-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D7CVP5i6z9/1Ey8jsM9eBX89kzvcJF2UEaLE88UIIiBJ6ug3BizyrXSpa+Fz1czx M7CkeC4rmc4J/gQ8oTA3hQ== 0000106498-97-000025.txt : 19971230 0000106498-97-000025.hdr.sgml : 19971230 ACCESSION NUMBER: 0000106498-97-000025 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971226 FILED AS OF DATE: 19971229 SROS: CSE SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTVACO CORP CENTRAL INDEX KEY: 0000106498 STANDARD INDUSTRIAL CLASSIFICATION: PAPER MILLS [2621] IRS NUMBER: 131466285 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-03013 FILM NUMBER: 97745397 BUSINESS ADDRESS: STREET 1: 299 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10171 BUSINESS PHONE: 2126885000 MAIL ADDRESS: STREET 1: 299 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10171 FORMER COMPANY: FORMER CONFORMED NAME: WEST VIRGINIA PULP & PAPER CO DATE OF NAME CHANGE: 19700114 DEF 14A 1 December 26, l997 Dear Fellow Shareholders: We cordially invite you to join us at the l998 Annual Meeting of Shareholders of Westvaco Corporation to be held at 10 o'clock in the morning on Tuesday, February 24, 1998. The meeting will be held in the Stuyvesant Room of the New York Marriott East Side Hotel, Lexington Avenue at 49th Street, New York, New York. Whether or not you expect to attend the meeting, however, please sign, date and promptly return the enclosed proxy. This year our proxy material includes two proposals. We ask for your support in voting FOR Proposal 1, the election of our directors; and FOR Proposal 2, the appointment of our independent accountants. Your interest in your company as demonstrated by the representation of your shares at our annual meeting is a great source of strength for your company. Your vote is very important to us and, accordingly, we ask that you sign, date and return the enclosed proxy as soon as conveniently possible. Sincerely, John A. Luke, Jr. Chairman, President and Chief Executive Officer Westvaco Paper, packaging and specialty chemicals Notice of 1998 Annual Meeting of Shareholders and Proxy Statement The Annual Meeting of Shareholders of Westvaco Corporation will be held in the Stuyvesant Room of the New York Marriott East Side Hotel, Lexington Avenue at 49th Street, New York, New York, on Tuesday, February 24, 1998, at ten o'clock in the morning for the following purposes: 1. To elect four directors for terms of three years each; 2. To consider and vote upon a proposal to ratify the action of the Board of Directors in appointing Price Waterhouse LLP as independent accountants for the corporation for the fiscal year 1998. All holders of common stock of record at the close of business on December 26, 1997, will be entitled to receive notice of and to vote at the annual meeting. Whether or not you expect to be at the meeting, please sign, date and promptly return the enclosed proxy. By Order of the Board of Directors John W. Hetherington Vice President, Assistant General Counsel and Secretary December 26, 1997 Proxy statement Westvaco Corporation 299 Park Avenue New York, New York 10171 This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Westvaco Corporation for the Annual Meeting of Shareholders to be held on February 24, 1998. Only holders of Westvaco common stock of record at the close of business on December 26, 1997, will be entitled to vote at the meeting, each share of such stock being entitled to one vote. The Proxy Statement and enclosed form of proxy are being mailed on or about Monday, January 5, 1998, to each shareholder entitled to vote. The presence of a majority of the outstanding shares of common stock, represented in person or by proxy at the meeting, will constitute a quorum. The nominees receiving the highest vote totals will be elected directors. Accordingly, abstentions and broker non-votes will not affect the outcome of the election. All other matters to be voted on will be decided by the affirmative vote of a majority of the shares present or represented at the meeting and entitled to vote. On any such matter, an abstention will have the same effect as a negative vote but, because shares held by brokers will not be considered entitled to vote on any matters as to which the brokers lack authority to vote, a broker non-vote will have no effect on the vote. On December 26, 1997, there were outstanding 101,946,427 shares of Westvaco common stock. The following investment advisers are believed to have beneficial ownership (as defined for certain purposes by the Securities and Exchange Commission) of more than 5% of the company's common stock by virtue of having investment authority and, to some extent, voting authority over the number of shares indicated below: Percent Shares of Class Invesco Capital Management 8,572,450 8.4% 1315 Peachtree Street, N.E. Atlanta, GA 30309 A subsidiary of Invesco PLC 11 Devonshire Square London, England Capital Research & Management 6,648,900 6.5% 333 South Hope Street Los Angeles, CA 10153 Sanford C. Bernstein & Co. 5,200,353 5.1% 767 Fifth Avenue New York, NY 10153 The Westvaco savings and investment plans for salaried and hourly employees held, as of October 31, 1997, a total of 12,441,123 shares, or 12%, for which full voting rights are exercisable by members of the plans. As of that date there were 12,400 current or former employees of Westvaco and its subsidiaries participating in such plans. All directors and officers as a group owned 4,340,972 shares, or 4.1%, of Westvaco common stock, including shares in the Savings and Investment Plan for Salaried Employees as of October 31, 1997, and including shares in which they had the right to acquire beneficial interest within 60 days through the exercise of stock options. In addition to the stock beneficially owned by each executive officer who is also a director, as shown hereinafter in connection with the election of directors, the following executive officers named in the Summary Compensation Table on page 19 held the following number of shares: Philip H. Emery, Jr., 181,502 shares, Frederick C. Haas, 277,210 shares, and Jack A. Hammond, 219,260 shares. All information concerning share ownership, unless otherwise stated, is as of the most recent practicable date. Attendance at the meeting will be limited to holders of record as of the record date, or their authorized representatives (not to exceed one per shareholder), and