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
[GRAPHIC OMITTED]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
November 18, 1999
Calgary, Alberta, Canada
The Fifty-Third Annual Meeting of Shareholders of Watson Wyatt & Company (the
"Company" or "Watson Wyatt") will be held on Thursday, November 18, 1999, at
8:30 a.m., at The Palliser, 139-9th Avenue, SW, Calgary, Alberta, Canada 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 27, 1999, 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, 1999
<PAGE>
[GRAPHIC OMITTED]
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 18, 1999
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, 1999, in connection with the Annual Meeting of Shareholders
of the Company to be held on November 18, 1999, 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 them being voted 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, 1999 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,
1999 is entitled to one vote per share on each matter to come before the Annual
Meeting. At the close of business on October 27, 1999, 14,897,639 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, is continuing its 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 - 57): Vice President, Central Regional Manager and
Director. 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 Chair of the Compensation
and Stock Committee and a member of the President's Pay Committee of the Board,
and has been a member of the Board since 1998.
Paula A. DeLisle (Age - 45): Vice President, Managing Consultant, Hong Kong and
Director. 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 is a member of the Audit and Compensation and Stock
Committees of the Board and has been a Director since 1997.
David B. Friend, M.D. (Age - 43): Vice President, Eastern Regional Manager
and Director. 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.
Before joining the Company, Dr. Friend served on the medical staff at Malden
Hospital for one year. Before attending medical school, Dr. Friend held the
position of Executive Vice President of High Voltage Engineering. Dr. Friend is
Chair of the Finance Committee of the Board and has been a Director since 1997.
John J. Haley (Age - 49): President, Chief Executive Officer and Director. Mr.
Haley joined the Company in 1977 as a consulting actuary. Mr. Haley formerly
managed the Washington, D.C. office and was the Director of the Company's
Benefits Practice. Mr. Haley is also a member of the Partnership Board of Watson
Wyatt Partners ("Watsons"). Mr. Haley is a member of the Executive Committee of
the Board and has been a Director since 1992.
Ira T. Kay (Age - 49): Vice President, North American Director, 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 a member of the Executive and Compensation and Stock
Committees of the Board and has been a member of the Board since 1996.
Brian E. Kennedy (Age - 56): 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 Chair of the Executive and Audit
Committees and a member of the President's Pay Committee of the Board, and has
been a member of the Board since 1996.
Eric P. Lofgren (Age - 48): Vice President, Global Director of the Benefits
Consulting Group and Director. He is also the Global Director of the Retirement
Consulting Practice. Mr. Lofgren joined the Company in 1989. Mr. Lofgren
previously spent seven years with William M. Mercer and seven years at Mutual of
New York. Mr. Lofgren has extensive experience in the areas of retirement plan
design, the effects of demographics on benefit systems and asset liability
management. Mr. Lofgren is a member of the Finance Committee of the Board, and
has been a member of the Board since 1998.
Robert D. Masding (Age - 55): 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 Watson Wyatt Partners, 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 - 60): 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, Charles E. Smith Residential Real
Estate Trust, Host Marriott Services and is Chairman of Ecutel, Inc., a private
internet firm. 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 - 40): Vice President, Managing Consultant for Southern
California and Director. Ms. McKee joined the Company in 1992. 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 was formerly the Director of Account Management for the Company's Western
Region. Ms. McKee is Chair of the Human Resources Committee and has been a
Director since 1997.
Kevin L. Meehan (Age - 54): Vice President. Mr. Meehan
joined Watson Wyatt's Washington office in 1983 to help start the Company's
flexible benefits operations. He has been a leader in developing the company's
Human Resources Technology (HRT) practice and the company's Account Management
function. Mr. Meehan manages the Washington office Account Management and
Marketing Team. Mr. Meehan is a member of the Compensation and Stock Committee
of the Board and is a nominee to the Board of Directors.
John A. Steinbrunner (Age - 49): 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
Executive and Compensation and Stock 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 - 45): 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.
Charles P. Wood, Jr. (Age -
55): Vice President and Western Regional Manager. Mr. Wood has been with the
Company since 1975. Mr. Wood is a consulting actuary for Watson Wyatt's Group
and Health Care practice. Mr. Wood is a member of the Human Resources Committee
of the Board and is a nominee to the Board of Directors.
STANDING COMMITTEES OF THE BOARD
Executive Committee
Brian E. Kennedy - Chair
John J. Haley
Ira T. Kay
John A. Steinbrunner
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 twelve meetings
during fiscal year 1999.
<PAGE>
Audit Committee
Brian E. Kennedy - Chair
Paula A. DeLisle
R. Michael McCullough
Sylvester J. Schieber 1
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 four meetings during fiscal year 1999.
