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22001144 Executive Compensation Policies:
Stock Ownership Guidelines & Holding Requirements
Anti-Hedging & Anti-Pledging Policies
Clawbacks
TABLE OF CONTENTS
Executive Summary ................................................................................................................................ 1
Introduction ............................................................................................................................................. 2
Overview of the ClearBridge 100 .................................................................................................... 2
Analysis Scope and Methodology ................................................................................................. 2
Definitions ............................................................................................................................................... 3
Executive Stock Ownership Guidelines and Holding Requirements .................................................. 4
Anti-Hedging and Anti-Pledging Policies .............................................................................................. 9
Clawback Policies ................................................................................................................................. 11
ClearBridge 100 Companies ................................................................................................................ 14
About ClearBridge ................................................................................................................................ 20
1
EXECUTIVE SUMMARY
This ClearBridge 100 Report presents findings on various executive compensation policies, including stock
ownership guidelines and holding requirements, anti-hedging and anti-pledging policies, and compensation
recovery (or “clawback”) policies among the “ClearBridge 100”. The ClearBridge 100 is comprised of 100 S&P
500® companies to provide a database representative of compensation practices and trends across the broad US
market.
These compensation policies have become increasingly important tools as part of the overall executive
compensation program to further enhance executives’ alignment with shareholders and encourage appropriate
behaviors. In addition, these policies, which reflect strong governance practices, are often a focal point for many
investors and proxy advisory firms as they evaluate a company’s compensation program.
Key Findings
Key findings from this ClearBridge 100 Report include:
Executive Stock Ownership Guidelines and Holding Requirements
96% of companies have stock ownership guidelines
Stock ownership guidelines are typically expressed as a multiple of salary. CEOs’ multiple at median is 5x
salary and other NEOs’ multiple at median is 3x salary
Companies have a slight preference for having a combination of stock ownership guidelines and holding
requirements (50%) as opposed to only stock ownership guidelines (46%)
Of companies that have holding requirements, most (81%) require stock to be held until the stock
ownership guidelines are met
Anti-Hedging and Anti-Pledging Policies
92% of companies disclose having an anti-hedging policy and 69% of companies disclose an anti-pledging
policy, representing an increase in disclosure over the prior year (vs. 87% and 56%, respectively, in 2013)
Clawback Policies
91% of companies disclose having clawback policies
The three most prevalent factors that trigger a clawback policy are if the executive is at fault for financial
restatements (57%), fraud/willful misconduct (47%) and any financial restatement (45%)
Clawbacks most typically apply to cash (92%), vested equity (92%) and unvested equity (87%)
The following pages present the detailed analyses underlying these key findings.
Standard & Poor's S&P 500®
Index is a registered trademark of Standard & Poor's, a division of the McGraw-Hill Companies Inc
2
INTRODUCTION
Overview of the ClearBridge 100
The ClearBridge 100 consists of 100 companies in the S&P 500® Index, selected to roughly approximate
the industry composition and size of the S&P 500® in order to provide a representation of the broad US market.
See the “ClearBridge 100 Companies” section of this report for a list of the companies included in the analysis.
Characteristics of ClearBridge 100
FY2013 Revenue
($ Millions)
Market Value as of 12/31/2013
($ Millions)
75th
Percentile $22,665 $59,597
Median $10,748 $25,231
25th
Percentile $5,211 $12,239
ClearBridge 100 Industry Composition
Analysis Scope and Methodology
This report analyzes executive stock ownership guidelines, holding requirements, anti-hedging policies and
anti-pledging policies, and compensation clawback policies, as disclosed in 2013 and 2014 proxy statements for
each of the ClearBridge 100 companies. The results have been aggregated in this report to provide a broad-
market view of practices and trends.
Design features in this report are either expressed as a percentage of ClearBridge 100 companies in total,
or as a percentage of companies with a particular type of practice. In certain charts and tables, totals may not add
up to 100% due to companies that incorporate more than one form of practice.
16%
9%
8%
16% 11%
11%
15%
6% 2%
6% Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Telecommunication Services
Utilities
3
DEFINITIONS
This section provides definitions for terms used throughout this report.
