DEF 14A
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ddef14a.txt
DEFINITIVE PROXY STATEMENT
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
The McGraw Hill Companies, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[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:
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(2) Aggregate number of securities to which 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 fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
1221 Avenue of the Americas
New York, NY 10020
The McGraw-Hill Companies [LOGO]
March 26, 2001
Dear Shareholder:
On behalf of the Board of Directors and management, we cordially invite you to
the Annual Meeting of Shareholders to be held Wednesday, April 25, 2001, at 11
A.M., at the principal executive offices of the Corporation, 1221 Avenue of
the Americas, New York, New York 10020. In the pages that follow you will find
the Notice of Meeting and Proxy Statement describing the formal business to be
transacted at this Meeting. Please read them carefully.
At the Annual Meeting, there will be a report to shareholders regarding the
operations of The McGraw-Hill Companies, Inc. In addition, time will be made
available for shareholders to discuss the formal business items as well as to
ask other questions about The McGraw-Hill Companies' operations.
It is important that your shares be voted at the Meeting in accordance with
your preference whether or not you plan to attend in person. Please sign, date
and return the enclosed Proxy Card in the prepaid envelope provided, or you
may access the automated telephone voting feature or vote electronically via
the Internet as described on your Proxy Card. Your cooperation in promptly
voting will save your Corporation additional solicitation costs and is appre-
ciated. If you do attend the meeting and wish to vote in person, you may with-
draw your Proxy at that time.
Sincerely,
/s/ Harold W. McGraw III
Harold W. McGraw III
Chairman of the Board, President and
Chief Executive Officer
1221 Avenue of the Americas
New York, NY 10020
The McGraw-Hill Companies [LOGO]
Notice of Annual Meeting of Shareholders
To Be Held April 25, 2001
To the Shareholders of The McGraw-Hill Companies, Inc.:
The Annual Meeting of Shareholders of The McGraw-Hill Companies, Inc. (the
"Corporation") will be held at the principal executive offices of the Corpora-
tion, 1221 Avenue of the Americas, New York, New York 10020, Wednesday, April
25, 2001, at 11 A.M., for the purpose of considering and voting upon the fol-
lowing:
1. Election of four directors;
2. Ratification of the appointment of independent auditors for 2001; and
3. Such other business as may properly come before the Meeting or any adjourn-
ment thereof.
Information relating to the above matters is set forth in the accompanying
Proxy Statement.
In accordance with the By-Laws and resolutions of the Board of Directors, only
shareholders of record at the close of business on March 13, 2001 shall be en-
titled to notice of and to vote at the Meeting.
By Order of the Board of Directors
Scott L. Bennett
Senior Vice President, Associate General
Counsel and Secretary
New York, New York
March 26, 2001
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Please sign and return the enclosed Proxy Card in the postage-paid envelope
provided, or if you prefer, please follow the instructions on the enclosed
Proxy Card for voting by telephone or via the Internet. You may access The
McGraw-Hill Companies' Investor Relations Web site at www.mcgraw-
hill.com/investor relations for further
Internet voting instructions, as well as to view the Proxy Statement and
Annual Report.
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The McGraw-Hill Companies, Inc.
Annual Meeting of Shareholders
To Be Held April 25, 2001
PROXY STATEMENT
To the Shareholders of The McGraw-Hill Companies, Inc.:
This statement is furnished in connection with the solicitation of proxies by
the Board of Directors of The McGraw-Hill Companies, Inc. (the "Corporation")
for use at the Annual Meeting of Shareholders to be held at 11 A.M. on April
25, 2001 (the "Meeting"), at the principal executive offices of the Corpora-
tion, 1221 Avenue of the Americas, New York, New York 10020, and at any ad-
journment thereof. A Notice of Meeting is attached hereto and a form of proxy
is enclosed.
The Proxy
The persons named as proxies were selected by the Board of Directors of the
Corporation and are officers of the Corporation.
Shareholders who do not expect to attend the Meeting in person are asked to
vote in one of the following three manners: (a) by electronic voting via the
Internet as described on the enclosed proxy card and as also described on the
Corporation's Investor Relations Web site at www.mcgraw-hill.com/investor re-
lations; (b) by telephonic voting as described on the enclosed proxy card; or
(c) by dating, signing and completing the enclosed proxy card and by returning
it without delay in the enclosed envelope, which requires no postage stamp if
mailed in the United States. Any shareholder giving a proxy has the power to
revoke it at any time before it is voted at the Meeting by filing with the
Secretary of the Corporation an instrument revoking it or by filing a duly ex-
ecuted proxy bearing a later date.
When the proxies are properly voted in one of the manners described above, the
shares they represent will be voted at the Meeting. If a shareholder partici-
pates in the Dividend Reinvestment Plan, any proxy given by such shareholder
will also govern the voting of all shares held for the shareholder's account
under the Dividend Reinvestment Plan, unless contrary instructions are re-
ceived.
The cost of soliciting proxies will be borne by the Corporation. The Corpora-
tion will request banks and brokers to solicit their customers who have a ben-
eficial interest in the Corporation's shares registered in the names of nomi-
nees and will reimburse such banks and brokers for their reasonable out-of-
pocket expenses of such solicitations. In addition, officers and full-time em-
ployees of the Corporation may solicit proxies by telephone or personal inter-
view. The Corporation has retained Georgeson Shareholder Communications Inc.
to assist in the solicitation of proxies. It is estimated the Corporation will
pay Georgeson Shareholder Communications Inc. a fee of $18,000 for these serv-
ices.
These proxy materials are being mailed to shareholders of the Corporation com-
mencing on March 26, 2001. A copy of the 2000 Annual Report to Shareholders
was mailed to shareholders on March 16, 2001.
Voting Securities
The outstanding securities of the Corporation on March 13, 2001 were
194,921,793 shares of Common Stock, par value $1 per share, and 1,328 shares
of $1.20 Convertible Preference Stock, par value $10 per share. Each share of
Common Stock and $1.20 Convertible Preference Stock is entitled to one vote at
the Meeting.
Voting Procedures
Under the New York Business Corporation Law (the "BCL") and the Corporation's
Restated Certificate of Incorporation, the presence, in person or by proxy, of
the holders of a majority of the outstanding shares of Common Stock and $1.20
Convertible Preference Stock is necessary to constitute a quorum of sharehold-
ers to take action at the Meeting. For these purposes, shares which are pres-
ent, or represented by a proxy, at the Meeting will be counted for quorum pur-
poses regardless of whether the holder of the shares or proxy fails to vote on
any particular matter or whether a broker with discretionary authority fails
to exercise its discretionary voting authority with respect to any particular
matter. Once a quorum of the shareholders is established, under the BCL and
the Corporation's Restated Certificate of Incorporation, (A) the directors
standing for election as set forth on pages 3 and 4 must be elected by a plu-
rality of the votes cast (Proposal One) and (B) the affirmative vote of the
holders of a majority of the votes cast is required to ratify the appointment
of the auditors as described on page 17 (Proposal Two). For voting purposes
(as opposed to for purposes of establishing a quorum), abstentions and broker
non-votes will have no effect in determining whether any item has been ap-
proved.
Votes at the Meeting will be tabulated by two inspectors of election appointed
by the Board of Directors.
1
1. ELECTION OF FOUR DIRECTORS
Under the Corporation's Restated Certificate of Incorporation, there are three
classes of directors which are to be as equal in number as possible. Two di-
rectors, Linda Koch Lorimer and Harold W. McGraw III, were elected in 1999 for
three-year terms expiring at the 2002 Annual Meeting. In addition, Sir
Winfried Bischoff was elected in 2000 for a two-year term expiring at the 2002
Annual Meeting. None of these three incumbent directors is standing for re-
election at the Meeting.
Three directors, Vartan Gregorian, James H. Ross and Sidney Taurel, were
elected in 2000 for three-year terms expiring at the 2003 Annual Meeting. None
of these three incumbent directors is standing for re-election at the Meeting.
Four directors, Pedro Aspe, George B. Harvey, Robert P. McGraw and Lois Dick-
son Rice, were elected in 1998 for three-year terms expiring at the 2001 An-
nual Meeting. Mr. Harvey, a director of the Corporation since 1985, will be
retiring from the Board after the Meeting pursuant to the Board of Directors'
long-standing retirement age policy. Accordingly, Ms. Rice and Messrs. Aspe
and Robert P. McGraw are to be elected at the Meeting for three-year terms ex-
piring at the 2004 Annual Meeting. In addition, Edward B. Rust, Jr. was
elected a director on January 31, 2001, by action of the Board of Directors
taken pursuant to the Corporation's By-Laws, for a term expiring at the 2001
Annual Meeting. Mr. Rust is also to be elected at the Meeting for a three-year
term expiring at the 2004 Annual Meeting.
In summary, at the Meeting, Ms. Rice and Messrs. Aspe, Robert P. McGraw and
Rust are to be elected for three-year terms expiring at the 2004 Annual Meet-
ing.
Harold W. McGraw, Jr., a director of the Corporation from 1954 to 1988, Chair-
man of the Board from 1976 to 1988, and Chief Executive Officer of the Corpo-
ration from 1975 to 1983, retired from the Board after the 1988 Annual Meeting
pursuant to the Board's retirement age policy. However, in recognition of
Mr. McGraw's past service and contributions to the Corporation and to assure
his continued close association with the Board and the Corporation, the Board
of Directors elected Mr. McGraw permanently to the position of Chairman Emeri-
tus.
