Certified Public Accountant.
Eric B. Schweizer (Age - 44): Treasurer. Mr. Schweizer joined the Company in
1993 as the Director of Treasury, and was subsequently appointed Treasurer in
1994. Prior to this position, Mr. Schweizer was with Woodward & Lothrop
department stores for fifteen years, most recently as the Director of Financial
Reporting.
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 (but did not do so in
1998). 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 27, 1998,
4,170,723 shares of Common Stock were pledged to the Company's lenders to secure
loans to shareholders, representing approximately 28.40% 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>
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, 1998, 1997 and
1996 by those persons who were, on June 30, 1998, 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 Long-Term
Compensation Compensation
Total
Name and Principal Fiscal Salary/ Restricted Stock Other Annual All Other
Position Year Salary Bonus1 Bonus Award(s) Compensation 3 Compensation 4
<S> <C> <C> <C> <C> <C> <C> <C>
A.W. Smith, Jr. 1998 615,000 375,000 990,000 0 28,300
President, 1997 591,230 330,000 921,230 0 23,950
Chief Executive 1996 559,300 300,000 859,300 20,000 0
Officer and Director
George Bailey 1998 515,000 290,000 6 805,000 0 15,100
Former Global 1997 208,330 250,000 458,330 247,000 2 25,000 261,870
Practice Director, 1996 N/A N/A N/A
Human Capital Group
(employment
commenced February
1, 1997 and
terminated September
28, 1998)
John J. Haley 1998 440,000 320,000 760,000 0 19,300
Vice President, 1997 403,790 215,000 618,790 0 17,350
President, 1996 385,700 225,000 610,700 30,000 0
Chief Executive
Officer-Elect and
Director
Paul R. Daoust 1998 550,000 189,000 739,000 20,500 5 23,690
Former Executive 1997 529,510 290,000 819,510 0 19,940
Vice President, 1996 507,800 275,000 782,800 10,000 0
Chief Operating
Officer and Director
Ira T. Kay 1998 405,000 300,000 705,000 0 18,550
Vice President, 1997 368,750 225,000 593,750 14,350 14,770
Global Practice 1996 331,250 200,000 531,250 12,300 0
Director, Human
Capital Group and
Director
*(See footnotes on following page.)
<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.
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 1998 86%
1997 79%
1996 106%
Bailey 6 1998 111%
1997 150%
1996 N/A
Haley 1998 142%
1997 105%
1996 117%
Daoust 1998 57%
1997 90%
1996 107%
Kay 1998 144%
1997 120%
1996 114%
2 Mr. Bailey was granted 50,000 shares at the time he was hired (at a value of
$4.94 per share) which were scheduled to vest in three equal installments on
February 1, 1998, 1999, and 2000. Based on the price of the Company's common
stock as of June 30, 1998, which was $6.05 per share, Mr. Bailey's
restricted stock was valued at $302,500. These shares would have been
entitled to any dividend declared on the Company's common stock.
3 "Other Annual Compensation" consists of a cash bonus of $1 per share for
each share purchased in 1996 and a cash bonus of $.50 per share for each
share purchased in 1997 under the Stock Purchase Plan. These bonuses were
also available to all participating associates. There were no stock
purchases under the Stock Purchase Plan in 1998. Messrs. Bailey and Kay were
the only named executive officers purchasing shares in 1997 since all others
are above the 200,000 share maximum.
4 "All Other Compensation" consists of the following: (i) for fiscal year 1997
only, a one-time non-compete bonus equal to 5% of each named executive's fiscal
year 1996 bonus (this bonus was not paid to Mr. Bailey because he was hired
after the non-competes were introduced); (ii) for fiscal years after 1996,
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; (iii) for fiscal years after 1996, 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 maximum; (iv) for Mr. Bailey, this amount
includes a sign-on bonus of $250,000 in 1997.
5 Includes rent on a Company apartment for Mr. Daoust's use while working at
the Company's headquarters in Bethesda, Maryland and amounts paid for
post-retirement career consulting services.
6 The amount of Mr. Bailey's bonuses for fiscal years 1997 and 1998 were
guaranteed at the time of Mr. Bailey's hire.