guests of management. Management has been gratified by the interest in Westvaco shown by its shareholders as evidenced by the representation, in person or by proxy, of more than 90% of its outstanding stock at each of the annual meetings held during the past 30 years. It is important that your stock be represented at the meeting. Whether or not you plan to attend, please sign, date and return the enclosed proxy promptly in order to be sure that your shares will be voted. You may revoke your proxy at any time before it is voted at the meeting by submitting a written revocation or a new proxy, or by attending and voting at the annual meeting. In addition to solicitation by mail, officers and assistant officers of Westvaco may solicit proxies by telephone or other electronic communication, or by personal contact. The cost of solicitation of proxies will be borne by Westvaco. Westvaco may engage the services of D. F. King & Co., Inc. for the solicitation of proxies on a limited basis at a cost which is estimated not to exceed $11,500 in fees, and somewhat more than half that amount in expenses. 1. Election of directors Four directors are to be elected to hold office for the terms set forth below and, in all cases, until their successors are elected and shall qualify. There is no provision for cumulative voting in the election of directors. At the meeting, one of the persons named in the enclosed proxy (or a substitute) will, if authorized, vote the shares covered by such proxy for election of the four nominees for directors listed on the following pages. The present nominees, David L. Hopkins, Jr., Douglas S. Luke, Jane L. Warner, and Richard A. Zimmerman, if elected, will be elected for a term expiring at the Annual Meeting of Shareholders to be held in the year 2001. The Board of Directors unanimously recommends a vote FOR the named nominees and, unless otherwise specified by the shareholder, the Board of Directors intends the accompanying proxy to be voted for the election of these nominees. Should any of these nominees become unavailable for election for any reason presently unknown, a person named in the enclosed proxy (or a substitute) will vote for the election of such other person or persons as the Board of Directors may recommend. Samuel W. Bodman III, Dr. Thomas W. Cole, Jr., and Rudolph G. Johnstone, Jr., will continue to serve for a term expiring at such meeting to be held in 2000. W.L. Lyons Brown, Jr., John A. Luke, Jr., and William R. Miller will continue to serve for a term expiring at the annual meeting to be held in 1999. Brief statements appear on the following pages setting forth the age, principal occupation, and other biographical information concerning each nominee and continuing director. Such statements include the number of shares of Westvaco common stock owned, representing in the case of each nominee and continuing director less than 1% of the outstanding shares. All information in this Proxy Statement concerning share ownership by nominees or continuing directors is as of the most recent practicable date. Nominees for election as directors for a term of three years expiring in 2001 David L. Hopkins, Jr.: Managing Director, BT Alex. Brown; Head, Alex Brown Asset Management, since 1993. Retired Managing Director, Morgan Guaranty Trust Company of New York. Westvaco Director since 1969. A.B., Princeton University, 1950. Director: Metropolitan Opera Association. Trustee: The Maryland Historical Society. Age 69. Westvaco shares owned 48,706 (Notes 1, 2). Term to expire: 2001 Douglas S. Luke: President and Chief Executive Officer, WLD Enterprises, Inc., a private investment company with diversified interests in marketable securities, real estate and operating businesses, since 1991. Westvaco Director since October 1996. B.A., University of Virginia, 1964. M.B.A., The Darden School, University of Virginia, 1966. Managing Director and Officer of Rothschild, Inc. and its predecessor, New Court Securities Corporation, 1979-1990. Director: Orbital Sciences Corporation, Regency Realty Corporation. Age 56. Westvaco shares owned 46,960 (Notes 1, 2). Term to expire: 2001 Jane L. Warner: President, Randall Textron and Executive Vice President, Textron Automotive Company, since 1994, both of which businesses are part of the Automotive Division of Textron, Inc., a global, multi-industry company with aircraft, automotive, industrial and financial businesses. Westvaco Director since November 1997. B.A., Michigan State University, 1970, M.A., 1973. M.B.A., Stanford University, 1988. Joined General Motors Corporation in 1973. Became General Superintendent, Chevrolet-Pontiac Canada Group in 1988 and Assistant Chief Engineer and Future Product Manager, Camaro/Firebird Platform, 1991 prior to joining Textron, Inc. Director: GMI Engineering and Management Institute. Age 50. Westvaco shares owned (Note 3). Term to expire: 2001 Richard A. Zimmerman: Retired Chairman and Chief Executive Officer, Hershey Foods Corporation, a manufacturer of food products. Westvaco Director since 1989. B.A., Pennsylvania State University, 1952. Joined Hershey Foods Corporation in 1958. Served as President, 1976-1985; Chief Operating Officer, 1976-1984; Chief Executive Officer, 1984-1993; and Chairman, 1985-1993. Director: Eastman Kodak Corporation, Lance, Inc. Trustee and Chairman of the Board: United Theological Seminary, Pennsylvania State University. Age 65. Westvaco shares owned 7,650 (Note 1). Term to expire: 2001 Directors whose terms of office continue Samuel W. Bodman III: Chairman and Chief Executive Officer, Cabot Corporation, a chemical, energy and materials company, since 1988. Westvaco Director since 1987. B.Ch.E., Cornell University, 1961. Sc.D., M.I.T., 1964. Joined FMR Corporation in 1970 and served as President and Chief Operating Officer from 1983-1986 prior to joining Cabot Corporation as President and Chief Operating Officer. Director: Cabot Oil and Gas Corporation, John Hancock Mutual Life Insurance Co., Security Capital Group Incorporated. Trustee: Massachusetts Institute of Technology, Isabella Stewart Gardner Museum. Age 59. Westvaco shares owned 34,500 (Note 1). Term to expire: 2000 Dr. Thomas W. Cole, Jr.: President, Clark Atlanta University since l989. Westvaco Director since 1994. B.S., Wiley College, 1961. Ph.D, University of Chicago, 1966. Joined faculty of Atlanta University