DEF 14A: Definitive proxy statements
Published on August 21, 2001
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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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 (S) 240.14a-11(c) or (S) 240.14a-12
Korn/Ferry International
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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(3) Per unit price or other underlying value of transaction computed
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
[LOGO OF KORN/FERRY INTERNATIONAL]
1800 Century Park East, Suite 900
Los Angeles, California 90067
August 20, 2001
Dear Stockholders:
It is my pleasure to invite you to attend the 2001 Annual Meeting of
Stockholders of Korn/Ferry International. The Annual Meeting will be held on
Tuesday, September 25, 2001 at 10:00 a.m. at the Park Hyatt Los Angeles Hotel
at Century City located at 2151 Avenue of the Stars, Los Angeles, California
90067.
At the Annual Meeting we will discuss the items of business discussed in
the attached notice and give a report on our business operations.
We are delighted that you have chosen to invest in Korn/Ferry International
and hope that, whether or not you attend the meeting, you will vote as soon as
possible by completing, signing, dating and returning the enclosed proxy card
in the envelope provided. Your vote is important, and voting by written proxy
will ensure your representation at the annual meeting. You may revoke your
proxy in accordance with the procedures described in the proxy statement at
any time prior to the time it is voted. If you attend the meeting, you may
vote in person even if you previously mailed your proxy card.
Sincerely,
[SIGNATURE OF PAUL C. REILLY]
Paul C. Reilly
Chairman of the Board
and Chief Executive Officer
[LOGO OF KORN/FERRY INTERNATIONAL]
1800 Century Park East, Suite 900
Los Angeles, California 90067
NOTICE OF ANNUAL MEETING
To Be Held on September 25, 2001
To the Stockholders:
On Tuesday, September 25, 2001, Korn/Ferry International will hold its 2001
Annual Meeting of Stockholders at the Park Hyatt Los Angeles Hotel at Century
City located at 2151 Avenue of the Stars, Los Angeles, California 90067. The
meeting will begin at 10:00 a.m.
Only stockholders who owned our common stock at the close of business on
the record date of August 1, 2001 can vote at this meeting or any adjournments
that may take place. The purposes of the Annual Meeting are to:
1. Elect three directors to serve for three-year terms and one director
to serve for a two year term;
2. Ratify the appointment of Arthur Andersen LLP as independent auditors
for fiscal 2002; and
3. Transact any other business properly presented at the meeting.
Our Board of Directors recommends that you vote in favor of each of the two
proposals outlined in the Proxy Statement accompanying this notice.
A quorum comprised of the holders of a majority of the outstanding shares
of our common stock on the record date must be present or represented for the
transaction of business at the meeting. Accordingly, it is important that your
shares be represented at the meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
IN THE ENVELOPE PROVIDED.
You may revoke your proxy at any time prior to the time it is voted by (1)
notifying the Corporate Secretary in writing; (2) returning a later-dated
proxy card; or (3) attending the meeting and voting in person.
Please read the proxy materials carefully. Your vote is important and we
appreciate your cooperation in considering and acting on the matters
presented.
By Order of the Board of Directors,
[SIGNATURE OF J. TIMOTHY SCOTT]
J. Timothy Scott
Corporate Secretary and Associate
General Counsel
August 20, 2001
Los Angeles, California
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
1. Q: Why am I receiving this proxy statement and the other enclosed
materials?
A: Our Board is providing these materials to you in connection with, and
soliciting proxies for use at, our 2001 Annual Meeting of Stockholders,
which will take place on September 25, 2001. As a stockholder on the
record date, you are invited to attend the Annual Meeting and you are
requested to vote on each of the proposals described in this proxy
statement. You do not need to attend the Annual Meeting to vote your
shares.
2. Q: What information is included in this mailing?
A: The information included in this proxy statement relates to, among
other things, the proposals to be voted on at the annual meeting, the
voting process and our compensation of directors and executive
officers.
3. Q: What proposals will be voted on at the annual meeting?
A: (1) The election of directors to serve on the Board; and
(2) The ratification of the appointment of Arthur Andersen LLP as our
independent auditors for fiscal 2002.
4. Q: How does the Board recommend I vote on each of the proposals?
A: The Board recommends that you vote your shares "FOR" all of its
nominees to the Board and "FOR" the ratification of the appointment of
the independent auditors.
5. Q: Who is entitled to vote at the annual meeting?
A: Holders of our common stock as of the record date, which is the close
of business on August 1, 2001, are entitled to vote at the annual
meeting.
6. Q: How many votes are provided to each share of common stock?
A: Each share of our common stock outstanding as of the record date is
entitled to one vote. As of the record date, 37,504,027 shares of our
common stock were issued and outstanding.
7. Q: How do I vote?
A: You can vote either by completing, signing and dating each proxy card
you received and returning it in the envelope provided or by attending
the annual meeting and voting in person. Once you have submitted your
proxy, you have the right to revoke your proxy at any time before it is
voted by:
(1) Notifying the Corporate Secretary in writing;
(2) Returning a later-dated proxy card; or
(3) Attending the annual meeting and voting in person.
8. Q: Who will count the votes?
A: Representatives of Mellon Investor Services will count the votes and
act as the inspector of election at the annual meeting.
9. Q: What does it mean if I receive more than one proxy card?
A: It means that your shares are registered differently and are in more
than one account. Sign and return all proxy cards to ensure that all
your shares are voted.
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10. Q: What shares are covered by the enclosed proxy card(s)?
A: The shares on the enclosed proxy card(s) represent all shares owned by
you as of the record date. These shares include shares (1) held
directly in your name as the "stockholder of record" and (2) held for
you as the "beneficial owner" through a stockbroker, bank or other
nominee. If you do not return your proxy card(s) with respect to these
shares, your shares may not be voted. If you own shares that are held
in our 401(k) plan, you will receive a proxy card for those shares
also. While the trustees of the 401(k) will vote those shares, you are
requested to return that proxy card to advise the trustees of your
wishes with respect to the matters to be voted on.
11. Q: What is the difference between holding shares as a "stockholder of
record" and as a "beneficial owner"?
A: Those terms refer to the following. You are a:
"Stockholder of record", if your shares are registered directly in your
name with our transfer agent, Mellon Investor Services. You are
considered, with respect to those shares, to be the stockholder of
record, and these proxy materials have been sent directly to you by us.
As the stockholder of record, you have the right to grant your voting
proxy to us or to vote in person at the Annual Meeting. We have
enclosed a proxy card for you to use.
"Beneficial owner", if your shares are held in a stock brokerage
account, including an Individual Retirement Account, or by a bank or
other nominee, you are considered to be the beneficial owner of shares
held in "street name", and these proxy materials are being forwarded to
you by your broker or nominee, who is considered, with respect to those
shares, to be the stockholder of record. As the beneficial owner, you
have the right to direct your broker or nominee on how to vote (your
broker or nominee has enclosed a voting instruction card for you to
use) and you are invited to attend the annual meeting. However, because
you are not the stockholder of record, you may not vote your shares in
person at the annual meeting.
12. Q: What if a beneficial owner does not provide the stockholder of record
with voting instructions for a particular proposal?
A: If you are a beneficial owner and you do not provide the stockholder of
record with voting instructions for a particular proposal, your shares
may constitute "broker non-votes," as described below, with respect to
that proposal.
13. Q: What are "broker non-votes"?
A: "Broker non-votes" are shares held by a broker or nominee with respect
to which the broker or nominee does not have discretionary power to
vote on a particular proposal or with respect to which instructions
were never received from the beneficial owner. Shares which constitute
broker non-votes with respect to a particular proposal will not be
considered present and entitled to vote on that proposal at the annual
meeting, even though the same shares will be considered present for
quorum purposes and may be entitled to vote on other proposals.
