UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
Filed by the Registrant X
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Filed by a Party other than the Registrant __
Check the appropriate box:
__ Preliminary Proxy Statement
X Definitive Proxy Statement
__ Definitive Additional Materials
__ Soliciting Material Pursuant to Exchange Act Rule 14a-11 or 14a-12
RIGHT MANAGEMENT CONSULTANTS, INC.
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of filing Fee (check the appropriate box):
X No Fee Required.
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__ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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2) Aggregate number of securities to which the transaction applies:
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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 is calculated and state how it was determined.)
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4) Proposed maximum aggregate value of transaction:
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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
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was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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RIGHT MANAGEMENT CONSULTANTS, INC.
1818 Market Street
33rd Floor
Philadelphia, Pennsylvania 19103
Dear Shareholder:
On behalf of the Board of Directors, I am pleased to invite you to
attend our 2002 Annual Meeting of Shareholders to be held on Thursday, May 2,
2002 at 10:00 a.m., Eastern Daylight Time. This year's Annual Meeting will be
held at our headquarters, 1818 Market Street, 33rd Floor, Philadelphia, PA
19103. At this meeting, you will have the opportunity to ask questions. Enclosed
with this proxy statement are your voting card and the 2001 Annual Report to
Shareholders.
The principal business of the meeting is to elect eleven (11)
directors, to ratify the selection of Ernst & Young LLP as the independent
public accountants of Right Management Consultants, Inc. for 2002, and to
transact any other business that is properly presented at the Annual Meeting.
The notice of meeting and Proxy Statement accompanying this letter describe the
specific business to be acted upon in more detail.
This year for the 2002 Annual Meeting, we have adopted the SEC's
"householding" rule. This rule permits us to deliver a single proxy or
information statement to a household, even though two or more shareholders live
under the same roof or a shareholder has shares registered in multiple accounts.
This rule enables us to reduce the expense of printing and mailing associated
with proxy statements and reduces the amount of duplicative information you may
currently receive. If this rule applies to you and you wish to continue
receiving proxy materials as in prior years, without participating in the
"householding" rule, please inform us in writing within sixty (60) days. If we
do not hear from you within sixty (60) days, we will assume that we have your
implied consent to deliver one set of proxy materials under this rule. This
implied consent will continue for as long as you remain a shareholder of the
company, unless you inform us in writing otherwise.
We are delighted that you have chosen to invest in Right Management
Consultants, Inc. and hope that, whether or not you plan to attend the Annual
Meeting, you will vote as soon as possible by completing, signing and returning
the enclosed proxy in the envelope provided. Your vote is important. Voting by
written proxy will ensure your representation at the Annual Meeting if you do
not attend in person.
I look forward to seeing you on May 2, 2002 at the Annual Meeting.
Sincerely,
/S/ CHARLES J. MALLON
---------------------
Charles J. Mallon
Secretary
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RIGHT MANAGEMENT CONSULTANTS, INC.
1818 Market Street
33rd Floor
Philadelphia, Pennsylvania 19103
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, MAY 2, 2002
Date: Thursday, May 2, 2002
Time: 10:00 a.m. (EDT)
Place: 1818 Market Street
33rd Floor
Philadelphia, PA 19103
We will hold our Annual Meeting of Shareholders on Thursday, May 2,
2002, at 10:00 a.m., at our headquarters, 1818 Market Street, 33rd Floor,
Philadelphia, Pennsylvania.
The purpose of the Annual Meeting is to consider and take action on the
following:
1. To elect eleven (11) directors for a term of one year.
2. To ratify the selection of Ernst & Young LLP as our
independent public accountants for the fiscal year 2002.
3. To transact any other business properly brought before the
Annual Meeting.
If you are a shareholder as of March 15, 2002, you may vote at the
meeting. This Proxy Statement, voting instructions and our 2001 Annual Report to
Shareholders are being distributed on or about April 12, 2002.
You are cordially invited to attend the meeting. However, whether or
not you expect to attend the meeting, to assure that your shares are represented
at the meeting, please date, execute, and mail promptly the enclosed proxy card
in the enclosed, stamped envelope. The return of the enclosed proxy card will
not affect your right to vote in person if you do attend the meeting.
By order of the Board of Directors
/s/ CHARLES J. MALLON
---------------------
Charles J. Mallon
Secretary
Philadelphia, Pennsylvania
April 12, 2002
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RIGHT MANAGEMENT CONSULTANTS, INC.
1818 Market Street
33rd Floor
Philadelphia, PA 19103
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
May 2, 2002
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Right Management Consultants, Inc., for
use at our Annual Meeting of Shareholders which is scheduled to be held on
Thursday, May 2, 2002, at 10:00 a.m. (EDT), at our headquarters, 1818 Market
Street, 33rd Floor, Philadelphia, Pennsylvania. This Proxy Statement, the
foregoing notice and the enclosed proxy are being sent to shareholders on or
about April 12, 2002.
Table of Contents
Page
Commonly Asked Questions and Answers about the Annual Meeting.................6
Principal Shareholders and Management's Holdings..............................9
Compliance with Section 16(a) of Securities Exchange Act of 1934.............11
Proposal 1 - Election of Directors...........................................11
Committees of the Board of Directors.........................................15
Certain Relationships and Related Party Transactions.........................16
Executive Compensation.......................................................17
Stock Option Grants..........................................................18
Option Exercises and Year-end Option Value...................................19
Retirement Compensation......................................................19
Employment and Change in Control Agreements..................................21
Compensation of Directors....................................................22
Independent Public Accountants...............................................23
Audit and Non-Audit Fees.....................................................23
Audit Committee Report.......................................................23
Compensation and Options Committee Report on Executive Compensation..........25
Compensation Committee Interlocks and Insider Participation
in Compensation.............................................................29
Common Shares Performance....................................................29
Proposal 2 - Ratification of Appointment of Independent Public Accountants...30
Other Business...............................................................30
Shareholder Proposals........................................................30
Annual Report on Form 10-K...................................................30
The Audit Committee Charter..................................................31
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Commonly Asked Questions and Answers about the Annual Meeting
Q. What am I voting on?
A. 1. Election of eleven (11) directors for a one-year term.
2. Ratification of Ernst & Young LLP as Right Management
Consultants, Inc.'s independent public accountants for fiscal
year 2002.
3. Any other business that properly comes before the meeting for
a vote.
Q. Who is entitled to vote at the Annual Meeting, and how many votes do
they have?
A. Common shareholders of record as of the close of business on March 15,
2002 may vote at the Annual Meeting. Each share has one vote. There
were 15,034,918 shares of common stock outstanding on March 15, 2002.
Q. How do I vote?
A. You must be present, or represented by proxy, at the Annual Meeting in
order to vote your shares. Since many of our shareholders are unable to
attend the Annual Meeting in person, we send proxy cards to all of our
shareholders to enable them to be represented and to vote at the Annual
Meeting.
Q. What is a proxy?
A. A proxy is a person you appoint to vote on your behalf. If you are
unable to attend the Annual Meeting, we are seeking your appointment of
proxies so that your Common Shares may be voted. You must complete and
return the enclosed proxy card to have your shares voted by proxy.
Q. By completing and returning this proxy card, who am I designating as my
proxy?
A. You will be designating Richard J. Pinola, our Chief Executive Officer
and Chairman of the Board and Joseph T. Smith, our Vice Chairman of the
Board, as your proxies. They may act together or individually on your
behalf, and will have the authority to appoint a substitute to act as
proxy.
Q. How will my proxy vote my shares?
A. Your proxy will vote according to the instructions on your proxy card.
We do not intend to bring any other matter for a vote at the Annual
Meeting, and we do not know of anyone else who intends to do so. Your
proxies are authorized to vote on your behalf, however, using their
best judgment, on any other business that properly comes before the
Annual Meeting.
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Q. How do I vote using my proxy card?
A. If you do not attend the Annual Meeting and vote in person, you may
vote by returning the enclosed proxy card to us. To vote by mail,
simply mark, sign, and date the enclosed proxy card, and return it in
the enclosed postage-paid envelope. Alternatively, you may deliver your
proxy card to us in person, by facsimile, or by a courier. If you hold
your shares through a broker, bank, or other nominee, you will receive
separate instructions from the nominee describing how to vote your
shares.
Q. Can I vote electronically?
A. If you are a registered shareholder (that is, you hold your stock in
certificate form), you may vote electronically through the Internet by
following the instructions included with your proxy card. If your
shares are held in "street name," please check your proxy card or
contact your broker or nominee to determine whether you will be able to
vote electronically.
