SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
AVON PRODUCTS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11:*
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4) Proposed maximum aggregate value of transaction:
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[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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[AVON LOGO]
[the company for women]
March 27, 2001
Dear Shareholder:
You are cordially invited to attend the 2001 Annual Meeting of
Shareholders, which will be held at 10:00 a.m. on Thursday, May 3, 2001 in the
Grand Salon at the Essex House, 160 Central Park South, New York City.
The business and operations of Avon will be reviewed at the Annual Meeting.
We hope that you will be able to attend.
Whether or not you plan to attend the Annual Meeting, your vote is
important. You can vote by the Internet, by telephone or by completing the
enclosed proxy card. Instructions for voting by the Internet or telephone are
given on the enclosed proxy card.
Sincerely yours,
/s/ ANDREA JUNG
------------------------
Andrea Jung
Chief Executive Officer
AVON PRODUCTS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NY 10105
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The 2001 Annual Meeting of Shareholders of Avon Products, Inc. ("Avon")
will be held in the Grand Salon at the Essex House, 160 Central Park South, New
York, New York 10019, on Thursday, May 3, 2001 at 10:00 a.m. for the following
purposes:
(1) To elect three (3) directors to three-year terms expiring in 2004;
(2) To act upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as Avon's independent accountants for 2001;
(3) To transact such other business as properly may come before the
meeting.
The Board of Directors has fixed the close of business on March 16, 2001 as
the record date for the purpose of determining the shareholders who are entitled
to notice of, and to vote at, the Annual Meeting and any adjournment or
postponement thereof.
THE BOARD OF DIRECTORS URGES YOU TO MARK, SIGN AND RETURN
THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID ENVELOPE PROVIDED
OR TO VOTE BY THE INTERNET OR BY TELEPHONE.
Ward M. Miller, Jr.
Senior Vice President,
Corporate Counsel and Secretary
March 27, 2001
New York, New York
AVON PRODUCTS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NY 10105
---------------------
PROXY STATEMENT
This Proxy Statement is furnished by and on behalf of the Board of
Directors of Avon Products, Inc. ("Avon" or the "Company") in connection with
the solicitation of proxies for use at the Annual Meeting of Shareholders of the
Company to be held on May 3, 2001 in the Grand Salon at the Essex House, New
York, New York 10019 and at any adjournment or postponement thereof (the "Annual
Meeting"). This Proxy Statement and the enclosed proxy card will be first mailed
on or about March 27, 2001 to the shareholders of record of Avon on the Record
Date, as defined below (the "Shareholders").
THE BOARD OF DIRECTORS URGES YOU TO MARK, SIGN, AND RETURN THE ENCLOSED
PROXY CARD IN THE POSTAGE-PREPAID ENVELOPE PROVIDED OR TO VOTE BY THE INTERNET
OR BY TELEPHONE.
SHARES ENTITLED TO VOTE
Proxies will be voted as specified by Shareholders. Unless contrary
instructions are specified, if the enclosed proxy card is executed and returned
(and not revoked) prior to the Annual Meeting, the Shares represented thereby
will be voted FOR election as directors of the nominees listed in this Proxy
Statement, and FOR ratification of the appointment of PricewaterhouseCoopers LLP
as Avon's independent accountants for 2001. The submission of a signed proxy
will not affect a Shareholder's right to attend, and to vote in person at, the
Annual Meeting. Shareholders who execute a proxy may revoke it at any time
before it is voted by filing a written revocation with the Secretary of Avon,
executing a proxy bearing a later date or attending and voting in person at the
Annual Meeting.
Only Shareholders of record as of the close of business on March 16, 2001
(the "Record Date") will be entitled to vote at the Annual Meeting. As of the
close of business on the Record Date, there were 237,621,288 shares of Avon's
common stock, par value $.25 per share ("Common Stock"), outstanding ("Shares").
Holders of Shares are entitled to vote cumulatively for the election of
directors and to cast one vote per Share on all other matters.
According to New York law, any corporate action taken at a shareholders
meeting is based on the votes cast. "Votes cast" means the votes actually cast
"for" or "against" a particular proposal, whether by signed proxy or in person.
Therefore, under New York law, abstentions and broker non-votes are not
considered in determining whether a proposal is approved by shareholders.
Directors are elected by a plurality of the votes cast; shareholder approval of
each other proposal to be considered at the Annual Meeting requires the
affirmative vote of a majority of the votes cast at the Annual Meeting.
In accordance with Company policy, all shareholder proxies, ballots and
voting materials that identify the votes of specific shareholders will be kept
permanently confidential, except as may be required by law, for all matters
other than contested elections. In addition, all proxy cards and other voting
materials will be returned by shareholders to an independent vote tabulator, and
the tabulation process and results of shareholder votes will be inspected by
independent inspectors of election.
PROPOSAL 1--ELECTION OF DIRECTORS
The Board of Directors is divided into three classes as nearly equal in
number as possible. Effective from and after the date of the Annual Meeting, the
Board has fixed the number of directors at 10 with three directors in the class
whose term expires in 2004 (the "Class of 2004"), three directors in the class
whose term expires in 2003 (the "Class of 2003") and four directors in the class
whose term expires in 2002 (the "Class of 2002"). The terms of three incumbent
directors, Edward T. Fogarty, Susan J. Kropf and Maria Elena Lagomasino, will
expire at the Annual Meeting. The terms of the other incumbent directors will
continue until either the 2002 or 2003 Annual Meeting. Richard S. Barton and
Jose Ferreira, Jr., whose terms would otherwise have expired at the Annual
Meeting, both resigned as directors, effective in December 2000 and January
2001, respectively. PROPOSAL 1: The Board of Directors has nominated Edward T.
Fogarty, Susan J. Kropf and Maria Elena Lagomasino for election to the Class of
2004 at the Annual Meeting, each to serve for a three-year term to expire at the
Annual Meeting in 2004.
All Shares represented by properly executed proxies received in response to
this solicitation will be voted for the election of directors as specified
therein by the Shareholders. Unless otherwise specified in the proxy, it is the
intention of the persons named on the enclosed proxy card to vote FOR the
election of Edward T. Fogarty, Susan J. Kropf and Maria Elena Lagomasino to the
Class of 2004. Each nominee of the Company has consented to serve as a director
of the Company if elected. If at the time of the Annual Meeting any nominee is
unable or declines to serve as a director, the discretionary authority provided
in the enclosed proxy card may be exercised to vote for a substitute candidate
designated by the Board of Directors. The Board of Directors has no reason to
believe that any of its nominees will be unable or decline to serve as a
director.
Shareholders may withhold their votes from the entire slate of nominees by
so indicating in the space provided on the enclosed proxy card. Shareholders may
withhold their votes from any particular nominee by writing that nominee's name
in the space provided for that purpose on the enclosed proxy card.
In voting for the election of directors, Shareholders are entitled to vote
cumulatively. Each Shareholder is entitled to cast in each election the number
of votes equal to the number of Shares held of record by such person, multiplied
by the number of directors to be elected in such election. In the election of
three directors to the Class of 2004, Shareholders will be entitled, under
cumulative voting, to a total of three votes per Share held of record by them,
and they may cast all of such votes in this election for a single nominee, or
distribute them among any two or more nominees, as they see fit. Shareholders
may (but need not) cumulate their votes in the election of directors by
indicating the distribution of their votes among the nominees in the space
provided on the enclosed proxy card. If votes are not so distributed on the
proxy, the persons appointed therein may exercise the right to vote the Shares
represented by such proxy cumulatively in such Class election and may distribute
the votes represented by suchproxy among one or more of the nominees listed
below (or any substitute candidates) for such Class in any manner they see fit.
Set forth below is certain information furnished to the Company by each
nominee and each director continuing in office after the Annual Meeting.
2
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION
AS DIRECTORS OF THE NOMINEES LISTED BELOW.
