SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
The Securities Exchange Act of 1934 (Amendment No. )
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THE ST. PAUL COMPANIES, INC.
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The following was distributed to employees of The St. Paul
Companies, Inc. and subsidiaries on April 7, 2003:
To: All St. Paul Employees
From: John MacColl, Vice Chairman and General Counsel
As you may know, The St. Paul recently filed its annual
proxy statement with the Securities and Exchange
Commission. If you read the proxy, you will see that it
includes a shareholder proposal concerning the Senior
Executive Performance Plan, a plan approved by an 82
percent vote at last year's Annual Meeting. This plan
enables, but does not require, the Board to award bonuses,
based on company performance, to the company's top
executives. The shareholder proposal, which has been
submitted by a company employee, recommends that the
performance plan be terminated.
The Senior Executive Performance Plan closely ties
compensation to performance and was put in place to enable
The St. Paul to attract and retain the executive talent
the Board knows is necessary for this company to succeed
in today's most demanding marketplace. In addition, a
performance-based plan must be in place under IRS
regulations in order for all compensation payments to be
tax deductible, which is a critical benefit to
shareholders.
The Board has the sole power to determine the bonus
amounts, if any, awarded to the company's senior
executives. For 2001, in the wake of the losses related
to the September 11 event and the costs the company
recognized in the fourth quarter related to our strategic
review, The St. Paul's executives voluntarily requested
that the Board award no bonuses to executive officers.
Bonuses of approximately $15 million were paid to non-
executive employees. For 2002, the company paid $3.8
million in bonuses to proxy officers and nearly $65 million
in bonuses to non-executive employees.
A comparison of the company's compensation profile to its
competitors is presented below. For 2002, the salary,
bonus and restricted stock compensation of The St. Paul
proxy officers was significantly less than that paid to the
proxy officers of each of our four principal competitors.
The facts speak for themselves:
- We paid 7% less than CNA
- We paid 13% less than The Travelers
- We paid 20% less than Chubb
- We paid 29% less than The Hartford
St. Paul senior management, including Jay Fishman, has met
with the company employee who has put forth this
shareholder proposal on at least six occasions in an
attempt to listen to his concerns and give him the facts
that would be helpful in allaying his concerns regarding
The St. Paul. Notwithstanding these efforts, this
individual, for whatever reasons, is making information
available which continues to mischaracterize Jay Fishman's
compensation as approximately $39 million for 2001, the
year that he joined The St. Paul. This is simply
incorrect, and below are the facts that set the record
straight.
- Jay joined the company in October 2001, and his salary
was set by the Board at $1 million annually. Thus, on a
pro rata basis, Jay received approximately $200,000 in
salary in 2001.
- In early 2002, Jay asked the Board not to pay his
guaranteed bonus of more than $200,000 for 2001. In its
place, the Board granted him 12,245 stock options at an
exercise price of approximately $44, the stock price on
the day the options were granted. Jay, like all senior
management, received no performance bonus for 2001.
- As indicated in the 2001 proxy, Jay received a one-
time partial reimbursement for compensation that he
forfeited when he left his previous employer to join The
St. Paul. He received 145,000 shares of restricted stock,
and $2.5 million in cash. Jay continues to hold all the
shares that were awarded.
- Finally, in connection with joining the company, Jay
received an initial stock option grant of 1.5 million
shares, with an exercise price of approximately $46, the
market price when he joined The St. Paul. As of this
date, Jay has received no value for these options, and
unless the stock trades above this exercise price, he will
receive no value in the future.
- For 2002, Jay's compensation is straightforward and is
clearly and fully described in the proxy statement.
Any employee who would like to discuss these executive
compensation issues further should contact John Clifford in
Human Resources.
We regret that it is necessary to take your time to review
this issue. However, we feel that it is critical that all
employees have the correct information. The actions we
have taken clearly demonstrate that we are a company
resolutely focused on the creation of shareholder value.