2
The Board of Directors' Recommendation
Unless otherwise specified by the shareholder, the Board of Directors intends
the accompanying proxy to be voted FOR the election of the named four nominees
as directors.
The Board of Directors does not contemplate that any nominee will be unable or
unwilling to serve as a director. However, if that should occur, the individu-
als named as the proxies reserve the right to substitute another person as may
be selected by the Board of Directors when voting at the Meeting.
Following is information about each of the four nominees for director who are
being proposed for election at the Meeting and about each of the six incumbent
directors.
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Nominees for Election as Directors for Terms Expiring at the 2004 Annual
Meeting
Pedro Aspe, age 51, has been Chairman of the Board of Vec-
tor Casa de Bolsa, S.A. de C.V. ("Vector"), an investment
banking firm in Mexico providing financial services to cor-
porations, financial institutions and individual investors,
since 1996. Vector is a subsidiary of Pulsar International,
S.A. de C.V., an industrial and financial company headquar-
tered in Mexico. Dr. Aspe has been since 1995 a professor
at the Instituto Tecnologico Autonomo de Mexico, located in
Mexico City. Dr. Aspe has held a number of positions with
the Mexican government and was most recently the Secretary
of Finance and Public Credit of Mexico from 1988 through
1994. Dr. Aspe is a member of the Advisory Board of Stan-
ford University's Institute of International Studies, of
the Visiting Committee of the Department of Economics of
MIT, of the Center for Politics and Economics at Claremont
University, of the Governing Board of Duxx Graduate School
of Business Leadership, and of the Executive Council of the
Mexican Center of The University of Texas at Austin. Dr.
Aspe is also a director of Axa S.A. de C.V. (Mexico) and
sits on the Advisory Board of Marvin & Palmer in Wilming-
ton, Delaware. Dr. Aspe has served as a director of the
Corporation since 1996 and is a member of the Audit and Fi-
nancial Policy Committees.
[PHOTO OF PEDRO ASPE]
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Robert P. McGraw, age 46, is currently President of
Averdale International LLC, an investment and consulting
company. He also serves as Chairman and Chief Executive Of-
ficer of Dragon River Health Products, LLC. Prior to that,
Mr. McGraw was Executive Vice President of the Professional
Publishing Group of the Corporation from 1989 to August
1998. He was Executive Vice President of the Healthcare
Group from 1987 to 1989, and Group Vice President of that
same group from 1985 to 1987. Prior to that he served in
several key positions in the Health Professions Division:
as General Manager from 1983 to 1985; as Editorial Director
from 1982 to 1983; and as Editor from 1979 to 1982. He
joined the Corporation in 1976 as a sales representative
for McGraw-Hill Higher Education, formerly known as the
College Division. Mr. McGraw has served as a director of
the Corporation since 1995 and is a member of the Financial
Policy Committee. (a)
[PHOTO OF ROBERT P. MCGRAW]
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Lois Dickson Rice, age 68, has been a guest scholar since
1991 in the Economics Study Program at the Brookings Insti-
tution, a research and education organization. Prior to
that she had been for more than five years Senior Vice
President, Government Affairs, and a director of Control
Data Corporation, which applies technology to specialized
computer, information and management needs. She has held
various positions with the College Board, an educational
association, and from 1971 through 1981 served as one of
its Vice Presidents. Ms. Rice is a director of Interna-
tional Multifoods and Unum/Provident Corporation. Ms. Rice
is a Trustee of the Harry Frank Guggenheim Foundation and
Reading Is Fundamental. She was a member of President
Clinton's Foreign Intelligence Advisory Board and a direc-
tor of the Public Agenda Foundation. Ms. Rice has served as
a director of the Corporation since 1988 and is a member of
the Audit and Compensation Committees.
[PHOTO OF LOIS DICKSON RICE]
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Edward B. Rust, Jr., age 50, has been since 1987 Chairman
of the Board and Chief Executive Officer of State Farm Mu-
tual Automobile Insurance Company. In addition, Mr. Rust is
President and Chief Executive Officer of a number of State
Farm affiliate companies. These combined State Farm enti-
ties constitute the largest insurer of automobiles and
homes in the United States. Mr. Rust is a director of Hel-
merich & Payne, an oil and gas exploration and production
company. Mr. Rust is Chairman of the American Enterprise
Institute and the Illinois Business Roundtable, and a
Trustee for Illinois Wesleyan University. Additionally, he
was selected to be a member of President George W. Bush's
Transition Advisory Team committee on education. He is also
Vice Chairman of the Business Higher Education Forum and
co-chairman of the Committee for Economic Development's
subcommittee on education studies. Mr. Rust has served as a
director of the Corporation since January 2001 and is a
member of the Audit and Compensation Committees.
[PHOTO OF Edward B. Rust, Jr.]
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Directors Whose Terms Expire at the 2002 Annual Meeting
Sir Winfried Bischoff (Sir Win), age 59, has been since May
2000 Chairman of Citigroup Europe, which represents the Eu-
ropean businesses of Citigroup, Inc., a global financial
services firm. He is also a member of Citigroup, Inc.'s
management committee. Sir Win was Chairman of Schroders
plc, an international investment banking and asset manage-
ment firm based in Great Britain, from 1995 to 2000. Prior
to that, Sir Win was Chairman of J. Henry Schroder Co. (the
London investment bank of Schroders plc) from 1983 to 1995
and Group Chief Executive of Schroders plc from 1984 to
1995. He is Deputy Chairman of Cable and Wireless plc where
he has been a director since 1991. Sir Win is a director of
Eli Lilly and Company, IFIL SpA (Italy) and Land Securities
plc. Sir Win has served as a director of the Corporation
since 1999 and is a member of the Audit and Financial
Policy Committees.
[PHOTO OF WINFRIED BISCHOFF]
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Linda Koch Lorimer, age 49, has been Vice President and
Secretary of Yale University since 1995, having returned to
Yale as Secretary of the University in 1993. She was Presi-
dent of Randolph-Macon Woman's College from 1987 to 1993
and was Associate Provost of Yale University from 1983 to
1987. She is a director of Sprint Corporation. Ms. Lorimer
also serves on the Board of Governors of the Center for
Creative Leadership, is Vice Chairman of the Board of the
Community Foundation of Greater New Haven and is the former
Chairman of the Board of the Association of American Col-
leges and Universities. Ms. Lorimer has served as a direc-
tor of the Corporation since 1994 and is a member of the
Compensation and Nominating and Corporate Governance Com-
mittees.
[PHOTO OF LINDA KOCH LORIMER]
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Harold W. McGraw III, age 52, has been Chairman of the
Board of the Corporation since 2000 and President and Chief
Executive Officer of the Corporation since 1998. Prior to
that, Mr. McGraw had been President and Chief Operating Of-
ficer of the Corporation since 1993. He was Executive Vice
President, Operations, of the Corporation from 1989 to
1993. Prior to that he was President of the McGraw-Hill Fi-
nancial Services Company, President of the McGraw-Hill Pub-
lications Company, Publisher of McGraw-Hill's Aviation Week
& Space Technology magazine and Vice President, Corporate
Planning. Before joining the Corporation in 1980, he held
several financial positions at the GTE Corporation. He is a
member of the Business Roundtable and the Business Council,
serves on the Boards of Hartley House (a New York City com-
munity settlement house), the National Actors Theatre, the
National Academy Foundation, the National Council on Eco-
nomic Education, the Wharton Graduate Executive Board, and
is co-chair of Carnegie Hall's Corporate Fund. Mr. McGraw
has served as a director of the Corporation since 1987 and
is Chairman of the Executive Committee. (a)
[PHOTO OF HAROLD W. MCGRAW III]
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Directors Whose Terms Expire at the 2003 Annual Meeting
Vartan Gregorian, age 66, has been since 1997 the President
of Carnegie Corporation of New York, a private philan-
thropic and grant-making institution. Prior to that he was
President of Brown University and a Professor of History at
Brown University from 1989 to 1997. He was President and
Chief Executive Officer of the New York Public Library from
1981 to 1989. Prior to 1981, Dr. Gregorian taught and held
administrative posts at the University of Texas at Austin
and at the University of Pennsylvania, where he served as
the founding Dean of the Faculty of Arts and Sciences and
Provost. Dr. Gregorian is a director of the Institute for
Advanced Study, the J. Paul Getty Trust and the Museum of
Modern Art (New York). He has served on the boards of many
non-profit organizations and foundations. Currently he is
President Emeritus of the New York Public Library and Brown
University. He was appointed by President George W. Bush to
be a member of the Fulbright Commission. He is also a mem-
ber of the American Philosophical Society and a Fellow of
the American Academy of Arts and Sciences. In 1998 Presi-
dent Clinton awarded him the National Humanities Medal. Dr.
Gregorian has served as a director of the Corporation since
1990 and is Chairman of the Nominating and Corporate Gover-
nance Committee and is a member of the Compensation and Ex-
ecutive Committees.
[PHOTO OF VARTAN GREGORIAN]
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James H. Ross, age 62, has been since 1999 Chairman of
National Grid plc, a public UK Company with interests in
electricity transmission and telecommunications in England,
Wales, the United States, Brazil and Argentina. Mr. Ross
has also been since 1996 Chairman of The Littlewoods
Organisation, a private company in Great Britain operating
in the retail, home shopping and leisure businesses. Mr.
