SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
KELLY SERVICES, INC.
(Name of registrant as specified in its charter)
KELLY SERVICES, INC.
(Name of person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: ______
______________________________________________________________________
(2) Aggregate number of securities to which transaction applies: ________
______________________________________________________________________
(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):
______________________________________________________________________
(4) Proposed maximum aggregate value of transaction: _____________________
______________________________________________________________________
(5) Total fee paid:
______________________________________________________________________
[ ] Fee paid previsouly 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: _____________________________________________
(2) Form, schedule or registration statement no.: _______________________
(3) Filing party: _______________________________________________________
(4) Date filed: _________________________________________________________
[LOGO]
KELLY SERVICES, INC.
April 24, 1998
To Our Stockholders:
We are pleased to invite you to attend the Annual Meeting of
Stockholders of Kelly Services, Inc., which will be held at 11:00 a.m.,
Eastern Daylight Time, Tuesday, May 19, 1998, in the Auditorium located on
the First Floor of the Kelly Services Headquarters Building, 999 West Big
Beaver Road, Troy, Michigan.
Matters scheduled for consideration at this Meeting are the election of
a director, voting on a proposal to approve recent amendments to the standards
for performance-based, annual incentive awards for certain executive officers
under the Company's Short-Term Incentive Plan and ratification of the
appointment of Price Waterhouse as the independent public accountants for the
Company for 1998.
The Meeting will also provide an opportunity to review with you the
business and affairs of the Company during 1997 and give you a chance to meet
your directors and officers.
Whether you plan to attend or not, please date, sign and return the
proxy card in the accompanying envelope. Your vote is important no matter how
many shares you own. If you do attend the Meeting and desire to vote in
person, you may do so even though you have previously submitted your proxy.
We look forward to seeing you at the Meeting.
Sincerely,
TERENCE E. ADDERLEY
Chairman, President and
Chief Executive Officer
KELLY SERVICES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 19, 1998
To the Stockholders of
Kelly Services, Inc.
Notice is hereby given that the Annual Meeting of Stockholders of Kelly
Services, Inc., a Delaware corporation, will be held at the offices of the
Company, 999 West Big Beaver Road, Troy, Michigan 48084-4782, on May 19, 1998
at 11 o'clock in the forenoon, Eastern Daylight Time, for the following
purposes:
1. To elect a Director as set forth in the accompanying Proxy
Statement.
2. To consider and act upon a proposal to approve recent amendments to
the standards for performance-based, annual incentive awards for
certain executive officers under the Company's Short-Term Incentive
Plan.
3. To ratify the appointment of Price Waterhouse LLP as independent
accountants.
4. To transact any other business as may properly come before the
Meeting or any adjournment or adjournments thereof.
Only holders of the Company's Class B common stock of record at the
close of business on March 23, 1998 will be entitled to notice of and to vote
at the Meeting.
To ensure a quorum, it is important that your proxy be mailed promptly
in the enclosed envelope, which requires no postage.
By Order of the Board of Directors
April 24, 1998
999 West Big Beaver Road
Troy, Michigan 48084-4782 EUGENE L. HARTWIG
Secretary
KELLY SERVICES, INC.
999 West Big Beaver Road
Troy, Michigan 48084-4782
April 24, 1998
PROXY STATEMENT
1998 ANNUAL MEETING OF STOCKHOLDERS
This statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Kelly Services, Inc.
(hereinafter called the "Company") for use at the Annual Meeting of
Stockholders of the Company to be held at the corporate offices of the
Company in Troy, Michigan on May 19, 1998 for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. The approximate date
on which this Proxy Statement and enclosed form of proxy are first being sent
to stockholders of the Company is April 24, 1998. If the enclosed form of
proxy is executed and returned by the stockholder, it may nevertheless be
revoked by the person giving it by written notice of revocation to the
Secretary of the Company, by submitting a later dated proxy or appearing in
person at the meeting any time prior to the exercise of the powers conferred
thereby.
If a proxy in the accompanying form is properly executed, returned to
the Company and not revoked, the shares represented by the proxy will be
voted in accordance with the instructions set forth thereon. If no
instructions are given with respect to the matters to be acted upon, the
shares represented by the proxy will be voted FOR the election of the
directors, designated Proposal 1 on the proxy, FOR the proposal to approve
standards for performance-based, annual incentive awards for certain
executive officers under the Company's Short-Term Incentive Plan, designated
Proposal 2, FOR the proposal to ratify the selection of independent
accountants, designated Proposal 3 on the proxy, and on any other matters
that properly come before the Annual Meeting in the manner as set forth on
the proxy. Abstentions (including broker non-votes) are not counted as votes
cast in the tabulation of votes on any matter submitted to stockholders.
Stockholders on the record date will be entitled to one vote for each
share held.
At the close of business on March 23, 1998, the outstanding number of
voting securities (exclusive of treasury shares) was 3,570,195 shares of the
Class B common stock, having a par value of $1.00. Class B common stock is
the only class of the Company's securities with voting rights.
1
Securities Beneficially Owned by
Principal Stockholders and Management
Under regulations of the Securities and Exchange Commission, persons
who have power to vote or dispose of common stock of the Company, either
alone or jointly with others, are deemed to be beneficial owners of the
common stock.
