SCHEDULE 14A
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[LOGO]
MMC
Marsh o Putnam o Mercer
Marsh & McLennan Companies
2003
Notice of Annual Meeting
And Proxy Statement
[LOGO]
MMC
Marsh o Putnam o Mercer
Marsh & McLennan Companies
Dear MMC Stockholder:
You are cordially invited to attend our annual stockholders meeting. The meeting
will be held at 10:00 a.m. on Thursday, May 15, 2003 in the auditorium on the
second floor at 1221 Avenue of the Americas, New York, New York.
In addition to the matters described in the attached proxy statement, we will
report on our Company's activities during 2002. You will have an opportunity to
ask questions and to meet your directors and executives.
Whether you plan to come to the annual meeting or not, your representation and
vote are important, and your shares should be voted. Please complete, sign, date
and return the enclosed proxy card promptly. You also may vote by telephone, or
electronically over the Internet, by following the instructions on your proxy
card.
We look forward to seeing you at the meeting. Your vote is important to us.
Very truly yours,
/s/ Jeffrey W. Greenberg
Jeffrey W. Greenberg
Chairman
March 27, 2003
MARSH & McLENNAN COMPANIES, INC.
1166 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036-2774
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AND
PROXY STATEMENT
TIME:
10:00 a.m. Local Time
DATE:
May 15, 2003
PLACE:
Second Floor Auditorium
1221 Avenue of the Americas
New York, New York
PURPOSE:
1. To elect five persons to serve as Class III directors, each for a
three-year term;
2. To adopt an amendment to MMC's Restated Certificate of
Incorporation increasing the number of authorized shares of
common stock;
3. To ratify the appointment of Deloitte & Touche LLP as independent
auditors; and
4. To conduct any other business that may properly come before the
meeting.
This notice and proxy statement describes the matters being voted on and
contains other information that may be helpful to you. In this material, we
refer to Marsh & McLennan Companies, Inc. as "MMC", the "Company", "we" or "us".
Only stockholders of record on March 19, 2003 may vote at the annual
meeting. You will need proof of ownership of MMC stock to enter the meeting.
This proxy solicitation material is being mailed to stockholders on or about
March 27, 2003 with a copy of MMC's 2002 Annual Report, which includes financial
statements for the period ended December 31, 2002.
YOUR VOTE IS IMPORTANT. YOU MAY CAST YOUR VOTE BY MAIL, TELEPHONE OR OVER
THE INTERNET BY FOLLOWING THE INSTRUCTIONS ON YOUR PROXY CARD.
/s/ GREGORY VAN GUNDY
GREGORY VAN GUNDY
SECRETARY
MARCH 27, 2003
TABLE OF CONTENTS
INFORMATION ABOUT OUR ANNUAL MEETING AND SOLICITATION OF PROXIES................................3
ITEM 1: ELECTION OF DIRECTORS...................................................................5
Nominees for Election as Directors for a Three-Year Term Expiring in 2006..............5
Directors Continuing in Office-Term Expiring in 2004...................................6
Directors Continuing in Office-Term Expiring in 2005...................................8
INFORMATION REGARDING THE BOARD OF DIRECTORS...................................................10
Committees............................................................................10
Code of Ethics........................................................................11
Tenure................................................................................11
Directors' Compensation...............................................................11
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS....................................12
COMPENSATION OF EXECUTIVE OFFICERS.............................................................14
Summary Compensation Table............................................................14
Option Grants in 2002.................................................................17
Aggregated Option Exercises in 2002 & Year-End Option Values..........................18
United States Retirement Program......................................................19
Employment Agreement..................................................................19
Compensation Committee Report.........................................................21
Stock Performance Graph...............................................................24
TRANSACTIONS WITH MANAGEMENT AND OTHERS; OTHER INFORMATION.....................................25
ITEM 2: PROPOSED AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION............................26
ITEM 3: RATIFICATION OF SELECTION OF AUDITORS..................................................27
Fees of Independent Auditors..........................................................27
AUDIT COMMITTEE REPORT.........................................................................28
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS.....................................................29
EXHIBIT A--PROPOSED AMENDMENT TO ARTICLE FOURTH OF THE RESTATED CERTIFICATE OF INCORPORATION...30
2
INFORMATION ABOUT OUR ANNUAL MEETING AND SOLICITATION OF PROXIES
WHO MAY VOTE
Holders of our common stock, as recorded in our stock register on March 19,
2003, may vote at the meeting. As of that date, there were [__________] shares
of common stock outstanding and entitled to one vote per share. A list of
stockholders will be available for inspection for at least ten days prior to the
meeting at the principal executive offices of MMC at 1166 Avenue of the
Americas, New York, New York.
HOW TO VOTE
You may vote in person at the meeting or by proxy. We recommend you vote by
proxy even if you plan to attend the meeting. You can always change your vote at
the meeting.
Most stockholders have a choice of proxy voting by using a toll free
telephone number, through the Internet or by completing the enclosed proxy card
and mailing it in the postage-paid envelope provided. Please refer to your proxy
card or the information forwarded by your bank, broker or other holder of record
to see which options are available to you.
Executors, administrators, trustees, guardians, attorneys and other
representatives voting on behalf of a stockholder should indicate the capacity
in which they are signing and corporations should sign by an authorized officer
whose title should be indicated.
HOW PROXIES WORK
MMC's Board of Directors is asking for your proxy. Giving us your proxy
means you authorize us to vote your shares at the meeting, or at any adjournment
thereof, in the manner you direct. You may vote for all, some, or none of our
director nominees. You may also vote for or against the other proposals or
abstain from voting.
If you sign and return the enclosed proxy card but do not specify how to
vote, we will vote your shares in favor of our director nominees and in favor of
Items 2 and 3.
As of the date hereof, we do not know of any other business that will be
presented at the meeting. If other business shall properly come before the
meeting, including any proposal submitted by a stockholder which was omitted
from this Proxy Statement in accordance with applicable federal securities laws,
the persons named in the proxy will vote according to their best judgment.
REVOKING A PROXY
You may revoke your proxy before it is voted by submitting a new proxy with
a later date, by voting in person at the meeting, or by sending written
notification addressed to:
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, New York 10036-2774
Attn: Mr. Gregory Van Gundy,
Corporate Secretary
Mere attendance at the meeting will not revoke a proxy that was previously
submitted to MMC.
QUORUM AND CONDUCT OF MEETING
In order to carry on the business of the meeting, we must have a quorum.
This means at least a majority of the outstanding shares eligible to vote must
be represented at the meeting, either by proxy or in person.
The Chairman has broad authority to conduct the annual meeting so that the
business of the meeting is carried out in an orderly and timely manner. In doing
so, the Chairman has broad discretion to establish reasonable rules for
discussion, comments and questions during the meeting. The Chairman also is
entitled to rely upon applicable law regarding disruptions or disorderly conduct
to ensure that the meeting is conducted in a manner that is fair to all
participants.
ATTENDANCE AT THE MEETING
Only stockholders, their proxy holders, and MMC's guests may attend the
meeting. Admission to the meeting will be on a first-come, first-served basis.
Verification of ownership may be required at the admissions desk. If your shares
are held in the name of your broker, bank, or other nominee, you must bring to
the meeting an account statement or letter from the nominee indicating that you
are the beneficial owner of the shares on March 19, 2003, the record date for
voting.
3
VOTES NEEDED
Directors are elected by a plurality of the votes cast. "Plurality" means
that the individuals who receive the largest number of votes cast FOR are
elected as directors up to the maximum number of directors to be chosen at the
meeting. Votes withheld from any director nominee will not be counted in such
nominee's favor.
Adoption of the proposal to amend the Restated Certificate of Incorporation
requires the affirmative vote of a majority of the outstanding shares of MMC's
stock. Accordingly, abstentions and broker nonvotes will have the effect of a
negative vote on the proposal.
All other matters to be acted on at the meeting require the affirmative
vote of a majority of the shares of MMC stock present or represented and
entitled to vote at the meeting to constitute the action of the stockholders. In
accordance with Delaware law, abstentions will be treated as present and
entitled to vote for purposes of the preceding sentence, while broker nonvotes
will not.
A "broker nonvote" is a proxy submitted by a broker in which the broker
fails to vote on behalf of a client on a particular matter for lack of
instruction when such instruction is required by the rules of the New York Stock
Exchange. Broker nonvotes will be counted for purposes of determining the
presence of a quorum for the transaction of business.
ELECTRONIC ACCESS TO PROXY MATERIALS AND ANNUAL REPORT
This proxy statement and the 2002 Annual Report can be viewed on our
website at http://www.mmc.com/annualreport.html. Most stockholders can elect to
view future proxy statements and annual reports over the Internet instead of
receiving paper copies in the mail.
If you are a stockholder of record, you can choose this option and save MMC
the cost of producing and mailing these documents by following the instructions
provided when you vote over the Internet. If you hold your MMC stock through a
bank, broker or other holder of record, please refer to the information provided
by that entity for instructions on how to elect to view our future proxy
statements and annual reports over the Internet.
If you choose to view our future proxy statements and annual reports over
the Internet, you will receive an e-mail message with instructions on how to
access MMC's proxy statement and annual report and vote. Your choice will remain
in effect until you tell us otherwise. You do not have to elect Internet access
each year. To view, cancel or change your enrollment profile, please go to
www.investordelivery.com.
SOLICITATION OF PROXIES
In addition to this mailing, proxies may be solicited personally,
electronically or by telephone. We pay the expenses of preparing the proxy
materials and soliciting this proxy. We also reimburse brokers and other
nominees for their expenses in sending these materials to you and obtaining your
voting instructions.
We have retained Georgeson Shareholder Communications Inc. to assist in the
proxy solicitation at a fee of approximately $10,000, plus expenses. In addition
to solicitation of proxies by mail, proxies may be solicited personally, by
telephone, e-mail and by facsimile by MMC's directors, officers and other
employees, who will receive no additional compensation for these solicitation
services.
MULTIPLE STOCKHOLDERS SHARING SAME ADDRESS
If you and other residents at your mailing address with the same last name
own shares of common stock through a bank, broker or other holder of record,
your bank or broker may have sent you a notice that your household will receive
only one annual report and proxy statement for each company in which you hold
stock through that bank or broker. This practice of sending only one copy of
proxy materials to holders residing at a single address is known as
"householding", and is designed to reduce printing and postage costs.
