UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.    )

Filed by the Registrant    x

Filed by a Party other than the Registrant    ¨

Check the appropriate box:

x    Definitive Proxy Statement

The McGraw-Hill Companies, Inc.

(Name of Registrant as Specified In Its Certificate)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

x    No fee required.

Notes:

Reg. §240.14a-101.

SEC 1913 (3-99)

March 22, 2004

DEAR SHAREHOLDER:

On behalf of our Board of Directors and management, we cordially invite you to attend our Annual Meeting of Shareholders on Wednesday, April 28, 2004. The Meeting will be held at our headquarters at 1221 Avenue of the Americas, New York, New York, at 11:00 a.m. (EDT). If you are unable to attend the Annual Meeting in New York, please join us via live webcast on the Company’s web site at www.mcgraw-hill.com.

The Notice of Meeting and Proxy Statement accompanying this letter describe the business we will consider at the Meeting. Your vote is very important. I urge you to vote to be certain your shares are represented at the Meeting even if you plan to attend. Most shareholders have a choice of voting over the Internet, by telephone or by using a traditional proxy card. Please refer to your proxy materials or the information forwarded by your bank, broker or other holder of record to see which methods are available to you.

I look forward to seeing you at the Meeting.

HAROLD MCGRAW III

Chairman of the Board, President and Chief Executive Officer

Notice of Annual Meeting of Shareholders

To Be Held April 28, 2004

The Annual Meeting of Shareholders of The McGraw-Hill Companies, Inc. will be held on Wednesday, April 28, 2004, at 11:00 a.m. (EDT) at the Company’s headquarters at 1221 Avenue of the Americas, New York, New York. At the Meeting, shareholders will be asked to:

You may vote at the Meeting if you were a shareholder of the Company at the close of business on March 9, 2004, the record date for the Meeting.

By Order of the Board of Directors.

SCOTT L. BENNETT

Senior Vice President, Associate General

Counsel and Secretary

New York, New York

March 22, 2004

Please sign and return the enclosed proxy card in the postage-paid envelope provided or, if you prefer, please follow the instructions on the enclosed proxy card for voting by telephone or via the Internet. You may access the Company’s Investor Relations web site at www.mcgraw-hill.com/investor  relations for further Internet voting instructions as well as to view the Proxy Statement and Annual Report online.

The McGraw-Hill Companies, Inc.

Proxy Statement

2004 Annual Meeting of Shareholders

The McGraw-Hill Companies, Inc.

Proxy Statement

2004 Annual Meeting of Shareholders

GENERAL INFORMATION

Why did I receive this Proxy Statement?

The Board of Directors of The McGraw-Hill Companies, Inc. (the “Company”, “we” or “us”) is soliciting proxies for the 2004 Annual Meeting of Shareholders (the “Annual Meeting” or “Meeting”) to be held on Wednesday, April 28, 2004, and at any adjournment of the Meeting. When the Company asks for your proxy, we must provide you with a Proxy Statement that contains certain information specified by law. This Proxy Statement summarizes the information you need to vote at the Annual Meeting.

The Notice of Annual Meeting, Proxy Statement and proxy are being mailed to shareholders beginning March 22, 2004. The Company’s 2003 Annual Report was mailed to shareholders on March 12, 2004.

What will I vote on?

Four items:

Will there be any other items of business on the agenda?

We do not expect any other items of business at the Meeting. Nonetheless, if there is an unforeseen need, your proxy will give discretionary authority to the persons named on the proxy to vote on any other matters that may be brought before the Meeting. These persons will use their best judgment in voting your proxy.

Who is entitled to vote?

Shareholders as of the close of business on the record date, which is March 9, 2004, may vote at the Annual Meeting.

How many votes do I have?

You have one vote for each share of common stock you held on the record date.

What constitutes a quorum for the Meeting?

A quorum is necessary to conduct business at the Annual Meeting. A quorum requires the presence at the Meeting of a majority of the outstanding shares entitled to vote, in person or represented by proxy. You are part of the quorum if you have voted by proxy. As of the record date, 191,564,369 shares of Company common stock were issued and outstanding.

How do I vote?

You can vote either in person at the Annual Meeting or by proxy without attending the Meeting. We urge you to vote by proxy even if you plan to attend the Meeting so we will know as soon as possible that enough votes will be present for us to hold the Meeting. If you attend the Annual Meeting in person, you may vote at the Meeting and your earlier proxy will not be counted.

May I vote by telephone or via the Internet?

Yes. Instead of submitting your vote by mail using the enclosed proxy card, you may be able to vote on the Internet or by telephone. Please note that there are separate Internet and telephone voting arrangements depending on whether you hold your shares:

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If you are a registered shareholder, you may vote by telephone or via the Internet by following the instructions on your proxy card.

If you are a beneficial owner, please refer to the information forwarded by your bank, broker or other holder of record to see which options are available to you. Most brokers and banks offer voting by telephone and via the Internet, as well as by mail.

If you vote via the Internet, you may incur costs, such as usage charges from Internet access providers and telephone companies. You will be responsible for these costs.

How do I vote my shares in the Dividend Reinvestment Plan?

If you participate in the Dividend Reinvestment Plan, any proxy you give will also govern the voting of all shares you hold in this Plan, unless you give us instructions to the contrary.

How do I vote my shares in the Company’s employee benefit plans?

You may instruct the plans’ Trustee on how to vote your shares in these plans by mail, by telephone, or via the Internet. Your vote must be received by April 23, 2004, or the shares represented will not be voted.

Can I change my vote?

Yes. If you are a shareholder of record, you have the right to revoke your proxy at any time before the Meeting by: (1) sending a notice to the Company’s Secretary, The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, New York 10020-1095; or (2) delivering a later dated proxy by telephone, on the Internet, or in writing. You may also revoke your proxy by voting in person at the Meeting.

If you are a beneficial owner, please refer to the information forwarded by your broker, bank or other holder of record for procedures on revoking or changing your proxy.

What are the costs of soliciting these proxies and who will pay them?

The Company will pay all costs of soliciting these proxies. Although we are mailing these proxy materials, some of our officers and employees may solicit proxies by telephone or in person. We will reimburse banks and brokers for the expenses they incur in forwarding the proxy materials to you. Georgeson Shareholder Communications Inc. is assisting us with the solicitation of proxies for a fee of $25,000 plus out-of-pocket expenses.

How many votes are required for the approval of each item?

Are abstentions and broker non-votes part of the quorum? What are broker non-votes? What if I vote “abstain”?

Abstentions, broker non-votes and votes withheld from Director nominees count as “shares present” at the Annual Meeting for purposes of determining a quorum. However, abstentions

and broker non-votes do not count in the voting results.

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Broker non-votes. If your shares are held by a broker, the broker may require your instructions in order to vote your shares. If you give the broker instructions, your shares will be voted as you direct. If you do not give instructions, one of two things can happen depending on the type of proposal. For the election of Directors and ratification of auditors, the broker may vote your shares in its discretion. For approval of the Amended and Restated 2002 Stock Incentive Plan and the shareholder proposal, the broker may not vote your shares at all. When that happens, it is called a “broker non-vote”.

Who will count the vote?

Votes at the Meeting will be counted by two independent inspectors of election appointed by the Board.

What if I don’t vote for some or all of the matters listed on my proxy card?

If you are a registered shareholder and you return a signed proxy card without indicating your vote for some or all of the matters, your shares will be voted as follows for any matter you did not vote on:

How do I submit a shareholder proposal for the 2005 Annual Meeting?

The Company’s 2005 Annual Meeting is scheduled for April 27, 2005. There are two different deadlines for submitting shareholder proposals. First, if a shareholder wishes to have a proposal considered for inclusion in next year’s Proxy Statement, he or she must submit the proposal in writing so that we receive it by November 22, 2004. Proposals should be addressed to the Company’s Secretary, The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, New York 10020-1095. If you submit a proposal, it must comply with applicable laws, including Rule 14a-8 of the Securities Exchange Act of 1934.