Set forth in the following table are the beneficial holdings on March
1, 1998, on the basis described above, of each person known by the Company to
own beneficially more than five percent of the Class B common stock:
Name and Address Number of Shares Percent
of and Nature of of
Beneficial Owners Beneficial Ownership (a) Class
- ----------------- ------------------------ -----
T. E. Adderley ............................. 3,214,566(b) 90.0
999 W. Big Beaver Road
Troy, Michigan 48084
First Chicago NBD Corporation. ............. 2,383,881(c) 66.7
One First National Plaza
Chicago, Illinois 60670
(a) Nature of beneficial ownership of securities is direct unless otherwise
indicated by footnote. Beneficial ownership as shown in the table arises
from sole voting power and sole investment power unless indicated by
footnote.
(b) Includes 952,100 shares directly held; 2,189,840 shares in the William R.
Kelly Trust of which he is a co-trustee and has sole investment power and
has shared voting power with First Chicago NBD Corporation, the other
co-trustee; 71,825 shares in an irrevocable trust, of which he is
beneficiary; 625 shares held in five separate trusts of which he is
co-trustee with sole or shared voting and investment power, in which he
has no equity interest; and 176 shares owned by Mr. Adderley's wife, in
which he disclaims beneficial interest. Because of the shares in the
William R. Kelly Trust of which he is a co-trustee with First Chicago NBD
Corporation and his own substantial stockholdings, Mr. Adderley may be
deemed to be a "control person" of the Company under applicable
regulations of the Securities and Exchange Commission.
(c) Based upon a report filed by First Chicago NBD Corporation with the
Securities and Exchange Commission on Schedule 13G and upon subsequent
information received from First Chicago NBD Corporation upon which the
Company relies for the information presented. The report indicates that
the number of shares of common stock owned by the reporting person are:
109,954, sole voting power; 2,264,138, shared voting power; 1,172, sole
dispositive power; and 192,869, shared dispositive power.
2
Set forth in the following table are the beneficial holdings of the
Class A and Class B common stock on March 1, 1998, on the basis described
above, of each director and the nominee for election, and all directors and
officers as a group.
Class A Common Stock Class B Common Stock
------------------------------- ------------------------------
Number of Shares Percent Number of Shares Percent
Directors and and Nature of of and Nature of of
Nominees Beneficial Ownership Class Beneficial Ownership Class
-------------- -------------------- ----- -------------------- -----
T. E. Adderley .................. 17,564,010(a)(b) 50.7 3,214,566(c) 90.0
M. A. Fay, O.P. ................. 365 * 0 *
C. V. Fricke .................... 4,457 * 781 *
V. G. Istock .................... 2,540 * 875 *
B. J. White ..................... 1,165 * 0 *
All Directors and
Executive Officers as
a group ....................... 17,742,943(b) 51.3 3,216,577 90.1
* Less than 1%
(a) Includes 770,822 shares directly held; 14,202,337 shares in the William
R. Kelly Trust of which he is co-trustee and has sole investment power
and has shared voting power with First Chicago NBD Corporation, the other
co-trustee; 310,612 shares in an irrevocable trust, of which he is
beneficiary; 2,227,092 shares held in eleven separate trusts of which he
is co-trustee with sole or shared investment power, in which he has no
equity interest; 52,009 shares held by Mr. Adderley and his wife as
custodian for certain of his minor children under the Michigan Uniform
Gifts to Minors Act, in which he has no equity interest; 1,138 shares
owned by Mr. Adderley's wife, in which he disclaims beneficial interest.
(b) Includes shares which the individuals have a right to acquire through the
exercise of stock options within 60 days.
(c) See footnote (b) to first table.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of common stock of the Company. Officers,
directors and greater than ten-percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
3
Board of Directors
The business, property and affairs of the Company are managed by the
Board of Directors, which establishes broad corporate policies and
performance objectives, but is not involved in the day-to-day operating
details. Regular meetings of the Board of Directors are held in each quarter
and special meetings are scheduled when required. The Board held four
meetings during the last fiscal year.
The Board of Directors has a standing Audit Committee, composed of M.A.
Fay, C.V. Fricke, V.G. Istock and B.J. White, which held four meetings in 1997.
The Audit Committee's purpose is to review the scope of the work and fees of
the independent accountants and to review with the independent accountants
their report or opinion on the Company's financial statements.
During 1997 the Board of Directors did not have a nominating committee.
The Compensation Committee whose functions are described in the Compensation
Committee Report on page 5 of this Proxy Statement held five meetings in 1997
and is composed of M.A. Fay, C.V. Fricke and B.J. White.
All of the Directors of the Company attended at least 75 percent of the
aggregate number of meetings of the Board of Directors and committees on
which each served, except for M.A. Fay who missed satisfying 75 percent
attendance by one meeting.
Compensation of Directors
Directors of the Company who are not salaried officers are paid an
annual retainer fee of $21,000, a fee of $1,000 for each meeting of the Board
of Directors attended and a fee of $800 for each meeting of a committee of
the Board of Directors attended. In addition, under the Non-Employee Director
Stock Award Plan approved by the stockholders in 1995, each non-officer
Director receives an annual grant of shares of the Company's Class A common
stock equal in value to one-half of the Director's annual retainer fee.
4
COMPENSATION COMMITTEE REPORT
COVERING EXECUTIVE COMPENSATION
The Company's compensation program for executives is administered by
the Compensation Committee of the Board of Directors consisting currently of
Maureen A. Fay, Cedric V. Fricke and B. Joseph White, Chairperson, each of
whom is an independent director. The Committee has responsibility for review
and approval of adjustments in salary and short-term incentive awards for
executives of the Company, including, with respect to 1997, administering the
Kelly Services, Inc. Short-Term Incentive Plan. The Committee also administers
the Kelly Services, Inc. Performance Incentive Plan (the Company's long-term
incentive plan) and makes recommendations with respect to granting awards
under such Plan subject to review and approval by a majority of the full
complement of those members of the Board of Directors who are "disinterested
persons" as that term is used in Rule 16b-3 of the Securities and Exchange
Commission.