If you did not respond that you did not want to participate in
householding, you were deemed to have consented to the process. If you did not
receive a householding notice from your bank, broker or other holder of record,
you can request householding by contacting that entity. You may revoke your
consent to householding at any time by calling 1-800-542-1061.
If you wish to receive a separate annual report or proxy statement, you may
telephone Corporate Development at (212) 345-5475 or write to:
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, New York 10036-2774.
Attn: Corporate Development
4
ITEM 1
ELECTION OF DIRECTORS
Our Board of Directors is divided into three classes. Members of each class
serve for a three-year term. Stockholders elect one class of directors at each
annual meeting. At this annual meeting, stockholders will vote on the election
of the five nominees described below.
The following section contains information provided by the nominees and
continuing directors about their principal occupation, business experience and
other matters. The nominees are all current directors of MMC, and each nominee
has indicated to MMC that he or she will serve if elected. Mr. John T. Sinnott,
Chairman of Marsh Inc., a subsidiary of MMC, and a director, is retiring from
MMC in July 2003 and not standing for election. We do not anticipate that any
nominee will be unable or unwilling to stand for election, but if that happens,
your proxy may be voted for another person nominated by the Board.
The Board proposes the election of the nominees listed below as directors
for a term ending at the 2006 Annual Meeting.
The Board of Directors recommends a vote FOR the election of all five
nominees.
NOMINEES FOR ELECTION AS DIRECTORS
FOR A THREE-YEAR TERM EXPIRING IN 2006
PETER COSTER DIRECTOR SINCE 1988
[PHOTO] Mr. Coster, age 63, is President and Chief Executive Officer of
Mercer Inc., a subsidiary of MMC. He joined Mercer in 1984 upon
its acquisition of a U.K. consulting firm that Mr. Coster had
joined in 1962. He is a trustee of The Foundation Fighting
Blindness.
CHARLES A. DAVIS DIRECTOR SINCE 2000
[PHOTO] Mr. Davis, age 54, is Vice Chairman of MMC and Chairman and Chief
Executive Officer of MMC Capital, Inc., an indirect subsidiary of
MMC. He became Vice Chairman of MMC in 1999 and has served as
Chief Executive Officer of MMC Capital since 1999 and as its
Chairman since 2002. He served as President of MMC Capital
beginning in 1998 before becoming Chairman. Prior to joining MMC,
in a 23-year career at Goldman, Sachs & Co. he held numerous
positions, including head of investment banking services
worldwide. Mr. Davis is a director of Media General, Inc.,
Progressive Corporation and Merchants Bancshares, Inc.
5
GWENDOLYN S. KING** **** DIRECTOR SINCE 1998
[PHOTO] Ms. King, age 62, is President of Podium Prose in Washington,
D.C. She was Senior Vice President, Corporate and Public Affairs
at Peco Energy from 1992 until 1998. From 1989 to 1992, she
served as Commissioner of the Social Security Administration in
the U.S. Department of Health and Human Services. In 2001, Ms.
King was appointed by President George W. Bush to the President's
Commission to Strengthen Social Security. Ms. King is a director
of Countrywide Financial Corporation, Lockheed Martin
Corporation, Monsanto Company, Pharmacia Corporation and the
National Association of Corporate Directors and a member of the
George Washington University Council on American Politics.
LAWRENCE J. LASSER DIRECTOR SINCE 1987
[PHOTO] Mr. Lasser, age 60, is President and Chief Executive Officer of
Putnam Investments, LLC, a subsidiary of MMC. He joined Putnam in
1969. Mr. Lasser is a trustee of approximately 100 mutual funds
managed by Putnam Investment Management, LLC. He is a member of
the Executive Committee of the Board of Governors of the
Investment Company Institute, a trustee of the Museum of Fine
Arts, Boston, and a member of the Boards of Directors of Beth
Israel/Deaconess Medical Center, Boston, and the United Way of
Massachusetts Bay. He is also a member of the CareGroup Board of
Managers Investment Committee, the Council on Foreign Relations
and the Commercial Club of Boston.
DAVID A. OLSEN** DIRECTOR SINCE 1997
[PHOTO] Mr. Olsen, age 65, is a director of U.S. Trust Corporation, an
honorary director of New York's South Street Seaport Museum and a
trustee of Bowdoin College. He was Chairman and Chief Executive
Officer of Johnson & Higgins prior to its business combination
with MMC in 1997. Mr. Olsen joined Johnson & Higgins in 1966. He
served as Vice Chairman of MMC from May 1997 until December 1997.
DIRECTORS CONTINUING IN OFFICE
(TERM EXPIRING IN 2004)
LEWIS W. BERNARD* *** DIRECTOR SINCE 1992
[PHOTO] Mr. Bernard, age 61, is Chairman of Classroom, Inc., a non-profit
educational corporation. He retired in 1991 from Morgan Stanley
&Co., Inc., where for almost 30 years he held numerous positions,
including that of Chief Administrative and Financial Officer. Mr.
Bernard is Chairman of the Board of the American Museum of
Natural History, Vice Chairman of the J. Paul Getty Trust and a
trustee of The Andrew W. Mellon Foundation.
6
MATHIS CABIALLAVETTA DIRECTOR SINCE 2000
[PHOTO] Mr. Cabiallavetta, age 58, is Vice Chairman of MMC and Chairman,
MMC Global Development. He joined MMC in 1999. Prior thereto he
was Chairman of the Board of UBS A.G. He is a past member of the
board of the Swiss National Bank and the International Capital
Markets Advisory Committee of the Federal Reserve Bank. He also
served as a Vice Chairman of the Board of Directors of the Swiss
Bankers Association. He is a director of Altria Group, Inc. and
HBM BioVentures AG in Switzerland.
ROBERT F. ERBURU*** **** DIRECTOR SINCE 1996
[PHOTO] Mr. Erburu, age 72, is Chairman of the Board of the National
Gallery of Art, the Pacific Council on International Policy and
the Board of Councilors of the College of Letters, Arts and
Science of the University of Southern California. He retired as
Chairman of the Board of The Times Mirror Company on January 1,
1996, a position he had held since 1986. He served as Chief
Executive Officer of The Times Mirror Company from 1981 to 1995.
Mr. Erburu is also Chairman Emeritus of the Huntington Library
and the J. Paul Getty Trust and a trustee of The William and
Flora Hewlett Foundation, the Ahmanson Foundation, the Ralph M.
Parson Foundation, the Fletcher Jones Foundation and the Carrie
Estelle Doheny Foundation.
OSCAR FANJUL** DIRECTOR SINCE 2001
[PHOTO] Mr. Fanjul, age 53, is Vice Chairman and Chief Executive Officer
of Omega Capital, a private investment firm in Spain. He was
Chairman of N.H. Hotels from 1997 until 1999 and of
Hidroelectrica del Cantabrico from 1999 to 2001. Mr. Fanjul is
Honorary Chairman of Repsol, S.A., where from its creation in
1986 until 1996 he was Chairman and Chief Executive Officer. Mr.
Fanjul is a director of Acerinox, Tecnicas Reunidas and the
London Stock Exchange and an advisory director of Unilever. He is
also a member of the International Advisory Board of MMC and of
The Chubb Corporation and of the European Advisory Board of the
Carlyle Group. He is also an International Advisor to Goldman,
Sachs & Co.
RAY J. GROVES DIRECTOR SINCE 1994
[PHOTO] Mr. Groves, age 67, is President and Chief Executive Officer of
Marsh Inc., a subsidiary of MMC. He joined MMC as Senior Advisor
in August 2001, became President and Chief Operating Officer of
Marsh in October 2001 and Chief Executive Officer in January
2003. Prior to joining MMC, he was Chairman of Legg Mason
Merchant Banking, Inc., a position he held since 1995. Mr. Groves
retired in 1994 from Ernst & Young, where he held numerous
positions for 37 years, including the last 17 years as Chairman
and Chief Executive Officer. He is a director of Boston
Scientific Corporation, Electronic Data Systems Corporation and
The Gillette Company. He is also a managing director and
Treasurer and Secretary of the Metropolitan Opera Association and
a director and former Chairman of The Ohio State University
Foundation.
7
DIRECTORS CONTINUING IN OFFICE
(TERM EXPIRING IN 2005)
JEFFREY W. GREENBERG* DIRECTOR SINCE 1996
[PHOTO] Mr. Greenberg, age 51, is Chairman of the Board and Chief
Executive Officer of MMC. He has been Chief Executive Officer
since 1999 and Chairman since 2000. Mr. Greenberg was Chairman of
MMC Capital from 1996 until 2002. He joined MMC in 1995. Mr.
Greenberg is on the board of The Brookings Institution, a trustee
of Brown University, the Spence School in New York City and New
York-Presbyterian Hospital and a member of the Board of Overseers
of the Joan and Sanford I. Weill Graduate School of Medical
Sciences of Cornell University. He is a member of the Council on
Foreign Relations and The Trilateral Commission.
STEPHEN R. HARDIS* ** DIRECTOR SINCE 1998
[PHOTO] Mr. Hardis, age 67, is Chairman of Axcelis Technologies, Inc. He
was Chairman and Chief Executive Officer of Eaton Corporation
prior to his retirement in 2000. He joined Eaton Corporation in
1979. Mr. Hardis is a director of American Greetings Corporation,
Apogent Technologies Inc., Lexmark International Corporation,
Nordson Corporation, Progressive Corporation and Steris
Corporation and a trustee of the Cleveland Clinic and the
Cleveland Orchestra.
THE RT. HON. LORD LANG OF MONKTON, DL* *** ****
DIRECTOR SINCE 1997
[PHOTO] Lord Lang, age 62, is chairman of BFS US Special Opportunities
Trust plc, Murray tmt plc, Thistle Mining Inc. and Second
Scottish National Trust plc. He was a member of the British
Parliament from 1979 to 1997, serving in the Cabinet as Secretary
of State for Scotland (1990 to 1995) and as President of the
Board of Trade and Secretary of State for Trade and Industry
(1995 to 1997). Lord Lang is also Chairman of the Patrons of the
National Galleries of Scotland and a Governor of Rugby School,
England.
