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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTIONProxy Statement Pursuant to Section 14(a) OF THE SECURITIES
EXCHANGE ACT OFof the Securities
Exchange Act of 1934 (AMENDMENT NO.(Amendment No. )
Filed by the registrantRegistrant [X]
Filed by a partyParty other than the registrantRegistrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement.Proxy Statement.
[ ] Confidential, for use of the
Commission only (as permitted by
RuleCONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2)).
[X] Definitive proxy statement.Proxy Statement.
[ ] Definitive additional materials.Additional Materials.
[ ] Soliciting material pursuantMaterial Pursuant to Section 240.14a-12
KELLY SERVICESKelly Services
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(Name of Registrant as Specified inIn Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Thanother than the Registrant)
Payment of filing feeFiling 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)1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2)2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3)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)4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5)5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] 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 formForm or scheduleSchedule and the date of its filing.
(1)1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2)2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3)3) Filing Party:
- --------------------------------------------------------------------------------
(4)4) Date Filed:
- --------------------------------------------------------------------------------
PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
[KELLY SERVICES LOGO]
April 12, 2002March 26, 2003
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Kelly Services, Inc., which will be held at 11:3000 a.m., Eastern Daylight Time,
Tuesday, May 14, 2002,April 29, 2003, 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
twothree Directors, and ratification of the appointment of PricewaterhouseCoopers LLP
as the independent public accountants for the Company for 2002.2003, and approval of
standards for performance-based, annual incentive award criteria for certain
executive officers under the Company's Short-Term Incentive Plan.
The Meeting will also provide an opportunity to review with you the
business of the Company during 20012002 and give you an opportunity 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 and Chief
Executive Officer
[KELLY SERVICES LOGO]
KELLY SERVICES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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 14, 2002April 29, 2003
at 11:3000 a.m., Eastern Daylight Time, for the following purposes:
1. To elect twothree Directors as set forth in the accompanying Proxy
Statement.
2. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants.
3. To approve standards for performance-based, annual incentive award
criteria for certain executive officers under the Company's Short-Term
Incentive Plan.
4. To transact any other business as may properly come before the Meeting
or any adjournment or adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH DIRECTOR NOMINEE SET FORTH IN
PROPOSAL 1 BELOW, A VOTE FOR THE APPOINTMENT OF PRICEWATERHOUSECOOPERS AS
INDEPENDENT ACCOUNTANTS AS SET FORTH IN PROPOSAL 2, AND A VOTE FOR THE APPROVAL
OF THE STANDARDS FOR PERFORMANCE-BASED, ANNUAL INCENTIVE AWARD CRITERIA FOR
CERTAIN EXECUTIVE OFFICERS UNDER THE COMPANY'S SHORT-TERM INCENTIVE PLAN AS SET
FORTH IN PROPOSAL 3.
Only holders of the Company's Class B common stock of record at the close
of business on March 25, 200210, 2003 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 12, 2002March 26, 2003
999 West Big Beaver Road
Troy, Michigan 48084-4782
GEORGE M. REARDON
Secretary
KELLY SERVICES, INC.
999 WEST BIG BEAVER ROAD
TROY, MICHIGAN 48084-4782
April 12, 2002March 26, 2003
PROXY STATEMENT
20022003 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 14,
2002April 29,
2003 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 12,
2002.March 26,
2003. 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 twothree Directors, designated Proposal 1
on the proxy, FOR the proposal to ratify the selection of independent
accountants, designated Proposal 2 on the proxy, FOR the proposal to approve the
standards for performance-based, annual incentive award criteria for certain
executive officers under the Company's Short-Term Incentive Plan, designated
Proposal 3, and on any other matters that properly come before the Annual
Meeting in the manner as set forth on the proxy. Abstentions (but not broker
non-votes) are counted for purposes of determining a quorum. However,
abstentions and 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 25, 2002,10, 2003, the number of issued and
outstanding voting securities (exclusive of treasury shares) was 3,491,1133,477,143
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.
The cost of soliciting proxies shall be borne by the Company. The
solicitation of proxies will be made primarily by mail. The Company may also
make arrangements with brokerage houses, custodians, banks, nominees, and
fiduciaries to forward solicitation material to beneficial owners of stock held
of record by them and to obtain authorization to execute proxies. The Company
may reimburse such institutional holders for reasonable expenses incurred by
them in connection therewith.
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 MarchFebruary 1,
2002,2003, 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:
Number of Shares Percent
Name and Address of and Nature of Of
Beneficial Owners Beneficial Ownership(a)(b) Class(b)
------------------- -------------------------- --------
T. E. Adderley.............................................. 3,214,566(c)(d) 92.192.4
999 W. Big Beaver Road
Troy, Michigan 48084
Bank One Corporation........................................ 2,382,709(e) 68.2192,869(e) 5.5
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) Because Securities and Exchange Commission attribution rules require stock
held in trust to be treated as beneficially held by each co-trustee sharing
voting power for the stock, the numbers of192,869 shares and percentages shown
total more than one hundred percent ofreported as being
beneficially owned by Bank One Corporation are also included in the
class.3,214,566 shares reported by T.E Adderley.
(c) Includes 952,100 shares directly held; 2,189,840 shares in the William R.
Kelly Trust of which heMr. Adderley is a co-trustee and has sole investment
power and has shared voting power with Bank One Corporation, the other co-trustee;power; 71,825 shares in an irrevocable trust, of which he is
beneficiary;beneficiary and has shared voting and investment power; 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.
(d) Because of the shares in the William R. Kelly Trust of which he is a
co-trustee with Bank One 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.
(e) Based upon a report filed by Bank One Corporation with the Securities and
Exchange Commission on Schedule 13G dated February 5, 2003 and upon
subsequent information received from Bank One Corporation upon which the
Company relies for the information presented. The report indicates that the
2,382,709192,869 shares of Class B common stock held by Bank One Corporation are
categorized as follows with respect to voting power and dispositiveinvestment power:
Voting Power: sole voting power 108,782; shared voting power 2,262,290; limited72,450; no
voting power 11,637; DispositiveInvestment Power: sole dispositiveinvestment power 11,637; shared
dispositiveinvestment power 2,371,072.181,232.
2
Set forth in the following table are the beneficial holdings of the Class A
and Class B common stock on MarchFebruary 1, 2002,2003, on the basis described above, of
each director and all directors and officers as a group.