Compensation Principles
The philosophy underlying the Company's executive compensation program
has the following goals: (a) to align key executive and management employees
with the Company's strategic and financial objectives; (b) to attract, retain
and motivate a management team of high quality; (c) to create incentives
which motivate employees to achieve continual growth and increasing
profitability of the Company; and (d) to promote appreciation of the common
interests of stockholders, executives and key management employees.
Total compensation is directly related to the successful achievement of
the Company's performance objectives. Short-term objectives are established
on an annual basis, the achievement of which is rewarded annually. Long-term
objectives are linked to a two-to-five-year performance period, the
achievement of which will be rewarded accordingly. All compensation, other
than stock options and restricted stock awards, whether in the form of
salary, short-term incentive awards, grants of performance shares, or cash
equivalents, will be based on successful accomplishment of periodically
established objectives reflecting the Company's business and financial goals.
Performance objectives, which are identified as short or long-term,
provide standards for the measurement of Company and unit performance. Some
performance objectives are Company-wide; others will vary, depending on
individual responsibilities, groups of employees or particular projects and
plans.
The Company has reviewed the nondeductibility of executive compensation
in excess of $1 million as required under Section 162(m) of the Internal
Revenue Code. At the Annual Meeting of Stockholders held on May 21, 1996 a
proposal was approved setting forth performance-based, objective criteria
governing whether performance shares awarded under the Company's Performance
Incentive Plan will be subject to forfeiture in whole or in part over the
award period. The Company's purpose in securing such approval was to preserve
the Company's tax deduction for awards of such performance shares made to its
Chief Executive Officer and those executives whose annual compensation may in
the future exceed $1 million. The Company will ordinarily seek to provide
performance-based compensation that allows for maximum deductibility under
Section 162(m)regulations. However, tax deductibility is only one of many
factors that must be considered in any final decision regarding executive
compensation. In order to best serve the Company and the interests of its
5
stockholders, the Company may determine that payment of non-deductible
compensation is necessary to provide an appropriate award consistent with its
overall philosophy and the intent of the performance-based programs.
In order to encourage substantial stock ownership by the Company's
senior executives so as to align their interests more closely with the
stockholders' interests, the Committee has approved share ownership
guidelines as objectives to be worked toward by these executives. The
guideline for the Chief Executive Officer is ownership of shares having a
value five times his base salary; for executive vice presidents, four times
base salary and for senior vice presidents, three times base salary.
The following is a discussion of the major elements of the Company's
executive compensation program along with a description of the decisions and
actions taken by the Committee with regard to 1997 compensation of Mr.
Adderley as the Company's Chief Executive Officer.
Annual Compensation
Annual cash compensation for executive officers consists of base
salaries and, for 1997, short-term incentive awards earned under the
Company's Short-Term Incentive Plan. Base salaries for executive officers are
targeted to be competitive with the marketplace identified by national
surveys of executive compensation in which the Company periodically
participates and which are recognized and credible within the professional
field of compensation management. Because the Company competes for
executive-level personnel beyond the staffing industry, the companies
included in the surveys referred to above are not the same as those included
in the Industry Index presented in the performance graph in the Company's
Proxy Statement. Base salaries are targeted to correspond generally with the
median of the range of salaries in the surveys consulted.
Competitive assessments include reviewing salary survey data of
comparative companies, not necessarily in the staffing industry, and other
relevant factors. Individual performance is also a factor in determining base
salary. The Committee is responsible for reviewing and approving the annual
salary increase budget for all officers.
For 1997, Mr. Adderley received a 5.1 percent salary increase from
$685,000 to $720,000 to bring his annualized base salary more in line with
the median base salaries of chief executive officers of other companies of
comparable size.
Annual incentive awards for executives paid under the Short-Term
Incentive Plan required that the Company achieve a certain level of pre-tax
earnings as established by the Committee at its March 1997 meeting. Because
the Company exceeded the threshold pre-tax earnings objective established for
1997, the Committee approved short-term incentive awards based upon a
percentage of the individual executive's target award.
Mr. Adderley's 1997 Short-Term Incentive Plan award was based entirely
on the Company's pre-tax earnings performance as described above. Based upon
the award payout schedule established at the time the pre-tax earnings target
was set, Mr. Adderley's award was determined to be $443,000.
Awards for other executive officers, including the four executive
officers named in the accompanying table ("Named Executives"), were
determined based on the Company's pre-tax earnings results. In addition to the
above awards, the Named Executives also received awards based on the
Committee's assessments of the performance of their respective units.
6
Long-Term Compensation
The long-term incentive compensation for executive officers can consist
of cash and stock-based awards made under the Company's Performance Incentive
Plan. Non-Qualified Stock Options, Incentive Stock Options and, in the case
of certain senior executives, Restricted Stock Awards and long-term
Performance Share Awards, are currently the only type of awards outstanding
under the Performance Incentive Plan.
During 1997, there was a review of compensation components for chief
executive officers in companies of similar size. As a result of that review,
the Committee during 1997 recommended that Mr. Adderley be awarded a
Non-Qualified Stock Option to purchase 69,000 shares of Class A common stock
and an Incentive Stock Option to purchase 3,000 shares of Class A common
stock to bring his total compensation package more in line with competitive
practice.
