SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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[x] Definitive Proxy Statement
[ ] Soliciting Material Pursuant to § 240.14a-11(c)or §240.14a-12
STATE STREET CORPORATION
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[STATE STREET LOGO]
Marshall N. Carter
Chairman and Chief Executive Officer
March 10, 1998
DEAR STOCKHOLDER:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of State Street Corporation. The meeting will be held in the
Enterprise Room at 225 Franklin Street, Boston, Massachusetts on Wednesday,
April 15, 1998, at 10:00 a.m. Your Board of Directors and management look
forward to greeting those stockholders able to attend.
The notice of meeting and proxy statement which follow describe the
business to be conducted at the meeting. You will be asked to elect six
directors. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE DIRECTORS NOMINATED.
Your vote is very important. Whether or not you plan to attend the
meeting, please carefully review the enclosed proxy statement. Then complete,
sign, date and mail promptly the accompanying proxy in the enclosed return
envelope. To be sure that your vote will be received in time, please return
the proxy at your earliest convenience.
We look forward to seeing you at the Annual Meeting so that we can update
you on our progress. Your continuing interest is very much appreciated.
Sincerely,
/s/Marshall N. Carter
State Street Corporation
225 Franklin Street
Boston, MA 02110-2804
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[STATE STREET LOGO]
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
STATE STREET CORPORATION:
The 1998 Annual Meeting of Stockholders of State Street Corporation will
be held on Wednesday, April 15, 1998, at 10:00 a.m., Eastern Time, at 225
Franklin Street, Fifth Floor, Boston, Massachusetts, for the following
purposes:
1. To elect six directors, each for a three-year term; and
2. To act upon such other business as may properly come
before the meeting and any adjournments thereof.
Stockholders of record at the close of business on February 27, 1998 are
entitled to notice of and to vote at the meeting and any adjournments thereof.
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE
PROVIDED FOR YOUR USE. FURNISHING THIS PROXY WILL NOT AFFECT YOUR RIGHT TO
REVOKE THIS PROXY OR TO VOTE IN PERSON SHOULD YOU ATTEND THE MEETING.
By Order of the Board of Directors,
Maureen Scannell Bateman
Secretary
March 10, 1998
State Street Corporation
225 Franklin Street
Boston, MA 02110-2804
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STATE STREET CORPORATION
225 Franklin Street, Boston, Massachusetts 02110
PROXY STATEMENT
This proxy statement, and the accompanying proxy, which are scheduled to
be sent to stockholders beginning on March 10, 1998, are furnished in
connection with the solicitation by the Board of Directors of State Street
Corporation (the "Corporation") of proxies for the 1998 Annual Meeting of
Stockholders of the Corporation to be held on April 15, 1998 and at any
adjournments thereof. The Board of Directors has fixed the close of business
on February 27, 1998 as the record date for determining the stockholders
entitled to notice of and to vote at the meeting. On the record date
161,012,794 shares of Common Stock of the Corporation were outstanding and
entitled to be voted at the meeting.
All shares represented by properly executed proxies, if such proxies are
received in time and not revoked, will be voted at such meeting in accordance
with any specifications thereon or, if no specifications are made, proxies
will be voted in accordance with the recommendations of the Board of
Directors. Each share of Common Stock is entitled to one vote. Any proxy may
be revoked at any time before it is voted by notifying the Secretary in
writing, by executing a later dated proxy or by notifying the Secretary at the
meeting and voting in person.
The Corporation will bear the cost of soliciting proxies. The
solicitation of proxies will be made primarily by mail. Proxies may also be
solicited personally, by telephone and other means of communication by regular
employees of the Corporation and its principal subsidiary, State Street Bank
and Trust Company (the "Bank"), without any additional remuneration and at
minimal cost. The Corporation intends to request banks, brokerage houses,
custodians, nominees and fiduciaries to forward soliciting material to their
principals and to obtain authorization for the execution of proxies. In
addition, the Corporation has retained MacKenzie Partners, Inc. to aid in the
solicitation of proxies. The cost of such services is $8,500, plus
expenses.
The Corporation's Annual Report, including financial statements for the
year ended December 31, 1997, is being mailed to stockholders together with
this proxy statement.
ELECTION OF DIRECTORS
In accordance with Massachusetts law, the By-laws of the Corporation
provide for the classification of the Board into three classes of directors as
nearly equal in number as possible, each class serving a three-year term, with
one class of directors to be elected at each annual meeting of stockholders
for the term specified and to continue in office until their successors are
elected and qualified. The exact number of directors is to be determined by
vote of the Board of Directors. Pursuant to the By-laws, at a meeting on
December 18, 1997, the Board of Directors fixed the number of directors at 18,
effective with the 1998 Annual Meeting. There are currently 19 directors of
the Corporation. David B. Gruber and Diana Chapman Walsh were elected Class
II directors by the Board on September 18, 1997. Joseph A. Baute, a Class II
director, will be retiring from the Board at the expiration of his present
term.
It is intended that shares represented by proxies solicited by the Board
of Directors will, unless contrary instructions are given, be voted for the
election of the six nominees listed below as directors to serve for a three
year term expiring at the Annual Meeting to be held in 2001. Although the
Board of Directors does not contemplate that any nominee will be unavailable
for election, in the event that vacancies occur unexpectedly, such shares may
be voted for substitute nominees, if any, as may be designated by the Board of
Directors. Information relating to each nominee for election as director and
for each continuing director, including his or her period of service as a
director of the Corporation, principal occupation and other biographical
material is shown below.
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DIRECTORS TO BE ELECTED AT THE 1998 ANNUAL MEETING
Class II
DAVID P. GRUBER Director since 1997
Chairman, Chief Executive Officer and Director of Wyman-Gordon Company, a
manufacturer of forging, investment casting and composite airframe structures
for the commercial aviation, commercial power and defense industries, since
1997. Mr. Gruber, age 56, joined Wyman-Gordon in 1991 as president and chief
operating officer, became a director in 1992 and president and chief executive
officer in 1994. Mr. Gruber began his career with General Tire and Rubber
Company. From 1978 to 1991 he was with Norton Company, including serving as
vice president of Advanced Ceramics, from 1987 to 1991. He is a member of the
board of trustees of Manufacturers' Alliance for Productivity and Innovation.
Mr. Gruber has a B.S. degree from Ohio State University.
CHARLES R. LAMANTIA Director since 1993
President and Chief Executive Officer of Arthur D. Little, Inc., which
provides management, technology and environmental consulting services. Dr.
LaMantia, age 58, was president and chief operating officer of Arthur D.
Little, Inc. from 1986 to 1988. Prior to rejoining Arthur D. Little in 1986,
he was president of Koch Process Systems, Inc. From 1977 to 1981, Dr.
LaMantia was vice president in charge of Arthur D. Little's services to the
chemical, metals and energy industries, having assumed that position after 10
years on the firm's consulting staff. He is a member of The Conference Board
and the Massachusetts Business Roundtable. Dr. LaMantia received B.A., B.S.,
M.S. and Sc.D. degrees from Columbia University and attended the Advanced
Management Program at Harvard Business School.
ALFRED POE Director since 1994
Chief Executive Officer of MenuDirect Corporation, a direct home delivery
prepared food service, since 1997. Mr. Poe, age 49, was formerly the
president of the Meal Enhancement Group and Corporate Vice President of the
Campbell Soup Company which he joined in 1991. From 1982 to 1991, he was with
Mars, Inc. and held various sales and marketing assignments in the United
States and the United Kingdom. He is a member of the board of directors of
B&G Foods, Inc., the LEAD (Leadership, Education and Development) Program for
minority students and the Executive Leadership Council. Mr. Poe holds a B.S.
degree from Polytechnic Institute of Brooklyn and an M.B.A. from the Harvard
Graduate School of Business.
