2011 Proxy Season Update: Insiders’ Perspective · backdating, financial fraud, proxy statement...

2011 Proxy Season Update: Insiders’ Perspective

THURSDAY, DECEMBER 9, 2010

TABLE OF CONTENTS

Biographies

• Rhonda L. Brauer Senior Managing Director, Georgeson Inc.

• Michael J. Diver Partner, Katten Muchin Rosenman LLP

• Edward HauderSenior Advisor, Exequity LLP

• Wayne A. Wald Partner, Katten Muchin Rosenman LLP

• Robert J. Wild Partner, Katten Muchin Rosenman LLP

Presentation

2011 Proxy Season Update: Insiders’ Perspective

Supplemental Materials

• Securities and Exchange Commission—Shareholder Approval of Executive Compensation and Golden Parachute Compensation

• Society of Corporate Secretaries & Governance Professionals—Shareholder Approval of Executive Compensation and Golden Parachute Compensation Letter

• Dodd-Frank Wall Street Reform and Consumer Protection Act

• Georgeson Report—ISS 2011 Policy Updates

• Georgeson—2010 Annual Corporate Governance Review

• Exequity—Top Ten Disclosure Change to Make in Light of Say on Pay

• Exequity—Quick Summary of ISS’s 2011 Policy Updates Related to Compensation

• Exequity Client Alert—SEC Proposes Rules Regarding Shareholder Approval of Executive Compensation and Golden Parachute Compensation

• Exequity—The Impact of Dodd-Frank on Executive Compensation

Rhonda L. Brauer is a Senior Managing Director – Corporate Governance at Georgeson, the proxy solicitation firm, which she joined in May 2008. She is focusing on helping companies to enhance communications with their shareholders and third-party opinion-makers and to analyze their current governance practices in light of the current corporate governance landscape and their own business developments.

Prior to joining Georgeson, Ms. Brauer held a variety of positions over 15 years in the Legal Department of The New York Times Company, most recently serving as Secretary and Corporate Governance Officer and as a member of the Company’s Senior Management Team. Her most recent responsibilities included providing key support to senior management and the board on the development and implementation of appropriate corporate governance practices and on strategic communications with institutional shareholders, investor publications, corporate governance rating firms and other relevant opinion-makers. She helped to lead the internal team that coordinated the Company’s response to a dissident’s withhold-the-vote campaign in 2007 and a threatened 2008 proxy fight, which eventually settled. Ms. Brauer also provided legal and other advice to The New York Times Company Foundation and The New York Times Neediest Cases Fund. Previously, she was responsible for legal advice on, among other things, disclosure and insider trading issues, and securities, treasury and transactional work.

Prior to working at The Times Company, Ms. Brauer was an associate lawyer with Cleary, Gottlieb, Steen & Hamilton in New York, NY and Brussels, Belgium, providing corporate legal advice to U.S. and international clients and pro bono work in the area of human rights.

Ms. Brauer speaks regularly at conferences on corporate governance issues. She is a member of the Society of Corporate Secretaries and Governance Professionals, for which she has served (since 2009) as Chair of its Chapter Task Force, (from 2006-2009) as the Chair of its Corporate Practices Committee, and (from 2006-2007) as a member of its Media Awareness Group. In addition, Ms. Brauer is a member of the Council of Institutional Investors and the Association of the Bar of the City of New York. She is also a member of the American Bar Association, for which she served (from 2008 - 2009) on its Task Force on the Delineation between the Roles of Shareholders and Boards.

Ms. Brauer is an Almoner for The Havens Relief Fund Society, for which she facilitates emergency grants for needy public school students and their families in New York City.

Ms. Brauer has a J.D. degree, magna cum laude and Order of the Coif, from Indiana University School of Law (Bloomington, IN) and an A.B. degree, magna cum laude and Phi Beta Kappa, from Cornell University’s College of Arts and Sciences (Ithaca, NY).

RHONDA L. BRAUERSenior Managing Director Georgeson Inc. 212.805.7168 [email protected]

http://www.kattenlaw.com/

Michael J. Diver concentrates his practice on securities regulatory and compliance matters, corporate governance and corporate and securities transactions. In addition to counseling clients with respect to securities offerings and compliance matters, Mr. Diver has extensive experience in representing public companies and individual officers and directors in matters before the Securities and Exchange Commission and the U.S. Department of Justice, including a number of high profile cases involving the subprime lending, telecommunications, information technology, banking and for-profit educational industries. His case experience covers virtually all areas of recent SEC enforcement focus, including matters related to the ongoing credit crisis, insider trading, stock options backdating, financial fraud, proxy statement disclosure and hedge fund activities. He has also advised audit committees and boards of directors in connection with corporate governance matters, internal investigations, financial restatements, special accounting reviews and NYSE and Nasdaq Stock Market inquiries.

Prior to joining the firm, Mr. Diver served as a Branch Chief in the Division of Enforcement of the Securities and Exchange Commission’s Chicago Regional Office. During his tenure with the Securities and Exchange Commission, he was responsible for managing a team of enforcement attorneys in investigating and prosecuting violations of the federal securities laws, including cases involving complex financial fraud, market manipulations, insider trading and violations of investment adviser and investment company regulations.

Mr. Diver graduated from Bucknell University in 1991 with a degree in economics and received his Juris Doctor degree from Northwestern School of Law of Lewis & Clark Law College, cum laude, in 1996. He is a member of the Bar of the State of Illinois and has been admitted to practice in the United States District Court for the Northern District of Illinois.

MICHAEL J. DIVERPartner Katten Muchin Rosenman LLP [email protected]


Ed is a Senior Advisor with Exequity, and is located in our Libertyville, Illinois offices. Prior to joining Exequity, Ed was a Principal at a large, national HR consulting firm where he led that firm’s Technical Solutions and Innovation Team, which was responsible for technical matters impacting compensation (financial accounting, securities, tax, corporate governance, and institutional shareholder issues).

Ed has worked with hundreds of companies and has extensive experience in all areas of executive and director compensation, including equity and cash incentive plans, RiskMetrics Group (formerly ISS) modeling, institutional investor analysis, accounting for equity awards, tax implications of compensation awards and plans, director pay issues, corporate governance issues related to compensation, and proxy disclosure of compensation matters.

Ed is a frequent speaker at national, regional, local and industry-specific conferences, seminars, and meetings, including The National Association of Stock Plan Professionals’ annual conferences and local chapter meetings, the Practising Law Institute’s Preparation of Annual Disclosure Documents yearly seminar, and the American Bar Association’s Section on Taxation meetings. Ed also has written numerous articles on executive compensation matters for professional publications, including Workspan, the Journal of Compensation and Benefits, The Corporate Board, and the Tax Management Compensation Planning Journal. In addition, Ed is frequently quoted on executive compensation issues by publications such as Fortune, HR Magazine, and Business Finance.

Ed received a B.A. from Juniata College, a J.D., cum laude, from Seattle University School of Law, and an LL.M. (Tax), with honors, from IIT-Chicago-Kent College of Law. Ed is an attorney and an active member of the Illinois State Bar and U.S. Tax Court.

EDWARD HAUDERSenior Advisor Exequity LLP [email protected]


QUALIFICATIONS AND CAREER PROFILE

Wayne A. Wald is a partner in the New York office of Katten Muchin Rosenman LLP. Mr. Wald concentrates in corporate and securities law, particularly capital formation and merger and acquisition transactions and ongoing representation of public and private companies.

Mr. Wald represents a variety of public and private companies, including private equity sponsor owned companies, in all aspects of their business, including with respect to corporate governance issues and ongoing and transactional general corporate and securities matters. Mr. Wald also represents issuers and underwriters in public and private offerings of equity and debt securities, including initial public offerings, 144A high yield debt offerings and PIPES transactions, and in private equity and venture capital related financings. In addition, he represents both acquirers and targets, and advises boards of directors, in connection with merger and acquisition transactions.

EDUCATION

Mr. Wald received his undergraduate degree, magna cum laude, (B.S., 1985) from the University at Albany (f/k/a State University of New York at Albany) and his law degree (J.D., 1989) from New York University, where he was a member of the Moot Court Board.

WAYNE A. WALDPartner Katten Muchin Rosenman [email protected]


Bob Wild is a partner in the firm’s Corporate Practice, focusing on the representation of publicly traded issuers in day-to-day federal securities law disclosure and compliance matters; board corporate governance matters; NYSE and NASDAQ initial and continued listing compliance; follow-on and secondary underwritten offerings of equity; Rule 144A high yield offerings and related registered exchange offerings; merger and annual meeting proxy statements; annual and quarterly periodic and current reports; Section 16 compliance; and Rule 10b5-1 plans and Rule 144 matters.

In addition, Mr. Wild also represents buyers and sellers in public and private acquisitions and divestitures of stock and assets. Mr. Wild’s client representations have included retailers, manufacturers, public accounting firms, consulting firms, wireless telecommunications providers, gaming companies, credit card issuers and bank holding companies.

Mr. Wild’s notable securities offerings include:

Associated Banc-Corp (NASDAQ GS: ASBC)

• $500,000,000 underwritten offering of common stock, Credit Suisse Securities (USA) LLC sole bookrunning manager

• $525,000,000 of senior preferred stock and related common stock warrants to the United States Department of Treasury in connection with the TARP Capital Purchase Program

• $100,000,000 InterNotes® subordinated notes, Joint Lead Managers and Lead Agents: Banc of America Securities LLC and Incapital LLC

• $2 billion senior and subordinated bank note program of Associated Bank, NA, a wholly owned subsidiary, agented by Credit Suisse First Boston, Citigroup, Goldman, Sachs & Co. and Merrill Lynch & Co.

• Negotiated several accelerated share repurchase plans with various global investment banks and related Form S-3 registration of common stock in connection with net share settlements

iPCS, Inc. (NASDAQ GS: IPCS)

• Shelf takedown underwritten secondary offering of common stock for affiliates of Apollo Management LP

• Rule 144A offering of $475 million of first and second lien senior secured high yield notes

• Offer to purchase and consent solicitation for $165 million and $125 million high yield notes

• Acquisition of Horizon PCS, Inc. (Pink Sheets: HZPS) and related Form S-4 and joint proxy statement/prospectus

• Rule 144A offering of $165 million high yield notes and resulting Form S-4 for exchange offer

ROBERT J. WILDPartner Katten Muchin Rosenman LLP [email protected]


2011 Proxy Season Update:Insiders’ Perspective

Thursday, December 9, 2010

Speakers

Michael DiverPartner

Katten Muchin Rosenman LLP

Wayne WaldPartner


Robert WildPartner


Rhonda BrauerSenior Managing Director

Georgeson Inc.

Edward HauderSenior Advisor Exequity LLP

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Overview of Dodd-Frank Governance—Related Rulemaking

Final 2010

• Proxy access Rule 14a-11 adopted but stayed (§971)

• NYSE Rule 452 amended to eliminate broker discretionary voting on executive compensation matters (§957)

• SOX 404(b) auditor attestation does not apply to non-accelerated filers (§989G)

Proposed December 2010/Final April – July 2011

• Exchange listing standards—compensation committee independence and compensation consultant conflicts (§952)

Final January – March 2011

• Say on Pay, Say on Pay Frequency and Say on Golden Parachutes (§951)

• Institutional investment managers reporting of votes on executive compensation (§951)

Proposed April – July 2011

• Disclosure of pay-for-performance, pay ratios and hedging by employees and directors (§§953 & 955)

• Recovery of executive compensation (§954)

• Exchange listing standards—defining “other significant matters” for broker voting of uninstructed shares (§957)

2

SEC 2010 Proxy Statement Comments

Executive Compensation Disclosure

• Specific performance targets for bonuses S-K 402(b)(2)(vii)

• Specifics of individual performance goals S-K 402(b)(2)(vii)

• Identify and compare companies in benchmarks S-K 402(b)(2)(xiv)

• Compensation risk management policies S-K 402(s)

2010 Governance Disclosure Changes

• Directors’ experience, qualifications, attributes or skills S-K 401(e)

• Diversity consideration and policy S-K 407(c)(2)(vi)

• Board risk oversight S-K 407(h)

Other Governance Comments

• Compensation committee interlocks S-K 407(e)(4)

3

Say on Pay Overview

Separate advisory non-binding votes

• Meetings to elect directors on or after January 21, 2011

• Approve compensation as disclosed in proxy statement

• Approve frequency of say on pay vote

One, two or every three years

Advisory non-binding vote to approve golden parachutes as disclosed in proposed S-K 402(t) for meetings to approve mergers and business combinations; voluntarily for annual meetings

• Applicable to meetings after the final rules effective date

Proposed rules provide no exemptions for smaller reporting companies

4

ISS 2011 Policy Updates Related to Compensation

Problematic Pay Practices—ISS is revising and shortening its list of “major”problematic pay practices.

Problematic Pay Practices Commitments—ISS will no longer accept future commitments on problematic pay practices as a way of preventing or reversing a negative vote recommendation.

Equity Compensation Plans: Burn Rate—ISS is making a change to its Burn Rate Policy so that the burn rate caps cannot increase or decrease by more than two percentage points from year to year.

Say When on Pay Vote—ISS will support annual advisory votes on compensation.

Voting on Golden Parachutes—ISS will evaluate such proposals on a case-by-case basis, but the presence of certain practices could lead ISS to recommend against a proposal.

ISS issued its 2011 Policy updates on November 19, 2010. However, unlike in years past, ISS is waiting until sometime in December 2010 to issue its FAQs, which will contain the 2011 Burn Rate Caps.

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ISS 2011 Policy Updates—Other Topics

On shareholder proposals for shareholders to act by written consent, may accept the shareholders’ right to call special meetings at a 10% threshold as a reasonable alternative.

Limited and publicly disclosed reasons to excuse director attendance < 75%

Enhanced focus on responsiveness to majority-supported shareholder proposals

More threshold-based approach to increased authorized capital stock proposals

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Preparing for Say-on-Pay andSay-When-on-Pay Votes

Preparationi. Evaluate executive compensation programs through prism of “pay riskiness” + educate

compensation committee members as to how third parties view this risk and any other concerns

ii. Evaluate long-term and short-term plan metricsiii. Evaluate peer groupiv. Appropriate balance of performance-based pay vs. non-performance-based payv. “Problematic” pay practices, e.g., repricing, tax gross-ups, perks, single trigger change-

in-controlvi. For Say-When-On-Pay, consider policies of proxy advisory firms and your shareholder

base Just starting to formulate and disclose their policies – ISS has proposed “annual”.

What to Expect?• Although not many, a few more majority AGAINST votes in future.

• Still remains to be seen (i) how companies will interpret votes, (ii) whether companies will engage their investors more and (iii) how entire system will manage so many votes.

• Greater potential to target compensation committee members if votes are ignored.

7

Shareholder Proposals Expected to be Most Prevalent

Majority voting for directors

Reports and policies on political contributions – aftermath of “Citizens United vs. Federal Election Commission”

Reports and action on sustainability, climate change, global warming and other environmental issues – BP spill aftermath

Executive compensation, e.g., retention periods for stock awards

Independent board chairmen

CEO succession processes

8

Constructively Engaging Your Shareholders

Continue to engage significant shareholders as part of an ongoing investor relations program.

Prepare for year-round and consistent shareholder-company engagement.

Use knowledge from shareholder engagement (i) to create effective proxy statement arguments and supplemental solicitation materials to drive home points, (ii) to respond to proxy advisory firms analysis and (iii) to effectively solicit votes.

If a shareholder proposal is received, consider creative win/win negotiating strategies.

Reminder: Failure to implement a shareholder proposal that receives majority shareholder support can eventually result in ISS recommendations for withhold/against votes for entire slate of directors and situation where “precatory” proposals may effectively become “binding”.

9

Contacts

Michael DiverPartner, Katten Muchin Rosenman LLPp / 312.902.5671 f / 312.577.4766 [email protected]

Rhonda BrauerSenior Managing Director, Georgeson Inc.p / 212.805.7168 f / [email protected]

Edward HauderSenior Advisor, Exequity LLPp / 847.996.3990 f / [email protected]

Wayne WaldPartner, Katten Muchin Rosenman LLPp / 212.940.8508 f / 212.940.8776 [email protected]

Robert WildPartner, Katten Muchin Rosenman LLPp / 312.902.5567 f / 312.577.8878 [email protected]

10

• Rule 144A offering of $300 million high yield notes and common stock warrants and resulting Form S-4 exchange offer and Form

• S-1 shelf offering

• $120 million convertible participating preferred stock investment by The Blackstone Group and Trust Company of the West

People’s Bank (NASDAQ GS: PBCT)

• Tender offer of approximately $255 million of subordinated notes

Mr. Wild’s notable mergers and acquisitions transactions include:

GlobalNetXchange, LLC

• Formation of Agentrics LLC, one of the world’s largest retail technology firms offering online auctions and strategic sourcing, in a merger of equals transaction with WorldWide Retail Exchange

Huron Consulting Group Inc. (NASDAQ GS: HURN)

• Acquisition of Glass & Associates, Inc., a turnaround and restructuring firm, in stock purchase valued at approximately $30 million, plus potential multi-year earn-outs payments

• Acquisition of Aaxis Technologies, Inc., an electronic data discovery consultant, in a stock purchase valued at approximately $7.8 million, plus potential multi-year earn-outs payments

iPCS, Inc. (NASDAQ GS: IPCS)

• Sale to AirGate PCS, Inc. in $900 million enterprise value transaction

Sears Roebuck & Company (NASDAQ GS: SHLD)

• Sale of NTB National Tire and Battery business with 226 retail stores and related transition services to TBC Corporation (NASDAQ:TBCC) for approximately $260 million

• Sales of several separate receivables portfolios of charged-off and Chapter 13 private label and general purpose credit card receivables with aggregate face principal of $2.5 billion for approximately $178 million

• Sales of several separate private label credit card receivables portfolios and transition servicing and program agreements

The representations described above were prior to Mr. Wild joining the firm.

Mr. Wild is the author of “Designing an Effective Securities Compliance Program,” Vol. 10, Corporate Compliance Series, Thomson/West, November 2009 (for information and to order, please click here).

Mr. Wild is a member of the Board of Directors and Audit Committee of the Boys & Girls Clubs of Chicago, and the Board of Managers and the Planned Giving Committee of the Robert R. McCormick Club of the Boys & Girls Clubs of Chicago. He is also a member of the Board of Trustees and Audit Committee of Chicago Waldorf School.

ROBERT J. WILD Continued


http://west.thomson.com/productdetail/5011/13512495/productdetail.aspx

http://www.bgcc.org/about_us/leadership__staff/corporate_board_of_directors/

http://mccormick.bgcc.org/club_board_of_managers/

http://www.chicagowaldorf.org/about/board-of-trustees-listing/

Mr. Wild is a member of the American Bar Association, Section of Business Law; the Chicago Bar Association, Federal Securities Law and Financial Institutions Committees; the Illinois State Bar Association, Corporations, Securities and Business Law Section Council, of which he served as chairman from 2005-2006; the National Association of Corporate Directors – Chicago Chapter; and the Society of Corporate Secretaries and Governance Professionals – Corporate Practices and Securities Law Committees; Chicago Chapter Advisory Committee.

Mr. Wild joined the firm in September 2007 and was previously a partner with Mayer Brown LLP. He is listed in the 2010 and 2011 editions of The Best Lawyers in America.

Mr. Wild earned his B.B.A. in 1983 from Loyola University Chicago, his M.S.T. in 1987 from DePaul University and his J.D. in 1989 from Loyola University Chicago School of Law, where he served as the executive editor for the Loyola Consumer Law Review. He is admitted to practice in Illinois (1989).

ROBERT J. WILD Continued


http://www.governanceprofessionals.org/society/chapch.asp?SnID=634420992

SECURITIES AND EXCHANGE COMMISSION

17 CFR PARTS 229, 240 and 249

[Release Nos. 33-9153; 34-63124; File No. S7-31-10]

RIN 3235-AK68

SHAREHOLDER APPROVAL OF EXECUTIVE COMPENSATION AND GOLDEN PARACHUTE COMPENSATION

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

SUMMARY: We are proposing amendments to our rules to implement the provisions of the

Dodd-Frank Wall Street Reform and Consumer Protection Act relating to shareholder

approval of executive compensation and “golden parachute” compensation arrangements.

Section 951 of the Dodd-Frank Act amends the Securities Exchange Act of 1934 by adding

Section 14A, which requires companies to conduct a separate shareholder advisory vote to

approve the compensation of executives, as disclosed pursuant to Item 402 of Regulation S-K

or any successor to Item 402. Section 14A also requires companies to conduct a separate

shareholder advisory vote to determine how often an issuer will conduct a shareholder

advisory vote on executive compensation. In addition, Section 14A requires companies

soliciting votes to approve merger or acquisition transactions to provide disclosure of certain

“golden parachute” compensation arrangements and, in certain circumstances, to conduct a

separate shareholder advisory vote to approve the golden parachute compensation

arrangements.

DATES: Comments should be received on or before November 18, 2010.

1

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments:

• Use the Commission’s Internet comment form

•

•

(http://www.sec.gov/rules/proposed.shtml);

Send an e-mail to [email protected].

on the subject line; or

Use the Federal Rulemaking Portal (http://w

instructions for submitting comments.

Please include File Number S7-31-10

ww.regulations.gov). Follow the

Paper Comments:

• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and

Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090.

All submissions should refer to File Number S7-31-10. This file number should be included

on the subject line if e-mail is used. To help us process and review your comments more

efficiently, please use only one method. The Commission will post all comments on the

Commission’s Internet website (http://www.sec.gov/rules/proposed.shtml). Comments are

also available for website viewing and printing in the Commission’s Public Reference Room,

100 F Street, NE, Washington, DC 20549, on official business days between the hours of

10:00 am and 3:00 pm. All comments received will be posted without change; we do not edit

personal identifying information from submissions. You should submit only information that

you wish to make available publicly.

2

FOR FURTHER INFORMATION CONTACT: Scott Hodgdon, Attorney-Adviser, at

(202) 551-3430, Anne Krauskopf, Senior Special Counsel, at (202) 551-3500, or Perry

Hindin, Special Counsel, at (202) 551-3440, Division of Corporation Finance, U.S. Securities

and Exchange Commission, 100 F Street, NE, Washington, DC 20549-3628.

SUPPLEMENTARY INFORMATION: We are proposing new Rule 14a-21 and

amendments to Rules 14a-4,1 14a-6,2 14a-83 and a new Item 24 and amendments to Item 5 to

Schedule 14A4 and amendments to Item 3 to Schedule 14C5 under the Securities Exchange

Act of 1934 (“Exchange Act”).6 We are also proposing amendments to Item 4027 of

Regulation S-K,8 Item 10119 of Regulation M-A,10 Item 15 of Schedule 13E-3,11 Item 8 of

1 17 CFR 240.14a-4.

2 17 CFR 240.14a-6.

3 17 CFR 240.14a-8.

4 17 CFR 240.14a-101.

5 17 CFR 240.14c-101.

6 15 U.S.C. 78a et seq.

7 17 CFR 229.402.

8 17 CFR 229.10 et seq.

9 17 CFR 229.1011.

10 17 CFR 229.1000 et seq.

11 17 CFR 240.13e-100.

3

Q.14

Schedule 14D-9,12 Item 9B in Part II of Form 10-K,13 and Item 5(c) in Part II of Form 10-

TABLE OF CONTENTS

I. Background and Summary II. Discussion of the Proposed Amendments

A. Shareholder Approval of Executive Compensation 1. Proposed Rule 14a-21(a) 2. Proposed Item 24 to Schedule 14A 3. Proposed Amendments to Item 402(b) of Regulation S-K

B. Shareholder Approval of the Frequency of Shareholder Votes on Executive Compensation

1. Proposed Rule 14a-21(b) 2. Proposed Item 24 of Schedule 14A 3. Proposed Amendment to Rule 14a-4 4. Proposed Amendment to Rule 14a-8 5. Proposed Amendments to Form 10-K and Form 10-Q 6. Effect of Shareholder Vote

C. Issues Relating to Both Shareholder Votes Required by Section 14A(a) 1. Proposed Amendments to Rule 14a-6 2. Broker Discretionary Voting 3. Relationship to Shareholder Votes on Executive Compensation for

TARP Companies D. Disclosure of Golden Parachute Arrangements and Shareholder Approval of

Golden Parachute Arrangements 1. General 2. Proposed Item 402(t) of Regulation S-K 3. Amendments to Schedule 14A, Schedule 14C, Schedule 14D-9,

Schedule 13E-3, and Item 1011 of Regulation M-A 4. Proposed Rule 14a-21(c)

E. Treatment of Smaller Companies F. Transition Matters G. General Request for Comment

III. Paperwork Reduction Act A. Background

12 17 CFR 240.14d-101.

13 17 CFR 249.310.

14 17 CFR 249.308a.

4

B. Burden and Cost Estimates Related to the Proposed Amendments C. Request for Comment

IV. Cost-Benefit Analysis A. Introduction B. Benefits C. Costs D. Request for Comment

V. Small Business Regulatory Enforcement Fairness Act VI. Consideration of Impact on the Economy, Burden on Competition, and Promotion of

Efficiency, Competition, and Capital Formation VII. Initial Regulatory Flexibility Act Analysis

A. Reasons for, and Objectives of, the Proposed Action B. Legal Basis C. Small Entities Subject to the Proposed Action D. Reporting, Recordkeeping, and other Compliance Requirements E. Duplicative, Overlapping, or Conflicting Federal Rules F. Significant Alternatives G. Solicitation of Comments

VIII. Statutory Authority and Text of the Proposed Amendments

I. BACKGROUND AND SUMMARY

Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the

“Act”)15 amends the Exchange Act by adding new Section 14A. New Section 14A(a)(1)

requires that “[n]ot less frequently than once every 3 years, a proxy or consent or

authorization for an annual or other meeting of the shareholders for which the proxy

solicitation rules of the Commission require compensation disclosure”16 must also “include a

15 Pub. L. No. 111-203 (July 21, 2010).

16 Exchange Act Section 14A(a)(1). Section 951 of the Act includes the language “or other meeting of the shareholders,” which is similar to corresponding language in Section 111(e)(1) of the Emergency Economic Stabilization Act of 2008, or EESA, 12 U.S.C. 5221. We have previously considered this language in connection with companies required to provide a separate shareholder vote on executive compensation so long as the company has outstanding obligations under the Troubled Asset Relief Program, or TARP. See Shareholder Approval of Executive Compensation of TARP Recipients, Release No. 34-61335 (Jan. 12, 2010) [75 FR 2789] (hereinafter, the “TARP Adopting Release”). We continue to view this provision to require a separate shareholder vote on executive compensation only with respect to an annual meeting of shareholders for which proxies will be solicited for the election of directors, or a special meeting in lieu of such annual meeting. Similarly, proposed Rules 14a-21(a) and (b) are intended to result in issuers conducting the required advisory votes in connection with the election of directors, the proxy materials for which are required to include disclosure of executive compensation.

5

separate resolution subject to shareholder vote to approve the compensation of executives,”17

as disclosed pursuant to Item 402 of Regulation S-K, or any successor to Item 402 (a “say-

on-pay” vote). The shareholder vote to approve executive compensation required by Section

14A(a)(1) “shall not be binding on the issuer or the board of directors of an issuer.”18

Section 951 of the Act also adds new Section 14A(a)(2) to the Exchange Act,

requiring that, “[n]ot less frequently than once every 6 years, a proxy or consent or

authorization for an annual or other meeting of the shareholders for which the proxy

solicitation rules of the Commission require compensation disclosure shall include a separate

resolution subject to shareholder vote to determine”19 whether the shareholder vote to

approve the compensation of executives “will occur every 1, 2, or 3 years.”20 As discussed

below, this shareholder vote “shall not be binding on the issuer or the board of directors of an

issuer.”21

In addition, Section 951 of the Act amends the Exchange Act by adding new Section

14A(b)(1), which requires that, in any proxy or consent solicitation material for a meeting of

shareholders “at which shareholders are asked to approve an acquisition, merger,

consolidation, or proposed sale or other disposition of all or substantially all the assets of an

issuer, the person making such solicitation shall disclose in the proxy or consent solicitation

17 Exchange Act Section 14A(a)(1).

18 Exchange Act Section 14A(c).




6

material, in a clear and simple form in accordance with regulations to be promulgated by the

Commission, any agreements or understandings that such person has with any named

executive officers of such issuer (or of the acquiring issuer, if such issuer is not the acquiring

issuer) concerning any type of compensation (whether present, deferred, or contingent) that is

based on or otherwise relates to the acquisition, merger, consolidation, sale or other

disposition of all or substantially all of the assets of the issuer.”22 These compensation

arrangements are often referred to as “golden parachute” compensation. Such disclosure

must include the aggregate total of all such compensation that may be paid or become

payable to or on behalf of such named executive officer, and the conditions upon which it

may be paid or become payable.23 Under Section 14A(b)(2), “unless such agreements or

understandings have been subject to [the periodic vote described in Section 14A(a)(1)],”24 a

separate shareholder vote to approve such agreements or understandings and compensation

as disclosed is also required.25 As with the annual shareholder vote to approve the

compensation of executives and the shareholder vote on the frequency of such votes, this

shareholder vote “shall not be binding on the issuer or the board of directors of an issuer.”26

None of the shareholder votes required pursuant to Section 14A (including the

shareholder vote to approve executive compensation, the shareholder vote on the frequency

22 Exchange Act Section 14A(b)(1).




26 Exchange Act Section 14A(c). For a more detailed discussion of the advisory nature of the shareholder votes required by Section 951 of the Act, see Section II.B.6 below.