Stock Ownership Guidelines are requirements for executives to own a specific number or value of shares
Holding Requirements are requirements for executives to retain a certain amount or percentage of vested
shares
Anti-pledging policies disallow executives from using compensation as collateral
Anti-hedging policies restrict executives from using compensation to hedge against company stock
Clawback policies allow companies to recoup compensation in connection with certain events
EXECUTIVE STOCK OWNERSHIP GUIDELINES
AND
HOLDING REQUIREMENTS
5
EXECUTIVE STOCK OWNERSHIP GUIDELINES AND HOLDING REQUIREMENTS
Executive Stock Ownership Guidelines and Holding Requirements
Prevalence of Executive Stock Ownership Guidelines and Holding Requirements
The prevalence of executive stock ownership guidelines has increased slightly from 2013 to 2014 (94% to
96%). Holding requirements have also increased in prevalence from 46% to 52%.
Companies are steadily moving towards having a combination of stock ownership guidelines and holding
requirements from just having stock ownership guidelines. In 2013, 51% of companies had stock ownership
guidelines only, while 43% of companies had both stock ownership guidelines and holding requirements. In 2014,
half of companies (50%) had both stock ownership guidelines and holding requirements, while 46% had stock
ownership guidelines only.
43%50%
51%
46%
3% 2%1% 1%
2013 2014
ClearBridge 100 Stock Ownership Policy Prevalence
Neither
Holding Requirements Only
Ownership Guidelines Only
Ownership Guidelines and Holding Requirements
94% 96%
2013 2014
Prevalence of Stock Ownership Guidelines
46%52%
2013 2014
Prevalence of Holding Requirements
6
EXECUTIVE STOCK OWNERSHIP GUIDELINES AND HOLDING REQUIREMENTS
Stock Ownership Guidelines Design
The most typical way to express stock ownership guidelines is as a multiple of salary (85% of companies
with stock ownership guidelines). 13% of companies with stock ownership guidelines express the guideline as a
number of shares, while 2% express the guideline as the lesser of a multiple of salary or number of shares in terms
of value.
Of companies that express the guideline as a multiple of salary, the most typical CEO stock ownership
guideline is 5x or 6x. For other NEOs, guidelines range from 1x to 5x, the most typical being 3x.
7%
37%
45%
11%
3x-4x
5x
6x
7x-10x
CEO Stock Ownership Guidelines: Multiple of Salary Prevalence
84%
14%
2%
85%
13%
2%
Multiple of Salary Number of Shares Lesser of Multiple of Salary or Number of Shares
Ownership Guideline Design Prevalence
2013 (n=94)
2014 (n=96)
7
EXECUTIVE STOCK OWNERSHIP GUIDELINES AND HOLDING REQUIREMENTS
Most companies (99%) count direct shares held towards meeting stock ownership guidelines. 401(k)
shares and unvested restricted stock and restricted stock units are also commonly included in stock ownership
guidelines (58% and 44%, respectively).
The most common timeframe required to achieve stock ownership guidelines is 5 years (83% of
companies).
6%
8%
83%
3%
Required Timeframe to Achieve
Stock Ownership Guidelines (n=72)
Holding Period in lieu of Requirement
<5 Years
5 Years
>5 Years
5%
6%
10%
44%
58%
99%
Deferred Shares
Unvested Options
Unvested Performance Shares
Unvested RS/RSUs
401(K) Shares
Direct Shares Held
Type of Stock Counting Towards Ownership Guidelines (n=84)
8
EXECUTIVE STOCK OWNERSHIP GUIDELINES AND HOLDING REQUIREMENTS
Holding Requirements Design
Of companies with holding requirements, most (81%) require executives to hold all or a portion of vested
and/or exercised shares, net of taxes, until stock ownership guidelines are met.
The majority of companies (85%) require at least 50% of net shares to be held for the specified time period.