DAVID A. SPINA Director since 1989
President and Chief Operating Officer of the Corporation since 1995. Mr.
Spina, age 55, joined State Street in 1969 as a credit analyst. He was
elected executive vice president in 1982 and vice chairman in 1992. Mr. Spina
held the positions of chief financial officer and treasurer from 1977 to
1992. Mr. Spina oversees the Corporation's investor services businesses,
which consist of custody, recordkeeping and related information services for
institutional investors, including marketing, customer service, operations,
systems and technology development. He is a director of the Metropolitan
Boston Housing Partnership, Inc., chairman of the Massachusetts Taxpayers
Foundation, Inc., trustee of the Dana Hall School and a member of the Banker's
Roundtable. Mr. Spina is Chairman Emeritus of the Massachusetts Housing
Investment Corporation and a former director of the Massachusetts Bankers
Association. Mr. Spina holds a B.S. degree from the College of the Holy Cross
and an M.B.A. from Harvard University. He was an officer in the United States
Navy from 1964 to 1969, serving a combat tour of duty in Vietnam.
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DIANA CHAPMAN WALSH Director since 1997
President of Wellesley College, since 1993. Prior to becoming President
of Wellesley College, Dr. Walsh, age 53, was professor and Chairman of the
Department of Health and Social Welfare at the Harvard School of Public
Health. She serves on the board of directors of the Consortium on Financing
Higher Education and is a member of the American Council on Education
Commission on International Education. Dr. Walsh received a B.A. degree from
Wellesley College, M.S. and Ph.D. degrees from Boston University and Doctor of
Humane Letters, honorus causa, from Boston University and Deree College,
American College of Greece.
ROBERT E. WEISSMAN Director since 1989
Chairman, Chief Executive Officer and Director of Cognizant Corporation,
which provides information systems and commercial data services, since 1996.
Cognizant is one of three companies resulting from the restructuring of The
Dun & Bradstreet Corporation. Mr. Weissman, age 57, joined Dun & Bradstreet
in 1979. He became Chief Executive Officer in 1994 and Chairman in 1995. He
is a member of the Institute of Management Accountants, the Society of
Manufacturing Engineers, the Institute of Electrical and Electronic Engineers,
The Business Roundtable, the Committee for Economic Development and The
U.S.-Japan Business Council and is a trustee of Babson College. Mr. Weissman
received a degree in Business Administration from Babson College in 1964.
DIRECTORS SERVING UNTIL THE 1999 ANNUAL MEETING
Class III
TENLEY E. ALBRIGHT, M.D. Director since 1993
Physician and surgeon. Dr. Albright's concentration in medicine and
health sciences stems from her specialty of general surgery. Following 23
years in private practice of surgery, Dr. Albright, age 62, founded and became
chairman of a clinical diagnostic research laboratory. She is Chairman of
Western Resources, Inc., a holding company of varied assets with plans for a
research and development park and a senior care facility, since 1994. She
serves on the board of directors of The West Company and the Whitehead
Institute for Biomedical Research, and is a member of the Board of Regents of
the National Library of Medicine, National Institutes of Health, the
corporation of Woods Hole Oceanographic Institution, New England Baptist
Hospital, the Massachusetts Society for Medical Research, and the Board of
Visitors of the Harvard Medical Institute for Research and Education. Dr.
Albright graduated from Harvard Medical School after attending Radcliffe
College and has received honorary degrees from Williams College, Hobart and
William Smith Colleges, Russell Sage College, New England School of Law,
Chatham College, State University of New York at Cortland, Springfield College
and Lasell College. Dr. Albright won the Gold Medal in figure skating at the
1956 Olympics in Cortina, Italy.
MARSHALL N. CARTER Director since 1991
Chairman and Chief Executive Officer of the Corporation. Prior to
joining State Street in 1991, Mr. Carter, age 57, was with Chase Manhattan
Bank for 15 years, the last three years as head of global securities
services. He served as a Marine Corps officer in Vietnam for two years where
he was awarded the Navy Cross and Purple Heart and had international affairs
service as a White House Fellow. Mr. Carter is a member of the board of
directors of Euroclear in Brussels and the Federal Reserve Bank of Boston.
Mr. Carter holds a degree in civil engineering from the U.S. Military Academy
at West Point and masters degrees from the Naval Postgraduate School and
George Washington University.
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NADER F. DAREHSHORI Director since 1990
Chairman of the Board, President and Chief Executive Officer of Houghton
Mifflin Company, publisher. Mr. Darehshori, age 61, served as College
Division vice president and manager of Houghton Mifflin's midwestern sales
region from 1984 until he was promoted to vice president and director of the
College Division in 1986. In 1987 he was elected senior vice president,
College Division. He was promoted to executive vice president and then to
vice chairman in 1989 and to his present position in 1990. Mr. Darehshori has
served as a director of Houghton Mifflin Company since 1989 and is chairman of
its executive committee. He is a director of Commercial Union Corporation and
the Massachusetts Business Roundtable. He is a trustee of Wellesley College,
the WGBH Educational Foundation and the Boston Symphony Orchestra. He is a
member of the Dana-Farber National Advisory Council for the Women's Cancers
Program. Mr. Darehshori also serves on the board of the Boston Public Library
Foundation.
CHARLES F. KAYE Director since 1979
Chairman, Transportation Investments, Incorporated, a lessor and asset
manager of intermodal transportation equipment. Mr. Kaye, age 70, is a
graduate of St. Thomas University and received a J.D. degree from Boston
College Law School. He was senior partner of the firm of Kaye, Sheldon and
Barton and special counsel to the Massachusetts Institute of Technology before
joining XTRA Corporation in 1967 as a director and general counsel. Mr. Kaye
became vice chairman in 1970 and served as chairman, president and chief
executive officer of XTRA from 1973 to 1990. Mr. Kaye is a trustee of Bentley
College and Lawrence Academy, a member of the Visiting Committee of the
Massachusetts General Hospital, chairman of the Alpha Omega Foundation and
town moderator of Littleton, Massachusetts. He has been the recipient of the
Association of American Railroads annual Intermodal Man of the Year Award and
the Air Force Association Distinguished Service Award.
JOHN M. KUCHARSKI Director since 1991
Chairman of the Board and Chief Executive Officer of EG&G, Inc., which
provides scientific and technological products and services worldwide. Mr.
Kucharski, age 62, joined EG&G in 1972 and was elected president and director
in 1986. He is a director of Nashua Corporation and New England Electric
System. He serves on the boards of trustees of Marquette University and
George Washington University. He is also a member of the president's council
and the advisory council to the College of Engineering of Marquette
University. Mr. Kucharski holds a B.S. degree from Marquette University, a
J.D. degree from George Washington University and is a member of the District
of Columbia Bar Association.
BERNARD W. REZNICEK Director since 1991
President, Premier Group, since 1996, and National Director, Utility
Marketing of Central States Indemnity Co. of Omaha, since 1997. From 1994 to
1996, Mr. Reznicek, age 61, was dean of the College of Business Administration
of Creighton University. From 1987 to 1990, he was president and chief
operating officer of Boston Edison Company. In 1990, he became chief
executive officer, and in 1992, he was elected chairman of Boston Edison,
serving until 1994. Prior to joining Boston Edison, he was president and
chief executive officer of Omaha Public Power District. Mr. Reznicek holds a
B.S. degree from Creighton University and an M.B.A. from the University of
Nebraska. He serves on the boards of CalEnergy Company, Guarantee Life
Company, Stone & Webster Incorporated and CSG Systems International.
