SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
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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
The Gillette Company
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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paid previously. Identify the previous filing by registration statement
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[logo] THE Prudential Tower Building
GILLETTE Boston, MA 02199
COMPANY
World-Class Brands, Products, People
April 2, 2002
Dear Fellow Gillette Stockholders:
We cordially invite you to attend our 2002 Annual Meeting of Stockholders. The
attached booklet contains the notice of annual meeting, as well as the proxy
statement, which describes the business we will conduct at the meeting and
provides information about Gillette that you should consider when you vote your
shares.
When you have finished reading the proxy statement, we urge you to vote your
shares promptly either via the Internet, by telephone or by marking, signing,
dating and returning the proxy card in the enclosed envelope. We encourage you
to vote by proxy whether or not you plan to attend.
/s/ James M. Kilts /s/ Edward F. DeGraan
James M. Kilts Edward F. DeGraan
Chairman of the Board President and Chief Operating Officer
and Chief Executive Officer
[logo] THE Prudential Tower Building
GILLETTE Boston, MA 02199
COMPANY
World-Class Brands, Products, People
NOTICE OF 2002 ANNUAL MEETING OF STOCKHOLDERS
=====================================================================
TIME: 10:00 a.m.
DATE: Thursday, May 16, 2002
PLACE: Hotel du Pont
11th and Market Streets
Wilmington, Delaware
PURPOSE: 1. To elect four directors to serve three-year
terms expiring in 2005.
2. To vote on a stockholder proposal, if the
proposal is presented at the meeting.
3. To consider any other business that is properly
presented at the meeting.
WHO MAY You may vote if you were a record owner of
VOTE: Gillette stock at the close of business on March
25, 2002. A list of stockholders of record will be
available at the meeting and, during the 10 days
prior to the meeting, at my office at the above
address in Boston.
By order of the Board of Directors
William J. Mostyn III
Deputy General Counsel and Secretary
Boston, Massachusetts
April 2, 2002
THE GILLETTE COMPANY
===============================================================================
2002 PROXY STATEMENT
TABLE OF CONTENTS
PAGE
GENERAL QUESTIONS ....................................................... 1
VOTING PROCEDURES ....................................................... 2
GENERAL VOTING QUESTIONS ................................................ 3
PROPOSAL 1 -- ELECTION OF DIRECTORS ..................................... 3
BOARD OF DIRECTORS
-- Biographies ...................................................... 4
-- Transactions with Directors and Management ....................... 7
-- Section 16(a) Beneficial Ownership Reporting Compliance .......... 7
-- Compensation of Directors ........................................ 7
-- Board and Committee Meetings ..................................... 8
-- Independent Auditor .............................................. 9
-- Audit Committee Report ........................................... 9
-- Stock Ownership of Directors and Executive Officers .............. 9
-- Stock Ownership Table ............................................ 10
EXECUTIVE OFFICERS' COMPENSATION
-- Compensation Committee Report on Executive Compensation .......... 11
-- Summary Compensation Table ....................................... 14
-- Stock Options Awarded During 2001 ................................ 15
-- Aggregate Stock Option Exercises During 2001 and Year-End
Stock Option Values .............................................. 16
-- Retirement Plan Table ............................................ 16
-- Employment Contracts, Termination of Employment and
Change-in-Control Arrangements ................................... 17
COMPARATIVE FIVE-YEAR INVESTMENT PERFORMANCE GRAPH ...................... 13
PROPOSAL 2 -- STOCKHOLDER PROPOSAL ...................................... 18
===============================================================================
GENERAL QUESTIONS
Q: WHY AM I RECEIVING THIS PROXY STATEMENT?
A: The Board of Directors is soliciting proxies for the 2002 Annual Meeting of
Stockholders. You are receiving a proxy statement because you own shares of
Gillette common stock that entitle you to vote at the meeting. By use of a
proxy, you can vote whether or not you attend the meeting. The proxy
statement describes the matters on which we would like you to vote and
provides information on those matters so that you can make an informed
decision.
The notice of annual meeting, proxy statement and proxy are being mailed to
stockholders on or about April 2, 2002.
Q: WHO CAN VOTE?
A: Those persons named on our records as owners of Gillette common stock at the
close of business on March 25, 2002, are entitled to one vote per share.
Q: HOW MANY SHARES ARE ENTITLED TO VOTE?
A: There are 1,056,345,436 shares of common stock outstanding and entitled to
vote. Each share is entitled to one vote.
Q: WHAT IS A QUORUM?
A: A quorum is the minimum number of shares required to hold a meeting. Under
the Gillette bylaws, a majority of the outstanding shares of stock entitled
to vote at the meeting, or 528,172,719 shares, must be represented in person
or by proxy for a quorum.
Q: WHEN ARE STOCKHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING DUE?
A: If you want to present a proposal to be considered for inclusion in next
year's proxy statement, it must be delivered in writing to the Secretary at
the Prudential Tower Building, Suite 4800, Boston, MA 02199, no later than
December 3, 2002.
If you want to present a proposal for consideration at next year's annual
meeting, without including the proposal in the proxy statement (including
the nomination of one or more directors), you must provide written notice
to the Secretary at the above address no later than February 15, 2003.
There are additional requirements under our bylaws and the proxy rules to
present a proposal, such as continuing to own a minimum number of Gillette
shares until the annual meeting and appearing in person at the meeting to
explain your proposal.
Q: WHO PAYS THE COST OF SOLICITATION?
A: Gillette pays the cost of soliciting your proxy and reimburses brokerage
firms and others for forwarding proxy material to you.
We have hired Georgeson Shareholder, a proxy solicitation firm, to assist
with the distribution of proxy materials and the solicitation of votes at a
cost of $18,000, plus out-of-pocket expenses. In addition to solicitation
by mail, solicitations may also be made by personal interview, telegram,
fax and telephone.
Q: WHO CAN ATTEND THE ANNUAL MEETING?
A: Only stockholders are invited to attend the meeting. To gain admittance, you
must bring a form of personal identification to the meeting, where your name
will be verified against our stockholder list.
If a broker or other nominee holds your shares and you plan to attend the
meeting, you should bring a recent brokerage statement showing your ownership
of the shares. You must also bring a form of personal identification.
Q: HOW CAN I RECEIVE A COPY OF THE ANNUAL REPORT?
A: The annual report for the year ended December 31, 2001, is being delivered
with this proxy statement.
THE GILLETTE COMPANY
===============================================================================
VOTING PROCEDURES
STOCKHOLDERS OF RECORD
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You are a stockholder of record if your Gillette shares are registered in your
own name with our transfer agent, EquiServe Trust Company, N.A.
Q: HOW DO I VOTE?
A: You may vote on the Internet, by telephone or by signing, dating and mailing
your proxy card. Detailed instructions for Internet and telephone voting are
attached to your proxy.
Q: WHAT IF I ABSTAIN OR WITHHOLD AUTHORITY TO VOTE ON A PROPOSAL?
A: If you sign and return your proxy card marked "abstain" or "withhold" on any
proposal, your shares will not be voted on that proposal and will not be
counted as votes cast in the final tally of votes with regard to that
proposal. However, your shares will be counted for purposes of determining
whether a quorum is present.
Q: WHAT DOES DISCRETIONARY AUTHORITY MEAN FOR STOCKHOLDERS OF RECORD?
A: If you sign and return your proxy card without making any selections, the
persons named on the proxy will vote your shares "for" proposal 1 and
"against" proposal 2. If other matters come before the meeting, the persons
named on the proxy card will have the authority to vote on those matters for
you as they determine. At this time, we are not aware of any matters that
will come before the meeting other than those disclosed in this proxy
statement.
Q: HOW DO I CHANGE MY VOTE?
A: A stockholder of record may revoke a proxy by giving written notice to the
Secretary before the meeting, by delivering a later-dated proxy (either in
writing, by telephone or over the Internet), or by voting in person at the
meeting.
EMPLOYEES
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Q: HOW DO I VOTE IF MY SHARES ARE HELD IN THE EMPLOYEES' SAVINGS PLANS, THE ESOP
OR THE GESOP?
A: The enclosed proxy will serve as a confidential voting instruction for
Gillette's savings plans, ESOP and GESOP.
The plans' trustees will vote your shares as instructed by you. To allow
sufficient time for the plans' trustees to vote, your instructions must be
received by May 9, 2002. If voting instructions have not been received from
participants by that date, the shares allocated to those participants'
accounts and plan shares that have not been allocated to participants'
accounts for each plan will be voted on each issue in proportion to the
shares as to which voting instructions have been received from other
participants of that plan.
BENEFICIAL STOCKHOLDERS
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You are a beneficial stockholder if a brokerage firm, bank, trustee or other
agent (called a "nominee") holds your stock. This is often called ownership in
"street name," since your name does not appear in our stock records.
Q: HOW DO I VOTE?
A: You must follow the voting procedures of your broker, bank or trustee.
Detailed instructions should be included with your proxy material.
Q: WHAT IF I ABSTAIN OR WITHHOLD AUTHORITY TO VOTE OR DON'T GIVE THE NOMINEE
VOTING INSTRUCTIONS?
A: Under the rules of the New York Stock Exchange, a nominee may not vote on
some proposals without receiving specific voting instructions from the
beneficial owner. This is called a "broker nonvote." At present, Gillette is
not aware of any proposal to come before the meeting on which nominees can't
vote without instructions.
