Marsh o Putnam o Mercer
Marsh & McLennan Companies
2004
Notice of Annual Meeting
And Proxy Statement
[MARSH & MCLENNAN COMPANIES, INC. LETTERHEAD]
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 20, 2004 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 2003. 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
April 1, 2004
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 20, 2004
PLACE:
Second Floor Auditorium
1221 Avenue of the Americas
New York, New York
PURPOSE:
1. To elect six persons to serve as Class I directors, each for a
three-year term;
2. To ratify the appointment of Deloitte & Touche LLP as
independent auditors; and
3. 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 22, 2004 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
April 1, 2004 with a copy of MMC's 2003 Annual Report, which includes financial
statements for the period ended December 31, 2003.
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/ Leon J. Lichter
LEON J. LICHTER
SECRETARY
APRIL 1, 2004
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 2007...................................................... 5
Directors Continuing in Office--Term Expiring in 2005................. 7
Directors Continuing in Office--Term Expiring in 2006................. 8
INFORMATION REGARDING THE BOARD OF DIRECTORS..................................10
Corporate Governance Guidelines.......................................10
Committees............................................................11
Policy on Stockholder Nominations of Directors........................12
Attendance............................................................13
Codes of Business Conduct and Ethics..................................13
Communications with the Board.........................................13
Tenure................................................................13
Directors' Compensation...............................................13
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS...................14
COMPENSATION OF EXECUTIVE OFFICERS............................................16
Summary Compensation Table............................................16
Option Grants in 2003.................................................19
Aggregated Option Exercises in 2003 & Year-End Option Values..........20
United States Retirement Program......................................21
Compensation Committee Report.........................................22
Stock Performance Graph...............................................26
TRANSACTIONS WITH MANAGEMENT AND OTHERS; OTHER INFORMATION....................27
ITEM 2: RATIFICATION OF SELECTION OF AUDITORS.................................28
Fees of Independent Auditors..........................................28
AUDIT COMMITTEE REPORT........................................................29
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS....................................32
APPENDIX A--AUDIT COMMITTEE CHARTER..........................................A-1
APPENDIX B--AUDIT COMMITTEE POLICY ON PRE-APPROVAL OF SERVICES PROVIDED
BY THE INDEPENDENT AUDITOR...................................................B-1
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 22,
2004, may vote at the meeting. As of that date, there were 518,157,649 shares of
common stock outstanding and entitled to one vote per share. A list of
stockholders will be available for inspection at the principal executive offices
of MMC at 1166 Avenue of the Americas, New York, New York for at least ten days
prior to the meeting.
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 proposal 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
Item 2.
As of the date of this proxy statement, 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 that
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. Leon J. Lichter,
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 of the annual meeting 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 22, 2004, 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.
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 2003 Annual Report can be viewed on our
website at http://www.mmc.com/annualreport.html. Most stockholders may 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 may 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 to view
these materials over the Internet 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
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.
In addition to this mailing, proxies may be solicited personally,
electronically or by telephone by our directors, officers, other employees or
our agents. We have retained Georgeson Shareholder Communications Inc. as our
agent to assist in the proxy solicitation at a fee of approximately $10,000,
plus expenses. If any of our directors, officers and other employees assist in
soliciting proxies, they will not receive additional compensation for those
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 the members
of your household 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 paper copy of the 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 six nominees described below for a term ending at the 2007 Annual
Meeting.
The following section contains information provided by the nominees and
continuing directors about their principal occupation, business experience and
other matters. Mr. Lawrence J. Lasser resigned from the board in November, 2003.
Five of the nominees are current directors of MMC. Mr. Zachary W. Carter is
a new nominee standing for election as a Class I director. Mr. Carter's
nomination was recommended to the Directors & Governance Committee by
stockholders, as well as by the chief executive officer and other executive
officers.
Each nominee has indicated to MMC that he will serve if elected. 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 of directors recommends a vote FOR the election of all six
nominees.
NOMINEES FOR ELECTION AS DIRECTORS
FOR A THREE-YEAR TERM EXPIRING IN 2007
[PHOTO OMITTED]
LEWIS W. BERNARD DIRECTOR SINCE 1992
EXECUTIVE COMMITTEE
COMPENSATION COMMITTEE (CHAIR)
Mr. Bernard, age 62, was chief of finance, administration and
operations of Morgan Stanley & Co., Inc. from 1985 until his
retirement in 1991. Mr. Bernard joined Morgan Stanley in 1963.
Mr. Bernard is chairman of Classroom, Inc., a non-profit
educational corporation. He is also 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.
[PHOTO OMITTED]
MATHIS CABIALLAVETTA DIRECTOR SINCE 2000
Mr. Cabiallavetta, age 59, is vice chairman of MMC, chairman of
MMC Global Development and a member of MMC's international
advisory board. Prior to joining MMC in 1999, Mr. Cabiallavetta
was chairman of the board of UBS A.G., a company he joined in
1971. Mr. Cabiallavetta is a director of Altria Group, Inc., HBM
BioVentures AG and the Swiss American Chamber of Commerce.
5
[PHOTO OMITTED] ZACHARY W. CARTER NEW NOMINEE
Mr. Carter, age 54, is a partner at the law firm of Dorsey &
Whitney LLP, where he is co-chair of the White Collar Crime and
Civil Fraud practice group. He joined Dorsey & Whitney in 1999.
Mr. Carter was the United States Attorney for the Eastern
District of New York from 1993 to 1999. Mr. Carter is chairman
of the Mayor's Advisory Committee on the Judiciary, chairman of
the board of directors of Hale House Center, Inc. and a trustee
of the New York University School of Law and the Vera Institute
of Justice.
[PHOTO OMITTED] ROBERT F. ERBURU DIRECTOR SINCE 1996
COMPENSATION COMMITTEE
DIRECTORS & GOVERNANCE COMMITTEE (CHAIR)
Mr. Erburu, age 73, was chairman of The Times Mirror Company
from 1986 until his retirement in 1996. Mr. Erburu joined Times
Mirror in 1961 and was its chief executive officer from 1981 to
1995. Mr. Erburu is chairman of the board of trustees of the
National Gallery of Art and chairman of the Board of Councilors
of the College of Letters, Arts and Science of the University of
Southern California. He is a director of the Pacific Council on
International Policy, the Ahmanson Foundation and the William
and Flora Hewlett Foundation.
[PHOTO OMITTED]
OSCAR FANJUL DIRECTOR SINCE 2001
AUDIT COMMITTEE
COMPENSATION COMMITTEE
Mr. Fanjul, age 54, is vice chairman and chief executive officer
of Omega Capital, a private investment firm in Spain. Mr. Fanjul
is honorary chairman of Repsol YPF, where he was chairman and
chief executive officer from its inception in 1986 until 1996.
He was chairman of Hidroelectrica del Cantabrico from 1999 to
2001 and chairman of NH Hoteles from 1997 until 1999. Mr. Fanjul
is a director of Acerinox, the London Stock Exchange, Unilever
(advisory director) and a member of MMC's international advisory
board.
[PHOTO OMITTED] RAY J. GROVES DIRECTOR SINCE 1994
Mr. Groves, age 68, is chairman and chief executive officer of
Marsh Inc., a subsidiary of MMC. He joined MMC as a senior
advisor in August 2001, became president and chief operating
officer of Marsh in October 2001 and chief executive officer of
Marsh in January 2003. Prior to joining MMC, he was chairman of
Legg Mason Merchant Banking, Inc. from 1995 to 2001, and
chairman and chief executive officer of Ernst & Young from 1977
until 1994. He is a director of Boston Scientific Corporation,
Electronic Data Systems Corporation and The Gillette Company.
Mr. Groves is a managing director of the Metropolitan Opera
Association and a director and former chairman of The Ohio State
University Foundation.
6
DIRECTORS CONTINUING IN OFFICE
(TERM EXPIRING IN 2005)
[PHOTO OMITTED] JEFFREY W. GREENBERG DIRECTOR SINCE 1996
EXECUTIVE COMMITTEE (CHAIR)
Mr. Greenberg, age 52, is chairman and chief executive officer
of MMC. Mr. Greenberg joined MMC in 1995 and was chairman of MMC
Capital, Inc., a subsidiary of MMC, from 1996 until 2002. He
became chief executive officer of MMC in 1999 and was elected
chairman in 2000. Mr. Greenberg is a trustee of The Brookings
Institution, Brown University, the Metropolitan Museum of Art
and New York-Presbyterian Hospital.
[PHOTO OMITTED]
STEPHEN R. HARDIS DIRECTOR SINCE 1998
EXECUTIVE COMMITTEE
AUDIT COMMITTEE (CHAIR)
Mr. Hardis, age 68, was chairman of Eaton Corporation from 1996
until his retirement in 2000. Mr. Hardis joined Eaton in 1979,
and was its chief executive officer from 1995 to 2000. He is
chairman of Axcelis Technologies, Inc. and a director of
American Greetings Corporation, Apogent Technologies Inc.,
Lexmark International Corporation, Nordson Corporation,
Progressive Corporation and Steris Corporation.
[PHOTO OMITTED]
THE RT. HON. LORD LANG OF MONKTON, DL DIRECTOR SINCE 1997
EXECUTIVE COMMITTEE
COMPENSATION COMMITTEE
DIRECTORS & GOVERNANCE COMMITTEE
Lord Lang, age 63, was a member of the British Parliament from
1979 to 1997. He served in the cabinet as president of the Board
of Trade and secretary of state for trade and industry from 1995
to 1997 and as secretary of state for Scotland from 1990 to
1995. Lord Lang is chairman of BFS US Special Opportunities
Trust plc, Thistle Mining Inc. and Second Scottish National
Trust plc. He is also chairman of the Patrons of the National
Galleries of Scotland and a governor of Rugby School, England.