Class A Common Stock Class B Common Stock
---------------------------------- ------------------------------------------------------------------- ---------------------------------
Number of Shares Percent Number of Shares
Percent
and Nature of Percent of and Nature of Percent of
Directors Beneficial Ownership(a) Class Beneficial Ownership Class
--------- ----------------------- ----------------- -------------------- -----------------
T. E. Adderley........................... 15,307,262(b) 46.9Adderley........................ 14,870,878(b) 46.1 3,214,566(c) 92.192.4
C. T. Camden............................. 167,479Camden.......................... 220,707 * 100 *
M. A. Fay, O.P. ......................... 15,322...................... 18,206 * 0 *
C. V. Fricke............................. 19,382Fricke.......................... 22,266 * 781 *
V. G. Istock............................. 17,465Istock.......................... 20,349 * 875 *
B. J. White.............................. 16,090White........................... 18,974 * 0 *
All Directors and Executive Officers
as a Group.................................. 15,829,013 48.5Group.......................... 15,552,276 48.2 3,216,422 92.192.5
* Less than 1%
(a) Includes shares which the individuals have a right to acquire through the
exercise of stock options within 60 days. Such exercisable options include:
367,100448,500 for T. E. Adderley; 12,500171,336 for C. T. Camden; 14,500 for M. A. Fay;
12,50014,500 for C. V. Fricke; 12,50014,500 for V. G. Istock; 12,50014,500 for B. J. White;
114,500 for C. T. Camden;
25,00047,502 for M. L. Durik; 72,750109,502 for W. K. Gerber; 28,45046,268 for G. M. Reardon;
and 64,40090,502 for A. G. Grimsley.
(b) Includes 1,035,4521,116,852 shares directly held; 11,697,33711,197,337 shares in the William R.
Kelly Trust of which heMr. Adderley is co-trustee and has sole investment
power and has shared voting power with Bank One Corporation, the other
co-trustee; 310,612 shares in an irrevocable trust, of which he is a
beneficiary; 2,227,0922,223,961 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; 35,63120,978 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.
(c) See footnotes (c) and (d) to first table.
SectionSECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the Securities Exchange Act of 1934 requiresUnited States, the Company's directors,
and executive officers and persons who ownany person holding more than ten percent of a
registered class10% of the Company's equity securities,common stock
(collectively, the "Reporting Persons") are required to report their ownership
of the common stock and any changes in that ownership to the Securities and
Exchange Commission. Specific due dates for these reports have been established
and pursuant to applicable rules, the Company is required to report in its proxy
statement any failure to file by these due dates. Based on certification
received from the Reporting Persons and on copies of the reports that such
persons have filed with the Securities and Exchange Commission, initialall required
reports of ownershipReporting Persons have been timely filed with the Securities 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.Exchange Commission for 2002.
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 does not actively manage the day-to-day operations. Regular
meetings of the Board of Directors are held in each quarter and special meetings
are scheduled when required. The Board held fourfive 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 foursix meetings in
2001.2002. 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.
The Compensation Committee, whose functions are described in the
Compensation Committee Report on page 5 of this Proxy Statement, held sixfour
meetings in 20012002 and is composed of M. A. Fay, C. V. Fricke, V. G. Istock, and
B. J. White. During 20012002 the Board of Directors did not have a nominating
committee.
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.
COMPENSATION OF DIRECTORS
Directors of the Company who are not salaried officers are paid an annual
fee of $50,000 (consisting of a $25,000 cash retainer fee and a stock award
worth $25,000), 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. The $25,000 stock award portion of the annual fee is made
under the Non-Employee Director Stock Award Plan approved by the stockholders in
1995, as amended on May 14, 2001, from which each non-officer Director receives
an annual grant of shares of the Company's Class A common stock equal in value
to the Director's annual cash retainer fee.
On May 10, 1999, the stockholders approved the adoption of the Kelly
Services, Inc. 1999 Non-Employee Directors Stock Option Plan, under which the
Board of Directors from time to time may make discretionary grants of options to
purchase shares of Class A common stock to non-employee directors. In 2001,2002, the
Board granted to each non-employee director an option to purchase 1,500 shares
of Class A common stock at the Fair Market Value of the stock on the day of the
grants. Each of these 10-year options vests in thirds on the first day of
January of each of the three years immediately following the grant.
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 of B. J. White, (Chair), M.
A. Fay, C. V. Fricke, and V. G. Istock, each of whom is an independent director.
The Committee has responsibility for review and final approval of all
adjustments in salary and short-term incentive awards for executives of the
Company, including, with respect to 2001,2002, 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 and retain 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-yearmultiple 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, are 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 ordinarily seeks to provide performance-based compensation that
allows for maximum deductibility under Section 162(m) of the Internal Revenue
Code and related 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
stockholders, the Company may determine that payment of non-deductible
compensation is necessary and appropriate to provide awards consistent with the
overall philosophy and objectives of the compensation programs.
The Company also seeks to encourage substantial stock ownership by the
Company's senior executives so as to align their interests more closely with the
stockholders' interests. In order to do so, the Committee has approved share
ownership guidelines as objectives to be worked toward by these executives. The
guideline for the Chairman and Chief Executive Officer is ownership of shares
having a value five times his base salary; for the President and Chief Operating
Officer, the guideline is four and a
5
half times his base salary; for executive vice presidents, the guideline is four
times base salary; and for senior vice presidents, the guideline is 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 20012002 compensation of Mr. Adderley
as the Company's Chairman and Chief Executive Officer.
ANNUAL COMPENSATION
Annual cash compensation for executive officers consists of base salaries
and cash incentive bonuses.
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 as credible
within the professional field of compensation management. Because the Company
competes to recruit executive-level personnel from many industries and not just
from the staffing industry, the companies included in the surveys referred to
above are not the same as those included in the Peer Group Index used in this
Proxy Statement for performance graph purposes. 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 budget
for all
officers.
In April 2001, Mr. Adderley received a 3.75 percent salary increase from
$800,000 to $830,000 to bring his annualized base salary more1 has been the customary point in line witheach year when the
median base salaries of
chief executive officersall staff employees of the Company are reviewed and possibly increased. In April
2002, the Committee considered whether economic conditions would warrant the
customary annual salary increases for Company personnel, including Company
officers. The Committee concluded that then-current conditions would not warrant
any general annual increase, subject to exceptions for special circumstances;
and that recommendation was followed by the Company. Accordingly, the Committee
also recommended that Mr. Adderley's salary for the year following April 2002
should remain unchanged at the rate set by the Committee in April of 2001, which
was $830,000 per year.
