Date of Document: 3/12/90
Print/Export Request: Entire Document
THE GILLETTE COMPANY
PRUDENTIAL TOWER BUILDING
BOSTON, MASSACHUSETTS 02199
Notice of Annual Meeting of Stockholders
The 1990 Annual Meeting of the stockholders of The Gillette Company will
be held at the Company's Andover Manufacturing Center, 30 Burtt Road,
Andover, Massachusetts, on Thursday, April 19, 1990, at 10:00 a.m. for
the following purposes:
1. To elect three directors for terms to expire at the 1993 Annual
Meeting of the stockholders.
2. To vote on the approval of the appointment of auditors for the year
1990.
3. To vote on five stockholder proposals, numbered 3 through 7 and
described in the accompanying proxy statement, if the proposals are
presented at the meeting.
4. To transact such other business as may properly come before the
meeting and any and all adjournments thereof.
The Board of Directors has fixed the close of business on March 5, 1990,
as the record date for the determination of the stockholders entitled to
notice of and to vote at the meeting.
Stockholders are invited to attend the meeting. Whether or not you
expect to attend, WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED
PROXY CARD IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. If you attend the
meeting, you may vote your shares in person, which will revoke any
previously executed proxy.
If your shares are held of record by a broker, bank or other nominee and
you wish to attend the meeting, you must obtain a letter from the
broker, bank or other nominee confirming your beneficial ownership of
the shares and bring it to the meeting. In order to vote your shares at
the meeting, you must obtain from the record holder a proxy issued in
your name.
Directions to the Andover Manufacturing Center may be obtained from the
Secretary, The Gillette Company, Prudential Tower Building, Boston,
Massachusetts 02199, telephone (617) 421-7788.
Regardless of how many shares you own, your vote is very important.
Please SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
By order of the Board of Directors
Kathryn E. DeMoss, Secretary
Boston, Massachusetts
March 12, 1990
The Gillette Company
Prudential Tower Building
Boston, Massachusetts 02199
Proxy Statement
March 12, 1990
Introduction
This proxy statement furnished in connection with the proxies on behalf
of the Board of Directors for the 1990 Annual Meeting of the
stockholders of the Company on April 19,1990. The Notice of Annual
Meeting, this proxy statement and the accompanying proxy are being
mailed to stockholders on or about March 12, 1990. You can ensure
that your shares are voted at the meeting by signing and returning
the enclosed proxy in the envelope provided. Sending in a signed
proxy will not affect your right to attend the meeting and vote in
person. You may revoke your proxy at any time before it is voted by
notifying the Company's Transfer Agent, The First National bank of
Boston, P.O. Box 1439, Boston, Massachusetts 02104-9903 in writing,
or by executing a subsequent proxy, which revokes your previously
executed proxy.
Voting of Proxies
Proxies will be voted as specified by the stockholders. Where specific
choices are not indicated, proxies will be voted for proposals 1 and 2
and against proposals 3 through 7. A plurality of the votes properly
cast for the election of directors by the stockholders attending the
meeting in person or by proxy will elect directors to office. The
affirmative vote of a majority of the votes so cast is required for
approval of proposals 2 through 7.
1. Election of Directors
At the meeting, three directors are to be elected to serve for terms to
expire at the 1993 Annual Meeting of the stockholders. Carol R.
Goldberg is standing for election for the first time. Derwyn F.
Phillips currently serves as a director, having previously been elected
by the stockholders. Warren E. Buffet also currently serves as a
director, having been elected by the Board of Directors on October 19,
1989, to fill a vacancy in the class of directors whose terms expire at
the 1992 Annual Meeting of the stockholders. Mr. Buffett is standing
for election at this time to apportion the number of directors among
the three classes as equally as possible. For additional information
related to Mr. Buffett's election, see "Certain Transactions with
Directors" at page 6. Three directors, Rita Ricardo Campbell, Raymond
C. Foster and Joseph J. Sisco, whose terms as directors will expire at
the 1990 Annual Meeting, are not standing for reelection, having reached
the mandatory retirement age for directors. Information regarding the
Board's three nominees for directors is set forth on page 2.
Information regarding the seven directors whose terms expire in 1991 and
1992 is set forth on pages 3 and 4.
The accompanying proxy will be voted for the election of the Board's
nominees unless contrary instructions are given. If any Board nominee
is unable to serve, which is not anticipated, the persons named as
proxies intend to vote for the remaining Board nominees and, unless the
number of such nominees is reduced by the Board Of Directors, for such
other person as the Board of directors may designate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS,
WHICH IS DESIGNATED AS PROPOSALS NO. 1 ON THE ENCLOSED PROXY CARD.
[SOURCE PAGE 2]
Nominees for election to the Board of Directors for Three-year Terms to
Expire at the 1993 Annual Meeting of Stockholders
Warren E. Buffett
Director since 1989
Mr. Buffett, 59 years of age, is the Chairman of the Board and Chief
Executive of officer Berkshire Hathaway Inc., a company engaged in a
number of diverse business activities, the most important of which is
the property and casualty insurance business. Prior to assuming those
positions in 1970, he was a general partner of Buffett Partnership, Ltd.
He is also a director of Capital Cities/ABC, Inc., The Coca-Cola and
Salomon Inc.
Carol R. Goldberg
Mrs. Goldberg, 58 years of age, is the President of the Avcar Group,
Ltd., a management consulting firm. She was the President and Chief
Operating Officer of The Stop & Shop Companies, Inc., a retail store
chain, from 1985 to November, 1989. Having joined Stop & Shop 1959, she
served in various management positions prior to her election as
Executive Vice President and Chief Operating Officer in 1982. She also
served as a director of that Company from 1972 to 1989. She serves as a
trustee and director of the Putnam Funds Group, a director of the Cowles
Media Company, and a director of Lotus Development Corporation. She is
also a director of the Kennedy Library Foundation.
Derwyn F. Phillips
Director Since 1987
Mr. Phillips, 59 years of age, is a Vice Chairman of the Board with
responsibility for Gillette North Atlantic operations. He joined
Gillette in 1969 and served as President of Gillete Canada from 1971 to
1975, President of the Toiletries Division from 1975 to 1977 and
President of the Personal Care Division from 1977 to 1981. He served as
Executive Vice President in charge of Gillette North America from 1981
until November 1987, when he was elected a Vice Chairman of the Board.
He is a director or a trustee of nine investment companies sponsored
by Sun Life Assurance Company of Canada (U.S.).
[SOURCE PAGE 3]
Members of the Board of Directors Continuing in Office
Terms Expire at the 1991 Annual Meeting of Stockholders
Lawrence E. Fouraker
Director since 1973
Mr. Fouraker 66 years of age, is a Fellow of the John F. Kennedy School
of Government, Harvard University, and Professor Emeritus of the Harvard
Business School. He joined the Business School faculty 1961, served as
Dean from 1970 to 1980 and as a Professor through October 1983. He is a
director of Citicorp; General Electric Company; Ionics, Incorporated;
New England Mutual Life Insurance Company and Alcan Aluminum Ltd. He is
also a trustee of the Boston Museum of Fine Arts.
Chairman of Executive Committee and member of Personnel Committee.
Herbert H. Jacobi
Director since 1981
Mr. Jacobi, 55 years of age, is Chairman of the Managing Partners of
Trinkaus & Brukhardt, a West German Bank. The Bank is affiliated with
Britain's Midland Group p.l.c., of which Mr. Jacobi is a member of the
senior executive management. He was a managing partner of Berliner
Handels-und Frankfurter Bank from 1977 until 1981 and an Executive Vice
President of Chase Manhattan Bank from 1975 to 1977. Mr. Jacobi also
served as Chairman of the Board of Midland Bank France S.A. from May
1982 to June 1983. He is also a director of Amtrol, Inc. and Braun AG,
a Gillette subsidiary, and an advisory director of Ambase Corporation.
He is a Vice President of the Northrhine-Westfalia Stock Exchange In
Duesseldorf.
Member of Executive and Finance Committees.
Colman M. Mockler, Jr.
Director since 1971
Mr. Mocker, 60 years of age, is Chairman of the Board and Chief
Executive Officer. He joined Gillette in 1957, was named Treasurer in
1965, Vice President 1967, Senior Vice President, Finance the following
year, and Executive Vice President in 1970. In 1971 he was elected Vice
Chairman of the Board with responsibility for legal and financial
functions. He was elected President in 1974, Chief Executive Officer in
1975, and Chairman in January 1976. He is also a director of Bank of
Boston Corporation. The First National Bank of Boston, John Hancock
Mutual Life Insurance Company, Raytheon Company and Fabreeka
International Incorporated.
Ex officio member of Executive Committee.