7

of such votes, and the shareholder vote to approve golden parachute compensation) is

binding on an issuer or its board of directors or is to be construed “as overruling a decision

by such issuer or board of directors.”27 These shareholder votes also do not “create or imply

any change to the fiduciary duties of such issuer or board of directors”28 nor do they “create

or imply any additional fiduciary duties for such issuer or board of directors.”29 In addition,

these votes will not be construed “to restrict or limit the ability of shareholders to make

proposals for inclusion in proxy materials related to executive compensation.”30

Section 14A(a)(3) requires that both the initial shareholder vote on executive

compensation and the initial vote on the frequency of votes on executive compensation be

included in proxy statements “for the first annual or other meeting of the shareholders

occurring after the end of the 6-month period beginning on the date of enactment” of the

Act.31 Thus, the statute requires separate resolutions subject to shareholder vote to approve

executive compensation and to approve the frequency of say-on-pay votes for proxy

statements relating to an issuer’s first annual or other meeting of the shareholders occurring

on or after January 21, 2011, whether or not the Commission has adopted rules to implement

27 Exchange Act Section 14A(c)(1).



30 Exchange Act Section 14A(c)(4). In addition, Exchange Act Section 14A(d) provides that every institutional manager subject to Exchange Act Section 13(f) [15 U.S.C. 78m(f)] shall report at least annually how it voted on any shareholder vote required by Section 951 of the Act, including the shareholder vote on executive compensation, the shareholder vote on the frequency of shareholder votes on executive compensation, and the golden parachute compensation vote, unless such vote is otherwise required to be reported publicly by rule or regulation of the Commission. Amendments to our rules to implement this requirement will be proposed in a separate rulemaking.


8

Section 14A(a). Because Section 14A(a) applies to shareholder meetings taking place on or

after January 21, 2011, any proxy statements, whether in preliminary or definitive form, even

if filed prior to this date, for meetings taking place on or after January 21, 2011, must include

the separate resolutions for shareholders to approve executive compensation and the

frequency of say-on-pay votes required by Section 14A(a) without regard to whether the

amendments proposed in this release have been adopted by that time.32

With respect to the disclosure of golden parachute arrangements in accordance with

Commission regulations in merger proxy statements required by Section 14A(b)(1), we note

that the statute similarly references a 6-month period beginning on the date of enactment of

the Act. However, because the statute requires such disclosure “in accordance with

regulations to be promulgated by the Commission,”33 the golden parachute compensation

arrangements disclosure under proposed new Item 402(t) and a separate resolution to approve

golden parachute compensation arrangements pursuant to Rule 14a-21(c) would not be

required for merger proxy statements relating to a meeting of shareholders until the effective

date of our rules implementing Section 14A(b)(1).

We are proposing Rule 14a-21 to provide a separate shareholder vote to approve

executive compensation, to approve the frequency of such votes on executive compensation

and to approve golden parachute compensation arrangements in connection with merger

transactions. We are also proposing a new Item 24 of Schedule 14A to provide disclosure

32 For a discussion of the relationship between Section 14A and the required shareholder votes on executive compensation for companies subject to EESA with outstanding obligations under TARP, see Section II.C.3 below.


9

regarding the effect of the shareholder votes required by Rule 14a-21, including disclosure of

the non-binding nature of the votes. In addition, our proposed amendments to Item 5 of

Schedule 14A, Item 3 of Schedule 14C, Item 1011 of Regulation M-A, Item 8 of Schedule

14D-9, and Item 15 of Schedule 13E-3 would require additional disclosure regarding golden

parachute arrangements in connection with mergers, Rule 13e-334 going-private transactions

and tender offers.

We are also proposing amendments to Item 402 of Regulation S-K to address the

issuer’s response to the shareholder vote on executive compensation in Compensation

Discussion and Analysis, and to prescribe disclosure about golden parachute compensation

arrangements in proposed new Item 402(t). Finally, we are proposing amendments to Form

10-K and Form 10-Q to require disclosure about whether and how the issuer will implement

the results of the shareholder advisory vote on the frequency of shareholder votes on

executive compensation.

II. DISCUSSION OF THE PROPOSED AMENDMENTS

A. Shareholder Approval of Executive Compensation

1. Proposed Rule 14a-21(a)

We are proposing Rule 14a-21(a), pursuant to which issuers35 would be required, not

less frequently than once every three years, to provide a separate shareholder advisory vote in

proxy statements to approve the compensation of executives. Proposed Rule 14a-21(a)

34 17 CFR 240.13e-3.

35 Our proposed rules would apply to issuers who have a class of equity securities registered under Section 12 [15 U.S.C. 78l] of the Exchange Act and are subject to our proxy rules. The application of this provision to companies subject to EESA with outstanding obligations under TARP is discussed in Section II.C.3 below.

10

would specify that the separate shareholder vote on executive compensation is required only

when proxies are solicited for an annual or other meeting of security holders for which our

rules require the disclosure of executive compensation pursuant to Item 402 of Regulation S-

K. Proposed Rule 14a-21(a) would require a separate shareholder vote to approve the

compensation of executives for the first annual or other such meeting of shareholders

occurring on or after January 21, 2011,36 the first day after the end of the 6-month period

beginning on the date of enactment of the Act.

Proposed Rule 14a-21(a) would specify how an issuer must provide a separate

shareholder advisory vote to approve the compensation of its named executive officers, as

defined in Item 402(a)(3)37 of Regulation S-K. In accordance with Section 14A(a)(1),

shareholders would vote to approve the compensation of the issuer’s named executive

officers, as such compensation is disclosed in Item 40238 of Regulation S-K, including the

Compensation Discussion and Analysis (“CD&A”), the compensation tables and other

narrative executive compensation disclosures required by Item 402.39 Smaller reporting

36 Section 14A(a)(3) requires the shareholder advisory votes beginning with “the first annual or other meeting of the shareholders occurring after the end of the 6-month period beginning on the date of enactment” of Section 951 of the Act. The Act was enacted on July 21, 2010.

37 17 CFR 229.402(a)(3).

38 If disclosure of golden parachute compensation arrangements pursuant to proposed Item 402(t) is included in an annual meeting proxy statement, such disclosure would be included in the disclosure subject to the shareholder advisory vote under Rule 14a-21(a). We are not proposing, however, to require that such disclosure under Item 402(t) be included in all annual meeting proxy statements.

39 While not required, our rules “would not preclude an issuer from seeking more specific shareholder opinion through separate votes on cash compensation, golden parachute policy, severance or other aspects of compensation.” See Report of the Senate Committee on Banking, Housing, and Urban Affairs regarding The Restoring American Financial Stability Act of 2010, S. Rep. No. 111-176 at 133 (2010).

11

companies40 are subject to scaled executive compensation disclosure requirements and are

not required to include a CD&A. Therefore, for smaller reporting companies, the

shareholders would vote to approve the compensation of the named executive officers, as

disclosed under Items 402(m)41 through 402(q)42 of Regulation S-K. We are also proposing

an instruction to new Rule 14a-21 to specify that Rule 14a-21 does not change the scaled

disclosure requirements for smaller reporting companies and that smaller reporting

companies would not be required to provide a CD&A in order to comply with Rule 14a-21.43

Consistent with Section 14A, the compensation of directors, as disclosed pursuant to

Item 402(k)44 and by Item 402(r)45 is not subject to the shareholder advisory vote. In

addition, if an issuer includes disclosure pursuant to Item 402(s)46 of Regulation S-K about

the issuer’s compensation policies and practices as they relate to risk management and risk-

taking incentives, these policies and practices would not be subject to the shareholder

advisory vote required by Section 14A(a)(1) as they relate to the issuer’s compensation for

employees generally. We note, however, that to the extent that risk considerations are a

40 As defined in Rule 12b-2 [17 CFR 240.12b-2], these generally are companies with a public float of less than $75 million as of the last day of their most recently completed second fiscal quarter.

41 17 CFR 229.402(m).

42 17 CFR 229.402(q).

43 In connection with the shareholder vote on executive compensation for companies subject to EESA with outstanding obligations under TARP, we adopted a similar instruction to Rule 14a-20. See TARP Adopting Release, supra note 16, at 75 FR 2795.

44 17 CFR 229.402(k).

45 17 CFR 229.402(r).

46 17 CFR 229.402(s).

12

material aspect of the issuer’s compensation policies or decisions for named executive

officers, the issuer is required to discuss them as part of its CD&A,47 and therefore such

disclosure would be considered by shareholders when voting on executive compensation.

Our proposed rule would not require issuers to use any specific language or form of

resolution to be voted on by shareholders. However, the shareholder vote must relate to all

executive compensation disclosure set forth pursuant to Item 402 of Regulation S-K. New

Section 14A(a)(1) of the Exchange Act requires that the shareholder vote must be “to

approve the compensation of executives, as disclosed pursuant to [Item 402 of Regulation S-

K] or any successor thereto.”48 In our view, a vote to approve a proposal on a different

subject matter, such as a vote to approve only compensation policies and procedures, would

not satisfy the requirement of Section 14A(a)(1) or proposed Rule 14a-21(a).49

Request for Comment

(1) Should we include more specific requirements regarding the manner in which

issuers should present the shareholder vote on executive compensation? For

example, should we designate the specific language to be used and/or require

issuers to frame the shareholder vote to approve executive compensation in the

form of a resolution? If so, what specific language or form of resolution should

be used?

47 See Proxy Disclosure Enhancements, Release No. 33-9089 (Dec. 16, 2009) [74 FR 68334] at note 38.


49 See the corresponding discussion in the TARP Adopting Release, supra note 16, at 75 FR 2791, note 14.

13

(2) Would it be appropriate to exempt smaller reporting companies from the

shareholder vote to approve executive compensation? Please explain the reasons

why an exemption would, or would not, be appropriate. Would the proposed

amendments be disproportionately burdensome for smaller reporting

companies?50

(3) Should we establish compliance dates to phase-in effectiveness of our proposed

rules? Are there other transition issues that our rules should address?

(4) Section 14A(a)(1), like Section 111(e) of the EESA, does not specify which

shares are entitled to vote in the shareholder vote to approve executive

compensation, nor does this section direct the Commission to adopt rules

addressing this point. As in our implementation of EESA Section 111(e), we are

not proposing to address this question in our rules. Should our rules

implementing Section 14A(a)(1) address this question? If so, how, and on what

basis?

2. Proposed Item 24 to Schedule 14A

We are also proposing a new Item 24 to Schedule 14A. Pursuant to this item, issuers

would be required to disclose in a proxy statement for an annual meeting (or other meeting of

shareholders for which our rules require executive compensation disclosure) that they are

providing a separate shareholder vote on executive compensation and to briefly explain the

50 Section 951 of the Act establishes a new Section 14A(e) of the Exchange Act, which provides that we may, by rule or order, exempt an issuer or class of issuers from the requirements of Section 14A(a) and (b). In determining whether to make an exemption under this subsection, we are directed to take into account, among other considerations, whether the requirements of Section 14A(a) and 14A(b) disproportionately burden small issuers. We are also soliciting comment on a number of issues relating to smaller reporting companies as discussed further in Section II.E below.

14

general effect of the vote, such as whether the vote is non-binding.51 This is similar to the

approach taken by the Commission in connection with disclosure requirements about the

shareholder vote on executive compensation for companies subject to EESA.52

Request for Comment

(5) Are there other disclosures that should be provided by issuers regarding the

shareholder vote on executive compensation? If so, what kinds of disclosure

would be useful to shareholders?

3. Proposed Amendments to Item 402(b)53 of Regulation S-K

In connection with our implementation of Section 14A(a)(1), we are also proposing

amendments to Item 402(b) of Regulation S-K. Item 402 requires the disclosure of executive

compensation and includes requirements prescribing narrative and tabular disclosure, as well

as separate scaled disclosure requirements for smaller reporting companies.54 Item 402(b)

contains the CD&A requirement. CD&A is intended to be a narrative overview that puts into

context the executive compensation disclosure provided elsewhere in response to the

requirements of Item 402. The CD&A disclosure requirement is principles-based, in that it

51 Section 14A(a) does not require additional disclosure with respect to the non-binding nature of the vote. We are proposing to require additional disclosure so that information about the advisory nature of the vote is available to shareholders before they vote.

52 See Item 20 of Schedule 14A; TARP Adopting Release, supra note 16, at 75 FR 2790.

53 17 CFR 229.402(b).

54 Item 402 also includes requirements to disclose director compensation (Items 402(k) and 402(r)) and the issuer’s compensation policies as they relate to risk management (Item 402(s)). As noted above, disclosure pursuant to these paragraphs is beyond the scope of the shareholder advisory vote to approve executive compensation. Similarly, as noted in note 38 above, disclosure pursuant to proposed Item 402(t) is beyond the scope of the shareholder advisory vote to approve executive compensation unless the issuer includes that disclosure in its annual meeting proxy statement.

15

identifies the disclosure concept and provides several non-exclusive examples. Under Item

402(b)(1), issuers must explain all material elements of their named executive officers’

compensation by addressing mandatory principles-based topics in their CD&A:

• What are the objectives of the company’s compensation programs?

• What is the compensation program designed to reward?

• What is each element of compensation?

• Why does the company choose to pay each element?

• How does the company determine the amount (and, where applicable, the formula)

for each element?

• How do each element and the company’s decisions regarding that element fit into the

company’s overall compensation objectives and affect decisions regarding other

elements?

Item 402(b)(2) of Regulation S-K sets forth certain non-exclusive examples of the kind of

information that an issuer should address in its CD&A, depending upon the facts and

circumstances.

Our proposals would amend Item 402(b) to require issuers to address in CD&A

whether and, if so, how their compensation policies and decisions have taken into account the

results of shareholder advisory votes on executive compensation. This proposed new

disclosure is not mandated by Section 951 of the Act, but we believe that a requirement to

provide that information would facilitate better investor understanding of issuers’

compensation decisions. We note that the shareholder advisory vote on executive

compensation will apply to all issuers, and as a result, we view information about how

16

issuers have responded to such votes as more in the nature of a mandatory principles-based

topic than an example. The manner in which individual issuers may respond to such votes in

determining executive compensation policies and decisions will likely vary depending upon

facts and circumstances. Accordingly, the proposal would amend Item 402(b)(1) to require

issuers to address in CD&A whether, and if so, how they have considered the results of

previous shareholder votes on executive compensation required by Section 14A and Rule

14a-2055 in determining compensation policies and decisions and, if so, how that

consideration has affected their compensation policies and decisions.56

Smaller reporting companies are subject to scaled disclosure requirements in Item

402 of Regulation S-K and are not required to include a CD&A. We are not proposing to

add a specific requirement for smaller reporting companies to provide disclosure about how

previous votes pursuant to Section 14A affected compensation policies and decisions because

we believe such information would not be as valuable outside the context of a complete

CD&A covering the full range of matters required to be addressed by Item 402(b). However,

we note that pursuant to Item 402(o)57 of Regulation S-K, smaller reporting companies are

required to provide a narrative description of any material factors necessary to an

understanding of the information disclosed in the Summary Compensation Table. If

55 17 CFR 240.14a-20. Because companies with outstanding indebtedness under the TARP will continue to have an annual say-on-pay vote until they repay all such indebtedness, we are proposing that these votes be addressed by issuers in CD&A as well. The treatment of companies subject to EESA with outstanding obligations under TARP is discussed in Section II.C.3 below.

56 Reporting companies are currently required to disclose, pursuant to Item 5.07 of Form 8-K [17 CFR 249.208a], the results of a shareholder vote within four business days after the end of the meeting at which the vote is held. We are not proposing any additional disclosure on Form 8-K for a company to discuss the results of the votes required by Exchange Act Section 14A, though companies may voluntarily provide additional disclosure.

57 17 CFR 229.402(o).

17

consideration of prior executive compensation advisory votes is such a factor for a particular

issuer, disclosure would be required pursuant to Item 402(o).

Request for Comment

(6) Should we amend Item 402(b) to require disclosure of the consideration of the

results of the shareholder advisory vote on executive compensation in CD&A as

proposed? If not, please explain why not.

(7) Should the requirement to discuss the issuer’s consideration of the results of the

shareholder vote be included in Item 402(b)(1) as a mandatory principles-based

topic, as proposed, or should it be included in Item 402(b)(2) as a non-exclusive

example of information that should be addressed, depending upon materiality

under the individual facts and circumstances? In this regard, commentators

should explain the reasons why they recommend either approach.

(8) Should the proposed requirement for CD&A discussion of the issuer’s

consideration of previous shareholder advisory votes be revised to relate only to

consideration of the most recent shareholder advisory votes?

(9) For smaller reporting companies, should we instead require disclosure to address

the consideration of previous shareholder advisory votes on executive

compensation? Would such information be valuable outside the context of a

complete CD&A? Would the existing requirements under Item 402(o) of

Regulation S-K, pursuant to which smaller reporting companies must provide a

narrative disclosure of any material factors necessary to an understanding of the

18

information disclosed in the Summary Compensation Table, be sufficient

information for investors in smaller reporting companies?

B. Shareholder Approval of the Frequency of Shareholder Votes on Executive Compensation

1. Proposed Rule 14a-21(b)

Under proposed Rule 14a-21(b), issuers would be required, not less frequently than

once every six years, to provide a separate shareholder advisory vote in proxy statements for

annual meetings to determine whether the shareholder vote on the compensation of

executives required by Section 14A(a)(1) “will occur every 1, 2, or 3 years.”58 Proposed

Rule 14a-21(b) would also clarify that the separate shareholder vote on the frequency of

shareholder votes on executive compensation would be required only in a proxy statement

solicited for an annual or other meeting of shareholders for which our rules require

compensation disclosure.59 Under proposed Rule 14a-21(b), issuers would be required to

provide the separate shareholder vote on the frequency of the say-on-pay vote for the first

annual or other such meeting of shareholders occurring on or after January 21, 2011.60


59 As discussed above in note 16, proposed Rule 14a-21(b) would require issuers to conduct the required advisory vote in connection with the election of directors, when our rules call for disclosure of executive compensation. In our view, a separate shareholder vote on the frequency of shareholder votes on executive compensation is required only with respect to an annual meeting of shareholders for which proxies will be solicited for the election of directors or a special meeting in lieu of such annual meeting.

60 See Section II.C.3 below for a discussion of the application of this section to companies subject to EESA with outstanding obligations under TARP.

19

Request for Comment

(10) Should we include more specific requirements regarding the manner in

which issuers should present the shareholder vote on the frequency of shareholder

votes on executive compensation? For example, should we designate the specific

language to be used and/or require issuers to frame the shareholder vote on the

frequency of shareholder votes to approve executive compensation in the form of

a resolution? If so, what specific language or form of resolution should be used?

(11) Should a new issuer be permitted to disclose the frequency of its say-on-pay

votes in the registration statement for its initial public offering and be exempted

from conducting say-on-pay and frequency votes until the year disclosed? For

example, if an issuer discloses in its initial public offering prospectus that it will

conduct a say-on-pay vote every two years, should we exempt it from the

requirements of Section 14A(a)(1) and 14A(a)(2) for its first annual meeting as a

reporting company?

(12) Section 14A(a)(2) does not specify which shares are entitled to vote in the

shareholder vote on the frequency of the shareholder vote to approve executive

compensation, nor does this section direct the Commission to adopt rules

addressing this point. We are not proposing to address this question in our rules,

but should our rules implementing Section 14A(a)(2) address this question? If so,

how, and on what basis?

20

2. Proposed Item 24 of Schedule 14A

In addition to disclosure regarding the vote on executive compensation, issuers would

be required to disclose in the proxy statement that they are providing a separate shareholder

advisory vote on the frequency of the shareholder advisory vote on executive compensation.

Item 24 of Schedule 14A would also require issuers to briefly explain the general effect of

this vote, such as whether the vote is non-binding.61 As noted above, this is similar to the

approach taken by the Commission in connection with disclosure requirements about the

shareholder vote on executive compensation for companies subject to EESA.

Request for Comment

(13) Should we require disclosure about the general effect of this shareholder

advisory vote? Is such disclosure useful to shareholders?

(14) Are there other disclosures that should be provided by issuers regarding the

shareholder vote on the frequency of say-on-pay votes? If so, what kinds of

disclosure would be useful to shareholders?

3. Proposed Amendment to Rule 14a-4

Section 14A(a)(2) requires a shareholder advisory vote on whether say-on-pay votes

will occur every 1, 2, or 3 years. Thus, shareholders must be given four choices: whether the

shareholder vote on executive compensation will occur every 1, 2, or 3 years, or to abstain

from voting on the matter. In our view, Section 14A(a)(2) does not allow for alternative

formulations of the shareholder vote, such as proposals that would provide shareholders with

61 As discussed above in note 51, Section 14A(a) does not require additional disclosure with respect to the non-binding nature of the vote. We are proposing to require additional disclosure so that information about the advisory nature of the vote is available to shareholders before they vote.

21

two substantive choices (e.g., to hold a separate shareholder vote on executive compensation

every year or less frequently), or only one choice (e.g., a company proposal to hold

shareholder votes every two years). We would expect that the board of directors will include

a recommendation as to how shareholders should vote on the frequency of shareholder votes

on executive compensation. However, the issuer must make clear in these circumstances that

the proxy card provides for four choices (every 1, 2, or 3 years, or abstain) and that

shareholders are not voting to approve or disapprove the issuer’s recommendation.

Accordingly, we are proposing amendments to our proxy rules to reflect the statutory

requirement that shareholders must be provided the opportunity to cast an advisory vote on

whether the shareholder vote on executive compensation required by Section 14A(a)(1) of

the Exchange Act will occur every 1, 2, or 3 years, or to abstain from voting on the matter.62

Specifically, we are proposing amendments to Rule 14a-4 under the Exchange Act,

which provides requirements as to the form of proxy that issuers are required to include with

their proxy materials, to require that issuers present four choices to their shareholders. Under

existing Rule 14a-4, the form of proxy is required to provide means whereby the person

solicited is afforded an opportunity to specify by boxes a choice between approval or

disapproval of, or abstention with respect to each separate matter to be acted upon, other than

62 Because the shareholder vote on the frequency of voting on executive compensation is advisory, we do not believe that it is necessary to prescribe a standard for determining which frequency has been “adopted” by the shareholders. As discussed in the following section, however, for purposes of Rule 14a-8 we are proposing that an issuer may exclude as “substantially implemented” a shareholder proposal that seeks a say-on-pay vote or that relates to the frequency of say-on-pay votes only if the issuer has implemented a say-on-pay voting frequency that is consistent with the vote of a plurality of the votes cast. For that rule, we are proposing a plurality standard because the proxy card will have three substantive choices (1, 2, or 3 years), and as a consequence there may be situations where none of these three frequencies has been supported by a majority of the votes cast or shares represented at a meeting.

22

elections to office.63 The proposed amendments would revise this standard to permit proxy

cards to reflect the choice of 1, 2, or 3 years, or abstain, for these votes.

Request for Comment

(15) Will the four choices available to shareholders for the frequency of

shareholder votes on executive compensation be sufficiently clear?

(16) Will issuers, brokers, transfer agents, and data processing firms be able to

accommodate four choices (i.e., 1, 2, or 3 years, or abstain) for a single line item

on a proxy card? What technical or processing difficulties do such a change to

the proxy card present? If there are technical or processing difficulties, are there

practical ways to mitigate them?

4. Proposed Amendment to Rule 14a-8

We are also proposing an amendment to Rule 14a-8 under the Exchange Act to add a

note to Rule 14a-8(i)(10) that would clarify the status of shareholder proposals that seek an

advisory shareholder vote on executive compensation or that relate to the frequency of

shareholder votes approving executive compensation. Rule 14a-8 provides eligible

shareholders with an opportunity to include a proposal in an issuer’s proxy materials for a

vote at an annual or special meeting of shareholders. An issuer generally is required to

include the proposal unless the shareholder has not complied with the rule’s procedural

requirements or the proposal falls within one of the rule’s 13 substantive bases for

63 Rule 14a-4(b)(1).

23

exclusion.64 One of the substantive bases for exclusion, Rule 14a-8(i)(10), provides that an

issuer may exclude a shareholder proposal that has already been substantially implemented.

We believe that under certain conditions, an issuer’s response to the say-on-pay and

related frequency votes in Section 951 of the Act may be viewed as having substantially

implemented subsequent shareholder proposals that seek a vote on the same matters. We are

proposing to add a new note to Rule 14a-8(i)(10) to permit the exclusion of a shareholder

proposal that would provide a say-on-pay vote or seeks future say-on-pay votes or that relates

to the frequency of say-on-pay votes, provided the issuer has adopted a policy on the

frequency of say-on-pay votes that is consistent with the plurality of votes cast in the most

recent vote in accordance with Rule 14a-21(b).65 As noted in Section I above, a “say-on-

pay” vote is defined as a separate resolution subject to shareholder vote to approve the

compensation of executives, as disclosed pursuant to Item 402 of Regulation S-K, or any

successor to Item 402.

As a result of this proposed amendment, if an issuer implements the results of the

advisory vote of its shareholders as to how often it will solicit votes to approve the

compensation of its executives, it would be permitted to exclude shareholder proposals that

propose a vote on the approval of executive compensation as disclosed pursuant to Item 402

of Regulation S-K or on the frequency of such votes, including those drafted as requests to

amend the issuer’s governing documents, so long as the issuer has adopted a policy on the

64 These substantive bases for exclusion are set forth in Rule 14a-8(i).

65 More specifically, to exclude such shareholder proposals, the issuer must have adopted the voting frequency receiving the greatest number of votes in the most recent advisory vote on the frequency of say-on-pay votes. We are prescribing this voting standard solely for purposes of determining the scope of the exclusion under Rule 14a-8(i)(10), and not for the purpose of determining whether a particular voting frequency should be considered to have been adopted or approved by shareholder vote as a matter of state law.

24


recent vote required by Rule 14a-21(b) and provides a vote on frequency at least as often as

required by Section 14A(a)(2). For example, if in the first vote under Rule 14a-21(b) the

largest number of votes were cast for a two-year frequency for future shareholder votes on

executive compensation, and the issuer discloses that it has approved a policy to hold the

vote every two years, a shareholder proposal seeking a different frequency could be excluded

so long as the issuer seeks votes on executive compensation every two years and provides a

vote on frequency at least every six years as required by Section 14A(a)(2).

We believe that, in these circumstances, additional shareholder proposals on

frequency generally would unnecessarily burden the company and its shareholders given the

company’s substantial implementation of a plurality shareholder vote regarding the

frequency of say-on-pay votes. For the same reasons, a shareholder proposal that would

provide an advisory vote or seek future advisory votes on executive compensation with

substantially the same scope as the vote required by Rule 14a-21(a) would be subject to

exclusion under Rule 14a-8(i)(10).66

Section 14A(c)(4) provides that the shareholder advisory votes required by Sections

14A(a) and (b) may not be construed “to restrict or limit the ability of shareholders to make

proposals for inclusion in proxy materials related to executive compensation.” As proposed

to be amended, Rule 14a-8(i)(10) would only provide a basis for exclusion of a say-on-pay

proposal if the company has adopted a policy on the frequency of say-on-pay votes that is

66 A shareholder proposal that proposes a periodic say-on-pay vote would not be excludable under Rule 14-8(i)(10) if the issuer does not adopt a frequency policy that is consistent with the plurality of votes cast in the most recent shareholder vote pursuant to Rule 14a-21(b).

25

consistent with the plurality of votes cast in the most recent shareholder vote. Otherwise,

simply having the required vote on frequency would not restrict or limit the ability of a

shareholder to have a say-on-pay proposal included in the company’s proxy materials.

Request for Comment

(17) Is it necessary or appropriate to prescribe a standard, such as a plurality, as

proposed, for resolving whether issuers have substantially implemented the

shareholders’ vote on the frequency of the vote on executive compensation for

purposes of Rule 14a-8? Is a standard other than plurality appropriate? Should

the standard vary if the company’s capital structure includes multiple classes of

voting stock (e.g., where classes elect different subsets of the board of directors)?

(18) Is the proposed amendment to Rule 14a-8(i)(10) appropriate? Should we, as

proposed, allow the exclusion of shareholder proposals that propose say-on-pay

votes with substantially the same scope as the votes required by Rule 14a-21(a)?

If not, please explain why not.

(19) Should we, as proposed, permit the exclusion of shareholder proposals that

seek to provide say-on-pay votes more or less regularly than the frequency

endorsed by a plurality of votes cast in the most recent vote required under Rule

14a-21(b), as described above? Are there other circumstances under which

shareholder proposals relating to the frequency of say-on-pay votes should be

considered substantially implemented and subject to exclusion under Rule 14a-

8(i)(10)?

26

(20) Should we amend Rule 14a-8(i)(10) to address other specific factual scenarios

that are likely to occur as a result of the implementation of Section 951 and our

related rules? Are there other specific facts and circumstances under which Rule

14a-8(i)(10) should permit or prohibit the exclusion of shareholder proposals that

seek say-on-pay votes?