In addition, the Company’s By-Laws provide that any shareholder wishing to nominate a candidate for Director or to propose any other business at the Annual Meeting must give the Company written notice no earlier than December 29, 2004 and no later than January 28, 2005. This notice must comply with applicable laws and the Company’s By-Laws. Copies of the By-Laws are available to shareholders free of charge on request to the Company’s Secretary, The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, New York 10020-1095. You may also download the By-Laws from the Corporate Governance section of the Company’s Investor Relations web site at www.mcgraw-hill.com/investor_relations.

Can I view future proxy materials online instead of receiving them by mail?

Yes. If you are a shareholder of record or own Company stock through one of the Company’s employee benefit plans, you may, if you wish, view future Proxy Statements and Annual Reports online. If you elect this feature, you will continue to receive a proxy card by mail which will include the web address for viewing the materials online. The proxy card will also include instructions for the three voting options: telephone, Internet or by mail. You may select any voting method regardless of how you received the materials. If you have more than one account, you may receive separate proxy cards for each account. Costs normally associated with electronic delivery, such as usage and telephone charges, as well as any costs incurred in printing documents, will be your responsibility.

At any time during the year, shareholders of record may give consent to view future Proxy Statement and Annual Report materials online. During the 2004 proxy voting period, the telephone and Internet systems will automatically prompt shareholders for their consent. If voting by mail, check the “Consent to View Future Materials Online” box on the proxy card. For other times during the year, go to www.melloninvestor.com/isd and enter the InvestorServiceDirect ^SM web site. First-time users will need to establish a Personal Identification Number (PIN). Under “Account Management,”

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select “Consent Update” and review the terms. A PIN confirmation will be mailed within two days to the address of record. If you are a beneficial owner, please contact your broker, bank or other holder of record for procedures on how to consent to view materials online instead of receiving them by mail.

What are the benefits of electronic delivery?

Electronic delivery saves the Company money by reducing printing and mailing costs. It will also make it convenient for you to view your proxy materials and vote your shares online. If you have shares in more than one account, it is also an easy way to eliminate receiving duplicate copies of proxy materials.

What are the costs of electronic delivery?

The Company charges nothing for electronic delivery. You may, of course, incur expenses associated with Internet access, such as telephone charges or charges from your Internet service provider.

May I change my mind later?

Yes. You may discontinue electronic delivery at any time. Shareholders of record may resume mail delivery of the Proxy Statement and Annual Report by calling Mellon Investor Services at (888) 201-5538 between the hours of 9:00 a.m. and 7:00 p.m., Monday through Friday.

If you are a beneficial owner, please contact your broker, bank or other holder of record for procedures on how to revoke your consent and resume delivery of materials by mail.

Will I receive a copy of the Company’s Annual Report?

Unless you previously elected to view our Annual Report via the Internet, we mailed you our 2003 Annual Report on March 12, 2004.

What is “householding”?

We have adopted “householding”, a procedure under which beneficial owners who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of our Annual Report and Proxy Statement unless one or more of these shareholders notifies us that they wish to continue receiving individual copies. This procedure reduces duplicate mailings and thus reduces our printing costs and postage fees. Shareholders who participate in householding will continue to receive separate proxy cards. Householding does not affect dividend check mailings.

What if I want to receive a separate copy of the Proxy Statement?

If you participate in householding and wish to receive a separate copy of the 2003 Annual Report or this Proxy Statement, or if you wish to receive separate copies of future Annual Reports and/or Proxy Statements, please call us at (866) 436-8502, or send an e-mail to investor_relations@mcgraw-hill.com, or write to: Investor Relations, The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, New York 10020-1095. We will deliver the requested documents to you promptly on your request.

Where can I find the voting results?

We will publish the voting results in our Form 10-Q for the Second Quarter of 2004 which we will file with the Securities and Exchange Commission (the “SEC”) by August 9, 2004. To view it online, go to the Company’s Investor Relations web site at www.mcgraw-hill.com/investor_relations, and click on the SEC Filings link.

Do the Directors attend the Meeting?

It is the Company’s policy that, subject to illness or an unavoidable schedule conflict, all Directors will attend and be introduced at the Meeting. All of our Directors attended the 2003 Annual Meeting.

What should I do if I want to attend the Meeting?

All shareholders of the Company may attend the Meeting. The Meeting will be held on the second floor of the Company’s headquarters at 1221 Avenue of the Americas, New York, New York 10020-1095, and will begin promptly at 11:00 a.m. (EDT). You may be asked to present photo identification before being admitted to the Meeting. If you have questions about attending the Meeting, you may call Investor Relations at (866) 436-8502.

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Can a shareholder communicate directly with our Board? If so, how?

Yes. You may communicate directly with our Board, including the Presiding Director, by writing to the Company’s Secretary, The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, New York 10020-1095 or by sending an e-mail to the Company’s Secretary at corporate_secretary@mcgraw-hill.com. The Company’s Secretary will then forward your questions or comments directly to our Board. For additional information about the Presiding Director, please see page 7 of this Proxy Statement.

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

The Company’s business and affairs are over-seen by our Board pursuant to the New York Business Corporation Law and our Certificate of Incorporation and By-Laws. Under the Company’s Certificate of Incorporation, the members of the Board are grouped into three classes. The three classes are as equal in number as possible. One class is elected at each Annual Meeting to hold office for a three-year term beginning on the date of the Meeting.

New members are assigned to classes upon ini-tial appointment so that the size of each class is as nearly equal as possible. As a result, a new member’s initial term may be less than three years. Three of the Director nominees standing for election at this year’s Annual Meeting, Messrs. Pedro Aspe, Robert P. McGraw and Edward B. Rust, Jr., are currently serving as Directors of the Company. The fourth nominee, Ms. Hilda Ochoa-Brillembourg, is standing for election by the shareholders for the first time. All four of the Director nominees are being nominated for three-year terms that will expire in 2007.

Mr. Vartan Gregorian, a Director since 1990, will be retiring from the Board after the 2004 Annual Meeting in accordance with the Board’s longstanding retirement age policy.

Mr. Harold W. McGraw, Jr., a Director from 1954 to 1988, Chairman of the Board from 1976 to 1988, and Chief Executive Officer from 1975 to 1983, retired from the Board after the 1988 Annual Meeting in accordance with the Board’s retirement age policy. However, in recognition of Mr. McGraw’s past service and contributions to the Company and to assure his continued close association with the Board and the Company, the Board elected Mr. McGraw permanently to the position of Chairman Emeritus.

Director Independence

The Board has determined that all of the Company’s Directors, with the exception of Messrs. Harold McGraw III (the Company’s Chairman of the Board, President and Chief Executive Officer) and Robert P. McGraw (the brother of Harold McGraw III), have met the independence requirements of the New York Stock Exchange, based upon the application of objective categorical standards adopted by the Board. In making a determination regarding a Director’s independence, the Board considers all relevant facts and circumstances, including the Director’s commercial, banking, consulting, legal, accounting, charitable and familial relationships, and such other criteria as the Board may determine from time to time. In accordance with the Company’s Corporate Governance Guidelines, a Director who satisfies all of the following criteria will be determined to be an independent Director of the Company:

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For purposes of paragraph (vi) above, an "immediate family member" is defined as a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in- law, brothers and sisters-in-law and anyone (other than an employee) who shares such person’s home. Individuals who are no longer immediate family members as a result of legal separation or divorce, or those who have died or become incapacitated are not taken into consideration with respect to the determination of a Director’s independence.

Presiding Director

On February 25, 2004, the Board appointed Ms. Linda Koch Lorimer, the Chair-Elect of the Nominating and Corporate Governance Committee, as the Presiding Director of the Board for the period February 25, 2004 through December 31, 2004. In her capacity as the Presiding Director, Ms. Lorimer will preside at regularly scheduled executive sessions of the Board at which only non-management Directors are present. Shareholders may communicate with Ms. Lorimer by sending a letter to the Company’s Secretary, The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, New York 10020-1095 or by sending an e-mail message to corporate_secretary@mcgraw-hill.com. The Company’s Secretary will then forward your letter to Ms. Lorimer.

