UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. __)
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Check the appropriate box:
__ Preliminary proxy statement
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RIGHT MANAGEMENT CONSULTANTS, INC.
(Name of Registrant as Specified In Its Charter)
----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing Fee (check the appropriate box):
X No Fee Required.
__ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
________________________________________________________________________
2) Aggregate number of securities to which the transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (Set forth the amount on which the
filing is calculated and state how it was determined.)
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4) Date Filed:
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RIGHT MANAGEMENT CONSULTANTS, INC.
1818 Market Street, 33rd Floor
Philadelphia, Pennsylvania 19103
Dear Shareholder:
On behalf of the Board of Directors, I am pleased to invite you to
attend our 2003 Annual Meeting of Shareholders to be held on Thursday, May 1,
2003 at 10:00 a.m., local time at our headquarters, 1818 Market Street, 33rd
Floor, Philadelphia, PA 19103. At this meeting, you will have the opportunity to
ask questions. Enclosed are a Notice of Meeting, Proxy Statement, your voting
card and the 2002 Annual Report to Shareholders.
The principal business of the meeting is to elect 11 directors, to
amend our Articles of Incorporation to increase the authorized shares of common
stock, to adopt the 2003 Stock Incentive Plan, to adopt the 2003 Employee Stock
Purchase Plan, to ratify the selection of Ernst & Young LLP as the independent
auditors of Right Management Consultants, Inc. for 2003, and to transact any
other business that is properly presented at the Annual Meeting. The Notice of
Meeting and Proxy Statement accompanying this letter describe the specific
business to be acted upon in more detail.
We are delighted that you have chosen to invest in Right Management
Consultants, Inc. and hope that, whether or not you plan to attend the Annual
Meeting, you will vote as soon as possible by completing, signing and returning
the enclosed proxy in the envelope provided. Your vote is important. Voting by
written proxy will ensure your representation at the Annual Meeting if you do
not attend in person.
I look forward to seeing you on May 1, 2003 at the Annual Meeting.
Sincerely,
/S/ THEODORE A. YOUNG
-----------------
Philadelphia, Pennsylvania Theodore A. Young
April 3, 2003 Secretary
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RIGHT MANAGEMENT CONSULTANTS, INC.
1818 Market Street, 33rd Floor
Philadelphia, Pennsylvania 19103
-----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, MAY 1, 2003
Date: Thursday, May 1, 2003
Time: 10:00 a.m. local time
Place: 1818 Market Street
33rd Floor
Philadelphia, PA 19103
We will hold our Annual Meeting of Shareholders on Thursday, May 1,
2003, at 10:00 a.m., at our headquarters, 1818 Market Street, 33rd Floor,
Philadelphia, Pennsylvania.
The purpose of the Annual Meeting is to consider and take action on the
following:
1. To elect eleven (11) directors for a term of one year.
2. To amend the Company's Articles of Incorporation to increase the
number of authorized Common Shares to One Hundred Million
(100,000,000) shares.
3. To adopt the Right Management Consultants, Inc. 2003 Stock Incentive
Plan.
4. To adopt the Right Management Consultants, Inc. 2003 Employee Stock
Purchase Plan.
5. To ratify the selection of Ernst & Young LLP as our independent
auditors for the fiscal year 2003.
6. To transact any other business properly brought before the Annual
Meeting.
If you are a shareholder as of March 17, 2003, you may vote at the
meeting. This Proxy Statement, voting instructions and our 2002 Annual Report to
Shareholders are being distributed on or about April 3, 2003.
You are cordially invited to attend the meeting. However, whether or
not you expect to attend the meeting, to assure that your shares are represented
at the meeting, please date, execute, and mail promptly the enclosed proxy card
in the enclosed, stamped envelope. The return of the enclosed proxy card will
not affect your right to vote in person if you do attend the meeting.
By order of the Board of Directors
/s/ THEODORE A. YOUNG
---------------------
Philadelphia, Pennsylvania Theodore A. Young
April 3, 2003 Secretary
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RIGHT MANAGEMENT CONSULTANTS, INC.
1818 Market Street, 33rd Floor
Philadelphia, PA 19103
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
May 1, 2003
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Right Management Consultants, Inc., for
use at our Annual Meeting of Shareholders which is scheduled to be held on
Thursday, May 1, 2003, at 10:00 a.m. local time, at our headquarters, 1818
Market Street, 33rd Floor, Philadelphia, Pennsylvania. This Proxy Statement, the
foregoing notice and the enclosed proxy are being sent to shareholders on or
about April 3, 2003.
Table of Contents
Page
Commonly Asked Questions and Answers about the Annual Meeting............6
Principal Shareholders and Management's Holdings........................10
Section 16(a) Beneficial Ownership Reporting Compliance.................12
Proposal 1-Election of Directors........................................13
Committees of the Board of Directors....................................16
Certain Relationships and Related Party Transactions....................17
Proposal 2-Amendment of Articles of Incorporation.......................18
Proposal 3-Adoption of 2003 Stock Incentive Plan........................19
Proposal 4-Adoption of 2003 Employee Stock Purchase Plan................26
Executive Compensation..................................................30
Stock Option Grants.....................................................31
Option Exercises and Year-end Option Value..............................32
Retirement Compensation.................................................32
Employment and Change in Control Agreements.............................34
Compensation of Directors...............................................35
Equity Compensation Plan................................................37
Auditors................................................................37
Audit and Non-Audit Fees................................................38
Audit Committee Report..................................................39
Compensation Committee Report on Executive Compensation.................40
Common Shares Performance...............................................45
Proposal 5-Ratification of Appointment of Independent Auditors..........46
Other Business..........................................................46
Shareholder Proposals...................................................46
Annual Report on Form 10-K..............................................46
Householding............................................................46
The Audit Committee Charter.............................................48
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Commonly Asked Questions and Answers about the Annual Meeting
-------------------------------------------------------------
Q. What am I voting on?
A. 1. The election of eleven (11) directors for a one-year term.
2. An amendment to the Company's Articles of Incorporation to
increase the authorized common shares to One Hundred Million
(100,000,000) shares.
3. Adoption of the 2003 Stock Incentive Plan.
4. Adoption of the 2003 Employee Stock Purchase Plan.
5. Ratification of Ernst & Young LLP as Right Management
Consultants, Inc.'s independent auditors for fiscal year 2003.
6. Any other business that properly comes before the meeting for a
vote.
Q. Who is entitled to vote at the Annual Meeting, and how many votes do
they have?
A. Common shareholders of record as of the close of business on March 17,
2003 may vote at the Annual Meeting. Each share has one vote. There
were 22,687,459 shares of common stock outstanding on March 17, 2003.
Q. How do I vote?
A. You must be present, or represented by proxy, at the Annual Meeting in
order to vote your shares. Since many of our shareholders are unable
to attend the Annual Meeting in person, we send proxy cards to all of
our shareholders to enable them to be represented and to vote at the
Annual Meeting.
Q. What is a proxy?
A. A proxy is a person you appoint to vote on your behalf. If you are
unable to attend the Annual Meeting, we are seeking your appointment
of proxies so that your Common Shares may be voted. You must complete
and return the enclosed proxy card to have your shares voted by proxy.
Q. By completing and returning this proxy card, who am I designating as
my proxy?
A. You will be designating Richard J. Pinola, our Chief Executive Officer
and Chairman of the Board and Joseph T. Smith, our Vice Chairman of
the Board, as your proxies. They may act together or individually on
your behalf, and will have the authority to appoint a substitute to
act as proxy.
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Q. How will my proxy vote my shares?
A. Your proxy will vote according to the instructions on your proxy card.
We do not intend to bring any other matter for a vote at the Annual
Meeting, and we do not know of anyone else who intends to do so. Your
proxies are authorized to vote on your behalf, however, using their
best judgment, on any other business that properly comes before the
Annual Meeting.
Q. How do I vote using my proxy card?
A. If you do not attend the Annual Meeting and vote in person, you may
vote by returning the enclosed proxy card to us. To vote by mail,
simply mark, sign, and date the enclosed proxy card, and return it in
the enclosed postage-paid envelope. Alternatively, you may deliver
your proxy card to us in person, by facsimile, or by a courier. If you
hold your shares through a broker, bank, or other nominee, you will
receive separate instructions from the nominee describing how to vote
your shares.
Q. Can I vote electronically?
A. If you are a registered shareholder (that is, you hold your stock in
certificate form), you may vote electronically through the Internet by
following the instructions included with your proxy card. If your
shares are held in "street name," please check your proxy card or
contact your broker or nominee to determine whether you will be able
to vote electronically.
Q. How do I revoke my proxy?
A. You may revoke your proxy at any time before your shares are voted at
the Annual Meeting by:
o Notifying our Corporate Secretary, Theodore A. Young, in writing
at 1818 Market Street, 33rd Floor, Philadelphia, PA 19103, that
you are revoking your proxy;
o Executing a new proxy card; or
o Attending and voting by ballot at the Annual Meeting.
Q. Is my vote confidential?
A. Yes, only certain employees will have access to your proxy card. All
comments remain confidential, unless you ask that your name be
disclosed.
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Q. Who will count the votes?
A. One of our officers will act as the inspector of election and will
count the votes in conjunction with our transfer agent, National City
Bank.
Q. What constitutes a quorum?
A. A majority of the outstanding shares, either present or represented by
proxy, constitutes a quorum. As of March 17, 2003 there were
22,687,459 shares of common stock issued, outstanding, and entitled to
vote at the Annual Meeting. A quorum is necessary in order to conduct
the Annual Meeting. If you choose to have your shares represented by
proxy at the Annual Meeting, you will be considered part of the
quorum. If a quorum is not present at the Annual Meeting, the
shareholders present in person or by proxy may adjourn the meeting to
a date when a quorum is present. If an adjournment is for more than 30
days or a new record date is fixed for the adjourned meeting, we will
provide notice of the adjourned meeting to each shareholder of record
entitled to vote at the meeting.
Q. What vote is needed for the proposals to be adopted and how will my
vote be counted?
A. With respect to Proposal 1, the election of directors, the eleven
directors who receive the most votes will be elected. You may vote
separately for, or withhold your vote separately for, each nominee.
Votes that are withheld will not be included in the vote tally for the
election of directors, and will have no effect on the results of the
vote. Shareholders do not have the right to cumulate votes in the
election of directors.
With respect to Proposals 2, 3, 4 and 5 the vote of a majority of the
shares of shareholders are required to approve the proposals.
Abstentions and any shares as to which a broker or nominee indicates
that it does not have discretionary authority to vote on a particular
matter, will be treated as shares that are present and entitled to
vote for purposes of determining the presence of a quorum but as
unvoted for purposes of determining whether the approval of
shareholders has been obtained with respect to these Proposals.
Q. What percentage of our Common Shares do the directors and officers
own?
A. As of March 17, 2003, our directors and executive officers owned
approximately 17.8% of our Common Shares. See the discussion under the
heading "Principal Shareholders and Management's Holdings" on page 10
for more details.
Q. Who is soliciting my proxy, how is it being solicited, and who pays
the cost?
A. The Board of Directors of Right Management Consultants, Inc. is
soliciting proxies primarily by mail. In addition, proxies may also be
solicited in person, by telephone, or facsimile. We will pay the cost
of soliciting proxies. We will also reimburse brokerage houses and
other custodians, nominees, and fiduciaries for their reasonable
out-of-pocket
8
expenses for forwarding proxy and solicitation material to the owners
of our common shares.
Q. When are Shareholder proposals for the year 2004 Annual Meeting due?
A. Shareholder proposals to be presented at our 2004 Annual Meeting must
be submitted in writing by December 5, 2003 to our Corporate
Secretary, at 1818 Market Street, 33rd Floor, Philadelphia, PA 19103.
You should submit any proposal by a method that permits you to prove
the date of delivery to us.
Q. How may I obtain a copy of the Company's Form 10-K?
A. You may request a copy of our Annual Report on Form 10-K for the year
ended December 31, 2002, by writing to our Corporate Secretary at 1818
Market Street, 33rd Floor, Philadelphia, PA 19103 or by visiting our
Investor Relations website at www.right.com/global/investor.
9
Principal Shareholders and Management's Holdings
The following table sets forth each nominee for director, each of our
five highest compensated executive officers, all directors and officers as a
group and each shareholder who is known to own beneficially more than 5% of the
22,687,459 outstanding Common Shares as of March 17, 2003.
Number of Shares Percent of Class
Name of Shareholder Beneficially Owned (1)
-------------------- ------------------ -----------------
Richard J. Pinola 2,612,637 (2) 10.7%
T. Rowe Price Associates, Inc. 2,256,000 (3) 10.0%
Barclays Global Investors, NA. 1,457,581 (4) 6.4%
FMR Corporation 1,389,264 (5) 6.1%
Joseph T. Smith 750,047 (6) 3.2%
Frank P. Louchheim 254,929 (7) 1.1%
John J. Gavin 190,631 (8) *
Larry A. Evans 136,665 (9) *
Frederick R. Davidson 88,038 (10) *
John R. Bourbeau 83,350 (11) *
James E. Greenway 49,137 (12) *
Christopher Pierce-Cooke 34,292 (13) *
Rebecca J. Maddox 32,777 (14) *
Catherine Y. Selleck 32,681 (15) *
G. Lee Bohs 12,627 (16) *
Stephen Johnson 5,000 *
Oliver S. Franklin 3,985 (17) *
All Directors and Officers as a Group (27 persons) 4,550,755 (18) 17.8%
-------------------------------------------------- --------------------------- --------------------
* Less than 1%
(1) Any securities not currently outstanding but subject to options exercisable
by such shareholder within 60 days of March 17, 2003 are deemed to be
outstanding for the purpose of computing the percentage of outstanding
securities of the class owned by such person.
