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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
HOUSEHOLD INTERNATIONAL, INC.
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(Name of Registrant as Specified in Its Charter)
[COMPANY NAME]
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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)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] 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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(3) Filing party:
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(4) Date filed:
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Household International, Inc. 2700 Sanders Road 847.564.5000 [HOUSEHOLD LOGO]
Prospect Heights, IL 60070
March 29, 2001
DEAR STOCKHOLDER:
You are cordially invited to attend our Annual Meeting of Stockholders on
Tuesday, May 8, 2001, at 9:00 a.m. at Household's facility in Brandon, Florida,
the home of over 1,100 Household employees.
Last year was another record-breaking operating year. Our net income increased
14% to $1.7 billion, while our earnings per share increased 16% to $3.55, the
highest level in our 123-year history. Our record earnings per share reflect
strong revenue growth driven by significant receivable growth across all
businesses. At the same time, we increased our spending on technology,
marketing, e-commerce and personnel to enhance our ability to achieve consistent
revenue and receivable growth. Another highlight was the performance of our
stock price, which increased 48% in 2000. Given our record-breaking operating
performance and strong fundamentals, we feel that Household is well positioned
for a successful 2001.
The notice of meeting and proxy statement following this letter describe the
business to be transacted. On the enclosed proxy card you are asked to elect
your Board of Directors for the upcoming year, vote on a stockholder proposal,
if presented to the meeting, and ratify the appointment of Arthur Andersen LLP
as our independent public accountants.
I believe that the Annual Meeting provides an excellent opportunity for you to
become better acquainted with Household. I hope you will be able to attend.
Whether or not you plan to attend the meeting, please vote as soon as possible
so your shares will be represented -- your vote is very important. You may vote
by mail, telephone or on the Internet as detailed in the enclosed proxy/voting
instruction card.
Sincerely,
/s/ William Aldinger
WILLIAM F. ALDINGER
Chairman and
Chief Executive Officer
IF YOU PLAN TO ATTEND THE ANNUAL MEETING:
PLEASE NOTE THAT SPACE LIMITATIONS MAKE IT NECESSARY TO LIMIT ATTENDANCE TO
STOCKHOLDERS AND ONE GUEST. EACH STOCKHOLDER MAY BE ASKED TO PRESENT VALID
PICTURE IDENTIFICATION, SUCH AS A DRIVER'S LICENSE OR PASSPORT. STOCKHOLDERS
HOLDING STOCK IN BROKERAGE ACCOUNTS WILL NEED TO BRING A COPY OF A BROKERAGE
STATEMENT REFLECTING STOCK OWNERSHIP AS OF THE MARCH 15, 2001 RECORD DATE.
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Household International, Inc. 2700 Sanders Road 847.564.5000 [HOUSEHOLD LOGO]
Prospect Heights, IL 60070
NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS
March 29, 2001
To the Stockholders of HOUSEHOLD INTERNATIONAL, INC.:
The Annual Meeting of Stockholders of Household International, Inc.
("Household") will be held at Household's facility at 636 Grand Regency
Boulevard, Brandon, Florida 33510, on Tuesday, May 8, 2001, at 9:00 a.m. for the
following purposes:
(1) to elect Directors;
(2) to consider and act upon a stockholder proposal, if presented to the
meeting;
(3) to ratify the appointment of Arthur Andersen LLP as our independent public
accountants; and
(4) to transact any other business which may properly come before the meeting.
Stockholders of record of Household's common stock, par value $1.00 per share
("Common Stock"); 5% Cumulative Preferred Stock, no par value; $4.50 Cumulative
Preferred Stock, no par value; and $4.30 Cumulative Preferred Stock, no par
value ("Preferred Stocks"), all as of the close of business on March 15, 2001,
are entitled to vote at the meeting.
YOUR VOTE IS IMPORTANT. IF YOU DO NOT EXPECT TO VOTE IN PERSON AT THE ANNUAL
MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN
THE ENVELOPE PROVIDED OR VOTE BY TELEPHONE OR ON THE INTERNET AS DESCRIBED ON
THE ENCLOSED PROXY CARD. Giving your proxy now will not affect your right to
vote in person if you attend the meeting.
By Order of the Board of Directors,
/S/ KENNETH H. ROBIN
KENNETH H. ROBIN
Senior Vice President-General Counsel
and Corporate Secretary
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Household International, Inc. 2700 Sanders Road 847.564.5000 [HOUSEHOLD LOGO]
Prospect Heights, IL 60070
PROXY STATEMENT
This Proxy Statement and the accompanying proxy card are being mailed to
Household stockholders in connection with the solicitation of proxies by the
Board of Directors for the 2001 Annual Meeting of Stockholders. This proxy
allows you to vote at our May 8, 2001 Annual Meeting of Stockholders without
attending the meeting. This proxy material is being mailed to stockholders on or
about March 29, 2001.
QUESTIONS AND ANSWERS
Q: WHO IS ENTITLED TO VOTE?
A: Stockholders of record at the close of business on March 15, 2001 are
entitled to vote at the Annual Meeting. The number of outstanding shares
entitled to vote at the meeting is 464,934,337 shares of Common Stock (not
including 86,482,316 shares of Common Stock held in treasury), 407,718 shares
of 5% Cumulative Preferred Stock, 103,976 shares of $4.50 Cumulative
Preferred Stock, and 836,585 shares of $4.30 Cumulative Preferred Stock. Each
share of Common and Preferred Stock is entitled to one vote; however, shares
of Common Stock which Household holds in treasury cannot be voted.
Q: WHAT AM I VOTING ON?
A: You are voting on:
- the election of nominees to serve on our Board of Directors.
- a stockholder proposal, if presented to the meeting.
- the ratification of the appointment of Arthur Andersen LLP as our
independent public accountants.
A majority of the shares voting at the Annual Meeting is necessary to elect
each of the nominated Directors and to approve each of the other proposals.
Q: HOW DO I CAST MY VOTE?
A: If you hold your shares as a stockholder of record, you can vote in person at
the Annual Meeting or you can vote by mail, telephone or on the Internet. If
you own Household shares through a broker, bank or other nominee in street
name, you will receive instructions from your bank, broker or other nominee
describing how to vote your shares. If you participate in the Household
International Tax Reduction Investment Plan ("TRIP"), see the following
question as to how to vote the shares of Common Stock held in your TRIP
account.
The enclosed proxy card contains instructions for mail, telephone and
Internet voting. Whichever method you use, your shares will be voted in
accordance with your instructions. If you submit a proxy card without giving
specific voting instructions, your shares will be voted as recommended by the
Board of Directors.
Q: HOW DO I VOTE MY TRIP SHARES?
A: If you participate in TRIP, to vote your shares of Common Stock held in your
TRIP account you must return your completed proxy/voting instruction card to
Computershare Investor Services LLC ("Computershare") in the envelope
provided or vote via telephone or on the Internet as outlined on the proxy
card by May 3, 2001. Vanguard Fiduciary Trust Company ("Vanguard"), the TRIP
Trustee, will act as your proxy and will vote the shares of Common Stock held
in your TRIP account. If Computershare does not receive your voting
instructions for your TRIP shares by May 3, 2001, those shares will be voted
by Vanguard in the same way as the majority of the TRIP held shares for which
voting instructions are received. For example, Vanguard will vote all unvoted
shares of Common Stock in TRIP for the fourteen nominees (the number of
Directors to be elected at the Annual Meeting) who receive the most votes
cast with Computershare for TRIP.
Q: HOW DOES THE BOARD RECOMMEND I VOTE ON THE PROPOSALS?
A: The Board recommends a vote FOR each nominee, AGAINST the stockholder
proposal and FOR the ratification of the appointment of Arthur Andersen LLP
as our independent public accountants.
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Q: HOW WILL THE PROXIES VOTE ON ANY OTHER BUSINESS BROUGHT UP AT THE MEETING?
A: By submitting your proxy card, you authorize the proxies to use their
judgment to determine how to vote on any matter brought before the Annual
Meeting. Household does not know of any other business to be considered at
the Annual Meeting.
Q: WHO CAN ATTEND THE MEETING?
A: All stockholders as of the March 15, 2001 record date, or their duly
appointed proxies, may attend the meeting, and each may be accompanied by one
guest. Each stockholder may be asked to present valid picture identification,
such as a driver's license or passport. Please note that if you hold your
shares in "street name" (that is, through a broker or other nominee), you
will need to bring a copy of a brokerage statement reflecting your stock
ownership as of the record date.
Q: CAN I CHANGE MY VOTE OR REVOKE MY PROXY?
A: You may change your vote or revoke your proxy on any matter at any time up to
the closing of the poll for that matter at the Annual Meeting by (1) sending
a written revocation to the Corporate Secretary of Household, (2) sending a
proxy dated after your most recent proxy, or (3) voting in person at the
meeting.
Q: WHO WILL COUNT THE VOTE?
A: The gathering and tabulation of your vote is monitored by Computershare who
must certify that proper procedures were followed before the results are
official.
Q: IS MY VOTE CONFIDENTIAL?
A: All proxies, consents, ballots and voting materials (including TRIP votes)
will be kept confidential and not disclosed to anyone other than
Computershare. Voting records will be disclosed if required by law or if the
election results are contested. If you write comments on a returned proxy,
the tabulator will send them to us with your name but without revealing how
you voted unless disclosure is necessary for us to understand your comment.
Q: WHAT IS A "QUORUM"?
A: A quorum is the number of shares that must be present to have the Annual
Meeting. Holders of over 50% of the outstanding shares entitled to vote must
be present in person or by proxy before the Annual Meeting can begin. Shares
are considered present even if the proxy indicates an abstaining or withheld
vote.
Q: WILL BROKER NON-VOTES OR ABSTENTIONS AFFECT THE VOTING RESULTS?
A: Although abstentions and broker non-votes count for quorum purposes, they do
not count as votes for or against the ratification of auditors or any other
proposal and will not affect voting results.
Q: WHAT SHARES ARE INCLUDED ON MY PROXY CARD?
A: Your proxy represents any shares of Common Stock registered in your name as
well as any full or fractional shares of Common Stock held in your name under
the Household Dividend Reinvestment and Common Stock Purchase Plan, Household
Employee Stock Purchase Plan, TRIP, Household Financial Corporation Limited
Match and Save Plan, Beneficial Employee Stock Purchase Plan, and/or
Beneficial Key Employees Stock Bonus Plan. Your proxy also represents any
shares of 5% Cumulative Preferred Stock, $4.50 Cumulative Preferred Stock and
$4.30 Cumulative Preferred Stock registered in your name. If you own other
Household shares through a broker, bank or other nominee in street name, you
will receive a separate proxy from your bank, brokerage firm or other nominee
relating to those shares.
Q: HOW AND WHEN MAY I SUBMIT A STOCKHOLDER PROPOSAL FOR THE 2002 ANNUAL MEETING?
A: If you are interested in submitting a proposal for inclusion in Household's
Proxy Statement for the 2002 Annual Meeting, you need to follow the
procedures outlined in Rule 14a-8 of the Securities and Exchange Commission.
To be eligible for inclusion, shareholder proposals must be received by
Household's Corporate Secretary no later than November 29, 2001. If you are
interested in presenting any proposal from the floor of the 2002 Annual
Meeting, your proposal must be received by Household's Corporate Secretary no
earlier than December 8, 2001, or later than January 7, 2002.
Q: HOW MUCH DID THIS PROXY SOLICITATION COST?
A: Household is paying for this proxy solicitation. Household hired Corporate
Investor Communications, Inc. to solicit proxies, for which they will be paid
$7,000 plus reimbursement of out-of-pocket expenses. Certain of Household's
Directors, officers or employees may also solicit proxies in person or by
telephone, but they will not receive any additional compensation for doing
so. Upon request,
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Household will reimburse brokerage firms and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding solicitation material to
beneficial owners of stock.