Q. How do I revoke my proxy?
A. You may revoke your proxy at any time before your shares are voted at
the Annual Meeting by:
o Notifying our Corporate Secretary, Charles J. Mallon, in
writing at 1818 Market Street, 33rd Floor, Philadelphia, PA
19103, that you are revoking your proxy;
o Executing a new proxy card; or
o Attending and voting by ballot at the Annual Meeting.
Q. Is my vote confidential?
A. Yes, only certain employees will have access to your proxy card. All
comments remain confidential, unless you ask that your name be
disclosed.
Q. Who will count the votes?
A. One of our officers will act as the inspector of election and will
count the votes in conjunction with our transfer agent, StockTrans,
Inc.
Q. What constitutes a quorum?
A. A majority of the outstanding shares, either present or represented by
proxy, constitutes a quorum. As of March 15, 2002 there were 15,034,918
shares of common stock issued, outstanding, and entitled to vote at the
Annual Meeting. A quorum is necessary in order to conduct the Annual
Meeting. If you choose to have your shares represented by proxy at the
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Annual Meeting, you will be considered part of the quorum. If a quorum
is not present at the Annual Meeting, the shareholders present in
person or by proxy may adjourn the meeting to a date when a quorum is
present. If an adjournment is for more than 30 days or a new record
date is fixed for the adjourned meeting, we will provide notice of the
adjourned meeting to each shareholder of record entitled to vote at the
meeting.
Q. What vote is needed for the proposals to be adopted and how will my
vote be counted?
A. With respect to Proposal 1, the election of directors, the eleven
directors who receive the most votes will be elected. You may vote
separately for, or withhold your vote separately for, each nominee.
Votes that are withheld will not be included in the vote tally for the
election of directors, and will have no effect on the results of the
vote. Shareholders do not have the right to cumulate votes in the
election of directors.
With respect to Proposal 2, the vote of a majority of the shares of
shareholders are required to approve the ratification of Ernst & Young
LLP as our independent public accountants for the fiscal year 2002.
Abstentions and any shares as to which a broker or nominee indicates
that it does not have discretionary authority to vote on a particular
matter, will be treated as shares that are present and entitled to vote
for purposes of determining the presence of a quorum but as unvoted for
purposes of determining whether the approval of shareholders has been
obtained with respect to Proposal 2.
Q. What percentage of our Common Shares do the directors and officers own?
A. As of March 15, 2002, our directors and executive officers owned
approximately 18.3% of our Common Shares. See the discussion under the
heading "Principal Shareholders and Management's Holdings" on page 9
for more details.
Q. Who is soliciting my proxy, how is it being solicited, and who pays the
cost?
A. The Board of Directors of Right Management Consultants, Inc. is
soliciting proxies primarily by mail. In addition, proxies may also be
solicited in person, by telephone, or facsimile. We will pay the cost
of soliciting proxies. We will also reimburse brokerage houses and
other custodians, nominees, and fiduciaries for their reasonable
out-of-pocket expenses for forwarding proxy and solicitation material
to the owners of our common shares.
Q. When are Shareholder proposals for the year 2003 Annual Meeting due?
A. Shareholder proposals to be presented at our year 2003 Annual Meeting
must be submitted in writing by December 1, 2002 to our Corporate
Secretary, at 1818 Market Street, 33rd Floor, Philadelphia, PA 19103.
You should submit any proposal by a method that permits you to prove
the date of delivery to us. See the discussion under the heading
"Shareholder Proposals" on page 30 for information regarding certain
procedures with respect to shareholder proposals.
Q. How may I obtain a copy of the Company's Form 10-K?
A. You may request a copy of our Annual Report on Form 10-K for the year
ended December 31, 2001, by writing to our Corporate Secretary at 1818
Market Street, Philadelphia, PA 19103.
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Principal Shareholders and Management's Holdings
The following table sets forth each nominee for director, all directors
and officers as a group and each shareholder who is known to own beneficially
more than 5% of the outstanding Common Shares as of March 15, 2002.
Number of Shares Percent of Class
Name of Shareholder Beneficially Owned (1)
------------------- ------------------ ---
FMR Corporation 2,019,575 (2) 13.4%
Richard J. Pinola 1,645,857 (3) 10.9%
T. Rowe Price Associates, Inc. 1,354,600 (4) 9.0%
Joseph T. Smith 478,780 (5) 3.2%
Frank P. Louchheim 173,680 (6) 1.2%
John J. Gavin 87,503 (7) *
Larry A. Evans 85,234 (8) *
Frederick R. Davidson 56,192 *
John R. Bourbeau 46,316 (9) *
James E. Greenway 24,561 (10) *
Charles J. Mallon 20,063 (11) *
Catherine Y. Selleck 19,287 (12) *
Rebecca J. Maddox 12,601 (13) *
Howard H. Mark 6,516 (14) *
Keiichi Iwao -- *
Oliver S. Franklin -- *
Stephen Johnson -- *
All Directors and Officers as a Group (23 persons) 2,750,444 (15) 18.3%
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* Less than 1%
(1) Any securities not currently outstanding but subject to options
exercisable by such shareholder within 60 days of March 15, 2002 are
deemed to be outstanding for the purpose of computing the percentage of
outstanding securities of the class owned by such person.
(2) Based on Schedule 13G/A dated February 14, 2002 filed by FMR
Corporation ("FMR") with the Securities and Exchange Commission
("SEC"). In such Schedule, FMR reported having sole voting power with
respect to 529,750 shares and sole dispositive power with respect to
all 2,019,575 shares. FMR's address is 82 Devonshire Street, Boston, MA
02109.
(3) The number of shares listed as held by Mr. Pinola includes (a) an
aggregate of 4,500 shares which are held in two separate trusts for his
children, as to which Mr. Pinola disclaims beneficial ownership and (b)
currently exercisable options to purchase 1,039,632 shares of our
Common Shares.
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(4) Based on Schedule 13G/A dated February 14, 2002 filed by T. Rowe Price
Associates, Inc. ("Price Associates") with the SEC. In such Schedule,
Price Associates reported having sole voting power with respect to
208,300 shares and sole dispositive power with respect to all 1,354,600
shares and states the following: "These securities are owned by various
individual and institutional investors including T. Rowe Price
Small-Cap Value Fund, Inc. (which owns 1,110,000 shares, representing
7.4% of the shares outstanding), which Price Associates serves as
investment adviser with power to direct investments and/or sole power
to vote the securities. For purposes of the reporting requirements of
the Securities Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates
expressly disclaims that it is, in fact, the beneficial owner of such
securities." Price Associates' address is 100 E. Pratt Street,
Baltimore, MD 21202.
(5) The number of shares listed as held by Mr. Smith includes currently
exercisable options to purchase an aggregate of 437,663 shares of our
Common Shares.
(6) The number of shares listed as held by Mr. Louchheim includes (a) an
aggregate of 3,543 shares which are held by certain of his children as
custodian for a total of seven minor grandchildren of Mr. Louchheim, as
to which Mr. Louchheim disclaims beneficial ownership, and (b)
currently exercisable options to purchase an aggregate of 29,533 of our
Common Shares.
(7) The number of shares listed as held by Mr. Gavin includes currently
exercisable options to purchase an aggregate of 45,000 of our Common
Shares.
(8) The number of shares listed as held by Mr. Evans includes (a) an
aggregate of 8,100 shares held by his wife, as to which Mr. Evans
disclaims beneficial ownership, and (b) currently exercisable options
to purchase an aggregate of 16,876 of our Common Shares.
(9) The number of shares listed as held by Mr. Bourbeau includes currently
exercisable options to purchase an aggregate of 13,500 of our Common
Shares.
(10) The number of shares listed as held by Mr. Greenway includes (a) an
aggregate of 9,343 shares held in a Stock Fund under our 401(K) Plan,
and (b) an approximate aggregate of 6,750 shares in an SEP IRA account
held jointly with his wife.
(11) The number of shares listed as held by Mr. Mallon includes currently
exercisable options to purchase an aggregate of 6,563 of our Common
Shares.
(12) The number of shares listed as held by Ms. Selleck includes currently
exercisable options to purchase an aggregate of 13,500 of our Common
Shares.
(13) The number of shares listed as held by Ms. Maddox includes currently
exercisable options to purchase an aggregate of 9,125 of our Common
Shares.
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(14) The number of shares listed as held by Mr. Mark includes (a) an
aggregate of 2,539 shares held in a Stock Fund under our 401(K) Plan,
and (b) currently exercisable options to purchase an aggregate of 3,750
of our Common Shares.
(15) The number of shares in the aggregate listed as held by our directors
and executive officers as a group includes (a) currently exercisable
options to purchase an aggregate of 1,636,705 of our Common Shares and
(b) 27,232 shares held in a Stock Fund under our 401(K) Plan.