If you sign and return a proxy card marked "abstain" or "withhold" on a
proposal, or if there is a "broker nonvote," your shares will not be voted on
the proposal and will not be counted as votes cast in the final tally of
votes with regard to that proposal.
In each case, your shares are counted for purposes of determining whether a
quorum is present.
Q: WHAT DOES DISCRETIONARY AUTHORITY MEAN FOR BENEFICIAL STOCKHOLDERS?
A: If you sign and return your proxy card without making any selections, the
shares may be voted by the nominee for you on proposals 1 and 2. If other
matters come before the meeting, the nominee may vote on those matters for
you, subject to the New York Stock Exchange's rules on the exercise of
discretionary authority.
Q: HOW DO I CHANGE MY VOTE?
A: To change your vote, follow the nominee's procedures on revoking or changing
your proxy.
GENERAL VOTING QUESTIONS
Q: WHO TABULATES THE VOTES?
A: Representatives of EquiServe will count the votes. The Board has appointed
EquiServe as the independent Inspector of Election.
Q: HOW MANY VOTES ARE NEEDED FOR THE PROPOSALS TO PASS?
A: The four nominees for director who receive the most votes will be elected.
An affirmative majority of the votes represented at the meeting must be cast
in favor of proposal 2 for approval. Proposal 2 is presented as a request to
the Board to take action. Affirmative votes for this proposal will inform the
Board about the level of interest in this proposal.
Q: IS MY VOTE CONFIDENTIAL?
A: Yes. The voting instructions of stockholders of record will only be available
to the Inspector of Election and proxy solicitor. Voting instructions for
employee benefit plans will only be available to the plans' trustees and the
Inspector of Election. The voting instructions of beneficial owners will only
be available to the owner's bank, broker or trustee. Your voting records will
not be disclosed to us unless required by law, requested by you or cast in a
contested election. If you are a stockholder of record or employee benefit
plan participant and write comments on your proxy card, your comments will be
provided to us, but your vote will remain confidential.
Q: WHAT SHARES ARE REFLECTED ON MY PROXY?
A: Your proxy reflects all shares owned by you at the close of business on March
25, 2002. For Gillette plan participants, shares held in their accounts in
the employees' savings plans, the ESOP and the GESOP as of that date are
included.
Q: IF I PLAN TO ATTEND THE ANNUAL MEETING, SHOULD I STILL VOTE BY PROXY?
A: Yes. Casting your vote in advance does not affect your right to attend the
meeting. Written ballots will be available at the annual meeting for
stockholders of record. If you send in your proxy card and also attend the
meeting, you do not need to vote again at the meeting unless you want to
change your vote.
Beneficial owners who wish to vote in person must request a proxy from the
nominee and bring that proxy to the meeting.
PROPOSAL 1
1. ELECTION OF DIRECTORS FOR TERMS TO EXPIRE AT THE 2005 ANNUAL MEETING OF
STOCKHOLDERS
Mrs. Goldberg is retiring from the Board and not standing for reelection.
The Board's nominees for election this year are:
o Warren E. Buffett
o Michael B. Gifford
o Ray J. Groves
o Marjorie M. Yang
The business experience and qualifications of the nominees are summarized on
page 4. Information about the directors whose terms expire in 2003 and 2004
appears on pages 5 and 6.
We will vote your shares as you instruct. If you sign, date and return your
proxy without specifying how you wish to vote, we will vote for all
nominees. If unforeseen circumstances make it necessary for the Board to
substitute another person for a nominee, we will vote your shares for that
other person.
THE BOARD RECOMMENDS THAT YOU VOTE FOR ALL FOUR NOMINEES.
THE GILLETTE COMPANY
===============================================================================
BOARD OF DIRECTORS
NOMINEES FOR DIRECTOR FOR TERMS TO EXPIRE AT THE 2005 ANNUAL MEETING
[Photo of Warren E. Buffett]
WARREN E. BUFFETT, AGE 71 -- DIRECTOR SINCE 1989
Chairman of the Board and Chief Executive Officer of Berkshire Hathaway Inc., a
company engaged in a number of diverse business activities, the most important
of which is the property and casualty insurance business. Prior to assuming
those positions in 1970, he was a general partner of Buffett Partnership, Ltd.
He is a director of The Coca-Cola Company and The Washington Post Company.
[Photo of Michael B. Gifford]
MICHAEL B. GIFFORD, AGE 66 -- DIRECTOR SINCE 1993
Former Chairman of the Board of Danka Business Systems PLC. He served in that
position from March 2001 to January 2002 and as Danka's interim Chief Executive
Officer from October 2000 to February 2001. From 1983 to 1996, he was Managing
Director and Chief Executive of The Rank Organization plc, London, England, a
leisure and entertainment company. He was Finance Director of Cadbury Schweppes
plc from 1978 to 1983 and Chief Executive of Cadbury Schweppes Australia from
1975 to 1978. He is a director of Danka Business Systems PLC.
[Photo of Ray J. Groves]
RAY J. GROVES, AGE 66
President and Chief Operating Officer of Marsh Inc. and a director of its parent
company, Marsh & McLennan Companies, Inc. He served as Chairman of Legg Mason
Merchant Banking, Inc. from 1995 to 2001. He retired in 1994 from Ernst & Young
where he had held numerous positions for 37 years, including the last 17 years
as Chairman and Chief Executive Officer. He is a director of American Water
Works Company, Inc., Boston Scientific Corporation and Electronic Data Systems
Corporation. He is a member of the Council on Foreign Relations. He is also a
managing director, treasurer and secretary of the Metropolitan Opera Association
and a director of The Ohio State University Foundation.
[Photo of Marjorie M. Yang]
MARJORIE M. YANG, AGE 49 -- DIRECTOR SINCE 1998
Chairman and Chief Executive Officer of Esquel Group, a leading garment and
textiles manufacturer headquartered in Hong Kong. She was a founding member of
the group in 1978 and, after holding various management positions, became
Chairman in 1995. She is a director of Wuxi International Service Pte. Ltd.,
Blue Dot Capital Pte. Ltd. and Pacific Century Regional Development. She is also
business advisor to the Chairman of SembCorp Industries Ltd. of Singapore,
Director of Associates of Harvard Business School and a member of MIT
Corporation. Ms. Yang is also a Member of the Standing Committee of the People's
Political Consulate Conference of Xinjiang.
DIRECTORS WHOSE TERMS EXPIRE AT THE 2003 ANNUAL MEETING
[Photo of Dennis F. Hightower]
DENNIS F. HIGHTOWER, AGE 60 -- DIRECTOR SINCE 1999
Retired Chief Executive Officer of Europe Online Networks, S.A. He served in
that position from June 2000 to February 2001. He was a Professor of Management
at the Harvard University Graduate School of Business Administration from July
1996 through June 2000 and a senior executive with The Walt Disney Company from
1987 to 1996. He was President of Walt Disney Television and Telecommunications
and earlier served as President of Disney Consumer Products - Europe, Middle
East and Africa. He also served in executive positions with General Electric
Company and McKinsey & Company, among others. Mr. Hightower is a director of
BriteSmile, Inc.; Northwest Airlines, Inc.; PanAmSat Corporation; Phillips-Van
Heusen Corporation; and The TJX Companies, Inc. He also serves as a trustee of
Howard University, Washington, D.C.
[Photo of Herbert H. Jacobi]
HERBERT H. JACOBI, AGE 67 -- DIRECTOR SINCE 1981
Chairman of the Supervisory Board of HSBC Trinkaus & Burkhardt KGaA, a German
bank, since 1998. He was Chairman of the Managing Partners of Trinkaus &
Burkhardt KGaA from 1981 to 1998. He was a managing partner of Berliner Handels-
und Frankfurter Bank from 1977 until 1981 and an Executive Vice President of
Chase Manhattan Bank from 1975 to 1977. Mr. Jacobi is a director of Atlanta AG;
Braun GmbH, a Gillette subsidiary; DROEGE & Comp.; and MADAUS AG. He is
President of German-American Federation Steuben-Schurz e.V. and a member of the
Supervisory Board of WILO-Salmson AG.
[Photo of Nancy J. Karch]
NANCY J. KARCH, AGE 54
Retired Senior Partner of McKinsey & Company, an independent consulting firm.
She served in that position from 1988 until her retirement in 2000. She served
in various executive capacities at McKinsey since 1974. Ms. Karch is a member of
the McKinsey Advisory Council and serves as a director of Liz Claiborne, Inc.,
Toys "R" Us, Inc., The Corporate Executive Board and Garden Ridge Corp., a
privately held home decor products retailer. She is also on the Board and the
Executive Committee of the Westchester Land Trust, a not-for-profit
organization.
[Photo of Richard R. Pivirotto]
RICHARD R. PIVIROTTO, AGE 71 -- DIRECTOR SINCE 1980
President of Richard R. Pivirotto Co., Inc., a management consulting firm. He
served as President of Associated Dry Goods Corporation, a retail department
store chain, from 1972 to 1976 and as Chairman of its Board of Directors from
1976 to February 1981. Mr. Pivirotto served as nonexecutive Chairman of the
Board of The Gillette Company from October 2000 to January 2001. He is a
director of General American Investors Company, Inc; Greenwich Hospital Corp.;
Immunomedics, Inc.; New York Life Insurance Company; and The Greenwich Bank &
Trust Company. He is a trustee of General Theological Seminary and Trustee
Emeritus of Princeton University.