Ross was Chief Executive and Deputy Chairman of Cable &
Wireless plc, an international provider of
telecommunications services, between 1992 and 1995. He was
a Managing Director of British Petroleum plc, which engages
in all phases of the petroleum business, from 1991 to 1992,
and Chairman and Chief Executive Officer of BP America
Inc., a subsidiary of British Petroleum plc, from 1988 to
1992. Mr. Ross is a director of Schneider Electric and
Datacard Inc. He is a trustee of the Cleveland Orchestra.
Mr. Ross has served as a director of the Corporation since
1989 and is Chairman of the Financial Policy Committee and
is a member of the Executive and Nominating and Corporate
Governance Committees.
[PHOTO OF JAMES H. ROSS]
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Sidney Taurel, age 52, has been Chairman, President and
Chief Executive Officer of Eli Lilly and Company, a pharma-
ceutical company, since 1999. Mr. Taurel was President and
Chief Executive Officer of Eli Lilly and Company from June
1998 through December 1998. Prior to that, Mr. Taurel was
President and Chief Operating Officer of Eli Lilly and Com-
pany since 1996. He was elected a director of Eli Lilly and
Company in 1991. Mr. Taurel joined Eli Lilly and Company in
1971 and has held management positions in the company's op-
erations in Brazil and Europe. He served as President of
Eli Lilly International Corporation from 1986 until 1991,
as Executive Vice President of the Pharmaceutical Division
from 1991 until 1993 and as Executive Vice President of Eli
Lilly and Company from 1993 until his appointment in 1996
as President and Chief Operating Officer. Mr. Taurel is a
director of IBM. He is also a member of the Board of Direc-
tors of the Pharmaceutical Research and Manufacturers of
America. Mr. Taurel is a member of the Board of Overseers
of the Columbia Business School and a Trustee of the India-
napolis Museum of Art. Mr. Taurel has served as a director
of the Corporation since 1996 and is Chairman of the Com-
pensation Committee and is a member of the Executive and
Nominating and Corporate Governance Committees.
[PHOTO OF SIDNEY TAUREL]
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(a)Harold W. McGraw III and Robert P. McGraw are brothers and the sons of
Harold W. McGraw, Jr.
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5
INFORMATION AS TO COMMITTEES, ATTENDANCE
AND FEES OF THE BOARD OF DIRECTORS
The Corporation's Board of Directors has standing Audit, Compensation and Nom-
inating and Corporate Governance Committees.
The Audit Committee is comprised of Ms. Lois Dickson Rice and Messrs. Pedro
Aspe, Winfried Bischoff, George B. Harvey and Edward B. Rust, Jr. During 2000,
the Audit Committee held five meetings. The functions performed by the Audit
Committee include assisting the Board of Directors in monitoring: (a) the in-
tegrity of the financial statements of the Corporation; (b) the compliance by
the Corporation with legal and regulatory requirements; and (c) the indepen-
dence and performance of the Corporation's internal and external auditors. The
functions performed by the Audit Committee are further described in the Char-
ter of the Audit Committee, which is included as Exhibit A to this Proxy
Statement.
The Compensation Committee is comprised of Ms. Lois Dickson Rice and Linda
Koch Lorimer and Messrs. Vartan Gregorian, Edward B. Rust, Jr. and Sidney
Taurel. During 2000, the Compensation Committee held seven meetings. The func-
tions performed by the Compensation Committee include: (a) establishing and
approving the compensation to be paid to members of the Corporation's senior
management; (b) administering the Corporation's executive incentive plans; (c)
administering the Corporation's stock incentive plans; and (d) authorizing and
approving special compensation arrangements for senior management.
The Nominating and Corporate Governance Committee is comprised of Ms. Linda
Koch Lorimer and Messrs. Vartan Gregorian, George B. Harvey, James H. Ross and
Sidney Taurel. During 2000, the Nominating and Corporate Governance Committee
held four meetings. The functions performed by the Nominating and Corporate
Governance Committee include: (a) recommending to the Board of Directors the
slate of nominees for election as directors at each Annual Meeting or for
election by the Board of Directors on an interim basis; (b) recommending to
the Board of Directors individuals to fill vacancies on it; (c) evaluating, on
a continuing basis, possible candidates to serve on the Board of Directors;
(d) recommending to the Board of Directors appropriate compensation to be paid
to the directors; (e) administering the Director Deferred Stock Ownership
Plan; (f) determining whether any relationship exists between an outside di-
rector and the Corporation that might affect the status of the director as in-
dependent; and (g) making recommendations, from time to time, to the Board of
Directors as to matters of corporate governance and periodically monitoring
the Board's performance. The Nominating and Corporate Governance Committee is
willing to consider recommendations of nominees by a shareholder if the share-
holder submits the nomination in compliance with the advance notice, informa-
tional and other requirements set forth in the Corporation's By-Laws. Share-
holders should direct such recommendations of nominees to the Nominating and
Corporate Governance Committee, c/o the Secretary of the Corporation at 1221
Avenue of the Americas, New York, New York 10020. The Corporation's By-Laws
also contain detailed procedures, including time limitations, which a share-
holder must comply with in order to introduce an item of business at a meeting
of shareholders.
In addition to the above mentioned three Committees, the Corporation's Board
of Directors has an Executive Committee and a Financial Policy Committee.
The Board of Directors of the Corporation held a total of eight meetings dur-
ing 2000. All directors attended at least 75% of: (1) all meetings of the
Board of Directors and (2) all meetings of all Board Committees on which they
served. The overall attendance record for all directors as a group during 2000
was 95.9%.
The Corporation provides a competitive director compensation program in order
to attract and retain highly qualified individuals with a broad range of expe-
rience. In order to closely align the outside directors' compensation with the
financial interests of shareholders, approximately 50% (or a greater percent-
age should a director so elect) of each outside director's total annual com-
pensation is paid in shares of the Corporation's Common Stock pursuant to the
Director Deferred Stock Ownership Plan.
For 2000, outside directors of the Corporation received an annual cash re-
tainer of $28,000, a cash fee of $1,200 for each Board meeting which they at-
tended, and a cash fee of $1,000 for each meeting of the Audit, Compensation,
Executive, Financial Policy and Nominating and Corporate Governance Committees
which they attended.
Additionally, under the Director Deferred Stock Ownership Plan, each outside
director received a deferred share credit equal to the average cash compensa-
tion paid to all outside directors during the calendar year. For 2000, this
credit was $47,372. These deferred
6
share credits are payable in shares of the Corporation's Common Stock
following a director's termination of Board membership. Further, pursuant to
the Director Deferred Stock Ownership Plan, the Corporation has written
agreements with Ms. Linda Koch Lorimer and Lois Dickson Rice and Messrs. Pedro
Aspe, George B. Harvey and Edward B. Rust, Jr. in which they have elected to
receive all or a portion of their annual cash retainer and Board and Committee
meeting fees payable in deferred shares of the Corporation's Common Stock in
lieu of the cash payments otherwise due and payable to them.
Pursuant to the Director Deferred Compensation Plan, the Corporation currently
has written agreements with Ms. Lois Dickson Rice and Mr. Vartan Gregorian,
respectively, to defer payment to them of all or a portion of their annual
cash retainer and Board and Committee meeting fees which would otherwise be
due and payable to them in connection with their service on the Board of
Directors. Interest on the deferred cash amount is to be based on the monthly
equivalent of a corporate bond index for the preceding year plus 2% (up to a
maximum of 150% of the bond index).
Further, pursuant to the Directors Retirement Plan, annual retirement and dis-
ability benefits are to be paid to each covered, non-employee director of the
Corporation upon retirement at or after age 65 or in the event of disability
in an amount equal to 10% of the then annual retainer fee for each year of
service on the Board, provided that the director shall have been a Board mem-
ber for at least five years. This Plan was amended in 1996 to provide that
current Board members shall not accrue any additional benefits under the Plan
after June 30, 1996 and any future new Board members after such date shall not
participate in the Plan.
As an inside director who is an employee of the Corporation, Mr. Harold W. Mc-
Graw III does not receive any fees for serving on the Board or for attending
meetings of Board Committees.
Indemnification
Each of the directors and one of the executive officers have entered into an
indemnification agreement with the Corporation pursuant to which each director
and executive officer shall be indemnified against judgments, fines, amounts
paid in settlement and reasonable expenses, including attorneys' fees actually
and necessarily incurred in any action or proceeding, whether civil or crimi-
nal, or any appeal therein, to the fullest extent permitted by the applicable
provisions of the New York Business Corporation Law. Such indemnification will
be reduced to the extent that a director or executive officer is effectively
indemnified by directors' and officers' liability insurance maintained by the
Corporation. The Corporation has for many years carried directors' and offi-
cers' liability insurance coverage. The Corporation's current insurance cover-
age was purchased for the three-year period beginning December 31, 1999 and
extending through December 31, 2002, for a three year aggregate premium of
approximately $1,613,500. The Corporation has purchased this insurance cover-
age from National Union Fire Insurance Company of Pittsburgh, PA.; Federal In-
surance Company; and Great American Insurance Companies. This coverage, sub-
ject to a number of standard exclusions and certain deductibles, indemnifies
the directors and officers of the Corporation and its subsidiaries for
liabilities or losses incurred in the performance of their duties up to an ag-
gregate sum of $65,000,000. No sums have been paid under this coverage to the
Corporation or any directors or officers nor have any claims for reimbursement
been made under this policy.