Compensation and Stock Committee
Thomas W. Barratt - Chair
Paula A. DeLisle
Ira T. Kay
Kevin L. Meehan 1
John A. Steinbrunner
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 nine meetings during
fiscal year 1999.
Finance Committee
David B. Friend, M.D. - Chair
Walter W. Bardenwerper 1
Elizabeth M. Caflisch 1
Eric P. Lofgren
Carl D. Mautz 1
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
twelve meetings during fiscal year 1999.
1 Non-director member.
<PAGE>
Human Resources Committee
Gail E. McKee - Chair
Martin J.K. Brown 1
David P. Marini 1
Marcia W. Marsh 1
J.P. 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
eight meetings during fiscal year 1999.
Note: The Board of Directors does not have a nominating committee.
President's Pay Committee
R. Michael McCullough - Chair
Thomas W. Barratt
Brian E. Kennedy
The President's Pay Committee recommends, for Board of Director approval, the
compensation of the President and Chief Executive Officer. The Committee held
three meetings during fiscal year 1999.
DIRECTORS' MEETINGS
The Board of Directors conducted six meetings during fiscal year 1999. 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 1999 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, 1999. 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, 1999
Occupation with the Company (Percentage of Total Shares)
<S> <C>
Thomas W. Barratt 89,000 (*)
Vice President and Central Regional Manager
Paula A. DeLisle 53,900 (*)
Vice President and Managing Consultant, Hong Kong
David B. Friend, M.D. 71,000 (*)
Vice President and Eastern Regional Manager
John J. Haley 227,749 (1.53%)
President and Chief Executive Officer
Ira T. Kay 80,525 (*)
Vice President and North American Director, Human Capital Group
Brian E. Kennedy 50,000 (*)
Vice President, Managing Director, Canada and Managing
Consultant, Toronto
Eric P. Lofgren 109,365 (*)
Vice President and Global Director, Benefits Consulting Group
Robert D. Masding 0 1
Senior Partner, Watson Wyatt Partners
R. Michael McCullough 7,500 (*)
Director
Gail E. McKee 27,375 (*)
Vice President and Managing Consultant, Southern California
Kevin L. Meehan 100,011 (*)
Vice President
A. W. Smith, Jr. 2 0
Former President & CEO
John A. Steinbrunner 103,191 (*)
Vice President and Central Region Retirement Practice Leader
A. Grahame Stott 134,000 (*)
Vice President and Managing Director, Asia-Pacific Region
Charles P. Wood, Jr. 200,934 (1.35%)
Vice President and Western Regional Manager
All current Directors and executive officers as a group (17) 1,101,741 (7.40%)
<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.
2 Mr. Smith's shares were repurchased by the Company at the time of his retirement, in accordance with the
Company's bylaws.
</FN>
</TABLE>
<PAGE>
BIOGRAPHICAL INFORMATION FOR OTHER EXECUTIVE OFFICERS OF THE COMPANY
Walter W. Bardenwerper (Age - 48): 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 is
Chair of the Company's Global Quality Committee. Mr. Bardenwerper was a Director
of the Company from 1992 to 1997, and was a member of the Executive Committee of
the Board from 1995 - 1997.
Peter L. Childs (Age - 36): Controller. Mr. Childs joined the Company in the
capacity of Controller in May, 1999. Prior to this position, Mr. Childs served
as Corporate Officer and acting Vice-President, Finance and Treasurer of Manor
Care, Inc., where he worked for five years. Mr. Childs was also an officer
and/or director of various subsidiaries of Manor Care, Inc.
Carl D. Mautz (Age - 52): Vice President and Chief Financial Officer. Mr. Mautz
joined the Company in 1997 as Controller, 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.