DIRECTORS WHOSE TERMS EXPIRE AT THE 2004 ANNUAL MEETING
[Photo of Edward F. Degraan]
EDWARD F. DEGRAAN, AGE 58 -- DIRECTOR SINCE 2000
President and Chief Operating Officer of The Gillette Company. He joined
Gillette in 1968 and has served in a variety of manufacturing, technical,
marketing and general management positions in nearly all of Gillette's core
businesses. He served as Executive Vice President, Duracell North Atlantic
Group, from 1996 until his election as Executive Vice President, Global Business
Management, Gillette Grooming Products and Duracell, in January 1999. He was
Executive Vice President, Global Business Management, from January 2000 to July
2000, when he became President and Chief Operating Officer. Mr. DeGraan served
as Acting Chief Executive Officer from October 2000 to February 2001. He serves
as a trustee of the National Urban League.
[Photo of Wilbur H. Gantz]
WILBUR H. GANTZ, AGE 64 -- DIRECTOR SINCE 1992
Former Chairman of the Board and Chief Executive Officer of PathoGenesis
Corporation, a biopharmaceutical company. He served as President of Baxter
International, Inc., a manufacturer and marketer of health care products, from
1987 to 1992. He joined Baxter International, Inc. in 1966 and held various
management positions prior to becoming its Chief Operating Officer in 1983. Mr.
Gantz is a director of W.W. Grainger and Company, Harris Bankcorp and Harris
Trust and Savings Bank.
[Photo of James M. Kilts]
JAMES M. KILTS, AGE 54 -- DIRECTOR SINCE 2001
Chairman of the Board and Chief Executive Officer of The Gillette Company since
January 2001 and February 2001, respectively. He formerly was President and
Chief Executive Officer of Nabisco Group Holdings Corp. from December 1999 until
it was acquired in December 2000 by Philip Morris Companies. He was President
and Chief Executive Officer of Nabisco Holdings Corp. and Nabisco Inc. from
January 1998 to December 1999. He was an Executive Vice President, Worldwide
Food, Philip Morris, from 1994 to 1997 and served as President of Kraft USA from
1989 to 1994. Before that, he served as President of Kraft Limited in Canada and
Senior Vice President of Kraft International. Mr. Kilts began his career with
General Foods Corporation in 1970. He is a director of the May Department Stores
Company and the Whirlpool Corporation. He also serves on the Board of Trustees
of Knox College, is a member of the Advisory Council of the University of
Chicago Graduate School of Business and is a director of International Executive
Service Corps.
[Photo of Jorge Paulo Lemann]
JORGE PAULO LEMANN, AGE 62 -- DIRECTOR SINCE 1998
General Partner of GP Investimentos, a buyout and restructuring firm. He founded
and was a Senior Partner of Banco de Investimentos Garantia S.A., a Brazilian
investment bank, from 1976 to 1998. He is a director and controlling stockholder
of AmBev American Beverage Co., Brazil's largest brewery. He is a director of
Lojas Americanas S.A., a Brazilian discount department store chain, and Utor
Investimentos e Participacoes Ltda. Mr. Lemann is also a director of Fundacao
Estudar, a provider of scholarships to needy students, and Swiss Re. Mr. Lemann
is Chairman of the Latin American Advisory Committee of the New York Stock
Exchange and an International Advisory Board Member of both DaimlerChrysler and
Credit Suisse Group.
TRANSACTIONS WITH DIRECTORS AND MANAGEMENT
Berkshire Hathaway Inc.
Gillette entered into an agreement with Berkshire Hathaway Inc. on July 20,
1989. Under the agreement, Berkshire Hathaway purchased $600 million of
Gillette's convertible preferred stock that it converted to common stock in
1991. At the time of the agreement, management consulted with independent
advisors concerning the terms of the agreement and determined that the terms
were fair to Gillette. The key terms of the agreement remaining in effect are
as follows:
o Berkshire Hathaway will not sell Gillette stock representing more than 3%
of the voting power to any single person, except under conditions related
to a change in control.
o Gillette has the right of first refusal to buy its stock from Berkshire
Hathaway. If Gillette does not buy the stock, Berkshire Hathaway can
require Gillette to register the stock for public offerings.
o While Berkshire Hathaway owns at least 5% of the voting power of
Gillette's stock, the directors will use their best efforts to secure the
election to the Board of Mr. Buffett, or another person nominated by
Berkshire Hathaway and acceptable to Gillette.
During the past fiscal year, Gillette paid $809,911 to Executive Jet, Inc., a
subsidiary of Berkshire Hathaway, for the cost of Gillette's use of an
aircraft.
KKR Associates, L.P.
As a result of the merger of Duracell International Inc. with Gillette on
December 31, 1996, KKR Associates, L.P., of which Mr. Kravis is a general
partner, and its limited partnerships, KKR Partners II, L.P. and D.I.
Associates, L.P., KKR and Gillette agreed that:
o KKR can require Gillette to register the KKR-held stock for sale, and
Gillette has done so.
o Gillette will indemnify KKR and the former officers, employees and
directors of Duracell, including Mr. Kravis, against some liabilities that
could arise out of the merger with Duracell.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
On one occasion, Mr. Hightower filed a late report covering a purchase of
Gillette stock made by a family trust of which he is a trustee.
On one occasion, Joseph F. Dooley, an executive officer of Gillette, filed a
late report covering a purchase of Gillette stock.
COMPENSATION OF DIRECTORS
Gillette provides both cash and stock-based compensation to its directors who
are not employees. The stock-based compensation aligns the interests of the
directors with those of Gillette's stockholders.
The following fees were paid to nonemployee directors
during 2001:
Annual Cash Retainer: $42,000
Board/Committee Attendance: $ 1,200 per meeting
Committee Chairpersons: $ 5,000 annually
Beginning in 2002, the nonemployee directors will receive an annual retainer
of $75,000. The Committee Chairpersons will continue to receive an additional
$5,000 annually. Board/Committee attendance fees will no longer be paid.
Deferred Compensation Plan: Under the Plan, 50% of each director's annual cash
retainer is deferred into stock equivalent units. Directors may choose to
defer any portion of their remaining retainers into cash and/or stock
equivalent units. Each stock equivalent unit is equal in value to a share of
Gillette's common stock. The value of the equivalent units varies according to
the market value of the stock. Stock equivalent units receive dividend
equivalents in the form of additional stock equivalent units. Retainers
deferred in cash are credited semiannually with interest.
At the time of deferral, the director may elect to take the deferred payment
either in a lump sum or in annual installments over a period of up to 10 years
following retirement, resignation or a change in control.
Stock Options: Annually, each nonemployee director receives a nonincentive
stock option to purchase 4,000 shares of common stock (5,000 shares beginning
in 2002) on the second business day after the annual meeting. These option
awards are nondiscretionary. In 2001, the awards were made on
April 23 at an exercise price of $26.08 per share (the average of the high and
low trading prices of the common stock on that date). The options become
exercisable in one-third increments on the first three anniversaries of the
award or in the event of a change in control. The options remain exercisable
for 10 years while the director serves on the Board. If a nonemployee director
leaves the Board after reaching age 65 or serving five or more years, the
options can be exercised for the lesser of five years or the remaining life of
the options. Beginning with options granted in 2002, options will become
immediately exercisable upon death, retirement or a change in control. The
postretirement exercise period will be the remaining life of the option. In
the event of a nonemployee director's death, the option exercise period will
be the lesser of three years or the remaining life of the option.
Other: In 2001, Mr. Jacobi received director fees totaling $6,837 for his
services as a director of Braun GmbH, a Gillette subsidiary.
BOARD AND COMMITTEE MEETINGS
The Board held eight meetings in 2001. All incumbent directors attended 75% or
more of the combined total meetings of the Board and the committees on which
they served. The Board currently has five committees. The Audit, Compensation,
Finance and Nominating and Corporate Governance Committees are comprised solely
of members who are "independent," as that term is defined by the New York Stock
Exchange. In addition, each member of the Audit Committee is "financially
literate" and at least one member has "accounting or financial management
expertise," as those terms are defined by the New York Stock Exchange. The
following table describes the Board's committees and the number of meetings held
in the year 2001.
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MEMBERS RESPONSIBILITIES MEETINGS HELD
- ----------------------------------------------------------------------------------------------------------
AUDIT o Monitor internal financial controls and the Four
Michael B. Gifford (Chairman) financial reporting process.
Henry R. Kravis o Monitor the audit of Gillette's consolidated
Jorge Paulo Lemann financial statements and report of the independent
Marjorie M. Yang auditor.
o Review the services and the independence of the
independent auditor.
- ----------------------------------------------------------------------------------------------------------
COMPENSATION* o Approve the compensation of the executive officers Seven
Richard R. Pivirotto (Chairman) (except the CEO), including awards of stock
Wilbur H. Gantz options, bonuses and other incentives.
Carol R. Goldberg o Recommend the compensation for the Chief Executive
Dennis F. Hightower Officer.
Herbert H. Jacobi o Recommend the compensation for Board members.
o Review the competitive position of, and approve
changes to, the plans, systems and practices
relating to compensation and benefits.
o Review the financial performance and operations of
the major benefit plans.
o Administer the stock option, stock equivalent unit
and other executive incentive plans, with
authority to make grants to selected employees.
o Make nonmaterial changes to executive incentive
plans.
o Review succession plans for executive officers.
- ----------------------------------------------------------------------------------------------------------
EXECUTIVE o Develop the succession plan for the position of Four
Warren E. Buffett (Chairman) Chief Executive Officer.
Carol R. Goldberg o Review reports on compliance with Gillette's
James M. Kilts policies.