NOMINEES FOR THE BOARD OF DIRECTORS FOR A THREE-YEAR TERM EXPIRING 2004
EDWARD T. FOGARTY
Director of Avon since 1995 Age: 64
[GRAPHIC OMITTED]
Mr. Fogarty is the former Chairman of Tambrands, Inc., the
manufacturer of Tampax tampons, and its Chief Executive
Officer from May 1994 to September 1997. Previously, he was
President, Colgate USA/Canada/Puerto Rico, for the
Colgate-Palmolive Company from 1989-1994. From 1983-1989, he
was Senior Vice President and General Manager, Consumer
Products Division, at Corning Inc. Mr. Fogarty is a director
of Goodyear Tire & Rubber Co. and UST, Inc.
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SUSAN J. KROPF
Director of Avon since 1998 Age 52
[GRAPHIC OMITTED]
Mrs. Kropf was elected President and Chief Operating
Officer of the Company in January 2001, previously having
been Executive Vice President and Chief Operating Officer,
North America and Global Business Operations, since
December 1999. She had been Executive Vice President and
President, North America, since March 1997 and a member of
the Board of Directors of the Company effective January 5,
1998. She had been appointed President of the Company's New
and Emerging Markets in July 1996 and previously was Senior
Vice President, Eastern Europe and during 1993 and 1994
Senior Vice President, Global Product Management. Mrs.
Kropf joined the Company in 1971 and held various positions
in manufacturing, marketing and product development prior
to 1993. Mrs. Kropf is a director of The Mead Corporation
and the Fragrance Foundation.
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MARIA ELENA LAGOMASINO
Director of Avon since October 2000 Age: 52
[GRAPHIC OMITTED]
Ms. Lagomasino is a Managing Director and Co-Head of JP
Morgan Private Bank. Prior to the merger of JP Morgan and
Chase Manhattan Bank at the end of 2000, she was Senior
Managing Director at The Chase Manhattan Bank in charge of
its Global Private Banking Group.Ms. Lagomasino had been
with Chase Manhattan since 1983 in various positions in
private banking, becoming its Global Private Banking
Executive in 1997. Prior to 1983 she was a Vice President
at Citibank. She is a director of Philips-Van Heusen
Corporation and a trustee of Helen Keller International and
the Synergos Institute.
================================================================================
3
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE--TERM EXPIRING 2003
STANLEY C. GAULT
Director of Avon since 1985 Age: 75
[GRAPHIC OMITTED]
Mr. Gault was elected Chairman of the Board of Directors in
a non-executive capacity, effective November 4, 1999. Mr.
Gault is the former Chairman of the Board of The Goodyear
Tire & Rubber Company from June 1991 to June 1996, a
manufacturer of tires, chemicals, polymers, plastic film and
other rubber products. Mr. Gault was Chief Executive Officer
of that Company from June 1991-December 1995. Previously, he
was Chairman of the Board and Chief Executive Officer of
Rubbermaid Incorporated from May 1, 1980 to May 1, 1991. He
also is a director of The Timken Company, H. Freedlander,
Wal-Mart Stores, Inc. and Vencor, Inc. He is a trustee and
Chairman of the Board of The College of Wooster and a
director of the National Association of Manufacturers.
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ANDREA JUNG
Director of Avon since 1998 Age 42
[GRAPHIC OMITTED]
Ms. Jung was elected Chief Executive Officer of the Company
effective November 4, 1999, having previously been
President and a member of the Board of Directors since
January 5, 1998 and Chief Operating Officer since July 1,
1998. She had been elected an Executive Vice President of
the Company in March 1997 concurrently continuing as
President, Global Marketing, a position she held from July
1996 to the end of 1997. Ms. Jung joined the Company in
January 1994 as President, Product Marketing for Avon U.S.
Previously she was Executive Vice President, Neiman Marcus
and a Senior Vice President for I. Magnin. Ms. Jung is a
director of the General Electric Company. She is also a
member of the Princeton University Board of Trustees and
the Board of Directors of the Cosmetic, Toiletry and
Fragrance Association (CTFA) and Catalyst.
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PAULA STERN, Ph.D
Director of Avon since 1997 Age 55
[GRAPHIC OMITTED]
Dr. Stern is President of The Stern Group, Inc., an economic
analysis and trade advisory firm established in 1988. She is
a member of the President's Advisory Committee for Trade
Policy and Negotiations (ACTPN). She was Commissioner of the
U.S. International Trade Commission from 1978 to 1986, and
was its Chairwoman 1984-1986. Dr. Stern is a director of
Harcourt General, Wal-Mart Stores, Inc. and The Neiman
Marcus Group, Inc. She serves on the board of a number of
academic and international organizations.
================================================================================
4
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE--TERM EXPIRING 2002
BRENDA C. BARNES
Director of Avon since 1994 Age: 47
[GRAPHIC OMITTED]
Ms. Barnes served as interim President of Starwood Hotels
from November 1999 through March 2000. Prior to 1998 she
served as President and Chief Executive Officer of
Pepsi-Cola North America, where she was responsible for the
beverage business in the United States and Canada. Ms.
Barnes previously held sales, marketing and general
management positions at Wilson Sporting Goods, Frito-Lay
and Pepsi-Cola in her 22 years with PepsiCo. She is a
director of Sears & Roebuck, Inc., The New York Times,
TyCom LTD, Lucas Arts Entertainment Co. LLC, Lucas Digital
LTD and is Chair of the Board of Trustees for Augustana
College.
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FRED HASSAN
Director of Avon since May 1999 Age 55
[GRAPHIC OMITTED]
Mr. Hassan is the Chairman and Chief Executive Officer of
Pharmacia Corporation, a research based global
pharmaceutical company. Prior to assuming this position in
February 2001, Mr. Hassan had been Chief Executive Officer
of Pharmacia since its creation in March 2000, and before
that had been President and Chief Executive Office of
Pharmacia & Upjohn, Inc., the predecessor to Pharmacia,
since May 1997. Mr. Hassan previously held senior
divisional and corporate positions with American Home
Products Corporation since 1989, including that of
Executive Vice President and Board member. Prior to joining
that company, he had held various executive positions with
Sandoz Pharmaceuticals Corporation, including CEO of its
U.S. operations and research and development. Mr. Hassan is
a director of Pharmacia Corporation.
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ANN S. MOORE
Director of Avon since 1993 Age: 50
[GRAPHIC OMITTED]
Mrs. Moore is President, The People Magazine Group at Time,
Inc. She has executive responsibilities for nine magazines
including The Parenting Group, People, InStyle, Teen People,
People en Espanol and Real Simple. Mrs. Moore joined Time
Inc. in 1978 in Corporate Finance. Since then, she has held
consumer marketing positions at Sports Illustrated, Fortune,
Money and Discover, moving to general management of Sports
Illustrated in 1983. She serves on the boards of a number of
non-profit organizations.
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LAWRENCE A. WEINBACH
Director of Avon since May 1999 Age 61
[GRAPHIC OMITTED]
Mr. Weinbach is Chairman of the Board, President and Chief
Executive Officer of Unisys Corporation, a worldwide
information services and technology company. He was elected
to that position in September 1997. He previously was
Managing Partner--Chief Executive of Andersen Worldwide, a
global professional services organization from 1989 to 1997
and had held various senior executive positions with
Andersen for a number of years prior thereto. Mr. Weinbach
is a director of Unisys Corporation.
================================================================================
5
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Company's Board of Directors held eight meetings in 2000. The Board has
the following regular committees: Audit Committee, Compensation Committee,
Finance and Strategic Planning Committee and Nominating and Corporate Governance
Committee. No director attended less than 75% of the aggregate number of
meetings of the Board and the Board Committees on which he or she served.
The Audit Committee, composed of Lawrence A. Weinbach as Chair, Richard S.