</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 1998
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:
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 1998
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:
<TABLE>
<CAPTION>
Annual Benefit Amounts 1:
Average Annual Compensation Years of Continuous Service
for 36 Consecutive Months
with the Highest Average
Preceding 10 15 20 25
Retirement
<S> <C> <C> <C> <C>
----------
$ 150,000 30,255 45,382 60,510 75,637
250,000* 51,255 76,882 102,510 128,137
350,000* 72,255 108,382 144,510 180,637
450,000* 93,255 139,882 186,510 233,137
550,000* 114,255 171,382 228,510 285,637
650,000* 135,255 202,882 270,510 338,137
750,000* 156,255 234,382 312,510 390,637
850,000* 177,255 265,882 354,510 443,137
950,000* 198,255 297,382 396,510 495,637
1,050,000* 219,255 328,882 438,510 548,137
<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 0.4% 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 $130,000.
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, 1998 are: Mr. Smith - 29.5 years; Mr. Bailey - 1.4 years;
Mr. Haley - 21.2 years; Mr. Daoust - 28.1 years and Mr. Kay - 4.6 years.
Benefits are based solely on the compensation shown in the "Total Salary/Bonus"
column of the Summary Compensation Table.
<PAGE>
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 ($121,875 as of June 30, 1998 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 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. The form of benefit under the SRP is
a temporary annuity 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.
ARRANGEMENTS WITH NAMED EXECUTIVE OFFICERS
The Company entered into an agreement with Mr. Bailey at the time he was hired
which set forth the terms of his initial compensation and benefits, including
immediate vesting under all of the Company's benefit plans. Under the terms of
that agreement, at the time of his separation from the Company, Mr. Bailey
received a payment including one year's base salary and medical benefits for one
year, and the 33,332 shares of restricted stock granted to Mr. Bailey but not
yet vested, vested immediately.
REPORT OF THE PRESIDENT'S 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 is applied to all associates, including
executive officers, and is administered by the Compensation and Stock Committee,
with the exception of the compensation of the CEO 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, 1998, the compensation of the Company's
executive officers (and all other bonus-eligible associates) was comprised
primarily of two elements: base salary and fiscal year-end bonuses. 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.
Determination of Compensation of the CEO. The base salary of the CEO for fiscal
year 1998 was established by the President's Pay Committee, which currently
consists of the Company's outside Director 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 salary received in fiscal year 1997.
2. The average basic merit increase for the Company overall.
3. The average salary increases in general industry and in the consulting
industry.
For the 1998 fiscal year-end bonus, the President's Pay Committee recommended,
and the Board approved, a bonus equal to 86% of the CEO's target bonus. The
Committee's recommendation, and the Board's decision, took into account the
following:
1. The average overall bonus funding for fiscal 1998, which was 100% of target.
2. The firm's accomplishments during the fiscal year, including:
o Development of a highly focused strategy.
o The excellent financial performance of our core consulting
businesses.
o The sale and divestment of non-core and non-performing businesses.
o The significant progress in moving ahead as one firm globally.
3. The costly write-down of our investment in Wellspring Resources.
In fiscal 1997, the Board approved a bonus of $380,000 for the CEO (90% of
target); the CEO voluntarily reduced his bonus to $330,000 (79% of target).
Determination of Compensation of Other Executive Officers. The base salary and
fiscal year-end bonuses of the Company's other Executive Officers are determined
by the CEO consistent with the factors described above and also taking into
account the performance of the business units managed by these individuals.
President's Pay Committee Compensation and Stock Committee
R. Michael McCullough - Chair Ira T. Kay - Chair
John J. Haley Thomas W. Barratt 1
Ira T. Kay Gary T. Hallenbeck
John S. Steinbrunner 2
Robert J. Webb 1
SHAREHOLDER RETURN GRAPH
The graph set forth on the opposite page depicts total cumulative shareholder
return and assumes $100 invested on July 1, 1993 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.