The decision to grant stock options is considered periodically by the
Committee during each year. Grants may be given to new hires, employees
promoted to new positions and other key managers and executives as deemed
appropriate by the Committee. Grant size is determined based on a guideline
of option shares for each management level that is generally competitive with
the median level of grants awarded by companies of similar size. Decisions
regarding the size of individual grants take into consideration the number of
outstanding, unexercised shares available to the individual compared to the
targeted guideline of the number of shares for the respective management
level of the employee.
In 1997, Mr. Adderley and the other most senior officers of the
Company, were granted long-term Performance Share Awards and/or Restricted
Shares of the Company's Class A common stock under the Company's Performance
Incentive Plan. The Performance Share Awards will be earned based on the
Company's cumulative pre-tax earnings over the 1997-1999 performance cycle.
The Restricted Shares vest over a four year period. In Mr. Adderley's case,
he received a Performance Award totaling 12,000 shares.
Conclusion
The Committee believes that the Company's executive compensation
program, providing as it does for competitive base salaries along with short
and long-term incentive compensation opportunities, is an important factor in
motivating senior officers as well as maintaining an appropriate focus on
increasing stockholder value.
B. JOSEPH WHITE, Chair
MAUREEN A. FAY, O.P.
CEDRIC V. FRICKE
7
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all compensation paid or accrued for
services rendered to the Company and its subsidiaries for the last three
fiscal years by the Chief Executive Officer and the four highest-paid
executive officers of the Company:
Long-Term
Compensation
------------------------------
Annual Compensation Awards
------------------- ------------------------------
Restricted Securities
Name and Stock Underlying All Other
Principal Position Year Salary Bonus Award(s)($)((1)) Options (#) Compensation((2))
------------------ ---- ------ ----- ---------------- ----------- -----------------
T. E. Adderley 1997 $711,250 $443,000 72,000 $ 60,195
Chairman, President and 1996 676,250 292,000 72,000 106,657
Chief Executive Officer 1995 650,000 241,000 $442,500 30,000 170,064
R. G. Barranco 1997 $415,000 $200,000 30,000 $ 32,847
Executive Vice President, 1996 395,000 127,000 30,000 30,060
Operations 1995 380,000 106,000 $191,750 15,000 35,160
R. E. Thompson 1997 $415,000 $200,000 30,000 $ 32,520
Executive Vice President, 1996 395,000 127,000 30,000 30,060
Administration 1995 380,000 106,000 $191,750 15,000 35,160
T. A. White 1997 $306,250 $150,000 $231,280 30,000 $ 21,615
Executive Vice President, 1996 230,000 54,000 12,000 18,350
Quality, Service Delivery and 1995 215,000 55,000 88,500 7,000 17,394
Information Technology
C. T. Camden 1997 $300,000 $150,000 $231,280 30,000 $ 20,880
Executive Vice President, 1996 205,000 48,000 12,000 15,080
Field Operations, 1995 212,000 35,000 88,500 6,000 11,706
Sales and Marketing
- ----------------
(1) Restricted Shares of the Company's Class A common stock were awarded in
November 1997 and May 1995. The shares awarded in November 1997 vest in
four equal annual installments beginning one year after the date of grant;
the May 1995 awards vest in three equal installments beginning one year
after the date grant. The above amounts represent the fair market value of
the entire award for each executive officer at the grant date. The number
of shares awarded in 1997 were: T. A. White, 8,000 and C. T. Camden,
8,000. The number of shares awarded in 1995 were: T. E. Adderley, 15,000;
R. G. Barranco, 6,500; R. E. Thompson, 6,500; T. A. White, 3,000; C. T.
Camden, 3,000. Dividends are payable on Restricted Shares.
At December 31, 1997, the aggregate number of Restricted Shares of the
Company's Class A common stock held by the executive officers named in the
Summary Compensation Table and the value
8
of these shares, based upon the $30.00 per share closing price of the
Company's Class A common stock on that date, were as follows:
Number of
Name Shares Value
---- --------- -----
T. E. Adderley ........... 15,000 $450,000
R. G. Barranco ........... 6,500 195,000
R. E. Thompson ........... 6,500 195,000
T. A. White .............. 11,000 330,000
C. T. Camden ............. 11,000 330,000
(2) Represents company contributions to non-qualified defined
contribution/deferred compensation plan for officers and certain other
management employees known as the Management Retirement Plan. The amount
reported above for Mr. Adderley includes contributions of $51,622 and
$99,204 for 1996 and 1995, respectively, made because he would have
earned a greater benefit had he remained under a defined benefit
Retirement Plan which was terminated December 31, 1988.
Option Grants in 1997
The following table shows all grants of stock options to the officers
named in the Summary Compensation Table above in 1997. The exercise price of
all such options was the fair market value on the date of grant except that
the option for 3,000 shares granted to Mr. Adderley at $30.87 was at 110% of
the fair market value of $28.06 on the date of the grant. With respect to
this option for 3,000 shares awarded to Mr. Adderley, fifty (50%) percent are
exercisable one year after the date grant with an additional twenty-five
(25%) percent exercisable on each of the next two anniversary dates of the
grant. Of the remaining options awarded, twenty (20%) percent are exercisable
one year after the grant date with an additional twenty (20%) percent
exercisable on each of the next four anniversary dates. Upon exercise of an
option, an officer purchases all or a portion of the shares covered by the
option by paying the exercise price multiplied by the number of shares as to
which the option is exercised, either in cash or by surrendering common
shares already owned by the officer.