in l966 and became Chairman, Department of Chemistry, Fuller E. Callaway Professor of Chemistry, Provost and Vice President for Academic Affairs prior to becoming President of West Virginia State College in 1982. Chancellor of the West Virginia Board of Regents, 1986-1988, President of Clark College, 1988, and President of Atlanta University, 1988. Director: West Virginia Wesleyan College, Atlanta Chamber of Commerce, Central Atlanta Progress, Atlanta Committee for Public Education, First Union Bank of Georgia, Atlanta Action Forum. Vice President: Atlanta Area Council, Boy Scouts of America; Eagle Scout. Age 56. Westvaco shares owned 4,850 (Note 1). Term to expire: 2000 Rudolph G. Johnstone, Jr.: Executive Vice President, Westvaco; Director since 1995. B.S. and M.S., North Carolina State University, 1958, 1960. Advanced Management Program Wharton School, University of Pennsylvania, 1989. Joined Westvaco in 1957. Container Division Regional Manager, 1970 and Assistant Division Manager, 1980. Became Vice President and Container Division Manager, 1985; Senior Vice President and Envelope Division Manager, 1990; Senior Vice President with responsibilities for Corporate Data Processing, Marketing Services and Human Resources, 1992; Executive Vice President, 1995. Director and Executive Committee Member: National Association of Manufacturers. Director: Direct Marketing Association, Foreign Policy Association. Age 61. Westvaco shares owned 258,961 (Note 1). Term to expire: 2000 W. L. Lyons Brown, Jr.: Former Chairman of the Board and Chief Executive Officer, Brown-Forman Corporation, a diversified consumer products company. Westvaco Director since 1994. B.A., University of Virginia, 1958. B.S. American Graduate School of International Management, 1960. Joined Brown-Forman Corporation, 1960. Became a Director, 1964 and Executive Vice President, 1972. Served as President, 1975-1983; Chief Executive Officer, 1975-1993; and Chairman of the Board, 1983-1995. Director: Pennzoil Company, Essex International Inc. Advisory Director: Bessemer Holdings, L.P. Former Member: President's Advisory Committee for Trade Policy and Negotiations. Chairman and Trustee: Winterthur Museum. Trustee: World Monuments Fund. Alumni Trustee: University of Virginia Endowment Fund. Trustees' Council: National Gallery of Art. Age 61. Westvaco shares owned 9,000 (Note 1). Term to expire: 1999 John A. Luke, Jr.: Chairman, President and Chief Executive Officer, Westvaco; Director since 1989. B.A., Lawrence University, 1971. M.B.A., The Wharton School, University of Pennsylvania, 1979. Joined Westvaco in 1979. Became Assistant Treasurer, 1982; Treasurer, 1983; Vice President and Treasurer, 1986; Senior Vice President, 1987; Executive Vice President, 1990; President and Chief Executive Officer, 1992; Chairman, President and Chief Executive Officer, 1996. Director: American Forest and Paper Association, The Americas Society, Inc., Arkwright Mutual Insurance Co., The Bank of New York, United Negro College Fund. Chairman of the Board of Trustees: Lawrence University. Trustee: Tinker Foundation. Governor: National Council of The Paper Industry for Air and Stream Improvement, Inc. Age 49. Westvaco shares owned 562,088 (Notes 1, 2). Term to expire: 1999 William R. Miller: Corporate Director. Westvaco Director since 1992. B.A., St. Edmund Hall, Oxford University, 1952, M.A., l956. Joined Bristol-Myers Company (now Bristol-Myers Squibb Company), a pharmaceutical company, in 1964. Became President International Division, 1972; President Pharmaceutical and Nutrition Group, 1981; Vice Chairman of the Board, 1985-1990. Former Chairman and Director: Pharmaceutical Manufacturers Association. Chairman of the Board: Vion Pharmaceuticals, Inc. (formerly OncoRx), SIBIA Neurosciences, Inc. Director: ImClone Systems, Inc., ISIS Pharmaceuticals, Inc., St. Jude Medical, Inc., Transkaryotic Therapies, Inc., Xomed Surgical Products, Inc. Advisory Director: Chugai Pharmaceuticals, Inc. Vice Chairman of the Board: Cold Spring Harbor Laboratory. Trustee: Manhattan School of Music, Metropolitan Opera Association, Opera Orchestra of New York. Member: Oxford University Chancellor's Court of Benefactors, Honorary Fellow: St. Edmund Hall. Chairman of the English-Speaking Union of the United States. Age 69. Westvaco shares owned 6,000. Term to expire: 1999 Notes with respect to nominees' and continuing directors' shareholdings (l) The total shares shown include shares of Westvaco common stock in which the nominees and continuing directors had a right to acquire beneficial interest within 60 days by the exercise of stock options. (2) The shares shown also include the following shares: Douglas S. Luke is a co-trustee of a trust which held a total of 24,998 shares of Westvaco common stock. John A. Luke, Jr., is a co-trustee of two trusts which held a total of 9,328 shares of Westvaco common stock. David L. Hopkins, Jr., is a co-trustee of a trust which held a total of 43,887 shares of Westvaco common stock. (3) Jane L. Warner, who became a director in November 1997, did not own shares or hold exercisable options at the time of her election. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 requires reporting by directors and certain officers of the company concerning their holdings and transactions in Westvaco common stock. A review of the company's records indicates that all reports required under the Section 16(a) rules were filed in a timely manner during the year, except for one report of one transaction by Samuel L. Torrence, a Senior Vice President. This was an exercise of stock appreciation rights and did not involve any transaction in the public market. A report has now been filed. Board and committee meetings The Board of Directors held eleven meetings, one each month except July, and 24 committee meetings during fiscal year 1997. Average attendance by directors at meetings of the Board and its committees was 94%. The Audit Committee, which met two times in fiscal year 1997, has as its members William R. Miller, Chair; Dr. Thomas W. Cole, Jr., David L. Hopkins, Jr., Katherine G. Peden, Jane L. Warner, and Richard A. Zimmerman, none of whom is an officer or employee of the corporation. The Audit Committee reviews the audit examination and annual financial reports of the corporation, and meets with and remains accessible to the internal auditors