Henry R. Kravis o Recommend committee assignments.
o Recommend positions on significant public policy
issues.
o Exercise the power and authority of the Board
between meetings.
- ----------------------------------------------------------------------------------------------------------
FINANCE o Approve financial policies. Four
Herbert H. Jacobi (Chairman) o Approve risk management policies (including the
Michael B. Gifford use of derivatives).
Jorge Paulo Lemann o Recommend stock repurchase programs.
Marjorie M. Yang o Recommend the dividend policy.
o Approve borrowing of funds.
o Recommend capital expenditures in excess of $20
million.
o Conduct post audits of major capital expenditures
and business acquisitions.
o Review financial condition and overall tax
strategy.
- ----------------------------------------------------------------------------------------------------------
NOMINATING & CORPORATE GOVERNANCE** o Develop the qualifications for membership on the One
Wilbur H. Gantz (Chairman) Board.
Warren E. Buffett o Recommend nominees for election as directors.
Dennis F. Hightower o Evaluate the performance of the Chief Executive
Richard R. Pivirotto Officer.
o Evaluate the Board's effectiveness and recommend
ways to improve governance.
o Recommend ways to enhance services to and improve
communications and relations with stockholders.
o Recommend changes to the Certificate of
Incorporation or Bylaws.
The Committee considers director nominations from
stockholders. They should be submitted in writing
to the Chairman of the Committee in care of the
Secretary, no later than 90 days prior to the
anniversary date of the prior year's annual
meeting (February 15, 2003).
- ----------------------------------------------------------------------------------------------------------
* Formerly the Personnel Committee
** Formed in October 2001
INDEPENDENT AUDITOR
The Board will act on the independent auditor for 2002 at its June meeting. A
representative of KPMG LLP, the independent auditor for 2001 will attend the
2002 Annual Meeting of Stockholders, where he will have the opportunity to
make a statement and will answer questions from stockholders.
AUDIT COMMITTEE REPORT
The Audit Committee has four "independent" directors, as defined by the New
York Stock Exchange. The Audit Committee operates under a written charter
adopted by the Board of Directors (Exhibit A).
Management is responsible for Gillette's internal financial controls and the
financial reporting process. The independent auditor is responsible for
performing independent audits of Gillette's consolidated financial statements
in accordance with generally accepted auditing standards and for issuing
reports thereon. Our responsibility is to oversee and monitor these activities
on behalf of the Board of Directors.
We met with management and the independent auditor several times in the course
of the year. Management has represented to us that Gillette's consolidated
financial statements for the year ended December 31, 2001, were prepared in
accordance with generally accepted accounting principles. We reviewed the
consolidated financial statements with both management and the independent
auditor and discussed with management and the independent auditor the quality,
not just the acceptability, of the accounting principles, the reasonableness
of significant judgments and the clarity of disclosures in the financial
statements. We also discussed the matters required to be discussed by
Statement on Auditing Standards No. 61 with the independent auditor. These
matters include significant adjustments, management judgments and accounting
estimates, significant new accounting policies and disagreements with
management, if any.
We also received the written disclosures required by Independent Standards
Board Standard No. 1 from the independent auditor and discussed with the
independent auditor the firm's independence and objectivity.
We received the following information concerning the fees of the independent
auditor for the year ended December 31, 2001, and have considered whether the
provision of these services is compatible with maintaining the independence of
the independent auditor:
o AUDIT FEES, EXCLUDING AUDIT-RELATED ................. $3.65 MILLION
o FINANCIAL INFORMATION SYSTEMS DESIGN AND
IMPLEMENTATION FEES ................................. $ 0
o ALL OTHER FEES
AUDIT-RELATED(1) ..................... $2.54 MILLION
TAX SERVICES ......................... $3.46 MILLION
OTHER NON-AUDIT SERVICES ............. $ .14 MILLION
TOTAL ALL OTHER FEES .......................... $6.14 MILLION
(1) Primarily statutory audits, issuance of letters to underwriters, audits of
employee benefit plan financial statements, audits of disposed businesses,
reviews of registration statements and issuance of consents
In addition to meetings with mangement and the independent auditor, we met
several times with Gillette's internal auditor to review staffing, the audit
plan and reports on the effectiveness of internal financial controls.
Based on the foregoing, we recommended to the Board of Directors that the
audited financial statements be included in Gillette's annual report on Form
10-K for the year ended December 31, 2001, that was filed with the Securities
and Exchange Commission.
By the Audit Committee:
Michael B. Gifford (Chairman)
Henry R. Kravis
Jorge Paulo Lemann
Marjorie M. Yang
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Five Percent Beneficial Ownership
A beneficial owner of stock is a person who has voting power, meaning the
power to control voting decisions, or investment power, meaning the power to
cause the sale of the stock. This power may be direct, by contract or through
other arrangements.
The following table provides information regarding beneficial owners of more
than five percent of the outstanding shares of Gillette common stock.
NUMBER OF PERCENT OF
NAME AND ADDRESS SHARES CLASS
- -----------------------------------------------------------------
Berkshire Hathaway Inc.(1) 96,000,000 9.1%
1440 Kiewit Plaza
Omaha, Nebraska 68131
- -----------------------------------------------------------------
- -----------------------------------------------------------------
FMR Corp.(2) 115,151,943 10.9%
82 Devonshire Street
Boston, MA 02109
- -----------------------------------------------------------------
(1) The shares are owned through six subsidiaries of Berkshire Hathaway Inc. One
of its subsidiaries, National Indemnity Company of 3024 Harney Street,
Omaha, Nebraska 68131, owns 60,000,000 shares or 5.7% of the outstanding
common stock. Warren E. Buffett, a director of Gillette, and trusts of which
he is trustee, but in which he has no financial interest, beneficially own
31.5% of the capital stock of Berkshire Hathaway Inc. His wife, Susan T.
Buffett, owns 2.4% of the capital stock of Berkshire Hathaway Inc.
(2) Information with respect to FMR Corp. is based on a Schedule 13G filed on
February 14, 2002, reporting share ownership as of December 31, 2001. Of the
total shares reported as owned, Fidelity Management & Research Company
beneficially owns 105,179,635 shares, Fidelity Management Trust Company
beneficially owns 6,636,559 shares and Fidelity International Limited
beneficially owns 3,335,749 shares. Also included as reporting persons on
the filing are Edward C. Johnson 3d, Chairman of FMR Corp., and Abigail P.
Johnson, Director of FMR Corp.
THE GILLETTE COMPANY
===============================================================================
STOCK OWNERSHIP TABLE
The following table shows the number of shares of Gillette common stock
beneficially owned on March 25, 2002, by the directors, nominees for director,
the individuals named in the Summary Compensation Table on page 14 and all
directors, nominees for director and current executive officers as a group.
Mrs. Goldberg is retiring from the Board, and Mr. Kravis will not be serving
out his term. All individuals listed in the table have sole voting and
investment power over the shares unless otherwise noted. Deferred stock units
represent units credited under the Deferred Compensation Plan for Outside
Directors. Supplemental Savings Plan Units represent a similar kind of stock
equivalent unit held under the Supplemental Savings Plan for employees.
Neither type of unit may vote; however, they are included in the table because
they represent an additional financial interest that is subject to the same
market risk as Gillette's common stock.
SUPPLEMENTAL
PERCENT SAVINGS PLAN
SHARES OPTIONS OF AND
BENEFICIALLY EXERCISABLE SHARES DEFERRED
NAME OWNED(1) WITHIN 60 DAYS OUTSTANDING STOCK UNITS
- -------------------------------------------------------------------------------
W. E. Buffett(2) 96,001,981 33,333 9.1% 14,618
C. W. Cramb 23,463 381,446 * 7,688
E. F. DeGraan 74,663 731,999 * 26,965
W. H. Gantz 12,781 33,333 * 7,508
M. B. Gifford 3,039 33,333 * 9,590
C. R. Goldberg(3) 8,338 33,333 * 15,055
R. J. Groves 5,000 -- * --
D. F. Hightower 1,305 5,333 * 2,203
P. K. Hoffman(4) 57,086 213,664 * 5,220
H. H. Jacobi 36,515 29,333 * 13,979
N. J. Karch -- -- * --
J. M. Kilts 30,687 1,000,000 * 1,471
H. R. Kravis(5) 2,277,256 17,333 * 9,144
J. P. Lemann 1,000,000 13,333 * 7,256
R. R. Pivirotto 8,370 33,333 * 17,961
R. K. Willard 684 138,330 * 1,666
M. M. Yang 4,000 9,333 * 7,113
Directors, Nominees &
Current Executive
Officers as a
Group(6) 99,611,865 3,332,427 9.7% 161,783
* Less than 1% of the outstanding shares of common stock.
(1) For the executive officers, this figure includes common stock held under
Gillette's broad-based employee benefit plans. Participants may direct the
voting of shares held under the plans and share voting and investment
power with the plans' trustees.
(2) Mr. Buffett shares voting and investment power over 96,000,000 of the
shares of common stock which are owned by subsidiaries of Berkshire
Hathaway Inc.
(3) As a trustee of family charitable trusts in which she has no financial
interest, Mrs. Goldberg shares voting and investment power with respect to
500 of the shares and disclaims beneficial ownership with respect to such
shares.
(4) Mr. Hoffman disclaims beneficial ownership of 6,390 shares.
(5) Trusts for the benefit of Mr. Kravis's family hold 477,868 shares, and a
charitable trust created by Mr. Kravis holds 49,388 shares. Mr. Kravis
disclaims beneficial ownership with respect to those 527,256 shares.