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Directors’ Biographies

Class of 2004

The following Directors have been nominated and are standing for election to serve for three-year terms that will expire in 2007. Messrs. Pedro Aspe, Robert P. McGraw and Edward B. Rust, Jr. are currently serving as Directors of the Company with terms that will expire at this year’s Annual Meeting. Ms. Hilda Ochoa-Brillembourg is standing for election by the shareholders for the first time. Please see page 31 of this Proxy Statement for voting information.

		Pedro Aspe, age 53, has been since April 2001 Chairman of the Board and Chief Executive Officer of Protego Asesores Financieros, a leading investment banking advisory firm in Mexico. From 1996 to March 2001, Dr. Aspe was Chairman of the Board of Vector Casa de Bolsa, S.A. de C.V., an investment banking firm in Mexico. Dr. Aspe has been since 1995 a professor at the Instituto Tecnológico Autónomo de México located in Mexico City. Dr. Aspe has held a number of positions with the Mexican government and was most recently the Secretary of Finance and Public Credit of Mexico from 1988 through 1994. Dr. Aspe is a director of Televisa located in Mexico City. Dr. Aspe is a member of the Advisory Board of Stanford University’s Institute of International Studies, the Visiting Committee of the Department of Economics of MIT, and the Center for Politics and Economics at Claremont University. Dr. Aspe also sits on the Advisory Board of Marvin & Palmer in Wilmington, Delaware and American International Group, Inc. Dr. Aspe has served as a Director of the Company since 1996 and is Chairman of the Audit Committee and a member of the Executive and Financial Policy Committees.

		Robert P. McGraw, age 49, is currently Chairman and Chief Executive Officer of Averdale International, LLC, an investment and consulting company. Prior to that, Mr. McGraw was Executive Vice President of the Professional Publishing Group of the Company from 1989 to August 1998. He was Executive Vice President of the Healthcare Group from 1987 to 1989, and Group Vice President of that same group from 1985 to 1987. Prior to that, he served in several key positions in the Health Professions Division of the Company: General Manager from 1983 to 1985; Editorial Director from 1982 to 1983; and Editor from 1979 to 1982. He joined the Company in 1976 as a sales representative for McGraw-Hill Higher Education. Mr. McGraw has served as a Director of the Company since 1995 and is a member of the Financial Policy Committee. (a)

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		Hilda Ochoa-Brillembourg, age 59, is the founder and has been since 1987 the President and Chief Executive Officer of Strategic Investment Group, a group of affiliated investment management firms, and Managing Director of Emerging Markets Investment Corporation and Emerging Markets Management, LLC. From 1976 to 1987, she was Chief Investment Officer of the Pension Investment Division at the World Bank. Prior to joining the World Bank, she served as an independent consultant in the fields of economics and finance, as a lecturer at the Universidad Catolica Andres Bello in Venezuela and as Treasurer of the C.A. Luz Electrica de Venezuela in Caracas. Ms. Ochoa-Brillembourg is Founding Chair of the Youth Orchestra of the Americas and a Trustee and Executive Committee member of the Washington Opera. She is also a Director of the National Symphony Orchestra and an Advisory Board member of the Rockefeller Center for Latin American Studies at Harvard University. Ms. Ochoa-Brillembourg is a Director of General Mills, Inc., the World Bank/International Monetary Fund Credit Union and the Harvard Management Company, Inc.

		Edward B. Rust, Jr., age 53, has been since 1987 Chairman of the Board and Chief Executive Officer of State Farm Insurance Companies, the largest insurer of automobiles and homes in the United States. Mr. Rust is a Director of Helmerick & Payne, an oil and gas drilling company, and Caterpillar Inc., a manufacturer of construction and mining equipment. Mr. Rust is a Trustee for Illinois Wesleyan University. Additionally, he was a member of President George W. Bush’s Transition Advisory Team Committee on Education. Mr. Rust is Co-Chairman of the Business Roundtable. He is also Chairman of the Business Higher Education Forum and Co-Chairman of the Committee for Economic Development’s Subcommittee on Education Studies. Mr. Rust has served as a Director of the Company since 2001 and is a member of the Audit and Compensation Committees.

Class of 2005

The following four Directors will continue in office until 2005:

		Sir Winfried Bischoff, age 62, has been since 2000 Chairman of Citigroup Europe, which represents the European businesses of Citigroup, Inc., a global financial services firm. He is also a member of Citigroup, Inc.’s Management Committee. Sir Winfried Bischoff was Chairman of Schroders plc, an international investment banking and asset management firm headquartered in Great Britain, from 1995 to 2000. Prior to that, Sir Winfried Bischoff was Chairman of J. Henry Schroder Co. (the London investment bank of Schroders plc) from 1983 to 1995 and Group Chief Executive of Schroders plc from 1984 to 1995. He is a Director of Eli Lilly and Company, IFIL SpA (Italy) and Land Securities plc. Sir Winfried Bischoff has served as a Director of the Company since 1999 and is a member of the Audit and Financial Policy Committees.

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		Douglas N. Daft, age 61, has been Chairman of the Board and Chief Executive Officer of The Coca-Cola Company since February 17, 2000. He served as President and Chief Operating Officer of The Coca-Cola Company from December 5, 1999 until February 17, 2000. He previously served as Senior Vice President of The Coca-Cola Company from 1991 until December 5, 1999. Mr. Daft also served as President of the Middle and Far East Group of The Coca-Cola Company, which included management responsibility for the Africa Group and the Schweppes Beverage Division, from October 29, 1999 until December 5, 1999. Mr. Daft has worked at The Coca-Cola Company since 1969, and has held various executive positions since 1984. Mr. Daft is a Director of SunTrust Banks, Inc. He also serves on the Boards of the Boys and Girls Clubs of America, Catalyst, and a number of educational and professional associations. Mr. Daft is a Trustee of Emory University, the American Assembly, and the Center for Strategic & International Studies. Mr. Daft is also a member of The Business Council and The Business Roundtable. Mr. Daft has served as a Director of the Company since February 2003 and is a member of the Audit and Compensation Committees.

		Linda Koch Lorimer, age 52, has been Vice President and Secretary of Yale University since 1995, having returned to Yale as Secretary of the University in 1993. She was President of Randolph-Macon Woman’s College from 1987 to 1993 and was Associate Provost of Yale University from 1983 to 1987. She is a Director of Sprint Corporation. Ms. Lorimer is the former Chairman of the Board of the Association of American Colleges and Universities and the Women’s College Coalition. Ms. Lorimer is a Director of Yale-New Haven Hospital and a Trustee of Hollins University. Ms. Lorimer has served as a Director of the Company since 1994 and is a member of the Compensation and Nominating and Corporate Governance Committees.