1 Non-director member.
2 Mr. Steinbrunner began serving on the Committee in May, 1998.
<PAGE>
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Comparative 5-Year Cumulative Total Return
Among Watson Wyatt, Peer Group, and Broad Index
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Watson Wyatt
Common Stock
100.00 108.03 109.73 120.19 128.95 147.20
Peer Group Index
100.00 97.78 112.69 189.17 135.04 163.19
NYSE Broad
Market Index
100.00 103.48 123.53 154.54 201.87 257.25
</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. Effective July 1, 1998, the Company sold
one-half of its investment in the holding company to Watson Wyatt Partners. 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.
Since his retirement from the Company on December 31, 1997, Mr. Charles Clemens,
a Director, has provided consulting services to the Company in his role as
Acting Director for the Health Care Practice. Fees for these services totaled
$120,615 for fiscal year 1998.
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,
except that due to an administrative oversight, two Form 4 filings were
inadvertently filed late.
II. PROPOSED AMENDMENT TO SECTION 9.4
OF THE COMPANY'S BYLAWS TO MORE SPECIFICALLY
DESCRIBE PERMITTED LIENS ARISING IN CONNECTION
WITH LOAN PROGRAMS ESTABLISHED
BY THE BOARD OF DIRECTORS
The Board seeks shareholder approval of a correcting amendment to Section 9.4 of
the Company's Bylaws to more specifically describe permitted liens arising in
connection with loan programs established by the Board of Directors (the "Bylaw
Amendment Proposal" or the "Amendment"). The Company's Board of Directors
unanimously approved the Amendment on August 27, 1998 and recommends that the
Shareholders approve the Amendment.
Section 9.4 of the Company's Bylaws essentially prohibits the imposition of
liens on the Company's stock by providing that stock held by a shareholder is
deemed to be offered for sale to the Company if a shareholder permits a lien to
be placed on his or her shares. The Amendment has been proposed because a
technical reading of Section 9.4 of the Bylaws could lead to the interpretation
that liens granted to NationsBank by all shareholders participating in the
shareholder loan program are prohibited by this section. The Bylaws not only
explicitly contemplate the shareholder loan program, but the clear intent of
this provision is to prevent shareholders from pledging their shares as
collateral to third parties for non-stock related loans, so that third parties
cannot obtain the shares in the event of a default. The Company has always
interpreted Section 9.4 as only applying to liens imposed by such third party
pledges or by operation of law. On recommendation of the General Counsel, the
Board of Directors has determined that it is appropriate to modify the language
of Section 9.4 to eliminate any ambiguity related to the permissibility of liens
arising in connection with loan programs established by the Board of Directors.
This is only a technical amendment to the Bylaws and does not in any way modify
the administration of the Company's stock program, the rights of any shareholder
or any outstanding NationsBank shareholder loans.
The Board of Directors recommends that the Shareholders vote FOR the Bylaw
Amendment Proposal. Approval of the Bylaw Amendment Proposal requires the
affirmative vote of the holders of shares representing at least 80% of the
outstanding voting rights of the Company's Common Stock, not merely 80% of the
stock present in person or by proxy at the Annual Meeting.
The full text of the Bylaw Amendment Proposal is set forth in Exhibit A to this
Proxy Statement. The Company will provide a copy of the complete Bylaws without
charge upon written request by a shareholder. Requests should be directed to
Walter W. Bardenwerper, Vice President, Secretary and General Counsel, Suite
800, 6707 Democracy Boulevard, Bethesda, Maryland 20817.
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. PricewaterhouseCoopers LLP acted as the Company's independent
public accountants for the fiscal year ended June 30, 1998.
PricewaterhouseCoopers LLP will continue to provide this service to the Company
for the fiscal year ended June 30, 1999. Representatives of
PricewaterhouseCoopers LLP are not expected to attend the Annual Meeting;
however, PricewaterhouseCoopers 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
initial distribution of the proxies, proxies may be solicited with the
assistance of associates of the Company personally, by telephone, electronically
or by facsimile. Also, the Company has made arrangements with its independent
auditors, PricewaterhouseCoopers LLP, for assistance with the solicitation
process. PricewaterhouseCoopers LLP will solicit proxies by telephone and by
electronic communication at an estimated cost of $12,000.
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 and for the Amendment
to Section 9.4 of the Company's Bylaws to more specifically describe permitted
liens arising in connection with loan programs established by the Board of
Directors.