(2) The number of shares listed as held by Mr. Pinola includes (a) an aggregate
of 6,750 shares which are held in two separate trusts for his children, as
to which Mr. Pinola disclaims beneficial ownership and (b) currently
exercisable options to purchase 1,703,200 shares of our Common Shares. Mr.
Pinola's address is c/o Right Management Consultants, Inc., 1818 Market
Street, Philadelphia, PA 19103.
(3) Based on Schedule 13G dated February 14, 2003 filed by T. Rowe Price
Associates, Inc. ("Price Associates") with the Securities and Exchange
Commission ("SEC"). In such Schedule, Price Associates reported having sole
voting power with respect to 529,600 shares and sole dispositive power with
respect to all 2,256,000 shares and states the
10
following: "These securities are owned by various individual and
institutional investors including T. Rowe Price Small-Cap Value Fund, Inc.
(which owns 1,590,000 shares, representing 7.0% of the shares outstanding),
which Price Associates serves as investment adviser with power to direct
investments and/or sole power to vote the securities. For purposes of the
reporting requirements of the Securities Exchange Act of 1934, Price
Associates is deemed to be a beneficial owner of such securities; however,
Price Associates expressly disclaims that it is, in fact, the beneficial
owner of such securities." Price Associates' address is 100 E. Pratt
Street, Baltimore, MD 21202.
(4) Based on Schedule 13G dated February 10, 2003 filed by Barclays Global
Investors, NA. ("Barclays") with the SEC. In such Schedule, Barclays
reported having sole voting power and sole dispositive power with respect
to 1,359,819 shares, representing 6.0% of the shares outstanding, and
Barclays Global Fund Advisors reported having sole voting power and sole
dispositive power with respect to 97,762 shares, representing 0.43% of the
shares outstanding. The address of Barclays and Barclays Global Fund
Advisors is 45 Fremont Street, San Francisco, CA 94105.
(5) Based on Schedule 13G/A dated February 14, 2003 filed by FMR Corporation
("FMR") with the SEC. In such Schedule, FMR reported having sole voting
power with respect to 45,614 shares and sole dispositive power with respect
to all 1,389,264 shares. FMR's address is 82 Devonshire Street, Boston, MA
02109.
(6) The number of shares listed as held by Mr. Smith includes currently
exercisable options to purchase an aggregate of 688,371 shares of our
Common Shares.
(7) The number of shares listed as held by Mr. Louchheim includes (a) an
aggregate of 5,315 shares which are held by certain of his children as
custodian for a total of seven minor grandchildren of Mr. Louchheim, as to
which Mr. Louchheim disclaims beneficial ownership, and (b) currently
exercisable options to purchase an aggregate of 53,114 of our Common
Shares.
(8) The number of shares listed as held by Mr. Gavin includes currently
exercisable options to purchase an aggregate of 126,876 of our Common
Shares.
(9) The number of shares listed as held by Mr. Evans includes (a) an aggregate
of 12,150 shares held by his wife, as to which Mr. Evans disclaims
beneficial ownership, and (b) currently exercisable options to purchase an
aggregate of 34,128 of our Common Shares.
(10) The number of shares listed as held by Mr. Davidson includes currently
exercisable options to purchase an aggregate of 3,750 of our Common Shares.
(11) The number of shares listed as held by Mr. Bourbeau includes currently
exercisable options to purchase an aggregate of 34,126 of our Common
Shares.
(12) The number of shares listed as held by Mr. Greenway includes (a) an
aggregate of 13,903
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shares held in a Stock Fund under our 401(K) Plan, and (b) an approximate
aggregate of 10,125 shares in an SEP IRA account held jointly with his
wife.
(13) The number of shares listed as held by Mr. Pierce-Cooke includes currently
exercisable options to purchase an aggregate of 24,438 of our Common
Shares.
(14) The number of shares listed as held by Ms. Maddox includes currently
exercisable options to purchase an aggregate of 27,563 of our Common
Shares.
(15) The number of shares listed as held by Ms. Selleck includes currently
exercisable options to purchase an aggregate of 24,000 of our Common
Shares.
(16) The number of shares listed as held by Mr. Bohs includes currently
exercisable options to purchase an aggregate of 7,500 of our Common Shares.
(17) The number of shares listed as held by Mr. Franklin includes currently
exercisable options to purchase an aggregate of 3,750 of our Common Shares.
(18) The number of shares in the aggregate listed as held by our directors and
executive officers as a group includes (a) currently exercisable options to
purchase an aggregate of 2,854,287 of our Common Shares and (b) 35,322
shares held in a Stock Fund under our 401(K) Plan and our Non-qualified
Deferred Compensation Plan.
Section 16(a) Beneficial Ownership Reporting Compliance
The rules of the SEC require that our directors and executive officers,
and persons who own more than ten percent of a registered class of our equity
securities, file with the SEC initial reports of ownership and reports of
changes in ownership of Common Shares and other equity securities. Officers,
directors and greater than ten percent shareholders are required by SEC
regulations to furnish us with copies of all forms they file.
To our knowledge, based solely on our review of the copies of such
reports furnished to us and written representations that no other reports were
required during the fiscal year ended December 31, 2002, two reports on Form 3,
initial statement of beneficial ownership, were filed untimely by Mr. Johnson
and Mr. Miyaki, reporting no beneficial ownership and thirty-four reports on
Form 4 of changes of ownership by nineteen executive officers and directors were
not timely filed. All late filings of reports on Form 4 of changes of ownership
relate to purchases of common shares in the Company's employee benefit plans or
the grant of stock options. Mr. Greenway, Mr. Holland and Mr. Miller, each of
whom is an executive vice president of the Company, each had five transactions
untimely filed for the direct purchase of shares through the Company's Employee
Stock Purchase Plan. The reports of grant of stock options were untimely filed
by Mr. Bohs, Mr. Boole, Mr. Bourbeau, Mr. Davies, Mr. Doris, Mr. Franklin, Mr.
Gavin, Mr. Greenway, Mr. Holland, Ms. Maddox, Mr. Mallon, Mr. Mark, Mr.
McCusker, Mr. McRae, Mr. Miller, Mr. Pierce-Cooke, Mr. Pinola, Ms. Selleck, and
Mr. Uezumi. Mr. Franklin also had an untimely filing for a purchase of common
shares. Mr. Bourbeau, Mr. Franklin, Ms. Maddox and Ms. Selleck are Directors of
the Company. The other individuals noted are executive officers
12
of the Company. Reports of these transactions were required to be filed on an
annual basis following December 31 each year until August 29, 2002 when this
requirement was accelerated to two business days following such acquisitions or
grants of stock options. In February 2003, the Company put into place procedures
to meet the accelerated reporting requirements.
PROPOSALS TO BE VOTED UPON
Proposal 1: ELECTION OF DIRECTORS
Our Board of Directors consists of eleven members. All current members
have been nominated for re-election, and have agreed to serve a one-year term if
elected. If any nominee is unable to stand for re-election, which we do not
expect, the Board may provide for a lesser number of directors or designate a
substitute. If a substitute is designated, shares represented by proxies may be
voted for a substitute nominee.
The Board of Directors recommends a vote "FOR" each of the nominees:
Name Director Since Age Position
Frank P. Louchheim 1980 79 Founding Chairman
Richard J. Pinola 1989 57 Chairman of the Board of Directors and Chief
Executive Officer
Joseph T. Smith 1991 67 Vice Chairman of the Board of Directors
John J. Gavin 1999 47 President and Chief Operating Officer
Larry A. Evans 1980 60 Founding Principal
John R. Bourbeau 1995 58 President of Midwest Reemployment Associates,
Inc., an Affiliate of the Company
Rebecca J. Maddox 1995 49 President of Maddox Smye LLC
Catherine Y. Selleck 1995 69 Business Consultant
Frederick R. Davidson 1997 66 Chairman of Right Management Consultants
Holdings, Pty. Ltd.
Oliver S. Franklin 2001 57 Executive Vice President of GS Capital
Management
Stephen Johnson 2002 67 Senior Consultant for Right Coutts
13
Mr. Louchheim is one of our founders. From November 1980 until
September 1987, he served as President, Chief Executive Officer and Chairman of
our Board of Directors. He continued to serve as Chief Executive Officer and
Chairman of the Board through December 1991. From January 1992 to December 1993,
he served as the full-time Chairman of the Board of Directors. Effective January
1, 1994, Mr. Louchheim was appointed Founding Chairman and continues as a
director.
Mr. Pinola was elected as a director by the Board in October 1989. Mr.
Pinola is a Certified Public Accountant and joined Penn Mutual Life Insurance
Company in 1969. He was appointed President and Chief Operating Officer in 1988,
which position he held until his resignation in September 1991. Mr. Pinola was a
financial consultant to various organizations from September 1991 until July
1992, at which time he was appointed President and Chief Executive Officer of
the Company. Effective January 1, 1994, Mr. Pinola was appointed Chairman of the
Board of Directors and continues as Chief Executive Officer. Mr. Pinola also
serves as a director of K-Tron International, a publicly held company that
manufactures equipment for the food and chemical industries. Mr. Pinola also is
a member of the Board of Trustees of King's College in Wilkes-Barre,
Pennsylvania.
Mr. Smith joined the Penn Mutual Life Insurance Company in 1963. In
1976, he was promoted to Vice President of Administration and Human Resources,
which position he held until his resignation in 1980. From 1981 to 1984, Mr.
Smith worked as an independent consultant offering a range of consulting
services to businesses. He joined us as a Senior Consultant in Professional
Services in August 1984 and, from August 1988 until September 1992 held the
position of Regional Managing Principal of our Philadelphia office. Mr. Smith
was elected as a Director in May 1991. From September 1992 through December
1993, Mr. Smith served as our Chief Operating Officer. Effective January 1,
1994, Mr. Smith was appointed President in which capacity he served until
December 1998. Effective January 1, 1999, Mr. Smith was appointed Vice Chairman
of the Board of Directors. Mr. Smith retired as an employee of the company on
January 1, 2001, and continues as Vice Chairman of the Board of Directors.
Mr. Gavin was employed at Arthur Andersen LLP in Philadelphia for 18
years in which he served as the partner in charge of the
manufacturing/distribution industries. Mr. Gavin joined us in December 1996 as
Executive Vice President. In this capacity, Mr. Gavin was responsible for the
overall marketing strategy and business development activities for our worldwide
operations. Effective January 1, 1999, Mr. Gavin was appointed President and
Chief Operating Officer. Also effective January 1, 1999, Mr. Gavin was elected a
Director by the Board of Directors. Mr. Gavin is a member of the Board of
Advisors for Temple University's Fox School of Business and he is a member of
the Board of Directors of Global Health Ministry. Mr. Gavin is also a director
of Opinion Research Corporation, a publicly held company that provides marketing
research and services.
Mr. Evans was professionally involved in the international finance and
venture capital industries, prior to May 1978. From May 1978 to November 1980,
Mr. Evans was employed as an independent outplacement consultant for Bernard
Haldane Associates, Inc., working with Mr.
14
Louchheim. Since November 1980, Mr. Evans served as our Executive Vice President
and a Director. From January 1990 until May 1995, Mr. Evans served as Regional
Managing Principal of several of our offices. From May 1995 until December 1999,
Mr. Evans worked in our corporate office together with our regional offices in
marketing to major national and international accounts. Effective January 1,
2000, Mr. Evans was appointed to oversee one of our largest Key Executive
Services practices. Mr. Evans retired as an employee of the company on January
1, 2001, at which point he founded Virtual Board of Advisors ("Virboa"), a
company that provides assistance with acquisitions. Mr. Evans serves on various
boards of both non-profit organizations and community associations. He also
holds directorships with Knite, Inc., a high-tech ignition company, and
Eschoolmall, an internet educational procurement and learning site.
Mr. Bourbeau founded Midwest Reemployment Associates, Inc., our
franchise affiliate, in 1981, where he currently serves as the Regional Managing
Principal and which has offices in Southfield, Grand Rapids, Kalamazoo and
Midland, Michigan, as well as Toledo, Ohio. Mr. Bourbeau also serves as a board
member for the National Council of Community & Justice, the Michigan Colleges
Foundation and the Detroit Historical Society, and is a life member of the
Economic Club of Detroit.
Ms. Maddox is President and Founder of Maddox Smye LLC, a ten year old
consulting firm specializing in helping Fortune 1000 companies market and sell
their products and services to women customers. Ms. Maddox holds an MBA in
Finance from Columbia University and is the author of "Inc. Your Dreams" and
"How to Get Rich Selling Cars to Women." Ms. Maddox serves on the Board of
D-Code, a market research firm in Canada and served for six years on the
Regional Advisory Board of PNC Bank.
