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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
(Mark
One)
x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
June 30, 2009
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Or
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
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Commission File Number: 001-16159
WATSON WYATT WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
Delaware
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52-2211537
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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901 N. Glebe Road, Arlington, VA 22203
(Address of principal executive offices) (Zip Code)
(703) 258-8000
(Registrants telephone number, including area code)
Securities registered
pursuant to Section 12(b) of the Act:
Title of each class
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Name of each exchange on which registered
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Class A Common Stock, $0.01 par value
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New York Stock Exchange and NASDAQ
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Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes
x
No
o
Indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of
the Act. Yes
o
No
x
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes
x
No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes
o
No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K
o
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2
of the Exchange Act.
Large accelerated
filer
x
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Accelerated
Filer
o
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Non-accelerated
Filer
o
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Smaller
reporting company
o
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(Do not check if a smaller reporting company)
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Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes
o
No
x
The aggregate market
value of the registrants voting and non-voting common stock held by
non-affiliates of the registrant was approximately $2,032,629,030 based on the
closing price as of the last business day of the registrants most recently
completed second fiscal quarter, December 31, 2008.
As of October 15, 2009 there were outstanding
42,528,286 shares of common stock par value $0.01 per share.
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EXPLANATORY NOTE
Watson Wyatt Worldwide, Inc. is filing this
Amendment No. 1 on Form 10-K/A (Amendment) to amend its Annual
Report on Form 10-K for the year ended June 30, 2009, filed with the
Securities and Exchange Commission (SEC) on August 14, 2009 (Original
10-K). We are filing this Amendment to the Original 10-K to include the
information required by Item 5 of Part II for the performance graph and
Items 10 through 14 of Part III of Form 10-K. Except for the addition
of the Part II and Part III information, no other changes have been
made to the Original 10-K. This Amendment does not reflect events occurring
after the filing of the Original 10-K or modify or update those disclosures
affected by subsequent events.
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Part II
Item
5. Performance Graph.
The graph below
depicts total cumulative stockholder return on $100 invested on June 30,
2004 in (1) Watson Wyatt Worldwide, Inc. common stock; (2) the
New York Stock Exchange Composite Index; and (3) an
independently-compiled, industry peer group index composed of the common stock
of all publicly-traded companies within the Companys standard industrial
classification code (SIC) offering management consulting services. The graph assumes reinvestment of dividends.
*$100 invested on 6/30/04 in stock or index, including
reinvestment of dividends.
Fiscal year ending June 30.
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6/04
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6/05
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6/06
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6/07
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6/08
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6/09
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Watson Wyatt Worldwide, Inc.
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100.00
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97.27
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134.70
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194.76
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205.27
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146.61
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NYSE Composite
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100.00
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111.76
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129.30
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159.65
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143.30
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102.20
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Peer Group
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100.00
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91.40
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109.58
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145.66
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137.62
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110.62
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Companies included in the independently-compiled, industry peer group
index include:
Accenture
Limited; Access Worldwide Communications Inc.; Bearingpoint Inc.; Brandpartners
Group Inc.; Corporate Executive Board Company; Diamond Management &
Technology Consultants; FTI Consulting Inc.; Hewitt Associates Inc.; Huron
Consulting Group Inc.; LECG Corp.; The Management Network Group Inc.; Maximus
Inc.; Navigant Consulting Inc.; The Hackett Group Inc. and Watson Wyatt
Worldwide, Inc. Deletions from
this group include Caneum Inc.; Harris Interactive Inc.; Inventiv Health Inc.
and Thomas Group Inc., because they are no longer in the Companys SIC.
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Part III
Item
10. Directors, Executive Officers, and
Corporate Governance.
DIRECTOR INFORMATION
Listed below are the names, ages and biographies of
our current directors and executive officers at September 30, 2009. Our directors are elected annually and serve
until the next annual meeting of stockholders and until their successors are
elected and qualified. Our executive officers serve until the next annual
meeting and until the election and qualification of their successors or until
their earlier death, resignation or removal by our board of directors.
John J. Gabarro
(age 70) has served as a Director since
1999 and was previously a Director of Watson Wyatt & Company from 1995
to 1998. Mr. Gabarro has been a professor at the Harvard Business School
since 1972. Mr. Gabarro is the UPS Foundation Professor of Human Resource
Management, Emeritus, in Organizational Behavior, having also served as Baker
Foundation Professor. He has taught in Harvards MBA, Executive and Doctoral
Programs. He has served as faculty chair of Harvards International Senior
Management Program and twice as head of its Organizational Behavior faculty and
most recently, as faculty chair of Harvards Advanced Management Program. Mr. Gabarro
completed his MBA, doctorate and post doctoral work at Harvard before joining
its faculty.
John J. Haley
(age 59) has served as President and Chief Executive
Officer of Watson Wyatt since January 1, 1999, Chairman of the Board of
Watson Wyatt since 1999 and as a director of Watson Wyatt since 1992. Mr. Haley joined Watson Wyatt in
1977. Prior to becoming President and
Chief Executive Officer of Watson Wyatt, he was the Global Director of the
Benefits Group at Watson Wyatt. Mr. Haley
is a Fellow of the Society of Actuaries and is a co-author of Fundamentals of
Private Pensions (University of Pennsylvania Press). Mr. Haley also serves on the boards of
MAXIMUS, Inc., a provider of health and human services program management,
consulting services and system solutions, and Hudson Highland Group, Inc.,
an executive search, specialty staffing and related consulting services
firm. He has an A.B. in Mathematics from
Rutgers College and studied under a Fellowship at the Graduate School of
Mathematics at Yale University.
R. Michael McCullough
(age 70) has served as a Director since
1996. Mr. McCullough retired in 1996 as Chairman and CEO of the management
consulting firm Booz, Allen & Hamilton. He joined Booz, Allen &
Hamilton in 1965 as a consultant, was elected a partner in the firm in 1971,
became Managing Partner of the firms Technology Center and was elected to the
position of Chairman and CEO in 1984. Mr. McCullough is a member of the
board of First Potomac Realty Trust, an industrial and office-industrial real
estate investment trust. Mr. McCullough has a B.S. in Electrical
Engineering from the University of Detroit.
Brendan
R. ONeill
(age 60) has served as
a Director since July 2006. Dr. ONeill was Chief Executive Officer
and Director of Imperial Chemical Industries PLC (ICI), a manufacturer of
specialty products and paints, until April 2003. From 2003 until 2006, Mr. ONeill
was an independent director for a range of companies. Dr. ONeill joined
ICI in 1998 as its Chief Operating Officer and Director, and was promoted to
Chief Executive Officer in 1999. Prior to Dr. ONeills career at ICI, he
held numerous positions at Guinness PLC, including Chief Executive of Guinness
Brewing Worldwide Ltd, Managing Director International Region of United
Distillers, and Director of Financial Control. Dr. ONeill also held
positions at HSBC Holdings PLC, BICC PLC, Aegis Group PLC, and the Ford Motor
Company. He has an M.A. from the University of Cambridge and a Ph.D. in
chemistry from the University of East Anglia, and is a Fellow of the Chartered
Institute of Management Accountants (U.K.). Dr. ONeill is also a Director
of Tyco International Ltd., Informa Group PLC and Endurance Specialty Holdings
Ltd.
Linda D. Rabbitt
(age 60) has served as a Director since 2002 and is the founder and CEO of Rand
Construction Corporation, a commercial construction company founded in 1989
that specializes in building renovation and tenant build-outs. Prior to
founding Rand Construction Corporation, Ms. Rabbitt was the co-founder and
co-owner of Hart Construction Company, Inc., a commercial tenant
construction company. From 1981 to 1985, Ms. Rabbitt was with KPMG (formerly
Peat Marwick), where she was Director of Marketing from 1982 to 1985. Ms. Rabbitt
is a Director of Brookfield Properties, a commercial real estate company and is
a Class C Director of the Federal Reserve Bank of Richmond. Ms. Rabbitt
is also a Director of the Greater Washington Board of Trade and served as its
Chair in 2002. Ms. Rabbitt has also served as a Director of the Economic
Club of Washington, D.C., as a Director of Leadership Washington, and is a
trustee of the Federal City Council and of George Washington University. Ms. Rabbitt
has a B.A. from the University of Michigan, Ann Arbor, and an M.A. from George
Washington University.
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Gilbert T. Ray
(age 65) has served as a Director since
2000. Mr. Ray was a partner of the law firm of OMelveny & Myers
LLP until his retirement in 2000. He practiced corporate law for almost three
decades. He has extensive experience with corporate and tax exempt
transactions, as well as international finance. Mr. Ray is a member of the
boards of: Automobile Club of Southern California, a provider of emergency road
and travel services and insurance; two variable annuity funds managed by
SunAmerica Asset management; Advance Auto Parts Company, a retailer of
automotive parts; Diamondrock Hospitality, a real estate investment trust; and
Dinequity, Inc., a restaurant management and franchise company. Mr. Ray
is also a trustee of The John Randolph Haynes and Dora Haynes Foundation.
John C. Wright
(age 61) has served as a Director since
2002 and is a retired partner of the accounting firm Ernst & Young. He
was with Ernst & Young for almost thirty years until his retirement in
2000. Mr. Wright has extensive expertise with complex financial accounting
and reporting matters, including many years of experience working on matters
before the Securities and Exchange Commission. During the last ten years of Mr. Wrights
career at Ernst & Young, he spent much of his time on international
matters. After Ernst & Young, he served briefly as the Chief Financial
Officer of Teligent, a telecommunications company, and was the Executive Vice
President and Chief Financial Officer of QuadraMed Corporation, a provider of
healthcare information technology solutions until 2005. Mr. Wright has a
B.S. in Accounting from the University of North Carolina.
BIOGRAPHICAL INFORMATION FOR OTHER
EXECUTIVE OFFICERS OF THE COMPANY
Walter W. Bardenwerper
(age 58) has served as Vice President
and General Counsel since joining Watson Wyatt in 1987 and has served as
Secretary since 1992. Mr. Bardenwerper
was a Director of Watson Wyatt & Company from 1992 to 1997. He is also a Director of Professional
Consultants Insurance Company. Mr. Bardenwerper
was previously an attorney with Cadwalader, Wickersham & Taft and
Assistant General Counsel and Secretary of Satellite Business Systems. He has a B.A. with Honors in Economics and
graduated Phi Beta Kappa from the University of Virginia, has a J.D. from the
University of Virginia Law School and served as a Law Clerk to United States
District Court Judge Albert W. Coffrin.
Robert J. Charles
(age 44)
has been a
Vice President and the Regional Manager (Asia-Pacific) of Watson Wyatt since
2007. Mr. Charles was previously
the Regional Practice Leader for the Benefits Practice in Asia-Pacific from
2003 to 2007 and also the Managing Consultant for Watson Wyatts Hong Kong
Office from 2004 to 2007. Mr. Charles
has also worked in India as Watson Wyatts Benefits Practice Leader for Watson
Wyatt India, where he led the integration for a new acquisition. He started his career as a consulting actuary
in Watson Wyatts Reigate office in 1987 and later became the Operations
Manager for the London Benefits team. Mr. Charles
was appointed a Partner of Watson Wyatt in Europe in 1999. He is a frequent speaker at conferences on
pension reforms, is a Fellow of the Institute of Actuaries (UK) and holds
a first class honours degree in mathematics from Oxford University.
David M.E.
Dow
(age 50) has served as Vice President and Global
Practice Director of the Technology and Administration Solutions (TAS) Group
since July 2005. Mr. Dow qualified as a Chartered Accountant with
KPMG in 1983 and worked for a number of years in the insurance industry before
joining The Wyatt Company in 1988 as a consultant. In the 21 years since, Mr. Dow
has held various leadership positions in consulting, outsourcing and technology
practices. He was Managing Director of Wyatt Financial Services Ltd from 1990
to 1995, Head of Practice of the Financial Services Group of Watson Wyatt
Partners from 1995 to 1998, Head of Practice for Benefits Administration
Solutions (Watson Wyatts UK outsourcing service) from 1998 and has been Vice
President and Global Practice Director for TAS since 2005. Mr. Dow also
held Partnership Board and Finance Committee roles within Watson Wyatt LLP and
in his current role is a member of the firms Global Matrix Group and European
Matrix Group.
Carl A. Hess
(age 47) has served as Vice President
and Global Practice Director, Investment Consulting since 2008. Prior to this, Mr. Hess
served as Americas Practice Director, Investment Consulting from 2006 and as
U.S. East Divisions Investment Practice Leader from 2004 to 2006. Mr. Hess
joined Watson Wyatt in 1989 as a senior consulting actuary. Prior to joining
Watson Wyatt, he worked for two other consulting firms and an insurance
company. Mr. Hess has responsibility for a number of Watson Wyatts major
investment clients, advising them on all investment issues. He also serves on
the board of the Homer Laughlin China Company and its subsidiaries. Mr. Hess
is a Fellow of the Society of Actuaries and a Chartered Enterprise Risk
Analyst. He has a B.A. degree cum laude in Logic from Yale University.
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Robert J. McKee
(age 47) has served as Vice President
and Global Director of Marketing since 2006. Mr. McKee joined Watson Wyatt
in 1992 and was named Director of Marketing for Watson Wyatt & Company
in 1998. Mr. McKee is responsible for: marketing strategy, planning and
research, brand management, marketing communications and public relations,
web-based marketing, and sales support. Prior to joining Watson Wyatt, Mr. McKee
held marketing and public relations roles at Towers Perrin and at the Guardian
Life Insurance Company of America. He has an A.B. degree from Columbia University.
Kevin L. Meehan
(age 64) has served as Regional Manager
(North America) since 2006, as a Vice President since 1994 and was a Director
from 1999 to 2002, and again from 2007 to 2008. Mr. Meehan joined Watson
Wyatt in 1983 and was instrumental in developing the companys flexible
benefits operations, our North America Technologies and Administration group
and our Account Management function. Over the years Mr. Meehan has led
teams that have won some of Watson Wyatts largest assignments and has managed
some of Watson Wyatts largest accounts.
Mr. Meehan has been a speaker on employee benefits tax and legal issues,
and has testified before the IRS, the Department of Labor and Committees of
Congress on these issues on behalf of our clients. Mr. Meehan has a B.A. from the College
of the Holy Cross and a J.D. from St. Johns University Law School.
Stephen E. Mele
(age 59) has served as Vice President
and Chief Human Resources Officer since 2007. Mr. Mele was most recently
the Chief People and Technology Officer at Mercer HR Consulting, having
previously worked at Prudential International as VP Human Resources. Earlier,
he had been the Group Head for Human Resources Operations at Standard Chartered
Bank and prior to that was HR Director at Clearstream and at Schlumberger. In
particular he has lived and worked in North America, the UK and continental
Europe. Mr. Mele received his B.S. in Business Administration from
Fairleigh Dickinson University.
Roger F. Millay
(age 52) has served as Vice President and Chief
Financial Officer of Watson Wyatt since August 2008. Prior to this, Mr. Millay was with
Discovery Communications LLC, a global cable TV programmer and digital media
provider since 2006, where he served as Senior Executive Vice President and
Chief Financial Officer. At Discovery he
was responsible for the global financial functions, including accounting,
treasury, budgeting, audit and tax.
Prior to this, Mr. Millay was Senior Vice President and Chief
Financial Officer with Airgas, Inc., an industrial gases and supplies
distributor and producer from 1999 to 2006.
Mr. Millay has over 25 years of experience in financial officer
positions, including roles at Arthur Young & Company, Citigroup, and
GE Capital. He holds a B.A. degree from
the University of Virginia, an M.S. in Accounting from Georgetown Universitys
Graduate School of Business and is a Certified Public Accountant.
Peter E. Mills
(age 51) has served as Vice President
and Regional Manager (Latin America) since 2005, and has been with Watson Wyatt
since 1988, most recently as Watson Wyatts Latin America Region Retirement
Practice Leader. Before that, Mr. Mills was a Senior Consultant for Watson
Wyatt in its Latin America and Caribbean region. He worked as a project manager
and account manager, and consulted for clients throughout the region. Mr. Mills
has over 20 years of professional experience. He graduated from the University
of Connecticut in 1980 with a B.S. degree in Mathematics and is a Fellow of the
Society of Actuaries, a member of the American Academy of Actuaries, a member
of the Actuarial Association of Colombia, and an Enrolled Actuary.