[PHOTO OMITTED] MORTON O. SCHAPIRO DIRECTOR SINCE 2002
AUDIT COMMITTEE
DIRECTORS & GOVERNANCE COMMITTEE
Mr. Schapiro, age 50, is president of Williams College. Prior to
joining Williams College, he was dean of the College of Letters,
Arts and Sciences of the University of Southern California from
1994 to 2000, the university's vice president for planning from
1999 to 2000 and chair of its Department of Economics from 1991
to 1994. Mr. Schapiro is a trustee of the Williamstown Theatre
Festival, the Sterling & Francine Clark Art Institute, the
College Board, Massachusetts Museum of Contemporary Art and
Hillel.
7
[PHOTO OMITTED] ADELE SIMMONS DIRECTOR SINCE 1978
EXECUTIVE COMMITTEE
AUDIT COMMITTEE
Mrs. Simmons, age 62, is vice chair of Chicago Metropolis 2020
and president of the Global Philanthropy Partnership. From 1989
to 1999, she was president of the John D. and Catherine T.
MacArthur Foundation. Ms. Simmons is a senior associate of the
Center for International Studies at the University of Chicago
and a director of The Field Museum and the Global Fund for
Women.
[PHOTO OMITTED] A. J. C. SMITH DIRECTOR SINCE 1977
EXECUTIVE COMMITTEE
Mr. Smith, age 69, is chairman of Putnam Investments, a
subsidiary of MMC. Mr. Smith was chairman of MMC from 1992 to
2000 and was its chief executive officer 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.
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.
DIRECTORS CONTINUING IN OFFICE
(TERM EXPIRING IN 2006)
[PHOTO OMITTED] PETER COSTER DIRECTOR SINCE 1988
Mr. Coster, age 64, is president of Mercer Inc., a subsidiary of
MMC. Mr. Coster joined Mercer in 1984 upon its acquisition of a
U.K. consulting firm that he joined in 1962. Mr. Coster became
president of Mercer in 1987. He is a trustee of The Foundation
Fighting Blindness.
[PHOTO OMITTED] CHARLES A. DAVIS DIRECTOR SINCE 2000
Mr. Davis, age 55, is vice chairman of MMC and chairman and
chief executive officer of MMC Capital. He joined MMC Capital as
president in 1998, was named chief executive officer in 1999 and
chairman in 2002. He has been vice chairman of MMC since 1999.
Prior to joining MMC, Mr. Davis was a partner of Goldman Sachs
Group L.P., a firm he joined in 1975. Mr. Davis is a director of
Axis Capital Holdings Limited, Media General, Inc., Progressive
Corporation and Merchants Bancshares, Inc.
8
[PHOTO OMITTED] GWENDOLYN S. KING DIRECTOR SINCE 1998
AUDIT COMMITTEE
DIRECTORS & GOVERNANCE COMMITTEE
Ms. King, age 63, is president of Podium Prose, a speaker's
bureau. From 1992 until 1998 she was senior vice president,
corporate and public affairs at Peco Energy. From 1989 to 1992
she served as commissioner of the Social Security Administration
in the U.S. Department of Health and Human Services. Ms. King is
a director of Countrywide Financial Corporation, Lockheed Martin
Corporation, Monsanto Company and the National Association of
Corporate Directors.
[PHOTO OMITTED]
DAVID A. OLSEN DIRECTOR SINCE 1997
AUDIT COMMITTEE
Mr. Olsen, age 66, was chairman of Johnson & Higgins from 1991
until its business combination with MMC in 1997. He served as
vice chairman of MMC from May through December of 1997. He
joined Johnson & Higgins in 1966, and was its chief executive
officer from 1990 to 1997. Mr. Olsen is a director of U.S. Trust
Corporation. He is an honorary director of New York's South
Street Seaport Museum.
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 ten
meetings during 2003.
CORPORATE GOVERNANCE GUIDELINES
Our board of directors has adopted the MMC Guidelines for Corporate
Governance. These guidelines are posted on the MMC website and a print copy is
available to any stockholder upon request.
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 of both MMC and the New York Stock Exchange.
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;
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; and
o the non-executive directors meet at regularly scheduled executive sessions
without management, at which meetings the chair of the Directors &
Governance Committee presides.
DIRECTOR INDEPENDENCE
It is the policy of MMC that a majority of the members of its board of
directors be independent of MMC's management. For a director to be deemed
"independent", the board must affirmatively determine that the director has no
direct or indirect material relationship with MMC. To assist the board in
determining director independence, the board has adopted the following
guidelines which include the categorical standards established by the New York
Stock Exchange, as amended from time to time, and which currently are as
follows:
A director will not be deemed "independent" if, within the preceding three
years:
(a) the director was employed by MMC or a member of his or her immediate
family was employed by MMC as an executive officer;
(b) the director, or a member of his or her immediate family, received
more than $100,000 per year in direct compensation from MMC (other
than director and committee fees and pension or certain other forms of
deferred compensation);
(c) the director was employed by, or affiliated with, or a member of his
or her immediate family was employed in a professional capacity by,
MMC's independent auditor;
(d) an MMC executive officer was on the compensation committee of a
company which concurrently employed the director, or which employed an
immediate family member of the director as an executive officer; or
(e) the director was an executive officer or employee, or the director's
immediate family member was an executive officer, of a company that
made payments to, or received payments from, MMC for property or
services in an amount which exceeds the greater of $1 million or 2% of
such company's consolidated gross revenues.
In addition, a director who satisfies the independence standards of the New
York Stock Exchange as set forth above will be presumed "independent" unless,
within the preceding three years:
(f) the director served as an executive officer, director or trustee of a
charitable organization to which MMC's charitable contributions (other
than matching contributions) exceed the greater of $1 million or 2% of
such organization's consolidated gross revenues in a particular fiscal
year.
10
With respect to items (a) through (f) above, the term "MMC" includes any
subsidiaries within MMC's consolidated reporting group. The term "immediate
family" includes a person's spouse, parents, children, siblings, mothers and
fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and
anyone (other than domestic employees) who shares such person's home.
Any director who fails to meet any of the standards outlined above will be
presumptively disqualified from a finding of independence.
The board has determined that the following commercial relationships do not
impair a director's independence:
o A director's ownership interest in MMC stock, Putnam mutual funds or the
private equity funds managed by MMC Capital; and
o A director's use of any of the services provided by MMC's subsidiaries in
the ordinary course of the subsidiaries' business (i.e., personal insurance
placements and any other services).
In accordance with these guidelines, the board has determined that the
following directors are independent: Mr. Bernard; Mr. Erburu; Mr. Fanjul; Mr.
Hardis; Ms. King; Lord Lang; Mr. Olsen; Mr. Schapiro and Ms. Simmons. In
addition, the board has determined that Zachary W. Carter, a new director
nominee, also will be an independent director if elected at the 2004 annual
meeting.
COMMITTEES
Our board has established an Executive Committee, an Audit Committee, a
Compensation Committee and a Directors & Governance Committee to assist the
board in discharging its responsibilities. Following each committee meeting the
respective committee chair reports the highlights of the meeting to the full
board.
Membership on each of the Audit, Compensation, and Directors & Governance
Committees is limited to independent non-executive directors. The
charters for these committees can be viewed on our website at
http://www.mmc.com/corpgov.html. In addition, MMC's Audit Committee charter is
attached to this proxy statement as Appendix A.
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 current members of the Executive Committee are Messrs. Bernard,
Greenberg (Chair), Hardis, Smith, Lord Lang and Ms. Simmons. The committee held
three meetings during 2003.
THE AUDIT COMMITTEE:
The Audit Committee is charged with assisting the board in fulfilling its
oversight responsibilities with respect to:
o the integrity of MMC's financial statements;
o the qualifications, independence and performance of MMC's independent
auditors;
o the performance of MMC's internal audit function; and
o compliance by MMC with legal and regulatory requirements.
The Audit Committee selects and oversees MMC's independent auditors, and
pre-approves all services to be performed by the independent auditors pursuant
to the Audit Committee pre-approval policy. The current members of the Audit
Committee are Messrs. Fanjul, Hardis (Chair), Olsen, Schapiro, Ms. King and Ms.
Simmons. All members of the Audit Committee are independent as required by MMC
and the listing standards of the New York Stock Exchange.
The board of directors has determined that Stephen R. Hardis, an
independent director and the chair of the Audit Committee, has the requisite
qualifications to satisfy the SEC definition of "audit committee financial
expert". Though Mr. Hardis currently serves on the audit committees of four
public companies including MMC, the board has determined that Mr. Hardis is able
to serve effectively on our Audit Committee.
The Audit Committee held ten meetings during 2003.
THE COMPENSATION COMMITTEE:
o evaluates the performance and determines the compensation of MMC's chief
executive officer;
11
o reviews and approves the compensation of other senior executives; and
o makes recommendations to the board with respect to MMC's incentive
compensation plans and equity-based plans and discharges the
responsibilities of the committee set forth in these plans.
The current members of the Compensation Committee are Messrs. Bernard,
Erburu, Fanjul and Lord Lang. All members of the Compensation Committee are
independent as required by MMC and the listing standards of the New York Stock
Exchange. The Compensation Committee held eight meetings during 2003.
THE DIRECTORS & GOVERNANCE COMMITTEE:
o develops, reviews and periodically reassesses MMC's corporate governance
principles and recommends proposed changes to the board;
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 current members of the Directors & Governance Committee are Mr. Erburu,
Lord Lang, Ms. King and Mr. Schapiro. All members of the committee are
independent as required by MMC and the listing standards of the New York Stock
Exchange. The Directors & Governance Committee held six meetings in 2003.
POLICY ON STOCKHOLDER NOMINATIONS OF DIRECTORS
The Directors & Governance Committee gives equal consideration to all
director nominees whether recommended by our stockholders, management or current
directors (both executive and non-executive).
The board has determined that 15 to 19 directors is the appropriate size
for the board and that this range is flexible enough to accommodate the
availability of any outstanding candidate at any time. The quality of the
individuals serving and the overall balance of executive and non-executive
members of the board are more important than the precise number of members, and
these considerations could lead to a Board outside this range from time to time.