14. Q: How are votes counted?
A: In the election of directors, you may vote "FOR" all of the nominees or
your vote may be "WITHHELD" with respect to one or more of the
nominees. For the other proposals, you may vote "FOR," "AGAINST" or
"ABSTAIN." If you sign your proxy card or broker voting instruction
card without voting "FOR," "AGAINST" or "ABSTAIN" for any of the
proposals, your shares will be voted in accordance with the
recommendations of the Board. With respect to Proposal No. 2,
abstentions will be equivalent to "AGAINST" votes, while broker non-
votes will be disregarded and will have no effect on the approval or
rejection of the proposals.
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15. Q: What is the voting requirement to approve each proposal?
A: In order to conduct business at the annual meeting, a "quorum," as
described below, must be established. In the election of directors, the
Board's nominees will become directors so long as they receive a
plurality of "FOR" votes; however, if any additional nominees for
director are properly brought before the stockholders for
consideration, only the nominees who receive the highest number of
"FOR" votes will become directors. Approval of Proposal No. 2, relating
to ratification of the auditors appointed by the Board, will require
affirmative "FOR" votes from a majority of those shares present (either
in person or by proxy) and entitled to vote at the annual meeting.
16. Q: What is a "quorum"?
A: A "quorum" is a majority of the holders of the outstanding shares
entitled to vote. A quorum must be present or represented by proxy at
the annual meeting for business to be conducted. Abstentions and broker
non-votes will be counted as present for quorum purposes.
17. Q: What happens if additional matters (other than the proposals described
in this proxy statement) are presented at the Annual Meeting?
A: The Board is not aware of any additional matters to be presented for a
vote at the Annual Meeting; however, if any additional matters are
properly presented at the annual meeting, your signed proxy card gives
authority to Paul C. Reilly and Michael D. Bekins to vote on those
matters in their discretion.
18. Q: How much did this proxy solicitation cost?
A: We hired Mellon Investor Services to assist in the distribution of
proxy materials and solicitation of votes for approximately $7,000,
including out-of-pocket expenses. We also reimburse brokerage houses
and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses for forwarding proxy and solicitation materials
to beneficial owners.
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PROPOSAL NO. 1--ELECTION OF DIRECTORS
Our Board is divided into three classes, with one class elected at each
Annual Meeting. Directors of each class are elected to serve for three year
terms. At this Annual Meeting we will elect four directors and our Board for
the coming year will be composed of ten directors. Of the total nominees for
election as directors, three will be elected to serve for a term of three
years and one will be elected to serve for the remaining two years of a three
year term. The nominees for election at the Annual Meeting to serve as Class
2004 Directors are James E. Barlett, Richard M. Ferry, and Sakie Fukushima.
The nominee for election at the Annual Meeting to serve as a Class 2003
Director for two years until the Annual Meeting of Stockholders in 2003 is
Paul C. Reilly. Mr. Reilly is the Chairman and Chief Executive Officer of our
company and was first elected to the Board in June 2001. Detailed information
regarding each of these nominees is provided on pages 6-8 of this proxy
statement. We do not expect any of the nominees to become unavailable to stand
for election, but, should this happen, the Board will designate a substitute
for each unavailable nominee. Proxies voting for any unavailable nominee will
be cast for that nominee's substitute. Each of the nominees has consented to
be named as a nominee in this proxy statement.
Required Vote
The Board's nominees will become directors so long as they receive a
plurality of "FOR" votes; however, if any additional nominees for director are
properly brought before the stockholders for consideration, only the four
nominees who receive the highest number of "FOR" votes will become directors.
Recommendation of the Board
The Board unanimously recommends that you vote "FOR" each of the nominees
named above for election as a director. Proxies will be voted "FOR" each of
the nominees named above unless you otherwise specify on your proxy card.
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PROPOSAL NO. 2--RATIFICATION OF THE APPOINTMENT
OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS
The Audit Committee has recommended, and the Board has approved, the
appointment of Arthur Andersen LLP as our independent auditors for fiscal
2002. Arthur Andersen LLP has served as our independent auditors since 1971,
including assisting us with accounting matters relating to the initial public
offering of our common stock. They have unrestricted access to the Audit
Committee to discuss audit findings and other financial matters.
Representatives of Arthur Andersen LLP will attend the annual meeting to
answer appropriate questions and may also make a statement if they so desire.
Audit Fees
The aggregate fees billed by Arthur Andersen LLP for professional services
rendered for the audit of our consoldiated and subsidiary annual financial
statements for the fiscal year ended April 30, 2001 and for the reviews of the
financial statements included in our quarterly reports on Form 10-Q for that
fiscal year were $957,139.
Financial Information Systems Design and Implementation Fees
The aggregate fees billed by Arthur Andersen LLP for professional services
rendered for information technology services relating to financial information
systems design and implementation for the fiscal year ended April 30, 2001
were $39,690.
All Other Fees
The aggregate fees billed by Arthur Andersen LLP for services rendered
other than the services described above under "Audit Fees" and "Financial
Information Systems Design and Implementation Fees" for the fiscal year ended
April 30, 2001 were $1,278,059.
Required Vote
Ratification of the auditors appointed by the Board will require
affirmative "FOR" votes from a majority of those shares present, either in
person or by proxy, and entitled to vote at the annual meeting.
Recommendation of the Board
The Board unanimously recommends a vote "FOR" the ratification of Arthur
Andersen LLP's appointment as independent auditors for fiscal 2002.
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THE BOARD OF DIRECTORS
The members of our Board of Directors are grouped into three classes: Class
2002 Directors will serve until the Annual Meeting of Stockholders in 2002;
Class 2003 Directors will serve until the Annual Meeting of Stockholders in
2003; and Class 2004 Directors will serve until the Annual Meeting of
Stockholders in 2004.
Class 2002 Directors
The following table sets forth certain information regarding the Class 2002
Directors, who serve on the Board until the Annual Meeting of Stockholders in
2002.
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Class 2003 Directors and Nominee
The following table sets forth certain information regarding the Class 2003
Directors, who will serve on the Board until the Annual Meeting of
Stockholders in 2003. Mr. Reilly was elected by the Board to serve as a
director and as its Chairman, effective June 29, 2001. In electing Mr. Reilly,
the Board directed that his candidacy be brought before the stockholders at
the 2001 Annual Meeting and, if elected, Mr. Reilly will serve on the Board
until the Annual Meeting of Stockholders in 2003.
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Nominees for Class 2004 Directors
The following table sets forth information regarding the Class 2004
Directors, who, if elected at the 2001 Annual Meeting, will serve on the Board
until the Annual Meeting of Stockholders in 2004.
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Statement on Corporate Governance
The Board held eleven meetings during fiscal 2001, and all of the directors
attended at least 75% of the Board meetings and the meetings of committees of
which they were members, except for Patti Hart who joined the Board during the
year and participated in the three of the five Board meetings since her
election.
Although the full Board considers all major decisions, the Bylaws permit
the Board to have the following standing committees to more fully address
certain areas of importance: an Audit Committee, a Compensation and Personnel
Committee, and a Nominating Committee. The members of the current standing
committees are:
Audit Committee. The Audit Committee makes recommendations concerning the
engagement of independent auditors, reviews the plans and results of the audit
engagement with the independent auditors, approves professional services
provided by the independent auditors, reviews the independence of the
auditors, considers the range of audit and non-audit fees, reviews the
adequacy of our internal accounting controls and ensures the integrity of
financial information supplied to stockholders. The Audit Committee is also
available to receive reports, suggestions, questions and recommendations from
the independent auditors, the Chief Financial Officer and the General Counsel.
It also confers with those parties in order to assure the sufficiency and
effectiveness of the programs being followed by corporate officers in the area
of compliance with the law and conflicts of interest. The Audit Committee is
composed entirely of outside directors and met eight times in fiscal 2001. The
Board has adopted a written charter for the Audit Committee, a copy of which
is attached as an appendix to this proxy statement. The Board, in its business
judgment, has determined that all members of the Audit Committee are
"independent" as required by the applicable listing standards of the New York
Stock Exchange.