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DIRECTORS SERVING UNTIL THE 2000 ANNUAL MEETING
Class I
I. MACALLISTER BOOTH Director since 1990
Retired Chairman, President and Chief Executive Officer of Polaroid
Corporation, a manufacturer of instant image recording products. Mr. Booth,
age 66, joined Polaroid in 1958 as a supervisor in the Film Division. He is a
director of John Hancock Mutual Life Insurance Company, Western Digital
Corporation, past chairman of Inroads National Board of Directors and a member
of the board of trustees of Eye Research Institute. He received B.S. and
M.B.A. degrees from Cornell University.
JAMES I. CASH, JR. Director since 1991
James E. Robison Professor of Business Administration at the Harvard
University Graduate School of Business Administration. Dr. Cash, age 50, has
been a faculty member of the Harvard Business School since 1976. He is a
director of Cambridge Technology Partners, Inc., The Chubb Corporation,
Knight-Ridder, Inc., General Electric Company, Tandy Corporation and WinStar
Communications. He received a B.S. degree in mathematics from Texas Christian
University and M.S. and Ph.D. degrees in computer science and management
information systems from Purdue University.
TRUMAN S. CASNER Director since 1990
Partner in the law firm of Ropes & Gray. Mr. Casner, age 64, received an
A.B. degree from Princeton University in 1955 and an LL.B. from Harvard Law
School in 1958. He served as law clerk to Chief Justice Wilkins of the
Massachusetts Supreme Judicial Court and joined Ropes & Gray in 1959, becoming
a partner in 1968. He is a trustee of the Museum of Science, Boston, chairman
of the corporation and past president of Belmont Hill School, a member of the
corporation of Woods Hole Oceanographic Institution and a director of the
Massachusetts Business Roundtable. He is a member of the American Law
Institute.
ARTHUR L. GOLDSTEIN Director since 1995
Chairman and Chief Executive Officer of Ionics, Incorporated, an
international company involved in the purification and treatment of water.
Mr. Goldstein, age 62, is a director of Cabot Corporation. He is a member of
the National Academy of Engineering and its Industry Advisory Board and a
member of the visiting committees at Harvard Business School and Harvard
School of Public Health. He is a trustee of the California Institute of
Technology and the Massachusetts General Physician's Organization, Inc., a
director of Jobs for Massachusetts, Inc. and the Massachusetts High Technology
Council. Mr. Goldstein received a B.S. degree in chemical engineering from
Rensselaer Polytechnic Institute, an M.S. in chemical engineering from the
University of Delaware and an M.B.A. from Harvard Business School.
DAVID B. PERINI Director since 1980
Chairman of Perini Corporation, a construction and real estate
development company. Mr. Perini, age 60, holds a B.S. degree from the College
of the Holy Cross and received a J.D. degree from Boston College Law School in
1962. He joined Perini Corporation in 1962. He has received awards from the
National Conference of Christians and Jews and the Italian American Charitable
Society and received the 1994 Ralph Lowell Distinguished Citizen Award. Mr.
Perini is a trustee of St. John's Preparatory School.
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DENNIS J. PICARD Director since 1991
Chairman and Chief Executive Officer of Raytheon Company, a diversified,
technology-based international company. Mr. Picard, age 65, joined Raytheon
in 1955 and held engineering and management assignments leading to his
election as president and director in 1989. He is a member of the National
Academy of Engineering and its Industry Advisory Board, a fellow of the
American Institute of Aeronautics and Astronautics and a fellow of the
Institute of Electrical and Electronic Engineers. Mr. Picard is a trustee of
Northeastern University and Bentley College, a corporator of Emerson Hospital,
a director of the Discovery Museums, the John F. Kennedy Library Foundation,
Jobs for Massachusetts, a member of the National Business Roundtable, The
Business Council, the Defense Policy Advisory Committee on Trade (DPACT), the
President's Export Council, the President's National Security
Telecommunications Advisory Council, the advisory committee of the American
Red Cross, the Armed Services YMCA of the United States and the Armed Forces
Communications and Electronics Association. He is a graduate of Northeastern
University and holds honorary doctorates from Northeastern University,
Merrimack College and Bentley College.
GENERAL INFORMATION
The Board of Directors has the overall responsibility for the conduct of
the business of the Corporation. Of the present 19 directors, 17 are outside
directors and 2 are executive officers of the Corporation. The Board of
Directors held 6 meetings during 1997 and each of the directors attended 75%
or more of the total of all meetings of the Board and of the committees of the
Board on which each director served during the year. Each member of the Board
of the Corporation, except Mr. Cash, Mr. Poe, Mr. Reznicek and Mr. Weissman,
is also a member of the Board of Directors of the Bank. The Board of
Directors of the Bank held 12 meetings during 1997. Each member of the
Executive Committee and the Examining and Audit Committee of the Corporation
is also a member of the corresponding committee of the Bank, and members
customarily hold joint meetings of both committees.
The Board of Directors has the following committees to assist it in
carrying out its responsibilities:
The EXECUTIVE COMMITTEE is authorized to exercise all the powers of the
Board of Directors as may be legally delegated to it by the Board in the
management and direction of the business and affairs of the Corporation,
including without limitation the review and approval of policies for the
extension of credit, investment of the Corporation's assets and financial
management; and to monitor activities under these policies and report
periodically to the Board. Its members are Charles F. Kaye, Chair, Joseph A.
Baute, Marshall N. Carter, Truman S. Casner and David A. Spina. During 1997,
the Committee held 13 meetings.
The EXAMINING AND AUDIT COMMITTEE oversees the operation of a
comprehensive system of internal controls to ensure the integrity of the
Corporation's financial reports and compliance with laws, regulations and
corporate policies, monitors communication with external auditors and bank
regulatory authorities and recommends the selection of the Corporation's
independent auditors. The Committee is composed of Joseph A. Baute, Chair,
Tenley E. Albright, I. MacAllister Booth and John M. Kucharski. During 1997,
the Committee held 8 meetings.
The EXECUTIVE COMPENSATION COMMITTEE oversees the compensation system for
the Corporation's executive officers and non-management directors. The
Committee consists of Robert E. Weissman, Chair, I. MacAllister Booth, Nader
F. Darehshori, Charles F. Kaye, Charles R. LaMantia and Bernard W. Reznicek.
During 1997, the Committee held 5 meetings.
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The NOMINATING COMMITTEE, which held 3 meetings during 1997, is composed
of I. MacAllister Booth, Chair, Marshall N. Carter, Arthur L. Goldstein, David
B. Perini, Dennis J. Picard and Alfred Poe. The Committee recommends nominees
to the boards of the Corporation and the Bank. In carrying out its
responsibility of finding the best qualified directors, the Committee will
consider proposals from a number of sources, including recommendations for
nominees submitted upon timely written notice to the Secretary of the
Corporation by stockholders.
COMPENSATION OF DIRECTORS
Directors who are also employees of the Corporation or the Bank receive
no compensation for serving as directors or as members of committees.
Directors who are not employees of the Corporation or the Bank received an
annual retainer of $25,000, payable at their election in shares of Common
Stock of the Corporation or in cash, plus a fee of $1,500 for each meeting of
the Board of Directors and each committee meeting attended, as well as travel
accident insurance and reimbursement for travel expenses, and 260 shares of
deferred stock payable when the director leaves the Board or retires, for the
period April 1997 through March 1998. In 1997, all outside directors elected
to receive their annual retainer in shares of Common Stock.
Under a plan effective January 1, 1995, non-employee directors with at
least five years' service are eligible for an annual retirement benefit equal
to their annual retainer at retirement, payable for a period equal to the
length of service of the director on the Board, up to a maximum of ten years.
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BENEFICIAL OWNERSHIP OF SHARES
MANAGEMENT
The table below sets forth the number of shares reported to the
Corporation of the Common Stock of the Corporation beneficially owned (as
determined under the rules of the Securities and Exchange Commission) by each
nominee for Class II Director, and for each Class I and Class III Director,
the chief executive officer and the four other most highly compensated
executive officers and by those persons and other executive officers as a
group as of the close of business on February 1, 1998. None of the nominees,
other directors or executive officers individually owned beneficially as much
as 1% of the outstanding shares of Common Stock. The nominees, other
directors and executive officers in the aggregate beneficially owned 1.52% of
the Corporation's Common Stock.