Martin S. Pike
(age
48) has served as Vice President and Global Practice Director of Insurance and
Financial Services since June 2009, was most recently European Practice
Director for the Insurance & Financial Services Practice, and is a
member of the Global Practice Management Team. Mr. Pike advises insurers
and banks on the full range of services including core actuarial activities and
wide ranging strategic advice. Mr. Pikes client experiences include
senior relationship management activities with large clients, M&A
transactions; advising a large UK company on the exercise of discretion in the
with-profits funds; and restructuring of business operations. Mr. Pike
graduated from Oxford University and joined Watson Wyatt in 1983, qualifying as
a Fellow of the Institute of Actuaries in 1988.
Paul E. Platten
(age 56) has been Vice President and
Global Practice Director of the Human Capital Group since 2005 and served as
the Managing Consultant for the Boston, Massachusetts office of Watson Wyatt
Worldwide from 2003 to 2005. He joined Watson Wyatt in June 2000 as the
National Practice Leader of Strategic Rewards, specializing in executive
compensation and strategic human resource issues. Mr. Platten has spent
more than 20 years working with organizations to develop pay and performance
programs that effectively link with strategic goals and cultural values. Prior
to joining Watson Wyatt, Mr. Platten was the partner in charge of the
PricewaterhouseCoopers LLP Boston Global HR Solutions practice. For 15 years
prior to joining PricewaterhouseCoopers, Mr. Platten was part of the Hay
Group as Vice President and Managing Director of Eastern Operations. Mr. Platten
is a frequent lecturer at the American Bar Association and World at Work. He is
co-
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author of the book
People,
Performance and Pay
, which has been translated into three languages.
Mr. Platten holds a B.S. degree in Psychology from Boston College and a
Ph.D. degree in Industrial and Organizational Psychology from New York
University.
Chandrasekhar (Babloo) Ramamurthy
(age 53) has
served as Vice President, Regional Manager (Europe) of Watson Wyatt since 2005
and served as a member of Watson Wyatts board of directors from 2005 to
2008. He joined The Wyatt Company in
1977. Following the establishment of the
global Watson Wyatt Worldwide alliance in 1995, Mr. Ramamurthy became a
partner of Watson Wyatt LLP. Mr. Ramamurthy
has been based primarily in London, although between 1983 and 1986 he
transferred to the international benefits and compensation consulting team
based in the New York region, where he dealt primarily with the head offices of
U.S. multinational companies. Since
returning to Europe, Mr. Ramamurthy has been the account manager for a
number of the firms major clients in the U.K., advising on a broad range of
human capital and employee benefits issues both in the U.K. and overseas. Mr. Ramamurthy was the Head of the
European Benefits Consulting Practice from 1999 to 2004, before being appointed
Managing Partner of Watson Wyatt LLP in 2004, and has also served on Watson
Wyatt LLPs Partnership Board. Mr. Ramamurthy
holds an honours degree in Mathematics from Kings College, London.
Gene H. Wickes
(age 56) has served as the Global Director of the
Benefits Practice of Watson Wyatt since 2005 and as a member of Watson Wyatts
board of directors from 2002 to 2007. Mr. Wickes
was Watson Wyatts Global Retirement Practice Director in 2004 and the
U.S. West Divisions Retirement Practice Leader from 1997 to 2004. Mr. Wickes joined Watson Wyatt in 1996 as
a senior consultant and consulting actuary.
He assists clients with their retirement and executive benefit
issues. Prior to joining Watson Wyatt,
he spent 18 years with Towers Perrin, where he assisted organizations with
welfare, retirement, and executive benefit issues. Mr. Wickes is a Fellow of the Society of
Actuaries and has a B.S. in Mathematics and Economics, an M.S. in Mathematics
and an M.S. in Economics, all from Brigham Young University.
CORPORATE
GOVERNANCE
Corporate
Governance Guidelines
Watson Wyatt Worldwide, Inc. is committed to
exercising the highest standard of ethical conduct and corporate governance
which we believe best serve our stockholders, employees and clients. We have
established and adopted Corporate Governance Guidelines for maintaining our
ethical standards, as well as, adopting corporate governance practices that
form a solid framework for effectively aligning our business objectives.
Stockholders may obtain copies of our Codes of Business Conduct and Ethics, the
Corporate Governance Guidelines and our Board committee charters on the Companys
website at http://www.watsonwyatt.com/ir or send a request addressed to Watson
Wyatt Worldwide, Inc., Office of the Secretary, 901 N. Glebe Road,
Arlington, Virginia 22203.
Code of Business
Conduct and Ethics
The Company has a Code of Business Conduct and Ethics
that applies to all of its employees, including the President and Chief
Executive Officer, the Chief Financial Officer and the Controller. The Company
also has a Code of Business Conduct and Ethics that applies to all of the
Companys Directors and any amendment or waiver of the Codes for executive
officers and Directors will be disclosed on the Companys website.
Communications with
the Board or Presiding Director
It is the policy of the Company to facilitate
communications of stockholders and other interested parties with the Board of
Directors and the Companys Presiding Director. Communications to Directors of
the Company must be in writing and may be sent to any Director, in care of the
Office of the Secretary, Watson Wyatt Worldwide, Inc., 901 N. Glebe Road,
Arlington, Virginia 22203. Communications may be sent by email to all Directors
as a group or to the Presiding Director using the email addresses posted by the
Company on its web site at www.watsonwyatt.com under Investor Relations.
Communications should identify the person submitting the communication, the
interest of such person in the subject matter of the communication, and the
address, telephone number and email address of the person submitting the
communication. Each communication will be forwarded to the Director(s) to
whom it is addressed. The Board has authorized the Companys Secretary to adopt
reasonable procedures for collecting and distributing communications to
Directors. If such procedures are adopted, they will be made available on the
Companys website at www.watsonwyatt.com under Investor Relations.
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Presiding Director
The Companys Board of Directors has designated R.
Michael McCullough as the Presiding Director of all executive sessions of the
independent Directors of the Board.
Nominees for
Director
The Nominating and Governance Committee makes
recommendations to the Board concerning individuals who are qualified to stand
for election as Directors. The Nominating and Governance Committee seeks
individuals with a broad and diverse range of skills who have demonstrated the
highest levels of personal and business integrity and sound business judgment,
particularly in professional services industries. The Nominating and Governance
Committee will consider suggestions of possible nominees for Director from the
Board of Directors and management, and may in the future retain a search firm
to assist it in identifying possible nominees for Director.
The Nominating and Governance Committee also will
consider recommendations of possible nominees for Director submitted by
stockholders. Recommendations may be submitted to any member of the Nominating
and Governance Committee in care of the Office of the Secretary, Watson Wyatt
Worldwide, Inc., 901 N. Glebe Road, Arlington, Virginia 22203. Candidates
recommended by stockholders will be evaluated in the same manner as other
candidates considered by the Nominating and Governance Committee.
Standing Committees
of the Board
The Company has three standing committees: Audit,
Compensation and Nominating and Governance. These committees operate pursuant
to written charters adopted by the Board of Directors. The Company also has a
Risk Management Committee consisting of six members, three of which are
independent directors.
Audit Committee
The Audit Committees principal responsibilities, as
set forth in its charter, are to assist the Board in overseeing the Companys
financial reporting process that is established and implemented by management.
The Audit Committee oversees the work of the independent registered public accounting
firm and also reviews information provided by the Companys Director of
Internal Audit, independent registered public accounting firm, and management
concerning internal accounting procedures and controls.
The Audit Committee is currently composed of four
independent Directors, John J. Gabarro, R. Michael McCullough, Gilbert T. Ray
and John C. Wright (Chair), all of whom meet the current independence
requirements of NYSE and NASDAQs listing standards. The Board of Directors has
determined that Mr. Wright is both independent and an audit committee
financial expert, as defined by SEC guidelines and NYSE and NASDAQ listing
standards. The Audit Committee held eight meetings during fiscal year 2009.
Compensation Committee
The Compensation Committee oversees executive
compensation policies, including the compensation of the Chief Executive
Officer (CEO), and oversees administration of the 2001 Employee Stock
Purchase Plan, the 2001 Deferred Stock Unit Plan for Selected Employees, the
Watson Wyatt Performance Share Bonus Incentive Program and the 2000 Long-Term
Incentive Plan. The Board has delegated to the Compensation Committee matters
associated with succession planning for the CEO. The Compensation Committee
currently is composed of John J. Gabarro, Brendan R. ONeill, Linda D. Rabbitt
and Gilbert T. Ray (Chair), all independent Directors, and all of whom meet the
independence requirements of the NYSE and NASDAQs listing standards. The
Compensation Committee held six meetings during fiscal year 2009.
Nominating and Governance Committee
The Nominating and Governance Committee provides
assistance to the Board of Directors of the Company in fulfilling its
responsibilities: by identifying individuals qualified to become Directors and
approving the nomination of candidates for all Directorships to be filled by
the Board of Directors or by the stockholders of the Company; identifying
Directors qualified to serve on the committees established by the Board of
Directors and recommending to the Board of Directors members for each committee
to be filled by the Board of Directors; maintaining and reviewing the Corporate
Governance Guidelines; and otherwise taking a leadership role in shaping the
corporate governance of the Company.
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The Nominating and Governance Committee currently is
composed of R. Michael McCullough (Chair), Brendan ONeill, Linda D. Rabbitt
and John C. Wright, all independent Directors, and all of whom meet the
independence requirements of the NYSE and NASDAQs listing standards. The
Nominating and Governance Committee held five meetings during fiscal year 2009.
Board Meetings
The Board of Directors conducted eleven meetings
during fiscal year 2009. All Directors attended 75 percent or more of the
meetings of the Board and the committees on which they served.
Meetings of
Non-Employee Directors
The non-employee Directors met without any management
Directors or employees present two times last year to discuss board policies,
processes and practices. The Presiding Director, who is also the Chair of the
Nominating and Governance Committee, chaired these meetings.
Annual Meeting
Attendance
All Directors attended the 2008 Annual Meeting of
Stockholders. All Directors are expected to attend the annual meeting of the
Companys shareholders.
Item 11.
EXECUTIVE COMPENSATION
Compensation
Discussion and Analysis
Executive
Summary
Our Compensation Discussion and Analysis will provide you with an
overview and analysis of (i) our compensation programs and policies for certain
of our executive officers identified below; (ii) the material compensation
decisions made by the Compensation Committee (the Committee) of the Board of
Directors under those programs and policies as reflected in the executive
compensation tables that appear following this Compensation Discussion and
Analysis; and (iii) the material factors that the Committee considered in
making those decisions.
The Companys executive
compensation philosophy and the elements of our executive compensation program
with regard to fiscal year 2009 are summarized below:
·
The main objectives of the Companys executive compensation program are
attracting, motivating and retaining the best executives and aligning their
interests with our strategy of maximizing stockholder value.
·
Total direct compensation under the Companys executive compensation
program consists of base salary, supplemental performance-based awards in the
form of fiscal year-end bonuses, and long-term incentive opportunities.
·
The Committee is responsible for evaluating and setting the
compensation levels of our executive officers.
In setting compensation levels for executives other than the CEO, the
Committee solicits the input and recommendations of our CEO, John J. Haley.
·
Total target and actual direct compensation levels for the Companys
named executive officers compare lower than those of its peer group, primarily
because of lower long-term incentive targets but also because of lower annual
incentive targets. Because the Companys
executive compensation program has higher fixed elements such as base salaries
and pension value, it has lower incentive elements. As a result, this has led the Committee to
target total direct compensation lower than other companies of our size with
similar performance.
·
During fiscal year 2009, the Company operated in the midst of the worst
recession since the Great Depression, which resulted in a worldwide economic
slowdown, a freeze in available credit markets, and a crisis in confidence on a
global scale. In spite of these
challenges, the Company achieved the second best operating results in the
Companys history. Revenues were $1.68
billion, up 3 percent on a constant
9
Table
of Contents
currency basis, and net income for the year was $146.5
million, or $3.42 per diluted share.
Constant currency adjusted earnings per share, excluding severance,
increased 11 percent from $3.50 in fiscal year 2008 to $3.89 in fiscal year
2009. The Company managed strong profit
margins of more than 12 percent and had zero debt as of June 30, 2009.
·
Revenue growth and earnings per share are the primary quantitative
metrics used by the Committee to determine long-term incentive compensation
earned during the applicable three-year performance periods designated by the
Committee for measuring long-term performance.
For performance shares that vested at the end of fiscal year 2009, the
compensation decisions reported herein reflect the Companys performance above
target with respect to both metrics for the three-year performance period
ending June 30, 2009.
·
Based on the Companys sustained performance year over year relative to
its peer group and the respective individual accomplishments of our named
executives during fiscal year 2009, the Committee deemed it appropriate for
fiscal year-end bonuses for our named executives for fiscal year 2009 to be
demonstrably higher than target. In
addition, certain named executives received a one-time transaction bonus in
recognition of significant and extraordinary efforts made by those executives
in negotiating and executing the pending merger agreement with Towers Perrin.
·
The Committee will continue to consider all relevant competitive
factors in determining compensation for our named executive officers.
Named Executives
Under the heading Executive
Compensation, we present a series of tables containing specific information
about the compensation earned or paid in fiscal year 2009 to the following
individuals, whom we refer to as our named executives:
·
John J. Haley, President, Chief Executive Officer, Chairman of the
Board and Director
·
Roger F. Millay, Vice President and Chief Financial Officer
·
Carl D. Mautz, former Vice President and Chief Financial Officer
·
Gene H. Wickes, Vice President and Global Director of the Benefits
Practice
·
Kevin L. Meehan, Vice President and Regional Manager (North America)
·
Walter W. Bardenwerper, Vice President, Secretary and General Counsel
Mr. Mautz retired from
the Company effective August 29, 2008.
He was replaced by Mr. Millay, who started with the Company on August 18,
2008.
The discussion below is intended to help you understand the detailed
information provided in those tables and to put that information into context
within our
overall compensation program.
Objectives
of Our Executive Compensation Program
The objectives of our executive compensation program are to:
1.
Attract,
motivate and retain the most highly qualified and capable executives by
providing competitive compensation based on individual and Company performance
and reflecting our mix of compensation elements.
We seek to compensate all of our executives fairly on a global basis
and on a basis that reflects the Companys performance relative to its key
competitors. Toward this end, we provide
competitive base compensation, supplemented with variable compensation based on
individual achievement of annual results and, for select senior executives,
long-term results. As discussed below,
we tie both annual and long-term compensation to quantitative and qualitative
performance assessments that impact our success in the marketplace.
10
Table of Contents
2.
Align
executive compensation with the Companys overall business strategies and
values.
We apply our compensation objectives to all of our executives. In implementing our compensation objectives,
we take into consideration the Companys business strategy and prevailing
market conditions. Specifically, our
executive compensation program is designed to reinforce business goals
identified through our PerformanceExcellence process and our Horizon
initiatives.
Our PerformanceExcellence process is an annual three-phase performance
management cycle composed of planning, a mid-year review and a year-end
review. It is designed to (a) align our
employees (whom we refer to as our associates) performance goals to our
business priorities; (b) develop their ability to achieve their goals; and (c) recognize
and reward their business results based on fair and accurate measurement.
Horizon is the Companys strategic plan for attaining its vision of
market leadership in the human capital consulting profession. Factors included in the strategic plan take
into account our market share gains, the prioritization and allocation of our
financial investments and resources based on contribution to market leadership,
effectiveness in enhancing our organizational structure, and the achievement of
strategic acquisitions.
3.
Focus
management on maximizing stockholder value.
We also believe that the best way to directly align the interests of
our named executives with the interests of our stockholders is to ensure that
our named executives acquire and retain an appropriate level of stock ownership
throughout their careers with us. In
fiscal year 2009, our compensation program pursued this specific objective in
three ways: (i) through our Performance Share Bonus Incentive Program
(discussed below); (ii) by paying 25 percent of annual fiscal year-end bonuses
to our named executives and other senior executives in the form of Company
stock; and (iii) through our stock ownership guidelines for our named
executives, as described in more detail below.
4.
Foster an
ownership approach among our executives and reward their focus on long-term
objectives.
For our named executives, a portion of their fiscal year 2009 total
direct compensation was delivered through our Performance Share Bonus Incentive
Program, which is a long-term performance-based arrangement that pays out in
Company stock based on the achievement of performance goals over a three-year
period. The Performance Share Bonus
Incentive Program combines the elements of basing compensation on corporate
performance, focusing on stockholder value, and rewarding long-term results.
When implementing our
compensation program, the level of our named executives compensation is
determined primarily based upon (a) an internal pay equity analysis that takes
into account the named executives level of responsibility and function within
the Company; (b) the extent to which the named executive has helped drive the
achievement of financial and strategic goals that impact stockholder value; (c)
the overall performance and profitability of the Company; and (d) our
assessment of the competitive marketplace, including a comparison against what
we deem to be our peer group of companies.