MORTON O. SCHAPIRO** DIRECTOR SINCE 2002
[PHOTO] Mr. Schapiro, age 49, is President of Williams College, a
position he assumed in 2000. From 1994 until 2000, he was Dean of
the College of Letters, Arts and Sciences at the University of
Southern California, and from 1999 to 2000 he also served as the
University's vice president for planning. Mr. Schapiro is a
trustee of The WM Group of Funds, a management subsidiary of
Washington Mutual Bank. He is also a trustee of the Williamstown
Theater Festival and the Sterling & Francine Clark Art Institute.
8
ADELE SIMMONS* ** DIRECTOR SINCE 1978
[PHOTO] Mrs. Simmons, age 61, is Vice Chair of Chicago Metropolis 2020,
President of the Global Philanthropy Partnership and a senior
associate of the Center for International Studies at the
University of Chicago. She was President of the John D. and
Catherine T. MacArthur Foundation from 1989 to 1999. She is a
director of The Field Museum, Environmental Defense, Synergos
Institute, the Rocky Mountain Institute, the Global Fund for
Women, the Union of Concerned Scientists and the American
Prospect. She is Chair of the Committee to Visit the Graduate
School of Education at Harvard University, a member of the
Advisory Board of the World Bank Institute and a senior advisor
to The World Economic Forum.
A. J. C. SMITH* DIRECTOR SINCE 1977
[PHOTO] Mr. Smith, age 68, retired in 2000 as Chairman of the Board of
MMC, a position he held since 1992. He was Chief Executive
Officer of MMC from 1992 to 1999. Mr. Smith is a trustee of
approximately 100 mutual funds managed by Putnam Investment
Management, LLC. He is Chairman of the Central Park Conservancy
and a trustee of the Carnegie Hall Society, Inc., the Educational
Broadcasting Corporation in New York City and the National
Museums of Scotland (Edinburgh). Mr. Smith is also a member of
the Board of Overseers of the Joan and Sanford I. Weill Graduate
School of Medical Sciences of Cornell University.
----------
* Member of the Executive Committee, of which Mr. Greenberg is Chair.
** Member of the Audit Committee, of which Mr. Hardis is Chair.
*** Member of the Compensation Committee, of which Mr. Bernard is Chair.
**** Member of the Directors and Governance Committee, of which Mr. Erburu is
Chair.
9
INFORMATION REGARDING THE BOARD OF DIRECTORS
MMC is a global professional services company. Our business is conducted by
our business units, and their employees and officers, under the direction of the
chief executive officer and the oversight of the Board, to enhance the long-term
value of MMC for its stockholders. The Board of Directors, which is elected by
the stockholders, is the ultimate decision-making body of MMC except with
respect to those matters reserved to the stockholders. The Board held seven
meetings during 2002.
Our Board includes a balance of non-executive and executive directors.
Independent non-executive directors constitute a majority of our Board and meet
the independence requirements proposed by the NYSE in 2002. With respect to our
directors:
o a meaningful portion of the compensation for non-executive directors
is paid in MMC stock;
o all new directors participate in an orientation. This orientation
includes background material and presentations by management on MMC's
operations and strategic plans, its financial statements and its key
policies and practices;
o board members have complete access to MMC's officers and employees.
Directors are encouraged to communicate directly with MMC's chief
financial officer, general counsel and other members of senior
management; and
o in addition to access to MMC officers, the Board and its committees
have the authority to obtain advice and assistance from external
advisors or consultants as they may deem necessary.
COMMITTEES
Our Board has established an Executive Committee, an Audit Committee, a
Compensation Committee and a Directors and Governance Committee to assist the
Board in discharging its responsibilities. New charters for the Compensation
Committee, and the Directors and Governance Committee established in 2002, have
been adopted by the Board of Directors and can be viewed on our website at
www.mmc.com/corpgov.html. Membership on the Audit, Compensation, and Directors
and Governance Committee is limited to independent non-executive directors.
Following each meeting of its committee, each committee chair reports the
highlights of the meeting to the full Board.
THE EXECUTIVE COMMITTEE:
o is empowered to act for the full Board in intervals between Board
meetings, with the exception of certain matters that under Delaware
law or MMC's by-laws may not be delegated; and
o meets as necessary, with all actions taken by the committee reported
at the next Board of Directors meeting.
The Executive Committee held three meetings during 2002.
THE AUDIT COMMITTEE:
The Audit Committee has oversight responsibility with respect to:
o the annual financial information to be provided to stockholders and
the Securities and Exchange Commission ("SEC");
o the system of internal controls that management has established; and
o the internal and external audit process.
All members of the Audit Committee are independent as required by the
listing standards of the New York Stock Exchange. The Board of Directors has
determined that Stephen R. Hardis, an independent non-executive director and the
chair of the Audit Committee, has the requisite qualifications to satisfy the
SEC definition of Audit Committee Financial Expert.
The Audit Committee held nine meetings during 2002.
THE COMPENSATION COMMITTEE:
o evaluates the performance and determines the compensation of MMC's
Chief Executive Officer;
o reviews and approves the compensation of other senior executives; and
o makes recommendations to the Board with respect to incentive
compensation plans and equity-based plans and discharges the
responsibilities of the committee set forth in MMC's plans.
The Compensation Committee held nine meetings during 2002.
THE DIRECTORS AND GOVERNANCE COMMITTEE:
o develops, reviews and periodically reassesses MMC's corporate
governance principles and recommends proposed changes to the Board;
10
o identifies, considers and recommends qualified candidates to the Board
for election as directors, including the slate of directors that the
Board proposes for election at the annual meeting;
o in consultation with the MMC chairman and other committee chairs,
recommends committee assignments to the Board; and
o develops processes for and oversees annual assessments of the Board's
performance and effectiveness.
The Directors and Governance Committee considers director nominees
recommended by our stockholders. Stockholders may propose nominees for
consideration by submitting the names and supporting information to:
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, New York 10036-2774
Attn: Directors & Governance Committee,
c/o Mr. Gregory Van Gundy,
Corporate Secretary
The Directors and Governance Committee held two meetings in 2002.
ATTENDANCE
The average attendance by directors at meetings of the Board and committees
thereof was 98%. All directors attended at least 75% of the meetings of the
Board and committees on which they served.
CODE OF ETHICS
In addition to its code of business conduct applicable to all employees and
directors, MMC has adopted a Code of Ethics, as provided by the Sarbanes-Oxley
Act of 2002, which applies to its chief executive officer, chief financial
officer and controller. A copy of that Code is filed as an exhibit to MMC's 2002
Annual Report on Form 10-K.
TENURE
Non-executive directors retire at the annual meeting after attaining age
72, unless the person has been a non-executive director for less than ten years.
In such cases, non-executive directors retire at the annual meeting following
the earlier of ten years of service or attaining age 75. Executive directors
other than the chief executive officer resign from the Board upon their
retirement. Currently the former MMC chief executive officer serves on the
Board.
DIRECTORS' COMPENSATION
As compensation for their services, we paid the following compensation to
our non-executive directors, Messrs. Bernard, Erburu, Fanjul, Hardis, Lang,
Olsen, Schapiro and Smith, Ms. King and Mrs. Simmons:
o a basic retainer of $40,000 per year and an annual grant of 1,800
shares of stock (the "Annual Stock Grant");
o a fee of $1,000 and reimbursement of related expenses for each meeting
of the board or a committee they attend;
o an additional retainer of $5,000 per year to the chair of each
committee (other than Mr. Greenberg as chair of the Executive
Committee); and
o an additional retainer of $2,000 per year to other members of
committees.
We also offer travel accident insurance benefits to non-executive directors
in connection with MMC-related business travel. Non-executive directors are
included in MMC's gift-matching program for certain charitable gifts by
employees up to a maximum of $5,000 per year.
Directors who are also employees receive no specific compensation for their
services as directors.
Under the terms of MMC's Directors Stock Compensation Plan, the directors
receive twenty-five percent of the basic retainer in shares of stock at the fair
market value thereof, as well as their Annual Stock Grant on each June 1. The
balance of their compensation (including attendance fees and committee
retainers) is paid in either shares of stock or cash, as the director elects.
The directors may defer receipt of all or a portion of their compensation to be
paid in shares until the year following either their retirement from the Board
or a specified earlier date.
Certain directors are investors in a fund that is a limited partner of
Trident II, L.P. ("Trident II"), a $1.4 billion private equity fund managed by
MMC Capital, Inc., an indirect subsidiary of MMC. Neither the directors nor the
fund are required to pay
11
management or carried interest performance fees in connection with their
investments in Trident II.
Since June 1, 2000, MMC has had an agreement with A.J.C. Smith, pursuant to
which Mr. Smith provides certain advisory and consultative services for MMC or
its affiliates, serves as chairman of MMC's International Advisory Board and is
a trustee of various Putnam Funds. He also serves as a director of Marsh &
McLennan Risk Capital Holdings, Ltd. and MMC Capital. For these services MMC
pays Mr. Smith $1,250,000 per year and provides support and other services and
business expense reimbursement. On May 16, 2002 the term of this agreement was
extended through May 31, 2003. For services rendered in 2002, Mr. Smith received
an additional $1,250,000 incentive payment.
Mr. Fanjul serves on MMC's International Advisory Board and is a director
of Marsh, S.A., a Spanish subsidiary of MMC, but receives no additional
compensation for such service.