(1) Company requirements typically one year post retirement (2) Company requirements range from 1 to 10 years
Timeframe to Hold
% of Cos. with
Requirement
Until SOG is met 81%
Post-retirement(1) 8%
Fixed Number of Years(2) 8%
Until retirement 3%
2014 Holding Requirement Policy Design (n=52)
8%
8%
25%
23%
37%
% of Net Shares
Required to be
Held
(n=52)
25% of net shares
~33% of net shares
50% of net shares
75% of net shares
100% of net shares
ANTI-HEDGING AND ANTI-PLEDGING POLICIES
10
ANTI-HEDGING AND ANTI-PLEDGING POLICIES
Anti-Hedging and Anti-Pledging Policies
92% of CB100 companies disclosed an anti-hedging policy in 2014, representing a modest increase from
87% in 2013. In comparison, 69% of companies disclosed an anti-pledging policy in 2014, representing a more
meaningful increase from 56% in 2013.
87%
92%
2013 2014
Disclosure of Anti-Hedging Policies (n=100)
56%
69%
2013 2014
Disclosure of Anti-Pledging Policies (n=100)
CLAWBACK POLICIES
12
CLAWBACK POLICIES
Clawback Policies
91% of companies disclosed a clawback policy in 2014 which is a slight increase from 2013 (87%). Among
companies that had a clawback policy in 2014, 93% had the clawback policy apply to current named executive
officers (“NEOs”), while 24% had the policy apply to other employees and 8% applied to former NEOs.
The main trigger for a clawback policy is if the executive is at fault for a financial restatement (57%),
fraud/willful misconduct (47%) and any financial restatement regardless of fault (45%). Less prevalent triggers are
executive misbehavior (21%) and non-compete/confidentiality (16%).
93%
26%
7%
93%
24%
8%
Current NEOs Other Current Employees Former NEOs
Executives Covered by Clawback Policy
2013 (n=86)
2014 (n=91)
17%
20%
43%
47%
55%
16%
21%
45%
47%
57%
Non-Compete/Conf identiality
Executive Misbehavior
Any Financial Restatement
Fraud or Willful Misconduct
At Fault for Financial Restatement
Prevalence of Clawback Policy Triggers
2014 (n=91)
2013 (n=86)
13
CLAWBACK POLICIES
Cash, vested equity and unvested equity are largely covered under companies’ clawback policies.
92% 91%
86%
92% 92%
87%
Cash Vested Equity Unvested Equity
Vehicles to be recovered under Clawback Policy
2013 (n=86)
2014 (n=91)
CLEARBRIDGE 100 COMPANIES
16
CLEARBRIDGE 100 COMPANIES
Company Industry
ACTAVIS PLC Health Care
ADOBE SYSTEMS INC Information Technology
AETNA INC Health Care
AGL RESOURCES INC Utilities
AKAMAI TECHNOLOGIES INC Information Technology
AMAZON.COM INC Consumer Discretionary
AMERICAN EXPRESS CO Financials
AMGEN INC Health Care
ANADARKO PETROLEUM CORP Energy
AON PLC Financials
AT&T INC Telecommunication Services
AVON PRODUCTS Consumer Staples
BAKER HUGHES INC Energy
BALL CORP Materials
BANK OF NEW YORK MELLON CORP Financials
BARD (C.R.) INC Health Care
BB&T CORP Financials
BIOGEN IDEC INC Health Care
BLACKROCK INC Financials
BORGWARNER INC Consumer Discretionary
BOSTON PROPERTIES INC Financials
BOSTON SCIENTIFIC CORP Health Care
BRISTOL-MYERS SQUIBB CO Health Care
CBRE GROUP INC Financials
CHUBB CORP Financials
CINCINNATI FINANCIAL CORP Financials
COCA-COLA CO Consumer Staples
COLGATE-PALMOLIVE CO Consumer Staples
CONSOL ENERGY INC Energy
CONSOLIDATED EDISON INC Utilities
CORNING INC Information Technology
CVS CAREMARK CORP Consumer Staples
DANAHER CORP Industrials
DENBURY RESOURCES INC Energy
DISCOVERY COMMUNICATIONS INC Consumer Discretionary
DOMINION RESOURCES INC Utilities
17
CLEARBRIDGE 100 COMPANIES
Company Industry
DOW CHEMICAL Materials
EATON CORP PLC Industrials
EBAY INC Information Technology
ECOLAB INC Materials
EMC CORP/MA Information Technology