We do not maintain employment agreements with any of the named
executives.
How We
Determine and Assess Executive Compensation
The Compensation
Committee is responsible for evaluating the compensation levels for each of the
named executives of the Company and for administering the Companys cash- and
equity-based incentive plans. The
Committee engages an independent compensation consultant, Frederic W. Cook &
Co., Inc. (Frederic Cook) and, in setting compensation levels for executives
other than the CEO, solicits the input and recommendations of our CEO, John
Haley. Frederic Cook periodically
reviews the Companys total compensation philosophy, target peer group and
target competitive positioning for reasonableness and appropriateness; conducts
competitive analyses of executive compensation for the chosen peer group and
reports on its findings to the Committee; and reviews the Companys total
executive compensation program on behalf of the Committee, in consultation with
management, and advises the Committee of changes that could be made to better
reflect evolving best practices and improve effectiveness. For fiscal year 2009, the Compensation
Committee instituted a formal process for conducting an annual assessment of
its independent compensation consultant.
11
Table of Contents
In making its determinations, the Committee relies on publicly
available information, commissioned survey data, and its knowledge of the
market for key executives. T
he Compensation Committee takes this peer
data information into account and generally seeks to provide competitive pay by
targeting total actual compensation opportunities for our named executives
between the 50
th
and 75
th
percentiles relative to a peer group. However, the Compensation Committee does not
target a particular peer group percentile for particular elements of
compensation. The peer group was
selected by the Compensation Committee based on the recommendations of Frederic
Cook and input from management on the comparability of the business operations
of potential peer group companies, and is re-evaluated annually.
The peer group companies include those few public
companies with human resources consulting lines of business. Because many of the Companys direct
competitors are privately owned (e.g., Towers Perrin and the Hay Group) or are
subsidiaries of larger public companies (e.g., Mercer Human Resource Consulting
and Buck Consultants), the number of direct competitors for which public
information is available for peer group comparison is limited. Therefore, additional peer group companies in
the consulting, staffing and professional services businesses are selected
using the following criteria: (a) reasonably comparable size (based on revenue
and market capitalization); (b) positive earnings before interest, taxes,
depreciation and amortization (EBITDA); (c) high human capital/low financial
capital business model; (d) creative/innovative business product; (e) highly
skilled employee base; (f) deemed a comparable by securities firms providing
research coverage; and (g) global reach.
For conducting a competitive assessment of the compensation levels of
each of its named executives in fiscal year 2009, the Compensation Committee
approved a peer group of ten companies, with two changes from the peer group
used in the prior fiscal year. Hudson Highland,
which was a primary company in the prior fiscal year, was dropped because it
is now primarily a staffing firm.
Resources Connection was moved up to the primary sub-set. Frederic Cook presented the Committee with
competitive compensation comparisons for the Companys fiscal year 2008 actual
total compensation and fiscal year 2009 target compensation against competitive
2008 actual and target compensation for the peer group companies. Comparisons were made separately by Frederic
Cook against the five primary companies considered to be most similar to the
Company, as well as against the combined peer group. The 10 companies comprising the combined
peer group for fiscal year 2009 are as follows:
Primary Peers
|
|
Secondary Peers
|
·
|
FTI Consulting
|
|
·
|
|
Aon
|
·
|
Hewitt Associates
|
|
·
|
|
CIBER
|
·
|
Navigant Consulting
|
|
·
|
|
Convergys
|
·
|
Perot Systems
|
|
·
|
|
Gartner
|
·
|
Resources Connection
|
|
·
|
|
Huron Consulting
|
|
|
Position Relative to Watson
Wyatt (Based on Fiscal Year 2008 Data)
|
|
|
|
Annual Revenue
($mil)
|
|
Market Capitalization
($mil)
|
|
Number of
Employees
|
|
Median Size: Primary
|
|
2,036
|
|
1,652
|
|
11,683
|
|
Median Size: Combined
|
|
1,293
|
|
1,423
|
|
8,400
|
|
|
|
|
|
|
|
|
|
·
|
Watson Wyatt
|
|
1,760
|
|
2,038
|
|
7,230
|
|
|
|
|
|
|
|
|
|
|
Watson Wyatt is
above median in size (average percentile rank of 60% when measured in terms of
revenue, earnings before interest, taxes, depreciation and amortization, total
assets, market capitalization and number of employees) compared to the combined
peer group. The combined peer group was
used for this purpose because it was determined that there are too few companies
in the primary peer group to calculate meaningful percentile ranks. An analysis performed for the Company by
Frederic Cook compared the compensation percentile ranks for our named
executives versus the combined peer group based on 2008 data. The analysis revealed that the Companys base
salaries for named executives continued to compare above median, which the
Committee believes is appropriate given the Companys percentile rank based on
average size. The competitiveness of
target bonuses for our named executives varied by position and they are
generally less competitive than our base salaries, but are sufficient to result
in actual total cash compensation that is above median when our performance is
above median.
12
Table of
Contents
The value of long-term
incentive compensation compared low, generally falling between the 25
th
percentile and
the median, with the result that total direct compensation was at or below the
median for most of our named executives.
However, Watson Wyatt is one of only a few companies in our combined
peer group with a defined benefit pension plan.
Taking into account both the change in pension value and actual total
direct compensation generally increases the competitiveness of the Companys
actual total compensation to above median and, in some cases, above the 75
th
percentile.
In light of its
determination regarding actual total compensation, the Committee determined
that total direct compensation for our named executives should continue to be
positioned near, but below, the median.
As a result, the Committee did not increase target annual and long-term
incentive levels for fiscal year 2009. However,
based on its post-year-end review of the Companys sustained positive
performance in fiscal year 2009, the Committee concluded that the annual
year-end bonuses for our named executives generally should exceed target in
order to reflect their strong performance during the fiscal year.
Elements of Our Executive Compensation Program
Our executive compensation program consists primarily of the following
integrated components: base salary, supplemental performance-based awards in
the form of fiscal year-end bonuses, and long-term incentive opportunities,
which together make up a named executives total direct compensation for a
given fiscal year. The only component
not available to all associates is the long-term incentive opportunity.
The process for determining Mr. Haleys salary and fiscal year-end
bonus is discussed in more detail on page 18.
In determining base salary increases and fiscal year-end bonus payments
for the named executives other than Mr. Haley, the Committee asks for
recommendations from Mr. Haley. In
making his recommendations for the named executives, Mr. Haley reviews each
named executives performance against their individual PerformanceExcellence
goals. For our named executives, these
goals consist primarily of objectives addressing the financial performance and
effective management of their respective business practice, region or corporate
function. While this process reflects a
methodical approach to evaluating the job performance of our named executives,
achievement of these goals is evaluated subjectively and scored in four
weighted performance domains, as described below in the discussion relating to
fiscal year-end bonuses. In making his
recommendations, Mr. Haley also takes into consideration the named executives
experience, the extent to which the named executive has contributed to the
Companys success during the fiscal year, the named executives expected level
of responsibility in the coming year, base salary and bonus pool levels for the
Company as a whole, peer group competitive data and relative pay levels of
other Watson Wyatt associates. The
following discussion will describe each of the components that comprise the
total direct compensation of our named executives.
Base Salary
In order to provide a fixed level of compensation for the performance
of an executives regular duties, the Company pays all of its named executives
a fixed, annual base salary, which the Committee reviews and approves at the
beginning of each fiscal year and which becomes effective on October 1 of each
year. Base salary decisions are highly
discretionary, and we do not target base salary as a particular percentage of
total compensation. Mr. Haley makes
salary recommendations to the Committee for the named executives other than
himself.
Based upon the
qualitative evaluation process discussed above, in conjunction with a review of
competitive peer group survey data, Mr. Haley recommended salary increases for
fiscal year 2009 for Messrs. Wickes and Meehan of 4.5% and for Mr. Bardenwerper
of 4.2% that became effective October 1, 2008.
In making these recommendations, the principal factors that Mr. Haley
considered were the Companys overall financial results for fiscal year 2008,
the individual performance of each executive during the fiscal year and salary
levels of similarly positioned executives in the Companys primary peer
group. Mr. Mautz did not receive a
salary increase as he retired from the Company prior to October 1, 2008. Mr. Millay did not receive a salary increase
effective October 1, 2008, as he had started with the Company just prior to
that time. Mr. Haley discussed each
recommendation with the Committee and, thereafter, the Committee approved the
recommended salary increases.
13
Table of Contents
A similar process was
followed for determining the base salaries for the named executives other than Mr.
Haley effective October 1, 2009. Because
of general economic conditions and a desire to be prudent. Mr. Haley
recommended that base salaries for all named executives remain unchanged
effective October 1, 2009, and the Committee agreed with his
recommendation. As discussed below, Mr. Haleys
base salary remained unchanged, as did the base salaries for the named
executives other than Mr. Haley.
Fiscal Year-End Bonuses
The Companys named executives participate in an annual fiscal year-end
bonus program, which the Company provides in order to supplement base salary
and reward achievement of individual, business unit/function and/or overall
Company results for the most recently completed fiscal year. Pursuant to this program, each named
executive is assigned a pre-determined bonus target as a percentage of base
salary as shown in the table below:
Name
|
|
Target
Bonus Percentage
|
|
John Haley
|
|
100.0
|
%
|
Roger Millay
|
|
62.5
|
%
|
Carl Mautz
|
|
62.5
|
%
|
Gene Wickes
|
|
62.5
|
%
|
Kevin Meehan
|
|
62.5
|
%
|
Walter Bardenwerper
|
|
62.5
|
%
|
Target bonus levels for our named executives are based on their
respective band levels, which generally reflect their level of responsibilities
and contributions to the business.
Target bonus percentage increases as an associates band level
increases. This reflects a belief that
as associates move to higher levels of responsibility with greater ability to
influence the Companys results, a higher proportion of pay should be
determined to be at risk and dependent on Company and individual
performance. Mr. Haleys target is
higher than for the other named executives in order to reflect his greater
level of responsibility and how critical his contributions are to the success
of the Company.
The amount of fiscal year-end bonuses awarded as a percentage of target
is discretionarily determined. Following
the end of fiscal year 2009, Mr. Haley evaluated the performance of each of the
other named executives by scoring their performance in four weighted
performance domains, as follows: (i) Business practice, region or Corporate
function (representing a qualitative assessment of financial and individual
performance in leading their respective practice, region or Corporate function)
50%; (ii) Watson Wyatt (representing a subjective judgment of their
contribution to the Company as a whole during the fiscal year) 25%; (iii) Other goals (representing individual
goals that were developed through our PerformanceExcellence process) 15%; and
(iv) Global Matrix Group (GMG) participation (representing their contribution
as a member of the Companys GMG) 10%.
Mr. Haley assigned a rating to each of the other named executives for
each performance category, which was then applied against the weighting for the
particular category and totaled for each of the named executives to arrive at
an overall performance rating for the fiscal year utilizing a six-point
scale. A named executives actual bonus
is based on this rating and the named executives applicable bonus funding
percentage. The bonus funding percentage
is the percentage of the Company-wide bonus pool that is subjectively allocated
to each applicable practice, region or Corporate function as a result of their
performance during the fiscal year.
In making his
recommendations within the framework discussed above, Mr. Haley took into
account each named executives responsibilities and accomplishments during the
fiscal year. In addition to the
sustained positive performance of the Company in fiscal year 2009 relative to
its peers, the bonus recommendations provided to the Committee by Mr. Haley
took into account the following qualitative assessment of each named executives
performance during the fiscal year.
Mr. Millay successfully
transitioned into his role as the new Chief Financial Officer of the Company
and efficiently and effectively oversaw the Companys adherence to the highest
standards of financial reporting and controls.
He led the development of improved processes and reporting capabilities
within the global finance and accounting functions, while at the same time providing
strong operational support and guidance to senior management and the Board of
Directors.
14
Table of Contents
Mr. Wickes, as the
leader of the Companys largest practice, managed to guide the Benefits
Practice to a successful year in the midst of a global economic crisis and
deteriorating market conditions. Pre-tax
net operating income for the Benefits Practice reached an all-time high, and
the annual organic, constant currency growth rate for the practice was strong,
especially when considering the global economic environment.
Mr. Meehan, like Mr. Wickes,
adapted well to rapidly changing and deteriorating market conditions and led
our North America region to a strong performance in fiscal year 2009. The North America region effectively managed
its costs, preserved its operating margins and was our most profitable region.
Mr. Bardenwerper
provided critical leadership in helping the Company through the economic
crisis. He also made significant strides
in guiding the Company through the regulatory and litigation challenges facing
it and provided valuable support to senior management and the Board of
Directors.
All of the named
executives other than Mr. Haley were rated by Mr. Haley as a 5
Very Strong Performance, corresponding to a suggested bonus range of 115% to
135% of target based on the named executives applicable bonus funding
percentage. Based on these performance
ratings, Mr. Haley recommended annual bonuses ranging from 118.7 percent
to 138.9 percent of target for the other named executives,
as set forth below.
Name
|
|
Area
|
|
Bonus as a
Percentage of
Target
|
|
Millay
|
|
F&A
|
|
118.7
|
%
|
Mautz
|
|
F&A
|
|
N/A
|
|
Wickes
|
|
Benefits
Practice
|
|
138.9
|
%
|
Meehan
|
|
North America
|
|
133.6
|
%
|
Bardenwerper
|
|
General Counsel
|
|
131.5
|
%
|
Because Mr. Mautz
retired from the Company effective August 29, 2008, he did not receive a
fiscal year-end bonus for fiscal year 2009.
Mr. Haley discussed
each recommendation with the Committee.
The Committee has the discretion to increase or decrease each of these
amounts (though not above the maximum incentive award established by the
Committee, described under Tax and Accounting Treatments of Elements of
Compensation below), but determined to approve all of the recommended payouts
without adjustment.
In order to facilitate
stock ownership by associates at our most senior levels, we have an equity
incentive feature of our bonus program under which 25 percent of the total
bonus awarded is delivered in the form of Company stock under the Companys
2001 Deferred Stock Unit Plan for Selected Employees, which could vest based on
the discretion of the Committee over two years.
The number of shares granted is based on the closing share price on the
grant date, which is the bonus payment date.
Consistent with past practice, the Committee exercised its discretion to
grant fully vested shares for fiscal year 2009.
Transaction
Bonuses
Mr. Haley also made
recommendations to the Committee for special one-time cash bonuses to a select
number of executives, including some of the named executives, in recognition of
the significant and extraordinary efforts made by those executives in
negotiating and executing the pending merger agreement with Towers Perrin. The Committee noted that the exceptional
fiscal year 2009 results discussed above for the Company were achieved within
the same time period as the Companys Chief Executive Officer, the Chief
Financial Officer, the General Counsel and the Global Director of the Benefits
Practice were successfully negotiating the largest merger in the history not
only of the Company itself, but of the human capital/actuarial industry as a
whole.
Mr. Wickes, Mr. Bardenwerper
and Mr. Millay took an active role throughout the lifecycle of the deal
and devoted a significant amount of time and effort in helping to negotiate the
terms of the merger agreement. Mr. Millay
and Mr. Bardenwerper also both played key roles in leading the due
diligence function and providing assistance in finalizing
15
Table of Contents
the contractual terms of
the merger. Accordingly, following
discussions of the time and effort exerted by each named executive, the
Committee approved the recommendations of Mr. Haley for special one-time
cash bonuses in the amount of $150,000 for Mr. Millay, $200,000 for Mr. Wickes
and $200,000 for Mr. Bardenwerper.
Long-Term Incentive Compensation: Performance Share Bonus Incentive
Program
In fiscal year 2009, our named executives received long-term incentive
compensation under our Performance Share Bonus Incentive Program (the SBI
Program). The SBI Program advances our
executive compensation objectives by rewarding the achievement of strategic
performance objectives with equity awards.
As a result, the Committee weighted our SBI Program so that it provides
a significant portion of our named executives total direct compensation
opportunity.
The target number of
deferred stock units that may be earned by the named executives under the SBI
Program represents a multiple of the cash portion (75 percent) of the named
executives target bonus for the year of grant, with the multiples ranging from
2.0 for Mr. Haley to 1.25, 1.0 or 0.75 for the other named
executives. Mr. Haleys multiple is
higher because his leadership is considered by the Committee to be critical to
the Company. Mr. Millays
multiplier, while not as high as Mr. Haleys, is higher than for the other
named executives in order to reflect the importance of his role as Chief
Financial Officer. Mr. Bardenwerpers
multiplier is lower than the remaining named executives to reflect the fact
that he is not a member of the Global Matrix Group. The following table shows how the number of
deferred stock units granted in fiscal year 2009 under the SBI Program was
determined for each of the named executives, for the performance period
beginning July 1, 2008 and ending June 30, 2011.