(6) One executive officer shares voting and investment power over 1,000 shares
and disclaims beneficial ownership with regard to 858 of those shares, and
one executive officer disclaims beneficial ownership with regard to 354
shares.
EXECUTIVE OFFICERS' COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The Gillette Company's compensation program is designed to achieve the
following goals:
o Motivate our executives to achieve Gillette's short- and long-term
business objectives and other qualitative goals.
o Recognize individual contributions, as well as overall business results.
o Attract and retain highly qualified executives.
o Align executive compensation with stockholder return.
OVERVIEW
The program consists of two types of compensation:
o Fixed compensation, which consists of salary and benefits.
o Incentive compensation, which includes both short- and long-term
incentives such as bonuses and stock options.
Total executive compensation depends on an executive's performance against
specific objectives. These objectives are assigned at the beginning of each
year and are designed to achieve the goals of Gillette's strategic growth
plan. They include both quantitative factors related to Gillette's financial
objectives and qualitative factors such as leadership ability; management
development; development and execution of strategies that will drive
Gillette's growth over the long term; and compliance with Gillette policies.
COMPONENTS
The primary components of our executive compensation program are base salary
and awards under the Incentive Bonus and Stock Option Plans. In addition, each
executive may participate in Gillette benefit plans such as the Executive Life
Insurance Program and Estate Preservation Plan, as well as broad-based plans
that include the Employees' Savings and Retirement Plans. Information on these
plans and programs during 2001 is found in the footnotes to the Summary
Compensation Table on page 14 and the Retirement Plan Table on page 16.
DETERMINING BASE SALARY, INCENTIVE BONUS AND
STOCK OPTION AWARDS
We approve the base salary paid to each executive officer; all bonus awards
under the Incentive Bonus Plan; and all stock option awards under the Stock
Option Plan. In the case of the CEO, we make recommendations to the Board.
Each year, we review a report prepared by an independent compensation
consultant that assesses the competitiveness of the Gillette executive
compensation program as compared with those of a selected group of leading
companies. The comparative group includes most of the companies listed on page
13 (Peer Group), plus several other companies against which Gillette competes
for executive talent. This report helps us determine whether to make
prospective adjustments to the executive compensation program generally or as
we assess the skills, experience and achievements of individual executives.
Base Salary
In determining the appropriate base salary of an executive officer, we assign
a salary range under a system of job evaluation based on the level of
responsibility and the executive's qualifications and experience. The
objective is to determine a salary that, together with other components,
provides competitive compensation. Salary increases are based on periodic
evaluations of the executive's performance.
Incentive Bonus Plan
At the beginning of each year, we establish a range of growth goals related to
earnings per share, return on assets and net sales growth. The amounts that we
may award as a bonus pool under the Incentive Bonus Plan depend on the degree
to which these goals are achieved.
We assign a target bonus to each executive based on grade level expressed as a
percent of year-end salary. Up to one-half of the target bonus is awarded to
all eligible employees, based solely on the level of achievement of overall
corporate financial objectives. The balance of the potential bonus is based on
the performance of the operating unit and the individual executive against
assigned objectives, plus a number of qualitative factors.
Under special provisions of the plan approved by the stockholders at the 2001
Annual Meeting, bonus awards to the executive officers named in the Summary
Compensation Table are conditioned upon Gillette's achievement of a minimum
net income target that we establish each year. If this target is met, as was
the case for 2001, bonuses may be paid to those executives up to a prescribed
maximum.
In addition, the plan provides for a discretionary reserve pool from which
bonuses may be awarded to employees, other than the executives named in the
Summary Compensation Table, who have made significant contributions toward the
achievement of their assigned objectives, even if the overall Gillette
financial growth goals are not met.
For 2001, the minimum net income target was achieved; however, Gillette's
financial growth goals were not. We granted bonus awards to the executives
named in the Summary Compensation Table pursuant to the special provisions of
the plan, and to certain other executives from the discretionary reserve pool,
based upon their contribution to the achievement of significant organizational
and operational objectives designed to fuel growth during 2001. The bonus
awards were intended to recognize individual contributions and to motivate the
executives to continue their efforts.
The most notable achievements of 2001 include the following:
o Attaining the highest U.S. shaving market share in 40 years.
o Recording seven consecutive months of market share gain in the U.S. by
Duracell, reversing a negative trend.
o Reversing a negative trend in global franchise health from 65% of our
global brands losing share in 2000 to 64% of our global brands gaining
share in 2001.
o Successfully completing the worldwide trade destocking initiative for
blades and batteries, so that future sales growth will reflect consumer
purchases.
o Significantly improving the use of working capital by reducing trade
receivables from $2,128 million in 2000 to $1,473 million, or by 31%, and
inventories from $1,162 million in 2000 to $1,011 million, or by 13%.
o Increasing free cash flow from $852 million in 2000 to $1,527 million, or
by 79%.
o Decreasing net debt from $4,452 million in 2000 to $3,318 million, or by
25%.
o Reducing capital expenditures from $793 million in 2000 to $624 million,
or by 21%.
o Establishing new Company-wide operating procedures and processes that
improved organization effectiveness, alignment and efficiency.
o Achieving a headcount reduction 22% greater than planned.
o Initiating the Functional Excellence and Leadership Program.
o Substantially changing the senior management team (two-thirds of the CEO's
direct reports are new to the positions or to Gillette.)
o Implementing the Strategic Sourcing Initiative realizing significant
savings in 2001.
Stock Option Plan
Stock options are awarded to employees who have demonstrated their ability to
contribute to the long-term success of Gillette. Stock options encourage these
individuals to act as owners of Gillette, directly aligning their interests
with the interests of the stockholders. We make stock option awards under the
1971 Stock Option Plan on an annual basis, and at other times, with exercise
prices equal to the average of the high and low trading prices of Gillette
stock on the date of the award. The number of shares awarded to each executive
is based on our assessment of the value of stock option awards needed to
maintain a competitive long-term incentive for executive talent, compared with
those awarded by the companies with which we compete for this talent. The
stock options we granted in 2001 met these criteria.
Compensation of Chief Executive Officer
Mr. Kilts's compensation for 2001, including salary, bonus and stock options,
was negotiated as part of his employment agreement at the time he was hired.
Prior to entering into this agreement, we engaged consultants to develop a
competitive employment offer for Mr. Kilts. They advised us that the
compensation and the benefits and perquisites included in the offer were
consistent with industry practice. The details of his employment agreement are
described on page 17 of this proxy statement under the caption "Employment
Contracts, Termination of Employment and Change-In-Control Arrangements" and
in the Summary Compensation Table on page 14. Going forward, Mr. Kilts's
compensation will be determined in accordance with his employment agreement
and the policies described in this report.
In October 2001, the Board created the Nominating and Corporate Governance
Committee, comprised of four independent directors. The charter for the new
committee includes the responsibility of evaluating the performance of the
Chief Executive Officer. On an annual basis, the Board will consider the
report of the Nominating and Corporate Governance Committee on CEO performance
and the report of the Compensation Committee on recommended CEO compensation
levels in determining the compensation to be awarded the CEO.
In evaluating CEO performance, the Board will consider, among other things:
personal qualities such as leadership, statesmanship and responsiveness;
general management qualities such as a global perspective on the business,
short-term results, strategic thinking and planning, knowledge of the business
and preparedness; financial expertise such as value creation, capital planning
and communications with the financial and investment communities; and
qualities relating to the use of human resources such as developing management
talent and creating an effective organization. In determining the appropriate
compensation to be awarded to the CEO, the Board will consider the CEO's
performance, the level of achievement of growth targets, the recommendations
of independent consultants and reviews of the compensation paid to CEOs at
companies against which Gillette competes for executive talent.
Section 162(m) of the Internal Revenue Code
This provision of Federal tax law limits the deductibility of compensation
paid to the Chief Executive Officer and the next four most highly paid
executive officers at the end of each year in which, for any of these covered
executives, compensation exceeds $1 million subject to certain exceptions. One
of the exceptions is performance-based compensation paid under a plan or
arrangement approved by stockholders. Gillette's stockholders have approved
both our Incentive Bonus and Stock Option Plans.
It is our policy generally to design executive compensation to be deductible
under Section 162(m). However, we exercise discretion to award compensation,
consistent with the interests of the shareholders, to recruit and retain
executives.
By the Compensation Committee:
Richard R. Pivirotto (Chairman)
Wilbur H. Gantz
Carol R. Goldberg
Dennis F. Hightower
Herbert H. Jacobi
GILLETTE COMPARATIVE FIVE-YEAR INVESTMENT PERFORMANCE
The following graph compares the total return on $100 invested in Gillette
common stock for the five-year period from December 31, 1996, through December
31, 2001, with a similar investment in the Standard & Poor's 500 Stock Index and
with the market value weighted returns of a Peer Group Index consisting of seven
consumer products companies of similar size that sell products worldwide. The
cumulative return includes reinvestment of dividends.
The list of Peer Group companies has been updated to reflect Gillette's
current view of its peers from a performance perspective. Johnson & Johnson
has been eliminated since its primary business is not related to Gillette's
core businesses. Avon Products, Inc. and Kimberly Clark Corporation have been
added. These companies market to the same trade channels or have a focus on
new products and building global brands.
The five-year performance graph has been restated to reflect these changes.