Compensation and Personnel Committee. The Compensation and Personnel
Committee determines the compensation of our executive officers and
administers the Performance Award Plan. In addition, the Compensation and
Personnel Committee reviews and makes recommendations to the Board with
respect to our overall compensation program for managing directors, vice
presidents and other employees, including salaries, employee benefit plans,
stock option grants and payment of bonuses. The Compensation and Personnel
Committee is composed entirely of outside directors. The Compensation and
Personnel Committee met twelve times during fiscal 2001.
Nominating Committee. The Nominating Committee recommends criteria to the
Board for the selection of nominees to the Board, evaluates all proposed
nominees, recommends nominees to the Board to fill vacancies on the Board,
and, prior to each Annual Meeting of Stockholders, recommends to the Board a
slate of nominees for election to the Board by the stockholders at the Annual
Meeting. The Nominating Committee also seeks possible nominees for the Board
and otherwise serves to aid in attracting qualified nominees to be elected to
the Board. The Nominating Committee is composed of two outside directors, with
four inside directors as ex-officio members. The Nominating Committee met five
times in fiscal 2001.
Directors' Compensation
Directors who are also employees or officers do not receive any additional
compensation for their service on the Board. Non-employee directors receive a
$28,000 annual retainer in cash and committee chairs receive an additional
$4,000. For meetings, outside directors receive $1,200 in cash for each
regular or special meeting
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attended and $600 for telephonic meetings. In addition, all directors are
reimbursed for their out-of-pocket expenses incurred in connection with their
duties as directors.
Directors who are not officers or employees are eligible to receive annual
stock option grants under our Performance Award Plan. Under the Performance
Award Plan, a non-employee director is automatically granted a nonqualified
stock option to purchase 2,500 shares of common stock when the person takes
office, at an exercise price equal to the market price of the common stock at
the close of trading on that date. In addition, on the day of the Annual
Meeting of Stockholders in each calendar year, beginning with the year after
they are first elected and continuing for each subsequent year during the term
of the Performance Award Plan, each continuing non-employee director is
granted a nonqualified stock option to purchase 2,500 shares of common stock
at an exercise price equal to the market price of the common stock at the
close of trading on that date. Non-employee directors may also be granted
discretionary awards. All automatically granted non-employee director stock
options will have a ten-year term and will be immediately exercisable. If a
non-employee director's services are terminated for any reason, any
automatically granted stock options held by the non-employee director that are
exercisable will remain exercisable for twelve months after such termination
of service or until the expiration of the option term, whichever occurs first.
Automatically-granted options are subject to the same adjustment, change in
control, and acceleration provisions that apply to awards generally, except
that any changes or Board or committee actions (1) will be effected through a
stockholder approved reorganization agreement or will be consistent with the
effect on options held by other than executive officers and (2) will be
consistent in respect of the underlying shares with the effect on stockholders
generally. Any outstanding automatic option grant that is not exercised prior
to a change in control event in which we do not survive will terminate, unless
the option is assumed or replaced by the surviving corporation.
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Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of August 1, 2001 the names and holdings
of each director and each nominee for director, the names and holdings of each
executive officer named in the Summary Compensation Table (the "named
executive officers"), and the holdings of all directors, nominees and
executive officers as a group. The following table also sets forth the names
of those persons known to us to be beneficial owners of more than 5% of our
common stock.
* Designates ownership of less than 1% of the company's outstanding common
shares.
(1) Other than with respect to the shares held under the 401(k) plan and the
options under the Performance Award Plan, each person has sole voting
and dispositive power with respect to the shares shown unless otherwise
indicated.
(2) Restricted stock as to which Mr. Reilly has voting power.
(3) Holding includes right to acquire beneficial ownership of 4,500 shares
of common stock within 60 days through the exercise of option granted
under the Performance Award Plan.
(4) Holding includes 19,985 shares of common stock held by the trustees of
the 401(k) Plan for the benefit of the listed individual and right to
acquire beneficial ownership 26,833 shares of common stock within
60 days through the exercise of option granted under the Performance
Award Plan.
(5) Holding includes 658,184 shares of common stock held by the trustees of
the Korn/Ferry Employee Tax Deferred Savings Plan (401(k) Plan) for the
benefit of the listed individual.
(6) Holding includes right to acquire beneficial ownership of 30,167 shares
of common stock within 60 days through the exercise of option granted
under the Performance Award Plan.
(7) Holding includes right to acquire beneficial ownership of 2,500 shares
of common stock within 60 days through the exercise of option granted
under the Performance Award Plan.
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(8) Holding includes 30,000 shares of common stock held by the Miller Family
Trust dated September 8, 1988 and right to acquire beneficial ownership
of 4,500 shares of common stock within 60 days through the exercise of
the option granted under the Performance Award Plan.
(9) Holding includes 215,015 shares of common stock held by the trustees of
the 401(k) Plan for the benefit of the listed individual and right to
acquire beneficial ownership of 120,134 shares of common stock within 60
days through the exercise of option granted under the Performance Award
Plan.
(10) Holding includes right to acquire beneficial ownership of 21,750 shares
of common stock within 60 days through the exercise of option granted
under the Performance Award Plan.
(11) Holding includes right to acquire beneficial ownership of 14,500 shares
of common stock within 60 days through the exercise of option granted
under the Performance Award Plan.
(12) Holding includes 3,763 shares of common stock held by the trustees of
the 401(k) Plan for the benefit of the listed individual and right to
acquire beneficial ownership of 10,167 shares of common stock within
60 days through the exercise of option granted under the Performance
Award Plan.
(13) Total holding as a group includes 896,947 shares of common stock held by
the trustees of the 401(k), 30,000 shares of common stock held by the
Miller Family Trust dated September 8, 1988 and right to acquire
beneficial ownership of a total 368,605 shares of common stock within 60
days through the exercise of options granted under the Performance Award
Plan.
(14) Shares are owned of record by several Farralon affiliates. The
investment managers that hold beneficial ownership of all such
securities include Enrique H. Boilini, David I. Cohen, Joseph F. Downes,
William F. Duhamel, Andrew B. Fremder, Richard B. Fried, Monica R.
Landry, William F. Mellin, Steven L. Millham, Meridee A. Moore, Thomas
F. Steyer and Mark C. Wehrly. This information is obtained from the
Schedule 13G filed on January 22, 2001.
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EXECUTIVE COMPENSATION
Report of the Compensation & Personnel Committee
Committee Composition and Role
The Compensation Committee is comprised entirely of directors who have
never served as our officers. The Committee (a) approves and oversees our
compensation programs, including incentive and stock option programs provided
to members of our senior management group, including all named executive
officers, and (b) approves or recommends to our Board, as required, specific
compensation actions, including salary adjustments, annual cash bonuses, stock
option grants, and employment contracts for our Chief Executive Officer and
other members of our senior officer group. The Committee met twelve times
during fiscal 2001.
Executive Compensation Philosophy
In establishing and assessing the compensation programs and compensation
policies for the executive officers and other senior executives, the Committee
is guided by the following principles:
. The total compensation of our executive officers and other key employees
must be competitive with those of other major executive recruiting
firms, recognizing our size and complexity relative to our peers;
. Individual cash bonuses and stock option awards should be closely tied
to the performance of the company as a whole, as well as to the team and
individual performance of the executive group; and
. The interests of senior management and our stockholders should be
closely aligned through direct management ownership of our common stock,
and by providing a meaningful portion of each key employee's total
compensation in the form of stock options.
Because a number of our peer organizations are privately-held, precise
information regarding the senior executive compensation practices among our
competitor group is difficult to obtain. In addition, even when such data are
available, meaningful differences in size, complexity and organizational
structure among our competitor group make direct comparisons of compensation
practices problematic. In assessing the competitiveness of our senior
executive compensation, the Committee relies on information obtained from the
proxies of publicly-traded competitors, information derived from data obtained
from executives and senior search consultants we recruited from competitor
organizations, and the Committee's general knowledge of the market for senior
management positions. From time to time, the Committee also retains
compensation consultants to assess the competitiveness of our officer
compensation and to make suggestions regarding compensation program design.