LAST NAME
|
|
BASE
PAY AS
OF
10/1/2008
|
|
FISCAL
YEAR-
END
BONUS
(FYEB)
TARGET
|
|
PORTION
OF FYEB
DELIVERED
AS CASH
|
|
CASH
PORTION
OF
TARGET
BONUS
|
|
MULTIPLIER
|
|
FULL
CASH
EQUIVALENT
OF
STOCK
GRANT
|
|
STOCK
PRICE AS
OF
6/30/2008
|
|
NUMBER
OF
DEFERRED
STOCK
UNITS
GRANTED
|
|
HALEY
|
|
$
|
915,000
|
|
100.0
|
%
|
75.0
|
%
|
$
|
686,250
|
|
2.00
|
|
$
|
1,372,500
|
|
$
|
52.89
|
|
25,951
|
|
MILLAY
|
|
$
|
550,000
|
|
62.5
|
%
|
75.0
|
%
|
$
|
257,813
|
|
1.25
|
|
$
|
322,266
|
|
$
|
52.89
|
|
6,094
|
|
WICKES
|
|
$
|
575,000
|
|
62.5
|
%
|
75.0
|
%
|
$
|
269,531
|
|
1.00
|
|
$
|
269,531
|
|
$
|
52.89
|
|
5,097
|
|
MEEHAN
|
|
$
|
575,000
|
|
62.5
|
%
|
75.0
|
%
|
$
|
269,531
|
|
1.00
|
|
$
|
269,531
|
|
$
|
52.89
|
|
5,097
|
|
BARDENWERPER
|
|
$
|
500,000
|
|
62.5
|
%
|
75.0
|
%
|
$
|
234,375
|
|
0.75
|
|
$
|
175,781
|
|
$
|
52.89
|
|
3,324
|
|
See note 1 to the table on Grants of Plan-Based Awards in Fiscal 2009
on page 24 for more information on the formula to be used to determine the
amount payable based on results for the fiscal 2009 through 2011 performance
period.
The number of deferred
stock units earned is based upon the extent to which the Company meets certain
performance goals set at the beginning of the three-year performance
period. For the fiscal 2007 through 2009
performance period, the fiscal 2008 through 2010 performance period, and the
fiscal 2009 through 2011 performance period, the Committee set financial
metrics for the SBI Program because it concluded that such metrics accurately
reflected the strategic performance goals for the Company and are aligned with
the interests of the Companys stockholders.
The financial metrics for each of the three-year SBI Program performance
periods are earnings per share growth and organic revenue growth. For significant foreign operations, revenue
for use in the revenue growth calculations reflects a constant currency
exchange between the local currency and the U.S. dollar.
Based on the extent to
which financial metrics are achieved over a three-fiscal-year period,
participants vest in between zero and 170 percent of the target number of
deferred stock units, with a threshold vesting level set at 30 percent of
target. Dividend equivalents are
credited only on stock units that ultimately vest.
16
Table of Contents
See note 2 to the Stock Vested During Fiscal Year 2009 table on page 27
for information on the formula used to determine the amount
payable and the results for the fiscal 2007 through 2009 performance period.
The fiscal year 2008 and
fiscal year 2009 SBI Program documents indicate that the Committee shall
accelerate the determination of vesting of awards and provide for their
immediate settlement in stock or cash in connection with a change in control,
subject to the Committees authority to assure fair and equitable treatment of
participants in the SBI Program.
Accordingly, on September 4,
2009, the Committee determined that, upon and subject to consummation of the
proposed merger between Watson Wyatt Worldwide, Inc. and Towers, Perrin,
Forster & Crosby to form a new, publicly listed company called Towers
Watson & Co. (the Merger), the fiscal 2008 SBI Program awards shall
not vest, with the effect that nothing will be earned or paid under those
awards and the awards will be forfeited, but the fiscal 2009 SBI Program will
vest at 100% of target. In reaching
these determinations, the Committee assessed performance to date and
projections of performance. As a result
of these evaluations, the Committee concluded that it is not likely that the
Company will achieve the fiscal year 2008 to 2010 minimum performance
metrics. With respect to the fiscal 2009
to 2011 performance period, the Committee determined that it is appropriate to
settle the awards at target in order to treat participants fairly, retain key
talent, and take account of the fact that the level at which performance
metrics may be met at the time of the Merger will be uncertain, as the
performance period would be only halfway completed as of December 31,
2009, the projected date of the Merger.
As a result, the
following number of shares of Towers Watson & Co.s Class A
common stock, plus dividend equivalents that will have accrued, will be paid to
the Companys named executives for their vested fiscal 2009 SBI Program awards
upon consummation of the Merger: Mr. Haley - 25,951; Mr. Millay -
6,094; Mr. Wickes - 5,097; Mr. Meehan - 5,097; and Mr. Bardenwerper
- 3,324.
Also, in light of the
pending Merger, the Committee determined to grant nonqualified stock options as
incentive compensation in lieu of establishing awards under the SBI Program for
fiscal 2010. The options were granted on
September 9, 2009 under the Companys 2000 Long-Term Incentive Plan. The options were granted to high-performing
senior executives of the Company, including the named executives, who otherwise would have been selected by the
Committee to receive SBI Program awards as a result of the executives having
direct impact on or responsibility for driving strategy throughout the
Company. In light of the anticipated
timing of the Merger, the Committee granted options with a Black-Scholes value
equal to approximately one-half of the target value of grants under the SBI
Program. The options have a seven year
term and will vest ratably over each of the three years following the date of
grant, provided that upon a change in control of the Company, including the
Merger, the options become fully exercisable.
The options have an exercise price equal to the grant date market price
of the Companys common stock ($42.47), so that participants will be able to
realize value under their options only to the extent that the options become
vested and the value of the Companys stock price, or the share-equivalent value
of Towers Watson common stock following the Merger, appreciates. The options otherwise will expire to the
extent that they are unvested upon a participants termination of employment
for reasons other than death, disability, retirement or termination without
cause. The number of options granted to
each of the named executives was as follows: Mr. Haley 55,530; Mr. Millay
- 13,042; Mr. Wickes 10,908; Mr. Meehan 10,908; and Mr. Bardenwerper
- 7,114.
Equity Award Policies
As discussed above, in
fiscal year 2009 we paid a portion of annual fiscal year-end bonuses in the
form of stock and also awarded stock under the SBI program for the fiscal 2007
through 2009 performance period. The
calculations of the amount of equity to be awarded are performed as of the last
business day preceding the bonus payment date, in the case of annual fiscal
year-end bonuses, and as of the last day of the preceding fiscal year, in the
case of the SBI Program. The timing of
these calculations is fixed in advance so as to eliminate the opportunity for
taking advantage of material nonpublic information.
17
Table of Contents
Base Salary and Bonus for the Chief Executive
Officer
Mr. Haleys base
salary from October 1, 2008 to September 30, 2009 was $915,000, an
increase of $40,000, or 4.6 percent over his previous years base salary of
$875,000. Effective October 1,
2009, Mr. Haleys annual base salary remained unchanged at $915,000. In determining to leave Mr. Haleys base
salary unchanged, the principal factors that the Compensation Committee
considered were salary levels of CEOs in the Companys peer group, general
economic conditions and the desire to be consistent with the treatment of the
other named executives.
The Committee recommended, and the Board of Directors approved, a bonus
($1,281,000) equal to 140 percent of Mr. Haleys target bonus. Below are Mr. Haleys fiscal year 2009
performance goals, which were the principal factors taken into account in
determining Mr. Haleys bonus.
1.
Meet the
fiscal year 2009 financial plan for revenue of $1.875 billion, Net Operating
Income of $478 million, and Earnings Per Share of $3.84. For significant foreign operations, the
calculation of fiscal year 2009 revenue, Net Operating Income and Earnings Per
Share reflects a constant currency exchange between the local currency and the
U.S. dollar from fiscal year 2008 to fiscal year 2009.
2.
Make sure
that the Insurance & Financial Services Practice meets fiscal year
2009 financial plan for revenue of $125 million ($119 million in fiscal year
2008) and Net Operating Income of $10 million, or 8% ($2 million, or 2% in
fiscal year 2008). For significant
foreign operations, the calculation of fiscal year 2009 revenue, Net Operating
Income and Earnings Per Share reflects a constant currency exchange between the
local currency and the U.S. dollar from fiscal year 2008 to fiscal year 2009.
3.
Champion
and monitor the Diversity Program.
4.
Continue
to develop succession planning for the CEO and top business leaders and instill
a succession process and culture in the organization.
5.
Work with
the new CFO to drive continued enhancement in financial reporting processes.
6.
Use
Horizon strategy to drive Company actions and plans. Continue to ensure that strategy is
consistent with current and future needs.
The Committee determined that Mr. Haley did not meet the financial
plan for fiscal year 2009, but that he did meet or exceed his other goals for
fiscal year 2009, and that financial performance was strong in light of the
difficult economic environment. In
making its bonus decision, the Committee also considered the results of an
internal CEO 360 evaluation of Mr. Haley by his direct reports and the
Board of Directors in which Mr. Haley scored very favorably in almost all
categories.
Mr. Haleys compensation level is significantly higher than that
of the other named executives. The
Committee believes this is appropriate given:
a.
His years
of experience in the human capital consulting industry;
b.
His
lengthy tenure and consistently superior performance as CEO of the Company;
c.
His level of responsibility and the
significance and critical nature of his contributions to the success of the
Company; and
d.
The growth
and performance of the Company under his leadership.
Severance Benefits
The Company has not
entered into employment agreements with its named executives. The Company also does not maintain a broad-based
severance plan. As a result, the Company
is not obligated to pay severance in the event of an involuntary termination of
employment of one of its named executives. However, because the SBI Program
represents a significant percentage of our named executives total direct
compensation opportunity, the Committee retains the discretion to determine
whether and how to adjust outstanding SBI Program awards in the event of a
termination of employment. In connection
with Mr. Mautzs retirement from the Company effective August 29,
2008, the Committee, in the exercise of such discretion, determined that Mr. Mautz
should vest in his fiscal year 2007 and fiscal year 2008 SBI Program awards at
the same time and to the same extent as other SBI Program participants,
dependent upon the achievement of relevant Company metrics for each of the
applicable three-year performance periods.
The plan under which the SBI Program is conducted also states that upon
a change in control,
18
Table of Contents
the Committee shall
accelerate the vesting of awards, subject to the Committees authority to
assure fair and equitable treatment of participants.
The Company also
maintains severance pay guidelines for associates, which would include the
named executives. The guidelines are
completely discretionary in the event of a termination of employment, and for
any termination, the amount paid by the Company may vary. The guidelines provide for severance pay in
an amount equal to two weeks pay for each full year of the named executives
service, up to a maximum of 24 weeks pay, or an amount equal to one weeks pay
for each full year of service, whichever is greater, payable in a lump sum upon
termination. Any severance benefits
payable to a named executive in such circumstances would be entirely
discretionary and would be determined by the Company on an individual basis with
the approval of the Committee.
Retirement and Savings Plan Benefits
Retirement Plans
The named executives participate in a defined benefit plan available to
Watson Wyatt associates in the United States.
The Companys sponsorship of such a plan is consistent with our belief
that defined benefit plans continue to represent a crucial and viable means for
us to provide for the future retirement security of our employees and to
encourage sustained service to the Company.
The plan benefits are based upon years of service with the Company and
the highest consecutive 60-month average of total pay, which includes base pay
and bonus. More details regarding the
defined benefit plan are included in the discussion following the Pension
Benefits table on page 28.
Savings Plans
Our named executives are also eligible to participate in the 401(k) plan
available to Watson Wyatt associates in the U.S. and in a non-qualified plan
designed to permit employees impacted by Internal Revenue Code (IRC)
limitations on annual contributions to 401(k) plans to continue to receive
Company matching contributions as if salary deferrals had continued once they
exceeded the IRC limitations.
Non-Qualified Retirement Plans
The Company also sponsors non-qualified defined benefit and defined
contribution retirement plans for our highly compensated executives, including
our named executives in the United States, which provide benefits in excess of
IRC limits. The purpose of these plans
is to provide our senior executives with the retirement benefits they would
have received in the absence of the IRC limitations.
Employee Welfare Benefit Plans
Our named executives are eligible for medical, life insurance and other
welfare benefits available to other Watson Wyatt associates, depending upon the
region in which they are located. There
are no special medical plans or other welfare plans for our named executives,
except that the named executives are covered by an excess personal liability
policy that the Company provides to only certain of its senior executives.
Tax and Accounting Treatments of Elements of
Compensation
Section 162(m) of the IRC disallows a tax deduction for the
Company for individual executive compensation exceeding $1 million in any
taxable year, excluding compensation that is considered to be performance based
under the Incentive Compensation Plan approved by the stockholders of the
Company.
During fiscal year 2006, the Company obtained stockholder approval for
a plan (known as the Incentive Compensation Plan) under which annual fiscal
year-end bonuses paid to senior executives may qualify as performance-based
compensation that is not counted toward the $1 million limitation on
deductibility of compensation. Under the
Incentive Compensation Plan, the Compensation Committee at the beginning of
each fiscal year establishes a performance period with respect to which awards
in the form of fiscal year-end bonuses are granted under the plan, and also
establishes a formula for determining the maximum award payable to a
participant.
For fiscal year 2009, the Committee established the fiscal year (July 1,
2008 to June 30, 2009) as the performance period and established the
maximum incentive award as 2.5 percent of net income for the performance period
in the case of the CEO and any other participant who is a member of the Board,
and 1.5 percent of net income for each other named executive. For fiscal year 2009, the Committee certified
the amount of net income as defined under the
19
Table of Contents
plan for the performance period and each participants maximum award
under the plan, and based on the subjective evaluations discussed above, the
Committee further determined each participants actual award, payable as their
fiscal year-end bonus as well as the transaction bonus for certain of the named
executives. The combined total bonuses
actually paid were well below the maximum incentive awards established by the
Committee.
As a result, the fiscal year-end bonuses and transaction bonuses paid
to the executives under the Incentive Compensation Plan will not be counted
toward the $1 million limitation on deductibility of compensation. Shares that vested under the previously
described fiscal year 2007 SBI Program do not qualify as performance-based
compensation and remain subject to the $1 million deductibility limitation
under IRC Section 162(m).
Prior to the adoption of
the Incentive Compensation Plan, the Company had adopted the Senior Officers
Deferred Compensation Plan, an unfunded nonqualified deferred compensation plan
under which amounts paid to senior
executives subject to Section 162(m) in
excess of $1 million are deferred on a mandatory basis until such time as the
executive is no longer subject to the requirements of Section 162(m) or
leaves the Company.
Mr. Haley, Mr. Wickes and Mr. Meehan have been required
to defer a portion of their compensation and therefore are the only named
executives who currently
participate in the Senior Officers Deferred Compensation Plan. The plan offers a minimum of three investment
options including an interest factor equal to the prime rate of interest as
reported by the Companys bank.
Additional information on contributions and earnings under this plan is
set forth in the Nonqualified Deferred Compensation table below.
Stock
Ownership Guidelines
The Company believes that
stock ownership aligns associates financial interest with the interests of
other stockholders and the Company. Our
executive ownership guidelines specify a minimum amount of Watson Wyatt stock
that an associate should accumulate over ten or more years of employment with
Watson Wyatt. For our named executives,
the guidelines call for accumulating and holding vested shares having a value
in excess of 150 percent of base salary, with such guideline prorated over the
first ten years of employment with the Company.
Each of our named executives had satisfied his guideline as of the end
of fiscal year 2009 and owned substantially more stock than required by the
guidelines.
COMPENSATION COMMITTEE REPORT
Our Committee is composed of four
independent Directors, each of whom meets the independence requirements of the
NYSE and NASDAQ listing standards and the rules and regulations of the
SEC. The Compensation Committee operates
under a written charter adopted by the Board.
Our charter can be viewed on the Companys website
(www.watsonwyatt.com), in the Investor Relations section.
We have reviewed and
discussed the Compensation Discussion and Analysis (CD&A) with the CEO, CFO
and senior management. Based upon our
review and such discussion, we recommended to the Board that the CD&A be
included in this disclosure document.
THE COMPENSATION
COMMITTEE:
Gilbert T. Ray (Chair)
John J. Gabarro
Brendan R. ONeill
Linda
D. Rabbitt
20
Table
of Contents
Executive Compensation
Summary Compensation Table
The following table sets
forth information for fiscal years 2009, 2008 and 2007 concerning the
compensation paid by the Company to (i) the Chief Executive Officer; (ii) the
Chief Financial Officer, and (iii) the three other most highly compensated
individuals who were serving as executive officers of the Company at the end of
fiscal year 2009. These individuals are
referred to as our named executives.