ITEM (1): ELECTION OF HOUSEHOLD DIRECTORS
Fourteen members will be elected to Household's Board of Directors. Each
nominee has indicated that, if elected, they will serve until the next Annual
Meeting or until their successor is elected. If a nominee advises us before the
Annual Meeting that he/she is unable, for any reason, to serve as a Director,
your proxy gives the people who vote your shares discretion to elect (or reject)
a substitute nominee.
NOMINEES FOR DIRECTOR
YEAR FIRST
ELECTED
NAME, PRINCIPAL OCCUPATION, COMMITTEE A DIRECTOR
MEMBERSHIPS AND BUSINESS ASSOCIATIONS AGE OF HOUSEHOLD
------------------------------------- --- ------------
WILLIAM F. ALDINGER 53 1994
Chairman and Chief Executive Officer, Household
International, Inc.
Member of the Executive Committee.
Mr. Aldinger joined Household in September 1994 as President and Chief Executive
Officer and became Chairman in May 1996. He served as Vice Chairman of Wells Fargo
Bank and a Director of several Wells Fargo subsidiaries from 1986 until joining
Household. Mr. Aldinger is also a Director of Household Finance Corporation (a
subsidiary of Household), Illinois Tool Works Inc., and MasterCard International,
Incorporated.
ROBERT J. DARNALL 63 1988
Chairman, Prime Advantage Corp.
(Internet Provider of Materials and Services to
Manufacturers)
Member of the Compensation and Executive Committees.
Mr. Darnall became Chairman of Prime Advantage Corp. after he retired as President
and Chief Executive Officer of Ispat North America, Inc. on January 31, 2000,
having served in that role since 1998. From 1992 until 1998, Mr. Darnall was
Chairman and Chief Executive Officer of Inland Steel Industries and also served as
the President and a Director of Inland from 1986. Mr. Darnall is also a Director of
Pactiv Corporation, Cummins Inc., Sunoco, Inc., and the Federal Reserve Bank of
Chicago.
GARY G. DILLON 66 1984
Director
Member of the Audit and Finance Committees.
Mr. Dillon retired as Chairman of the Board of Schwitzer Group (a manufacturer of
engine components) on March 1, 1999. He had served as Chairman of Schwitzer since
1991 and Chief Executive Officer of Schwitzer since 1989. From 1989 to 1997 he also
served as President of Schwitzer. Prior to 1989 he was President and Chief
Executive Officer of Household Manufacturing, Inc., the former diversified
manufacturing subsidiary of Household.
JOHN A. EDWARDSON 51 1995
President and Chief Executive Officer, CDW Computer Centers,
Inc.
(Retailer of Computer and Technology Products and
Services)
Member of the Audit and Compensation Committees.
In January 2001, Mr. Edwardson became President, Chief Executive Officer and a
member of the Board of Directors of CDW Computer Centers, Inc. He previously was
with Burns International Services Corporation through October 2000 when Burns was
acquired by Securitas AB, having served as its President and Chief Executive
Officer since March 1, 1999, and as its Chairman since June 1, 1999. He previously
served as President, Chief Operating Officer and a member of the Board of Directors
of both UAL Corporation and United Airlines, Inc. from 1994 until 1998. He was
Executive Vice President and Chief Financial Officer of Ameritech Corporation prior
to 1994. Mr. Edwardson is also a Director of Focal Communications Corporation.
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YEAR FIRST
ELECTED
NAME, PRINCIPAL OCCUPATION, COMMITTEE A DIRECTOR
MEMBERSHIPS AND BUSINESS ASSOCIATIONS AGE OF HOUSEHOLD
------------------------------------- --- ------------
MARY JOHNSTON EVANS 71 1977
Director
Chair of the Nominating & Governance Committee; member of
the Audit Committee.
Mrs. Evans served as Vice Chairman of the Board of AMTRAK between 1974 and 1979. In
addition to being a Director of Household, Mrs. Evans is a Director of Moody's
Corporation, Delta Air Lines, Inc., The Dun & Bradstreet Corp., Saint-Gobain Corp.,
and Sunoco, Inc.
J. DUDLEY FISHBURN 54 1995
Director
Member of the Finance and Nominating & Governance
Committees.
Mr. Fishburn became Chairman of the Board of HFC Bank plc (Household's primary
subsidiary in the United Kingdom) in 1998. He previously served as the Conservative
Member of Parliament for Kensington in London from 1988 to 1997. Prior to entering
Parliament, Mr. Fishburn was Executive Editor, The Economist Newspaper Ltd. from
1979 until 1988. He is also a Director of Cordiant Group Communications plc, First
NIS Fund (Luxembourg), Henderson Smaller Companies Investment Trust plc, Murray
Emerging Economies Trust plc, and Philip Morris Companies Inc. and a Trustee of The
National Trust, The Open University and The Peabody Trust.
CYRUS F. FREIDHEIM, JR. 65 1992
Vice Chairman, Booz, Allen & Hamilton, Inc.
(Management Consulting Firm)
Member of the Executive and Finance Committees.
Mr. Freidheim is Vice Chairman of Booz, Allen & Hamilton, Inc., with which he has
been affiliated since 1966. He is also a Director of Security Capital Group, Inc.,
a Chair and a Trustee of Thunderbird American Graduate School of Institutional
Management and a Trustee of the Brookings Institution.
JAMES H. GILLIAM, JR. 55 1998
Attorney and Consultant
Member of the Finance Committee.
Mr. Gilliam is an attorney presently engaged in private practice and also performs
consulting services for various businesses. Mr. Gilliam was employed in various
capacities with Beneficial Corporation from 1979 until its merger with Household on
June 30, 1998. At the time of the merger, he was an Executive Vice President,
General Counsel and a Director of Beneficial. Mr. Gilliam is a Trustee of The
Hodson Trust and the National Geographic Society and a Director of CTW Foundation.
LOUIS E. LEVY 68 1992
Director
Chair of the Audit Committee; member of the Finance
Committee.
Mr. Levy retired as Vice Chairman of KPMG Peat Marwick LLP in 1990, having been
with the firm since 1958. Mr. Levy is also a Director of Deutsche Banc Alex.
Brown/Flag Investors Group of Mutual Funds and ISI Group of Mutual Funds.
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YEAR FIRST
ELECTED
NAME, PRINCIPAL OCCUPATION, COMMITTEE A DIRECTOR
MEMBERSHIPS AND BUSINESS ASSOCIATIONS AGE OF HOUSEHOLD
------------------------------------- --- ------------
GEORGE A. LORCH 59 1994
Director
Chair of the Compensation Committee; member of the
Nominating & Governance Committee.
Mr. Lorch served as Chairman of the Board since 1994 and President and Chief
Executive Officer since 1993 of Armstrong World Industries, Inc. until May 2000.
From May until August 2000, Mr. Lorch served as Chairman and President and Chief
Executive Officer of Armstrong Holdings, Inc. (the parent of Armstrong World
Industries, Inc. formed in May 2000). In August 2000, Mr. Lorch became a Chairman
Emeritus of Armstrong Holdings, Inc. Armstrong World Industries, Inc. recently has
filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code.
Mr. Lorch is a Director of R.R. Donnelley & Sons Company, The Williams Companies,
Inc., and Pfizer Inc.
JOHN D. NICHOLS 70 1988
Director
Chair of the Executive Committee; "ex officio" non-voting
member of the Audit, Compensation, Finance and Nominating &
Governance Committees.
Mr. Nichols retired as Chairman of the Board of Illinois Tool Works Inc. in 1996,
having served in that role since 1986, previously serving as its President from
1982 through 1986 and Chief Executive Officer from 1982 until 1995. Mr. Nichols had
been a Director of Illinois Tool Works since 1981. Mr. Nichols is a Director of
Grand Eagle Companies Inc., Philip Morris Companies Inc., Rockwell International
Corporation, and the Ravenswood Winery Inc.
JAMES B. PITBLADO 68 1994
Director
Chair of the Finance Committee; member of the Audit
Committee.
Mr. Pitblado was a Senior Executive with RBC Dominion Securities, Inc. of Toronto,
Canada and its predecessor companies from 1959 to 1994 and served as Chairman from
1985 until 1992. He was a Director of Household Financial Corporation Limited (the
Canadian business unit of Household) between 1984 and 1994. He is the Chairman of
the Hospital for Sick Children Foundation.
S. JAY STEWART 62 1994
Director
Member of the Compensation and Executive Committees.
Mr. Stewart retired as Chairman of the Board and Chief Executive Officer of Morton
International, Inc. in October 1999, having served in that role since 1994 and as a
Director since 1989. Also, from June 1999 until November 1, 1999, he was Vice
Chairman and a Director of Rohm and Haas Company after it acquired Morton
International. From 1989 through 1994 he was President and Chief Operating Officer
of Morton International. Mr. Stewart is also a Director of Autoliv, Inc.
LOUIS W. SULLIVAN, M.D. 67 1993
President of the Morehouse School of Medicine
(Educational Institution)
Member of the Compensation and Nominating & Governance
Committees.
Dr. Sullivan has been President of the Morehouse School of Medicine in Atlanta,
Georgia since 1993. He held the same position from 1981 until 1989 when he was
confirmed as United States Secretary of Health and Human Services. Dr. Sullivan is
also a Director of Bristol-Myers Squibb Company, CIGNA Corporation, Endo Vascular
Instruments, Inc., Equifax Inc., Georgia-Pacific Corporation, and Minnesota Mining
and Manufacturing Company, and a Director and Chairman of BioSante Pharmaceuticals,
Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR
DIRECTORS (ITEM 1 ON THE PROXY CARD).
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MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors has responsibility for establishing broad corporate
policies and reviews Household's overall performance rather than day-to-day
operations. The Board's primary responsibility is to represent the interests of
Household's stockholders, as a whole, in directing the company's managers to
build long-term stockholder wealth. The Board selects, evaluates and provides
for the succession of top management and, subject to stockholder election,
Directors. It reviews and approves corporate objectives and strategies, and
evaluates proposed major commitments of corporate resources. It participates in
decisions that have a potential major economic impact on your company.
Management keeps the Directors informed of company activity through regular
written reports and presentations at Board and committee meetings. The Board has
adopted specific Corporate Governance Standards to ensure that it adheres to
"best practices".
The Board of Directors met five times in 2000. Each Director attended 75% or
more of the total number of meetings of the Board of Directors and the
committees of which such Director was a member.
The Board has standing Audit, Compensation, Executive, Finance and Nominating
& Governance Committees. Each committee has a charter which was approved by the
Board. Each committee must review the appropriateness of its charter at least
annually. Each independent Director serves on at least two committees. Messrs.
Aldinger and Gilliam are the only non-independent Directors on the Board. Mr.
Nichols, in his role as Chair of the Executive Committee, may attend all
committee meetings. Mr. Aldinger also attends these meetings except those where
independent Directors desire to meet in executive session. He does not
participate in any meeting at which his compensation is evaluated.
The AUDIT COMMITTEE oversees our accounting, auditing, and financial reporting
practices. The Audit Committee met four times in 2000 and is comprised entirely
of independent Directors. For further information on the Audit Committee see
"Audit Committee Report and Outside Auditor Independence" beginning on page 22.
The COMPENSATION COMMITTEE determines the annual salary, bonus and other
benefits, including incentive compensation awards, of our senior management. It
evaluates existing and proposed employee benefit plans and may propose plan
changes to the Board. The Compensation Committee met four times in 2000 and is
comprised entirely of independent Directors.
The EXECUTIVE COMMITTEE can exercise many of the Board's duties between Board
meetings. The Executive Committee did not meet in 2000.
The FINANCE COMMITTEE reviews our financial policies and condition. It sets
dividend policy and considers the company's financing requirements and capital
plans. The Finance Committee met two times in 2000 and is comprised entirely of
Directors who are not officers or employees of Household or any of its
subsidiaries.
The NOMINATING & GOVERNANCE COMMITTEE recommends the Directors to be nominated
for election at each Annual Meeting of Stockholders, nominates individuals to
fill any vacancies which may occur on the Board, and reviews management
succession and development plans. The Nominating & Governance Committee also
reviews Board size and composition, as well as Director compensation. The
Nominating & Governance Committee will consider Director nominations made by our
stockholders if they are submitted in writing and sent to the Corporate
Secretary of Household at Household's headquarters. Any stockholder wishing to
recommend a proposed nominee should contact the Corporate Secretary to verify
the nominating procedures. The Nominating & Governance Committee met twice
during 2000 and is comprised entirely of independent Directors.