Joseph F. Turley
Director since 1980
Mr. Turley, 64 years of age, was the President and Chief Operating
Officer of the Company until his retirement in 1988. He joined the
Company in 1960 and serve as General Manager of the Gillette subsidiary
in Spain, as President Of Gillette Canada and from 1971 to 1976, as
President of the Safety Razor Division. He was Executive Vice President
in charge of Gillette North America from 1976 to February 1981, when he
became President and Chief Operating Officer. Mr. Turley is a director
of Copley Properties, Inc., EG&G, Inc. and eighteen investment companies
sponsored by New England Mutual life Insurance Company.
Member of Executive and Personnel Committees.
[SOURCE PAGE 4]
Members of the Board of Directors Continuing in Office Terms Expire at
the 1992 Annual Meeting of Stockholders
Richard R. Pivirotto
Director since 1980
Mr. Pivirotto, 59 years of age, is President of Richard R. Pivirotto
Co., Inc., a management consulting firm. He served as President of
Associated Dry Goods Corporation, a retail department store chain, from
1972 to 1976 and as Chairman of its Board of Directors from 1976 to
February 1981. He is also a director of Chemical Banking Corporation,
Chemical Bank, General American Investors Company, Inc., New York Life
Insurance Company and Westinghouse Electric Corporation.
Chairman of Personnel Committee and member of Finance Committee.
Juan M. Steta
Director since 1987
Mr. Steta, 63 years of age, is a partner in the law firm of Santamarina
y Steta, Mexico City, which is engaged in a general business practice.
He joined the firm in 1949 and was elected a partner in 1956. He serves
as Chairman of the Board of Materiales Moldables and Quimicos y
Derivados and as a director of several other Mexican corporations,
including General Motors de Mexico, Grupo IDESA and Dixon Ticonderoga.
He is also a director of Barnes Group Inc. in Bristol, Connecticut.
Member of Audit and Finance Committees.
Alfred M. Zeien
Director since 1980
Mr. Zeien, 60 years of age, is a Vice Chairman of the Board with
responsibility for Gillette International operations except Europe and
for Diversified Companies. From 1981 to November 1987, as Vice
Chairman, he was the Company's senior technical officer and also headed
the new business development group. He served as Senior Vice President,
Technical Operations, from 1978 to 1981, and as Chairman of the Board of
Management of Braun AG, a Gillette subsidiary, from 1976 to 1978. With
Gillette since 1968, he has also served as General Manager of Braun's
International and Appliance Divisions and as a Group Vice President of
the Diversified Companies Group. Mr. Zeien is also director of Polaroid
Corporation, Repligen Corporation and Square D Company.
Committees of the Board -- Board Meetings
The Board of Directors has the following standing committees, which are
composed entirely of directors who are not employees of the Company,
except that the Chief Executive Officer is an ex officio member of the
Executive Committee.
Audit Committee
The members are Dr. Sisco (Chairman), Dr. Campbell, Mr. Foster and Mr.
Steta.
The Committee recommends the appointment of the Company's independent
auditors, meets with the auditors to review their report on the
financial operations of the business, and approves the audit services
and
[SOURCE PAGE 5]
any other services to be provided. It reviews the Company's internal
audit function and the performance and adequacy of the Company's pension
fund managers. It also reviews compliance with the Company's statement
of policy as to the conduct of its business. Three meetings of the
Committee were held in 1989.
Executive Committee
The members are Mr. Fouraker (Chairman), Mr. Jacobi, Mr. Mockler (ex
officio), Dr. Sisco and Mr. Turley.
The Executive Committee, acting with the Finance Committee, reviews and
makes recommendations on capital investment proposals. It is also
available to review and make recommendations to the Board with respect
to the nature of the business, plans for future growth, senior
management succession and stockholder relations. The Committee has the
added functions of reviewing the composition and responsibilities of the
Board and its committees and recommending to the Board nominees for
election as directors. It will consider nominations by stockholders,
which should be submitted in writing to the Chairman of the Committee in
care of the Secretary of the Company. Eight meetings of the Committee
were held in 1989.
Finance Committee
The members are Dr. Campbell (Chairman), Mr. Foster, Mr. Jacobi, Mr.
Pivirotto and Mr. Steta.
The Finance Committee reviews and makes recommendations with respect to
the Company's financial policies, including cash flow, borrowing and
dividend policy and the financial terms of acquisitions and
dispositions. Acting with the Executive Committee, it reviews and makes
recommendations on capital investment proposals. Seven meetings of the
Committee were held in 1989.
Personnel Committee
The members are Mr. Pivirotto (Chairman), Mr. Fouraker and Mr. Turley.
The Committee reviews and makes recommendations to the management or
Board on personnel policies and plans or practices or practices
relating to compensation. It also administers the Company's executive
incentive compensation plans and approves the salaries of all officers
and certain other senior executives. Eight meetings of the Committee
were held in 1989.
The Board of Directors held ten meetings in 1989.
Stock Ownership of Certain Beneficial Owners and Management
As of March 2, 1990, Berkshire Hathaway Inc., located at 1440 Kiewit
Plaza, Omaha, Nebraska 68131, beneficially owned, through six insurance
subsidiaries, 600,000 shares of Series B Cumulative Convertible
Preferred Stock of the Company, entitling it to a total of 12,000,000
votes, which constitutes 10.8% of the votes entitled to be cast by the
holders of the outstanding voting securities of the Company. One of the
six Berkshire Hathaway Inc. subsidiaries, National Indemnity Company,
3024 Harney Street, Omaha, Nebraska 68131, owned directly 375,000 shares
of the 600,000 Series B Cumulative Convertible Preferred shares issued,
entitling it to 7,500,000 votes or 6.8% of the votes entitled to be cast
by the holders of the outstanding voting securities of the Company. The
capital stock of Berkshire Hathaway Inc. is beneficially owned
approximately 41.8% by Mr. Buffett and a trust of which he is trustee
but in which he has no economic interest and 3.23% by his wife, Susan T.
Buffett.
State Street Bank and Trust Company, P.O. Box 5259, Boston,
Massachusetts 02101, has reported in a Schedule 13G dated February 14,
1990, filed with the Securities and Exchange Commission, that, as of
December 31, 1989, in its capacity as Trustee of The Gillette Company
Employees' Savings Plan and the 1983-1986 Employee Stock Ownership Plan,
it held on behalf of plan participants a total of 5,199,096 common
shares, or 5.4% of the outstanding common stock of the Company and 4.7%
of the votes entitled to be cast at the meeting, over which it exercises
shared voting and dispositive power. In addition, as Trustee of various
collective investment funds for employee benefit plans and as co-trustee
for various personal trust accounts, it held 622,878 common shares, or
approximately .6% of the outstanding common stock of the Company and of
the votes entitled to be cast at the meeting, and exercises sole voting
and dispositive power
[SOURCE PAGE 6]
with respect to 621,710 of those shares and shared voting and
dispositive power with respect to the remaining 1,158 of those shares.
In its capacity as Trustee of The Gillette Company 1990 Employee Stock
Ownership Plan, State Street Bank and Trust Company held 165,872 shares
of Series C ESOP Convertible Preferred stock, or 1.5% of the votes
entitled to be cast at the meeting, over which it exercises shared
voting and dispositive power. Each Series C ESOP Preferred share is
entitled to ten votes.
The following table sets forth the number of shares of Gillette common
and preferred stock beneficially owned as of March 2, 1990, by each
director and nominee and by all the directors and officers as a group.
Except for Mr. Buffett, no director or nominee for director beneficially
owned as much as 1% of the outstanding common stock or voting securities
having 1% of the voting power. The shares beneficially owned by all
directors and officers as a group constitute 12% of the votes entitled
to be cast by the holders of the outstanding voting securities of the
Company. All the individuals listed in the table have sole voting and
investment power over the shares reported as owned, except as follows:
Mr. Buffett has shared voting and investment power over the 600,000
preferred shares reported as owned; Dr. Campbell has shared voting and
investment power over the 4,019 common shares reported as owned; and Dr.
Sisco has shared voting and investment power over 1,046 of the common
shares reported as owned. In addition, certain officers have shared
voting and investment power over a total of 13,936 of the total number
of common shares reported as owned by the group and have disclaimed
beneficial ownership with respect to 1,273 of the total number of common
shares reported as owned by the group.