7
BENEFICIAL OWNERSHIP OF THE CORPORATION'S COMMON STOCK (a),(b)
The following table indicates the beneficial ownership of the Corporation's
Common Stock as of February 15, 2001 by: (1) each of the directors and nomi-
nees; (2) the chief executive officer and each of the other four most highly
compensated executive officers; and (3) all directors, nominees and executive
officers of the Corporation as a group, based upon information supplied by
each of the directors, nominees and officers:
Sole Voting Total Director
Power and Shared Voting Right to Acquire Number Deferred
Sole Power and Shares within 60 of Shares Percent of Stock
Investment Shared Investment Days by Exercise Beneficially Common Ownership
Name of Beneficial Owner Power Power of Options Owned Stock(a) Plan(c)
------------------------ ----------- ----------------- ---------------- ------------ ---------- ---------
Pedro Aspe.............. 7,096 7,096 (d) 8,892
Robert J. Bahash........ 194,527 212,975 407,562 (d)
Winfried Bischoff....... 2,000 2,000 (d) 1,049
Vartan Gregorian........ 1,968 1,968 (d) 4,561
George B. Harvey........ 4,045 4,045 (d) 8,789
Linda Koch Lorimer...... 2,708 2,708 (d) 6,792
Barbara B. Maddock...... 41,155 87,666 128,821 (d)
Harold W. McGraw III.... 427,752 551,040 978,792 (d)
Robert P. McGraw........ 78,442 78,442 (d) 1,909
John D. Negroponte...... 9,776 48,400 58,176 (d)
Lois Dickson Rice....... 1,250 1,250 (d) 4,984
James H. Ross........... 3,124 3,124 (d) 4,561
Edward B. Rust, Jr. .... 1,000 1,000 (d)
Sidney Taurel........... 2,000 2,000 (d) 5,120
Kenneth M. Vittor....... 49,713 79,587 129,300 (d)
All Directors and Execu-
tive Officers of the
Corporation as a group
(a total of 21 persons,
including those named
above)(e)(f)........... 934,088 1,213,091 2,147,179 1.1% 46,657
-------
(a) The number of shares of Common Stock outstanding on February 15, 2001 was
194,909,896. The percent of Common Stock is based on such number of shares
and is rounded off to the nearest one percent.
(b) To the Corporation's knowledge, no person is the beneficial owner of more
than 5% of the Corporation's Common Stock, other than FMR Corp., having a
principal place of business at 82 Devonshire Street, Boston, Massachusetts
02109-3614 ("FMR"). On February 14, 2001, FMR advised the Corporation by
furnishing the Corporation with its Schedule 13G filed with the Securities
and Exchange Commission that, as of December 31, 2000, it beneficially
owned in the aggregate 11,648,701 shares or approximately 5.9% of the out-
standing Common Stock of the Corporation. FMR has certified in its Sched-
ule 13G filing that the Corporation's Common Stock was acquired in the or-
dinary course of business and was not acquired for the purpose of changing
or influencing control of the Corporation.
(c) This amount represents the number of shares of the Corporation's Common
Stock which have been credited to a bookkeeping account maintained for
each non-employee director of the Corporation pursuant to the Director De-
ferred Stock Ownership Plan. This Plan is further described on pages 6 and
7.
(d) Less than 1%.
(e) Spouses and children of some
members of this group may own
other shares in which the mem-
bers of this group disclaim any
beneficial interest and which
are not included in the above
table.
(f) Harold W. McGraw, Jr., Chairman
Emeritus of the Corporation, is
the beneficial owner, as of
February 28, 2001, of 4,805,050
shares of Common Stock, of
which 68,090 are held in Mr.
McGraw's name and 4,736,960 are
held in the name of the Harold
W. McGraw, Jr. Trust. These
shares represent approximately
2.5% of the Corporation's is-
sued and outstanding Common
Stock. In addition, Anne P. Mc-
Graw, the wife of Harold W. Mc-
Graw, Jr., is the beneficial
owner of 160,000 shares of Com-
mon Stock. None of these shares
has been included in the above
table.
8
INFORMATION AS TO EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of the
Corporation's chief executive officer and each of the other four most highly
compensated executive officers (the "Named Officers") for services rendered in
all capacities to the Corporation in 1998, 1999 and 2000:
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
---------------------------------- ----------------------------------------------
Awards Payouts
Other --------------------- ---------- All
Annual Restricted Securities Long-Term Other
Name and Principal Compen- Stock Underlying Incentive Compen-
Position Year Salary Bonus sation(a) Awards(b) Options Payouts(c) sation
------------------------ ---- -------- ---------- --------- ---------- ---------- ---------- --------
Harold W. McGraw III 2000 $900,000 $1,400,000 $32,719 0 125,000 $1,238,254 $197,601(f)
Chairman, President and 1999 825,000 1,200,000 38,805 0 189,239(d) 1,734,826 148,720
Chief Executive Officer 1998 712,000 759,562 42,158 0 134,400 1,620,019 133,418
Robert J. Bahash 2000 $605,000 $ 770,000 $20,789 0 48,000 $ 780,262 $127,032(f)
Executive Vice
President, 1999 575,000 700,000 24,388 0 183,518(d) 1,081,168 104,783
Chief Financial Officer 1998 505,000 468,079 26,893 0 57,752(d) 1,051,854 93,228
John D. Negroponte 2000 $420,000 $ 420,000 $10,097 0 28,000 $ 365,864 $ 73,447(f)
Executive Vice
President, 1999 400,000 400,000 6,481 0 26,400 -- (e) 60,853
Global Markets 1998 375,000 284,918 3,234 0 -- -- (e) 2,978
Kenneth M. Vittor 2000 $390,000 $ 380,000 $10,097 0 52,483(d) $ 365,864 $ 68,397(f)
Executive Vice President
and 1999 370,000 350,000 11,570 0 36,486(d) 502,383 56,536
General Counsel 1998 320,000 244,215 11,847 0 39,330(d) 417,806 51,490
Barbara B. Maddock 2000 $370,000 $ 380,000 $10,004 0 41,418(d) $ 357,216 $ 66,497(f)
Executive Vice
President, 1999 350,000 350,000 10,537 0 37,048(d) 408,664 51,156
Organizational
Effectiveness 1998 292,500 207,583 9,874 0 23,200 342,790 38,441
-------
(a) Represents dividend equivalents
paid on outstanding Long-Term Re-
stricted Performance Share and
Restricted Stock Awards.
(b) The number and value of Re-
stricted Performance Share hold-
ings at year end was as follows:
2000
-------------------------
Unearned
Restricted
Performance Value
Shares (at $58.625)*
----------- -------------
H. W. McGraw
III............. 34,807 $2,040,560
R. J. Bahash..... 22,116 $1,296,551
J. D.
Negroponte...... 10,741 $ 629,691
K. M. Vittor..... 10,741 $ 629,691
B. B. Maddock.... 10,643 $ 623,946
* Based on a closing price of the
Corporation's Common Stock on
December 29, 2000 of $58.625 as
reported on the New York Stock
Exchange Composite Transactions
Tape.
Dividend equivalent payments
equal to the dividend paid on the
Corporation's Common Stock were
paid in cash on Restricted Per-
formance Shares in 2000.
(c) The 2000 payment amount, representing a 150% payout, is based on a fair
market value of $58.83 for the Corporation's Common Stock on February 15,
2001.
(d) Includes Restoration Stock Options as discussed more fully on page 10.
(e) Mr. Negroponte did not participate in the 1996 and 1997 Long-Term Incen-
tive Awards which matured December 1998 and December 1999, respectively.
(f) For 2000, the dollar value re-
ported in this column includes
the following items:
2000
Above Corporation
Market Contribution
Interest on to Defined
Deferred Contribution
Compensation Plans Total
------------ ------------ --------
H. W. McGraw III.. -- $197,601 $197,601
R. J. Bahash.... $4,958 $122,074 $127,032
J. D.
Negroponte..... -- $ 73,447 $ 73,447
K. M. Vittor.... -- $ 68,397 $ 68,397
B. B. Maddock... -- $ 66,497 $ 66,497
9
OPTION GRANTS IN 2000
The following table sets forth all grants of stock options made during 2000
pursuant to the 1993 Employee Stock Incentive Plan to the Named Officers in
the Summary Compensation Table:
Individual Grants
--------------------------------------------------------------
Potential Realizable Value at
Number of % of Total Assumed Annual Rates of Stock
Securities Options Price Appreciation for Option
Underlying Granted to Exercise Term(a)
Options Employees in or Base Expiration ---------------------------------
Name Type Granted 2000 Price Date 5% 10%
---- ----------- ---------- ------------ -------- ---------- -------------- ---------------
H. W. McGraw III........ Annual 125,000 (b) 3.01% $59.2813 01/02/2010 $ 4,660,200 $ 11,809,888
R. J. Bahash............ Annual 48,000 (b) 1.16% $59.2813 01/02/2010 $ 1,789,517 $ 4,534,997
J. D. Negroponte........ Annual 28,000 (b) 0.67% $59.2813 01/02/2010 $ 1,043,885 $ 2,645,415
K.M. Vittor............. Annual 28,000 (b) 0.67% $59.2813 01/02/2010 $ 1,043,885 $ 2,645,415
Restoration 12,304 (c) 0.30% $59.4063 01/01/2008 $ 297,571 $ 693,452
Restoration 12,179 (c) 0.29% $59.4063 01/03/2009 $ 345,454 $ 827,399
B. B. Maddock........... Annual 28,000 (b) 0.67% $59.2813 01/02/2010 $ 1,043,885 $ 2,645,415
Restoration 7,390 (c) 0.18% $58.8438 01/01/2007 $ 177,034 $ 412,556
Restoration 6,028 (c) 0.15% $58.8438 01/01/2006 $ 120,637 $ 273,680
All Shareholders........ N/A N/A N/A N/A N/A $6,149,650,873(d) $15,584,458,708(d)
All Optionees........... N/A 4,153,929 100% $49.9616 (e) (e) $ 127,250,482 $ 321,504,628
Optionees' Gain as % of
All Shareholders'
Gain................... N/A N/A N/A N/A N/A 2.07% 2.06%
-------
(a) The dollar amounts under these RSO grants are non-qualified, and
columns are the result of calcu- are first exercisable six months
lations at the 5% and 10% rates after the date of grant at the
required by the Securities and market value at the date of grant
Exchange Commission for the op- of the RSO. Only one RSO will be
tion term and therefore are not granted for each original stock
intended to and may not accu- option granted. In the event of a
rately forecast possible future change in control of the Corpora-
appreciation, if any, of the Cor- tion, all options become fully
poration's Common Stock price. vested.