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table reflects as of February 28, 2003 (except with respect
to interests in MMC's Stock Investment Plan and Stock Investment Supplemental
Plan, which are as of December 31, 2002) the number of shares of our common
stock which each director and each named executive officer has reported as
owning beneficially or otherwise having a pecuniary interest in, and which all
directors and executive officers of MMC have reported as owning beneficially as
a group. It also includes the number of shares of stock beneficially owned by
persons known to MMC to own more than 5% of the outstanding shares.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP (1)
---------------------------------------
SOLE VOTING OTHER THAN
AND SOLE VOTING
INVESTMENT AND INVESTMENT
NAME POWER POWER (2) TOTAL
---- ----------- -------------- ---------
Lewis W. Bernard ........................................ 6,000 55,301 61,301
Mathis Cabiallavetta .................................... 11,804 508,118 519,922
Peter Coster ............................................ 46,014 1,014,051 1,060,065
Charles A. Davis ........................................ 26,398 705,006 731,404
Robert F. Erburu ........................................ -- 38,582 38,582
Oscar Fanjul ............................................ 13,393 -- 13,393
Jeffrey W. Greenberg .................................... 116,684 1,838,257 1,954,941
Ray J. Groves ........................................... 7,848 189,632 197,480
Stephen R. Hardis ....................................... 2,000 13,352 15,352
Gwendolyn S. King ....................................... -- 9,852 9,852
Lord Lang ............................................... 5,258 2,800 8,058
Lawrence J. Lasser ...................................... -- 798,150 798,150
David A. Olsen .......................................... 428,678 213,154 641,832
Morton O. Schapiro ...................................... -- 2,063 2,063
Adele Simmons ........................................... 233,214 184,750 417,964
John T. Sinnott ......................................... 101,584 992,764 1,094,347
A.J.C. Smith ............................................ 1,099,478 2,145,154 3,244,632
All directors and executive officers as a group,
including the above (20 individuals) .................. 2,144,790 9,713,575 11,858,365
12
AMOUNT PERCENTAGE OF STOCK
BENEFICIALLY OUTSTANDING AS OF
NAME OWNED DECEMBER 31, 2002
---- ------------ -------------------
Marsh & McLennan Companies Stock Investment Plan (3)
1166 Avenue of the Americas
New York, NY 10036-2774 28,146,683 5.3%
----------
(1) As of February 28, 2003, no director or named executive officer
beneficially owned more than 1% of the outstanding stock, and all directors
and executive officers as a group beneficially owned approximately 2.2% of
the outstanding stock.
(2) Includes shares of stock: (i) that are held in the form of shares of
restricted stock; (ii) that are held indirectly for the benefit of such
individuals or jointly, or directly or indirectly for certain members of
such individuals' families, with respect to which beneficial ownership in
certain cases may be disclaimed; and (iii) that represent such individuals'
interests in MMC's Stock Investment Plan. Also includes MMC stock units
that are subject to issuance in the future with respect to the Directors
Stock Compensation Plan, cash bonus deferral plans, MMC's Stock Investment
Supplemental Plan or restricted stock units in the following aggregate
amounts: Mr. Bernard, 55,300 shares; Mr. Cabiallavetta, 91,673 shares; Mr.
Coster, 147,492 shares; Mr. Davis, 140,841 shares; Mr. Erburu, 38,581
shares; Mr. Greenberg, 148,707 shares; Mr. Groves, 71,298 shares; Mr.
Hardis, 13,352 shares; Ms. King, 9,452 shares; Mr. Lasser, 434,910 shares;
Mr. Schapiro 2,063 shares; Mrs. Simmons, 27,058 shares; Mr. Sinnott,
303,469 shares; Mr. Smith, 97,026 shares; and all directors and executive
officers as a group, 1,729,834 shares. Additionally, includes shares of
stock which may be acquired on or before April 30, 2003 through the
exercise of stock options as follows: Mr. Cabiallavetta, 405,000 shares;
Mr. Coster, 710,000 shares; Mr. Davis, 520,000 shares; Mr. Greenberg,
1,572,500 shares; Mr. Groves, 100,000 shares; Mr. Lasser, 315,000 shares;
Mr. Sinnott, 565,000 shares; Mr. Smith, 2,000,000 shares; and all directors
and executive officers as a group, 6,882,500 shares.
(3) Under the provisions of the Stock Investment Plan, voting rights are passed
through to the employees in proportion to their interests. Unvoted shares
will generally be voted by the trustee in proportion to the shares voted.
Shares held in the Plan are registered in the name of the Plan's trustee
and not in the names of the individual participants. Of the 28,116,960
shares held in the Plan at December 31, 2002, approximately 90,250, or
0.3%, were held for directors and executive officers of MMC and are
included in the ownership shown above for all directors and executive
officers as a group.
13
COMPENSATION OF EXECUTIVE OFFICERS
The following tables contain information with respect to the CEO and the
six other most highly compensated executive officers of MMC. We adjusted the
number of shares and per share prices to reflect MMC's two-for-one stock split
effective June 28, 2002.
SUMMARY COMPENSATION TABLE
The following table sets forth cash and other compensation paid or earned
for services rendered in 2002, 2001 and 2000.
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------------- -----------------------------------
NAME AND OTHER ANNUAL RESTRICTED SECURITIES LTIP ALL OTHER
PRINCIPAL COMPENSATION STOCK UNDERLYING PAYOUTS COMPENSATION
POSITION YEAR SALARY($) BONUS($)(1) ($)(2) AWARDS ($)(3) OPTIONS (#) ($)(4) ($)(5)
----------------------- ---- --------- ----------- ------------ ------------- ----------- --------- ------------
Jeffrey W. Greenberg ...... 2002 1,200,000 91,798 2,171,187 450,000 2,107,832 48,003
Chairman and Chief 2001 1,200,000 2,500,000 188,642 2,339,118 400,000 -- 48,902
Executive Officer 2000 1,200,000 1,500,000 -- 4,101,064 400,000 350,000 48,900
Marsh & McLennan
Companies, Inc.
Lawrence J. Lasser ........ 2002 1,000,000 57,744 1,000,093 100,000 -- 350,000
President 50,000(7)
Putnam Investments, LLC 2001 1,000,000 17,000,000 -- 1,000,003 100,000 -- 349,000
10,627,000(6) 50,000(7)
2000 1,000,000 33,000,000 -- 1,000,028 -- -- 243,000
John T. Sinnott ........... 2002 950,000 -- 1,586,323 120,000 -- 54,150
Chairman 2001 900,000 1,200,000 165,943 1,380,953 120,000 -- 51,300
Marsh Inc. 2000 900,000 800,000 180,894 1,250,027 100,000 -- 51,300
Peter Coster .............. 2002 950,000 515,930 1,720,376 120,000 -- 54,150
President 2001 950,000 750,000 198,051 1,791,943 140,000 -- 54,863
Mercer Inc. 2000 900,000 800,000 132,921 1,227,165 120,000 -- 51,975
Mathis Cabiallavetta ...... 2002 850,000 -- 1,435,046 220,000 -- 48,450
Vice Chairman 2001 800,000 875,000 -- 1,316,413 200,000 -- 46,200
Marsh & McLennan 2000 700,000 800,000 -- 1,053,505 200,000 -- 27,125
Companies, Inc.
Charles A. Davis .......... 2002 850,000 -- 1,576,952 200,000 1,794,373 34,002
Vice Chairman 2001 800,000 875,000 -- 1,346,413 200,000 -- 32,001
Marsh & McLennan 2000 750,000 800,000 -- 1,227,561 200,000 105,000 30,000
Companies, Inc.
President
MMC Capital, Inc.
Ray J. Groves ............. 2002 850,000 -- 764,175 200,000 -- 20,188
President and Chief 2001 333,333 250,000 -- 1,012,601 200,000 -- --
Executive Officer
Marsh Inc.
----------
(1) Mr. Davis deferred a portion of his bonus in respect of 2000 and 2001, and
Mr. Lasser deferred a portion of his bonus in respect of 2000, pursuant to
plans under which participants may elect to invest their deferred amounts
on a notional basis indirectly in various private equity funds managed by
MMC subsidiaries and affiliated firms.
(2) With regard to Messrs. Greenberg and Coster, represents payments to cover
tax liabilities arising from funding annuities under the Benefit
Equalization and Supplemental Retirement Plans. These plans are part of
MMC's United States retirement program. With regard to Mr. Lasser,
represents perquisites, including approximately $35,000 for financial
advisory services and $15,000 for a supplemental healthcare plan provided
to certain senior executives at Putnam.
(3) At December 31, 2002, each individual in the Summary Compensation Table had
outstanding shares of restricted stock and restricted stock units of MMC
with an aggregate value (using the closing price of common stock on the
14
Consolidated Transaction Reporting System on December 31, 2002 of $46.21)
as follows: Mr. Greenberg, 148,300 shares and 103,508 units worth
$6,852,943 and $4,783,105, respectively; Mr. Lasser, 146,400 shares and
434,910 units worth $6,765,144 and $20,097,191, respectively; Mr. Sinnott,
150,400 shares and 146,790 units worth $6,949,984 and $6,783,166,
respectively; Mr. Coster, 161,000 shares and 105,994 units worth $7,439,810
and $4,897,983, respectively; Mr. Cabiallavetta, 10,000 shares and 78,038
units worth $462,100 and $3,606,136, respectively; Mr. Davis, 42,600 shares
and 84,760 units worth $1,968,546 and $3,916,760, respectively; and Mr.
Groves, 18,334 shares and 8,990 units worth $847,214 and $415,428,
respectively.
During the applicable vesting and restricted periods, holders of shares of
restricted stock receive the same dividend payments as those paid on the
outstanding shares of stock and such shares generally vest on the January 1
following the tenth anniversary of the date of grant. Holders of restricted
stock units receive dividend equivalent payments that are equal in amount
to dividends paid on shares of common stock, and such units generally vest
three years from the date of grant. Vesting of restricted stock and
restricted stock units may be accelerated upon a change in control. "Change
in Control" of MMC means generally any of the following: any person or
group becoming the owner of securities with 50% or more of the voting power
of MMC; within a two-year period (with certain exceptions) a change in
directors constituting a majority of the Board; stockholder approval of a
merger or consolidation of MMC resulting in MMC stockholders not owning
securities with 50% or more of the voting power of the surviving entity;
and stockholder approval of a plan of complete liquidation or an agreement
for the sale or disposition of all or substantially all of MMC's assets.
Under the MMC Special Severance Pay Plan, certain holders of restricted
stock or awards in lieu of restricted stock with at least 10 years of
service will receive payment in shares of stock upon forfeiture of their
award if their employment with MMC or one of its subsidiaries terminates.
The amount of such payment is based on years of service, with the
individual receiving up to a maximum of 90% of the value of the restricted
shares after 25 years of service, and is subject to execution of a
non-solicitation agreement.
(4) Under MMC Capital's Long Term Incentive Plan ("LTIP") Mr. Davis and Mr.
Greenberg have received various awards, including carried interest
performance payments. The LTIP currently operates as an incentive
compensation pool that varies in amount based on the extent of investment
return and fees from originating, structuring and managing certain
insurance and related industry investments in which MMC has direct or
indirect interests. As of December 31, 2002, the estimated value of Mr.