(21) Should the proposed note to Rule 14a-8(i)(10) be available if the issuer has

materially changed its compensation program in the time period since the most

recent say-on-pay vote required by Section 14A(a)(1) and Rule 14a-21(a) or the

most recent frequency vote required by Section 14A(a)(2) and Rule 14a-21(b)?

5. Proposed Amendments to Form 10-K and Form 10-Q

Issuers are currently required to disclose the results of shareholder votes pursuant to

Item 5.07 of Form 8-K within four business days following the day the shareholder meeting

ends. The rules we propose today would not alter this requirement. We are proposing

amendments to Form 10-K and Form 10-Q to require additional disclosure regarding the

issuer’s action as a result of the shareholder vote on the frequency of shareholder votes on

executive compensation in accordance with Section 14A.67

Our proposed amendments to Item 9B of Form 10-K and new Item 5(c) of Part II of

Form 10-Q would require an issuer to disclose, in the quarterly report on Form 10-Q

covering the period during which the shareholder advisory vote occurs, or in the annual

report on Form 10-K if the shareholder advisory vote occurs during the issuer’s fourth

67 A company may, but is not required to, provide additional disclosure in Item 5.07 of Form 8-K regarding any of the shareholder votes required by Section 951 of the Act and how the results of these votes affect its plans for the future.

27

quarter, its decision regarding how frequently it will conduct shareholder advisory votes on

executive compensation in light of the results of the shareholder vote on frequency. Because

the shareholder vote to determine the frequency of shareholder votes on executive

compensation is advisory and non-binding on the issuer, we are proposing disclosure in the

Form 10-Q (or the Form 10-K for shareholder meetings taking place during the fourth

quarter) to notify shareholders on a timely basis whether the issuer’s determination regarding

frequency will follow the results of the shareholder vote.

Request for Comment

(22) Should we require, as proposed, disclosure in a Form 10-Q or Form 10-K

regarding the issuer’s plans with respect to the frequency of its shareholder votes

to approve executive compensation? Would this disclosure be useful for

investors?

(23) Would the proposed Form 10-Q or Form 10-K disclosure notify shareholders

on a timely basis of the issuer’s determination regarding the frequency of the say-

on-pay vote? Should this disclosure instead be included in the Form 8-K

reporting the voting results otherwise required to be filed within four business

days after the end of the shareholder meeting, or in a separate Form 8-K required

to be filed within four business days of when an issuer determines how frequently

it will conduct shareholder votes on executive compensation in light of the results

of the shareholder vote on frequency?

(24) Would the amendments to Form 10-Q and 10-K, as proposed, allow an issuer

sufficient time to analyze the results of the shareholder votes on the frequency of

28

shareholder votes on executive compensation and reach a conclusion on how it

should respond? Should the issuer’s plans with respect to the frequency of such

shareholder votes instead be required to be disclosed no later than in the Form 10-

Q or Form 10-K for the next full time period ended subsequent to the vote (for

example, if the vote occurs in the second quarter of the issuer’s fiscal year, the

disclosure would be required no later than in the Form 10-Q for the third quarter)?

6. Effect of Shareholder Vote

Although the language in Section 951 of the Act indicates that the separate resolution

subject to shareholder vote is “to determine” the frequency of the shareholder vote on

executive compensation, in light of new Section 14A(c) of the Exchange Act, we believe this

shareholder vote, and all shareholder votes required by Section 951 of the Act, are intended

to be non-binding on the issuer or the issuer’s board of directors. Under new Section 14A(c),

the shareholder votes referred to in Section 14A(a) and Section 14A(b) (which includes all

votes under Section 951 of the Act) “shall not be binding on the issuer or the board of

directors of an issuer.”68 As proposed, new Item 24 of Schedule 14A would include

language to require disclosure regarding the general effect of the shareholder advisory votes,

such as whether the vote is non-binding.69


69 Even though each of the shareholder advisory votes required by Section 14A is non-binding pursuant to the rule of construction in Section 14A(c), we believe these votes could play a role in an issuer’s executive compensation decisions.

29

Request for Comment

(25) Under the proposed rules, the shareholder vote on the frequency of the say-on-

pay vote would not bind the issuer or board of directors of the issuer. Are there

other ways to provide for a vote “to determine” the frequency of the say-on-pay

resolution that are consistent with the Section 14A(c) rule of construction that the

vote “shall not be binding”?

C. Issues Relating to Both Shareholder Votes Required by Section 14A(a)

1. Proposed Amendments to Rule 14a-6

Rule 14a-6(a) generally requires issuers to file proxy statements in preliminary form

at least ten calendar days before definitive proxy materials are first sent to shareholders,

unless the items included for a shareholder vote in the proxy statement are limited to

specified matters. During the time before final proxy materials are filed, our staff has the

opportunity to comment on the disclosures and issuers are able to incorporate the staff’s

comments in their final proxy materials. However, an issuer is not required to file

preliminary materials if the only matters to be acted upon are:

• the election of directors,

• the election, approval or ratification of the accountants,

• approval or ratification of certain employee benefits plans or plan amendments,

• shareholder proposals under Rule 14a-8,70 and

70 Rules 14a-6(a)(5) and (6) specify other proposals by investment companies registered under the Investment Company Act of 1940 [15 U.S.C. 80a-1 et seq.], the inclusion of which does not compel filing of preliminary materials.

30

• shareholder votes to approve executive compensation for companies with outstanding

indebtedness under the TARP, in accordance with the EESA.71

Absent an amendment to Rule 14a-6(a), a proxy statement that includes a solicitation

for either the shareholder vote on the approval of executive compensation or the approval of

the frequency of the votes approving executive compensation required by Sections 14A(a)(1)

and 14A(a)(2) would need to be filed in preliminary form. Because the shareholder vote on

executive compensation and the shareholder vote on the frequency of such shareholder votes

would be required for all issuers, we view them as similar to the other items specified in Rule

14a-6(a) that do not require a preliminary filing.72

We are proposing to amend Rule 14a-6(a) to add the shareholder votes on executive

compensation and the frequency of shareholder votes on executive compensation required by

Section 14A(a) to the list of items that do not trigger a preliminary filing.73 Under the

proposed amendments, a proxy statement that includes a solicitation with respect to either of

these shareholder votes would not trigger a requirement that the issuer file the proxy

71 See Rule 14a-6(a)(7) [17 CFR 240.14a-6(a)(7)].

72 In our view, a preliminary filing requirement for the shareholder votes on executive compensation and the frequency of such votes would impose unnecessary administrative burdens and preparation and processing costs associated with the filing and processing of proxy material that would unlikely be selected for review in preliminary form. See Proxy Rules – Amendments to Eliminate Filing Requirements for Certain Preliminary Proxy Material; Amendments With Regard to Rule 14a-8, Shareholder Proposals, Release No. 34-25217 (Dec. 21, 1987) [52 FR 48982].

73 In the recent release relating to the similar shareholder votes for companies subject to EESA with outstanding indebtedness under the TARP program, we received comments regarding whether a preliminary proxy statement should be required for shareholder votes on executive compensation for TARP companies. While some commentators argued that a preliminary proxy statement should be required, other commentators argued persuasively that the burdens of such an approach outweighed the costs. As a result, we decided to eliminate the requirement for a preliminary proxy statement for shareholder votes on executive compensation for TARP companies. See TARP Adopting Release, supra note 16, at 75 FR 2791.

31

statement in preliminary form, so long as any other matters to which the solicitation relates

include only the other matters specified by Rule 14a-6(a).

Request for Comment

(26) Should we amend Rule 14a-6(a) under the Exchange Act as proposed so that

issuers are not required to file a preliminary proxy statement as a consequence of

providing a separate shareholder vote on executive compensation in accordance

with Rule 14a-21(a)? If not, please explain why not.

(27) Should we amend Rule 14a-6(a) under the Exchange Act as proposed so that

issuers are not required to file a preliminary proxy statement as a consequence of

providing a separate shareholder vote on the frequency of shareholder votes on

executive compensation in accordance with Rule 14a-21(b)? If not, please

explain why not.

(28) Should we amend Rule 14a-6(a) under the Exchange Act so that issuers are

not required to file a preliminary proxy statement as a consequence of providing

any other separate shareholder vote on executive compensation? If so, please

explain in what circumstances.

2. Broker Discretionary Voting

Section 957 of the Act amends Section 6(b) of the Exchange Act74 to direct national

securities exchanges to change their rules to prohibit broker discretionary voting of

uninstructed shares in certain matters, including shareholder votes on executive

compensation. The national securities exchanges have begun to amend their rules regarding

74 15 U.S.C. 78f(b).

32

broker discretionary voting on executive compensation matters to implement this

requirement.75 Under these amended exchange rules, for issuers with a class of securities

listed on a national securities exchange, broker discretionary voting of uninstructed shares

would not be permitted for a shareholder vote on executive compensation or a shareholder

vote on the frequency of the shareholder vote on executive compensation.76

3. Relationship to Shareholder Votes on Executive Compensation for TARP Companies

Issuers that have received financial assistance under the Troubled Asset Relief

Program, or TARP, are required to conduct a separate annual shareholder vote to approve

executive compensation during the period in which any obligation arising from the financial

assistance provided under the TARP remains outstanding.77

Because the vote required to approve executive compensation pursuant to the

Emergency Economic Stabilization Act of 2008, or EESA, is effectively the same vote that

would be required under Section 14A(a)(1), we believe that a shareholder vote to approve

executive compensation under Rule 14a-20 for issuers with outstanding indebtedness under

the TARP would satisfy Rule 14a-21(a). Consequently, we would not require issuers who

conduct an annual shareholder vote to approve executive compensation pursuant to EESA to

conduct a separate shareholder vote on executive compensation under Section 14A(a)(1)

until such issuers have repaid all indebtedness under the TARP. These issuers would be

75 See, e.g., Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change to Amend NYSE Rule 452 and Listed Company Manual Section 402.08 to Eliminate Broker Discretionary Voting on Executive Compensation Matters, Release No. 34-62874, SR-NYSE-2010-59 (Sept. 9, 2010).

76 Broker discretionary voting in connection with merger or acquisition transactions is not permitted under current rules of the national securities exchanges. See, e.g., NYSE Rule 452.

77 Section 111(e) of the Emergency Economic Stabilization Act of 2008, 12 U.S.C. 5221. See also Rule 14a-20.

33

required to include a separate shareholder advisory vote on executive compensation pursuant

to Section 14A(a)(1) and proposed Rule 14a-21(a) for the first annual meeting of

shareholders after the issuer has repaid all outstanding indebtedness under the TARP.

Even though issuers with outstanding indebtedness under the TARP have a separate

statutory requirement to provide an annual shareholder vote on executive compensation so

long as they are indebted under the TARP, these issuers would be required, pursuant to

Section 14A(a)(2) of the Exchange Act, to provide a separate shareholder advisory vote on

the frequency of shareholder votes on executive compensation for the first annual or other

such meeting of shareholders on or after January 21, 2011. In our view, however, because

such issuers have a requirement to conduct an annual shareholder advisory vote on executive

compensation so long as they are indebted under the TARP, a shareholder advisory vote on

the frequency of such votes while the issuer remains subject to a requirement to conduct such

votes on an annual basis would not serve a useful purpose.

We have considered, therefore, whether issuers with outstanding indebtedness under

the TARP should be subject to the requirements of Section 14A(a)(2) of the Exchange Act.

We do not believe it is necessary or appropriate in the public interest or consistent with the

protection of investors to require an issuer to conduct a shareholder advisory vote on the

frequency of the shareholder advisory vote on executive compensation when the issuer

already is required to conduct advisory votes on executive compensation annually regardless

of the outcome of such frequency vote. Because Section 14A(a)(2) would burden TARP

issuers and their shareholders with an additional vote while providing little benefit to either

the issuer or its shareholders, we believe an exemption by rule is appropriate, pursuant to

34

both the exemptive authority granted by Section 14A(e) of the Exchange Act78 and the

Commission’s general exemptive authority pursuant to Section 36(a)(1) of the Exchange

Act.79 As a result, Rule 14a-21(b), as proposed, would exempt issuers with outstanding

indebtedness under the TARP from the requirements of Rule 14a-21(b) and Section

14A(a)(2) until the issuer has repaid all outstanding indebtedness under the TARP. Similar

to the approach for shareholder advisory votes under Rule 14a-21(a), these issuers would be

required to include a separate shareholder advisory vote on the frequency of shareholder

advisory votes on executive compensation pursuant to Section 14A(a)(2) and proposed Rule

14a-21(b) for the first annual meeting of shareholders after the issuer has repaid all

outstanding indebtedness under the TARP.

Request for Comment

(29) Should issuers who have outstanding indebtedness under the TARP be

required to conduct a shareholder advisory vote under Rule 14a-21(a) for the first

annual meeting after the issuer has repaid all outstanding indebtedness under the

TARP? Should we amend Rule 14a-20 to reflect this requirement?

78 Exchange Act Section 14A(e) provides that “the Commission may, by rule or order, exempt an issuer or class of issuers from the requirement” under Sections 14A(a) or 14A(b). Section 14A(e) further provides that “in determining whether to make an exemption under this subsection, the Commission shall take into account, among other considerations, whether the requirements under [Section 14A(a) and 14A(b)] disproportionately burdens small issuers.” In proposing the exemption, the Commission considered whether the requirements of Section 14A(a) and (b) as applied to TARP recipients to conduct a shareholder advisory vote on the frequency of say-on-pay votes could disproportionately burden small issuers. As described further in Section II.E below, we have also considered whether the provision as a whole disproportionately burdens small issuers. We note, in addition, that to the extent a TARP recipient is a small issuer, it would be subject to the exemption.

79 15 U.S.C. 78 mm(a)(1). Exchange Act Section 36(a)(1) provides that “the Commission, by rule, regulation, or order, may conditionally or unconditionally exempt any person, security, or transaction, or any class of persons, securities, or transactions, from any provision or provisions of this title or of any rule or regulation thereunder, to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors.”

35

(30) Should issuers who have outstanding indebtedness under the TARP satisfy

Rule 14a-21(a) when such issuers conduct a shareholder advisory vote to approve

executive compensation pursuant to Rule 14a-20? Should we reflect this position

in Rule 14a-21(a)?

(31) Should issuers who have outstanding indebtedness under the TARP be

exempted, as proposed, from the requirement to conduct a shareholder advisory

vote under Section 14A(a)(2) and Rule 14a-21(b) until the first annual meeting

after the issuer has repaid all outstanding indebtedness under the TARP? Is our

proposed approach consistent with the purposes of Section 951 of the Act?

Instead, should issuers who have outstanding indebtedness under the TARP be

required to provide the shareholder vote on frequency at a time when they are still

required to provide an annual vote under EESA? Should such an issuer be

permitted, at its discretion, to conduct a shareholder advisory vote on frequency

while it has outstanding indebtedness under the TARP and, if such vote is held,

not be required to conduct such a vote at its first annual meeting after it has repaid

all outstanding indebtedness under the TARP?

D. Disclosure of Golden Parachute Arrangements and Shareholder Approval of Golden Parachute Arrangements

1. General

Section 14A(b)(1) of the Exchange Act requires all persons making a proxy or

consent solicitation seeking shareholder approval of an acquisition, merger, consolidation or

proposed sale or disposition of all or substantially all of an issuer’s assets to provide

36

disclosure, in accordance with rules we promulgate, of any agreements or understandings that

the soliciting person has with its named executive officers (or that it has with the named

executive officers of the acquiring issuer) concerning compensation that is based on or

otherwise relates to the merger transaction. In addition, Section 14A(b)(1) requires

disclosure of any agreements or understandings that an acquiring issuer has with its named

executive officers and that it has with the named executive officers of the target company in

transactions in which the acquiring issuer is making a proxy or consent solicitation in seeking

shareholder approval of an acquisition, merger, consolidation or proposed sale or disposition

of all or substantially all of an issuer’s assets. Section 14A(b)(1) of the Exchange Act

requires the disclosure to be in a “clear and simple form in accordance with regulations to be

promulgated by the Commission” and to include “the aggregate total of all such

compensation that may (and the conditions upon which it may) be paid or become payable to

or on behalf of such executive officer.”80

Under existing Commission rules, a target company soliciting shareholder approval

of a merger is required to describe briefly any substantial interest, direct or indirect, by

security holdings or otherwise, of any person who has been an executive officer or director

since the beginning of the last fiscal year in any matter to be acted upon.81 In response to this

requirement, target companies often include disclosure in their proxy statements about

compensation arrangements that may be payable to a target company’s executive officers and

directors in connection with the transaction. In addition, under our existing rules, companies


81 Item 5 of Schedule 14A.

37

are required to include in annual reports and annual meeting proxy statements detailed

information in accordance with Item 402(j) of Regulation S-K about payments that may be

made to named executive officers upon termination of employment or in connection with a

change in control.82 The Item 402(j) disclosure is provided based on year-end information

and various assumptions, and generally does not reflect any actual termination or termination

event.83

While the Commission’s existing rules require disclosure about golden parachute

arrangements as described above, they do not include detailed requirements for such

disclosures that are applicable to proxy or consent solicitations to approve the transaction, as

required by Section 14A(b)(1) of the Exchange Act. Consequently, in order to implement the

disclosure requirements of Section 14A(b)(1), we are proposing to amend Schedule 14A to

require disclosure with respect to golden parachute compensation arrangements in proxy or

consent solicitations in connection with an acquisition, merger, consolidation, or proposed

sale or other disposition of all or substantially all assets, in accordance with new proposed

Item 402(t) of Regulation S-K. As described below, although not required by Section

14A(b)(1), we are also proposing to amend the disclosure requirements of other, similar

forms, so that comparable golden parachutes disclosure would be required in other, similar

82 See Item 402(j) of Regulation S-K [17 CFR 229.402(j)], Item 8 of Schedule 14A, and Item 11 of Form 10-K. Item 402(j) disclosure is required in both Annual Reports on Form 10-K and in annual meeting proxy statements, though such disclosure is typically provided in annual meeting proxy statements and incorporated into the Form 10-K by reference pursuant to General Instruction G(3) of Form 10-K. References to “annual meeting proxy statements” in this context are meant to encompass both locations for the disclosure.

83 See Instruction 1 to Item 402(j), which requires quantitative disclosure applying the assumptions that the triggering event took place on the last business day of the issuer’s last completed fiscal year, and the price per share of the issuer’s securities is the closing market price as of that date. Where a triggering event has actually occurred for a named executive officer who was no longer serving as a named executive officer of the issuer at the end of the last completed fiscal year, Instruction 4 to Item 402(j) requires Item 402(j) disclosure for that named executive officer only for that triggering event.

38

transactions.84 We are not proposing to amend the requirements for golden parachutes

disclosure in annual meeting proxy statements, although, as described below, under our

proposal companies would be permitted to provide disclosure in annual meeting proxies in

accordance with the new requirement.85

Section 14A(b)(1) requires disclosure of agreements or understandings between the

person conducting the solicitation and any named executive officers of the issuer or any

named executive officers of the acquiring issuer if the person conducting the solicitation is

not the acquiring issuer. In the typical case, the soliciting person is the target company in a

merger transaction since target company shareholder approval is ordinarily required to

approve a merger under state law. Consistent with Section 14A(b)(1) of the Exchange Act,

agreements or understandings between a target issuer conducting a solicitation and its named

executive officers would be subject to disclosure under proposed Item 402(t). In addition,

because golden parachute compensation arrangements also may involve agreements or

understandings between the acquiring company and the named executive officers of the

target company, we have formulated proposed Item 402(t) to require disclosure of this

compensation in addition to the disclosure mandated by Section 14A(b)(1). As proposed,

Item 402(t) would require disclosure of all golden parachute compensation relating to the

merger among the target and acquiring companies and the named executive officers of each

84 See Section II.D.3 below.

85 See Sections II.D.2 and II.D.4 below.

39

in order to cover the full scope of golden parachute compensation applicable to the

transaction.86

2. Proposed Item 402(t) of Regulation S-K

As noted above, Section 14A(b)(1) of the Exchange Act requires disclosure of the

golden parachute compensation in any proxy or consent solicitation to approve an

acquisition, merger, consolidation or proposed sale or disposition of all or substantially all

assets to be “in a clear and simple form in accordance with regulations to be promulgated by

the Commission” and to include “the aggregate total of all such compensation that may (and

the conditions upon which it may) be paid or become payable to or on behalf of such

executive officer.”87 To satisfy these requirements for proxy or consent solicitations for

these transactions, proposed Item 402(t) of Regulation S-K would require disclosure of

named executive officers’ golden parachute arrangements in both tabular and narrative

formats.88 We are proposing the following new table:

86 As described below, however, because any agreements between a soliciting target company’s named executive officers and the acquiring company are beyond the scope of the disclosure required by Section 14A(b)(1), such agreements would not be subject to the Rule 14a-21(c) shareholder advisory vote required by Section 14A(b)(2) and Rule 14a-21(c). See discussion of Rule 14a-21(c) in Section II.D.4 below.


88 Proposed Instruction 1 to Item 402(t) would provide that disclosure would be required for individuals covered by Items 402(a)(3)(i), (ii), and (iii), and for smaller reporting companies, the individuals covered by Items 402(m)(2)(i) and (ii). Accordingly, issuers would not have to provide Item 402(t) information with respect to individuals who would have been among the most highly compensated executive officers but for the fact that they were not serving as an executive officer at the end of the last completed fiscal year, for whom Item 402 information otherwise is required by Item 402(a)(3)(iv), and for smaller reporting companies by Item 402(l)(2)(iii).

40

Golden Parachute Compensation

Name (a)

Cash ($) (b)

Equity ($) (c)

Pension/ NQDC ($) (d)

Perquisites/ Benefits ($) (e)

Tax Reim burse ment ($) (f)

Other ($) (g)

Total ($) (h)

PEO PFO A B C

The table would present quantitative disclosure of the individual elements of

compensation that an executive would receive that are based on or otherwise relate to the

merger, acquisition, or similar transaction, and the total for each named executive officer.89

Elements that would be separately quantified and included in the total would be any cash

severance payment (e.g., base salary, bonus, and pro-rata non-equity incentive plan90

compensation payments) (column (b)); the dollar value of accelerated stock awards, in-the-

money option awards for which vesting would be accelerated, and payments in cancellation

of stock and option awards (column (c)); pension and nonqualified deferred compensation

benefit enhancements (column (d)); perquisites and other personal benefits and health and

welfare benefits (column (e)); and tax reimbursements (e.g., Internal Revenue Code Section

280G tax gross-ups) (column (f)). We have proposed an “Other” column of the table for any

additional elements of compensation not specifically includable in the other columns of the

table (column (g)). This column, like the columns for the other elements, would require

89 Proposed Item 402(t)(2) of Regulation S-K.

90 As defined in Item 402(a)(6)(iii) of Regulation S-K.

41

footnote identification of each separate form of compensation reported. The final column in

the table would require disclosure, for each named executive officer, of the aggregate total of

all such compensation (column (h)).91 As proposed, the table would require separate

footnote identification of amounts attributable to “single-trigger” arrangements and amounts

attributable to “double-trigger” arrangements, so that shareholders can readily discern these

amounts.92

As noted above, issuers are currently required to provide disclosure in annual reports

on Form 10-K and in annual meeting proxy statements of potential payments upon

termination or change-in-control for their named executive officers under Item 402(j) of

Regulation S-K. That item, which does not typically apply to merger proxies, requires

disclosure regarding each contract, agreement, plan or arrangement, whether written or

unwritten, that provides for payments to a named executive officer at, following, or in

connection with termination or change in control of the issuer.93 We considered whether

making the disclosure requirements in Item 402(j) applicable to transactions enumerated in

Section 14A(b)(1), rather than adopting a new disclosure item for purposes of Section

14A(b)(1), would be an appropriate approach to satisfy the requirements of the Act. It

appears, however, that certain elements required by Section 14A(b)(1) are not included in

91 Exchange Act Section 14A(b)(1) requires disclosure of “the aggregate total of all such compensation that may (and the conditions upon which it may) be paid or become payable to or on behalf of such executive officer.”

92 A “double-trigger” arrangement requires that the executive’s employment be terminated without cause or that the executive resign for good reason within a limited period of time after the change-in-control to trigger payment. A “single-trigger” arrangement does not require such a termination or resignation after the change-in-control to trigger payment.

93 The circumstances covered by Item 402(j) include, without limitation, resignation, severance, retirement, a constructive termination of a named executive officer, a change in control of the registrant, or a change in a named executive officer’s responsibilities.

42

Item 402(j). Specifically, we believe that the requirement in Section 14A(b)(1) to present the

information in a clear and simple form is most appropriately satisfied through the use of

tabular disclosure, and Item 402(j) does not require disclosure in tabular format. In addition,

Item 402(j) does not require disclosure about arrangements that do not discriminate in scope,

terms or operation in favor of executive officers and that are available generally to all

salaried employees, 94 permits exclusion of de minimis perquisites and other personal

benefits, 95 and does not require presentation of an aggregate total of all compensation that is

based on or otherwise relates to a transaction.96

We also considered whether it would be appropriate to amend Item 402(j) to include

the elements required by Section 14A(b)(1), rather than adopting a new disclosure item.

Section 14A(b)(1) addresses only compensation that is “based on or otherwise relates to an

acquisition, merger, consolidation, sale, or other disposition of all or substantially all of the

assets of the issuer.” In comparison, Item 402(j) requires disclosure of potential payments in

connection with “any termination, including without limitation resignation, severance,

retirement or a constructive termination of a named executive officer, or a change in control

of the registrant or a change in the named executive officer’s responsibilities.”97 Although

we could amend Item 402(j) to mandate disclosure of all the elements required by Section

94 Instruction 5 to Item 402(j).

95 See Instruction 2 to Item 402(j), which permits exclusion of perquisites and other personal benefits or property if the aggregate amount of such compensation will be less than $10,000.

96 We are also proposing conforming changes to Item 402(a)(6)(ii) [17 CFR 229.402(a)(6)(ii)] and Item 402(m)(5)(ii) [17 CFR 229.402(m)(5)(ii)] of Regulation S-K to clarify that information regarding group life, health, hospitalization, or medical reimbursement plans that do not discriminate in scope, terms or operation , in favor of executive officers or directors of the company and that are generally available to all salaried employees must be included in disclosure pursuant to proposed Item 402(t).

97 Item 402(j) of Regulation S-K.

43

14A(b)(1) for every termination scenario covered by the item, we believe such an approach

would impose significant new burdens on issuers. Alternatively, although we could amend

Item 402(j) to include the disclosure elements required by Section 14A(b)(1) only with

respect to change in control of the issuer, we believe that such an approach could result in a

disclosure presentation that would be confusing to investors. Consequently, we are

proposing the new item requirements described above.

In a proxy statement soliciting shareholder approval of a merger or similar

transaction, Item 402(t)’s tabular quantification of dollar amounts based on issuer stock price

would be required to be based on the closing price per share as of the latest practicable date.98

Where Item 402(t) disclosure is included in an annual meeting proxy statement,99 such

amounts would be calculated based on the closing market price per share of the issuer’s

securities on the last business day of the issuer’s last completed fiscal year,100 consistent with

quantification standards used in Item 402(j).101

The tabular disclosure required by Item 402(t) would require quantification with

respect to any agreements or understandings, whether written or unwritten, between each

named executive officer and the acquiring company or the target company, concerning any

type of compensation, whether present, deferred or contingent, that is based on or otherwise

relates to an acquisition, merger, consolidation, sale or other disposition of all or substantially

98 Proposed Instruction 1 to Item 402(t)(2).

99 A company may choose to include the disclosure in the annual meeting proxy statement in order for the Section 14A(a)(1) shareholder vote to satisfy the exception from the merger proxy separate shareholder vote. See Section II.D.4 below.

100 Proposed Instruction 2 to Item 402(t)(2).

101 See Instruction 1 to Item 402(j).

44

all assets. As described above, the proposed table would quantify cash severance, equity

awards that are accelerated or cashed out, pension and nonqualified deferred compensation

enhancements, perquisites, and tax reimbursements. In addition, the proposed table would

require disclosure and quantification of the value of any other compensation related to the

transaction.102

However, Item 402(t) would require tabular and narrative disclosure only of

compensation that is based on or otherwise relates to the transaction. As proposed, Item

402(t), like Item 402(j),103 would not require separate disclosure or quantification with

respect to compensation disclosed in the Pension Benefits Table and Nonqualified Deferred

Compensation Table. Item 402(t) also would not require disclosure or quantification of

previously vested equity awards. Because these amounts are vested without regard to the

transaction, we do not view them as compensation “that is based on or otherwise relates to”

the transaction. Similarly, the proposed table would not require disclosure and quantification

of compensation from bona fide post-transaction employment agreements to be entered into

in connection with the merger or acquisition transaction, as we do not view future

employment arrangements as compensation “that is based on or otherwise relates to” the

transaction.104

102 We have proposed an Instruction 3 to Item 402(t)(2) to provide, like Instruction 1 to Item 402(j), that in the event uncertainties exist as to the provision of payments and benefits, or the amounts involved, the issuer is required to make a reasonable estimate applicable to the payment or benefit and disclose material assumptions underlying such estimate in its disclosure. Unlike Item 402(j), as proposed Item 402(t) would not permit the disclosure of an estimated range of payments.