Had the former Peer Group Index been used for the performance graph in this
year's proxy statement, the values of the cumulative return to investors in
the Peer Group Index would have been as follows: 1996 (100), 1997 (145), 1998
(180), 1999 (201), 2000 (195) and 2001 (199).
[Graphic Omitted]
- -----------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
Gillette $100 $130 $125 $109 $ 98 $ 92
Peer $100 $142 $174 $193 $180 $169
Group
S&P 500 $100 $133 $171 $207 $188 $166
- -----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Peer Group Companies:
- ---------------------
Avon Products, Inc. Energizer Holdings, Inc. Procter & Gamble Company
The Clorox Company Kimberly Clark Corporation Unilever, N.V.
Colgate-Palmolive Company Philips Electronics, N.V.
- --------------------------------------------------------------------------------
THE GILLETTE COMPANY
===============================================================================
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------------------------- ------------
# OF STOCK
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDED COMPENSATION(2)
- --------------------------- ---- ------ ----- --------------- ------- ---------------
James M. Kilts 2001 $947,917 $1,250,000 $337,916 2,650,000 $252,146
Chairman and Chief
Executive Officer
Edward F. DeGraan 2001 789,375 350,000 -- 475,000 96,697
President and Chief 2000 642,083 715,000 -- 180,000 54,922
Operating Officer 1999 500,000 210,000 -- 180,000 42,264
Charles W. Cramb 2001 550,000 200,000 -- 185,000 49,955
Senior Vice President 2000 512,500 350,000 -- 110,000 36,431
1999 467,500 150,000 -- 150,000 37,401
Peter K. Hoffman 2001 480,000 135,000 -- 125,000 39,128
Vice President
Richard K. Willard 2001 510,000 150,000 -- 165,000 42,543
Senior Vice President 2000 480,833 255,000 27,124 110,000 24,459
1999 79,167(3) 500,000(3) -- 120,000 3,024
(1) Other Annual Compensation paid to Mr. Kilts includes $127,849 for housing, $206,563 to cover certain taxes and $3,504 for
home security systems.
(2) All Other Compensation includes the following payments or accruals:
CONTRIBUTION
SAVINGS MATCH COMPANY UNDER ESTATE FINANCIAL
EQUIVALENTS ON MATCH TO LIFE INSURANCE PRESERVATION PLANNING
DEFERRED BONUS SAVINGS PLAN PREMIUMS(I) PLAN(II) SERVICE(iii)
James M. Kilts(iv) $60,000 $52,396 $24,750 $ -- $15,000
Edward F. DeGraan -- 79,219 4,377 8,101 5,000
Charles W. Cramb -- 47,750 2,205 -- --
Peter K. Hoffman 8,100 26,400 1,628 -- 3,000
Richard K. Willard -- 40,800 1,743 -- --
(i) Value of premiums paid by Gillette during 2001 under the Executive Life Insurance Program. The program provides
Company-paid coverage during employment equal to four times annual salary. During retirement, a death benefit equal
to the executive's final annual salary continues in effect.
Mr. Kilts has waived participation in Gillette's Executive Life Insurance Program. Instead, Gillette pays premiums for
Mr. Kilts and his wife on existing term life insurance policies.
(ii) The named executives are eligible to participate in a Gillette-sponsored Estate Preservation Plan. Gillette and the
executive officers share equally the cost of a $1,000,000 life insurance policy payable on the death of the
survivor of each executive and his spouse. Gillette contributes its share of the premiums during the first five
years of the policy and recovers its contribution at the end of a 15-year period, or if earlier, when the survivor
of the executive and the executive's spouse dies.
(iii) The named executives are eligible to receive an annual reimbursement for financial planning services not to exceed
$5,000. In the case of Mr. Kilts, the amount is $15,000 annually.
(iv) The total of All Other Compensation for Mr. Kilts also includes $100,000 as reimbursement for legal fees and
expenses in connection with his employment agreement.
(3) Amounts represent salary for two months and a signing bonus in connection with his employment on November 1, 1999.
STOCK OPTIONS AWARDED DURING 2001
AWARD DATE
INDIVIDUAL AWARDS VALUE
------------------------------------------------------------------ ----------
% OF TOTAL
NUMBER OF OPTIONS AWARDED AWARD DATE
OPTIONS TO EMPLOYEES PER SHARE PRESENT VALUE
NAME AWARDED(1) IN 2001 EXERCISE PRICE EXPIRATION DATE ($)(2)
- ---- ---------- ------- -------------------------------- ------
James M. Kilts 2,000,000 11.1% $34.16 01/19/11 $22,674,260
650,000 3.6% 28.26 06/21/11 5,891,360
Edward F. DeGraan 300,000 1.7% 34.16 01/19/11 3,401,139
175,000 1.0% 28.26 06/21/11 1,586,135
Charles W. Cramb 65,000 0.4% 32.19 02/15/11 693,344
120,000 0.7% 28.26 06/21/11 1,087,636
Peter K. Hoffman 35,000 0.2% 32.19 02/15/11 373,339
90,000 0.5% 28.26 06/21/11 815,727
Richard K. Willard 65,000 0.4% 32.19 02/15/11 693,344
100,000 0.6% 28.26 06/21/11 906,363
(1) With the exception of the 2,000,000 options awarded to Mr. Kilts on January 19, option awards in 2001 were made
under the 1971 Stock Option Plan. The January 19 award to Mr. Kilts was made on substantially similar terms to those
granted under the 1971 Stock Option Plan, except that one- quarter of these options vested immediately, and the
remainder vest annually in one-third increments over a three-year period. The material terms of awards granted under
the 1971 Stock Option Plan are:
o Awards consist of a combination of incentive (subject to limitations imposed by U.S. tax law) and nonincentive
stock options.
o Exercise price is the average of the high and low trading prices of the common stock on the date of award.
o In general, options become exercisable in one-third increments over the first three anniversaries of the award.
The 300,000 options awarded to Mr. DeGraan on January 19, 2001, become exercisable in one-half increments on the
first and second anniversaries of the grant. Beginning with options granted in 2002, all options become
immediately exercisable upon retirement, death or disability.
o Options remain exercisable for 10 years from the date of award during employment. For options granted prior to
2002, the postretirement exercise period for employees is the lesser of five years or the life of the options.
If the employee optionee is not retirement eligible, the post-termination exercise period is the lesser of three
years or the remaining term of the option. Options granted from 2002 onward will remain exercisable for the
remaining term of the option in the case of retirement and for the lesser of three years or the remaining term
of the option in the event of death or disability. In the event of a change in control, options not otherwise
exercisable at termination of employment become immediately exercisable, and if the participant's employment is
terminated (other than for cause) within two years thereafter, the exercise period is the lesser of two years or
the remaining term of the option.
o Awards cannot be repriced, or exchanged with the effect of repricing, without stockholder approval.
(2) The award date present value for each option was determined using a Black- Scholes option pricing model. The
principal assumptions used in the model were:
EXPIRATION DATE 1/19/11 2/15/11 6/21/11
--------------- ------- ------- -------
Stock Price Volatility 33.1% 33.7% 33.4%
Dividend Yield 1.9% 2.0% 2.3%
Risk Free Rate of Return 5.4% 5.4% 5.5%
Expected Life in Years 5.46 5.46 5.46
The model generates a theoretical value based on the assumptions and is not intended to predict future prices of the
stock. There is no assurance that these values or any other value will be achieved. The actual value will be dependent
upon:
o The performance of Gillette as reflected in the future price of the stock.
o Continued employment with Gillette.
AGGREGATE STOCK OPTION EXERCISES DURING 2001 AND YEAR-END STOCK OPTION VALUES
TOTAL VALUE
OF UNEXERCISED
NUMBER OF NUMBER OF UNEXERCISED IN-THE-MONEY STOCK
SHARES UNDERLYING VALUE STOCK OPTIONS HELD OPTIONS HELD AT
NAME OPTIONS EXERCISED REALIZED AT FISCAL YEAR-END FISCAL YEAR-END
---- ----------------- -------- ---------------------------- ---------------
James M. Kilts -- -- Exercisable 500,000 --
Unexercisable 2,150,000 $3,386,500
Edward F. DeGraan 28,000 $527,100 Exercisable 581,999 2,787,507
Unexercisable 655,001 1,163,553
Charles W. Cramb -- -- Exercisable 359,780 888,424
Unexercisable 308,336 814,326
Peter K. Hoffman -- -- Exercisable 201,998 812,570
Unexercisable 186,502 571,475
Richard K. Willard -- -- Exercisable 116,664 52,799
Unexercisable 278,336 710,126
RETIREMENT PLAN TABLE
The table below shows an estimate of the total annual pension benefits payable
in the form of a straight-life annuity for employees who retire at or after
age 65 under the Retirement Plan and Supplemental Retirement Plan.
After the Retirement Plan was adopted, changes in the law limited the amount
of benefits that could be paid under tax-qualified plans. As permitted by law,
we adopted the Supplemental Retirement Plan for the payment of amounts to
employees who may be affected by those limitations, so that, in general, total
benefits will continue to be calculated on the basis approved by the
stockholders.
In general, the benefit upon retirement at or after age 65 with 25 years or
more of service is equal to 50% of the employee's average annual compensation,
minus 75% of primary Social Security benefits. Average annual compensation is
an employee's salary and bonus, as defined in the Plan, for the highest-paid
five calendar years during the last 10 full calendar years of employment. A
benefit becomes payable at retirement for employees with at least 5 years of
service.