Individual Grants
------------------------------------------------------
Number of Potential Realizable Value at
Securities % of Total Assumed Annual Rates of Stock
Underlying Options Price Appreciation for Option Term
Options Granted to ----------------------------------
Granted Employees Exercise or Expiration
Name (#) in Fiscal Year Base Price Date 0% 5% 10%
---- --------- -------------- ----------- ---------- -- ---------- ----------
T. E. Adderley ....... 3,000 $30.87 03/11/02 0 $ 14,841 $ 42,979
69,000 28.06 03/11/07 1,217,737 3,085,983
------- ---------- ---------
72,000 16.57 $1,232,577 $3,128,962
R. G. Barranco ....... 3,000 $28.06 03/11/07 0 $ 52,945 $ 134,173
27,000 28.06 03/11/07 476,506 1,207,559
------- ---------- ---------
30,000 6.90 $ 529,451 $1,341,732
R. E. Thompson ....... 3,000 $28.06 03/11/07 0 $ 52,945 $ 134,173
27,000 28.06 03/11/07 476,506 1,207,559
------- ---------- ---------
30,000 6.90 $ 529,451 $1,341,732
T. A. White .......... 3,000 $28.06 03/11/07 0 $ 52,945 $ 134,173
27,000 28.06 03/11/07 476,506 1,207,559
------- ---------- ---------
30,000 6.90 $ 529,451 $1,341,732
C. T. Camden ......... 3,000 $28.06 03/11/07 0 $ 52,945 $ 134,173
27,000 28.06 03/11/07 476,506 1,207,559
------- ---------- ---------
30,000 6.90 $ 529,451 $1,341,732
9
The dollar amounts under the 5% and 10% columns in the table above are
the result of calculations required by the Securities and Exchange
Commission's rules and therefore are not intended to forecast possible future
appreciation of the stock price of the Company. As shown in the 0% column
above, no gain to the named officers or all employees is possible without
appreciation in the price of the Company's common stock, which will benefit
all stockholders. For example, in order for any of the named officers to
realize the potential values set forth in the 5% and 10% columns in the table
above with respect to the exercise price of $28.06 (the fair market value on
the date of the grant), the price per share of the Company's Class A common
stock would be approximately $45.71 and $72.79, respectively, as of the
expiration date of their options.
Option Exercises During 1996 and Year-End Option Values
The following table shows stock option exercises during 1997 by each of
the officers named in the Summary Compensation Table and the value of
unexercised options at December 31, 1997:
Number of
Securities Underlying
Unexercised Options Value of Unexercised In-the-Money
at Year End (#) Options at Year End
Shares Acquired --------------------------- ---------------------------------
Name on Exercise (#) Value Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------------- ----------- ------------- ----------- -------------
T. E. Adderley ....... 0 0 69,500 157,500 $95,650 $ 172,287
R. G. Barranco ....... 27,200 $186,050 3,200 70,600 $10,800 $ 84,425
R. E. Thompson ....... 27,200 $209,800 3,200 70,600 $10,800 $ 84,425
T. A. White .......... 0 0 11,400 47,100 $15,450 $ 68,550
C. T. Camden ......... 0 0 4,800 43,200 $ 1,200 $ 59,925
Long-Term Incentive Plans -- Awards in Last Fiscal Year Table
The following table provides information on performance share awards
made by the Company in 1997 under the Company's Performance Incentive Plan.
Long-Term Incentive Plans -- Awards in Last Fiscal Year
Estimated Future Performance
Share Payouts Under Non-Stock
Number of Performance or Price Based Plans
Performance Other Period ------------------------------
Shares (1) Until Maturation Threshold Target Maximum
Name (#) or Payout (#) (#) (#)
---- ----------- ---------------- --------- ------ -------
T. E. Adderley ....... 12,000 1997-1999 0 12,000 12,000
R. G. Barranco ....... 5,000 1997-1999 0 5,000 5,000
R. E. Thompson ....... 5,000 1997-1999 0 5,000 5,000
T. A. White .......... 5,000 1997-1999 0 5,000 5,000
C. T. Camden ......... 5,000 1997-1999 0 5,000 5,000
- ----------------
(1) Each performance share awarded in 1997 consisted of one share of the
Company's Class A common stock, contingently granted and earned based on
the Company's cumulative earnings per share over the three year 1997-1999
performance period. During the performance period, the shares are issued
and outstanding and the executive officer to whom the award has been made
has the right to receive dividends thereon.
10
Performance Graph
The following graph compares the cumulative total return of the
Company's Class A common stock, with that of the NASDAQ Stock Market Index,
a Peer Group Index, and the S&P Services (Commercial & Consumer) Index for the
five years ended December 31, 1997. The graph assumes an investment of $100 on
January 1, 1992 and that all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN Kelly
Services, NASDAQ Stock Market Index, Peer Group Index
and S&P Services (Commercial & Consumer) Index
[ Performance Graph ]
1992 1993 1994 1995 1996 1997
Kelly Services 100 81 82 85 85 98
NASDAQ Stock Market Index 100 115 112 159 195 240
Peer Group Index (See note 1) 100 124 177 209 232 309
S&P Services (Commercial & Consumer) (See note 2) 100 97 89 120 124 171
Notes:
1. The Peer Group Index consists of other U.S. temporary help service
companies selected by the Company which have a stock market capitalization
of more than $100,000,000. The index includes: CDI Corp., Manpower Inc.,
Olsten Corp., and Robert Half International Inc. (all of which are traded
on the NYSE).