Title Shares
Name of Class Owned
Warren E. Buffett Series B Preferred 600,000(1)
Rita Ricardo Campbell Common 4,019
Raymond C. Foster Common 400
Lawrence E. Fouraker Common 3,000
Carol R. Goldberg Common 500
Herbert H. Jacobi Common 400
Colman M. Mockler, Jr. Common 181,746(2)
Derwyn F. Phillips Common 59,921(2)
Richard R. Pivirotto Common 800
Joseph J. Sisco Common 2,708
Juan M. Steta Common 2,100
Joseph F. Turley Common 70,877
Alfred M. Zeien Common 101,683(2)
All directors and officers Series B Preferred 600,000
as a group Common 754,361(2)
(TABLE CONTINUED)
Option Shares Exercisable
Name Within 60 days
Warren E. Buffett --
Rita Ricardo Campbell --
Raymond C. Foster --
Lawrence E. Fouraker --
Carol R. Goldberg --
Herbert H. Jacobi --
Colman M. Mockler, Jr. 45,000
Derwyn F. Phillips 49,264
Richard R. Pivirotto --
Joseph J. Sisco --
Juan M. Steta --
Joseph F. Turley --
Alfred M. Zeien 111,000
All directors and officers --
as a group 555,728
(1) Owned by insurance subsidiaries of Beckshire Hathaway Inc., a
company which Mr. Buffett may be deemed to control. The 600,000 Series
B Cumulative Convertible Preferred shares represent 100% of the issued
securities of that class. Each share is entitled to vote as if
converted to twenty common shares, a total of 12,000,000 votes, which
constitutes 10.8% of the total votes entitled to be cast by the holders
of the Company's outstanding voting securities.
(2) Includes common shares held under the Company's savings plans and
1983-1986 Employee Stock Ownership Plan, as follows: Mr. Mockler
39,912; Mr. Phillips 18,073; Mr. Zeien 39,083, all employee directors
and officers as a group 284,595.
Certain Transactions with Directors
On July 20, 1989, the Company issued 600,000 shares of 8 3/4% Series B
Cumulative Convertible Preferred Stock, without par value, at $1,000 per
share, for a total of $600,000,000, to six insurance subsidiaries of
Berkshire Hathaway Inc. ("Berkshire Hathaway").
[SOURCE PAGE 7]
Each Series B share is convertible at the option of the holder into
twenty shares of common stock, a total of 12,000,000 shares, at a
conversion price of $50 per share (subject to anti-dillution
adjustments) after July 19, 1991, or earlier upon the occurrence of a
change in control or certain other events.
The Series B stock also contains certain restrictions on repurchase by
the Company of common stock.
Unless the Series B stock is converted, the Company must redeem it on
July 20, 1999 at the purchase price plus accrued dividends. The Series
B shares are also subject to redemption prior to July 20, 1999 upon the
occurrence of certain events, including change in control events, at the
option of either the Company or the holders, depending on the event, at
varying (including an event price as defined) not less than the purchase
price plus accrued dividends.
If Series B quarterly dividends are not current for three quarters or
there is a default in payment of any extraordinary dividend or in any
redemption, the Series B stockholders, voting separately as a class, may
elect two additional directors..
Each share of Series B preferred stock carries rights under the
Company's Series A Preferred Stock Purchase Rights Plan as if it were
converted into common stock, or ten such rights per Series B preferred
share, subject to anti-dilution provisions.
In general, Berkshire Hathaway agreed that, without the approval of the
Company's Board of Directors, until July 20, 1999, it will not acquire,
other than through conversion or similar transactions, shares giving it
a total of more than 14% of the voting power of the Company or become a
participant in a proxy solicitation or a member of another group within
the meaning of Section 13(d) of the Securities Exchange Act of 1934 with
respect to the Company Berkshire Hathaway also agreed not to knowingly
sell more than 30% of the Company's voting securities to any one entity
or group except upon a change in control of the Company, as defined, and
to give the Company certain rights of first refusal in the event of
sales of the Company's voting securities by Berkshire Hathaway.
The Company's directors agreed to elect Mr. Buffett to the Board of
Directors and to use their best efforts to secure the election to the
Board by the shareholders of Mr. Buffet, or such other individual
reasonably acceptable to the Company as Berkshire Hathaway might
nominate.
During 1989 the Company's Mexican subsidiaries retained the law firm of
Santamarina y Steta, of which Mr. Steta is a partner, and paid the firm
a total of $143,980 for its services. It is expected that Mr. Steta's
firm will continue to provide legal services to the subsidiaries in
Mexico during 1990.
Compensation of Directors
Directors who are not employees of the Company or its subsidiaries are
paid an annual retainer of $20,000 plus a fee of $750 for attendance at
each meeting of the Board of Directors or of its committees. Committee
Chairmen receive an additional retainer of $30,000 a year. The
directors may defer payment of all or any portion of their retainers or
fees until after retirement of resignation from the Board or until a
change in control occurs. Deferred amounts accrue interest equivalents.
Upon the death of a director, any unpaid amounts become payable in a
lump sum.
During 1989 Mr. Jacobi received attendance fees totaling $5,047 for his
service as a director of Braun AG, a Gillette subsidiary, and Dr. Sisco
received fees totaling $3,000 for his services as a director of Gillette
Capital Corporation, also a Gillette subsidiary. No retainers or fees
are paid to directors who are employees of the Company or its
subsidiaries.
A director who has attained age 70 cannot stand for reelection to the
Board. Directors who have served as Board members for five or more
years receive an annual retirement benefit, which is equal to the annual
retainer in effect when they leave the Board and is payable for a period
equal to their years of service. No credit is given for service as a
director while an employee of the Company. Payment of the benefit
commences when service ends, or at age 65 if a director leaves the Board
at an earlier age. Upon the death of a director,the present value of any
unpaid become payable in a lump sum. In the event of a change in
control, a director leaving the Board would be entitled to receive
immediate payment of the present value of the full retirement benefit.
A director who at any time acts in a manner contrary to the best
interests of the Company risks forfeiture of the future retirement
benefit.
[SOURCE PAGE 8]
Legal Proceedings Relating to Officers and Directors
The Company and certain of its officers and directors are named
defendants in nine pending lawsuits filed as derivative and putative
class actions relating to certain actions by Gillette during and after
the 1988 proxy contest. Equitable and monetary relief is sought.
Management, after review and consultation with counsel, considers that
any liability from all of these pending lawsuits and claims would not
materially affect the consolidated financial position of the Company.
Compensation of Executive Officers
The following table sets forth all cash compensation paid to (i) each of
the most highly compensated executive officers of the Company and (ii)
all officers as a group for services rendered in all capacities to the
Company and its subsidiaries during the 1989. Information in included
for only the period during which such persons served as officers of the
Company.
(A) (B) (C)
Cash Compensation
(C-1)
Name of individual or Capacities in which Salary plus
Number in group served bonus
Colman M. Mockle, Jr. Chairman of the Board and $1,105,000
Chief Executive Officer
Derwyn F. Phillips Vice Chairman of the Board 438,750
Alfred M. Zeien Vice Chairman of the Board 695,000
Gaston R. Levy Executive Vice President 474,333
John W. Symons Executive Vice President 481,836
Lorne R. Waxlax Executive Vice President 510,000
All officers as a group
(26 in number) $8,673,245
(TABLE CONTINUED)
(C)
Cash Compensation
(A) (C-2) (C-3)
Name of individual or Other
Number in group compensation Total
Colman M. Mockle, Jr. $ 16,250 $ 1,121,250
Derwyn F. Phillips 104,510 543,260
Alfred M. Zeien 13,717 708,717
Gaston R. Levy 93,416 567,749
John W. Symons 132,138 613,974
Lorne R. Waxlax 101,399 611,399
All officers as a group
(26 in number) $1,960,353 $10,633,648
(*) The amounts in Column C-1 are comprised of salaries, including
portions deferred under the Employees' Savings Plan pursuant to Section
401(k) of the Internal Revenue Code, and bonuses. Included in Column C-
2 are: (1) savings plan equivalents credit on 1989 bonus amounts
deferred under the Incentive Bonus Plan, (2) payments related to
expatriate assignments and (3) Stock Equivalent Unit Plan amounts paid
or deferred with respect to 1989. Also paid or deferred in 1989 were
the following Stock Equivalent Unit Plan amounts attributable to
deferrals in prior years and not previously disclosed in the
compensation table: Mr. Phillips $6,122; Mr. Zeien $18,853; Mr. Levy
$5,754; Mr. Symons $31,033; Mr. Waxlax $20,262; all officers as a group
$216,449.
The Board of Directors has adopted a severance pay and benefit
arrangement to become effective in the event of a change in control.
The arrangement would obligate any acquirer to continue long-standing
Gillette practice regarding severance payments to terminated employees.
Severance payments to U.S. employees whose employment is terminated
under certain circumstances after a change in control would, as under
present practice, be based on seniority and position level, subject to a
minimum for certain key employees, including certain officers other than
the Chairman, who has voluntarily excluded himself from the minimum
payment. Severance payments to employees in foreign countries would
comply with local law and follow past Gillette practice.
The maximum amount payable under the severance pay arrangement,
including any benefit plan payments resulting from a change in control,
is 2.99 times average annual compensation for the five-year period
preceding termination of employment. For most employees, including the
named officers, it is unlikely that payments would reach the maximum.
