THE GILLETTE COMPANY
PRUDENTIAL TOWER BUILDING
BOSTON, MASSACHUSETTS 02199
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1989 Annual Meeting of the stockholders of The Gillette Company
will be held at the Company's Andover Manufacturing Center, 30 Burtt
Road, Andover, Massachusetts, on Thursday, April 20, 1989, at 10:00
a.m. for the following purposes:
1. To elect three directors for terms to expire at the 1992 Annual
Meeting of the stockholders.
2. To vote on the proposed amendment of the 1971 Stock Option Plan and
the Stock Equivalent Unit Plan, as described in the accompanying proxy
statement.
3. To vote on the approval of the appointment of auditors for the year
1989.
4. To vote on five stockholder proposals, numbered 4 through 8 and
described in the accompanying proxy statement, if the proposals are
presented at the meeting.
5. To transact such other business as may properly come before the
meeting and any and all adjournments thereof.
The Board of Directors has fixed the close of business on March 6,
1989, as the record date for the determination of the stockholders
entitled to notice of and to vote at the meeting.
Stockholders are invited to attend the meeting. Whether or not you
expect to attend. WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED
PROXY CARD IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. If you attend the
meeting, you may vote your shares in person, which will revoke any
previously executed proxy.
If your shares are held of record by a broker, bank or other nominee
and you wish to attend the meeting, you must obtain a letter from the
broker, bank or other nominee confirming your beneficial ownership of
the shares and bring it to the meeting. In order to vote your shares at
the meeting, you must obtain from the record holder a proxy issued in
your name.
Directions to the Andover Manufacturing Center may be obtained from the
Secretary, The Gillette Company, Prudential Tower Building, Boston,
Massachusetts 02199, telephone (617) 421-7788.
Regardless of how many shares you own, your vote is very important.
Please SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
By order of the Board of Directors
Kathryn E. DeMoss, Secretary
Boston, Massachusetts
March 13, 1989
Proxy Statement
March 13, 1989
Introduction
This proxy statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors for the 1989 Annual
Meeting of the stockholders of the Company on April 20, 1989. The
Notice of Annual Meeting, this proxy statement and the accompanying
proxy card are being mailed to stockholders on or about March 13, 1989.
You can ensure that your shares are voted at the meeting by signing and
returning the enclosed proxy in the envelope provided. Sending in a
signed proxy will not affect your right to attend the meeting and vote
in person. You may revoke your proxy at any time before it is voted by
notifying the Company's Transfer Agent. The First National Bank of
Boston, P.O. Box 1439, Boston, Massachusetts 02104-9903 in writing, or
by executing a subsequent proxy, which revokes your previously
executed proxy.
Voting of Proxies
Proxies will be voted as specified by the stockholders. Where specific
choices are not indicated, proxies will be voted for proposals 1, 2 and
3 and against proposals 4 through 8. The affirmative vote of the
holders of a majority of the Gillette common stock voted at the meeting
in person or by proxy is required for adoption of proposals 2 through
8.
1. ELECTION OF DIRECTORS
At the meeting, three directors, whose terms expire at the 1989 Annual
Meeting, are standing for reelection to serve for terms to expire at
the 1992 Annual Meeting of the stockholders and until their successors
are elected. Mr. Charles A. Meyer, whose term as a director also will
expire at the 1989 Annual Meeting, is not standing for reelection,
having reached the mandatory retirement age for directors. Information
regarding the Board's three nominees for directors is set forth on page
2. Information regarding the eight directors whose terms expire in 1990
and 1991 is set forth on pages 3 and 4.
The accompanying proxy will be voted for the election of the Board's
nominees unless contrary instructions are given. If any Board nominee
is unable to serve, which is not anticipated, the persons named as
proxies intend to vote for the remaining Board nominees and, unless the
number of such nominees is reduced by the Board of Directors, for such
other person as the Board of Directors may designate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS,
WHICH IS DESIGNATED AS PROPOSAL NO. 1 ON THE ENCLOSED PROXY CARD.
[SOURCE PAGE 2]
Nominees for Election to the Board of Directors for Three-Year Terms to
Expire at the 1992 Annual Meeting of Stockholders
Richard R. Pivirotto
Director since 1980
Mr. Pivirotto, 58 years of age, is President of Richard R. Pivirotto
Co., Inc., a management consulting firm. He served as President of
Associated Dry Goods Corporation, a retail department store chain, from
1972 to 1976 and as Chairman of its Board of Directors from 1976 to
February 1981. He is a director of Chemical Banking Corporation,
Chemical Bank, General American Investors Company, Inc., Jerrico, Inc.,
New York Life Insurance Company and Westinghouse Electric Corporation.
Member of Finance and Personnel Committees.
Juan M. Steta
Director since 1987
Mr. Steta, 62 years of age, is a partner in the law firm of Santamarina
y Steta, Mexico City, which is engaged in a general business practice.
He joined the firm in 1949 and was elected a partner in 1956. He serves
as Chairman of the Board of Materials Moldables and Quimicos y
Derivados and as a director of several other Mexican corporations,
including General Motors de Mexico, Grupo IDESA and Dixon Ticonderoga.
He is also a director of Barnes Group, Inc. in Bristol, Connecticut.
Member of Audit and Finance Committees.
Alfred M. Zeien
Director since 1980
Mr. Zeien, 59 years of age, is a Vice Chairman of the Board with
responsibility for Gillette International operations except Europe and
for Diversified Companies. From 1981 to November 1987, as Vice
Chairman, he was the Company's senior technical officer and also headed
the new business development group. He served as Senior Vice President,
Technical Operations, from 1978 to 1981, and as Chairman of the Board
of Management of Braun AG, a Gillette subsidiary, from 1976 to 1978.
With Gillette since 1968, he has also served as General Manager of
Braun's International and Appliance Divisions and as a Group Vice
President of the Diversified Companies Group. Mr. Zeien is a director
of Polaroid Corporation, Repligen Corporation and Square D Company.
[PHOTOS OMITTED]
[SOURCE PAGE 3]
Members of the Board of Directors Continuing in Office
Terms Expire at the 1990 Annual Meeting of Stockholders
Rita Ricardo Campbell
Director since 1978
Dr. Campbell, 68 years of age, has been a Senior Fellow of the Hoover
Institution, Stanford University, since 1968. Prior to joining the
Institution in 1961, she had been an instructor in economics at Harvard
University, an Assistant Professor at Tufts College and an economist
with the House Ways and Means Committee and the Wage Stabilization
Board. Dr. Campbell specializes in social security, the economics of
health-care programs and government decision-making in the
pharmaceutical sector. She is a director of Watkins-Johnson Company and
served through 1988 on the President's Economic Policy Advisory Board
and the National Council on the Humanities.
Chairman of Finance Committee and member of Audit Committee.
Raymond C. Foster
Director since 1981
Mr. Foster, 69 years of age, is a director and the former Chairman of
the Board of Stone & Webster, Incorporated, a firm engaged in
engineering, design and construction, and financial and management
consulting services. A major in the Army Ordnance Department during
World War II, Mr. Foster joined Stone & Webster Engineering Corporation
in 1946 and was elected its Chairman and Chief Executive Officer in
1965. He became a director and Vice Chairman of the parent company in
1971 and served as Chairman of the Board from 1974 until January 1988.
He is also a director of W. R. Grace & Co. and an honorary director of
Bank of Boston Corporation and The First National Bank of Boston.
Member of Audit and Finance Committees.
Derwyn F. Phillips
Director since 1987
Mr. Phillips, 58 years of age, is a Vice Chairman of the Board with
responsibility for Gillette North Atlantic operations. He joined
Gillette in 1969 and served as President of Gillette Canada from 1971
to 1975, President of the Toiletries Division from 1975 to 1977 and
President of the Personal Care Division from 1977 to 1981. He served as
Executive Vice President in charge of Gillette North America from 1981
until November 1987, when he was elected a Vice Chairman of the Board.
He is a director or a trustee of nine investment companies sponsored by
Sun Life Assurance Company of Canada (U.S.).
Joseph J. Sisco
Director since 1979
Dr. Sisco, 69 years of age, is a partner of Sisco Associates, a
management consulting firm. From 1976 to early 1981 he served as
President and Chancellor of The American University in Washington, D.C.
He is active in the field of foreign affairs as a writer, lecturer, and
radio and TV analyst. With the State Department from 1951 to 1976, he
served as Assistant Secretary of State for Near Eastern and South Asian
Affairs and as Under Secretary of State for Political Affairs, the top
career post. Dr. Sisco is a director of GEICO Corporation, The
Interpublic Group of Companies, Inc., Raytheon Company, Tenneco Inc.
and Gillette Capital Corporation, a Gillette subsidiary.
Chairman of Audit Committee and member of Executive Committee.