2. The S&P Specialized Services Index, presented in 1995, was renamed in 1996
to the S&P Services (Commercial & Consumer) Index. This Index consists of
the following service companies: H & R Block Inc., CUC International Inc.,
Dun & Bradstreet Corp., HFS Inc., and Service Corp. International.
11
Matters to be Brought Before the Meeting
Election of Directors
Proposal 1
The Board of Directors is divided into three classes with each class
elected for a three-year term. Under the Certificate of Incorporation, the
Board of Directors shall consist of no fewer than five (5) and no more than
nine (9) members, the exact number of directors to be determined from time to
time by the Board of Directors. The Board of Directors has fixed the number
of Directors constituting the whole Board at five (5).
The Board of Directors recommends that the nominee named below be
elected to serve as a Director. The nominee will serve for a three (3) year
term ending at the Annual Meeting of Stockholders held after the close of the
fiscal year ended December 31, 2000.
The shares represented by the enclosed form of proxy, when properly
executed by a stockholder of record, will be voted at the Annual Meeting, or
any adjournment thereof, as designated thereon if unrevoked at the time of
the meeting. If a nominee is unavailable for election for any reason on the
date of the election of the Director (which event is not anticipated), the
persons named in the enclosed form of proxy may vote for the election of a
person designated by a majority of the proxy attorneys present at the
meeting. The Director will be elected by a majority of the votes cast by
holders of Class B common stock who are present in person, or represented by
proxy, and entitled to vote at the Meeting.
The name and age of the nominee and for each person whose term of
office as a Director will continue after the meeting as of March 1, 1998,
their present occupations or employment during the past five years and other
data regarding them, based upon information received from the respective
individuals, are hereinafter set forth:
Year of Year First
Expiration of Principal Elected as
Name and Age Elective Term Occupation Director
------------ ------------- ---------- --------
Nominee for Election as Director to be Elected for a Three-Year Term
T. E. Adderley(a) ... 2001 Chairman, President and Chief Executive Officer of 1962
Age 64 the Company; Director of DTE Energy Company;
Director of First Chicago NBD Corporation.
Directors Continuing in Office
M. A. Fay, O.P. ..... 2000 President of the University of Detroit Mercy; 1997
Age 63 Director of First Chicago NBD Corporation.
C. V. Fricke ........ 2000 Professor Emeritus, University of Michigan-Dearborn. 1978
Age 69
V. G. Istock ........ 2000 Chairman, President and Chief Executive Officer of 1991
Age 57 First Chicago NBD Corporation; Chairman and Chief
Executive Officer of First National Bank of
Chicago; and Chairman and Chief Executive Officer
of NBD Bank, Michigan; Director of First Chicago
NBD Corporation; Director of Masco Corporation.
B. J. White ......... 1999 Dean and Professor of Business Administration of the 1995
Age 50 University of Michigan School of Business
Administration; Director of Equity Residential
Property Trust.
(a) Mr. Adderley is a director and executive officer of all subsidiaries of
the Company.
12
Approval of Standards For
Performance-Based, Annual Incentive Award Criteria
and Limitations for Certain Executive Officers Under the
Company's Short-Term Incentive Plan
Proposal 2
Background for Proposal
Section 162(m) of the Internal Revenue Code, as amended in 1993,
establishes a limit of $1 million per year on the tax deductibility of annual
compensation paid to the chief executive officer and the next four
highest-paid executive officers of a public company, unless such compensation
is "performance-based" and certain conditions are met. These conditions
include that an award under an incentive plan be objectively determinable
based upon a performance standard or standards, that the nature of the
standards, the executives covered and individual award maximums be approved
by the Company's stockholders at least once every five years, and that
changes in any of these conditions also must be approved by the stockholders.
In 1993 the Board of Directors replaced the Company's former
Executive Bonus Plan with an annual cash award plan, the Short-Term Incentive
Plan ("STIP"), designed to provide incentive awards to certain officers and
other management-level employees based upon their contributions to the
Company's growth and profitability.
Although the STIP generally requires that at least one of the
performance goals established by the Compensation Committee of the Board of
Directors each year be a quantitatively measured Company performance
objective, the Plan also gives the Committee discretion to establish other
goals, the achievement of which may require subjective assessment. The Board
of Directors believes that this flexibility generally afforded the
Compensation Committee under the STIP is beneficial and in the best interest
of the Company and its stockholders and therefore should be retained.
After final Section 162(m) regulations were adopted, certain changes
were made in the STIP and approved by the Company's stockholders at the
Company's 1995 Annual Meeting in order to conform the STIP to those
regulations.
In light of the Compensation Committee's subsequent experience in
administering the STIP, in March of this year, the Board of Directors further
amended the STIP, as it applies to those executives whose STIP incentive
awards are subject to the provisions of Section 162(m) ("Senior Executive
Officers"). These changes are intended to afford the Compensation Committee
greater flexibility in fashioning STIP awards for the Senior Executive
Officers while keeping in mind the deduction limits imposed by Section
162(m). These amendments, which are further discussed below, are being
proposed for stockholder approval at the upcoming Annual Meeting.