All directors represent the interests of all stockholders, not just the
interests of any particular stockholder, stockholder group or other
constituency. Candidates for the board of directors must be experienced,
dedicated, and meet the highest standards of ethics and integrity. The Directors
& Governance Committee, with the active involvement of the board chairman,
periodically reviews with the board the requisite skills and characteristics for
new directors as well as the composition of the board as a whole, taking into
account, among other things, the mix and diversity of skills, backgrounds and
experience. A majority of our directors must satisfy the independence
requirements of both MMC and the New York Stock Exchange. Each member of the
Audit Committee must be financially literate and at least one member must
possess the requisite qualifications to satisfy the SEC definition of "audit
committee financial expert".
Once a candidate is identified, the Directors & Governance Committee will
consider the candidate's mix of skills and experience with businesses and other
organizations of comparable size, as well as his or her reputation, background
and time availability (in light of anticipated needs). The committee will also
consider the interplay of the candidate's experience with the experience of
other board members, the extent to which the candidate would be a desirable
addition to the board and any committees of the board and any other factors it
deems appropriate.
Stockholders may propose director nominees for consideration by submitting
a recommendation in writing to:
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, New York 10036-2774
Attn: Directors & Governance Committee
c/o Mr. Leon J. Lichter,
Corporate Secretary
The Directors & Governance Committee may ask any proposed nominee to
provide such information as is reasonably necessary to determine his or her
eligibility and qualifications to serve as a director of MMC, including
information that relates to a candidate's independence and financial literacy.
12
Depending on the needs of the Board, the Directors & Governance Committee
may consider director nominees proposed by stockholders at anytime throughout
the year, but in no event will a nominee be considered later than the next
annual meeting of stockholders for which a recommendation was timely received.
To be timely received in connection with an annual meeting of stockholders, a
recommendation on a proposed director candidate should be sent to us at the
above address no later than the December 31st preceding that annual meeting.
ATTENDANCE
The average attendance by directors at meetings of the board and committees
thereof was approximately 95%. All current directors attended at least 75% of
the meetings of the board and committees on which they served. All directors are
expected to attend our annual meeting of stockholders. In 2003, all of our
directors attended the annual stockholders' meeting.
CODES OF BUSINESS CONDUCT AND ETHICS
We have adopted the MMC Code of Business Conduct and Ethics that is
applicable to all directors, officers and other employees of MMC. This code is
posted on the MMC website and a print copy is available to any stockholder upon
request. We have also adopted the Code of Ethics for Chief Executive and Senior
Financial Officers which applies to our chief executive officer, chief financial
officer and controller and which is filed as an exhibit to our 2002 Annual
Report on Form 10-K.
COMMUNICATIONS WITH THE BOARD
To report any issue relating to the accounting, internal accounting
controls or auditing practices of MMC (including its subsidiaries and
affiliates), employees, stockholders and others may contact the company by mail
or telephone. Anyone who wishes to send a communication to all or certain
directors, including a communication to our independent directors, may also do
so by mail or telephone:
By mail to:
Marsh & McLennan Companies, Inc.
P.O. Box 4974
New York, N.Y. 10185-4974
By telephone to the MMC Compliance & Ethics Line:
CANADA & THE U.S.: 1-800-381-2105
OUTSIDE CANADA & THE U.S. use your country's AT&T Direct(R) service number
to reach the MMC Ethics & Compliance Line toll-free.
MMC's procedures for handling complaints and concerns of employees
and other interested parties are posted on our website at
http://www.mmc.com/corpgov.html.
TENURE
Non-executive directors retire at the annual meeting following their 72nd
birthday, 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 a former MMC chief executive officer serves on the
board.
DIRECTORS' COMPENSATION
Directors who are also employees receive no specific compensation for their
services as directors.
With regard to compensation for the services of our non-executive
directors, we paid the following compensation to Messrs. Bernard, Erburu,
Fanjul, Hardis, Olsen, Schapiro, Smith, Lord Lang, Ms. King and Ms. Simmons:
o a basic retainer of $40,000 per year and an annual stock grant as
determined by the Directors & Governance Committee, which was 1,800 shares
in 2003 (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 matching-gift program
13
for certain charitable gifts by employees up to a maximum of $5,000 per year.
Under the terms of MMC's Directors Stock Compensation Plan, the
non-executive directors receive twenty-five percent of their 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 non-executive 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.
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.
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., a subsidiary of MMC. Neither the directors nor the fund are
required to pay management or carried interest performance fees in connection
with their investments in Trident II.
Since June 1, 2000, MMC has had an annual 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. In November 2003 Mr. Smith was
appointed chairman of Putnam Investments, a subsidiary of MMC. He also serves as
a director of Marsh & McLennan Risk Capital Holdings, Ltd. and MMC Capital. For
these services MMC pays Mr. Smith $2 million per year and provides support and
other services and business expense reimbursement. On May 16, 2003 the term of
this agreement was extended through May 31, 2004. For services rendered in 2003,
Mr. Smith received an additional incentive payment of $500,000.
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table reflects as of February 27, 2004 (except with respect
to interests in MMC's Stock Investment Plan and Stock Investment Supplemental
Plan, which are as of December 31, 2003) the number of shares of our common
stock which each director, nominee and named executive officer has reported as
owning beneficially or otherwise having a pecuniary interest in, and which all
directors, nominees 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 59,971 65,971
Mathis Cabiallavetta ................... 15,740 823,753 839,493
Zachary W. Carter ...................... -- -- --
Peter Coster ........................... 70,542 1,158,053 1,228,595
Charles A. Davis ....................... 29,622 1,002,403 1,032,025
Robert F. Erburu ....................... -- 42,977 42,977
Oscar Fanjul ........................... 16,635 -- 16,635
Jeffrey W. Greenberg ................... 113,284 2,514,111 2,627,395
Ray J. Groves .......................... 9,727 391,238 400,965
Stephen R. Hardis ...................... 22,000 17,057 39,057
Gwendolyn S. King ...................... -- 12,385 12,385
Lord Lang .............................. 6,260 3,800 10,060
David A. Olsen ......................... 425,680 213,154 638,834
Morton O. Schapiro ..................... -- 4,130 4,130
Adele Simmons .......................... 194,882 178,271 373,153
A.J.C. Smith ........................... 1,176,488 1,748,128 2,924,616
All directors, nominees and executive
officers as a group, including the
above (20 individuals) ............... 2,190,744 9,624,561 11,815,305
--------- --------- ----------
14
AMOUNT PERCENTAGE OF STOCK
BENEFICIALLY OUTSTANDING AS OF
NAME OWNED DECEMBER 31, 2003
--------- ------------ -----------------
Marsh & McLennan Companies
Stock Investment Plan (3)
1166 Avenue of the Americas
New York, NY 10036-2774 ............... 27,472,785 5.2%
Barclays Global Investors, NA (4)
45 Fremont Street
San Francisco, CA 94105 ............... 27,159,881 5.2%
----------
(1) As of February 27, 2004, no director, nominee 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 2.3% 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, 59,971 shares; Mr. Cabiallavetta, 120,007 shares; Mr.
Coster, 147,717 shares; Mr. Davis, 196,036 shares; Mr. Erburu, 42,977
shares; Mr. Greenberg, 142,980 shares; Mr. Groves, 129,636 shares; Mr.
Hardis, 17,057 shares; Ms. King, 11,985 shares; Mr. Schapiro, 4,130 shares;
Mrs. Simmons, 29,781 shares; and all directors and executive officers as a
group, 1,217,728 shares. Additionally, includes shares of stock which may
be acquired on or before April 27, 2004 through the exercise of stock
options as follows: Mr. Cabiallavetta, 635,000 shares; Mr. Coster, 855,000
shares; Mr. Davis, 732,500 shares; Mr. Greenberg, 2,010,000 shares; Mr.
Groves, 250,000 shares; Mr. Smith, 1,700,000 shares; and all directors,
nominees and executive officers as a group, 7,092,650 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 the same proportion as 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
27,472,785 shares held in the Plan at December 31, 2003, approximately
24,043, or .01%, 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.
(4) Based upon the number of shares listed in a Schedule 13G filed by Barclays
Global Investors, dated February 13, 2004, on behalf of itself and
affiliated entities.
15
COMPENSATION OF EXECUTIVE OFFICERS
The following tables contain information with respect to the CEO and the
five other most highly compensated executive officers of MMC. The number of
shares and per share prices are adjusted 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 2003, 2002 and 2001.
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------------- --------------------------------------------------
NAME AND OTHER ANNUAL RESTRICTED SECURITIES LTIP ALL OTHER
PRINCIPAL COMPENSATION STOCK UNDERLYING PAYOUTS COMPENSATION
POSITION YEAR SALARY($) BONUS($)(1) ($) AWARDS ($)(2) OPTIONS(#)(3) ($)(4) ($)(5)
---- --------- ---------- ------------ ------------ ------------ --------- ------------
Jeffrey W. Greenberg ........... 2003 1,200,000 3,500,042 -- 1,056,988 500,000 542,293 51,602
Chairman and Chief 8,060,625(6)
Executive Officer 2002 1,200,000 4,500,040 91,798 921,150 450,000 2,107,832 48,003
Marsh & McLennan 2001 1,200,000 3,750,037 188,642 839,020 400,000 -- 48,902
Companies, Inc.
Charles E. Haldeman(7) ......... 2003 483,333 8,600,006 -- 4,000,076 45,000 -- 15,000
President and Chief 80,000(9)
Executive Officer 2002 75,000 8,600,008 -- 2,595,408 55,600 -- 4,000,000
Putnam Investments 869,952(8) 19,200(9)
Charles A. Davis ............... 2003 900,000 2,350,042 -- 1,341,283 250,000 599,175 41,252
Vice Chairman 2002 850,000 2,000,000 -- 636,281 200,000 1,794,373 34,002
Marsh & McLennan 2001 800,000 1,750,046 -- 551,977 200,000 -- 32,001
Companies Inc.
President
MMC Capital, Inc.