CORPORATE GOVERNANCE STANDARDS
Household believes its Corporate Governance Standards support its primary
responsibility of building long-term stockholder wealth. The cornerstones of
Household's corporate governance systems are:
- - The Board has ultimate responsibility for governing the affairs of Household,
including the selection of executive management, determining business strategy
and fulfilling a fiduciary obligation to stockholders to maximize the value of
their investment.
- - Management of Household is expected to be loyal to the corporation, implement
approved business strategy, appropriately resolve day-to-day operational
issues, keep the Board informed, and maintain and promote high ethical
standards while seeking to attain the maximum benefit or return to Household
in all business dealings.
- - The interests of stockholders in Household are to be protected. Stockholders
are to be kept informed of all material developments within Household.
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Some of the standards adopted by the Board are as follows:
BOARD/COMMITTEE GUIDELINES
- - All Directors will stand for election every year.
- - Each standing committee of the Board must adopt and approve a charter, which
in turn must be approved by the Board. Each committee will review the
appropriateness of its charter at least annually.
- - Director compensation shall be a combination of cash and options in Common
Stock, with the stock option component being a significant portion of total
compensation. All Directors will be encouraged to acquire a significant
economic investment in common equity-related instruments of Household with the
recommended goal being three times the Director's annual cash retainer.
- - The Chief Executive Officer will report annually to the Nominating &
Governance Committee and the Board on the plans or programs implemented by
Household for management succession and development. Annually, all independent
Directors will meet in a separate session, led by the Chair of the Executive
Committee, to review the performance of the Chairman, Chief Executive Officer
and President, if any, including a discussion of the perceived effectiveness
of the process implemented for management succession and development.
BOARD/COMMITTEE COMPOSITION
- - No Director shall serve on more than two of the standing committees. The
Audit, Compensation and Nominating & Governance Committees shall consist
entirely of independent Directors. Membership of the Executive Committee shall
consist of independent Directors, the Chairman and the Chief Executive Officer
of Household.
- - Chair of the Executive Committee shall be deemed the "lead director" for the
Board.
- - At least every two years, the Board shall discuss the effectiveness of the
Board and its various committees as compared to other public corporations.
- - Interlocking directorships are not allowed; i.e., where a senior executive
officer of Household serves on the Board or as a trustee of the company or
institution that employs the independent Director.
STOCKHOLDER RIGHTS
- - It is recognized that stockholders, lenders, customers, employees, communities
and vendors are all interested in the long-term viability of Household. To
that end, superior financial performance and the building of long-term
stockholder wealth will be Household's goals. The Board will use its best
judgment to balance the needs of all stakeholders in the pursuit of these
goals.
- - All common stockholders will have equal voting rights.
- - Household is committed to developing and maintaining open lines of
communication with its stockholders by striving to maintain an active,
consistent and credible investor relations program.
MANAGEMENT/COMPENSATION
- - Household will be a pay-for-performance company with compensation for
management being strongly linked to objectively measured financial goals set
in advance by the Compensation Committee.
- - Stock options will not be repriced or the exercise price reduced even if the
current market price of Common Stock is below the exercise price.
- - Household shall require that executive officers and key employees own
Household Common Stock.
If you are interested in reviewing the Corporate Governance Standards of
Household, they may be found on our website at www.household.com.
DIRECTOR COMPENSATION
In 2000, the independent Directors of Household received an annual cash
retainer of $50,000 (except the Chair of the Executive Committee, who received a
retainer of $62,000). Household does not pay additional compensation for
committee membership or meeting attendance fees to its Directors. The Chairs of
the Audit, Compensation, Finance and Nominating & Governance Committees received
an additional $5,000, and the Chair of the Executive Committee received an
additional $30,000. As Chairman of the Board of HFC Bank plc, Mr. Fishburn was
paid 94,000 British pounds sterling for his service and 3,120 British pounds
sterling for health insurance by HFC Bank plc. Other than Mr. Fishburn,
Directors who are employees of, or personal consultants to, Household or any of
its subsidiaries do not receive any additional compensation related to their
Board service.
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In 2000, independent Directors could elect to receive all or a portion of
their cash compensation in shares of Common Stock, defer it under the Deferred
Fee Plan for Directors or purchase options to acquire Common Stock. Under the
Deferred Fee Plan, Directors may invest their deferred compensation in either
units of phantom shares of Common Stock, with dividends credited toward
additional stock units; or cash, with interest credited at a market rate set
under the plan. At the end of the deferred period, all accumulated amounts under
the Deferred Fee Plan invested in phantom shares of Common Stock will be paid in
shares of Common Stock either in a lump sum or installments as selected by the
Director. For stock options, the value of each option will be the fair market
value of the option as determined in accordance with the Black-Scholes model (a
commonly used formula to determine the value of a stock option) on the last
business day of June. The exercise price for each share covered by an option
will be the fair market value of Common Stock on that day, which is the average
of the high and low sales prices for Common Stock as published in The Wall
Street Journal. During 2000, Directors elected to receive, in the aggregate, 75%
of their cash compensation in Common Stock, stock options or deferred into
phantom shares of Common Stock.
In November 2000, independent Directors received their annual option to
purchase 8,000 shares of Common Stock at the stock's fair market value on the
day the option was granted ($49.22 per share). Director options have a term of
ten years and one day, fully vest six months from the date granted, and once
vested, are exercisable at any time during the option term. Directors may use
shares they already own to pay for shares bought through an option exercise.
In 1995, the Directors' Retirement Income Plan was discontinued, and the
present value of each Director's accrued benefit was deposited into the Deferred
Phantom Stock Plan for Directors. Under the Deferred Phantom Stock Plan,
Directors with less than ten years of service received 750 phantom shares of
Common Stock annually during the first ten years of service as a Director. In
January 1997, the Board eliminated this and all future Director retirement
benefits. Any payouts to current Directors earned under the Deferred Phantom
Stock Plan will be made only when a Director leaves the Board due to death,
retirement or resignation and will be paid in shares of Common Stock either in a
lump sum or installments as selected by the Director. Directors who joined the
Board after January 1997 will not receive any retirement benefits.
Household provides each Director with $250,000 of accidental death and
dismemberment insurance and a $10 million personal excess liability insurance
policy. Independent Directors also are offered, on terms that are not more
favorable than those available to the general public, a MasterCard/Visa credit
card issued by one of Household's subsidiaries with a credit limit of $15,000.
Household guarantees the repayment of amounts charged on each card. Directors
may use an apartment maintained by Household in New York City for their personal
use, as available. Directors are credited with $340 additional compensation for
tax purposes for each night the apartment is used for personal use.
Under Household's Matching Gift Program, we match charitable gifts to
qualified organizations (subject to a maximum of $10,000 per year), with a
double match for the first $500 donated to higher education institutions (both
public and private) and eligible non-profit organizations which promote
neighborhood revitalization or economic development for low and moderate income
populations. Each current independent Director may ask us to contribute up to
$5,000 annually to charities of the Director's choice which qualify under our
philanthropic program.
AGREEMENT WITH MR. JAMES H. GILLIAM, JR.
On June 30, 1998, a subsidiary of Household merged with Beneficial
Corporation. As part of the merger terms, James H. Gilliam, Jr. was appointed a
Household Director as of June 30, 1998. Mr. Gilliam agreed to provide consulting
services to Household for twenty-four months (to June 30, 2000) for $1,000,000
per annum (paid monthly), as well as a guaranteed pension of $500,000 per year,
commencing at age 55 (April 21, 2000), to be offset by the benefit payable under
Beneficial's defined benefit pension and savings plans. In July 2000, the
Corporation made a lump sum payment of $5,231,106 to Mr. Gilliam in settlement
of any amounts owed to him for his guaranteed pension. The lump sum payment
amount was determined using interest and mortality assumptions utilized in
computing lump sum payments in 2000 under the Corporation's Retirement Income
Plan. Mr. Gilliam also received reimbursement for business expenses incurred
relating to Household matters. Mr. Gilliam is a current nominee for the Board of
Directors.
SHARES OF COMMON STOCK BENEFICIALLY OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
The following table lists the beneficial ownership, as of March 15, 2001,
of Common Stock by each
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Director and nominee for Director, and the executive officers named on page 15,
individually and as a group. "Beneficial ownership" includes shares for which an
individual has direct or indirect voting or investment power and includes any
shares the individual has a right to acquire within 60 days. No Director or
executive officer owns any Preferred Stock of Household.
NUMBER OF NUMBER OF
SHARES COMMON
BENEFICIALLY STOCK
NAME OF BENEFICIAL OWNER OWNED(1) EQUIVALENTS(2) TOTAL(3)
- ------------------------ ------------ -------------- --------
William F. Aldinger 2,319,458 23,349 2,342,807
Lawrence N. Bangs 633,587 12,988 646,575
Robert J. Darnall 46,347 13,436 59,783
Gary G. Dillon 108,795 11,867 120,662
John A. Edwardson 48,085 9,388 57,473
Mary Johnston Evans 51,394 15,072 66,466
Rocco J. Fabiano 246,362 2,876 249,238
J. Dudley Fishburn 29,764 1,455 31,219
Cyrus F. Freidheim, Jr. 43,540 10,555 54,095
James H. Gilliam, Jr.(4) 130,907 230 131,137
Gary D. Gilmer 344,523 9,952 354,475
Louis E. Levy 38,200 9,156 47,356
George A. Lorch 43,786 10,838 54,624
Siddharth N. Mehta 252,924 20,742 273,666
John D. Nichols 218,176 21,116 239,292
James B. Pitblado 59,397 3,114 62,511
David A. Schoenholz 565,482 10,963 576,445
S. Jay Stewart 50,370 5,997 56,367
Louis W. Sullivan 44,607 6,365 50,972
--------- ------- ---------
Directors and Executive Officers as a Group 5,275,704 199,459 5,475,163
- ---------------
(1) Directors and executive officers have sole voting and investment power over
shares listed above, except as follows. The number of shares of Common Stock
held by spouses or children in which beneficial ownership is disclaimed is
as follows: Mr. Fabiano, 27,795; Mr. Nichols, 13,200; and Directors and
executive officers as a group, 40,995. The number of shares of Common Stock
held by spouses, children and family foundations in which voting and
investment power is shared (or presumed to be shared) is as follows: Mr.
Aldinger, 121,500; Mr. Gilmer, 2,400; and Mr. Nichols, 2,150; and Directors
and executive officers as a group, 126,050. The number of shares of Common
Stock held under Household's employee benefit plans in which participants
have voting rights and/or investment power is as follows: Mr. Aldinger,
21,273; Mr. Bangs, 51,669; Mr. Fabiano, 574; Mr. Gilmer, 40,127; Mr. Mehta,
1,324; Mr. Schoenholz, 21,653; and Directors and executive officers as a
group, 136,620. The number of shares included in the table above which may
be acquired by Household's executive officers through May 14, 2001, pursuant
to the exercise of employee stock options is: Mr. Aldinger, 2,003,500, of
which 631,250 vested options are held by Mr. Aldinger's family partnership;
Mr. Bangs, 473,000; Mr. Fabiano, 118,750; Mr. Gilmer, 269,250; Mr. Mehta,
248,000; Mr. Schoenholz, 429,900; and Directors and executive officers as a
group, 4,000,573.
(2) Represents the number of Common Stock share equivalents owned by executive
officers under Household's Supplemental TRIP and Deferred Compensation Plan
and by Directors under Household's Deferred Fee Plan for Directors and the
Deferred Phantom Stock Plan for Directors. These share equivalents do not
have voting rights, but are valued according to the market price of the
Common Stock. The share equivalents accrue dividends at the same rate as the
Common Stock.
(3) No Director or executive officer beneficially owns directly or indirectly
more than 1% of Common Stock. Directors and executive officers as a group
beneficially own approximately 1% of the Common Stock.