Compliance with Section 16(a) of Securities Exchange Act of 1934
The rules of the SEC require that our directors and executive officers,
and persons who own more than ten percent of a registered class of our equity
securities, file with the SEC initial reports of ownership and reports of
changes in ownership of Common Shares and other equity securities. Officers,
directors and greater than ten percent shareholders are required by SEC
regulations to furnish us with copies of all forms they file.
To our knowledge, based solely on our review of the copies of such
reports furnished to us and written representations that no other reports were
required during the fiscal year ended December 31, 2001, two initial reports of
ownership by Mr. Iwao and Mr. Hayashi, former Chairman and Chief Executive
Officer of Right WayStation, Inc., and eight reports of changes of ownership by
four directors were not timely filed. The late filings of reports of changes of
ownership include two reports by Mr. Davidson, reporting two indirect sales
transactions, two reports by Mr. Evans, reporting a sale of shares directly
owned by him and seven indirect sales transactions all occurring on the same
day, two reports by Mr. Louchheim reporting five sales transactions, and two
reports by Dr. Smye, former director, reporting three sales transactions.
PROPOSALS TO BE VOTED UPON
Proposal 1: Election of Directors
After Dr. Smye's resignation in February 2002, our Board of Directors
consists of eleven members. Ten of the current members have been nominated for
re-election, and have agreed to serve a one-year term if elected. Keiichi Iwao
has decided not to run for re-election. One new nominee, Stephen Johnson, is
being proposed. If any nominee is unable to stand for election or re-election,
as the case may be, which we do not expect, the Board may provide for a lesser
number of directors or designate a substitute. If a substitute is designated,
shares represented by proxies may be voted for a substitute nominee.
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The Board of Directors recommends a vote "FOR" each of the nominees:
Name Director Since Age Position
Frank P. Louchheim 1980 78 Founding Chairman
Richard J. Pinola 1989 56 Chairman of the Board of Directors and Chief
Executive Officer
Joseph T. Smith 1991 66 Vice Chairman of the Board of Directors
John J. Gavin 1999 45 President and Chief Operating Officer
Larry A. Evans 1980 59 Founding Principal
John R. Bourbeau 1995 57 President of Midwest Reemployment Associates,
Inc., an Affiliate of the Company
Rebecca J. Maddox 1995 48 President of Rebecca Maddox Co. LLC
Catherine Y. Selleck 1995 68 Business Consultant
Frederick R. Davidson 1997 65 Chairman of Right Management Consultants Holdings, Pty. Ltd.
Oliver S. Franklin 2001 56 Executive Vice President of GS Capital Management
Stephen Johnson N/A 66 Chairman of Coutts Consulting Group, Ltd.
Mr. Louchheim is one of our founders. From November 1980 until
September 1987, he served as President, Chief Executive Officer and Chairman of
our Board of Directors. He continued to serve as Chief Executive Officer and
Chairman of the Board through December 1991. From January 1992 to December 1993,
he served as the full-time Chairman of the Board of Directors. Effective January
1, 1994, Mr. Louchheim was appointed Founding Chairman and continues as a
director.
Mr. Pinola was elected as a director by the Board in October 1989. Mr.
Pinola is a Certified Public Accountant and joined Penn Mutual Life Insurance
Company in 1969. He was appointed President and Chief Operating Officer in 1988,
which position he held until his resignation in September 1991. Mr. Pinola was a
financial consultant to various organizations from September 1991 until July
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1992, at which time he was appointed President and Chief Executive Officer of
the Company. Effective January 1, 1994, Mr. Pinola was appointed Chairman of the
Board of Directors and continues as Chief Executive Officer. Mr. Pinola also
serves as a director of K-Tron International, a publicly held company.
Mr. Smith joined the Penn Mutual Life Insurance Company in 1963. In
1976, he was promoted to Vice President of Administration and Human Resources,
which position he held until his resignation in 1980. From 1981 to 1984, Mr.
Smith worked as an independent consultant offering a range of consulting
services to businesses. He joined us as a Senior Consultant in Professional
Services in August 1984 and, from August 1988 until September 1992 held the
position of Regional Managing Principal of our Philadelphia office. Mr. Smith
was elected as a Director in May 1991. From September 1992 through December
1993, Mr. Smith served as our Chief Operating Officer. Effective January 1,
1994, Mr. Smith was appointed President in which capacity he served until
December 1998. Effective January 1, 1999, Mr. Smith was appointed Vice Chairman
of the Board of Directors. Mr. Smith retired as an employee of the company on
January 1, 2001, and continues as Vice Chairman of the Board of Directors.
Mr. Gavin was employed at Arthur Andersen LLP in Philadelphia for 18
years in which he served as the partner in charge of the
manufacturing/distribution industries. Mr. Gavin joined us in December 1996 as
Executive Vice President. In this capacity, Mr. Gavin was responsible for the
overall marketing strategy and business development activities for our worldwide
locations. Effective January 1, 1999, Mr. Gavin was appointed President and
Chief Operating Officer. Also effective January 1, 1999, Mr. Gavin was elected a
Director by the Board of Directors. Mr. Gavin is a member of the Board of
Advisors for Temple University's Fox School of Business and he is a member of
the Board of Directors of Global Health Ministry. Mr. Gavin is also a director
of Opinion Research Corporation, which provides marketing research and services.
Mr. Evans was professionally involved in the international finance and
venture capital industries, prior to May 1978. From May 1978 to November 1980,
Mr. Evans was employed as an independent outplacement consultant for Bernard
Haldane Associates, Inc., working with Mr. Louchheim. Since November 1980, Mr.
Evans served as our Executive Vice President and a Director. From January 1990
until May 1995, Mr. Evans served as Regional Managing Principal of several of
our offices. From May 1995 until December 1999, Mr. Evans worked in our
corporate office together with our regional offices in marketing to major
national and international accounts. Effective January 1, 2000, Mr. Evans was
appointed to oversee one of our largest Key Executive Services practices. Mr.
Evans retired as an employee of the company on January 1, 2001, at which point
he founded Virtual Board of Advisors ("Virboa"), a company that provides
assistance with acquisitions. Mr. Evans serves on various boards of both
non-profit organizations and community associations. He also holds directorships
with Knite, Inc., a high-tech ignition company, Eschoolmall, an internet
educational procurement and learning site, and he is an advisor to Embedded
Wireless Devices, a wireless solutions company.
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Mr. Bourbeau founded Midwest Reemployment Associates, Inc., our
franchise affiliate, in 1981, where he currently serves as the Regional Managing
Principal and which has offices in Southfield, Grand Rapids, Kalamazoo, Lansing
and Midland, Michigan, as well as Toledo, Ohio. Mr. Bourbeau also serves as a
board member for the State of Michigan Chamber of Commerce, Michigan Colleges
Foundation, Detroit Historical Society, and is a life member of the Economic
Club of Detroit.
Ms. Maddox is President and Founder of Rebecca Maddox Co. LLC, a
consulting firm specializing in helping Fortune 1000 companies market and sell
their products and services to women customers. Ms. Maddox is a Certified Public
Accountant, holds an MBA in Finance from Columbia University and is the author
of Inc. Your Dreams. Ms. Maddox serves on the Board of D-Code, a market research
firm in Canada and served for six years on the Regional Advisory Board of PNC
Bank.
Ms. Selleck spent many years with IBM, in various executive capacities.
Subsequent to her positions with IBM, Ms. Selleck joined Metaphor, a software
and services company, where she served as President and Chief Executive Officer.
She is now an independent business consultant to information technology
companies on a wide range of business issues. Ms. Selleck is a Trustee of
Occidental College.
Mr. Davidson is the Chairman of Right Management Consultants Holdings,
Pty. Ltd., formerly Right D&A Pty. Ltd., an Asia-Pacific career transition firm
of which we acquired a fifty-one percent interest during 1997, and which is now
owned 100% by us. Mr. Davidson was elected a Director by the Board of Directors
on July 24, 1997. Mr. Davidson is Chairman of St. John Ambulance Australia
(Victoria), Chairman of Cooperative Research Centre for Cochlear Implant and
Hearing Aid Innovation, Chairman of Hearworks, Pty. Ltd., a Commander of the
Order of St. John, and a member of the International Institute of Strategic
Studies in London.