Senior Executive Compensation
The compensation provided to our senior officers, including the named
executive officers, consists of an annual base salary, an annual cash bonus
and stock options granted at the market price of our common stock as of the
date of grant.
Base Salaries
Base salaries for our executive officers, including our Chief Executive
Officer, and selected other key employees, are established annually by the
Committee based on the Committee's understanding of competitive practices
among our major competitors, internal equity considerations, and individual
performance. For fiscal 2002, the salaries of our executive officers were not
increased from those in effect for fiscal 2001.
Cash Bonuses
The maximum aggregate annual cash bonuses paid to our executive officers is
limited by a formula that ties aggregate bonuses to a percentage of our net
income. The actual annual cash bonus of each executive officer, including the
Chief Executive Officer, is determined by the Committee based on its
assessment of the
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performance of the Company and of the executive officers as a group (team
performance) and as individuals. The assessment of individual performance is
based on objectives established and mutually agreed to at the beginning of the
fiscal year, as well as other factors deemed important by the Committee.
Subject to the maximum aggregate cash bonuses dictated by the above-mentioned
formula, the target and maximum cash bonuses available to each executive
officer are one times and two times base salary, respectively.
In determining the level of cash bonuses for our executive officers for
fiscal 2001, the Committee took into consideration the Company's financial
performance and stock price performance, the performance of our subsidiary
operations, including Futurestep, and the performance of each officer with
respect to their individual objectives. This process resulted in the following
cash bonuses awarded to our executive officers for fiscal 2001: Windle Priem,
$500,000; Richard Ferry, $300,000; Michael Bekins, $325,000; Peter Dunn,
$300,000; Elizabeth Murray, $220,000; Gary Hourihan, $250,000. These awards
represented the following percentage of each individual's target award
opportunity: Windle Priem, 77%; Richard Ferry, 75%; Michael Bekins, 72%; Peter
Dunn, 61%; Elizabeth Murray, 55%; Gary Hourihan 70%.
Stock Options
As part of their total compensation package, each of our executive
officers, including the Chief Executive Officer, is eligible to receive an
annual grant of stock options (performance options) with a Black-Scholes value
equal to a percentage of their cash bonus award. The specific percentage
awarded each executive officer, including the Chief Executive Officer, was
based on the Committee's assessment of Company, team, and individual
performance during fiscal 2001. This process resulted in the following option
awards for fiscal 2001 performance: Windle Priem, 18,990 shares; Michael
Bekins, 13,160 shares; Peter Dunn, 14,480 shares; Elizabeth Murray, 11,700
shares; Gary Hourihan, 10,530 shares. Richard Ferry, as in the past, declined
the grant of options to preserve the shares for other employees.
Employment Contracts
Each of our named executive officers is covered by an employment agreement
that provides for a minimum level of salary, cash bonus potential, and option
and benefit eligibility. The agreements also provide for a defined severance
benefit in the event of a termination of employment without "cause" or for
"good reason" as such terms are defined in the agreements. Such severance
benefits range up to two times salary and target bonus depending upon the
officer. The agreements also provide for the continuation of health and
welfare benefits upon a termination without cause or for good reason. It is
the Committee's belief that such agreements are necessary from a competitive
perspective and also contribute to the stability of the management team.
Internal Revenue Code Section 162(m)
As one of the factors in the review of compensation matters, the
Compensation Committee considers the anticipated tax treatment to the company.
The deductibility of some types of compensation for executive officers depends
upon the timing of an executive's vesting or exercise of previously granted
rights or on whether such plans qualify as "performance-based" plans under the
provisions of the tax laws. It is the Committee's policy, to the extent that
such policy does not conflict with prudent management practices, to satisfy
the requirements necessary to allow the compensation of its executive officers
to be deductible under Section 162(m) of the Internal Revenue Code, as
amended.
Compensation and Personnel Committee
Charles D. Miller, Chair
Frank V. Cahouet
Gerhard Schulmeyer
14
Summary Compensation Table
(1) Contributions to our 401(k) plan for fiscal year 2001 have not yet been
determined.
(2) Represents insurance premiums.
(3) Represents insurance premiums of $48,102 and a 401(k) plan contribution
of $10,275.
(4) Represents insurance premiums of $40,485 and a 401(k) plan contribution
of $4,620
(5) Represents insurance premiums.
(6) Represents insurance premiums of $30,268 and a 401(k) plan contribution
of $10,275
(7) Represents insurance premiums of $29,916 and a 401(k) plan contribution
of $11,287.
(8) Represents insurance premiums of $28,644 and a tuition contribution of
$2,000.
(9) Represents insurance premiums of $24,718, a 401(k) plan contribution of
$10,275 and a tuition reimbursement of $2,000.
(10) Represents insurance premiums of $24,366 and a 401(k) plan contribution
of $11,287.
(11) Represents insurance premiums.
(12) Represents insurance premiums of $18,966 and a 401(k) plan contribution
of $10,275.
(13) Represents insurance premiums of $18,614 and a 401(k) plan contribution
of $3,249.
(14) Represents insurance premiums of $24,729 and a tuition reimbursement of
$2,000
15
(15) Represents Mr. Hourihan's base salary from May 1, 1999 to June 30, 1999
at an annual rate of $300,000 and from July 1, 1999 to April 30, 2000 at
an annual rate of $340,000.
(16) Represents insurance premiums of $13,547, a 401(k) plan contribution of
$8,021 and second installment of a signing bonus, $125,000.
(17) Represents compensation paid to Mr. Hourihan from January 28, 1999, when
he joined the Company, through the end of fiscal 1999. Mr. Hourihan's
base salary for fiscal 1999 was paid at an annual rate of $300,000.
(18) Represents insurance premiums of $1,100 and first installment of a
signing bonus, $125,000.
(19) Represents insurance premiums.
(20) Represents insurance premiums of $14,941 and a 401(k) plan contribution
of $10,275.
(21) Represents insurance premiums of $14,889, a 401(k) plan contribution of
$11,287 and a $11,828 tax equalization amount paid to Mr. Bekins in
connection with his service in Asia.
(22) Mr. Ferry declined the grants of options to preserve the shares for
other employees.
Employment Agreements
Paul C. Reilly, Chairman and Chief Executive Officer since June 29,
2001. In connection with the election of Paul C. Reilly as Chairman and Chief
Executive Officer, we entered into an employment agreement with Mr. Reilly.
The term of the agreement is for three years, and will automatically renew for
successive two-year periods thereafter until the first April 30th following
the date on which Mr. Reilly reaches age 65; provided, however, that either we
or Mr. Reilly may terminate this agreement at the end of the initial term or
any renewal term by delivering to the other party at least 60 days' prior
written notice. Mr. Reilly's base salary is $650,000 and the agreement
provides for an annual target bonus equal to 150% of base salary and an annual
maximum bonus of up to 300% of base salary. In addition, the agreement
provides that Mr. Reilly will be eligible for an annual grant of stock options
having a target grant value of $1,250,000 and a maximum grant value of
$1,750,000 based on a Black-Scholes option pricing model valuation. We have
also agreed to pay certain transition and relocation costs incurred by
Mr. Reilly.
In connection with his election, Mr. Reilly was granted options to purchase
450,000 shares with an exercise price of $15.50 per share, the closing price
of the stock in trading in the New York Stock Exchange on June 29, 2001. Of
these options 300,000 vest in equal installments over three years and 150,000
vest in three equal installments based on the attainment of specified price
levels in our stock. The price levels for vesting are $28 per share, $33 per
share and $38 per share. In addition, the Board made a restricted stock award
of 100,000 shares to Mr. Reilly. The restricted stock awarded to Mr. Reilly
will vest in three annual installments beginning in June 2002. To the extent
not vested, the restricted stock will be forfeited if Mr. Reilly is terminated
with cause or he resigns without good reason.