[PHOTOS OMITTED]
[SOURCE PAGE 4]
Members of the Board of Directors Continuing in Office
Terms Expire at the 1991 Annual Meeting of Stockholders
Lawrence E. Fouraker
Director since 1973
Mr. Fouraker, 65 years of age, is a Fellow of the John F. Kennedy
School of Government, Harvard University, and Professor Emeritus of the
Harvard Business School. He joined the Business School faculty in 1961,
served as Dean from 1970 to 1980 and as a Professor through October
1983. He is a director of Citicorp, General Electric Company, Ionics,
Incorporated, New England Mutual Life Insurance Company, Texas Eastern
Corporation and Alcan Aluminium Ltd. He is a trustee of the Boston
Museum of Fine Arts.
Chairman of Personnel Committee and member of Executive Committee.
Herbert H. Jacobi
Director since 1981
Mr. Jacobi, 54 years of age, is Chairman of the Managing Partners of
Trinkaus & Burkhardt, a West German bank. The Bank is affiliated with
Britain's Midland Group p.l.c., of which Mr. Jacobi is a member of the
senior executive management. He was a managing partner of Berliner
Handels- und Frankfurter Bank from 1977 until 1981 and an Executive
Vice President of Chase Manhattan Bank from 1975 to 1977. Mr. Jacobi
also served as Chairman of the Board of Midland Bank France S. A. from
May 1982 to June 1983. He is a director of Amtrol, Inc. and Braun AG, a
Gillette subsidiary, and an advisory director of The Home Group, Inc.
He is a Vice President of the Northrhine-Westfalia Stock Exchange in
Duesseldorf.
Member of Executive and Finance Committees.
Colman M. Mockler, Jr.
Director since 1971
Mr. Mockler, 59 years of age, is Chairman of the Board and Chief
Executive Officer. He joined Gillette in 1957, was named Treasurer in
1965, Vice President in 1967, Senior Vice President, Finance the
following year, and Executive Vice President in 1970. In 1971 he was
elected Vice Chairman of the Board with responsibility for legal and
financial functions. He was elected President in 1974, Chief Executive
Officer in 1975, and Chairman in January 1976. He is also a director of
Bank of Boston Corporation, The First National Bank of Boston, John
Hancock Mutual Life Insurance Company, Raytheon Company and Fabreeka
International Incorporated.
Ex officio member of Executive Committee.
Joseph F. Turley
Director since 1980
Mr. Turley, 63 years of age, retired as President and Chief Operating
Officer on April 30, 1988. He joined the Company in 1960 and served as
General Manager of the Gillette subsidiary in Spain, as President of
Gillette Canada and, from 1971 to 1976, as President of the Safety
Razor Division. He was Executive Vice President in charge of Gillette
North America from 1976 to February 1981, when he became President and
Chief Operating Officer. Mr. Turley is a director of Copley Properties,
Inc., EG&G, Inc. and sixteen investment companies sponsored by New
England Mutual Life Insurance Company.
Member of Executive Committee.
[PHOTOS OMITTED]
[SOURCE PAGE 5]
Committees of the Board - Board Meetings
The Board of Directors has the following standing committees, which are
composed entirely of directors who are not employees of the Company,
except that the Chief Executive Officer is an ex officio member of the
Executive Committee.
Audit Committee
The members are Dr. Sisco (Chairman), Dr. Campbell, Mr. Foster and Mr.
Steta.
The Committee recommends the appointment of the Company's independent
auditors, meets with the auditors to review their report on the
financial operations of the business, and approves the audit services
and any other services to be provided. It reviews the Company's
internal audit function and the performance and adequacy of the
Company's pension fund managers. It also reviews compliance with the
Company's statement of policy as to the conduct of its business. Three
meetings of the Committee were held in 1988.
Executive Committee
The members are Mr. Meyer (Chairman), Mr. Fouraker, Mr. Jacobi, Mr.
Mockler (ex officio), Dr. Sisco and Mr. Turley.
The Executive Committee, acting with the Finance Committee, reviews and
makes recommendations on capital investment proposals. It is also
available to review and make recommendations to the Board with respect
to the nature of the business, plans for future growth, senior
management succession and stockholder relations. The Committee has the
added functions of reviewing the composition and responsibilities of
the Board and its committees and recommending to the Board nominees for
election as directors. It will consider nominations by stockholders,
which should be submitted in writing to the Chairman of the Committee
in care of the Secretary of the Company. Six meetings of the Committee
were held in 1988.
Finance Committee
The members are Dr. Campbell (Chairman), Mr. Foster, Mr. Jacobi, Mr.
Pivirotto and Mr. Steta.
The Finance Committee reviews and makes recommendations with respect to
the financial policies of the Company, including cash flow, borrowing
and dividend policy and the financial terms of acquisitions and
dispositions. Acting with the Executive Committee, it reviews and makes
recommendations on capital investment proposals. Eight meetings of the
Committee were held in 1988.
Personnel Committee
The members are Mr. Fouraker (Chairman), Mr. Meyer and Mr. Pivirotto.
The Committee reviews and makes recommendations to the management or
Board on personnel policies and plans or practices relating to
compensation. It also administers the Company's executive incentive
compensation plans and approves the salaries of all officers and
certain other senior executives. Nine meetings of the Committee were
held in 1988.
The Board of Directors held eleven meetings in 1988.
STOCK OWNERSHIP BY DIRECTORS AND OFFICERS
The following table sets forth the number of shares of Gillette common
stock beneficially owned on March 3, 1989, by each director (less than
1% of total shares outstanding in each case) and by all the directors
and officers as a group (approximately 1.5% of total shares
outstanding). All of the individuals listed in the table have sole
voting and investment power over the shares reported as owned, except
Dr. Campbell, who has shared voting and investment power over the 4,000
shares reported as owned, and Dr. Sisco, who has shared voting and
investment power over 1,023 of the shares reported as owned. In
addition, certain officers have shared voting and investment power over
a total of 12,936 of the total number of shares reported as owned by
the group and have disclaimed beneficial ownership with respect to
1,405 of the total number of shares reported as owned by the group.
[SOURCE PAGE 6]
Name
Rita Ricardo Campbell
Raymond C. Foster
Lawrence E. Fouraker
Herbert H. Jacobi
Charles A. Meyer
Colman M. Mockler, Jr.
Derwyn F. Phillips
Richard R. Pivirotto
Joseph J. Sisco
Shares
Owned
(*)
Option Shares
Exercisable
Within 60 Days
4,000
400
2,000
-
400
2,400
180,274
69,230
400
2,158
25,000
58,796
-
Juan M. Steta
Joseph F. Turley
Alfred M. Zeien
All directors and officers
as a group
1,000
88,652
94,904
30,942
133,200
840,504
636,248
(*) Includes shares held through the Employees' Savings Plan, the
Employee Stock Ownership Plan and, where applicable, the Gillette
Canada Savings Plan, as follows: Mr. Mockler 38,419; Mr. Phillips
17,374; Mr. Zeien 37,604, all employee directors and officers as a
group 302,576.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth all cash compensation paid to (i) each
of the most highly compensated executive officers of the Company and
(ii) all officers as a group for services rendered in all capacities to
the Company and its subsidiaries during 1988. Information is included
for only the period during which such persons served as officers of the
Company.
(A)
(B)
Name of individual or
number in group
Capacities in which
served
Colman M. Mockler, Jr.
Chairman of the
Board and Chief
Executive Officer
Vice Chairman of
the Board
Vice Chairman of
the Board
Executive Vice
President
Executive Vice
President
Executive Vice
President
Derwyn F. Phillips
Alfred M. Zeien
Gaston R. Levy
John W. Symons
Lorne R. Waxlax
All officers as a group
(28 in number)
(TABLE CONTINUED)
(A)
Name of individual or
number in group
Colman M. Mockler, Jr.
(C)
Cash Compensation (*)
(C-1)
(C-2)
Salary plus
Other
bonus
compensation
(C-3)
Total
$946,250
$10,500
$956,750
Derwyn F. Phillips
504,375
52,450
556,825
Alfred M. Zeien
580,000
13,683
593,683
Gaston R. Levy
389,250
36,004
425,254
John W. Symons
424,202
83,446
507,648
Lorne R. Waxlax
419,000
62,712
481,712
$7,983,477
$1,431,592
$9,415,069
All officers as a group
(28 in number)
(*) The amounts in column C-1 are comprised of salaries, including
portions deferred under the Employees' Savings Plan pursuant to
Section 401(k) of the Internal Revenue Code, and bonuses. Included
in column C-2 are: (1) savings plan equivalents credited on 1988
bonus amounts deferred under the Incentive Bonus Plan, (2) payments
related to expatriate assignments and (3) Stock Equivalent Unit
Plan amounts paid or deferred with respect to 1988. Also paid or
deferred in 1988 were the following Stock Equivalent Unit Plan
amounts attributable to deferrals in prior years and not previously
disclosed in the compensation table: Mr. Phillips $64,655; Mr.
Zeien $18,210; Mr. Symons $25,403; Mr. Waxlax $78,313; all officers
as a group $840,602.