Certain newly-hired executives were paid predetermined cash bonuses for
2002 as a recruiting inducement. All other companies of
comparable size.
All potential 20012002 cash bonuses to executive
officers (including Mr. Adderley) were subject to the terms of the Company's
Short-Term Incentive Plan. In accordance with that plan, in the first quarter of
20012002 the Committee established target and threshold goals relating to corporate
diluted earnings per share and a payout schedule for each executive showing a
range of potential bonus amounts the executive could receive under the plan,
which depended on the extent to which the Company's actual 20012002 diluted earnings
per share met or exceeded the threshold. The entire potential bonus for Mr.
Adderley and for the each other named executive officer was tied solely to this
objectively determinable standard. The potential bonuses for other executive
participants in the Plan were tied partially to this corporate earnings standard
and partially to other performance goals, which also were established by the
Committee in the first quarter of the year and were set in light of the
particular functions and responsibilities of the individual executives.
6
The Company's actual earnings per share for the year 2001 did not exceed2002 exceeded the
payout threshold the Committee had established for the year. Payment of bonuses
was made based on the pre-established schedule for the level of earnings per
share actually achieved. After the end of the year, the Committee determined that, based on the schedule, noapproved a
$211,000 cash bonus
would be approved for 2001 for Mr. Adderley, or for any named executive officer
and that no payment underbased entirely on the corporate performance portion of the Plan would be
made for any other executive. Similarly, because the other performance goals
taken into account for participants in the Plan were affected by the same
factors that caused the overall corporate performance
6
to fall below the bonus threshold, the Committee decided that no regular bonus
payments would be approved for 2001 for any executive in the Plan.earnings per share
schedule.
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 executives, Restricted Stock Awards, are currently the only type of
awards outstanding under the Performance Incentive Plan.
During 2001,2002, 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 20012002 recommended that Mr. Adderley be awarded a Non-Qualified
Stock Option to purchase 45,000 shares of Class A common stock, in accordance
with the parameters of competitive practice. These stock options vest over a
three-year period.
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.
In 2001,2002, Mr. Adderley and the other most senior officers of the Company
were granted Restricted Shares of the Company's Class A common stock under the
Company's Performance Incentive Plan. These Restricted Shares vest over a three
year period. Mr. Adderley received twoa Restricted Share AwardsAward totaling 22,5007,200
shares.
Since 2000 was the final year of the last Performance Share Award granted
by the Committee, there were no Performance Share payments to anyone in 2001. No
new Performance Share Awards were made in 2001.
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 executives as well as maintaining an appropriate focus on increasing
stockholder value.
B. J. WHITE, Chair
M. A. FAY, O.P.
C. V. FRICKE
V. G. ISTOCK
7
REPORT OF THE AUDIT COMMITTEE
ORGANIZATION
The Audit Committee of the Board of Directors is composed of four
independent directors, as defined by Nasdaq rules, and operates under a written
charter adopted by the Board of Directors on May 15, 2000 (previously published
inand amended by the
2001 Proxy Statement).Board of Directors on February 6, 2003, a copy of the fully amended charter is
attached hereto as Exhibit A. The current members of the Audit Committee are C.
V. Fricke (Chair), B. J. White, M. A. Fay, and V. G. Istock.
PRIMARY FUNCTION
The primary function of the Audit Committee is to oversee the audit process
and provide assistance to the Board of Directors in fulfilling its
responsibilities relating to the corporate accounting and reporting practices.
In addition, the Audit Committee shall review other financial matters as
delegated by the Board of Directors.
PRE-APPROVAL POLICY
The Audit Committee has adopted a policy requiring pre-approval of all
audit and non-audit services of the independent accounts prior to their
engagement by the Company. The policy is further described in the Audit
Committee Charter attached as Exhibit A hereto.
REVIEW AND INDEPENDENT ACCOUNTANTS
The Audit Committee has reviewed the Company's audited consolidated
financial statements and discussed such statements with the Company's management
and with PricewaterhouseCoopers LLP, the Company's independent accountants for
fiscal year 2001.2002. The Audit Committee has discussed with its independent
accountants the matters required to be discussed by Statement of Auditing
Standards No. 61, "Communication with Audit Committees."
The Audit Committee received from PricewaterhouseCoopers LLP the written
disclosures required by Independence Standards Board Standard No. 1 and
discussed the same with PricewaterhouseCoopers LLP, including their
independence.
RECOMMENDATION
Based upon the forgoing review and discussions, the Audit Committee
recommended to the Board of Directors of the Company that the Company's audited
consolidated financial statements be included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 30, 2001,29, 2002, and be filed with the
U.S. Securities and Exchange Commission.
This report is submitted by the Audit Committee of the Board of Directors.
C. V. FRICKE, Chair
B. J. WHITE
M. A. FAY, O. P.
V. G. ISTOCK
8
AUDIT AND RELATED FEES
AUDIT FEES
Aggregate fees for professional services rendered by PricewaterhouseCoopers
LLP ("PricewaterhouseCoopers") in connection with its audit of the Company's
consolidated financial statements as of and for the yearyears ended December 29, 2002 and
December 30, 2001 and its limited reviews of the Company's unaudited condensed
consolidated interim financial statements were $436,580.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION$681,300 and $605,000
respectively.
AUDIT RELATED FEES
DuringFor the years ended December 29, 2002 and December 30, 2001, fees for
professional services rendered by PricewaterhouseCoopers in connection with
audits of employee benefit plans and internal control reviews totaled $26,500
and $92,500 respectively.
TAX FEES
For the years ended December 29, 2002 and December 30, 2001, fees for
professional services rendered by PricewaterhouseCoopers in connection with tax
compliance, tax planning, and advice totaled $606,643 and $350,170 respectively.
ALL OTHER FEES
For the year ended December 29, 2002, fees for professional legal services
rendered by an affiliate of PricewaterhouseCoopers in Hungary totaled $5,463.
For the year ended December 30, 2001, PricewaterhouseCoopers rendered no
professional services to the Company in connection with the design and
implementation of financial information systems.
ALL OTHER FEES
In addition to the feesother than those professional services
described above, aggregate fees of $611,090 were
billed by PricewaterhouseCoopers during the year ended December 30, 2001, for
the following professional services:
Audit-related services(a)................................... $260,920
Income tax compliance and related tax services.............. 350,170
(a) Audit related fees include fees for statutory and subsidiary audits and for
audits of Company benefit plans.above.