Proposed STIP Criteria for Senior Executive Officers
As the amended STIP is proposed to be administered with respect
to the Senior Executive Officers, the Compensation Committee, during the
first quarter of each year, shall consider the establishment of a Plan target
award for each Senior Executive Officer expressed as a percentage of eligible
salary.
13
The Committee shall next establish objective performance standards
for the corporate and/or divisional/departmental portions of the awards, and
determine what percentage of the target award, if any, will be based on each
such objective performance standard.
The Committee will select one or a combination of the following as
objective performance standards: pre-tax or after tax corporate earnings for
the year or the equivalent of such amounts in basic or diluted earnings per
share, sales, gross profit, earnings from operations, net operating profit
after taxes above the cost of capital, market share, customer satisfaction,
quality metrics, shareholder value and return on assets, investment or equity.
The Committee shall also specify during the first quarter which, if
any, types or categories of extraordinary, unusual, non-recurring or other
items of gain or loss shall be excluded or otherwise not taken into account
when actual corporate or divisional/departmental results are calculated.
The Committee will finally establish an award payout schedule based
upon the extent to which the objective performance standard(s) is or is not
achieved or exceeded. The Committee retains the right in its discretion to
reduce an award based on company, divisional/departmental or individual
performance, but will have no discretion to increase any award so calculated.
In addition to awards based on quantitatively determinable
performance standards, the Committee may, in its discretion and acting in the
best interests of the Company, set one or more other incentive goals for a
portion or all of a Senior Executive Officer's STIP award, the achievement of
which need not be quantitatively determinable but, instead, may require
subjective assessments of the quality of performance to which the goals
relate ("qualitative performance standards"). If a qualitative performance
standard is established with respect to a Senior Executive Officer's STIP
target award, the Committee shall specify at the time of the award what
percentage of the total target award will be based on that objective. The
Committee will, however, have discretion to increase or decrease that portion
of an award which does not qualify for the performance-based exclusion from
the Section 162(m) cap on compensation deductibility.
Regardless of the attainment of performance standards, in no event
shall the total annual STIP award to any Senior Executive Officer, including
any portion based on qualitative performance objectives, exceed $2,000,000.
Executives Covered by Proposed Criteria
The proposed STIP performance-based criteria described above will be
applied each year to the Company's Chief Executive Officer and, for any given
year, also will apply to each executive officer at or above the senior vice
president level who is determined by the Compensation Committee to be an
executive who is most likely to be named in the Summary Compensation Table of
the Company's proxy statement for the next year's Annual Meeting of
Stockholders.
Differences from STIP before the Recent Amendments
With respect to Senior Executive Officers, there are four principal
differences between the STIP as recently amended and the STIP prior to the
recent amendments:
1. The definition of Senior Executive Officer has been changed.
Previously, the definition covered officers at or above the executive vice
president level but no other officers.
14
2. The range of criteria that the Compensation Committee may use for
setting quantitatively determinable performance standards has been expanded.
Previously, the only permissible criteria were pre-tax earnings or the
equivalent of such amount in earnings per share.
3. The Committee may now set qualitative performance standards for a
portion or all of a STIP award for any Senior Executive Officer. That part of
an award related to the achievement of qualitative performance standards will
not be excluded from Section 162(m)'s $1,000,000-per-executive annual
deduction limit. Previously, only quantitatively determinable standards were
permissible for awards to Senior Executive Officers.
4. The per executive annual limit on STIP payouts has been increased
to $2,000,000. Previously, that limit was $1,500,000.
1998 Awards to Senior Executive Officers
Consistent with the criteria described above, the Compensation
Committee, in the first quarter, designated the Senior Executive Officers for
1998. The Committee also determined the target incentive award for each,
established a 1998 pre-tax earnings performance standard and the percentage
of the 1998 target award each Senior Executive Officer may receive under the
STIP if that performance standard is achieved, and approved a schedule of
possible STIP payouts for 1998 ranging from zero (if the specified pre-tax
earnings threshold is not achieved) to the maximum percent of each Senior
Executive Officer's target award salary percentage, depending on the extent
to which actual pre-tax earnings are less or more than the target amount. In
addition, for certain of the 1998 Senior Executive Officers other than Mr.
Adderley, the Committee established qualitative standards for portions of
their STIP target awards based on the Committee's assessment of the
divisional/departmental performance for which they are responsible. Due to
the nature of the performance criteria, the actual amount (if any) that any
executive officer will receive for 1998 performance (or for performance in
any later year) is not now determinable.
Effect of Stockholder Approval; Subsequent Amendments
The Board believes that if the recent STIP amendments are approved as
proposed, the full amount of each STIP award to a Senior Executive Officer
for quantitatively determinable standards will continue to qualify as
performance-based compensation excluded from Section 162(m)'s deduction
limits. Under the current Section 162(m) regulations, any STIP awards paid in
a given year to any of the five executives then covered by that section for
achievement of qualitative performance standards will not be excluded from
the section's $1,000,000-per-executive annual deduction limit. However,
Section 162(m) only affects the deductibility of that portion of non-excluded
compensation which exceeds $1,000,000; it has no effect on the deductibility
of non-excluded compensation at or below that amount.
Assuming stockholder approval of the amendments as proposed, the
current Section 162(m) regulations will permit the Compensation Committee to
use any or all of the expanded range of criteria for quantitatively
determinable STIP awards for up to five years (that is, through 2002) without
seeking further stockholder approval of those criteria. The Board also may
terminate the STIP at any time and may further amend it from time to time,
with or without stockholder approval. However, any amendment that, within the
meaning of the Section 162(m) regulations, would materially change the
"employees covered," the "performance measures" or the "maximum award"
payable would be subject to stockholder approval.