Ms. Selleck spent many years with IBM, in various executive capacities.
Subsequent to her positions with IBM, Ms. Selleck joined Metaphor, a software
and services company, where she served as President and Chief Executive Officer.
She is now an independent business consultant on a wide range of business
issues. Ms. Selleck is Chair-elect of the Board of Trustees of Occidental
College.
Mr. Davidson is the Chairman of Right Management Consultants Holdings,
Pty. Ltd., formerly Right D&A Pty. Ltd., an Asia-Pacific career transition firm
of which we acquired a fifty-one percent interest during 1997, and which is now
owned 100% by the Company. Mr. Davidson was elected a Director by the Board of
Directors on July 24, 1997. Mr. Davidson is President of St. John Ambulance
Australia (Victoria), Chairman of Cooperative Research Centre for Cochlear
Implant and Hearing Aid Innovation, Chairman of Hearworks, Pty. Ltd., a
Commander of the Order of St. John, and a member of the International Institute
of Strategic Studies in London.
Mr. Franklin is a consultant to private equity and venture capital
firms. Mr. Franklin co-founded in 1998, RISA Investment Advisers, LLC ("RISA"),
an investment firm focusing on the RISA Fund and RISA Business Finance. He
served as the President of RISA until it was sold in early 2002. Prior to
co-founding RISA, Mr. Franklin was a Senior Vice President at The Fidelity
Management Trust Company, where he directed a unit that developed new
institutional financial
15
products. Also in 1998, he was appointed Her Majesty's Honorary Consul in
Philadelphia. In this position, he is responsible for promoting British
diplomatic, investment and consular interest in the region. Mr. Franklin is a
member of the Philadelphia Securities Association and The National Association
of Securities Professionals.
Mr. Johnson spent much of his career in the fibre and petrochemical
industry. He held a position with AKZO-NOBEL for many years, where his
concentrations included strategic planning and international operations. He
entered the career consulting business in 1986 when he took the position of
Senior Consultant with Coutts Consulting Group, Ltd. ("Coutts"). In 1987, Mr.
Johnson was appointed Chief Executive Officer of Coutts, where his
responsibilities included the management of operations and the development of
the business. In 1987, Mr. Johnson became a Director of Coutts. Effective in
1996, he was appointed Chairman of the Board of Directors for Coutts. Mr.
Johnson was employed by the Company From March 22, 2002 through September, at
which he point he entered into a part-time consulting arrangement with the
Company.
Committees of the Board of Directors
What are the current committees of the Board of Directors?
The Board of Directors has four committees: the Compensation Committee,
the Audit Committee, the Executive Committee and the Nominating/Corporate
Governance Committee. The composition of the Compensation, Audit and
Nominating/Corporate Governance Committees consists entirely of independent
directors. The composition of the Executive Committee is a majority of
independent directors. In this connection, at its meeting on December 12, 2002,
the Board of Directors reached a determination that there is no material
relationship between Mr. Louchheim and the Company which precludes his being
classified as an independent director. Among the factors considered by the board
was that Mr. Louchheim's employment by the Company ceased more than five years
ago.
The composition and roles of the committees are as follows:
Nominating/
Compensation Audit Executive Corporate
Committee Committee Committee Governance
--------- --------- --------- Committee
----------
Mr. Louchheim X X
Mr. Pinola X
Mr. Gavin X
Ms. Maddox X X X
Ms. Selleck X X X
Mr. Franklin X X X X
16
COMPENSATION COMMITTEE: This Committee's duties involve reviewing proposals made
by the Chief Executive Officer to grant stock options, evaluating the rationale
and expected contributions of the grantees to our future results, ensuring that
compensation is at market levels and is supportive of our overall goals and
objectives, and determining whether to approve stock option grants with any
modifications it deems appropriate. This Committee is also responsible for
remuneration agreements with the Chief Executive Officer and the President/Chief
Operating Officer. Ms. Selleck serves as Chair of this Committee.
AUDIT: The Committee's principal function is to oversee our annual audit and
financial reporting. Ms. Maddox serves as Chair of this Committee. The Board of
Directors adopted a revised Audit Committee Charter on December 12, 2002, a copy
of which is attached as Exhibit A.
EXECUTIVE COMMITTEE: This Committee is available to meet when necessary at any
time and has the power of the Board of Directors in between the scheduled Board
meetings. Mr. Pinola serves as Chair of this Committee.
NOMINATING/CORPORATE GOVERANCE COMMITTEE: This Committee recommends to the Board
of Directors nominees for election or re-election as director at the next Annual
Meeting of shareholders or for vacancies arising within the Board of Directors.
The Nominating Committee will consider nominees recommended by shareholders,
which should be submitted in writing to the Nominating Committee on or before
the date specified under "Shareholder Proposals" below in order to be considered
for the next Annual Meeting. The Nominating Committee is under no obligation to
recommend any persons identified by shareholders as nominees to the Board of
Directors. Mr. Louchheim is Chair of this Committee.
How many Board and Committee Meetings were held in 2002?
During 2002, the Board of Directors met five times, one of which was a
special meeting, the Compensation Committee met four times, one of which was a
special meeting, the Audit Committee met three times, and the
Nominating/Corporate Governance Committee met once. The Executive Committee did
not meet during 2002. All members of the Board attended each meeting of the
Board, except that Mssrs. Evans, Davidson and Franklin each attended four of the
five meetings, and Mr. Johnson attended all four meetings held following his
election to the Board in May 2002. All committee meetings had full attendance of
committee members.
Certain Relationships and Related Party Transactions
Midwest Reemployment Associates, Inc., ("Midwest"), the franchise
business owned by Mr. Bourbeau, received approximately $2,216,000 and $1,675,000
in fees from us during 2002 and 2001, respectively, for services performed on
our behalf. Midwest incurred approximately $4,530,000 and $2,783,000 in
royalties and fees payable to us for our services performed during 2002 and
2001, respectively, on behalf of Midwest, including payments for reimbursable
expenses and materials purchased from us by Midwest. The fees paid and received
by Midwest
17
were in accordance with our standard fee and royalty arrangement with all of our
franchisees under our Affiliate Agreement.
In accordance with two separate consulting agreements, one for Mr.
Smith and one for Mr. Evans, each effective January 1, 2001, we paid Mr. Smith
approximately $120,000 in both 2002 and 2001 and we paid Mr. Evans approximately
$37,500 in 2002 and $75,000 in 2001 for the consulting services they provided to
us during those periods. In connection with these consulting agreements, Mr.
Smith and Mr. Evans were provided with the usage of an automobile or an
automobile allowance. In addition, for their outstanding performance and
numerous years of service to the Board of Directors, both Mr. Smith and Mr.
Evans' stock options were extended beyond their retirement. The Company
recognized $100,000 in compensation expense in 2001 related to these extended
stock options. Also, Mr. Smith was awarded a $50,000 bonus in 2002 and 2001.
On March 22, 2002, we purchased all of the shares of Atlas Group
Holdings Limited ("Atlas"), the parent company of Coutts, of which Mr. Johnson
was Chairman of the Board of Directors and a partial owner. Andrew McRae, our
Group Executive Vice President of Europe, was also a partial owner of Coutts.
Coutts was a London based career transition and organizational consulting firm
with operations in Europe, Japan and Canada. This acquisition was valued at
approximately $118,129,000, including the costs of the transaction. The
consideration consisted of a combination of cash, purchase price notes and funds
we supplied to repay existing indebtedness of Atlas. The total of the cash and
purchase price notes payable to the shareholders of Coutts was approximately
$59,240,000, of which Mr. Johnson and Mr. McRae each received $1,935,000. Mr.
Johnson's consideration was payable to him as approximately $61,000 in cash and
approximately $1,874,000 in a purchase price note. Mr. Johnson called on the
total amount of his note in October 2002 and the Company paid to him
approximately $2,039,000, including principle and interest and net of tax. Mr.
McRae's consideration was payable to him as approximately $209,000 in cash and
approximately $1,726,000 in a purchase price note.
In addition to the purchase price payable to Stephen Johnson and the
amount paid to him by the Company upon redemption of his loan note, Mr. Johnson
was employed by the Company from March 22, 2002 through September 2002, at which
point he entered into a part-time consulting agreement with the Company. For the
consulting services provided by Mr. Johnson to the Company during the fourth
quarter of 2002, the Company paid him approximately $24,000. Per this consulting
arrangement, Mr. Johnson was provided with a car allowance.
Proposal 2 : TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED COMMON SHARES
The Company presently has authority to issue up to 45,000,000 shares of
common stock and up to 1,000,000 shares of preferred stock. There are presently
issued and outstanding 22,687,459 shares of common stock and no preferred stock.
In addition, 7,964,181 shares of common stock are reserved for issuance in
connection with outstanding stock options, potential
18
stock option grants and potential purchases under the 1996 Employee Stock
Purchase Plan ("1996 ESPP"), for a total of 30,651,640 shares outstanding and
reserved. While there are no present plans to issue shares for any purpose,
other than (a) as restricted stock or upon the exercise of options granted under
the 1993 Stock Incentive Plan or the 2003 Stock Incentive Plan, or (b) in
connection with the 1996 ESPP or the 2003 Employee Stock Purchase Plan, in order
to have sufficient shares authorized for potential stock splits, use in
connection with acquisitions and other general corporate purposes, the Board of
Directors has approved an Amendment to the Articles of Incorporation to increase
the authorized capital to 100,000,000 common shares and 1,000,000 preferred
shares. As is the case with the presently authorized and unissued shares, the
Board of Directors would have the authority to issue these shares from time to
time in its discretion.
As amended, Article 5 of the Company's Articles of Incorporation will
read as follows:
"The aggregate number of shares that this Corporation will have
authority to issue is:
1. One Hundred Million (100,000,000) shares of Common Stock,
par value of $0.01 per share; and
2. One Million (1,000,000) shares of Preferred Stock, no par
value.
The Board of Directors may issue in one or more class or series, shares
of Preferred Stock, with full, limited, multiple, fractional or no voting
rights, and with such designations, preferences, qualifications, privileges,
limitations, restrictions, options, conversion rights or other special or
relative rights as shall be fixed from time to time by the Board of Directors.
Shareholders shall not have the right to cumulate their shares in
voting for the election of directors."
The affirmative vote of the holders of a majority of the Company's
Common Stock present at the meeting in person or by proxy is required to approve
the amendment adopted by the Board as described above. THE BOARD OF DIRECTORS
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE ADOPTION OF THE
AMENDMENT TO THE ARTICLES OF INCORPORATION.
Proposal 3: TO ADOPT THE RIGHT MANAGEMENT CONSULTANTS, INC. 2003 STOCK INCENTIVE
PLAN (the "2003 Plan")
The Board of Directors believes the Company's stock option program is
an effective means of attracting, motivating and retaining key personnel of the
Company, and that the authorization of the 2003 Plan to replace the expiring
1993 Stock Incentive Plan (the "1993 Plan") will facilitate the achievement of
this purpose. The remaining number of shares of common stock for which options
may be granted pursuant to the 1993 Plan is 2,072,850.
19
The 1993 Plan will by its terms expire on December 31, 2003 after which no
options may be granted under the plan. The terms of the 2003 Plan are
substantially identical as those of the 1993 Plan, except the existing
prohibition against repricing options in the 1993 Plan has been made more
explicit in the 2003 Plan.
In order to provide for grants after 2003 and to have available a stock
incentive plan in order to attract further key personnel, on February 20, 2003,
the Board of Directors adopted the 2003 Plan, subject to shareholder approval.
Upon such approval, no further grants will be made under the 1993 Plan. The
number of shares available for grant in the 2003 Plan is 3,000,000 shares.
Therefore the replacement of the 1993 Plan by the 2003 Plan will increase shares
available for grant from 2,072,850 to 3,000,000 and provide for a continuation
of the Company's ability to grant options to January 31, 2013.
1. Summary of the Plan
The key features of the Plan are as follows:
(a) Eligibility. All employees and directors are eligible to receive
options under the Plan. Only employees (including employee-directors) are
eligible to receive restricted stock under the Plan. Members of the committee
administering the Plan (see "Administration" below) are ineligible to receive
any awards under the Plan. Currently, there are approximately 3,000 persons
eligible to receive awards under the Plan.
(b) Grant. The Plan allows the Committee (as defined below) to grant
individually, or in combination, options and restricted stock as the Committee,
in its sole discretion, may determine. Options may be in the form of Incentive
Stock Options or Non-qualified Stock Options.
(c) Shares Covered by the Plan. The maximum number of shares of common
stock reserved for issuance under the Plan (the "Plan Shares"), as amended, is
3,000,000 (increased from the 2,072,850 shares remaining under the 1993 Plan),
subject to adjustment upon the occurrence of a stock dividend, stock split,
recapitalization or certain other capital adjustments. If an option granted
under the Plan expires or terminates without having been fully exercised for any
reason or, generally, if restricted stock granted under the 2003 Plan is
forfeited for any reason, the Plan Shares underlying the unexercised portion of
such option or forfeited restricted stock, as the case may be, may again be the
subject of one or more awards granted pursuant to the Plan. No more than 300,000
of the Plan Shares are available for award in the form of restricted stock. In
addition, options with respect to more than 150,000 shares will not be granted
to any single recipient in any calendar year.