Our employees held 9,498,411 shares of Common Stock in TRIP as of December
31, 2000, excluding the shares held by Directors and executive officers
shown in the table. Our Pooled Investment Fund ("PIF"), which holds assets
of our domestic pension plan, held 2,480,910 shares of Common Stock as of
December 31, 2000. Together, TRIP and PIF held 2.5% of the Common Stock
outstanding on December 31, 2000.
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(4) As trustee of The Hodson Trust and a director of the CTW Foundation, Mr.
Gilliam has shared voting and investment power over 700,005 shares of Common
Stock. Mr. Gilliam disclaims beneficial ownership of such shares and,
therefore, they are not included in the shares listed above.
STOCK OWNERSHIP GOALS
We believe stock ownership by our executive officers and other key employees
is important to create a culture that promotes stockholder value and aligns the
interests of our employees with you, our stockholder. As a result, we
established stock ownership goals for approximately 200 employees. Each is
expected to own Common Stock with a value equal to a multiple of two to six
times (depending on position level) their annual base salary at the end of a
five-year period. Each year these employees are expected to achieve at least
one-fifth of their goal except that a short-timer schedule has been developed
where goals are graduated to facilitate stock ownership for new hires. For
example, Mr. Mehta joined Household June 15, 1998 and met 10% of his goal in
2000, and is expected to meet 30% of his goal in 2001, 65% in 2002 and 100% in
2003. Individual ownership goals rise with any salary increase. The following
table reflects the stock ownership goals for the individuals in the Summary
Compensation Table.
STOCK OWNERSHIP GOAL
-------------------------------------
AS A
CURRENT MULTIPLE GOAL
STOCK OF BASE NUMBER OF
NAME TITLE OWNERSHIP(1) SALARY SHARES(2)
- ---- ----- ------------ -------- ---------
William F. Aldinger Chairman & Chief Executive Officer 339,307 6 107,681
Lawrence N. Bangs Vice Chairman 173,575 5 44,867
Gary D. Gilmer Group Executive -- Consumer Lending 85,225 5 44,867
David A. Schoenholz Group Executive -- Chief Financial Officer 146,545 5 44,867
Siddharth N. Mehta Group Executive -- Credit Card Services 25,666 5 44,867
Rocco J. Fabiano Group Executive -- Retail Finance 130,448 5 44,867
- ---------------
(1) As of March 13, 2001, ownership goals include shares held directly and
indirectly and the number of shares held under employee benefit plans,
including Common Stock share equivalents held in the Supplemental TRIP and
Deferred Compensation Plans.
(2) Calculated by multiplying the executive's base salary by the applicable
multiple and dividing that amount by the fair market value of the Common
Stock on December 29, 2000 ($55.72 per share).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Directors and
executive officers and any persons holding more than ten percent of a registered
class of our equity securities to report their initial ownership and any
subsequent change to the Securities and Exchange Commission ("SEC") and the New
York Stock Exchange ("NYSE"). We are required to tell you in the annual Proxy
Statement if we know of any failure to report as required. We reviewed copies of
all reports furnished to us and obtained written representations from our
Directors and officers that no other reports were required. Based on this, all
Section 16(a) filing requirements were complied with, except that Mr. John D.
Nichols, Director, failed to timely report one open market purchase of 11,500
shares of Common Stock by his IRA on February 10, 1999.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table lists three owners who have advised us that they hold more
than 5% of our Common Stock as of December 31, 2000.
NUMBER
OF SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OWNED OF CLASS
- -------------- ------------------- ------------ --------
Common Stock.. Capital Research and Management 43,691,600(1) 9.3%
Company
333 South Hope Street
Los Angeles, CA 90071
Common Stock.. Davis Selected Advisers, L.P. 29,557,294(2) 6.3%
2949 East Elvira Road, Suite 101
Tucson, AZ 85706
Common Stock FMR Corp. 27,118,624(3) 5.8%
82 Devonshire Street
Boston, MA 02109
- ---------------
(1) Capital Research and Management Company filed a Schedule 13G with the SEC
disclosing that, as of December 31, 2000, it had sole dispositive power over
43,691,600 shares of Common Stock for which beneficial ownership is
disclaimed, and no sole or shared voting power over shares of Common Stock.
(2) Davis Selected Advisers, L.P., filed a Schedule 13G with the SEC disclosing
that, as of December 31, 2000, it had sole dispositive power and sole voting
power over 29,557,294 shares of Common Stock.
(3) FMR Corp. filed a Schedule 13G with the SEC disclosing that, as of December
31, 2000, it had sole dispositive power over 27,118,624 shares of Common
Stock, sole voting power over 1,709,989 shares of Common Stock and no shared
voting power over shares of Common Stock.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
This Compensation Committee Report on Executive Compensation should not be
considered part of ("incorporated by reference") other documents we have filed
or must file with the SEC.
GENERAL
The Compensation Committee of Household's Board of Directors (the "Committee")
determines salaries and salary ranges, incentive compensation and other
compensation for the top five highest paid employees and all direct reports to
the Chief Executive Officer. The Committee also examines and recommends to the
Board of Directors the creation or amendment of company pension, benefit or
compensation plans and programs. The Committee grants stock options, restricted
stock rights and other awards under our executive compensation plans. The
Committee establishes financial and qualitative performance goals, which may be
objective or subjective, for each of the executive officers listed in the Proxy
Statement and all other direct reports to Mr. Aldinger. It later reviews whether
the performance goals were met during the specified period and determines the
compensation to be paid. A report on each officer's performance is then
presented to and reviewed by the Board of Directors.
We retain the compensation consulting firm, Frederic W. Cook & Co., Inc. to
advise the Committee as to the competitiveness of compensation paid to our
senior officers. Frederic W. Cook & Co., Inc. reviews our compensation programs
and goals and compares them to a broad financial services comparator group.
Frederic W. Cook & Co., Inc. reviewed the compensation for the Chief Executive
Officer and the next five most highly paid officers for 2000 and reported to the
Committee that the compensation of such officers is within current market
practice.
COMPENSATION PHILOSOPHY AND GOALS
Our corporate goal is to link compensation to financial performance. We
designed our compensation programs so that base salaries are generally
competitive with our comparator group (22 companies, all in the S&P Financials),
with substantially higher earnings potential on bonus and long-term compensation
if we deliver superior stockholder earnings results. Performance is measured
primarily by earnings per share ("EPS") growth. We are a pay-for-performance
company.
The executive compensation policy is designed to retain and attract
exceptional executives by offering highly competitive compensation for superior
performance. In addition to reviewing compensation and performance within our
comparator group, the Committee
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also measures each executive's performance on an individual, business unit and
corporate basis.
We believe the stockholders' interests are best served when a significant
portion of an executive's total compensation is at risk based on meeting
specific performance goals. These objectives are designed to help us achieve our
strategic and financial goals, and specifically, to improve stockholder value.
To support our belief in pay for performance, the Board of Directors adopted,
and stockholders approved, the 1998 Key Executive Bonus Plan for members of
senior management. This is a short-term cash incentive plan which places even
more emphasis on shared objectives and corporate performance while remaining
deductible as a "performance based" plan under the Internal Revenue Code of
1986. The bonus pool for this Plan will equal 5% of the company's net income
that exceeds the net income required to achieve a 12% return on average common
stockholder equity ("ROE"), as determined in accordance with the Plan for the
plan year. If the ROE achieved by the Company is less than the designated
threshold set by the Committee, no bonus will be paid under this Plan. The
Committee will determine at the beginning of each year what percentage of the
bonus pool will be allocated to each participating executive and is not required
to award the entire bonus pool. The Committee exercises its discretion in
determining actual bonus awards under this Plan by setting financial, and in
some cases, qualitative, objectives for each key executive at the beginning of
each year which may include meeting revenue or receivable targeted growth; a
targeted loss reserve ratio; a targeted equity to managed assets ratio; a
targeted EPS; reducing expenses and charge-offs by specified percentages;
attaining specified net income and operating efficiency ratios for the company
and/or the executive's respective business unit; and increasing the number of
our products used per our customer.
Our policy encourages stock ownership by executives. We wish to make their
personal net worth heavily dependent on appreciation in the value of our stock
over the long term. The Committee believes that stock options should be the
primary form of long-term incentive compensation for senior executives. However,
in 2000, the Committee granted a one-time special award of restricted stock
rights to 66 key executives to assist in retention, reward outstanding
performance and reflect current trends in compensation in the financial services
industry. Future senior executive compensation -- except in unusual
circumstances -- will be limited to salary, cash bonus, and stock options. In
keeping with market practice, certain supplemental benefits and perquisites are
also provided.
The four components of executive compensation are:
Base Salary: Determined by individual financial and non-financial performance,
actual pay versus market data for each position and general economic conditions.
In administering base pay, all executive positions are evaluated and placed in
appropriate career bands. Market data for each position is reviewed annually to
evaluate our competitiveness.
Annual Cash Bonus: Tied directly to individual and corporate financial
performance, the annual bonus encourages potential recipients to achieve
individual, business unit and corporate financial and operational goals.
Excellent performance is encouraged by placing a significant part of the
executive's total compensation at risk. Therefore, when certain objective or
subjective performance goals are not met, annual bonuses may be reduced or not
paid.
Long-Term Incentives: Stock options provide our executives with incentive to
maximize stockholder value. Stock options create a common interest between
management and you. Option awards are based on the Committee's evaluation of the
executive's performance.
Executive Benefits: Household provides its executive management with the broad
benefit coverage available to all employees as well as specific, targeted
supplemental benefits and perquisites that are necessary to be competitive in
this market.
EXECUTIVE OFFICER COMPENSATION
- - Chief Executive Officer
Mr. Aldinger's 2000 base salary was determined by the Committee through an
evaluation of his prior year's performance, value to the company and market data
prepared by Frederic W. Cook & Co., Inc. With the goal to keep most of Mr.
Aldinger's compensation at risk and related to corporate financial performance,
Mr. Aldinger was not awarded any salary increase. His last salary increase was
in September, 1998, which was in recognition of his increased duties and
responsibilities as a result of the successful merger with Beneficial
Corporation.
Mr. Aldinger's annual cash bonus was determined based on the satisfaction of
shared corporate objective financial performance goals as well as qualitative
goals relating to improvement and diversity of our middle management team. The
shared financial performance goals for Mr. Aldinger were: (a) targeted earnings
per share, (b) targeted return on equity, (c) targeted receivable growth, (d)
targeted revenue growth, (e) targeted tangible equity to managed assets, and (f)
targeted increase in the number of our products used per our customer. During
2000 Household achieved superior operating results. Earnings per share
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rose 16% to the highest level in our 123-year history, return on equity
surpassed 23%, receivables grew over 22%, managed revenues increased 18%, return
on managed assets was 2%, and the number of products our customers use increased
10%. As a result, Mr. Aldinger satisfied all targeted financial performance
goals as well as his qualitative goals set by the Committee. In accordance with
the intent and purposes of the 1998 Key Executive Bonus Plan, a bonus pool of
$41,000,000 was generated based on 2000 financial results. Mr. Aldinger's
maximum bonus opportunity for 2000, as set by the Committee, was 20% of the
pool, or $8,200,000. The Committee approved a 2000 bonus of $4,000,000 to Mr.
Aldinger, which represented 10% of the pool, based on his excellent performance
and market data on comparable positions.
In 2000, the Committee also approved an amendment to Mr. Aldinger's
Supplemental Executive Retirement Plan ("SERP") to add a 20 year pension service
and benefit credit. This amendment was made to Mr. Aldinger's SERP to make it
more consistent with SERP arrangements typically provided to Chief Executive
Officers in the financial services industry, based on market data prepared by
Arthur Andersen LLP.
- - Other Executive Officers
The other executive officers reviewed by the Committee and named in this Proxy
Statement were also paid annual bonuses under the 1998 Key Executive Bonus Plan
based on (i) position level, which determines the maximum percentage of the
bonus pool which may be awarded (this ranges from 3% to 11%) and (ii)
achievement of certain shared Household objective financial performance goals,
of which the results for 2000 are discussed above, and (iii) the satisfaction of
specific individual objective and subjective performance goals relating to the
company and their individual business unit. No executive officer received the
maximum amount permitted by the Plan.