Barton, Fred Hassan and Paula Stern met three times in 2000. The
responsibilities of the Audit Committee are set forth in the Audit Committee
Charter which is attached as an appendix to this proxy statement. This Charter
was initially adopted by the Board on May 4, 2000 and revised March 6, 2001. In
addition, a separate report of the Audit Committee is set forth below.
The Compensation Committee, composed of Brenda C. Barnes, as Chair, Edward
T. Fogarty, Ann S. Moore, and Paula Stern met four times in 2000. The
responsibilities of the Compensation Committee include, in addition to such
other duties as the Board may specify: (i) reviewing management's
recommendations for compensation of officers of the Company and its affiliates
and approving such compensation for all senior officers of the Company; (ii)
making recommendations to the Board with respect to compensation for any
employee of the Company who also is a director of the Company; (iii) reviewing
and approving (or recommending to the Board for approval) the adoption,
modification or amendment of employee benefit plans; (iv) reviewing and
approving (or recommending to the Board for approval) compensation programs and
policies affecting officers and key employees of the Company, including all
incentive compensation plans and establishing performance goals and objectives
under such plans; (v) administering all of the Company's long-term incentive
compensation plans and approving (or recommending to the Board for approval),
the grant of awards under such plans including, but not limited to, stock
options, restricted stock, performance units, stock bonuses and cash awards;
(vi) reviewing the existing compensation and benefit plans for employees and
making recommendations to the Board with respect to changes where warranted; and
(vii) annually assessing the performance of the Company's Chief Executive
Officer and such other senior officers as it maydeem appropriate.
The Finance and Strategic Planning Committee, composed of Edward T.
Fogarty, as Chair, Richard S. Barton, Fred Hassan and Stanley C. Gault met three
times in 2000. The responsibilities of the Finance and Strategic Planning
Committee include, in addition to such other duties as the Board may specify:
(i) reviewing with management on a timely basis significant financial matters of
the Company and its subsidiaries, including capital needs, credit ratings,
funding activities and investment of surplus funds; (ii) reviewing relationships
with the Company's principal lending institutions and investment advisors; (iii)
reviewing the financial terms of proposed acquisitions and sales or other
dispositions of significant assets or subsidiaries of the Company and making
recommendations to the Board as appropriate; (iv) reviewing proposals for and
making recommendations to the Board with respect to all offerings of the
Company's debt and equity securities; (v) reviewing the funding programs of the
Company and providing guidance and general parameters for the Company's debt and
lease commitments and total indebtedness; (vi) reviewing the management of the
Company's employee benefits trust funds; (vii) approving dividend declarations
and such other transactions as may be specifically delegated by the Board;
(viii) approving capital transactions and other project expenditures up to a
maximum of Forty Million Dollars ($40,000,000), and periodically reviewing
actual principal capital expenditures versus related approved budgeted amounts;
(ix) evaluating the Company's strategic planning process and procedures; (x)
working with management and the Board in developing and reviewing the Company's
strategic plans; and (xi) analyzing and approving the Company's stated financial
objectives.
The Nominating and Corporate Governance Committee, composed of Ann S.
Moore, as Chair, Brenda C. Barnes, Stanley C. Gault and Laurence A. Weinbach met
two times in 2000. The responsibilities of the Nominating and Corporate
Governance Committee include, in addition to such other duties as the Board may
specify, reviewing and making recommendations to the Board, with respect to: (i)
Board policies regarding the size and composition of
6
the Board, qualifications for Board membership, and the compensation of
non-employee directors; (ii) prospective candidates for Board membership; (iii)
candidates to fill vacancies on the Board that occur between annual meetings of
shareholders; (iv) the slate of nominees for director to be proposed for
election by shareholders at annual meetings; (v) the number of Board committees
and their composition; (vi) changes or additions to Board and committee
procedures; (vii) policies and procedures with respect to periodically assessing
the effectiveness of the Board and Board committees; and (viii) management
development and succession planning. Shareholders may submit nominations of
candidates for election to the Board of Directors. Additional information
regarding the shareholder nomination procedure will be provided upon request to
the Secretary of the Company.
At the end of 2000, following the resignation of Richard S. Barton, Maria
Elena Lagomasino replaced him as a member of the Audit Committee and the Finance
and Strategic Planning Committee.
Directors who are officers or employees of the Company or any subsidiary of
the Company receive no remuneration for services as a director. Each
non-management director receives an Annual Retainer consisting of $25,000 plus
an annual grant of shares of the Company's Common Stock having a market value as
of the date of grant of approximately $25,000, based on the average mean price
of Common Stock as reported on the New York Stock Exchange for the preceding ten
trading days. The first such grant was made immediately after the 1997 Annual
Meeting of Shareholders with subsequent grants to be made immediately after
future Annual Meetings. All shares so granted to a non-management director will
be restricted as to transfer until he or she retires from the Board, but will
immediately be entitled to regular dividends and eligible for voting rights
similar to all other outstanding shares of Common Stock.
In addition to the Annual Retainer, each non-management director receives a
fee of $1,000 for each special meeting of the Board of Directors and each
committee meeting attended, and an annual retainer of $3,000 for acting as Chair
of any committee of the Board. The Company has adopted a compensation plan for
its non-management directors permitting them by individual election to defer all
or a portion of their fees. The value of such deferred fees, depending upon
elections made by such director, may increase or decrease proportionately with
the price of the Common Stock or earn interest at a rate based on the prime
rate.
Each non-management director receives an annual grant of options to
purchase 4,000 shares of the Company's Stock, at an exercise price based on the
price of a share of Common Stock as reported on the New York Stock Exchange on
the date of grant. The first such grant was made immediately after the 1997
Annual Meeting; additional grants were made immediately after the 1998, 1999 and
2000 Annual Meetings and subsequent grants will be made immediately after future
Annual Meetings. Each grant of options will have a ten year term as to exercise
but the options covered by any one grant may not be exercisable until one year
after the date of such grant.
Maria Elena Lagomasino is a managing director of JP Morgan Private Bank, a
division of JP Morgan Chase, an investment banking firm that will perform
services for the Company during the course of 2001, a substantial portion of
which would be a continuation of ongoing services regularly provided during
2000.
Effective as of November 4, 1999, Stanley C. Gault was elected Chairman of
the Board of Directors in a non-executive capacity and on that date was granted
200,000 non-qualified stock options.
7
OWNERSHIP OF SHARES
The following table sets forth certain information as of March 9, 2001
regarding the amount of Common Stock beneficially owned by each director and
director nominee of Avon, each named executive (as defined in the introduction
to the Summary Compensation Table), and all directors and executive officers of
Avon as a group. The table also shows information for holders of more than five
percent of the outstanding shares of Common Stock as of January 1, 2001, as set
forth in recent filings with the Securities and Exchange Commission. All shares
shown in the table reflect sole voting and investment power except as otherwise
noted.
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------------ -------------------- ---------
FMR Corporation (1) ..................... 33,362,745 14.0
The Capital Group Companies (2) ......... 18,469,600 7.8
Morgan Stanley Dean Witter & Co. (3) .... 12,752,100 5.3
Brenda C. Barnes (4) .................... 33,308 *
Robert J. Corti (5) ..................... 119,769 *
Edward T. Fogarty (4) ................... 31,794 *
Stanley C. Gault (4) .................... 171,529 *
Fred Hassan (4) ......................... 19,130 *
Andrea Jung (6) ......................... 529,874 *
Susan J. Kropf (7) ...................... 256,387 *
Maria Elena Lagomasino .................. 200 *
Fernando Lezama (8) ..................... 209,652 *
Ann S. Moore (4)(9) ..................... 27,702 *
Paula Stern (4) ......................... 18,990 *
Lawrence A. Weinbach (4) ................ 9,630 *
All directors and executive
officers as a group [15] .............. 1,547,749(10) *
- - - - - - - ----------------
* Indicates less than 1% of the outstanding Shares, inclusive of shares that
may be acquired within 60 days of March 9, 2001 through the exercise of
stock options.