(d) Administration. The 2003 Plan is administered by Compensation
Committee of the Board of Directors composed of three of the Company's
independent Directors (the "Committee"). Each member of the Committee is a
non-employee director as such term is defined in Rule 16b-3 under the Securities
Exchange Act of 1934, as amended and an "outside director" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
Subject to the provisions of the 2003 Plan, the Committee is authorized
20
to determine the participants to whom, and the times at which, awards under the
2003 Plan shall be granted. Furthermore, the Committee determines the type of
award to be granted and the number of shares underlying options and/or amount of
restricted stock (or any combination thereof) comprising such award. The
Committee is authorized to determine other terms and conditions of awards which
are not inconsistent with the 2003 Plan. Any awards granted pursuant to the Plan
will be evidenced by an award document setting forth the terms of the award.
Interpretation and construction by the Committee of any provision of the 2003
Plan or of any award document is final, binding and conclusive.
(e) Term of the 2003 Plan. The 2003 Plan will continue indefinitely,
until terminated by the Board; provided, that no Incentive Stock Option will be
granted under the Plan after January 31, 2013.
(f) Option Provisions.
(i) Exercise Price of Options under the 2003 Plan. The
Committee determines for each option grant, the exercise price for the shares
covered thereby (the "Option Shares"). The exercise price cannot be less than
85% of the fair market value of the Option Shares at the time of grant, provided
that, with respect to all Incentive Stock Options, the exercise price may not be
less than 100% of the fair market value of such shares on the date that the
option is granted. In addition, if an Incentive Stock Option is granted to an
optionee who then owns, directly or by attribution under Section 424(d) of the
Code, shares of the Company's stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, the exercise price
must be at least 110% of the fair market value of such shares on the date the
option is granted.
(ii) Repricing Prohibited. Repricing of outstanding options is
prohibited without approval of the shareholders of the Company.
(iii) Payment. Payment for shares of common stock purchased
upon exercise of options may be made in cash or by such other mode of payment as
the Committee may approve.
(iv) Restriction on Exercise. An option cannot be exercised
before the later of six months from the date of grant or the expiration of any
longer period prescribed by the Committee.
(v) Term of Options. Unless the applicable award agreement
provides otherwise, the right of an optionee to exercise any part of an option
granted pursuant to the Plan terminates on the first to occur of the following:
(A) Ten years after the date of grant or
expiration of the option terms specified in the
option document;
21
(B) If an Incentive Stock Option, five years
from the date of grant if, on the date of the grant,
the optionee possesses more than 10% of the combined
voting power of all classes of stock of the Company;
(C) Expiration of one year from the date the
optionee's employment or service terminates with the
Company as a result of death or disability;
(D) Expiration of three months from the date
the optionee's employment or service with the Company
terminates for any reason other than death,
disability or those reasons specified in subsections
(F) and (G) of this paragraph;
(E) The date set by the Committee as an
accelerated expiration of termination date (which can
be no earlier than 30 days after notice of such date)
in the event of a "Change of Control" (as defined in
the Plan);
(F) The date of a finding by the Committee
that the optionee (a) became employed by a competitor
without the consent of the Company or has become
engaged in competition with the Company, (b) has been
dishonest or fraudulent in any matter affecting the
Company, (c) committed an act substantially
detrimental to the interest of the Company or was
terminated for reasons which constitute cause under
applicable law, or (d) disclosed secret or
confidential information of the Company; and
(G) The date set by the Board as an
accelerated expiration date in the event of the
liquidation or dissolution of the Company.
In the event an optionee is found to have done anything described in clause (F),
in addition to immediate termination of the option, the optionee will
automatically forfeit all Option Shares for which the Company has not yet
delivered stock certificates, upon refund by the Company of the amounts paid for
such Option Shares.
(vi) Transferability of Options. Options granted under the
Plan are not transferable by the optionee except by will or laws of descent and
distribution. However, a non-qualified stock option may be transferred pursuant
to the terms of a "qualified domestic relations order" within the meaning of
Section 414(p) of the Code or within the meaning of Section 206(d) of the
Employee Retirement Income Security Act of 1974, as amended.
22
(vii) Amendment of the Option Documents. The Committee may
amend the provisions of option documents issued to an optionee, subject to the
optionee's consent if the amendment is not favorable to the optionee. Consent of
the optionee is not required for acceleration of the expiration date of an
option granted under the Plan in the event of the dissolution or liquidation of
the Company or by the occurrence of certain other corporate transactions.
(g) Restricted Stock. The Plan authorizes the Committee to grant awards
of restricted stock consisting of shares that may not be sold, transferred or
otherwise disposed of by participants and which may be forfeited in the event of
termination of employment or upon the failure to satisfy other conditions
established by the Committee, in either case, prior to the end of a restriction
period established by the Committee. The minimum restriction period that may be
established by the Committee is six months from the grant of restricted stock.
An award of restricted stock entitles a participant to all of the rights of a
shareholder of the Company, including the right to vote and receive any
dividends thereon unless otherwise determined by the Committee. The Committee,
in its sole discretion, may permit or require the payment of any cash dividends
on restricted stock to be deferred and, if the Committee so determines,
reinvested in additional restricted stock or other investment vehicles. An award
of restricted stock may contain other restrictions or limitations at the
discretion of the Committee. Unless otherwise provided by the Committee at the
time of grant or otherwise, upon termination of employment for any reason during
a restriction period, all shares of restricted stock still subject to
restriction will be forfeited by the participant. At the expiration of each
applicable restriction period, the Company will release to the participant
certificates for the restricted stock as to which any applicable restrictions
and conditions have been satisfied.
(h) Amendments of the Plan. The Board of Directors or its executive
committee in its discretion, may amend the Plan from time to time but may not,
without obtaining shareholder approval within twelve months before or after such
action, change the class of the individuals eligible to receive an Incentive
Stock Option or increase the maximum number of Plan Shares (other than as a
result of an adjustment in the event of a stock dividend, stock split,
recapitalization or certain other capital adjustments). No amendment to the Plan
shall adversely affect any outstanding option or restricted stock, without the
consent of the optionee or the holder of restricted stock, as the case may be.
Subject to the provisions of the Plan, the Board of Directors may authorize
adjustments to options granted under the Plan with respect to the number of
shares subject to the options, option price, term and any restrictions. Such
adjustments may be accomplished by cancellation of outstanding options and
subsequent granting of options; provided that the Board of Directors may not
reduce the exercise price of outstanding options other than for adjustments in
the Company's capitalization without first obtaining shareholder approval.
23
(i) Change of Control. In the event of a Change of Control of the
Company (as defined in the Plan), all options previously granted become
immediately exercisable, and the Compensation Committee may take whatever other
action with respect to the outstanding options and restricted stock it deems
necessary or desirable.
2. Federal Income Tax Matters
The following discussion is intended to point out the general
principles of current federal income tax law applicable to the options and
restricted stock.
(a) Incentive Stock Options.
Incentive Stock Options granted under the Plan are intended to qualify
for the favorable federal income tax treatment currently accorded "Incentive
Stock Options" as defined under Section 422 of the Code.
Under the Code, generally no federal income tax is imposed at the time
an Incentive Stock Option is granted or exercised. Ordinarily, no income is
required to be recognized at the time an Incentive Stock Option is exercised.
However, it should be noted that, for purposes of the alternative minimum tax,
the excess of the fair market value of the Option Shares, determined at the time
of exercise, over the option exercise price is includible in alternative minimum
taxable income.
If the shares of stock acquired upon the exercise of an Incentive Stock
Option are not disposed of (i) within two years after the date of the grant of
the Incentive Stock Option, or (ii) within one year after the exercise of the
Incentive Stock Option, then, generally, any gain realized upon the sale or
other disposition of such shares will be treated as long-term capital gain.
These holding periods are not applicable to Incentive Stock Options exercised
after the death of an optionee by his estate or a person who acquired the right
to exercise such Incentive Stock Option by reason of the death of the optionee.
The optionee's tax basis, in shares of stock acquired upon the exercise
of an Incentive Stock Option, in the event that the entire exercise price is
paid in cash, is equal to the exercise price paid. In a case where the optionee
pays all or a portion of the exercise price in the form of shares of stock of
the Company already owned by him or her, in general, (i) the optionee will not
recognize any gain (or loss) with respect to the already-owned shares, but the
amount of the gain, if any, which is not so recognized will be excluded from the
optionee's bases in the new shares received, and (ii) the new shares received
will have a holding period that includes the holding period of the already-owned
shares. In the event the already-owned shares used to acquire new shares were
acquired pursuant to the exercise of an Incentive Stock Option, the optionee
will be treated as having made a Disqualifying Disposition (as defined below) of
the already-owned shares if the holding period requirements have not been
satisfied.
In the event an optionee sells or otherwise disposes of shares of stock
acquired upon the exercise of an Incentive Stock Option before the expiration of
two years after the grant of the
24
Incentive Stock Option or before the expiration of one year after the exercise
of the Incentive Stock Option (a "Disqualifying Disposition"), the lesser of (i)
the excess of the fair market value of the Option Shares at the time the
Incentive Stock Option was exercised over the exercise price of such shares, and
(ii) the excess of the amount realized upon such Disqualifying Disposition over
the exercise price, is treated as ordinary income at the time of the sale or
other disposition. Any gain upon a Disqualifying Disposition which is not
treated as ordinary income will be treated as capital gain, and will be a
long-term capital gain if the Option Shares have been held for a period of more
than one year prior to such disposition. The Company generally is entitled to a
tax deduction equal to the amount of ordinary income, if any, recognized by the
optionee upon a Disqualifying Disposition.
(b) Non-Qualified Stock Options.
Non-qualified Stock Options granted under the Plan will not qualify for
the favorable federal income tax treatment accorded Incentive Stock Options.
Generally, an optionee should not recognize any income for federal income tax
purposes at the time of the grant of a Non-qualified Stock Option under the
Plan. Upon the exercise of a Non-qualified Stock Option, the excess of the fair
market value of the shares of stock acquired pursuant to such exercise,
determined at the time of the exercise, over the exercise price, constitutes
ordinary income to the optionee. The Company generally is entitled to an
equivalent income tax deduction for the taxable year in which the optionee is
required to recognize such ordinary income.
(c) Restricted Stock.
Generally, a participant who receives a grant of restricted stock will
recognize ordinary income with respect to such stock in the year or years in
which such stock ceases to be subject to forfeiture. The amount of ordinary
income recognized will be equal to the fair market value of the restricted stock
on the date it ceases to be subject to forfeiture. Notwithstanding the general
rule, a participant who receives restricted stock which is subject to forfeiture
may elect, within 30 days of the issuance of such stock, to include in his or
her taxable income for the year of issuance an amount equal to the fair market
value of such restricted stock at the date of such issuance. If a participant
makes this election, no additional ordinary income is required to be recognized
at the time the risk of forfeiture for such restricted stock lapses. However, in
the event that such participant actually forfeits the stock, such participant
may not recognize a loss with respect to the forfeited shares. Any dividends
paid to a participant on restricted stock prior to the lapse of the risk of
forfeiture will be treated as ordinary income.
The Company will be entitled to a deduction with respect to a
restricted stock award in the year in which ordinary income is recognized by the
participant on account of such award. Such deduction will be equal to the amount
of ordinary income recognized by the participant with respect to such restricted
stock.
25
(d) Relevance of Distinction Between Capital Gains and Ordinary Income.
Currently, the maximum rate of tax imposed on ordinary income is 38.6%
and the maximum marginal rate of tax imposed on long-term capital gains is 28%.
In addition to this difference in tax rates, the distinction between capital
gains and ordinary income is relevant for a number of reasons, including the
fact that capital losses only are deductible against capital gains and a limited
amount ($3,000) of ordinary income.
The above description is a partial summary of material provisions of
the 2003 Plan and is qualified in its entirety by reference to the 2003 Plan, a
copy of which will be sent without charge prior to the Meeting to any
shareholder requesting it from the Secretary of the Company.
3. New Plan Benefits
Awards granted under the 2003 Plan are subject to the discretion of the
Compensation Committee and are not determinable at this time.
The affirmative vote of the holders of a majority of the Company's
Common Stock present at the meeting in person or by proxy is required to approve
the amendment to the Plan adopted by the Board as described above. THE BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE ADOPTION OF
THE 2003 STOCK INCENTIVE PLAN.
Proposal 4: TO ADOPT THE RIGHT MANAGEMENT CONSULTANTS, INC.
2003 EMPLOYEE STOCK PURCHASE PLAN
On February 20, 2003, the Board of Directors of the Company adopted,
subject to shareholder approval, the Right Management Consultants, Inc. 2003
Employee Stock Purchase Plan (the "2003 ESPP") and reserved 1,000,000 shares of
authorized common stock of the Company for issuance under the ESPP. The 2003
ESPP will replace the expiring 1996 Employee Stock Purchase Plan (the "1996
ESPP"). The 1996 ESPP will by its terms expire on December 31, 2003 after which
no purchases may be made under the plan. The terms of the 2003 ESPP are
substantially identical as those of the 1993 ESPP. Upon approval of the 2003
ESPP the 1996 ESPP will be discontinued and no further purchases will be made
under that plan.