9
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,
and a former Executive Vice President of the Company, as well as the total compensation paid to each individual during the
Company's last three fiscal years:
Long-Term Compensation
-----------------------------------------------------------------------------------
Annual Compensation Awards Payouts
-------------------- -------------------------------------------- ------------------------ --------------
Number
Restricted of Shares Long-Term
Name and Share Underlying Incentive Plan All Other
Principal Position Year Salary Bonus Award(s)(1) Options Payouts(2) Compensation(3)
------------------ ---- ------ ----- ----------------------- ---------- -------------- ---------------
T. E. Adderley................ 2001 $817,500 $ 0 $596,1602002 $830,000 $211,000 $161,280 45,000 $ 0 $69,162$45,650
Chairman and 2001 817,500 0 596,160 45,000 0 69,162
Chief Executive Officer 2000 800,000 440,000 432,000 90,000 209,834 85,800
Chief Executive Officer 1999 790,000 630,000 394,800 72,000 301,560 76,634
C. T. Camden.................. 2001 $655,0002002 $700,000 $147,000 $107,520 25,000 $ 0 $384,640$38,500
President and 2001 655,000 0 384,640 75,000 $ 0 $48,840
President and48,840
Chief Operating Officer 2000 600,000 233,000 240,000 40,000 87,431 49,500
Chief Operating Officer 1999 575,000 300,000 210,560 30,000 125,650 45,132
W. K. Gerber.................. 2001 $561,6672002 $570,000 $ 0 $252,16094,000 $ 67,200 15,000 $ 0 $41,671$31,350
Executive Vice President 2001 561,667 0 252,160 15,000 0 41,671
and Chief Financial Officer 2000 550,000 196,000 192,000 30,000 0 48,000
and Chief Financial Officer 1999 535,000 250,000 157,920 25,000 0 45,853
M. L. Durik................... 2001 $487,5002002 $508,333 $ 0 $252,16083,000 $ 67,200 15,000 $ 0 $ 9,4437,625
Executive Vice President, 2001 487,500 0 252,160 15,000 0 9,443
Human Resources 2000 440,000 142,000 144,000 30,000 0 10,800
Human Resources(4) 1999 200,532 100,000 108,800 20,000 0 8,794
T.A. White.................... 2001 $420,769 $ 0 $267,200 0 $ 0 $26,151
Former Executive VP, 2000 600,000 233,000 240,000 40,000 87,431 54,000
Chief Administration and 1999 575,000 300,000 210,560 30,000 125,650 48,432
Technology Officer(5)
A. G. Grimsley................ 2001 $410,0002002 $430,000 $ 0 $252,16070,000 $ 67,200 15,000 $ 0 $33,550$23,650
Executive Vice President, 2001 410,000 0 252,160 15,000 0 33,550
US Commercial 2000 340,500 200,000 144,000 30,000 52,459 31,830
US Commercial 1999 309,000 190,000 105,280 20,000 0 25,477
(1) Restricted Shares of the Company's Class A common stock were awarded in
February 2002, March 2001, August 2001, March 2000, and March 1999.2000. The shares awarded
vest in three equal annual installments beginning one year after the date of
grant, except for one award granted to M.L. Durik in August of 1999 which
vests in four equal annual installments.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 2002 were: T.E. Adderley, 7,200; C.T. Camden, 4,800; W.K. Gerber, 3,000;
M.L. Durik 3,000; and A.G. Grimsley, 3,000. The number of shares awarded in
2001 were: T. E. Adderley, 22,500; C. T. Camden, 14,500; T. A. White, 10,000; W. K. Gerber,
9,500; M. L. Durik, 9,500; and A. G. Grimsley, 9,500. The number of shares
awarded in 2000 were: T. E. Adderley, 18,000; C. T. Camden, 10,000; T. A. White,
10,000; W. K.
Gerber, 8,000; M. L. Durik, 6,000; and A. G. Grimsley, 6,000.
The number of shares awarded in 1999 were: T. E. Adderley, 15,000; C. T.
Camden, 8,000; T. A. White, 8,000; W. K. Gerber, 6,000; M. L. Durik, 4,000,
and A. G. Grimsley, 4,000. Dividends are payable on Restricted Shares.
10
At December 30, 2001, (the endthe last business day of the Company's 2002 fiscal year)year the aggregate
number of unvested Restricted Shares of the Company's Class A common stock
held by the executive officers named in
10
the Summary Compensation Table and the value of these shares, based upon the
$22.06$25.095 per share closing price of the Company's Class A common stock on
that date, were as follows:
Name No. of Shares Value
---- ------------- -----
T. E. Adderley......................................... 39,500 $871,370Adderley.......................................... 28,200 $707,679
C. T. Camden........................................... 23,833 525,756Camden............................................ 17,800 446,691
W. K. Gerber........................................... 18,833 415,456Gerber............................................ 13,000 326,235
M. L. Durik............................................ 15,500 341,930
T. A. White (*)........................................ 0 0Durik............................................. 12,333 309,497
A. G. Grimsley......................................... 14,833 327,216Grimsley.......................................... 11,333 284,402
(*) All unvested Restricted Shares held by Ms. White on August 31, 2001
were cancelled upon her departure from the Company.
(2) Value of shares received in each year for the three year performance period
ending December 31 of the year preceding the year in which the shares were
received.
(3) Represents Company contributions to non-qualified defined
contribution/deferred compensation plan for officers and certain other
management employees known as the Management Retirement Plan.
(4) Mr. Durik has been an employee of the Company since July 1999.
(5) Ms. White served as an executive officer until her departure on August 31,
2001.