Greenberg's and Mr. Davis' interest in any future payouts under the LTIP
(including their carried interests) aggregated approximately $1.0 million
and $0.8 million, respectively, in each case based on a liquidation value
as of that date and subject to realization of estimated returns and
including awards with respect to fees received and realized gains not yet
distributed. The vesting schedules for carried interest awards made under
the LTIP were determined at the date of grant and will accelerate upon a
change in control of MMC (as described in footnote 3 above), a change in
control of MMC Capital (defined to mean that MMC no longer owns more than
50% of MMC Capital), or upon the retirement, death or disability of the
participating executive.
In addition, in 1999, Mr. Greenberg purchased both general and limited
partnership interests in the general partner of Trident II, and in 1999 and
2000, Mr. Davis purchased both general and limited partnership interests in
the general partners of four private equity funds managed by MMC Capital,
including Trident II. These purchases were on an after-tax, out-of-pocket
basis. In connection with these partnership interests, Mr. Greenberg and
Mr. Davis received participations in carried interests in these funds. In
2000, Mr. Greenberg and Mr. Davis received $237,267 and $382,562,
respectively, in connection with their carried interests. At this time, it
is not meaningful to project values of the carried interest participations.
The carried interests are subject to reduction or forfeiture in connection
with termination of employment. However, in the event of a change in
control of MMC or MMC Capital prior to a termination of employment other
than for cause, the carried interests cannot be so reduced or forfeited,
even with respect to subsequent investments. From time to time, Mr.
Greenberg and Mr. Davis may be excused from participating in a particular
investment in order to avoid the appearance of any inappropriate
remuneration or as otherwise deemed advisable. See "Transactions with
Management and Others; Other Information" below. Additionally, in 1999
and/or 2000, Messrs. Greenberg, Lasser, Sinnott, Coster, Davis and Groves,
either in their capacities as employees of MMC or its subsidiaries or as
directors of MMC, purchased, on an after-tax, out-of-pocket basis, limited
partnership interests in one or more funds that invest in or alongside
private equity funds managed by MMC subsidiaries and affiliated firms.
Neither these individuals nor their funds are required to pay any
management, carried interest performance or other fees, except in some
cases an administrative fee, in connection with these investments.
(5) Amounts shown for 2002 consist of the following: (a) MMC matching
contributions under the Stock Investment Plan of $7,334 for Mr. Greenberg,
$10,450 for Mr. Sinnott, $10,450 for Mr. Coster, $10,450 for Mr.
Cabiallavetta and $3,334 for Mr. Davis, and under the Stock Investment
Supplemental Plan of $40,669 for Mr. Greenberg, $43,700 for Mr. Sinnott,
$43,700 for Mr. Coster, $38,000 for Mr. Cabiallavetta, $30,668 for Mr.
Davis and $20,188 for Mr. Groves
15
and (b) contributions by Putnam Investments of $30,000 to the Putnam Profit
Sharing Retirement Plan and $120,000 to the Putnam Executive Deferred
Compensation Plan for Mr. Lasser. Additionally, Mr. Lasser received
$200,000 from MMC for his service as a trustee of the Putnam Funds. Amounts
shown for 2001 for Mr. Lasser reflect an additional $96,000 from the amount
shown in last year's proxy statement for his service as a trustee of the
Putnam Funds that was earned in 2001 but not paid until 2002.
(6) Represents Putnam restricted stock units. At December 31, 2002, Mr. Lasser
had 101,250 restricted stock units of Putnam Class B Shares with an
estimated aggregate value of $4,587,638 based on a specified valuation
methodology for determining fair market value which at December 31, 2002
was $45.31 per share. All grants of Putnam restricted stock units include
the right to dividend equivalents that are equal in amount to dividends
paid on the outstanding Class A Shares of Putnam. The Putnam restricted
stock units vest at a rate of 25% a year beginning with the first
anniversary of the date of the grant. Upon the happening of certain
corporate events affecting Putnam or MMC, vesting of shares of Putnam
restricted stock units may be accelerated.
(7) Mr. Lasser was granted Putnam options, which become exercisable 25% a year
beginning one year from the date of grant. The exercise price of the Putnam
options may be paid in cash or in Class B Shares of Putnam. Upon the
occurrence of certain corporate events affecting Putnam or MMC, all Putnam
options will become fully exercisable.
16
OPTION GRANTS IN 2002
The table below describes MMC stock options granted during 2002 and stock
options to purchase Putnam Class B Shares granted to Mr. Lasser in 2002.
INDIVIDUAL GRANTS(1)
------------------------------------------------ POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES PRICE EXPIRATION -------------------------------
NAME GRANTED IN 2002 ($/SH) DATE 5% ($) 10%($)
---- ----------- ---------- -------- ---------- -------------- --------------
Jeffrey W. Greenberg .... 450,000 2.1 56.00 3/20/2012 15,848,145 40,162,310
Lawrence J. Lasser ...... 100,000 0.5 56.00 3/20/2012 3,521,810 8,924,958
50,000(3) 8.7 74.57 3/20/2012 2,344,834 5,942,269
John T. Sinnott ......... 120,000 0.6 56.00 3/20/2012 4,226,172 10,709,949
Peter Coster ............ 120,000 0.6 56.00 3/20/2012 4,226,172 10,709,949
Mathis Cabiallavetta .... 220,000 1.0 56.00 3/20/2012 7,747,982 19,634,907
Charles A. Davis ........ 200,000 1.0 56.00 3/20/2012 7,043,620 17,849,916
Ray J. Groves ........... 200,000 1.0 56.00 3/20/2012 7,043,620 17,849,916
MMC Stockholders(4) ..... 18,902,052,792 47,901,512,964
----------
(1) All MMC stock options become exercisable 25% a year beginning one year from
the date of grant. The option exercise price may be paid in cash or in
shares of common stock. In the event of a change in control of MMC (as
described in footnote 3 to the Summary Compensation Table above), all stock
options will become fully exercisable and vested, and any restrictions
contained in the terms and conditions of the option grants shall lapse. If
any payments made in connection with a change in control are subject to the
excise tax imposed under the federal tax laws, MMC will increase the option
holder's payment as necessary to restore such option holder to the same
after-tax position had the excise tax not been imposed.
(2) The dollar amounts are the result of calculations at the 5% and 10% growth
rates set by the SEC; the rates are not intended to be a forecast of future
stock price appreciation. A zero percent stock price growth rate will
result in a zero gain for all option holders.
(3) Mr. Lasser was granted an option to acquire Putnam Class B Shares which
become exercisable 25% a year beginning on March 21, 2003. The fair market
value of each Putnam Class B Share on the date of grant was $74.57.
(4) The dollar amounts are included for comparative purposes to show the
aggregate gain that would be achieved by all holders of the outstanding
stock of MMC at the assumed stock price appreciation rates at the end of
the 10-year term of the MMC options granted on March 21, 2002 at an
exercise price of $56.00.
17
AGGREGATED OPTION EXERCISES IN 2002 & YEAR-END OPTION VALUES
The following table sets forth certain information concerning stock options
exercised during 2002 and the number and value of specified unexercised options
at December 31, 2002.
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXCERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE DECEMBER 31, 2002 DECEMBER 31, 2002 (1)(2)
ACQUIRED ON REALIZED -------------------------------- --------------------------------
NAME EXERCISE(#) ($) (1) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
------ ------------ --------- -------------- ---------------- -------------- ----------------
Jeffrey W. Greenberg .... -- -- 1,185,000 1,025,000 21,725,678 1,217,110
Lawrence J. Lasser ...... 30,000 767,238 265,000 175,000 5,203,150 8,250
-- -- 416,250(3) 113,750(3) 570,000 --
John T. Sinnott ......... 90,000 2,980,463 455,000 285,000 7,886,191 221,010
Peter Coster ............ -- -- 590,000 310,000 11,778,191 222,660
Mathis Cabiallavetta .... -- -- 225,000 495,000 506,407 183,469
Charles A. Davis ........ -- -- 345,000 475,000 2,691,528 227,609
Ray J. Groves ........... -- -- 50,000 350,000 -- --
----------
(1) Values are based on the fair market value on December 31, 2002, minus the
grant price.
(2) The value of unexercised in-the-money stock options at December 31, 2002 is
presented pursuant to SEC rules and, with respect to MMC stock, is based on
the closing price on the Consolidated Transaction Reporting System on
December 31, 2002 of $46.21 and, with respect to the Putnam Class B Shares,
is based on a specified valuation methodology for determining fair market
value which at December 31, 2002 was $45.31 per share. The actual amount,
if any, realized upon exercise of stock options will depend upon the market
price of the stock relative to the exercise price per share at the time the
stock option is exercised. There is no assurance that the values of
unexercised in-the-money stock options reflected in this table will be
realized.
(3) Represents options to acquire Putnam Class B Shares.
18
UNITED STATES RETIREMENT PROGRAM
MMC maintains a United States retirement program consisting of the Marsh &
McLennan Companies Retirement Plan, a non-qualified Benefit Equalization Plan
and a non-qualified Supplemental Retirement Plan.
The following table shows the estimated before-tax annual straight-life
annuity benefit payable under these retirement programs to employees with the
specified Maximum Average Salary (average salary over the 60 consecutive months
of employment that produces the highest average) and specified years of service
upon retirement at age 65, after giving effect to adjustments for Social
Security benefits:
YEARS OF SERVICE
---------------------------------------------------------------------
MAXIMUM
AVERAGE SALARY 5 10 20 30 40 45
-------------- -------- -------- -------- -------- -------- ----------
$ 800,000 ............ $ 75,870 $151,739 $303,478 $443,348 $523,348 $563,348
$ 900,000 ............ $ 85,870 $171,739 $343,478 $501,348 $591,348 $636,348
$ 1,000,000 .......... $ 95,870 $191,739 $383,478 $559,348 $659,348 $709,348
$ 1,100,000 .......... $105,870 $211,739 $423,478 $617,348 $727,348 $782,348
$ 1,200,000 .......... $115,870 $231,739 $463,478 $675,348 $795,348 $855,348
$ 1,300,000 .......... $125,870 $251,739 $503,478 $733,348 $863,348 $928,348
$ 1,400,000 .......... $135,870 $271,739 $543,478 $791,348 $931,348 $1,001,348
$ 1,500,000 .......... $145,870 $291,739 $583,478 $849,348 $999,348 $1,074,348
The compensation of participants used to calculate the retirement benefit
consists of regular salary as disclosed in the "Salary" column of the Summary
Compensation Table and excludes bonuses and other forms of compensation not
regularly received. For the six individuals named above, other than Mr. Lasser
who participates in the Putnam Profit Sharing Retirement Plan and related plans
and not in MMC's U.S. retirement program, the 2002 compensation used to
calculate the Maximum Average Salary and the number of years of credited service
are as follows: Mr. Greenberg, $1,200,000, 7 years; Mr. Sinnott, $950,000, 40
years; Mr. Coster, $950,000, 41 years; Mr. Cabiallavetta, $850,000, 4 years; Mr.