Amount and Nature
of Beneficial
Name Ownership
----- -----------------
Tenley E. Albright, M.D. 16,344(1)(7)
Joseph A. Baute 15,720(2)(7)
I. MacAllister Booth 10,118(7)
Dale L. Carleton 189,782(3)
Marshall N. Carter 245,370(3)(4)
James I. Cash, Jr. 8,686(7)
Truman S. Casner 13,365(5)(7)
Nader F. Darehshori 9,523(7)
Arthur L. Goldstein 2,906(7)
David P. Gruber 1,275
Charles F. Kaye 61,786(7)
John M. Kucharski 7,914(7)
Charles R. LaMantia 7,446(5)(7)
Ronald E. Logue 98,019(3)
Nicholas A. Lopardo 355,930(3)(5)
David B. Perini 20,359(7)
Dennis J. Picard 10,010(7)
Alfred Poe 4,186(7)
Bernard W. Reznicek 10,614(7)
David A. Spina 852,344(3)(6)
Diana Chapman Walsh 875
Robert E. Weissman 12,686(7)
All of the above and other
executive officers as a group
(28 persons) 2,452,430(3)(5)
- --------------------
(1) Includes 6,398 shares held in trust for a family member pursuant to a
trust of which Dr. Albright is a co-trustee and 2,200 shares owned by a family
member with respect to which she disclaims beneficial ownership.
(2) Includes 400 shares owned by a member of Mr. Baute's family with respect
to which he disclaims beneficial ownership.
(3) Includes shares which may be acquired within 60 days through the exercise
of stock options as follows: Mr. Carleton, 133,056; Mr. Carter, 102,000; Mr.
Lopardo, 252,280; Mr. Logue, 70,892; Mr. Spina, 402,400, and the group,
1,349,700.
(4) Includes 113,370 shares held jointly and 30,000 shares owned by a member
of Mr. Carter's family with respect to which he disclaims beneficial
ownership.
(5) Includes shares as to which voting power is shared, as follows: Mr.
Casner, 4,000; Dr. LaMantia, 2,000; Mr. Lopardo, 10,976, and the group,
19,976.
(6) Includes 40,000 shares owned by a member of Mr. Spina's family with
respect to which he disclaims beneficial ownership.
(7) Includes 260 shares of deferred stock.
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COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's executive officers and directors to file initial reports of
ownership and reports of changes in ownership of the Common Stock of the
Corporation with the Securities and Exchange Commission and the New York Stock
Exchange. Executive officers and directors are required by regulations to
furnish the Corporation with copies of all Section 16(a) forms which they
file.
Based on a review of the copies of such forms furnished to the
Corporation and written representations from the Corporation's executive
officers and directors, the Corporation believes that in 1997 all Section
16(a) filing requirements applicable to its executive officers and directors
were met. The initial report on Form 3 of Dr. Diana Chapman Walsh, although
timely filed, did not report 400 shares held in trust, and Dr. Walsh filed an
amended Form 3.
CERTAIN TRANSACTIONS
During 1997 certain directors and executive officers of the Corporation
and the Bank, and various corporations and other entities associated with such
directors, were customers of the Bank and its affiliates and had ordinary
business transactions with the Bank. The transactions include loans and
commitments made in the ordinary course of the Bank's business and on
substantially the same terms, including interest rate and collateral, as those
prevailing at the time for comparable transactions with unrelated persons with
no more than normal risk of collection, nor did they present other unfavorable
features. During 1997, the Bank and other subsidiaries of the Corporation have
used products or services of Cognizant Corporation and a subsidiary of Ionics,
Incorporated with which two of the directors of the Corporation were
associated. Additional transactions of this nature may be expected to take
place in the ordinary course of business in the future. Ropes & Gray, a law
firm of which Mr. Casner, a director of the Corporation, is a partner, was
retained by the Corporation to handle certain legal matters during the past
year. It is anticipated that the firm will continue to provide legal services
in the current year.
No executive officer of the Corporation is allowed to borrow from the
Bank other than through the use of a reserve account with limits of up to
$20,000 as allowed by Massachusetts law and at the same interest rate paid by
the public.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Corporation's Executive Compensation Committee are I.
MacAllister Booth, Nader F. Darehshori, Charles F. Kaye, Charles R. LaMantia,
Bernard W. Reznicek and Robert E. Weissman, Chair. None of these individuals
is or has been an officer or employee of the Corporation or the Bank.
9
<PAGE>
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee of the Board of Directors (the
"Committee") furnishes the following report on Executive Compensation.
POLICY
State Street combines information technology with banking, trust,
investment management and securities processing capabilities to support the
investment strategies of our customers worldwide. The Corporation's goal is
to be the leading company serving institutional investors worldwide. The
Corporation's executive compensation program, by providing competitive pay and
aligning executive compensation with the Corporation's business strategy, is
designed to attract and retain superior executives, to focus these individuals
on achieving the Corporation's objectives and to reward executives for meeting
specific short-term and long-term performance targets. The executive
compensation program places emphasis on challenging performance goals,
business growth and sustainable real growth in earnings per share. By
including stock based compensation plans within the compensation strategy,
State Street links closely the goals of stockholders and executives. Nineteen
executives participated in the executive compensation program in 1997. The
chairman and chief executive officer, the president and chief operating
officer, the vice chairmen, and executive vice presidents are considered
executives for this purpose.
The principles of State Street's compensation strategy are applied
throughout the Corporation. Since executives of the Corporation have the
greatest opportunity to influence long-term performance, a greater proportion
of their compensation is linked to the achievement of long-term financial
goals and to stock price. Other individuals who manage business units or have
corporate functional or staff responsibilities have a significant opportunity
to influence the Corporation's results, and a sizable portion of their total
compensation is related to the achievement of financial goals of both the unit
and the Corporation. In addition to executives, many officers who make
significant contributions to the Corporation participate in the Corporation's
equity incentive programs and in a variety of annual incentive plans. In line
with competitive practices, State Street also offers specific bonus
opportunities to individuals who have specialized sales, trading or investment
responsibilities. Outstanding performance by these specialists is rewarded
with bonuses linked directly to the attainment of challenging and measurable
business goals.
The Executive Compensation Committee is comprised entirely of
independent, non-employee directors. The Committee is responsible for setting
and administering policies which relate to executive compensation, other
incentive programs and the equity incentive programs of the Corporation. The
Committee on an annual basis reviews and evaluates the Corporation's executive
compensation program.
The Committee met five times in 1997 and reported its activities to the
Board of Directors. In conjunction with its annual comprehensive review and
evaluation of the executive compensation program, the Committee engaged its
own independent compensation consultant. The consultant worked for the
Committee in reviewing the executive compensation program, in reviewing a
reference group of public companies against which the Corporation's executive
compensation, financial performance and total return to stockholders was
compared, and in considering modifications to existing plans. The Committee,
with assistance from its independent consultant, validated this group of
companies as a reference group against which to compare compensation practices
and competitive levels of compensation. This group includes large U.S. bank
holding companies, selected technology-based companies engaged in servicing
businesses and believed to be competing with the Corporation for the same
caliber of executive talent, and New England bank holding companies.
10
<PAGE>
The Committee believes that the Corporation's most direct competitors for
executives are not necessarily the same companies that would be included in a
peer group established to compare stockholder returns. Therefore, the
reference companies used for comparative compensation purposes contain some
overlap with, but are not identical to, the companies in the S&P Financial
Index used for performance comparison under "Stockholder Return Performance
Presentation".