Upon shareholder approval, no further purchases will be made under the
1996 ESPP. The number of shares remaining available for purchase in the 1996
ESPP is 245,000 shares. Therefore the replacement of the 1996 ESPP by the 2003
ESPP will increase shares available for purchase from 245,000 to 1,000,000 and
provide for a continuation of the Company's ability to permit purchases to
January 31, 2013.
26
Summay of the 2003 ESPP
-----------------------
The 2003 ESPP permits eligible employees to set aside a portion of
their pay to purchase shares of common stock of the Company on a regular basis.
The price for each share purchased under the 2003 ESPP will be 85% of the
closing price of the Company's common stock on the purchase date (generally, the
last trading day of each calendar month).
Eligibility
-----------
All employees of the Company and its subsidiaries will be eligible to
participate in the 2003 ESPP, except (a) employees who owns 5% or more of the
stock of the Company or any subsidiary, or (b) employees who have not completed
one-half year of service.
No employee may be granted rights to purchase stock under the 2003
ESPP, which rights, together with rights under any other stock purchase plan of
the Company and its subsidiaries, accrue at a rate that exceeds $25,000 of the
fair market value of such stock (determined at the effective date of the
applicable offering) for each calendar year in which the rights are outstanding
at any time, or 10% of total compensation the employee receives during the
applicable offering period.
Risks Not Transferable
----------------------
Rights to purchase shares under the 2003 ESPP are not transferrable.
Termination of Participants
---------------------------
Upon termination of a participant's employment for any reason, that
participant will cease to be eligible to purchase shares under the 2003 ESPP and
his or her participation in the 2003 ESPP will terminate. In that case, any
amounts withheld from the participant's pay for the purpose of purchasing shares
under the 2003 ESPP and which have not yet been applied to the purchase of
shares will be paid to the participant in cash.
Shares Covered By the Plan
--------------------------
One Million (1,000,000) shares of common stock have been approved for
issuance under the 2003 ESPP subject to adjustment upon the occurrence of a
stock dividend, stock split, recapitalization or certain adjustments. Shares
issued pursuant to the 2003 ESPP may be either shares purchased in the open
market, or authorized and unissued shares.
Administration
--------------
The Plan will be administered by the Compensation Committee.
Administration will consist of, among other things, adopting procedures to
implement the 2003 ESPP, oversight with respect to documentation of
participants, compliance with regulations and procedures, and interpretation of
ESPP provisions. The Company may engage one or more third party
27
administrations to assist the Committee or to otherwise handle administrative
functions with respect to the 2003 ESPP.
U.S. Federal Income Tax Matters
-------------------------------
An employee does not recognize income at the time of entry into the
2003 ESPP or purchase of a share. If no disposition of the stock is made within
two years from the date of purchase, upon subsequent disposition of the stock or
the death of a participating employee, ordinary income will be recognized to the
extent of the lesser of (1) 15% of the average market value on the date of
purchase, or (2) the amount by which the net proceeds of the sale exceed the
price paid. Any further gain upon such a disposition of the stock is treated as
long-term capital gain. No income tax deduction will be allowed by the Company
for shares transferred to an employee, provided such shares are held for the
period described above.
If the shares are disposed of before the expiration of the period
described above, the employee will recognize ordinary income for the taxable
year of the disposition equal to the excess of the fair market value of the
shares on the date of purchase over the price paid. Under such circumstances,
the participating employee will be deemed to have a tax basis in the shares
equal to their fair market value as of the date of purchase and any gain or loss
resulting from such disposition will be treated as long or short-term capital
gain or loss depending on how long the shares were held. Generally, the Company
will be entitled to a deduction equal to the amount of ordinary income
recognized by the employee.
Amendment of the 2003 ESPP
--------------------------
The Board of Directors may periodically amend the 2003 ESPP in any
respect, except that, without the approval of a majority of the shares of stock
of the Company then issued and outstanding and entitled to vote, no amendment
shall be made (i) increasing the number of shares approved for the 2003 ESPP
(other than as provided above), (ii) decreasing the purchase price per share,
(iii) withdrawing the administration of the 2003 ESPP from a Committee
consisting of persons not eligible to participate in the 2003 ESPP, or (iv)
changing the designation of subsidiaries eligible to participate in the 2003
ESPP.
Termination of the 2003 ESPP
----------------------------
This Plan and all rights of employees under any offering hereunder
shall terminate at any time, at the discretion of the Board of Directors. No
offering of shares extended beyond December 31, 2013 will be made under the
2003 ESPP.
New Plan Benefits
-----------------
The number of shares and the price per share of shares to be purchased
under the 2003 ESPP are not determinable at this time.
28
The affirmative vote of the holders of a majority of the
Company's Common Stock present at the meeting in person or by proxy is required
to approve the adoption of the 2003 ESPP adopted by the Board as described
above. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL
OF THE ADOPTION OF THE 2003 EMPLOYEE STOCK PURCHASE PLAN.
29
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation of the Chief Executive
Officer and the four other most highly compensated executive officers for 2002
("named officers"), as well as the compensation paid to each such individual for
2000 and 2001.
Annual Compensation Long Term
------------------- ---------
Compensation
------------
Common Shares
Underlying All Other
Name Year Salary Bonus Options Compensation (1)
---- --- ------ ----- ------- ----------------
Richard J. Pinola 2002 $ 580,000 $3,203,464 75,000 $ 458,114
Chairman of the Board and CEO 2001 580,000 3,590,087 175,001 390,699
2000 530,000 265,000 -- 68,278
John J. Gavin 2002 $ 385,000 $1,617,243 37,500 $ 218,548
President and COO 2001 385,000 1,540,934 62,501 172,087
2000 350,000 140,000 100,000 29,747
James E. Greenway 2002 $ 250,000 $ 820,240 15,000 $ 63,033
EVP Global Response Team 2001 250,000 965,291 15,000 45,535
and Western U.S. Group 2000 220,000 77,000 25,000 2,625
Christopher Pierce-Cooke 2002 $ 250,000 $ 820,240 15,000 $ 39,000
EVP Consulting 2001 250,000 482,646 22,500 13,500
2000 200,000 100,918 84,375 --
G. Lee Bohs (2) 2002 $ 241,507 $ 820,240 37,500 $ 41,253
EVP Corporate 2001 -- -- -- --
Development 2000 -- -- -- --
(1) Includes amounts paid, payable or accrued in connection with
retirement. Such amounts consist of contributions and allocations
relating to qualified and non-qualified defined contribution plans,
excluding the Supplemental Executive Retirement Plan effective on
January 1, 2000. Matching contributions to our qualified 401(k) savings
plan and the non-qualified deferred compensation plan vest at a rate of
33 1/3% per year from the date of hire. Contributions to the
supplemental non-qualified plans vest according to the terms in each
officer's respective employment agreement. See "Employment Agreements
and Change in Control Agreements." During fiscal 2002, the Company's
matching contributions to the named officers aggregated $16,500 to the
qualified 401(k) savings plan and $458,855 to the non-qualified
deferred compensation plan. In addition, during fiscal 2002, the
Company's contributions to the supplemental non-qualified plans for Mr.
Pinola and Mr. Gavin aggregated $344,593.
(2) Mr. Bohs worked for the Company for the period of January 1987 to
September 1999. He left the Company to pursue other opportunities in
1999 and re-joined the Company in mid-January 2002. His salary above
for 2002 represents a pro-rated amount.
30
Stock Option Grants
The table below shows option grants made in 2002 to the named officers.
Individual Grants Potential Realizable Value at
----------------- Assumed Annual Rates of Stock
Price Appreciation for Option Term (2)
Number of % of Total --------------------------------------
Underlying Options
Options Granted to Exercise
Granted in Employees in Price Per Expiration Date
Name 2002 (1) 2002 Share ---------------- 5% 10%
----- --------- ---- ----- --- -----
Richard J. Pinola 37,500 4.6% $14.11 7/24/2012 $744,277 $2,412,766
37,500 4.6% $12.94 10/22/2012 $682,562 $2,212,700
John J. Gavin 18,750 2.3% $14.11 7/24/2012 $372,139 $1,206,383
18,750 2.3% $12.94 10/22/2012 $341,281 $1,106,350
James E. Greenway 7,500 0.9% $14.11 7/24/2012 $148,855 $482,553
7,500 0.9% $12.94 10/22/2012 $136,512 $442,540
Christopher Pierce-Cooke 7,500 0.9% $14.11 7/24/2012 $148,855 $482,553
7,500 0.9% $12.94 10/22/2012 $136,512 $442,540
G. Lee Bohs 22,500 2.8% $10.76 1/3/2012 $340,543 $1,103,956
7,500 0.9% $14.11 7/24/2012 $148,855 $482,553
7,500 0.9% $12.94 10/22/2012 $136,512 $442,540
(1) The grants detailed above were made on January 4, 2002, July 25, 2002
and October 23, 2002 in connection with achieving our earnings per
share targets, and for Mr. Bohs, to begin his employment with us. The
first one-third of each grant becomes exercisable one year from the
date the grant was made. All options vest on a cumulative basis,
one-third each year. These options were granted at an exercise price
equal to the closing price of the Common Shares as of the date of
grant. If a change in control (as defined in the 1993 Stock Incentive
Plan pursuant to which the options were granted) were to occur before
the expiration date, these options would vest and become exercisable
immediately.
(2) The potential realizable values are based on an assumption that the
stock price of our Common Shares will appreciate at the annual rate
shown (compounded annually) from the date of grant until the end of the
option term. These values do not take into account amounts required to
be paid as income taxes under the Internal Revenue Code and any
applicable state laws or option provisions providing for termination of
an option following termination of employment, non-transferability or
vesting within a three year period. These amounts are calculated based
on the assumptions required to be used by the SEC and do not reflect
our estimate of future stock price growth of our Common Shares.
31
Option Exercises and Year-end Option Value
The table below shows information concerning the exercise of stock
options during 2002 by each of the named officers and the year-end value of the
in-the-money unexercised options.
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options at 12/31/02 Options at 12/31/02 (1)
------------------------------- ------------------------
Shares Acquired Value
on Exercise (#) Realized ($) Exercisable Non-Exercisable Exercisable Non-Exercisable
--------------- ----------- ----------- --------------- ----------- ----------------
Richard J. Pinola -- -- 1,703,200 250,001 $14,589,594 $96,750
John J. Gavin -- -- 126,876 437,501 $937,744 $3,517,875
James E. Greenway 15,188 $177,510 18,750 114,375 $122,063 $886,752
Christopher Pierce-Cooke 11,188 $121,244 24,438 114,375 $164,096 $886,725
G. Lee Bohs -- -- -- 37,500 $ -- $56,025
(1) Based on the closing price ($13.25) on the NYSE on December 31, 2002.
Retirement Compensation
In addition to our defined contribution savings plan under Section
401(K) of the Internal Revenue Code, and our non-qualified deferred compensation
plan for certain employees (see Compensation and Options Committee Report on
Executive Compensation), effective January 1, 2000, the Board of Directors
approved a non-qualified Supplemental Executive Retirement Plan for executive
officers and other key employees. The purpose of this plan is to provide
supplemental income benefits to plan participants or their survivors upon
participants' retirement or death. This plan was amended effective January 1,
2002, to change the defined percentage of the average final compensation for
benefits payable to Mr. Pinola and Mr. Gavin and to change the number of years
of service for participants in the plan, with the exception of Mr. Pinola and
Mr. Gavin.
The following tables set forth the estimated aggregate annual benefits
payable under our Supplemental Executive Retirement Plan, to persons in
specified average final compensation and credited service classifications upon
retirement at age 65. The first table relates to Mr. Pinola and Mr. Gavin,
whose benefits payable are 50% of their average final compensation, and are not
service-related, except for vesting purposes. The second table relates to all
other participants whose benefits payable are 20% of their average final
compensation after ten years of service, and a pro-rata reduction for total
service less than ten years, as well as for future service less than five years.
Amounts shown in these tables do not include deductions for U.S. Social Security
benefits per terms of this plan.
32
Estimated Aggregate Annual Retirement Benefit
Average Assuming Credited Service of:
Final ------------------------------------------------------------------
Compensation 15 Years 20 Years 25 Years 30 Years 35 Years
------------ -------- -------- -------- -------- --------
$335,000 $167,500 $167,500 $167,500 $167,500 $167,500
385,000 192,500 192,500 192,500 192,500 192,500
435,000 217,500 217,500 217,500 217,500 217,500
485,000 242,500 242,500 242,500 242,500 242,500
535,000 267,500 267,500 267,500 267,500 267,500
585,000 292,500 292,500 292,500 292,500 292,500
635,000 317,500 317,500 317,500 317,500 317,500
685,000 342,500 342,500 342,500 342,500 342,500
The rounded number of years of credited service for Mr. Pinola and Mr. Gavin are 11 and 6,
respectively.