and independent accountants of the corporation. It reviews in advance the appointment of the independent accountants, the scope of their work, and the fees for all services provided. It also reviews annually with the General Counsel the status of the company's legal compliance program, as well as significant issues in litigation. The Compensation Committee, which met eight times in fiscal year 1997, has as its members Richard A. Zimmerman, Chair; Samuel W. Bodman III, W.L. Lyons Brown, Jr., Dr. Thomas W. Cole, Jr., David L. Hopkins, Jr., and Katherine G. Peden, none of whom is an officer or employee of the corporation. The Compensation Committee receives regular reports on industrial relations, approves or reviews all compensation of senior management, determines awards under the Annual Incentive Compensation Plan, oversees matters relating to the corporation's stock option plans and various issues related to the management of its savings and investment plans. In addition, the Committee reviews the management of, and proposed changes to, the corporation's various employee benefit plans. The Committee on Board Membership, which met five times in fiscal year 1997, has as its members Katherine G. Peden, Chair; Samuel W. Bodman III, W.L. Lyons Brown, Jr., John A. Luke, John A. Luke, Jr., and Richard A. Zimmerman. The Committee on Board Membership reviews and makes recommendations concerning the qualifications of individuals for re-election and to fill vacancies on the Board of Directors, as well as the levels of compensation paid to non-salaried directors. A Westvaco bylaw requires nominations for the Board from any shareholder to be delivered to the Board Membership Committee, Westvaco's Secretary, not less than 90 days in advance of an annual meeting nor later than the seventh day following the date that notice of a special meeting is first given to shareholders. The bylaw also requires the nomination to contain specified information about the nominee and the shareholder making the nomination, as well as a consent to serve by the nominee. In addition to such nominations, the Board Membership Committee will consider such suggestions for possible nominations as may be sent by shareholders to the Committee. The Finance Committee, which met five times in fiscal year 1997, has as its members David L. Hopkins, Jr., Chair; W. L. Lyons Brown, Jr., Douglas S. Luke, John A. Luke, John A. Luke, Jr., and William R. Miller. The Finance Committee reviews the financial condition of the corporation and its requirement for funds, studies its credit and financing policies, considers the dividend policy of the corporation and makes recommendations concerning these matters, and reviews funding recommendations for the salaried and hourly pension plans together with the investment performance of such plans. The Committee on the Environment, Safety and Health, which met three times in fiscal year 1997, has as its members Samuel W. Bodman III, Chair; Dr. Thomas W. Cole, Jr., Douglas S. Luke, John A. Luke, John A. Luke, Jr., William R. Miller, Katherine G. Peden, and Jane L. Warner. The Committee on the Environment, Safety and Health oversees the stewardship of the corporation with respect to conservation of the natural resources and its ability to protect the natural environment. It also oversees implementation of the company's workplace safety and health program. The committee receives regular reports from management, reviews environmental, safety and health matters with management, and makes recommendations as needed. The International Committee, which met one time in fiscal year 1997, has as its members John A. Luke, Chair; Samuel W. Bodman III, W. L. Lyons Brown, Jr., Douglas S. Luke, John A. Luke, Jr., William R. Miller, and Richard A. Zimmerman. The International Committee serves as a resource for management, sharing its knowledge and expertise on opportunities outside of the United States which may be of interest to the company. Director compensation Only directors who are not employees of the corporation receive fees. Since March 1, 1997, fees paid to each outside director have consisted of an annual retainer of $30,000 plus an attendance fee of $1,000 for each meeting of the Board and committee meeting of the Board at which the director is present. Each director may elect to defer payment of a percentage of his or her fees, with interest, to a later date or dates. In accordance with the provisions of our incentive stock plan for non-employee directors approved by shareholders, stock options covering 1,500 shares are granted each year to each non-employee director up to the limit of shares in the plan. Executive Compensation Report of the Compensation Committee The Committee The Compensation Committee is a Board committee composed entirely of outside directors, none of whom is or has been at any time an employee of the company or is receiving any compensation from the company other than as a director. The Committee administers the Westvaco Executive Compensation Program (the "Program") which is designed to attract and retain distinctly capable and highly motivated individuals who can create and execute programs that will produce sound, long-term rewards for shareholders. The compensation of all employees, including executive officers, whose annual salary exceeds $275,000, is determined by the Committee which informs the Board on any action taken with respect to the compensation of the CEO. Performance Factors A major Westvaco objective is to increase the value of the company for its shareholders over the long term. Beginning in July 1967, the company began to measure the performance of its stock against major market indices as well as against its peers and other leading industrial companies. The results, which are shown on page 18 , show a high degree of success in creating long-term shareholder value. Another major company objective has been to minimize the impact of the business cycle on its earnings through an extensive emphasis on distinctive and differentiated products and services. This program was initiated in 1984 and has been described since then in company literature distributed to shareholders. The success of this product strategy, as well as the company's cost containment and productivity improvement strategies, is regularly monitored within the company and at the Board level. The