Davis, $850,000, 5 years; and Mr. Groves, $850,000, 1 year. Mr. Lasser is also
entitled to receive a special retirement benefit in accordance with the terms of
the Lasser Agreement. See "Employment Agreement" below.
EMPLOYMENT AGREEMENT
Putnam Investments ("Putnam"), a subsidiary of MMC, has an employment
agreement with Lawrence J. Lasser, its President and Chief Executive Officer
(the "Lasser Agreement") dated December 31, 1997, and amended in 2001. The term
of the Lasser Agreement expires on December 31, 2005. MMC has certain
obligations and has guaranteed Putnam's obligations under the Lasser Agreement.
MMC has also agreed to use its best efforts to include Mr. Lasser on the
management slate of nominees for directors when his current term expires at this
year's Annual Meeting of Stockholders.
Under the Lasser Agreement:
o Mr. Lasser receives an annual salary of $1,000,000 and is eligible for
annual bonuses under MMC's Senior Management Incentive Compensation
Plan.
o Upon his retirement (or at the time he is no longer subject to certain
limitations imposed by the Internal Revenue Code with respect to the
tax deductibility of his compensation ("162(m) Limitations")), Mr.
Lasser will receive a special retirement benefit in consideration for
a non-competition covenant and post-employment
19
consulting arrangement. The then estimated present value equivalent of
this benefit, $15,000,000, is deemed invested from December 31, 1997
in various Putnam funds.
Mr. Lasser was also granted a deferred special payment ("Putnam Fund
Payment") equal to the value, as of February 15, 2001, of 300,000 MMC shares
(150,000 shares before the June 28, 2002 two-for-one stock split). Such amount
is deemed invested in Putnam funds in accordance with Mr. Lasser's direction and
vests on December 31, 2005. The Putnam Fund Payment shall be paid to Mr. Lasser
on the later of December 31, 2005 or the date upon which he is no longer subject
to 162(m) Limitations, or, before such date, in the event of termination of his
employment due to death, disability, Good Cause, or by Putnam or MMC without
cause. Mr. Lasser will not receive the Putnam Fund Payment if he is terminated
for cause or terminates his own employment (other than for "Good Cause"), prior
to December 31, 2005. The Putnam Fund Payment will be forfeited if Mr. Lasser
violates the non-competition covenant.
In March of 2002, Mr. Lasser received options to acquire (i) 100,000 shares
of MMC stock and (ii) 50,000 Class B Common Shares of Putnam ("Class B Shares").
Mr. Lasser also is entitled to receive an award of options to acquire 100,000
shares of MMC stock in March of each of 2003 and 2004. These options become
exercisable 25% a year beginning one year from grant or upon the happening of
certain corporate events.
If Mr. Lasser's employment is terminated by Putnam or MMC without cause or
if he terminates his employment for "Good Cause", Mr. Lasser will receive a
payment equal to his base salary and annual bonus for the balance of the term of
the Lasser Agreement. The Lasser Agreement provides for accelerated vesting or
forfeiture of Putnam restricted stock units, Putnam options, MMC restricted
stock units and MMC options upon certain terminations of Mr. Lasser's
employment. Equity based awards granted pursuant to the original employment
agreement, which would have expired on December 31, 2001, are not forfeited upon
employment terminating after that date.
If any payments under the Lasser Agreement attributable to (i) the Putnam
options to acquire 175,000 Class B shares granted on December 31, 1997, (ii) the
150,000 Putnam restricted stock units vesting on December 31, 2001, (iii) the
MMC options, (iv) MMC restricted stock units, or (v) the Putnam Fund Payment are
subject to the excise tax imposed under the federal tax laws, MMC will increase
the payment to Mr. Lasser as necessary to restore him to the same after-tax
position had the excise tax not been imposed.
"Good Cause" is defined generally to include:
o an uncured breach by Putnam or MMC of a material term of the Lasser
Agreement;
o a relocation of Putnam's executive offices or a reassignment of Mr.
Lasser to a location outside of the Boston area;
o the failure to pay Mr. Lasser a minimum annual bonus equal to the sum
of (i) two times the bonus amount corresponding to a pre-assigned
partnership interest of 5% under Putnam's Partners Incentive
Compensation Plan with a specified base partnership percentage plus
(ii) an amount corresponding to one unit under Putnam's Operating
Heads Incentive Compensation Plan;
o failure to grant the additional equity-based awards described above;
o a change in control of MMC (as described in footnote 3 to the "Summary
Compensation Table" below); or
o a change in control of Putnam (defined to mean that MMC no longer owns
more than 50% of Putnam).
20
COMPENSATION COMMITTEE REPORT
COMPENSATION PHILOSOPHY, POLICIES AND PLANS FOR EXECUTIVE OFFICERS
MMC is a professional services firm with businesses having distinct
economic characteristics, marketplaces and operating conditions. The leadership
position attained over time by MMC's operating subsidiaries in their respective
businesses in terms of services provided, market share, revenue, profitability
and rate of growth has been earned largely through the selection, training and
development of top caliber executive, managerial and professional talent.
Ongoing investment in the firm's executive talent has produced favorable
long-term returns to MMC stockholders. Therefore, it is critical to the ongoing
success of MMC that its executives continue to be among the most highly
qualified and capable professionals available in their respective business
segments to lead the organization's businesses and to create stockholder value.
The Compensation Committee of the Board of Directors, all of whose members
are independent non-executive directors, is charged by MMC's Compensation
Committee charter with reviewing and approving MMC's compensation philosophies
and overseeing the development and implementation of compensation programs
intended to attract, retain and motivate highly capable and productive
employees. To that end, MMC's executive compensation program is designed to
reinforce business strategies, reflect marketplace practices and dynamics, and
provide cost and tax effective incentives and rewards. The committee reviews
program elements regularly to consider and implement any changes necessary to
achieve these ongoing objectives. MMC's philosophy regarding incentives and
rewards is implemented through compensation policies and plans intended to
enhance financial performance in a highly competitive marketplace, which
includes competition from privately-held firms offering attractive equity
ownership opportunities. In terms of compensation data, the committee
periodically reviews the levels of executive compensation from a number of
survey sources and, as appropriate, through projects undertaken with the
assistance of outside professional consultants, with a focus on pay data
available relating to professional talent among MMC's businesses. In addition,
the committee periodically evaluates chief executive officer compensation by
comparing it to data developed from a selected group of major corporations (16
in 2002) in diversified financial, banking and insurance sectors. This grouping
is broader than the peer grouping in the Stock Performance Graph set forth below
in order to obtain a meaningful representation of competitive compensation
practices and levels for senior executive positions in comparable companies and
industry segments.
The Chief Executive Officer of MMC heads a group of senior management
officers, most of whom are executives of MMC's operating subsidiaries. These
senior officers participate in various compensation plans and are paid in
accordance with award guidelines and performance criteria that reflect overall
MMC and individual operating unit performance. The plans, which include
short-term and long-term elements, are intended to be retrospective, reflecting
prior individual and organizational performance, as well as prospective,
providing motivation and rewards for achieving future success. Such compensation
is designed to reflect the combined annual and long-term performance of MMC, the
operating subsidiary and the employee. Moreover, individual contributions by
these executives are assessed in the context of a top management team that views
itself as a professional partnership.
Members of the senior management group of Putnam Investments participate in
a different compensation program, which is based on competitive practices in the
investment management industry. In terms of annual incentives, these employees
are eligible for bonuses that are determined based on the absolute and
incremental profit of Putnam. With regard to long-term incentives, these
employees are eligible to receive periodic awards of Putnam restricted stock and
stock options with respect to Class B shares of Putnam; they may also be
considered for grants of MMC restricted stock and/or options from time to time.
Since employees of Putnam participate in a separate compensation program,
statistics provided in the following sections of this report relating to the
compensation of MMC's senior management group exclude Putnam employees.
21
SHORT-TERM COMPENSATION (SALARY AND ANNUAL INCENTIVE AWARDS)
With regard to short-term compensation, salaries are reviewed annually, and
increases are approved by the Committee on a discretionary basis in
consideration of current individual and organizational performance, role,
affordability and marketplace factors. Organizational performance refers to the
business unit's success in achieving business objectives and addressing
conditions affecting long-term growth and profits. For participants in the
senior management compensation program, salaries are compared to the top
quartile of the relevant marketplace, with aggregate annual cash compensation
adjusted to reflect MMC's performance. Salaries accounted for 33% of total
compensation (excluding stock options) in 2002 for MMC's senior management
group.
The size of the incentive award pool for senior management cash bonuses is
based on earnings and reflects MMC's net operating income growth. However, the
Committee may approve a payout of less than the full bonus pool. In this regard,
a specific target level is not established for the award pool, nor, absent any
contractual obligations, are minimum award levels guaranteed for bonus
recipients. With respect to individual award determinations, such assessments by
the Committee are largely judgmental, not formulaic, weighing the Chief
Executive Officer's recommendation and evaluation as to the executive's
managerial and professional role within the organization, relative contribution
(compared with the internal peer group) to the firm's operations and earnings
growth, and marketplace compensation levels. For MMC's senior management group,
individual bonuses constituted 37% of total compensation (excluding stock
options) for 2002.
LONG-TERM COMPENSATION (RESTRICTED STOCK, RESTRICTED STOCK UNIT AND
STOCK OPTION AWARDS)
It is the Committee's strongly held belief that the continuing success of
MMC is dependent on the effectiveness of programs intended to retain and
motivate its executives. Accordingly, long-term compensation is designed to
recognize the individual's potential future contributions to the organization
and to link the executive's financial interests with those of stockholders by
fostering stock ownership. Such equity ownership opportunities for MMC
executives are made available through plans that provide for restricted stock,
restricted stock unit and stock option grants. Moreover, in order to help
promote retention of key talent through stock ownership that is at risk,
ownership rights to restricted stock, restricted stock units and stock options
are acquired over time. In addition, under voluntary deferral programs, a
supplemental equity award with vesting requirements may be granted as an
incentive for long-term stock ownership.