15
Effect of Non-Approval
If the proposed amendments are not approved by stockholders, the
amendments will be revoked, and the STIP will continue to be operated with
respect to Senior Executive Officers as was the case prior to the recent
amendments. In any event, the Compensation Committee, acting within its
delegated authority, will continue from time to time to consider how best to
structure the compensation of these and other executive officers of the
Company, which compensation may include non-STIP incentive bonuses to such
officers for achievement of qualitative performance objectives set by the
Committee.
Required Vote
The proposal to approve the performance-based annual incentive
criteria will be carried if it receives the affirmative vote of the holders
of a majority of the Company's Class B common stock present in person or by
proxy and entitled to vote at the Annual Meeting. For purposes of this
stockholder vote, any shares that are the subject of a so-called "broker
non-vote" will not be considered present, but any shares for which an
abstention is registered will be considered present. In other words, any
broker non-vote on the proposal will have no effect on the outcome of the
vote, while any abstention registered with respect to the proposal will have
the same effect as a vote "Against" the proposal.
The Board of Directors recommends a vote "FOR" approval of the recent
amendments for performance-based, annual incentive award criteria and
limitations for Senior Executive Officers under the Company's Short-Term
Incentive Plan.
Relationship with Independent Accountants
Proposal 3
The Board of Directors of the Company has appointed the firm of Price
Waterhouse LLP as independent accountants of the Company for the current
fiscal year ending January 3, 1999, subject to ratification by the
stockholders. This firm has served as independent accountants for the Company
for many years and is considered to be well qualified by the Board of
Directors. As in prior years, a representative of that firm will be present
at the Annual Meeting and will have the opportunity to make a statement and
to respond to appropriate questions.
It is recommended by the Board of Directors that the proposal to ratify
the appointment of Price Waterhouse LLP as independent accountants for the
year 1998 be approved. If stockholders fail to approve this proposal, the
Board will reconsider the appointment of Price Waterhouse LLP as independent
accountants for the year 1998.
The proposal to ratify the appointment of Price Waterhouse LLP will be
carried if it receives the affirmative vote of the holders of a majority of
the Company's Class B common stock present in person or by proxy and entitled
to vote at the Annual Meeting.
16
Stockholder Proposals
Proposals of stockholders intended to be presented at the next Annual
Meeting must be received by the Secretary, Kelly Services, Inc., 999 West Big
Beaver Road, Troy, Michigan 48084, no later than December 18, 1998.
Other Matters
At the date of this Proxy Statement the Company knows of no matters,
other than the matters described herein, that will be presented for
consideration at the Meeting. If any other matters do properly come before
the Meeting, all proxies signed and returned by holders of the Class B common
stock, if not limited to the contrary, will be voted thereon in accordance
with the best judgment of the persons voting the proxies.
A copy of the Company's printed Annual Report as of December 28, 1997,
the close of the Company's latest fiscal year, has been mailed to each
stockholder of record. The expense of preparing, printing, assembling and
mailing the accompanying form of proxy and the material used in the
solicitation of proxies will be paid by the Company. In addition, the Company
may reimburse brokers or nominees for their expenses in transmitting proxies
and proxy material to principals.
It is important that the proxies be returned promptly. Therefore,
stockholders are urged to execute and return the enclosed form of proxy in
the enclosed postage prepaid envelope.
By Order of the Board of Directors
EUGENE L. HARTWIG
Secretary
17
[FRONT OF PROXY CARD]
KELLY SERVICES, INC.
999 West Big Beaver Road
Troy, Michigan 48084
Solicited by the Board of Directors
for the Annual Meeting of Stockholders on May 19, 1998
The undersigned hereby appoints as Proxies Terence E. Adderley, Paul K. Geiger
and Eugene L. Hartwig, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated on the reverse
side, all shares of Class B Common Stock of Kelly Services, Inc. (the
"Company") held of record by the undersigned on March 23, 1998 at the Annual
Meeting of Stockholders to be held on May 19, 1998 and any adjournments
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE
VOTED FOR SUCH PROPOSAL.
PLEASE MARK, DATE AND SIGN ON THE REVERSE SIDE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES OF AMERICA.
Please sign this Proxy exactly as your name(s) appear(s) on the books of the
Company. Joint owners should each sign personally. Trustees, custodians, and
other fiduciaries should indicate the capacity in which they sign, and where
more than one name appears, a majority must sign. If the shareholder is a
corporation, the signature should be that of an authorized officer who should
state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_________________________ _________________________
_________________________ _________________________
_________________________ _________________________
- -------------------------------------------------------------------------------
[BACK OF PROXY CARD]
PLEASE MARK VOTES AS IN THIS EXAMPLE /X/
KELLY SERVICES, INC.
CLASS B COMMON STOCK
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date______________________
________________________________ ________________________________
Stockholder sign here Co-owner sign here
1. Election of Director.
With-
For hold
/ / / /
T.E. Adderley
For Against Abstain
2. Approve standards for performance-based annual
incentive awards for certain executives under / / / / / /
the Short-Term Incentive Plan.
For Against Abstain
3. Ratify the appointment of Price Waterhouse
LLP as independent accountants. / / / / / /
4. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting.
Mark box at right if you wish only one Annual Report to be mailed to your
household. / /
Mark box at right if an address change or comment has been noted on the
reverse side of this card. / /
DETACH CARD