The Board of Directors has adopted a severance pay and benefit
arrangement to become effective in the event of a change in control.
The arrangement would obligate any acquirer to continue long-standing
Gillette practice regarding severance payments to terminated employees.
Severance payments to U.S. employees whose employment is terminated
under certain circumstances after a change in control would, as under
present practice, be based on seniority and position level, subject to
a minimum for certain key employees,
[SOURCE PAGE 7]
including certain officers other than the Chairman, who has voluntarily
excluded himself from the minimum payment. Severance payments to
employees in foreign countries would comply with local law and follow
past Gillette practice.
The maximum amount payable under the severance pay arrangement,
including any benefit plan payments resulting from a change in control,
is 2.99 times average annual compensation for the five-year period
preceding termination of employment. For most employees, including the
named officers, it is unlikely that payments would reach the maximum.
The estimated aggregate of severance pay, excluding benefit plan
payments, to all officers as a group on December 31, 1988, in the event
of a change in control on that date would have been $12,553,941, or
approximately 1.9 times the amount of their compensation on that date,
excluding benefit plan payments. In general, benefit plan payments
resulting from a change in control are dependent upon salary, but vary
with seniority and position level.
A change in control is defined in the Company's Retirement Plan and, in
general, means those events by which control of the Company passes to
another person or corporation. These events include a purchase of the
Company's stock pursuant to a tender offer, the acquisition of 20% or
more of the Company's stock by a person or group, or a merger or sale
of substantially all of the assets of the Company. In addition, a
change in control would occur if, during any two-year period, the
individuals who were serving on the Board of Directors of the Company
at the beginning of the period or who were nominated for election or
elected to the Board during the period with the affirmative vote of at
least two-thirds of such individuals still in office, ceased to
constitute a majority of the Board. For a description of certain
benefit plan provisions applicable in the event of a change in control
of the Company, see the plan summaries appearing under the heading
"Benefit and Incentive Plans" below.
The Board of Directors has extended benefits generally comparable to
those applicable in the event of a change in control of the Company to
employees, including officers, whose employment is terminated pursuant
to the Corporation's 1987 Restructuring Plan.
Compensation of Directors
Directors who are not employees of the Company or its subsidiaries are
paid an annual retainer of $17,500 plus a fee of $600 for attendance at
each meeting of the Board of Directors or of its committees. Committee
Chairmen receive an additional retainer of $3,000 a year. The directors
may defer payment of all or any portion of their retainers or fees
until after retirement or resignation from the Board or until a change
in control occurs. Deferred amounts accrue interest equivalents. Upon
the death of a director, any unpaid amounts become payable in a lump
sum. During 1988, Mr. Jacobi received attendance fees totaling $6,556
for his services as a director of Braun AG, a Gillette subsidiary, and
Dr. Sisco received fees totaling $3,000 for his services as a director
of Gillette Capital Corporation, also a Gillette subsidiary. No
retainers or fees are paid to directors who are employees of the
Company or its subsidiaries.
A director who has attained age 70 cannot stand for reelection to the
Board. Directors who have served as Board members for five or more
years receive an annual retirement benefit, which is equal to the
annual retainer in effect when they leave the Board and is payable for
a period equal to their years of service. No credit is given for
service as a director while an employee of the Company. Payment of the
benefit commences when service ends, or at age 65 if a director leaves
the Board at an earlier age. Upon the death of a director, the present
value of any unpaid amount becomes payable in a lump sum. In the event
of a change in control, a director would become entitled to receive
immediate payment of the present value of the full retirement benefit
upon leaving the Board. A director who at any time acts in a manner
contrary to the best interests of the Company risks forfeiture of the
future retirement benefit.
During 1988, the Company's Mexican subsidiaries retained the law firm
of Santamarina y Steta, of which Mr. Steta is a partner, and paid the
firm a total of $84,793 for its services. It is expected that Mr.
Steta's firm will continue to provide legal services to the
subsidiaries in Mexico during 1989.
Benefit and Incentive Plans
The following are summaries of the Company's benefit and incentive
plans pursuant to which compensation was paid or accrued during 1988
for the officers named in the compensation table and all officers as a
group.
[SOURCE PAGE 8]
Employees' Savings Plan
Under the Employees' Savings Plan, the Company contributes 50 cents for
each dollar up to a maximum of 10% of compensation saved by eligible
domestic employees, including officers. Employees also may contribute
up to 5% of their compensation not matched by any Company contribution,
either in lieu of or in addition to the 10% of compensation which is
matched by the Company.
As permitted under Section 401(k) of the Internal Revenue Code, up to
10% of an employee's compensation, or a maximum of $7,627 in 1989,
whichever is less, may be contributed from pre-tax compensation. The
U.S. income tax on these contributions is deferred until they are
distributed in accordance with the provisions of the Plan.
Employees may elect to have their contributions invested in bond,
guaranteed or interest income and equity funds or in Gillette stock, as
provided under the Plan. Contributions made by the Company are invested
in Gillette stock but, under certain limited circumstances, may be
transferred to the guaranteed fund. Prior to 1989, the Company's
contributions vested after two years for most employees (four years for
higher-paid employees, including officers) or, in general, the earlier
of retirement, death, disability, or a change in control. In response
to the Tax Reform Act of 1986, the Plan was amended, effective January
1, 1989, to provide that, in general, all Company contributions vest
immediately for all employees after two years of Plan participation.
Distributions under the Plan are made when the employment of a
participant ceases, unless the participant elects to defer receipt of
payment to a later date, commencing by age 70 1/2. The participant may
elect to receive payment in a lump sum or in installments. Withdrawals
may be made during employment, subject to forfeiture, participation and
tax penalties, except that withdrawals of Section 401(k) savings prior
to age 59 1/2 are restricted to hardship situations.
Participants may instruct the Trustee in confidence how to vote their
vested and unvested shares and whether or not to accept an offer for
their shares.
The aggregate of employer contributions to the Savings Plan described
above for the period from January 1, 1986, through 1988 for the
following persons and groups was: Mr. Mockler $103,563; Mr. Phillips
$61,062; Mr. Zeien $70,385; Mr. Levy $38,822; Mr. Waxlax $48,917; all
participating officers as a group $842,827; all other employees
$21,086,766.
Mr. Symons is an employee of the Company's subsidiary in the United
Kingdom and is not eligible to participate in the Savings Plan. Mr.
Phillips and one other officer of the Company, both of whom are former
employees of the Gillette subsidiary in Canada, participated in a
similar plan maintained by that subsidiary and will receive a
distribution of their account balances in the future.
Retirement Plan
The Company's Retirement Plan provides benefits upon retirement or
disability to domestic employees covered by the Plan, including
officers, who meet certain age or service requirements. In general, the
benefit upon retirement at age 65 with 25 years of service is equal to
50% of the employee's average annual compensation (salary plus bonus,
if any) during the five calendar years of highest compensation included
in the last ten calendar years of employment, minus 75% of primary
social security benefits. Covered compensation for 1988 is as shown in
column C-1 of the compensation table on page 6. An employee who does
not retire under the Plan, but whose employment is terminated after
completing at least five years of credited service, has a vested right
to the pension accrued prior to the date employment was terminated. The
eligibility requirement for a vested right pension was ten years of
credited service prior to a January 1, 1989, Plan amendment. The
amendment was adopted to comply with the Tax Reform Act of 1986. The
Plan is wholly paid for by the Company.
Provisions of the Tax Reform Act of 1986 effective January 1, 1989, may
require that certain changes be made to the Plan's method of
calculating benefits; however, as permitted, the Company may elect to
implement any such changes at a later date, retroactive to January 1,
1989.
The Plan prohibits any reduction after a change in control in the
benefits accrued for employees who meet the age and service
requirements for retirement. An early retirement or vested right
retirement benefit, whichever is applicable, is provided for employees
who, as of the date of a change in control or as of the date of the
termination of their employment within a one-year period thereafter,
are, in each case after any applicable
[SOURCE PAGE 9]
severance period, within five years of qualifying for an early
retirement benefit or one year of qualifying for a vested right
benefit. Any excess assets held in the Plan's trust following any
change in control would be used to increase the benefits payable to
covered employees.
The table below shows annual pensions upon retirement at age 65 before
social security reduction.
Average Annual Compensation
Used as Basis for
Computing Pension
$90,000
100,000
200,000
15 Years of
Service
$27,000
30,000
60,000
Annual Pension
25 Years or
20 Years of
or More
Service
of Service
$36,000
40,000
80,000
$45,000
50,000
100,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
90,000
120,000
150,000
180,000
210,000
240,000
270,000
300,000
120,000
160,000
200,000
240,000
280,000
320,000
360,000
400,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
As of December 31, 1988, the officers named in the compensation table
on page 6 had the following years of service under the Retirement Plan:
Mr. Mockler, 32 years; Mr. Phillips, 20 years; Mr. Zeien, 21 years; Mr.