Estimated Aggregate Annual Retirement Benefit
Average Assuming Credited Service of:
Final --------------------------------------------------------------------
Compensation 15 Years 20 Years 25 Years 30 Years 35 Years
------------ -------- -------- -------- -------- ---------
$150,000 $30,000 $30,000 $30,000 $30,000 $30,000
200,000 40,000 40,000 40,000 40,000 40,000
250,000 50,000 50,000 50,000 50,000 50,000
300,000 60,000 60,000 60,000 60,000 60,000
350,000 70,000 70,000 70,000 70,000 70,000
400,000 80,000 80,000 80,000 80,000 80,000
450,000 90,000 90,000 90,000 90,000 90,000
500,000 100,000 100,000 100,000 100,000 100,000
550,000 110,000 110,000 110,000 110,000 110,000
600,000 120,000 120,000 120,000 120,000 120,000
The rounded number of years of credited service for Mr. Greenway, Mr.
Pierce-Cooke and Mr. Bohs are 5, 3 and 1, respectively.
Compensation, for the purposes of determining retirement benefits,
consists of a participant's salary. This is the same salary as listed on the
Summary Compensation Table above. Severance pay, contingent payments and other
forms of special remuneration are excluded. For 2002, compensation for purposes
of determining retirement benefits for the named officers are the same as the
amounts shown in the Executive Compensation table.
Average final compensation represents a defined percentage of an
average of a participant's three highest consecutive annual salaries for the
participant's credited service. Participants, with the exception of Mr. Pinola
and Mr. Gavin, vest in their accrued retirement benefit upon completion of five
years' service. Mr. Pinola's and Mr. Gavin's accrued retirement benefit vests at
5% for each year of service plus another 10% for each year of plan
participation. The benefits shown in the table above are calculated based on a
lifetime with a guaranteed minimum of ten years.
33
Employment and Change in Control Agreements
Effective January 1, 2002, we entered into a second amendment to Mr.
Pinola's Employment Agreement dated December 12, 1995. The term of Mr. Pinola's
employment was extended for three years from January 1, 2002 to December 31,
2004, and his base salary was increased to $580,000 per year. For the year
commenced January 1, 2003, the Compensation Committee has set Mr. Pinola's base
salary at $830,000, reflecting Mr. Pinola's contribution to the Company's
exceptional performance during 2001 and 2002, and reflecting the change in
approach to compensation for 2003 described in the Report of the Compensation
Committee set forth later in this Proxy Statement.
Under Mr. Pinola's amended agreement, we will pay to Mr. Pinola
annually as incentive compensation a cash bonus based on our financial
performance for that year in such amounts, as are determined by our Board of
Directors or its Compensation Committee. Mr. Pinola is also entitled to
participate in any profit sharing, retirement plans and insurance programs made
available to certain other employees.
The amended agreement also entitles Mr. Pinola to participate in a
supplemental compensation plan to which 5% of his compensation, including base
salary and bonuses, is credited yearly. Mr. Pinola's deferred compensation
account balance vests at the rate of 10% per year, beginning at age 47. The
account balance is payable as a life annuity (based on specified mortality
tables) in equal monthly installments with interest on the unpaid balance upon
his termination of service with us (except for death or if he is discharged for
cause) on or after age 62, subject to earlier payment in the event of death or
disability prior to termination of service, termination by us without cause and
under certain circumstances relating to a change in control. In the event there
is a change in control, we shall establish a trust and shall, from time to time,
transfer into the trust sufficient assets to meet our obligation to pay the
supplemental compensation benefits to Mr. Pinola and his beneficiaries. Also, if
Mr. Pinola's employment is terminated within two years after the change in
control, he shall be entitled to begin receiving the supplemental compensation
benefits as if he had reached his normal retirement date prior to termination.
Mr. Pinola's employment agreement is renewable for successive one year
terms beginning January 1, 2004 unless either party gives written notice of
non-renewal to the other at least 120 days prior to the expiration of the term.
Mr. Pinola's employment will not be renewed under this agreement on or after
December 31 of the calendar year in which he reaches age 65. If Mr. Pinola's
employment is terminated without cause, his employment is not renewed at the end
of the term of his employment agreement, or if Mr. Pinola terminates his
employment as a result of various reasons specified in the agreement, he will be
entitled to severance compensation equal to the greater of $580,000 or his total
salary and cash bonus paid during the 12 month period immediately preceding the
termination. This amount will be payable over the longer of the remaining term
of the agreement or 12 months from the date of termination. Upon certain changes
in control (as defined in the agreement), Mr. Pinola may, upon written notice to
us within 60 days thereafter, elect to either (a) continue his employment for a
period equal to the greater of the current term or a period which expires two
years after the date of the change in
34
control or (b) terminate this employment and receive severance compensation. In
either case, the annual compensation payable to him shall not be less than the
greater of the total amount of the base salary and cash bonus paid to him during
the 12 months immediately preceding the change in control or $580,000.
Effective January 1, 2002, we entered into an amendment to Mr. Gavin's
Employment Agreement, dated January 1, 1999. The terms of Mr. Gavin's agreement
are similar to those of Mr. Pinola's, except that Mr. Gavin's base salary per
year will be $385,000, and any component of his compensation determined by his
base salary is based upon $385,000. For the year commenced January 1, 2003, the
Compensation Committee has set Mr. Gavin's base salary at $525,000. Mr. Gavin is
also entitled to participate in a supplemental compensation plan with similar
terms as outlined above for Mr. Pinola, except that Mr. Gavin's interest in his
plan will be fully vested at the end of 2003.
To assist in retaining key members of our management, the Board of
Directors adopted in February 1997 a policy to provide for the potential payment
of severance to all Executive Vice Presidents in the event of a change in
control. Under this policy, the Executive Vice Presidents would be entitled to a
severance payment payable over two years if their employment was involuntarily
terminated within eighteen months of a change in control. The total amount
payable annually would not be less than the greater of: (1) the total amount of
base salary and incentive payments paid during the calendar year immediately
preceding the change in control; or (2) the annualized amount of the Executive
Vice President's then current salary as of the date of the change of control if
the respective Executive Vice President did not work the full calendar year
immediately preceding the change in control. Under this policy, a change in
control includes the sale of a controlling interest in Common Shares, the sale
of all or substantially all of our assets, or a merger or consolidation where
the surviving entity is not controlled by our present management.
During 2002, to implement the foregoing policy, we entered into Change
of Control Agreements with each Executive Vice President providing terms
consistent with the description of benefits described above. In addition, we
also entered into Change of Control Agreements with our Chief Executive and
Chief Operating Officers on terms comparable to those in their employment
agreements, as described above.
Compensation of Directors
For 2002, we paid all directors who were not officers or employees
$17,000 per year as a director's fee, plus $750 for each Board of Directors
meeting attended and $750 for each Committee meeting attended plus reasonable
out-of-pocket expenses for attending such meetings. We also paid the Audit
Committee Chair and the Compensation Committee Chair $1,500 and $2,500,
respectively, per year.
In addition, pursuant to our 1995 Directors Stock Option Plan, each
director who was never an officer or employee received a grant of 7,500 options
on December 31, 2002. The first one-third of such options becomes exercisable on
December 31, 2003. The options vest on a
35
cumulative basis, one-third each year, and they expire on December 30, 2012.
These options were granted at an exercise price equal to the closing price of
our Common Shares on the New York Stock Exchange as of the date of grant of
$13.25.
Directors who have served as an officer, but who were no longer
employed with us during 2002, received a grant of 7,500 options on January 2,
2003 under our 1993 Stock Incentive Plan. The first one-third of such options
becomes exercisable on January 2, 2004. The options vest on a cumulative basis,
one-third each year, and they expire on January 1, 2013. These options were
granted at an exercise price equal to the closing price of our Common Shares on
the New York Stock Exchange as of the date of grant of $12.65.
For grants under the Directors Stock Option Plan beginning in 2003, the
number of shares subject to option has been reduced to 2,500 consistent with a
general reduction in the number of shares to be subject to options awarded to
employees beginning in 2003, as described in the Report of the Compensation
Committee set forth later in this Proxy Statement. Similarly, the opportunity
for stock options for Directors who served as officers for 2003 has been reduced
to 2,500 shares. Also, to reflect increased responsibilities of the directors in
the current regulatory environment and to align the approach to compensation of
our Directors with our executive employees, we increased the retainer for
Directors, so that as of January 1, 2003, the compensation of Directors who are
not and never were employees is as follows:
Annual Retainer: $42,000
Attendance Fees: $ 1,000 for each Board meeting
$750 for each committee meeting
Expenses related to attendance
Committee Chairman
Additional Retainer: $ 5,000
Stock Options: 2,500 shares annually, with an exercise
price equal to the fair market value
of the Company's common stock on the
date of grant, expiring 10 years from
the date of grant
Directors who are now or were employees of the Company receive no fees
for their service as Directors.
36
Equity Compensation Plans
The following table summarizes information, as of December 31, 2002, relating to
the Company's 1993 Stock Incentive Plan and the Directors Stock Option Plan
pursuant to which grants of stock options or restricted stock may be granted
from time to time.
Equity Compensation Plan Information
------------------------------------
--------------------------- ---------------------------- --------------------------- -----------------------------
Number of securities
Number of securities to be Weighted-average exercise remaining available for
issued upon exercise of price of outstanding future issuance under
outstanding options, options, warrants and equity compensation plans
Plan category warrants and rights rights (excluding securities
------------- ------------------- ------ reflected in column (a))
(a) (b) -------------------------
(c)
--------------------------- ---------------------------- --------------------------- -----------------------------
Equity compensation plans
approved by security holders 5,172,098 $6.90 2,580,352
Equity compensation plans
not approved by security -- --
holders ---------- ----- ---------
Total 5,172,098 $6.90 2,580,352
--------------------------- ---------------------------- --------------------------- -----------------------------
Auditors
For the fiscal year ended, December 31, 2002 our independent auditors
were Ernst & Young LLP. Representatives of Ernst & Young LLP will be available
at the 2003 Annual Meeting to address questions and to make any statements that
they so desire.
For the fiscal years ended December 31, 2001 and 2000, our auditors
were Arthur Andersen LLP, who were dismissed as our auditors by the Board of
Directors at the recommendation of the Audit Committee on April 8, 2002.
The reports of Arthur Andersen LLP on the Company's financial
statements for the fiscal years ended 2001 and 2000 did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles, except with respect to the
adoption of SAB No. 101 that was effective January 1, 2000.
In connection with the audits of the Company's financial statements for
the fiscal year ended December 31, 2001, and in the subsequent period through
April 8, 2002, there were no disagreements between the Company and Arthur
Andersen LLP on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures which, if not resolved to
the satisfaction of Arthur Andersen LLP would have caused them to make reference
to the matter in their report.
37
The Company provided Arthur Andersen LLP with a copy of the forgoing
disclosure. Arthur Andersen LLP's letter dated April 22, 2002, stating its
agreement with such statements, was filed as Exhibit 16.1 to the Company's Form
8-K/A filed on April 22, 2002, which is incorporated herein by reference.
During the years ended December 31, 2000 and December 31, 2001, and
during the subsequent period through April 8, 2002, the Company did not consult
Ernst & Young LLP with respect to the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company's consolidated financial
statements, or any other matters or reportable events as set forth in Items 304
(a) (2) (i) and (ii) of Regulation S-K.
Audit and Non-Audit Fees
Audit Fees
----------
The aggregate fees for professional services rendered for the quarterly
review procedures and for the audit of our financial statements for 2002 that
were paid to Ernst & Young LLP, our independent auditors, were $631,000.
Financial Information Systems Design and Implementation
-------------------------------------------------------
There were no financial information systems design and implementation
fees paid to Ernst & Young LLP during 2002.
All Other Fees
--------------
Aggregate fees billed for services rendered by Ernst & Young LLP during
the year ended December 31, 2002 (other than as set forth above under "Audit
Fees") were as follows:
Tax services $ 345,000
Review of Registration Statement for planned
offering of common shares 174,000
Statutory audits for certain foreign jurisdictions 76,000
Other services 109,000
-------
Total All Other Fees $ 704,000
=======
All non-audit services were reviewed with the Audit Committee, which
concluded that the provision of such services by Ernst & Young LLP was
compatible with the maintenance of that firm's independence in the conduct of
its audit.
38
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composed of three
directors listed in this report. This Committee's principle function is to
oversee our annual audit and periodic financial reporting. This Committee
recommends to the Board of Directors, subject to shareholder ratification, the
selection of our auditors.
In connection with the appointment of members to this Committee, the
Board considered the new requirement of the New York Stock Exchange that members
of this Committee be independent directors. Ms. Maddox and Ms. Selleck are
independent directors. Mr. Bourbeau had served on the Audit Committee during
2002 until October 24, 2002 consistent with the independence rules adopted by
the Securities and Exchange Commission and NASDAQ at the time our Common Stock
was listed on that exchange. In appointing Mr. Bourbeau to this Committee, the
Board recognized his lack of independent director status, but determined that
his membership was required in our best interests and the interests of our
shareholders. As a condition to the listing of our Common Stock on the New York
Stock Exchange, the Board accepted Mr. Bourbeau's resignation from the Audit
Committee and on October 24, 2002 appointed Mr. Franklin to that Committee to
meet a condition of listing required by the NYSE.
Management is responsible for our internal controls and the financial
reporting process. The auditors are responsible for performing an independent
audit of our consolidated financial statements in accordance with generally
accepted auditing standards and to issue a report thereon. This Committee's
principal function is to oversee this annual audit and financial reporting.