Name
and Principal
Position
|
|
Fiscal
Year
|
|
Salary
($)(1)
|
|
Bonus
($)(2)
|
|
Stock
Awards
($)(3)
|
|
Change in
Pension
Value and
Nonqual.
Deferred
Comp.
Earnings
($)(4)
|
|
All Other
Compensation
($)(5)
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Haley
|
|
2009
|
|
$
|
905,000
|
|
$
|
1,281,000
|
|
$
|
602,058
|
|
$
|
511,176
|
|
$
|
87,393
|
|
$
|
3,386,627
|
|
President, Chief
|
|
2008
|
|
865,000
|
|
1,300,000
|
|
1,980,375
|
|
2,491,531
|
|
79,495
|
|
6,716,401
|
|
Executive Officer,
|
|
2007
|
|
826,250
|
|
876,750
|
|
2,018,750
|
|
1,597,575
|
|
29,839
|
|
5,349,164
|
|
Chairman of the Board
and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger Millay(6)
|
|
2009
|
|
481,250
|
|
558,000
|
|
0
|
|
120,607
|
|
6,900
|
|
1,166,757
|
|
Vice President and
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl D. Mautz(7)
|
|
2009
|
|
78,333
|
|
0
|
|
(23,924
|
)
|
520
|
|
62,133
|
|
117,062
|
|
Former Vice President
|
|
2008
|
|
467,500
|
|
330,000
|
|
539,422
|
|
262,747
|
|
24,298
|
|
1,623,967
|
|
and Chief Financial
|
|
2007
|
|
456,250
|
|
250,000
|
|
355,938
|
|
376,949
|
|
4,950
|
|
1,444,087
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gene H. Wickes
|
|
2009
|
|
568,750
|
|
699,000
|
|
119,633
|
|
1,065
|
|
75,449
|
|
1,463,897
|
|
Vice President and
|
|
2008
|
|
546,250
|
|
465,000
|
|
396,250
|
|
427,450
|
|
69,762
|
|
1,904,712
|
|
Global Director of the
|
|
2007
|
|
531,250
|
|
335,000
|
|
407,734
|
|
519,927
|
|
45,847
|
|
1,839,758
|
|
Benefits Practice
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin L. Meehan
|
|
2009
|
|
568,750
|
|
480,000
|
|
117,154
|
|
1,527
|
|
33,339
|
|
1,200,770
|
|
Vice President,
|
|
2008
|
|
545,000
|
|
530,000
|
|
365,703
|
|
1,071,507
|
|
30,169
|
|
2,542,379
|
|
Regional Manager
|
|
2007
|
|
522,500
|
|
340,000
|
|
249,688
|
|
216,334
|
|
4,950
|
|
1,333,472
|
|
(North America)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Walter Bardenwerper
|
|
2009
|
|
495,000
|
|
611,000
|
|
78,121
|
|
1,263
|
|
1,800
|
|
1,187,184
|
|
Vice President,
|
|
2008
|
|
476,250
|
|
375,000
|
|
258,223
|
|
660,089
|
|
25,389
|
|
1,794,951
|
|
Secretary and General
|
|
2007
|
|
461,250
|
|
275,000
|
|
263,965
|
|
655,099
|
|
4,950
|
|
1,660,264
|
|
Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Table
of Contents
(1)
Salary adjustments become effective on October 1
of each fiscal year. Effective October 1,
2008, Mr. Haleys base salary increased from $875,000 to $915,000, Mr. Wickes
base salary increased from $550,000 to $575,000, Mr. Meehans base salary
increased from $550,000 to $575,000 and Mr. Bardenwerpers base salary
increased from $480,000 to $500,000.
Except for Mr. Millay and Mr. Mautz, the salary amounts shown
in the Summary Compensation Table for fiscal year 2009 reflect three months of
salary at the rate in effect prior to October 1, 2008 and nine months of
salary at the new rate effective October 1, 2008. The salary amount shown for Mr. Millay
represents the amount of salary from his date of hire on August 18, 2009
based on an annual rate of $550,000. The
salary amount shown for Mr. Mautz represents the amount of salary from July 1,
2008 through his retirement effective August 29, 2008 based on an annual
rate of $470,000.
(2)
Reflects the value of fiscal year-end
bonuses earned during fiscal year 2009 and paid in September 2009 in the
following amounts: Mr. Haley - $1,281,000; Mr. Millay - $408,000; Mr. Wickes
- $499,000; Mr. Meehan - $480,000; and Mr. Bardenwerper -
$411,000. Twenty-five percent of each
such bonus was paid in the form of fully vested Company stock issued under the
2001 Deferred Stock Unit Plan for Selected Employees. The remaining seventy-five percent of each
such bonus was paid in cash. The amounts
shown also reflect transaction bonuses in the amount of $150,000 for Mr. Millay,
$200,000 for Mr. Wickes and $200,000 for Mr. Bardenwerper. These bonuses were intended to reflect the
special and extraordinary efforts of these named executives leading up to the
announcement on June 29, 2009 of the pending merger with Towers, Perrin,
Forster & Crosby. The transaction
bonuses were paid entirely in cash in September 2009.
(3)
Represents the dollar amount required to
be recognized by the Company as an expense in fiscal year 2009 under Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 123(R),
Share-Based Payment
(FAS 123(R)),
disregarding the effect of estimated forfeitures (of which there were none in
fiscal year 2009), for awards under the Performance Share Bonus Incentive
Program (SBI Program). Assumptions used
in the calculation of these amounts are described in Note 9 to the Companys
financial statements for the fiscal year ending June 30, 2009.
The awards for which
expense is shown in this table for fiscal year 2009 include (i) SBI
Program awards described in the Grants of Plan-Based Awards in Fiscal Year 2009
table beginning on page 24
of this
disclosure document and (ii) awards granted in fiscal years 2007 and 2008
for which we recognized expense in fiscal year 2009, which are described below
the Stock Vested During Fiscal Year 2009 table and the Outstanding Equity
Awards at 2009 Fiscal Year-End table beginning on page 25 of this
disclosure document.
The decrease in
stock-based compensation expense recognized in fiscal year 2009 as compared
with fiscal years 2008 and 2007 is due in part to lower forecasted vesting
under the fiscal year 2009, 2008 and 2007 SBI Programs than has historically
resulted under earlier SBI Programs for which compensation expense was
recognized in fiscal years 2008 and 2007.
In addition, during fiscal year 2009 the Company lowered its forecast
for projected vesting under the fiscal year 2008 SBI Program, resulting in a
reversal in fiscal year 2009 of compensation expense recognized in prior
periods. This reversal resulted in
negative compensation expense being recognized for Mr. Mautz in fiscal
year 2009 due to the true-up of previously recorded compensation expense.
(4)
Reflects any aggregate increase in
actuarial present values during fiscal year 2009 of each named executives
accumulated benefits under the Watson Wyatt & Company Pension Plan for
U.S. Employees and the Excess Compensation Plan of Watson Wyatt &
Company. For fiscal year 2009, any
increase was determined using assumptions that are the same as those used in
the Companys financial statements for the year ending June 30, 2009
except that retirement is assumed to occur at the earliest unreduced retirement
age for the named executives or as of fiscal year end for named executives
older than the earliest unreduced retirement age, and no pre-retirement
terminations or deaths are assumed to occur.
The earliest unreduced
retirement age for Messrs. Haley, Mautz and Meehan is age 60 because all
of their accumulated benefits were earned under the grandfathered prior pension
plan provisions as of June 30, 2008 (see plan description below for more
detail). The earliest unreduced
retirement age for Messrs. Millay, Wickes and Bardenwerper is age 62 based
on the unreduced retirement age for benefits earned after June 30,
2008. As a result of the transition from
prior pension plan provisions to post-2008 benefit provisions, the earliest
unreduced retirement age for Messrs. Wickes and Bardenwerper changed from
age
22
Table
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60 as of June 30,
2008 to age 62 as of June 30, 2009.
This caused the actuarial present value of their accumulated pension
benefits to decrease by $101,057 and $337,146, respectively, despite the
additional accrued benefits payable at age 62.
The actuarial present value of Mr. Meehans accumulated benefits
decreased during the fiscal year, by $332,834, because he is already past the
earliest unreduced retirement age. The
actuarial present value of Mr. Mautzs accumulated benefits decreased
during the fiscal year, by $1,862,099 because he received payments totaling
$1,862,777 after his retirement on August 29, 2009. These decreases are not reflected in the
respective amounts reported in the Summary Compensation Table for these named
executives.
The increases in the
actuarial present values for Mr. Haley and Mr. Millay for fiscal year
2009 of $508,258 and $120,607, respectively, can be attributed to several
factors. First, the increases are due to
salary increases during the year, which raised the highest average compensation
being used in the calculations, and due to the accrual of an additional year of
service (subject to a 25-year service cap).
Second, because Mr. Haley and Mr. Millay are younger than the
earliest unreduced retirement age, the present values increased because they
are one year closer to the assumed retirement date and retirement benefits are
thus assumed to be one year closer to payment.
Third, assumption changes made by the Company for financial reporting
purposes as of June 30, 2009 lessened the increase in the present value
calculations. The changes updated the
post-retirement mortality table and increased the discount rate. These assumption changes lessened the
increase in the present value amounts by two to three percent.
The amounts shown for
fiscal year 2009 also include above-market interest on balances in the Deferred
Savings Plan for U.S. Employees of Watson Wyatt & Company (the Deferred
Savings Plan) of $2,918 for Mr. Haley, $520 for Mr. Mautz, $1,065
for Mr. Wickes, $1,527 for Mr. Meehan and $1,263 for Mr. Bardenwerper. Interest is considered above-market to the
extent it exceeds 120 percent of the applicable federal long-term rate. Nonqualified deferred compensation earnings
and account balances under the Deferred Savings Plan are disclosed in the
Non-qualified Deferred Compensation during Fiscal Year 2009 table beginning on page 29
of this disclosure document.
(5)
For fiscal year 2009, all other
compensation consists of (a) Company matching contributions made to a
qualified savings plan in the amount of $6,900 each for Mr. Haley, Mr. Millay,
Mr. Wickes, and Mr. Meehan, $1,589 for Mr. Mautz and $1,800 for Mr. Bardenwerper;
(b) Company contributions made to a non-qualified deferred compensation
plan in the amount of $59,818 for Mr. Haley, $24,319 for Mr. Wickes,
and $26,439 for Mr. Meehan; and (c) payment for the annual cash out
of excess unused paid time off (all U.S.-based associates are subject to the
same paid time off limits) in the amount of $20,675 for Mr. Haley, $60,544
for Mr. Mautz and $44,230 for Mr. Wickes.
The Company provides to
its named executives no perquisites or other personal benefits having an
aggregate incremental cost for any named executive in excess of $10,000, and as
a result, the value of any such perquisites or other personal benefits is not
included in this column.
(6)
Mr. Millay joined the Company beginning August 18,
2008.
(7)
Mr. Mautz retired from the Company effective August 29,
2008.
23
Table
of Contents
Grants of Plan-Based Awards in Fiscal Year 2009
The
table below shows the equity awards that were made to each of the named
executives during fiscal year 2009 under the Companys Performance Share Bonus
Incentive Program (SBI Program). The SBI
Program is a long-term stock bonus arrangement for senior executives of the
Company and its affiliates. Incentives
under the SBI Program are provided through grants of deferred stock units
pursuant to the Companys 2001 Deferred Stock Unit Plan for Selected
Employees. Each vested deferred stock
unit represents a right to receive one share of Company stock following the end
of the three-year performance period.
|
|
|
|
Grant
|
|
Estimated Future Payouts
Under Equity Incentive Plan
Awards(1)
|
|
Grant Date
Fair Value of
Stock
|
|
Name
|
|
Grant
Date
|
|
Approval
Date
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum
(#)
|
|
Awards
($)(2)
|
|
Haley
|
|
7/1/08
|
|
9/11/08
|
|
7,786
|
|
25,951
|
|
44,117
|
|
$
|
2,333,348
|
|
Millay
|
|
7/1/08
|
|
9/11/08
|
|
1,829
|
|
6,094
|
|
10,360
|
|
547,940
|
|
Mautz
|
|
N/A
|
|
N/A
|
|
0
|
|
0
|
|
0
|
|
0
|
|
Wickes
|
|
7/1/08
|
|
9/11/08
|
|
1,530
|
|
5,097
|
|
8,665
|
|
458,292
|
|
Meehan
|
|
7/1/08
|
|
9/11/08
|
|
1,530
|
|
5,097
|
|
8,665
|
|
458,292
|
|
Bardenwerper
|
|
7/1/08
|
|
9/11/08
|
|
998
|
|
3,324
|
|
5,651
|
|
298,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Represents threshold, target and maximum
number of performance-based deferred stock units to be earned (vested) under
the Companys SBI Program following the end of the three-year performance period
beginning July 1, 2008 and ending June 30, 2011. Amounts actually earned are payable in shares
of Company stock. Dividend equivalents
are accrued during the performance period for outstanding SBI awards but are
only paid out to the extent such awards are earned. See a discussion of the SBI Program in the
Compensation Discussion and Analysis beginning on page 15 of this
disclosure document.
For the fiscal year 2009
grants, the performance criteria selected by the Compensation Committee were
Earnings Per Share Growth and Revenue Growth, as defined below, and the vesting
criteria are based upon such metrics.
Earnings
Per Share (E.P.S.) Growth is defined as E.P.S. for the third year of the
performance period compared to E.P.S. for the fiscal year preceding the start
of the performance period, expressed as a percentage. E.P.S. is defined as fully diluted earnings
per share from continuing operations.
Revenue Growth is defined as the percentage change in revenue from the
fiscal year prior to the performance period of the plan to the third year of
the performance period, exclusive of any acquisitions during the performance
period.
For the fiscal 2009 through 2011 performance period, an earn-out
schedule using total growth over the three-year performance period for E.P.S.
and Revenue is shown below:
E.P.S. Growth at or above
|
|
47
|
%
|
100
|
%
|
135
|
%
|
170
|
%
|
|
34
|
%
|
65
|
%
|
100
|
%
|
135
|
%
|
|
27
|
%
|
30
|
%
|
65
|
%
|
100
|
%
|
|
|
|
|
20
|
%
|
25
|
%
|
35
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Growth
at or above
|
|
(2)
Represents the grant date (July 1,
2008) fair value of the award at maximum, determined in accordance with FAS
123(R), based on the closing price on the last day of the fiscal year prior to
the grant date of $52.89.
24
Table
of Contents
Outstanding Equity Awards at 2009 Fiscal Year-End
The following table sets
forth information concerning the outstanding stock awards held at June 30,
2009 by each of the named executives. The stock awards shown represent performance
shares granted under the fiscal year 2008 and fiscal year 2009 Performance
Share Bonus Incentive Program (SBI Program).
No shares for such fiscal years had vested as of June 30, 2009.
|
|
Stock Awards
|
|
Name
|
|
Equity Incentive Plan Awards: Number
of Unearned Shares, Units or Other
Rights That Have Not Vested
(#)
|
|
Equity Incentive Plan Awards: Market or
Payout Value of Unearned Shares, Units or
Other Rights That Have Not Vested
($)(1)
|
|
|
|
|
|
|
|
|
Haley
|
|
7,904
|
(2)
|
$
|
296,637
|
|
|
|
7,842
|
(3)
|
294,310
|
|
|
|
|
|
|
|
Millay
|
|
1,842
|
(3)
|
69,130
|
|
|
|
|
|
|
|
Mautz
|
|
1,327
|
(2)
|
49,802
|
|
|
|
|
|
|
|
Wickes
|
|
1,553
|
(2)
|
58,284
|
|
|
|
1,541
|
(3)
|
57,834
|
|
|
|
|
|
|
|
Meehan
|
|
1,553
|
(2)
|
58,284
|
|
|
|
1,541
|
(3)
|
57,834
|
|
|
|
|
|
|
|
Bardenwerper
|
|
1,017
|
(2)
|
38,168
|
|
|
|
1,005
|
(3)
|
37,718
|
|
(1)
Reflects the value as calculated based on the closing price of the Companys
stock on June 30, 2009 of $37.53 per share.
(2)
Represents the number of performance shares granted under the fiscal year 2008
SBI Program and credited with dividend equivalents through July 15, 2009
under the terms of the Watson Wyatt & Company Holdings 2001 Deferred
Stock Unit Plan for Selected Employees, assuming vesting at threshold
performance of 30 percent following completion of the three-year performance
period ending June 30, 2010.