The elements of the Corporation's executive compensation program
currently consist of base salary, annual bonus, performance units, stock
options and restricted stock awards. These are integrated components where
salary and bonus reflect one year results, performance units reflect two year
results and stock options and restricted stock awards reflect long-term stock
price appreciation. As a result of its 1997 review, the Committee has
determined that the fundamental elements of this compensation plan are
appropriate for a program that supports the Corporation's business strategy,
provides competitive compensation and creates value for stockholders. The
Committee's policies with respect to each of these elements, including the
bases for the compensation reported for 1997 to the Corporation's chief
executive officer, Mr. Carter, and chief operating officer, Mr. Spina, are
discussed below.
BASE SALARIES
The Committee recommends to the Board of Directors the base salary of Mr.
Carter and Mr. Spina and reviews the salaries of the other executives. Base
salaries for executives are determined by subjectively evaluating the
responsibilities of the position, the strategic value of the position to State
Street, and the experience and performance of the individual. No specific
formula is used to set base salaries. The Committee has determined however,
that to be competitive it is appropriate for State Street's executive salary
levels to be near the median of the reference group.
Annual salary adjustments are determined by reviewing market compensation
data and subjectively considering the overall scope of each position and its
strategic importance to State Street, the performance of the Corporation, an
evaluation of the individual's performance and the length of time since the
individual's last salary increase. The Committee also considers the range of
salary increases which are awarded to all employees of the Corporation. With
respect to the base salary granted to Mr. Carter and Mr. Spina, the Committee
reviewed all of the factors noted above including data supplied by the
compensation consultant on market levels of pay for the chief executive
officer and chief operating officer at companies in the reference group and
the recent performance of the Corporation including specifically earnings per
share and return on equity under the leadership of Mr. Carter and Mr. Spina.
No particular weight was applied to any single factor in making the
Committee's determination. When compared to salaries paid to chief executive
officer positions in the reference group, Mr. Carter's salary was slightly
above the median.
ANNUAL BONUSES
The Corporation's executives are eligible for annual cash bonuses under
the provisions of the Senior Executive Annual Incentive Plan which was
approved at the 1997 annual meeting of stockholders. The terms of the plan
provide that the Committee assign to each executive a minimum, target and
maximum bonus award opportunity, stated as a percent of salary. The levels of
bonus opportunity assigned to each executive are determined by reviewing
competitive compensation data supplied by the compensation consultant, the
level of responsibility of each executive and the strategic importance of the
executive's position to the Corporation. At its meeting in December of 1996,
the Committee assigned a range of bonus opportunity for Mr. Carter for 1997 at
a minimum award of 0% of salary, a target award of 90% of salary and a maximum
award of 180% of salary.
11
<PAGE>
The minimum bonus opportunity for Mr. Spina was established at 0% of salary,
the target award was 80% of salary and the maximum award was 160% of salary.
The actual level of bonus earned is based upon achievement of specific
performance targets established by the Committee. Annually the Committee
reviews one and five year earnings per share and return on equity data for the
reference group as well as for other companies represented in the S&P Financial
Index. The Corporation's total return to stockholders for the one and five
year period as compared to the S&P Financial Index is also reviewed. In
establishing targets for the annual incentive plan, the Committee considers
this data along with the Corporation's long-term financial goals, the specific
financial goals for the following year, and the business environment in which
the Corporation is operating. The Committee then establishes the measures
that will be used, the weighting of the measures and specific performance
targets at which various levels of bonus will be earned.
The 1997 performance targets were based on earnings per share and return
on equity. The Committee approved a performance/payout schedule which
identified various earnings per share and return on equity levels at which
specific awards would be earned. The Committee further specified that amounts
earned in excess of the target award level would be paid in shares of the
Corporation's common stock.
At its meeting in February 1998, the Committee certified that specific
performance goals had been achieved and approved a total bonus payment for
1997 of $1,372,275 for Mr. Carter and $834,600 for Mr. Spina. Bonuses for
other participants in the plan receiving bonuses totaled $5,284,306 for the
year. In all cases, amounts earned over target amounts were paid in shares of
the Corporation's common stock.
PERFORMANCE UNITS
Long-term compensation is provided to executives in the form of both
performance units and equity awards. Performance units represent a contingent
right to a cash payment, based upon the price of the Corporation's common
stock, in the event the Corporation meets specified performance goals over a
specified time period following the grant. Performance units have been
granted to the Corporation's executives once every two years or at the time an
officer joined the executive group.
At its meeting in December 1996, the Executive Compensation Committee
granted performance units under the 1994 Stock Option and Performance Unit
Plan to the executive group. These grants included 80,000 performance units
granted to Mr. Carter and 50,000 performance units granted to Mr. Spina. The
size of the grants was determined based upon subjective factors, including
primarily the perceived importance of the executive's contribution to the
success of the Corporation, similar to the subjective factors considered in
setting base salary, and a target level of long-term incentive opportunity
based upon data supplied by the Committee's compensation consultant with
respect to the reference group. These grants have a two year performance
period covering the years 1997 and 1998. At its meeting in February 1997, the
Committee established performance targets for the 1997-1998 performance period
for these grants. Performance units are earned based on targets tied to a
combination of return on equity, earnings per share and total return to
stockholders measures. At the end of the two year performance period,
December 31, 1998, a cash payment will be calculated based upon the number of
performance units earned times the market value of the Corporation's common
stock at the end of the performance period. In this way, the final cash value
of the performance units relates directly to both corporate financial
performance in determining how many units are earned and stock price
appreciation in determining the cash value of the units earned.
STOCK OPTIONS
Typically, stock options are granted to executives every two years or at
the time an officer joins the executive group, although the Committee has the
authority to grant options at any time and has made additional grants in
conjunction with new responsibilities assumed by members of the executive
group. The Committee
12
<PAGE>
selects the executives to receive options and sets the size of option awards
based upon subjective factors, including primarily the perceived importance of
the executive's contribution to the success of the Corporation, similar to the
subjective factors considered in setting base salary, a target level of
long-term incentive opportunity based upon data supplied by the compensation
consultant with respect to the reference group and upon the amount of and
value of the performance units which are granted concurrently. The exercise
price of options is equal to the market price of the shares at the time of the
grant and the options become exercisable in equal installments over a three
year period. Because stock options are granted at market price, the value of
the stock options is wholly dependent upon an increase in the Corporation's
stock price. The Committee views stock option grants as a part of the
executive's total compensation package for the period covered by the grant,
and therefore, the amount of stock options outstanding at the time of a new
grant or granted in prior years does not serve to increase or decrease the
size of the new grant.
At its meeting in December 1996, the Committee granted Mr. Carter options
to purchase 300,000 shares and Mr. Spina options to purchase 160,000 shares
based upon a subjective review of all of the factors noted above; no
particular weight was applied to any single factor in making the Committee's
determination.
RESTRICTED STOCK
Restricted stock awards are used to recruit, motivate and retain high
potential individuals. Typically, awards are made to individuals who are not
members of the executive group. Occasionally the Committee will grant
restricted stock to members of the executive group as part of a recruitment
package or based upon subjective factors, to reward what is perceived to be
exceptional performance. One member of the executive group received an award
in 1997. The award was made without payment from the recipient and provides
for a restricted period of one year.