In this context, the Committee has met and held discussions with
management and the auditors. Management represented to the Committee that our
consolidated financial statements were prepared in accordance with generally
accepted accounting principles, and the Committee has reviewed and discussed the
consolidated financial statements with management and the auditors. This
Committee discussed with the auditors matters required to be discussed by
Statement on Auditing Standards No. 61 (Communications with Audit Committees).
The auditors also provided to the Committee the written disclosures
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and the Committee discussed with the
auditors their independence.
Based upon this Committee's discussion with management and the auditors
and the Committee's review of the representation of management and the report of
the auditors to this Committee, this Committee recommended that the Board of
Directors include the audited consolidated financial statements in our Annual
Report on Form 10-K for the year ended December 31, 2002 filed with the SEC.
This Committee also recommended the appointment of Ernst & Young LLP to serve as
our independent auditors for fiscal year 2003.
Audit Committee
Rebecca J. Maddox, Chair
Catherine Y. Selleck
Oliver Franklin
39
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is comprised of
non-employee directors listed in this report. This Committee is responsible for
overseeing management's recommendations on executive compensation and stock
option proposals, policies, and programs. In addition, this Committee makes
yearly recommendations to the Board of Directors, as to the compensation to be
paid to the Chief Executive Officer.
Compensation Philosophy
This report reflects our compensation philosophy as adopted by this
Committee and endorsed by the Board of Directors. Our executive compensation
programs are intended to provide our executives and managing principals with
competitive market salaries and the opportunity to earn incentive compensation
related to performance expectations identified by management and approved by the
Board of Directors. The broad objectives of our executive compensation program,
are to:
(1) Support and reinforce our business strategy and link pay to
shareholder value;
(2) Align compensation with the goals and key performance measures
of the business;
(3) Attract and retain high quality executives and managing
principals; and
(4) Reward such employees for superior performance, as measured by
financial results and key strategic achievements.
A significant portion of executive pay is variable, uncapped, and is
tied to improvement in earnings per share (EPS) and, in the case of group
executives and regional managing principals, to their region's and group's
operating performance. This policy reflects management's belief that continuous
improvement in EPS and growth in group revenue and operating income directly
contributes toward creating shareholder value through the potential of
increasing our stock price.
Pay Positioning
This Committee's executive compensation program is constructed to
provide an opportunity for compensation, through the three components described
below (base salaries, annual incentive compensation and long-term incentives).
Competitive levels of pay for purposes of compensation comparison are provided
periodically by our staff and by compensation consultants' published surveys,
outside consulting firms and by the review of comparable public companies'
executive compensation disclosures in their annual proxy statements. The primary
companies used in the compensation comparison are other publicly held consulting
and service firms, although privately-held professional services companies of
similar size are also considered in determining pay level opportunity.
40
Pay Mix and Measurement For Executives
The compensation of executives currently includes base salary, annual
incentive compensation and stock option awards. This Committee considers the
total compensation of the Chief Executive Officer, the most highly compensated
officers and the other executives in reviewing each element of compensation. In
general, the proportion of an executive's incentive compensation increases with
the executive's level of responsibility. Executives also receive various
benefits, including life, medical, and disability insurance, similar to those
generally available to all of our employees.
Changes for 2003. The stock option opportunities for all eligible
employees for the year beginning January 1, 2003, have been set at the same
level as for 2002 prior to the three-for-two stock split effected in October
2002, thereby effectively reducing the opportunity as a percentage of
outstanding common shares. Also for 2003, the Committee adjusted the mix of base
salary and stock option opportunity to reduce the number of shares of common
stock to be awarded to executive level employees upon achievement of targets to
approximately one-half the number of shares available in prior years. Both
changes were done to reflect the consensus of senior management and the
Committee that such general compensation trends in the United States supported
this shift in approach. To compensate executive level employees for the
additional reduction in option opportunity for 2003, the Committee authorized a
one-time adjustment in the base salaries of affected employees by adding to base
salaries approximately one-half the value of the additional reduction in option
opportunity.
Base Salaries
This Committee, based on management's recommendations, seeks to set
base salaries for our executives at levels that are competitive for executives
with comparable roles and responsibilities within other comparison companies. We
maintain an executive salary administration program which uses ongoing internal
and periodic external comparisons to set salary ranges at or around the median
levels of the comparison companies.
Individual executive salaries are reviewed annually. Annual salary
adjustments are determined by a subjective evaluation of: (1) the position's
responsibilities, (2) competitive market rates, (3) strategic importance of the
position, and (4) individual performance and contributions. The annual salaries
for executives (other than the CEO and the President/COO whose salaries are
evaluated by the Committee with the Board of Directors) are approved by this
Committee following a review with the CEO and Chief Operating Officer.
Annual Incentive Compensation
This Committee administers an annual cash incentive plan for
executives. The annual cash incentive plan reflects our belief that executives'
contributions to shareholder value come from maximizing earnings and the annual
incentive payments to executives are made upon the achievement of annual
corporate financial objectives (expressed as a post-incentive EPS goal)
41
that reflect targeted annual growth. Individual award targets are established at
the beginning of the year and are based on an individual's position and
contribution to our results. Awards are increased or decreased for achievement
that is above or below target levels. We exceeded our 2002 EPS target by 40%
which resulted in corporate executive officers receiving incentive awards higher
than their target amount. In addition, each executive is measured annually
against qualitative criteria selected to provide incentives for performance
towards strategic initiatives. Achievement or failure to achieve these criteria
as recommended by our CEO and COO may increase or decrease the individual's
annual incentive amount by up to 20%. The Board of Directors and the Committee
review similar criteria for our CEO and COO with the ability to increase or
decrease the individual's annual incentive compensation by up to 20% for
achievement or failure to achieve these goals. No discretionary adjustment has
ever been made to incentive pay for any executive.
In addition to the incentive to achieve the EPS goal, certain
executives and managing principals responsible for team region and/or group
performance are rewarded in part based on the achievement of regional and/or
group revenue and income targets. No awards are made unless a threshold regional
and/or group revenue and income target levels are achieved that generally
reflect significant growth over the prior year.
Long-Term Incentives
We provide executives with the opportunity to earn annual stock options
in order to retain and motivate them to improve long-term stock values. Annual
grants of stock options are made to executives based on a market analysis of
long-term incentive levels within a peer group of companies. The annual grants
are intended to reflect the individuals' respective responsibilities, as well as
the actual and expected contribution of the individuals to our long-term
success.
Stock options are granted only if we achieve our annual EPS target. In
order for group executives and regional managing principals to receive stock
options, their group must achieve its operating income target for the preceding
year, in addition to achieving our annual EPS target. Grants vest in equal
amounts over a three-year period and are exercisable over a ten-year period.
This Committee reviews and establishes the grants for all executive officers.
Since we exceeded our EPS target for 2002 and each group met their
respective income targets, accordingly, stock options were granted to all
eligible employees, including managing principals.
Retirement Compensation
The intent of this Committee's retirement compensation policy is to
provide employees and executives with certain tax-qualified retirement benefits.
We maintain a defined contribution savings plan available to substantially all
employees, including executives, under Section 401(K) of the Internal Revenue
Code. Under this plan, we contribute 25% of the participating employee's
contribution. Employee contributions are generally limited to 10% of their
compensation, subject to Internal Revenue Code limitations. We also provide
discretionary contributions if we meet or
42
exceed our EPS target. A discretionary contribution of an additional 12.5% of
the participating employee's contribution was made for 2002 as we exceeded our
EPS target.
In addition, we provide a non-qualified salary savings plan to eligible
employees to help them save for retirement. Under the plan, participants may
contribute an elected percentage of their annual cash compensation. Effective
August 2001, we amended the plan where we will contribute 25% of the
participating employee's contribution. Similar to our defined contribution
401(K) savings plan, we also provide discretionary contributions under this
non-qualified savings plan if we meet or exceed our EPS target. A discretionary
contribution of an additional 12.5% of the participating employee's contribution
was made for 2002 as we exceeded our EPS target.
Effective January 1, 2000, the Board of Directors approved a
non-qualified Supplemental Executive Retirement Plan for executive officers and
other key employees for the purpose of providing supplemental income benefits to
plan participants or their survivors upon participants' retirement or death. We
have established and maintain a grantor "rabbi" trust for the purpose of
accumulating funds with which to meet our future obligations under the plan.
Although the trust is irrevocable and assets contributed to the trust can only
be used to pay such benefits with certain exceptions, the benefits under the
plan remain our obligations. We have purchased company-owned life insurance
policies for its benefit on the lives of certain participants estimated to be
sufficient to recover, over time, the full cost of the benefits provided plus
the cost of insurance.
We also have non-qualified supplemental deferred compensation plans for
Mr. Pinola, Mr. Smith and Mr. Gavin. Upon his retirement and effective January
1, 2001, Mr. Smith began receiving payments in accordance with this plan. The
details of this plan for Mr. Pinola and Mr. Gavin were described under the
section "Employment and Change in Control Agreements" previously mentioned in
this proxy statement.
Section 162 (m)
Section 162(m) of the Internal Revenue Code generally imposes a
$1,000,000 limit on the deductibility of certain compensation that it pays to
certain executive officers unless certain requirements are met. Compensation
attributable to options granted under the various stock option plans currently
in effect is expected to qualify for deductibility. This Committee monitors the
effect of this section on the deductibility of such compensation and intends to
optimize the deductibility of such compensation to the extent deductibility is
consistent with the objectives of the executive compensation program. This
Committee, however, intends to weigh the benefits of full deductibility with the
objectives of the executive compensation program and, if this Committee believes
to do so is in our best interests and the interests of our shareholders, we will
make compensation arrangements that may not be fully deductible due to this
section.
During 2002, the provisions of this section will result in a portion of
the incentive compensation paid to our five highest paid executives for 2002 to
be non-deductible. The Committee believes the compensation to these individuals
reflects its policies as stated in this report. The Committee also notes that
the Company's 2002 Operating Plan provided for cash
43
compensation for each of these individuals to be under the limits imposed by
Section 162 (m), except in the case of Mr. Pinola where cash compensation at
target was scheduled to be approximately at the limits imposed by Section
162(m). The variable cash compensation for 2002 reflected the fact that the
actual EPS for 2002 exceeded the target EPS by 40%. In general, bonuses for all
of our employees, all of which are performance based, also reflected the
exceptional results for 2002. For 2003, only Mr. Pinola's base salary and cash
bonus at target would exceed the limits imposed by Section 162(m). Payment of
this amount to Mr. Pinola, or amounts exceeding the limits of Section 162(m) to
other executives will occur only if the Company's actual 2003 EPS exceeds
certain targeted amounts.
Chief Executive Officer Compensation
The principles guiding compensation for our Chief Executive Officer are
substantially the same as those set forth for other executives as previously
described in this report. During 2002, our most highly compensated officer was
Richard J. Pinola, Chairman of the Board and CEO. Mr. Pinola's performance was
reviewed by the Committee which made recommendations to the Board regarding his
annual cash compensation (salary plus annual incentive) and approved his
long-term incentive awards.
In accordance with Mr. Pinola's Employment Agreement noted previously
in this report, Mr. Pinola's annual base salary during 2002 was $580,000. Mr.
Pinola received additional compensation based on the Company's final 2002
results. Mr. Pinola's base salary for 2003 is $830,000.
Compensation Committee
Catherine Y. Selleck, Chair
Rebecca J. Maddox
Oliver Franklin
Compensation Committee Interlocks and Insider Participation in Compensation
Mr. Pinola, our Chief Executive Officer and Chairman, makes general
recommendations to and reviews with the Compensation Committee the compensation
of our executive officers, other than his own. This information is carefully
considered by the Committee. Except for this process, during 2002, there were no
interlocking relationships between any of our executive officers and any entity
whose directors or executive officers serve on the Board of Directors'
Compensation Committee, nor did any current or past officers serve on the
Compensation Committee. Except as discussed in the section "Certain
Relationships and Related Party Transactions" with respect to the transactions
with Midwest, the franchise owned by Mr. Bourbeau, and with respect to the
consulting agreements made with Mr. Smith, Mr. Johnson and Mr. Evans, and with
respect to the purchase of Coutts, of which Mr. Johnson was Chairman of the
Board of Directors and partial owner, no member of any committee of the Board of
Directors in 2002 had any relationship with us other than as a director and
member of such committee.
44
COMMON SHARES PERFORMANCE
The line graph set forth below compares for the period December 31,
1997 through December 31, 2002, the cumulative return on our Common Shares based
on the market price of the Common Shares, with the cumulative return (assuming
dividend reinvestment) of common stock listed on the Russell 2000 Index, and the
common stock issued by companies with SIC Code: 8742, Management Consulting
Services Index. The SIC Code Index was selected primarily because it is
representative of our professional service business and the Russell 2000 Index
was selected because it represents a comparable market capitalization. We
believe the SIC Code Index and the Russell 2000 Index compare effectively with
us based on the selection criteria mentioned above.