11
OPTION GRANTS IN 20012002
The following table shows all grants of stock optionsall Non-Qualified Stock Options and
Incentive Stock Options to the officers named in the Summary Compensation Table
above in 2001.2002. The exercise price of all such options was the fair market value
on the date of grant. One third (1/3) are exercisable one year after the grant
date with an additional one third (1/3) exercisable on each of the next two
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 % of Total Potential Realizable Value at
of Shares Options Assumed Annual Rates of Stock
Underlying Granted to Price Appreciation for Option Term(2)Term(1)
Options Option Employees Exercise or Expiration -------------------------------------------------------------------------------
Name Granted Type(1)Type in Fiscal Year Base Price Date 0% 5% 10%
---- ---------- ------------- -------------- ----------- ---------- -- -- --- ---------- ----------
T. E. Adderley....... 45,000 NQ 8.45 $25.60 08/13/119.80 $22.40 02/12/12 $0 $ 724,487 $1,835,991$633,926 $1,606,492
C. T. Camden......... 3,5004,000 ISO $25.60 08/13/11$22.40 02/12/12 $0 $ 56,349 $ 142,799
21,50021,000 NQ $25.60 08/13/11$22.40 02/12/12 0 346,144 877,196
4,000 ISO $21.00 12/03/11 0 52,827 133,874
46,000 NQ $21.00 12/03/11 0 607,512 1,539,555
------ --295,832 749,696
---------- ----------
75,000 14.08---- --------- -----------
25,000 5.44 $0 $1,062,832 $2,693,424$352,181 $ 892,495
W. K. Gerber......... 3,5004,000 ISO $25.60 08/13/11$22.40 02/12/12 $0 $ 56,349 $ 142,799
11,50011,000 NQ $25.60 08/13/11$22.40 02/12/12 0 185,147 469,198
------ --154,960 392,698
---------- -------------- --------- -----------
15,000 2.823.27 $0 $211,309 $ 241,496 $ 611,997535,497
M. L. Durik.......... 3,5004,000 ISO $25.60 08/13/11$22.40 02/12/12 $0 $ 56,349 $ 142,799
11,50011,000 NQ $25.60 08/13/11$22.40 02/12/12 0 185,147 469,198
------ --154,960 392,698
---------- -------------- --------- -----------
15,000 2.823.27 $0 $211,309 $ 241,496 $ 611,997
T. A. White.......... 0 -- 0 0 -- $0 $ 0 $ 0535,497
A. G. Grimsley....... 3,5004,000 ISO $25.60 08/13/11$22.40 02/12/12 $0 $ 56,349 $ 142,799
11,50011,000 NQ $25.60 08/13/11$22.40 02/12/12 0 185,147 469,198
------ --154,960 392,698
---------- -------------- --------- -----------
15,000 2.823.27 $0 $211,309 $ 241,496 $ 611,997535,497
(1) Option type is either Incentive Stock Option (ISO) or Non-Qualified Stock
Option (NQ).
(2) 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, with respect to the grants expiring on
August
13, 2011,February 12, 2012, 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 $25.60$22.40 (the fair market value on the date
of the grant), the price per share of the Company's Class A common stock
would have to be approximately $41.70$36.49 and $66.40,$58.10, respectively, as of the
expiration date of their options.
12
OPTION EXERCISES DURING 20012002 AND YEAR-END OPTION VALUES
The following table shows stock option exercises during 20012002 by each of the
officers named in the Summary Compensation Table and the value of unexercised
options at December 30, 2001:fiscal year end 2002:
Number of
Shares Underlying Value of Unexercised
Unexercised Options In-the-Money
Number of at Year End Options at Year End
Shares Acquired Value ---------------------------- ----------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------- ----------- ------------- ----------- -------------
T. E. Adderley............Adderley........... 0 $0 298,900 190,100 $0379,100 151,900 $ 081,405 $181,260
C. T. Camden..............Camden............. 0 $0 85,000 138,000 $0 $53,000139,502 108,498 $103,543 $230,232
W. K. Gerber..............Gerber............. 0 $0 59,000 76,000 $090,751 59,249 $ 027,581 $ 60,569
M. L. Durik...............Durik.............. 0 $0 17,500 47,500 $035,001 44,999 $ 0
T.16,425 $ 56,850
A. White...............G. Grimsley........... 0 $0 0 0 $069,401 48,599 $ 0
A. G. Grimsley............ 0 $0 45,300 57,700 $025,350 $ 059,825
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR TABLE
There were no performance share awards made by the Company in 20012002 under
the Company's Performance Incentive Plan.
EQUITY COMPENSATION PLAN INFORMATION
The following table shows the number of securities of the Company that can
be issued upon the exercise of outstanding options, warrants and rights, the
weighted-average of exercise price of outstanding options, warrants and rights,
and the number of securities remaining available for future issuance under the
Company's equity compensation plans as of the fiscal year end for 2002.
Number of securities
remaining available for
future issuance under equity
Number of securities to Weighted-average compensation plans
be issued upon exercise exercise price of (excluding securities
of outstanding options, outstanding options, reflected in the
Plan Category warrants and rights warrants and rights first column)(2)
------------- ----------------------- -------------------- ----------------------------
Equity compensation plans approved by
security holders(1)................ 2,673,000 $26.04 1,133,000
Equity compensation plans not
approved by security holders(3).... 0 0 0
--------- ------ ---------
Total................................ 2,673,000 $26.04 1,133,000
(1) The equity compensation plans of the Company approved by the Company's
security holders include the Company's Performance Incentive Plan and the
Company's Non-Employee Director Stock Option Plan.
(2) The Performance Incentive Plan provides that the maximum number of shares
available for grants is 10 percent of the outstanding Class A common stock,
adjusted for plan activity over the preceding five years.
(3) The Company has no equity compensation plans that have not been approved by
its security holders.
13
PERFORMANCE GRAPH
The following graph compares the cumulative total return of the Company's
Class A common stock with that of a Peer Group Index and the S&P MidCap 400
Index for the five years ended December 31, 2001.2002. The graph assumes an
investment of $100 on December 31, 19961997 and that all dividends were reinvested.
The Peer Group Index consists of the following publicly traded staffing services
companies: CDI Corp., Manpower Inc., and Spherion Corporation.
COMPARISON OF FIVE5 YEAR CUMULATIVE TOTAL RETURN
KELLY SERVICES, INC., PEER GROUP INDEX AND S&P MIDCAP 400 INDEXASSUMES INITIAL INVESTMENT OF $100
DECEMBER 2002
[PERFORMANCE GRAPH]
- -------------------------------------------------------------------------------------------------------------
1996-----------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
KELLY SERVICES, INC. 100 115 125 102 100 96$100.00 $108.97 $89.29 $87.56 $83.98 $96.33
- -------------------------------------------------------------------------------------------------------------
PEER GROUP INDEX 100 123 87 115 92 84
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
S&P MIDCAP 400 INDEX 100 132 157 181 212 211$100.00 $119.11 $136.34 $160.56 $159.59 $136.41
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
PEER GROUP INDEX $100.00 $70.61 $93.80 $74.82 $68.57 $65.60
- -----------------------------------------------------------------------------------------------------------
14
MATTERS TO BE BROUGHT BEFORE THE MEETING
ELECTION OF DIRECTORDIRECTORS
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 six (6).
The Board of Directors recommends that the nominees named below be elected
to serve as Directors. The nominees will serve for a three (3) year term ending
at the Annual Meeting of Stockholders held after the close of the fiscal year
ended January 2, 2005.1, 2006.