As of December 31, 2001, the executives named in the Summary Compensation Table
had the following years of service under the Retirement Plan: Mr. Kilts, 1 year;
Mr. DeGraan, 32 years; Mr. Cramb, 32 years; Mr. Hoffman, 30 years; and Mr.
Willard, 2 years.
ANNUAL PENSION*
AVERAGE ANNUAL COMPENSATION ------------------------------------------------------------
USED AS BASIS FOR 15 YEARS 20 YEARS 25 YEARS OR MORE
COMPUTING PENSION OF SERVICE OF SERVICE OF SERVICE
--------------------------- ---------- ---------- ----------------
$ 400,000 $120,000 $160,000 $ 200,000
800,000 240,000 320,000 400,000
1,200,000 360,000 480,000 600,000
1,600,000 480,000 640,000 800,000
2,000,000 600,000 800,000 1,000,000
2,400,000 720,000 960,000 1,200,000
* Before Social Security offset.
In addition to his participation in the Company's Retirement Plan, Mr. Kilts, under the terms of his employment
contract, is entitled to receive a pension from the Company, the principal terms of which are described on page
17. Mr. Kilts's pension benefits estimated below would be offset by any amounts payable to him under the
Company's Retirement Plan.
36 MONTH 10 YEARS
AVERAGE ANNUAL COMPENSATION 3 YEARS 5 YEARS (MAXIMUM)
--------------------------- -------- -------- ----------
$1,500,000 $225,000 $375,000 $ 750,000
2,000,000 300,000 500,000 1,000,000
2,500,000 375,000 625,000 1,250,000
3,000,000 450,000 750,000 1,500,000
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Gillette follows long-standing practices regarding separation arrangements for
executive officers whose employment terminates without cause. Under these
arrangements, the executive officer agrees not to compete with Gillette for a
period of time and releases all claims against Gillette. During the covered
period, Gillette continues to provide coverage under welfare and benefits
plans, and unvested options continue to vest.
In connection with Mr. Kilts's appointment as Chairman of the Board of
Directors and Chief Executive Officer, he and Gillette signed a renewable
three-year employment agreement, effective January 19, 2001. The terms of the
agreement provide for Mr. Kilts to receive an annual base salary of no less
than $1 million and a bonus during the year 2001 of at least 100% of base
salary, prorated for the portion of the year he is employed. He was paid a
signing bonus of $250,000, and Gillette agreed to reimburse his legal fees and
expenses in connection with the agreement. For future years, he is eligible
for an annual target bonus opportunity of not less than 100%, nor more than
200%, of base pay if the performance goals for the relevant year are met.
At the time he was hired, the Board awarded Mr. Kilts options to purchase two
million shares of Gillette common stock at an exercise price of $34.16 per
share (the average of the high and low trading prices on the award date) on
substantially similar terms to those granted under the 1971 Stock Option Plan,
except that one-quarter of these options vest immediately, and the remainder
vest in one-third increments annually over a three-year period. Under the
terms of Mr. Kilts's employment agreement, Gillette awarded Mr. Kilts an
option on 650,000 shares under the 1971 Stock Option Plan in June 2001 and is
obligated to make option awards on not less than 650,000 shares in 2002 and
2003.
Pursuant to the agreement, at the time of his employment, Mr. Kilts purchased
29,274 shares of Gillette's common stock at a price of $34.16 per share, or $1
million in total. He will hold these shares for a period of not less than three
years, or his earlier termination of employment.
In addition, Mr. Kilts will participate in employee welfare and benefit plans
and will be provided housing, certain executive perquisites and, for security
reasons, transportation and a home security system.
Mr. Kilts will be entitled to receive a pension, starting when his employment
ends (for reasons other than cause or death), of five percent of his final
average compensation (determined on the basis of a consecutive thirty-six
month period) for each year or partial year of employment, up to a maximum of
50 percent of his final average compensation. This pension would be offset by
any pension he may otherwise become entitled to under the Company's Retirement
Plan.
The employment agreement provides that if Mr. Kilts's employment is terminated
without "cause," or if Mr. Kilts terminates his employment for "good reason,"
both as defined in the agreement, he will be entitled to receive a prorated
annual incentive bonus for the year of termination and a lump sum equal to the
sum of two years' base salary and two times the target bonus for the year of
termination. Under these circumstances, he will receive two years' credit for
purposes of his pension calculation and be entitled to vesting of any unvested
options with an exercise period equal to the lesser of five years or the
original term of the options. He will also be subject to a two-year
noncompetition agreement.
In the event of a change in control, change-in-control provisions substantially
similiar to those described below will apply to Mr. Kilts except that, in the
event his employment is terminated by Gillette without cause within two years
following a change in control, his options will remain exercisable through the
end of their 10-year terms.
Mr. DeGraan has a two-year renewable employment agreement providing that in the
event his employment is involuntarily terminated for reasons other than cause,
disability or death or if he leaves for good reason or elects to leave at the
end of the term, in return for certain postemployment protections for the
Company, such as noncompetition and nonsolicitation, he will receive severance
payments equal to two years' salary and target bonus. This agreement terminates
automatically in the event of a change in control.
The other executive officers named in the Summary Compensation Table also have
renewable two-year employment agreements. These agreements provide that in the
event the executive's employment is terminated by Gillette for reasons other
than cause, disability or death or if the executive leaves for good reason in
return for certain protections such as post employment noncompetition and
nonsolicitation, Gillette will pay the executive severance equal to two years'
base salary and target bonus. These agreements terminate automatically in the
event of a change in control.
The executive officers named in the Summary Compensation Table have change-in-
control agreements. These agreements become operative only upon a change in
control of Gillette (as defined under the agreements). After a change in
control, each agreement becomes, in effect, a two-year employment agreement
providing salary, bonus and other employee benefits at levels not less than
those existing prior to the change in control. If the executive terminates
employment for "good reason," as defined in the agreement, within the two-year
period or voluntarily terminates employment during the 30-day period following
the first anniversary of the change in control, the executive is entitled to
receive a lump sum severance payment equal to three times the executive's base
salary and specified bonus. The executive also is entitled to receive other
payments and benefits, including increased pension benefits, continuation of
employee welfare benefits, reimbursement of any "parachute" excise tax imposed
on payments under the agreements and reimbursement of reasonable legal expenses
related to the agreement.
THE GILLETTE COMPANY
===============================================================================
Proposal 2
2. STOCKHOLDER PROPOSAL
This proposal was submitted by the New York City Employees' Retirement System
("NYCERS"), c/o Comptroller of the City of New York, 1 Centre Street, New York,
NY 10007-2341, the owner of 1,627,723 shares of Gillette's common stock.
BE IT RESOLVED, that the stockholders of The Gillette Company request that
the Board of Directors take the necessary steps to declassify the Board of
Directors and establish annual elections of directors, whereby directors would
be elected annually and not by classes. This policy would take effect
immediately, and be applicable to the reelection of any incumbent director
whose term, under the current classified system, subsequently expires.
SUPPORTING STATEMENT
We believe that the ability to elect directors is the single most important
use of the shareholder franchise. Accordingly, directors should be accountable
to shareholders on an annual basis. The election of directors by classes, for
three-year terms, in our opinion, minimizes accountability and precludes the
full exercise of the rights of shareholders to approve or disapprove annually
the performance of a director or directors.
In addition, since only one-third of the Board of Directors is elected
annually, we believe that classified boards could frustrate, to the detriment
of long-term shareholder interest, the efforts of a bidder to acquire control
or a challenger to engage successfully in a proxy contest.
We urge your support for the proposal to repeal the classified board and
establish that all directors be elected annually.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE REASONS
SET FORTH BELOW.
Our stockholders approved our classified Board in 1986 by an overwhelming
majority. We continue to believe that a classified board is in the best
interest of Gillette's stockholders.
Our classified Board assures that a majority of directors at any time will
have the prior experience and in-depth knowledge of Gillette to oversee its
complex, multinational business, even if one particular class is not elected
in any given year. Thus, we believe the classified Board structure provides
significant advantages to Gillette's long-term investors by ensuring that the
Board is able to implement a long-term strategy and focus on long-term
business performance. In addition, we believe a director's contributions are
best measured over several years versus the short-run evaluation necessitated
by annual elections.
Because a classified board can also make it more difficult for third parties
with short-term objectives to seize control of Gillette in a single proxy
contest, the classified board structure provides us with the leverage we need
under coercive conditions to negotiate terms that will maximize the value of
Gillette for all stockholders.
We believe our corporate governance program provides us with a high quality,
effective Board of Directors aligned with the interests of Gillette
stockholders. Among other things, our Nominating and Corporate Governance
Committee, consisting solely of independent directors, is exclusively
responsible for determining nominations for membership on the Board. Under our
bylaws our members cannot stand for reelection once they reach the age of 70,
except when a third-party has a contractual right to nominate a director. Our
members must tender their resignation if their principal occupations change.
Finally, Gillette's former CEOs and Presidents cannot remain on the Board
after retiring from or leaving their executive positions.
We are committed to a truly independent and proactive Board of Directors, and
we firmly believe a classified Board assists us in that effort.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL WHICH IS
DESIGNATED AS PROPOSAL 2 ON THE ENCLOSED PROXY.
===============================================================================
EXHIBIT A
CHARTER OF THE AUDIT COMMITTEE
OF THE
BOARD OF DIRECTORS
OF
THE GILLETTE COMPANY
A. PURPOSE AND AUTHORITY OF COMMITTEE
The Audit Committee is appointed by the Board of Directors to assist in
monitoring: (1) the integrity of the financial statements of the Company, (2)
the compliance by the Company with legal and regulatory requirements relating
to the financial reporting process and (3) the independence and performance of
the Company's internal and external auditors.