Mr. Franklin is an Executive Vice President with GS Capital Management,
a private equity and venture capitalist firm. He joined GS Capital Management in
early 2002. Prior to this, Mr. Franklin co-founded in 1998, RISA Investment
Advisers, LLC ("RISA"), an investment firm focusing on the RISA Fund and RISA
Business Finance. He served as the President of RISA until it was sold in early
2002. Prior to co-founding RISA, Mr. Franklin was the Senior Vice President at
The Fidelity Management Trust Company, where he directed a unit that developed
new institutional financial products. Also in 1998, The British Ambassador to
the US appointed him Her Majesty's Honorary Consul in Philadelphia. In this
position, he is responsible for promoting British diplomatic, investment and
consular interest in the region. Mr. Franklin is a member of the Philadelphia
Securities Association and The National Association of Securities Professionals.
Mr. Johnson spent much of his career in the fibre and petrochemical
industry. He held a position with AKZO-NOBEL for many years, where his
concentrations included strategic planning and international operations. He
entered the career consulting business in 1986 when he took the position of
Senior Consultant with Coutts Consulting Group, Ltd. ("Coutts"). In 1987, Mr.
Johnson was appointed Chief Executive Officer of Coutts, where his
14
responsibilities included the management of operations and the development of
the business. In 1987, Mr. Johnson became a Director of Coutts. Effective in
1996, he was appointed Chairman of the Board of Directors for Coutts.
Committees of the Board of Directors
What are the current committees of the Board of Directors?
The Board of Directors has four committees: the Compensation and
Options Committee, the Audit Committee, the Executive and Finance Committee and
the Nominating Committee.
Compensation and Executive and Finance Nominating
Options Committee Audit Committee Committee Committee
Mr. Louchheim X X
Mr. Pinola X X
Mr. Smith X
Mr. Gavin X
Mr. Evans X
Mr. Bourbeau X X
Ms. Maddox X X
Ms. Selleck X X
Mr. Davidson X
Mr. Franklin X
COMPENSATION AND OPTIONS COMMITTEE: This Committee's duties involve reviewing
proposals made by the Chief Executive Officer to grant stock options, evaluating
the rationale and expected contributions of the grantees to our future results,
ensuring that compensation is at market levels and is supportive of our overall
goals and objectives, and determining whether to approve stock option grants
with any modifications it deems appropriate. This Committee is also responsible
for remuneration agreements with the Chief Executive Officer and the
President/Chief Operating Officer. Ms. Selleck serves as Chair of this
Committee.
AUDIT: The Committee's principle function is to oversee our annual audit and
financial reporting. Ms. Maddox serves as Chair of this Committee. The Board of
Directors has adopted a written Audit Committee Charter, a copy of which is
attached as Exhibit A.
EXECUTIVE AND FINANCE COMMITTEE: This Committee is available to meet when
necessary at anytime and has the power of the Board of Directors in between the
scheduled Board meetings.
NOMINATING COMMITTEE: This Committee recommends to the Board of Directors
nominees for election or re-election as director at the next Annual Meeting of
shareholders or for vacancies arising within the Board of Directors. The
Nominating Committee will consider nominees recommended by shareholders, which
should be submitted in writing to the Nominating Committee on or before the date
15
specified under "Shareholder Proposals" below in order to be considered for the
next Annual Meeting. The Nominating Committee is under no obligation to
recommend any persons identified by shareholders as nominees to the Board of
Directors. Mr. Louchheim is Chair of this Committee.
How many Board and Committee Meetings were held in 2001?
During 2001, the Board of Directors met seven times, one of which was a
special meeting, the Compensation and Options Committee met six times, one of
which was a special meeting, the Audit Committee met two times, and the
Nominating Committee met once. The Executive and Finance Committee did not meet
during 2001. Mr. Iwao attended three of the seven Board meetings that he was
scheduled to attend during the year.
Certain Relationships and Related Party Transactions
Midwest Reemployment Associates, Inc., ("Midwest"), the franchise
business owned by Mr. Bourbeau, received approximately $1,675,000 in fees from
us during 2001 for services performed on our behalf. Midwest incurred
approximately $2,783,000 in royalties and fees payable to us for our services
performed during 2001 on behalf of Midwest, including payments for reimbursable
expenses and materials purchased from us by Midwest. The fees paid and received
by Midwest were in accordance with our standard fee and royalty arrangement with
all of our franchisees under our Affiliate Agreement.
In accordance with two separate consulting agreements, one for Mr.
Smith and one for Mr. Evans, each effective January 1, 2001, we paid Mr. Smith
approximately $120,000 and we paid Mr. Evans approximately $75,000 for the
consulting services they provided to us during 2001. Per these consulting
agreements, Mr. Smith and Mr. Evans were provided with the usage of an
automobile or an automobile allowance. In addition, for their outstanding
performance and numerous years of service to the Board of Directors, both Mr.
Smith and Mr. Evans' stock options were extended beyond their retirement. For
his efforts during 2001, Mr. Smith was awarded a $50,000 bonus.
Effective January 1, 2001, we purchased an additional 31% interest in
Right WayStation, a Japanese career transition and organizational consulting
firm of which Mr. Iwao is a Director. This purchase gave us a controlling 51%
interest in Right WayStation. We paid an aggregate purchase price of
approximately $9,540,000 to the shareholders of Right WayStation, of which Mr.
Iwao received $6,246,000. In connection with this purchase agreement, Mr. Iwao
provides consulting services to Right WayStation under a consulting agreement.
During 2001, Right WayStation paid Mr. Iwao approximately $98,750 for his
consulting services.
Effective January 1, 2002, we purchased from Mr. Iwao an additional 20%
interest in Right WayStation, bringing our total ownership to 71%. We paid the
total purchase price of approximately $3,285,000 to Mr. Iwao. After this
transaction, Mr. Iwao now owns 5 shares of Right WayStation, representing less
than 1% of the total outstanding stock of Right WayStation.
16
On March 22, 2002, we purchased all of the shares of Atlas Group
Holdings Limited ("Atlas"), the parent company of Coutts, of which Mr. Johnson
was Chairman of the Board of Directors and a partial owner. Coutts is a London
based career transition and organizational consulting firm with operations in
Europe, Japan and Canada. This acquisition was valued at approximately
$105,000,000, including the costs of the transaction. The consideration
consisted of a combination of cash, purchase price notes and funds we supplied
to repay existing indebtedness of Atlas. The total of the cash and purchase
price notes payable to the shareholders of Coutts was approximately $59,011,000,
of which Mr. Johnson received $1,928,000. This consideration was payable to Mr.
Johnson approximately $61,000 in cash and approximately $1,867,000 in a purchase
price note.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation of the Chief Executive
Officer and the four other most highly compensated executive officers for 2001
("named officers"), as well as the compensation paid to each such individual for
2000 and 1999.
Annual Compensation Long Term Compensation
Common Shares
Underlying
Options Compensation (1)
Name Year Salary Bonus
Richard J. Pinola Chairman 2001 $580,000 $3,590,087 175,001 $390,699
of the Board and CEO 2000 530,000 265,000 -- 68,278
1999 530,000 556,500 125,000 79,250
John J. Gavin 2001 $385,000 $1,540,934 62,501 $172,087
President and COO 2000 350,000 140,000 100,000 29,747
1999 350,000 301,875 60,000 36,877
James E. Greenway 2001 $250,000 $965,291 15,000 $45,535
EVP - Western Group 2000 220,000 77,000 25,000 2,625
1999 200,000 152,500 13,500 3,750
Howard H. Mark (2) 2001 $190,000 $748,621 15,000 $35,188
EVP, e-Business 2000 32,096 20,000 11,250 --
1999 144,970 -- 3,375 3,750
Charles J. Mallon 2001 $190,000 $733,621 15,000 $34,067
EVP and Chief Financial 2000 175,000 61,250 56,250 2,625
Officer 1999 128,333 61,333 19,688 3,750
(1) Includes amounts paid, payable or accrued in connection with
retirement. Such amounts consist of contributions and allocations
relating to qualified and non-qualified defined contribution plans,
17
excluding the Supplemental Executive Retirement Plan effective on
January 1, 2000. Matching contributions to our qualified 401(k) savings
plan and the non-qualified deferred compensation plan vest at a rate of
33 1/3% per year from the date of hire. Contributions to the
supplemental non-qualified plans vest according to the terms in each
officer's respective employment agreement. See "Employment Agreements
and Change in Control Agreements."
(2) Mr. Mark's stock options received in 1999 expired with his departure
from the Company in December 1999. Mr. Mark re-joined the Company in
November 2000. His salary above for 2000 represents a pro-rated amount
for the time he worked with the Company during that year.
Stock Option Grants
The table below shows option grants made in 2001 to the named officers.