EQUIFAX INC Industrials
EXELON CORP Utilities
EXXON MOBIL CORP Energy
FIRST HORIZON NATIONAL CORP Financials
FMC TECHNOLOGIES INC Energy
FOSSIL GROUP INC Consumer Discretionary
FRONTIER COMMUNICATIONS CORP Telecommunication Services
GENERAL ELECTRIC CO Industrials
GOLDMAN SACHS GROUP INC Financials
GOOGLE INC Information Technology
HARLEY-DAVIDSON INC Consumer Discretionary
HERSHEY CO Consumer Staples
HESS CORP Energy
ILLINOIS TOOL WORKS Industrials
INTEL CORP Information Technology
INTL BUSINESS MACHINES CORP Information Technology
JPMORGAN CHASE & CO Financials
JUNIPER NETWORKS INC Information Technology
KELLOGG CO Consumer Staples
KRAFT FOODS GROUP INC Consumer Staples
L BRANDS INC Consumer Discretionary
M & T BANK CORP Financials
MASCO CORP Industrials
MATTEL INC Consumer Discretionary
MCDONALD'S CORP Consumer Discretionary
MEADWESTVACO CORP Materials
MERCK & CO Health Care
MOODY'S CORP Financials
MOTOROLA SOLUTIONS INC Information Technology
MYLAN INC Health Care
NASDAQ OMX GROUP INC Financials
18
CLEARBRIDGE 100 COMPANIES
Company Industry
NEWELL RUBBERMAID INC Consumer Discretionary
NEWMONT MINING CORP Materials
NISOURCE INC Utilities
NVIDIA CORP Information Technology
PACCAR INC Industrials
PENTAIR LTD Industrials
PEPSICO INC Consumer Staples
PFIZER INC Health Care
PIONEER NATURAL RESOURCES CO Energy
PPL CORP Utilities
PRICELINE.COM INC Consumer Discretionary
QUANTA SERVICES INC Industrials
QUEST DIAGNOSTICS INC Health Care
SCHWAB (CHARLES) CORP Financials
SHERWIN-WILLIAMS CO Materials
STARWOOD HOTELS&RESORTS WRLD Consumer Discretionary
TARGET CORP Consumer Discretionary
TERADATA CORP Information Technology
TEXAS INSTRUMENTS INC Information Technology
TIFFANY & CO Consumer Discretionary
TIME WARNER INC Consumer Discretionary
UNITED PARCEL SERVICE INC Industrials
UNITED TECHNOLOGIES CORP Industrials
VF CORP Consumer Discretionary
WAL-MART STORES INC Consumer Staples
XEROX CORP Information Technology
YAHOO INC Information Technology
YUM BRANDS INC Consumer Discretionary
20
ABOUT CLEARBRIDGE
ClearBridge Compensation Group is an independent consulting firm providing advice to boards of
directors and senior management on the design of effective executive and incentive compensation programs with a
focus on alignment with shareholders, linkage with business strategy, and adherence to strong governance
standards.
Our consultants have extensive experience and expertise in executive compensation program design. Our
work spans across industries for both publicly-traded and privately-held companies. Our aim is to establish
transparent connections between management and shareholders and understandable links between
performance and compensation.
We provide an array of compensation services to meet the individual needs of our clients. A sample of our
consulting services includes:
Total Compensation Review and Design
Annual Incentive Design
Long-term Incentive Design
Performance Measurement and Goal Setting
Pay-for-Performance Assessment
Board of Director Compensation
Stock Ownership Programs
Employment Agreements
Severance / Change in Control Arrangements
Compensation Governance Review™
Proxy/CD&A Disclosure
Say-on-Pay Preparation and Shareholder Engagement
Transactional Compensation Design (e.g., M&A, IPOs)
This report was authored by Johna Seo and Urboshi Pal. For questions specific to this ClearBridge 100
report, or for more information on ClearBridge Compensation Group or any of the services outlined above, please
visit our website or contact our New York City office at:
515 Madison Avenue
32nd
Floor
New York, NY 10022
212-886-1022
www.ClearBridgeComp.com