(1) The address of FMR Corporation is 82 Devonshire Street, Boston,
Massachusetts 02109; most shares are held by its subsidiary, Fidelity
Management and Research Company.
(2) The address of the Capital Group Companies is 333 South Hope Street, Los
Angeles, California 90071; most shares are held by its subsidiary, Capital
Research and Management.
(3) The address of Morgan Stanley Dean Witter & Co. is 1585 Broadway, New York,
New York 10036.
(4) Includes 2,584 restricted shares granted to the indicated non-management
director (1,130 shares with respect to Messrs. Hassan and Weinbach) as part
of his or her Annual Retainer compensation plus additional restricted
shares granted to certain non-management directors upon discontinuance in
1997 of the Directors' Retirement Plan, as follows: Ms. Barnes 4,060
shares, Mr. Fogarty 2,204 shares, Mr. Gault 11,272 shares, and Mrs. Moore
4,812 shares. For all such restricted shares, the director has sole voting
but no investment power. In addition, there is included for each indicated
non-management director shares which he or she has the right to acquire
within 60 days of March 9, 2001 through the exercise of stock options as
follows: Messrs. Gault, Hassan and Weinbach, 8,000 shares each and for each
other non-management director, 16,000 shares each.
(5) Includes 10,000 shares as to which Mr. Corti has sole voting but no
investment power and 92,769 shares as to which Mr. Corti has the right to
acquire within 60 days of March 9, 2001 through the exercise of stock
options.
(6) Includes 136,700 shares as to which Ms. Jung has sole voting but no
investment power and 330,489 shares as to which Ms. Jung has the right to
acquire within 60 days of March 9, 2001 through the exercise of stock
options.
(7) Includes 40,000 shares as to which Ms. Kropf has sole voting but no
investment power and 156,329 shares as to which Ms. Kropf has the right to
acquire within 60 days of March 9, 2001 through the exercise of stock
options.
(8) Includes 10,000 shares as to which Mr. Lezama has sole voting but no
investment power and 107,132 shares as to which Mr. Lezama has the right to
acquire within 60 days of March 9, 2001 through the exercise of stock
options.
(9) Mrs. Moore shares voting and investment power with her spouse as to some of
these shares.
(10) Includes 200 shares as to which the directors and executive officers as a
group disclaim beneficial ownership. Includes 26,568 shares as to which
beneficial ownership was shared with others and 910,687 shares which the
directors and executive officers as a group have a right to acquire within
60 days of March 9, 2001 through the exercise of stock options.
8
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
The Compensation Committee is made up of outside, non-employee members of
the Board of Directors whose names are listed at the end of this report. The
Committee reviews compensation levels of elected officers, evaluates the
performance of the CEO, and approves the policies that govern the compensation
programs of the Company's executive officers. This includes reviewing and
recommending for approval by non-management directors of the Board specific
overall compensation packages for the Chief Executive Officer (CEO), and any
other executive officer who is also a member of the Board.
EXECUTIVE COMPENSATION GUIDING PRINCIPLES
The Company's executive compensation program is designed to attract,
motivate and retain the key talent responsible for the Company's long term
success, to reward executives for achieving both financial and strategic Company
goals and to support the Company's overall business strategy. The guiding
principles used in the design of the program are:
o Total compensation levels must be competitive with the compensation
practices of other leading beauty, direct selling and consumer
products companies and commensurate with relative shareholder returns
and financial performance.
o Compensation philosophy must be linked to "pay for performance" such
that individual compensation awards are commensurate with Company,
operating business unit and individual performance.
o Compensation programs must be designed to balance short- and long-term
financial objectives that build shareholder value and reward for team
and overall Company performance.
o Compensation programs should focus executives on the financial
objectives that support increased total shareholder returns.
Working with an independent compensation consulting firm, the Company
annually evaluates the compensation of its key executives against a Compensation
Peer Group consisting of 15 beauty and consumer goods companies to ensure that
our total compensation program is competitive. For compensation of select
positions, the Company evaluates against industry companies to better represent
the market for the executive talent in specialty functions in which the Company
competes. The total target compensation of executive officers is positioned
slightly above the median rate of the Compensation Peer Group. The three
components of total compensation include base salary, an annual bonus plan named
the Management Incentive Plan and long-term incentive compensation.
BASE SALARY
The midpoints of salary ranges for executive officers are set at the median
of the Compensation Peer Group companies. With the Company's pay for performance
philosophy, exceptional performers are eligible for salaries above the median of
the peer group. Annual salary increases are based on individual performance, job
responsibilities, competitive data of the Compensation Peer Group, and the
Company's overall salary budget guidelines. Base salaries of executive officers
are reviewed annually by the Committee. In 2000, salaries for executive officers
overall were slightly ahead of the median of the peer group for similar
positions.
MANAGEMENT INCENTIVE PLAN
The Management Incentive Plan (MIP) provides cash incentive compensation
aligned with the short-term performance of the Company. Bonuses range from 0 to
200% of individual target awards, which are set as a
9
percentage of salary by management level. Incentives are payable based upon the
degree of attainment of pre-established performance measures set by the
Compensation Committee at the beginning of each year.
For 2000 pre-established performance measures for the CEO and COOs and
other Global executive officers were based on the combination of the achievement
of Global Net Sales and Earnings Per Share (E.P.S.) objectives, expressed as a
matrix, as well as certain key performance indicator objectives. The performance
measures for a number of other senior officers also included operating profit
objectives and net sales for their business unit.
The chart below illustrates the weighting of performance objectives
assigned to key executives in various categories. The term "OBU" means
"Operating Business Unit".
LOCAL NET SALES
GLOBAL NET SALES AND LOCAL OTHER KEY
AND GLOBAL EPS OPERATING PROFIT OBJECTIVES
---------------- ----------------- -----------
CEO and COOs and Global Staff ..... 70% 30%
OBU Heads ......................... 30% 40% 30%
GM's, Country MIP Participants .... 20% 50% 30%
The MIP in 2000 balances local and global results, focuses on revenues as
well as earnings, and provides incentive and rewards based on global and
business performance. For 2000 the Global matrix target objective was exceeded
but one of the other key performance objectives fell below target resulting in
an overall performance that was 119.9% of target for Global executives.
LONG-TERM INCENTIVE COMPENSATION
Effective commencing in the year 2000, the Committee recommended, and the
Board of Directors approved, the Avon Products Inc. 2000 Stock Incentive Plan,
which plan was approved at the Annual Meeting of Shareholders held May 4, 2000.
Pursuant to such Plan awards may be made in the form of non-qualified stock
options, incentive stock options, stock appreciation rights, performance units,
stock units, and shares of restricted stock. During the course of the year 2000
non-qualified stock options were granted under the Plan to approximately 500
executives. None of the named executives received stock option grants in 2000 as
they had received grants in December 1999.
The principal purpose of the Plan is to provide competitive incentive
compensation to senior management of the company that is linked to stock
ownership and increase in shareholder value derived from the appreciation in the
Company's stock price.
Under the 2000 Stock Incentive Plan, non-qualified stock options are
granted annually for a term of ten years at 100% of the market price on the date
of grant. An option may not be exercised earlier than one year after the grant
date and generally is thereafter exercisable in cumulative annual portions at
the rate of one-third of the total shares covered by the grant.
SENIOR EXECUTIVE COMPENSATION PROGRAM
As indicated above, the performance based senior executive compensation
system principally consists of the Management Incentive Plan (MIP) and the 2000
Stock Incentive Plan. The MIP performance objectives for the Company's highest
paid Global officers is evenly weighted 70% for Global Net Sales growth and
Global E.P.S. growth within a matrix of such objectives for both 2000 and 2001.