103 See Instruction 3 to Item 402(j).

104 Information regarding such future employment agreements is subject to disclosure pursuant to Item 5(a) of Schedule 14A to the extent that such agreements constitute a “substantial interest” in the matter to be acted upon, as well as Item 5(b)(xii).

45

Pursuant to the proposed narrative disclosure requirements,105 to implement the

statutory mandate to disclose the conditions upon which the compensation may be paid or

become payable, Item 402(t) would require issuers to describe any material conditions or

obligations applicable to the receipt of payment, including but not limited to non-compete,

non-solicitation, non-disparagement or confidentiality agreements, their duration, and

provisions regarding waiver or breach.106 We have also proposed a requirement to provide a

description of the specific circumstances that would trigger payment,107 whether the

payments would or could be lump sum, or annual, and their duration, and by whom the

payments would be provided,108 and any material factors regarding each agreement.109 These

proposed narrative items are modeled on the narrative disclosure currently required with

respect to termination and change-in-control agreements.110 An issuer seeking to satisfy the

exception from the separate merger proxy shareholder vote under Section 14A(b)(2) and

Rule 14a-21(c) by including Item 402(t) disclosure in an annual meeting proxy statement

soliciting the shareholder vote required by Section 14A(a)(1) and Rule 14a-21(a)111 would be

able to satisfy Item 402(j) disclosure requirements with respect to a change-in-control of the

105 Proposed Item 402(t)(3) of Regulation S-K.

106 Proposed Item 402(t)(3)(iii) of Regulation S-K.

107 Proposed Item 402(t)(3)(i) of Regulation S-K.

108 Proposed Item 402(t)(3)(ii) of Regulation S-K.

109 Proposed Item 402(t)(3) of Regulation S-K. Such material factors would include, for example, provisions regarding modifications of outstanding options to extend the vesting period or the post-termination exercise period, or to lower the exercise price.

110 Item 402(j) of Regulation S-K.

111 This exception is discussed in Section II.D.4 below.

46

issuer by providing the disclosure required by Item 402(t).112 The issuer would, however,

still be obligated to include in an annual meeting proxy statement disclosure in accordance

with Item 402(j) about payments that may be made to named executive officers upon

termination of employment.

Request for Comment

(32) Should Item 402(t) disclosure be required only in the context of an

extraordinary transaction, as proposed? Should we extend the Item 402(t)

disclosure requirement to annual meeting proxy statements generally, or in annual

meeting proxy statements in which the shareholder advisory vote required by

Section 14A(a)(1) is solicited? Would this disclosure be useful in annual meeting

proxy statements in the absence of an actual transaction, or are the existing

compensation disclosure requirements applicable to annual meeting proxy

statements sufficient? Should we amend Item 402(j) to cover the matters required

by Section 14A(b)(1) that are not otherwise required by that Item, rather than

adopt proposed Item 402(t)?

(33) As proposed, Item 402(t) would require disclosure of all golden parachute

compensation relating to the merger among the target and acquiring companies

and the named executive officers of each in order to cover the full scope of golden

parachute compensation applicable to the transaction. Would it be potentially

confusing to require disclosure under Item 402(t) that relates to golden parachute

112 We note also that one example of material information to be addressed in CD&A is the basis for selecting particular termination or change-in-control events as triggering payment (e.g., the rationale for providing a single trigger for payment in the event of a change-in-control). See Item 402(b)(2)(xi) of Regulation S-K.

47

compensation of a broader group of individuals than required by Section

14A(b)(1)?

(34) Does proposed Item 402(t) tabular disclosure capture “any type of

compensation (whether present, deferred, or contingent) that is based on or

otherwise relates to” the transaction? Will proposed Item 402(t) elicit disclosure

of all elements of golden parachute compensation that may be paid or become

payable and the aggregate total thereof “in a clear and simple form”? If not, what

specific revisions are necessary to accomplish these objectives?

(35) Should we also require tabular disclosure of previously vested equity and

pension benefits and require the total amount to include those amounts? For

example, should the value of vested pension and nonqualified deferred

compensation be presented so that shareholders may easily compare that value to

the value of any enhancements attributable to the change-in-control transaction?

Similarly, should the value of previously vested restricted stock and the in-the-

money value of previously vested options be presented so that shareholders can

compare these amounts to the value of awards for which vesting would be

accelerated? Would inclusion of these amounts in the total overstate the amount

of compensation payable as a result of the transaction?

(36) In the table, will the proposed footnote identification of amounts of single-

trigger and double-trigger compensation elements effectively highlight amounts

payable on each basis? If not, should these elements be highlighted by disclosing

48

them in separate columns, or by some other means? Is this information useful to

investors?

(37) Are there any elements captured by the “Other” column that should be

presented separately, or in a different manner? If so, please explain why and how.

(38) Should employment agreements that named executive officers of the target

issuer enter into with the acquiring issuer for services to be performed in the

future be excluded from the table, as proposed? Are such agreements used to

induce target executives to support the transaction? Should such employment

agreements instead be required to be quantified and included in the table? If such

agreements should be quantified, should they be quantified separately, such as in

a separate table, or is there a better way to present such agreements? If

quantification is appropriate, should we specify how employment agreements

should be quantified, for example by requiring a reasonable estimate applicable to

the payment or benefit and disclosure of material assumptions underlying such

estimates, or a valuation based on projected first year annual compensation, or

average annual basis, or a present value for this compensation? If so, please

explain.

(39) In proxy statements soliciting shareholder approval of a merger or similar

transaction, we are proposing that the tabular quantification of dollar amounts

based on issuer stock price be based on the closing price per share as of the latest

practicable date. Is this measurement date appropriate? Would a different

measurement, such as the average closing price over the first five business days

49

following the public announcement of the transaction, more accurately reflect the

amounts payable to the named executive officers in connection with the

transaction? If so, explain why.

(40) The proposed narrative disclosure would explain by whom payments would

be provided. Are any additional instructions needed to provide clarity with

respect to the tabular disclosure in circumstances where separate payments would

be made by the target issuer and the acquiring issuer? Should a separate table be

required where golden parachute compensation is payable to named executive

officers of the acquiring issuer, as well as named executive officers of the target

issuer?

(41) Will the proposed narrative disclosure adequately describe the conditions

upon which the golden parachute compensation may be paid or become payable

to or on behalf of each named executive officer? What, if any, additional

disclosure is needed to accomplish this objective? What, if any, disclosure that

we have proposed to require is not necessary to accomplish this objective?

Explain why.

(42) Are there other items of narrative disclosure that would be useful for

investors? For example, should we require issuers to describe the basis for

selecting each form of payment and to describe why it chose the various forms of

compensation?113

113 See Item 402(b)(2)(xi) of Regulation S-K.

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(43) As proposed, many of the table’s columns would report more than one

element of golden parachute compensation, with footnote quantification of the

individual elements. Would it facilitate investor understanding to present in

separate columns any of those individual elements, such as the different

components of cash severance? If so, explain which elements and why. Would

additional columns make the table too complex?

(44) As proposed, issuers would not have to provide Item 402(t) information with

respect to individuals who would have been among the most highly compensated

executive officers but for the fact that they were not serving as an executive

officer at the end of the last completed fiscal year.114 Should Item 402(t)

information be required if such individuals remain employed by the issuer at the

time of the proxy solicitation? If so, explain why. Also, as proposed, issuers

would have to provide Item 402(t) information with respect to all individuals who

served as the principal executive officer or principal financial officer of the issuer

during the last completed fiscal year or who were among the issuer’s other most

highly compensated executive officers at the end of that year,115 even if such

persons are no longer employed by the issuer at the time of the proxy solicitation.

Would Item 402(t) disclosure with respect to such an individual serve a useful

purpose or should we exclude former employees from the disclosure requirement?

114 Item 402(a)(3)(iv) provides that up to two such individuals are named executive officers for purposes of this item’s general disclosure requirements.

115 Such persons are named executive officers as defined in Item 402(a)(3)(i) – (iii).

51

3. Amendments to Schedule 14A, Schedule 14C, Schedule 14D-9, Schedule 13E-3, and Item 1011 of Regulation M-A

We are proposing amendments to Items 5(a) and (b) of Schedule 14A under the

Exchange Act, as well as conforming changes to Item 3 of Schedule 14C, Item 1011(b) of

Regulation M-A, Item 15 of Schedule 13E-3 and Item 8 of Schedule 14D-9. These

amendments would be consistent with the goals of Section 14A(b)(1) by requiring that the

disclosure set forth in Item 402(t) of Regulation S-K be included in any proxy or consent

solicitation material seeking shareholder approval of an acquisition, merger, consolidation, or

proposed sale or other distribution of all or substantially all the assets of the issuer. Our

amendments would require such disclosure not only in a proxy or consent solicitation

relating to such a transaction, as required by the Act, but also in the following:

• information statements filed pursuant to Regulation 14C;116

• proxy or consent solicitations that do not contain merger proposals but require

disclosure of information under Item 14 of Schedule 14A pursuant to Note A of

Schedule 14A;117

• registration statements on Forms S-4 and F-4 containing disclosure relating to

mergers and similar transactions;118

116 See proposed Item 3 of Schedule 14C.

117 For example, acquiring companies may solicit proxies to approve the issuance of shares or a reverse stock split in order to conduct a merger transaction; such proxy statements would be required to include disclosure of information required under Item 14 of Schedule 14A pursuant to Note A of Schedule 14A. See proposed Item 5(a)(5) and Item 5(b)(3) of Schedule 14A.

118 In addition to the proposed disclosure requirements on golden parachute arrangements in registration statements on Forms S-4 and F-4, companies will continue to be subject to the requirement to file such agreements and understandings as exhibits to these registration statements as required by Item 601(b)(10) of Regulation S-K [17 CFR 229.601(b)(10)].

52

• going private transactions on Schedule 13E-3;119 and

• third-party tender offers on Schedule TO120 and Schedule 14D-9121

solicitation/recommendation statements.

Issuers may structure transactions in a manner that avoids implicating Section 14(a)

of the Exchange Act (e.g., tender offers and certain Rule 13e-3 going-private transactions),

while still effectively seeking the consent of shareholders with respect to their investment

decision (e.g., whether or not to tender their shares or approve a going-private transaction, in

instances where such going-private transactions are not subject to Regulation 14A). For

these reasons, we believe requiring Item 402(t) disclosure in all such transactions furthers the

purposes of Section 14A(b) of the Exchange Act and would minimize the regulatory

disparity that might otherwise result from treating such transactions differently. Thus, our

proposed amendments would require the Item 402(t) disclosure in whatever form the

transaction takes, whether a merger, acquisition, a Rule 13e-3 going private transaction or a

tender offer. The vote required by Section 14A(b)(2), however, would not be extended to

transactions beyond those specified in that section.

We are also proposing to include language in Item 1011(b) of Regulation M-A that

would require the bidder122 in a third-party tender offer to provide information in its Schedule

TO about a target’s golden parachute arrangements but only to the extent the bidder has

made a reasonable inquiry about the golden parachute arrangements and has knowledge of

119 See proposed Item 15 of Schedule 13E-3.

120 See proposed Item 1011(b) of Regulation M-A.

121 See proposed Item 8 of Schedule 14D-9.

122 “Bidder” is defined in Rule 14d-1(g)(2) [17 CFR 240.14d-1(g)(2)].

53

such arrangements, since certain bidders in non-negotiated transactions may not have access

to such information. In addition, we are proposing an exception to the disclosure

requirement under Item 1011(b) for both bidders and targets in third-party tender offers and

filing persons in Rule 13e-3 going-private transactions where the target or subject company

is a foreign private issuer.123 We are also proposing an exception to the disclosure obligation

under Item 402(t) with respect to agreements and understandings with senior management of

foreign private issuers where the target or acquirer is a foreign private issuer.124 We believe

such accommodations are appropriate in light of our long-standing accommodation to foreign

private issuers regarding compensation disclosure.125

Request for Comment

(45) Should we require Item 402(t) disclosure, as proposed, in transactions not

specifically referenced in the Act? Is this disclosure necessary to minimize

potential regulatory arbitrage? If not, please explain why not.

(46) Are there any impediments to providing this disclosure in such transactions?

If so, please explain.

(47) Are the proposed exceptions from the Item 402(t) disclosure requirements for

bidders and target companies in third-party tender offers and filing persons in

Rule 13e-3 going-private transactions where the target or subject company is a

foreign private issuer appropriate? Is the proposed exception from the Item 402(t)

123 “Foreign private issuer” is defined in Rule 3b-4(c) [17 CFR 240.3b-4(c)].

124 Proposed Instruction 2 to Item 402(t).

125 See, e.g., Item 402(a)(1) of Regulation S-K, and Items 6.B and 6.E.2 of Form 20-F [17 CFR 249.220f].

54

disclosure obligation with respect to agreements or understandings with senior

management of foreign private issuers appropriate? If not, why not? Are any

other exceptions for transactions involving foreign private issuers necessary?

4. Proposed Rule 14a-21(c)

Section 951 of the Act also amends the Exchange Act to add Section 14A(b)(2),

which generally requires a separate shareholder advisory vote on golden parachute

compensation arrangements required to be disclosed under Section 14A(b)(1) in connection

with mergers and similar transactions. A separate shareholder advisory vote would not be

required on golden parachute compensation if disclosure of that compensation had been

included in the executive compensation disclosure that was subject to a prior advisory vote of

shareholders under Section 14A(a)(1) of the Exchange Act and Rule 14a-21(a).

As discussed above,126 we are proposing new Item 402(t) of Regulation S-K to

implement the compensation disclosure requirements set forth in new Section 14A(b)(1) of

the Exchange Act by requiring disclosure of the full scope of golden parachute compensation

applicable to the transaction. Consistent with Section 951 of the Act, whether or not Section

14A(b)(2) also requires the issuer to solicit shareholder approval of golden parachute

compensation arrangements, disclosure prescribed by proposed Item 402(t) would be

required in any proxy or consent solicitation for a meeting at which shareholders are asked to

approve an acquisition, merger, consolidation or sale of the issuer’s assets.

Under proposed Rule 14a-21(c), issuers would be required to provide a separate

shareholder advisory vote in proxy statements for meetings at which shareholders are asked

to approve an acquisition, merger, consolidation, or proposed sale or other disposition of all

126 See Section II.D.2 above. 55

or substantially all assets, consistent with Section 14A(b)(2). This advisory vote would be

required only with respect to the golden parachute agreements or understandings required to

be disclosed by Section 14A(b)(1), as disclosed pursuant to proposed Item 402(t) of

Regulation S-K. Section 14A(b)(1) requires disclosure of any agreements or understandings

between the soliciting person and any named executive officer of the issuer or any named

executive officers of the acquiring issuer, if the soliciting person is not the acquiring issuer.

When a target issuer conducts a proxy or consent solicitation to approve a merger or similar

transaction, golden parachute compensation agreements or understandings between the

acquiring issuer and the named executive officers of the target issuer are not within the scope

of disclosure required by Section 14A(b)(1), and thus a shareholder vote to approve

arrangements between the soliciting target issuer’s named executive officers and the

acquiring issuer is not required by Exchange Act Section 14A(b)(2). Consequently, we have

proposed Rule 14a-21(c) to require a shareholder advisory vote only on the golden parachute

compensation agreements or understandings for which Section 14A(b)(1) requires disclosure

and Section 14A(b)(2) requires a shareholder vote.

As described above,127 however, because compensation arrangements may involve

agreements or understandings between the acquiring issuer and the named executive officers

of the target issuer, proposed Item 402(t) of Regulation S-K would require disclosure of

compensation pursuant to these arrangements, as well as the arrangements for which Section

14A(b)(1) requires disclosure, in order to require disclosure of the full scope of golden

parachute compensation applicable to the transaction. In this regard, Item 402(t) of

127 See Section II.D.2 above.

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Regulation S-K would require disclosure of a broader group of agreements and

understandings than required by Exchange Act Section 14A(b)(1), but proposed Rule 14a-

21(c) would require a separate shareholder advisory vote only on the agreements and

understandings described in Exchange Act Section 14A(b)(1). Even though agreements and

understandings between the acquiring issuer and the named executive officers of the target

issuer would not be subject to the Rule 14a-21(c) vote unless the acquiring issuer is soliciting

proxies to approve the merger, we are proposing to require this disclosure because we believe

that shareholders may find disclosure about these arrangements informative to their voting

decisions regarding not only the Rule 14a-21(c) advisory vote, but also the transaction itself.

Moreover, some issuers may choose to subject these arrangements to the shareholder

advisory vote voluntarily because of investor interest in the full scope of golden parachute

compensation applicable to the transaction or for other reasons.

Our proposed rule would not require issuers to use any specific language or form of

resolution to be voted on by shareholders. This shareholder vote would not be binding on the

issuer or its board of directors. In addition, consistent with Section 14A(b)(2), issuers would

not be required to include in the merger proxy a separate shareholder vote on the golden

parachute compensation disclosed under Item 402(t) of Regulation S-K if Item 402(t)

disclosure of that compensation had been included in the executive compensation disclosure

that was subject to a prior vote of shareholders under Section 14A(a)(1) of the Exchange Act

and Rule 14a-21(a). In this regard, we note that Section 14A(b)(2) requires only that the

golden parachute arrangements have been subject to a prior shareholder vote under Section

14A(a)(1); such arrangements need not have been approved by shareholders.

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For issuers to take advantage of this exception, however, the executive compensation

disclosure subject to the prior shareholder vote would need to have included Item 402(t)

disclosure of the same golden parachute arrangements. Even if the annual meeting proxy

statement provides some disclosure with respect to golden parachute arrangements,128 the

annual meeting proxy statement would need to include the disclosure required by Item 402(t)

in order for the annual meeting shareholder vote under Section 14A(a)(1) and Rule 14a-21(a)

to satisfy the exception from the merger proxy separate shareholder vote under Section

14A(b)(2) and Rule 14a-21(c). Consequently, we would expect that some issuers may

voluntarily include Item 402(t) disclosure with their other executive compensation disclosure

in annual meeting proxy statements soliciting the shareholder vote required by Section

14A(a)(1) and Rule 14-21(a) so that this exception would be available to the issuer for a

potential subsequent merger or acquisition transaction. We also expect that some issuers

may choose to include the new disclosure for other reasons, such as investor interest in the

information.

The exception would be available only to the extent the same golden parachute

arrangements previously subject to an annual meeting shareholder vote remain in effect, and

the terms of those arrangements have not been modified subsequent to the Section 14A(a)(1)

shareholder vote. New golden parachute arrangements, and any revisions to golden

parachute arrangements that were subject to a prior Section 14A(a)(1) shareholder vote

would be subject to the separate merger proxy shareholder vote requirement of Section

128 See CD&A and Item 402(j) of Regulation S-K, and for smaller reporting companies see Item 402(q)(2) of Regulation S-K for the disclosure requirements applicable to annual meeting proxy statements.

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14A(b)(2) and Rule 14a-21(c).129 Because a shareholder vote would already have been

obtained on portions of the arrangements, however, we are proposing that only the new

arrangements and revised terms of the arrangements previously subject to a Section

14A(a)(1) shareholder vote would be subject to the merger proxy separate shareholder vote

under Section 14A(b)(2) and Rule 14a-21(c).

Under our proposal, issuers providing for a shareholder vote on new arrangements or

revised terms would provide two separate tables under Item 402(t) of Regulation S-K in

merger proxy statements.130 One table would disclose all golden parachute compensation,

including both arrangements and amounts previously disclosed and subject to a say-on-pay

vote under Section 14A(a)(1) and Rule 14a-21(a) and the new arrangements or revised terms.

The second table would disclose only the new arrangements or revised terms subject to the

vote, so that shareholders can clearly see what is subject to the shareholder vote under

Section 14A(b)(2) and Rule 14a-21(c). Similarly, in cases where Item 402(t) requires

disclosure of arrangements between an acquiring company and the named executive officers

of the soliciting target company, issuers should clarify whether these agreements are included

in the shareholder advisory vote by providing a separate table of all agreements and

understandings subject to the shareholder advisory vote required by Section 14A(b)(2) and

129 As proposed, if the disclosure pursuant to Item 402(t) has been updated to change only the value of the items in the Golden Parachute Compensation Table to reflect price movements in the issuer’s securities, no new shareholder advisory vote under Section 14A(b)(1) would be required. However, if any terms of such agreements have changed subsequent to the prior Section 14A(a)(1) shareholder vote, a separate vote under Section 14A(b)(2) and Rule 14a-21(c) would be required. For example, we would view any change that would result in an IRC Section 280G tax gross-up becoming payable as a change in terms triggering such a separate vote.

130 See proposed Instruction 6 to Item 402(t)(2) of Regulation S-K.

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Rule 14a-21(c), if different from the full scope of golden parachute compensation subject to

Item 402(t) disclosure.131

Request for Comment

(48) If golden parachute arrangements have been modified or amended subsequent

to being subject to the annual shareholder vote under Rule 14a-21(a), should we

require the merger proxy separate shareholder vote to cover the entire set of

golden parachute arrangements or should we, as proposed, require a separate vote

only as to the changes to such arrangements? For example, if a new arrangement

is added, would the Section 14A(b)(2) shareholder advisory vote be meaningful if

shareholders do not have the opportunity to express their approval or disapproval

of the full complement of compensation that would be payable?

(49) Should we exempt certain changes to golden parachute arrangements that

have been altered or amended subsequent to their being subject to the annual

shareholder vote under Rule 14a-21(a)? For example, should we require a

separate vote under Rule 14a-21(c) if the only change is the addition of a new

named executive officer not included in the prior disclosure or a change in terms

that would reduce the amounts payable? Should we provide an exemption for

golden parachute arrangements previously subject to an annual shareholder vote if

the only change is the subsequent grant, in the ordinary course, of additional

awards under an employee benefit plan, such as stock options or restricted stock,

131 Proposed Instruction 7 to Item 402(t)(2). As discussed above, such agreements are not required to be subject to the proposed Rule 14a-21(c) shareholder advisory vote, but issuers may voluntarily subject them to such a vote.

60

that are subject to the same acceleration terms that applied to those already

covered by the previous vote? For example, if subsequent to the previous vote,

additional equity awards are granted in the ordinary course pursuant to a plan,

such as an annual option grant, and those awards are subject to acceleration in the

event of a change in control on the same terms as earlier awards that were subject

to the previous vote, should we exempt those subsequent awards? Should any

other types of changes to golden parachute compensation arrangements be so

exempted?

(50) Where an issuer voluntarily includes Item 402(t) disclosure in an annual

meeting proxy statement to satisfy the exception from the Section 14A(b)(2)

shareholder vote, should all Item 402(t) disclosure be required to be presented in

one section of the document, without cross references, to facilitate shareholder

understanding? If not, why not? Does proposed Instruction 6 to Item 402(t)(2)

assure certainty and predictability regarding the availability of this exception? If

not, what additional instructions are needed?

(51) Section 14A(b)(2) does not specify which shares are entitled to vote in the

shareholder vote to approve the agreements or understandings and compensation

specified in Section 14A(b)(1), nor does this section direct the Commission to

adopt rules addressing this point. We are not proposing to address this question in

our rules, but should our rules implementing Section 14A(b)(2) address this

question? If so, how, and on what basis?

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E. Treatment of Smaller Companies

Section 951 of the Act establishes a new Section 14A(e) of the Exchange Act, which

provides that we may, by rule or order, exempt an issuer or class of issuers from the

requirements of Section 14A(a) and (b). In determining whether to make an exemption

under this subsection, we are directed to take into account, among other considerations,

whether the requirements of Sections 14A(a) and 14A(b) disproportionately burden small

issuers.

Our proposed rules would not exempt small issuers from the requirements of Sections

14A(a) and 14A(b). We believe the shareholder advisory votes and additional disclosure

required by Section 14A and our proposed rules would be significant for investors in all

issuers, including smaller reporting companies.132 As a result, the proposed rules discussed

above will all apply to smaller reporting companies, with the exception of our proposed

amendment to Item 402(b) of Regulation S-K, as smaller reporting companies are not

required to provide a CD&A. We do not believe that smaller reporting companies should be

exempt from the say-on-pay vote, frequency of say-on-pay votes and golden parachute

disclosure and vote because we believe investors have the same interest in voting on the

compensation of smaller reporting companies and in clear and simple disclosure of golden

parachute compensation in connection with mergers and similar transactions as they have for

other issuers.

We have crafted our proposals to minimize the costs for smaller reporting companies,

while providing shareholders the opportunity to express their views on the companies’

132 “Smaller reporting company” is defined in Rule 12b-2 under the Exchange Act.

62

compensation arrangements. For example, our proposed amendments would provide the

shareholders of smaller reporting companies with the same voting rights with respect to

executive compensation as shareholders of other companies subject to the proxy rules. We

are not currently aware that Section 14A and our proposed rules would unduly burden

smaller reporting companies. Our proposed amendments, for example, would not alter the

existing scaled disclosure requirements set forth in Item 402 of Regulation S-K for smaller

reporting companies, which recognize that the compensation arrangements of smaller

reporting companies typically are less complex than those of other public companies.133

Under our proposed rules, we would not alter the provision in our rules that smaller reporting

companies are not required to provide a CD&A.

Our proposed rules would, however, require quantification of golden parachute

arrangements in merger proxies. Smaller reporting companies are not required to provide

this quantification under current Item 402(q) in annual meeting proxy statements, and would

not be required to do so under our proposals unless they seek to qualify for the exception for

a shareholder advisory vote on golden parachute compensation in a later merger transaction.

Even though our proposed rules would impose additional disclosure requirements relating to

the shareholder advisory votes required by Section 14A, we preliminarily do not believe our

proposed rules would impose a significant additional cost or disproportionate burden upon

smaller reporting companies. As noted above, smaller reporting companies tend to have less

133 See Executive Compensation and Related Person Disclosure, Release No. 33-8732A (Aug. 29, 2006) [71 FR 53158] (hereinafter, the “2006 Executive Compensation Release”) at Section II.D.1. The scaled compensation disclosure requirements for smaller reporting companies are set forth in Item 402(1) [17 CFR 229.402(l)] through (r) [17 CFR 229.402(r)] of Regulation S-K.

63

complex compensation arrangements134 so the proposed additional disclosures should not add

significantly to their disclosure burden. As a result, we do not believe our proposed rules

would place a disproportionate burden on smaller reporting companies.

Request for Comment

(52) Should we fully, partially, or conditionally exempt smaller reporting

companies or some other category of smaller companies from some or all of the

requirements of Section 14A? Are the provisions of Section 14A unduly

burdensome on small companies and if so, how are they unduly burdensome?

(53) Should we fully, partially, or conditionally exempt smaller reporting

companies or some other category of smaller companies from any or all of our

proposed rules? If so, which ones? Are any of our proposed rules unduly

burdensome to smaller reporting companies and if so, how are they unduly

burdensome?

(54) Are the golden parachute arrangements of smaller reporting companies

relatively simple and straightforward compared to those of larger issuers? Would

the disclosure of such arrangements required by proposed Item 402(t) impose an

undue burden on smaller reporting companies?

(55) Should we clarify in an instruction to Rule 14a-21, as proposed, that smaller

reporting companies are not required to include a CD&A in their proxy statements

in order to comply with our proposed amendments?

134 In adopting executive compensation disclosure requirements applicable to smaller reporting companies, we have recognized that the executive compensation arrangements of these issuers typically are less complex than those of other public companies. See 2006 Executive Compensation Release, supra note 133, at Section II.D.1.

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(56) Are there any other steps that we should take to reduce the burden on smaller

reporting companies?

F. Transition Matters

As noted above in Section I, Section 14A(a)(3) requires that both the initial

shareholder vote on executive compensation and the initial vote on the frequency of votes on

executive compensation be included in proxy statements relating to an issuer’s first annual or

other meeting of the shareholders occurring on or after January 21, 2011. Because Section

14A(a) applies to shareholder meetings taking place on or after January 21, 2011, any proxy

statements, whether in preliminary or definitive form, even if filed prior to this date, for

meetings taking place on or after January 21, 2011, must include the separate resolutions for

shareholders to approve executive compensation and the frequency of say-on-pay votes

required by Section 14A(a) without regard to whether the Commission has adopted rules to

implement Section 14A(a) by that time. Therefore, in order to facilitate compliance with the

new statute, we are addressing certain first year transition issues.

Rule 14a-6 currently requires the filing of a preliminary proxy statement at least ten

days before the proxy is sent or mailed to shareholders unless the meeting relates only to the

matters specified by Rule 14a-6(a). Until we take final action to implement Exchange Act

Section 14A, we will not object if issuers do not file proxy material in preliminary form if the

only matters that would require a filing in preliminary form are the say-on-pay vote and

frequency of say-on-pay vote required by Section 14A(a).