(b) The annual awards, which were (c) Restoration options granted pur-
granted pursuant to the 1993 Em- suant to provisions described
ployee Stock Incentive Plan, were above.
for non-qualified stock options
and provide that one-half of the (d) The amount shown represents the
option vests on the first anni- hypothetical return to all share-
versary of the grant, and the re- holders of the Corporation's Com-
maining one-half vests on the mon Stock assuming that all the
second anniversary of the grant. shareholders purchased the Corpo-
In the event of a change in con- ration's Common Stock at the
trol of the Corporation, the op- close of business on January 3,
tion becomes fully vested. 2000 at a purchase price of
$49.9616, the average price for
The Compensation Committee ap- all optionees, and that all
proved a new stock option en- shareholders hold the Common
hancement in 1997 called a Resto- Stock continuously for a ten-year
ration Stock Option ("RSO"). If period. The number of outstanding
shares of the Corporation's Com- shares of Common Stock on January
mon Stock are delivered in pay- 3, 2000 was 195,720,974. The hy-
ment of the exercise price of a pothetical return presented is
stock option (as opposed to the not intended as a projection of
use of cash or "cashless exer- the future performance of the
cises"), an RSO will be granted Corporation's Common Stock, but
equal to the number of shares rather is provided for illustra-
used to exercise the stock op- tive purposes only.
tion. The expiration date of
these RSO grants (which are made (e) Expiration dates range from Janu-
pursuant to the 1993 Employee ary 1, 2001 through November 30,
Stock Incentive Plan) remains the 2010. $49.9616 represents the av-
last day the underlying grant is erage exercise price of the
exercisable. Additionally, if grants to all optionees. All
shares are withheld to satisfy grants were made at the fair mar-
the tax obligation on the real- ket value of the Corporation's
ized gain, the RSO will include Common Stock at the time of the
shares equal to the number of grant.
shares withheld for taxes.
10
AGGREGATE OPTION EXERCISES IN 2000 AND 2000 YEAR-END OPTION VALUES
The following table sets forth information with respect to options exercised
by each of the Named Officers during 2000 and the number and value of unexer-
cised options as of December 31, 2000:
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-The-Money Options
December 31, 2000 at December 31, 2000(a)
Shares Acquired Value ------------------------- -------------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------- ----------- ------------- ----------- -------------
H. W. McGraw III........ 17,197 $ 54,815 433,540 180,000 $11,236,796 $385,000
R. J. Bahash............ 0 $ 0 166,475 70,500 $ 608,781 $157,500
J. D. Negroponte........ 8,000 $159,600 21,200 41,200 $ 312,150 $ 92,400
K. M. Vittor............ 31,476 $517,671 27,904 65,683 $ 304,339 $ 92,400
B. B. Maddock........... 22,000 $803,782 60,466 41,200 $ 629,555 $ 92,400
-------
(a) Based on a closing price of the Corporation's Common Stock on December 29,
2000 of $58.625 as reported on the New York Stock Exchange Composite
Transactions Tape.
LONG-TERM INCENTIVE PLAN AWARDS IN 2000
The following table sets forth information concerning long-term incentive
awards granted during 2000 to the Named Officers pursuant to the 1993 Employee
Stock Incentive Plan:
Estimated Future Payout
Under Non-Stock Price Based Plans
-----------------------------------
Number of Performance Period Threshold Target Maximum
Restricted Until Number of Number of Number of
Name Performance Shares(a) Maturation or Payout Shares Shares Shares
---- --------------------- -------------------- ----------- ----------- -----------
H. W. McGraw III........ 10,121 shares 3 Years 2,024 10,121 15,182
R. J. Bahash............ 6,494 shares 3 Years 1,299 6,494 9,741
J. D. Negroponte........ 3,205 shares 3 Years 641 3,205 4,808
K. M. Vittor............ 3,205 shares 3 Years 641 3,205 4,808
B. B. Maddock........... 3,205 shares 3 Years 641 3,205 4,808
-------
(a) Restricted Performance Share Awards pursuant to the 1993 Employee Stock
Incentive Plan with payment in the Corporation's Common Stock based upon
the degree of achievement of a three-year cumulative compound growth rate
in diluted earnings per share ("the EPS growth goal") maturing on December
31, 2002. The awards do not provide for interim payments (other than the
payment of dividend equivalents). The threshold amount will be earned at
the achievement of 60% of the EPS growth goal, the target amount will be
earned at the achievement of 100% of the EPS growth goal and the maximum
award amount will be earned at the achievement of 120% or more of the EPS
growth goal. The Awards will be forfeited if the achievement is less than
60% of the EPS growth goal. The Restricted Performance Shares are entitled
to dividend equivalent payments and voting rights comparable to the Corpo-
ration's Common Stock based upon the target number of shares awarded.
In the event of a change in control of the Corporation, all of the finan-
cial goals are deemed to have been satisfied, and the recipient will re-
ceive the target amount no later than the normal maturity date of the
award.
11
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a graph comparing the yearly percentage change in the cumu-
lative total shareholder return on the Corporation's Common Stock with the cu-
mulative total return of the S&P 500 Composite Stock Index and the cumulative
total return for a group of peer companies for the five-year period commencing
on January 1, 1996 and ending on December 31, 2000.
Shareholder Return
Performance Graph
Five Year Cumulative Total Return a,b,c,d
(Year Ending December 31, 2000)
[GRAPH]
1995 1996 1997 1998 1999 2000
------ ------ ------ ------ ------ ------
The McGraw-Hill Companies 100 109 179 252 310 300
S&P 500 Composite Stock Index 100 123 164 211 255 232
Peer Group 100 117 179 187 245 215
Assumes $100 invested on December 31, 1995 in The McGraw-Hill Companies Common
Stock, S&P 500 Composite Stock Index and Peer Group.
(a) Total return includes reinvest-
ment of dividends through December
31, 2000.
(b) Peer Group includes the following
companies: Dow Jones & Company, Inc.,
The Dun & Bradstreet Corporation,
Gannett Co., Inc., Houghton Mifflin
Company, Knight-Ridder Inc., Meredith
Corporation, The New York Times Com-
pany, Times Mirror Corporation
(through December 1999), and Tribune
Company.
(c) In November 1996, Dun &
Bradstreet Corporation ("D&B") spun-
off two subsidiaries. In calculating
the total shareholder return for D&B,
the shares of the spun-off subsidiar-
ies were deemed to be reinvested in
shares of D&B. In June 1998, D&B com-
pleted the spin-off of R.H. Donnelley
Corporation through a tax-free divi-
dend. The Peer Group results reflect
total shareholder returns for D&B,
including the reinvestment of a $6
per share cash equivalent distribu-
tion. Effective October 2, 2000, D&B
completed the spin-off of Moody's In-
vestor Service business segment. A
$57 cash equivalent distribution in
connection with the spin-off of
Moody's was reinvested to account for
the new capital structure.
(d) Effective June 12, 2000, Tribune
Company completed its merger with
Times Mirror Corporation ("TMC"). The
five year cumulative total return in-
cludes TMC as part of the index re-
turns beginning with December 31,
1995 through December 31, 1999. Be-
ginning with 2000, TMC has been elim-
inated from the index.
12
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
Introduction
The McGraw-Hill Companies' executive compensation program (the "Program") is
administered by the Compensation Committee of the Board of Directors (the
"Committee") which is composed of the individuals listed below who are inde-
pendent non-employee directors of the Corporation. The Committee has sole re-
sponsibility for all compensation matters with respect to the Corporation's
senior management. The Committee regularly reports to the Board of Directors
on its activities and decisions and meets in executive session with all non-
employee directors at year-end to review the CEO's performance and compensa-
tion.