[GRAPH]
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
-------- ------- -------- -------- -------- ---------
Company $100.00 $115.68 $90.19 $123.53 $304.98 $350.20
SIC Code 100.00 109.91 120.78 59.44 54.50 34.12
Russell 2000 100.00 97.20 116.24 111.22 112.36 88.11
45
Proposal 5: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Our Board of Directors, based on the recommendation of the Audit
Committee and subject to ratification by the shareholders at our Annual Meeting,
has approved the appointment of Ernst & Young LLP as our independent auditors
for fiscal year 2003. If the shareholders do not ratify this appointment by the
affirmative vote of a majority of shares present in person or represented by
proxy at the Meeting, other auditors will be considered by the Board of
Directors upon recommendation of the Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT
OF THE INDEPENDENT AUDITORS.
OTHER BUSINESS
The Board of Directors does not know of any further business to be
presented at the Meeting. However, should any other matter requiring a vote the
shareholders arise, the persons appointed by the enclosed proxy intend to vote
on those matters in accordance with their judgement as to our best interests.
Shareholder Proposals
Shareholder proposals for the 2004 Annual Meeting of Shareholders must
be received by December 5, 2003 to be considered for inclusion in our 2004 Proxy
Statement. Shareholder proposals must be submitted in writing to our Corporate
Secretary, at 1818 Market Street, 33rd Floor, Philadelphia, PA 19103. At the
2004 Annual Meeting of Shareholders, Management will have discretionary
authority to act upon such matters as may be brought before the Meeting as to
which written notice was not received on or before February 18, 2004.
Annual Report on Form 10-K
We file an Annual Report on Form 10-K with the SEC. Shareholders may
obtain a paper copy of this report, including the financial statements and
schedules, without charge, by writing to our Corporate Secretary at 1818 Market
Street, 33rd Floor, Philadelphia, PA 19103. You may also request this
information at out website, www.right.com.
Householding
If you have consented to the delivery of only one set of proxy materials to
multiple shareholders who share your address, then only one proxy statement and
only one annual report are being delivered to your household unless we have
received contrary instructions from one or more of the shareholders sharing your
address. We will deliver promptly upon oral or written request a separate copy
of the proxy statement or the annual report to any shareholder at your address.
If you wish to receive a separate copy of the proxy statement or the annual
report, you may call us toll-free at 1-800-237-4448 or write to our Corporate
Secretary at 1818 Market Street, 33rd Floor, Philadelphia, PA 19103.
Shareholders sharing an address who now receive multiple copies of
46
the proxy statement or the annual report may request delivery of a single copy
by calling us at the above number or writing to us at the above address.
The Board of Directors urges shareholders to attend the Meeting.
Whether or not you plan to attend the Meeting, shareholders are asked to
complete, date, sign and return the enclosed proxy promptly in the accompanying
envelope. Shareholders who attend the Meeting may vote their shares personally
even though they have sent in their proxies.
By Order of the Board of Directors
/S/ THEODORE A. YOUNG
-----------------
Theodore A. Young
Secretary
Philadelphia, PA
April 3, 2003
47
EXHIBIT A
---------
CHARTER OF THE AUDIT COMMITTEE
OF
RIGHT MANAGEMENT CONSULTANTS, INC.
As adopted December 12, 2002
----------------------------
Purpose and Composition
This Charter governs the operations of the Audit Committee. The Audit
Committee shall be comprised of three or more directors as determined by the
Board of Directors and shall meet the qualification requirements of the
applicable stock market rules governing the exchange or market on which the
Company's common stock is traded.
The members of the Audit Committee shall be elected by the Board of
Directors annually and shall serve until their successors are duly elected and
qualified. Unless a Chair is elected by the full Board of Directors, the members
of the Audit Committee may designate a Chair by majority vote of the full Audit
Committee membership.
Statement of Policy
The Audit Committee shall provide assistance to the Board of Directors
in overseeing the financial reporting process, the systems of internal
accounting and financial controls, the performance and independence of the
external auditors, and the annual independent audit of the Corporation's
financial statements.
The external auditor for the Corporation is ultimately accountable to
the Audit Committee and the Board of Directors. The Audit Committee and the
Board shall have the ultimate authority and responsibility to select, evaluate
and, where appropriate, replace the external auditor.
Responsibility and Processes
The primary responsibility of the Audit Committee is to oversee the
Corporation's financial reporting process on behalf of the Board of Directors
and report the results of their activities to the Board of Directors. It is not
the duty of the Audit Committee to plan or conduct audits, to determine that the
Corporation's financial statements are complete and accurate and are in
accordance with generally accepted accounting principles or to assure compliance
with laws. These are the responsibilities of management and the external
auditor. In carrying out its responsibilities, the Audit Committee's policies
and procedures should remain flexible in order to react to changing conditions
and circumstances.
The following shall be the principal recurring processes of the Audit
Committee
48
in carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the Audit Committee may alter or supplement
them as appropriate.
1. Annually, the Audit Committee shall recommend to the Board of Directors the
selection of the Corporation's external auditor, subject to the stockholder
ratification of the selection, if such ratification is required or sought.
2. The Audit Committee shall discuss with the external auditor the overall scope
and plans for the respective audit examinations.
3. The Audit Committee shall ensure that the external auditor submits annually a
formal written statement delineating all relationships between the external
auditor and the Corporation. The Audit Committee is responsible for engaging in
a dialogue with the external auditor with respect to such disclosed
relationships that may impact the objectivity and independence of the external
auditor and recommending that the Board of Directors take appropriate action to
satisfy itself of the external auditor's independence.
4. The Audit Committee shall establish policies and procedures for the
engagement of the external auditor to provide non-audit services, and consider
whether the external auditor's performance of any non-audit services is
compatible with the external auditor's independence.
5. The Audit Committee shall discuss with management and the external auditor
the adequacy and effectiveness of the Corporation's accounting and financial
records and system for monitoring and managing business risk and legal
compliance programs. Further, the Audit Committee shall meet separately with the
external auditor, with and without management present, to discuss the results of
their examinations.
6. The Audit Committee shall review and discuss with management and the external
auditor the Corporation's interim financial results to be included in the
Corporation's quarterly reports filed with the Securities and Exchange
Commission, and the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communications with Audit Committees), as it may be modified
or supplemented.
7. The Audit Committee shall review with management and the external auditor the
financial statements to be included in the Corporation's Annual Report on Form
10-K (or the annual report to the shareholders if distributed prior to the
filing of Form 10-K), as well as the auditor's judgment about the quality, not
just acceptability, of the Corporation's accounting principles as applied in its
financial reporting. The review shall also include a discussion of the
reasonableness of judgments and estimates made in the preparation of the
financial statements that may be viewed as critical, as well as the clarity of
financial statement disclosures. In addition, the Audit Committee shall discuss
the results of the annual audit and any other matters required to be
communicated to the Audit Committee by the external auditor under generally
accepted auditing standards, including the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communications with Audit Committees),
as it may be modified or supplemented.
49
8. Based on its review and discussions of the above items, the Audit Committee
shall recommend to the Board of Directors whether the financial statements
should be included in the Annual Report on Form 10-K (or the annual report to
shareholders if distributed prior to the filing of Form 10-K).
9. As a whole, or through the Chair, the Audit Committee shall review the impact
on the financial statements of significant events, transactions, or changes in
accounting principles or estimates which potentially affect the quality of the
financial reporting with management and the external auditor prior to the filing
of the Corporation's Report on Form 10-Q or 10-K, or as soon as practicable if
the communications cannot be made prior to its filing.
10. Management and the external auditor shall discuss with the Audit Committee
significant changes to the Corporation's auditing and accounting principles,
policies, controls, procedures and practices proposed or contemplated by the
external auditor, the internal auditors or management.
11. The Audit Committee shall review and reassess this Charter annually and
recommend any appropriate changes to the Board of Directors. The Audit Committee
shall conduct an annual performance self-evaluation and report its findings to
the Board of Directors.
12. The Audit Committee shall review and reassess the Corporation's Code of
Conduct annually and recommend any appropriate changes to the Board of
Directors. The Audit Committee shall annually review employee responses as to
compliance with the Code of Conduct and prepare a report of employee compliance
for the Board of Directors.
The Audit Committee shall review any significant disagreement that is
brought to its attention, after inquiry, among management and the external
auditor in connection with the preparation of the Corporation's financial
statements. In addition, the Audit Committee shall review with management and
the external auditor any pending or threatened action by regulators or
government agencies and any employee complaints or published report that raise
material issues regarding the Corporation's financial statements or accounting
policies. The Audit Committee may request any officer or employee of the
Corporation or the Corporation's outside counsel or external auditor to attend a
meeting of the Audit Committee or to meet with any members of, or consultants
to, the Audit Committee. The Audit Committee shall have the resources and
authority appropriate to discharge its responsibilities, including the authority
to engage outside auditors for special audits, reviews and other procedures and
to retain special counsel and other expert consultants.
Reports
1. The Audit Committee shall prepare or cause the preparation of the report
required by the rules of the Securities and Exchange Commission for inclusion in
the Corporation's annual proxy statement.
2. The Committee shall submit any recommendations for changes to the Audit
Committee Charter to the full Board of Directors for approval, and report the
findings of its
50
annual self-evaluation to the Board of Directors.
3. The Audit Committee shall maintain minutes of its meetings and regularly
report its activities to the Board of Directors.
Reliance on Information Provided
In adopting this Audit Committee Charter, the Board of Directors
acknowledges that the Audit Committee members are not employees of the
Corporation and are not providing any expert or special assurance as to the
Corporation's financial statements or any professional certification as to the
external auditor's work or auditing standards. Each member of the Audit
Committee shall be entitled to rely on the integrity of those persons and
organizations within and outside the Corporation that provide information to the
Audit Committee and the accuracy and completeness of the financial information
provided to the Audit Committee by such persons or organizations absent actual
knowledge to the contrary.
Independence of Audit Committee Members
Director's fees, including fees for serving on the audit and other
committees of the Board, are the only compensation audit committee members may
receive from the Corporation.
51
RIGHT MANAGEMENT CONSULTANTS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Shareholders -- May 1, 2003
The undersigned shareholder of RIGHT MANAGEMENT CONSULTANTS, INC.,
revoking all previous proxies, hereby constitutes and appoints RICHARD J. PINOLA
and JOSEPH T. SMITH, and each of them acting as individuals, as the attorney and
proxy of the undersigned, with full power of substitution, for and in the name
and stead of the undersigned, to attend our Annual Meeting of Shareholders to be
held on Thursday, May 1, 2003, at 10:00 A.M. at our headquarters, 1818 Market
Street, 33rd Floor, Philadelphia, Pennsylvania, and to vote all Common Shares
which the undersigned would be entitled to vote if personally present at the
Meeting, and at any adjournment or postponement thereof; provided that said
proxies are authorized and directed to vote as indicated with respect to the
following matters:
1. / / FOR all nominees for director named below.
/ / WITHHOLD AUTHORITY to vote for all nominees for director named
below.
/ / FOR all of the nominees for director named below, except WITHHOLD
AUTHORITY to vote for the nominee(s) whose name(s) is (are) lined
through.
Nominees: FRANK P. LOUCHHEIM, RICHARD J. PINOLA, JOSEPH T. SMITH, JOHN
J. GAVIN, LARRY A. EVANS, JOHN R. BOURBEAU, REBECCA J. MADDOX,
CATHERINE Y. SELLECK, FREDERICK R. DAVIDSON, OLIVER S. FRANKLIN AND
STEPHEN JOHNSON
2. / / FOR adoption of the amendment to the Articles of Incorporation
increasing the authorized number of common shares.
/ / AGAINST
/ / ABSTAIN
3. / / FOR adoption of the 2003 Stock Incentive Plan.
/ / AGAINST
/ / ABSTAIN
4. / / FOR adoption of the 2003 Employee Stock Purchase Plan.
/ / AGAINST
/ / ABSTAIN
5. / / FOR the ratification of the Selection by the Audit Committee of
Ernst & Young LLP, as our independent auditors for the current fiscal
year.
/ / AGAINST
/ / ABSTAIN
6. In their discretion, the proxies will vote on such other business as
may properly come before the Meeting.
52
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholders. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" THE NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2, 3, 4 and 5
REFERRED TO IN THIS PROXY. This proxy also delegates discretionary authority to
vote with respect to any other business which may properly come before the
Meeting or any adjournment or postponement thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE ANNUAL REPORT,
NOTICE OF MEETING AND THE PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH. The
undersigned also hereby ratifies all that the said attorneys and proxies may do
by virtue hereof and hereby confirms that this proxy shall be valid and may be
voted whether or not the shareholder's name is signed as set forth below or a
seal is affixed or the description, authority or capacity of the person signing
is given or other defect of signature exists.
NOTE: PLEASE MARK, DATE AND SIGN THIS PROXY CARD AND RETURN IT IN THE
ENCLOSED ENVELOPE. Please sign this proxy exactly as name appears in address
below. If shares are registered in more than one name, all owners should sign.
If signing in a fiduciary or representative capacity, such as attorney-in-fact,
executor, administrator, trustee or guardian, please give full title and attach
evidence of authority. Corporations please sign with full corporate name by a
duly authorized officer and affix the corporate seal.
Dated: _______________, 2003
____________________(SEAL)
(Shareholder's Signature)
____________________(SEAL)
(Shareholder's Signature)