The estimated aggregate of severance pay, excluding benefit plan
payments, to all officers as a group on December 31, 1989, in the event
of a change in control on that date, would have been $13,630,673, or
approximately 2 times the amount of their base salary on that date. In
general, benefit plan payments resulting from a change in control are
dependent upon salary but vary with seniority and position level.
[SOURCE PAGE 9]
A change in control is defined in the Company' Retirement Plan and, in
general, means those events by which control of the Company passes to
another person or corporation. Theses events include a purchase of the
Company's stock pursuant to a tender offer, the acquisition of 20% or
more of the Company' stock by a person or group, a merger, or a sale of
substantially all of the assets of the Company. In addition, a change
in control would occur if, during any two-year period, the individuals
who were serving on the Board of Directors of the Company at the
beginning of the period or who were nominated for election or elected to
the Board during the period with the affirmative vote of at least
two-thirds of such individuals still in office, ceased to constitute a
majority of the Board. For a description of certain benefit plan
provision applicable in the event of a change in control of the Company,
see the plan summaries appearing under the heading "Benefit and
Incentive Plans" below.
The Board of Directors has extended benefits generally comparable to
those applicable in the event of a change in control of the Company to
employees, including officers, whose employment is terminated pursuant
to the Company's 1987 Restructuring Plan or the organization of its
toiletries business announced in December 1989.
Benefit and Incentive Plans
The following are summaries of the Company's benefit and incentive plans
pursuant to which compensation was paid or accrued during 1989 or is
proposed to be paid or accrued in the future for the benefit of the
officers named in the compensation table and all officers as a group.
Employees' Savings Plan
Under the Employees' Savings Plan, for each dollar up to a maximum of
10% of compensation saved by eligible domestic employees, including
officers, the Company contributes 50 cents. Employees also may
contribute up to 5% of their compensation not matched by any Company
contribution, either in lieu of or in addition to the 10% of
compensation that is matched by the Company.
As permitted under Section 401(k) of the Internal Revenue Code, up to
the lesser of 10% of an employee's compensation or an annual maximum
($7,979 in 1990) may be contributed on a tax-deferred basis. Company-
matched contributions are split equally between after-tax and tax-
deferred savings.
Employees may elect to have their contributions invested in bond,
guaranteed or interest income and equity funds or in Gillette common
stock, as provided under the Plan. Contributions made by the Company
are invested in Gillette common stock but, under certain limited
circumstances, may be transferred to the guaranteed fund. In general,
all Company contributions vest immediately for all employees after two
years of Plan participation or in the event of a change in control.
Distribution under the Plan generally are made when the employment of a
participant ceases, unless the participant elects to defer receipt of
payment to a later date. However, in all cases, a participant must
commence receiving distributions within a prescribed period after
attaining age 70 1/2. The participant may elect to receive the
distribution in a lump sum or in installments. Withdrawals may be made
during employment, subject to forfeiture, participation and tax
penalties, except that withdrawals of Section 401(k) savings prior to
age 59 1/2 are restricted to hardship situations.
Participants may instruct the Trustee in confidence how to vote their
vested and unvested shares and whether or not to accept an offer for
their shares.
The Company's contributions pursuant to its savings plans during 1989
for the accounts of the following persons and all officers as a group
were: Mr. Mockler $39,000; Mr. Phillips $26,938; Mr. Zeien $30,751; Mr.
Levy $16,467; Mr. Waxlax $22,450; all participating officers as a group
$356,933.
Mr. Symons is an employee of the Company's subsidiary in the United
Kingdom and is not eligible to participate in the Employees' Savings
Plan. Mr. Phillips and one other officer of the Company, both of whom
are former employees of the Gillette subsidiary in Canada, participated
in a similar plan maintained by that subsidiary and will receive a
distribution of their account balances in that plan in the future.
[SOURCE PAGE 10]
Retirement Plan
The Company's Retirement Plan provides benefits upon retirement or
disability to domestic employees covered by the Plan, including
officers, who meet certain age and service requirements. In general,
the benefit upon retirement at age 65 with 25 years of service is equal
to 50% of the employee's average annual compensation (salary plus bonus,
if any) during the five calendar years of highest compensation included
in the last ten calendar years of employment, minus 75% of primary
social security benefits. An employee who does not retire under the
Plan, but whose employment is terminated after completing at least five
years of credited service, has a vested right to the pension accrued
prior to the date employment was terminated. The Plan is wholly paid
for by the Company.
Provisions of the Tax Reform Act of 1986 effective January 1, 1989, may
require that certain changes be made to the Plan's method of calculating
benefits; however, as permitted by law, the Company has elected to
implement any such changes at a later date, retroactive to January 1,
1989.
The Plan prohibits any reduction after a change in control in the
benefits accrued for employees who meet the age and service requirements
for retirement. An early retirement benefit is provided for employees
who, as of the date of a change in control or as of the date of the
termination of their employment within a one-year period thereafter,
are, after any applicable severance period, within five years of
qualifying for an early retirement benefit. A vested right retirement
benefit is provided for employees who, as of the date of a change in
control or as of the date of the termination of their employment within
a one-year period thereafter, are, after any applicable severance
period, within one year of qualifying for a vested right benefit. Any
excess assets held in the Plan's trust following any change in control
would be used to increase the benefits payable to covered employees.
The table below shows annual pensions upon retirement at age 65 before
social security reduction.
Annual Pension
Average Annual Compensation
Used as Basis for 15 Years of 20 Years of 25 Years or More
Computing Pension Service Service of Service
$ 100,000 $ 30,000 $ 40,000 $ 50,000
200,000 60,000 80,000 100,000
300,000 90,000 120,000 150,000
400,000 120,000 160,000 200,000
500,000 150,000 200,000 250,000
600,000 180,000 240,000 300,000
700,000 210,000 280,000 350,000
800,000 240,000 320,000 400,000
900,000 270,000 360,000 450,000
1,000,000 300,000 400,000 500,000
1,100,000 330,000 440,000 550,000
1,200,000 360,000 480,000 600,000
Covered compensation for the named officers and all officers as a group
for 1989 is as shown in column C-1 of the compensation table on page 8.
As of December 31, 1989, the officers named in the compensation table on
page 8 had the following years of service under the Retirement Plan:
Mr. Mockler, 33 years; Mr. Phillips, 21 years; Mr. Zeien, 22 years; Mr.
Levy, 31 years; Mr. Waxlax, 32 years.
Mr. Symons has completed 24 years of service and participates in The
Gillette U.K. Pension Plan, which provides benefits upon retirement or
disability to U.K. employees covered by the Plan, including officers,
who meet certain age and service requirements. The Plan provided for
employee contributions at the rate of 3% of compensation until October
1976 and 5% thereafter through January 1987, at which time employee
contributions were discontinued. In general the benefit upon retirement
at age 60 with 30 years of service is equal to 70% of an employee's
average annual compensation (salary plus bonus, if any) during the three
consecutive years of highest compensation included in the last ten years
of employment prior to retirement, minus the average of the U.K. social
security basic pension over the three years prior to retirement. In
general, under the Plan, credited service of less than 30 years would
result in a proportionately reduced pension.
[SOURCE PAGE 11]
Employees who do not retire under the Plan, but whose employment
terminates after they have completed at least two years of credited
service, are entitled under U.K. law to a vested right to the pension
accrued prior to termination date. Benefits are adjusted annually for
inflation. Like its U.S. counterpart, the U.K. Plan contains provisions
designed to protect the rights of participants in the event of a change
in control.
Mr. Symons' compensation for 1989 for purposes of calculating his
pension benefit is as shown in Column C-1 of the compensation table on
page 8. Had Mr. Symons retired on December 31, 1989, he would have been
entitled to an annual benefit of approximately $192,400 under the U.K.
Plan.
Certain limitations on the amount of benefits under tax-qualified plans,
such as the Employees' Savings Plan and the Retirement PLan, were
imposed by the Employee Retirement Income Security Act of 1974, the Tax
Equity and Fiscal Responsibility Act of 1982 and the Tax Reform Act of
1986. The Company has adopted supplemental plans, as permitted by law,
for the payment of amounts to employees who may be affected by those
limitations, so that, in general, total benefits will continue to be
calculated as before on the basis approved by the stockholders.
1990 Employee Stock Ownership Plan ("ESOP")
The ESOP was adopted on January 17, 1990, as part of the Company's
modified U.S. retiree medical benefit program. All regular U.S.
employees with at least one year of service, except those covered by
collective bargaining agreements, will participate in the Plan.
The ESOP trust has borrowed $100,000,000 to purchase 165,872 shares of
the Company's Series C ESOP Convertible Preferred Stock. The ESOP trust
is obligated to repay the loan in periodic installments over a ten-year
period, with interest on the unpaid balance at 8.1% per year. The
Company has guaranteed these payments. The ESOP trust will make the
payments partly by applying the 8% per annum quarterly dividends on the
preferred stock held by the ESOP trust. The Company will make any
additional contribution to the trust necessary for the Trustee to make
each loan payment.