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 (as of March 1, 2002)2003) of the nominee and of each person
whose term of office as a Director will continue after the Meeting, 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 Expiration of Year First
ElectiveExpiration of Principal Elected as
Name and Age Elective Term Occupation Director
------------ ------------- ---------- ----------
NOMINEES FOR ELECTION AS DIRECTOR TO BE ELECTED FOR A THREE-YEAR TERM
B. J. White................. 2002 Interim President, University of Michigan; Dean, Wilbur 1995
Age 54 K. Pierpont Collegiate Professor and Professor of
Business Administration of the University of Michigan
Business School; Trustee of Equity Residential
Properties Trust, Inc. and the mutual funds of Fred
Alger Management Company; Director of Gordon Food
Service, Inc. and of Kaydon Corporation. Formerly:
Director of Union Pump Company, Inc. and of Three-D
Departments, Inc.
C. T. Camden (b)............ (c) President and Chief Operating Officer (2001) of the (c)
Age 47 Company. Formerly: Executive Vice President and Chief
Operating Officer (2001), Executive Vice President of
Operations, Sales and Marketing (1997), and Senior
Vice President Sales and Marketing (1995) of the
Company.
DIRECTORS CONTINUING IN OFFICE
T. E. Adderley(a)........... 2004 Chairman (1998) and Chief Executive Officer of the 1962
Age 68 Company and past President of the Company; Director
of DTE Energy Company. Formerly: Director of First of
Chicago NBD Corporation and Director of Detroit
Edison Company.
15
Year of
Expiration of Year First
Elective Principal Elected as
Name and Age Term Occupation Director
------------ ------------- ---------- ----------
M. A. Fay, O. P. ......................... 2003 President of the University of Detroit Mercy; Director 1997
Age 6768 Director of Bank One Corporation. Formerly:
Director of First Chicago NBD Corporation.
C. V. Fricke................Fricke................... 2003 Professor Emeritus, University of Michigan-Dearborn. 1978
Age 7374
V. G. Istock................Istock................... 2003 Retired Chairman/President of Bank One Corporation; 1991
Age 6162 Director of Masco Corporation. Formerly: Chairman,
President and Chief Executive Officer of First
Chicago NBD Corporation; Chairman and Chief
Executive Officer of First National Bank of
Chicago; Chairman and Chief Executive Officer of
NBD Bank, Michigan; Director of Bank One
Corporation and First Chicago NBD Corporation;
Director of Federal Reserve Bank of Chicago.
15
Year of Year First
Expiration of Principal Elected as
Name and Age Elective Term Occupation Director
------------ ------------- ---------- ----------
DIRECTORS CONTINUING IN OFFICE
T. E. Adderley(a).............. 2004 Chairman (1998) and Chief Executive Officer of the 1962
Age 69 Company and past President of the Company;
Director of DTE Energy Company. Formerly: Director
of First of Chicago NBD Corporation and Director
of Detroit Edison Company.
B. J. White.................... 2005 Managing Director, Fred Alger Management. Inc.; 1995
Age 55 Trustee of Equity Residential Properties Trust,
Inc. and the mutual funds of Fred Alger Management
Company; Director of Gordon Food Service, Inc. and
of Kaydon Corporation. Formerly: Interim
President, University of Michigan; Dean, Wilbur K.
Pierpont Collegiate Professor and Professor of
Business Administration of the University of
Michigan Business School; Director of Union Pump
Company, Inc. and of Three-D Departments, Inc.
C. T. Camden(b)................ 2005 President and Chief Operating Officer (2001) of the 2002
Age 48 Company. Formerly: Executive Vice President and
Chief Operating Officer (2001), Executive Vice
President of Operations, Sales and Marketing
(1997), and Senior Vice President Sales and
Marketing (1995) of the Company.
(a) Mr. Adderley is a director and executive officer of virtually all
subsidiaries of the Company.
(b) Mr. Camden is a director and executive officer of virtually all subsidiaries
of the Company.
(c) Mr. Camden was appointed by the Board of Directors to fill the vacant seat
created by the Board of Directors at the November 29, 2001 meeting of the
Board of Directors. Upon election at the 2002 Annual Meeting of
Stockholders, his term will expire in 2005.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
PROPOSAL 2
The Board of Directors of the Company has appointed the firm of
PricewaterhouseCoopers LLP as independent accountants of the Company for the
current fiscal year ending December 29, 2002,28, 2003, 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 respond to appropriate questions. Fees
paid to PricewaterhouseCoopers LLP for fiscal year 20012002 are set forth on page 9
of the Proxy Statement under the heading Audit and Related Fees.
It is recommended by the Board of Directors that the proposal to ratify the
appointment of PricewaterhouseCoopers LLP as independent accountants for the
year 20022003 be approved. If stockholders fail to approve this proposal, the Board
will reconsider the appointment of PricewaterhouseCoopers LLP as independent
accountants for the year 2002.2003.
The proposal to ratify the appointment of PricewaterhouseCoopers 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
APPROVAL OF STANDARDS FOR
PERFORMANCE-BASED, ANNUAL INCENTIVE AWARD CRITERIA
FOR CERTAIN EXECUTIVE OFFICERS UNDER THE
COMPANY'S SHORT-TERM INCENTIVE PLAN
PROPOSAL 3
DESCRIPTION OF THE STIP PLAN
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"), which is designed to provide incentive awards to certain officers and
other management-level employees based on their contributions to the Company's
growth and profitability. Participants in the plan are selected by authority of
the Compensation Committee, delegated in some instances to the Company's chief
executive officer. When the performance objectives of a fiscal year are met,
bonus payments are made early in the following fiscal year.
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.
BACKGROUND FOR THE PROPOSAL; DEDUCTIBILITY
Section 162(m) of the Internal Revenue Code, as amended in 1993,
establishes a limit of $1,000,000 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:
(1) that an award under an incentive plan be objectively determinable based on a
performance standard or standards; (2) 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 (3) that changes in any of
these conditions be approved by the stockholders.
After Section 162(m) regulations were issued, certain changes were made in
the STIP and approved by the Company's stockholders at the Company's 1995 Annual
Meeting to conform the STIP to those regulations.
In March 1998, 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) ("Named Officers"). These changes were intended to
afford the Compensation Committee greater flexibility in fashioning STIP awards
for the Named Officers while keeping in mind the deduction limits imposed by
Section 162(m). These amendments were approved by the Company's stockholders at
the Company's 1998 Annual Meeting.