With respect to senior officers who are OBU heads, 30% of their objectives are
based on such global matrix and 40% on a separate matrix based on the OBU sales
and operating profits. The Company has announced long-term growth objectives of
4% to 6% for Global Net Sales growth and 12% to 14% for Global E.P.S. growth.
Most analysts who follow the Company's performance place a high degree of
importance on the Company's achievement of such objectives. Their attainment
over the course of the year
10
2000 substantially contributed towards an increase in the Company stock price in
2000 as illustrated by the Performance Graph on page 12 of this proxy statement.
Not only are MIP cash awards strongly linked to the on-going achievement of
growth performance objectives but the value of stock options are wholly
dependent upon stock price appreciation, appreciation that generally can be
attained by a company in the consumer products industry, such as Avon Products,
Inc., only by long-term growth in sales and E.P.S.
Accordingly, the Committee strongly believes that the Company's overall
incentive compensation system appropriately focuses the Company's senior
executive officers on maintaining the long-term success of the Company.
DETERMINATION OF CEO COMPENSATION
For 2000, the Compensation Committee approved a CEO Assessment process to
establish performance objectives in December for the upcoming year, enabling the
most senior level goals to be cascaded throughout the organization. The
Corporate objectives set for year 2000 included the achievement of Year 2000
operating objectives, the strengthening of Avon's New Business Development
efforts in order to accelerate growth, the enhancement of organizational focus
and commitment to Business Process Redesign, and the strengthening of
organizational leadership and corporate governance.
Ms. Jung's salary was set at $900,000 per annum for the year 2000. Her
annual incentive compensation bonus for 2000, which had an overall target
performance percentage equal to 100% of base salary, was linked to the
performance objectives described above under "Management Incentive Plan". The
Committee approved an award of 119.9% of her overall bonus target resulting in
an award to her of $1,079,370.
In December, a restricted stock grant of 136,700 shares was awarded to Ms.
Jung, no portion of which will vest prior to December 2003.
EXECUTIVE STOCK OWNERSHIP GUIDELINES
To further support the Company's goal of achieving a strong link between
stockholder and executive interests, the Company has adopted stock ownership
guidelines for the Company's most senior executives to underscore and encourage
executive share ownership. Senior executives are required to own Company stock
equal to one to five times their base salary achieved over a five-year period of
time. Unexercised stock options are not counted for purposes of meeting the
ownership guidelines. Guidelines generally will apply to select senior
executives, with ownership targets increasing with the level of responsibility.
LIMITATIONS ON THE DEDUCTIBILITY OF COMPENSATION
Pursuant to Section 162(m) of the 1986 Internal Revenue code, a portion of
annual compensation payable to any of the company's five highest paid executive
officers (apart from stock options) may not be deductible by the company for
federal income tax purposes to the extent such officer's overall compensation
exceeds $1 million. It is anticipated that non-deferred 2000 compensation
payable to several executive officers during 2000 may be slightly in excess of
$1 million, inclusive of performance-based incentive compensation. For 2000 the
Committee has determined that it retain the discretion of providing its senior
executive officers with the opportunity of earning appropriate performance-based
incentive compensation notwithstanding that a small portion thereof may not be
eligible for a tax deduction under the current Internal Revenue Code laws.
Brenda C. Barnes, Chair
Edward T. Fogarty
Ann S. Moore
Paula Stern
11
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN(1)
AVON, S&P 500 INDEX, AND INDUSTRY COMPOSITE(2)
[GRAPHIC OMITTED]
Assumes $100 invested on December 29, 1995 (last trading day of 1995) in
Avon Common Stock, the S&P 500 Index and the Industry Composite. The dollar
amounts indicated in the graph above and in the chart below are as of December
31 or the last trading day in the year indicated.
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
Avon $100.0 $153.3 $170.3 $250.2 $190.3 $281.3
S&P 500 100.0 121.5 159.2 203.9 246.7 224.3
Industry Composite(2) 100.0 131.2 189.9 213.6 249.6 197.8
- - - - - - - ---------
(1) Total Return assumes reinvestment of dividends at the closing price at the
end of each quarter.
(2) Industry Composite includes Alberto-Culver, Campbell Soup, Clorox, Colgate
Palmolive, Dial, Dole Food, Estee Lauder, General Mills, Gillette, Heinz,
Hershey Foods, Procter & Gamble, and Revlon.
12
TABLES AND PLANS
This section of the proxy statement discloses fiscal 2000 plan and non-plan
compensation awarded or paid to, or earned by, the Company's Chief Executive
Officer and, of the Company's other executive officers during fiscal 2000, each
of the four persons who were most highly compensated in fiscal 2000 (together,
these persons are sometimes referred to as the "named executives").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------- ------------------------------
SECURITIES
OTHER RESTRICTED UNDERLYING LONG-TERM ALL
ANNUAL STOCK OPTIONS/ INCENTIVE OTHER
SALARY BONUS COMPENSATION AWARDS SARs PAYOUTS COMPENSATION
NAME AND POSITION YEAR ($) ($) (2) ($)(3) (#) ($) ($)(4)
----------------- ---- ------ ------ ------------ --------- ----------- --------- ------------
Andrea Jung(1) .................... 2000 897,536 1,079,370 60,259 5,400,000 0 0 40,389
President and 1999 671,097 512,256 0 350,000 1,170,881 30,199
Chief Executive Officer 1998 550,000 629,899 3,847,500 105,484 0 17,149
Susan J. Kropf(1) ................. 2000 548,493 494,711 0 0 0 24,682
Executive Vice President 1999 475,665 276,708 0 110,000 733,260 21,405
and Chief Operating 1998 450,000 513,447 1,822,500 25,634 0 13,451
Officer, North America
Jose Ferreira, Jr.(1) ............. 2000 548,493 494,711 0 0 0 40,871
Executive Vice President 1999 479,333 446,078 0 110,000 412,178 35,980
and Chief Operating 1998 410,000 514,529 1,215,000 22,786 0 16,589
Officer, International
Fernando Lezama ................... 2000 508,445 572,886 0 0 0 0
Executive Vice President, 1999 485,333 238,599 0 60,833 370,594 0
Asia Pacific 1998 461,100 345,742 911,250 22,786 0 0
Robert J. Corti ................... 2000 374,548 315,745 0 0 0 16,855
Executive Vice President 1999 335,617 203,193 870,000 58,833 363,711 15,103
and Chief Financial
Officer
- - - - - - - ---------------
(1) Effective as of January 15, 2001, Ms. Kropf was elected President and Chief
Operating Officer, Ms. Jung was elected Chief Executive Officer and Mr.
Ferreira resigned as an officer of the company.
(2) This column would include the value of certain personal benefits only where
the value is greater than the lower of $50,000 or 10% of an executive's
Salary and Bonus for the year. Such threshold was not exceeded for any of
the named executives, other than Ms. Jung for whom the Company reimbursed
her home security system ($19,013), financial planning and tax preparation
services ($25,107), and the cost of a leased automobile ($16,139).
(Footnotes continued on next page)
13
(3) The dollar amount shown equals the number of shares of restricted stock
granted, multiplied by stock price on grant date. The following table
presents information regarding aggregate holdings of restricted stock at
January 5, 2001 for the named executives. Dividends on these shares are
paid at the same time as those on the Company's unrestricted stock. In the
event of a change of control, all shares of restricted stock would be
cashed out.
HOLDINGS OF RESTRICTED SHARES AT 1/5/01
-----------------------------------------------
NUMBER OF AGGREGATE MARKET
RESTRICTED TOTAL NUMBER VALUE OF
SHARES GRANTED OF RESTRICTED RESTRICTED SHARES
NAME IN FISCAL 2000 SHARES HELD AT 1/5/01(A)
- - - - - - - ---- --------------- ------------- -----------------
Ms. Jung ............... 136,700 136,700 6,544,512
Ms. Kropf .............. 0 0 0
Mr. Ferreira ........... 0 0 0
Mr. Lezama ............. 0 0 0
Mr. Corti .............. 0 20,000 957,500
- - - - - - - -----------
(a) "Market Value" is determined by reference to the per share closing
price on December 31, 2000 ($47.875).