Within this framework, absent a contractual obligation, the size of each
executive's equity grants reflects the recommendations of the chief executive
officer with grants authorized at the sole discretion of the Committee. Such
determinations include consideration of MMC's future profit performance
expectations and the individual's organizational role, current performance and
potential to contribute to the long-term success of MMC, as well as review and
consideration of the competitive practices on which award guidelines are based.
These considerations, and not prior stock-based awards or MMC stock ownership
targets, determine the mix and size of stock grants to individuals.
Most members of MMC's senior management group are eligible to receive
annual discretionary restricted stock grants on the basis described above. In
2002, the awards for this senior management group accounted for 19% (including
supplemental equity awards as described above) of total compensation (excluding
stock options).
A select number of participants from the senior management group are also
eligible for an annual discretionary grant of restricted stock units, which are
deferred stock-based awards. The awards reflect MMC's earnings and growth, with
individual grants based on the subjective factors outlined above including each
executive's organizational role and performance. Historically, the grant value
of individual awards has ranged from approximately 50% to 150% of the
executive's cash bonus. Units earned are distributable in shares and generally
vest after completion of three years of service from the date of grant. The
restricted stock units granted in 2002 to MMC's senior management group made up
11% of total compensation (excluding stock options) for the year.
Stock options are another equity element of senior management compensation.
Members of the
22
senior management group are eligible for option grants on an annual basis. The
size of an individual grant reflects the factors discussed earlier including
organizational role, performance and marketplace practices. Present holdings may
be considered as well but no reference is made to unexercised options or
appreciation thereon.
TAX CONSIDERATIONS
As noted above, MMC's executive compensation program is designed to be cost
and tax effective. The Committee's policy is to take actions deemed to be in the
best interests of MMC and its stockholders, recognizing, however, that
compensation payments may not in all instances qualify for tax deductibility
because of the restrictions set forth in Section 162(m) of the Internal Revenue
Code.
BASIS FOR CEO COMPENSATION
Both the quantitative and qualitative criteria described earlier are
applied in assessing the performance and determining the compensation of the
Chairman and Chief Executive Officer of MMC, Jeffrey W. Greenberg. Current and
long-term financial performance of MMC, information which is available to all
MMC stockholders, are major factors in arriving at the compensation
determinations made by the Committee relative to Mr. Greenberg. Consideration is
also given to his leadership and influence on the long-term strength and
performance of MMC.
The annual base salary for Mr. Greenberg during 2002 was $1,200,000,
unchanged since January 1, 2000. With regard to cash bonus, Mr. Greenberg
participates in the same MMC annual incentive plan as MMC's senior management
group. His 2002 cash bonus award under the plan was $3,000,000.
In connection with long-term compensation, Mr. Greenberg was granted 15,000
shares of restricted stock in 2002 under terms previously described. In
addition, Mr. Greenberg was granted 24,008 restricted stock units in connection
with his 2001 cash bonus and received 1,500 restricted stock units for deferring
receipt of vesting shares of restricted stock. The combined value of his
restricted stock and restricted stock unit grants was $2,171,187. In addition,
Mr. Greenberg was granted 450,000 stock options during 2002.
Mr. Greenberg also participates in the MMC Capital Long Term Incentive
Plan, which is structured to reflect compensation practices in the private
equity investment industry. Pursuant to the terms of the plan, he received cash
payments totaling $2,107,832 in 2002. In addition, in 1999 Mr. Greenberg
received a carried interest in Trident II as a result of owning partnership
interests in the general partner of Trident II.
Based on the previously referenced review of chief executive officer
compensation for 2001 (latest data available), Mr. Greenberg's 2002 cash
compensation was positioned at approximately the 70th percentile of the 2001
market survey group, and his long-term compensation (including any long-term
incentive plan payouts but excluding stock options) was at about the 65th
percentile of the 2001 survey market. The 450,000 stock options granted to Mr.
Greenberg during 2002 approximated the 55th percentile of the 2001 survey
market. Total compensation for Mr. Greenberg in 2002, which includes all
elements of pay from the Summary Compensation Table except stock option grants,
was at about the 65th percentile of the 2001 survey market.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE MMC BOARD OF DIRECTORS
Lewis W. Bernard Robert F. Erburu The Rt. Hon. Lord Lang of
Monkton, DL
23
STOCK PERFORMANCE GRAPH
The following graph compares MMC's cumulative total stockholder return
(rounded to the nearest whole dollar) on its stock, the Standard & Poor's 500
Stock Index and a company-constructed composite industry index, consisting of
Aon Corporation, Arthur J. Gallagher & Co., Franklin Resources, Inc. and T. Rowe
Price Group, Inc., over the five-year period from December 31, 1997 through
December 31, 2002.
[DATA BELOW REPRESENTS A LINE CHART IN THE PRINTED DOCUMENT]
Composite
Industry
MMC S&P 500 Index
----- ------- ---------
1997 100 100 100
1998 121 129 89
1999 202 156 102
2000 252 141 129
2001 236 125 133
2002 208 97 103
Assumes $100 invested at the closing price on December 31, 1997 with
dividends reinvested on the date of payment without commissions. This table does
not forecast future performance of MMC common stock.
24
TRANSACTIONS WITH MANAGEMENT AND OTHERS; OTHER INFORMATION
From time to time, in the ordinary course of business and on commercial
terms, MMC and its subsidiaries may provide services to, or in connection with
transactions involving, investment funds and their portfolio companies managed
or advised by MMC Capital, in which various executive officers and directors of
MMC have direct or indirect interests. Such services include:
o acting as an insurance or reinsurance broker;
o consulting;
o transaction advisory services; or
o investment management.
A portion of the fees received by MMC Capital or its subsidiaries from
portfolio companies for transaction, management or other advisory services is
dedicated to the LTIP pool described in footnote 4 to "Executive
Compensation-Summary Compensation Table".
The aggregate amount received for all such services rendered in 2002 by MMC
and its subsidiaries was approximately $76 million. This amount predominantly
consists of insurance brokerage and related payments made by portfolio companies
to MMC subsidiaries relating to insurance and reinsurance placements with such
insurers in the normal course of business.
In June 2002, Trident II purchased 43.3% of The ARC Group, LLC ("ARC") from
Marsh & McLennan Risk Capital Holdings, Ltd. ("MMRCH"), a wholly-owned
subsidiary of MMC. Trident II paid $23.6 million for this interest, resulting in
a gain of approximately $9.0 million for MMC. The purchase price is subject to
reduction by up to $1.2 million under certain limited circumstances, depending
on the total proceeds ultimately realized by Trident II. The transaction was
approved by the Executive Committee of the Board of Directors of MMC, with Mr.
Greenberg recusing himself. In passing on the adequacy of the purchase price,
the Committee considered a report by MMC's Planning & Analysis Group and a March
2002 purchase by Trident II of a 27% interest in ARC at the same valuation from
Arch Capital Group Ltd., a publicly traded company in which each of Trident II
and MMC has a minority interest. All members of the Executive Committee who are
investors in Trident II and Mr. Davis have excused themselves from participating
in Trident II's investment in ARC.
Under the MMC Capital, Inc. LTIP, Messrs. Greenberg and Davis and certain
other employees of MMC Capital participate in the profit generated from certain
investments made by MMRCH, such as the ARC investment. Messrs. Greenberg and
Davis each would have received a payment of approximately $210,000 under the
terms of the LTIP in connection with MMRCH's sale of its interest in ARC.
However, in view of the potential conflict of interest, Messrs. Greenberg and
Davis have waived receipt of these LTIP payments unless and until Trident II
recovers its purchase price on the ARC investment, in which event Messrs.
Greenberg and Davis would be entitled to receive the LTIP payments, with
interest accrued on amounts paid at a rate of 4.74% per annum through the date
of payment.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires MMC's
directors and executive officers, and persons who own more than ten percent of
the common stock of MMC, to file with the SEC and the New York Stock Exchange
initial reports of beneficial ownership and reports of changes in beneficial
ownership of MMC stock. Such persons are also required by SEC regulation to
furnish MMC with copies of all Section 16(a) forms they file. To MMC's
knowledge, based solely on a review of the copies of such reports furnished to
MMC and written representations that no other reports were required, during 2002
all Section 16(a) filing requirements applicable to such individuals were
complied with except for one report covering one transaction filed late by Mr.
Olsen.
25
ITEM 2
PROPOSED AMENDMENT TO RESTATED
CERTIFICATE OF INCORPORATION
The Board of Directors has approved an amendment to MMC's Restated
Certificate of Incorporation to increase the aggregate number of shares of MMC
common stock which MMC is authorized to issue, from eight hundred million
(800,000,000) to one billion six hundred million (1,600,000,000). MMC's
authorized preferred stock of six million (6,000,000) shares will remain
unchanged. The Board determined that this amendment was advisable following the
2-for-1 stock split of MMC's common stock on June 28, 2002. The complete text of
the proposed amendment, which would amend the first paragraph of article FOURTH
of the Restated Certificate of Incorporation, is attached to this Proxy
Statement as Exhibit A.
As of December 31, 2002, MMC had 535,589,137 shares of common stock issued
and outstanding and approximately 93,294,427 shares committed to be issued under
MMC's various employee benefit and compensation plans. The remaining number of
authorized shares of common stock available for issuance is approximately
171,116,436. The additional 800 million shares proposed to be authorized would
be issuable from time to time for various corporate purposes, including stock
splits, stock dividends, employee benefit and compensation plans, acquisitions
and public or private sale for cash as a means of raising capital. MMC does not
at this time have any understanding, arrangement or agreement pursuant to which
any of the additional shares to be authorized would be issued.
If approved by the stockholders, the proposed increase in the number of
authorized shares of common stock could have the effect of making it more
difficult for another party to gain control of MMC on an unfriendly basis, since
MMC could issue such additional shares to a third party. MMC knows of no party
with intentions of gaining control of MMC and MMC has no present plans for
selling shares in connection with such a situation.
MMC believes that approval by MMC stockholders of the proposed amendment
will provide the Board of Directors with flexibility and will enhance its
ability to respond to various corporate opportunities which may arise in the
future without the delay of seeking shareholder approval. The Board will
continue to seek stockholder approval for transactions which require such
approval under our by-laws, Delaware law and/or the rules of any stock exchanges
on which our shares are listed at the time of the transaction.