Potential Realizable Value at
Individual Grants Assumed Annual Rates of Stock
----------------- Price Appreciation for Option Term (2)
Number of % of Total --------------------------------------
Underlying Options
Options Granted to Exercise
Granted in Employees in Price Per Expiration
Name 2001 (1) 2001 Share Date 5% 10%
---- -------- ---- ----- ---- -- ---
Richard J. Pinola 37,500 6.0% $16.00 7/25/2011 $843,972 $2,735,950
37,500 6.0% $21.94 10/07/2011 $1,157,296 $3,751,672
100,001 16.0% $21.97 10/23/2011 $3,090,373 $10,018,239
John J. Gavin 18,750 3.0% $16.00 7/25/2011 $421,986 $1,367,975
18,750 3.0% $21.94 10/07/2011 $578,648 $1,875,836
25,001 4.0% $21.97 10/23/2011 $772,617 $2,504,635
James E. Greenway 7,500 1.2% $16.00 7/25/2011 $168,794 $547,190
7,500 1.2% $21.94 10/07/2011 $231,459 $750,334
Howard H. Mark 7,500 1.2% $16.00 7/25/2011 $168,794 $547,190
7,500 1.2% $21.94 10/07/2011 $231,459 $750,334
Charles J. Mallon 7,500 1.2% $16.00 7/25/2011 $168,794 $547,190
7,500 1.2% $21.94 10/07/2011 $231,459 $750,334
(1) The grants detailed above were made on July 26, 2001, October 8, 2001
and October 24, 2001 in connection with achieving our earnings per
share targets, and for Mr. Pinola and Mr. Gavin, to renew their
employment agreements with us. The first one-third of each grant
becomes exercisable one year from the date the grant was made. All
options vest on a cumulative basis, one-third each year. These options
were granted at an exercise price equal to the closing price of the
Common Shares on the NASDAQ as of the date of grant. If a change in
control (as defined in the 1993 Stock Incentive Plan pursuant to which
18
the options were granted) were to occur before the expiration date,
these options would vest and become exercisable immediately.
(2) The potential realizable values are based on an assumption that the
stock price of our Common Shares will appreciate at the annual rate
shown (compounded annually) from the date of grant until the end of the
option term. These values do not take into account amounts required to
be paid as income taxes under the Internal Revenue Code and any
applicable state laws or option provisions providing for termination of
an option following termination of employment, non-transferability or
vesting within a three year period. These amounts are calculated based
on the assumptions required to be used by the SEC and do not reflect
our estimate of future stock price growth of our Common Shares.
Option Exercises and Year-end Option Value
The table below shows information concerning the exercise of stock
options during 2001 by each of the named officers and the year-end value of the
in-the-money unexercised options.
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options at 12/31/01 Options at 12/31/01 (1)
------------------------------- -----------------------
Shares Acquired Value
on Exercise (#) Realized ($) Exercisable Non-Exercisable Exercisable Non-Exercisable
--------------- ------------ ----------- --------------- ----------- ---------------
Richard J. Pinola -- -- 983,382 268,751 $10,694,405 $1,121,250
John J. Gavin 138,750 $1,812,575 18,750 332,501 $232,688 $3,432,300
James E. Greenway 22,875 $245,703 7,500 81,375 $93,075 $853,043
Howard H. Mark -- -- 3,750 22,500 $47,550 $104,850
Charles J. Mallon 11,157 $181,965 5,625 77,813 $69,806 $812,161
(1) Based on the closing price ($17.30) on the NASDAQ on December 31, 2001.
Retirement Compensation
In addition to our defined contribution savings plan under Section
401(K) of the Internal Revenue Code, and our non-qualified deferred compensation
plan for certain employees (see Compensation and Options Committee Report on
Executive Compensation), effective January 1, 2000, the Board of Directors
approved a non-qualified Supplemental Executive Retirement Plan for executive
officers and other key employees. The purpose of this plan is to provide
supplemental income benefits to plan participants or their survivors upon
participants' retirement or death. This plan was amended effective January 1,
2002, to change the defined percentage of the average final compensation for
benefits payable to Mr. Pinola and Mr. Gavin and to change the number of years
of service for participants in the plan, with the exception of Mr. Pinola and
Mr. Gavin.
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The following tables set forth the estimated aggregate annual benefits
payable under our Supplemental Executive Retirement Plan, to persons in
specified average final compensation and credited service classifications upon
retirement at age 65. The first table relates to Mr. Pinola, and Mr. Gavin,
whose benefits payable are 50% of their average final compensation, and are not
service-related, except for vesting purposes. The second table relates to all
other participants whose benefits payable are 20% of their average final
compensation after ten years of service, and a pro-rata reduction for total
service less than ten years, as well as for future service less than five years.
Amounts shown in these tables do not include deductions for U.S. Social Security
benefits per terms of this plan.
Estimated Aggregate Annual Retirement Benefit
Average Assuming Credited Service of:
Final ----------------------------------------------------------------------
Compensation 15 Years 20 Years 25 Years 30 Years 35 Years
------------ -------- -------- -------- -------- --------
$335,000 $167,500 $167,500 $167,500 $167,500 $167,500
385,000 192,500 192,500 192,500 192,500 192,500
435,000 217,500 217,500 217,500 217,500 217,500
485,000 242,500 242,500 242,500 242,500 242,500
535,000 267,500 267,500 267,500 267,500 267,500
585,000 292,500 292,500 292,500 292,500 292,500
635,000 317,500 317,500 317,500 317,500 317,500
685,000 342,500 342,500 342,500 342,500 342,500
The rounded number of years of credited service for Mr. Pinola and Mr.
Gavin are 10 and 5, respectively.
Estimated Aggregate Annual Retirement Benefit
Average Assuming Credited Service of:
Final ---------------------------------------------------------------------
Compensation 15 Years 20 Years 25 Years 30 Years 35 Years
------------ -------- -------- -------- -------- --------
$150,000 $ 30,000 $ 30,000 $ 30,000 $ 30,000 $ 30,000
200,000 40,000 40,000 40,000 40,000 40,000
250,000 50,000 50,000 50,000 50,000 50,000
300,000 60,000 60,000 60,000 60,000 60,000
350,000 70,000 70,000 70,000 70,000 70,000
400,000 80,000 80,000 80,000 80,000 80,000
450,000 90,000 90,000 90,000 90,000 90,000
500,000 100,000 100,000 100,000 100,000 100,000
550,000 110,000 110,000 110,000 110,000 110,000
600,000 120,000 120,000 120,000 120,000 120,000
The rounded number of years of credited service for Mr. Greenway, Mr.
Mark and Mr. Mallon are 4, 4 and 5, respectively.
Compensation, for the purposes of determining retirement benefits,
consists of a participant's salary. This is the same salary as listed on the
Summary Compensation Table above. Severance pay, contingent payments and other
20
forms of special remuneration are excluded. For 2001, compensation for purposes
of determining retirement benefits for the named officers are the same as the
amounts shown in the Executive Compensation table.
Average final compensation represents a defined percentage of an
average of a participant's three highest consecutive annual salaries for the
participant's credited service. Participants, with the exception of Mr. Pinola
and Mr. Gavin, vest in their accrued retirement benefit upon completion of five
years' service. Mr. Pinola's and Mr. Gavin's accrued retirement benefit vests at
5% for each year of service plus another 10% for each year of plan
participation. The benefits shown in the table above are calculated based on a
lifetime with a guaranteed minimum of ten years.
Employment and Change in Control Agreements
Effective January 1, 2002, we and Mr. Pinola entered into a second
amendment to Mr. Pinola's Employment Agreement dated December 12, 1995. The term
of Mr. Pinola's employment was extended for three years from January 1, 2002 to
December 31, 2004, and his base salary was increased to $580,000 per year.
Under Mr. Pinola's amended agreement, we will pay to Mr. Pinola
annually as incentive compensation a cash bonus based on our financial
performance for that year in such amounts, as are determined by our Board of
Directors or its Compensation and Options Committee. Mr. Pinola is also entitled
to participate in any profit sharing, retirement plans and insurance programs
made available to certain other employees.
The amended agreement also entitles Mr. Pinola to participate in a
deferred compensation plan to which 5% of his compensation, including base
salary and bonuses, is credited yearly. Mr. Pinola's deferred compensation
account balance vests at the rate of 10% per year, beginning at age 47. The
account balance is payable as a life annuity (based on specified mortality
tables) in equal monthly installments with interest on the unpaid balance upon
his termination of service with us (except for death or if he is discharged for
cause) on or after age 62, subject to earlier payment in the event of death or
disability prior to termination of service, termination by us without cause and
under certain circumstances relating to a change in control. In the event there
is a change in control, we shall establish a trust and shall, from time to time,
transfer into the trust sufficient assets to meet our obligation to pay the
deferred compensation benefits to Mr. Pinola and his beneficiaries. Also, if Mr.
Pinola's employment is terminated within two years after the change in control,
he shall be entitled to begin receiving the deferred compensation benefits as if
he had reached his normal retirement date prior to termination.