contribution of an individual to the execution of corporate strategies, including the foregoing objectives, remains the principal basis on which job performance is evaluated and, therefore, is a significant factor in determining salaries, incentive compensation for the most senior executives as hereafter described, and grants of stock options. Cash Compensation The Westvaco Annual Incentive Compensation Plan (the "Plan") which places a portion of a senior executive's compensation at risk, and ties it to company and personal performance, was approved by the shareholders at the company's 1996 Annual Shareholders' Meeting. The Plan is administered by the Compensation Committee. Funding for awards is based on a formula tied to the overall performance of the company. The formula, which provides funding based on 2% of net income in excess of 6% return on shareholders' equity, is designed so that a pool of money will be available for use by the Committee to provide annual cash compensation for senior managers in the then-current competitive range as indicated by regular annual studies. The Plan is designed to meet IRS requirements for tax deductibility. The Committee uses its discretion under the Plan carefully, taking into account anticipated competitive compensation for various job levels, and in appraising the performance of the company and of the individuals in senior management in determining awards to each individual considered. Key criteria for individual performance focus on improved shareholder value through financial and operating performance, advancing the company's strategy of product and service differentiation, and organizational development. Under the Plan no one executive can receive more than 20% of the available pool. It is anticipated that in many years something less than the total amount of the available pool will be used. Any amounts that are not awarded in a particular year may not be carried over to the pool for a subsequent year. Based on 1997 fiscal year performance, the funding formula provided a total available pool of $561,000 for incentive compensation. The total payout for eight executives after the close of fiscal year 1997 was $330,000, representing 59% of the total available award pool. The Committee believes that it is important that total cash compensation for Westvaco's executive officers be at a level that is competitive with that paid by comparable companies. The competitiveness of the compensation of the CEO and the other executive officers identified in the Summary Compensation Table is evaluated through an assessment of total annual cash compensation (salary + incentive compensation) paid by the seven peer paper companies, which along with Westvaco comprise the Dow Jones Paper Index in the proxy performance graphs on pages 17 and 18, and by other companies comparable in size to Westvaco. Such assessments are supported by executive compensation surveys performed for the Committee each year. Using this frame of reference as a general guideline, actual compensation levels are determined by an annual evaluation of individual job performance, without attempting to target a specific level within the competitive frame of reference. Salaries for the other senior officers are determined on a similar basis, except that a salary range is established for each such officer based upon total annual cash compensation, including any incentive compensation, paid to comparable officers of the companies in a somewhat broader group encompassing companies comparable to Westvaco both within and without the paper industry. A midpoint is determined with reference to the median of this group. Individual salaries are reviewed annually under a formal performance appraisal program and adjusted relative to the midpoint within the range, as appropriate, based on individual job performance. The Committee regularly reviews the cash compensation of the company's executive officers named in the Summary Compensation Table relative to the annual cash compensation paid by companies in the Dow Jones Paper Index. Compensation at Westvaco is inclined to be more level throughout the organization than is generally seen in most companies, and the compensation philosophy at Westvaco tends to be conservative. In 1996, four of the seven other companies reporting with Westvaco in the Dow Jones Paper Index provided more total cash compensation than Westvaco to their five highest paid executives. Equity-Based Compensation Stock Options Grants of stock options are made by the Committee to create a direct tie between the interests of key employees and shareholders of the company. Such options are usually granted each year with an exercise price equal to the market price of the related shares on the date of grant, so that individuals receiving such grants benefit only if shareholders benefit through appreciation in the post-grant value of Westvaco shares. Position responsibility, job performance, and salary level are principal factors considered by the Compensation Committee in determining the size of grants. Grants are also compared with the grants of options and other long-term incentives within the Dow Jones Paper Index, and by other companies comparable in revenues to Westvaco in other industries. The Committee does not consider the number of options already held by an individual in making additional grants. The Savings and Investment Plans The savings and investment plans for Westvaco employees, (the "S&I Plans"), with company matching, provide an attractive way for all employees, including executive officers, to acquire and hold stock in the company by contributing a percentage of their compensation. They reflect the company's strong commitment to equity ownership by employees, thus tying the interests of all members of the Westvaco organization to the interests of the shareholders as a whole. The S&I Plans provide specific and pre-established performance-based criteria to determine the level of supplemental company matching. While the company's strategy of differentiated products and services contributed to greater stability of earnings as compared with its competitors, less favorable market conditions caused the company not to meet or exceed each of these pre-established reference points for fiscal 1997. As a result, there was no supplemental match for fiscal 1997 above the regular company match