Philosophy
The Program has been designed to enable the Corporation to attract, motivate
and retain senior management by providing a fully competitive total compensa-
tion opportunity based on performance. The Program consists of three key ele-
ments: (1) base salaries which reflect competitive marketplace data and evalu-
ated individual performance; (2) annual incentive opportunities which are pay-
able for the achievement of annual financial performance goals established by
the Committee; and (3) long-term stock-based incentive opportunities consist-
ing of annual grants of restricted performance shares, which are payable for
the achievement of three-year financial performance goals established by the
Committee, and annual stock option grants. The stock-based incentive opportu-
nities are intended to align the interests of senior management with those of
the Corporation's shareholders. The executive compensation program permits
differentiation in total compensation opportunity based on assessments of in-
dividual performance, contributions, assignments and future potential. Fur-
ther, the program is structured so that at higher management levels a larger
portion of annual compensation is variable, based on company performance, and
a larger portion of total compensation is composed of stock-based compensa-
tion.
The Committee's policy with respect to the tax deductibility of executive com-
pensation under Section 162(m) of the Internal Revenue Code is to qualify such
compensation for deductibility where practicable. The 1996 Key Executive
Short-Term Incentive Compensation Plan and the 1993 Employee Stock Incentive
Plan have been approved by the Corporation's shareholders pursuant to the re-
quirements of Section 162(m) of the Internal Revenue Code so that the awards
earned under these plans will qualify for tax deduction by the Corporation
when paid.
Following is a discussion of each of the elements of the Program and a de-
scription of the specific decisions and actions taken by the Committee with
regard to 2000 compensation for the CEO.
Program Competitiveness
Each element of the Program is intended to be fully competitive with compara-
ble elements of competitor companies in the publishing, information and media
industry. Base salaries are determined within the framework of position re-
sponsibility, individual performance and the external marketplace. Competitive
market data are derived annually using a third-party consultant survey of the
publishing, information and media industry, which includes reported data from
companies in the peer group index of the Shareholder Return Performance Graph
(the "Peer Group").
The annual incentive award opportunities are established by the Committee
based on recommendations developed by an independent compensation consulting
firm selected by the Committee. These recommended incentive opportunities are
competitive with median levels of incentive opportunities using available in-
centive opportunity data for the competitor companies included in the Peer
Group and incentive opportunity data from a third-party media industry compen-
sation survey of other publishing, information and media companies.
The long-term incentive grant guidelines provide competitive long-term compen-
sation opportunities in the form of restricted performance share and stock op-
tion grants. The grant guidelines for these awards are derived from general
industry long-term incentive grant data and are adjusted by an independent
compensation consultant to reflect median long-term incentive grant practices
of publishing, information and media industry companies including those in the
Peer Group.
Annual Salary and Incentive Compensation
Annual compensation for senior management consists of base salary and the an-
nual incentive awards earned under the 1996 Key Executive Short-Term Incentive
Compensation Plan. Base salary increases for senior executives other than the
CEO are recommended annually by Mr. McGraw and are reviewed and approved by
the Committee.
13
Target awards established under the 1996 Key Executive Short-Term Incentive
Compensation Plan are established as a dollar amount for each executive at the
beginning of the year. The maximum payment opportunity is set at 200% of the
annual target award. Payment of the annual incentive awards for Mr. McGraw and
the other executives named in the Summary Compensation Table is based on the
Corporation's performance in relation to minimum, target and maximum diluted
Earnings Per Share goals which are approved by the Committee at the beginning
of the plan year.
Long-Term Incentive Compensation
The long-term incentive compensation program for senior management consists of
two types of annual stock awards: restricted performance shares and stock op-
tions. Restricted performance share awards are established for each executive
and granted annually on or before April 1. The awards vest at the end of a
three-year award cycle within a range of 20% to 150% of the shares awarded
based on the achievement of minimum, target and maximum cumulative compound
diluted Earnings Per Share growth goals which are established by the Committee
at the beginning of the award cycle. These restricted performance share awards
are subject to forfeiture if the minimum performance goal is not attained, or
if a participant's employment is terminated for certain reasons before the
shares become vested. During the award cycle, participants receive dividends
on and have the right to vote the awarded shares.
The second component of the long-term incentive compensation program consists
of stock options which provide participants with the right to purchase shares
of the Corporation's Common Stock at its market value on the date of grant.
Each stock option grant becomes exercisable in two equal annual installments
commencing one year after grant, and each grant has a ten-year maximum term.
2000 CEO Compensation
Mr. McGraw's base salary is reviewed annually by the Committee which considers
competitive CEO base salary information from the Peer Group companies, Mr.
McGraw's individual performance and contributions since his last review, and
the merit increase guidelines in effect for other salaried employees during
this period. Effective January 1, 2000, the Committee increased Mr. McGraw's
base salary by 9.1% to $900,000 based on its review and assessment of the fac-
tors and criteria described above.
In January 2000, stock-based long-term incentive awards were granted. Mr. Mc-
Graw received an award
of 10,121 restricted performance shares which will mature on December 31,
2002, subject to the achievement of the Committee-approved diluted Earnings
Per Share performance goals established for this award, and he received
125,000 stock option shares. These awards are disclosed in the Long-Term In-
centive Plan Awards Table and the Option Grants Table.
In order to calculate the degree of achievement of the Earnings Per Share
Goals for the 2000 Short-Term Incentive Compensation Award and the 1998, 1999,
and 2000 Long-Term Restricted Performance Share Awards, the Committee deter-
mined that the reported 2000 diluted Earnings Per Share, excluding the one-
time gain on the sale of Tower Group International, the dilution associated
with the Tribune Education acquisition, and the cumulative effect of the
change in accounting required by the Securities and Exchange Commission's
Staff Accounting Bulletin No. 101, as amended, (Revenue Recognition in Finan-
cial Statements), would be used for purposes of determining the degree of
achievement of these awards.
In early 2001, the Committee reviewed and approved the 2000 annual incentive
award payment for Mr. McGraw under the 1996 Key Executive Short-Term Incentive
Compensation Plan. Based on the Corporation's adjusted diluted Earnings Per
Share for 2000, as measured against the Earnings Per Share performance goal
established by the Committee at the beginning of the year, Mr. McGraw's earned
incentive payment was $1,400,000, representing 200% of his 2000 target oppor-
tunity.
In early 2001, the Committee reviewed and approved the degree of achievement
and award payout to Mr. McGraw for the 1998 Long-Term Restricted Performance
Share Award which covered the years 1998, 1999 and 2000 and matured on Decem-
ber 31, 2000. The cumulative compound Earnings Per Share growth for the three-
year award cycle exceeded the maximum 150% payment goal established by the
Committee for this Award. As a result, Mr. McGraw received a share payment of
21,048 shares representing 150% of his target award. The dollar value of
Mr. McGraw's 1998 Long-Term Restricted Performance Share Award payout is shown
in the Long-Term Incentive Plan Payout Column of the Summary Compensation Ta-
ble.
Closing Statement
The Committee believes that the caliber and motivation of the Corporation's
key employees and the quality of their leadership make a significant differ-
ence in the long-term performance of the Corporation. The Committee further
believes that compensation should vary with the Corporation's financial per-
formance so that executives are well rewarded when performance
14
meets or exceeds standards established by the Committee, and there should be
downside risks to compensation when performance does not meet these standards.
In its view, the Committee believes that The McGraw-Hill Companies' executive
compensation program is meeting the goals contained in the Program's
philosophy.
The foregoing report has been furnished on behalf of the Board of Directors by
the members of its Compensation Committee.
Sidney Taurel (Chairman)
Vartan Gregorian
Linda Koch Lorimer
Lois Dickson Rice
AUDIT COMMITTEE REPORT
The Audit Committee reviews the Corporation's financial reporting process on
behalf of the Board of Directors. All of the members of the Committee are in-
dependent directors in accordance with the definition of such independence as
provided by the listing standards of the New York Stock Exchange. Management
has the primary responsibility for the financial statements and the reporting
process, including the system of internal controls. The Board of Directors has
adopted a written charter for the Audit Committee, which is included as Ex-
hibit A to this Proxy Statement.
In this context, the Committee has met and held discussions with management
and the independent auditors. Management represented to the Committee that the
Corporation's 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
independent auditors, which review included a discussion of the quality, and
not just the acceptability, of the accounting principles, the reasonableness
of significant judgments, and the clarity of disclosures in the financial
statements. The Committee discussed with the independent auditors matters re-
quired to be discussed by Statement on Auditing Standards No. 61 (Communica-
tion With Audit Committees).
In addition, the Committee has reviewed with the independent auditors the au-
ditor's independence from the Corporation and its management. The Audit Com-
mittee received from the independent auditors the written disclosures and the
letter regarding its independence as required by Independence Standards Board
Standard No. 1 (Independence Discussions With Audit Committees).
The Committee discussed with the Corporation's internal and independent audi-
tors the overall scope and plans for their respective audits. The Committee
met with the internal and independent auditors, with and without management
present, to discuss the results of their examinations, the evaluations of the
Corporation's internal controls, and the overall quality of the Corporation's
financial reporting.
The Committee has also considered whether the provision of services by our in-
dependent auditors Ernst & Young LLP not related to the audit of the financial
statements referred to above is compatible with maintaining Ernst & Young
LLP's independence.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board has approved, that the
audited financial statements be included in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 2000, as filed with the Securities
and Exchange Commission. The Committee and the Board also have recommended,
subject to shareholder approval, the selection of the Corporation's indepen-
dent auditors for 2001.