17
DEFINITION OF NAMED OFFICERS
Under the STIP, Named Officers are the Company's chief executive officer
and, for any given year, each executive officer at or above the senior vice
president level who is determined by the Compensation Committee to be an
executive likely to be named in the Summary Compensation Table of the Company's
proxy statement for the next year's Annual Meeting of Stockholders.
PROPOSED CONTINUED STIP CRITERIA FOR NAMED OFFICERS
The STIP criteria for Named Officers have been as follows for STIP Plan
years 1998 through 2002:
"During the first quarter of each year the Committee shall consider the
establishment of a Plan target award, expressed as a percentage of
eligible salary, for each of the Named Officers.
"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 Named Officer's Plan 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 Named Officer's
Plan target award, the Committee shall specify at the time of the award
what percentage of the total 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.
"In no event shall the total annual Plan award to a Named Officer,
including the non-performance-based portion, exceed $2,000,000 a year."
18
In February of 2003, the Board of Directors amended the Plan solely by
extending the term for application of the criteria reproduced above to STIP Plan
years 2003 through 2007. This proposal seeks stockholder approval for that
extension.
2003 AWARDS TO NAMED OFFICERS
Consistent with the criteria described above, the Compensation Committee,
in the first quarter of 2003, designated the Named Officers for 2003, who are
the same officers shown in the Summary Compensation Table of this proxy
statement. The Committee also determined the target incentive award for each
Named Officer, established the 2003 earnings per share performance standard and
the percentage of the 2003 target award each Named Officer may receive under the
STIP if that performance standard is achieved, and approved a schedule of
possible STIP payouts for 2003 ranging from zero percent (if the specified
earnings per share threshold is not achieved) to the maximum percent of each
Named Officer's target award salary percentage, depending on the extent to which
actual earnings per share are less or more than the target amount. Because of
the contingent nature of the performance criteria and the potential for base
salaries of Named Officers to be changed during 2003 pursuant to the Company's
regular merit increase process, the actual amount (if any) that any executive
officer will receive for 2003 performance (or for performance in any later year)
is not now determinable.
EFFECT OF STOCKHOLDER APPROVAL; SUBSEQUENT AMENDMENTS
The Board believes that if the continued STIP criteria are approved as
proposed, the full amount of each STIP award to a Named 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 proposed continued criteria, 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 that are deductible for up to five years (that is, through 2007)
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 to assure the deductibility of the
payments following such amendments.
EFFECT OF NON-APPROVAL
If the proposed criteria are not approved by the stockholders, the STIP
awards for Named Officers that have been conditioned on stockholder approval
will not be made. However, 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
19
may include non-STIP incentive bonuses to such officers for achievement of
performance objectives set by the Committee.
REQUIRED VOTE
The proposal to approve the performance-based annual incentive compensation
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.
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 14, 2002.November 28, 2003.
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 30, 2001,29, 2002, 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
GEORGE M. REARDON
Secretary
1720
EXHIBIT A
KELLY SERVICES, INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
ORGANIZATION
The Audit Committee shall be comprised of at least three outside Directors
who meet the independence criteria relating to audit committee members set forth
in the applicable requirements of the Nasdaq Stock Market and the rules of the
Securities and Exchange Commission.
Audit Committee members will meet the requirements of the Nasdaq Stock
Market relating to the financial literacy and experience of audit committee
members. At least one member of the Audit Committee shall qualify as an "audit
committee financial expert" as defined in Item 401(h) of Regulation S-K. The
board of directors must determine that such a person has all of the following
attributes:
- An understanding of Generally Accepted Accounting Principles (GAAP).
- The ability to assess the general application of GAAP in connection with
the accounting for estimates, accruals and reserves.
- Experience in preparing, auditing, analyzing or evaluating financial
statements that present a level of complexity of accounting issues that
are generally comparable to those expected to be raised by the Company's
financial statements, or experience actively supervising one or more
persons engaged in such activities.
- An understanding of internal controls and procedures for financial
reporting.
- An understanding of audit committee functions.
STATEMENT OF POLICY
The primary function of the Audit Committee is to oversee the audit process
and provide assistance to the Board of Directors in fulfilling its
responsibilities relating to the corporate accounting and reporting practices.
In addition, the Audit Committee shall review other financial matters as
delegated by the Board of Directors.
RESPONSIBILITIES
1. Review and approve the audit scope, services, fees and term of
appointment of the independent public accountants for auditing of the financial
records of the Company and its subsidiaries, and make recommendations to the
Board regarding such matters.
2. Approve all audit and non-audit services of the independent public
accountants prior to engagement by the Company. Such pre-approval may be
delegated the Chair of the Audit Committee so long as all such pre-approvals are
presented to the full Audit Committee at a regularly scheduled meeting.
21
3. Consider in consultation with the independent accountants and the Vice
President of Internal Audit, the audit scope and plan of external and internal
audits, the involvement of the internal auditors in the audit examination, and
the independent auditor's responsibility under generally accepted auditing
standards.
4. Receive periodic reports from the independent accountants and the
Internal Audit Department on their activities and assessment of the Company's
compliance with, and the adequacy of existing internal controls.
5. Obtain a formal written statement from the independent accountants
delineating all relationships between the accountants and the company that may
bear on the independence of such accountants and obtain a written statement from
the independent accountants confirming their independence at least annually.
6. Review with management and the independent accountants:
- The Company's quarterly and annual financial statements including the
quarterly reports on Form 10-Q and the annual report on Form 10-K filed
with the Securities and Exchange Commission.
- The independent accountants' audit of the financial statements and their
associated report, including any opinions rendered in connection with the
financial statements. This includes any related management letter, and
management's response to the recommendations.
- Any significant changes required in the independent accountants' audit
plan.
- Any serious difficulties encountered in the conduct of the audit or
disputes with management during the audit.
7. Review with management and the Vice President of Internal Audit:
- Significant findings during the year and management's responses.
- The Internal Audit Department's audit plan and staffing.
- The results of their review with respect to officers' expense reports.
8. Meet with the Vice President of Internal Audit and the independent
accountants in separate executive sessions to discuss any sensitive issues.
9. Establish procedures for the receipt, review and retention of complaints
received by the company regarding potential fraud, ethics violations, internal
accounting controls, or auditing matters including confidential, anonymous
submissions by the Company's employees.