		Harold McGraw III, age 55, has been Chairman of the Board of the Company since 2000 and President and Chief Executive Officer of the Company since 1998. Prior to that, Mr. McGraw had been President and Chief Operating Officer of the Company since 1993. He was Executive Vice President, Operations, of the Company from 1989 to 1993. Prior to that, he was President of the McGraw-Hill Financial Services Company, President of the McGraw-Hill Publications Company, Publisher of Aviation Week & Space Technology magazine and Vice President, Corporate Planning. Before joining the Company in 1980, he held financial positions at the GTE Corporation. He is a member of The Business Roundtable, The Business Council, and serves as Chairman of The Emergency Committee for American Trade. Mr. McGraw is a Director of United Technologies Corporation. He also serves on the Boards of the National Organization on Disability, the National Actors Theatre, the National Academy Foundation, the National Council on Economic Education, the Wharton Graduate Executive Board, and Hartley House (a New York City community settlement house) and is Co-Chair of Carnegie Hall’s Corporate Fund. Mr. McGraw has served as a Director of the Company since 1987 and is Chairman of the Executive Committee. (a)

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Class of 2006

The following three Directors will continue in office until 2006:

		James H. Ross, age 65, has been Deputy Chairman of National Grid Transco plc since 2002, a public UK company with interests in electricity and gas transmission and distribution in the United Kingdom, the United States, Argentina, Zambia and Australia. Prior to that, Mr. Ross was Chairman of National Grid Group plc from 1999 to 2002. Mr. Ross was also Chairman of The Littlewoods Organisation from 1996 to 2002, a private company in Great Britain operating in the retail home shopping and leisure businesses. Mr. Ross was Chief Executive and Deputy Chairman of Cable & Wireless plc, an international provider of telecommunications services, between 1992 and 1995. He was a Managing Director of British Petroleum plc, which engages in all phases of the petroleum business, from 1991 to 1992, and Chairman and Chief Executive Officer of BP America Inc., a subsidiary of British Petroleum plc, from 1988 to 1992. Mr. Ross is a Director of Schneider Electric and Datacard Inc. He is also the Chairman of the Leadership Foundation for Higher Education in the United Kingdom. Mr. Ross has served as a Director of the Company since 1989 and is Chairman of the Financial Policy Committee and a member of the Executive and Nominating and Corporate Governance Committees.

		Kurt L. Schmoke, age 54, left the Washington, D.C. based law firm of Wilmer Cutler & Pickering where he was a partner from 2000 through 2002 to become Dean of the Howard University School of Law in January 2003. Prior to that, Mr. Schmoke served three terms as the Mayor of Baltimore from 1987 until 1999. Mr. Schmoke served as the State’s Attorney for Baltimore City from 1982 until 1987. Mr. Schmoke is a Director of The Baltimore Life Companies and Legg Mason, Inc. He is a Trustee of Tuskegee University, a member of the Council on Foreign Relations, and a member of the Board of Directors of the World Wildlife Fund. Mr. Schmoke was named to President Jimmy Carter’s domestic policy staff in 1977. Mr. Schmoke has served as a Director of the Company since February 2003 and is a member of the Financial Policy and Nominating and Corporate Governance Committees.

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		Sidney Taurel, age 55, has been Chairman, President and Chief Executive Officer of Eli Lilly and Company, a pharmaceutical company, since 1999. Mr. Taurel joined Lilly in 1971 and held management positions in the company’s operations in Brazil and Europe before becoming President of Eli Lilly International Corporation in 1986. He was elected a Director of Eli Lilly and Company in 1991, became Executive Vice President in 1993, and President and Chief Operating Officer in 1996. He has served as President and CEO since June 1998, adding the role of Chairman of the Board in January 1999. Mr. Taurel is a Director of IBM. He is a member of The Business Council and The Business Roundtable, and a Director of Pharmaceutical Research and Manufacturers of America. He is a Member of the Board of Overseers of the Columbia Business School, a founder and Chairman of the Capital Campaign of the International School of Indiana, a Vice Chair of the Kennedy Center Corporate Fund, and a Trustee of the Indianapolis Museum of Art. In June 2002, President Bush appointed him to the President’s Homeland Security Advisory Council, and in February 2003 to the President’s Export Council. Mr. Taurel has served as a Director of the Company since 1996 and is Chairman of the Compensation Committee and a member of the Executive and Nominating and Corporate Governance Committees.

(a) Messrs. Harold McGraw III and Robert P. McGraw are brothers and the sons of Mr. Harold W. McGraw, Jr.

Corporate Governance Materials

The following corporate governance materials are available and can be viewed and downloaded from the Corporate Governance section of the Company’s Investor Relations web site at www.mcgraw-hill.com/investor_relations: (i) the Company’s Certificate of Incorporation; (ii) the Company’s By-Laws; (iii) the Company’s Corporate Governance Guidelines; (iv) Board Committee Charters for the Company’s Audit, Compensation, Executive, Financial Policy, and Nominating and Corporate Governance Committees; (v) the Code of Business Ethics applicable to all Company employees; (vi) the Code of Ethics applicable to the Company’s Chief Executive Officer and Senior Financial Officers; and (vii) the Audit Committee’s Policy concerning Employee Complaint Procedures regarding Accounting and Auditing Matters.

Committees of the Board of Directors

The Company has standing Audit, Compensation, and Nominating and Corporate Governance Committees. The Chairman of each Committee reports to the full Board as appropriate from time to time. Each Committee has a Charter that is reviewed by the Nominating and Corporate Governance Committee on a regular basis. In addition to these three standing Committees, the Board has an Executive Committee and a Financial Policy Committee. A brief description of the Audit, Compensation, and Nominating and Corporate Governance Committees follows.

Audit Committee

The Audit Committee’s duties include, among other matters, assisting the Board’s oversight of:

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Additional information about the Audit Committee follows:

Compensation Committee

The Compensation Committee’s duties include, among other matters:

All current members of the Committee are independent as defined in the rules of the New York Stock Exchange. The Committee has a Charter which is available and can be viewed and downloaded from the Corporate Governance section of the Company’s Investor Relations web site at www.mcgraw-hill.com/investor_relations. A copy of the Charter is available to shareholders free of charge on request to the Company’s Secretary, The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, New York 10020-1095.

Nominating and Corporate Governance Committee

The functions performed by the Nominating and Corporate Governance Committee include, among other matters:

Additional information about the Nominating and Corporate Governance Committee follows:

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Membership and Meetings of the Board and Its Committees

In 2003, no Director attended fewer than 75 percent of the aggregate of the total number of meetings of the Board and the Committees on which he or she served. Current Committee membership and the number of meetings of the full Board and each Committee are shown in the table below.

Beginning in 2004, the non-management Directors will meet in executive sessions at least two times each year without any member of management present. Mr. Robert P. McGraw, who is not an independent Director as defined in the rules of the New York Stock Exchange due to his familial relationship with Mr. Harold McGraw III, the Company’s Chairman, President and Chief Executive Officer, will not be present at one of these non-management Director executive sessions.

* Sir Winfried Bischoff is an executive of an affiliated company of Citigroup Inc. Since the Company may use the investment banking or financial advisory services of Citigroup Inc. from time to time in the future, Sir Winfried Bischoff will not serve on the Audit Committee following this Annual Meeting.

Indemnification

Each Director and certain of our executive officers have entered into an indemnification agreement with the Company which provides indemnification for judgments and amounts paid in settlement and related expenses to the fullest extent permitted under the applicable provisions of the New York Business Corporation Law. This indemnification will be reduced to the extent that a Director or executive officer is indemnified by the Company’s directors’ and officers’ liability insurance. The Company has for many years carried directors’ and officers’ liability insurance coverage. The Company’s current insurance coverage was purchased for the period December 31, 2003 to December 31, 2004, for an annual premium of $1,723,831. The Company has purchased this insurance coverage from National Union Fire Insurance Company of Pittsburgh, PA; Federal Insurance Company; Great American Insurance Companies; and Liberty Mutual Insurance Co. This coverage, subject to a number of standard exclusions and certain deductibles, indemnifies the Directors and officers of the Company and its subsidiaries for liabilities or losses incurred in the performance of their duties up to an aggregate sum of $65,000,000. No sums have been paid under this coverage to the Company or any Directors or officers nor have any claims for reimbursement been made under this policy.

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Audit Committee Report

The Audit Committee reviews the Company’s financial reporting process on behalf of the Board. All of the members of the Committee are independent Directors in accordance with the listing standards of the New York Stock Exchange. As noted above on page 15, Sir Winfried Bischoff will no longer serve on the Audit Committee following the 2004 Annual Meeting. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal controls. The Board has adopted a written Charter for the Audit Committee.