If Mr. Reilly's employment terminates due to death or disability, then we
will pay Mr. Reilly, or his legal representatives, all accrued compensation as
of the date of termination, and all outstanding stock options held by
Mr. Reilly at the time of termination will vest and remain exercisable until
their originally scheduled expiration dates. If Mr. Reilly's employment is
terminated by us for cause, is terminated by Mr. Reilly prior to its
expiration without good reason or if Mr. Reilly fails to renew the agreement
after its initial term, then we will pay Mr. Reilly all accrued compensation
as of the date of termination.
Prior to a change in control, if Mr. Reilly's employment is terminated by
us without cause or is terminated by Mr. Reilly for good reason then we will
pay Mr. Reilly all accrued compensation as of the date of termination, and a
lump sum amount equal to 200% of his base salary and target bonus. If prior to
a change in control, Mr. Reilly's employment is terminated because the Company
elects not to renew the agreement, then Mr. Reilly will be entitled to a lump
sum amount equal to his base salary and target bonus. On termination in any of
the
16
foregoing circumstances, all of Mr. Reilly's outstanding stock options as of
the date of termination will vest and will remain exercisable until their
originally scheduled expiration dates.
If there is a change in control and within 12 months Mr. Reilly's
employment is terminated by us, either without cause, because we elect not to
renew the agreement or for a performance reason, or by Mr. Reilly for good
reason, then we will pay Mr. Reilly all accrued compensation as of the date of
termination, and a lump sum equal to (1) 200% of the greater of his base
salary or the annual base salary in effect just prior to the change in
control, whichever amount is higher, plus (2) the greater of 200% of his
maximum bonus for the incentive year in which such termination occurs or the
maximum bonus for the preceding fiscal year. On termination in any of the
foregoing circumstances, all of Mr. Reilly's outstanding stock options as of
the date of termination will vest and will remain exercisable until their
originally scheduled expiration dates.
Windle B. Priem, Chief Executive Officer and President until June 29,
2001. Upon the election of Mr. Reilly, Mr. Priem stepped down as Chief
Executive Officer and President. In connection with this change, we entered
into a new employment agreement with Mr. Priem in July 2001. This agreement
provides for a term extending through September 30, 2003. Pursuant to the
agreement, Mr. Priem's annual salary is $450,000 and provides that Mr. Priem
shall be eligible for discretionary bonus awards. This agreement supersedes
the employment agreement previously in effect, which is described below.
Until the effectiveness of the foregoing agreement in July 2001, Mr. Priem
was subject to an employment agreement entered into in June 1999. The
agreement entered into in June 1999 provided for a term of three years. The
agreement provided for a minimum base salary of $600,000 annually, with an
annual target bonus equal to 100% of base salary and an annual maximum bonus
of up to 200% of base salary.
If Mr. Priem's employment were terminated due to death or disability, we
were to pay Mr. Priem, or his legal representatives, all accrued compensation
as of the date of termination and all of Mr. Priem's outstanding stock options
as of the effective date of the employment agreement vested and remained
exercisable until their originally scheduled expiration dates. If Mr. Priem's
employment was terminated by us for cause, terminated by Mr. Priem prior to
its expiration or if Mr. Priem failed to renew the agreement after its initial
term, then were to pay Mr. Priem all accrued compensation as of the date of
termination.
Under this former agreement if, prior to a change in control, Mr. Priem's
employment were terminated by us without cause, terminated by Mr. Priem for
good reason or if we failed to renew the agreement, we were to pay Mr. Priem
all accrued compensation as of the date of termination, a lump sum equal to
200% of the then base salary and target bonus and all of Mr. Priem's
outstanding stock options as of the effective date of the employment agreement
would have vested and remained exercisable for their originally scheduled
expiration dates. Following a change in control, if Mr. Priem's employment
were terminated by us without cause or by Mr. Priem for good reason, we were
to pay Mr. Priem all accrued compensation as of the date of termination, a
lump sum equal to 200% of then base salary and maximum bonus in effect
immediately prior to the date of termination or the then base salary and
maximum bonus applicable to Mr. Priem just prior to the change in control
event, whichever would be higher, and all of Mr. Priem's outstanding stock
options as of the effective date of the employment agreement would have vested
and remained exercisable for their originally scheduled expiration dates.
In connection with the execution of the employment agreement in June 1999,
the Board of Directors also granted Mr. Priem an option to purchase 100,000
shares of our common stock at an exercise price of $13.6875 per share. The
option will expire on September 2, 2004, unless earlier terminated as provided
below. The option agreement provided for vesting upon satisfaction of certain
stock performance thresholds, which have been met. This option became
exercisable on October 6, 1999 and shall terminate prior to expiration on the
death, disability or termination of Mr. Priem's employment for any reason.
Following death, disability or retirement, this option shall remain
exercisable for a period of twelve months, but not beyond the original
expiration date. Upon a termination of Mr. Priem's employment for any other
reason, this option shall remain exercisable for a period of three months, but
not beyond the original expiration date.
17
Richard M. Ferry, Chairman of the Board until June 29, 2001. In January
2001, we entered into an employment agreement with Richard M. Ferry. Under
this agreement Mr. Ferry will be paid a salary of $400,000 through September
2001 at which time his salary will be reduced to $300,000 until September 30,
2002. Thereafter, Mr. Ferry will be eligible for discretionary bonuses and
will be entitled to certain benefits and perquisites until September 2007. If
Mr. Ferry is terminated by us without cause or he resigns for good reason
prior to September 2002, he will be entitled to receive a lump sum payment
equal to the remainder of the salary payable to him under the agreement.
Peter L. Dunn, General Counsel and, until August 2001, Vice Chair. In June
1999, we entered into an employment agreement with Peter L. Dunn as Vice Chair
and General Counsel, effective April 29, 1999. The term of the agreement is
for three years, and will automatically renew for successive two-year periods
thereafter until the first April 30th following the date on which Mr. Dunn
reaches age 65; provided, however, that either we or Mr. Dunn may terminate
this agreement at the end of the initial term or any renewal term by
delivering to the other party at least 120 days' prior written notice.
Mr. Dunn's base salary is $495,000 and the agreement provides for an annual
target bonus equal to 100% of base salary and an annual maximum bonus of up to
200% of base salary. In connection with Mr. Reilly's election as Chairman and
Chief Executive Officer, Mr. Dunn has agreed to step down from his positions
as Vice Chair and as a director.
If Mr. Dunn's employment terminates due to death or disability, then we
will pay Mr. Dunn, or his legal representatives, all accrued compensation as
of the date of termination, and all outstanding stock options held by Mr. Dunn
at the time of termination will vest and remain exercisable until their
originally scheduled expiration dates. If Mr. Dunn's employment is terminated
by us for cause, is terminated by Mr. Dunn prior to its expiration without
good reason or if Mr. Dunn fails to renew the agreement after its initial
term, then we will pay Mr. Dunn all accrued compensation as of the date of
termination.
If, prior to a change in control, Mr. Dunn's employment is terminated by us
without cause or is terminated by Mr. Dunn for good reason then we will pay
Mr. Dunn all accrued compensation as of the date of termination, and a lump
sum amount equal to 200% of his base salary and target bonus. If Mr. Dunn's
employment is terminated because the Company elects not to renew the
agreement, then Mr. Dunn will be entitled to a lump sum amount equal to one
times his base salary and target bonus. If Mr. Dunn's employment is terminated
by us for performance reasons, then Mr. Dunn will be entitled to a lump sum
amount equal to one and one-half times his base salary and target bonus. On
termination in any of the foregoing circumstances, all of Mr. Dunn's
outstanding stock options as of the date of termination will vest and will
remain exercisable until their originally scheduled expiration dates.