(4) The amounts in this column include the following: (i) Company matching
contributions to the Employees' Savings and Stock Ownership Plan and/or
Deferred Compensation Plan--Ms. Jung $40,389, Ms. Kropf $24,682, Mr.
Ferreira $24,567, and Mr. Corti $16,855;(ii) above-market portion of
interest earned on deferred compensation--Mr. Ferreira $16,304. In
addition, not included in this column, Mr. Ferreira received an aggregate
relocation, overseas housing and cost-of-living allowance totalling
$222,048.
OPTION GRANTS
No options to purchase shares of the Company's Common Stock were granted to
any of the named executives in Fiscal 2000. Each of them had been granted
options in December 1999, information on which was set forth in the proxy
statement for the Annual Meeting of Shareholders held May 4, 2000.
OPTION EXERCISES AND VALUES
This table presents information regarding options exercised for shares of
the Company's Common Stock during fiscal 2000 and the value of unexercised
options held at December 31, 2000.
AGGREGATED OPTION EXERCISES IN FISCAL 2000
AND 2000 FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES UNDERLYING VALUES OF UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED VALUE UNEXERCISED OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)(2)
ON EXERCISE REALIZED -------------------------------- ----------------------------------
NAME (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - - - - - - ---- -------------- -------- --------------- ---------------- -------------- -----------------
Ms. Jung .............. 10,000 278,750 282,204 278,584 5,054,932 3,164,448
Ms. Kropf ............. 0 0 141,117 81,877 3,170,527 1,017,747
Mr. Ferreira .......... 9,448 205,849 104,153 80,829 1,574,114 1,001,508
Mr. Lezama ............ 52,000 1,521,674 94,536 48,151 1,487,752 601,226
Mr. Corti ............. 0 0 83,950 44,465 1,667,083 542,493
- - - - - - - ------------
(1) Value Realized is calculated as follows: [(Per Share Closing Sale Price on
Date of Exercise)-(Per Share Exercise Price)] x Number of Shares for which
the Option was exercised.
(2) Value of Unexercised, In-the-Money Options at 12/31/00 is calculated as
follows: [(Per Share Closing Sale Price on 12/31/00)-(Per Share Exercise
Price)] x Number of Shares Subject to Unexercised Options. The per share
closing price on 12/31/00 was $47.875.
14
RETIREMENT, DEATH AND SEVERANCE BENEFITS
Three of the named executives accrue retirement benefits under a
Supplemental Executive Retirement Plan (the "Supplemental Plan") which is
described below, namely Ms. Jung, Ms. Kropf and Mr. Corti. Benefits under the
Supplemental Plan are based on the average of a participant's three highest
years compensation during the ten years of service prior to retirement and the
number of years of creditable service. Such compensation includes base salary
and annual incentive bonuses. Benefits payable under the Supplemental Plan are
offset by benefits payable to the participant under the Company's Employees'
Retirement Plan (the "Retirement Plan"). The following table shows the estimated
annual retirement benefits for a life annuity under the Supplemental Plan
(inclusive of benefits payable by the Retirement Plan) for participants retiring
at age 65 whose three year average compensation and years of service at
retirement would be in the classification shown.
ESTIMATED ANNUAL RETIREMENT ALLOWANCES AT AGE 65
AVERAGE OF THREE
HIGHEST YEARS' YEARS OF CREDITABLE SERVICE
ANNUAL COMPENSATION ------------------------------------------------------------
IN LAST TEN YEARS 15 20 25 30 35
--------------------- ------- -------- -------- -------- --------
$ 500,000 ............. 150,000 200,000 250,000 275,000 300,000
600,000 ............. 180,000 240,000 300,000 330,000 360,000
700,000 ............. 210,000 280,000 350,000 385,000 420,000
800,000 ............. 240,000 320,000 400,000 440,000 480,000
900,000 ............. 270,000 360,000 450,000 495,000 540,000
1,000,000 ............. 300,000 400,000 500,000 550,000 600,000
1,100,000 ............. 330,000 440,000 550,000 605,000 660,000
1,200,000 ............. 360,000 480,000 600,000 660,000 720,000
1,300,000 ............. 390,000 520,000 650,000 715,000 780,000
1,400,000 ............. 420,000 560,000 700,000 770,000 840,000
1,500,000 ............. 450,000 600,000 750,000 825,000 900,000
As of December 31, 2000, Ms. Jung had an average three year compensation of
$1,132,393 and 7 years of creditable service; Ms. Kropf had an average three
year compensation of $836,795 and 30 years of creditable service; and Mr. Corti
had an average three year compensation of $554,841 and 24 years of creditable
service. Mr. Ferreira who resigned in January 2001 will receive aggregate
retirement benefits that are based on the above table with 24 years of
creditable service and average three year compensation of $983,645.
The retirement benefits of Mr. Lezama, who is a resident of Mexico, are
determined under a plan provided for the Company's overseas executives, which is
similar to the Supplemental Plan. Benefits payable under such plan are offset by
benefits payable to him under local government and Avon-sponsored plans in
Mexico. As of December 31, 2000, Mr. Lezama's estimated aggregate retirement
benefits for a life annuity are indicated by the above table based on 35 years
of service and an average final three-year compensation of $688,234.
15
CONTRACTS WITH EXECUTIVES
The Company has employment contracts ("Employment Contracts") with four of
the named executives, namely Ms. Jung, Ms. Kropf, Mr. Ferreira and Mr. Corti.
The Employment Contracts provide that if the executive's employment is
terminated without cause, the executive generally shall receive a payment equal
to the sum of: (i) the present value of the executive's Base Salary for a period
equal to two or three years (depending upon the executive's position at the
Company); (ii) continuation of benefits for two or three years (depending upon
the executive's position at the Company); and (iii) a bonus payment in an amount
not to exceed the executive's target annual bonus for the year of termination.
Mr. Ferreira is receiving severance payments inclusive of amounts provided by
such a contract.
The Employment Contracts also provide that upon the executive's actual or
constructive termination of employment in connection with the occurrence of
certain change of control or potential change of control events (as defined in
the Employment Contracts), the executive will receive payment of an amount equal
to the sum of: (a) up to three years' salary and bonus, (b) the present value of
three years' insurance and fringe benefits, and (c) the cash-out value of all
then outstanding stock options, and Restricted Shares. Assuming an actual or
potential change of control had occurred on January 2, 2001 and with termination
of the executives immediately thereafter, Ms. Jung would receive $5,938,000; Ms.
Kropf would receive $3,134,000; and Mr. Corti would receive $2,102,000 plus, the
amounts referred to in (b) and (c) above.
The Employment Contracts also provide for reimbursement by the Company of
any excise taxes incurred under Section 4999 of the Internal Revenue Code by
reason of a change of control, and for any income and excise taxes incurred in
connection with such reimbursement. The actual amount of such reimbursements is
difficult to determine due to, among other things, (i) the number of variables
involved, such as the price of the Common Stock at relevant times and the
circumstances and timing of any termination, and (ii) uncertainties regarding
the application of the relevant tax rules.
16
AUDIT COMMITTEE REPORT
The basic function of the Audit Committee is oversight. The Company's
management is responsible for preparing the Company's financial statements and
its outside independent accountants are responsible for auditing those financial
statements. Management, including its finance and internal audit staffs, is
responsible for the fair presentation of the information set forth in such
financial statements in conformity with generally accepted accounting
principles, and for maintaining an effective internal control system. The
independent accountants' responsibility is to provide their opinion, based on
their audits, that the financial statements fairly present, in all material
respects, the financial position, results of operations and cash flows of the
Company in conformity with generally accepted accounting principles.