The Audit Committee shall have the authority to retain special accounting,
legal or other consultants to advise the Committee. The Audit Committee may
request any officer or employee of the Company, the Company's independent
auditor or outside counsel to attend a meeting of the Committee or to meet
with any members of, or consultants to, the Committee.
B. SPECIFIC RESPONSIBILITIES AND DUTIES
Reports
1. Review and assess the adequacy of this Charter on an annual basis and submit
any amendments to the Board of Directors for approval.
2. Review with management and the independent auditor the significant financial
reporting issues and judgments made in connection with the preparation of
the Company's financial statements, including the selection, application and
disclosure of critical accounting policies and analyses of the effect of
alternative assumptions, estimates or methods on the Company's financial
statements.
3. Review with management and the independent auditor the effect of regulatory
and accounting initiatives as well as off-balance sheet structures on the
Company's financial statements.
4. Recommend to the Board of Directors whether the audited consolidated
financial statements should be included in the Company's Annual Report to
the Securities and Exchange Commission on Form 10-K.
5. Review with management and the independent auditor the Company's Quarterly
Reports to the Securities and Exchange Commission on Form 10-Q before
filing, including the results of the independent auditor's review and the
Company's press releases reporting quarterly results.
6. Review the reports to management prepared by the internal auditing
department and the independent auditor and management's responses.
Independent Auditor
1. Recommend to the Board of Directors the appointment of the independent
auditor, considering, among other things, the firm's independence and
effectiveness.
2. Review the experience and qualifications of the senior members of the
independent auditor team and the quality control procedures of the
independent auditor.
3. Review the audit fees and other compensation paid to the independent
auditor.
4. Approve the retention of the independent auditor for any significant, non-
audit-related service and the fee for such service.
5. Review the disclosures of the independent auditor required by Independent
Standards Board Standard No.1 and discuss with the independent auditor the
firm's significant relationships with the Company.
6. Discuss with the independent auditor the matters required to be discussed by
Statement on Auditing Standards No. 61.
7. Review the annual audit plans of the independent auditor.
8. Approve the Company's hiring of senior management of the independent auditor
who were engaged on the Company's account.
9. Obtain a list of issues discussed with the national office of the
independent auditor by the Company's audit team.
10. Obtain assurance from the independent auditor that section 10A of the
Securities Act has not been implicated.
Internal Audit Department
1. Review the annual audit plans of the internal audit department.
2. Review the activities, organizational structure, budget and qualifications
of the internal audit department.
Financial Reporting Processes
1. Meet periodically with management to review the Company's major business
risks and the steps that management has taken to monitor and control such
risks.
2. Review with management and the independent auditor any correspondence with
regulators or government agencies and any employee complaints or published
reports that raise material issues regarding the Company's financial
statements or accounting policies.
3. Review any changes to the Company's accounting principles or auditing
practices.
4. Review any significant difficulties reported by the independent auditor in
conducting the audit, including any restrictions on the scope of work or
access to required information.
5. Review any significant disagreement between management and the independent
auditor in connection with the preparation of the financial statements.
6. Review with the Company's General Counsel any legal matter that could have
a significant impact on the Company's financial statements.
Other
1. Perform any other activities consistent with this Charter, the Company's
Bylaws and Certificate of Incorporation as the Committee or the Board of
Directors deems necessary or appropriate.
C. COMMITTEE COMPOSITION
The Audit Committee shall consist of at least three members. The members shall
meet the independence and experience requirements of the New York Stock
Exchange. In particular, the Chairman shall have accounting or related
financial management expertise. The members of the Audit Committee shall be
appointed by the Board on the recommendation of the Executive Committee.
D. MEETINGS
The Committee shall meet at least three times annually in person and
additionally by telephone as appropriate. Two members of the Committee shall
constitute a quorum. A majority of the members present shall decide any
question brought before the Committee. The Committee shall meet at least
semiannually with the Chief Financial Officer (and other members of
management, if necessary), the director of the internal auditing department
and the independent auditor in separate private sessions.
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 Company'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 Company's
policies.
[logo] THE
GILLETTE Prudential Tower Building
COMPANY Boston, MA 02199
World-Class Brands, Products, People
NOTICE OF 2002 ANNUAL MEETING OF STOCKHOLDERS
---------------------------------------------
TIME: 10:00 a.m.
DATE: Thursday, May 16, 2002
PLACE: Hotel du Pont
11th and Market Streets
Wilmington, Delaware
PURPOSE: 1. To elect four directors to serve three-year terms
expiring in 2005.
2. To vote on a stockholder proposal, if the proposal
is presented at the meeting.
3. To consider any other business that is properly
presented at the meeting.
WHO MAY You may vote if you were a record owner of Gillette
VOTE: stock at the close of business on March 25, 2002. A
list of stockholders of record will be available at
the meeting and, during the 10 days prior to the
meeting, at my office at the above address in Boston.
By order of the Board of Directors
William J. Mostyn III
Deputy General Counsel and Secretary
Boston, Massachusetts
April 2, 2002
ZGIL5B DETACH HERE
[logo] THE PROXY
GILLETTE PRUDENTIAL TOWER BUILDING
COMPANY BOSTON, MA 02199
P
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
R
The undersigned (a) revokes all prior proxies and appoints and
O authorizes William J. Mostyn III and Richard K. Willard and each of them
with power of substitution, as the Proxy Committee, to vote the stock of the
X undersigned at the 2002 Annual Meeting of the stockholders of The Gillette
Company on May 16, 2002, and any adjournment thereof, as specified on the
Y reverse side of this card on proposals 1 and 2 and, in their discretion, on
all other matters incident to the conduct of the meeting and, if applicable,
(b) directs, as indicated on the reverse, the voting of the shares allocated
to the benefit plan account(s) of the undersigned at the 2002 Annual Meeting
and at any adjournment thereof. Plan shares for which no directions are
received and unallocated plan shares will be voted on each issue in
proportion to those shares allocated to participant accounts of the same
plan for which voting instructions on that issue have been received. Each
trustee is authorized to vote in its judgment or to empower the Proxy
Committee to vote in accordance with the Proxy Committee's judgment on other
matters incident to the conduct of the meeting and any adjournment thereof.
- ----------- -----------
SEE REVERSE (IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE) SEE REVERSE
SIDE SIDE
- ----------- -----------
[logo] THE YOUR VOTE IS IMPORTANT!
GILLETTE VOTE BY INTERNET OR TELEPHONE
COMPANY 24 HOURS A DAY, 7 DAYS A WEEK
C/O EQUISERVE
P.O. BOX 43068
PROVIDENCE, RI 02940-3068
THE INTERNET AND TELEPHONE VOTING
FACILITIES WILL CLOSE AT 9:00 P.M.
E.S.T. ON WEDNESDAY, MAY 15 VOTE BY
TELEPHONE VOTE BY INTERNET
- ----------------- ----------------
VOTE BY TELEPHONE VOTE BY INTERNET
- ----------------- ----------------
It's fast, convenient, and immediate! It's fast, convenient, and your vote
Call Toll-Free on a Touch-Tone Phone is immediately confirmed and posted.
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
- ------------------------------------ -------------------------------------
1. READ THE ACCOMPANYING PROXY 1. READ THE ACCOMPANYING PROXY
STATEMENT AND PROXY CARD. STATEMENT AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER 2. GO TO THE WEBSITE
1-877-PRX-VOTE (1-877-779-8683). www.eproxyvote.com/g
FOR SHAREHOLDERS RESIDING OUTSIDE
THE UNITED STATES, CALL COLLECT ON 3. ENTER YOUR 14-DIGIT VOTER CONTROL
A TOUCH-TONE PHONE NUMBER LOCATED ON YOUR PROXY CARD
1-201-536-8073. ABOVE YOUR NAME.
THERE IS NO CHARGE FOR THIS CALL.
4. FOLLOW THE RECORDED INSTRUCTIONS.
3. ENTER YOUR 14-DIGIT VOTER CONTROL
NUMBER LOCATED ON YOUR PROXY CARD
ABOVE YOUR NAME.
4. FOLLOW THE INSTRUCTIONS PROVIDED.
- ------------------------------------ -------------------------------------
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime! Go to www.eproxyvote.com/g anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
ZGIL5A DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
THIS PROXY WILL BE VOTED AS SPECIFIED BY THE STOCKHOLDER, BUT IF NO CHOICE IS SPECIFIED, IT WILL BE VOTED FOR PROPOSAL 1
AND AGAINST PROPOSAL 2.
- ----------------------------------------------------------- -----------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
- ----------------------------------------------------------- AGAINST PROPOSAL 2.
-----------------------------------------------------
1. Election of directors for 3-year terms FOR AGAINST ABSTAIN
(01) Warren E. Buffett, (02) Michael B. Gifford, 2. Stockholder Proposal
(03) Ray J. Groves, (04) Marjorie M. Yang - Declassify the Board [ ] [ ] [ ]
of Directors.
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
For, except withhold vote from the following nominee(s):
[ ] _________________________________
- ----------------------------------------------------------- -----------------------------------------------------
MARK HERE ONLY IF YOU PLAN TO ATTEND THE ANNUAL [ ]
MEETING IN PERSON
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Signature: ________________________ Date: ________________ Signature: __________________________ Date: _____________