- - Long-Term Incentive Compensation
In 2000, awards made to executive officers under the 1996 Long-Term Executive
Incentive Compensation Plan were comprised of stock options (as discussed on
page 18) and the one-time special grant of restricted stock rights (discussed on
page 16). The Committee believes that compensation based on an increase of our
Common Stock price is an appropriate method of providing long-term incentives as
it is directly related to our financial performance and maintains a significant
portion of the executive's total compensation at-risk.
The Committee believes a long-term award must be meaningful in order to
provide the best incentive and retain the best executives. Our aim is to provide
a compensation package that rewards superior performance. The Committee's stock
option award recommendation was based on a review of each executive's
performance for the year, the executive's value to the company, previous option
awards, and competitive information provided by Frederic W. Cook & Co., Inc. No
specific weight was accorded to any of the factors noted in this decision
process. The Committee's one-time special RSR award was based on many factors.
The most significant factor was retention concerns given the depressed market
value of financial stocks at that time as well as the eligibility of many key
executives to retire with full retirement benefits in the near term. The
Committee based its award determination on market research of similar awards
made by Household's competitors in the financial services industry. Mr. Bangs
was not granted any of the special RSRs given his retirement plans.
TAX DEDUCTIBILITY
We established compensation programs that we believe meet all the current
tests required for compensation to be deductible to us for federal income tax
purposes. The Committee has directed the company to modify, when necessary,
compensation plans for its executive officers to maximize our federal tax
deduction. The Committee reserves the right to use good independent judgment, on
a case by case basis, to make nondeductible awards to reward employees for
excellent service or recruit new executives while taking into consideration the
financial effects such action may have on the company.
It is the Committee's view that the compensation package of Mr. Aldinger and
each of the named executive officers was based on an appropriate balance of (1)
our overall or a particular business unit's 2000 financial performance, (2) the
officer's individual performance, and (3) competitive standards. No member of
the Committee is a former or current officer or employee of Household or any of
its subsidiaries.
COMPENSATION COMMITTEE
G. A. Lorch, Chairman
R. J. Darnall
J. A. Edwardson
S. J. Stewart
L. W. Sullivan, M.D.
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PERFORMANCE OF HOUSEHOLD
The graphs, charts and related disclosures contained in this section of the
Proxy Statement should not be considered part of (i.e., are not "incorporated by
reference") other documents we have filed or must file with the SEC. The stock
price performance shown in the graphs does not necessarily indicate future price
performance.
FIVE-YEAR CUMULATIVE TOTAL RETURN
ASSUMES INVESTMENT OF $100 BEGINNING DECEMBER 31, 1995 AND THE REINVESTMENT OF
DIVIDENDS.
LINE GRAPH
HOUSEHOLD S&P FINANCIALS S&P 500
--------- -------------- -------
12/95 100.00 100.00 100.00
12/96 158.00 135.00 123.00
12/97 222.00 200.00 164.00
12/98 209.00 223.00 211.00
12/99 200.00 232.00 255.00
12/00 300.00 292.00 232.00
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 12/95 12/96 12/97 12/98 12/99 12/2000
- ---------------------------------------------------------------------------------------------------------------------------------
Household 100 158 222 209 200 300
- ---------------------------------------------------------------------------------------------------------------------------------
S&P Financials 100 135 200 223 232 292
- ---------------------------------------------------------------------------------------------------------------------------------
S&P 500 100 123 164 211 255 232
- ---------------------------------------------------------------------------------------------------------------------------------
The above chart compares total returns (assuming all dividends are reinvested)
of Household, the Standard & Poor's Composite Financial Stock Price Index ("S&P
Financials") and the Standard & Poor's 500 Composite Stock Price Index ("S&P
500"). Our Common Stock is included in both of the S&P indices. The chart
assumes $100 was invested in Household Common Stock on December 31, 1995, and
that all dividends are reinvested. We are required to publish the five-year
return chart so you can compare our performance to other stocks. We also have
included information below showing total return over different periods because
shares may have been acquired at different times and we believe it is helpful to
know how the Common Stock performed in other periods.
The estimated compound annual total return (which is the stock price
appreciation that occurs over the period noted plus the value of dividends paid
to stockholders and reinvested over that same period of time) for the past one,
three, five and ten year periods for Household's Common Stock and the noted
indices was as follows (in percentages):
- ----------------------------------------------------------------------------------------------------------------------------
3 YEARS 5 YEARS 10 YEARS
TOTAL RETURN 2000 (1998-2000) (1996-2000) (1991-2000)
- ----------------------------------------------------------------------------------------------------------------------------
Household 50% 11% 25% 29%
S&P Financials 26% 13% 24% 24%
S&P 500 (9)% 12% 18% 17%
- ----------------------------------------------------------------------------------------------------------------------------
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EXECUTIVE COMPENSATION
The table below discloses information concerning compensation for services
rendered during 2000, 1999 and 1998 to Household and its subsidiaries by its
Chief Executive Officer and each of the five most highly paid executive officers
of Household as of December 31, 2000.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
---------------------------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ------------------------ --------
----------------------------------------- NUMBER
OTHER RESTRICTED OF SHARES
NAME AND ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) RIGHTS OPTIONS PAYOUTS COMPENSATION
- ------------------------------------------------------------------------------------------------------------------------------
William F. Aldinger 2000 $1,000,000 $4,000,000 $ 154,242 $7,999,962(2) 600,000 -- $245,382(3)
Chairman, Chief 1999 1,000,000 3,000,000 107,639 -- 460,000 -- 213,104
Executive Officer 1998 888,463 2,300,000 82,188 -- 500,000 -- 151,383
and Director
- ------------------------------------------------------------------------------------------------------------------------------
Lawrence N. Bangs 2000 $ 509,616 $2,000,000 $ (71,026) -- 250,000 -- $134,509(3)
Vice Chairman 1999 500,000 1,500,000 (111,839) -- 124,000 -- 97,566
1998 390,385 850,000 181,285 -- 134,000 -- 67,360
- ------------------------------------------------------------------------------------------------------------------------------
Gary D. Gilmer 2000 $ 500,000 $2,000,000 $ 63,743 $4,999,966(2) 150,000 -- $122,873(3)
Group Executive -- 1999 500,000 1,500,000 44,303 -- 124,000 -- 83,459
Consumer Lending 1998 404,809 850,000 288,951 -- 134,000 -- 34,954
- ------------------------------------------------------------------------------------------------------------------------------
David A. Schoenholz 2000 $ 500,000 $2,000,000 -- $4,999,966(2) 150,000 -- $123,433(3)
Group Executive -- 1999 500,000 1,500,000 -- -- 124,000 $456,094(4) 79,101
Chief Financial 1998 425,482 750,000 -- -- 134,000 222,305(4) 56,918
Officer
- ------------------------------------------------------------------------------------------------------------------------------
Siddharth N. Mehta(5) 2000 $ 509,616 $1,500,000 -- $4,999,966(2) 150,000 -- $ 91,934(3)
Group Executive -- 1999 500,000 1,000,000 $ 84,000 -- 124,000 -- 16,018
Credit Card Services 1998 259,615 700,000 59,188 -- 434,000 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Rocco J. Fabiano 2000 $ 497,115 $1,500,000 -- $4,999,966(2) 125,000 -- $ 89,827(3)
Group Executive -- 1999 350,000 1,000,000 $ 102,260 -- 75,000 -- 16,961
Retail Finance 1998 252,278 311,250 -- -- 75,000 -- 20,112
- ------------------------------------------------------------------------------------------------------------------------------
(1) Other Annual Compensation includes items such as financial planning
services, physical exams, club initiation fees, expatriate benefits, and car
allowances. SEC rules require disclosure of the specific type and amount of
compensation when a benefit exceeds 25 percent of the total Other Annual
Compensation for an individual executive officer. That itemization follows:
Car allowances for 2000 were: $14,423 for Mr. Aldinger, $11,000 for Messrs.
Bangs, Gilmer, Schoenholz, $11,212 for Mr. Mehta and $10,577 for Mr.
Fabiano. Mr. Aldinger: Board policy expressly directs the Chairman to use
our corporate aircraft to the fullest extent for business and personal
travel and that personal aircraft use be reported as income. Under the IRS
formula, his personal use of company aircraft was calculated to be $106,881
in 2000, $68,408 in 1999, and $48,170 in 1998. Mr. Bangs: In the early
1990s, Mr. Bangs was on international assignment to HFC Bank plc in the U.K.
and continues to have compensation related to this expatriate experience.
For example, in 2000, Mr. Bangs repaid $88,232 to Household for an
expatriate 1999 tax year equalization settlement. In 1999, Mr. Bangs repaid
$129,113 to Household for an expatriate 1998 tax year equalization
settlement. In 1998, he received $169,272 in compensation related to his
U.K. assignment. Of that amount, $190,474 related to U.K. tax liability;
$54,929 related to a tax gross-up; and he repaid $76,131 to Household for an
expatriate 1997 tax year equalization settlement. Mr. Gilmer: Mr. Gilmer was
transferred to the U.K. in 1995 as Managing Director of HFC Bank plc. He
returned to the United States in January, 1998. Included are tax
equalization, relocation, housing and cost of living payments and
adjustments. In 2000, $34,312 was related to a U.K. tax liability for Mr.
Gilmer. In 1999, $49,593 was paid to Mr. Gilmer relating to his tax advances
and related gross-up. He repaid $29,036 to Household for an expatriate 1998
tax year equalization settlement. In 1998, Mr. Gilmer received $276,203 in
compensation relating to his U.K. assignment. Of that amount, $125,166 was
related to U.K. tax liability; $65,956 was related to U.S. tax liability;
and $53,082
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was for relocation expenses. Mr. Mehta: Pursuant to his hiring agreement,
Mr. Mehta received $66,000 on his one-year anniversary with Household
representing the company contribution he would have received in TRIP had he
been eligible to participate during his first year. Mr. Mehta received
$46,477 in relocation expenses in 1998. Mr. Fabiano: In 1999, Mr. Fabiano
received $97,429 to terminate certain stockholder agreements relating to
Household securities.
(2) On May 10, 2000, the Compensation Committee granted special one-time
restricted stock rights to 66 key executives of the corporation to assist in
retention, reward outstanding operating performance and reflect current
trends in compensation in the financial services industry. The Restricted
Stock Right values shown reflect the fair market value of the underlying
Household Common Stock on the date of grant ($39 7/8 per share). This
valuation does not take into account the diminution in value attributable to
the restrictions applicable to the underlying shares. Based on a closing
Common Stock price of $55 per share on December 29, 2000, the aggregate
value of the Restricted Stock Rights is as follows: Mr. Aldinger, 200,626
shares ($11,034,430); Mr. Gilmer, 125,391 shares ($6,896,505); Mr.
Schoenholz, 125,391 shares ($6,896,505); Mr. Mehta, 125,391 shares
($6,896,505); and Mr. Fabiano, 125,391 shares ($6,896,505). These special
Restricted Stock Rights vest one-third on the second anniversary of the date
of grant and two-thirds on the third anniversary of the date of grant.
Dividend equivalents, in the form of additional income, are paid on all
underlying shares for the Restricted Stock Rights at the same rate as paid
to all Common Stock shareholders. Upon a change in control, these Restricted
Stock Rights will not immediately vest like other outstanding restricted
stock rights, unless the executive's employment ends under certain
circumstances within the 36 month period following a change in control.
(3) Includes life insurance premiums paid by Household in 2000 for the benefit
of executives as follows: Mr. Aldinger, $5,382; Mr. Bangs, $15,085; Mr.
Gilmer, $4,987; Mr. Schoenholz, $3,433; Mr. Mehta, $2,077; and Mr. Fabiano,
$0. The remaining amounts shown being Household's contribution for the
executive officer's participation in TRIP and Supplemental TRIP (see page
19).