Rule 14a-4 under the Exchange Act currently provides that persons solicited are to be

afforded the choice between approval or disapproval of, or abstention with respect to, each

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matter to be voted on, other than elections of directors. Exchange Act Section 14A(a)(2)

requires a “separate resolution subject to shareholder vote to determine whether [the say-on-

pay] votes … will occur every 1, 2, or 3 years.”135 Until we take final action to implement

Exchange Act Section 14A, we will not object if the form of proxy for a shareholder vote on

the frequency of say-on-pay votes provides means whereby the person solicited is afforded

an opportunity to specify by boxes a choice among 1, 2 or 3 years, or abstain. In addition,

we understand that some proxy service providers may have difficulty in the short term in

programming their systems to enable shareholders to vote among four choices and that their

systems are currently set up to register at most three votes – for, against, abstain. If proxy

service providers are not able to reprogram their systems to enable shareholders to vote

among four choices in time for the shareholder votes required by Section 14A(a)(2), until we

take final action to implement Exchange Act Section 14A, we will not object if the form of

proxy for a shareholder vote on the frequency of say-on-pay votes provides means whereby

the person solicited is afforded an opportunity to specify by boxes a choice among 1, 2 or 3

years, and proxies are not voted on the frequency of say-on-pay votes matter in the event the

person solicited does not select a choice among 1, 2 or 3 years.136

Finally, issuers with outstanding indebtedness under the TARP are already required to

conduct an annual shareholder advisory vote on executive compensation until the issuer has

repaid all outstanding indebtedness under the TARP. Because such issuers are subject to an

annual requirement to provide a say-on-pay vote, a requirement to provide a vote on the


136 See Shareholder Communications, Shareholder Participation in the Corporate Electoral Process and Corporate Governance Generally, Release No. 34-16356 (Nov. 21, 1979) [44 FR 68770].

66

frequency of such votes would impose unnecessary burdens on issuers and shareholders.

Until we take final action to implement Exchange Act Section 14A, we will not object if an

issuer with outstanding indebtedness under the TARP does not include a resolution for a

shareholder advisory vote on the frequency of say-on-pay votes in its proxy statement for its

annual meeting, provided it fully complies with its say-on-pay voting obligations under

EESA Section 111(e).

G. General Request for Comment

We request and encourage any interested person to submit comments on any aspect of

our proposals, other matters that might have an impact on the amendments, and any

suggestions for additional changes. With respect to any comments, we note that they are of

greatest assistance to our rulemaking initiative if accompanied by supporting data and

analysis of the issues addressed in those comments and by alternatives to our proposals

where appropriate.

III. PAPERWORK REDUCTION ACT

A. Background

The proposed amendments contain “collection of information” requirements within

the meaning of the Paperwork Reduction Act of 1995 (“PRA”).137 We are submitting the

proposed amendments to the Office of Management and Budget (“OMB”) for review in

accordance with the PRA.138 The title for the collection of information is:

(1) “Regulation 14A and Schedule 14A” (OMB Control No. 3235-0059);

137 44 U.S.C. 3501 et seq.

138 44 U.S.C. 3507(d) and 5 CFR 1320.11.

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(2) “Regulation 14C and Schedule 14C” (OMB Control No. 3235-0057);

(3) “Form 10-K” (OMB Control No. 3235-0063);

(4) “Form 10-Q” (OMB Control No. 3235-0070);

(5) “Form 10” (OMB Control No. 3235-0064);

(6) “Regulation S-K” (OMB Control No. 3235-0071);139

(7) “Schedule 14D-9” (OMB Control No. 3235-0102);

(8) “Schedule 13E-3” (OMB Control No. 3235-0007);

(9) “Schedule TO” (OMB Control No. 3235-0515);

(10) “Form S-1” (OMB Control No. 3235-0065);



(13) “Form F-4” (OMB Control No. 3235-0325); and

(14) “Form N-2” (OMB Control No. 3235-0026).

The regulations, schedules, and forms were adopted under the Securities Act and the

Exchange Act, except for Form N-2, which we adopted pursuant to the Securities Act and the

Investment Company Act. The regulations, forms, and schedules set forth the disclosure

requirements for periodic reports, registration statements and proxy and information

statements filed by companies to help shareholders make informed voting decisions. The

hours and costs associated with preparing, filing and sending the form or schedule constitute

139 The paperwork burden from Regulation S-K is imposed through the forms that are subject to the disclosures in Regulation S-K and is reflected in the analysis of those forms. To avoid a Paperwork Reduction Act inventory reflecting duplicative burdens, for administrative convenience we estimate the burdens imposed by Regulation S-K to be a total of one hour.

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reporting and cost burdens imposed by each collection of information. An agency may not

conduct or sponsor, and a person is not required to respond to, a collection of information

unless it displays a currently valid OMB control number.

As discussed in more detail above, we are proposing new Rule 14a-21 under the

Exchange Act and new Item 24 of Schedule 14A. Proposed Rule 14a-21 would implement

the requirements of Section 14A of the Exchange Act to provide separate shareholder

advisory votes on executive compensation, the frequency of shareholder votes on executive

compensation, and, in connection with merger and similar transactions, golden parachute

compensation arrangements. New Item 24 of Schedule 14A would require disclosure in

proxy statements with respect to each of these shareholder votes. New Rule 14a-21 and new

Item 24 of Schedule 14A would increase existing disclosure burdens for proxy statements by

requiring:

• New disclosure about the requirement to provide separate shareholder votes on

executive compensation, the frequency of shareholder votes on executive

compensation and golden parachute compensation arrangements in connection

with merger transactions; and

• New disclosure of the general effect of the shareholder advisory votes, such as

whether such votes are non-binding.

As discussed in more detail above, we are also proposing amendments to Item 402(b)

of Regulation S-K. The proposed amendments to Item 402(b) of Regulation S-K may

increase existing disclosure burdens for proxy statements by requiring:

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• New disclosure of whether, and if so, how the issuer has considered the results of

previous shareholder votes on executive compensation required by Section 14A of

the Exchange Act in determining compensation policies and decisions, and if so,

how that consideration has affected the issuer’s compensation decisions and

policies.

As discussed in more detail above, we are also proposing new Item 402(t) of

Regulation S-K and the proposed amendments to Item 1011(b) of Regulation M-A, Item 5 of

Schedule 14A, Item 15 of Schedule 13E-3 and Item 8 of Schedule 14D-9. These proposed

amendments would increase existing disclosure burdens for proxy statements, registration

statements on Form S-4 and F-4, tender offer schedules and going private schedules by

requiring:

• New tabular and narrative disclosure of understandings and agreements of named

executive officers with acquiring and target companies in connection with merger,

acquisition, tender offer and Rule 13e-3 going-private transactions, and disclosure

of the aggregate total of all compensation that may be paid or become payable to

each named executive officer.

As discussed in more detail above, we are proposing to amend Forms 10-K and 10-Q.

The proposed amendments to Form 10-K and Form 10-Q would increase existing disclosure

burdens for annual reports on Form 10-K and quarterly reports on Form 10-Q by requiring:

• New disclosure of the issuer’s decision of how frequently to provide a separate

shareholder vote on executive compensation in light of a shareholder advisory

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vote on the frequency of shareholder votes on executive compensation conducted

pursuant to Section 14A(a)(2) of the Exchange Act.

Together, new Rule 14a-21 and new Item 24 of Schedule 14A and the proposed

amendments to Item 5 of Schedule 14A and the proposed amendments to Item 402 of

Regulation S-K, Item 1011 of Regulation M-A, Item 15 of Schedule 13E-3 and Item 8 of

Schedule 14D-9 would implement and supplement the requirements under Section 14A of

the Exchange Act and also would provide additional meaningful disclosure regarding golden

parachute arrangements and regarding issuers’ consideration of the shareholder votes and the

impact of such votes on issuers’ compensation policies and decisions. We believe these

changes may result in more meaningful disclosure for investors making voting or investment

decisions.

We are proposing an amendment to Rule 14a-4, which relates to the form of proxy

that issuers are required to include with their proxy materials, to require that issuers present

four choices to their shareholders in connection with the advisory vote on frequency. We are

also proposing an amendment to Rule 14a-6 to add the shareholder votes on executive


Section 14A(a) to the list of items that do not trigger the filing of a preliminary proxy

statement. In addition, we are proposing an amendment to Rule 14a-8, adding a note to Rule

14a-8(i)(10) to clarify the status of shareholder proposals relating to the approval of

executive compensation or the frequency of shareholder votes approving executive

compensation. Finally, we are proposing conforming amendments to Item 402(a) and Item

402(m) of Regulation S-K, clarifying that the disclosure required by proposed Item 402(t)

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includes information regarding group life, health, hospitalization, or medical reimbursement

plans that do not discriminate in scope, terms or operation, in favor of executive officers or

directors of the registrant and that are available generally to all salaried employees. Pursuant

to these conforming amendments, issuers may continue to omit such information in

connection with disclosure required by other portions of Item 402 of Regulation S-K. The

proposed amendments to Rule 14a-4, Rule 14a-6, Rule 14a-8 under the Exchange Act and

Item 402(a) and Item 402(m) of Regulation S-K would not increase any existing disclosure

burden. We believe these proposals, if adopted, would merely clarify existing and new

statutory requirements or reduce burdens otherwise arising from our proposals. As a result,

these amendments would not affect any existing disclosure burden.

Compliance with the proposed amendments by affected U.S. issuers would be

mandatory. Responses to the information collections would not be kept confidential and there

would be no mandatory retention period for the information disclosed.

B. Burden and Cost Estimates Related to the Proposed Amendments

We anticipate that the proposed disclosure amendments would increase the burdens

and costs for companies that would be subject to the proposed amendments. New Section

14A of the Exchange Act, as created by Section 951 of the Act, has already increased the

burdens and costs for issuers by requiring separate shareholder votes on executive

compensation and the frequency of shareholder votes on executive compensation. Section

14A also requires additional disclosure of golden parachute arrangements in proxy

solicitations to approve merger transactions and a separate shareholder vote to approve such

arrangements in certain circumstances. Our proposed amendments address the Act’s

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requirements in the context of disclosure under the federal proxy rules, Regulation S-K and

related forms and schedules, thereby creating only an incremental increase in the burdens and

costs for such issuers. The proposed amendments will specify how issuers are to comply with

Section 14A of the Exchange Act and require new disclosure with respect to comparable

transactions.

For purposes of the PRA, we estimate the annual incremental paperwork burden for

all companies to prepare the disclosure that would be required under our proposals to be

approximately 25,192 hours of company personnel time and a cost of approximately

$8,141,200 for the services of outside professionals. These estimates include the time and the

cost of data gathering systems and disclosure controls and procedures, the time and cost of

preparing and reviewing disclosure by in-house and outside counsel and executive officers,

and the time and cost of filing documents and retaining records. In deriving our estimates,

we recognize that the burdens will likely vary among individual companies based on a

number of factors, including the size and complexity of their organizations, and the nature of

their operations. We believe that some companies will experience costs in excess of this

average in the first year of compliance with proposals and some companies may experience

less than the average costs.

We derived the above estimates by estimating the average number of hours it would

take an issuer to prepare and review the proposed disclosure requirements. These estimates

represent the average burden for all companies, both large and small. Our estimates have

been adjusted to reflect the fact that some of the proposed amendments would be required in

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some but not all of the above listed documents depending upon the circumstances, and would

not apply to all companies.

With respect to reporting companies, the disclosure required by new Item 402(t) of

Regulation S-K would be required in merger proxy and information statements, Forms S-4

and F-4, Schedule 13E-3 and certain tender offer documents and

solicitation/recommendation statements. As proposed, the disclosure required by new Item

402(t) may also be included in annual meeting proxy statements on a voluntary basis.

The disclosure required by our amendments to Item 402(b) of Regulation S-K would

be required in proxy and information statements as well as Forms 10, 10-K, S-1, S-4, S-11,

and N-2. The proposed amendments to CD&A would not be applicable to smaller reporting

companies because under current CD&A reporting requirements these companies are not

required to provide CD&A in their Commission filings. Based on the number of proxy

filings that were received in the 2009 fiscal year, we estimate that approximately 1,200

domestic companies are smaller reporting companies that have a public float of less than $75

million.

Our annual burden estimates are also based on other assumptions. First, we assumed

that the burden hours of the proposed amendments would be comparable to the burden hours

related to similar disclosure requirements under current reporting requirements, such as the

disclosure required by Item 402(j). Second, we assumed that substantially all of the burdens

associated with the proposed amendments to Rule 14a-21 and Item 24 would be associated

with Schedule 14A as this would be the primary disclosure document in which these items

would be prepared and presented. In the case of our proposed amendments to Item 402(b)

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and Item 402(t) of Regulation S-K, we have assumed the burdens associated with the

proposed amendments would be associated with various disclosure documents as these items

will be included in a number of forms and statements. For each reporting company, we

estimate that the proposed amendments would impose on average the following incremental

burden hours:

• 2 hours for the proposed amendments to CD&A

• 1 hour for the proposed amendments to Item 24 of Schedule 14A

• 1 hour for the proposed amendments to Form 10-K

• 1 hour for the proposed amendments to Form 10-Q

• 20 hours for new Item 402(t) of Regulation S-K

1. Annual Meeting Proxy Statements

For purposes of the PRA, in the case of reporting companies, we estimate the annual

incremental paperwork burden for proxy statements under the proposed amendments would

be approximately 1 hour per form for companies that are smaller reporting companies, and 3

hours per form for companies that are non-accelerated filers (and not smaller reporting

companies), accelerated filers, or large accelerated filers.140 The estimated burden is smaller

for smaller reporting companies as such issuers are not required to include a CD&A.

140 Our estimate for annual proxy statements is based upon an estimated burden over a six-year period during which the shareholder advisory votes required by Section 14A(a) would not occur annually. We used a six-year period because issuers will conduct at least two shareholder advisory votes on executive compensation and at least one shareholder advisory vote on the frequency of such votes in this time period. We then estimated an average annual burden based on the average burden over the six-year period.

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2. Exchange Act Periodic Reports

For purposes of the PRA, we estimate the annual incremental paperwork burden for

Form 10-K under the proposed amendments would be approximately 1 hour per form.141 We

estimate the annual incremental paperwork burden for Form 10-Q under the proposed

amendments would be approximately 1 hour per form. Our estimates below also account for

the fact that each issuer would only be required to include additional disclosure in either the

Form 10-K or one of the quarterly Form 10-Q filings each year.

3. Securities Act Registration Statements and Exchange Act Registration Statements


incremental paperwork burden for Securities Act and Exchange Act registration statements

under the proposed amendments would be approximately 2 hours per form, which represents

the additional burden associated with our proposed amendments to CD&A. In making our

estimates, we note that the additional burdens in CD&A would only apply to issuers who

have conducted a prior shareholder advisory vote and would not apply, for example, to

issuers making an initial filing on Form S-1 or Form S-11.

4. Merger Proxies, Tender Offer Documents and Schedule 13E-3


incremental paperwork burden for merger proxy statements, registration statements on Form

S-4 and F-4 to be 21 hours per form, as these forms would be required to include additional

disclosures under Item 24 of Schedule 14A and Item 402(t) of Regulation S-K. We estimate

the annual incremental paperwork burden for merger information statements, tender offer

141 We have assumed that the annual incremental paperwork burden under the proposed amendments to Item 402(b) of Regulation S-K would be included in the annual meeting proxy statement so that the annual incremental paperwork burden for the Form 10-K relates only to the proposed amendments to Item 9A.

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documents and tender offer solicitation/recommendation statements and Schedules 13E-3 to

be 20 hours per form, as these forms would not be required to include additional disclosure

under Item 24 of Schedule 14A.

The tables below illustrate the total annual compliance burden of the collection of

information in hours and in cost under the proposed amendments for annual reports;

quarterly reports; proxy and information statements; Form 10; registration statements on

Forms S-1, S-4, F-4, S-11, and N-2; and Regulation S-K.142 The burden estimates were

calculated by multiplying the estimated number of responses by the estimated average

amount of time it would take an issuer to prepare and review the proposed disclosure

requirements. For the Exchange Act reports on Form 10-K and Form 10-Q, and the proxy

statements we estimate that 75% of the burden of preparation is carried by the company

internally and that 25% of the burden of preparation is carried by outside professionals

retained by the issuer at an average cost of $400 per hour. The registration statements on

Forms S-1, S-4, F-4, S-11, and N-2, and the Exchange Act registration statement on Form 10,

we estimate that 25% of the burden of preparation is carried by the issuer internally and that

75% of the burden of preparation is carried by outside professionals retained by the issuer at

an average cost of $400 per hour. There is no change to the estimated burden of the

collections of information under Regulation S-K because the burdens that this regulation

imposes are reflected in our revised estimated for the forms. The portion of the burden

carried by outside professionals is reflected as a cost, while the portion of the burden carried

by the issuer internally is reflected in hours.

142 Figures in both tables have been rounded to the nearest whole number.

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Table 1. Incremental Paperwork Burden under the proposed amendments for annual reports; quarterly reports; proxy and information statements:

Number of Responses143

(A)

Incremental Burden Hours/Form (B)

Total Incremental Burden Hours (C)=(A)*(B)

75% Company (D)=(C)*0.75

25% Professional (E)=(C)*0.25

Professional Costs (F)=(E)*$400

10-K144 1,803 1 1,803 1,352 451 $180,400 10-Q 5,409 1 5,409 4,057 1,352 $540,800 Form 10145 9 2 18 4 14 $5,600 DEF 14A146 7,212

Accel. Filers

6,112 3 18,336 13,752 4,584 $1,833,600

SRC Filers

1,100 1 1,100 825 275 $110,000

DEF 14C 582 Accel. Filers

482 2 964 723 241 $96,400

SRC Filers

100 0 0 0 0 $0

Reg. S-K N/A N/A N/A N/A N/A N/A Total 27,630 20,713 $2,766,800

Table 2. Incremental Paperwork Burden under the proposed amendments for registration Statements, merger proxy and information statements, tender offer documents and

143 The number of responses reflected in the table equals the actual number of forms and schedules filed with the Commission during the 2009 calendar year, adjusted to reflect the estimated number of forms and schedules that would be required to include additional disclosure under our rules as proposed. As explained below in notes 144 through 146, we have reduced the number of estimated filings to reflect that the additional disclosure requirements as proposed would only apply to a smaller number of the forms filed.

144 We calculated the burden hours for Forms 10-K and 10-Q based on the number of proxy statements filed with the Commission during the 2009 calendar year. We assumed that there would be an aggregate equal number of Forms 10-K and 10-Q to disclose the issuer’s plans with respect to the frequency vote as the number of proxy statements and further assumed that 75% of issuers would disclose this information on Form 10-Q and 25% would disclose this information on Form 10-K.

145 The burden allocation for Form 10 uses a 25% internal to 75% outside professional allocation. We have reduced the number of estimated Form 10 filings to reflect that approximately 95% of these forms would not require additional disclosure, as new disclosure required under Item 402 as proposed would only relate to issuers in spin-off transactions that are disclosing compensation of public parent companies that have conducted a prior shareholder vote on executive compensation.

146 The estimates for Schedule 14A and Schedule 14C are separated to reflect our estimate of the burden hours and costs related to the proposed amendments to CD&A which would be applicable to companies that are large accelerated filers, accelerated filers, and non-accelerated filers (that are not smaller reporting companies), but would not be applicable to smaller reporting companies.

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Schedules 13E-3:

Number of Responses147

(A)

Incremental Burden Hours/Form (B)

Total Incremental Burden Hours (C)=(A)*(B)

25% Company (D)=(C)*0.25

75% Professional (E)=(C)*0.75

Professional Costs (F)=(E)*$400

Form S-1148 485 2 970 243 727 $290,800 Form S-11 22 2 44 11 33 $13,200 Form S-4149 499 21 10,479 2,620 7,859 $3,143,600 Form F-4 27 21 567 142 425 $170,000 DEFM 14A 137 21 2,877 719 2,158 $863,200

DEFM 14C150

14 20 280 70 210 $84,000

Schedule TO-T151

50 20 1,000 250 750 $300,000

Schedule 14D-9

77 20 1,540 385 1,155 $462,000

Schedule 13E-3

5 20 100 25 75 $30,000

Form N-2152 29 2 58 14 44 $17,600

147 The number of responses reflected in the table equals the actual number of forms and schedules filed with the Commission during the 2009 calendar year, adjusted to reflect the estimated number of forms and schedules that would be required to include additional disclosure under our rules as proposed. As explained below in notes 148 through 152, we have reduced the number of estimated filings to reflect that the additional disclosure requirements as proposed would only apply to a smaller number of the forms filed.

148 We have reduced the number of estimated Form S-1 and Form S-11 filings to reflect that approximately 60% of these forms would not require additional disclosure, as new disclosure required under Item 402 as proposed would only relate to issuers who are already public companies and have conducted a prior shareholder vote on executive compensation.

149 We have reduced the number of estimated Form S-4 and Form F-4 filings to reflect an approximate 75% of these forms which will not relate to mergers or similar transactions but will be other transactions (e.g., holding company formations and financings) to which the amended rules would not apply.

150 We have reduced the number of estimated DEFM14C filings to reflect an approximate 15% of these forms, which will not relate to merger transactions but will involve dissolutions and similar transactions.

151 We have reduced the number of estimated Schedules TO-T, 14D-9 and 13E-3 to reflect the approximate number of these filings to which the proposed rules would apply, based on the total number of filings from calendar year 2009. We have substantially reduced the number of Schedules 13E-3 to avoid double counting, as the majority of these forms are filed in conjunction with a DEF14A. In addition, we have reduced the number of Schedule TO-T filings as we anticipate that some bidders would incorporate by reference disclosure in Schedule 14D-9 and not incur an additional disclosure burden.

152 We have reduced the number of estimated Form N-2 filings to reflect that 29 filings were made by business development companies during calendar year 2009, because only business development companies would be subject to the proposed disclosure required under Item 402 on Form N-2.

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Reg. S-K N/A N/A N/A N/A N/A N/A Total 17,915 4,479 $5,374,400

C. Request for Comment

Pursuant to 44 U.S.C. 3506(c)(2)(B), we request comment to:

• evaluate whether the proposed collections of information are necessary for the proper

performance of the functions of the Commission, including whether the information

will have practical utility;

• evaluate the accuracy of our estimate of the burden of the proposed collections of

information;

• determine whether there are ways to enhance the quality, utility, and clarity of the

information to be collected;

• evaluate whether there are ways to minimize the burden of the collections of

information on those who respond, including through the use of automated collection

techniques or other forms of information technology; and

• evaluate whether the proposed amendments will have any effects on any other

collections of information not previously identified in this section.

Any member of the public may direct to us any comments concerning the accuracy of

these burden estimates and any suggestions for reducing the burdens. Persons who desire to

submit comments on the collection of information requirements should direct their comments

to OMB, Attention: Desk Officer for the Securities and Exchange Commission, Office of

Information and Regulatory Affairs, Room 10102, New Executive Office Building,

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Washington, DC 20503 and should send a copy to Elizabeth M. Murphy, Secretary,

Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090, with

reference to File No. S7-31-10. Requests for materials submitted to the OMB by us with

regard to these collections of information should be in writing, refer to File No. S7-31-10 and

be submitted to the Securities and Exchange Commission, Office of Investor Education and

Advocacy, 100 F Street NE, Washington, DC 20549-0213. Because OMB is required to

make a decision concerning the collections of information between 30 and 60 days after

publication, your comments are best assured of having their full effect if OMB receives them

within 30 days of publication.

IV. COST-BENEFIT ANALYSIS

A. Introduction

We are proposing rulemaking to implement and supplement the provisions of the

Dodd-Frank Act relating to shareholder approval of executive compensation and disclosure

and shareholder approval of golden parachute compensation arrangements. Section 951 of

the Dodd-Frank Act amends the Exchange Act by adding new Section 14A. New Section

14A(a)(1) requires companies to conduct a separate shareholder advisory vote to approve the

compensation of executives. Section 14A(a)(2) requires companies to conduct a separate

shareholder advisory vote to determine how often an issuer will conduct a shareholder

advisory vote on executive compensation. In addition, Section 14A(b) requires companies

soliciting votes to approve merger or acquisition transactions to provide disclosure of certain

“golden parachute” compensation arrangements and, when such arrangements have not been

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included in the shareholder advisory vote on executive compensation, to conduct a separate

shareholder advisory vote to approve the golden parachute compensation arrangements.153

We are proposing new Rule 14a-21 to implement Section 14A(a)(1) by providing

separate shareholder advisory votes to approve executive compensation, to approve the

frequency of such votes on executive compensation, and to approve golden parachute

compensation arrangements at shareholder meetings at which shareholders are asked to

approve merger transactions. In addition to the votes required by Section 14A, we are also

proposing a new Item 24 of Schedule 14A to elicit disclosure, similar to our approach with

respect to TARP companies providing shareholder advisory votes on executive

compensation, regarding the effect of the shareholder votes required by Rule 14a-21,

including whether the votes are non-binding.

Our proposed new Item 402(t) of Regulation S-K implements and supplements the

statutory requirement in Section 14A(b)(1) to promulgate rules for the clear and simple

disclosure of golden parachute compensation arrangements that the soliciting person has with

its named executive officers (if the acquiring issuer is not the soliciting person) or that it has

with the named executive officers of the acquiring issuer that relate to the merger transaction.

In addition, Item 402(t), as proposed, would supplement the requirements of Section

14A(b)(1) by requiring disclosure of golden parachute compensation arrangements between

the acquiring company and the named executive officers of the target company if the target

company is the soliciting person.

153 According to the Dodd-Frank Wall Street Reform and Consumer Protection Act Conference Report at page 872, Section 951 is “designed to address shareholder rights and executive compensation practices.”

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Our proposed amendments to Item 5 of Schedule 14A would require disclosure

regarding golden parachute compensation arrangements in accordance with Section

14A(b)(1) of the Exchange Act. We are also proposing that additional disclosure regarding

golden parachute compensation arrangements be required in connection with other

transactions. We have proposed amendments to Regulation M-A, Schedule 14D-9 and

Schedule 13E-3 that would require additional disclosure regarding golden parachute

compensation arrangements in connection with Rule 13e-3 going-private transactions and

tender offers.

We are also proposing amendments to Item 402 of Regulation S-K to require

additional Compensation Discussion and Analysis disclosure about the issuer’s response to

the shareholder vote on executive compensation and to provide additional disclosure about

golden parachute compensation arrangements. We are also proposing amendments to Form

10-K and Form 10-Q to require disclosure regarding the issuer’s action as a result of the

shareholder advisory vote on the frequency of shareholder votes on executive compensation.

We are proposing an amendment to Rule 14a-4, which relates to the form of proxy

that issuers are required to include with their proxy materials, to require that issuers present

four choices to their shareholders in connection with the advisory vote on frequency. We are

also proposing an amendment to Rule 14a-6 to add the shareholder votes on executive


Section 14A(a) to the list of items that do not trigger the filing of a preliminary proxy

statement. In addition, we are proposing an amendment to Rule 14a-8, adding a note to Rule

14a-8(i)(10) to clarify the status of shareholder proposals relating to the approval of

83

executive compensation or the frequency of shareholder votes approving executive

compensation.

Our proposed rulemaking, which implements the relevant provisions of the Dodd-

Frank Act, will directly affect most public companies as well as potential private acquirers.

Our proposed rules implement the shareholder advisory vote requirements of Section 14A,

promulgate rules for additional disclosure in accordance with Section 14A(b)(1), and provide

for additional disclosure, not required by Section 14A, relating to the shareholder advisory

votes. In addition, our proposed rules expand the required disclosure of Section 14A(b)(1) to

require disclosure of arrangements between additional parties, namely agreements between

the acquiring company and named executive officers of the target company, and require

disclosure with respect to additional transactions, including certain tender offers and Rule

13e-3 going-private transactions. As discussed below, the enhanced disclosure required by

our proposed rulemaking regarding the shareholder approval of executive compensation and

companies’ responses to shareholder votes would provide shareholders and investors with

timely information about such votes that is consistent with the information required to be

provided under the Act and that would enhance the operation of our rules pursuant to the Act.

The enhanced disclosure regarding golden parachute compensation would provide a more

complete picture of the compensation to shareholders as they consider voting and investment

decisions relating to mergers and similar transactions.

B. Benefits

The proposed rulemaking is intended to implement and supplement the requirements

of Section 14A of the Exchange Act as set forth in Section 951 of the Dodd-Frank Act. The

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proposed amendments also provide for enhanced disclosure relating to the shareholder

advisory votes required by Exchange Act Section 14A and how an issuer’s consideration of

such votes affects its compensation policies and decisions. Our proposed rules would not

only implement the shareholder advisory votes required by Section 14A, but would also

require additional disclosure addressing how issuers have considered these required

shareholder advisory votes, and if so, how such votes have affected the companies’

compensation policies and decisions.

We believe the enhanced disclosures about the results of the shareholder advisory

vote on the frequency of the approval of executive compensation would provide timely

information to shareholders about the issuer’s plans for future shareholder advisory votes.

Our proposed enhanced disclosure and proposed amendments to the CD&A requirements in

Item 402(b) of Regulation S-K about an issuer’s consideration of the results of a shareholder

vote to approve executive compensation and how that consideration has affected its

compensation policies and decisions would benefit shareholders and other market

participants by providing potentially useful information for voting and investment decisions.