of 75 percent. Recent Performance Westvaco's differentiated product strategy continues to yield benefits. A comparison of the company's total return to shareholders over the past two years with that of the Dow Jones Paper Index, as reviewed by the Committee, is reflected on the following graph: Total Return to Shareholders 1995 1996 1997 Westvaco 100.00 105.84 125.49 S&P 500 Index 100.00 124.09 163.94 Dow Jones Paper Index 100.00 103.09 116.28 Data source: Standard & Poor's Compustat Services, a division of McGraw-Hill Companies except for Dow Jones Paper Index data which comes from Dow Jones & Company, Inc. The company's earnings performance under the very challenging business conditions which have confronted the paper industry since 1995, compares very favorably with the other companies in the Dow Jones Paper Index. Compensation for the Chief Executive Officer Specific performance criteria are established against which the Committee measures the performance of the Chief Executive Officer. These same criteria are used by the Chief Executive Officer in evaluating the company's other senior officers. The base salary of the company's Chairman, President and Chief Executive Officer, John A. Luke, Jr., was, at his request, not increased in 1997. A base salary adjustment was granted in 1997 to only one executive officer named in the Summary Compensation Table. The CEO's incentive compensation for 1997 was $90,000. The total incentive compensation paid in 1997 under the Westvaco Annual Incentive Compensation Plan to the other executive officers listed in the Summary Compensation Table was $130,000. The Committee believes the total cash compensation of John A. Luke, Jr., is appropriate when compared to the total cash compensation for similar positions in the Dow Jones Paper Index companies. In December 1996, the Committee granted stock options to John A. Luke, Jr., for 95,000 shares and simultaneously made grants to 361 other officers and salaried employees. Conclusion The Committee remains convinced that the caliber and motivation of the company's executives and all of its employees is extremely important to the company's ability to meet future challenges and to continue to deliver long-term value to its shareholders. The Committee also believes that the Westvaco Executive Compensation Program is making an important contribution to the company's performance, and is deserving of shareholder support. Richard A. Zimmerman, Chair Samuel W. Bodman III W. L. Lyons Brown, Jr. Dr. Thomas W. Cole, Jr. David L. Hopkins, Jr. Katherine G. Peden Total Return to Shareholders 1992 1993 1994 1995 1996 1997 Westvaco 100.00 93.05 101.20 123.83 131.06 155.39 S&P 500 Index 100.00 114.94 119.39 150.95 187.32 247.47 DJ Paper Index 100.00 97.97 120.60 145.19 149.68 168.82 Data source: Standard & Poor's Compustat Services, a division of McGraw-Hill Companies except for Dow Jones Paper Index data which comes from Dow Jones & Company, Inc. This graph compares the cumulative total return to shareholders on Westvaco common stock for a five-year period ended October 31, 1997, with the return on the Standard & Poor's 500 Stock Index (S&P 500) and the Dow Jones Paper Index. Long-Term Total Return to Shareholders This optional graph of the long-term total return on Westvaco common stock in comparison to the S&P 500 and the Dow Jones Paper Index over a long-term period. Westvaco S&P 500 DJPI 1967 100 100 100 1968 162 114 151 1969 150 110 166 1970 115 98 128 1971 99 115 112 1972 142 140 109 1973 220 140 150 1974 150 99 122 1975 209 125 176 1976 295 150 238 1977 302 141 184 1978 295 150 201 1979 376 173 223 1980 418 229 249 1981 449 230 243 1982 548 267 295 1983 717 342 367 1984 905 363 401 1985 898 434 416 1986 1,436 578 633 1987 1,646 615 651 1988 1,753 705 806 1989 1,740 892 924 1990 1,548 825 787 1991 2,581 1,101 1,198 1992 2,482 1,211 1,145 1993 2,310 1,392 1,122 1994 2,512 1,446 1,381 1995 3,074 1,828 1,663 1996 3.253 2,268 1,714 1997 3,857 2,997 1,934 Creating long-term rewards for shareholders is a major Westvaco objective. Accordingly, this graph, using the same method of measuring return as in the five-year graph and using the same indices, is presented to show comparative cumulative return over a long term. Neither this graph, nor the graph for the five-year period, should be taken to imply any assurance that past performance is predictive of future performance. Summary Compensation Table The following shows the compensation paid or accrued by Westvaco to or for each of its five most highly compensated executive officers for all periods during the fiscal year ended October 31, 1997. Long-term Compensation Annual Awards Name and Compensation Options/ All Other Principal Position Year* Salary Bonus(1) SARs (#)(2) Compensation(3) John A. Luke, Jr. 1997 $874,167 $90,000 95,000 $43,388 Chairman, President and 1996 862,500 150,000 85,000 45,563 Chief Executive Officer 1995 783,333 200,000 75,000 64,957 Rudolph G. Johnstone,Jr. 1997 620,000 60,000 60,000 30,600 Executive Vice President 1996 583,333 100,000 50,000 30,750 1995 475,000 125,000 37,500 39,613 Frederick C. Haas 1997 499,167 35,000 45,000 24,038 Senior Vice President 1996 490,000 45,000 45,000 24,075 1995 429,167 50,000 30,000 31,659 Philip H. Emery, Jr. 1997 449,167 35,000 45,000 21,788 Senior Vice President 1996 437,500 40,000 40,000 21,488 1995 356,667 50,000 27,000 26,879 Jack A. Hammond 1997 449,167 - 45,000 20,213 Senior Vice President 1996 450,000 40,000 40,000 22,050 1995 437,500 75,000 30,000 33,838 *Fiscal years ended October 31. (1) Represents the variable component of total annual compensation under the Westvaco Annual Incentive Plan as discussed in the Report of the Compensation Committee. (2) All SARs held by officers were cancelled during 1997. (3) Represents company contributions and accruals of $7,125 and $36,263 for John A. Luke, Jr.; $7,125 and $23,475 for Rudolph G. Johnstone, Jr.; $6,863 and $14,925 for Philip H. Emery, Jr.; and $6,282 and $13,931 for Jack A. Hammond, to the Salaried Savings and Investment Plan and unfunded Savings and Investment Restoration Plan, respectively. Represents company accruals for only the unfunded Savings and Investment Restoration Plan in the case of Frederick C. Haas in 1997. The five executive officers named above hold interests equivalent to a total 247,147 shares under such plans. Option/SAR Grants