Mathis Cabiallavetta(10) ....... 2003 900,000 2,200,043 -- 2,596,591 300,000 -- 54,000
Vice Chairman 2002 850,000 1,900,040 -- 560,000 220,000 -- 48,450
Marsh & McLennan 2001 800,000 1,750,046 -- 516,320 200,000 -- 46,200
Companies, Inc.
Ray J. Groves .................. 2003 900,000 2,000,013 -- 1,518,459 200,000 -- 54,000
Chief Executive Officer 2002 850,000 1,700,044 -- 595,366 200,000 -- 20,188
Marsh Inc. 2001 333,333 400,059 -- 1,012,601 200,000 -- --
Peter Coster ................... 2003 950,000 1,650,013 -- 666,345 200,000 -- 57,000
President 2002 950,000 1,550,031 515,930 820,337 120,000 -- 54,150
Mercer Inc. 2001 950,000 1,650,039 198,051 791,878 140,000 -- 54,863
----------
(1) The bonus amounts shown in the table include both cash and (except as noted
below with respect to Mr. Haldeman) the value of restricted stock units of
MMC, respectively, for the years 2003, 2002 and 2001, as follows: Mr.
Greenberg $2,000,000 and $1,500,042 in 2003, $3,000,000 and $1,500,040 in
2002 and $2,500,000 and $1,250,037 in 2001; Mr. Davis $1,000,000 and
$1,350,042 in 2003, $900,000 and $1,100,000 in 2002 and $875,000 and
$875,046 in 2001; Mr. Cabiallavetta $1,000,000 and $1,200,043 in 2003,
$950,000 and $950,040 in 2002 and $875,000 and $875,046 in 2001; Mr. Groves
$1,200,000 and $800,013 in 2003, $950,000 and $750,044 in 2002 and $250,000
and $150,059 in 2001; and Mr. Coster $850,000 and $800,013 in 2003,
$750,000 and $800,031 in 2002 and $750,000 and $900,039 in 2001. The
restricted stock units of MMC vest three years from the date of grant.
Other features of the restricted stock units are described in footnote 2,
below. For Mr. Haldeman, the bonus amounts shown in the table include: for
2003, $6,500,000 of cash and $2,100,006 of Class B common shares of Putnam
("Putnam Class B Shares") (as described further in footnote 8, below); and
for 2002, $6,600,000 of cash and $2,000,008 of MMC stock. These bonus
amounts were guaranteed to Mr. Haldeman in his employment letter upon
joining Putnam in 2002. (Bonus amounts shown in this column for 2002 and
2001 have been revised from the amounts shown in last year's proxy
statement to include restricted stock units awarded in 2003 and 2002 as a
component of each officer's bonus for 2002 and 2001 performance,
respectively.)
16
(2) Amounts shown in the table for 2003 include the value of restricted stock
of MMC granted in March 2003. The restricted stock vests in the year
following completion of ten (10) years of service from the date of grant.
The amounts shown in 2003 for Messrs. Greenberg, Davis, Cabiallavetta and
Groves also include the value of restricted stock units of MMC granted
under MMC's voluntary deferral programs. These restricted stock units vest
no earlier than three years from the date of grant. The amount shown in
2003 for Mr. Haldeman represents restricted stock units of MMC granted to
Mr. Haldeman in 2004 for 2003 performance, one-half of which vest after
three years and one-half of which vest after five years. 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 holders of restricted stock units receive dividend
equivalent payments that are equal in amount to dividends paid on shares of
common stock. 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 ten years of service will receive payment in
shares of stock upon forfeiture of their awards 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,
subject to execution of a non-solicitation agreement. (Amounts shown in
this column for 2002 and 2001 have been revised from the amounts shown in
last year's proxy statement to move the value of bonus-related restricted
stock units from this column to the "Bonus" column.)
As of December 31, 2003, each individual in the table had outstanding
restricted stock and restricted stock units of MMC with an aggregate value
(using the closing price of common stock on the Consolidated Transaction
Reporting System on December 31, 2003 of $47.89) as follows: Mr. Greenberg,
356,800 shares (including the shares described in footnote 6, below) and
98,808 units worth $17,087,152 and $4,731,915, respectively; Mr. Haldeman,
41,700 units worth $1,997,013; Mr. Davis, 73,559 shares and 102,712 units
worth $3,522,741 and $4,918,878, respectively; Mr. Cabiallavetta, 68,500
shares and 87,634 units worth $3,280,465 and $4,196,793, respectively; Mr.
Groves, 11,568 shares and 63,587 units worth $553,992 and $3,045,182,
respectively; and Mr. Coster, 171,700 shares and 119,201 units worth
$8,222,713 and $5,708,536, respectively.
(3) Amounts shown in the table for 2003 represent options to purchase shares of
MMC (and, as noted in footnote 9, below, with respect to Mr. Haldeman,
options to purchase Putnam Class B Shares) granted in March 2003.
(4) MMC Capital's Long Term Incentive Plan ("LTIP") 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. Vesting schedules under the LTIP will accelerate upon a
change in control of MMC (as described in footnote 2 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 partnership interests in the
general partner of Trident II, and in 1999, 2000 and 2003, Mr. Davis
purchased partnership interests in the general partners of five private
equity funds managed by MMC Capital, including Trident II and Trident III.
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. Based on the carrying
values contained in the financial statements of these private equity funds
as of December 31, 2003, the estimated value of Mr. Greenberg's and Mr.
Davis' interest in future payouts in respect of these participations
aggregated approximately $2.8 million and $4.9 million, respectively, in
each case based on a liquidation value as of that date and subject to
realization of estimated returns. The carried interests are subject to
reduction or forfeiture in connection with termination of employment under
certain circumstances. 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. In 2003, Mr. Davis purchased, on an after-tax,
out-of-pocket basis, a limited partnership interest in a fund that invests
alongside a private equity fund managed by a subsidiary of MMC. Neither he
nor the fund is required to pay any fees, except in some cases an
administrative fee, in connection with these investments.
17
(5) Amounts shown in the table for 2003 consist of the following: (a) MMC
matching contributions under the Stock Investment Plan of $8,600 for Mr.
Greenberg, $3,763 for Mr. Davis, $12,000 for Mr. Cabiallavetta, $5,250 for
Mr. Groves and $12,000 for Mr. Coster, and under the Stock Investment
Supplemental Plan of $43,002 for Mr. Greenberg, $37,489 for Mr. Davis,
$42,000 for Mr. Cabiallavetta, $48,750 for Mr. Groves and $45,000 for Mr.
Coster and (b) contributions by Putnam of $15,000 to the Putnam Profit
Sharing Retirement Plan for Mr. Haldeman. The 2002 amount shown for Mr.
Haldeman of $4 million was paid to him to offset the value of amounts
forfeited from his prior employer in connection with his joining Putnam in
2002.
(6) This amount represents the value of a special 10-year restricted stock
grant to Mr. Greenberg of 187,500 restricted shares, as described in the
Compensation Committee Report on page 25 of this proxy statement. The
restricted stock vests in the year following completion of ten (10) years
of service from the date of grant and, except as noted below, is subject to
the same conditions as the restricted stock described in footnote 2, above.
After the ten (10) year vesting period, Mr. Greenberg must retain at least
50% of the after-tax shares until at least one year following his
termination as an officer and/or director of MMC. This grant is also
subject to non-competition and non-solicitation restrictions that apply
both during and after employment.
(7) Mr. Haldeman joined Putnam in 2002. Mr. Haldeman's compensation for 2002
and 2003 was based in part on commitments made to him in connection with
his joining Putnam in 2002.
(8) This amount represents the value of restricted Putnam Class B Shares. At
December 31, 2003, Mr. Haldeman had 14,400 restricted Putnam Class B Shares
with an estimated aggregate value of $484,128 based on a specified
valuation methodology for determining fair market value which at December
31, 2003 was $33.62 per share. All grants of restricted Putnam Class B
Shares include the right to dividend payments equal in amount to dividends
paid on the outstanding Class A Shares of Putnam. The restricted Putnam
Class B Shares vest at a rate of 25% a year beginning with the first
anniversary of the date of the grant. Upon certain corporate events
affecting Putnam or MMC, vesting of shares of restricted Putnam Class B
Shares may be accelerated.
(9) Represents options to purchase Putnam Class B shares.
(10) Mr. Cabiallavetta's US dollar-denominated salary and cash bonus for 2003
were paid approximately 66% in Swiss Francs. The Swiss Franc amounts for
2003 were determined using an average exchange rate for 2002 (1.53 CHF to 1
US$). Were fluctuating exchange rates to have been applied, Mr.
Cabiallavetta's 2003 salary and cash bonus amounts would have been $982,848
and $1,125,695, respectively.
18
OPTION GRANTS IN 2003
The table below describes MMC stock options granted in March 2003 and stock
options to purchase Putnam Class B Shares granted to Mr. Haldeman in March 2003.
INDIVIDUAL GRANTS(1)
--------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES PRICE EXPIRATION -------------------------------
NAME GRANTED IN 2003 ($/SH) DATE 5%($) 10%($)
---- ---------- ---------- -------- ---------- ------------- -------------
Jeffrey W. Greenberg ......... 500,000 2.9 42.99 3/19/2013 313,518,090 34,257,494
Charles E. Haldeman .......... 45,000 0.3 42.99 3/19/2013 1,216,628 3,083,174
80,000(3) 3.7 39.57 3/15/2013 1,990,829 5,045,151
Charles A. Davis ............. 250,000 1.5 42.99 3/19/2013 6,759,045 17,128,747
Mathis Cabiallavetta ......... 300,000 1.7 42.99 6/19/2013 8,110,854 20,554,497
Ray J. Groves ................ 200,000 1.2 42.99 3/19/2013 5,407,236 13,702,998
Peter Coster ................. 200,000 1.2 42.99 3/19/2013 5,407,236 13,702,998
MMC Stockholders(4) .......... 14,247,903,240 36,106,984,213
----------
(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 2 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. Haldeman was granted an option to acquire Putnam Class B Shares which
becomes exercisable 25% a year beginning on March 15, 2004. The fair market
value of each Putnam Class B Share on the date of grant was $39.57.