George B. Harvey (Chairman)
Pedro Aspe
Winfried F.W. Bischoff
Lois Dickson Rice
DEFINED BENEFIT RETIREMENT PLANS
The officers named in the Summary Compensation Table are entitled to retire-
ment benefits under two defined benefit plans maintained by the Corporation:
The Employee Retirement Plan ("ERP"), and the Employee Retirement Plan Supple-
ment ("ERP Supplement"). In addition, Messrs. McGraw and Bahash participate in
the Senior Executive Supplemental Death, Disability and Retirement Benefits
Plan (the "Supplemental Benefits Plan").
The ERP provides participants with retirement benefits based upon career com-
pensation. These benefits are subject to limitation under certain provisions
of the Internal Revenue Code. The Corporation makes all of the required con-
tributions to the Plan and participants make no contributions to such Plan.
The benefit formula applicable to the Named Officers is 1.0% of each year's
earnings, and the vesting schedule of ERP provides that participants are 100%
vested after comple-
15
tion of five years of continuous service with the Corporation. Under the ERP
Supplement, participants are provided with retirement benefits that would have
been provided under the ERP except for the limitations imposed by the Internal
Revenue Code.
Under the Supplemental Benefits Plan, a participant is entitled to receive
upon normal retirement at age 65 an annual retirement benefit equal to 55% of
the participant's highest rate of annual base salary and highest target oppor-
tunity under the Key Executive Short-Term Incentive Compensation Plan during
the 36 month period before retirement, reduced by the participant's annual re-
tirement benefits under ERP and ERP Supplement, the annual annuity value of a
hypothetical savings account, the participant's annual retirement benefit un-
der pension plans of any previous employers, and the participant's annual So-
cial Security retirement benefit.
The following table sets forth the annual benefits under the ERP, the ERP Sup-
plement, and the Supplemental Benefits Plan (computed as a straight life annu-
ity payment) payable upon retirement at age 65 to each of the Named Officers
based upon the Corporation's contributions and the participant's 2000 compen-
sation (salary and 2000 target opportunity under the Key Executive Short-Term
Incentive Compensation Plan for purposes of the Supplemental Benefits Plan):
ANNUAL RETIREMENT BENEFIT FROM
CORPORATE CONTRIBUTIONS
ERP and Supplemental
Name ERP Supplement Benefits Plan Total
---- -------------- ------------- --------
Harold W. McGraw III $289,000 $282,000 $571,000
Robert J. Bahash $170,000 $194,000 $364,000
John D. Negroponte $ 35,000 $ 0 $ 35,000
Kenneth M. Vittor $113,000 $ 0 $113,000
Barbara B. Maddock $ 91,000 $ 0 $ 91,000
Pursuant to the Supplemental Benefits Plan, in the event of involuntary termi-
nation of employment without cause or resignation of employment by the partic-
ipant for good reason within two years after a change of control of the Corpo-
ration, or resignation by the participant for any reason during the 30 day pe-
riod following the first anniversary of such change of control, a participant
shall receive a lump sum payment that is actuarially equivalent to the monthly
retirement benefit the participant would have received ranging from 44% to 55%
of final monthly earnings and target opportunity under the Key Executive
Short-Term Incentive Compensation Plan, based upon the participant's age at
the date of termination. The Supplemental Benefits Plan is administered by the
Compensation Committee of the Board of Directors, which Committee approves
participants who are recommended by the Corporation's Chief Executive Officer.
Senior Executive Severance Plan
The Senior Executive Severance Plan provides that if the employment of a
participating senior executive of the Corporation, including the Named
Officers, is involuntarily terminated without cause or the executive resigns
for good reason, the executive shall receive a minimum severance payment of 12
months base salary and a maximum severance payment of 24 months base salary,
the actual amount of severance to be based upon 1.6 multiplied by the number
of years of continuous service with the Corporation. In addition, each
participant shall continue to participate in the Corporation's retirement,
life, medical and other insurance benefit plans and programs during the period
the participant receives severance payments, or in lieu thereof, each
participant shall receive an additional cash payment equal to 10% of the
severance amount. The receipt of payments by participants pursuant to the
Senior Executive Severance Plan is in lieu of receiving benefits pursuant to
the Corporation's regular separation allowance plan, which plan is applicable
to all full-time employees of the Corporation. The Plan was amended to provide
that benefits will be payable to participants who voluntarily terminate their
employment within a 30 day period one year after a change in control of the
Corporation has occurred. The Senior Executive Severance Plan is administered
by the Compensation Committee of the Board of Directors, which Committee
approves participants who are recommended by the Corporation's Chief Executive
Officer.
16
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
During the year ended December 31, 2000, Ernst & Young LLP audited the consol-
idated financial statements of the Corporation and its subsidiaries.
Audit Fees
During the year ended December 31, 2000, Ernst & Young LLP billed the Corpora-
tion an aggregate of $2.2 million in fees for professional services rendered
for the audit of the Corporation's annual financial statements for the year
ended December 31, 2000, and for the reviews of the financial statements in-
cluded in the Corporation's Forms 10-Q filed with the Securities and Exchange
Commission for the year ended December 31, 2000.
All Other Fees
During the year ended December 31, 2000, Ernst & Young LLP billed the Corpora-
tion an aggregate of $4.9 million in fees for professional services rendered
for services other than those included under the paragraph referred to above
under the heading "Audit Fees". Said $4.9 million included audit-related serv-
ices of $1.2 million and non-audit services of $3.7 million. Audit-related
services generally included fees for pension and other special purpose audits,
accounting consultations and securities registration statements. Non-audit re-
lated services generally included fees for tax compliance and consulting serv-
ices. Ernst & Young LLP did not bill the Corporation any amounts for Financial
Information Systems Design and Implementation Fees.
The Board of Directors, after receiving a favorable recommendation from the
Audit Committee, has again selected Ernst & Young LLP to serve as the Corpora-
tion's independent auditors for 2001. Although not required to do so, the
Board is submitting the selection of this firm for ratification by the Corpo-
ration's shareholders to ascertain their views. Ernst & Young LLP has advised
the Corporation that it has no direct, nor any material indirect, financial
interest in the Corporation or any of its subsidiaries. A representative of
Ernst & Young LLP is expected to be present at the Meeting with the opportu-
nity to make a statement if the representative desires to do so, and such rep-
resentative will be available to respond to appropriate questions.
The following resolution will be offered by the Board of Directors at the
Meeting:
RESOLVED: That the selection by the Board of Directors of Ernst & Young LLP
as independent auditors for this Corporation and its subsidiaries for 2001
be, and hereby is, ratified and approved.
The Board of Directors' Recommendation
Your Board recommends that you vote FOR this resolution. Unless otherwise
specified by the shareholder, the Board intends the accompanying proxy to be
voted for this resolution.
3. OTHER MATTERS
The Board of Directors knows of no other matters which may properly be brought
before the Meeting. However, if other matters should properly come before the
Meeting, it is the intention of those named in the solicited proxy to vote
such proxy in accordance with their best judgment.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Corpora-
tion's directors, executive officers, and persons who own more that 10% of a
registered class of the Corporation's equity securities, to file with the Se-
curities and Exchange Commission and the New York Stock Exchange reports on
Forms 3, 4 and 5 concerning their ownership of the Common Stock and other eq-
uity securities of the Corporation.
Based solely on the Corporation's review of copies of such reports and written
representations that no other reports were required, the Corporation believes
that all of its directors and executive officers filed all of said reports on
a timely basis during 2000 except for Vartan Gregorian, who inadvertently
filed one late report on Form 4 disclosing one transaction.
Deadlines for Submission of Shareholder Proposals
There are two different deadlines for the submission of shareholder proposals.
Shareholder proposals which are being submitted for inclusion in the Corpora-
tion's proxy statement and form of proxy for the 2002 Annual Meeting of Share-
holders must be received by the Corporation at its principal executive of-
fices, 1221 Avenue of the Americas, New York, New York 10020, on or before No-
vember 23, 2001. Such proposals when submitted must be in full compliance with
applicable laws, including Rule 14a-8 of the Securities Exchange Act of 1934.
17
Under the Corporation's By-Laws, shareholder proposals which are being
submitted other than for inclusion in the Corporation's proxy statement and
form of proxy for the 2002 Annual Meeting of Shareholders must be received by
the Corporation at its principal executive offices, 1221 Avenue of the
Americas, New York, New York 10020, no earlier than December 27, 2001 and no
later than January 25, 2002. Such proposals when submitted must be in full
compliance with applicable law and the Corporation's By-Laws.
By Order of the Board of Directors
Scott L. Bennett
Senior Vice President, Associate General Counsel and Secretary
New York, New York
March 26, 2001
18
EXHIBIT A
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AUDIT COMMITTEE CHARTER
-------------------------------------------------------------------------------
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AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board to assist the Board in monitor-
ing (1) the integrity of the financial statements of the Company, (2) the com-
pliance by the Company with legal and regulatory requirements and (3) the in-
dependence and performance of the Company's internal and external auditors.
The members of the Audit Committee shall meet the independence and experience
requirements of the New York Stock Exchange. The members of the Audit Commit-
tee shall be appointed by the Board on the recommendation of the Nominating
and Corporate Governance Committee.
The Audit Committee shall have the authority to retain special legal, account-
ing or other consultants to advise the Committee. The Audit Committee may re-
quest any officer or employee of the Company or the Company's outside counsel
or independent auditor to attend a meeting of the Committee or to meet with
any members of, or consultants to, the Committee.
The Audit Committee shall make regular reports to the Board.
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management, including
major issues regarding accounting and auditing principles and practices as
well as the adequacy of internal controls that could significantly affect
the Company's financial statements.