Levy, 30 years; Mr. Waxlax, 31 years.
Mr. Symons has 24 years of service and participates in the The Gillette
U.K. Pension Plan, which provides benefits upon retirement or
disability to U.K. employees covered by the Plan, including officers,
who meet certain age or service requirements. In general, the benefit
upon retirement at age 60 with 30 years of service is equal to 70% of
an employee's average annual compensation (salary plus bonus, if any)
during the five consecutive years of highest compensation included in
the last ten years of employment prior to retirement, minus the average
of the U.K. social security basic pension over the five years prior to
retirement. Covered compensation for 1988 for Mr. Symons is as shown in
column C-1 of the compensation table on page 6. In general, under the
Plan, credited service of less than 30 years would result in a
proportionately reduced pension. Employees who do not retire under the
Plan, but whose employment terminates after they have completed at
least two years of credited service, are entitled under U.K. law to a
vested right to the pension accrued prior to termination date. Like its
U.S. counterpart, the U.K. Plan contains provisions designed to protect
the rights of participants in the event of a change in control.
From 1974 through January 1987, Mr. Symons made contributions under the
Plan in an amount equal to approximately 5% of his compensation. Had
Mr. Symons retired on December 31, 1988, he would have been entitled to
an annual benefit of approximately $143,300 under the Plan.
Certain limitations on the amount of benefits under tax-qualified
plans, such as the Employees' Savings Plan and the Retirement Plan were
imposed by the Employee Retirement Income Security Act of 1974, the Tax
Equity and Fiscal Responsibility Act of 1982 and the Tax Reform Act of
1986. The Company has adopted supplemental plans, as permitted by law,
for the payment of amounts to employees who may be affected by those
limitations, so that, in general, total benefits will continue to be
calculated as before on the basis approved by the stockholders.
Employee Stock Ownership Plan
The Plan was established in 1982, and contributions were made with
respect to the tax years 1983 through 1986. As a result of the Tax
Reform Act of 1986, tax credits for employer contributions attributable
to tax years after 1986 were eliminated and, therefore, no further
contributions to the Plan were made.
Under the Plan, the Company contributed cash or Gillette shares in
amounts equivalent to certain payroll-related tax credits to a trust
fund comprised of Gillette shares and held on behalf of eligible
domestic
[SOURCE PAGE 10]
employees, including officers. These tax credits amounted to 1/2 of 1%
of covered payroll for the tax years 1983 through 1986. Each year
shares were allocated to the accounts of eligible employees
essentially on an equal basis. A total of 34 shares were allocated to
the account of each employee who was an eligible participant during
that entire period. Dividends earned on these shares are used to
purchase additional shares of Company stock, which are allocated to
participant accounts. Distributions equal to the then-current value of
the shares and earned dividends, in the form of either cash or Gillette
shares, are made only upon termination of employment.
The Company's contributions under the Plan represented no direct cost
to the Company, since they were offset by a corresponding reduction in
the Company's tax liability.
Participants may instruct the Trustee in confidence how to vote their
shares and whether or not to accept an offer for their shares.
Incentive Bonus Plan
Under the Plan, a bonus pool is earned if profit from operations, as
defined in the Plan, exceeds that of the prior year by a specified
percentage determined each year by the Personnel Committee. Beginning
with the 1989 incentive year, two additional factors are being used by
the Personnel Committee to determine the overall size of any bonus pool
earned: return on assets and sales growth. A reserve equivalent to no
more than 20% of the amount of the projected bonus pool (15% for
incentive years prior to 1989) may be established by the Committee each
year from which bonuses will be awarded, if the overall goals for that
year are not met, to employees in operating units that have achieved
assigned objectives.
The Plan provides that key management employees, including officers,
may receive awards ranging from 5% to 50% of their salary for the year
(5-30% for incentive years prior to 1989). Based on recommendations of
senior management and evaluations of performance against goals assigned
for the year, the Chairman approves bonus awards to individual
recipients other than himself. Awards to officers and certain senior
executives are subject to approval by the Personnel Committee. The
Committee determines the amount of any bonus award to the Chairman.
Before being selected to receive a bonus, participants have the option
to defer payment of all or a part of any bonus that may be awarded to
any year until their retirement or until an earlier change in control.
Prior to retirement, participants may elect to further defer bonus
amounts beyond their date of retirement or until an earlier change in
control. All deferred amounts accrue interest equivalents. Under
certain circumstances following a change in control, otherwise eligible
employees terminated during the year the change in control occurred
would remain eligible for consideration for a bonus award.
Bonuses earned in 1988 by the named officers and all officers as a
group are included in columns C-1 and C-2 of the compensation table on
page 6.
For the years 1986, 1987 and 1988, the aggregate of bonuses earned
under the Plan by the following persons and groups were: Mr. Mockler
$588,000; Mr. Phillips $263,750; Mr. Zeien $291,875; Mr. Levy $213,300;
Mr. Symons $223,000; Mr. Waxlax $237,000; all present officers as a
group $4,120,350 and all other employees $11,233,988.
Life Insurance Program
Certain executives, including officers of the Company, may participate
in a life insurance program that provides coverage during employment
equal to four times annual salary, subject to a $400,000 minimum and a
$1,000,000 maximum amount of coverage. After retirement, a death
benefit equal to annual salary, subject to a $100,000 minimum and a
$250,000 maximum, continues in effect for the life of the participant.
Mr. Symons participates in a life insurance program maintained by a
Gillette U.K. subsidiary that provides all employees with coverage
during employment equal to four times annual salary plus bonus, if any.
In addition, certain key employees of the U.K. subsidiary, including
Mr. Symons, participate in a life insurance program that provides
accidental death benefits equal to three times annual salary.
2. Proposed Amendment of the 1971 Stock Option Plan and Stock
Equivalent Unit Plan.
On the recommendation of the Personnel Committee of the Board of
Directors and subject to approval by the stockholders, the Board has
amended the 1971 Stock Option Plan and the Stock Equivalent Unit Plan.
The proposed amendment extends the period for grants under both plans
to April 21, 1994, increases by
[SOURCE PAGE 11]
2,900,000 the number of shares on which stock options may be granted,
and increases by 1,500,000 the number of basic stock units that may be
awarded under the Stock Equivalent Unit Plan.
If approved, the amendment would make available for grant over the next
five years a lesser combined number of shares and units than were
available during prior comparable periods over the 18-year history of
the Plan. The number of newly authorized shares on which options could
be granted under the 1971 Stock Option Plan during the proposed
additional five-year period would represent approximately 3% of the
currently outstanding shares of the Company's stock. Shares of the
Company's stock are not issued under the Stock Equivalent Unit Plan.
The stockholders adopted the plans in 1971 and amended them in 1977,
1979 and 1984 to extend the period for grants and to increase the
number of options and units which could be granted under the plans.
As options expire unexercised they again become available for grant. On
March 3, 1989, options on 98,200 shares were ungranted. Options on
1,439,498 shares, granted at option prices ranging from $6.235 to
$39.50 per share after adjustment for stock splits (a weighted average
average price of $24.77 per share), will expire at various dates up to
October 24, 1998.
Similarly, basic stock units forfeited before the vesting of any
interest in them again become available for grant. On March 3, 1989,
there were 412,028 units ungranted and there were 1,541,746 units
outstanding as to which no vesting had occurred.
The Board of Directors is of the opinion that these plans have helped
the Company to compete for, motivate and retain high-caliber executives
and other key employees, and that it is in the best interests of the
Company to amend the plans as proposed. Rewards under these
stock-related plans are dependent on the same factors as those which
directly benefit the Company's stockholders, namely: dividends paid and
appreciation in the market value of the Company's stock. Both plans are
administered by the Personnel Committee, which is composed of directors
who are not employees and are not eligible to participate in either
plan. The amendment will permit the Committee to continue to grant
options and basic stock units to officers and other key employees who
have the potential to manage the business of the Company successfully
in the future.
Other material provisions of the plans are described below.
1971 Stock Option Plan
General Provisions
Options may be awarded by the Personnel Committee to selected key
employees of the Company and its subsidiaries, including those who may
also serve as officers or directors. At any given time, this group may
represent approximately 1% of all employees.
The Committee may designate options granted under the Plan as incentive
stock options ("ISO's"), a type of option authorized under the 1981
amendments to the Internal Revenue Code. Options are granted at not
less than the fair market value of the Company's stock on the date of
grant and are exercisable as determined by the Committee, except that
options must be exercised within ten years from the date of grant. All
outstanding options have ten-year terms and are exercisable one year
from the date of grant, provided the optionee is still an employee.
Options generally remain exercisable for a limited period following the
termination of employment of the optionee. The period for
post-retirement exercise of non-incentive stock options is two years,
unless a shorter period is designated by the Personnel Committee. The
period for ISO's is three months. If the termination of employment
occurs within one year after a change in control, any options held by
the optionee that were not otherwise exercisable when employment ceased
would become immediately exercisable.