(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 20, 2003 at an
exercise price of $42.99.
19
AGGREGATED OPTION EXERCISES IN 2003 & YEAR-END OPTION VALUES
The following table sets forth certain information concerning stock options
exercised during 2003 and the number and value of specified unexercised options
at December 31, 2003. There were no stock option exercises by any of the named
executives in 2003.
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXCERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE DECEMBER 31, 2003 DECEMBER 31, 2003(1)
ACQUIRED ON REALIZED ---------------------------------- --------------------------------
NAME EXERCISE(#) ($) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
------ ------------ -------- -------------- ---------------- -------------- ----------------
Jeffrey W. Greenberg ........... -- -- 1,572,500 1,137,500 24,809,587 2,748,000
Charles E. Haldeman ............ -- -- 13,900 86,700 16,819 270,957
4,800(2) 94,400(2) -- --
Charles A. Davis ............... -- -- 520,000 550,000 3,445,737 1,404,000
Mathis Cabiallavetta ........... -- -- 405,000 615,000 1,014,875 1,649,000
Ray J. Groves .................. -- -- 150,000 450,000 -- 980,000
Peter Coster ................... -- -- 710,000 390,000 12,984,359 1,105,300
----------
(1) The value of unexercised in-the-money stock options at December 31, 2 003
is presented pursuant to SEC rules and is based on the fair market value on
December 31, 2003, minus the grant price. Fair Market Value with respect to
MMC stock is based on the closing price on the Consolidated Transaction
Reporting System on December 31, 2003 of $47.89 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, 2003 was $33.62 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.
(2) Represents options to acquire Putnam Class B Shares.
20
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 ....... $ 75,718 $151,437 $302,874 $442,592 $522,592 $ 562,592
$ 900,000 ....... $ 85,718 $171,437 $342,874 $500,592 $590,592 $ 635,592
$1,000,000 ....... $ 95,718 $191,437 $382,874 $558,592 $658,592 $ 708,592
$1,100,000 ....... $105,718 $211,437 $422,874 $616,592 $726,592 $ 781,592
$1,200,000 ....... $115,718 $231,437 $462,874 $674,592 $794,592 $ 854,592
$1,300,000 ....... $125,718 $251,437 $502,874 $732,592 $862,592 $ 927,592
$1,400,000 ....... $135,718 $271,437 $542,874 $790,592 $930,592 $1,000,592
$1,500,000 ....... $145,718 $291,437 $582,874 $848,592 $998,592 $1,073,592
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. Haldeman
who participates in the Putnam Profit Sharing Retirement Plan and related plans
and not in MMC's U.S. retirement program, the 2003 compensation used to
calculate the Maximum Average Salary and the number of years of credited service
are as follows: Mr. Greenberg, $1,200,000, 9 years; Mr. Davis, $900,000, 7
years; Mr. Cabiallavetta, $900,000, 6 years; Mr. Groves, $900,000, 3 years; and
Mr. Coster, $950,000, 43 years.
21
COMPENSATION COMMITTEE REPORT
This report is submitted to the stockholders of Marsh & McLennan Companies,
Inc. ("MMC") by the Compensation Committee (the "Committee") of the board of
directors. The Compensation Committee consists solely of non-executive directors
who are independent, as determined by the board in accordance with MMC
guidelines and New York Stock Exchange listing standards. The Committee met
eight times in 2003.
By its charter, the Committee is charged with reviewing and approving MMC's
compensation philosophies and overseeing the development and implementation of
compensation programs for the CEO and other senior executives. The Committee
determines the compensation of MMC's chief executive officer ("CEO"), approves
the compensation of other senior executives and makes recommendations to the
board of directors with respect to incentive compensation plans and equity-based
plans. This report reflects the Committee's executive compensation policies,
plans and actions.
EXECUTIVE COMPENSATION PRINCIPLES
MMC is a professional services organization comprising businesses with
distinct economic characteristics, marketplaces and operating conditions. In its
consideration of the level, composition, and terms and conditions of
compensation for executive officers of MMC and its subsidiaries, the Committee
seeks to enable MMC to attract, retain and motivate the most highly qualified
and capable professionals available to lead the organization's businesses. To
that end, MMC's executive compensation program is designed to support business
strategies, to enhance the achievement of financial objectives and to reflect
marketplace practices and dynamics. The Committee also wants to ensure that a
substantial portion of executive officers' long-term compensation is tied to the
long-term performance of MMC and MMC's stock price. These principles are
reflected in the actions discussed below relating to salaries, annual incentive
awards and long-term compensation.
Federal tax law limits the ability of publicly-traded companies to secure
an income tax deduction for compensation paid to certain highly compensated
individuals. The Committee's policy is to take actions deemed to be in the best
interests of MMC and its stockholders, recognizing, however, that achieving the
desired flexibility in the design and delivery of compensation may result in
compensation that is not in all instances deductible for federal income tax
purposes because of the restrictions set forth in Section 162(m) of the Internal
Revenue Code.
MAJOR COMPENSATION COMPONENTS
The compensation program for executive officers comprises base salary,
annual performance-based incentive compensation and long-term incentive
compensation. The Committee reviews periodically the levels and components of
executive compensation and utilizes an independent compensation consulting firm
to provide data, to offer professional observations regarding the compensation
practices of comparable companies and to advise the Committee on specific
executive compensation subjects that arise. Survey data is developed from a
group of selected major corporations (16 in 2003) in the diversified financial,
banking and insurance sectors that are representative of the size and type of
company with which MMC competes in the marketplace for executive talent. This
grouping is broader than the peer group in the Stock Performance Graph set forth
below in order to obtain a meaningful understanding of competitive compensation
practices and levels for senior executive positions in comparable companies and
industry segments. The compensation components and levels among the comparator
companies are considered by the Committee in determining base salary, incentive
compensation awards and equity-based compensation for the CEO and in approving
the recommendations of the CEO for executive officers of MMC and its
subsidiaries, as described below. In addition, in 2002 and 2003 the Committee
utilized an independent compensation consulting firm to evaluate MMC CEO
compensation and MMC's equity compensation practices with respect to executive
officers, as discussed more fully below.
Members of Putnam's senior management group (including Mr. Haldeman)
participate in a compensation program designed over time to complement Putnam's
business needs and reflect its marketplace. Mr. Haldeman's compensation for 2003
was based in part on commitments made to him in connection with his joining
Putnam in 2002 and also reflects his increased responsibilities in connection
with becoming president and chief
22
executive officer of Putnam in November 2003. Annual incentive awards for Putnam
executives are made under plans that are funded based on the level of Putnam's
earnings, earnings growth, annual plan funding agreements with MMC or
predetermined plan formulae. Long-term incentive compensation for Putnam
executives is in the form of restricted stock and stock options with respect to
Class B shares of Putnam. Putnam employees may also be considered for grants of
MMC restricted stock and/or options from time to time. Because employees of
Putnam participate in a compensation program specific to Putnam, the discussion
provided in the following sections of this report relating to the compensation
of MMC's executive officers excludes Putnam.
BASE SALARY
Base salaries of executive officers are intended to reflect their roles and
responsibilities and be competitive with respect to the relevant marketplace as
to the availability of talent and compensation levels. In general, an executive
officer's base salary is adjusted when such an adjustment is necessary to
reflect a change in the individual's responsibilities, growth in their job role
or when market or internal equity conditions may warrant. Salaries for Messrs.
Cabiallavetta, Davis and Groves were increased in 2003 based on a combination of
these factors. In 2003, salaries accounted for 21% of total compensation
(excluding stock options) for MMC's executive officers.
ANNUAL INCENTIVE COMPENSATION
For 2003, annual incentive compensation for executive officers was
comprised of cash and restricted stock units. The size of the annual cash
incentive award pool is based on earnings and reflects MMC's net operating
income growth. However, the Committee may approve awards that, in the aggregate,
may be less than the pool. For 2003, the Committee approved an annual incentive
award pool based on MMC's pre-tax income for 2003 and pre-tax income growth over
2002.
With respect to individual annual incentive awards, the Committee exercises
its judgment, weighing the CEO's recommendation and evaluation of the executive
officer's managerial and professional role within the organization, relative
contribution (compared with the internal peer group) to the individual business
segment, the firm's overall operations and earnings growth, any special
circumstances and marketplace factors. Awards reflect judgments reached in
weighing these considerations and are not formulaic.
The restricted stock unit component of the annual incentive for executive
officers is distributable in shares and vests after three years of service from
the date of grant with no annual incremental vesting. These grants reflect
annual performance and are intended to serve as both a retention and longer-term
performance-linked component of the annual incentives for executive officers.
The proportion of restricted stock units relative to cash bonus is approved by
the Committee using the factors outlined in the preceding paragraph. For 2003,
the value of restricted stock units granted to executive officers ranged from
approximately 25% to 60% of the executive officer's total annual bonus. The
value of restricted stock units awarded to the named executive officers is
included in the Summary Compensation Table under the "Bonus" column for the year
earned.
In 2003, cash bonuses and restricted stock units constituted 27% and 21%,
respectively, of total compensation (excluding stock options) for MMC's
executive officers.
LONG-TERM COMPENSATION
The Committee believes that retaining and motivating the executive officers
of MMC by fostering stock ownership is essential to continuing success. The
Committee has relied historically on various forms of stock-based grants as
incentives and rewards for executive officers to reinforce a longer-term
perspective and to link executive officers' financial interests over time with
those of stockholders. The professional services businesses of MMC compete also
with privately-held firms that offer attractive equity ownership opportunities.
Relative to this market segment, MMC's ability to recruit, reward and retain
executives is heavily dependent on offering opportunities for long-term stock
accumulation. In 2003, long-term incentive grants to MMC executive officers were
made in the form of 10-year restricted stock and stock options that vest over
time. In addition, under voluntary deferral programs, a supplemental restricted
stock unit award with vesting requirements may be granted as an additional
inducement for long-term stock ownership.