In the performance of its oversight function, the Committee has considered
and discussed the audited financial statements with management and the
independent accountants. The Committee has also discussed with the independent
accountants the matters required to be discussed by Statement on Auditing
Standards No. 61, Communication with Audit Committees (which includes, among
other items, matters related to the conduct of the audit of the Company's
financial statements), and Statement on Auditing Standards No. 90, Audit
Committee Communications (which includes the accountants' judgments about the
quality, not just the acceptability, of the Company's accounting principles and
estimates underlying the financial statements).
The Committee also has received the written disclosures and the letter from
the independent accountants required by Independence Standards Board Standard
No. 1, Independence Discussions with Audit Committees (which relates to the
accountants' independence from the Company and its related entities), has
considered whether the provision of non-audit services by the independent
accountants to the Company is compatible with maintaining the auditor's
independence and has discussed with the accountants the accountants'
independence, including any relationships that may impact their objectivity and
independence.
Based upon the reports and discussions described in this report, the
Committee recommended to the Board that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2000 filed with the Securities and Exchange Commission.
Lawrence A. Weinbach, Chairman
Fred Hassan
Maria Elena Lagomasino
Paula Stern
17
PROPOSAL 2--RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Unless otherwise directed by the Shareholders, proxies will be voted for
ratification of the appointment by the Board of Directors, upon the
recommendation of the Audit Committee, of PricewaterhouseCoopers LLP, Certified
Public Accountants, as independent accountants for the year 2001.
PricewaterhouseCoopers LLP began auditing the accounts of the Company in 1989.
If the appointment of PricewaterhouseCoopers LLP is not ratified by the
Shareholders, the Audit Committee will reconsider its recommendation. A member
of the firm will be present at the Annual Meeting to answer appropriate
questions and to make a statement if he or she desires.
AUDIT FEES
The aggregate fees, including out-of-pocket expenses, for professional
services rendered by PricewaterhouseCoopers LLP for the audit of the Company's
annual financial statements for the fiscal year ended December 31, 2000 and for
the reviews of the financial statements included in the Company's Quarterly
Reports on Form 10-Q for that fiscal year were $3.0 million.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
PricewaterhouseCoopers LLP did not render to the Company information
technology services relating to financial information systems design and
implementation during the fiscal year ended December 31, 2000.
ALL OTHER FEES
The aggregate fees, including out-of-pocket expenses, for services rendered
by PricewaterhouseCoopers LLP to the Company, other than the services described
under the two captions above, during the fiscal year ended December 31, 2000
were approximately $8.8 million. Of this amount, (i) approximately $4.3 million
represents human resource benefits-related services (outsourced human resources
benefits call center, communications and administration), of which $1.4 million
was paid by unconsolidated entities such as Avon's Retirement Plan trust and
401k Savings Plan; (ii) approximately $1.4 million represents a global tax
planning study which will be completed in 2001; (iii) approximately $1.4 million
represents miscellaneous tax services, including expatriate tax services,
provided to the Company's worldwide locations; (iv) approximately $.6 million
represents pension audits and statutory audits of the Company's international
subsidiaries that were required by local jurisdictions but not necessary to
support the audit of the Company's financial statements; and (v) approximately
$1.1 million represents other services such as management consulting services
($.6 million) and insurance claim support services ($.3 million).
With respect to the proposal to ratify the appointment of
PricewaterhouseCoopers LLP as independent accountants, Shareholders may direct
that their votes be cast for or against such proposal, or may abstain, by
marking the appropriate box on the proxy card.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS FOR THE YEAR 2001.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting. However, if any other matters are properly brought before the
Annual Meeting, the persons appointed in the accompanying proxy intend to vote
the shares represented thereby in accordance with their best judgment.
18
SOLICITATION OF PROXIES
The cost of the solicitation of proxies on behalf of Avon will be borne by
Avon. Directors, officers and other employees of Avon may, without additional
compensation except reimbursement for actual expenses, solicit proxies by mail,
in person or by telecommunication. In addition, Avon has retained Morrow & Co.,
Inc. at a fee estimated not to exceed $20,000, plus reasonable out-of-pocket
expenses, to assist in the solicitation of proxies. Avon will reimburse brokers,
fiduciaries, custodians and other nominees for out-of-pocket expenses incurred
in sending Avon's proxy materials to, and obtaining instructions relating to
such materials from, beneficial owners.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any proposal that a Shareholder may desire to have included in the
Company's proxy material for presentation at the 2002 Annual Meeting must be
received by the Company at Avon Products, Inc., 1345 Avenue of the Americas, New
York, New York 10105, Attention: Secretary, on or prior to November 23, 2001.
Upon the written request of any Shareholder to the Shareholder Relations
Department (Attention: Marilyn Reynolds) at the address listed above (telephone
number 212-282-5619), the Company will provide without charge a copy of its
Annual Report on Form 10-K for 2000, as filed with the Securities and Exchange
Commission.
By Order of the Board of Directors
Ward M. Miller, Jr.
Senior Vice President,
Corporate Counsel and Secretary
March 27, 2001
New York, New York
19
- - - - - - - --------------------------------------------------------------------------------
If your Shares are held in the name of a brokerage firm, bank nominee or
other institution, only it can sign a proxy card with respect to your Shares.
Accordingly, please contact the person responsible for your account and give
instructions for a proxy card to be signed representing your Shares.
- - - - - - - --------------------------------------------------------------------------------
If you have any questions about giving your proxy or require assistance, please
contact our proxy solicitor at:
MORROW & CO., INC.
445 Park Avenue
New York, New York 10022
(212) 754-8000
Call Toll-Free 1-800-662-5200
20
APPENDIX
AVON PRODUCTS, INC.
AUDIT COMMITTEE CHARTER
REVISED MARCH 6, 2001
PURPOSE
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its responsibility to oversee (1) the Company's financial
reporting process and systems of internal controls regarding finance and
accounting compliance; (2) the independence and performance of the Company's
independent accountants and internal audit staff; and (3) the integrity of the
Company's financial statements and financial reports.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access to the
independent accountants as well as anyone in the Company. The Board and the
Committee are to represent the Company's shareholders; accordingly, the
independent accountants are accountable to the Board and the Committee. The
Board and the Committee have the ultimate authority and responsibility to
select, evaluate and, where appropriate, replace the independent accountants
(including the appointment of the independent accountants to be proposed for
shareholder ratification in any proxy statement).
COMPOSITION AND MEETINGS
The Committee will be comprised of three or more outside directors as
determined by the Board. The members of the Committee will meet the independence
and experience requirements of the New York Stock Exchange (NYSE). The members
of the Committee will be appointed at least annually by the Board, with one of
the members appointed as Committee Chair.
The Committee is to meet at least three times annually and more frequently
as circumstances dictate. The Committee is to meet in separate executive
sessions with the Company's Chief Financial Officer, independent accountants and
internal audit at least once each year and at other times when considered
appropriate.
RESPONSIBILITIES
In performing its oversight responsibilities, the Committee will:
1. Review and assess the adequacy of this charter annually and recommend
any proposed changes to the Board for approval.
2. Make recommendations to the Board with respect to the appointment of
independent accountants.
3. Review and approve the timing and scope of the independent
accountants' audit examination and the related fees, and discuss with
the independent accountants issues that may impact audit
effectiveness.
4. Review the audit results, including any material comments and
recommendations on internal controls or accounting matters by the
Company's independent accountants and the Company's responses thereto.
5. Review the scope and effectiveness of internal auditing activities and
significant internal audit findings.
6. Review material changes in, and overall compliance with, accounting
and financial reporting requirements, policies and procedures.