Shares delivered on exercise of options may be either authorized and
unissued shares or treasury shares. Payment on exercise is made in cash
or, at the discretion of the Secretary of the Personnel Committee, in
shares of the Company's common stock or partially in cash and partially
in shares. An employee who is not an officer or a director of the
Company may pay the purchase price in cash installments over a
five-year period at a rate no less than the minimum rate of interest
provided under the Internal Revenue Code for such installment
purchases. Payment in stock cannot be made on exercise of non-incentive
stock options
[SOURCE PAGE 12]
designated as ISO's in April 1982. On approval by the Board of
Directors, options may provide for a loan, guarantee or other
assistance by the Company. No such loan, guarantee or other assistance
has been provided to any officer or director while serving in that
capacity.
The Board may terminate the Plan or may amend it or any outstanding
option, but stockholder approval is required to increase the number of
shares available under the Plan, reduce the price at which options may
be granted to below 95% of the fair market value on the date of grant,
reduce the option price of outstanding options, extend the term of an
option beyond ten years, or extend the period during which options may
be granted. No amendment may adversely affect the rights of any
optionee under an outstanding option or, after a change in control,
deprive an optionee of a right which became operative upon a change in
control.
Federal Income Tax Consequences Upon Issuance and Exercise of Options
The Company is of the opinion that an employee receiving a stock option
will not realize any compensation income under the Internal Revenue
Code upon the grant of the option.
The exercise of a non-incentive stock option results in immediate
taxable income to the optionee in an amount equal to the difference
between the option price and the market price on the date of exercise.
This same amount is deductible by the Company as compensation paid.
Because of restrictions applicable to certain officers of the Company
on the sale of stock acquired by the exercise of a stock option, the
recognition of compensation and the deduction by the Company of that
compensation with respect to a non-incentive stock option may occur six
months after the date of exercise and be measured with respect to the
market price on that date.
The exercise of an ISO results in no tax consequences either to the
optionee or the Company. Although the difference between the option
price and the market price on the date of exercise is not taxable to
the optionee upon exercise, it is a tax preference item which, under
certain circumstances, may give rise to an alternative minimum tax
liability (AMT) to the optionee. The sale within one year of stock
acquired by the exercise of an ISO will result in immediate taxable
income to the optionee in an amount equal to the difference between the
option price and the lesser of the market price on the date of exercise
or the net proceeds of the sale. This amount is deductible by the
Company as compensation paid.
The basis to the optionee of the stock acquired by the exercise of a
non-incentive stock option is the amount paid by the optionee plus the
amount of taxable income recognized. The basis of the stock acquired by
the exercise of an ISO and held for at least one year is the amount
paid by the optionee.
Stock Option Transactions
The following table presents information on stock option transactions
during the three-year period ending December 31, 1988, of the persons
named and of all present officers as a group. The amounts indicated
have been adjusted, as applicable, to give effect to the 1986 and 1987
2-for-1 stock splits.
Options Granted
1/1/86-12/31/86 (*)
Average
Number
per Share
of
Option
Shares
Price
Colman M. Mockler, Jr.
Derwyn F. Phillips
Alfred M. Zeien
Gaston R. Levy
John W. Symons
Lorne R. Waxlax
All officers as a group
75,000
42,500
53,000
21,500
22,000
25,000
418,100
$28.09
32.32
29.18
30.97
31.04
30.61
30.27
Options
Exercised
1/1/8612/31/88
Net
Value (**)
$4,411,157
1,543,676
1,227,831
292,145
970,867
13,309,941
(*) Includes the following options granted during 1988: Mr. Mockler
20,000 shares at $37.38 per share; Mr. Phillips 15,000 shares at
$37.38; Mr. Zeien 15,000 shares at $37.38; Mr. Levy 6,500 shares at
$33.81; Mr. Symons 7,000 shares at $33.81; Mr. Waxlax 7,500 shares
at $33.81; all officers as a group 130,000 shares at an average
price of $35.18 and all other employees 218,600 shares at an
average price of $33.88.
(**) Aggregate market value on date of exercise less aggregate option
price.
[SOURCE PAGE 13]
From January 1, 1986, through December 31, 1988, options on 669,500
shares were granted at an average per share option price of $30.51 to
employees other than the group of officers.
The closing price of the common stock of the Company on March 3, 1989,
as quoted on a composite basis, was $35.50 per share.
Stock Equivalent Unit Plan
General Provisions
Each basic stock unit is treated as equivalent to one share of the
Company's stock, although in no case does the employee receive the
original market value of the basic units awarded. Instead, the
employee's account is credited with appreciation, if any, in the market
value of the Company's stock and with dividend equivalent units as
dividends are paid on the stock. Amounts credited for appreciation on
basic stock units are limited to 100% of the market value of the stock
on the date of the award.
Awards of basic stock units may be made under the Plan to a somewhat
broader group of key employees of the Company and its subsidiaries than
those who are eligible to receive stock options. At any given time,
eligible employees are expected to represent approximately 2% of all
employees. No awards are made to officers who also serve as directors.
With respect to certain grants made after 1983, all or any portion of
an award may, by its terms, be contingent upon achievement of future
performance goals.
Awards made after 1983 accrue benefits over seven years, vesting and
becoming payable in segments over the third through the seventh years
of that period. Awards made prior to 1984 accrue benefits over ten
years, vesting and becoming payable in segments over the fourth through
the tenth years of that period. Each award is revalued annually until
the award becomes fully vested and the value becomes fixed and payable.
Before each vesting, the employee may elect to defer the amounts
becoming payable. In general, awards become fully vested upon the
retirement, death or disability of the employee and, in the case of
retirement or disability, payment may be deferred by employee election
to future years. If a deferred amount represents the final value of a
fully vested award, the amount accrues interest until paid.
The Plan provides that, upon a change in control, all
performance-related contingency provisions of awards would be removed,
awards of employees whose employment is terminated under certain
circumstances as described in the Plan would become fully vested, and,
in the event of a related liquidation, merger or consolidation of the
Company, all awards either would become fully vested or would be
replaced by the surviving corporation.
The Board of Directors may amend the Plan, but stockholder approval is
required to extend the maturity date of an award or the period during
which awards may be made or to increase the maximum number of basic
stock units that may be awarded. The Board may terminate the Plan at
any time, but no termination or amendment may adversely affect the
rights of participants under outstanding awards or, after a change in
control, deprive a participant of a right which became operative upon a
change in control.
The following table presents information for the three-year period
ending December 31, 1988, on units awarded under the Plan and amounts
credited to vested segments of prior awards of the persons named, all
present officers as a group and all other employees. All amounts have
been adjusted, as applicable, to give effect to the 1986 and 1987
2-for-1 stock splits.
Basic Units Awarded
1/1/86-12/31/88
Amounts
Number
of
Units
Derwyn F. Phillips
Alfred M. Zeien
Gaston R. Levy
John W. Symons
Lorne R. Waxlax
All officers as a group
All other employees
25,850 (*)
24,210
22,520
27,400
132,210
1,604,210
Weighted
Average
Value per
Unit
Credited
to Vested
Accounts
1/1/8612/31/88
$23.91
27.22
28.48
27.69
27.93
29.89
$281,902
62,702
150,877
111,365
241,513
3,148,073
37,873,943
(*) The units awarded to Mr. Phillips during the period were granted
prior to his becoming a director of the Company on November 19,
1987.
[SOURCE PAGE 14]
The amounts credited during 1988 to the vested accounts of the named
persons and the group of officers are included in column C-2 of the
compensation table on page 6 or the footnote to the table. The amounts
credited to the vested accounts of all other employees during 1988
totaled $17,501,943.
It is not possible to determine the value under the Plan of future
payments to employees or the cost to the Company, as these
determinations depend on several variable factors, including the amount
of dividends paid on the Company's stock and the market value of the
stock. The cost of the awards is being accounted for over the terms of
the grants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
AMENDMENT OF THE 1971 STOCK OPTION PLAN AND STOCK EQUIVALENT UNIT PLAN,
WHICH IS DESIGNATED AS PROPOSAL NO. 2 ON THE ENCLOSED PROXY CARD.
3. Appointment of Auditors
On the recommendation of the Audit Committee of the Board of Directors,
the Board has appointed Peat Marwick Main & Co. as auditors for the
year 1989, subject to approval by the stockholders. Peat Marwick Main
& Co. has audited the books of the Company for many years.
Representative of Peat Marwick Main & Co. will attend the 1989 Annual
Meeting, where they will have the opportunity to make a statement if
they wish to do so and will be available to answer appropriate
questions from the stockholders.
Should the appointment of auditors be disapproved by the stockholders,
the Board of Directors will review its selection.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
APPOINTMENT OF AUDITORS, WHICH IS DESIGNATED AS PROPOSAL NO. 3 ON THE
ENCLOSED PROXY CARD.