3. Discuss with management and the independent auditor significant financial
reporting issues and judgments made in connection with the preparation of
the Company's financial statements.
4. Review with management and the independent auditor the Company's quarterly
and yearly financial statements prior to the filing of a Form 10-Q or Form
10-K.
5. Meet periodically with management to review the Company's major financial
risk exposures and the steps management has taken to monitor and control
such exposures.
6. Review major changes to the Company's auditing and accounting principles
and practices as suggested by the independent auditor, internal auditors
or management.
7. Recommend to the Board the appointment of the independent auditor, which
firm is ultimately accountable to the Audit Committee and the Board.
8. Approve the fees to be paid to the independent auditor.
9. Receive periodic reports from the independent auditor regarding the audi-
tor's independence, discuss such reports with the auditor, and if so de-
termined by the Audit Committee, recommend that the Board take appropriate
action to satisfy itself of the independence of the auditor.
10. Evaluate together with the Board the performance of the independent audi-
tor and, if so determined by the Audit Committee, recommend that the Board
replace the independent auditor.
11. Review the appointment and replacement of the senior internal auditing ex-
ecutive.
12. Review the significant reports to management prepared by the internal au-
diting department and management's responses.
13. Meet with the independent auditor prior to the year-end audit to review
the scope of year-end work and coordination of efforts between the inde-
pendent auditors and the internal audit department.
14. Obtain reports, as appropriate, from management, the Company's senior in-
ternal auditing executive, and/or the independent auditor that the Company
and its subsidiary/foreign affiliated entities are in conformity with ap-
plicable legal requirements and the Company's Code of Business Ethics.
15. Discuss with the independent auditor the matters required to be discussed
by generally accepted auditing standards relating to the conduct of the
audit.
16. Review with the independent auditor any problems or difficulties the audi-
tor may have encountered and any management letter provided by the auditor
and the Company's response to that letter. Such review should include:
(a) Any difficulties encountered in the course of the audit work, including
any restrictions on the scope of activities or access to required in-
formation.
(b) Any changes required in the planned scope of the internal audit.
(c) The internal audit department responsibilities, budget and staffing.
17. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
18. Advise the Board with respect to the Company's policies and procedures re-
garding compliance with the Company's Code of Business Ethics.
19. Meet at least annually with the Chief Financial Officer, the senior inter-
nal auditing executive, and the independent auditor in separate executive
sessions.
20. Review, as appropriate, with the Company's General Counsel legal matters
that may have a material impact on the financial statements, the Company's
compliance policies and any material reports or inquiries received from
regulators or governmental agencies.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is
the responsibility of management and the independent auditor. Nor is it the
duty of the Audit Committee to conduct investigations, to resolve disagree-
ments, if any, between management and the independent auditor or to assure com-
pliance with laws and regulations and the Company's Code of Business Ethics.
[RECYCLE LOGO - Printed on Recycled Paper for a quality environment.]
The McGraw-Hill Companies, Inc.
Proxy/Voting Instruction Card Solicited on Behalf of the Board of Directors
The undersigned appoints Scott L. Bennett and Kenneth M. Vittor, and each of
them, proxies with full power of substitution, to vote the shares of stock of
The McGraw-Hill Companies, Inc., which the undersigned is entitled to vote, at
the Annual Meeting of Shareholders of said Corporation to be held at the
principal executive offices of the Corporation, 1221 Avenue of the Americas, New
York, N.Y. 10020 on Wednesday, April 25, 2001, at 11 A.M., and any adjournment
thereof.
The McGraw-Hill Companies employees. If you are a current or former employee of
the Corporation, this card also provides voting instructions for shares held in
The Savings Incentive Plan of The McGraw-Hill Companies, Inc. and its
Subsidiaries, The Employee Retirement Account Plan of The McGraw-Hill Companies,
Inc. and its Subsidiaries, The Savings Incentive Plan of Standard & Poor's, The
Employee Retirement Account Plan of Standard & Poor's, and The Employees'
Investment Plan of McGraw-Hill Broadcasting Company, Inc. If you are a
participant in any of these Plans and have shares of Common Stock of the
Corporation allocated to your account under these Plans, The Northern Trust
Company, the Trustee of each of these Plans (the "Trustee"), is hereby
instructed to vote all the shares of Common Stock of The McGraw-Hill Companies,
Inc. which are credited to the undersigned's account as of March 13, 2001, at
the Annual Meeting of Shareholders to be held on April 25, 2001, and any
adjournment thereof, on the items set forth on the reverse hereof and, in the
Trustee's discretion, upon such other business as may properly come before the
Meeting. Voting rights will be exercised by the Trustee as directed, provided
instructions are received by April 20, 2001.
THE MATTERS TO BE VOTED UPON AND THE INSTRUCTIONS ARE SET FORTH ON THE REVERSE
SIDE. PLEASE VOTE, SIGN AND RETURN PROMPTLY.
(continued and to be signed on the reverse side)
--------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE IF VOTING BY MAIL /\
ELECTRONIC ACCESS TO FUTURE ANNUAL REPORTS AND PROXY STATEMENTS
For your convenience, we are now offering shareholders of The McGraw-Hill
Companies the option of viewing future Annual Reports and Proxy Statements on
the Internet instead of receiving them by mail.
3 Ways to Consent to View Future Materials Online:
. By telephone: press 1 when asked during the voting process.
. By Internet: make this election when prompted during the voting process.
. By mail: mark the box on the top half of the proxy/voting card (see other
side).
How It Works:
If you give your consent, it means that beginning in 2002 you will only receive
a proxy/voting card in the mail. The proxy card will contain the Web site
address and other necessary information to view the Proxy Statement and Annual
Report online. You will continue to be able to vote your shares in one of three
ways: by telephone, Internet, or by mail. Costs normally associated with
electronic access, such as usage and telephone charges, will be the
responsibility of the shareholder.
To resume mail delivery of the Proxy Statement and Annual Report, you may revoke
the election at any time by calling Mellon Investor Services at 1-888-201-5538.
To view this year's materials, go to the Corporation's Investor Relations Web
site at www.mcgraw-hill.com/investor_relations
[LOGO]
The McGraw-Hill Companies
1221 Avenue of the Americas
New York NY 10020
www.mcgraw-hill.com
Please mark
your votes as [X]
indicated in
this example
THIS PROXY/VOTING INSTRUCTION CARD WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER(S). If not otherwise specified, the proxy/voting instruction card
will be voted FOR the Election of Directors and FOR Proposal 2. THE BOARD OF
DIRECTORS RECOMMENDS YOU VOTE FOR PROPOSALS 1 AND 2:
FOR ALL WITHH0LD
NOMINEE(S) AUTHORITY
except as set FOR ALL
1. Election of Directors forth below NOMINEE(S)
Election of the following nominees as
directors for three-year terms [_] [_]
expiring at the 2004 Annual Meeting:
(01) Pedro Aspe (02) Robert P. McGraw
(03) Lois Dickson Rice (04) Edward B Rust, Jr.
INSTRUCTION: To withhold authority to vote for any individual nominee(s), write
that nominee(s)' name below.
--------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Ratification of the appointment of [_] [_] [_]
independent auditors for 2001.
And, in their discretion, in the transaction of such
other business as may properly come before the
Meeting.
[_] New! Consent to View Future Materials Online
I consent to access future Annual Reports and
Proxy Statements electronically via the Internet
instead of receiving them by mail.
---------------------------------
See other side for additional details.
Signature(s) Date:
---------------------------------- ---------------
NOTE: Please sign exactly as your name appears on this card and return
the card in the enclosed envelope.
--------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE IF VOTING BY MAIL /\
3 Choices: You can vote by telephone, on the Internet or by mail
------------------------------------------------------------------------------------------------------------------------------------
VOTE BY TELEPHONE
Call toll-free 1-800-840-1208 on a touch-tone telephone 24 hours a day, 7 days a week. There is no charge to you for
this call. Have your proxy card in hand. You will be asked to enter the 11-digit control number, which is located in the
box in the lower right hand corner of this proxy card.
[GRAPHIC]
. If you choose to vote as the Board of Directors recommends on ALL proposals, press 1 when asked.
. If you choose to vote on each proposal separately, press 0 when asked, then:
You will hear these instructions for Proposal 1: You will hear these instructions for Proposal 2:
. To vote FOR ALL, press 1. . To vote FOR, press 1.
. To WITHHOLD ALL, press 9. . To vote AGAINST, press 9.
. To WITHHOLD FOR AN INDIVIDUAL NOMINEE, press 0. . To ABSTAIN, press 0.
------------------------------------------------------------------------------------------------------------------------------------
VOTE ON THE INTERNET
Access the Internet address http://www.proxyvoting.com/mhp
[GRAPHIC] ------------------------------
This site is available 24 hours a day, 7 days a week. At the Web site, enter your 11-digit control number,
which is in the lower right hand corner of this proxy card. The site offers links to online versions of the
Proxy Statement and Annual Report.
------------------------------------------------------------------------------------------------------------------------------------
VOTE BY MAIL
[GRAPHIC] Mark, sign and date your proxy card and return it promptly
in the enclosed postage-paid envelope, or mail to
Mellon Investor Services
Proxy Processing
Church Street Station, PO Box 1677
New York, NY 10008-1677
Note: If you vote by telephone or on the Internet,
DO NOT mail back your proxy card.