Eric B. Schweizer (Age - 45): 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. 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
1996, 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, 1999,
3,734,537 shares of Common Stock were pledged to the Company's lenders to secure
loans to shareholders, representing approximately 25.07% 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, 1999, 1998 and
1997 by those persons who were, on June 30, 1999, 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)
Total Other All
Name and Principal Fiscal Salary/ Annual Other
Position Year Salary Bonus 1 SIBP Bonus/SIBP Compensation2 Compensation3
<S> <C> <C> <C> <C> <C> <C> <C>
John J. Haley 1999 543,750 422,625 491,000 1,457,375 0 25,255
President, 1998 440,000 320,000 0 760,000 0 19,300
Chief Executive 1997 403,790 215,000 0 618,790 0 17,350
Officer and Director
A.W. Smith, Jr. 1999 635,000 380,800 432,970 1,448,770 0 220,120
Chairman and 1998 615,000 375,000 0 990,000 0 28,300
Director 1997 591,230 330,000 0 921,230 0 23,950
Eric P. Lofgren 1999 390,000 290,000 260,960 940,960 0 19,170
Vice President, 1998 331,500 250,000 0 581,500 0 15,035
Global Director, 1997 314,500 180,000 0 494,500 7,500 11,250
Benefits Consulting
Group and Director
Kevin L. Meehan 1999 326,250 300,000 290,425 916,675 0 17,690
Vice President 1998 280,150 250,000 0 530,150 0 5,110
1997 263,670 180,000 0 443,670 3,000 10,470
David B. Friend, M.D. 1999 415,000 315,000 175,270 905,270 0 21,380
Vice President, 1998 387,500 270,000 0 657,500 0 17,125
Eastern Regional 1997 314,167 200,000 0 514,170 12,000 6,000
Manager 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
Haley 1999 105%
1998 142%
1997 105%
Smith 1999 85%
1998 86%
1997 79%
Lofgren 1999 145%
1998 139%
1997 114%
Meehan 1999 176%
1998 175%
1997 136%
Friend 1999 150%
1998 135%
1997 114%
2 "Other Annual Compensation" consists of a cash bonus of $.50 per share for
each share purchased in 1997 under the Stock Purchase Plan. This bonus was
also available to all participating associates. There were no stock
purchases under the Stock Purchase Plan in 1998 and no cash bonus was
offered under the 1999 Stock Purchase Plan. Messrs. Friend, Meehan and
Lofgren were the only named executive officers purchasing shares in 1997
since all others are above the 200,000 share maximum.
3 "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; (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; (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 maximum; (iv) for fiscal year 1999 for Mr. Smith, a
payment of $188,140 for accrued, but unused, paid time-off.
</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 1999
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 Amounts1:
Average Annual Compensation
for 36 Consecutive Months Years of Continuous
with the Highest Average Service
Preceding Retirement 10 15 20 25
<S> <C> <C> <C> <C>
$ 150,000 30,178 45,266 60,355 75,444
250,000* 51,178 76,766 102,355 127,944
350,000* 72,178 108,266 144,355 180,444
450,000* 93,178 139,766 186,355 232,944
550,000* 114,178 171,266 228,355 285,444
650,000* 135,178 202,766 270,355 337,944
750,000* 156,178 234,266 312,355 390,444
850,000* 177,178 265,766 354,355 442,944
950,000* 198,178 297,266 396,355 495,444
1,050,000* 219,178 328,766 438,355 547,944
1,150,000* 240,178 360,266 480,355 600,444
1,250,000* 261,178 391,766 522,355 652,944
<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, 1999 are: Mr. Haley - 22.17 years; Mr. Smith - 30.50 years;
Mr. Lofgren - 10.00 years ; Mr. Meehan - 16.17 years; and Dr. Friend - 4.00
years. Under the qualified plan, Mr. Smith will receive a monthly benefit of
$5,014 payable for life. Benefits are based solely on the compensation shown in
the "Salary" and "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 ($123,950 as of June 30, 1999 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 (excluding SIBP payments); 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 and 60
or more "points" as of December 31, 1996 (sum of age and service is 60 or
greater).
For purposes of the SRP, annual compensation refers to compensation amounts
shown in the "Salary" and "Bonus" columns of the Summary Compensation Table.
Transition benefits will equal the amount of total retirement benefits that
would have been paid under the qualified plan, excess plans and SRP formulas in
effect prior to January 1, 1997, less any benefits paid under the qualified and
excess plans 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).
Under the non-qualified plan, Mr. Smith received a lump sum benefit of
$5,047,143 at retirement, and as a result of an adjustment to include his 1999
fiscal year-end bonus, Mr. Smith will receive on October 31, 1999, an additional
lump sum benefit of $80,989.
Other Pension Plans. The Company also has other pension plans that have been
established in various countries for the benefit of eligible associates in those
jurisdictions.
Pension Arrangements with Named Executive Officer. The Company has an agreement
with Dr. Friend to provide a supplemental pension benefit if he remains
continuously employed by the Company until June 15, 2000. At the time of his
retirement, Dr. Friend will receive an additional service credit (for the
purposes of calculating benefits only) so that his total service credit will be
calculated as follows: (actual years of service + 1) multiplied by 1.5. In
addition, if, prior to the date on which Dr. Friend would be entitled to receive
an early retirement benefit, there is a change in control of the Company and Dr.
Friend leaves the employ of the Company within six months of the change in
control, his pension will be calculated as if he had reached early retirement.