4. Stockholder Proposal
The Annuity Reserve Fund of the Los Angeles Unified School District,
Box 2298, Los Angeles, CA 90051, owner of 12,000 shares of the common
stock of the Company, has given notice that it intends to present the
following resolution for action at the Annual Meeting.
"WHEREAS in our opinion the political climate in South Africa provides
a weak and unstable business environment which could result in a
partial or total loss of corporate assets invested there; and
WHEREAS we believe consumer boycotts directed at corporation conducting
business in South Africa could result in decreased business performance
outside South Africa; and
WHEREAS in our opinion divestment efforts instituted by current
stockholders could depress the value of equities in this corporation;
and
WHEREAS in our opinion this degree of business risk cannot be
considered prudent.
Therefore be it
RESOLVED, that the shareholders request that the Board of Directors:
1. Make no new investments in South Africa nor develop business
relations within South Africa.
2. Develop and implement a plan, as necessary, to expeditiously
terminate business relationships and/or investments within South Africa
(total pull out).
3. Apply the policies of no new investments and termination of existing
interests to indirect and/or subsidiary or affiliate operations."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF
PROPOSAL NO. 4 FOR THE REASONS SET FORTH ON PAGE 16.
[SOURCE PAGE 16]
5. Stockholder Proposal
This proposal was submitted by Edward V. Regan, State Comptroller of
the State of New York, as Trustee of the New York State Common
Retirement Fund, office of the State Comptroller, Albany, New York
12236, which is the owner of 1,210,913 shares of the common stock of
the Company. Co-filers of the proposal are: the General Board of
Pensions of the United Methodist Church, 1200 Davis Street, Evanston,
Illinois 60201, owners of 43,000 shares; The New York State Teachers
Retirement System, 10 Corporate Woods Drive, Albany, New York,
12211-2395, owners of 986,400 shares; The Franco-American Oblate
Fathers, Inc., local province of the Oblates of Mary Immaculate, 45
Kenwood Avenue, Worcester, Massachusetts 01605, owners of 50 shares;
The Daughters of the Holy Spirit, 72 Church Street, Putnam, Connecticut
06260, owners of 2,573 shares and the Sisters of St. Chretienne, 297
Arnold Street, Wrentham, Mass. 02093, owners of 500 shares of the
common stock of the Company.
"WHEREAS, we believe, the system of apartheid continues to deny civil
and human rights to the majority Black population in South Africa and
fosters social, political and economic instability throughout that
country;
WHEREAS, pension funds and other institutional investors are
continually pressured by state and local legislatures to protest
apartheid by adopting divestment programs, tantamount to establishing
national foreign policy, which involve large sales of stock which, in
our opinion, will adversely impact the beneficiaries of such
institutions;
WHEREAS, to our knowledge, management has failed or refused to avail
itself of the opportunity to oppose or protest either such
inappropriate governmental activities or the divestment of its stock;
WHEREAS, we believe, withdrawal of corporate interest from South
Africa, as contrasted to the divestment of stock, not only results in
more pressure for change in South Africa, but also protects the
interests of shareholders;
NOW, THEREFORE, be it resolved that the shareholders request the Board
of Directors to established as policy that:
The corporation implement a program of withdrawing its operations from
South Africa and the sale of its interest in any affiliate there. Where
possible, this program should advance management participation and
promote ownership by Black employees."
The following statement has been submitted by the proponents in support
of the resolution:
"In our opinion, the corporation should no longer invest within the
framework of apartheid which mandates the denial of basic human and
civil rights of the Black majority. Although strides have been made by
the corporation to eliminate discrimination within its South African
operations, its efforts to gain the statutory dismantling of
apartheid have had minimal effect. Shareholders must unite in voicing
their opposition to the discriminatory practices of South Africa and
convince the corporation to make known, through withdrawal, that it
cannot exist with the system of apartheid.
The corporation has a modest presence there and the prognosis is for
expanded political and social unrest. Furthermore, there is a growing
use of product boycotts and contract restrictions in the United States
and the prospect of additional and more severe Congressional sanctions.
All of this, in our opinion, will have an adverse impact on the value
of the company.
In addition, corporate withdrawal from South Africa will quickly
eliminate any need for state and local officials and others to advocate
the divestment of stock to protest apartheid. Since the corporation has
neither objected to nor sought to block such inappropriate governmental
activities or such sale of its stock, it should not be surprised if the
shareholders, institutional or individual, seek to protect their
interest by calling for corporate withdrawal. Indeed, to be consistent,
the corporation should not object to this resolution.
In recommending withdrawal from South Africa, we request that, where
possible, it include negotiation with the labor unions and promote
Black employee participation in ownership and management. By
[SOURCE PAGE 16]
so assisting in the establishment of an economic foundation for the
Black majority, the corporation can best express and exercise its
contribution toward the elimination of apartheid."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF
PROPOSAL NO. 5 FOR THE REASONS SET FORTH BELOW.
As indicated in last year's proxy statement, the Board of Directors has
continued to monitor developments affecting the difficult decision as
to whether to continue the Company's South African operations. While
recognizing that it may have to reassess its position, the Board
presently believes that, on balance, the Company's continued presence
in South Africa does more good than would its withdrawal, and that the
Company should continue its operations there.
The Company's operations in South Africa consist of two small
businesses. Gillette South Africa Limited, a manufacturing facility
located at Springs, near Johannesburg, sells razors and blades,
personal care products and disposable plastic bags and wraps. Oral-B
Laboratories (S. A.) (Proprietary) Limited distributes toothbrushes.
These businesses employ approximately 344 persons, the majority of
whom, presently 213, are non-white. In 1988 Gillette's operations in
South Africa accounted for approximately 1% of the Company's sales and
earnings.
From a business standpoint, South Africa presently provides a small but
worthwhile market for the Company's products, although some
restructuring of South African operations may have to be considered as
part of the Company's worldwide restructuring program. If South Africa
can overcome its political and economic problems, it is hoped that it
would become a larger and more important market. The provisions of the
United States Revenue Act of 1987 affecting South African operations of
U.S. companies have had a negative impact on the earnings from the
Company's South African operations, but these businesses have remained
profitable.
From the standpoint of employee and human relations, the Company has
been in the forefront in support of human rights in South Africa. The
Company's businesses in South Africa have totally integrated facilities
and identical wage rates for white and non-white employees. The
businesses provide excellent fringe benefits and offer active
educational programs to increase the general skill level of non-white
employees. The businesses have been active in the community, providing
programs such as scholarships for needy black university students,
funds and equipment for technical and secondary schools, adult
education programs and, most recently, funds and equipment for medical
care. In February 1985, Gillette became South Africa's first private
sector sponsor of a Legal Aid Clinic. During 1988, the Company
continued expenditures in support of these programs, and employee
participation in these programs grew.
In conjunction with these activities, since May 1977, Gillette has been
a signatory of the Sullivan Principles, now called the Statement of
Principles for South Africa, and has consistently received high ratings
for its efforts, including the highest rating for both operations in
1988. In addition, the local managements of Gillette's South African
companies, on an individual basis and through organizations such as the
American Chamber of Commerce, have worked and will continue to work to
press the South African government to dismantle the apartheid system.
The companies also actively lead programs aimed at improving race
relations.
The Board of Directors acknowledges that it is more difficult for U.S.
businesses in South Africa acting collectively to have a significant
impact on the future course of social change in South Africa. However,
it disagrees with the premise of the proponents that withdrawal of U.S.
corporate interests from South Africa has resulted or will in the
future necessarily result in any effective pressure for change on the
South African government. The Board believes that individual companies
such as Gillette, have an opportunity to continue to make meaningful
contributions to the South African society, to the lives of their South
African employees and to the communities in which they operate.
The Board will continue to monitor the situation in South Africa
closely, and further consideration of economic and political
developments may cause it to reassess its position. For the present, it
believes that it is in the best interests of the stockholders and the
related interests of its employees to continue its operations in South
Africa.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THESE STOCKHOLDER
PROPOSALS, WHICH ARE DESIGNATED AS PROPOSALS NOS. 4 AND 5 ON THE
ENCLOSED PROXY CARD.
[SOURCE PAGE 17]
6. Stockholder Proposal
This proposal was submitted by Franklyn Barrett, 41 4th Street,
Frenchtown, N.J. 08825, the owner of 100 shares of the common stock of
the Company.
"I propose that Gillette Corp. (sic) and its subsidiaries stop testing
of all kinds on animals and that all animals in the custody of Gillette
be pensioned off to a farm or farms where they will be provided for by
Gillette and that regular unannounced inspections be made by the
company to check on their welfare.
Any employees guilty of violating this rule will be dismissed. The
Company may not hire or allow anyone else to do this testing for the
company.
In the event that Gillette no longer tests animals, I wish to have my
proposal voted on anyway for two reasons (1) to guarantee the
permenance (sic) of this situation and (2) to see to it that the
company does not have others doing this work for the company."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF
PROPOSAL NO. 6 FOR THE REASONS SET FORTH ON PAGES 18 AND 19.