(3)
Represents the number of performance shares granted under the fiscal year 2009
SBI Program and credited with dividend equivalents through July 15, 2009
under the terms of the Watson Wyatt & Company Holdings 2001 Deferred
Stock Unit Plan for Selected Employees, assuming vesting at threshold
performance of 30 percent following completion of the three-year performance
period ending June 30, 2011. As of June 30,
2009, the Company was projecting that the minimum performance criteria would
not be met and that there would be no payout under this program.
The fiscal year 2008 and
fiscal year 2009 SBI Program documents state that the Committee shall
accelerate the vesting of awards and provide for the immediate settlement in stock
or cash in connection with a change in control, subject to the Committees
authority to assure fair and equitable treatment of participants in the SBI
Program.
Accordingly, on September 4,
2009, the Committee determined that, upon and subject to consummation of the
proposed merger between Watson Wyatt Worldwide, Inc. and Towers, Perrin,
Forster & Crosby to form a new, publicly listed company called Towers
Watson & Co. (the Merger), the fiscal 2008 SBI Program awards shall
not vest, with the effect that nothing will be earned or paid under those
awards and the awards will be forfeited, but the fiscal 2009 SBI Program will
vest at 100% of target. In reaching
these determinations, the Committee assessed performance to date and
projections of performance. As a result
of these evaluations, the Committee concluded that it is not likely that the
Company will achieve the fiscal year 2008 to 2010 minimum performance
metrics. With respect to the fiscal 2009
to 2011 performance period, the Committee determined that it is appropriate to
settle the
25
Table
of Contents
awards at target in order
to treat participants fairly, retain key talent, and take account of the fact
that the level at which performance metrics may be met at the time of the
Merger will be uncertain, as the performance period would be only halfway
completed as of December 31, 2009, the projected date of the Merger.
As a result, the
following number of shares of Towers Watson & Co.s Class A
common stock, plus dividend equivalents that will have accrued, will be paid to
the Companys named executives for their vested fiscal 2009 SBI Program awards
upon consummation of the Merger, representing vesting at 100% of target: Mr. Haley
- 25,951; Mr. Millay - 6,094; Mr. Wickes - 5,097; Mr. Meehan -
5,097; and Mr. Bardenwerper - 3,324.
Stock Vested During Fiscal Year 2009
The following table sets
forth information concerning stock awards that vested during fiscal year 2009
for each of the named executives. The
stock awards represent performance shares issued under the Companys fiscal
year 2007 Performance Share Bonus Incentive Program (the SBI Program),
including dividend equivalents credited to those shares, that vested following
the end of the three-year performance period beginning July 1, 2006 and
ending June 30, 2009.
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares
Acquired
on Vesting
(#)(1)
|
|
Value Realized
on Vesting
($)(2)
|
|
|
|
|
|
|
|
Haley
|
|
49,076
|
|
$
|
1,841,822
|
|
|
|
|
|
|
|
Millay
|
|
0
|
|
0
|
|
|
|
|
|
|
|
Mautz
|
|
8,450
|
|
317,129
|
|
|
|
|
|
|
|
Wickes
|
|
9,827
|
|
368,807
|
|
|
|
|
|
|
|
Meehan
|
|
9,735
|
|
365,355
|
|
|
|
|
|
|
|
Bardenwerper
|
|
6,408
|
|
240,492
|
|
|
|
|
|
|
|
|
(1)
Represents the number of Company shares earned
(vested) under the Companys fiscal year 2007 SBI Program following the end of
the three-year performance period beginning July 1, 2006 and ending June 30,
2009. For the fiscal year 2007 grants,
the performance criteria selected by the Compensation Committee were Earnings
Per Share Growth and Revenue Growth, as defined below, and the vesting criteria
were based upon such metrics.
Earnings
Per Share (E.P.S.) Growth was defined as E.P.S. for the third year of the
performance period compared to E.P.S. for the fiscal year preceding the start
of the performance period, expressed as a percentage. E.P.S. was defined as fully diluted earnings
per share from continuing operations.
Revenue Growth was defined as the percentage change in revenue from the
fiscal year prior to the performance period of the plan to the third year of
the performance period, exclusive of any acquisitions during the performance
period. In order for any of the deferred
stock units granted for this performance period to vest, a threshold level of
achievement under each performance criteria needed to be obtained. Additional deferred stock units would vest to
the extent that performance was above the threshold levels.
26
Table
of Contents
An earn-out schedule
using
total growth over the three-year performance period for E.P.S. and
Revenue is shown below:
E.P.S. Growth at or above
|
|
30
|
%
|
100
|
%
|
135
|
%
|
170
|
%
|
|
22.5
|
%
|
65
|
%
|
100
|
%
|
135
|
%
|
|
15
|
%
|
30
|
%
|
65
|
%
|
100
|
%
|
|
|
|
|
15
|
%
|
20
|
%
|
25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Growth
at or above
|
|
Following the completion
of the fiscal 2007 through 2009 performance period, the Committee determined
that 3-year E.P.S. Growth exceeded 30 percent and Revenue Growth exceeded 20
percent but was less than 25 percent. As
a result, the Committee determined that awards for the 2007
through
2009 performance period had vested at 135 percent.
(2)
Reflects the value as calculated based on the closing
price of the Companys stock on June 30, 2009 of $37.53 per share. The shares were actually distributed on September 15,
2009, based on the Companys closing share price on the prior business day of
$44.05.
The actual value of
stock awarded on the distribution date was $2,161,798
to
Mr. Haley, of which $2,106,397 was automatically deferred in the form of
shares into the Senior Officers Deferred Compensation Plan (SODCP); $372,223
to Mr. Mautz; $432,879 to Mr. Wickes, of which
$52,731 was automatically deferred in the form of shares into the SODCP;
$428,827
to Mr. Meehan; and $282,272
to Mr. Bardenwerper.
The automatic deferrals to the SODCP occurred in order to keep
deductible compensation below the $1 million deductible limit imposed by Section 162(m) of
the Internal Revenue Code. For a
description of the material terms of the SODCP, refer to Note 1 of the
Non-qualified Deferred Compensation during Fiscal Year 2009 table beginning on page 30
of this disclosure document.
Pension Benefits at 2009 Fiscal Year-End
The Pension Benefits
table below provides information as of June 30, 2009 regarding the number
of years of credited service, the earliest unreduced retirement age and the
present value of accumulated benefits payable at that retirement age with
respect to the Watson Wyatt & Company Pension Plan for U.S. Employees
(the Pension Plan), the Excess Benefit Plan of Watson Wyatt &
Company (the Excess Benefit Plan) and the Excess Compensation Plan of Watson
Wyatt & Company (the Excess Compensation Plan). None of the named executives currently has an
accrued benefit under the Excess Benefit Plan, and thus the Excess Benefit Plan
is not separately listed.
27
Table
of Contents
Name
|
|
Plan Name
|
|
Number of
Years Credited
Service
(#)
|
|
Earliest
Unreduced
Retirement
Age
|
|
Present Value of
Accumulated
Benefit
($)(1)
|
|
Payments
During
Last
Fiscal
Year
($)
|
|
Haley
|
|
Watson Wyatt & Company Pension Plan for
U.S. Employees
|
|
32.17
|
|
60
|
|
$
|
1,587,055
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess Compensation Plan of Watson Wyatt &
Company
|
|
32.17
|
|
60
|
|
11,670,721
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
13,257,776
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millay
|
|
Watson Wyatt & Company Pension Plan for
U.S. Employees
|
|
0.83
|
|
62
|
|
16,433
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess Compensation Plan of Watson Wyatt &
Company
|
|
0.83
|
|
62
|
|
104,174
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
120,607
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mautz(2)
|
|
Watson Wyatt & Company Pension Plan for
U.S. Employees
|
|
11.50
|
|
60
|
|
470,255
|
|
33,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess Compensation Plan of Watson Wyatt &
Company
|
|
11.50
|
|
60
|
|
0
|
|
1,829,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
470,255
|
|
1,862,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wickes
|
|
Watson Wyatt & Company Pension Plan for
U.S. Employees
|
|
12.50
|
|
62
|
|
380,506
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess Compensation Plan of Watson Wyatt &
Company
|
|
12.50
|
|
62
|
|
1,896,647
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
2,277,153
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meehan
|
|
Watson Wyatt & Company Pension Plan for
U.S. Employees
|
|
26.17
|
|
60
|
|
1,089,741
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess Compensation Plan of Watson Wyatt &
Company
|
|
26.17
|
|
60
|
|
4,675,959
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
5,765,700
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bardenwerper
|
|
Watson Wyatt & Company Pension Plan for
U.S. Employees
|
|
22.08
|
|
62
|
|
746,013
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess Compensation Plan of Watson Wyatt &
Company
|
|
22.08
|
|
62
|
|
2,874,856
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
3,620,869
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
Table
of Contents
(1)
The assumptions and methodology used in calculating
the estimated present value shown in this column are the same as those used and
disclosed in the Companys audited financial statements (see Note 5) as of June 30,
2009, except the named executives are assumed to retire at their earliest
unreduced retirement age as shown in the above chart or their current age, if
later, and no pre-retirement terminations or deaths are assumed to occur. Also, no additional compensation or service
is assumed beyond the June 30, 2009 calculation date. The specific relevant assumptions include
using a discount rate of 7.50 percent and 6.75 percent, respectively, for the
Pension Plan and the Excess Compensation Plan, and post-retirement mortality
based on the mortality table described in Section 430(h)(3)(A) of the
Internal Revenue Code for annuitants. In
addition, for the Excess Compensation Plan benefits which are payable as a lump
sum, an interest rate of 3.50 percent and the 1983 Group Annuity Mortality
table (blended 50/50 for males and females) were used in the calculations.
(2)
Mr. Mautz retired from the Company on August 29,
2008 and commenced receiving his benefits from the Pension Plan on September 30,
2008 in the monthly amount of $3,301.62 under the 100% joint and survivor
option. He also received a lump sum cash
out of his benefits from the Excess Compensation Plan in two installments of
$1,026,729 and $803,031 on September 30, 2008 and March 31, 2009,
respectively.
U.S. Based Pension Plans
The Pension Plan is a
broad-based, tax-qualified defined benefit pension plan that provides a benefit
to eligible employees of the Company. In
general, all U.S. salaried and hourly employees, with the exception of temporary
employees, leased employees and contract employees are eligible to
participate. Pension Plan benefits are
based upon years of service with the Company and the highest consecutive
60-month average of total compensation (base pay, overtime and bonus). The credited service amounts shown in the
table above represent actual years of service with the Company. No additional years of credited service have
been granted to the named executives under the Pension Plan.
The standard form of
benefit payment under the Pension Plan is a single life annuity benefit for
participants who are not married and a 100 percent joint and contingent annuity
benefit for married participants.
Alternatively, participants may elect a joint and contingent annuity
with a continuation percentage of up to 100 percent, a certain and continuous
annuity benefit with five or more years of guaranteed payments, or a
combination of these, subject to the plan provisions, Retirement Committee
approval and statutory limits. The
payout option must be elected by the Participant before benefit payments begin.
The monthly benefit at
normal retirement (age 65) under the qualified plan is equal to 1.7 percent
times the participants average monthly compensation for the 60 consecutive
months with the highest compensation plus 0.4 percent times the average monthly
compensation for the 60 consecutive months with the highest compensation that
exceeds the Social Security Covered Compensation, all times the number of
completed years and months of continuous service up to 25 years.
For terminations after June 30,
2003, the Plans early retirement age is age 55 with five years of service
(except as noted below for grandfathered associates). For associates who are eligible for early
retirement and who retire prior to age 62, gross benefits are reduced 8 percent
per year between ages 58 and 62, and 6 percent per year between ages 55 and
58. For deferred vested associates who
retire prior to age 65, gross benefits are actuarially reduced from age
65. As of June 30, 2009, Messrs. Haley,
Wickes, Meehan and Bardenwerper were eligible for early retirement benefits.
Associates who were
employed by the Company on June 30, 2003 are grandfathered in prior
pension plan provisions for five years, or until June 30, 2008. During the five-year grandfathering period,
eligible associates will continue to accrue benefits under the Pension Plan
provisions in effect before July 1, 2003, except that the five-year
certain and continuous annuity form of payment is not grandfathered. Under these provisions, the same formula
described above is used except that an associates average pay is determined to
be the highest average 36 consecutive months of total pay. In addition, the benefit can never be less
than the June 30, 2003 accrued benefit indexed by 3 percent each year.
Benefits accrued under
the grandfathered formulas will be frozen on the earlier of June 30, 2008
or termination of employment, except for the formula that indexes the June 30,
2003 accrued benefit which will be frozen at termination of employment. At retirement or termination, whether before
or after June 30, 2008, an associates accrued benefit will not be less
than the frozen grandfathered benefit.
If the associate terminates employment after age 50, the frozen grandfathered
benefit will be reduced by 5 percent per year for commencement before age
60.
29
Table
of Contents
For termination before
age 50, this benefit will be actuarially reduced from age 65. Grandfathered associates who attain age 50
with 10 years of service will be eligible for early retirement under the Plan. Messrs. Haley, Wickes, Meehan and
Bardenwerper all currently qualify for the grandfathered Pension Plan
provisions and are eligible for early retirement under those provisions.
The Excess Benefit and
Excess Compensation Plans are designed to restore to eligible associates the
reductions to their pension benefit imposed by IRC limitations. When the excess plan benefits are added to
the benefit provided by the Pension Plan, eligible associates will receive a
total benefit equal to the benefit that would have been provided by the Pension
Plan had the limitations not existed.
The form of benefit payment provided under the excess plans is a lump
sum payable six months following the termination of employment for the named
executives. The named executives
currently have no accrued benefit under the Excess Benefit plan as the sum of
their benefits under the Pension Plan and the Excess Compensation Plan does not
exceed the maximum benefit limitation under IRC Section 415.
Non-qualified Deferred Compensation during Fiscal
Year 2009
The following table sets forth information concerning
aggregate earnings during fiscal year 2009 under the Companys non-qualified
deferred compensation plans and aggregate account balances in those plans as of
June 30, 2009.
Name
|
|
Non-Qualified
Deferred
Compensation
Plan(1)
|
|
Executive
Contributions
During FY09
($)
|
|
Company
Contributions
During FY09
($)
|
|
Aggregate
Earnings in
Last FY
(FY 2009)
($)
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
Aggregate
Balance
at Last FYE
(6/30/09)
($)
|
|
Haley
|
|
Deferred Savings
|
|
$
|
0
|
|
$
|
59,818
|
(2)
|
$
|
15,835
|
(3)
|
$
|
0
|
|
$
|
388,541
|
(5)
|
|
|
SODCP
|
|
4,538,441
|
|
0
|
|
(3,517,626
|
)(4)
|
0
|
|
8,066,440
|
(6)
|
Mautz
|
|
Deferred Savings
|
|
0
|
|
0
|
|
2,230
|
(3)
|
77,590
|
(7)
|
2,904
|
(5)
|
|
|
SODCP
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
Millay
|
|
Deferred Savings
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
SODCP
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
Wickes
|
|
Deferred Savings
|
|
0
|
|
24,319
|
(2)
|
5,806
|
(3)
|
0
|
|
145,855
|
(5)
|
|
|
SODCP
|
|
532,622
|
|
0
|
|
(266,989
|
)(4)
|
0
|
|
573,397
|
(6)
|
Meehan
|
|
Deferred Savings
|
|
0
|
|
26,439
|
(2)
|
8,260
|
(3)
|
0
|
|
196,707
|
(5)
|
|
|
SODCP
|
|
298,888
|
|
0
|
|
(100,477
|
)(4)
|
0
|
|
198,411
|
(6)
|
Bardenwerper
|
|
Deferred Savings
|
|
0
|
|
0
|
|
6,824
|
(3)
|
0
|
|
140,411
|
(5)
|
|
|
SODCP
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
The Deferred Savings Plan was established to
supplement the benefits of those participants in the Watson Wyatt &
Company Savings Plan for U.S. Employees whose Company matching contributions to
the Savings Plan are limited by the compensation and elective deferral
limitations, or the non-discrimination requirements, imposed by the Internal
Revenue Code. The Deferred Savings Plan
does not allow for employee contributions.
Participants generally vest in their account after three years of
service. All of the named executives
(with the exception of Mr. Millay, who is not currently a participant in
the Deferred Savings Plan) are fully vested in their account balances in the
Deferred Savings Plan. Participants are
eligible for payment of their vested account balance upon termination of
employment or retirement.