As the loan is repaid by the ESOP trust, the Series C ESOP shares held
in the trust will be allocated to participant accounts. To the extent
that loan repayments are made with dividends paid on shares standing in
participant accounts, those dividends will be replaced with additional
shares. Except for such dividends attributable to shares previously
allocated to participant accounts, allocation will be on an equal basis
to the account of each participant who is employed on the last business
day of the calendar quarter for which the allocation is made. The first
allocation to participant accounts will be made as of September 30,
1990. It is anticipated that by year-end 1990 approximately 7.6% of the
stock in the trust will have been allocated to participant accounts.
In general, participant accounts will vest after five years of service
under the ESOP or upon retirement, permanent disability, death,
permanent layoff or a change in control of the Company. Distributions
will be made when the employment of a participant ceases unless the
participant elects to defer receipt of payment to a date no later than
the year the participant reaches 70 1/2.
On distribution, the participant may elect to receive the fair market
value of the shares in the participant's account in cash or common
stock, in a lump sum or in installments. Each share of Series C ESOP
Preferred Stock was purchased by the ESOP for $602.875 and is
convertible into ten shares of common stock at $60.2875 per share. No
Series C ESOP Preferred share will be distributed to any participant.
Instead, the Series C ESOP Preferred shares will either be converted
into common shares or repurchased by the Company for their original
purchase price, whichever will yield greater value to the participant.
Prior to the first allocation of shares to participant accounts in
September 1990, the Trustee will vote the Series C ESOP Preferred shares
in accordance with its best judgment. Thereafter, participants may
instruct the Trustee in confidence how to vote the shares held in their
accounts and whether or not to accept an offer for these shares;
unallocated shares will be voted and offers for them will be accepted in
proportion to participant instructions with respect to allocated shares.
[SOURCE PAGE 12]
The ESOP Preferred shares are redeemable upon the occurrence of certain
change in control or other events, at the option of the Company or the
holder, depending on the event, at varying prices not less than the
purchase price plus accrued dividends.
1983-1986 Employee Stock Ownership Plan (PAYSOP)
The Plan was established in 1982, and contributions were made with
respect to the tax years 1983 through 1986. As a result of the Tax
Reform Act of 1986, tax credits for employer contributions attributable
to tax years after 1986 were eliminated; therefore, no further
contributions to the Plan were made.
Under the Plan, the Company contributed cash or Gillette common shares
in amounts equivalent to certain payroll-related tax credits to a trust
fund comprised of Gillette common shares and held on behalf of eligible
domestic employees, including officers. These tax credits amounted to
1/2 of 1% of covered payroll for the tax years 1983 through 1986. Each
year shares were allocated to the accounts of eligible employees
essentially on an equal basis. A total of 34 shares was allocated to
the account of each employee who was an eligible participant during that
entire period. Dividends earned on these shares are used to purchase
additional shares of Company common stock, which are allocated to
participant accounts. Distributions equal to the then-current value of
the common shares and earned dividends, in the form of either cash or
Gillette common stock, are made only upon termination of employment.
The Company's contributions under the Plan represented no direct cost to
the Company since they were offset by a corresponding reduction in the
Company's tax liability.
Participants may instruct the Trustee in confidence how to vote their
shares and whether or not to accept an offer for their shares.
Stock Equivalent Unit Plan
Awards of basic stock units may be made under the Plan to selected key
employees of the Company and its subsidiaries. No awards are made to
officers who also serve as directors. With respect to certain grants
made after 1983, all or any portion of an award may, by its terms, be
contingent upon achievement of future performance goals.
Each basic stock unit is treated as equivalent to one share of the
Company's common stock, although in no case does the employee receive
the original market value of the basic units awarded. Instead, the
employee's account is credited with appreciation, if any, in the market
value of the Company's common stock and with dividend equivalent units
as dividends are paid on the stock. Amounts credited for appreciation
on basic stock units are limited to 100% of the market value of the
stock on the date of the award.
Awards made after 1983 accrue benefits over seven years, vesting and
becoming payable in segments over the third through the seventh years of
that period. Awards made prior to 1984 accrue benefits over ten years,
vesting and becoming payable in segments over the fourth through the
tenth years of that period. Each award is revalued annually until the
award becomes fully vested and the value becomes fixed and payable.
Before each vesting, the employee may elect to defer the amounts
becoming payable. In general, awards become fully vested upon the
retirement, death or disability of the employee and, in the case of
retirement or disability, payment may be deferred by employee election
to future years. If a deferred amount represents the final value of a
fully vested award, the amount accrues interest equivalents until paid.
The Plan provides that, upon a change in control, all
performance-related contingency provisions of awards would be removed,
awards of employees whose employment is terminated under certain
circumstances as described in the Plan would become fully vested, and,
in the event of a related liquidation, merger or consolidation of the
Company, all awards either would become fully vested or would be
replaced by the surviving corporation.
The amounts credited during 1989 to the vested accounts of the named
persons and the group of officers are included in column C-2 of the
compensation table on page 8 or the footnote to the table.
[SOURCE PAGE 13]
1971 Stock Option Plan
Options on shares of the Company's common stock may be awarded by the
Personnel Committee to selected key employees of the Company and its
subsidiaries, including those who may also serve as officers or
directors.
The Committee may designate options granted under the Plan as
incentive stock options ("ISO's"), a type of option authorized under
the 1981 amendments to the Internal Revenue Code. Options are granted
at not less than the fair market value of the Company's common stock
on the date of grant and are exercisable as determined by the
Committee, except that options must be exercised within ten years from
the date of grant. All outstanding options have ten-year terms and
are exercisable one year from the date of grant, provided the
optionee is still an employee. Officers are required to pay the full
purchase price, in cash of shares, upon exercise of an option.
Options generally remain exercisable for a limited period following
the termination of employment of the optionee. The period for
post-retirement exercise of non-incentive stock options is two years
unless a shorter period is designated by the Personnel Committee. The
period for ISO's is three months. If the termination of employment
occurs within one year after a change in control, any options held by
the optionee that were not otherwise exercisable when employment
ceased would become immediately exercisable.
The following table presents information on stock option transactions
during 1989 of the persons named and of all officers as a group.
Options Granted Options Exercised
1/1/89-12/31/89 1/1/89-12/31/89
Average
Number per Share
of Option Net
Shares Price Value(*)
Colman M. Mockler, Jr. 27,500 $45.88 $ 0
Derwyn F. Phillips 20,000 45.88 766,343
Alfred M. Zeien 20,000 45.88 1,365,361
Gaston R. Levy 10,000 40.19 0
John W. Symons 12,000 40.19 0
Lorne R. Waxlax 11,000 40.19 0
All officers as a group 185,300 $42.26 $4,155,672
(*) Aggregate market value on date of exercise less aggregate option
price.
Incentive Bonus Plan
Under the Plan, a bonus pool is earned if profit from operations,
return on assets and sales growth goals, as determined each year by
the Personnel Committee, are achieved. In order for any bonus pool
to be earned, the minimum profit from operations goal must be met. A
reserve equivalent to no more than 20% of the amount of the projected
bonus pool (25% for incentive years after 1989) may be established by
the Committee each year from which bonuses will be awarded, if no
bonus pool is earned for that year, to employees in operating units
that have achieved assigned objectives.
The Plan provides that key management employees, including officers,
may receive awards during ranging from 5% to 50% of their salary for
the year. Based on recommendations of senior management and
evaluations of performance against goals assigned for the year, the
Chairman approves bonus awards to individual recipients other than
himself. Awards to officers and certain senior executives are
subject to approval by the Personnel Committee. The Committee
determines the amount of any bonus award to the Chairman. Before
being selected to receive a bonus, participants have the option to
defer payment of all or a part of any bonus that may be awarded to
any year until their retirement or until an earlier change in control.
Prior to retirement, participants may elect to further defer bonus
amounts beyond their date of retirement or until an earlier change in
control. All deferred amounts accrue interest equivalents. Under
certain circumstances following a change in control, otherwise
eligible employees terminated during the year the change in control
occurred would remain eligible for consideration for a bonus award.
Bonuses earned in 1989 by the named officers and all officers as a
group are included in columns C-1 and C-2 of the compensation table on
page 8.
[SOURCE PAGE 14]
Life Insurance Program
Certain executives, including officers of the Company, may participate
in a life insurance program that provides coverage during employment
equal to four times annual salary, subject to a $400,000 minimum and a
$1,000,000 maximum amount of coverage, with the participant paying the
premium for coverage equal to two times salary, $200,000, whichever is
less. After retirement, a Company-paid death benefit equal to annual
salary, subject to a $100,000 minimum and a $250,000 maximum, continues
in effect for the life of the participant.
Mr. Symons participates in a life insurance program maintained by a
Gillette U.K. subsidiary that provides all employees with coverage
during employment equal to four times annual salary plus bonus, if any.