TAX LAW
Section 162(m) of the Internal Revenue Code generally precludes the
Corporation from taking federal income tax deductions for compensation in
excess of $1,000,000 per year for the Chief Executive Officer and any of its
four other highest paid executive officers, if those individuals are employed
on the last day of the tax year. Performance-based compensation is not,
however, generally subject to the deduction limit, provided certain
requirements of Section 162(m) are satisfied. The Committee reviewed all
elements of the executive compensation program against the standards for
qualifying for the tax deduction. Stock option and performance unit awards
under the 1994 Stock Option and Performance Unit Plan and under the 1997
Equity Incentive Plan and awards under the Senior Executive Annual Incentive
Plan have been designed to qualify as performance-based compensation, with the
intended result that the deduction of compensation under these plans,
including compensation from the exercise of options or from performance units,
would not be affected by the Section 162(m) deduction limits. A portion of a
bonus earned in 1997 under the State Street Global Advisors Incentive Plan did
not qualify for the federal income tax deduction pursuant to Section 162(m).
The restricted stock award was not intended to qualify for exemption from
the Section 162(m) limits; as a result, the deductibility of all or a portion
of the compensation provided by this award may be limited under Section
162(m).
In administering the executive compensation program, the Committee will
continue to consider whether the deductibility of compensation will be limited
under Section 162(m) and, in appropriate cases, will strive to structure such
compensation so that any such limitation will not apply.
13
<PAGE>
CONCLUSION
Through the program described above, the Corporation's executive
compensation is linked directly to the Corporation's performance, growth in
stockholder value and each executive's contribution to those results. As the
Corporation's business changes, particularly in light of its efforts to expand
globally, and with the increasingly competitive and complex business and
regulatory environment, the continuing assessment of the compensation
structure and goals is required to assure that compensation incentives remain
consistent with stockholder interest and closely tied to continuing growth in
stockholder value.
Submitted by,
I. MacAllister Booth
Nader F. Darehshori
Charles F. Kaye
Charles R. LaMantia
Bernard W. Reznicek
Robert E. Weissman, Chair
14
<PAGE>
EXECUTIVE COMPENSATION
Shown below is information concerning the annual and long term
compensation paid by the Corporation and its subsidiaries, including the Bank,
to the chief executive officer and the four other most highly compensated
executive officers of the Corporation (the "Named Executive Officers") for the
periods shown.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- ---------------
AWARDS PAYOUTS
------ -------
NAME OTHER SECURITIES ALL OTHER
AND ANNUAL UNDERLYING LTIP COMPEN-
PRINCIPAL SALARY BONUS COMPENSA- OPTIONS PAYOUTS SATION
POSITION YEAR ($) ($)(1) TION($)(3) (#)(2) ($)(3) ($)(4)
- --------- ---- ------ ------ --------- --------- ------- --------
<C> <C> <C> <C> <C> <C> <C> <C>
Marshall N. Carter
Chairman and 1997 937,517 1,372,275 0 None 0 4,750
Chief Executive 1996 862,500 640,406 0 300,000 1,772,196 4,750
Executive Officer 1995 750,004 455,627 0 None 0 4,620
David A. Spina(5)
President and 1997 643,767 834,600 0 None 0 4,750
Chief Operating 1996 606,250 360,113 0 160,000 1,181,464 4,750
Operating Officer 1995 550,003 267,301 0 50,000 0 4,620
Nicholas A. 1997 500,019 1,576,775 0 25,000 0 4,750
Lopardo (6) 1996 487,500 1,171,313 0 72,000 590,732 4,750
Vice Chairman 1995 450,002 957,251 0 None 0 4,620
Dale L. Carleton(7) 1997 437,504 469,463 0 25,000 0 4,750
Vice Chairman 1996 387,500 191,813 0 72,000 886,098 4,750
1995 343,752 139,220 0 None 0 4,620
Ronald E. Logue 1997 437,522 469,463 0 15,000 0 4,750
Executive Vice 1996 381,250 188,719 0 72,000 738,415 4,750
President 1995 325,000 131,626 0 None 0 4,620
- -------------------------------
</TABLE>
(1) Bonuses earned in excess of the targets established pursuant to the
Senior Executive Annual Incentive Plan were paid in shares of the
Corporation's Common Stock calculated at the fair market value on February 19,
1998 ($60.0625), as follows: Mr. Carter received $855,000 in cash and
$517,275 in shares; Mr. Spina received $520,000 in cash and $314,600 in
shares; Mr. Lopardo received $325,000 in cash and $196,625 in shares; Mr.
Carleton received $292,500 in cash and $176,963 in shares, and Mr. Logue
received $292,500 in cash and $176,963 in shares.
(2) Reflects a two-for-one stock split effective April 1997.
(3) Long term compensation payouts reflect performance units earned in
accordance with the attainment of performance targets for the 2 year period,
1995-1996, and paid in cash equal to the fair market value of the
Corporation's Common Stock at the end of the performance period.
(4) Reflects the Corporation's contributions to the Salary Savings Program.
(5) Mr. Spina was elected President and Chief Operating Officer on December
21, 1995.
(6) Includes bonuses from the Corporation's Senior Executives Annual
Incentive Plan and from the State Street Global Advisors Incentive Plan.
Elected Vice Chairman on December 18, 1997; was Executive Vice President prior
thereto.
(7) Elected Vice Chairman on December 18, 1997; was Executive Vice President
prior thereto.
15
<PAGE>
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term(2)
- ---------------------------------------------------------- --------------------
(a) (b) (c) (d) (e) (f) (g)
Percent
Number of of Total
Securities Options
Underlying Granted to Exercise
Options Employees or Base
Granted In Fiscal Price Expiration
Name (#)(1) Year ($/Sh) Date 5$($) 10%($)
- ---- ---------- ---------- -------- ---------- ----- ------
<C> <C> <C> <C> <C> <C> <C>
Marshall N. Carter None --- --- --- --- ---
David A. Spina None --- --- --- --- ---
Nicholas A. Lopardo 25,000 1.9 $56.25 12/17/07 884,000 2,241,000
Dale L. Carleton 25,000 1.9 $56.25 12/17/07 884,000 2,241,000
Ronald E. Logue 15,000 1.1 $56.25 12/17/07 531,000 1,345,000
- --------------------
</TABLE>
(1) Options become exercisable in 33 1/3% installments over a three year
period commencing December 18, 1998. No SARs were granted.
(2) Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent certain assumed rates of
appreciation only, as set by the Securities and Exchange Commission. The
actual value, if any, that the Named Executive Officer may realize from these
options will depend solely on the gain in stock price over the exercise price
when the options are exercised.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
OPTIONS AT DECEMBER 31, 1997
DECEMBER 31, 1997(1) ($)(2)
---------------------- ------------------
SHARES VALUE
ACQUIRED ON REALIZED EXER- UNEXER- EXER- UNEXER-
NAME EXERCISE(#) ($)(3) CISABLE CISABLE CISABLE CISABLE
- ---- ----------- -------- ------- ------- ------- -------
<C> <C> <C> <C> <C> <C> <C>
Marshall N. Carter 92,800 3,539,000 150,000 294,000 4,781,000 9,404,000
David A. Spina None --- 402,400 199,600 17,457,000 6,657,000
Nicholas A. Lopardo 15,044 773,200 252,280 112,520 11,854,000 3,043,000
Dale L. Carleton None --- 133,056 112,520 5,659,000 3,043,000
Ronald E. Logue None --- 118,240 94,932 4,590,000 2,657,000
- --------------------
</TABLE>
(1) Reflects a two-for-one stock split effective April 1997.
(2) Represents the difference between the fair market value of the stock on
December 31, 1997 ($58.09375) and the exercise price of the stock options.
(3) Represents the difference between the fair market value of the stock at
the time of the exercise and the exercise price of the stock options.
16
<PAGE>
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the cumulative total
stockholder return on the Corporation's Common Stock to the cumulative total
return of the S&P 500 Index and the S&P Financial Index for the period of five
fiscal years which commenced December 31, 1992 and ended December 31, 1997,
assuming $100 invested in the Corporation's Common Stock and in each index on
December 31, 1992 and assuming reinvestment of dividends. The S&P Financial
Index is a publicly available measure of 71 of the Standard & Poor's 500
companies, representing 33 banking companies, 20 insurance companies and 18
financial services companies.