Mr. Pinola's employment agreement is renewable for successive one year
terms beginning January 1, 2004 unless either party gives written notice of
non-renewal to the other at least 120 days prior to the expiration of the term.
Mr. Pinola's employment will not be renewed under this agreement on or after
December 31 of the calendar year in which he reaches age 65. If Mr. Pinola's
employment is terminated without cause, his employment is not renewed at the end
of the term of his employment agreement, or if Mr. Pinola terminates his
employment as a result of various reasons specified in the agreement, he will be
21
entitled to severance compensation equal to the greater of $580,000 or his total
salary and cash bonus paid during the 12 month period immediately preceding the
termination. This amount will be payable over the longer of the remaining term
of the agreement or 12 months from the date of termination. Upon certain changes
in control (as defined in the agreement), Mr. Pinola may, upon written notice to
us within 60 days thereafter, elect to either (a) continue his employment for a
period equal to the greater of the current term or a period which expires two
years after the date of the change in control or (b) terminate this employment
and receive severance compensation. In either case, the annual compensation
payable to him shall not be less than the greater of the total amount of the
base salary and cash bonus paid to him during the 12 months immediately
preceding the change in control or $580,000.
Effective January 1, 2002, we entered into an amendment to Mr. Gavin's
Employment Agreement, dated January 1, 1999. The terms of Mr. Gavin's agreement
are similar to those of Mr. Pinola's, except that Mr. Gavin's base salary per
year will be $385,000, and any component of his compensation determined by his
base salary is based upon $385,000. Mr. Gavin is also entitled to participate in
a deferred compensation plan with similar terms as outlined above for Mr.
Pinola, except that Mr. Gavin vests in his plan at the rate of 20% per year,
beginning at age 61.
To assist in retaining key members of our management, the Board of
Directors adopted in February 1997 a policy to provide for the potential payment
of severance to all Executive Vice Presidents in the event of a change in
control. Under this policy, the Executive Vice Presidents would be entitled to a
severance payment payable over two years if their employment was involuntarily
terminated within eighteen months of a change in control. The total amount
payable annually would not be less than the greater of: (1) the total amount of
base salary and incentive payments paid during the calendar year immediately
preceding the change in control; or (2) the annualized amount of the Executive
Vice President's then current salary as of the date of the change of control if
the respective Executive Vice President did not work the full calendar year
immediately preceding the change in control. Under this policy, a change in
control includes the sale of a controlling interest in Common Shares, the sale
of all or substantially all of our assets, or a merger or consolidation where
the surviving entity is not controlled by our present management.
Compensation of Directors
For 2001, we paid all directors who were not officers or employees
$17,000 per year as a director's fee, plus $750 for each Board of Directors
meeting attended and $750 for each Committee meeting attended plus reasonable
out-of-pocket expenses for attending such meetings. We also paid the Audit
Committee Chair and the Compensation and Options Committee Chair $1,500 and
$2,500, respectively, per year.
In addition, pursuant to our 1995 Directors' Stock Option Plan, each
director who was never an officer or employee received a grant of 7,500 options
on December 31, 2001. The first one-third of such options becomes exercisable on
December 31, 2002. The options vest on a cumulative basis, one-third each year,
22
and they expire on December 30, 2011. These options were granted at an exercise
price equal to the closing price of our Common Shares on the NASDAQ as of the
date of grant of $17.30.
Directors who have served as an officer, but who were no longer
employed with us during 2001, received a grant of 7,500 options on January 4,
2002 under our 1993 Stock Incentive Plan. The first one-third of such options
becomes exercisable on January 4, 2003. The options vest on a cumulative basis,
one-third each year, and they expire on January 3, 2012. These options were
granted at an exercise price equal to the closing price of our Common Shares on
the NASDAQ as of the date of grant of $16.14.
Independent Public Accountants
For the fiscal year ended, December 31, 2001, our independent public
accountants were Arthur Andersen LLP. Representatives of Arthur Andersen LLP
will be available at the 2002 Annual Meeting to address questions.
Audit and Non-Audit Fees
Fees paid to Arthur Andersen LLP, our independent public accountants,
during 2001 for audit services were $278,218. All other fees paid during 2001
were $538,026, including audit-related fees of $125,947 and other fees of
$412,079. Audit-related fees include benefit plan audits, acquisition due
diligence, accounting consultation, risk consultation, other audit-related
projects and consents. Other fees were primarily for tax services. There were no
financial information systems design and implementation fees paid to Arthur
Andersen LLP during 2001.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composed of three
directors listed in this report. This Committee's principle function is to
oversee our annual audit and financial reporting. This Committee recommends to
the Board of Directors, subject to shareholder ratification, the selection of
our independent public accountants.
Management is responsible for our internal controls and the financial
reporting process. The independent public accountants are responsible for
performing an independent audit of our consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report
thereon. This Committee's principle function is to oversee this annual audit and
financial reporting.
23
In connection with the appointment of members to this Committee, the
Board considered the new requirement of the NASD that members of this Committee
be independent directors. Ms. Maddox and Ms. Selleck are independent directors.
In appointing Mr. Bourbeau to this Committee, the Board recognized his lack of
independent director status, but determined that his membership was required in
our best interests and the interests of our shareholders. The Board recognizes
that the appointment of Mr. Bourbeau is exceptional and under limited
circumstances. It was acknowledged that Mr. Bourbeau is the controlling
shareholder of Midwest, our affiliate. Mr. Bourbeau in not employed directly by
us. Mr. Bourbeau holds a degree in Business Administration from Wayne State
University. It is the opinion of the Board that Mr. Bourbeau's relationship with
the Company would not interfere with the exercise of his judgement as a member
of this Committee, and that he is financially literate with background and
experience helpful to the work of this Committee. Specifically, Mr. Bourbeau's
knowledge of our operations, as the chief executive officer of an affiliate, is
deemed a benefit. In addition, Mr. Bourbeau's long-standing service on this
Committee was noted and this prior service provides a valuable source of
continuity.
The Board also feels that Mr. Bourbeau's continuation on this Committee
is consistent with the policy of having a chief executive officer of one of our
affiliates serve on the Board and on certain key committees. This has been our
policy since our founding. The decision to reappoint Mr. Bourbeau was reviewed
by our legal counsel who concurred in the permissibility of the decision in
light of the above factors.
In this context, the Committee has met and held discussions with
management and the independent public accountants. Management represented to the
Committee that our consolidated financial statements were prepared in accordance
with generally accepted accounting principles, and the Committee has reviewed
and discussed the consolidated financial statements with management and the
independent public accountants. This Committee discussed with the independent
public accountants matters required to be discussed by Statement on Auditing
Standards No. 61 (Communications with Audit Committees).
The independent public accountants also provided to the Committee the
written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Committee discussed
with the independent public accountants their independence.
Based upon this Committee's discussion with management and the
independent public accountants and the Committee's review of the representation
of management and the report of the independent public accountants to this
Committee, this Committee recommended that the Board of Directors include the
audited consolidated financial statements in our Annual Report on Form 10-K for
the year ended December 31, 2001 filed with the SEC. This Committee also
recommended the appointment of Ernst & Young LLP to serve as our independent
public accountants for fiscal year 2002.
Audit Committee
Rebecca J. Maddox, Chair
Catherine Y. Selleck
John R. Bourbeau
24
COMPENSATION AND OPTIONS COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation and Options Committee of the Board of Directors is
comprised of non-employee directors listed in this report. This Committee is
responsible for overseeing management's recommendations on executive
compensation and stock option proposals, policies, and programs. In addition,
this Committee makes yearly recommendations to the Board of Directors, as to the
compensation to be paid to the Chief Executive Officer.
Compensation Philosophy
This report reflects our compensation philosophy as adopted by this
Committee and endorsed by the Board of Directors. Our executive compensation
programs are intended to provide our executives and managing principals with
competitive market salaries and the opportunity to earn incentive compensation
related to performance expectations identified by management and approved by the
Board of Directors. The broad objectives of our executive compensation program,
are to:
(1) Support and reinforce our business strategy and link pay to
shareholder value;
(2) Align compensation with the goals and key performance measures
of the business;
(3) Attract and retain high quality executives and managing
principals; and
(4) Reward such employees for superior performance, as measured by
financial results and key strategic achievements.
A significant portion of executive pay is variable, uncapped, and is
tied to improvement in earnings per share (EPS) and, in the case of group
executives and regional managing principals, to their region's and group's
operating performance. This policy reflects management's belief that continuous
improvement in EPS and growth in group revenue and operating income directly
contributes toward creating shareholder value through the potential of
increasing our stock price.