10. Include in the Company's proxy statement a report on the Company's
financial statements, as required by the SEC, that "based on the review and
discussion of the audited financial statements with management and the
independent auditors, the audit committee recommended to the Board that the
22
audited financial statements be included in the Company's Annual Report on Form
10-K for filing with the Commission." In addition, the report must state
whether:
- The audit committee discussed with the independent auditors those matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication With Audit Committees).
- The audit committee has received from the auditors certain disclosures
regarding the auditor's independence required by Independence Standards
Board Standard No. 1.
- The Board of Directors has adopted a written charter for the audit
committee (a copy of the charter must be included as an appendix to the
Company's proxy statement at least once every three years).
- The audit committee members are "independent" as defined by the Nasdaq
standards.
11. The Audit Committee shall have the authority and funding to retain
special legal, accounting or other consultants to advise the Committee.
12. The Audit Committee will have such additional duties and
responsibilities as may be provided in applicable requirements of the Nasdaq
Stock Market and the rules of the Securities and Exchange Commission, as in
effect from time to time.
13. The Audit Committee will review the written Audit Committee Charter
annually.
23
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 14, 2002APRIL 29, 2003
The undersigned hereby appoints as Proxies T.E. Adderley, William K.
Gerber and George M. Reardon, 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 25, 200210, 2003 at the Annual
Meeting of Stockholders to be held on May 14, 2002April 29, 2003 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.
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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.
- --------------------------------------------------------------------------------
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PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAME(S) APPEAR(S) ON THE BOOKS OF THE
COMPANY. JOINT OWNERS SHOULD EACH SIGN PERSONALLY. TRUSTEES AND OTHER
FIDUCIARIES SHOULD INDICATE THE CAPACITY IN WHICH THEY SIGN, AND WHERE MORE
THAN ONE NAME APPEARS, A MAJORITY MUST SIGN. IF A CORPORATION, THIS SIGNATURE
SHOULD BE THAT OF AN AUTHORIZED OFFICER WHO SHOULD STATE HIS OR HER TITLE.
DO YOU HAVE ANY COMMENTS?- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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/\FOLD AND DETACH HERE -HERE/\
YOU CAN NOW ACCESS YOUR KELLY SERVICES, INC. ACCOUNT ONLINE.
Access your Kelly Services, Inc. shareholder account online via Investor
ServiceDirect(SM)ServiceDirect(R) (ISD).
Mellon Investor Services LLC, agent for Kelly Services, Inc., now makes it easy
and convenient to get current information on your shareholder account. After a
simple, and secure process of establishing a Personal Identification Number
(PIN), you are ready to log in and access your account to:
- View account status - View payment history for dividends
- View certificate history - Make address changes
- View book-entry information - Obtain a duplicate 1099 tax form
- Establish/change your PIN
VISIT US ON THE WEB AT HTTP://WWW.MELLONINVESTOR.COM
AND FOLLOW THE INSTRUCTIONS SHOWN ON THIS PAGE.
STEP 1: FIRST TIME USERS - ESTABLISH A PIN
You must first establish a Personal Identification Number (PIN) online by
following the directions provided in the upper right portion of the web screen
as follows. You will also need your Social Security Number (SSN) available to
establish a PIN.
INVESTOR SERVICEDIRECT(SM) IS CURRENTLY ONLY AVAILABLE FOR DOMESTIC INDIVIDUAL
AND JOINT ACCOUNTS.
- - SSN
- - PIN
- - Then click on the ESTABLISH A PIN STEP 2: LOG IN FOR ACCOUNT ACCESS STEP 3: ACCOUNT STATUS SCREEN
You must first establish a Personal You are now ready to log in. To access You are now ready to access your
Identification Number (PIN) online by your account please enter your: account information. Click on the
following the directions provided in the appropriate button to view or initiate
upper right portion of the web screen as - SSN or Investor ID transactions.
follows. You will also need your Social - PIN
Security Number (SSN) or Investor ID - Then click on the SUBMIT button - Certificate History
available to establish a PIN. - Book-Entry Information
If you have more than one account, - Issue Certificate
THE CONFIDENTIALITY OF YOUR PERSONAL you will now be asked to select the - Payment History
INFORMATION IS PROTECTED USING SECURE SOCKET appropriate account. - Address Change
LAYER (SSL) TECHNOLOGY. - Duplicate 1099
- - SSN or Investor ID
- - PIN
- - Then click on the Establish PIN button
Please be sure to remember your PIN, or maintain
it in a secure place for future reference.
STEP 2: LOG IN FOR ACCOUNT ACCESS
You are now ready to log in. To access your account please enter your:
- - SSN
- - PIN
- - Then click on the SUBMIT button
If you have more than one account, you will now be asked to select the
appropriate account.
STEP 3: ACCOUNT STATUS SCREEN
You are now ready to access your account information. Click on the appropriate
button to view or initiate transactions.
- - Certificate History
- - Book-Entry Information
- - Issue Certificate
- - Payment History
- - Address Change
- - Duplicate 1099
FOR TECHNICAL ASSISTANCE CALL 1-877-978-7778 BETWEEN
9AM-7PM MONDAY-FRIDAY EASTERN TIME
PLEASE MARK
YOUR VOTES AS
INDICATED IN /X/
THIS EXAMPLE
1.Please
Mark Here
for Address [ ]
Change or
Comments
SEE REVERSE SIDE
Election of Directors FOR ALL WITHHOLD FOR ALL
EXCEPT FOR AGAINST ABSTAIN
01 Carl T. Camden / / / /Maureen A. Fay, O.P. [ ] [ ] [ ] 2. Ratify the appointment of / / / / / /
PricewaterhouseCoopers [ ] [ ] [ ]
02 Cedric V. Fricke LLP as independent accountantsaccountants.
03 Verne G. Istock FOR WITHHOLD
02 B. Joseph White / / / /AGAINST ABSTAIN
3. Approval of standards for performance-based, [ ] [ ] [ ]
annual incentive award criteria for certain
Instructions: To withhold authority to vote for any executive officers under the Company's
individual nominee(s), mark "FOR ALL EXCEPT" and Short-Term Incentive Plan.
write the name of the nominee(s) in the space
provided below. 4. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting.
- ----------------------------------------------------- PLEASE BE SURE TO SIGN AND DATE THIS PROXY.
Signature_____________________________________ Signature_____________________________________ Date____________________
NOTE: Please be sure to sign and date this Proxy.
SIGNATURE _______________________________________________ SIGNATURE _______________________________________________ DATE __________
NOTE: PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
- -----------------------------------------------------------------------------------------------------------------------------------
-as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
/\ FOLD AND DETACH HERE -/\