Comparison of Five-Year Cumulative Total Return
[GRAPH]
YEAR ENDED DECEMBER 31
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
<C> <C> <C> <C> <C> <C> <C>
State Street Corporation
Total Return $100 $ 87 $ 68 $108 $157 $286
S&P 500 Index
Total Return 100 110 112 153 189 252
S&P Financial Index
Total Return 100 111 107 165 223 330
</TABLE>
17
<PAGE>
RETIREMENT BENEFITS
As of January 1, 1990, the benefit formula under the Corporation's
defined benefit plan (the "Retirement Plan") was changed to a cash balance
formula. An account balance was established for each participant equal to the
then present value of the participant's benefit earned to date. Each year
this account balance is increased by interest at a specified rate and a
contribution credit equal to a percentage of the participant's base salary for
the calendar year exclusive of overtime, bonuses or other extraordinary
benefits or allowances. The percents of base salary are 4.0% for the first
year of participation increasing to 11.25% for the thirtieth year, and zero
thereafter. Employees who were participants on December 31, 1989 will receive
the greater of their account balance or the benefit derived from the
"grandfathered" formula if the participant retires from the plan. The
grandfathered formula, based on 30 years of service, is equal to a benefit of
50% of final average pay minus 50% of the estimated Social Security benefit.
For periods of service of less than 30 years, the benefit is reduced pro rata.
Employees are enrolled in the Retirement Plan following the completion of
one year of service and attainment of the age of 21. The normal retirement
age is 65, although earlier retirement options are available. The Retirement
Plan has a five-year vesting provision, and participants who are vested will
receive their account balance or annuity equivalent if they leave the employ
of the Corporation or the Bank before retirement.
Under federal law, an employee's benefits under a qualified retirement
plan are limited to certain maximum amounts. On October 1, 1987, the
Corporation adopted a supplemental retirement plan, as amended (the "1987
Supplemental Plan") to supplement the benefits under the Retirement Plan by
payment of additional retirement benefits out of general funds of the
Corporation. Each of the Named Executive Officers is included in the 1987
Supplemental Plan.
Effective as of January 1, 1995 the Corporation adopted a supplemental
defined benefit pension plan (the "1995 Supplemental Plan") to provide certain
key employees with retirement benefits and encourage the continued employment
of such employees with the Corporation. The 1995 Supplemental Plan provides
for the payment of additional annual benefits upon retirement at age 65 (or a
proportionately reduced amount in the event of retirement on or after the age
of 55 but prior to the age of 65), calculated as a straight life annuity,
equal to 50% of such participant's final average earnings (highest average of
any 5 consecutive years' earnings, as defined therein, during the last 10
years of employment) less annual benefits paid to such participant from the
Retirement Plan, the 1987 Supplemental Plan and other retirement income
payable to such participant under other plans of the Corporation or other of
the participant's employers. Such benefits are subject to forfeiture in the
event that the participant's employment with the Corporation terminates for
any reason prior to reaching age 55 or completing 10 full years of employment
with the Corporation. In addition, such benefits shall terminate if the
participant engages in certain competitive activities within two years of
termination. Each of the Named Executive Officers is included in the 1995
Supplemental Plan.
Under an agreement dated March 5, 1992, Mr. Carter will receive an
additional pension contribution as a percent of base compensation calculated
as if a contribution had been made to the Retirement Plan of 7.50% in the
first year and 3.75% in each of the next 15 years. In addition, the Carter
Letter Agreement (as defined below) provides, among other things, that the
forfeiture and termination provisions relating to the 1995 Supplemental Plan
will be deemed inapplicable in the event that (i) Mr. Carter's employment is
terminated for reasons other than voluntary resignation, death or malfeasance
before July 23, 2001 and (ii) he is not eligible for the severance benefits
set forth in the change of control arrangements described below. See -
"Termination of Employment and Change of Control Arrangements".
18
<PAGE>
Final average earnings include annual base salary plus any annual cash
incentive compensation awards only. As of December 31, 1997, the credited
years of service for each of the Named Executive Officers were as follows:
Mr. Carter, 5; Mr. Spina, 24; Mr. Lopardo, 9; Mr. Carleton, 18; and Mr.
Logue, 6. Current compensation covered by the Retirement Plan as of December
31, 1997 for each of the Named Executive Officers was as follows: Mr. Carter,
$1,540,406; Mr. Spina, $985,121; Mr. Lopardo, $1,671,329; Mr. Carleton,
$591,821; and Mr. Logue, $588,727.
The estimated annual aggregate benefits (which are not subject to a
deduction for Social Security), assuming a single life annuity, payable upon
normal retirement under the final average pay formula to the Named Executive
Officers assuming each continues to be employed by the Corporation until age
65 at his annual base salary and cash incentive compensation at December 31,
1997 are as follows: Mr. Carter, $770,203; Mr. Spina, $492,561; Mr. Lopardo,
$835,665; Mr. Carleton, $295,911; and Mr. Logue, $294,364.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Corporation has employment agreements with Messrs. Carter, Spina,
Lopardo, Carleton and Logue which become operative following a change of
control of the Corporation, as defined in the employment agreements. The
employment agreements continue in effect while the executive officers are
employed by the Corporation until December 31, 1997 with provision for
automatic renewal, and remain in effect for a period of two years after a
change of control. If the employment of the executive officers is terminated
following a change of control, or if Mr. Carter's or Mr. Spina's employment is
terminated voluntarily within thirty days of the six month period following a
change of control, or within thirty days of the twelve month period following
a change of control for the other Named Executive Officers they would become
entitled to various benefits under the employment agreements, including
payment of three times the executive officers' base salary and bonus, unless
the executive officers' employment were terminated by the Corporation for
cause or by the executive officers without good reason as defined in the
agreement. If the executive officers had been terminated on December 31,
1997, they would have been entitled to receive the following amounts as
severance pay: Mr. Carter, $6,966,873; Mr. Spina, $4,453,848; Mr. Lopardo,
$6,230,373; Mr. Carleton, $2,758,389; and Mr. Logue, $2,758,461. The
Corporation will make additional payments in an amount such that after the
payment of income and excise taxes, the executive officer will be in the same
after tax position as if no excise tax under Section 4999 of the Internal
Revenue Code had been imposed. Each of the outstanding agreements pursuant to
which stock options and performance units were granted to Messrs. Carter,
Spina, Lopardo, Carleton and Logue by the Corporation contains provisions for
acceleration of stock options and payment of performance units following a
change of control. A change of control is defined in the agreements to
include the acquisition of 25% or more of the Corporation's then outstanding
stock or other change of control as determined by regulatory authorities, a
significant change in the composition of the Board of Directors, merger or
consolidation by the Corporation without certain approvals of the Board of
Directors, and the sale of a majority of the Corporation's assets.
The Corporation entered into a letter agreement with Mr. Carter (the
"Carter Letter Agreement") that provides for severance pay equal to two years'
salary and bonus if (i) his employment is terminated for reasons other than
voluntary resignation, death or malfeasance before July 23, 2001, and (ii) he
is not eligible for the severance benefits set forth in the change in control
arrangements described above. In such circumstances, for purposes of
determining the amount payable to Mr. Carter pursuant to the 1995 Supplemental
Plan (i) the forfeiture and termination provisions described above will be
deemed inapplicable, and (ii) the benefits otherwise payable thereunder will
be reduced by multiplying such amounts by a fraction, the numerator of which
is the number of whole calendar months Mr. Carter was employed by the
Corporation and the denominator of which is 120. Such payments shall
terminate in the event that Mr. Carter becomes employed by one of the top five
master
19
<PAGE>
trust or custody banks or one of the top five mutual fund custodians within
two years of termination (the "Non-Competition Clause"). The Carter Letter
Agreement also provides that in the event of a change in control of the
Corporation and termination of Mr. Carter's employment under circumstances
which entitle him to receive a severance payment pursuant to the change in
control arrangements described above the 1995 Supplemental Plan will be
modified in the manner set forth above (except that the Non-Competition Clause
will be inapplicable) and Mr. Carter will be provided with a benefit
equivalent in value to that which he would receive had his employment with the
Corporation continued an additional three years.