In addition, certain key employees of the U.K. subsidiary, including
Mr. Symons, participate in a life insurance program that provides
accidental death benefits equal to three annual salary.
2. Appointment of Auditors
On the recommendation of the Audit Committee of the Board of Directors,
the Board has appointed KPMG Peat Marwick as auditors for the year 1990,
subject to approval by the stockholders. KPMG Peat Marwick has audited
the books of the Company for many years.
Representatives of KPMG Peat Marwick will attend the 1990 Annual
Meeting, where they will have the opportunity to make a statement if
they wish to do so and will be available to answer appropriate questions
from the stockholders.
Should the appointment of auditors be disapproved by the stockholders,
the Board of Directors will review its selection.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
APPOINTMENT OF AUDITORS, WHICH IS DESIGNATED AS PROPOSAL NO. 2 ON THE
ENCLOSED PROXY CARD.
3. Stockholder Proposal
The Annuity Reserve Fund of the Los Angeles Unified School District,
P.O. Box 2298, Los Angeles, CA 90051, owner of 12,000 shares of the
common stock of the Company, has given notice that it intends to present
the following resolution for action at the Annual Meeting.
"WHEREAS in our opinion the political climate in South Africa provides a
weak and unstable business environment which could result in a partial
or total loss of corporate assets invested there; and
WHEREAS we believe consumer boycotts directed at corporations conducting
business in South Africa could result in decreased business performance
outside South Africa; and
WHEREAS in our opinion divestment efforts instituted by current
stockholders could depress the value of equities in this corporation;
and
WHEREAS in our opinion this degree of business risk cannot be considered
prudent:
Therefore be it
RESOLVED that the shareholders request that the Board of Directors:
1. Make no new investments in South Africa nor develop business
relations within South Africa.
2. Development and implement a plan, as necessary, to expeditiously
terminate business relationships and/or investments within South Africa
(total pull out).
3. Apply the policies of no new investments and termination of existing
interests to all indirect and/or subsidiary of affiliate operations."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF
PROPOSAL NO. 3 FOR THE REASONS SET FORTH ON PAGE 16.
[SOURCE PAGE 15]
4. Stockholder Proposal
This proposal was submitted by Edward V. Regan, State Comptroller of the
State of New York, as Trustee of the New York State Common Retirement
Fund, Office of the State Comptroller, Albany, New York 12236, which is
the owner of 1,187,572 shares of the common stock of the Company.
Co-filers of the proposal are: the New York State Teachers' Retirement
System, 10 Corporate Woods Drive, Albany, New York 12211, owners of
768,300 shares; the General Board of Pensions of the United Methodist
Church, 1200 Davis Street, Evanston, Illinois 60201, owners of 26,858
shares; The Ministers and Missionaries Benefit Board of the American
Baptist Churches, 475 Riverside Drive, New York, New York 10115, owners
of 52,200 shares; and The Daughters of the Holy Spirit, 72 Church
Street, Putnam, Connecticut 06260, owners of 2,573 shares of the common
stock of the Company.
"WHEREAS, we believe, the system of apartheid continues to deny civil
and human rights to the majority Black population in South Africa and
fosters social, political and economic instability throughout that
country;
WHEREAS, pension funds and other institutional investors are continually
pressured by state and local political leaders to protest apartheid by
adopting divestment programs involving large sales of stock which, in
our opinion, will adversely impact the beneficiaries of such
institutions;
WHEREAS, to our knowledge, management has failed or refused to avail
itself of the opportunity to oppose or protest the divestment of its
stock;
WHEREAS, we believe, withdrawal of corporate interests from South
Africa, as contrasted to the divestment of stock, not only results in
more pressure for change in South Africa, but also protects the
interests of shareholders;
NOW, THEREFORE, be it resolved that the shareholders request the Board
of Directors to establish as policy that:
The corporation implement a program of withdrawing its operations from
South Africa and the sale of its interest in any affiliate there. Where
possible, this program should include negotiation with labor
representatives and promote Black employee participation in ownership
and management."
The following statement has been submitted in support of the resolution.
"In our opinion, the corporation should no longer invest within the
framework of apartheid which mandates the denial of basic human and
civil rights of the Black majority. Although strides have been made by
the corporation to eliminate discrimination within its South African
operations, its efforts to gain the statutory dismantling of apartheid
have had minimal effect. Shareholders must unite in voicing their
opposition to the discriminatory practices of South Africa and convince
the corporation to make known, through withdrawal, that it cannot exist
with the system of apartheid.
The corporation has a modest presence there and the prognosis is for
expanded political and social unrest. Furthermore, there is a growing
use of product boycotts and contract restrictions in the United States
and the prospect of additional and more severe Congressional sanctions.
All of this, in our opinion, will have an adverse impact on the value of
the company.
In addition, corporate withdrawal from South Africa will quickly
eliminate any need for state and local officials and others to advocate
the divestment of stock to protest apartheid. Since the corporation has
neither objected to nor sought to block such inappropriate governmental
activities or such sale of its stock, it should not be surprised if the
shareholders seek to protect their interest by calling for corporate
withdrawal. Indeed, to be consistent, the corporation should not object
to this resolution.
In recommending withdrawal from South Africa, we request that, where
possible, it include negotiation with the labor unions and promote Black
employee participation in ownership and management. By so assisting in
the establishment of an economic foundation for the Black majority, the
corporation can best express and exercise its contribution toward the
elimination of apartheid."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF
PROPOSALS NOS. 3 AND 4 FOR THE REASONS SET FORTH BELOW.
[SOURCE PAGE 16]
As indicated in the proxy statements of the last three years, the Board
of Directors has continued to monitor developments affecting the
difficult decision as to whether to continue the Company's South African
operations. Political events in South Africa this past year provide
some basis for hope for the beginning of steps that could lead to a
peaceful resolution of some of that country's problems. At this time,
the Board continues to believe that, on balance, the Company's continued
presence in South Africa does more good than would its withdrawal and
that the Company should continue its operations there.
The Company's operations in South Africa consist of two small
businesses. Gillette South Africa Limited ("Gillette South Africa"),
sells razors, blades and shaving preparations. Oral-B Laboratories
(S.A.) (Proprietary) Limited distributes toothbrushes. As of December
31, 1989, these businesses employed approximately 127 persons,
two-fifths of whom were non-white. During the last quarter of 1989 the
Company restructured its South African operations as part of its
worldwide restructuring program, selling the Gillette South Africa
manufacturing facility and its business in toiletries and plastic wraps
to Twins Pharmaceuticals Limited, a South African affiliate of Anglo
American Corporation. As a result, sixty percent of the Gillette South
Africa employees in the affected businesses were transferred to Twins or
remained with Gillette South Africa. Generous severance packages,
negotiated with the unions, were provided to other employees, the vast
majority of whom were offered positions but chose separation. In 1989
Gillette's operations in South Africa accounted for approximately 1% of
the Company's sales and earnings.
From a business standpoint, South Africa presently provides a small but
worthwhile market for the Company's products. If South Africa can
overcome its social and economic problems, it is hoped that it would
become a larger and more important market. The provisions of the United
State Revenue Act of 1987 affecting South Africa operations of U.S.
companies have had a negative impact on the earnings from the Company's
South African operations, but these businesses have remained profitable.
From the standpoint of employee and human relations, the Company's
businesses in South Africa have been in the forefront in support of
human rights in South Africa: they have totally integrated facilities
and identical wage rates for white and non-white employees; they provide
excellent fringe benefits and offer active educational programs for
non-white employees; and they have been active in the community,
providing programs such as scholarships for needy black university
students, funds and equipment for technical and secondary schools, adult
education programs and funds and equipment for medical care. In 1985
Gillette became South Africa's first private sector sponsor of a Legal
Aid Clinic. During 1989 the Company continued expenditures in support
of these programs, and it will continue them in 1990.
Since 1977 Gillette has been a signatory of the Sullivan Principles (now
called the Statement of Principles for South Africa) and has
consistently received high ratings for its efforts, including the
highest rating for both businesses in 1989. In addition, the local
managements, on an individual basis and through organizations such as
the American Chamber of Commerce, have worked and will continue to work
to press the South African government to dismantle the apartheid system.
The local companies also actively lead programs aimed at improving race
relations.
The Board of Directors acknowledges that it is difficult for U.S.
businesses in South Africa to have a significant impact on social change
in South Africa. However, it does not agree that withdrawal of U.S.
interests from South Africa has resulted, or in the future will
necessarily result, in any effective pressure for change on the South
African government. The Board believes that individual companies, such
as Gillette, have an opportunity to continue to make meaningful
contributions to the South African society, to the lives of their South
African employees and to the communities in which they operate. For the
present, the Board believes that it is in the best interests of the
stockholders and the related interests of its employees to continue its
operation in South Africa.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THESE STOCKHOLDER
PROPOSALS, WHICH ARE DESIGNATED AS PROPOSALS NOS. 3 AND 4 ON THE
ENCLOSED PROXY CARD.