(4) The payments shown for 1999 and 1998 represent the payouts of a Special
Performance Share Award granted February 1, 1994, to Mr. Schoenholz (15,750
shares), of which 50% was paid February 1, 1999, 25% on February 2, 1998,
and 25% on February 7, 1997, at the $43.44, $42.34 and $32.92
(split-adjusted) per share fair market values of Common Stock on said dates,
respectively.
(5) Mr. Mehta joined Household on June 15, 1998. The salary shown in 1998 is for
the period from June 15, 1998, to December 31, 1998. Under the terms of his
employment agreement, Mr. Mehta was guaranteed a bonus of $600,000 for the
1998 calendar year. Upon joining Household, Mr. Mehta received an option to
acquire 300,000 shares of Common Stock.
INCENTIVE AND STOCK OPTION PLANS
Household's stockholders previously approved the Household International 1996
Long-Term Executive Incentive Compensation Plan (the "1996 Plan"). The Committee
has discretion to grant employees awards under the 1996 Plan. The Committee may
award stock options, restricted stock rights or Common Stock as incentive
compensation. Until stockholders approve a new incentive compensation plan, all
incentive awards will be made under the 1996 Plan. The 1996 Plan will terminate
on May 8, 2006. The 1996 Plan allows certain optionees to transfer options
within specific rules and limitations and provides for immediate vesting of all
outstanding awards in the event of a change in control of Household. No more
than 1,200,000 shares may be awarded under the 1996 Plan to any one person in
any calendar year.
Under the 1996 Plan, the Committee may grant any type of option to purchase
shares of Common Stock that is legally permitted at the time of grant. Options
will generally not be exercisable less than one year nor more than ten years and
one day from the date of grant. However, the Committee may extend the expiration
date of any option provided it does not exceed fifteen years from the date the
option is granted. The Committee has not extended the expiration date of any
option granted to any of the named executive officers. The option price per
share under each plan will not be less than the fair market value of one share
of Common Stock on the date of grant. Any unissued shares or shares subject to
option grants which expire will be made available for issuance by the Committee
in the future. Shares of Common Stock issued under the 1996 Plan may be
authorized but unissued shares, treasury shares, or shares purchased in the open
market.
Options to acquire Common Stock are also outstanding under an incentive plan
adopted by stockholders in 1984 (the "1984 Plan"), and various option plans
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assumed by Household in connection with the mergers with Beneficial Corporation
in 1998 and Renaissance Holdings, Inc. in 2000. All options outstanding under
these plans are fully vested. No further awards will be made under any of these
plans. Payment for options under each of the plans may be made with cash or, at
the discretion of the Committee, with shares of Common Stock or both cash and
shares.
As of March 15, 2001, options were granted for 14,094,409 shares of Common
Stock under the 1996 Plan, while options to acquire 4,303,529 shares were
outstanding under the 1984 Plan and options to purchase 1,134,665 shares were
outstanding under the Beneficial and Renaissance option plans. We have 9,342,218
shares of Common Stock available for grant under the 1996 Plan. These amounts
will be proportionately adjusted for any stock dividends, stock splits,
consolidations or reclassifications.
The 1996 Plan authorizes the Committee to grant Restricted Stock Rights
("RSRs"). RSRs entitle an employee to receive shares of Common Stock if the
employee satisfies conditions set by the Committee in the award. The most common
condition requires the employee to remain employed by Household for a period
before the actual shares are issued to the employee. The Committee may
accelerate any payment prior to the vesting period for reasons such as achieving
individual or corporate performance levels established when the RSR was granted.
Unless specifically noted in the grant, if there is a change in control of
Household, all outstanding RSRs vest in full. A holder of RSRs is not entitled
to any of the rights of a holder of Common Stock until the shares are issued;
however, the Committee may direct Household to pay the holder cash equal to the
cash dividends declared on Common Stock for each share of stock subject to an
RSR. RSRs were also granted under the 1984 Plan. As of December 31, 2000, 2,135
employees had outstanding RSRs representing 3,954,303 shares under the 1996 Plan
and the 1984 Plan. During 2000, a special award of RSRs was granted to some of
the named executive officers. Please review footnote 2 to the "Summary
Compensation Table" on page 15 for a complete discussion of these RSRs.
The average purchase price for all outstanding options held by the 457
participants in the 1996, 1984, Beneficial and Renaissance plans at December 31,
2000, was $31.09 with expiration dates from 2001 to 2010. The following table
shows option exercises by the named executive officers in 2000 and their gain
("value realized"), which is the market value on the exercise date less the
price of the option when it was granted. It also shows the number of options
that have not been exercised and their potential value using the fair market
value on December 29, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
DECEMBER 31, 2000 DECEMBER 31, 2000(1)
SHARES VALUE --------------------------- ---------------------------
NAME EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- ---------- ----------- ------------- ----------- -------------
William F. Aldinger 250,000 $9,070,325 2,303,500 1,307,500 $70,804,439 $14,101,119
Lawrence N. Bangs 0 0 473,000 440,000 12,875,876 4,361,988
Gary D. Gilmer 50,000 1,736,750 269,250 328,750 6,282,533 3,524,591
David A. Schoenholz 37,943 1,403,786 429,900 340,000 11,189,081 3,711,988
Siddharth N. Mehta 0 0 248,000 460,000 3,100,748 4,717,138
Rocco J. Fabiano 0 0 112,500 237,500 1,911,469 2,786,499
- ---------------
(1) Calculated based on the fair market value of Common Stock on December 29,
2000 ($55.72 per share).
Executive officers participating in the 1998 Key Executive Bonus Plan may
receive assistance in exercising stock options awarded under the 1984 and 1996
Plans. Executives in Career Bands S and D may also receive assistance to settle
their tax consequences upon vesting of RSRs under the 1984 and 1996 Plans. The
Committee may direct the company to lend funds or guarantee loans that will be
used to pay the exercise price for an option or tax consequences upon RSR
issuances. Loans have a maximum term of eight years. Loans extended under the
Plans bear interest at a variable rate that is adjusted each year to equal the
greater of the average annual rate for three-year U.S. Treasury notes for the
preceding calendar year (6.62 percent for 2000), and the applicable rate in
effect under Section 1274(d) of the Internal Revenue Code (the "Code") at the
time the loan is made (currently 5.07 percent for loans made in March, 2001).
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The following lists the unpaid principal balances for executive officers with
loans outstanding under the Plans during 2000 and for all executive officers as
a group.
BALANCE AS OF MAXIMUM BALANCE
NAME DECEMBER 31, 2000 DURING 2000
- ---- ----------------- ---------------
William F. Aldinger $2,791,575 $3,014,412
Lawrence N. Bangs 1,497,881 1,588,480
Gary D. Gilmer 524,771 564,385
David A. Schoenholz 1,621,676 1,730,695
All Executive Officers as a Group(1) $7,801,898 $8,313,966
- ---------------
(1) The balance as of December 31, 2000 and the maximum balance during 2000
represent loans to six persons.
The following table shows the number of stock options granted in 2000 to the
named executives, the percentage each award is of the total granted to employees
in 2000, the per share exercise or base price and the expiration date. The table
also presents the potential realizable value for each grant and the resulting
benefit to all Common Stock shareholders if the assumed appreciation in stock
price occurs. The presentation of stock options in the table below is required
by SEC rules and is not intended to forecast possible future appreciation, if
any, of the Common Stock price.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
NUMBER % OF TOTAL ANNUAL RATES OF STOCK
OF SHARES OPTIONS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------------------
NAME GRANTED IN FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ---------- -------------- --------- ---------- -- ---
All Common Shareholders(2) n/a n/a n/a $14,580,033,686 $36,948,667,959
All Employee Optionees(3) 2,490,000 100% $49.22 11/13/10 77,075,942 195,325,570
Optionee Gain as % of All Common
Shareholders Gain n/a n/a n/a n/a .05% .05%
William F. Aldinger 600,000 24.1 $49.22 11/13/10 18,572,516 47,066,402
Lawrence N. Bangs 250,000 10.0 $49.22 11/13/10 7,738,548 19,611,001
Gary D. Gilmer 150,000 6.0 $49.22 11/13/10 4,643,129 11,766,601
David A. Schoenholz 150,000 6.0 $49.22 11/13/10 4,643,129 11,766,601
Siddharth N. Mehta 150,000 6.0 $49.22 11/13/10 4,643,129 11,766,601
Rocco J. Fabiano 25,000 1.0 $35.47 02/08/10 557,653 1,413,203
100,000 4.0 $49.22 11/13/10 3,095,419 7,844,400
- ---------------
(1) Options to employees generally vest (can be exercised) as follows: 25% at
each anniversary after the grant date with full vesting on the fourth
anniversary. The 1984 and 1996 Plans allow the Committee to modify terms of
outstanding options and to reprice the options. No options have ever been
repriced by Household.
The option holder may use shares already held to purchase the option shares
or to pay withholding taxes. The options were granted for a term of ten
years and one day, subject to earlier termination or certain events related
to termination of employment.
(2) The "All Common Shareholders" line is shown for comparison purposes only.
The Potential Realizable Value to all common shareholders is the aggregate
net gain for all common shareholders using the fair market price of $49.22
on the November 13, 2000, option grant date. Potential appreciation is
calculated using assumed annual rates of 5% and 10% for a ten-year period.
There can be no assurance that the Common Stock will perform at the rates
shown in the table. Household will neither make nor endorse any predictions
as to future stock performance.
(3) The option price shown for the "All Employee Optionees" line is $49.22 (the
fair market value option price as determined on the grant date of November
13, 2000). This option exercise price of $49.22 is shown as it reflects
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approximately 97% of all employee options granted in 2000. The assumed
expiration date for the "All Employee Optionees" line is November 13, 2010.
As described on page 8, on November 13, 2000, each independent Director
received an option to purchase 8,000 shares of Common Stock. These options
are not included in the information provided on the "All Employee Optionees"
line.
EMPLOYMENT AGREEMENTS
Executive officers have employment contracts approved by the Committee. The
initial term of each contract is 18 months, renewed daily, unless we choose not
to renew the contract. During the contract term, each executive officer receives
a minimum specified annual salary (which may be increased but not decreased),
and is entitled to receive benefits from our executive bonus and incentive
plans, employee retirement plans, and medical, disability and life insurance
plans. We may terminate any contract for cause. An executive may terminate a
contract if his or her compensation is reduced, there is a substantial reduction
in responsibilities or the executive is given notice of non-renewal. With the
exception of Mr. Aldinger, if a contract is terminated, the executive receives a
lump sum payment, which approximates 150% of the executive's salary and bonus as
well as health coverage at Household's expense for up to 18 months. In the case
of Mr. Aldinger, the lump sum payment will approximate 200% of his salary and
bonus. Mr. Aldinger will also be entitled to life, health and disability
coverage, as well as automobile and financial counseling allowances, for up to
two years.
Under such contracts, an executive whose position is adversely influenced
following a change in control of Household is entitled to receive a lump sum
severance payment equal to or approximating 300% of the executive's salary and
bonus. In addition, the executive will receive three additional years' benefits
under Household's retirement plans, as well as three additional years' health,
life and disability insurance coverage, and automobile and financial counseling
allowances. Except in the case of Mr. Aldinger and during a limited 60 day
period following a change in control during which an executive may voluntarily
resign for any reason and receive severance payments, no executive will receive
the additional severance payment following a change in control of Household
unless the executive loses his or her job or resigns after experiencing certain
adverse changes in compensation or job conditions. Mr. Aldinger is entitled to
resign for any reason within 36 months after a change in control and receive all
payments under the contract following a change in control.
Each terminated executive will also receive pro rata vesting (Mr. Aldinger
will be 100% vested) in stock options and restricted stock to the extent not
already vested but all executive officers will become 100% vested in the case of
a change in control.
Severance payments considered "excess parachute payments" by Section 280G(b)
of the Code are subject to federal excise tax. We will pay the executive an
additional amount equal to the excise tax imposed under Section 4999 of the Code
plus income tax payable with respect to the payment of such excise tax amount.