If there is a change in control and within 12 months Mr. Dunn's employment
is terminated by us, either without cause, because we elect not to renew the
agreement or for a performance reason, or is terminated by Mr. Dunn for good
reason, then we will pay Mr. Dunn all accrued compensation as of the date of
termination, and a lump sum equal to (1) 200% of the greater of his base
salary plus (2) the greater of 200% of his maximum bonus for the incentive
year in which such termination occurs or the maximum bonus for the preceding
fiscal year. On termination in any of the foregoing circumstances, all of
Mr. Dunn's outstanding stock options as of the date of termination will vest
and will remain exercisable until their originally scheduled expiration dates.
Elizabeth S.C.S. Murray, Chief Financial Officer and Executive Vice
President. In June 1999, we entered into an employment agreement with
Elizabeth S.C.S. Murray as Chief Financial Officer and Executive Vice
President, effective April 29, 1999. The term of the agreement is for three
years, and will automatically renew for successive two-year periods thereafter
until the first April 30th following the date on which Ms. Murray reaches
age 65; provided, however, that either we or Ms. Murray may terminate this
agreement at the end of the initial term or any renewal term by delivering to
the other party at least 120 days' prior written notice. Ms. Murray's base
salary is $400,000 and the agreement provides for an annual target bonus equal
to 100% of base salary and an annual maximum bonus of up to 200% of base
salary.
18
If Ms. Murray's employment terminates due to death or disability, then we
will pay Ms. Murray, or her legal representatives, all accrued compensation as
of the date of termination, and all outstanding stock options held by
Ms. Murray at the time of termination will vest and remain exercisable until
their originally scheduled expiration dates. If Ms. Murray's employment is
terminated by us for cause, is terminated by Ms. Murray prior to its
expiration without good reason or if Ms. Murray fails to renew the agreement
after its initial term, then we will pay Ms. Murray all accrued compensation
as of the date of termination.
If, prior to a change in control, Ms. Murray's employment is terminated by
us without cause or is terminated by Ms. Murray for good reason then we will
pay Ms. Murray all accrued compensation as of the date of termination, and a
lump sum amount equal to 200% of her base salary and target bonus. If
Ms. Murray's employment is terminated because the Company elects not to renew
the agreement, then Ms. Murray will be entitled to a lump sum amount equal to
one times her base salary and target bonus. If Ms. Murray's employment is
terminated by us for performance reasons, then Ms. Murray will be entitled to
a lump sum amount equal to one and one-half times her base salary and target
bonus. On termination in any of the foregoing circumstances, all of
Ms. Murray's outstanding stock options as of the date of termination will vest
and will remain exercisable until their originally scheduled expiration dates.
If there is a change in control and within 12 months Ms. Murray's
employment is terminated by us, either without cause, because we elect not to
renew the agreement or for a performance reason, or by Ms. Murray for good
reason, then we will pay Ms. Murray all accrued compensation as of the date of
termination, and a lump sum equal to (1) 200% of the greater of her base
salary or the annual base salary in effect just prior to the change in
control, whichever amount is higher, plus (2) the greater of 200% of her
maximum bonus for the incentive year in which such termination occurs or the
maximum bonus for the preceding fiscal year. On termination in any of the
foregoing circumstances, all of Ms. Murray's outstanding stock options as of
the date of termination will vest and will remain exercisable until their
originally scheduled expiration dates.
Gary C. Hourihan, Executive Vice President, Organizational Development. In
March 2000, we entered into an employment agreement with Gary C. Hourihan as
Executive Vice President, Organizational Development. The initial term of the
agreement is through April 30, 2002 and the term will automatically renew for
successive two-year periods thereafter until the first April 30th following
the date on which Mr. Hourihan reaches age 65; provided, however, that either
we or Mr. Hourihan may terminate this agreement at the end of the initial term
or renewal term by delivering to the other party at least 120 days' prior
written notice. Mr. Hourihan's base salary is $360,000 and the agreement
provides for an annual target bonus equal to 100% of base salary and an annual
maximum bonus of up to 200% of base salary.
If Mr. Hourihan's employment terminates due to death or disability, then we
will pay Mr. Hourihan, or his legal representatives, all accrued compensation
as of the date of termination, and all outstanding stock options held by
Mr. Hourihan at the time of termination will vest and remain exercisable until
their originally scheduled expiration dates. If Mr. Hourihan's employment is
terminated by the Company for cause, is terminated by Mr. Hourihan prior to
its expiration without good reason or if Mr. Hourihan fails to renew the
agreement after its initial term, then we will pay Mr. Hourihan all accrued
compensation as of the date of termination.
If, prior to a change in control, Hourihan's employment is terminated by us
without cause or is terminated by Mr. Hourihan for good reason then we will
pay Mr. Hourihan all accrued compensation as of the date of termination, and a
lump sum amount equal to 200% of his base salary and target bonus. If Mr.
Hourihan's employment is terminated because the Company elects not to renew
the agreement, then Mr. Hourihan will be entitled to a lump sum amount equal
to one times his base salary and target bonus. If Mr. Hourihan's employment is
terminated by us for performance reasons, then Mr. Hourihan will be entitled
to a lump sum amount equal to one and one-half times his base salary and
target bonus. On termination in any of the foregoing circumstances, all of
Mr. Hourihan's outstanding stock options as of the date of termination will
vest and will remain exercisable until their originally scheduled expiration
dates.
19
If there is a change in control and within 12 months Mr. Hourihan's
employment is terminated by us, either without cause, because we elect not to
renew the agreement or for a performance reason, or by Mr. Hourihan for good
reason, then we will pay Mr. Hourihan all accrued compensation as of the date
of termination, and a lump sum equal to (1) 200% of the greater of his base
salary or the annual base salary in effect just prior to the change in
control, whichever amount is higher, plus (2) the greater of 200% of his
maximum bonus for the incentive year in which such termination occurs or the
maximum bonus for the preceding fiscal year. On termination in any of the
foregoing circumstances, all of Mr. Hourihan's outstanding stock options as of
the date of termination will vest and will remain exercisable until their
originally scheduled expiration dates.
Michael D. Bekins, Chief Operating Officer. We entered into an employment
agreement with Michael D. Bekins as Chief Operating Officer, effective May 1,
2000. The term of the agreement is for three years, and will automatically
renew for successive two-year periods thereafter until the first April 30th
following the date on which Mr. Bekins reaches age 65; provided, however, that
either we or Mr. Bekins may terminate this agreement at the end of the initial
term or renewal term by delivering to the other party at least 120 days' prior
written notice. Mr. Bekin's base salary is $450,000 and the agreement provides
for an annual target bonus equal to 100% of base salary and an annual maximum
bonus of up to 200% of base salary.
If Mr. Bekins' employment terminates due to death or disability, then we
will pay Mr. Bekins, or his legal representatives, all accrued compensation as
of the date of termination, and all outstanding stock options held by Mr.
Bekins at the time of termination will vest and remain exercisable until their
originally scheduled expiration dates. If Mr. Bekins' employment is terminated
by us for cause, is terminated by Mr. Bekins prior to its expiration without
good reason or if Mr. Bekins fails to renew the agreement after its initial
term, then we will pay Mr. Bekins all accrued compensation as of the date of
termination.
If, prior to a change in control, Mr. Bekins' employment is terminated by
us without cause or is terminated by Mr. Bekins for good reason then we will
pay Mr. Bekins all accrued compensation as of the date of termination, and a
lump sum amount equal to 200% of his base salary and target bonus. If Mr.
Bekins' employment is terminated because the Company elects not to renew the
agreement, then Mr. Bekins will be entitled to a lump sum amount equal to one
times his base salary and target bonus. If Mr. Bekins' employment is
terminated by us for performance reasons, then Mr. Bekins will be entitled to
a lump sum amount equal to one and one-half times his base salary and target
bonus. On termination in any of the foregoing circumstances, all of Mr.