in the Fiscal Year Ended October 31, 1997 Individual Grants Number of % of Total Securities Options/SARs Underlying Granted to Options/SARs Employees in Exercise Expiration Name Granted(2) Fiscal Year(2) Price($/Sh) Date John A. Luke, Jr. 95,000 9.99%/14.01% $27.4375 12/17/2006 Rudolph G. Johnstone, Jr. 60,000 6.31%/8.85% 27.4375 12/17/2006 Frederick C. Haas 45,000 4.73%/6.64% 27.4375 12/17/2006 Philip H. Emery, Jr. 45,000 4.73%/6.64% 27.4375 12/17/2006 Jack A. Hammond 45,000 4.73%/6.64% 27.4375 12/17/2006 All Optionees 950,515 100% $27.4375 12/17/2006 Potential Realizable Value at Assumed Annual Rates of Stock Appreciation for Option Term (1) 5% 10% John A. Luke, Jr. $1,639,241 $4,154,183 Rudolph G. Johnstone, Jr. 1,035,310 2,623,695 Frederick C. Haas 776,483 1,967,771 Philip H. Emery, Jr. 776,483 1,967,771 Jack A. Hammond 776,483 1,967,771 All Optionees $16,401,297 $41,564,349 All shareholders(3) $1,758,819,811 $4,457,220,636 Optionees gain as % of all shareholder gain 0.93% 0.93% (1) The dollar amounts under these columns are not intended to and may not accurately forecast possible future appreciation, if any, of Westvaco's common stock price. These are purely hypothetical amounts resulting from calculations at the 5% and 10% rates required by the Securities and Exchange Commission. (2) Executive officers were granted options in tandem with stock appreciation rights (SARs). For each of the named executives the percentage on the left represents the percent of total options granted to all employees and the percentage on the right represents the percentage of total SARs granted to all employees. All SARs held by officers were cancelled during 1997. Tandem limited stock appreciation rights (LSARs) were also granted to executive officers which remain in effect and are exercisable in the event of a change in control. Exercise of an option or LSAR cancels any tandem grant. All options were granted at market value on the date of grant and become exercisable twelve months from the date of grant. (3) As of October 31, l997, there were 101,930,023 shares of common stock outstanding. The calculations shown are based on the assumed rates of appreciation, compounded annually, from the stock's fair market value of $27.4375 on December 17, 1996, when the above options were granted. Aggregated Option/SAR Exercises in Last Fiscal Year and October 31, l997 Option Values Number of Unexercised Number of Options At Securities October 31, 1997(2) Underlying Options/ Value Exercisable/ Name SARs Exercised Realized(1) Unexercisable John A. Luke, Jr. 16,874 $163,116 $377,494/95,000 Rudolph G. Johnstone, Jr. 16,546 217,308 132,408/60,000 Frederick C. Haas 77,835 929,433 105,718/45,000 Philip H. Emery, Jr. 27,202 290,532 100,177/45,000 Jack A. Hammond - - 127,353/45,000 Value of Unexercised In-the-Money Options At October 31, 1997(3) Exercisable/Unexercisable John A. Luke, Jr. $3,459,721/489,848 Rudolph G. Johnstone, Jr. 1,007,802/309,378 Frederick C. Haas 796,719/232,033 Philip H. Emery, Jr. 751,611/232,033 Jack A. Hammond 992,436/232,033 (l) The value realized on stock option and SAR exercises represents the difference between the grant price of the options/SARs and the market price of the shares of underlying stock as of the date of exercise multiplied by the number of options/SARs exercised. All grants are made at the fair market value of the stock on the date of grant. (2) During 1997, all SARs held by officers were cancelled. (3) The value of unexercised in-the-money options represents the difference between the grant price of the options and the market price of $32.5938 at October 31, 1997, multiplied by the number of in-the-money options outstanding. Pension Plan Table Years of Service Remuneration 25 30 35 40 45 $ 500,000 $174,100 $209,000 $243,800 $279,100 $314,800 660,000 231,300 277,500 323,800 370,500 417,700 820,000 288,400 346,100 403,800 461,900 520,500 980,000 345,600 414,700 483,800 553,400 623,400 1,140,000 402,700 483,300 563,800 644,800 726,300 1,300,000 459,900 551,900 643,900 736,300 829,200 The corporation's contributions to its Retirement Plan for Salaried Employees are computed on an aggregate actuarial basis with no specific allocation of contributions to individuals. The table above shows the approximate annual retirement benefits net of social security benefits that would be received under current plan provisions based upon the noted compensation levels and years of service. As of December 31, 1997, the executive officers named in the Summary Compensation Table set forth on page 19 will have the following years of credited service: John A. Luke, Jr., 18.7; Rudolph G. Johnstone, Jr., 34.6; Frederick C. Haas, 34.8; Jack A. Hammond, 36.5; and Phillip H. Emery, Jr., 32. The amounts of covered compensation under the plan during 1997 for each of the individuals named in the Summary Compensation Table set forth on page 19 were approximately the same as set forth in the salary and bonus columns of that table. These approximated annual retirement benefits have been calculated under the plan's 50% joint and survivor annuity form of pension and on the assumption of retirement benefits beginning at age 65. To the extent that an employee's retirement benefit as computed in accordance with the plan exceeds maximum amounts permitted under the Internal Revenue Code, the difference will be paid by Westvaco under an unfunded benefit plan approved by the Board of Directors. Benefit Assurance Trusts. The company has entered into four benefit assurance trusts in connection with the company's unfunded benefit plans in order to preserve the benefits earned under the plans in the event of a significant change in corporate structure. Upon the occurrence of any potentially significant change in corporate structure, the company will contribute additional funds to the trusts which will be sufficient to pay, in accordance with the terms of the plans, the benefits authorized under the plans. If the funds in the trusts are insufficient to pay amounts due under the plans, the company remains obligated to pay any deficiency. Severance Pay Plans Westvaco has implemented two severance pay plans for salaried employees who are involuntarily terminated. One plan, which covers normal business occurrences of job elimination and discharge for reasons other than gross misconduct, provides severance pay ranging from 2 