In this context, the Committee has met and held discussions with management and the independent auditors. Management represented to the Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Committee has reviewed and discussed the consolidated financial statements with management and the independent auditors, which review included a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Committee discussed with the independent auditors matters required to be discussed by Statement on Auditing Standards No. 61 as amended by Statement on Auditing Standards No. 90 (Communication With Audit Committees).

In addition, the Committee has reviewed with the independent auditors the auditors’ independence from the Company and its management. The Audit Committee received from the independent auditors the written disclosures and the letter regarding its independence as required by Independence Standards Board Standard No. 1 (Independence Discussions With Audit Committees).

The Committee discussed with the Company’s internal and independent auditors the overall scope and plans for their respective audits. The Committee met with the internal and independent auditors, with and without management present, to discuss the results of their examinations, the evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.

The Committee has also considered whether the provision of services by the Company’s independent auditors Ernst & Young LLP not related to the audit of the financial statements referred to above is compatible with maintaining Ernst & Young LLP’s independence.

In reliance on the reviews and discussions referred to above, the Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, as filed with the SEC. The Committee and the Board also have recommended, subject to shareholder approval, the selection of the Company’s independent auditors for 2004.

Pedro Aspe (Chairman)

Sir Winfried Bischoff

Douglas N. Daft

Edward B. Rust, Jr.

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Independent Auditor’s Fees and Services

Shareholders are being asked to ratify the appointment of Ernst & Young LLP as the independent auditor for the Company and its subsidiaries for 2004. Please see page 38 of this Proxy Statement for voting information. During the years ended December 31, 2003 and December 31, 2002, Ernst & Young LLP audited the consolidated financial statements of the Company and its subsidiaries. The aggregate fees Ernst & Young LLP billed the Company for these years for professional services rendered were as follows:

In addition, the policies and procedures contained in the Audit Committee Charter (which is attached to this Proxy Statement as Appendix A) provide that the Committee will preapprove both the retention of the independent auditor for non-audit services and the fee for such services in accordance with the Company’s independence guidelines.

Directors’ Compensation

Directors who are employees receive no additional compensation for serving on the Board or its Committees.

The Company provides the following annual compensation to non-management Directors:

Cash Compensation

Stock Compensation

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Board and Committee fees in deferred shares of common stock in lieu of these cash payments. The Company currently has written agreements with Messrs. Pedro Aspe and Edward B. Rust, Jr. to receive all or part of these cash payments as deferred shares.

Other Director Plans

EXECUTIVE COMPENSATION

This section contains information on various aspects of compensation of the Company’s executives. In particular, it contains information regarding the cash and equity compensation of Mr. Harold McGraw III and the four most highly compensated executive officers other than Mr. McGraw who were serving as executive officers on December 31, 2003 (the “named executive officers”).

Compensation Committee Report on Executive Compensation

The following is a report of the Compensation Committee of the Board regarding executive compensation. The Committee’s functions and membership are described on pages 13 and 15, respectively, of this Proxy Statement.

Introduction

The Company’s executive compensation program (the “Program”) is administered by the Compensation Committee of the Board (the “Committee”) which is composed of the individuals listed below, all of whom are non-management Directors of the Company who meet the independence requirements of the New York Stock Exchange. The Committee has sole responsibility for all compensation matters with respect to the Company’s senior management. The Committee regularly reports to the Board on its activities and decisions and meets in executive session with all independent Directors at year-end to review the CEO’s performance and compensation.

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Philosophy

The Program has been designed to enable the Company to attract, motivate and retain senior management by providing a fully competitive total compensation opportunity based on performance. The Program consists of three key elements: (1) base salaries, which reflect competitive marketplace data and evaluated individual performance; (2) annual incentive opportunities, which are payable for the achievement of annual financial performance goals established by the Committee; and (3) long-term stock-based incentive opportunities consisting of annual grants of restricted performance shares, which are payable for the achievement of three-year financial performance goals established by the Committee, and annual stock option grants. The stock-based incentive opportunities are intended to align the interests of senior management with those of the Company’s shareholders. The Program permits differentiation in total compensation opportunity based on assessments of sustained individual performance, current responsibilities and future potential. Further, the Program is structured so that at higher management levels a larger portion of annual compensation is variable, based on Company performance, and a larger portion of total compensation is composed of stock-based compensation.

The Committee’s policy with respect to the tax deductibility of executive compensation under Section 162(m) of the Internal Revenue Code is to qualify such compensation for deductibility whenever practicable. In the event that earned compensation for executives covered by Section 162(m) may not be deductible by the Company, the Committee may elect to defer such payments, in its sole discretion, until such time that the compensation payment would become deductible. The 1996 Key Executive Short-Term Incentive Compensation Plan, the 1993 Employee Stock Incentive Plan and the 2002 Stock Incentive Plan have been approved by the Company’s shareholders pursuant to the requirements of Section 162(m) of the Internal Revenue Code so that the awards earned under these Plans will qualify for tax deduction by the Company when paid.

It is the Committee’s intent to fulfill its responsibilities according to the highest standards of corporate conduct and governance practices in the long-term best interest of the Company and its shareholders.

Program Competitiveness

The Program is intended to be fully competitive with the total executive compensation programs of competitor companies in the publishing, information and media industry when performance goals are met. Base salaries, annual incentive award opportunities and long-term incentive grant guidelines are determined within the framework of position responsibility, individual performance and the external marketplace. Competitive market data are derived annually using a third-party consultant survey of the publishing, information and media industry, which includes reported data from companies in the peer group index of the Shareholder Return Performance Graph (the “Peer Group”) shown on page 28 of this Proxy Statement.

The annual incentive award opportunities are established by the Committee based on recommendations developed by an independent compensation consulting firm selected by and responsible to the Committee. They are competitive with median levels of incentive opportunities using available data for the competitor companies included in the Peer Group and data from a third-party media industry compensation survey of other publishing, information and media companies.

The long-term incentive grant guidelines provide competitive compensation opportunities in the form of restricted performance share and stock option grants. These guidelines are derived from general industry long-term incentive grant data and are adjusted by an independent compensation consultant to reflect median grant practices of publishing, information and media industry companies including those in the Peer Group.

Following is a discussion of each of the elements of the Program and a description of the specific decisions and actions taken by the Committee with regard to 2003 compensation for the CEO.

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Annual Salary and Incentive Compensation

Annual compensation for senior management consists of base salary and the annual incentive awards earned under the Key Executive Short-Term Incentive Compensation Plan. Base salary increases for senior executives other than the CEO are recommended annually by Mr. Harold McGraw III and are reviewed and approved by the Committee.

Target awards established under the Key Executive Short-Term Incentive Compensation Plan are established as a dollar amount for each executive at the beginning of the year. The maximum payment opportunity is set at 200% of the annual target award. Payment of the annual incentive awards for Mr. Harold McGraw III and the other executives named in the Summary Compensation Table is based on the Company’s performance in relation to minimum, target and maximum diluted Earnings Per Share goals which are approved by the Committee at the beginning of the Plan year.

Long-Term Incentive Compensation

The long-term incentive compensation program for senior management consists of two types of annual stock awards: restricted performance shares and stock options. Restricted performance share awards are established for each executive and granted annually. The outstanding 2002 and 2003 awards will vest at the end of a three-year award cycle, with payment ranging up to a maximum of 200% of the shares awarded based on the achievement of cumulative compound diluted Earnings Per Share growth goals established by the Committee at the beginning of each award cycle. The restricted performance share awards are subject to forfeiture if the minimum performance goal is not attained or if a participant’s employment is terminated for certain reasons before the shares become vested. During the award cycle, participants receive dividends on and have the right to vote the awarded shares.

The second component of the long-term incentive compensation program consists of stock options, which provide participants with the right to purchase shares of the Company’s common stock at its market value on the date of grant. Each stock option grant becomes exercisable in two equal annual installments commencing one year after grant and has a ten-year maximum term.