23
The long-term restricted stock granted to executive officers vests in the
year following completion of ten (10) years of service from the date of grant
with no annual incremental vesting. This restriction period is longer than the
restriction period applied to similar restricted stock grants by companies in
the comparator group described above. The Committee believes restricted stock is
an effective retention tool because of the length of the restriction period and
is an appropriate reward for contributions over time. The long restriction
period can foster executive officers' accumulation of substantial MMC stock
ownership positions, linking their long-term capital accumulation opportunity to
shareholder return.
Stock options are another element of executive long-term compensation.
Executive officers are eligible for option grants on an annual basis. Individual
grants reflect factors discussed earlier including organization role,
performance, potential for future contributions to the long-term success of MMC
and marketplace factors. Stock options granted to executives have an exercise
price equal to the fair market value of MMC stock on the trading day prior to
the date of the grant and vest ratably over four (4) years of service from the
date of grant.
Within this framework, the mix and value of long-term incentive grants for
executive officers (other than the CEO) are approved by the Committee based on
the recommendations of the CEO. As noted earlier in this report, the Committee
utilized an independent compensation consulting firm to evaluate MMC's equity
compensation practices for executives and to compare the practices and resultant
equity holding levels with multiple groupings of comparator companies. As a
result of that study, long-term incentive grants made to certain executive
officers in 2003 include a special grant of 10-year restricted stock. The
special 10-year restricted stock award was made to executive officers who
recently joined MMC and is intended to enhance their share holdings for
long-term incentive and retention.
In 2003, 10-year restricted stock awards accounted for 31% of total
compensation (excluding stock options) for MMC's executive officers.
CEO COMPENSATION
Mr. Greenberg's compensation is composed of base salary, annual
performance-based incentive compensation and long-term compensation. Mr.
Greenberg has no employment agreement, nor does he have any special retirement
or severance arrangement with MMC.
The Committee evaluates Mr. Greenberg's performance and determines his
compensation by applying both the quantitative and qualitative criteria
described earlier for executive officers. In doing so, the Committee considers
MMC's current and long-term financial performance. The Committee also considers
Mr. Greenberg's influence on the strategic direction and long-term strength and
performance of MMC in the context of his broader leadership responsibilities,
including his role in developing talent, enabling value-creating collaboration
among MMC's businesses and leading corporate development.
Mr. Greenberg's base salary for 2003 was $1,200,000, unchanged since
January 1, 2000.
Mr. Greenberg participates in the same MMC annual incentive plan as MMC's
other executive officers. For 2003, the Committee's evaluation of Mr.
Greenberg's performance considered MMC's strong financial results measured by
net operating income increasing 10% and earnings per share increasing 15%. The
Committee also recognized Mr. Greenberg's outstanding leadership and his ongoing
role in guiding MMC and Putnam in the context of the regulatory and business
issues resulting from the revelations of inappropriate market timing in certain
Putnam mutual funds by a number of investment professionals who have now left
the firm.
Notwithstanding MMC's and Mr. Greenberg's positive performance in 2003, the
Committee considered the effects of the events at Putnam and made an annual
incentive award to Mr. Greenberg of $1,000,000 less than in 2002 (i.e., cash of
$3,000,000 in 2002 and $2,000,000 in 2003, and restricted stock units with a
value at grant of $1,500,000 in each year).
In 2003, Mr. Greenberg received long-term incentive grants of 21,000 shares
of 10-year restricted stock and 500,000 stock options. Mr. Greenberg also
received a supplemental grant of 3,285 restricted stock units under a voluntary
24
deferral program in connection with his deferral of previously granted
restricted stock units.
As noted earlier in this report, in 2002 and 2003 the Committee utilized an
independent compensation consulting firm to assist in evaluating Mr. Greenberg's
compensation, including components and amounts, relative to MMC's performance
against the 16-company comparator group as previously described on page 22. The
study compared Mr. Greenberg's compensation and MMC performance (measured by,
among other time frames, three-year total shareholder return) with the
compensation of CEOs of the comparator group. The study concluded that MMC's
performance was in the top quartile of the comparator group for the period
analyzed but that Mr. Greenberg's total compensation was below the average and
median of the group. The study also concluded that Mr. Greenberg's total MMC
equity holdings were significantly below the average and median of the
comparator group, primarily because Mr. Greenberg joined MMC in mid-career and
did not receive a large MMC stock grant upon joining MMC or upon becoming CEO.
The study found Mr. Greenberg's total equity holdings to be at the 34th
percentile of the comparator group.
The Committee believes it is important for Mr. Greenberg to have a
substantial ownership interest in MMC and that Mr. Greenberg's long-term equity
awards recognize his leadership and capacity to contribute to the long-term
growth and success of the company. Since Mr. Greenberg has no employment
agreement or special retirement or severance arrangement, his long-term
remuneration opportunities are based on MMC stock ownership. The Committee
believes that this emphasis on MMC stock serves as an incentive to build
stockholder value over the long-term. At the same time, the Committee believes
that Mr. Greenberg's equity grants should also serve as a retention tool. To
accomplish these objectives, the Committee established a program in March 2003
for a series of special 10-year restricted stock grants to Mr. Greenberg. The
restricted stock granted pursuant to this program vests in the year following
completion of ten (10) years of service from the date of grant. In addition,
after the ten (10) year vesting period, Mr. Greenberg must retain at least 50%
of the after-tax shares until at least one year following his termination as an
officer and/or director of MMC. This special grant is also subject to
non-competition and non-solicitation restrictions that apply both during and
after employment, the breach of which will require return of a portion of the
shares under certain circumstances. In 2003, Mr. Greenberg was granted 187,500
shares of 10-year restricted stock pursuant to this program. The value of this
special grant is included in the Summary Compensation Table under the column
captioned "Restricted Stock Awards."
Based on a review of CEO compensation for 2002 (latest data available), Mr.
Greenberg's total compensation for 2003, which includes base salary, annual
incentive compensation and long-term compensation (except the special restricted
stock award), was at approximately the 50th percentile of the reported 2002 data
for the comparator companies. His long-term compensation (including any
long-term incentive plan payouts and stock options, but excluding the special
restricted stock award) was at approximately the 55th percentile of the
comparator companies.
CONCLUSION
The Committee believes that MMC's executive compensation program is
designed and administered to attract exceptional talent and to motivate
executives to remain with MMC and to perform in an exceptional manner. By
ensuring that such persons are leading MMC's business units and operations, the
long-term interests of stockholders will be served. The Committee believes that
its actions in 2003 were consistent with this intent and faithful to the
compensation principles outlined above.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE MMC BOARD OF DIRECTORS
Lewis W. Bernard Oscar Fanjul
Robert F. Erburu The Rt. Hon. Lord Lang of
Monkton, DL
25
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, 1998 through
December 31, 2003.
[Line Chart Omitted]
1998 1999 2000 2001 2002 2003
MMC 100 168 209 195 172 184
S&P 500 100 121 110 97 76 97
Composite Industry Index 100 108 119 116 90 132
Assumes $100 invested at the closing price on December 31, 1998 with
dividends reinvested on the date of payment without commissions. This table does
not forecast future performance of MMC common stock.
26
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 "Compensation of Executive
Officers --Summary Compensation Table".
The aggregate amount received for all such services rendered in 2003 by MMC
and its subsidiaries was approximately $38.5 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.
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 2003
all Section 16(a) filing requirements applicable to such individuals were
complied with except for one report covering one transaction filed late by each
of Mr. Cabiallavetta and Ms. Simmons. In addition, for prior years, one
transaction was filed late by each of Mr. Olsen (1999) and Ms. Simmons (2001)
and two transactions were filed late by Mr. Smith (2001 and 2002).
27
ITEM 2
RATIFICATION OF SELECTION OF AUDITORS
The Audit Committee has recommended the selection of Deloitte & Touche LLP
as independent auditors for the 2004 fiscal year, subject to stockholder
ratification. Deloitte & Touche will audit our consolidated financial statements
for fiscal 2004 and perform other services. Deloitte & Touche acted as MMC's
independent auditors for the year ended December 31, 2003. 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
For the fiscal years ended December 31, 2003 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 2003 2002
------------------------------------------------------ ---------- ----------
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 ..... $9,675,000 $8,796,000
---------- ----------
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 other
accounting research services ....................... $3,680,000 $2,727,000
TAX FEES for tax consulting and compliance
services not related to the audit .................. $1,395,000 $2,055,000
ALL OTHER FEES including administrative services
related to regulatory compliance and other
non-audit services. In 2002 also includes market
research services and fees related to Marsh Inc.
financial system implementation services
contracted for in 2001 and concluded in 2002 ....... $ -- $5,722,000
The Audit Committee has adopted a policy regarding pre-approval of audit
and non-audit services provided by Deloitte & Touche LLP to MMC and its
subsidiaries. A copy of this policy is attached to this proxy statement as
Appendix B.
28
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, 2003 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 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, 2003 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
29
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 2005 Annual Meeting of Stockholders
of MMC must submit such proposal in writing to MMC in care of the Secretary of
MMC on or before December 2, 2004.
Stockholders who wish to present a proposal at the 2005 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 19, 2005 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. Leon J. Lichter,
Corporate Secretary
30
APPENDIX A
MARSH & MCLENNAN COMPANIES, INC.
AUDIT COMMITTEE CHARTER
(January 15, 2004)
PURPOSE OF COMMITTEE
The purpose of the Audit Committee of the Board of Directors of Marsh & McLennan
Companies, Inc. ("MMC") is to assist the Board in fulfilling its oversight
responsibilities with respect to (i) the integrity of MMC's financial
statements, (ii) the qualifications, independence and performance of MMC's
independent auditors, (iii) the performance of MMC's internal audit function,
(iv) compliance by MMC with legal and regulatory requirements and (v) the other
responsibilities set out herein.
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that MMC's financial statements and disclosures are complete and
accurate and are in accordance with generally accepted accounting principles and
applicable rules and regulations. These are the responsibilities of management
and the independent auditors. Furthermore, while the Committee is responsible
for reviewing MMC's policies and practices with respect to risk assessment and
management, it is the responsibility of the Chief Executive Officer and senior
management to assess and manage MMC's exposure to risk.