weeks to 52 weeks of an employee's salary (including any bonus) based on years of service. Terminated employees also receive unused and vested vacation pay. In the case of job elimination, an employee may continue medical, dental, disability, accidental death and dismemberment and life insurance coverage for specified periods of time ranging from 1 to 6 months. The other plan provides that if any salaried employee is involuntarily terminated (including, in the case of employees above a determined senior grade, certain actions constituting constructive discharge) for any reason other than fraud, misappropriation or embezzlement within 2 years after a significant change (a 20 percent acquisition of the company's voting securities, a merger, sale or dissolution of the company in certain circumstances, or certain changes in the composition of the company's Board of Directors), the employee is entitled to severance pay ranging from 2 weeks to 104 weeks of any employee's salary (including any incentive compensation) based on years of service, plus an additional 20 percent. In addition, employees will receive the value of lost benefits under the company's retirement, savings and investment, medical, dental, disability, accidental death and life insurance plans and any unused and vested vacation pay. 2. Proposal to ratify appointment of independent accountants The Board of Directors, pursuant to the recommendation of its Audit Committee, has appointed Price Waterhouse LLP to serve as independent accountants for the corporation for the 1998 fiscal year subject to approval by the shareholders at the annual meeting. Price Waterhouse LLP currently serves as the corporation's independent accountants and received $1,389,900 in fees and expenses during fiscal year 1997 for audit-related services. The Audit Committee has been advised by Price Waterhouse LLP that neither the firm, nor any of its partners or staff, has any direct financial interest or material indirect financial interest in the corporation or any of its subsidiaries. Representatives of Price Waterhouse LLP will attend the annual meeting, will have an opportunity to make a statement if they desire and will be available to respond to appropriate questions. If the shareholders do not ratify this appointment, the appointment of other independent public accountants will be considered by the Audit Committee. The Board of Directors unanimously recommends a vote FOR the ratification of the appointment of Price Waterhouse LLP as independent accountants. Unless otherwise specified by the shareholder, the Board intends the accompanying proxy to be voted for such ratification. Other matters Westvaco's bylaws contain detailed procedures, including time limitations, which a shareholder must comply with in order to introduce an item of business at an annual meeting. The Board of Directors knows of no such other matters to be brought before this meeting. However, if any other matters were to properly come before the meeting, a person named in the accompanying proxy (or a substitute) would vote thereon in accordance with his best judgment. Shareholder proposal date Proposals which shareholders intend to present at the 1999 Annual Meeting of Shareholders must be received by the corporation by August 28, 1998, to be considered for inclusion in the corporation's Proxy Statement and form of proxy relating to the 1999 annual meeting. John W. Hetherington Vice President, Assistant General Counsel and Secretary December 26, 1997 Form 10-K available without charge The corporation's annual report on Form 10-K filed with the Securities and Exchange Commission may be obtained at no charge after January 29, 1998, by writing to: Secretary, Westvaco Corporation, 299 Park Avenue, New York, New York 10171. Exhibits to the Form 10-K are also available at a cost of twenty-five cents per page. WESTVACO Westvaco Corporation Westvaco Building 299 Park Avenue New York, New York 10171 212 688 5000 For shareholder information outside of New York City, call toll free 1 800 432 9874 Westvaco on the World Wide Web, earnings, corporate news releases, product information, financial and environmental reports and other company information can be found on Westvaco's Internet site: http://www.westvaco.com 50% recovered fiber 10% postconsumer fiber The proxy statement is printed on American Eagle web dull paper manufactured at Westvaco's Tyrone, PA, fine papers mill. The following is the text of the proxy card for individual shareholders mailed with the proxy statement. WESTVACO CORPORATION PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned appoints John A. Luke, Jr., Rudolph G. Johnstone, Jr., and John W. Hetherington, successively, with full power of substitution, to represent the undersigned and to vote all Common Stock of Westvaco Corporation which the undersigned would be entitled to vote at the Annual Meeting of Shareholders of the Corporation to be held on February 24, 1998 and at any adjournment of the meeting. (Continued and to be signed on the reverse side) Westvaco Westvaco Building PROXY 299 Park Avenue New York, NY 10171 Solicited on Behalf of the Board of Directors Annual Meeting of Shareholders February 24, 1998 -------------- ---------------- ACCOUNT NUMBER COMMON - ------------------------------------------------------------------------------- The Board of Directors recommends a vote FOR all nominees listed below and FOR proposals 2. 1. Election of Directors: David L. Hopkins, Jr., Douglas S. Luke, Jane L. Warner and Richard A. Zimmerman. ___FOR ___WITHHELD WITHHELD for the following nominee(s) only, write name(s) below. all nominees for all nominees ____________________________ 2. Appointment of Price Waterhouse LLP as independent accountants for 1998. ___FOR ___AGAINST ___ABSTAIN The proxies are directed to vote as specified above and on any matters properly coming before the meeting and any adjournment thereof. If no direction is made, the proxies will vote FOR all nominees listed above and FOR Proposals 2. Please date, sign and return this proxy promptly. Dated____________________, 1998 Signature______________________ _______________________________ _______________________________ Please sign exactly as your name appears on this proxy. If signing for estates, trusts or corporations, title or capacity should be stated. -----END PRIVACY-ENHANCED MESSAGE-----