2003 CEO Compensation

Mr. Harold McGraw III’s base salary is reviewed annually by the Committee, which considers competitive CEO base salary information from the Peer Group companies, Mr. Harold McGraw III’s individual performance and contributions since his last review, and the merit increase guidelines in effect for other salaried employees during this period. Effective January 1, 2003, the Committee increased Mr. Harold McGraw III’s base salary by 4.5% to $1,063,000 based on its review and assessment of the factors and criteria described above.

In April 2003, stock-based long-term incentive awards were granted. Mr. Harold McGraw III received an award of 16,895 restricted performance shares which will mature on December 31, 2005, subject to the achievement of the Committee-approved diluted Earnings Per Share performance goals established for this award, and he received a stock option grant for 194,000 shares. These awards, along with those of the other proxy-named executives, are disclosed in the Long-Term Incentive Plan Awards Table and the Option Grants Table.

To calculate the degree of achievement of the Earnings Per Share performance goal for the 2003 Short-Term Incentive Compensation Award, the Committee determined that the reported 2003 income from continuing operations diluted Earnings Per Share (excluding the gain on the disposition of the Company’s 45% equity investment in Rock-McGraw, Inc.) as described in the Company’s Annual Report would be used for purposes of determining the degree of achievement of this award. The 2003 income from continuing operations diluted Earnings Per Share, as described above, will also be used in determining the degree of achievement of the outstanding

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2002 and 2003 Restricted Performance Share Awards.

In early 2004, the Committee reviewed and approved the 2003 annual incentive award payment for Mr. Harold McGraw III under the Key Executive Short-Term Incentive Compensation Plan. Based on the Company’s adjusted diluted Earnings Per Share for 2003, as described above, and measured against the Earnings Per Share performance goal established by the Committee at the beginning of the year, Mr. Harold McGraw III’s earned incentive payment was $1,002,372, representing 119.33% of his 2003 target opportunity.

In early 2004, the Committee reviewed and approved the degree of achievement and award payout to Mr. Harold McGraw III for the 2001 Long-Term Restricted Performance Share Award, which covered the years 2001, 2002 and 2003 and matured on December 31, 2003. For purposes of this award, the Committee, in its discretion, chose to exclude less than all of the gain realized from the disposition of the Company’s equity investment in Rock-McGraw, Inc. in order to offset the impact of a loss realized in 2001 from the World Trade Center terrorist attack. The Committee believes this action is fair and appropriate for all participants, including Mr. Harold McGraw III. Further, it ensures the Company’s tax deductibility for the 2001 Long-Term Incentive Award payment to Mr. Harold McGraw III under the Section 162(m) regulations of the Internal Revenue Code. The cumulative compound Earnings Per Share growth for the three-year award cycle, including the adjustment described above, was 9.05% under the performance goal originally established by the Committee for this Award. Mr. Harold McGraw III received a share payment of 10,861 shares representing 80.28% of his target award. The dollar value of Mr. Harold McGraw III’s 2001 Long-Term Restricted Performance Share Award payout is shown in the Long-Term Incentive Payout Column of the Summary Compensation Table.

Closing Statement

The Committee believes that the caliber and motivation of the Company’s key employees and the quality of their leadership make a significant difference in the long-term performance of the Company. The Committee further believes that compensation should vary with the Company’s financial performance so that executives are well rewarded when performance exceeds the ambitious goals established by the Committee, and there should be commensurate risks to compensation when performance does not meet these goals.

In its view, the Committee believes that the Company’s executive compensation program is meeting the goals contained in the Program’s philosophy.

The foregoing report has been furnished on behalf of the Board of Directors by the members of its Compensation Committee.

Sidney Taurel (Chairman)

Douglas N. Daft

Vartan Gregorian

Linda Koch Lorimer

Edward B. Rust, Jr.

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Summary Compensation Table

The following table contains information concerning the named executive officers for services rendered in all capacities to the Company in 2001, 2002 and 2003:

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Option Grants In 2003

The following table includes all grants of stock options made in 2003 under the 2002 Stock Incentive Plan to the named executive officers:

The Compensation Committee approved a new stock option enhancement in 1997 called a Restoration Stock Option (“RSO”). If shares of the Company’s common stock are delivered in payment of the exercise price of a stock option (as opposed to the use of cash or “cashless exercises”), an RSO will be granted equal to the number of shares used to exercise the stock option. The expiration date of these RSO grants (which are made under the 2002 Stock Incentive Plan) remains the last day the underlying grant is exercisable. Additionally, if shares are withheld to satisfy the tax obligation on the realized gain, the RSO will include shares equal to the number of shares withheld for taxes. RSO grants are non-qualified, and are first exercisable six months after the date of grant at the market value at the date of grant of the RSO. Only one RSO will be granted for each original stock option granted. If there is a change in control of the Company, all options become fully vested.

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Aggregate Option Exercises in 2003 and 2003 Year-End Option Values

The following table contains information on options exercised by each of the named executive officers during 2003 and the number and value of unexercised options on December 31, 2003:

Long-Term Incentive Plan Awards in 2003

The following table contains information concerning long-term incentive awards granted during 2003 to the named executive officers under the 2002 Stock Incentive Plan:

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Retirement Benefits

The named executive officers are entitled to retirement benefits under two defined benefit plans of the Company: the Employee Retirement Plan (generally referred to as “ERP”) and the Employee Retirement Plan Supplement (generally referred to as “ERP Supplement”). In addition, Messrs. Harold McGraw III and Robert J. Bahash participate in the Senior Executive Supplemental Death, Disability and Retirement Benefit Plans (the “Supplemental Benefits Plan”).

Key features of ERP provide that:

Under ERP Supplement, participants receive retirement benefits that they would have received under ERP but for the limitations imposed by the Internal Revenue Code referred to above.

Key features of the Supplemental Benefits Plan provide that:

Under the Supplemental Benefits Plan, if a participant is involuntarily terminated without cause at any time after a change in control, or resigns for good reason within two years after a change of control, or resigns for any reason during the 30-day period following the first anniversary of a change of control, the participant will receive a lump sum payment. This payment will range between 44% to 55% of the participant’s final monthly earnings and target opportunity under the Key Executive Short-Term Incentive Compensation Plan subject to reduction for other benefits. This payment will be actuarially calculated based upon the participant’s age on the date of termination.

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The table below is a calculation for each of the named executive officers of the aggregate annual benefits under ERP, ERP Supplement and the Supplemental Benefits Plan. These calculations are computed as a straight life annuity payment payable on retirement at 65. Further, the calculation uses the participant’s salary and, for the Supplemental Benefits Plan, the 2003 target opportunity under the Company’s Key Executive Short-Term Incentive Compensation Plan:

Annual Retirement Benefit

From the Company’s Contributions

Senior Executive Severance Plan

The Senior Executive Severance Plan provides that if the employment of a participating senior executive of the Company, including the named executive officers, is involuntarily terminated without cause or the executive resigns for good reason, the executive will receive a minimum severance payment of 12 months base salary and a maximum severance payment of 24 months base salary. The actual amount of severance will be based on (i) 1.6 multiplied by the number of years of continuous service with the Company plus (ii) if the participant has more than 7.5 years of continuous service, 10% of such participant’s monthly salary multiplied by the number of months of severance determined in (i) in excess of 12. In addition, each participant will continue to participate in the Company’s retirement, life, medical and other insurance benefit plans and programs during the period the participant receives severance payments.

Alternatively, a participant may receive a cash payment equal to 110% of the severance amount. The receipt of payments by participants under the Senior Executive Severance Plan is in lieu of receiving benefits pursuant to the Company’s other Separation Allowance Plans, which Plans are applicable to all full-time employees of the Company. The Plan provides that benefits will be payable to participants who voluntarily terminate their employment within a 30-day period one year after a change in control of the Company has occurred. The Senior Executive Severance Plan is administered by the Compensation Committee. The Committee approves participants who are recommended by the Company’s Chief Executive Officer.