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 PricewaterhouseCoopers
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 attached Proxy in a sealed
envelope to your Office Administrator by November 11, 1998 for forwarding to
PricewaterhouseCoopers 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 to be included in the Proxy
Statement for the 1999 Annual Meeting of the Company, currently expected to be
held on November 18, 1999, 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, 1999.
In addition, if a shareholder fails to provide the Company notice prior to
September 12, 1999 of his or her intention to present a proposal at the meeting,
then the Company's Management proxies will be entitled to use their
discretionary voting authority if such shareholder proposal is raised at the
1999 Annual Meeting of Shareholders.
By Order of the Board of Directors,
/s/ Walter W. Bardenwerper
Walter W. Bardenwerper, Secretary
Bethesda, Maryland
October 28, 1998
<PAGE>
FINAL COPIES
MANAGEMENT PROXY WATSON WYATT & COMPANY
The undersigned hereby appoints A.W. Smith, Jr., John J. Haley 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 19, 1998, 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 AND A
VOTE FOR THE PROPOSED AMENDMENT TO SECTION 9.4 OF THE COMPANY'S BYLAWS
I. FOR all fourteen nominees listed below (except as otherwise directed below);
WITHHOLD AUTHORITY TO VOTE FOR all fourteen nominees listed below:
Thomas W. Barratt Robert D. Masding
Paula A. DeLisle R. Michael McCullough
David B. Friend Gail E. McKee
John J. Haley Paul V. Mee
Ira T. Kay A.W. Smith, Jr.
Brian E. Kennedy John A. Steinbrunner
Eric P. Lofgren 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. FOR AGAINST the proposed amendment to Section 9.4 of the Company's
Bylaws to more specifically describe permitted liens arising in
connection with loan programs established by the Board of
Directors (the "Bylaw Amendment Proposal").
III. 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 AND FOR THE PROPOSED
AMENDMENT TO SECTION 9.4 OF THE COMPANY'S BYLAWS. 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 a sealed envelope) to their Office Administrator
for forwarding to PricewaterhouseCoopers LLP, 1301 K Street, N.W., Suite 800
West, Washington, D.C. 20005-3333 (Attn: Shannon Murphy). Please mark, sign,
date and return this Proxy to your Office Administrator on or before November
11, 1998.
<PAGE>
Exhibit A
Inserted language in bold italics
Section 9.4 Death, Termination of Employment, Bankruptcy, Liens. On the death of
a shareholder, or upon the termination of a shareholder's employment with the
Corporation or any subsidiary of the Corporation, whether said termination be by
retirement, voluntary or involuntary termination, or for any other reason, or
upon the Corporation receiving actual knowledge that a shareholder or any
personal holding corporation or similar approved entity as described in Section
9.2 has become bankrupt or suffered or permitted the imposition of any lien or
attachment on any Stock of the Corporation owned by such shareholder or any
trust, personal holding company or other similar approved entity holding Stock
for his benefit (except any permitted lien arising from a loan program
established by the Board of Directors to facilitate the financing of purchases
of Stock by Eligible Purchasers), whichever first occurs ("Determination Date"),
all Stock of the Corporation then owned by such shareholder or his
representative or held for his benefit in any trust, personal holding company or
other entity permitted hereunder shall be deemed offered for sale and to
constitute Offered Shares subject to purchase by the same procedure as set forth
in Section 9.1 of this Section 9, excepting that, purchase of such shares shall
occur on such Closing Date (not more than 245 days after the Determination
Date), as the President or Secretary shall determine with payment to be made in
accordance with Section 9.6 hereof. Any of such shares of Stock not elected to
be purchased by the Corporation or by Eligible Purchasers within 245 days after
the Determination Date shall be purchased by the Corporation unless and to the
extent that the Corporation is prohibited from doing so by the DGCL. For
purposes of this Section 9.4, notwithstanding any other provision of this Bylaw,
a shareholder shall be deemed to own all Stock transferred by him to a trust
satisfying the terms and conditions of Section 9.2 hereof and such trust shall
have the same obligations with respect to the sale of such Stock hereunder as
the shareholder would have had if the Stock had not been transferred to said
trust.
A-1