The Committee shall report to the Board on a regular basis.
COMMITTEE MEMBERSHIP
The Committee shall be comprised of three or more directors. Members of the
Committee shall be recommended by the MMC Directors and Governance Committee and
be elected by the full Board. As determined in the business judgment of the
Board, each member of the Committee shall satisfy the independence and
experience requirements of the New York Stock Exchange and any other legal and
regulatory requirements and at least one member of the Committee shall have
accounting or related financial management expertise as defined by the New York
Stock Exchange.
RESOURCES AND AUTHORITY OF THE COMMITTEE
The Committee shall have the resources and authority appropriate to discharge
its duties and responsibilities, including full access to MMC employees and
officers and internal or external advisors or consultants. If, in the course of
fulfilling its duties, the Committee wishes to consult with outside legal,
accounting or other advisors, the Committee may retain these advisors without
seeking Board approval.
COMMITTEE STRUCTURE AND OPERATIONS
The Board shall designate one member of the Committee as its chair. The
Committee may meet in person or telephonically or act by unanimous written
consent. The Committee chair, in consultation with Committee members, shall
determine the schedule of meetings of the Committee (which meetings shall occur
at least quarterly). Further meetings shall occur, or matters be submitted for
action by unanimous written consent, when deemed necessary or desirable by the
Committee, its chair or the Chairman of MMC. The Committee is to meet
periodically in separate sessions with the chief financial officer (and/or other
management personnel), with internal audit and with the independent auditors as
the Committee deems necessary.
The Committee chair, who may consult with internal audit, management or other
Committee members, develops the agenda for Committee meetings. Where
practicable, materials should be distributed to Committee members prior to each
Committee meeting.
DELEGATION TO SUBCOMMITTEE
The Committee may delegate all or a portion of its duties and responsibilities
to a subcommittee or subcommittees of the Committee.
A-1
ATTENDANCE
The Committee chair may invite such members of management, representatives of
the independent auditors and internal audit and other persons to the Committee's
meetings as he or she may deem desirable or appropriate.
COMMITTEE DUTIES AND RESPONSIBILITIES
A. Oversight of Independent Auditors and Audit Process:
1. The Committee shall have the sole authority to select (subject to
shareholder ratification), compensate, retain and oversee MMC's
independent auditors (including resolution of any disagreements
between management and the independent auditors regarding MMC's
financial reporting). The independent auditors shall report directly
to the Committee.
2. The Committee shall review and discuss with the independent auditors
the scope, staffing and general extent of the audit. The Committee's
review shall include an explanation from the independent auditors of
the factors considered by the auditors in determining the audit scope,
including the major risk factors. The independent auditors shall
confirm to the Committee that no inappropriate limitations have been
placed on the scope or nature of their audit procedures.
3. The Committee shall pre-approve all services, both audit and permitted
non-audit, to be performed for MMC by the independent auditors
pursuant to pre-approval policies and procedures established by the
Committee. In this regard, the Committee may delegate its authority to
pre-approve such services to one or more Committee members, provided
that any such approvals are presented to the full Committee at the
next scheduled Audit Committee meeting.
4. The Committee shall evaluate the independent auditors' qualifications,
performance and independence, including the consideration of the
independent auditors' quality controls and whether the provision of
permitted non-audit services is compatible with maintaining the
independent auditors' independence. The Committee's conclusions with
respect to the independent auditors shall be presented to the full
Board on at least an annual basis. As part of such evaluation, the
Committee shall specifically review and evaluate the qualifications
and rotation of the lead audit partner and shall review a report or
reports prepared at least annually by the independent auditors:
a. describing their internal quality control procedures, and
b. describing any material issues raised by (i) the most recent peer
or internal quality control review of the firm or (ii) by any
inquiry or investigation by governmental or professional
authorities, within the preceding five years, with respect to one
or more audits carried out by the firm and any steps taken to
deal with any such issues.
5. The Committee shall review a report or reports prepared at least
annually by the independent auditors describing all relationships
between the independent auditors and MMC and providing confirmations
with respect to the requirements of all applicable auditor
independence rules. The Committee shall discuss with the independent
auditors any disclosed relationships that may impact the objectivity
and independence of the independent auditors and, if necessary,
recommend appropriate action in response to the report.
6. The Committee shall discuss with management and internal audit their
views of the independent auditors' performance.
7. The Committee shall set policies for the hiring of current or former
employees of the independent auditors.
8. The Committee shall discuss with the independent auditors any audit
problems or difficulties and management's response thereto, and review
matters relating to the conduct of the audit required to be
communicated by the independent auditors by applicable auditing
standards, including:
a. any schedule of unadjusted differences,
A-2
b. the independent auditors' judgment about the quality of MMC's
accounting principles,
c. any restrictions on the scope of activities or access to
requested information, and
d. any significant disagreements with management.
9. The Committee shall review and discuss with the independent auditors
their views about the quality of MMC's financial and accounting
personnel.
B. Oversight of Financial Statements and Related Matters:
1. The Committee shall review and discuss as appropriate with management,
internal audit and the independent auditors, in separate meetings if
necessary:
a. The annual audited financial statements, including MMC's
disclosures under "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and recommend to
the Board whether the audited financial statements should be
included in MMC's Form 10-K Report,
b. the quarterly financial statements, including MMC's disclosures
under "Management's Discussion and Analysis of Financial
Condition and Results of Operations," prior to the filing of
MMC's Form 10-Q Reports, including the results of the independent
auditors' review of the quarterly financial statements,
c. MMC's policies generally with respect to earnings press releases
and with respect to financial information and earnings guidance
provided to analysts and rating agencies, including in each case
the type and presentation of information to be disclosed and
paying particular attention to the use of non-GAAP financial
information. The Committee or its chair may review any of MMC's
earnings press releases as the Committee or the chair deems
appropriate,
d. MMC's critical accounting policies and practices and any major
issues regarding accounting principles and financial statement
presentations, including any significant changes in MMC's
selection or application of accounting principles,
e. any analyses or other written communications prepared by
management, internal audit and/or the independent auditors
setting forth significant financial reporting issues and
judgments made in connection with the preparation of the
financial statements, including analyses of the effects of
alternative GAAP methods on the financial statements,
f. the effect of any off-balance sheet structures and regulatory and
accounting initiatives, including any SEC investigations or
proceedings, on MMC's financial statements, and
g. disclosures made to the Audit Committee by MMC's Chief Executive
Officer and Chief Financial Officer in connection with their
certification process for the Form 10-K and Form 10-Q reports
about (i) any significant deficiencies in the design or operation
of internal controls over financial reporting and (ii) any fraud
involving management or other employees who have a significant
role in MMC's internal controls over financial reporting.
2. The Committee shall review with MMC's management, internal audit and
the independent auditors MMC's significant accounting and financial
reporting controls, any major issues as to the adequacy of MMC's
internal controls and procedures and any special steps adopted in
light of material deficiencies. The Committee shall obtain annually in
writing from the independent auditors their letter as to the adequacy
of internal controls.
3. The Committee shall review MMC's policies and practices with respect
to risk assessment and risk management, including discussing with
management MMC's major financial risk exposures and the steps that
have been taken to monitor and control such exposures.
A-3
C. Oversight of Internal Audit Function:
1. The Committee shall evaluate at least annually the performance,
responsibilities, budget and staffing of MMC's internal audit function
and review the internal audit plan. The Committee shall also review of
the appointment and replacement of the senior internal audit
executive. Separately, the Committee shall review the
responsibilities, budget and staffing of MMC's internal audit function
with the independent auditors.
2. The Committee shall receive and review regular reports of major
findings by internal audit and how management is addressing the
conditions reported.
D. Oversight of Compliance and Regulatory Matters:
1. The Committee shall review MMC's Code of Ethics for Chief Executive
and Senior Financial Officers and MMC's Code of Business Conduct and
Ethics periodically (including compliance therewith) and report on
such compliance to the Board. The Committee shall be responsible for
overseeing waivers of such Codes for MMC Directors and senior
executive officers.
2. The Committee shall establish procedures for:
a. the receipt, retention and treatment of complaints received by
MMC regarding accounting, internal accounting controls or
auditing matters, and
b. the confidential, anonymous submission by MMC employees of
concerns regarding questionable accounting or auditing matters.
3. The Committee shall receive and review reports concerning legal and
regulatory matters, including significant regulatory agency
examinations that may have a material impact on the financial
statements.
E. Other Matters:
The Committee shall have any other appropriate duties or responsibilities
expressly delegated to the Committee by the Board.
COMMITTEE REPORT
The Committee shall prepare the audit committee report that Securities and
Exchange Commission rules require to be included in MMC's proxy statement.
PERFORMANCE EVALUATION
The Committee shall annually (i) evaluate its own performance and (ii) review
and assess the adequacy of this charter.
A-4
APPENDIX B
MARSH & McLENNAN COMPANIES, INC.
AUDIT COMMITTEE POLICY
PRE-APPROVAL OF SERVICES PROVIDED BY THE INDEPENDENT AUDITOR
NOVEMBER 19, 2003
POLICY
The Audit Committee of Marsh & McLennan Companies, Inc. and its
subsidiaries (the "Company") and management of the Company have always
recognized the importance of maintaining the independence of the public
accountant (the "Auditor"). Management also recognizes that the Audit Committee
is responsible for the selection, compensation, review of performance,
pre-approval of specific services, and oversight of the Auditor. This policy of
the Audit Committee provides the guidelines necessary to adhere to the Company's
commitment to auditor independence and comply with all relevant laws,
regulations, and guidelines relating to auditor independence. This policy is
based on three principles of independence with respect to services provided by
the Auditor: the Auditor is not permitted to function in the role of management,
audit its own work, or serve in an advocacy role for the Company.
This policy sets forth categories of prohibited non-audit services and
permitted services along with the specific steps to be followed to obtain Audit
Committee pre-approval for permitted services.