Pay Positioning
This Committee's executive compensation program is constructed to
provide an opportunity for compensation, through the three components described
below (base salaries, annual incentive compensation and long-term incentives),
to vary with performance relative to a peer group of professional services
companies. Competitive levels of pay for purposes of compensation comparison are
provided periodically by our staff and by compensation consultants' published
surveys, outside consulting firms and by the review of comparable public
companies' executive compensation disclosures in their annual proxy statements.
The primary companies used in the compensation comparison are other publicly
held consulting and service firms, although privately-held professional services
companies of similar size are also considered in determining pay level
opportunity.
25
Pay Mix and Measurement For Executives
The compensation of executives currently includes base salary, annual
incentive compensation and stock option awards. This Committee considers the
total compensation of the Chief Executive Officer, the most highly compensated
officers and the other executives in reviewing each element of compensation. In
general, the proportion of an executive's incentive compensation increases with
the executive's level of responsibility. Executives also receive various
benefits, including life, medical, and disability insurance, similar to those
generally available to all of our employees.
Base Salaries
This Committee, based on management's recommendations, seeks to set
base salaries for our executives at levels that are competitive for executives
with comparable roles and responsibilities within other comparison companies. We
maintain an executive salary administration program which uses ongoing internal
and periodic external comparisons to set salary ranges at or around the median
levels of the comparison companies.
Individual executive salaries are reviewed annually. Annual salary
adjustments are determined by a subjective evaluation of: (1) the position's
responsibilities, (2) competitive market rates, (3) strategic importance of the
position, and (4) individual performance and contributions. The annual salaries
for executives (other than the CEO and the President/COO whose salaries are
evaluated by the Committee with the Board of Directors) are approved by this
Committee following a review with the CEO and Chief Operating Officer.
Annual Incentive Compensation
This Committee administers an annual cash incentive plan for
executives. The annual cash incentive plan reflects our belief that executives'
contributions to shareholder value come from maximizing earnings and the annual
incentive payments to executives are made upon the achievement of annual
corporate financial objectives (expressed as a post-incentive EPS goal) that
reflect targeted annual growth. Individual award targets are established at the
beginning of the year and are based on an individual's position and contribution
to our results. Awards are increased or decreased for achievement that is above
or below target levels. We exceeded our 2001 EPS target by 77% which resulted in
corporate executive officers receiving incentive awards higher than their target
amount. In addition, each executive is measured annually against qualitative
criteria selected to provide incentives for performance towards strategic
initiatives. Achievement or failure to achieve these criteria as recommended by
our CEO and COO may increase or decrease the individual's annual incentive
amount by up to 20%. The Board of Directors and the Committee review similar
criteria for our CEO and COO with the ability to increase or decrease the
individual's annual incentive compensation by up to 20% for achievement or
failure to achieve these goals. No adjustment has ever been made to incentive
pay for any executive.
26
In addition to the incentive to achieve the EPS goal, certain
executives and managing principals responsible for team region and/or group
performance are rewarded in part based on the achievement of regional and/or
group revenue and income targets. No awards are made unless a threshold regional
and/or group revenue target level is achieved that generally reflects
significant growth over the prior year.
Long-Term Incentives
We provide executives with the opportunity to earn annual stock options
in order to retain and motivate them to improve long-term stock values. Annual
grants of stock options are made to executives based on a market analysis of
long-term incentive levels within a peer group of companies. The annual grants
are intended to reflect the individuals' respective responsibilities, as well as
the actual and expected contribution of the individuals to our long-term
success.
Stock options are granted only if we achieve our annual EPS target. In
order for group executives and regional managing principals to receive stock
options, their group must achieve its operating income target for the preceding
year, in addition to us achieving our annual EPS target. Grants vest in equal
amounts over a three-year period and are exercisable over a ten-year period.
This Committee reviews and establishes the grants for all executive officers.
Since we exceeded our EPS target for 2001 and each group met their
respective income targets, accordingly, stock options were granted to all
eligible employees, including managing principals.
Retirement Compensation
The intent of this Committee's retirement compensation policy is to
provide employees and executives with certain tax-qualified retirement benefits.
We maintain a defined contribution savings plan available to substantially all
employees, including executives, under Section 401(K) of the Internal Revenue
Code. Under this plan, we contribute 25% of the participating employee's
contribution. Employee contributions are generally limited to 10% of their
compensation, subject to Internal Revenue Code limitations. We also provide
discretionary contributions if we meet or exceed our EPS target. A discretionary
contribution of an additional 12.5% of the participating employee's contribution
was made for 2001 as we exceeded our EPS target.
In addition, we provide a non-qualified creditor exempt salary savings
plan to eligible employees to help them save for retirement. Under the plan,
participants may contribute an elected percentage of their annual cash
compensation. Effective August 2001, we amended the plan where we will
contribute 25% of the participating employee's contribution. Similar to our
defined contribution 401(K) savings plan, we also provide discretionary
contributions under this non-qualified savings plan if we meet or exceed our EPS
target. A discretionary contribution of an additional 12.5% of the participating
employee's contribution was made for 2001 as we exceeded our EPS target.
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Effective January 1, 2000, the Board of Directors approved a
non-qualified Supplemental Executive Retirement Plan for executive officers and
other key employees for the purpose of providing supplemental income benefits to
plan participants or their survivors upon participants' retirement or death. We
have established and maintain a grantor "rabbi" trust for the purpose of
accumulating funds with which to meet our future obligations under the plan.
Although the trust is irrevocable and assets contributed to the trust can only
be used to pay such benefits with certain exceptions, the benefits under the
plan remain our obligations. We have purchased company-owned life insurance
policies for its benefit on the lives of certain participants estimated to be
sufficient to recover, over time, the full cost of the benefits provided plus
the cost of insurance.
We also have non-qualified deferred compensation plans for Mr. Pinola,
Mr. Smith and Mr. Gavin. Upon his retirement and effective January 1, 2001, Mr.
Smith began receiving payments in accordance with this plan. The details of this
plan for Mr. Pinola and Mr. Gavin were described under the section "Employment
and Change in Control Agreements" previously mentioned in this proxy statement.
Section 162 (m)
Section 162(m) of the Internal Revenue Code generally imposes a
$1,000,000 limit on the deductibility of certain compensation that it pays to
certain executive officers unless certain requirements are met. Compensation
attributable to options granted under the various stock option plans currently
in effect is expected to qualify for deductibility. This Committee monitors the
effect of this section on the deductibility of such compensation and intends to
optimize the deductibility of such compensation to the extent deductibility is
consistent with the objectives of the executive compensation program. This
Committee, however, intends to weigh the benefits of full deductibility with the
objectives of the executive compensation program and, if this Committee believes
to do so is in our best interests and the interests of our shareholders, we will
make compensation arrangements that may not be fully deductible due to this
section.
During 2001, the provisions of this section will result in a portion of
the incentive compensation paid to Mr. Pinola for 2001 to be non-deductible. The
Committee believes the compensation to Mr. Pinola reflects its policies as
stated in this report. The Committee also notes that the Company's 2001
Operating Plan provided for cash compensation for Mr. Pinola to be approximately
at the limits imposed by Section 162 (m). The variable cash compensation for
2001 reflected the fact that the actual EPS for 2001 exceeded the target EPS by
77%. In general, bonuses for all of our employees, all of which are performance
based, also reflected the exceptional results for 2001.
Chief Executive Officer Compensation
The principles guiding compensation for our Chief Executive Officer are
substantially the same as those set forth for other executives as previously
described in this report. During 2001, our most highly compensated officer was
Richard J. Pinola, Chairman of the Board and CEO. Mr. Pinola's performance was
reviewed by the Committee which made recommendations to the Board regarding his
annual cash compensation (salary plus annual incentive) and approved his
long-term incentive awards.
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In accordance with Mr. Pinola's Employment Agreement noted previously
in this report, Mr. Pinola's annual base salary during 2001 was $580,000. Mr.
Pinola received additional compensation based on the Company's final 2001
results.
Compensation and Options Committee
Catherine Y. Selleck, Chair
Rebecca J. Maddox
Oliver Franklin
Compensation Committee Interlocks and Insider Participation in Compensation
Mr. Pinola, our Chief Executive Officer and Chairman, makes general
recommendations to and reviews with the Compensation and Options Committee the
compensation of our executive officers, other than his own. This information is
carefully considered by this Committee. Except for this, during 2001, there were
no interlocking relationships between any of our executive officers and any
entity whose directors or executive officers serve on the Board of Directors'
Compensation and Options Committee, nor did any current or past officers serve
on the Compensation and Options Committee. Except as discussed in the section
"Certain Relationships and Related Party Transactions" with respect to the
transactions with Midwest, the franchise owned by Mr. Bourbeau, and with respect
to the consulting agreements made with Mr. Smith and Mr. Evans, and with respect
to the purchase of Right WayStation, of which Mr. Iwao was a Director and is
partial owner, and with respect to the purchase of Coutts, of which Mr. Johnson
was Chairman of the Board of Directors and partial owner, no member of any
committee of the Board of Directors in 2001 had any relationship with us other
than as a director and member of such committee.