The
Senior Officers Deferred Compensation Plan (SODCP) is an unfunded
nonqualified deferred compensation plan under which applicable employee
remuneration (within the meaning of IRC Section 162(m)(4)) otherwise
payable to senior
executives who are subject to Section 162(m) in
excess of $1 million is deferred on a mandatory basis until such time as the
executive is no longer subject to the requirements of 162(m) or leaves the
Company, at which time it becomes payable in a lump sum to the executive. The deferred amounts also become payable to
the executive in the event of a change in control of the Company. As of June 30, 2009, Mr. Haley, Mr. Wickes
and Mr. Meehan were the only
participants in the SODCP. The plan offers a choice of investment
options consisting of the S&P 500 Index, the Russell 2000 Index, Watson
Wyatt Worldwide, Inc. common stock and a guaranteed interest factor equal
to
30
Table
of Contents
the
prime rate of interest as reported by the Companys primary bank. The investment options the executive has
selected may thereafter be changed in accordance with policies and procedures
developed by the Committee.
(2)
Represents Company contributions accrued
as of June 30, 2009 and credited to each participants account on September 15,
2009. These amounts are reported in the All
Other Compensation column of the Summary Compensation Table for fiscal year
2009.
(3) Represents interest earned during fiscal
year 2009 on account balances in the Deferred Savings Plan. Interest under the Deferred Savings Plan is
calculated using the prime rate of interest as reported by the Companys bank,
determined as of the first day of the calendar year. Of the amounts shown, a portion was
determined to represent above-market interest and thus is included in the
Summary Compensation Table for each named executive. The amount of such above-market interest is
$2,918 for Mr. Haley, $520 for Mr. Mautz, $1,065 for Mr. Wickes,
$1,527 for Mr. Meehan and $1,263 for Mr. Bardenwerper. Interest is considered above-market to the
extent it exceeds 120 percent of the applicable federal long-term rate.
(4)
Represents earnings during fiscal year
2009 on Mr. Haleys, Mr. Wickes and Mr. Meehans respective
account balances in the SODCP. Mr. Haleys
account balance is deemed to be invested pursuant to his election from among
the available investment options and is credited with earnings on a monthly
basis. Based on his elections, Mr. Haleys
account balance is currently deemed to be invested partially in the S&P 500
Index, partially in the Russell 2000 Index, and partially in Watson Wyatt
Worldwide, Inc. common stock. Mr. Wickes
and Mr. Meehans respective account balances are deemed to be invested
entirely in Watson Wyatt Worldwide, Inc. common stock. None of the amounts shown were determined to
represent above-market earnings.
(5)
Other than the amounts shown as Company
contributions for fiscal year 2009 and accruals attributable to above-market
interest, no portion of the amounts shown has been reported in the Summary
Compensation Table for fiscal year 2009 or in prior fiscal years. Of the balances reported, $51,322 for Mr. Haley,
$16,738 for Mr. Mautz, $22,275 for Mr. Wickes, and $22,609 for Mr. Meehan
is attributable to Company contributions reported in prior fiscal years, and
$10,384 for Mr. Haley, $2,443 for Mr. Mautz, $3,712 for Mr. Wickes,
$5,535 for Mr. Meehan and $2,137 for Mr. Bardenwerper is attributable
to above-market interest accruals reported in prior fiscal years.
(6)
Of the amount shown for Mr. Haley,
$552,787 represents the portion of fiscal year end bonuses, $382,486 represents
salary amounts and $7,686,458 represents the value of shares otherwise payable
from the fiscal year 2005 and fiscal year 2006 SBI Programs that were deferred
into the SODCP in fiscal year 2009 or prior fiscal years. Of the amount shown for Mr. Wickes and Mr. Meehan,
$793,458 and $298,888, respectively, represents the value of shares otherwise
payable from the fiscal year 2005 and fiscal year 2006 SBI Programs that were
deferred into the SODCP in fiscal year 2009.
The compensation expense relating to shares otherwise payable from the
respective SBI Programs that were deferred into the SODCP were reported on the
Summary Compensation Table for those years covered by the three-year
performance period for each of the respective SBI Programs. The remainder of the amounts shown consists
of accumulated aggregate earnings or losses.
(7)
Following his retirement, Mr. Mautz
received a distribution of $48,600 on October 15, 2008 and a second
distribution of $28,990 on April 30, 2009.
31
Table of Contents
Post
Termination Payments and Benefits
The Company does not have employment agreements with
any of the named executive officers. The
Company has not entered into any change in control agreements with any of the
named executive officers. The fiscal
year 2008 and fiscal year 2009 SBI Program documents state that the Committee
shall accelerate the vesting of awards and provide for the immediate settlement
in stock or cash in connection with a change in control, subject to the
Committees authority to assure fair and equitable treatment of participants in
the SBI Program. Thus, the Compensation
Committee could provide for vesting at any level allowed under the SBI Program,
regardless of performance at the time against the metrics specified in the
applicable SBI Program, including vesting above the threshold performance level
of 30 percent as shown in the Outstanding Equity Awards at 2009 Fiscal Year-End
table. However, any such action would be
at the complete discretion of the Compensation Committee. See the discussion following the Outstanding
Equity Awards at 2009 Fiscal Year End Table for an explanation of the Committees
determination following the end of the 2009 fiscal year of outstanding equity
awards under the fiscal year 2008 and fiscal year 2009 SBI Programs upon the
closing of the proposed merger with Towers, Perrin, Forster & Crosby.
The account values
payable through the Non-qualified Deferred Compensation Plans are shown in the
Non-qualified Deferred Compensation During Fiscal Year 2009 table and would not
change based on early retirement, death, disability or a change in control of
the Company. The value of benefits
payable to the named executives under the Pension Plan or the Excess
Compensation Plan outlined above may increase (or decrease) in the event of the
early retirement, death or disability of the named executive. Benefits do not become payable under the
Pension Plan or the Excess Compensation Plan as a result of a change in control
of the Company. Using the assumptions
employed in the Pension Benefits Table (PBT) with the exception of using the
actual Excess Compensation Plan lump sum interest rate as of June 30,
2009, the present value of the pension and disability benefit (as applicable)
payable to each of the named executives as of June 30, 2009 in the event
of early retirement, death or disability is shown in the following table.
|
|
|
|
Total Present Value in case of :
|
|
|
|
|
|
|
|
Early
Retirement
(1)
|
|
Increase /
(Decrease)
from PBT
|
|
Death
(2)
|
|
Increase
/
(Decrease)
from PBT
|
|
Disability
(3)
|
|
Increase
/
(Decrease)
from PBT
|
|
Haley
|
|
Pension Plan
|
|
1,607,254
|
|
20,199
|
|
1,415,884
|
|
(171,171
|
)
|
1,005,810
|
|
(581,245
|
)
|
|
|
Excess Plan
|
|
11,728,251
|
|
57,530
|
|
10,455,785
|
|
(1,214,936
|
)
|
7,309,596
|
|
(4,361,125
|
)
|
|
|
Disability
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
1,616,863
|
|
1,616,863
|
|
|
|
Total
|
|
13,335,505
|
|
77,729
|
|
11,871,669
|
|
(1,386,107
|
)
|
9,932,269
|
|
(3,325,507
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millay
|
|
Pension Plan
|
|
N/A
|
|
N/A
|
|
0
|
|
(16,433
|
)
|
210,590
|
|
194,157
|
|
|
|
Excess Plan
|
|
N/A
|
|
N/A
|
|
0
|
|
(104,174
|
)
|
1,324,825
|
|
1,220,651
|
|
|
|
Disability
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
3,116,193
|
|
3,116,193
|
|
|
|
Total
|
|
N/A
|
|
N/A
|
|
0
|
|
(120,607
|
)
|
4,651,608
|
|
4,531,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wickes
|
|
Pension Plan
|
|
462,804
|
|
82,298
|
|
411,862
|
|
31,356
|
|
473,121
|
|
92,615
|
|
|
|
Excess Plan
|
|
2,264,177
|
|
367,530
|
|
2,024,263
|
|
127,616
|
|
2,341,078
|
|
444,431
|
|
|
|
Disability
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
2,202,255
|
|
2,202,255
|
|
|
|
Total
|
|
2,726,981
|
|
449,828
|
|
2,436,125
|
|
158,972
|
|
5,016,454
|
|
2,739,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meehan
|
|
Pension Plan
|
|
1,089,741
|
|
0
|
|
952,936
|
|
(136,805
|
)
|
1,039,987
|
|
(49,754
|
)
|
|
|
Excess Plan
|
|
4,641,745
|
|
(34,214
|
)
|
4,292,024
|
|
(383,935
|
)
|
4,456,387
|
|
(219,572
|
)
|
|
|
Disability
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
203,042
|
|
203,042
|
|
|
|
Total
|
|
5,731,486
|
|
(34,214
|
)
|
5,244,960
|
|
(520,740
|
)
|
5,699,416
|
|
(66,284
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bardenwerper
|
|
Pension Plan
|
|
901,891
|
|
155,878
|
|
795,158
|
|
49,145
|
|
640,360
|
|
(105,653
|
)
|
|
|
Excess Plan
|
|
3,427,360
|
|
552,504
|
|
3,026,918
|
|
152,062
|
|
2,449,652
|
|
(425,204
|
)
|
|
|
Disability
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
1,752,777
|
|
1,752,777
|
|
|
|
Total
|
|
4,329,251
|
|
708,382
|
|
3,822,076
|
|
201,207
|
|
4,842,789
|
|
1,221,920
|
|
32
Table
of Contents
(1)
The increase for early retirement versus the PBT is
due primarily to reflecting the immediate early retirement benefit payable for
those under unreduced retirement age. The early retirement factors available to
the named executives through the grandfathered pension plan provisions reflect
a subsidy versus the benefit at unreduced retirement age. Note that these factors are generally
available to all grandfathered plan participants depending on age and service
conditions. An additional cause for the increase is due to using the actual lump
sum interest rate for the Excess Compensation Plan as of June 30, 2009
versus the rate assumed in future years for financial accounting purposes. The
Excess Compensation Plan benefit is payable as a lump sum. With the exception of Mr. Millay, all
named executives are currently eligible for early retirement under the terms of
the Pension Plan and the Excess Compensation Plan.
(2)
In case of death, the Pension Plan and the Excess
Compensation Plan provide a death benefit to the named executives spouse assuming
the named executive retired on the date of his death, elected the 100 percent
joint and contingent benefit form and died the next day. This benefit is
provided if the participant is early retirement eligible at death and is
available to all plan participants. The death benefit would represent a
decrease in the present value of the benefit because the benefit is actuarially
reduced for payment during the life of the spouse only. However, the table does show an increase
versus the amounts shown in the PBT in some cases because of the application of
the early retirement factors and the different lump sum interest rate as
described in footnote (1) above.
(3)
In case of disability, the Company provides a
disability benefit equal to 66.67 percent of base salary, subject to a maximum
monthly benefit of $30,000. This benefit
is payable until age 65 or for at least 12 months, assuming the participant
continues to meet the definition of disability. The table shows the value of
the temporary disability benefit that would be payable to age 65 along with the
pension benefits payable at age 65. Employees also receive service credits for
pension purposes while on disability. The table shows that the present value
increases or decreases for the different named executives. This is primarily a
function of whether the named executives current salary exceeds the maximum
monthly disability benefit and how close he is to reaching the 25 year pension
service cap.
In addition, upon any
termination of employment the named executives may be entitled to distributions
under the deferred compensation plans described above and to benefits generally
available to salaried employees, including distributions under the Companys
401(k) plan, health care benefits, disability benefits and accrued
vacation pay. Two of our named
executives, Mr. Haley and Mr. Bardenwerper, in addition to accruing
annual vacation during fiscal year 2009, have frozen vacation balances from
prior years which, if unused, will be paid out to them upon termination of
employment at their then current rate of hourly base salary. At June 30, 2009, the liability for
frozen vacation pay was $287,365 for Mr. Haley and $50,001 for Mr. Bardenwerper. In the context of any particular separation
from the Company, the Company and the executive may mutually agree on severance
terms that could include additional benefits or payments.
In connection with his
retirement from the Company effective August 29, 2008, Mr. Mautz
commenced receiving his benefits from the Pension Plan and received a lump sum
cash out of his benefits from the Excess Compensation Plan, as described in
note 2 following the Pension Benefits at 2009 Fiscal Year-End Table, and
received distributions from his account in the Deferred Savings Plan, as
described in note 7 to the Non-qualified Deferred Compensation during Fiscal
Year 2009 Table. In addition, the
Committee determined that Mr. Mautz should continue to vest in his awards
under the fiscal year 2007 and fiscal year 2008 SBI Programs to the same extent
as other participants following the completion of each of the applicable
three-year performance periods. Mr. Mautz
vested in 8,450 shares under the Companys fiscal year 2007 SBI Program
following completion of the three-year performance period ending June 30,
2009, as disclosed in the Stock Vested During Fiscal Year 2009 Table. Mr. Mautz did not receive any severance
benefits in connection with his retirement from the Company.
33
Table
of Contents
Director
Compensation in Fiscal Year 2009
Every two years, at the direction of the Committee,
Frederic Cook performs a competitive assessment of total director compensation
using the same peer group as is used for conducting the competitive assessment
of the compensation levels of each of the named executives. The Committee takes the competitive findings
of the biennial assessment into account along with other factors in determining
any recommendations it may make to the Board regarding the total compensation
arrangements for our non-employee directors.
In fiscal 2009, we provided the following compensation
to those of our Directors who are not employees of the Company.
Name
|
|
Fees
Earned or
Paid in
Cash
($)
|
|
Stock
Awards
($)(1)
|
|
Total
($)
|
|
John J. Gabarro
|
|
$
|
89,651
|
|
$
|
89,997
|
|
$
|
179,648
|
|
R. Michael
McCullough
|
|
110,750
|
|
91,827
|
|
202,577
|
|
Brendan R.
ONeill
|
|
83,233
|
|
90,780
|
|
174,013
|
|
Linda D. Rabbitt
|
|
48,700
|
|
139,299
|
|
187,999
|
|
Gilbert T. Ray
|
|
108,733
|
|
90,521
|
|
199,254
|
|
John C. Wright
|
|
130,600
|
|
90,503
|
|
221,103
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
As of June 30, 2009, the aggregate number of
shares held by each outside Director, all of which were fully vested, was as
follows: Gabarro 15,207; McCullough 2,500; ONeill 445; Rabbitt 11,623;
Ray 10,974; and Wright 14,373. In
addition, as a result of deferral elections, Mr. McCullough held a vested
right to 6,319.02 deferred stock units; Mr. ONeill and Ms. Rabbitt
each held a vested right to 4,561.62 deferred stock units; Mr. Ray held a
vested right to 1,307.09 deferred stock units; and Mr. Wright held a
vested right to 1,906.61 deferred stock units, payable in shares upon
termination of Board service.
Pursuant to the Amended Compensation
Plan for Outside Directors:
(1) outside
Directors of the Company are paid a quarterly retainer of $11,250 plus $1,500
per day for board meetings;
(2)
the fee
for regular committee meetings is $1,000 per day for Compensation or Nominating
and Governance Committee meetings and $2,000 per day for Audit Committee
meetings;
(3)
the
compensation for telephone meetings of less than four hours duration is 50
percent of the applicable per day fee;
(4) the
fee for other meetings is $1,000 per day;
(5)
the Chairs
of the Audit, Compensation, and Nominating and Governance Committees receive an
annual retainer of $15,000, $10,000, and $5,000, respectively; and
(6) the
Presiding Director receives an annual retainer of $10,000.
Outside Directors are paid in a
combination of cash and the Companys common stock, at the end of each calendar
quarter (at the completed quarter-end share price) for services during the
preceding quarter. Directors may elect
to be paid through any combination of cash, deferral of cash under the Companys
Voluntary Deferred Compensation Plan for Non-Employee Directors, and/or shares
of the Companys common stock. In
addition, outside Directors receive shares with a grant date market value of
approximately $90,000 (subject to rounding) at the end of each fiscal year for
services performed during the preceding fiscal year. Amounts reported in the table above reflect
the FAS 123(R) grant date fair market value of the shares granted. Because the value of the shares received
equals the number of shares issued multiplied by the grant date fair market
value, no assumptions are relevant in determining grant date fair market value
for FAS 123(R) purposes. The shares
vest immediately at grant, and Directors may elect to receive the shares at the
end of each fiscal year or in deferred stock units payable in shares upon
termination of Board service.
34
Table of Contents
The Company also maintains the Voluntary
Deferred Compensation Plan for Non-Employee Directors to enable outside
Directors who hold 5,000 or more shares of the Companys common stock, at their
election, to defer receipt of any or all of their Directors fees until they
are no longer serving as Directors of the Company. Deferred amounts are credited
with interest each month using an interest factor equivalent to the prime rate
of interest as reported by the Companys primary bank. None of the non-employee directors earned
above-market interest on these deferred amounts during fiscal year 2009.