Our proposed rules would also specify how the shareholder advisory votes required

by Section 14A(a) relate to existing shareholder advisory votes required for issuers with

outstanding indebtedness under TARP. In our view, because of the similarity of the separate

annual say-on-pay vote requirements, a company with indebtedness under TARP need only

provide one annual shareholder advisory vote. As we have discussed above, we have

indicated that the annual shareholder advisory vote under EESA would fulfill the

requirements for the shareholder vote pursuant to Section 14A(a)(1) and Rule 14a-21(a). We

85

believe this benefits such companies by reducing confusion and burdens of the two

requirements by specifying that two separate annual shareholder votes are not required. In

addition, because issuers with indebtedness under TARP must conduct an annual shareholder

advisory vote on executive compensation, we have proposed an exemption from the

frequency vote required by Section 14A(a)(2) and Rule 14a-21(b) until the issuer repays all

indebtedness under TARP. We believe this benefits such issuers and their shareholders by

avoiding the cost and confusion of conducting a vote on the frequency of a shareholder

advisory vote when the frequency of such a vote is mandated by another requirement.

In our proposed rules, we also provide guidance for issuers and shareholders

regarding the interaction of the shareholder advisory votes required by Section 14A and

shareholder proposals under Rule 14a-8 by proposing a note to Rule 14a-8(i)(10). The

proposed note would reduce potential confusion among shareholders and issuers with respect

to what may be excluded under our rules by providing for the exclusion of certain

shareholder proposals that the company has substantially implemented, while preserving the

ability of shareholders to make proposals relating to executive compensation.

New proposed Item 402(t) of Regulation S-K would require narrative and tabular

disclosure of golden parachute compensation arrangements in the clear and simple form

required by Section 14A(b)(1) of the Exchange Act. Because Section 14A(b)(1) requires that

disclosure not only be in a clear and simple form, but also that it include an aggregate total of

all golden parachute compensation for each named executive officer, we have proposed Item

402(t) to require that such disclosure appear in a table. The tabular format is designed to

provide investors with clear disclosure about golden parachute compensation that is

86

comparable across different issuers and transactions and make the information more

accessible. In addition to the tabular disclosure, we are also proposing narrative disclosure to

provide additional context and provide disclosure not suitable to the tabular format. Our

approach is similar to the existing approach to executive compensation disclosure in Item

402 of Regulation S-K and provides a focused manner in which to present and quantify

golden parachute compensation. Narrative disclosure supplements the tables by providing

additional context and discussion of the numbers presented in the table. We believe that the

proposed combination of narrative and tabular disclosure would provide the clearest picture

of the full scope of golden parachute compensation in the clear and simple format required

by Section 14A(b)(1).

Because Section 14A(b)(1)’s disclosure requirements are limited to agreements or

understandings between the person conducting the solicitation and any named executive

officers of the issuer or any named executive officers of the acquiring issuer if the person

conducting the solicitation is not the acquiring issuer, we have formulated proposed Item

402(t) to require disclosure, in addition to the disclosure mandated by Section 14A(b)(1), of

agreements or understandings between the acquiring company and the named executive

officers of the target company. As proposed, Item 402(t) would require disclosure of all

golden parachute compensation relating to the merger among the target and acquiring

companies and the named executive officers of each in order to cover the full scope of golden

parachute compensation applicable to the transaction. By providing disclosure of the full

scope of golden parachute compensation, we believe issuers would provide more detailed

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and comprehensive information to shareholders to consider when making their voting or

investment decisions.

Likewise, additional disclosure on golden parachute compensation, without regard to

whether the transaction is structured as a merger, a tender offer or a Rule 13e-3 going-private

transaction that is not subject to Regulation 14A, would benefit shareholders and other

market participants by allowing them to timely and more accurately assess the transaction

and evaluate with greater acuity the golden parachute compensation that named executive

officers could expect to receive and the related potential interests such officers might have in

pursuing and/or supporting a change in control transaction. While our existing disclosure

requirements include much of this disclosure, the specificity and narrative and tabular format

of proposed Item 402(t) would allow for a clear presentation of the full scope of the

information. Furthermore, by standardizing disclosure of golden parachute compensation

arrangements across different transaction structures, our proposed rules would enable

shareholders to compare more easily such compensation among various types of change in

control transactions and structures. In addition, our proposed rules would also enable the

shareholders of the acquirer to timely and more accurately assess the cost of the acquisition

transaction in proxy statements for which additional disclosure is required pursuant to Note

A of Schedule 14A where acquirer shareholders do not vote on the merger transaction but

vote to approve another proposal such as the issuance of shares or a stock split.

We have proposed such disclosure in both tabular and narrative formats, with

disclosure of aggregate total compensation, in accordance with the requirement of Section

14A(b)(1) that such disclosure be in a clear and simple form. To the extent investors expect

88

to see information about all of the economic benefits that may accrue to an executive in one

location of the proxy statement (including golden parachute arrangements and other

compensation, such as future employment contracts), the benefit of this disclosure may be

limited since, as proposed, the information about other executive compensation that may be

disclosed in proxy materials would not need to be included in the tabular format pursuant to

Item 402(t) of Regulation S-K.

Our proposed rulemaking would also benefit issuers by specifying how they must

comply with the requirements of Exchange Act Section 14A in the context of the federal

proxy rules. The proposed rulemaking would eliminate uncertainty that may exist among

issuers and other market participants, if we did not propose any rules, regarding what is

necessary under the Commission’s proxy rules when conducting a shareholder vote required

under Exchange Act Section 14A. The proposed rules would specify how the statutory

requirements operate in connection with the federal proxy rules and accordingly, we believe

the proposed rulemaking would promote better compliance with the requirements of

Exchange Act Section 14A and reduce the amount of management time and financial

resources necessary to ensure that issuers comply with their obligations under both Exchange

Act Section 14A and the federal proxy rules. This would benefit issuers, their shareholders

and other market participants.

C. Costs

We recognize that the proposed amendments would impose new disclosure

requirements on companies and are likely to result in costs related to information collection.

The proposed rulemaking that requires the disclosure of executive compensation in a tabular

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format is likely to result in certain costs. We expect these costs, however, to be limited since

much of the compensation required to be disclosed under our proposed rulemaking is

currently required to be disclosed in narrative format in the existing disclosure regime.

We have proposed new Item 402(t) to implement the requirement of Section

14A(b)(1) of the Exchange Act that we promulgate rules for disclosure of golden parachute

compensation arrangements in a clear and simple form, which we believe is best provided in

both narrative and tabular format. In addition to the required disclosure under Section

14A(b)(1), we have also proposed expanding the disclosure to cover agreements between the

acquiring company and the named executive officers of a target company in a merger or

similar transaction. Though this additional disclosure would result in certain additional costs

for issuers preparing a merger proxy, we believe that the additional disclosure is appropriate

in order to provide shareholders information about the full scope of golden parachute

compensation applicable to the transaction. There may also be certain indirect costs to

issuers and shareholders as a result of our proposed rules, as the additional disclosure of

golden parachute compensation may result in increased transactional expenses in the form of

additional advisers and consultants, increased time to prepare disclosure documents, and

increased time and expense to negotiate compensation arrangements.

Furthermore, companies engaging in or subject to a third-party tender offer or Rule

13e-3 going-private transaction may face increased costs because of the required disclosure

of golden parachute compensation arrangements, including the required table and aggregate

totals, under the proposed rulemaking. In addition, companies soliciting proxies or consents

for transactions for which additional disclosure is required pursuant to Note A of Schedule

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14A may face increased costs as well due to the additional disclosure requirements of Item 5

of Schedule 14A. We have proposed these disclosure requirements that go beyond the

requirements of Section 14A(b)(1) because we believe the proposed rules would reduce the

regulatory disparity that might otherwise result from treating such transactions differently

from mergers. As noted above, there may also be additional indirect costs relating to such

increased disclosure, as well as costs associated with obtaining compensation information

from the other parties involved in a transaction in order to fulfill the issuer’s disclosure

obligations.

The expanded Compensation Discussion and Analysis disclosure under the proposed

rulemaking may also result in costs associated with drafting disclosure that addresses

whether, and if so, how the results of a shareholder vote on executive compensation were

considered in determining the issuer’s compensation policies and decisions and any resultant

effect on those compensation policies and decisions. Similarly, the proposed revisions to the

periodic reporting requirements on Forms 10-K and 10-Q may result in costs associated with

assessing the results of a shareholder vote on the frequency of shareholder votes to approve

executive compensation and drafting the additional disclosure regarding the company’s plans

to conduct votes in the future. Some of these costs could include the cost of hiring additional

advisors, such as attorneys, to assist in the analysis and drafting.

We believe that these costs would not be unduly burdensome given that most of the

disclosure is covered by our existing disclosure requirements, even though we are proposing

that such disclosure be included in both narrative and tabular format. In addition to the

existing narrative requirements, we are proposing tabular disclosure with an aggregate total

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and no de minimis threshold for perquisites. We expect that there will be incremental costs

associated with drafting the additional disclosure, but that much of the information would be

readily obtainable by the parties given existing disclosure requirements and as part of the due

diligence process prior to drafting the transaction documents.

In addition to the direct costs associated with the required disclosure, the proposed

rule might create additional indirect costs for private companies that may be engaged in

takeovers of public companies. We do not expect, however, the specific and detailed

disclosure and the shareholder advisory vote regarding golden parachutes to diminish the

number of takeover transactions.

Our proposed note to Rule 14a-8(i)(10) may also impose certain costs on shareholders

as our proposal would permit issuers to exclude certain shareholder proposals that would

otherwise not be excludable under our rules. In addition, our proposals may impose certain

indirect costs on shareholders who might pursue alternative means to communicate their

positions regarding the frequency of say-on-pay votes.

For purposes of the PRA, we have estimated the collection of information burden and

cost. However, we acknowledge that the PRA estimates do not reflect the full magnitude of

the economic costs considered above. The estimates of total amount of time and resources

spent in preparing are 25,202 labor hours and $8,142,000 costs. Of these, 15,300 labor hours

and $2,040,000 are estimated for annual meeting proxy and information statements, 5,409

labor hours and $721,200 are estimated for periodic reports, 272 labor hours and $327,200

for Securities Act registration statements (excluding Forms S-4 and F-4), Exchange Act

registration statements, and Investment Company Act registration statements, and 4,211

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labor hours and $5,052,800 for merger proxies and information statements, registration

statements on Forms S-4 and F-4, tender offer statements and Schedules 13E-3 for Rule 13e-

3 transactions that are not otherwise subject to Regulation 14A.

D. Request for Comment

We request data to quantify the costs and the value of the benefits described above.

We seek estimates of these costs and benefits, as well as any costs and benefits not already

defined, that may result from the adoption of these proposed amendments. We also request

qualitative feedback on the nature of the benefits and costs described above and any benefits

and costs we may have overlooked.

V. SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT

For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996, or

“SBREFA,”154 we solicit data to determine whether the proposals constitute a “major” rule.

Under SBREFA, a rule is considered “major” where, if adopted, it results or is likely to result

in:

• An annual effect on the economy of $100 million or more (either in the form of an

increase or a decrease);

• A major increase in costs or prices for consumers or individual industries; or

• Significant adverse effects on competition, investment or innovation.

We request comment on the potential impact of the proposed amendments on the U.S.

economy on an annual basis, any potential increase in costs or prices for consumers or

154 5 U.S.C. 603. 93

individual industries, and any potential effect on competition, investment or innovation.

Commentators are requested to provide empirical data and other factual support for their

views if possible.

VI. CONSIDERATION OF IMPACT ON THE ECONOMY, BURDEN ON COMPETITION, AND PROMOTION OF EFFICIENCY, COMPETITION AND CAPITAL FORMATION

Section 23(a)(2) of the Exchange Act155 also requires us, when adopting rules under

the Exchange Act, to consider the impact that any new rule would have on competition.

Section 23(a)(2) prohibits us from adopting any rule that would impose a burden on

competition not necessary or appropriate in furtherance of the purposes of the Exchange Act.

In addition, Section 2(b)156 of the Securities Act and Section 3(f)157 of the Exchange Act

require us, when engaging in rulemaking where we are required to consider or determine

whether an action is necessary or appropriate in the public interest, to also consider whether

the action will promote efficiency, competition, and capital formation.

Our proposed amendments would implement the Section 14A requirement for

shareholder advisory votes to approve executive compensation, the frequency of such votes,

and golden parachute compensation arrangements in connection with merger and similar

transactions. We have proposed certain additional disclosure requirements to provide

investors with additional information about these required votes and to apply the required

disclosure from Section 14A(b)(1) to certain other agreements and transaction structures.

155 15 U.S.C. 78w(a).

156 15 U.S.C. 77b(b).

157 15 U.S.C. 78c(f). 94

We do not believe that the additional disclosure we have proposed in our rulemaking would

impose a burden on competition.

The proposed amendments would not only implement the requirements of Section

14A of the Exchange Act, but would also help ensure that shareholders receive disclosure

regarding the required votes, the nature of an issuer’s responsibilities to hold the votes under

Section 14A, and the issuer’s consideration of the results of the votes and the effect of such

consideration on the issuer’s compensation policies and decisions. The proposed

amendments would also enhance the transparency of a company’s compensation policies. As

discussed in greater detail above, we believe these benefits would be achieved without

imposing any significant additional burdens on issuers. As a result, the proposed

amendments should improve the ability of investors to make informed voting and investment

decisions, and, therefore lead to increased efficiency and competitiveness of the U.S. capital

markets.

We believe the proposed amendments would also benefit issuers and their

shareholders by specifying how issuers must comply with the Dodd-Frank Act requirements,

in the context of the federal proxy rules and our disclosure rules. By specifying how issuers

must comply with the shareholder advisory votes and enhanced disclosure requirements from

Section 14A, our proposed rules would allow for more consistent disclosure from all entities

and clearer disclosure for shareholders. By reducing uncertainty, our proposed rules would

permit issuers to more efficiently plan and draft disclosure documents, including annual

meeting proxy statements, merger proxies, and tender offer and going-private documents.

95

Our rules as proposed would require enhanced disclosure of golden parachute

compensation arrangements in merger and similar transactions, regardless of how such

transactions are structured. We believe the uniformity of our proposed disclosure

requirements across different types of transactions would help competition as issuers would

be able to structure such transactions as they see fit, without the additional disclosure

required by Section 14A(b) weighing in favor of a particular transaction structure. Though

our proposed rules would create additional, incremental disclosure burdens, we believe that

our proposed rules would enhance capital formation by allowing for clearer disclosure, more

informed voting decisions by investors, and consistency across different types of

transactions.

We request comment on whether the proposed amendments, if adopted, would

impose a burden on competition. We also request comment on whether the proposed

amendments, if adopted, would promote efficiency, competition, and capital formation.

Commentators are requested to provide empirical data and other factual support for their

view to the extent possible.

VII. INITIAL REGULATORY FLEXIBILITY ACT ANALYSIS

This initial Regulatory Flexibility Analysis (IRFA) has been prepared in accordance

with the Regulatory Flexibility Act. It relates to proposed revisions to the rules under the

Exchange Act regarding the proxy solicitation process and related executive compensation

disclosures.

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A. Reasons for, and Objectives of, the Proposed Action

These proposals are designed to implement the requirements of Section 951 of the

Dodd-Frank Act, enhance the disclosure relating to the shareholder advisory votes required

by Exchange Act Section 14A, and specify how our proxy rules would apply to such votes.

Specifically, the proposals amend the proxy rules to require shareholder advisory votes to

approve executive compensation, to approve the frequency of shareholder votes to approve

executive compensation, and to approve golden parachute compensation arrangements in

connection with merger transactions. Our proposals also require enhanced disclosure

regarding an issuer’s consideration of these votes and the impact of such consideration on an

issuer’s compensation policies and decisions.

B. Legal Basis

We are proposing the amendments pursuant to Sections 13, 14(a), 14A, 23(a), and 36

of the Exchange Act.

C. Small Entities Subject to the Proposed Action

The proposed amendments would affect some companies that are small entities. The

Regulatory Flexibility Act defines “small entity” to mean “small business,” “small

organization,” or “small governmental jurisdiction.”158 The Commission’s rules define

“small business” and “small organization” for purposes of the Regulatory Flexibility Act for

each of the types of entities regulated by the Commission. Securities Act Rule 157159 and

158 5 U.S.C. 601(6).

159 17 CFR 230.157.

97

Exchange Act Rule 0-10(a)160 defines a company, other than an investment company, to be a

“small business” or “small organization” if it has total assets of $5 million or less on the last

day of its most recent fiscal year. We estimate that there are approximately 1,210 companies,

other than investment companies, that may be considered small entities. The proposed

amendments would affect small entities that have a class of securities that are registered

under Section 12 of the Exchange Act. An investment company, including a business

development company,161 is considered to be a “small business” if it, together with other

investment companies in the same group of related investment companies, has net assets of

$50 million or less as of the end of its most recent fiscal year.162 We believe that certain

proposals would affect small entities that are business development companies who have a

class of securities registered under Section 12 of the Exchange Act. We estimate that there

are approximately 32 business development companies that may be considered small entities.

D. Reporting, Recordkeeping, and other Compliance Requirements

The proposed disclosure amendments are designed to enhance the disclosure

regarding the shareholder advisory votes required by Section 14A of the Exchange Act and

provide additional disclosure about golden parachute compensation arrangements. These

amendments would require small entities to provide:

• Disclosure of the shareholder advisory votes required by Section 14A and the

effects of such votes, including whether they are non-binding;

160 17 CFR 240.0-10(a).

161 Business development companies are a category of closed-end investment companies that are not required to register under the Investment Company Act [15 U.S.C. 80a-2(a)(48)].

162 17 CFR 270.0-10(a) 98

• Disclosure of golden parachute arrangements described by Section 14A(b)(1) of

the Exchange Act in merger proxies, and additional disclosure not required by

Section 14A(b)(1) in connection with tender offers and going private transactions;

and

• Disclosure of the issuer’s decision in light of the shareholder vote on the

frequency of shareholder votes to approve executive compensation required by

Section 14A(a)(2) of the Exchange Act as to how frequently the issuer will

include a shareholder vote on the compensation of executives.

E. Duplicative, Overlapping, or Conflicting Federal Rules

We believe the proposed amendments would not duplicate, overlap, or conflict with

other federal rules.

F. Significant Alternatives

The Regulatory Flexibility Act directs us to consider alternatives that would

accomplish our stated objectives, while minimizing any significant adverse impact on small

entities. In connection with the proposed disclosure amendments, we considered the

following alternatives:

• Establishing different compliance or reporting requirements or timetables that

take into account the resources available to small entities;

• Clarifying, consolidating, or simplifying compliance and reporting requirements

under the rules for small entities;

• Use of performance rather than design standards; and

• Exempting small entities from all or part of the requirements.

99

Currently, small entities that are smaller reporting companies under Exchange Act

Rule 12b-12 are subject to some different compliance or reporting requirements under

Regulation S-K and the proposed amendments would not affect these requirements.163 Under

Regulation S-K, smaller reporting companies are permitted to provide abbreviated

compensation disclosure with respect to the principal executive officer and two most highly

compensated executive officers for the last two completed fiscal years. Specifically, smaller

reporting companies may provide the executive compensation disclosure specified in Items

402(l) through (r) of Regulation S-K, rather than the corresponding disclosure specified in

Items 402(a) through (k) of Regulation S-K. Items 402(l) through (r) do not require smaller

reporting companies to provide CD&A. Other than the proposed amendments to CD&A, the

remaining proposed disclosure requirements would apply to smaller reporting companies to

the same extent as larger issuers.

As noted above, the proposed amendments to CD&A would not apply to smaller

reporting companies. We are not proposing to expand the existing scaled disclosure

requirements under Item 402 of Regulation S-K, or establish additional different compliance

requirements or an exemption from coverage of the proposed amendments for smaller

reporting companies. The proposed amendments would provide investors with enhanced

disclosure regarding the shareholder votes required by Section 14A of the Exchange Act and

the issuers’ consideration of the votes.

We are proposing amendments to Item 5 of Schedule 14A, as well as other forms and

schedules, to implement and supplement the requirement of Section 14A(b)(1) to provide

163 Rule 12b-2 excludes business development companies from the definition of “smaller reporting companies.”

100

disclosure of golden parachute compensation arrangements in a clear and simple form.

Under our proposed rules, all companies would be subject to the same golden parachute

disclosure requirements. As proposed, Schedule 14A would require the disclosure pursuant

to Item 402(t) of Regulation S-K with respect to golden parachute compensation

arrangements for merger proxies. Though much of the disclosure required by our proposed

amendment to Item 5 of Schedule 14A is currently required for all issuers, regardless of size,

under our proposed rules such disclosure would be required to be included in a tabular format

pursuant to Item 402(t) of Regulation S-K, which would include an aggregate total and

specific quantification of various compensation elements. All companies, regardless of size,

would also be subject to these additional disclosure requirements in connection with other

transactions not required by Section 14A(b)(1), including certain tender offers and Rule 13e-

3 going-private transactions.

In addition, our proposed amendments would require clear and straightforward

disclosure of issuer’s responses to shareholder advisory votes, and of golden parachute

compensation arrangements in connection with mergers and similar transactions. We have

used design rather than performance standards in connection with the proposed amendments

because, based on our past experience, we believe the proposed amendments would be more

useful to investors if there were specific disclosure requirements. The proposed disclosures

are intended to result in more comprehensive and clear disclosure. In addition, the specific

disclosure requirements in the proposed amendments would promote consistent and

comparable disclosure among all companies.

101

We seek comment on whether we should exempt small entities from any of the

proposed disclosures or scale the proposed amendments to reflect the characteristics of small

entities and the needs of their investors.

G. Solicitation of Comments

We encourage the submission of comments with respect to any aspect of this Initial

Regulatory Flexibility Analysis. In particular, we request comments regarding:

• How the proposed amendments can achieve their objective while lowering the burden

on small entities;

• The number of small entity companies that may be affected by the proposed

amendments;

• The existence or nature of the potential impact of the proposed amendments on small

entity companies discussed in the analysis; and

• How to quantify the impact of the proposed amendments.

Respondents are asked to describe the nature of any impact and provide empirical

data supporting the extent of the impact. Such comments will be considered in the

preparation of the Final Regulatory Flexibility Analysis, if the proposed rule amendments are

adopted, and will be placed in the same public file as comments on the proposed amendments

themselves.

VIII. STATUTORY AUTHORITY AND TEXT OF THE PROPOSED AMENDMENTS

The amendments described in this release are being proposed under the authority set

forth in Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act,

102

Sections 3(b), 6, 7, 10, and 19(a) of the Securities Act of 1933, and Sections 13, 14(a), 14A,

23(a), and 36 of the Securities Exchange Act of 1934, as amended.

List of Subjects

17 CFR Parts 229, 240 and 249

Reporting and recordkeeping requirements, Securities.

TEXT OF THE PROPOSED AMENDMENTS

For the reasons set out in the preamble, the Commission proposes to amend title 17,

chapter II, of the Code of Federal Regulations as follows:

PART 229 - STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND CONSERVATION ACT OF 1975 - REGULATION S-K

1. The authority citation for part 229 is amended by adding authority for §402 and

§1011 to read as follows:

Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 77z-3, 77aa(25), 77aa(26),

77ddd, 77eee, 77ggg, 77hhh, 777iii, 77jjj, 77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o,

78u-5, 78w, 78ll, 78mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-31(c), 80a-37, 80a-38(a),

80a-39, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless otherwise noted.

* * * * *

Section 229.402 is also issued under sec. 951, Pub. L. 111-203, 124 Stat. 1376.


* * * * *

2. Amend § 229.402 by:

a. revising the last sentence of paragraph (a)(6)(ii);

b. removing “and” at the end of paragraph (b)(1)(v);

103

c. removing the period and adding in its place “; and” at the end of paragraph

(b)(1)(vi);

d. adding paragraph (b)(1)(vii);

e. revising the last sentence of paragraph (m)(5)(ii); and

f. adding paragraph (t).

The revisions read as follows:

§ 229.402 (Item 402) Executive compensation.

(a) * * *

(6) * * *

(ii) * * * Except with respect to the disclosure required by paragraph (t) of this Item,

registrants may omit information regarding group life, health, hospitalization, or medical

reimbursement plans that do not discriminate in scope, terms or operation, in favor of

executive officers or directors of the registrant and that are available generally to all salaried

employees.

* * * * *

(b) * * *

(1) * * *

(vii) Whether and if so, how the registrant has considered the results of previous

shareholder advisory votes on executive compensation required by section 14A of the

Exchange Act (15 U.S.C. 78n-1) and previous shareholder advisory votes on executive

compensation required by §240.14a-20 of this chapter in determining compensation policies

104

and decisions and, if so, how that consideration has affected the registrant’s executive

compensation decisions and policies.

* * * * *

(m) * * *

(5) * * *

(ii) * * * Except with respect to disclosure required by paragraph (t) of this Item,

smaller reporting companies may omit information regarding group life, health,

hospitalization, or medical reimbursement plans that do not discriminate in scope, terms or

operation, in favor of executive officers or directors of the smaller reporting company and

that are available generally to all salaried employees.

* * * * *

(t) Golden Parachute Compensation. (1) In connection with

(i) Any proxy or consent solicitation material providing the disclosure required by

section 14A(b)(1) of the Exchange Act (15 U.S.C. 78n-1(b)(1)) or

(ii) Any proxy or consent solicitation that includes disclosure under Item 14 of

Schedule 14A (§240.14a-101) pursuant to Note A of Schedule 14A,

with respect to each named executive officer of the acquiring company and the target

company, provide the information specified in paragraphs (t)(2) and (3) of this section

regarding any agreement or understanding, whether written or unwritten, between such

named executive officer and the acquiring company or target company, concerning any type

of compensation, whether present, deferred or contingent, that is based on or otherwise

105

relates to an acquisition, merger, consolidation, sale or other disposition of all or substantially

all assets of the issuer, as follows:

Golden Parachute Compensation

Name (a)

Cash ($) (b)

Equity ($) (c)



Tax Reim burse ment ($) (f)

Other ($) (g)

Total ($) (h)

PEO PFO A B C

(2) The table shall include, for each named executive officer:

(i) The name of the named executive officer (column (a));

(ii) The aggregate dollar value of any cash severance payments, including but not

limited to payments of base salary, bonus, and pro-rated non-equity incentive compensation

plan payments (column (b));

(iii) The aggregate dollar value of :

(A) Stock awards for which vesting would be accelerated;

(B) In-the-money option awards for which vesting would be accelerated; and

(C) Payments in cancellation of stock and option awards (column (c)):

(iv) The aggregate dollar value of pension and nonqualified deferred compensation

benefit enhancements (column (d));

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(v) The aggregate dollar value of perquisites and other personal benefits or property,

and health care and welfare benefits (column (e));

(vi) The aggregate dollar value of any tax reimbursements (column (f));

(vii) The aggregate dollar value of any other compensation that is based on or

otherwise relates to the transaction not properly reported in columns (b) through (f) (column

(g)); and

(viii) The aggregate dollar value of the sum of all amounts reported in columns (b)

through (g) (column (h)).

Instructions to Item 402(t)(2).

1. If this disclosure is included in a proxy or consent solicitation seeking approval of

an acquisition, merger, consolidation, or proposed sale or other disposition of all or

substantially all the assets of the registrant, or in a proxy or consent solicitation that includes

disclosure under Item 14 of Schedule 14A (§240.14a-101) pursuant to Note A of Schedule

14A, the disclosure provided by this table shall be quantified assuming that the triggering

event took place on the latest practicable date, and that the price per share of the registrant’s

securities is the closing market price as of the latest practicable date. Compute the dollar

value of in-the-money option awards for which vesting would be accelerated by determining

the difference between this price and the exercise or base price of the options.

2. If this disclosure is included in a proxy solicitation for the annual meeting at which

directors are elected for purposes of subjecting the disclosed agreements or understandings to

a shareholder vote under section 14A(a)(1) of the Exchange Act (15 U.S.C. 78n-1(a)(1)), the

disclosure provided by this table shall be quantified assuming that the triggering event took

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place on the last business day of the registrant’s last completed fiscal year, and the price per

share of the registrant’s securities is the closing market price as of that date. Compute the

dollar value of in-the-money option awards for which vesting would be accelerated by

determining the difference between this price and the exercise or base price of the options.

3. In the event that uncertainties exist as to the provision of payments and benefits or

the amounts involved, the registrant is required to make a reasonable estimate applicable to

the payment or benefit and disclose material assumptions underlying such estimates in its

disclosure. In such event, the disclosure would require forward-looking information as

appropriate.

4. For each of columns (b) through (g), include a footnote quantifying each separate

form of compensation included in the aggregate total reported. Include the value of all

perquisites and other personal benefits or property. Individual perquisites and personal

benefits shall be identified and quantified as required by Instruction 4 to Item 402(c)(2)(ix) of

this section. For purposes of quantifying health care benefits, the registrant must use the

assumptions used for financial reporting purposes under generally accepted accounting

principles.

5. For each of columns (b) through (h), include a footnote quantifying the amount

payable attributable to a double-trigger arrangement (i.e., amounts triggered by a change-in-

control for which payment is conditioned upon the executive officer’s termination without

cause or resignation for good reason within a limited time period following the change-in-

control), specifying the time-frame in which such termination or resignation must occur in

order for the amount to become payable, and the amount payable attributable to a single-

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trigger arrangement (i.e., amounts triggered by a change-in-control for which payment is not

conditioned upon such a termination or resignation of the executive officer).