[SOURCE PAGE 17]
5. Stockholder Proposal
This proposal was submitted by Franklyn Barrett, 41 4th Street,
Frenchtown, N.J. 08825, the owner of 100 shares of the common stock of
the Company.
"I propose that Gillette Corp. (sic) and its subsidiaries stop testing
of all kinds on animals and that all animals in the custody of Gillette
be pensioned off to a farm or farms where they will be provided for by
Gillette and that regular unannounced inspections be made by the company
to check on their welfare. Any employee guilty of violating this rule
will be dismissed. The company may not hire or allow anyone else to do
this testing for the company.
In the event that Gillette no longer tests animals, I wish to have my
proposal voted on anyway for two reasons (1) to guarantee the
permenance (sic) of this situation and (2) to see to it that the
company does not have others doing this work for the company."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF
PROPOSAL NO. 5 FOR THE REASONS SET FORTH ON PAGES 18 AND 19.
6. Stockholder Proposal
This proposal was submitted by Ms. Elizabeth Aszkanazy, 15 Gosford
Boulevard #5, Toronto, Ontario M3N 267 Canada, and People for the
Ethical Treatment of Animals, Inc., P.O. Box 42516, Washington, D.C.,
20015, owners of 1,680 shares and 80 shares, respectively, of the common
stock of the Company.
"WHEREAS Gillette manufactures cosmetics, toiletries, and office
products, such as hairsprays, shampoos, deodorants and correction fluid,
and
WHEREAS Gillette conducts procedures in which animals have products
and/or components thereof placed into their eyes or onto their skin,
and/or are made to inhale or ingest such and are ultimately killed; and
WHEREAS our company has stated that 'Gillette employees are committed to
the reduction of the use of animals in product testing. . .':
NOW THEREFORE BE IT RESOLVED, THAT Gillette report annually to
shareholders regarding the scope of its use of animals to test
cosmetics, household and office products and on its efforts to end the
use of animals to test these products."
The following statement has been submitted in support of the resolution.
"Several major cosmetics companies have discontinued using animals to
test their products, including industry leaders Avon, Faberge and
Revlon. According to the New York Times, "the moves. . .reflect growing
confidence in the reliability of alternative testing methods' (New York
Times, August 2, 1989, A-1).
While Gillette has said it is working to reduce its use of animal tests,
shareholders presently have no information about the numbers and species
of animals used or the kinds or procedures that are performed. Without
this information, shareholders are unable to monitor and evaluate the
company's efforts in this area.
Animal tests do not necessarily keep unsafe products off the market or
prevent injuries. Gillette's Liquid Paper contains trichloroethylene,
which 'was identified as a carcinogen through tests on laboratory
animals' before being put on the market (Los Angeles Times, September
29, 1989, A-32). A 1988 report by the Consumer Product Safety
Commission's National Injury Information Clearinghouse recorded 34,980
hospital emergency room cases related to cosmetics, with another 41,334
linked to household products.
The 1988 Annual Report of the American Association of Poison Control
Center's National Data Collection System listed 110,546 exposure cases
related to cosmetics and personal care products (including three deaths)
and 137,240 cases related to 'cleaning substances.'
[SOURCE PAGE 18]
We request the following basic information, with the exception of trade
secret information:
(1) total number of animals, by species and kinds of tests, used
annually in testing cosmetics and household products, at in-house and
contract laboratories, including number of animals used in procedures
with and without anesthesia;
(2) how the company has made use of non-animal tests including cell and
tissue cultures, computer modeling, and computerized data bases and how
the company has made use of available product ingredients that are
'generally recognized as safe' by the government; and
(3) funds and personnel allocated to the development and implementation
of non-animal tests.
This proposal is simply a request for information, much, if not all, of
which is already maintained by or on behalf of our company. It would
not in any way prohibit product testing using animals nor affect the
testing of medical products.
Please support the shareholders' right to know, by voting FOR this
proposal. Thank you."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF
PROPOSALS NOS. 5 AND 6 FOR THE REASONS SET FORTH BELOW.
Gillette products are used by hundreds of millions of consumers around
the world. The Company has a moral and legal responsibility to insure
that all Gillette products are safe for employees to make and for
consumers to use. The Company has an obligation to its stockholders to
continue the development and marketing of safe and effective new
products.
All major markets for Gillette products have laws and regulations to
protect people from the potential hazards associated with product
manufacture and use. Gillette and all other manufacturers are obligated
to provide assurances of safety. Unfortunately, tests using animals are
often the only scientifically accepted way to substantiate safety.
Although important progress has been made and is continuing, the total
replacement of animals in safety testing is not yet a realistic
expectation for the near future. When asked whether there existed any
non-animal alternative test methodologies to replace the Draize
eye-irritancy and other acute toxicity tests, Dr. Frank E. Young,
Commissioner of the U.S. Food and Drug Administration (FDA) stated in
March 1988, "At the present time and in the foreseeable future, the
answer is no." However, several companies, including Gillette, continue
to work toward the goal of replacing animals in safety testing.
The Board of Directors agrees that stockholders should be informed about
the Company's efforts to minimize the use of animals in testing and to
refine the methods used in safety evaluation. These efforts include:
(1) participation in the industry-sponsored and U.S. Food and Drug
Administration-sanctioned Cosmetic Ingredient Review Program;
(2) maintenance and use of a computerized safety information database;
(3) maintenance and use of a computerized product formulae database;
(4) computerized search and review of worldwide medical literature on
ingredient safety; and (5) support of the Cosmetic, Toiletry and
Fragrance Association programs to develop alternatives to animal
testing.
In addition, the Company has a program to help develop, validate and
adopt alternatives to laboratory animal testing for product safety,
including the creation in 1989 of an in vitro (non-animal) testing group
as part of the Gillette Medical Evaluation Laboratories (GMEL). The
group includes toxicologists with backgrounds in the research and
development of in vitro testing regimens. Its sole mission will be to
position the Company as a leader in non-animal test methodologies.
The directors believe that such continuing developments are reasonable
and responsible outgrowths of the ongoing Gillette policy to reduce
significantly the number of laboratory animals required for product
safety tests, to further refine test methods and to adopt non-animal
test alternatives as soon as they are accepted by state and federal
regulatory agencies and the scientific community. In fact, of all new
Gillette products given medical safety clearance in recent years, more
than two-thirds did not involve additional tests on laboratory animals.
[SOURCE PAGE 19]
The Company has previously reported it is conducting tests with the
Eytex System to validate its use as an in vitro screening test to
predict eye irritancy. If scientifically validated and approved by
the FDA, the Eytex System would further substantially reduce the use
of animals in product safety tests.
The Company's staff toxicologists routinely screen all proposed
ingredients through the computerized systems referred to above and
reject those that are unsuitable for employee exposure or use in
consumer products. Nevertheless, when otherwise safe ingredients are
combined in new compounds, animal testing is sometimes necessary to
establish that the new compounds are also safe.
When animal testing was performed in Gillette laboratories, humane
test methods were used to avoid pain and suffering in the test animals
to the extent possible. Although all animal testing is now done by
outside testing laboratories, the same high standard is set. All
outside laboratories are legally required to comply with Federal
Animal Welfare Act regulations promulgated by the United States
Department of Agriculture and all other federal, state and local laws
concerning animal care. In addition, Gillette retains only those
laboratories that have met the stringent accreditation standards of
the American Association for Accreditation of Laboratory Animal Care.
In summary, Gillette and its employees are fully committed to using
animal tests only when necessary, are concerned about the humane
treatment of animals and are seeking to develop, validate and adopt
alternatives to laboratory animal testing for product safety. The
Company believes that proposals 5 and 6 will not add to this effort in
any meaningful manner.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THESE STOCKHOLDER
PROPOSALS, WHICH ARE DESIGNATED AS PROPOSALS NOS. 5 AND 6 ON THE
ENCLOSED PROXY CARD.
7. Stockholder Proposal
This proposal was submitted on behalf of the New York City Fire
Department Pension Fund, Art. 1B, by a Trustee of the Fund, One Centre
Street, Room 530, New York, N.Y. 10007. The Fund is the owner of 26,765
shares of the common stock of the Company.
"RESOLVED, that the shareholders of the Corporation request the board
adopt and implement a policy requiring all proxies , ballots and voting
tabulations that identify shareholders be kept confidential, except when
disclosure is mandated by the law of the Corporation's state of
incorporation, such disclosure is expressly requested by shareholder or
during a contested election and that the tabulators and the inspectors
of election be independent and not the employees of the Corporation."