COMMON SHARES PERFORMANCE
The line graph set forth below compares for the period December 31,
1996 through December 31, 2001, the cumulative return on our Common Shares based
on the market price of the Common Shares, with the cumulative return (assuming
dividend reinvestment) of common stock listed on the Russell 2000 Index, and the
common stock issued by companies with SIC Code: 8742, Management Consulting
Services Index. The SIC Code Index was selected primarily because it is
representative of our professional service business and the Russell 2000 Index
was selected because it represents a comparable market capitalization. We
believe the SIC Code Index and the Russell 2000 Index compare effectively with
us based on the selection criteria mentioned above.
Comparison of a 5-year Cumulative Total Return Among Right
Management Consultants, Inc., SIC Code Index and Russell 2000 Index
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
-------- -------- -------- -------- -------- --------
Company $100.00 $ 57.30 $ 66.29 $ 51.69 $70.79 $174.77
SIC Code 100.00 117.10 128.70 141.44 69.61 63.82
Russell 2000 100.00 122.34 118.91 142.21 136.07 137.46
Assumes $100 Invested on December 31, 1996 and All Dividends Reinvested
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Proposal 2: Ratification of Appointment of Independent Public Accountants
While we have no dispute with Arthur Andersen LLP, the Audit Committee
considered other independent accountants in addition to Arthur Andersen LLP for
appointment as our auditor for fiscal year 2002. Our Board of Directors, based
on the recommendation of the Audit Committee and subject to ratification by the
shareholders at our Annual Meeting, has approved the appointment of Ernst &
Young LLP as our independent accountants for fiscal year 2002. If the
shareholders do not ratify this appointment by the affirmative vote of a
majority of shares present in person or represented by proxy at the Meeting,
other independent public accountants will be considered by the Board of
Directors upon recommendation of the Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT
OF THE INDEPENDENT PUBLIC ACCOUNTANTS.
OTHER BUSINESS
The Board of Directors does not know of any further business to be
presented at the Meeting. However, should any other matter requiring a vote the
shareholders arise, the persons appointed by the enclosed proxy intend to vote
on those matters in accordance with their judgement as to our best interests.
Shareholder Proposals
Shareholder proposals for the 2003 Annual Meeting of Shareholders must
be received by December 1, 2002 to be considered for inclusion in our 2003 Proxy
Statement. At the 2003 Annual Meeting of Shareholders, Management will have
discretionary authority to act upon such matters as may be brought before the
Meeting as to which written notice was not received on or before February 20,
2003.
Annual Report on Form 10-K
We file an Annual Report on Form 10-K with the SEC. Shareholders may
obtain a paper copy of this report, including the financial statements and
schedules, without charge, by writing to Mr. Paul Straub, Vice President and
Corporate Controller, Right Management Consultants, Inc., 1818 Market Street,
33rd Floor, Philadelphia, PA 19103.
The Board of Directors urges shareholders to attend the Meeting.
Whether or not you plan to attend the Meeting, shareholders are asked to
complete, date, sign and return the enclosed proxy promptly in the accompanying
envelope. Shareholders who attend the Meeting may vote their shares personally
even though they have sent in their proxies.
By Order of the Board of Directors
/S/ CHARLES J. MALLON
Charles J. Mallon
Secretary
Philadelphia, PA
April 12, 2002
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EXHIBIT A
THE AUDIT COMMITTEE CHARTER
Function, Scope, Duties and Responsibilities
A. Functions
Primary responsibility for the Company's financial reporting rests with
the management, overseen by the Board of Directors. The principal
function of the Audit Committee is to assist the Board of Directors in
carrying out this oversight responsibility. This function is performed
by gathering information sufficient for the knowledgeable review and
understanding of reports and recommendations of the management and
independent outside auditors. In turn, the Committee should aid in the
transmission of these reports to the Board.
B. Scope
The Committee shall be composed of Outside Directors, one of whom will
be its Chairman. The Chairman and Chief Executive Officer, President
and Chief Financial Officer shall work closely with the Audit Committee
on the formulation of its recommendations. The Committee will report to
the full Board on its activities.
C. Duties and Responsibilities
The Audit Committee is expected to:
1. Review, examine and discuss with management the reports and
recommendations of the independent auditors and follow up the
implementation of their suggestions.
2. Ensure the auditors full and direct access to the Board
through the Audit Committee should they feel it is needed and
it cannot be arranged properly through the Chairman of the
Board.
3. Conduct an executive session with the independent auditors at
least once per year.
4. Review proposed audit coverage with the independent auditors
and Chief Financial Officer. This should include their fees
for the Audit engagement.
5. Review the Company's internal and financial controls and keep
the Board informed through reports of significant control
issues.
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6. Evaluate the performance of the independent auditors and
recommend their engagement to the Board.
7. Review the Company's legal counsel matters which may have a
significant impact on the Company's financial statements.
8. Review Company policies and procedures for a regular review of
officers' expenses and perquisites and, where appropriate,
review a summary of expenses and perquisites at least
annually.
9. Review releases of financial information to the public
including Form 10-K, 8K, the Annual Report and other reports
as requested.
10. Review and approve the plan of internal audit.
11. Review compliance with the Company's Code of Conduct at least
annually.
32
RIGHT MANAGEMENT CONSULTANTS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Shareholders -- May 2, 2002
The undersigned shareholder of RIGHT MANAGEMENT CONSULTANTS, INC.,
revoking all previous proxies, hereby constitutes and appoints RICHARD J. PINOLA
and JOSEPH T. SMITH, and each of them acting as individuals, as the attorney and
proxy of the undersigned, with full power of substitution, for and in the name
and stead of the undersigned, to attend our Annual Meeting of Shareholders to be
held on Thursday, May 2, 2002, at 10:00 A.M. at our headquarters, 1818 Market
Street, 33rd Floor, Philadelphia, Pennsylvania, and to vote all Common Shares
which the undersigned would be entitled to vote if personally present at the
Meeting, and at any adjournment or postponement thereof; provided that said
proxies are authorized and directed to vote as indicated with respect to the
following matters:
1. / / FOR all nominees for director named below.
/ / WITHHOLD AUTHORITY to vote for all nominees for director named
below.
/ / FOR all of the nominees for director named below, except WITHHOLD
AUTHORITY to vote for the nominee(s) whose name(s) is (are) lined
through.
Nominees: FRANK P. LOUCHHEIM, RICHARD J. PINOLA, JOSEPH T. SMITH,
JOHN J. GAVIN, LARRY A. EVANS, JOHN R. BOURBEAU, REBECCA J. MADDOX,
CATHERINE Y. SELLECK, FREDERICK R. DAVIDSON, OLIVER S. FRANKLIN AND
STEPHEN JOHNSON
2. / / FOR the ratification of the selection by the Board of Directors of
Ernst & Young LLP, as our independent public accountants for the
current fiscal year.
/ / AGAINST
/ / ABSTAIN
3. In their discretion, the proxies will vote on such other business as
may properly come before the Meeting.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholders. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" THE NOMINEES FOR DIRECTOR AND FOR PROPOSAL 2 REFERRED TO IN THIS
PROXY. This proxy also delegates discretionary authority to vote with respect to
any other business which may properly come before the Meeting or any adjournment
or postponement thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE ANNUAL REPORT,
NOTICE OF MEETING AND THE PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH. The
undersigned also hereby ratifies all that the said attorneys and proxies may do
by virtue hereof and hereby confirms that this proxy shall be valid and may be
voted whether or not the shareholder's name is signed as set forth below or a
seal is affixed or the description, authority or capacity of the person signing
is given or other defect of signature exists.
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NOTE: PLEASE MARK, DATE AND SIGN THIS PROXY CARD AND RETURN IT IN THE
ENCLOSED ENVELOPE. Please sign this proxy exactly as name appears in address
below. If shares are registered in more than one name, all owners should sign.
If signing in a fiduciary or representative capacity, such as attorney-in-fact,
executor, administrator, trustee or guardian, please give full title and attach
evidence of authority. Corporations please sign with full corporate name by a
duly authorized officer and affix the corporate seal.
Dated: _______________, 2002
____________________(SEAL)
(Shareholder's Signature)
____________________(SEAL)
(Shareholder's Signature)
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