6. A registrant conducting a shareholder advisory vote pursuant to §240.14a-21(c) of

this chapter to cover new arrangements and understandings, and/or revised terms of

agreements and understandings that were previously subject to a shareholder advisory vote

pursuant to §240.14a-21(a) of this chapter, shall provide two separate tables. One table shall

disclose all golden parachute compensation, including both the arrangements and amounts

previously disclosed and subject to a shareholder advisory vote under section 14A(a)(1) of

the Exchange Act (15 U.S.C. 78n-1(a)(1)) and §240.14a-21(a) of this chapter and the new

arrangements and understandings and/or revised terms of agreements and understandings that

were previously subject to a shareholder advisory vote. The second table shall disclose only

the new arrangements and/or revised terms subject to the separate shareholder vote under

section 14A(b)(2) of the Exchange Act and §240.14a-21(c) of this chapter.

7. In cases where this Item 402(t)(2) requires disclosure of arrangements between an

acquiring company and the named executive officers of the soliciting target company, the

registrant shall clarify whether these agreements are included in the separate shareholder

advisory vote pursuant to §240.14a-21(c) of this chapter by providing a separate table of all

agreements and understandings subject to the shareholder advisory vote required by section

14A(b)(2) of the Exchange Act (15 U.S.C. 78n-1(b)(2)) and §240.14a-21(c) of this chapter, if

different from the full scope of golden parachute compensation subject to Item 402(t)

disclosure.

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(3) Provide a succinct narrative description of any material factors necessary to an

understanding of each such contract, agreement, plan or arrangement and the payments

quantified in the tabular disclosure required by this paragraph. Such factors shall include, but

not be limited to a description of:

(i) The specific circumstances that would trigger payment(s);

(ii) Whether the payments would or could be lump sum, or annual, disclosing the

duration, and by whom they would be provided; and

(iii) Any material conditions or obligations applicable to the receipt of payment or

benefits, including but not limited to non-compete, non-solicitation, non-disparagement or

confidentiality agreements, including the duration of such agreements and provisions

regarding waiver or breach of such agreements.

Instruction to Item 402(t).

1. A registrant that does not qualify as a “smaller reporting company,” as defined by

§229.10(f)(1) of this chapter, must provide the information required by this Item 402(t) with

respect to the individuals covered by Items 402(a)(3)(i), (ii) and (iii) of this section. A

registrant that qualifies as a “smaller reporting company,” as defined by §229.10(f)(1) of this

chapter, must provide the information required by this Item 402(t) with respect to the

individuals covered by Items 402(m)(2)(i) and (ii) of this section.

2. The obligation to provide the information in this Item 402(t) shall not apply to

agreements and understandings described in paragraph (t)(1) of this section with senior

management of foreign private issuers, as defined in §240.3b-4 of this chapter.

110

3. Amend § 229.1011 by redesignating paragraph (b) as paragraph (c) and adding new paragraph (b):

The addition reads as follows:

§ 229.1011 (Item 1011) Additional information.

* * * * *

(b) Furnish the information required by Item 402(t)(2) and (3) of this part

(§229.402(t)(2) and (3)) and in the tabular format set forth in Item 402(t)(1) of this part

(§229.402(t)(1)) with respect to each named executive officer

(1) Of the subject company in a Rule 13e-3 transaction; or

(2) Of the issuer whose securities are the subject of a third-party tender offer,

regarding any agreement or understanding, whether written or unwritten, between such

named executive officer and the subject company, issuer, bidder, or the acquiring company,

as applicable, concerning any type of compensation, whether present, deferred or contingent,

that is based upon or otherwise relates to the Rule 13e-3 transaction or third-party tender

offer.

Instructions to Item 1011(b)

1. The obligation to provide the information in paragraph (b) of this section shall not

apply where the issuer whose securities are the subject of the Rule 13e-3 transaction or

tender offer is a foreign private issuer, as defined in §240.3b-4 of this chapter.

2. In connection with any Schedule TO (§240.14d-100 of this chapter), a bidder’s

disclosure obligation pursuant to paragraph (b) of this section need be provided only to the

extent known after making reasonable inquiry.

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3. For purposes of Instruction 1 to Item 402(t)(2) of this part: If the disclosure is included

in a Schedule 13E-3 (§240.13e-100 of this chapter), TO (§240.14d-100 of this chapter) or

14D-9 (§240.14d-101 of this chapter), the disclosure provided by this table shall be

quantified assuming that the triggering event took place on the latest practicable date and that

the price per share of the securities of the subject company in a Rule 13e-3 transaction, or of

the issuer whose securities are the subject of the third-party tender offer, is the closing market

price as of the latest practicable date.

* * * * *

PART 240 – GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934

4. The authority citation for Part 240 is amended by adding authority for §13e-100,

§14a-4, §14a-6, §14a-8, §14a-21, §14a-101, and §14c-101 as follows:

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 77ttt,

78c, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5,

78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, and 7201 et

seq., 18 U.S.C. 1350, and 12 U.S.C. 5221(e)(3), unless otherwise noted.

* * * * *

Section 240.13e-100 is also issued sec. 951, under Pub. L. 111-203, 124 Stat. 1376.

Section 240.14a-4 is also issued under sec. 951, Pub. L. 111-203, 124 Stat. 1376.





112

Section 240.14c-101 is also issued under sec. 951, Pub. L. 111-203, 124 Stat. 1376.

* * * * *

5. Amend §240.13e-100 by revising Item 15.


§240.13e-100 Schedule 13E-3, Transaction statement under section 13(e) of the Securities Exchange Act of 1934 and Rule 13e-3 (§240.13e-3) thereunder.

* * * * *

Item 15. Additional Information.

Furnish the information required by Item 1011(b) and (c) of Regulation M-A

(§229.1011(b) and (c) of this chapter).

* * * * *

6. Amend §240.14a-4 by:

(a) adding the phrase “and votes to determine the frequency of shareholder votes on

executive compensation pursuant to §240.14a-21(b) of this chapter” at the end of the first

sentence of paragraph (b)(1);

(b) adding paragraph (b)(3).

The addition reads as follows:

§240.14a-4 Requirements as to proxy.

* * * * *

(b) * * *

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(3) A form of proxy which provides for a shareholder vote on the frequency of

shareholder votes to approve the compensation of executives required by section 14A(a)(2)

of the Securities Exchange Act of 1934 (15 U.S.C. 78n-1(a)(2)) shall provide means whereby

the person solicited is afforded an opportunity to specify by boxes a choice among 1, 2 or 3

years, or abstain.

7. Amend §240.14a-6 by:

(a) removing “and/or” at the end of paragraph (a)(6);

(b) revising paragraph (a)(7);

(c) adding paragraph (a)(8).


§240.14a-6 Filing requirements.

(a) * * *

(7) A vote to approve the compensation of executives as required pursuant to section

14A(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78n-1(a)(1)) and §240.14a-

21(a) of this chapter, or pursuant to section 111(e)(1) of the Emergency Economic

Stabilization Act of 2008 (12 U.S.C. 5221(e)(1)) and §240.14a-20 of this chapter; and/or

(8) A vote to determine the frequency of shareholder votes to approve the compensation

of executives as required pursuant to Section 14A(a)(2) of the Securities Exchange Act of

1934 (15 U.S.C. 78n-1(a)(2)) and §240.14a-21(b) of this chapter.

8. Amend §240.14a-8 by adding Note to paragraph (i)(10) to read as follows:

§240.14a-8 Shareholder proposals.

* * * * *

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(i) * * *

(10) * * *

Note to paragraph (i)(10): A company may exclude, as substantially implemented, a

shareholder proposal that would provide an advisory vote or seek future advisory votes to

approve the compensation of executives as disclosed pursuant to Item 402 of Regulation S-K

(§229.402 of this chapter) or any successor to Item 402 (a “say-on-pay” vote) or that relates

to the frequency of say-on-pay votes, provided the company has adopted a policy on the


recent shareholder vote required by §240.14a-21(b) of this chapter.

9. Add §240.14a-21 to read as follows:

§240.14a-21 Shareholder approval of executive compensation, frequency of votes for approval of executive compensation and shareholder approval of golden parachute compensation.

(a) If a solicitation is made by a registrant and the solicitation relates to an annual or

other meeting of shareholders for which the rules of the Commission require executive

compensation disclosure pursuant to Item 402 of Regulation S-K (§229.402 of this chapter),

the registrant shall, for the first annual or other meeting of shareholders on or after January

21, 2011 and not less frequently than once every 3 years thereafter, include a separate

resolution subject to shareholder advisory vote to approve the compensation of its named

executive officers, as disclosed pursuant to Item 402 of Regulation S-K.

(b) If a solicitation is made by a registrant and the solicitation relates to an annual or

other meeting of shareholders for which the rules of the Commission require executive

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compensation disclosure pursuant to Item 402 of Regulation S-K (§229.402 of this chapter),

the registrant shall, for the first annual or other meeting of shareholders on or after January

21, 2011 and not less frequently than once every 6 years thereafter, include a separate

resolution subject to shareholder advisory vote as to whether the shareholder vote required by

paragraph (a) of this section should occur every 1, 2 or 3 years. Registrants required to

provide a separate shareholder vote pursuant to §240.14a-20 of this chapter shall include the

separate resolution required by this section for the first annual or other meeting of

shareholders after the registrant has repaid all obligations arising from financial assistance

provided under the TARP, as defined in section 3(8) of the Emergency Economic

Stabilization Act of 2008 (12 U.S.C. 5202(8)), and not less frequently than once every 6

years thereafter.

(c) If a solicitation is made by a registrant for a meeting of shareholders at which

shareholders are asked to approve an acquisition, merger, consolidation or proposed sale or

other disposition of all or substantially all the assets of the registrant, the registrant shall

provide a separate shareholder vote to approve any agreements or understandings and

compensation disclosed pursuant to Item 402(t) of Regulation S-K (§229.402(t) of this

chapter), unless such agreements or understandings have been subject to a shareholder

advisory vote under paragraph (a) of this section. Consistent with section 14A(b) of the

Exchange Act (15 U.S.C. 78n-1(b)), any agreements or understandings between an acquiring

company and the named executive officers of the registrant, where the registrant is not the

acquiring company, are not required to be subject to the separate shareholder advisory vote

under this paragraph.

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Instructions to §240.14a-21:

1. Disclosure relating to the compensation of directors required by Item 402(k) and

Item 402(r) of Regulation S-K (§229.402(r) of this chapter) is not subject to the shareholder

vote required by paragraph (a) of this section. If a registrant includes disclosure pursuant to

Item 402(s) of Regulation S-K (§229.402(s) of this chapter) about the registrant’s

compensation policies and practices as they relate to risk management and risk-taking

incentives, these policies and practices would not be subject to the shareholder vote required

by paragraph (a) of this section. To the extent that risk considerations are a material aspect

of the registrant’s compensation policies or decisions for named executive officers, the

registrant is required to discuss them as part of its Compensation Discussion and Analysis

under §229.402(b) of this chapter, and therefore such disclosure would be considered by

shareholders when voting on executive compensation.

2. If a registrant includes disclosure of golden parachute compensation arrangements

pursuant to Item 402(t) (§229.402(t) of this chapter) in an annual meeting proxy statement,

such disclosure would be subject to the shareholder vote required by paragraph (a) of this

section.

3. Registrants that are smaller reporting companies entitled to provide scaled

disclosure in accordance with Item 402(l) of Regulation S-K (§229.402(l) of this chapter) are

not required to include a Compensation Discussion and Analysis in their proxy statements in

order to comply with this section. For smaller reporting companies, the vote required by

paragraph (a) of this section must be to approve the compensation of the named executive

117

officers as disclosed pursuant to Item 402(m) through (q) of Regulation S-K (§229.402(m)

through (q) of this chapter).

10. Amend §240.14a-101 by:

(a) removing the dash that appears before paragraph (a) of Item 5 and adding in its

place an open parenthesis;

(b) adding paragraph (a)(5) of Item 5;

(c) adding paragraph (b)(3) of Item 5;

(d) adding Item 24.


§240.14a-101 Schedule 14A. Information required in proxy statement.

SCHEDULE 14A INFORMATION

* * * * *

Item 5. Interest of Certain Persons in Matters to Be Acted Upon.

(a) * * *

(5) If the solicitation is made on behalf of the registrant, furnish the information required

by Item 402(t) of Regulation S-K (§229.402(t) of this chapter).

* * * * *

(b) * * *

(3) If the solicitation is made on behalf of the registrant, furnish the information required

by Item 402(t) of Regulation S-K (§229.402(t) of this chapter).

118

* * * * *

Item 24. Shareholder Approval of Executive Compensation. Registrants required to

provide any of the separate shareholder votes pursuant to §240.14a-21 of this chapter shall

disclose that they are providing each such vote as required pursuant to section 14A of the

Securities Exchange Act (15 U.S.C. 78n-1), and briefly explain the general effect of each

vote, such as whether each such vote is non-binding.

11. Amend §240.14c-101 by adding paragraph (c) of Item 3.


§240.14c-101 Schedule 14C. Information required in information statement.

SCHEDULE 14C INFORMATION

* * * * *

Item 3. * * *

(c) Furnish the information required by Item 402(t) of Regulation S-K (§229.402(t)

of this chapter).

12. Amend §240.14d-101 by revising Item 8 to add the words “and (c)” after “Item

1011(b)”.

PART 249 -- FORMS, SECURITIES EXCHANGE ACT OF 1934

13. The authority citation for part 249 is amended by adding authority for §308a and

§310 to read as follows:

Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; and 18 U.S.C. 1350, unless

otherwise noted. * * * * *

119

Section 249.308a is also issued under sec. 951, Pub. L. 111-203, 124 Stat. 1376.


* * * * *

14. Amend Form 10-Q (referenced in §249.308a) by adding paragraph (c) to Item 5

in Part II to read as follows:

Note: The text of Form 10-Q does not, and this amendment will not, appear in the Code

of Federal Regulations.

Form 10-Q

* * * * *

Part II – OTHER INFORMATION

* * * * *

Item 5. Other Information.

* * * * *

(c) If an annual or other meeting of shareholders relating to the election of directors

has occurred during the period covered by this report at which shareholders voted on the

frequency of shareholder votes on the compensation of executives as required by section 14A

of the Securities Exchange Act of 1934 (15 U.S.C. 78n-1), disclose the company’s decision

in light of such vote as to how frequently the company will include a shareholder vote on the

compensation of executives for the six years subsequent to such meeting.

120

15. Amend Form 10-K (referenced in §249.310) by adding a second sentence to

Item 9B in Part II to read as follows:

Note: The text of Form 10-K does not, and this amendment will not, appear in the

Code of Federal Regulations.

Form 10-K

* * * * *

Part II – Other Information

* * * * *

Item 9B. Other Information.

(a) * * * If an annual or other meeting of shareholders relating to the election of

directors has occurred during the fourth fiscal quarter in the period covered by this report at

which shareholders voted on the frequency of shareholder votes on the compensation of

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executives as required by section 14A of the Securities Exchange Act of 1934 (15 U.S.C.

78n-1), disclose the company’s decision in light of such vote as to how frequently the

company will include a shareholder vote on the compensation of executives for the six years

subsequent to such meeting.

* * * * *

By the Commission.

Elizabeth M. Murphy Secretary

Date: October 18, 2010

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November 18, 2010 Elizabeth M. Murphy, Secretary U.S. Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 Re: Shareholder Approval of Executive Compensation and Golden Parachute Compensation, File No. S7-31-10 Dear Ms. Murphy: The Society of Corporate Secretaries & Governance Professionals (the “Society”) appreciates the opportunity to respond to the proposed rules on Shareholder Approval of Executive Compensation and Golden Parachute Compensation, SEC Rel. No. 34-63124 (October 18, 2010) (the “Release”) by the Securities and Exchange Commission (the “SEC” or the “Commission”). Founded in 1946, the Society is a professional membership association of over 3,100 attorneys, accountants and other governance professionals who serve approximately 2,000 companies of most every size and industry. Society members are responsible for supporting the work of corporate boards of directors, board committees, and the executive management of their companies regarding corporate governance and disclosure. Our members are generally responsible for their companies’ compliance with securities laws and regulations, corporate law, and stock exchange listing requirements. The Society generally supports the SEC’s efforts to implement the provisions of Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) relating to the advisory votes by shareholders on executive compensation (the “Say on Pay Proposal”) and on the frequency of the Say on Pay Proposal (the “Frequency Proposal”), as well as golden parachute compensation arrangements. However, as explained below, we have concerns about certain parts of the proposed rules, particularly where they go beyond the requirements of the Dodd-Frank Act. I. WE COMMEND THE STAFF FOR ITS GUIDANCE ON NOT TRIGGERING A

PRELIMINARY PROXY REQUIREMENT The Society strongly agrees with the Commission’s proposed amendment to Rule 14a-6(a) to add Say on Pay Proposals and Frequency Proposals to the list of items that do not trigger the filing of a preliminary proxy statement. We agree with the Commission that because these items are required of all companies, they are similar to the other items listed in Rule 14a-6(a) that do not require a preliminary filing. In addition, requiring preliminary proxy filings by all companies because of these advisory votes would impose additional costs and unnecessary administrative burdens on both companies and the Commission.

2

In addition, the Society commends the Commission for providing the transition guidance in the Release stating that until the SEC takes final action to implement Section 14A, it will not object if companies do not file preliminary proxy materials if the only matters that would require such filings are these advisory votes (or other items specified in Rule 14a-6(a)). This guidance is timely and very helpful to many Society members, and it will minimize confusion on this issue as these new rules are finalized and implemented. II. DISCLOSURE REGARDING RESPONSE TO PREVIOUS SAY ON PAY

PROPOSALS SHOULD NOT BE REQUIRED

A. The Commission should not expand the disclosure required in the Compensation Discussion and Analysis because it would not provide meaningful information to investors.

The Proposal would amend Item 402(b) of Regulation S-K to require companies to address in the Compensation Discussion & Analysis (“CD&A”) whether, and if so how, their compensation policies and decisions have taken into account the results of previous Say on Pay Proposals. We do not believe that this disclosure requirement would be useful to investors and are concerned that it would either (1) generate meaningless boilerplate disclosure, or (2) deem this information “material” regardless of whether or not it is. We note that Instruction 3 to Item 402(b) states, in part, that the CD&A should “focus on the material principles underlying the registrant's executive compensation policies and decisions and the most important factors relevant to analysis of those policies and decisions. The Compensation Discussion and Analysis shall reflect the individual circumstances of the registrant and shall avoid boilerplate language” (emphasis added). Shareholder support for management proposed advisory votes on executive compensation has generally been very high, suggesting that the vast majority of companies would have nothing to disclose in response to this requirement -- or worse they would feel compelled to disclose the absence of anything to disclose. We are concerned that the proposed amendments to Item 402(b) would in fact result in precisely more boilerplate for a large number of companies and therefore undermine the objectives of this Instruction.

Second, the proposed amendment is unnecessary because material information relating to compensation of executives is already mandated. Instruction 1 to Item 402(b) states “The purpose of the Compensation Discussion and Analysis is to provide to investors material information that is necessary to an understanding of the registrant's compensation policies and decisions regarding the named executive officers.” (emphasis added). To the extent any changes in a company’s compensation arrangements were material and came about as a result of a shareholder Say on Pay vote, discussions of such changes in the CD&A would likely refer to such vote.

Finally, as noted in the Release, this proposed new disclosure is not required by the Dodd-Frank Act. Even more noteworthy, disclosure of a company’s response to any other advisory non-binding vote (e.g., shareholder proposals under Rule 14a-8) is not required to be

3

discussed the next year’s proxy statement. The Release does not suggest any reason to treat the advisory vote on Say on Pay any differently than other non-binding votes.

B. If the Commission does expand the required CD&A disclosure, it should be

included in Item 402(b)(2) and only be required with regard to the company’s most recent Say on Pay Proposal.

In the event that the SEC decides to require Item 402(b) disclosure of the consideration of the results of the Say on Pay Proposal, the Society recommends that the new disclosure be addressed in Item 402(b)(2) as a non-exclusive example of information that should be addressed, depending upon materiality under the individual facts and circumstances, and not in Item 402(b)(1) as a mandatory principles-based topic. As noted above, we believe this approach would eliminate the potential for boilerplate disclosure.

We also note that in the event that the Say on Pay Proposal receives less than majority support, it is likely that an issuer would need to address this result in the following year’s discussion of its compensation policies.

Alternatively, if the SEC includes the new requirement in the final rules as a required disclosure under Item 402(b)(1), we believe it should only be required if the Say on Pay Proposal does not receive majority support at the time it was most recently submitted to a shareholder vote.

Finally, any requirement for CD&A disclosure of the company’s consideration of previous votes on the Say on Pay Proposals should relate only to the time such proposal was most recently submitted to shareholders. Requiring disclosure about the company’s consideration of earlier shareholder advisory votes would only increase the length and density of the CD&A, making it more difficult for shareholders’ review. We do not believe that a lengthy and potentially confusing discussion of the results of prior advisory votes is warranted, and in any event such disclosure may no longer be relevant. If the results of earlier shareholder advisory votes are material to the decisions made by the company’s compensation committee, disclosure would already be required under the existing rules. III. ITEM 24 OF SCHEDULE 14A WOULD PROVIDE NO MEANINGFUL

DISCLOSURE TO INVESTORS Proposed Item 24 of Schedule 14A would require companies to disclose that they are providing the Say on Pay Proposal and the Frequency Proposal because they are required to do so under Section 14A of the Securities Exchange Act and to briefly explain the general effect of the votes. We do not believe that this type of disclosure would provide additional meaningful information to investors (e.g., “We are providing for a shareholder vote on this item because we are required to do so.”). Instead, the Society believes that this requirement will merely result in boilerplate disclosure. Companies make numerous disclosures and routinely hold shareholder votes as required by applicable rules without having to state that those disclosures or votes are mandatory. We do

4

not see any need to require companies to include such statements with regard to the Say on Pay Proposal or the Frequency Proposal. The Society believes that the types of disclosure contemplated by proposed Item 24 would tend to result in the addition of boilerplate language to the proxy statement that would not contain meaningful information to investors. While a similar type of disclosure is currently required of companies that have received public funds through the TARP program, proposed Item 24 would apply broadly to all companies regardless of their status. Finally, the current proxy disclosure rules (Item 21) already provide for disclosure on the vote required for approval of each item of business at the shareholders’ meeting. Companies have the discretion to use that item to describe the non-binding nature of the Say on Pay Proposal and the Frequency Proposal. For the reasons stated above, the Commission should not include new Item 24 in the final rules. Instead, companies should have flexibility in disclosing the nature and effect of these advisory votes on executive compensation. IV. COMPANIES SHOULD BE ALLOWED TO PROPOSE THE FREQUENCY VOTE

IN A THREE CHOICE FORMAT The Society is concerned that for many companies the four choice approach proposed with regard to the vote on the Frequency Proposal – i.e., shareholders would be offered a choice of four boxes -- 1 year, 2 years, 3 years and abstain, may be a problem for some of the participants in the proxy voting system. There have been varying and sometimes conflicting reports about whether all proxy service providers will be able to reprogram their systems in time to enable the four choice selection for the upcoming proxy season that begins in about two months. Even if all service providers can accommodate the four choice approach, conversion to a four box proxy card will be time consuming and costly, and the increased costs will ultimately be borne by the company and its shareholders. Moreover, there are alternatives that would not require conversion to the four choice format and therefore would not result in similar cost increases for reprogramming. For this reason, the Society recommends that the SEC allow companies flexibility to choose the format that best fits their particular situation. The following is an example of an alternative that may be more practical for some companies and service providers.

Do you have a preference as to the frequency of the advisory vote on executive compensation? Yes ____ No ____ Abstain ___ If you voted yes above, how frequently do you want an advisory vote on executive compensation? [Management recommends _________]

5

Every year ____ Every 2 years ___ Every 3 years ___

Under this formulation, vote tabulators can use the three option format that is currently used and with which shareholders are familiar. We understand that this type of cascading voting is not optimal but many of our members have used even more complicated cascading votes in merger proxies without confusion or other significant problems. The significant benefit of this approach is that service providers will not have to reprogram their existing systems. V. ADVISORY VOTES ON ANY PART OF THE ITEM 402 DISCLOSURES SHOULD

BE EXCLUDED The Commission should amend Rule 14a-8, as proposed, but should include language in the new Note expressly stating that shareholder proposals asking for advisory votes on any part of the disclosures required under Item 402 would be excludable. We make this point because while the phrasing of the proposed Note to paragraph (i)(10) is clear that a proposal to approve all of the compensation of executives as disclosed pursuant to Item 402 may be excluded if the frequency proviso is met, we are nonetheless concerned that the proposed phrasing might be construed so as not to permit the exclusion, as substantially implemented, of a shareholder proposal that would provide an advisory vote to approve only a portion of the compensation of executives as disclosed pursuant to Item 402. Thus, if Rule 14a-8(i)(10) were limited to shareholder proposals relating to companies’ executive compensation disclosures in their entirety, a proposal seeking a separate vote on a component of the disclosure – for example, the compensation decisions relating to the CEO, or with respect to just the Summary Compensation Table, or limited to the CD&A – might not be excludable as substantially implemented even though the subject matter would be included as part of the required advisory vote on executive compensation. As a result, companies and shareholders could be subjected to unnecessary and duplicative votes, which would frustrate the purpose of amending Rule 14a-8. The Society agrees that it is both necessary and appropriate to prescribe a standard for excluding shareholder proposals under Rule 14a-8(i)(10) on the basis of “substantial implementation” of the Say on Pay Proposal and the Frequency Proposal. SEC rules implementing Dodd-Frank should provide a basis for excluding shareholder proposals that cover those same subjects; otherwise, requiring management to include such proposals in the proxy would be unnecessary and the Frequency Proposal would be meaningless. We believe the plurality standard, as stated in the proviso in the proposed Note to paragraph (i)(10) to Rule 14a-8, is an appropriate basis for excluding shareholder proposals on executive compensation and frequency as substantially implemented. That standard properly reflects the fact that because there are three choices of frequency, a plurality vote, and not a majority vote, may often result. Any higher standard, such as one based on the majority of votes cast, would unduly limit the availability of Rule 14a-8(i)(10). We further believe that, as proposed, Rule 14a-8 should permit companies that meet the plurality standard to exclude any shareholder proposal that provides or seeks another frequency vote. Rule 14a-8 would thereby enable companies to prevent duplicative votes

6

relating to the frequency with which shareholders are asked to vote on executive compensation as disclosed. To clarify its scope, the Society recommends that the Note to paragraph (i)(10) of Rule 14a-8, as adopted, allow the exclusion of shareholder proposals based on the most recent Frequency Vote, regardless of whether such vote was required by Rule 14A-21(b). In other words, the Note as proposed appears to unintentionally exclude from its scope Frequency Proposals that were conducted on a more frequent basis than mandated by the new rules. In addition, the note should also state that a company may exclude, as substantially implemented, any shareholder proposal that would provide an advisory vote or seek future advisory votes to approve the compensation of executive officers as disclosed pursuant to Item 402 of Regulation S-K “or any part of such disclosure,” if the company has adopted a policy on the frequency of advisory votes on executive compensation as described in the Note. This recommended wording would make clear that companies meeting the plurality vote standard may exclude shareholder proposals that provide or seek a vote on all or any part of the compensation of executives that has been disclosed. It would not permit the exclusion of a proposal that falls outside the scope of the Say on Pay Proposal such as a shareholder proposal seeking a shareholder vote on changes in compensation policies or on future compensation. VI. FREQUENCY VOTES ARE ADVISORY AND NEW DISCLOSURE AS TO A

COMPANY’S RESPONSE SHOULD NOT BE REQUIRED The Society believes that the Commission should not amend Form 10-K and Form 10-Q, as proposed, to require that companies disclose their decisions on the frequency of future Say on Pay Proposals in their Forms 10-Q for the quarter in which the annual meeting takes place (or in the Form 10-K if the annual meeting takes place in the fourth quarter). First, this would be an unprecedented and significant departure from the traditional manner in which disclosure in response to other non-binding shareholder votes is handled. Under Section 951 of the Dodd-Frank Act, the Frequency Proposal is explicitly non-binding. For many years companies have asked their shareholders to cast non-binding votes on shareholder proposals under Rule 14a-8. Companies have had the discretion to determine the timing and substance of any disclosure about their responses to such advisory votes. The Release cites no reason why a new disclosure obligation should be imposed on companies in periodic reports with regard to this new advisory vote. We assume that the obligation is proposed to give potential proponents notice of the company’s position with respect to the Frequency Proposal in an effort to reduce the likelihood of conflicting shareholder proposals (that will be excludable under Rule 14a-8, as proposed to be amended). However, we see no reason why the Frequency Proposal – unlike any other advisory vote – should trigger a mandatory disclosure requirement at all. We also note that no other Annual Meeting agenda items are required to be disclosed so far in advance, and we do not see any reason why the Frequency vote should be treated any differently.