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PERFORMANCE GRAPH

This graph compares the return on the Company’s common stock with that of the Standard & Poor’s 500 Stock Index and our Peer Group for the years 1999 through 2003. The graph assumes that, on December 31, 1998, a person invested $100 in each of the Company’s common stock, the S&P 500 Stock Index, and the Peer Group’s common stock. The graph measures total shareholder return, which takes into account both stock price and dividends. It assumes that dividends a company pays are reinvested in that company’s stock.

Shareholder Return Performance Graph

Five-Year Cumulative Total Return^2,3,4,5

(Through December 31, 2003)

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OWNERSHIP OF COMPANY STOCK (a), (b)

A beneficial owner of stock is a person who has voting power, meaning the power to control voting decisions, or investment power, meaning the power to cause the sale of the stock. The following table shows the number of shares of the Company’s common stock beneficially owned on February 3, 2004 by:

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SECTION 16(a) BENEFICIAL OWNERSHIP

REPORTING COMPLIANCE

Under SEC rules, our Directors and executive officers are required to file with the SEC reports of holdings and changes in beneficial ownership of Company stock. We have reviewed copies of these SEC reports as well as other records and information. Based on that review, we believe that all reports were timely filed, except for one late Form 4 filing by Mr. Robert J. Bahash due to an inadvertent administrative oversight.

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ITEMS OF BUSINESS TO BE ACTED ON AT THE MEETING

Item 1. Election of Directors

The term for Directors elected this year will expire at the Annual Meeting held in 2007. Each nominee listed below has agreed to serve that term. If any Director is unable to stand for election, the individuals named as the proxies have the right to designate a substitute. If that happens, shares represented by proxies may be voted for a substitute Director.

The Board recommends that you vote FOR each of the following nominees:

Biographical information about these nominees, as well as the other seven incumbent Directors, can be found on pages 8 through 12 of this Proxy Statement.

Item 2. Proposal to Approve Amended and

Restated 2002 Stock Incentive Plan

On January 28, 2004, the Board unanimously amended and restated the 2002 Stock Incentive Plan (as amended and restated, the “Amended Plan”), subject to approval by the Company’s shareholders at this Annual Meeting. The corporate purpose underlying the Amended Plan is to provide an opportunity for the Company’s employees to acquire a proprietary interest in the Company. We believe this will be an added incentive to employees to contribute to the Company’s future success and prosperity which will enhance the value of the Company for the benefit of the shareholders.

The sustained growth and profitability of the Company largely depend on our ability to attract and retain individuals of exceptional ability and talent. The Board believes that the adoption of the Amended Plan will facilitate this goal.

In addition to these objectives, the proposed Amended Plan will enable the Company to achieve the following intended outcomes:

1. The Amended Plan will give the Company greater flexibility to respond to anticipated changes in executive compensation practices given the potential accounting changes for stock options and other new regulatory requirements. The Company expects to make greater use of performance stock, reducing the Company’s reliance on stock options.

2. The Company currently intends to significantly reduce the annual stock usage rate (or “run rate”) and anticipates that it will be less than 2% per year of the total number of outstanding shares.

3. The Company expects to continue many compensation and governance best practices such as no stock option repricings, no discounted stock options, and no loans to executives.

The Amended Plan is also being presented to shareholders for approval of the performance criteria and limits which it contains for certain grants. These provisions are intended to meet the requirements of Section 162(m) of the Internal Revenue Code (“Section 162(m)”) and will enable the Company to continue to deduct for tax purposes certain compensation paid to the Company’s CEO and the highest compensated executives, other than the CEO, named in this Proxy Statement (the “covered executives”). The Amended Plan will only become effective upon shareholder approval. If shareholder approval is not received, the prior version of the Plan will remain effective until further amended.

As part of its previously announced 2003 share repurchase program, the Company currently intends to continue its practice of minimizing the dilutive effect of the Amended Plan and other

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stock-based programs through the acquisition of shares to offset share issuances. Between January 1, 2003 and December 31, 2003, the Company repurchased approximately 3.4 million shares of its stock. The Company is currently authorized to repurchase approximately another 13.9 million shares of common stock. The closing price of the Company’s common stock on March 1, 2004 was $77.70.

The Board contemplates that the Amended Plan will operate in addition to the other compensation plans the Company currently offers. Awards outstanding under these existing plans will not be affected by the adoption of the amendments to the Amended Plan. The following is a summary of the Amended Plan. This summary is qualified in its entirety by reference to the full text of the Amended Plan, which is attached to this Proxy Statement as Appendix B.

Summary of the Amended Plan

The Amended Plan permits the granting of any or all of the following types of awards:

Incentive stock options would not be issuable under the Amended Plan. The total number of shares of stock reserved and available for grants of awards under the Amended Plan on or after the date of this Annual Meeting (the “Aggregate Limit”) will equal the remaining number of shares of stock reserved and available for grants of awards under the existing version of the Plan immediately prior to the date of this Annual Meeting (which as of May 1, 2004 will be approximately 200,000 shares), increased by 4,000,000 shares of stock.

Shares of stock subject to an award (other than a stock option or SAR or dividend equivalent) or shares of stock paid in settlement of a dividend equivalent will reduce the Aggregate Limit by one share for each such share granted or paid on or after the date of this Annual Meeting. Shares of stock subject to a stock option or SAR will reduce the Aggregate Limit by one-third of a share for each such share granted on or after the date of this Annual Meeting; provided, that the increase in the Aggregate Limit by 4,000,000 shares of stock as provided above will not, as a result of such share counting, increase the total number of shares of stock that may be issued under the Amended Plan by more than 9,500,000 shares of stock.

Therefore, under the terms of the Amended Plan, up to 4,000,000 new shares could, for example, be granted as performance stock, restricted stock, or other stock-based awards. Since the Aggregate Limit is only reduced by one-third of the number of shares of stock subject to a stock option or SAR (which represents a change from the original terms of the 2002 Stock Incentive Plan), then, in theory at least, up to 12,000,000 such stock options or SARs (but no other types of awards) could be granted under the Amended Plan. As noted in the preceding paragraph, in recognition of this fact, the Amended Plan provides a further limitation that no more than 9,500,000 shares of stock will be issued under this Plan. This figure represents less than 4.9% of the aggregate amount of common stock outstanding and is consistent with prior stock plans of the Company which have been submitted to shareholders for approval in the past. It is anticipated that some mix of the foregoing awards will be granted under the Amended Plan, rather than a disproportionate amount of one type of award over another, with a greater emphasis on grants of shares with

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performance goals as opposed to grants of stock options than existed in the past. Under the original Plan, the aggregate number of shares of stock (other than pursuant to stock options or SARs) was limited to 33% of the then applicable aggregate limit. This limitation has been dropped in the Amended Plan in order to take account of the anticipated shift to a granting of a larger proportion of shares as performance stock rather than stock options in light of probable changes in the required accounting treatment of options.

The Aggregate Limit will not be reduced by: (i) shares of stock subject to an award payable only in cash or property other than stock, or other awards for which shareholder approval is not required under the listing standards of the New York Stock Exchange; or (ii) in the case of awards granted in tandem with each other, shares of stock in excess of the number of shares of stock issuable thereunder.

The Aggregate Limit will be increased as follows: by the number of shares of stock granted as an award under the Amended Plan or an award under the 1993 Employee Stock Incentive Plan (other than stock option, SAR or 1993 Plan stock option awards) or by one-third of the number of shares of stock in the case of stock option, SAR or 1993 Plan stock option awards that are, in each case:

The Compensation Committee will administer the Amended Plan and has authority to:

Officers and other employees of the Company and its subsidiaries and affiliates are eligible to be participants under the Amended Plan. Outside Directors of the Company, however, are ineligible to participate in the Amended Plan. As of March 1, 2004, it is anticipated that approximately 1,800 officers and employees (out of the approximately 3,900 employees who are eligible to participate) will receive an award under the Amended Plan.