7. Stockholder Proposal
This proposal was submitted by Ms. Elizabeth Aszkanazy, 15 Gosford
Building #5, N-York, Toronto, Ontario M3N 2G7 Canada, and People for
the Ethical Treatment of Animals, Inc., P.O. Box 42516, Washington,
D.C. 20015, owners of 1,840 shares and 80 shares, respectively, of the
common stock of the Company.
"WHEREAS, Gillette manufactures cosmetics, toiletries, and office
products, such as hair sprays (White Rain), shampoos (Silkience),
deodorants (Right Guard), and correction fluids (Liquid Paper), and
WHEREAS, development and testing of some of these products contributes
to the experimental use each year of hundreds or thousands of living
animals in tests, some of which cause unrelieved pain and suffering,
and
WHEREAS, Gillette asserts "our industry is concerned about animal
welfare and is committed to the reduction of the use of animals in
product testing,"
NOW, THEREFORE, BE IT RESOLVED that is recommended to the Board of
Directors that our company report annually to shareholders on progress
toward its stated commitment to reduce the use of animals in product
testing, including disclosure of the total number of animals, by
species, used each year, and the aggregate cost of such tests."
The following statement has been submitted by the proponents in support
of the resolution:
"This proposal is designed to give shareholders the information we need
to evaluate what progress our company is making towards its own stated
commitment to reduce reliance on animal tests.
(That commitment can make good economic sense: in its 1986 report to
Congress, the U.S. Office of Technology Assessment compared
whole-animal tests with non-animal alternatives already available and
those under study and state "Whole-animal tests can be far more costly
than in vitro and non-animal alternatives...")
Presently, Gillette shareholders have no information about how many
animals our company uses, what species (dogs, cats, rabbits, guinea
pigs, primates?), in what kinds of procedures they are used. Does
Gillette use oral toxicity tests in which animals are made to ingest
potentially-toxic substances orally? Does Gillette use the Draize
irritation test in which rabbits have chemicals placed into their eyes
and/or onto their skin?
Until recently, Gillette did its own animal testing, and concerned
shareholders could obtain government reports filed by the company
showing numbers and kinds of animals used.
In 1987, however, Gillette shut down its in-house animal laboratory and
now contracts out its animal testing. Gillette does not say which
outside laboratories it uses, and outside laboratories do not report
which work they do is for Gillette.
[SOURCE PAGE 18]
In the last full year during which Gillette did in-house testing, it
reported using nearly 100 live rabbits in tests "involving pain or
distress without administration of appropriate anesthetic," according
to government reports. In 1985, a Gillette employee reported observing
and photographing conscious animals in toxic inhalation tests for hair
sprays and aerosol deodorants, and rabbits restrained in stocks as
correction fluid ingredients were put into their eyes.
We have the right to know if our company is making maximum use of
non-animal test methods, including cell and tissue culture, computer
modeling, databases to avoid test duplication, etc., and using
available product ingredients that do not require animal tests, such as
those "generally recognized as safe" by scientific and governmental
bodies.
As Gillette has stated its commitment to work toward reducing animal
tests, it should give shareholders the necessary information to measure
its progress toward meeting that commitment.
Last year, shareholders voted nearly 10,000,000 shares in favor of our
proposal. Please join us by voting FOR this proposal."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF
PROPOSAL NO. 7 FOR THE REASONS SET FORTH BELOW.
Gillette products are used by hundreds of millions of consumers around
the world. The Company has a moral and legal responsibility to insure
that all Gillette products are safe both for employees to make and for
consumers to use. Furthermore, the Company has an obligation to its
stockholders to continue the development and marketing of safe and
effective new products in order to maintain and strengthen its
competitive position.
Gillette products face worldwide regulatory concerns. All major markets
have laws to protect people from the potential hazards associated with
product manufacture and use. Gillette and all other manufacturers are
obligated to provide assurances of safety and must, therefore, use the
most reliable scientific methods.
Presently, tests using animals are often the only scientifically
accepted way to substantiate safety. Although important progress has
been made and the effort is continuing, the total replacement of
animals in safety testing is not a realistic expectation for the near
future. When asked whether there existed any non-animal alternative
test methodologies to replace the Draize eye-irritancy and other acute
toxicity tests, Dr. Frank E. Young, Commissioner of the U.S. Food &
Drug Administration (FDA), stated in March 1988, "At the present time
and in the foreseeable future, the answer is no. "Officials from the
U.S. Consumer Product Safety Commission and the Maryland and
Massachusetts Poison Centers have made similar statements regarding
present test methodologies. However, several companies, including
Gillete, continue to work on non-animal screening tests which, although
not replacements for the Draize eye test, may lessen the need for its
use.
The Board of Directors agrees that stockholders should be informed
about the Company's efforts to minimize the use of animals in testing
and to refine the methods used in safety evaluation. These efforts
include: (1) participation in the industry-sponsored and FDA-sanctioned
Cosmetic Ingredient Review Program, (2) maintenance and use of a
computerized safety information database, (3) maintenance and use of a
computerized product formulae database, (4) computerized search and
review of worldwide medical literature on ingredient safety and (5)
support of the Cosmetic, Toiletry and Fragrance Association programs to
develop alternatives to animal testing.
The Company is currently conducting tests with the Eytex System to
validate its use as an in vitro (non-animal) screening test to predict
eye irritancy. If scientifically validated, and if approved by the FDA,
the Eytex System would further substantially reduce the use of the
Draize eye-irritancy test.
The Company's medical review officers routinely screen all proposed
ingredients through the computerized systems referred to above and
reject those which are unsuitable for employee exposure or use in
consumer products. Nevertheless, when otherwise safe ingredients are
combined in new compounds, animal testing is sometimes necessary to
establish that the new compounds are also safe.
When animal testing was performed in Gillette laboratories, humane test
methods were used to avoid pain and suffering in the test animals
whenever possible. Although all animal testing is now done by outside
[SOURCE PAGE 19]
testing laboratories, the same high standard is met. All outside
laboratories are legally required to comply with Federal Animal Welfare
Act regulations promulgated by the United States Department of
Agriculture and all other federal, state and local laws concerning
animal care. In addition, Gillette retains only those laboratories that
have met the stringent accreditation standards of the American
Association for Accreditation of Laboratory Animal Care.
In summary, Gillette employees are fully committed to using animal
tests only when necessary and are concerned about the humane treatment
of animals. The Company believes that the further effort required to
compile and disclose test information with respect to the number of
animals used in testing each year and the cost of these tests will not
result in any corresponding benefit.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THESE STOCKHOLDER
PROPOSALS, WHICH ARE DESIGNATED AS PROPOSALS NOS. 6 AND 7 ON THE
ENCLOSED PROXY CARD.
8. Stockholder Proposal
This proposal was submitted on behalf of the New York City Police
Pension Fund, Art. 2, by Harrison J. Goldin, Comptroller of the City of
New York and a Trustee of the Fund, One Centre Street, Room 530, New
York, N.Y. 10007. The Fund is the owner of 80,200 shares of the common
stock of the Company.
"RESOLVED that the shareholders of the Corporation request that the
board adopt and implement a policy requiring all proxies, ballots and
voting tabulations that identify shareholders be kept confidential,
except when disclosure is mandated by the law of the Corporation's
state of incorporation or such disclosure is expressly requested by a
shareholder, and that the inspectors of election be independent and not
the employees of the Corporation."
The following statement has been submitted by the proponent in support
of the resolution:
"The secret ballot is fundamental to the American political system. The
reason for this protection is to ensure that voters are not subjected
to actual or perceived coercive pressure. It is time that this
fundamental principle of the confidential ballot be applied to public
corporations.
Shareholders need the protection of a confidential ballot no less than
voters in political elections. While there is no imputation that
management has acted coercively, the existence of this possibility is
sufficient to justify confidentially (sic).
Among the categories of shareholders subject to coercive voting
pressure could include participants in employee stock purchase plans
who may fear management retaliation if their voting records are
available to management. Institutional money managers, banks, insurance
companies and others may fear losing a corporation's business if they
do not vote in accordance with management's wishes. This coercion is
evidenced by a recent survey of members of the New York Society of
Security Analysis which found that twenty-two percent of its members
that voted proxies have felt undue pressure to vote a certain way.
These coercive pressures would be eliminated by a confidential ballot.
This resolution would permit shareholders to voluntarily disclose their
vote to management in the event that they expressly request such
disclosure on their proxy cards. Additionally, shareholders may
disclose their vote to any other person they choose. This resolution
would merely restrict the ability of the Corporation to have access to
the vote of its shareholders without their specific consent.
Many shareholders believe voter confidentiality is ensured when shares
are held in street or nominee name. This is not so. Management has
various means of determining actual (beneficial) ownership. This
resolution is the only way to ensure a secret ballot.
The Corporation complies with current Federal and state proxy
regulations. These regulations, however, simply specify a minimum
standard of corporate conduct. The only way to ensure a voting process
free of the taint of coercion is through a proxy voting system that
complies with the American principle of voter confidentiality."