The amendment to the Restated Certificate of Incorporation does not alter
the rights and privileges of MMC's outstanding shares of common stock, which
include a stockholder rights plan, or the manner in which the Board of Directors
may authorize the issuance of additional shares of common or preferred stock.
Holders of MMC common stock have no preemptive rights and current stockholders
would not have any preferential right to purchase any of the additional common
shares.
Under Delaware law, the favorable vote of the holders of a majority of the
outstanding shares of MMC common stock will be required to adopt this proposed
amendment. Unless otherwise directed in the proxy, the persons named in the
proxy will vote FOR the proposal to amend MMC's Restated Certificate of
Incorporation increasing the number of authorized shares of common stock.
26
ITEM 3
RATIFICATION OF SELECTION OF AUDITORS
The Audit Committee has recommended, and the Board of Directors has
approved, the selection of Deloitte & Touche LLP as independent auditors for the
2003 fiscal year, subject to stockholder ratification. Deloitte & Touche will
audit our consolidated financial statements for fiscal 2003 and perform other
services. Deloitte & Touche acted as MMC's independent auditors for the year
ended December 31, 2002. A Deloitte & Touche representative will be present at
the meeting, and will have an opportunity to make a statement and to answer your
questions.
The affirmative vote of a majority of the shares of MMC stock present or
represented and entitled to vote at the meeting is required to ratify the
appointment of Deloitte & Touche LLP. Unless otherwise directed in the proxy,
the persons named in the proxy will vote FOR the ratification of Deloitte &
Touche LLP. The Board recommends you vote FOR this proposal.
FEES OF INDEPENDENT AUDITORS
The Audit Committee has adopted preapproval policies and procedures with
respect to the engagement by MMC or its subsidiaries of Deloitte & Touche LLP to
render audit and non-audit services. For the fiscal years ended December 31,
2001 and 2002, fees for services provided by Deloitte & Touche LLP, the member
firms of Deloitte Touche Tohmatsu and their respective affiliates were as
follows:
FEES 2002 2001
---------------------------------------------- ---------- ----------
AUDIT FEES for the audit of MMC's annual
financial statements and reviews of the
financial statements included in MMC's
quarterly reports on Form 10-Q, and including
services in connection with statutory and
regulatory filings or engagements .................... $8,796,000 $8,396,000
AUDIT-RELATED FEES, including fees for audits
of employee benefit plans, computer and
control related audit services, agreed-upon
procedures, merger and acquisition assistance
and accounting research services ..................... $2,727,000 $2,138,000
TAX FEES for tax consulting and compliance
services not related to the audit .................... $2,055,000 $1,102,000
FINANCIAL INFORMATION SYSTEMS DESIGN AND
IMPLEMENTATION FEES related to Marsh Inc.
financial system implementation services
contracted for in 2001 which were concluded
in 2002 .............................................. $2,600,000 $2,875,000
ALL OTHER FEES including administrative
services related to regulatory compliance and
other non-audit services. In 2001 also
includes non-financial information system
services and in 2002 also includes market
research services .................................... $3,122,000 $4,949,000
27
AUDIT COMMITTEE REPORT
The primary function of the Audit Committee is to assist the Board of
Directors in its oversight of MMC's financial reporting process. The Committee
operates pursuant to a charter approved by the MMC Board. Management is
responsible for MMC's financial statements and overall reporting process,
including the system of internal controls. The independent auditors are
responsible for conducting annual audits and quarterly reviews of MMC's
financial statements and expressing an opinion as to the conformity of the
annual financial statements with generally accepted accounting principles.
In the performance of its oversight function, the Committee has reviewed
and discussed the audited financial statements as of and for the year ended
December 31, 2002 with management and the independent auditors. The Committee
has also discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, COMMUNICATION WITH AUDIT
COMMITTEES. Finally, the Committee has received the written disclosures and the
letter from the independent auditors required by Independence Standards Board
Standard No. 1, INDEPENDENCE DISCUSSIONS WITH AUDIT COMMITTEES, has considered
whether the provision of information technology consulting services relating to
financial information systems design and implementation and other non-audit
services by the independent auditors to the Company is compatible with
maintaining the auditor's independence and has discussed with the auditors the
auditors' independence.
It is not the duty or responsibility of the Committee to conduct auditing
or accounting reviews or procedures. In performing their oversight
responsibility, members of the Committee rely without independent verification
on the information provided to them and on the representations made by
management and the independent accountants. Accordingly, the Audit Committee's
oversight does not provide an independent basis to determine that management has
maintained appropriate accounting and financial reporting principles or
appropriate internal controls and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. Furthermore, the Audit
Committee's considerations and discussions do not assure that the audit of MMC's
financial statements has been carried out in accordance with generally accepted
auditing standards or that the financial statements are presented in accordance
with generally accepted accounting principles.
Based upon the review and discussions described in this report, and subject
to the limitations on the role and responsibilities of the Committee referred to
above and in the charter, the Committee recommended to the Board that the
audited financial statements referred to above be included in MMC's Annual
Report on Form 10-K for the year ended December 31, 2002 to be filed with the
Securities and Exchange Commission.
SUBMITTED BY THE AUDIT COMMITTEE
OF THE MMC BOARD OF DIRECTORS
Oscar Fanjul David A. Olsen
Stephen R. Hardis Morton O. Schapiro
Gwendolyn S. King Adele Simmons
28
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS
Stockholders who wish to present a proposal and have it considered for
inclusion in MMC's proxy materials for the 2004 Annual Meeting of Stockholders
of MMC must submit such proposal in writing to MMC in care of the Secretary of
MMC on or before November 29, 2003.
Stockholders who wish to present a proposal at the 2004 Annual Meeting that
has not been included in MMC's proxy materials must submit such proposal in
writing to MMC in care of the Secretary of MMC. Any such proposal received by
the Secretary of MMC on or after February 16, 2004 shall be considered untimely
under the provisions of MMC's by-laws governing the presentation of proposals by
stockholders. In addition, the by-laws of MMC contain further requirements
relating to the timing and content of the notice which stockholders must provide
to the Secretary for any nomination or matter to be properly presented at a
stockholders meeting.
Such proposals should be addressed to:
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, New York 10036-2774
Attn: Mr. Gregory Van Gundy,
Corporate Secretary
By order of the Board of Directors,
/s/ Gregory Van Gundy
Gregory Van Gundy
Secretary
29
EXHIBIT A
PROPOSED AMENDMENT TO ARTICLE FOURTH
OF THE RESTATED CERTIFICATE OF INCORPORATION
OF MARSH & MCLENNAN COMPANIES, INC.
INCREASE IN AUTHORIZED CAPITAL STOCK
Article FOURTH of the Restated Certificate of Incorporation is proposed to
be amended by revising the first paragraph of Article FOURTH to read in its
entirety as follows:
FOURTH: The total number of shares of stock which the Corporation has the
authority to issue is 1,606,000,000 of which 6,000,000 are shares of Preferred
Stock with a par value of one dollar per share (hereinafter sometimes referred
to as "Preferred Stock"), and 1,600,000,000 are shares of Common Stock with a
par value of one dollar per share (hereinafter sometimes referred to as "Common
Stock").
30
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036-2774
www.mmc.com
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================================================================================
MARSH & MCLENNAN COMPANIES, INC.
The Board of Directors Recommends a vote "FOR" the listed nominees.
1. Election of Directors
Nominees: 01) Peter Coster
02) Charles A. Davis
03) Gwendolyn S. King
04) Lawrence J. Lasser
05) David A. Olsen
For Withhold For All To withhold authority to vote, mark "For
All All Except All Except" and write the nominee's
number on the line below.
[_] [_] [_] ________________________________________
The Board of Directors Recommends a vote "FOR" the For Against Abstain
following proposals.
2. Adoption of amendment to Restated Certificate
of Incorporation increasing number of
authorized shares of common stock. [_] [_] [_]
3. Ratification of Deloitte & Touche LLP as
independent auditors for 2003. [_] [_] [_]
Your telephone or Internet vote authorizes the
named proxies to vote your shares in the same
manner as if you marked, signed and returned your
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telephone or the Internet there is no need for you
to mail back your Proxy Form.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN
THE MANNER DIRECTED HEREIN. IF NO DIRECTIONS ARE
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Signature [PLEASE SIGN WITHIN BOX] Date
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Signature (Joint Owners) Date
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PROXY PROXY
MARSH & McLENNAN COMPANIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 2003 ANNUAL MEETING
FOR ALL STOCKHOLDERS
The undersigned hereby appoints Jeffrey W. Greenberg and William L.
Rosoff proxies (each with power to act alone and with the power of substitution)
of the undersigned to vote all shares which the undersigned would be entitled to
vote at the Annual Meeting of Stockholders of Marsh & McLennan Companies, Inc.
to be held on Thursday, May 15, 2003 at 10:00 a.m. (New York City time) in the
auditorium, 2nd Floor, 1221 Avenue of the Americas, New York, New York and at
any adjournment thereof.
FOR STOCKHOLDERS WHO ARE ALSO PARTICIPANTS IN MARSH & McLENNAN COMPANIES STOCK
INVESTMENT PLAN AND THE PUTNAM INVESTMENTS PROFIT SHARING RETIREMENT PLAN:
This card also constitutes the confidential voting instructions of the
participants in the Marsh & McLennan Companies Stock Investment Plan and The
Putnam Investments Profit Sharing Retirement Plan. By signing and returning this
card, the undersigned directs the Trustees under each Plan to vote in person or
by proxy all shares of stock of Marsh & McLennan Companies, Inc. (the "Company")
allocated to the undersigned under said Plans upon all matters at the Annual
Meeting of Stockholders of the Company on May 15, 2003 and at any adjournment
thereof. Provided this card is received by May 9, 2003, voting rights will be
exercised by the Trustees as directed or, if not specifically directed, FOR the
items stated herein. Under the Plans, the Trustees shall vote all other shares
in the same proportion as those shares for which it has received a signed
instruction card.
INSPECTORS OF ELECTION
C/O PROXY SERVICES
P.O. BOX 9162
FARMINGDALE, NY 11735
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(If you noted any Address Changes/Comments above,
please mark corresponding box on the reverse side.)
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