The Amended Plan will operate in addition to the Company’s existing executive benefit plans and programs. In the event of any merger, reorganization, consolidation, recapitalization, stock dividend or other dividend other than the regular cash dividend, stock split, spin-off or other change in corporate structure affecting the stock, substitution or adjustment shall be made in the aggregate number and the kind of shares reserved or available for issuance under the Amended Plan, in the maximum number of shares issuable to any single participant, and in the number, kind and, where applicable, option or exercise price of shares subject to outstanding awards, as the Compensation Committee determines is appropriate.

Stock Options

The Compensation Committee will fix the option price at which the common stock may be purchased under the Amended Plan. This price cannot be less than 100% of the fair market value of the stock on the date the option is granted. Options currently vest over a two year period, with one half of the shares under option vesting at the end of one year after grant and the second half after two years. The Committee will also fix the option term, although no option

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may be exercised more than ten years after it has been granted. The Amended Plan prohibits repricing of options.

The purchase price will be paid in cash or, if the Committee permits, through delivery of shares of common stock having a fair market value equal to the purchase price, by withholding shares otherwise payable pursuant to the award, or by a combination of cash and common stock. Unless the Committee determines otherwise, if a participant’s employment with the Company is terminated, except for cause, a stock option that has vested may generally be exercised for six months after termination. In the event of retirement, disability or death of a participant, any stock option may be exercised for a specified period of time after such event as described in the Amended Plan.

Stock Appreciation Rights

The Compensation Committee has the right to grant SARs alone or in tandem with other awards. When a SAR is exercised, the holder will be entitled to receive the excess of the fair market value of the shares for which the SAR is exercised over the option price of the related stock option. When a SAR is exercised, the Committee determines whether the Company will pay the holder in cash, stock, or a combination of cash and stock. On such exercise, any stock option or other award to which such SAR is related will be deemed to have been exercised.

Performance Stock and Restricted Stock

The Amended Plan permits the Compensation Committee to make awards of performance stock and restricted stock. Performance stock is an award of shares whose vesting and forfeiture restrictions are related to the attainment of one or more performance goals and objectives (including the goals and objectives described below under “Section 162(m)”) and such other terms and conditions as the Compensation Committee may specify.

Restricted stock is an award of shares whose vesting and forfeiture restrictions are related to the participant’s continued service with the Company for a specified period of time and such other terms and conditions as the Committee may specify. The Committee will determine the time or times when such awards will be subject to forfeiture, and all of the other terms and conditions of such grants. Recipients of performance stock and restricted stock are not required to provide consideration to the Company, other than the rendering of services.

Performance stock and restricted stock may not be sold by the recipient during the forfeiture period determined by the Committee. The participant will have, with respect to such stock awards, all of the rights of a shareholder of the Company, including the right to vote such shares and the right to receive dividends. Subject to certain exceptions described in the Amended Plan, on termination of employment during the restriction period, the participant forfeits all shares still subject to restriction.

Other Stock-Based Awards

The Compensation Committee will have, in addition to performance stock and restricted stock, the authority under the Amended Plan to make awards of stock that are valued in whole or in part by reference to, or are otherwise based on, the Company’s common stock. These awards may include cash settled performance shares, cash or stock settled stock appreciation rights, shares valued by reference to subsidiary performance, and phantom stock and similar units. These awards may be granted either alone or in addition to or in tandem with other awards. The terms and conditions of the award will be determined at the discretion of the Committee. An award may include a participant’s right to receive, either currently or on a deferred basis, dividends or dividend equivalents with respect to the number of shares covered by the award.

Term

The Amended Plan would continue in effect for a period of ten years, unless earlier terminated by the Board.

Amendments

The Board may amend the Amended Plan. Without the approval of the shareholders, however,

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the Board may not adopt any amendment which requires shareholder approval under Section 162(m) and the securities laws.

Change in Control

The Amended Plan provides that in the event of a change in control of the Company, except as otherwise provided in the agreement of grant, all SARs outstanding and all stock options granted become fully exercisable and vested. Except as otherwise provided in the agreement of grant, the restriction and deferral limitations applicable to any grants of performance stock, restricted stock and other stock-based awards will lapse

and such shares will be fully vested. All outstanding stock options, SARs, performance stock, restricted stock and other such stock-based awards will, at the discretion of the Committee, be either cashed out or converted into awards based upon publicly traded common stock of the corporation that acquires the Company or which otherwise results from the change in control.

In recent years, grants of performance stock, through action by the Compensation Committee, have contained the following provisions applicable to a change in control. Upon a change in control: (a) the established performance goals otherwise required to be met for the performance stock to be awarded are deemed to have been achieved; (b) a portion of such shares, pro- rated to the date of the change in control, would be immediately distributed to the employee; and (c) the balance of the shares not so distributed would be converted into cash at the price per share paid by an acquirer related to the change in control and paid to the employee following the original maturity date of the award. In the case of such cash payments, however, in the event the employee is terminated involuntarily (except for cause), dies, retires, or is disabled prior to the maturity date, the cash amount is paid upon such occurrence. It is the Company’s present intention to continue including such provisions in its awards of performance stock.

Tax Aspects of the Plan

The Company believes that under present law the following are the federal tax consequences generally arising with respect to awards granted under the Amended Plan:

Section 162(m)

Section 162(m) limits the Company’s tax deduction to $1 million per year for certain compensation paid to each of the Company’s covered executives. This limitation does not apply to “performance-based compensation.” Options and SARs may qualify as performance-based compensation if shareholders approve a

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maximum limit on the number of shares underlying such awards that may be granted to any participant over a specified period. Other awards may qualify as performance-based compensation if payment under such awards is made under the following circumstances:

Accordingly, the Board is also seeking shareholder approval of the Amended Plan to permit the Company to continue to deduct for tax purposes compensation paid to covered executives under awards that qualify as performance-based compensation (“Qualifying Awards”).

The Amended Plan provides that two types of Qualifying Awards may be granted. The first type is stock options and SARs. No participant may be granted in any 60-month period stock options or SARs under the Amended Plan which, in the aggregate, cover more than 2,000,000 shares of the Company’s common stock.

The second type includes performance grants and any other award (other than options and SARs) whose payment is conditioned on the attainment of the performance objectives for the performance goals the Committee establishes for a performance cycle in accordance with the provisions of Section 162(m). More than one performance goal may apply to a given performance cycle based on the attainment of the performance objectives for any of the performance goals applicable to that cycle. The Committee determines the duration of a performance cycle, and the Committee will be authorized to permit overlapping or consecutive performance cycles.

The performance goals that the Committee may select for a performance cycle include any of the following: diluted earnings per share, net income, operating margin, operating income and net operating income, pretax profit, revenue growth, return on sales, return on equity, return on assets, return on investment, stock price growth, total return to shareholders, EBITDA, economic profit, and cash flow, each of which may be established on a corporate-wide basis or established with respect to one or more operating units, divisions, acquired businesses, minority investments, partnerships or joint ventures.

The Committee will have the discretion, by participant and by award, to reduce (but, in the case of Qualifying Awards only, not to increase) some or all of the amount that would otherwise be payable under the award if the participant satisfies the performance objectives included in the Qualifying Award.

For any performance cycle with a duration of 36 months, no participant may receive Qualifying Awards covering more than 300,000 shares of stock or which provide for the payment for such performance cycle of more than 300,000 shares of stock (or cash amounts based on the value of more than 300,000 shares of stock). The comparable figure under the Plan prior to this amendment was 150,000 shares of stock. For a performance cycle that is longer or shorter than 36 months, the maximum limits described in the previous sentence will be adjusted by multiplying such limit by a fraction, the numerator of which is the number of months in the performance cycle and the denominator of which is 36.

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Because the amounts to be received under the Amended Plan can only be determined with precision in the future, the table below shows the grants that were made in April 2003 for the covered executives; for all current executive officers, as a group; for all current Directors who are not executive officers, as a group; and for all employees, including all current officers who are not executive officers, as a group.