Bekins' outstanding stock options as of the date of termination will vest and
will remain exercisable until their originally scheduled expiration dates.
If there is a change in control and within 12 months Mr. Bekins' employment
is terminated by us, either without cause, because we elect not to renew the
agreement, or for a performance reason, or by Mr. Bekins for good reason, then
we will pay Mr. Bekins all accrued compensation as of the date of termination,
and a lump sum equal to (1) 200% of the greater of his base salary or the
annual base salary in effect just prior to the change in control, whichever
amount is higher, plus (2) the greater of 200% of his maximum bonus for the
incentive year in which such termination occurs or the maximum bonus for the
preceding fiscal year. On termination in any of the foregoing circumstances,
all of Mr. Bekins' outstanding stock options as of the date of termination
will vest and will remain exercisable until their originally scheduled
expiration dates.
20
Aggregated Option Exercises and Year-End Option Values
The following table shows information for the named executive officers,
concerning:
(1) exercises of stock options during fiscal 2001; and
(2) the amount and values of unexercised stock options as of April 30,
2001.
(1) This amount represents solely the difference between the closing price on
April 30, 2001 of $18.88 per share of our common stock and the respective
exercise prices of those unexercised options that had an exercise price
below such market price (i.e., "in-the-money" options). No assumptions or
representations regarding the "value" of such options are made or
intended.
(2) This amount represents the number of securities with respect to which the
options were exercised with no shares acquired.
Option Grants in Last Fiscal Year
21
Performance Graph
The Securities and Exchange Commission requires us to present a chart
comparing the cumulative total stockholder return on its shares with the
cumulative total stockholder return on (1) a broad equity market index and (2)
a published industry index or a company-established peer group. The following
graph compares the monthly percentage change in our cumulative total
stockholder return with the cumulative total return of the companies in the
Standard & Poor's 500 Stock Index and a peer group constructed by us.
Cumulative total return for each of the periods shown in the performance graph
is measured assuming an initial investment of $100 on February 11, 1999, the
date public trading of our common stock began in connection with our initial
public offering, and the reinvestment of any dividends paid by any company in
the peer group on the date the dividends were declared.
The peer group is comprised of publicly traded companies, which are engaged
principally or in significant part in professional staffing and consulting.
The returns of each company have been weighted according to their respective
stock market capitalization at the beginning of each measurement period for
purposes of arriving at a peer group average. The members of the peer group
are Heidrick & Struggles International, Inc. (HSII), Headhunter.net (HHNT),
Hotjobs.com (HOTJ) and TMP Worldwide, Inc. (TMPW).
The stock price performance depicted in this graph is not necessarily
indicative of future price performance. This graph will not be deemed to be
incorporated by reference by any general statement incorporating this proxy
statement into any filing by us under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent we specifically
incorporate this information by reference, and shall not otherwise be deemed
soliciting material or deemed filed under those Acts.
PERFORMANCE GRAPH APPEARS HERE
* Comparable Index = Heidrick & Struggles International, Inc. (HSII),
Headhunter.net (HHNT), Hotjobs.com (HOTJ), and TMP Worldwide, Inc. (TMPW).
22
REPORT OF AUDIT COMMITTEE
The role of the Audit Committee is to assist the Board of Directors in its
oversight of the company's financial reporting process. The Audit Committee of
the Board of Directors, comprised of three outside directors, held eight
meetings during 2000. The Audit Committee met with the independent auditors,
management and internal auditors to assure that all were carrying out their
respective responsibilities. The Committee reviewed the performance and fees
of the independent auditors, and met with them to discuss the scope and
results of their audit work, including the adequacy of internal controls and
the quality of the company's reporting. The Committee discussed with the
independent auditors their judgments regarding the quality and acceptability
of the company's accounting principles, the clarity of its disclosure and the
degree of aggressiveness or conservatism of its accounting principles and
underlying estimates. The Committee discussed with and received a letter from
the independent auditors confirming their independence. The Committee also
considered whether the provision of non-audit services by the independent
auditors to the company is compatible with maintaining the auditor's
independence, and the Committee has discussed with the auditors their
independence.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of
accounting or auditing, or with respect to the assessment of auditor
independence. Members of the Committee rely without independent verification
on the information provided to them and on the representations made by
management and the independent auditors. Accordingly, the Audit Committee's
oversight does not provide an independent basis to determine that management
has maintained appropriate accounting and financial reporting principles or
appropriate internal control and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. Furthermore, the
Audit Committee's considerations and discussions referred to above do not
assure that the audit of the company's financial statements has been carried
out in accordance with generally accepted auditing standards, that the
financial statements are presented in accordance with generally accepted
accounting principles or that the company's auditors are in fact
"independent".
Based upon the reports and discussions described in this report, and
subject to the limitations on the role and responsibilities of the Committee
referred to above and in its charter, the Committee reviewed and discussed the
audited financial statements for the fiscal year ended April 30, 2001with
management and recommended to the Board of Directors that those financial
statements be included in the company's Form 10-K filing with the Securities
and Exchange Commission.
Audit Committee
Frank V. Cahouet, Chair
James E. Barlett
Charles D. Miller
23
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
We believe that all SEC filings of our officers, directors and ten percent
stockholders complied with the requirements of Section 16 of the Securities
Exchange Act of 1934 during fiscal 2001, based on a review of forms filed,
except that one Form 3 regarding a new senior officer was filed late. The
report was for Stephen Semprevivo and reflected only a grant of options.
Annual Report to Stockholders
Enclosed with this proxy statement is our annual report for fiscal 2001,
which includes our Annual Report on Form 10-K (excluding the exhibits
thereto). The annual report is enclosed for the convenience of stockholders
and should not be viewed as part of these proxy solicitation materials. If any
person who was a beneficial owner of our common stock on August 1, 2001 for
the annual meeting desires additional information, a complete copy of our
Annual Report on Form 10-K, including the exhibits thereto, will be furnished
upon written request. The request should identify the requesting person as a
stockholder as of August 1, 2001 and should be directed to J. Timothy Scott,
Esq., Corporate Secretary, Korn/Ferry International, 1800 Century Park East,
Suite 900, California 90067. Our Annual Report on Form 10-K, including the
exhibits thereto, is also available through the SEC's web site at
http://www.sec.gov.
Submission of Stockholder Proposals for Consideration and Nominations of
Persons for Election as Directors at the Annual Meeting
In order for business to be properly brought before the Annual Meeting by a
stockholder, the stockholder must give notice of such business in writing to
J. Timothy Scott, Esq., Corporate Secretary, Korn/Ferry International, 1800
Century Park East, Suite 900, California 90067, at least 90 and not more than
120 days prior to the anniversary of the Annual Meeting of Stockholders in the
previous year.
With respect to director nominations and stockholder proposals, such notice
must set forth as to each matter the stockholder proposes to bring before the
meeting:
. the name and address, as they appear on the company's books, of the
stockholder proposing such business,
. the number of shares of the company owned of record and beneficially by
the stockholder and any beneficial owner raising the matter,
. a representation that such stockholder is a holder of record of stock of
the company entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting propose such business or nomination,
. a representation whether the stockholder or beneficial holder or any
group with which such person is affiliated intends to distribute proxy
materials or solicit proxies with respect to the matter,
. as to any director nomination, a description of all arrangements or
understandings between such stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by such stockholder,
. as to any director nomination, such other information regarding each
nominee proposed by such stockholder as would have been required to be
included in a proxy statement filed pursuant to the proxy rules of the
SEC had each nominee been nominated by the Board of Directors, and
. as to any director nomination, the consent of each nominee to serve as a
director of the company if so elected,
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. as to any business other than director nominations, a brief description
of the business desired to be brought before the annual meeting and the
reasons for conducting such business at the annual meeting, and if the
business is a proposal to amend the Bylaws, the language of the proposed
amendment,
. as to any business other than director nominations, any material
interest of the stockholder in such business, and
. as to any business other than director nominations, any other
information that is required to be provided by the stockholder, in his
or her capacity as a proponent of a proposal, pursuant to Regulation 14A
under the Exchange Act.