CONTROL OBJECTIVE-PROHIBITED SERVICES
The Company shall not retain the Auditor to provide any of the following
prohibited services, as defined in Regulation S-X of the Securities Exchange Act
of 1934, and any other services that the SEC or the Public Company Accounting
Oversight Board determines is impermissible.
o Bookkeeping or other services related to the accounting records or
financial statements of the Company;(1)
o Financial information systems design and implementation;(1)
o Appraisal or valuation services, fairness opinions, or contribution-in-kind
reports;(1)
o Actuarial services;(1)
o Internal audit outsourcing services;(1)
o Management functions and human resources services;
o Broker or dealer, investment advisor or investment banking services;
o Legal services; and
o Expert services, or support thereof, unrelated to the audit.
In addition, the Company shall not retain the Auditor to provide any of the
following services or any other services determined to be impermissible by the
Audit Committee:
o Tax services for senior officers of the Company; and
o Tax services involving a transaction initially recommended by the Auditor
where the primary business purpose of the transaction is tax avoidance and
the tax treatment is not clearly supported by relevant tax regulations.
----------
(1) Service is prohibited unless it is reasonable to conclude that the results
will not be subject to audit attest procedures.
B-1
CONTROL OBJECTIVE-PERMITTED SERVICES
Ensure that the Company obtains Audit Committee pre-approval for services
to be provided by the Auditor.
PROCEDURES AND GUIDELINES FOR ENGAGING THE AUDITOR
In lieu of Audit Committee pre-approval on an engagement-by-engagement
basis, four categories of service, Audit Services, Audit-Related Services, Tax
Services and Other Services (as described in more detail below), are
pre-approved subject to annual budget approvals by the Audit Committee. The
annual budgets for Audit, Audit-Related, Tax and Other Services shall include
reasonable detail as to the types of services contemplated. Each budget will be
submitted to the Audit Committee and approval of such budget by the Audit
Committee must be received before the start of any such services for such annual
period. Services not contemplated during the budget process must be presented to
the Audit Committee for pre-approval in accordance with the pre-approval
procedures described hereafter.
AUDIT SERVICES ARE DEFINED AS:
o All services performed to comply with U. S. generally accepted auditing
standards ("GAAS");
o Services generally only the Auditor can reasonably provide.
A list of permissible Audit Services is attached as Exhibit 1.
AUDIT-RELATED SERVICES
o Services, that are of an assurance nature, traditionally performed by the
Auditor due to their knowledge of the Company.
A list of permissible Audit-Related Services is attached as Exhibit 1.
TAX SERVICES ARE DEFINED AS:
o Services performed by the Auditor's tax practice except those services
directly related to the financial statements audit or otherwise expressly
prohibited above.
A list of permissible Tax Services is attached as Exhibit 2.
OTHER SERVICES ARE DEFINED AS:
o Attest services not related to the audit (i.e., operational audit services
such as SAS70).
PRE-APPROVAL PROCESS FOR UNBUDGETED SERVICES
Any previously unbudgeted Audit, Audit-Related, Tax and Other Services, can
be provided by the Auditor with prior notification and approval by the Audit
Committee as to the nature of the service and related fees for each engagement.
The Vice President-Audit and Control will submit requests for any
previously unbudgeted Services to be provided by the Auditor to the Audit
Committee for review and will notify the requestor of the Audit Committee's
decision thereafter. Requests should be supported by detailed documentation
including an explanation of the business purpose of the proposed engagement, the
cost and an explanation of the vendor selection process.
The Auditor and management must ensure that all Audit, Audit-Related, Tax
and Other Services are permissible under applicable legal requirements and are
pre-approved by the Audit Committee.
When an engagement approval is required prior to the next scheduled meeting
of the Audit Committee, the Audit Committee chair may grant such approval. If
the Audit Committee chair is unavailable, approval may be granted by any other
member of the Audit Committee. Any such approvals shall be disclosed at the next
meeting of the Audit Committee.
B-2
At least annually, the Audit Committee will review the suitability of this
policy and review the fee budget process as presented by the Company's Vice
President-Audit and Control for Audit, Audit-Related and Other Services and by
the Company's Vice President-Taxes for Tax Services.
At least semi-annually, the Company's Vice President and Controller will
provide a report showing amounts billed by the Auditor compared to budget
approvals for each of the Audit, Audit-Related, Tax and Other Services.
LIMITED EXCEPTION TO PRE-APPROVAL REQUIREMENTS
Pre-approval requirements can be waived by the Audit Committee for
non-audit services provided that such services: 1) do not aggregate to more than
5% of total fees paid by the Company to the Auditor in the fiscal year when
services are provided, 2) were not recognized as non-audit services at the time
of the engagement, and 3) are promptly brought to the attention of the Audit
Committee and approved prior to the completion of the audit.
B-3
Exhibit 1
LIST OF PERMISSIBLE AUDIT SERVICES
o U.S. GAAS audits of financial statements;
o Quarterly reviews;
o Consultation on accounting issues;
o Assistance with implementation of new accounting standards;
o Review of SEC filings (i.e., 10K, 10Q, proxy statement, etc.);
o Comfort letters, letters to underwriters related to financing;
o Statutory audits for subsidiaries or affiliates of the Company;
o Compliance letters, agreed-upon procedures, review and reports based upon
audited financial statements;
o Use of specialists integral to expressing opinions on financial statements;
and
o Review of tax accruals in financial statement;
o Attest Services required by statute or regulation (i.e., Sarbanes-Oxley
section 404).
LIST OF PERMISSIBLE AUDIT-RELATED SERVICES
o Due diligence service related to potential mergers and acquisitions or other
business transactions;(1)
o Employee benefit plan audits;
o Accounting consultations and audits in connection with acquisitions;
o Internal control reviews;
o Attest services related to financial reporting not required by statute or
regulations (i.e. SAS 70, Frag 21); and
o Forensic and investigative services related to financial statement matters;
o Sarbanes-Oxley section 404 implementation advice.
----------
(1) Use of our Auditor is not preapproved if our Auditor also audits the target
company. Specific Audit Committee approval must be obtained.
B-4
Exhibit 2
LIST OF PERMISSIBLE TAX SERVICES
COMPLIANCE
o Review, assistance and preparation services with respect to the Company's tax
returns including: -U.S., Federal, state and local, and international
CONSULTING
o Tax opinions on business transactions;
o Requests for rulings or technical advice from taxing authorities;
o U.S. federal, state and local tax planning and advice;
o International tax planning and advice;
o Assistance with tax controversy services including tax audits and appeals
(excluding litigation services);
o Employee benefit plan tax services;
o Transfer pricing services for non-financial reporting purposes; and
o Tax-only valuations.
COMPLIANCE AND CONSULTING
o International employee assignment tax services (prohibited for senior officers
of the Company)
OTHER
o Licensing or purchase of income tax preparation software.(1)
----------
(1) Service is prohibited if it involves the design or implementation of
hardware or software system that aggregates source data underlying the
financial statement or generates information that is significant to the
audit of the Company's financial statements (i.e., the income tax accruals
or related financial statement disclosures).
B-5
[This Page Intentionally Left Blank]
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036-2774
www.mmc.com
[GRAPHIC OMITTED]
MARSH & McLENNAN COMPANIES, INC.
C/O PROXY SERVICES
P.O. BOX 9162
FARMINGDALE, NY 11735
VOTE BY TELEPHONE OR INTERNET OR MAIL
24 HOURS A DAY -- 7 DAYS A WEEK
IT'S FAST AND CONVENIENT
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site and follow the instructions to obtain your records and to create an
electronic voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return to Marsh & McLennan Companies, Inc., c/o Proxy
Services, P.O. Box 9162, Farmingdale, NY 11735.
PLEASE RETURN THIS CARD PROMPTLY USING THE
ACCOMPANYING ENVELOPE
TO VOTE, MARK BLOCKS BELOW
IN BLUE OR BLACK INK AS FOLLOWS: MMCLN1 KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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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) Lewis W. Bernard FOR WITHHOLD FOR ALL
02) Mathis Cabiallavetta ALL ALL EXCEPT
03) Zachary W. Carter
04) Robert F. Erburu [_] [_] [_]
05) Oscar Fanjul
06) Ray J. Groves To withhold authority to vote,
mark "For All Except" and write the
nominee's number on the line below
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL 2. FOR AGAINST ABSTAIN
2. Ratification of Deloitte & Touche LLP
as independent auditors for 2004. [_] [_] [_]
Your telephone or Internet vote authorizes the
named proxies to vote the shares in the same
manner as if you marked, signed and returned your
Proxy Form. If you have submitted your proxy by
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 MADE, THEY WILL BE VOTED FOR ITEMS 1 AND 2.
IN THEIR DISCRETION THE PROXY HOLDERS ARE
AUTHORIZED TO VOTE UPON ANY OTHER MATTERS THAT
MAY PROPERLY COME BEFORE THE MEETING OR ANY
POSTPONEMENT THEREOF.
For address changes and/or comments, please check
this box and write them on the back where
indicated. [_]
If you are voting by telephone, in order to
select the option to view materials
electronically via the Internet in the future or
attend the meeting you must select option #2
(vote on directors and proposals individually) on
the telephone prompt.
Please indicate if you wish to view meeting YES NO
materials in the future electronically via the
Internet rather than receiving a hard copy. Note
that you will continue to receive a proxy card
for voting purposes only. [_] [_]
Please indicate if you plan to attend this
meeting. [_] [_]
Please sign exactly as your name or names appear
above. For joint accounts, each owner should
sign. If signing for a corporation or partnership
or as agent, attorney or fiduciary, indicate
capacity in which you are signing.
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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 2004 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 20, 2004 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 20, 2004 and at any adjournment
thereof. Provided this card is received by May 14, 2004, voting rights will be
exercised by the Trustees as directed or, if not specifically directed, FOR
items 1 and 2 and, in their discretion, upon any other matters that may properly
come before the meeting or any postponement thereof. 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. Participants in these plans
cannot vote at the meeting and may only vote their shares as provided in this
paragraph.
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(If you noted any Address Changes/Comments above,
please mark corresponding box on the reverse side.)
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