Executive officers and Directors of Household have been, or may become,
customers of, or had transactions with, Household's subsidiaries. Such
transactions, which include credit card loans, are made by our subsidiaries in
the ordinary course of business on substantially the same terms, including
interest rate and collateral, as those for comparable transactions with other
persons and do not involve more than normal risk of loss or other unfavorable
consequences.
SAVINGS-STOCK OWNERSHIP AND PENSION PLANS
Household established its Tax Reduction Investment Plan, which is a deferred
profit-sharing and savings plan for our eligible employees. TRIP also qualifies
as an employee stock ownership plan. With certain exceptions, an employee at
least 21 years of age with one year of service (three years of service if under
age 21) and not part of a collective bargaining unit may contribute into TRIP,
on a pre-tax and after-tax basis, up to 15% of the participant's cash
compensation (subject to a maximum annual pre-tax contribution by a participant
of $10,500, as adjusted for cost of living increases, and certain other
limitations imposed by the Code) and invest such contributions in Common Stock
or separate equity or income funds.
We contribute 3% of compensation on behalf of each participant who contributes
1% and we match any additional participant contributions up to 4% of
compensation but the matching contributions will not exceed 6% of a
participant's compensation if the participant contributes 4% of compensation.
Our matching contributions are invested in Common Stock. The
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plan provides for immediate vesting of all contributions. With certain
exceptions, a participant's after-tax contributions which have not been matched
by us can be withdrawn at any time. Both our matching contributions made prior
to 1999 and the participant's after-tax contributions may be withdrawn after
five years of participation in the plan. A participant's pre-tax contributions
and our matching contributions after 1998 may not be withdrawn except for an
immediate financial hardship, upon termination of employment, or after attaining
age 59 1/2. Participants may borrow from their TRIP accounts under certain
circumstances.
Household has also established the Supplemental Tax Reduction Investment Plan
("Supplemental TRIP") and the Excess Benefit Plan ("Excess Plan"), which are
unfunded plans for eligible employees of Household and its participating
subsidiaries whose participation in TRIP is limited by the Code. Only matching
contributions required to be made by Household pursuant to the basic TRIP
formula are invested in Supplemental TRIP through a credit to a bookkeeping
account maintained by us which deems such contributions to be invested in Common
Stock share equivalents.
The Household Retirement Income Plan ("RIP") is a non-contributory, defined
benefit pension plan for employees of Household and its U.S. subsidiaries who
are at least 21 years of age with one year of service and not part of a
collective bargaining unit. Annual pension benefits equal a percentage of an
employee's "Final Average Salary" (as defined below) not in excess of "Covered
Compensation" (as defined below) plus a percentage of an employee's Final
Average Salary that exceeds Covered Compensation. "Covered Compensation" is the
average of the Social Security taxable wage base over the 35-year period ending
in the year of retirement or earlier termination of employment. "Final Average
Salary" equals the average of salary plus bonus, whether paid in cash or stock,
for the five successive highest paid years out of the employee's last 10 years
of service. The percentage applied to Final Average Salary and Covered
Compensation is determined on the basis of years of employment and age at
retirement. This percentage increases as years of employment and age at
retirement increase. Participants become fully vested in their accrued pension
benefits after three years of vesting service. Payment of vested pension
benefits normally begins at age 65, but an early retirement benefit at reduced
levels may be paid if a participant is at least 55 years of age with 10 years of
employment or, if the participant was an employee on December 31, 1989, is at
least 50 years of age with 15 years of employment.
Effective January 1, 2000, RIP was amended to provide an account-based formula
instead of the traditional defined benefit formula described above for employees
hired after 1999. The account-based formula provides a benefit based upon a
percentage of compensation for each year of service and an assumed rate of
return. The contribution percentage is 2% and the assumed rate of return is tied
to the lesser of the 10-year or 30-year treasury rate.
In 1997, the Board adopted a Supplemental Executive Retirement Plan ("SERP")
for Mr. Aldinger because he would not otherwise qualify for a full benefit under
RIP and the Household Supplemental Retirement Income Plan ("Supplemental RIP")
due to his age when he joined Household. In 2000, the SERP was subsequently
amended and restated to provide for a benefit based upon the RIP 1989 formula
but with 20 years of benefit service being added and with an offset not only for
RIP and Supplemental RIP but also for pension benefits received from Wells Fargo
and Citibank. A portion of the SERP benefit will become payable in the event
that Mr. Aldinger voluntarily terminates employment, dies or becomes disabled
prior to January 1, 2003. The benefit under the SERP formula (before offset)
will not be increased, however, except for interest, after Mr. Aldinger attains
age 60.
TRIP and RIP may be made available to members of a collective bargaining unit
if inclusion results from good faith bargaining.
A portion of the benefits payable under RIP to certain executive officers
(including those named in the Summary Compensation Table) may be paid by
Household through the Supplemental RIP. Supplemental RIP was established due to
the limitations imposed on the Retirement Plan by federal laws limiting benefits
payable under tax-qualified plans. Payments made by Household under Supplemental
RIP to certain officers have been deposited by such officers in trusts they
created.
The following table illustrates the amount of RIP (including Supplemental RIP
and any related trust) total annual pension benefits on a straight-life annuity
basis for eligible employees retiring at age 65 who were employed before 1990.
If the employee was hired after 1989 and does not have at least 30 years of
employment at retirement, his benefit will be reduced 1/360 for each month less
than 30 years. The amounts in this table are not subject to deduction for Social
Security or other offset amounts and do not reflect any limitations on benefits
imposed by ERISA or federal tax laws.
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The years of employment of Messrs. Aldinger, Bangs, Gilmer, Schoenholz, Mehta
and Fabiano for purposes of RIP are, respectively, 7 years, 42 years, 30 years,
17 years, 3 years and 4 years.
AVERAGE ANNUAL
COMPENSATION 40 OR
USED AS BASIS 15 TO 30 35 YEARS MORE YEARS
FOR COMPUTING PENSION YEARS OF EMPLOYMENT OF EMPLOYMENT OF EMPLOYMENT
- --------------------- ------------------- ------------------- -------------------
$1,000,000 $ 567,767 $ 592,767 $ 617,767
$1,500,000 $ 852,767 $ 890,267 $ 927,767
$2,000,000 $1,137,767 $1,187,767 $1,237,767
$2,500,000 $1,422,767 $1,485,267 $1,547,767
$3,000,000 $1,707,767 $1,782,767 $1,857,767
$3,500,000 $1,992,767 $2,080,267 $2,167,767
$4,000,000 $2,277,767 $2,377,767 $2,477,767
$4,500,000 $2,562,767 $2,675,267 $2,787,767
$5,000,000 $2,847,767 $2,972,767 $3,097,767
ITEM (2): STOCKHOLDER PROPOSAL
The Corporation has been notified that Northstar Asset Management Inc., 30 St.
John Street, Boston, Massachusetts 02130, who holds 1,100 shares of the
Corporation's Common Stock, intends to present the following proposal for
consideration at the Annual Meeting:
"WHEREAS, the sub-prime lending industry has come under increasing public
scrutiny for predatory lending directed at low-income people. Several states and
the US Congress have held public hearings on predatory lending practices. The
state of North Carolina has adopted strict laws imposing restrictions on
sub-prime lending practices. Other states are presently considering similar
legislation;
Household International's executive officers have made public statements
committing to business practices free of predatory lending. We believe our
corporate leaders should be evaluated based on their success in meeting these
commitments;
Household International has been the subject of numerous protests over its
lending policies and practices. These protests have been reported in both
national and local media and potentially threaten Household International's
reputation, a vital asset in the marketplace. Among the concerns of community
activists is the practice of packaging loans with highly profitable single
premium credit insurance. In a June 2000 report on predatory lending the US
Treasury Department called lump-sum credit insurance "unfair, abusive and
deceptive."
RESOLVED, the Board shall conduct a special executive compensation review to
study ways of linking a portion of executive compensation to successfully
addressing the public's concern about predatory lending practices. Among the
factors considered in this review might be: implementation of policies to
prevent predatory lending, development of staff training programs about
predatory lending, constructive meetings with concerned community groups, and
reductions in the levels of predatory lending complaints filed with government
bodies. A summary of this review will be published in the Compensation
Committee's report to stockholders.
SUPPORTING STATEMENT
Household International's officers have stated their strong commitment to high
standards of corporate social responsibility. The proposed resolution creates a
mechanism for evaluating the company's officers in meeting these objectives and
would offer company leaders a positive incentive for establishing Household
International as a leader in ending predatory lending practices and ensuring
fair treatment of customers."
MANAGEMENT'S STATEMENT
THE BOARD OF DIRECTORS OF HOUSEHOLD RECOMMENDS THAT THE STOCKHOLDERS VOTE
"AGAINST" THIS PROPOSAL.
Generally, the Proposal requests Household to consider ways to tie executive
compensation to ethical lending standards. As described below, Household
believes that the objectives of this Proposal have been implemented because
goals for senior executives for compensation purposes are already based on a
combination of quantitative and qualitative measures, including compliance with
laws and the Statement of Business Principles of Household adopted by your Board
of Directors.
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The Corporation's executive compensation program is administered by the
Compensation Committee of the Board of Directors. This Committee is composed
solely of independent, outside directors. Each senior executive is evaluated by
the Compensation Committee and is assigned goals for the upcoming year. A
detailed report of the Compensation Committee describing particular performance
of senior executives against these goals is included in the Corporation's Proxy
materials.
An absolute requirement for each senior executive, in fact every employee of
the Corporation, is that he, or she, will abide by the Statement of Business
Principles of Household. The Statement of Business Principles is very clear.
They require that every employee "act honestly and fairly at all times" and that
they "comply with all applicable laws and regulations." Adherence to this policy
is expected and is considered in evaluating the performance of each employee at
all levels of the Corporation. As stated in this policy, '[v]iolations of this
policy and failures to report known violations will subject the employee to
disciplinary procedures, including termination of employment."
Household's commitment to fair and honest dealings with its customers are
central to its business philosophy. In addition to its adoption of the Statement
of Business Principles discussed above, Household has taken many other actions
in furtherance of its commitment to prevent unfair lending practices. For
example, in February 2001, Household formed a special, blue-ribbon advisory
board, the Household International Consumer Advisory Board, that will advise
Household on its lending and business principles, including the Corporation's
business and legislative initiatives, as well as community relations and
philanthropic activities. For this advisory function, the Corporation brought
together a group of highly-respected leaders from the public and private sector,
including former U.S. Senator Connie Mack, the Honorable Thomas F. McLarty,
former California State Senator Art Torres and Ohio State University College of
Law Professor Vincene Verdun. Household also has created and maintains a
Responsible Lending Committee, chaired by its Vice Chairman, to evaluate and
formulate its lending policies and to ensure effective communication of the
Corporation's position regarding predatory lending issues and practices.
Moreover, Household devotes significant resources to on-going compliance with
applicable law and regulation, the primary focus of such laws and regulations
being the prevention of unfair lending practices.
Based upon the foregoing, Household already has tied its executive's
compensation to ethical lending standards through its Statement of Business
Principles and its policy to enforce those Principles as a condition of
employment and has implemented many of the policies and programs sought in this
Proposal. ACCORDINGLY, THE BOARD RECOMMENDS A VOTE "AGAINST" THIS PROPOSAL (ITEM
2 ON THE PROXY CARD).
AUDIT COMMITTEE REPORT AND OUTSIDE AUDITOR INDEPENDENCE
GENERAL
The Audit Committee approved this Report on January 29, 2001. This Report
should not be considered part of ("incorporated by reference") any other
document we have filed, or will file, with the SEC.
ROLE AND ACTIONS OF THE AUDIT COMMITTEE
The primary purpose of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities relating to accounting, auditing
and financial reporting practices. The Audit Committee consists of five
independent Directors (as independence is defined by the rules of the NYSE) and
operates pursuant to a written charter adopted by the Board of Directors. The
Audit Committee reviews this charter annually. A copy of this charter is
included with this proxy statement as Annex A.