The following statement has been submitted by the proponent in support
of the resolution:
"The secret ballot is fundamental to the American political system. The
reason for this protection is to ensure that voters are not subjected to
actual or perceived coercive pressure. We believe that it is time that
this fundamental principle of the confidential ballot be applied to
public corporations.
Strong support was shown at the last annual meeting when 26.9% of the
votes were cast in favor of this proposal.
It is our belief that shareholders need the protection of a confidential
ballot no less than voters in political elections. While there is no
imputation that management has acted coercively, the existence of this
possibility is sufficient to justify confidentiality.
The categories of shareholders who could be subject to coercive voting
pressure include participants in employee stock purchase plans who may
fear management retaliation if their voting records are available to
management. Institutional money managers, banks, insurance companies
and others may fear losing a corporation's business if they do not vote
in accordance with management's wishes. A survey of members of the New
York Society of Security Analysts found that twenty-two percent of its
members felt undue pressure to vote a certain way. These perceived
coercive pressures would be eliminated by a confidential ballot.
[SOURCE PAGE 20]
This resolution would permit shareholders to voluntarily disclose their
vote to management by expressly requesting such disclosure on their
proxy cards. Additionally, shareholders may disclose their vote to any
other person they choose. This resolution would merely restrict the
ability of the Corporation to have access to the vote of its
shareholders without their specific consent.
Many shareholders believe confidentiality of ownership is ensured when
shares are held in street or nominee name. This is not always the case.
Management has various means of determining actual (beneficial)
ownership. For instance, proxy solicitors have elaborate databases that
can match account numbers with the identity of some owners. Moreover,
why should shareholders have to transfer their shares to nominees in an
attempt to maintain confidentiality? In our opinion, this resolution is
the only way to ensure a secret ballot for all shareholders irrespective
of how they choose to hold their shares.
The Corporation complies with current Federal and state proxy
regulations. These regulations, however, simply specify a minimum
standard of corporate conduct. We believe that the only way to ensure a
voting process free of the taint of coercion is through a proxy voting
system that complies with the American principle of voter
confidentiality.
We urge you to vote FOR this resolution."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF
PROPOSAL NO. 7 FOR THE REASONS SET FORTH BELOW.
This proposal is virtually identical to a proposal submitted last year
by a trustee of the New York City Police Pension Fund and rejected by
over 73% of the shareholders who voted on it.
The Board does not share the concern of the proponent that confidential
voting is necessary to guard against coercion in the stockholder voting
process. Gillette officers, directors, employees and agents are
required to respect the right of all stockholders to vote without
coercion or retaliation with regard to business or employment
considerations. The proponent concedes that, "there is no imputation
that management has acted coercively." As to the proponent's concerns
about coercion of employees, participants in the Company's employees
savings plans and employee stock ownership plans instruct the trustees
of these plans in confidence how to vote their shares. As to
stockholders who hold shares in a nominee or "street" name or through a
broker, the Federal securities laws provide that such nominees may not
disclose to the Company the names of stockholders who object to such
disclosure. The proponent also concedes that, "The Corporation complies
with current Federal and state proxy regulations."
The Company decided, in response to last year's proposal, to employ a
confidential voting procedure on a trial basis for the 1989 Annual
Meeting. The Company's procedure will again be used on a trial basis
this year. The Company will evaluate whether the procedure should be
continued for future meetings and the need for any modifications.
In general, the procedure requires that proxies and ballots be kept
confidential from officers, directors and employees of the Company and
from third parties. Certain employees or agents, such as those serving
as tabulators, judges, or proxy solicitors who have agreed to comply
with this procedure, may be permitted access to the information to
facilitate their participation in soliciting proxies and conducting the
meeting. The procedure does not apply in the event of a proxy contest
or other solicitation based on an opposition proxy statement or a matter
requiring for passage more than a majority of the shares voting.
Although this year's proposal contains an exception for a "contested
election", the Board believes that the proposal is still somewhat vague
and might result in needless expense. Certain specific issues of
concern to the Company are not addressed, including:
The proponent's proposal requests that "tabulators and the inspectors of
election be independent and not the employees of the Corporation." For
a number of years, the Company has employed its transfer agent to
tabulate votes and has appointed judges of election from among Company
attorneys. Both tabulators and judges are obligated to discharge their
duties in accordance with the confidentiality procedure, honestly and in
the interests of all stockholders. The Board believes this longstanding
practice is economical, efficient and consistent with confidentiality.
[SOURCE PAGE 21]
The proponent opposes permitting employees or agents who are serving as
proxy solicitors access to the voting information on the proxy cards
they solicit. The Board believes that unless such access is permitted,
solicitation of proxies could become more difficult and expensive.
The proponent's proposal contains no exception for situations where a
higher than usual affirmative stockholder vote is required, e.g., an
amendment to the Company's Certificate of Incorporation to effect a
stock split. The proponent's proposal could be interpreted to prevent
Company representatives from determining which stockholders had
abstained from voting on the proposal so that they could be urged to
vote.
For the reasons stated above, and particularly in light of the
confidential voting procedure employed for the Company's 1990 Annual
Meeting, the Board believes the proposal is again largely moot.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
STOCKHOLDER PROPOSAL, WHICH IS DESIGNATED AS PROPOSAL
NO. 7 ON THE ENCLOSED PROXY CARD.
Outstanding Voting Securities
On March 5, 1990, the record date for the 1990 Annual Meeting, there
were outstanding and entitled to vote 96,953,560 shares of the $1 par
value common stock of the Company, entitled to one vote per share;
600,000 shares of Series B Cumulative Convertible Preferred Stock,
entitled to twenty votes per share; and 165,872 shares of Series C ESOP
Convertible Preferred Stock, entitled to ten votes per share. The
holders of the Company's common and preferred stock vote together as one
class on all matters submitted to a vote of the stockholders of the
Company.
Solicitation of Proxies
The Company is employing the confidential voting procedure described at
page 20 of this proxy statement for the 1990 Annual Meeting. The cost
of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, solicitations may also be made by personal
interview, telegram and telephone. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to send
proxies and proxy material to their principals, and the Company will
reimburse them for their expenses in so doing. Consistent with the
Company's confidential voting procedure, directors, officers and other
regular employees of the Company, as yet undesignated, may also request
the return of proxies by telephone or telegram, or in person. The
Company has retained Georgeson & Company Inc., New York, New York, to
assist in the solicitation of proxies using the means referred to above
at an anticipated cost of $17,500 plus reasonable expenses.
Annual Report
The Annual Report of the Company for the year ended December 31, 1989,
is being mailed to all stockholders with this proxy statement.
Stockholder Proposals
In general, stockholder proposals intended to be presented at an Annual
Meeting, including proposals for the nomination of directors, must be
received by the Company 60 days in advance of the meeting, or by
February 18, 1991, to be considered for the 1991 Annual Meeting. The
requirements for submitting such proposals are set forth in the
Company's Bylaws.
Stockholder proposals intended to be considered for inclusion in the
proxy statement for presentation at the 1991 Annual Meeting must be
received by the Company by November 12, 1990.
Other Matters
The Board of Directors does not know of any matter other than those
described in this proxy statement that will be presented for action at
the meeting. If other matters properly come before the meeting, the
persons named as proxies intend to vote the shares they represent in
accordance with their judgment.
PROXY
THE GILLETTE COMPANY
PRUDENTIAL TOWER BUILDING, BOSTON, MASSACHUSETTS 02199
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned revokes all prior proxies and appoints and authorities
Kathryn E. DeMoss and Joseph E. Mullaney and each of them with power of
substitution, as the Proxy Committee, to vote the stock of the
undersigned at the 1990 Annual Meeting of the stockholders of The
Gillette Company on April 19, 1990, and any adjournment thereof, as
specified on the reverse side of this card on proposals 1 through 7 and
in their discretion on all other matters coming before the meeting.
X Please mark votes as in this example.
This proxy will voted as directed by the stockholder, but if no choice
is specified, it will be voted FOR proposals 1 and 2 and AGAINST
proposals 3, 4, 5, 6 and 7.
The Board of Directors recommended a vote FOR proposals 1 and 2.
1. Election of directors for 3-years terms:
W.E. Buffett, C.R. Goldberg, D.F. Phillips
[ ] FOR ALL NOMINEES
[ ] WITHHELD FROM ALL NOMINEES
2. Approval of the appointment of auditors.
FOR except vote withheld from the following nominees.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
The Board of Directors recommends a vote AGAINST proposals 3, 4, 5, 6
and 7.
3. Stockholder proposal-South Africa.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
4. Stockholder proposal-South Africa.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
5. Stockholder proposal-Animal Testing.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
6. Stockholder proposal-Animal Testing
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
7. Stockholder proposal-Confidential Voting.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
Please sign name exactly as it appears hereon. When signing as
attorney, executor, trustee or in other representative capacity,
state full title. (IMPORTANT - FILL IN DATE).
Signature:
Date:
( END OF DOCUMENT. )