<PAGE>
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, 1999, 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 bonus, and a Stock
Incentive Bonus Plan (SIBP) payment. 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, practice, region and Company performance. The SIBP, which is paid
in January of the following year to those eligible associates still employed by
the Company, is based on the SIBP funding level approved by the Board, an
individual's actual bonus received and their actual stock ownership as compared
to their career stock ownership target.
Determination of Compensation of the CEO.
Mr. Haley was named CEO-Elect effective August 26, 1998, with his transition to
President and CEO to be effective January 1, 1999. In light of this pending
management transition, Mr. Haley's base salary was adjusted on October 1, 1998
by the then CEO, Mr. Smith,1 after taking into account the following factors:
1. Mr. Haley's level of base salary received in fiscal year 1998;
2. The average basic merit increase for the Company overall;
3. The average salary increases in general industry and in the
consulting industry; and
4. Mr. Haley assuming the CEO position on January 1, 1999.
1 In subsequent years, Mr. Haley's base salary will be established by the
President's Pay Committee and approved by the Board.
<PAGE>
The CEO's bonus is determined by the President's Pay Committee, which currently
consists of the Company's outside Director, as Chair of the President's Pay
Committee, and the Chairs of the Executive and the Compensation and Stock
Committees. For the 1999 fiscal year-end bonus, the President's Pay Committee
recommended, and the Board approved, a bonus equal to 105% of Mr. Haley'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 1999, which was 105% of
target.
2. The firm's accomplishments during the fiscal year, including:
o The outstanding financial performance of the firm's core consulting
businesses.
o The exit from the outsourcing business actually costing less than had been
projected.
o A significant acquisition in the firm's Eastern Region.
Mr. Haley's SIBP payment was determined by a formula that took into
account his fiscal year end bonus and his stock ownership level.
The base salary of Mr. Smith, who served as President and CEO for the first half
of fiscal year 1999, and as Chairman for the latter half, was established by the
President's Pay Committee and was then approved by the Board of Directors. For
the 1999 fiscal year-end bonus of Mr. Smith, the President's Pay Committee
recommended a bonus equal to 75% of Mr. Smith's target bonus. After some
discussion, the Board approved a bonus equal to 85% of Mr.
Smith's target bonus, based on the following:
1. The average overall bonus funding for fiscal 1999;
2. The firm's accomplishments during the first half of the fiscal year;
and
3. Mr. Smith's assistance in transitioning leadership of the firm to Mr.
Haley during the second half of the year.
Mr. Smith's SIBP payment was also determined by applying the appropriate
formula calculation.
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 Thomas W. Barratt - Chair
Thomas W. Barratt Paula A. DeLisle
Brian E. Kennedy Ira T. Kay
Kevin L. Meehan 1
John A. Steinbrunner
1 Non-director member.
<PAGE>
SHAREHOLDER RETURN GRAPH
The graph set forth below depicts total cumulative shareholder return and
assumes $100 invested on July 1, 1994 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.
[OBJECT OMITTED]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Watson Wyatt Common Stock
100.00 101.58 111.26 119.37 136.26 150.45
Peer Group Index
100.00 115.25 193.47 138.11 166.90 117.10
NYSE Broad Market Index
100.00 119.37 149.34 195.08 248.59 282.59
</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.
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, all Section 16(a) filing
requirements applicable to such officers and Directors have been complied with,
except that due to an administrative oversight, two Form 3 and one Form 4 filing
were inadvertently filed late.
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, 1999.
PricewaterhouseCoopers LLP will continue to provide this service to the Company
for the fiscal year ended June 30, 2000. 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.
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 of Directors.
<PAGE>
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, 1999 for forwarding to
PricewaterhouseCoopers LLP. Please return your Proxy in accordance with the
directions on the bottom of the Proxy form.
SHAREHOLDER PROPOSALS
Any shareholder wishing to present a proposal to be included in the Proxy
Statement for the 2000 Annual Meeting of the Company, currently expected to be
held on November 16, 2000, 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, 2000.
In addition, if a shareholder fails to provide the Company notice prior to
September 12, 2000 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
2000 Annual Meeting of Shareholders.
By Order of the Board of Directors,
/s/ Walter W. Bardenwerper
Walter W. Bardenwerper, Secretary
Bethesda, Maryland
October 28, 1999
<PAGE>
MANAGEMENT PROXY WATSON WYATT & COMPANY
The undersigned hereby appoints John J. Haley and Walter W. Bardenwerper, and
each of them, as his or her proxies, each with full power of substitution, to
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 18, 1999, 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 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 Kevin L. Meehan
Ira T. Kay John A. Steinbrunner
Brian E. Kennedy A. Grahame Stott
Eric P. Lofgren Charles P. Wood, Jr.
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 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: Maura Lyons). Please mark, sign, date
and return this Proxy to your Office Administrator on or before November 11,
1999.