None of the current Directors who are employed by the Company is
compensated separately for his or her services as a Director or as a member of
any committee.
Item
12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters.
The following table sets forth information known to
the Company concerning the shares of Class A common stock beneficially
owned, as of October 1, 2009, by (i) the Directors during the last fiscal
year and nominees for Director of the Company; (ii) the executive officers
named in the Summary Compensation Table herein under Executive Compensation;
and (iii) all executive officers and Directors as a group. Except as
otherwise indicated in the footnotes to the table below, the Company believes
that the beneficial owners of the common stock, based on information furnished
by such owners, have sole investment power and voting power with respect to
such shares.
|
|
Number of Outstanding Shares Beneficially
Owned on October 1, 2009
|
|
|
|
Number and Class
|
|
Percent of Class(a)
|
|
Name of Beneficial Owner
|
|
Class A
|
|
Class A
|
|
John J. Haley(b)
|
|
100,541
|
|
*
|
|
Roger F. Millay
|
|
1,876
|
|
*
|
|
Carl D. Mautz(i)
|
|
5,729
|
|
*
|
|
Gene H. Wickes(c)
|
|
65,447
|
|
*
|
|
Walter W. Bardenwerper
|
|
63,806
|
|
*
|
|
Kevin L. Meehan(d)
|
|
48,346
|
|
*
|
|
John J. Gabarro
|
|
15,207
|
|
*
|
|
R. Michael McCullough(e)
|
|
8,831.70
|
|
*
|
|
Brendan R. ONeill(f)
|
|
5,015.75
|
|
*
|
|
Linda D. Rabbitt(f)
|
|
16,388.75
|
|
*
|
|
Gilbert T. Ray(g)
|
|
12,283.73
|
|
*
|
|
John C. Wright(h)
|
|
16,283.46
|
|
*
|
|
|
|
|
|
|
|
All executive officers and Directors as a group:
20
|
|
827,313.39
|
|
1.9
|
%
|
35
Table
of Contents
(a)
Beneficial ownership of 1
percent or less of all of the outstanding common stock is indicated with an
asterisk (*).
(b)
Ownership includes 14,252
shares that were deferred but are treated as beneficially owned and does not
include 213,886.69 deferred stock units.
(c)
Ownership does not include
16,506.52 deferred stock units.
(d)
Ownership does not include
5,297.05 deferred stock units.
(e)
Ownership includes 6,319.02
shares that were deferred but are treated as beneficially owned.
(f)
Ownership includes 4,561.62
shares that were deferred but are treated as beneficially owned.
(g)
Ownership includes 1,307.09
shares that were deferred but are treated as beneficially owned.
(h)
Ownership includes 1,906.61
shares that were deferred but are treated as beneficially owned.
(i)
Mr. Mautz retired from
Watson Wyatt effective August 29, 2008.
Security Ownership Of Certain
Beneficial Owners
The following table sets forth information known to
the Company concerning the shares of Class A common stock beneficially
owned, as of June 30, 2009 by entities that have reported beneficial
ownership of greater than five percent.
|
|
Number of Outstanding Shares
Beneficially
|
|
|
|
Owned as of June 30, 2009
|
|
Name of
Beneficial
Owner
|
|
Number and Class
(a)
|
|
Percent
of Class
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
|
|
|
|
Class A
|
|
(Options)
|
|
Class A
|
|
Marathon
Asset Management LLP
|
|
2,167,452
|
(b)
|
0
|
|
5.08
|
|
Barclays
Global Investors UK Holdings Ltd
|
|
3,045,159
|
(c)
|
0
|
|
7.14
|
|
(a)
Pursuant to current regulations of the SEC, securities
must be listed as beneficially owned by a person who directly or indirectly has
or shares the power to vote (voting power) or the power to dispose of (dispositive
power) the securities, whether or not the person has any economic interest in
the securities. In addition, a person is deemed a beneficial owner if he has
the right to acquire beneficial ownership within 60 days, whether upon exercise
of a stock option or warrant, conversion of a convertible security or
otherwise. The information contained in this table has been included solely in
reliance upon and without independent investigation of, SEC filings including
the disclosures contained in the schedules and forms referenced in the
footnotes below.
(b)
As reported by Marathon Asset Management LLP (Marathon)
in its report on Form 13F filed with the SEC for the quarter ended June 30,
2009, Marathon has shared investment discretion with respect to all of such
shares and discloses that it shares voting authority over 1,567,597 shares and
no voting authority over 599,855 shares.
(c)
As reported by Barclays Global Investors UK Holdings
Ltd (Barclays) in its report on Form 13F filed with the SEC for the
quarter ended March 31, 2009, Barclays disclosed the following: (i) Barclays
Global Investors Ltd had defined investment discretion with respect to 34,885
shares and sole voting authority with respect to 3,065 shares and no voting
authority with respect to 31,820 shares; (ii) Barclays Global Investors
N.A. had defined investment discretion with respect to 1,649,344 shares and
sole voting authority with respect to 1,396,617 shares and no voting authority
with respect to 252,727 shares; (iii) Barclays Global Fund Advisors had
defined investment discretion with respect to 1,222,908 shares and sole voting
authority with respect to 1,059,626 shares and no voting authority with respect
to 274,282 shares; (iv) Barclays Global Investors Australia Ltd had
defined investment discretion with respect to 10,440 shares
36
Table
of Contents
and sole voting authority
with respect to 10,440 shares; (v) Barclays Global Investors Canada Ltd
had defined investment discretion with respect to 3,147 shares and sole voting
authority with respect to 3,147 shares; and (vi) Barclays Global
Investors Japan Ltd had defined investment discretion with respect to 13,445
shares and sole voting authority with respect to 13,445 shares.
Item
13. Certain Relationships and Related
Transactions, and Director Independence.
Review, Approval or Ratification
of Transactions with Related Persons
Our Related Party
Transactions Policy (the Policy) is designed to avoid entering into
transactions with directors, executive officers, immediate family members and
certain other persons with specified relationships to the Company (a Related
Person) except where clearly consistent with the interests of the Company and
appropriately vetted and approved. This Policy is set forth in writing and
administered by the Audit Committee and applies to any transaction or
relationship or series of similar transactions arrangements or relationships
with a Related Person. Under the Policy the Chief Financial Officer (CFO)
shall seek approval of the Audit Committee for any proposed transaction with a
Related Person of which he is informed or becomes aware. If the CFO becomes
aware of an existing transaction with a Related Person which has not been
approved in advance under the Policy, the matter will be referred to the Audit
Committee. The Audit Committee will evaluate any options available, including
ratification or take other appropriate action for existing transactions that
were not approved initially by the Audit Committee. The Audit Committee will
review the proposed transaction for approval, ratification or other appropriate
action. In making its determination, the Audit Committee considers all relevant
factors including (i) the extent of the Related Persons interest in the
Related Person Transaction, (ii) if applicable, the availability of other
sources of comparable products or services, (iii) whether the terms of the
Related Person Transaction are no less favorable than terms generally available
in unaffiliated transactions under like circumstances, (iv) benefit to the
Company, and (v) the aggregate value of the Related Person Transaction.
During Fiscal Year 2009 there were no transactions subject to this policy by
Related Persons.
Director
Independence
The Board is composed of a majority of Directors who
qualify as independent Directors pursuant to the corporate governance standards
for companies listed on the NYSE and NASDAQ. The Board committee structure
includes an Audit Committee, Compensation Committee, Nominating and Governance
Committee and a Risk Management Committee, the first three committees
consisting entirely of independent Directors.
In determining independence, each year the Board
affirmatively determines whether Directors have any material relationship with
the Company. When assessing the materiality of a Directors relationship with
the Company, the board considers all relevant facts and circumstances, not
merely from the Directors standpoint, but from that of the persons or
organizations with which the Director has an affiliation, and the frequency or
regularity of the services, if any, provided to or by such persons or
organizations, whether the services are being carried out at arms length in
the ordinary course of business and whether the services are being provided
substantially on the same terms to the Company as those prevailing at the time
from unrelated parties for comparable transactions. Material relationships can
include commercial, banking, industrial, consulting, legal, accounting,
charitable and familial relationships. A Director will not be considered
independent if:
(1) the Director is, or in the past three years
has been, an employee of the Company, or an immediate family member of the
Director is, or in the past three years has been, an executive officer of the
Company;
(2) the Director, or a member of the Directors
immediate family, is receiving or has in the past three years received direct
compensation from the Company in excess of $100,000 per year, other than
compensation for Board service, compensation received by the Directors
immediate family member for service as a non-executive employee of the Company,
and pension or other forms of deferred compensation for prior service with the
Company;
(3) the Director, or a member of the Directors
immediate family, is or in the past three years has been an executive officer
of another company where any of the Companys present executives at the same
time serves or served on the Compensation Committee;
37
Table of Contents
(4) the Director or an immediate family member is
a current partner of the Companys internal or outside auditor; the Director is
a current employee of the internal or outside auditor; the Director has an
immediate family member who is a current employee of the internal or outside
auditor and who participates in the auditors audit, assurance or tax
compliance practice; or the Director or an immediate family member was within
the past three years a partner or employee of the internal or outside auditor
and personally worked on the Companys audit; or
(5) the Director is an executive officer or
employee, or a member of the Directors immediate family is an executive
officer of another company that has made payments to or received payments from
the Company for property or services in an amount that, in any of the past
three fiscal years, exceeded the greater of $1 million or 2 percent of the
other companys consolidated gross revenues.
For these purposes, an immediate family member
includes a Directors spouse, parents, children, siblings, mother and
father-in-law, sons and daughters-in-law, brothers and sisters-in-law, and
anyone (other than a domestic employee) who shares the Directors home.
Applying these standards, the Board has determined
that the following Directors are independent: John J. Gabarro, R. Michael
McCullough, Brendan R. ONeill, Linda D. Rabbitt, Gilbert T. Ray, and John C.
Wright. In making these determinations, the board determined that none of the
independent Directors, their family members or organizations with which the
Directors are affiliated have any material direct or indirect relationship with
the Company.
Item
14. Principal Accounting Fees and
Services.
Fees Paid to the Independent
Registered Public Accounting Firm
The Audit Committee has responsibility for the
appointment, compensation and oversight of the work of the independent
registered public accounting firm. Deloitte & Touche LLP (Deloitte)
is the Companys independent registered public accounting firm and audited the
Companys financial statements for fiscal years 2008 and 2009.
As part of its oversight responsibility, the Audit
Committee must pre-approve all permissible services to be performed by the
independent registered public accounting firm. The Audit Committee has
established policies and procedures for the pre-approval of audit and non-audit
services to be performed by the independent registered public accounting firm.
Under the policy, the Committee must give prior
approval for any amount or specific type of service within four categories: (i) audit,
(ii) audit-related, (iii) tax services or, to the extent permitted by law,
(iv) other services that the independent registered public accounting firm
provides. Prior to the annual engagement, the Audit Committee may grant
pre-approval for specific independent registered public accounting firm
services within these four categories at maximum pre-approved fee levels; however,
the Audit Committees policy is generally not to engage the independent
registered public accounting firm for any non-audit related services, including
tax planning or tax return preparation. If circumstances arise that would
require the Company to engage the independent registered public accounting firm
for additional services not contemplated in the original pre-approval, then the
engagement for such services would require separate pre-approval by the Audit
Committee. The Chair of the Audit Committee is authorized to approve a request
for pre-approval provided the additional service is presented to the Audit
Committee for approval at its next scheduled meeting.
The following table presents fees for professional
audit services rendered by Deloitte for the audit of the Companys annual
financial statements for the years ended June 30, 2008 and 2009 and fees
billed by Deloitte for other services rendered during those respective periods.
38
Table
of Contents
|
|
2008
|
|
2009
|
|
|
|
Deloitte &
Touche
|
|
Deloitte &
Touche
|
|
Fee Category
|
|
LLP
|
|
LLP
|
|
Audit
Fees (1)
|
|
$
|
3,780,581
|
|
$
|
3,621,500
|
|
Audit-Related
Fees (2)
|
|
374,406
|
|
132,000
|
|
Tax
Fees (3)
|
|
42,683
|
|
13,041
|
|
Subtotal
|
|
4,197,670
|
|
3,766,541
|
|
All
Other Fees (4)
|
|
2,000
|
|
2,000
|
|
Total
Fees
|
|
$
|
4,199,670
|
|
$
|
3,768,541
|
|
(1) Audit Fees consists of fees billed for
professional services performed by Deloitte for the audit of the Companys annual
financial statements, review and audit of internal controls to ascertain
compliance with the Sarbanes-Oxley Act, review of financial statements included
in the Companys quarterly and annual filings, and services that are normally
provided in connection with statutory and regulatory filings or engagements.
(2) Audit-Related Fees includes fees for
benefit plan audits and related services performed by Deloitte that are
reasonably related to the performance of the audit or review of the Companys
financial statements and are not reported under Audit Fees.
(3) Tax Fees includes fees of Deloitte for any
professional services related to tax compliance, tax advice and/or tax planning
primarily for overseas matters.
(4) All Other Fees represents fees for an
annual license fee for access to Deloittes online database of financial
reporting and accounting literature.
39
Table of Contents
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
WATSON WYATT WORLDWIDE,
INC.
|
|
(Registrant)
|
|
|
Date: October 20,
2009
|
By:
|
/s/ John J. Haley
|
|
|
John J. Haley
|
|
|
President and Chief
Executive Officer
|
Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ John J. Haley
|
|
President, Chief
Executive Officer and Director
|
|
October 20,
2009
|
John J. Haley
|
|
|
|
|
|
|
|
|
|
/s/ Roger F. Millay
|
|
Vice President and
Chief Financial Officer
|
|
October 20,
2009
|
Roger F. Millay
|
|
|
|
|
|
|
|
|
|
/s/ Peter L. Childs
|
|
Controller
|
|
October 20,
2009
|
Peter L. Childs
|
|
|
|
|
|
|
|
|
|
/s/ John J. Gabarro
|
|
Director
|
|
October 20,
2009
|
John J. Gabarro
|
|
|
|
|
|
|
|
|
|
/s/ R. Michael
McCullough
|
|
Director
|
|
October 20,
2009
|
R. Michael McCullough
|
|
|
|
|
|
|
|
|
|
/s/ Brendan ONeill
|
|
Director
|
|
October 20,
2009
|
Brendan ONeill
|
|
|
|
|
|
|
|
|
|
/s/ Linda D. Rabbitt
|
|
Director
|
|
October 20,
2009
|
Linda D. Rabbitt
|
|
|
|
|
|
|
|
|
|
/s/ Gilbert T. Ray
|
|
Director
|
|
October 20,
2009
|
Gilbert T. Ray
|
|
|
|
|
|
|
|
|
|
/s/ John C. Wright
|
|
Director
|
|
October 20,
2009
|
John C. Wright
|
|
|
|
|
40
Table of Contents
EXHIBITS.
In reviewing the
agreements included or incorporated by reference as exhibits to this Annual
Report on Form 10-K/A, it is important to note that they are included to
provide investors with information regarding their terms, and are not intended
to provide any other factual or disclosure information about Watson Wyatt or
the other parties to the agreements. The agreements contain representations and
warranties made by each of the parties to the applicable agreement. These
representations and warranties have been made solely for the benefit of the
other parties to the applicable agreement, and should not be treated as
categorical statements of fact, but rather as a way of allocating risk between
the parties; have in some cases been qualified by disclosures that were made to
the other party in connection with the negotiation of the applicable agreement,
which disclosures are not necessarily reflected in the agreement; may apply
standards of materiality in a way that is different from what may be material
to investors; and were made only as of the date of the applicable agreement or
such other date or dates as may be specified in the agreement and are subject
to more recent developments.
Accordingly, these
representations and warranties may not describe the actual state of affairs as
of the date they were made or at any other time. Additional information about
Watson Wyatt may be found elsewhere in this Annual Report on Form 10-K/A
and our other public filings, which are available without charge through the
SECs website at
http://www.sec.gov
.
21
|
Subsidiaries of Watson
Wyatt Worldwide, Inc.
|
31.1
|
Certification of Chief
Executive Officer Pursuant to Securities Exchange Act Rules 13a-14 and
15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
31.2
|
Certification of Chief
Financial Officer Pursuant to Securities Exchange Act Rules 13a-14 and
15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
32
|
Certification of Chief
Executive Officer and Chief Financial Officer Pursuant to Title 18, U.S.C.
Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
41
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