[SOURCE PAGE 20]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF
PROPOSAL NO. 8 FOR THE REASONS SET FORTH BELOW.
The Board does not share the premise of the proponent that confidential
voting is necessary to guard against coercion in the stockholder voting
process. Gillette officers, directors, employees and agents are
required to respect the right of all stockholders to vote without
coercion or retaliation with regard to business or employment
considerations. Even the proponent concedes that, "There is no
imputation that management has acted coercively. "With respect to the
proponent's concerns about coercion of employees, participants in the
Company's employees savings plans and Employee Stock Ownership Plan
instruct the trustees of these plans in confidence how to vote their
shares. Any other stockholder who chooses to do so can maintain
confidentiality and anonymity by holding shares in a nominee or
"street" name or through a broker. The Federal securities laws provide
that such nominees may not disclose to the Company the names of
stockholders who object to such disclosure and, as the proponent also
concedes, "the Corporation complies with current Federal and state
proxy regulations."
Although the Board is not convinced that a confidential voting
procedure is necessary, it agreed that Gillette representatives should
meet with the proponent's representatives in an effort to respond to
the need perceived by the proponent and in an attempt to reach
agreement on a confidential voting procedure. Unfortunately, complete
agreement was not reached. However, the Company has decided that in
response to this proposal, it will employ a confidential voting
procedure on a trial basis for the 1989 Annual Meeting.
In general, the procedure will require that proxies and ballots be kept
confidential from officers, directors and employees of the Company and
from third parties. Certain employees or agents serving as tabulators,
judges, proxy solicitors or otherwise who have agreed to comply with
this procedure may be permitted access to the information to facilitate
their participation in soliciting proxies and conducting the meeting.
The procedure will not apply in the event of a proxy contest or other
solicitation based on an opposition proxy statement or in the event of
a proxy solicitation on any matter requiring for passage more than a
majority of the shares voting. The Company will determine whether the
procedure should be continued at future meetings and, if so, what
modifications may be appropriate.
The Board believes that the proponent's proposal is overly broad and
vague and might result in needless expense. Certain specific issues of
concern to the Company are not addressed. It was specific issued such
as those listed below that impeded agreement between the Company and
the proponent's representatives.
The proponent's proposal requests that "inspectors of election be
independent and not the employees of the Corporation." For a number of
years, the Company has employed its transfer agent to tabulate votes
and has appointed judges of election from among Company attorneys. Both
tabulators and judges are obligated to discharge their duties honestly
and in the interests of all stockholders, and there is no suggestion by
the proponent that this has not been done. Nevertheless, the proponent
has indicated that it opposes the practice of appointing judges of
election from among Company attorneys as inconsistent with the purposes
of its proposal. The Board believes this longstanding practice is
economical, efficient and consistent with confidentiality.
The proponent's proposal does not make clear whether the Company could
continue to permit employees or agents who are serving as proxy
solicitors access to the voting information on the proxy cards they
solicit. The proponent has indicated that it is opposed to the use of
employees as proxy solicitors and to solicitors having access to the
information on the cards they solicit as inconsistent with the
purposes of its proposal. The Board believes that unless such access is
permitted, solicitation of proxies and dialogue with stockholders on
the part of Company representatives could become more difficult and
expensive.
The proponent's proposal does not contain any clear exception for a
proxy contest or consent solicitation, although such an exception is
commonly understood to be applicable among the relatively few major
companies employing confidential voting and the proponent has indicated
that it would agree to such an exception. Such an exception is fair and
reasonable in such situations, since a party opposed to management
would be free to solicit proxy cards and to communicate with
stockholders based on the information on the cards.
[SOURCE PAGE 21]
The proponent's proposal also contains no exception for situations
where a higher than usual affirmative stockholder vote is required,
such as a stockholder vote on an amendment to the Company's certificate
of incorporation. The proponent has objected to such an exception as
inconsistent with the purposes of its proposal. The proponent's
proposal could be interpreted to prevent Company representatives from
determining which stockholders had abstained from voting on the
proposal so that they could be urged to vote. This might increase the
risk that the will of a majority of stockholders voting could be
frustrated by a minority.
For the reasons stated above and particularly in light of the
confidential voting procedure being employed for the Company's 1989
Annual Meeting, the Board believes that proposal is largely moot.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
STOCKHOLDER PROPOSAL, WHICH IS DESIGNATED AS PROPOSAL NO. 8 ON THE
ENCLOSED PROXY CARD.
Outstanding Voting Securities
On March 6, 1989, the record date for the 1989 Annual Meeting, there
were outstanding and entitled to vote 96,667,971 shares of the 1$ par
value common stock of the Company, constituting the only presently
outstanding class of voting securities. Each such share of common stock
is entitled to one vote.
Solicitation of Proxies
The cost of soliciting proxies will be borne by the Company. In
addition to solicitation by mail, solicitations may also be made by
personal interview, telegram and telephone. Arrangements will be made
with brokerage houses and other custodians, nominees and fiduciaries to
send proxies and proxy material to their principals, and the Company
will reimburse them for their expenses in so doing. Directors, officers
and other regular employees of the Company, as yet undesignated, may
also request the return of proxies by telephone, telegram, or in
person. The Company has retained Georgeson & Company Inc., New York,
New York, to assist in the solicitation of proxies using the means
referred to above at an anticipated cost of $25,000 plus reasonable
expenses.
The Company is employing the confidential voting procedure described at
page 20 of this proxy statement on a trial basis for the 1989 Annual
Meeting.
Security Ownership of Certain Beneficial Owners
State Street Bank and Trust Company, P.O. Box 5259, Boston,
Massachusetts 02101, has reported in a Schedule 13G dated February 8,
1989, filed with the Securities and Exchange Commission, that, as of
December 31, 1988, in its capacity as Trustee of The Gillette Company
Employees' Savings Plan, it held on behalf of Plan participants
5,151,763 shares, or 5.3%, of the outstanding common stock of the
Company, over which it exercised shared voting and dispositive
authority.
Annual Report
The Annual Report of the Company for the year ended December 31, 1988,
is being mailed to all stockholders with this proxy statement.
Stockholder Proposals
In general, stockholder proposals intended to be presented at an annual
meeting, including proposals for the nomination of directors, must be
received by the Company 60 days in advance of the meeting, or by
February 16, 1990, to be considered for the 1990 Annual Meeting. The
requirements for submitting such proposals are set forth in the
Company's Bylaws.
Stockholder proposals intended to be considered for inclusion in the
proxy statement for presentation at the 1990 Annual Meeting must be
received by the Company by November 13, 1989.
Other Matters
The Board of Directors does not know of any matter other than those
described in this proxy statement that will be presented for action at
the meeting. If other matters properly come before the meeting, the
persons named as proxies intend to vote in accordance with their
judgment.
This proxy will be voted as directed by the stockholder, but if no
choice is specified, it will be voted FOR proposals 1, 2, and 3 and
AGAINST proposals 4, 5, 6, 7 and 8.
The Board of Directors recommends a vote FOR proposals 1, 2 and 3, and
AGAINST proposals 4, 5, 6, 7 and 8.
1. Election of directors to serve for 3-year terms:
Nominees: R.R. Pivirotto. J.M. Stela, A.M. Zeien
(X) FOR all nominees
(X) WITHHELD from all nominees
For, except vote withheld from the following nominee(s):
2. Approval of amendment of 1971 Stock Option Plan and Stock Equivalent
Unit Plan.
(X) For
(X) Against
(X) Abstain
3. Approval of appointment of auditors.
(X) For
(X) Against
(X) Abstain
4. Stockholder proposal - South Africa
(X) For
(X) Against
(X) Abstain
5. Stockholder proposal - South Africa.
(X) For
(X) Against
(X) Abstain
6. Stockholder proposal - Animal Testing.
(X) For
(X) Against
(X) Abstain
7. Stockholder proposal - Animal Testing.
(X) For
(X) Against
(X) Abstain
8. Stockholder proposal - Confidential Voting.
(X) For
(X) Against
(X) Abstain
Please sign name exactly as it appears on reverse When signing as
attorney, executor, trustee or in other representative capacity,
state full life.
(IMPORTANT-FILL IN DATE)
Signature
Date
Signature
Date
The Gillette Company Prudential Tower Building, Boston, Massachusetts
02199
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned revokes all prior proxies and appoints and authorizes
Kathryn E. DeMoss and Joseph E. Mullaney and each of them with power of
substitution, as the Proxy Committee, to vote the common stock of the
undersigned at the 1989 Annual Meeting of the stockholders of The
Gillette Company on April 20, 1989, and any adjournment thereof, as
specified on the reverse side of this card on proposals 1 through 8 and
in accordance with their judgment on all other matters coming before
the meeting.
NEW ADDRESS:
(Important-To be signed and dated on reverse side)
( END OF DOCUMENT. )