The Audit Committee recommends to the Board of Directors the selection of
Household's independent outside auditors. Arthur Andersen LLP acted as our
independent outside auditors for the 2000 fiscal year and has been selected by
the Audit Committee to act in such capacity for the 2001 fiscal year.
Household's management is responsible for designing and maintaining
appropriate systems of internal controls and financial reporting processes. The
independent outside auditors are responsible for performing an audit of our
consolidated financial statements in accordance with generally accepted auditing
standards and issuing their report thereon. The Audit Committee provides
independent, objective oversight of these functions.
The Audit Committee met with management, Household's internal auditors and its
independent outside auditors four times throughout the past year. Meetings with
the internal auditors and the independent outside auditors were held both in the
presence of management and privately. At these meetings the Audit Committee
discussed the overall scope and plans for the respective audits, the results of
the examinations, the evaluations of our internal controls, and the overall
quality of our financial reporting. The Audit Committee also discussed
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with the independent outside auditors the matters required by Statement on
Auditing Standards No. 61 (Communication with Audit Committees).
INDEPENDENCE OF THE OUTSIDE AUDITORS
With respect to outside auditor independence, the Audit Committee has received
the written disclosures and the letter from Arthur Andersen required by the
Independence Standards Board Standard No. 1 (Independence Discussions With Audit
Committees). Management advised the Audit Committee, and Arthur Andersen
confirmed, that the aggregate fees billed by Arthur Andersen in the most recent
fiscal year for the following matters were as follows:
- Audit Fees -- $1,977,000
- Financial Information Systems Design and Implementation Fees -- None
- All Other Fees -- $1,998,000
The Audit Committee discussed with Arthur Andersen their independence from
Household and its management and specifically considered whether the payments
made for non-audit services was compatible with maintaining that independence.
In evaluating Arthur Andersen's independence, the Audit Committee recognized
that a substantial amount of "All Other Fees" relate to services traditionally
provided by auditors such as due diligence, issuance of comfort letters, review
of registration statements, consulting services, miscellaneous tax services,
expatriate tax services and other services. Also, in considering the
independence standard, the Audit Committee looked to whether a relationship or
service: (a) created a mutual or conflicting interest between Arthur Andersen
and Household; (b) placed Arthur Andersen in the position of auditing its own
work; (c) resulted in Arthur Andersen acting as a manager or employee of
Household; or (d) placed Arthur Andersen in a position of being an advocate for
Household. Based on the foregoing, the Audit Committee believes that Arthur
Andersen LLP is independent for purposes of auditing the financial information
of Household.
AUDIT COMMITTEE RECOMMENDATION
Management has represented to the Audit Committee that our consolidated
financial statements for the year ended December 31, 2000 were prepared in
accordance with generally accepted accounting principles. Based on the Audit
Committee's discussions with management, Household's internal auditors and
Arthur Andersen and its review of the reports of Arthur Andersen with respect to
these financial statements to Household and the Audit Committee, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that the audited consolidated financial statements be included in the
Corporation's Annual Report on Form 10-K for the year ended December 31, 2000,
to be filed with the SEC.
AUDIT COMMITTEE MEMBERS
L.E. Levy, Chair
G.G. Dillon
J.A. Edwardson
M.J. Evans
J.B. Pitblado
ITEM (3): RATIFICATION OF AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, voted to
appoint Arthur Andersen LLP to serve as the independent public accountants for
the fiscal year ending December 31, 2001. Although it is not required to do so,
the Board is asking for your approval of this appointment. If the selection is
not ratified, the Board of Directors will reconsider the appointment. A
representative of Arthur Andersen LLP will be present at the Annual Meeting to
answer stockholders' questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF ARTHUR
ANDERSEN LLP AS THE INDEPENDENT PUBLIC ACCOUNTANTS FOR HOUSEHOLD FOR 2001 (ITEM
3 ON THE PROXY CARD).
OTHER BUSINESS
The management of Household knows of no business which will be presented for
action at the Annual Meeting other than that stated in this Proxy Statement. If,
however, other business should properly come before the meeting, the
proxyholders will vote or refrain from voting in respect thereof in accordance
with their best judgment.
The 2000 Annual Report is being mailed to stockholders on or about March 29,
2001, with this proxy material. If for any reason you did not receive a copy of
the report, another will be sent upon request.
HOUSEHOLD WILL PROVIDE ANY HOUSEHOLD STOCKHOLDER A COPY OF HOUSEHOLD'S REPORT
ON FORM 10-K FOR ITS MOST RECENT FISCAL YEAR AT NO COST. HOUSEHOLD IS REQUIRED
TO FILE THIS 10-K REPORT WITH THE SECURITIES AND EXCHANGE COMMISSION. WRITTEN
REQUESTS FOR THE REPORT SHOULD BE DIRECTED TO THE CORPORATE COMMUNICATIONS
DEPARTMENT, HOUSEHOLD INTERNATIONAL, INC., 2700 SANDERS ROAD, PROSPECT HEIGHTS,
ILLINOIS 60070.
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ANNEX A
AUDIT COMMITTEE CHARTER
The scope, duties and functions of the Audit Committee of the Board of
Directors, including its structure, process and membership requirements, shall
be as follows:
1) To review the accounting principles, policies and practices, financial
reporting, internal accounting controls, and the internal audit functions
of the Corporation and its subsidiaries, including evaluating exposures to
risks that could impact the financial statements and to inform the Chief
Executive Officer and the Board as to any material concerns therewith; and
to coordinate with the Finance Committee to ensure appropriate
consideration of treasury related risks;
2) To recommend to the Board of Directors the selection or replacement of the
Corporation's principal independent auditors, subject, as to the selection,
to ratification by the shareholders, and such action it deems appropriate
to ensure the independence of the auditors;
3) To review the scope of the audits of the Corporation and its subsidiaries
conducted by the Corporation's independent and internal auditors, who are
ultimately accountable to the Board and this committee, and monitor their
implementation:
a) By reviewing and evaluating the independent auditors' work, opinion and
letter of comment to management and management's response thereto,
including all information required to be furnished to the committee by
the independent auditor pursuant to rules of the Securities and
Exchange Commission or other regulators or as required by applicable
professional standards, and in general consulting with the independent
auditors on any matters the committee considers advisable;
b) By reviewing the work of the internal audit department to assure
adequacy of corporate controls in providing centralized accountability;
4) To ensure that the independent auditors submit on a periodic basis a formal
written statement delineating all relationships with the Corporation and
its subsidiaries and to review these relationships and the professional
services performed for the Corporation and its subsidiaries by the
independent auditors to determine if their objectivity and independence may
have been impaired;
5) To approve all fees to be paid to the independent auditor;
6) To review the annual financial statements of the Corporation and its
subsidiaries prior to publication;
7) To review the Corporation's monitoring compliance with the Statement of
Business Principles;
8) To review legal and regulatory matters that may have a material impact on
the financial statements, related compliance policies, programs and reports
from regulators;
9) In its discretion to consider from time to time any other matters which the
committee believes are required of it in keeping with its responsibilities;
10) The Chairman and Vice Chairman (if any) of the committee shall be
experienced in accounting or financial management, as determined by the
Board. The duties of the Chairman and Vice Chairman (if any) will include
the review, by either of them, of all quarterly financial information of the
Corporation with management and the independent auditors prior to
publication;
11) Meet at least annually with the senior internal auditing executive and the
independent auditor in executive sessions;
12) The Committee shall consist of not less than three members and all members
shall be Independent Directors and financially literate as determined by the
Board; and
13) Review and reassess the adequacy of this charter at least annually and
submit it to the Board for approval.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Corporation's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and the Corporation's Statement of
Business Principles.
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PROXY/VOTING INSTRUCTION CARD FOR 2001 ANNUAL MEETING OF STOCKHOLDERS OF
HOUSEHOLD INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints K.H. Robin, M.J. Evans and J.W. Blenke, and
each of them, true and lawful proxies, with power of substitution, to vote all
shares of Common and/or Preferred Stock of the undersigned, at the Annual
Meeting of Stockholders of Household International, Inc., to be held May 8,
2001, and at any adjournment thereof, on any business that may properly come
before the meeting, including the proposals set forth on the reverse side of
this card, which are referred to in the Notice of 2001 Annual Meeting of
Stockholders and Proxy Statement provided to you.
IMPORTANT-- THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
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29
HOUSEHOLD INTERNATIONAL
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
A VOTE FOR ITEMS 1 AND 3 AND A VOTE AGAINST ITEM 2 IS RECOMMENDED BY THE BOARD OF DIRECTORS. SHARES WILL BE SO
VOTED UNLESS YOU OTHERWISE INDICATE.
For Withhold For All
All All Except For Against Abstain
1. Election of Directors / / / / / / 2. Stockholder Proposal relating to / / / / / /
Nominees: 01-W.F. Aldinger, special executive compensation
02-R.J. Darnall, 03-G.G. Dillon, review.
04-J.A. Edwardson, 05-M.J. Evans,
06-J. D. Fishburn, 07-C.F. Freidheim, Jr., 3. Ratification of appointment of / / / / / /
08-J.H. Gilliam, Jr., 09-L.E. Levy, Arthur Andersen LLP as independent
10-G.A. Lorch, 11-J.D. Nichols, 12-J.B. public accountants.
Pitblado, 13-S.J. Stewart, 14-L.W. Sullivan.
(INSTRUCTION: To withhold authority to vote for any individual nominee, check
the "For All Except" box above and strike a line through the nominee's name
listed above.)
Date:
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Please
Sign:
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Please
Sign:
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NOTE: PLEASE SIGN EXACTLY AS NAME
APPEARS HEREON. FOR JOINT ACCOUNTS BOTH
OWNERS SHOULD SIGN. WHEN SIGNING AS
EXECUTOR, ADMINISTRATOR, ATTORNEY, TRUSTEE
OR GUARDIAN, ETC., PLEASE SIGN YOUR FULL TITLE.
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DETACH PROXY CARD HERE
CONTROL NUMBER
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET!
Whether or not you are able to attend our 2001 Annual Meeting of Stockholders, it is important your shares be represented, no matter
how many shares you own. This year if voting by proxy, you may vote by mail, telephone or Internet. Your telephone or Internet vote
authorizes the named proxies to vote your shares in the same manner as if you marked, signed, and returned your proxy card. To vote
by mail, complete and sign the proxy provided above, detach it at the perforation and mail it in the enclosed postage paid envelope.
To vote by telephone or Internet, follow these easy steps:
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TO VOTE BY PHONE Call toll free 1-888-698-8089 in the United States or Canada any time on a touch tone
telephone. There is NO CHARGE to you for the call.
Enter the 6-digit CONTROL NUMBER located above.
Option #1: To vote as the Board of Directors recommends on ALL proposals:
Press 1.
When asked, please confirm your vote by pressing 1.
Option #2: If you choose to vote on each proposal separately, press 0 and follow the
simple recorded instructions.
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TO VOTE BY INTERNET Go to the following website:
WWW.HARRISBANK.COM/WPROXY
Enter the information requested on your computer screen, including your 6-digit
CONTROL NUMBER located above.
Follow the simple instructions on the screen.
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IF YOU VOTE BY TELEPHONE OR THE INTERNET, DO NOT MAIL BACK THE PROXY CARD.
Your vote will be kept permanently confidential as described in the enclosed Proxy Statement.
In order to reduce the number of duplicate mailings of proxy materials, Household has consolidated on a single proxy/voting
instruction card all of your holdings in Household Common Stock registered under the identical name and tax identification number,
including ownership that may be attributed to Household's Dividend Reinvestment & Common Stock Purchase Plan, our Employee Stock
Purchase Plan, our 401(k) employee benefit plan, the Tax Reduction Investment Plan ("TRIP"), our matching contribution plan for
Canadian employees, the Match and Save Plan, the Beneficial Employees Stock Purchase Plan and the Beneficial Key Employees Stock
Bonus Plan. The proxy also provides voting instructions for shares of Household Common Stock held in TRIP as disclosed in the Proxy
Statement.
Thank you for voting!