Stockholder Proposals and Nominations for Next Year's Annual Meeting
Notice of any stockholder proposal or nomination of a person for election
as director that is intended by a stockholder to be included in our proxy
statement relating to our Annual Meeting of Stockholders in 2002 must be
received by J. Timothy Scott, Esq., Corporate Secretary, Korn/Ferry
International, 1800 Century Park East, Suite 900, California 90067 by April
22, 2002.
Each notice of any stockholder proposal must comply with the Securities
Exchange Act of 1934, the rules and regulations thereunder, and our Bylaws as
in effect at the time of such notice.
By Order of the Board of Directors,
[SIGNATURE OF J. TIMOTHY SCOTT]
J. Timothy Scott
Corporate Secretary and
Associate General Counsel
August 20, 2001
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YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN
YOUR PROXY CARD
IN THE ENVELOPE PROVIDED
AS SOON AS POSSIBLE
26
APPENDIX
AMENDED AND RESTATED
AUDIT COMMITTEE CHARTER
The Board of Directors shall appoint annually the members of the Audit
Committee. Members of the Committee shall serve at the will of the Board of
Directors.
Members
The Committee shall be comprised of three or more directors, each of whom
shall be independent of management and the Company and free from any
relationships to the Company that might in the opinion of the Board of
Directors interfere with the exercise of his or her independent judgment in
carrying out the functions of the Committee. The Board of Directors shall
apply the New York Stock Exchange corporate governance listing standards for
purposes of evaluating a Committee member's independence. Each member of the
Committee shall, when appointed to the Committee, or within a reasonable
period of time thereafter, be "financially literate" in the business judgment
of the Board of Directors. "Financially literate" is defined as familiar with
fundamental financial statements. At least one member of the Committee shall
have accounting or related financial management "expertise" as such
qualification is interpreted by the Board of Directors in its business
judgment.
Responsibilities
The Committee shall:
1. Provide assistance to the Board of Directors in fulfilling its
statutory and fiduciary responsibilities for fiscal examinations of the
Company and in monitoring management's and the outside auditors'
participation in the Company's accounting and financial reporting
process.
2. Review the Company's financial and accounting controls and procedures
with the outside auditors and the Company's financial management.
3. Review the engagement and independence of the outside auditors.
4. Recommend to the Board of Directors whether, based on discussions with
management and the outside auditors, the financial statements shall be
included in the Company's Annual Report on Form 10-K.
5. Annually, review and reassess the adequacy of the Audit Committee
Charter.
Notwithstanding that the Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the 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 or to set auditor independence standards. Management is responsible
for maintaining a system of internal controls, appropriate accounting and
financial reporting principles and policies and preparing the Company's
financial statements. The outside auditors are responsible for planning and
carrying out a proper audit of the financial statements and other procedures
requested by the Company. The function of the Committee is oversight.
Each member of the Committee shall be entitled to rely on (i) the integrity
of those persons and organizations within and outside the Company from which
it receives information, (ii) the accuracy of the financial and other
information provided to the Committee by such persons or organizations absent
actual knowledge to the contrary and (iii) representations made by management
as to any information technology, internal audit and other non-audit services
provided by the auditors to the Company.
The outside auditors shall submit to the Company annually a formal written
statement delineating all relationships between the outside auditors and the
Company ("Statement as to Independence"), addressing each non-audit service
provided to the Company and the matters set forth in Independence Standards
Board No. 1. In addition, the outside auditors shall also submit to the
Company annually a formal written statement of the fees
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billed for each of the following categories of services rendered by the
outside auditors: (i) the audit of the Company's annual financial statements
for the most recent fiscal year and the reviews of the financial statements on
Form 10-Q for that fiscal year; (ii) information technology consulting
services for the most recent fiscal years, in the aggregate and by each
service (and separately identifying fees for such services relating to
financial information systems design and implementation); and (iii) all other
services rendered by the independent auditors for the most recent fiscal year,
in the aggregate and by each service.
Authority
The Committee shall have authority appropriate to discharge its
responsibilities set forth in this Charter. The Committee may access internal
and external resources, including counsel, experts and consultants, as
required to perform its functions.
Functions
The Committee shall:
1. Recommend to the Board of Directors the appointment or nomination of
the outside auditors for the coming year, considering the independence
and effectiveness of the outside auditors. The outside auditors shall
ultimately be accountable to the Committee and the Board of Directors.
The Board of Directors, with the assistance of the Committee, has the
ultimate authority and responsibility to select, evaluate and, where
appropriate, replace the outside auditors.
2. Review the scope and general extent of the annual audit plan and other
activities and proposed fees of the outside auditors for audit and non-
audit services.
3. Ensure that the outside auditors prepare and deliver annually a
Statement as to Independence (it being understood that the outside
auditors are responsible for the accuracy and completeness of this
Statement) and discuss with the outside auditors any disclosed
relationships or services that may impair the objectivity and
independence of the outside auditors in order to recommend that the
Board of Directors take appropriate action, as necessary, in response
to such relationships in order to satisfy itself of the accountants'
independence.
4. If applicable, consider whether the outside auditors' provision of (a)
information technology consulting services relating to financial
information systems design and implementation and (b) other non-audit
services to the Company is compatible with maintaining the independence
of the outside auditors.
5. Prior to the filing of the Company's Quarterly Report on Form 10-Q the
Chair of the Committee shall review with the outside auditors and
management of the Company the interim financial statements and discuss
whether any matters are required to be communicated by the outside
auditors to the Committee under generally accepted auditing standards.
If matters are required to be communicated, the Committee shall discuss
such matters with the outside auditors and the management of the
Company.
6. Review and discuss with management and the outside auditors, upon
completion of the annual audit, the Company's financial statements and
related SEC reports for their adequacy and compliance with generally
accepted accounting, reporting and disclosure principles. Obtain
communications from the outside auditors (and management's responses
thereto) concerning matters relating to the scope and results of their
audit that the outside auditors are required to provide to the
Committee under Statement on Auditing Standards No. 61.
7. Prepare (a) any report or other disclosures, including any
recommendation of the Committee, required by the rules of the
Securities and Exchange Commission to be included in the Company's
annual proxy statement and (b) such written affirmation regarding the
Committee as is required by New York Stock Exchange corporate
governance listing standards.
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8. Evaluate the effectiveness of the external audit efforts, the Company's
accounting and financial controls, policies and procedures, and the
Company's business ethics policies and practices through a review of
reports by, and at regular meetings with, the external auditors and
with management, as appropriate.
9. Promote quality in the financial reporting and accounting practices of
the Company by maintaining regular and open channels of communication
between the Board of Directors, the outside auditors, and the financial
management of the Company.
Meetings
The Committee shall hold at least four meetings each year and others as
deemed necessary by its Chair. A report on all Committee meetings will be
provided to the Board of Directors.
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[LOGO OF KORN/FERRY INTERNATIONAL]
PROXY FOR THE 2001 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the accompanying Notice of Annual
Meeting of Stockholders, dated September 25, 2001, and the related Proxy
Statement and hereby appoints Michael D. Bekins and Paul C. Reilly, and each of
them the attorney(s), agent(s) and proxy of the undersigned, with full power of
substitution, to vote all stock of Korn/Ferry International which the
undersigned is entitled to vote, for the matter indicated on the reverse side of
this proxy card in the manner designated on the reverse side, or if not
indicated by the undersigned in their discretion, and to vote in their
discretion with respect to such other matter (including matter incident to the
conduct of the meeting) as may properly come before the meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE PROPOSALS.
________________________________________________________________________
COMMENTS/ADDRESS CHANGE: please mark comment/address box on reverse side
(Continued and to be signed on
other side)
. FOLD AND DETACH HERE .
. FOLD AND DETACH HERE .