The Corporation has an Executive Compensation Trust (the "Trust") to
provide a source for payments required to be made to participants, including
Messrs. Carter, Spina, Lopardo, Carleton, and Logue under the 1987
Supplemental Plan, the 1995 Supplemental Plan and to Mr. Carter pursuant to
the Carter Letter Agreement. The Trust has been partially funded in the
amount of $5,000,000. The Trust is revocable until a change of control
occurs, at which time it becomes irrevocable. A change of control is defined
to include the acquisition of 25% or more of the Corporation's then
outstanding stock or other change of control as determined by regulatory
authorities, a significant change in the composition of the Board of
Directors, merger or consolidation by the Corporation without certain
approvals of the Board of Directors, and the sale of a majority of the
Corporation's assets.
VOTE REQUIRED
The six nominees for election as directors who receive a plurality of the
votes properly cast for the election of directors at the Annual Meeting, a
quorum being present, shall be elected directors. Consistent with state law
and under the Corporation's By-laws, a majority of the shares entitled to vote
at the Annual Meeting, present in person or represented by proxy, constitutes
a quorum. Votes cast by proxy or in person at the Annual Meeting will be
counted by persons appointed by the Corporation to act as tellers for the
meeting.
The tellers will count shares represented by proxies that withhold
authority to vote for a nominee for election as a director only as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. None of the withheld votes will be counted as votes "for" a
director. As a result, none of the withheld votes will have any effect on the
outcome of the voting on the election of directors (assuming a quorum is
otherwise present).
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Examining and
Audit Committee, has selected Ernst & Young LLP as independent auditors for
the Corporation for the year ending December 31, 1998. It is expected that
representatives of Ernst & Young LLP will be present at the Annual Meeting to
respond to appropriate questions and will have the opportunity to make a
statement if they so desire.
PROPOSALS AND NOMINATIONS BY STOCKHOLDERS
Stockholders who wish to present proposals at the 1999 Annual Meeting of
Stockholders for inclusion in the Corporation's proxy material for that
meeting must submit such proposals to the Secretary of the Corporation on or
before November 10, 1998 for inclusion in the proxy materials circulated by
the Board of Directors relating to the 1999 Annual Meeting.
20
<PAGE>
Pursuant to the By-laws of the Corporation, proposals of business and
nominations for directors other than those to be included in the Corporation's
proxy statement and form of proxy may be made by stockholders of record
entitled to vote at the meeting if notice is timely given and if the notice
contains the information required by the By-laws. Except as noted below, to
be timely a notice with respect to the 1999 Annual Meeting must be delivered
to the Secretary of the Corporation no earlier than January 15, 1999 and no
later than February 15, 1999 unless the date of the 1999 Annual Meeting is
advanced by more than thirty (30) days or delayed by more than sixty (60) days
from the anniversary date of the 1998 Annual Meeting in which event the
By-laws provide different notice requirements. In the event the Board of
Directors nominates a New Nominee (as defined) a stockholder's notice shall be
considered timely if delivered not later than the 10th day following the date
on which public announcement (as defined) is first made of the election or
nomination of such New Nominee. Any proposal of business or nomination should
be mailed to: Secretary, State Street Corporation, 225 Franklin Street,
Boston, Massachusetts 02110.
OTHER MATTERS
The Board of Directors does not know of any other matters which may be
presented for action at the meeting. Should any other business come before
the meeting, the persons named on the enclosed proxy will, as stated therein,
have discretionary authority to vote the shares represented by such proxies in
accordance with their best judgment.
The Board of Directors would like to have you attend the meeting in
person. Please, however, mark, date, sign and return the enclosed proxy as
promptly as possible in any event. If you attend the meeting, you may
nonetheless vote in person by ballot if you desire.
March 10, 1998
21
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[STATE STREET LOGO]
State Street Corporation
225 Franklin Street
Boston, MA 02110-2804
<PAGE>
PROXY PROXY
STATE STREET CORPORATION
Annual Meeting of Stockholders - April 15, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of State Street Corporation (the "Corporation")
hereby appoints Susanne G. Clark, Evalyn Lipton Fishbein and Claire A. Fusco
(each with power to act without the others and with power of substitution)
proxies to represent the undersigned at the Annual Meeting of Stockholders of
the Corporation to be held on April 15, 1998 and at any adjournments thereof,
with the power the undersigned would possess if personally present, and to
vote, as designated, all shares of Common Stock of the Corporation which the
undersigned may be entitled to vote at said Meeting, hereby revoking any proxy
heretofore given.
To vote in accordance with the Board of Directors' recommendations just sign
and date the other side; no boxes need to be checked.
PLEASE VOTE, DATE, AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign this proxy exactly as your name(s) appear(s) on the books of the
Corporation. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If a corporation, this signature
should be that of an authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------ --------------------------
- ------------------------ --------------------------
- ------------------------ --------------------------
- ------------------------ --------------------------
<PAGE>
[x] PLEASE MARK VOTES AS IN THIS 1. Election of Six Directors:
EXAMPLE
- --------------------------------- FOR ALL FOR ALL
STATE STREET CORPORATION NOMINEES WITHHOLD EXCEPT
- --------------------------------- [ ] [ ] [ ]
The matters to come before D. Gruber C. LaMantia A. Poe
the meeting are fully described D. Spina D. Walsh R. Weissman
in the Notice of and Proxy
Statement for the meeting, If you do not wish your shares
receipt of which is hereby voted "FOR" one or more
acknowledged. THE SHARES nominee(s), mark the "For All
REPRESENTED BY THIS PROXY WILL Except" box and strike a line
BE VOTED IN ACCORDANCE WITH THE through the name(s) of the
SPECIFICATIONS MADE. IF NO nominee(s). Your shares will
SPECIFICATION IS MADE, THE PROXY be voted for the remaining
WILL BE VOTED FOR THE ELECTION OF nominee(s).
DIRECTORS AS SET FORTH IN ITEM 1.
2. In their discretion, the
Proxies are authorized to
RECORD DATE SHARES: vote upon such other business
as may come before the
meeting or any adjournments
REGISTRATION thereof.
Please be sure to sign and date
this Proxy.
Date Mark box at right if an
address change or comment [ ]
- -------------------------------------- has been noted on the
Stockholder Co-owner reverse side of this card.
signs here signs here
DETACH CARD DETACH CARD
- -----------------------------------------------------------------------------
STATE STREET CORPORATION
DEAR STOCKHOLDER:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of State Street Corporation. The meeting will be held in the
Enterprise Room at 225 Franklin Street, Boston, Massachusetts on Wednesday,
April 15, 1998, at 10:00 a.m. Your Board of Directors and management look
forward to greeting those stockholders able to attend.
The notice of meeting and proxy statement which follow describe the
business to be conducted at the meeting. You will be asked to elect six
directors. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE DIRECTORS NOMINATED.
Your vote is very important. Whether or not you plan to attend the
meeting, please carefully review the enclosed proxy statement. Then complete,
sign, date and mail promptly the accompanying proxy in the enclosed return
envelope. To be sure that your vote will be received in time, please return
the proxy at your earliest convenience.
We look forward to seeing you at the Annual Meeting so that we can update
you on our progress. Your continuing interest is very much appreciated.
Sincerely,
Marshall N. Carter
Chairman and Chief Executive Officer