A-1
7. Annually review compliance by Company employees with the Company's
policy on standards of business conduct and the expense accounts of
senior management.
8. Review the scope and effectiveness of internal accounting controls
with the Company's financial management and independent accountants.
9. Review the Company's audited financial statements to be included in
its Annual Report and recommend their approval to the Board.
10. Prior to release of annual earnings, review the financial results with
Company management and independent accountants.
11. Prior to the filing of each quarterly report or Form 10-Q, review with
management and the independent accountants any matters required to be
discussed by Statement of Auditing Standards ("SAS") No. 61 and SAS
No. 90; such review may be conducted by the Chair of the Committee, or
in his or her absence, any other Committee member.
12. Review and approve non-audit services to be performed by the
independent accountants and the related fees. It shall consider
whether the provision by the independent accountants of financial
information systems design and implementation services and of all
other non-audit services to the Company is compatible with maintaining
the independence of such accountants.
13. Obtain from the independent accountants and review on an annual basis
a formal written statement delineating all relationships between the
independent accountants and the Company that might bear on the
independence of the accountants, consistent with Independence
Standards Board Standard No. 1.
14. Engage in a dialogue with the independent accountants about any
disclosed relationships or services that may impact their objectivity
and independence and, when appropriate in the judgment of the
Committee, take appropriate action in response to the accountants'
disclosure to satisfy itself and the Board of the accountants'
independence.
15. Report to the Board on Audit Committee activities and significant
issues.
The basic function of the Audit Committee is oversight. The Company's
management is responsible for preparing the Company's financial statements and
its outside independent accountants are responsible for auditing those financial
statements. Management, including its finance and internal audit staffs, is
responsible for the fair presentation of the information set forth in such
financial statements in conformity with generally accepted accounting
principles, and for maintaining an effective internal control structure. The
independent accountants' responsibility is to provide their opinion, based on
their audits, that the financial statements fairly present, in all material
respects, the financial position, results of operations and cash flows of Avon
in conformity with generally accepted accounting principles. However, it is not
the duty of the Audit Committee, or any of its members, to conduct separate
auditing or accounting reviews or provide independent assurance of the Company's
compliance with applicable laws and regulations.
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[AVON LOGO]
the company for women
P R O X Y
AVON PRODUCTS, INC.
PROXY CARD SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
VOTING INSTRUCTION CARD TO CHASE MANHATTAN BANK, N.A., TRUSTEE
AND FIDELITY MANAGEMENT TRUST CO., TRUSTEE
The undersigned hereby appoints Robert J. Corti, Ward M. Miller, Jr. and C.
Richard Mathews, and each of them, proxies, with full power of substitution and
resubstitution, to vote and act with respect to all shares of the Company's
Common Stock (the "Shares") owned of record by the undersigned and which the
undersigned is entitled to vote, at the Annual Meeting of Shareholders of the
Company to be held on May 3, 2001, and at any adjournments or postponements
thereof, as specified on the reverse side of this card, and to vote in
accordance with their discretion on such other matters as may properly come
before the meeting.
The undersigned also provides instructions to Chase Manhattan Bank, N.A.,
Trustee, and Fidelity Management Trust Co., Trustee, to vote shares of the
common stock of the Company allocated, respectively, to accounts the undersigned
may have under the Avon Products, Inc. Personal Savings Account Plan or the
Avon-Mirabella/Lomalinda Employees Savings Plan, and which are entitled to be
voted at the aforesaid Annual Meeting or any adjournment thereof, as specified
on the reverse side of this card. Unless your card is received by May 1, 2001,
and unless you have specified your directions, your shares cannot be voted by
the Trustees.
IF NO SPECIFICATION IS MADE ON THE REVERSE SIDE OF THIS CARD:
O ALL SUCH SHARES OWNED OF RECORD BY THE UNDERSIGNED WILL BE VOTED FOR THE
ELECTION OF NOMINEES PROPOSED FOR ELECTION AS DIRECTORS AND FOR PROPOSAL 2.
O ALL SUCH SHARES ALLOCATED UNDER THE AVON PRODUCTS, INC. PERSONAL SAVINGS
ACCOUNT PLAN AND THE AVON-MIRABELLA/LOMALINDA EMPLOYEES SAVINGS PLAN WILL
NOT BE VOTED.
NOMINEES FOR ELECTION AS DIRECTORS
CLASS OF 2004: 01. EDWARD T. FOGARTY, 02. SUSAN J. KROPF AND 03. MARIA ELENA
LAGOMASINO
Instruction for Cumulative Voting for the Class of 2004: Unless otherwise
specified below, this proxy/instruction card shall authorize the proxies
listed above to cumulate all votes which the undersigned is entitled to
cast at the Annual Meeting for, and to allocate such votes among, one or
more of the nominees for the Class of 2004 listed above, as such proxies
shall determine in their sole and absolute discretion, in order to maximize
the number of such nominees elected to such class of Avon's Board of
Directors. To specify a method of cumulative voting, write "Cumulate For"
and the number of Shares and the name(s) of the nominees(s) in the space
below.
---------------
| SEE REVERSE |
| SIDE |
---------------
- - - - - - - --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
[AVON LOGO]
ANNUAL MEETING OF SHAREHOLDERS
MAY 3, 2001
10:00 A.M.
THE GRAND SALON
AT THE ESSEX HOUSE
160 CENTRAL PARK SOUTH
NEW YORK, NEW YORK
|
- - - - - - - ----- PLEASE MARK YOUR | 1305
| X | VOTES AS IN THIS |
- - - - - - - ----- EXAMPLE |--------
- - - - - - - --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
- - - - - - - --------------------------------------------------------------------------------
FOR WITHHELD
1. PROPOSAL 1 ------- -------
Election of | | | |
Directors to | | | |
the Class of ------- -------
2004 (See
reverse)
FOR AGAINST ABSTAIN
2. PROPOSAL 2. ------- ------- -------
Ratification of | | | | | |
the appointment of | | | | | |
PricewaterhouseCoopers ------- ------- -------
as Avon's independent
accountants.
Annual Report--Mark here to discontinue mailing of -------
annual report to shareholders for this account (for | |
multiple account holders only). | |
-------
- - - - - - - --------------------------
To withhold authority for any nominee(s) for the Class of 2004,
write the name(s) of such nominee(s) in the space provided above.
- - - - - - - --------------------------------------------------------------------------------
PLEASE SIGN, DATE, AND RETURN YOUR PROXY PROMPTLY!
Please sign exactly as name appears hereon. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such.
--------------------------------------------------
--------------------------------------------------
SIGNATURE(S) DATE
THIS PROXY REVOKES ALL PRIOR DATED PROXIES. THE SIGNER HEREBY ACKNOWLEDGES
RECEIPT OF AVON'S PROXY STATEMENT DATED MARCH 27, 2001.
- - - - - - - --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
[AVON LOGO]
In addition to voting by mail, we now offer two new cost-effective and
convenient ways to vote your shares. You may now vote 24 hours a day, 7 days a
week, using either a touch-tone telephone or through the Internet. YOUR
TELEPHONE OR INTERNET VOTE MUST BE RECEIVED BY 12 A.M. NEW YORK TIME, MAY 3rd.
After you have read the accompanying proxy statement, please vote using one of
the following methods:
By Telephone:
1. Call 1-877-PRX-VOTE (1-877-779-8683), toll-free, from a touchtone telephone
(outside the U.S. and Canada, call 201-536-8073).
2. Enter your control number located in the box above, just below the
perforation.
3. Follow the recorded instructions.
By Internet:
1. Log onto internet and type http://www.eproxyvote.com/avp.
2. Enter your control number, located in the box above, just below the
perforation.
3. Follow the on-line instructions.
By Mail:
1. Mark, sign and date your proxy/instruction card, and return it promptly in
the enclosed return envelope. If you are voting by telephone or the
Internet, please do not mail your proxy.