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Second, the Society is also very concerned that requiring companies to make and disclose their decisions on the Frequency Proposal in the short time frame would deprive boards and their committees of the ability to carefully consider the vote, available alternatives, and the best interests of their companies. As a practical matter, the proposed rules would require that, within a period of time as short as three or four weeks, management, the board and/or one or more board committees would have to (i) review the voting results, (ii) assess their significance, (iii) discuss the available alternatives internally and, as appropriate, with external advisors and investors, (iv) reach a decision, and (v) meet to act on the decision. In addition, time would be needed to draft the disclosure once the board and/or its committees reach their decisions and act on them.1 The short time frame also seems to assume that the shareholders will express a clear preference on the Frequency Proposal, thereby giving the board a “mandate” as to the requested timing for future Say on Pay Proposals. However, it is quite possible that the Frequency Proposal will lead to inconclusive results, which may necessitate more extensive deliberations. As created by Section 951 of the Dodd-Frank Act, Section 14A of the Securities Exchange Act states that the non-binding Frequency Proposal “may not be construed [] as overruling a decision by such company or board of Directors” or creating or changing fiduciary duties by the company or board.2 This language does not support imposing a significant burden on the company or board – i.e., an obligation to make a decision within a specified (and perhaps, unduly short) period of time and to publicly disclose that decision in the company’s next quarterly or annual report filed with the SEC. We submit that the best approach is the one that companies currently follow with regard to all advisory shareholder votes – i.e., they use their discretion to decide the timing of, and disclosure method for, any company decisions made in response to a non-binding shareholder vote. It is our view that on Frequency Proposal votes, a company would likely disclose its response no later than in the following year’s proxy statement. In summary, the requirement that companies disclose their decisions about their anticipated responses to the Frequency Vote in the next periodic report is inconsistent with the fact that no other advisory votes are required to be disclosed, and in any event, such requirement would be unduly burdensome to companies, their Boards, and management.

1 As an example, if a company has its annual meeting on June 28, 2010, the Proposal would require that a final decision be made by the company and disclosed in the Form 10-Q that the company files no later than August 9, 2010,, which is only six few weeks after the meeting. 2 Securities Exchange Act, Section 14A(c)(1) (2) and (3).

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VII. SPECIFIC RESOLUTION LANGUAGE FOR SAY ON PAY AND FREQUENCY PROPOSALS

A. The Commission should include non-exclusive examples of acceptable “separate resolution” language for the Say on Pay Proposal.

The Release requests input on whether more specific requirements should be included in the new rules regarding the manner in which companies should present the Say on Pay Proposal and the Frequency Proposal. The Release expressly asks if the SEC should designate the specific language to be used and/or require companies to frame these two advisory votes in the form of a resolution (and, if so, what specific language or form of resolution should be used). To date, management Say on Pay Proposals have generally included a specific resolution within the discussion of the proposal, though the specific wording of the resolutions has varied. Examples of these include the following:

RESOLVED that the shareholders approve the compensation of the company’s named executive officers disclosed in the Compensation Discussion and Analysis, the compensation tables and the related narrative disclosures included in this proxy statement. OR RESOLVED, that the shareholders approve the compensation of the company’s named executive officers as disclosed in this proxy statement [pursuant to Item 402 of Regulation S-K].

While the Society believes that the Commission should not mandate any specific language for the separate resolution in the Say on Pay Proposal, it might be helpful if the final release includes non-exclusive examples of resolution language that complies with the rules, such as the resolutions above.

B. The Commission should include non-exclusive examples of acceptable “separate resolution” language for the Frequency Proposal or clarify in the final rule that this proposal itself satisfies the “separate resolution” requirement.

In contrast to the Say on Pay Proposal, the Frequency Proposal required by proposed Rule 14a-21(b) does not easily lend itself to formulation as a resolution because shareholders are being asked to select one of three possible frequencies. Therefore, we suggest that the Commission either (i) clarify in the final rules that the “separate resolution” requirement is satisfied by companies including the Frequency Proposal in their proxy statements without the need for any additional specific resolution in that proposal or (ii) provide non-exclusive examples of “separate resolution” language in the final rule release that would meet the rule’s requirements with regard to the Frequency Proposal.

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VIII. THE PROPOSED SCOPE OF THE GOLDEN PARACHUTE DISCLOSURE SHOULD BE LIMITED

A. The Commission should clarify the golden parachute provisions to require

disclosure only of arrangements triggered by the transaction being voted upon by the shareholders.

The Dodd-Frank Act requires that any person making a solicitation for shareholder approval of a merger or similar transaction must disclose and seek shareholder approval of golden parachute arrangements of such person that are based on or related to the transaction. While we believe that the SEC’s proposed rule intends to follow the Congressional intent on this issue, the text of the proposed rule itself seems ambiguous and suggests that disclosure is required of any golden parachute arrangement, regardless of whether the arrangement is triggered or otherwise related to the transaction that is the subject of the solicitation. This is inconsistent with the discussion in the Release, which states that “Item 402(t) would require disclosure of all golden parachute compensation relating to the merger among the target and acquiring companies and the named executive officers of each in order to cover the full scope of golden parachute compensation applicable to the transaction” (emphasis added).3 However, the proposed rule text creates confusion that should be clarified by the SEC in the final rule text.

Specifically, we suggest the following changes in bold below to the text of the proposed rule:

Item 402(t)(1)(ii) Any proxy or consent solicitation that includes disclosure under Item 14 of Schedule 14A (§240.14a-101) pursuant to Note A of Schedule 14A, with respect to each named executive officer of the acquiring company and the target company, provide the information specified in paragraphs (t)(2) and (3) of this section regarding any agreement or understanding, whether written or unwritten, between such named executive officer and the acquiring company or target company, concerning any type of compensation, whether present, deferred or contingent, that is based on or otherwise relates to an the acquisition, merger, consolidation, sale or other disposition of all or substantially all assets of the company that, in each case, is the subject of such proxy or consent solicitation.

B. Disclosure of golden parachute arrangements of an acquirer’s named executive officers should be required only if the acquirer’s shareholders are voting on the transaction at issue.

The Society believes that it is not appropriate to require disclosure of golden parachute arrangements of an acquiring company’s named executive officers (“NEOs”) that are triggered by a transaction when the acquirer’s shareholders are not required to vote on the

3 Release, page 39. This concept is repeated throughout the Release (see pages 45, 47 and 89).

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transaction. By requiring disclosure of an acquirer’s golden parachute arrangements when the only shareholders voting on the transaction are those of the target company, the SEC is proposing that companies include more disclosure than is required by the Dodd-Frank Act. The disclosure concerning the acquirer’s parachutes would be irrelevant and potentially confusing. The disclosure required under the Dodd-Frank Act is designed to provide relevant information so that target company shareholders can make an informed decision on the required advisory vote (or an informed decision on, among other things, whether to tender their shares in a tender offer). The Release seems to acknowledge the possibility or likelihood of confusion by proposing language to clarify which tabular data relate to the target company NEOs and which relate to the acquiring company’s NEOs. In short, in a merger solicitation, voting shareholders should only be presented with the data necessary to cast an informed vote on the golden parachute arrangements of their company’s NEOs that are triggered by the transaction at issue (or any arrangement that the target has with the acquirer’s NEOs as required by the Dodd-Frank Act). Requiring more disclosure would likely confuse shareholders about the scope of their advisory vote and would add lengthy and complex disclosures to documents that are already cumbersome. IX. SMALLER REPORTING COMPANIES SHOULD BE EXEMPT FROM SECTION

14A

The Society believes that smaller reporting companies that comply with the scaled disclosure rules under Item 402 could be more likely to receive an unfavorable shareholder vote on the Say on Pay Proposal and Frequency Proposal as a result of their reduced level of required compensation disclosure.

Notwithstanding the instruction to new Rule 14a-21 that specifies that this rule does not change the scaled disclosure requirements for smaller reporting companies and that such companies would not be required to provide a CD&A in order to comply with Rule 14a-21, we believe that smaller reporting companies would nonetheless feel compelled to include CD&A to provide additional disclosure so as to reduce the potential for an unfavorable shareholder vote. Smaller reporting companies never have the opportunity to review the voting recommendation reports of proxy advisory firms in advance. Often, these companies do not have access to these reports even after they are issued and thus lack the knowledge of any errors and the opportunity to request that advisory firms make clarifications or corrections of erroneous facts or analysis.

Item 402(o) of Regulation S-K requires smaller reporting companies to provide a narrative disclosure of any material factors necessary to an understanding of the information disclosed in the Summary Compensation Table. As Item 402(o) was not intended to provide the perspective of the company’s board of directors on compensation objectives and policies (as is the intended purpose of the CD&A), we believe that smaller reporting companies that provide information consistent with their existing disclosure requirements would not provide sufficient information for shareholders to understand compensation objectives and policies in a way to vote favorably on the Say on Pay Proposal and Frequency Proposal.

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The Staff noted in adopting executive compensation disclosure requirements applicable to smaller reporting companies that the Commission has recognized that the executive compensation arrangements of these issuers typically are less complex than those of other public companies.4 However, the unintended effect of subjecting smaller reporting companies to Rule 14a-21 would be to eliminate the most meaningful relief of the scaled disclosure requirements adopted in the 2006 Executive Compensation Release. Further, placing smaller reporting companies in the position of being compelled to include CD&A (or CD&A-type disclosure) to communicate the rationales for their compensation policies so as to reduce the potential for unfavorable votes on the Say on Pay Proposal and Frequency Proposal would be unduly burdensome to smaller reporting companies.

Summary For all of the foregoing reasons, we respectfully request that the SEC modify the proposed rules as explained above. We appreciate the opportunity to comment on this important proposal and would be happy to provide you with further information to the extent you would find it useful. Respectfully submitted, /S/ NEILA B. RADIN By: Neila B. Radin Chair, Securities Law Committee The Society of Corporate Secretaries & Governance Professionals cc: Mary L. Schapiro, Chairman Luis A. Aguilar, Commissioner Kathleen L. Casey, Commissioner Troy A. Paredes, Commissioner Elisse B. Walter, Commissioner Meredith Cross, Director, Division of Corporation Finance Felicia Kung, Chief, Office of Rulemaking, Division of Corporation Finance

4 See Executive Compensation and Related Person Disclosure, Release No. 33-8732A (Aug. 29, 2006) [71 FR 53158] (hereinafter, the “2006 Executive Compensation Release”) at Section II.D.1.

H. R. 4173

One Hundred Eleventh Congress of the

United States of America AT THE SECOND SESSION

Begun and held at the City of Washington on Tuesday, the fifth day of January, two thousand and ten

An Act To promote the financial stability of the United States by improving accountability

and transparency in the financial system, to end ‘‘too big to fail’’, to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE.—This Act may be cited as the ‘‘Dodd-Frank Wall Street Reform and Consumer Protection Act’’.

(b) TABLE OF CONTENTS.—The table of contents for this Act is as follows:

Sec. 1. Short title; table of contents. Sec. 2. Definitions. Sec. 3. Severability. Sec. 4. Effective date. Sec. 5. Budgetary effects. Sec. 6. Antitrust savings clause.

TITLE I—FINANCIAL STABILITY Sec. 101. Short title. Sec. 102. Definitions.

Subtitle A—Financial Stability Oversight Council Sec. 111. Financial Stability Oversight Council established. Sec. 112. Council authority. Sec. 113. Authority to require supervision and regulation of certain nonbank finan-

cial companies. Sec. 114. Registration of nonbank financial companies supervised by the Board of

Governors. Sec. 115. Enhanced supervision and prudential standards for nonbank financial

companies supervised by the Board of Governors and certain bank hold-ing companies.

Sec. 116. Reports. Sec. 117. Treatment of certain companies that cease to be bank holding companies. Sec. 118. Council funding. Sec. 119. Resolution of supervisory jurisdictional disputes among member agencies. Sec. 120. Additional standards applicable to activities or practices for financial sta-

bility purposes. Sec. 121. Mitigation of risks to financial stability. Sec. 122. GAO Audit of Council. Sec. 123. Study of the effects of size and complexity of financial institutions on cap-

ital market efficiency and economic growth.

Subtitle B—Office of Financial Research Sec. 151. Definitions. Sec. 152. Office of Financial Research established. Sec. 153. Purpose and duties of the Office. Sec. 154. Organizational structure; responsibilities of primary programmatic units. Sec. 155. Funding. Sec. 156. Transition oversight.

H. R. 4173—524

Subtitle E—Accountability and Executive Compensation

SEC. 951. SHAREHOLDER VOTE ON EXECUTIVE COMPENSATION DISCLOSURES.

The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 14 (15 U.S.C. 78n) the fol-lowing:

‘‘SEC. 14A. SHAREHOLDER APPROVAL OF EXECUTIVE COMPENSATION.

‘‘(a) SEPARATE RESOLUTION REQUIRED.— ‘‘(1) IN GENERAL.—Not less frequently than once every 3

years, a proxy or consent or authorization for an annual or other meeting of the shareholders for which the proxy solicita-tion rules of the Commission require compensation disclosure shall include a separate resolution subject to shareholder vote to approve the compensation of executives, as disclosed pursu-ant to section 229.402 of title 17, Code of Federal Regulations, or any successor thereto.

‘‘(2) FREQUENCY OF VOTE.—Not less frequently than once every 6 years, a proxy or consent or authorization for an annual or other meeting of the shareholders for which the proxy solici-tation rules of the Commission require compensation disclosure shall include a separate resolution subject to shareholder vote to determine whether votes on the resolutions required under paragraph (1) will occur every 1, 2, or 3 years.

‘‘(3) EFFECTIVE DATE.—The proxy or consent or authoriza-tion for the first annual or other meeting of the shareholders occurring after the end of the 6-month period beginning on the date of enactment of this section shall include—

‘‘(A) the resolution described in paragraph (1); and ‘‘(B) a separate resolution subject to shareholder vote

to determine whether votes on the resolutions required under paragraph (1) will occur every 1, 2, or 3 years.

‘‘(b) SHAREHOLDER APPROVAL OF GOLDEN PARACHUTE COM-PENSATION.—

‘‘(1) DISCLOSURE.—In any proxy or consent solicitation material (the solicitation of which is subject to the rules of the Commission pursuant to subsection (a)) for a meeting of the shareholders occurring after the end of the 6-month period beginning on the date of enactment of this section, at which shareholders are asked to approve an acquisition, merger, consolidation, or proposed sale or other disposition of all or substantially all the assets of an issuer, the person making such solicitation shall disclose in the proxy or consent solicita-tion material, in a clear and simple form in accordance with regulations to be promulgated by the Commission, any agree-ments or understandings that such person has with any named executive officers of such issuer (or of the acquiring issuer, if such issuer is not the acquiring issuer) concerning any type of compensation (whether present, deferred, or contingent) that is based on or otherwise relates to the acquisition, merger, consolidation, sale, or other disposition of all or substantially all of the assets of the issuer and the aggregate total of all such compensation that may (and the conditions upon which

H. R. 4173—525

it may) be paid or become payable to or on behalf of such executive officer.

‘‘(2) SHAREHOLDER APPROVAL.—Any proxy or consent or authorization relating to the proxy or consent solicitation mate-rial containing the disclosure required by paragraph (1) shall include a separate resolution subject to shareholder vote to approve such agreements or understandings and compensation as disclosed, unless such agreements or understandings have been subject to a shareholder vote under subsection (a). ‘‘(c) RULE OF CONSTRUCTION.—The shareholder vote referred

to in subsections (a) and (b) shall not be binding on the issuer or the board of directors of an issuer, and may not be construed—

‘‘(1) as overruling a decision by such issuer or board of directors;

‘‘(2) to create or imply any change to the fiduciary duties of such issuer or board of directors;

‘‘(3) to create or imply any additional fiduciary duties for such issuer or board of directors; or

‘‘(4) to restrict or limit the ability of shareholders to make proposals for inclusion in proxy materials related to executive compensation. ‘‘(d) DISCLOSURE OF VOTES.—Every institutional investment

manager subject to section 13(f) shall report at least annually how it voted on any shareholder vote pursuant to subsections (a) and (b), unless such vote is otherwise required to be reported publicly by rule or regulation of the Commission.

‘‘(e) EXEMPTION.—The Commission may, by rule or order, exempt an issuer or class of issuers from the requirement under subsection (a) or (b). In determining whether to make an exemption under this subsection, the Commission shall take into account, among other considerations, whether the requirements under sub-sections (a) and (b) disproportionately burdens small issuers.’’. SEC. 952. COMPENSATION COMMITTEE INDEPENDENCE.

(a) IN GENERAL.—The Securities Exchange Act of 1934 (15 U.S.C. 78 et seq.) is amended by inserting after section 10B, as added by section 753, the following: ‘‘SEC. 10C. COMPENSATION COMMITTEES.

‘‘(a) INDEPENDENCE OF COMPENSATION COMMITTEES.— ‘‘(1) LISTING STANDARDS.—The Commission shall, by rule,

direct the national securities exchanges and national securities associations to prohibit the listing of any equity security of an issuer, other than an issuer that is a controlled company, limited partnership, company in bankruptcy proceedings, open- ended management investment company that is registered under the Investment Company Act of 1940, or a foreign private issuer that provides annual disclosures to shareholders of the reasons that the foreign private issuer does not have an inde-pendent compensation committee, that does not comply with the requirements of this subsection.

‘‘(2) INDEPENDENCE OF COMPENSATION COMMITTEES.—The rules of the Commission under paragraph (1) shall require that each member of the compensation committee of the board of directors of an issuer be—

‘‘(A) a member of the board of directors of the issuer; and

‘‘(B) independent.

H. R. 4173—526

‘‘(3) INDEPENDENCE.—The rules of the Commission under paragraph (1) shall require that, in determining the definition of the term ‘independence’ for purposes of paragraph (2), the national securities exchanges and the national securities associations shall consider relevant factors, including—

‘‘(A) the source of compensation of a member of the board of directors of an issuer, including any consulting, advisory, or other compensatory fee paid by the issuer to such member of the board of directors; and

‘‘(B) whether a member of the board of directors of an issuer is affiliated with the issuer, a subsidiary of the issuer, or an affiliate of a subsidiary of the issuer. ‘‘(4) EXEMPTION AUTHORITY.—The rules of the Commission

under paragraph (1) shall permit a national securities exchange or a national securities association to exempt a particular rela-tionship from the requirements of paragraph (2), with respect to the members of a compensation committee, as the national securities exchange or national securities association deter-mines is appropriate, taking into consideration the size of an issuer and any other relevant factors. ‘‘(b) INDEPENDENCE OF COMPENSATION CONSULTANTS AND

OTHER COMPENSATION COMMITTEE ADVISERS.— ‘‘(1) IN GENERAL.—The compensation committee of an issuer

may only select a compensation consultant, legal counsel, or other adviser to the compensation committee after taking into consideration the factors identified by the Commission under paragraph (2).

‘‘(2) RULES.—The Commission shall identify factors that affect the independence of a compensation consultant, legal counsel, or other adviser to a compensation committee of an issuer. Such factors shall be competitively neutral among cat-egories of consultants, legal counsel, or other advisers and preserve the ability of compensation committees to retain the services of members of any such category, and shall include—

‘‘(A) the provision of other services to the issuer by the person that employs the compensation consultant, legal counsel, or other adviser;

‘‘(B) the amount of fees received from the issuer by the person that employs the compensation consultant, legal counsel, or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel, or other adviser;

‘‘(C) the policies and procedures of the person that employs the compensation consultant, legal counsel, or other adviser that are designed to prevent conflicts of interest;

‘‘(D) any business or personal relationship of the com-pensation consultant, legal counsel, or other adviser with a member of the compensation committee; and

‘‘(E) any stock of the issuer owned by the compensation consultant, legal counsel, or other adviser.

‘‘(c) COMPENSATION COMMITTEE AUTHORITY RELATING TO COM-PENSATION CONSULTANTS.—

‘‘(1) AUTHORITY TO RETAIN COMPENSATION CONSULTANT.—

H. R. 4173—527

‘‘(A) IN GENERAL.—The compensation committee of an issuer, in its capacity as a committee of the board of direc-tors, may, in its sole discretion, retain or obtain the advice of a compensation consultant.

‘‘(B) DIRECT RESPONSIBILITY OF COMPENSATION COM-MITTEE.—The compensation committee of an issuer shall be directly responsible for the appointment, compensation, and oversight of the work of a compensation consultant.

‘‘(C) RULE OF CONSTRUCTION.—This paragraph may not be construed—

‘‘(i) to require the compensation committee to implement or act consistently with the advice or rec-ommendations of the compensation consultant; or

‘‘(ii) to affect the ability or obligation of a com-pensation committee to exercise its own judgment in fulfillment of the duties of the compensation com-mittee.

‘‘(2) DISCLOSURE.—In any proxy or consent solicitation material for an annual meeting of the shareholders (or a special meeting in lieu of the annual meeting) occurring on or after the date that is 1 year after the date of enactment of this section, each issuer shall disclose in the proxy or consent mate-rial, in accordance with regulations of the Commission, whether—

‘‘(A) the compensation committee of the issuer retained or obtained the advice of a compensation consultant; and

‘‘(B) the work of the compensation consultant has raised any conflict of interest and, if so, the nature of the conflict and how the conflict is being addressed.

‘‘(d) AUTHORITY TO ENGAGE INDEPENDENT LEGAL COUNSEL AND OTHER ADVISERS.—

‘‘(1) IN GENERAL.—The compensation committee of an issuer, in its capacity as a committee of the board of directors, may, in its sole discretion, retain and obtain the advice of independent legal counsel and other advisers.

‘‘(2) DIRECT RESPONSIBILITY OF COMPENSATION COM-MITTEE.—The compensation committee of an issuer shall be directly responsible for the appointment, compensation, and oversight of the work of independent legal counsel and other advisers.

‘‘(3) RULE OF CONSTRUCTION.—This subsection may not be construed—

‘‘(A) to require a compensation committee to implement or act consistently with the advice or recommendations of independent legal counsel or other advisers under this subsection; or

‘‘(B) to affect the ability or obligation of a compensation committee to exercise its own judgment in fulfillment of the duties of the compensation committee.

‘‘(e) COMPENSATION OF COMPENSATION CONSULTANTS, INDE-PENDENT LEGAL COUNSEL, AND OTHER ADVISERS.—Each issuer shall provide for appropriate funding, as determined by the compensation committee in its capacity as a committee of the board of directors, for payment of reasonable compensation—

‘‘(1) to a compensation consultant; and ‘‘(2) to independent legal counsel or any other adviser to

the compensation committee.

H. R. 4173—528

‘‘(f) COMMISSION RULES.— ‘‘(1) IN GENERAL.—Not later than 360 days after the date

of enactment of this section, the Commission shall, by rule, direct the national securities exchanges and national securities associations to prohibit the listing of any security of an issuer that is not in compliance with the requirements of this section.

‘‘(2) OPPORTUNITY TO CURE DEFECTS.—The rules of the Commission under paragraph (1) shall provide for appropriate procedures for an issuer to have a reasonable opportunity to cure any defects that would be the basis for the prohibition under paragraph (1), before the imposition of such prohibition.

‘‘(3) EXEMPTION AUTHORITY.— ‘‘(A) IN GENERAL.—The rules of the Commission under

paragraph (1) shall permit a national securities exchange or a national securities association to exempt a category of issuers from the requirements under this section, as the national securities exchange or the national securities association determines is appropriate.

‘‘(B) CONSIDERATIONS.—In determining appropriate exemptions under subparagraph (A), the national securities exchange or the national securities association shall take into account the potential impact of the requirements of this section on smaller reporting issuers.

‘‘(g) CONTROLLED COMPANY EXEMPTION.— ‘‘(1) IN GENERAL.—This section shall not apply to any con-

trolled company. ‘‘(2) DEFINITION.—For purposes of this section, the term

‘controlled company’ means an issuer— ‘‘(A) that is listed on a national securities exchange

or by a national securities association; and ‘‘(B) that holds an election for the board of directors

of the issuer in which more than 50 percent of the voting power is held by an individual, a group, or another issuer.’’.

(b) STUDY AND REPORT.— (1) STUDY.—The Securities and Exchange Commission shall

conduct a study and review of the use of compensation consult-ants and the effects of such use.

(2) REPORT.—Not later than 2 years after the date of the enactment of this Act, the Commission shall submit a report to Congress on the results of the study and review required by this subsection.

SEC. 953. EXECUTIVE COMPENSATION DISCLOSURES.

(a) DISCLOSURE OF PAY VERSUS PERFORMANCE.—Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n), as amended by this title, is amended by adding at the end the following:

‘‘(i) DISCLOSURE OF PAY VERSUS PERFORMANCE.—The Commis-sion shall, by rule, require each issuer to disclose in any proxy or consent solicitation material for an annual meeting of the share-holders of the issuer a clear description of any compensation required to be disclosed by the issuer under section 229.402 of title 17, Code of Federal Regulations (or any successor thereto), including information that shows the relationship between executive compensation actually paid and the financial performance of the issuer, taking into account any change in the value of the shares of stock and dividends of the issuer and any distributions. The

H. R. 4173—529

disclosure under this subsection may include a graphic representa-tion of the information required to be disclosed.’’.

(b) ADDITIONAL DISCLOSURE REQUIREMENTS.— (1) IN GENERAL.—The Commission shall amend section

229.402 of title 17, Code of Federal Regulations, to require each issuer to disclose in any filing of the issuer described in section 229.10(a) of title 17, Code of Federal Regulations (or any successor thereto)—

(A) the median of the annual total compensation of all employees of the issuer, except the chief executive officer (or any equivalent position) of the issuer;

(B) the annual total compensation of the chief executive officer (or any equivalent position) of the issuer; and

(C) the ratio of the amount described in subparagraph (A) to the amount described in subparagraph (B). (2) TOTAL COMPENSATION.—For purposes of this subsection,

the total compensation of an employee of an issuer shall be determined in accordance with section 229.402(c)(2)(x) of title 17, Code of Federal Regulations, as in effect on the day before the date of enactment of this Act.

SEC. 954. RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION.

The Securities Exchange Act of 1934 is amended by inserting after section 10C, as added by section 952, the following: ‘‘SEC. 10D. RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION

POLICY.

‘‘(a) LISTING STANDARDS.—The Commission shall, by rule, direct the national securities exchanges and national securities associa-tions to prohibit the listing of any security of an issuer that does not comply with the requirements of this section.

‘‘(b) RECOVERY OF FUNDS.—The rules of the Commission under subsection (a) shall require each issuer to develop and implement a policy providing—

‘‘(1) for disclosure of the policy of the issuer on incentive- based compensation that is based on financial information required to be reported under the securities laws; and

‘‘(2) that, in the event that the issuer is required to prepare an accounting restatement due to the material noncompliance of the issuer with any financial reporting requirement under the securities laws, the issuer will recover from any current or former executive officer of the issuer who received incentive- based compensation (including stock options awarded as com-pensation) during the 3-year period preceding the date on which the issuer is required to prepare an accounting restatement, based on the erroneous data, in excess of what would have been paid to the executive officer under the accounting restate-ment.’’.

SEC. 955. DISCLOSURE REGARDING EMPLOYEE AND DIRECTOR HEDGING.

Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n), as amended by this title, is amended by adding at the end the following:

‘‘(j) DISCLOSURE OF HEDGING BY EMPLOYEES AND DIRECTORS.— The Commission shall, by rule, require each issuer to disclose in any proxy or consent solicitation material for an annual meeting of the shareholders of the issuer whether any employee or member

H. R. 4173—530

of the board of directors of the issuer, or any designee of such employee or member, is permitted to purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) that are designed to hedge or offset any decrease in the market value of equity securities—

‘‘(1) granted to the employee or member of the board of directors by the issuer as part of the compensation of the employee or member of the board of directors; or

‘‘(2) held, directly or indirectly, by the employee or member of the board of directors.’’.

SEC. 956. ENHANCED COMPENSATION STRUCTURE REPORTING.

(a) ENHANCED DISCLOSURE AND REPORTING OF COMPENSATION ARRANGEMENTS.—

(1) IN GENERAL.—Not later than 9 months after the date of enactment of this title, the appropriate Federal regulators jointly shall prescribe regulations or guidelines to require each covered financial institution to disclose to the appropriate Fed-eral regulator the structures of all incentive-based compensa-tion arrangements offered by such covered financial institutions sufficient to determine whether the compensation structure—

(A) provides an executive officer, employee, director, or principal shareholder of the covered financial institution with excessive compensation, fees, or benefits; or

(B) could lead to material financial loss to the covered financial institution. (2) RULES OF CONSTRUCTION.—Nothing in this section shall

be construed as requiring the reporting of the actual compensa-tion of particular individuals. Nothing in this section shall be construed to require a covered financial institution that does not have an incentive-based payment arrangement to make the disclosures required under this subsection. (b) PROHIBITION ON CERTAIN COMPENSATION ARRANGEMENTS.—

Not later than 9 months after the date of enactment of this title, the appropriate Federal regulators shall jointly prescribe regula-tions or guidelines that prohibit any types of incentive-based pay-ment arrangement, or any feature of any such arrangement, that the regulators determine encourages inappropriate risks by covered financial institutions—

(1) by providing an executive officer, employee, director, or principal shareholder of the covered financial institution with excessive compensation, fees, or benefits; or

(2) that could lead to material financial loss to the covered financial institution. (c) STANDARDS.—The appropriate Federal regulators shall—

(1) ensure that any standards for compensation established under subsections (a) or (b) are comparable to the standards established under section of the Federal Deposit Insurance Act (12 U.S.C. 2 1831p–1) for insured depository institutions; and

(2) in establishing such standards under such subsections, take into consideration the compensation standards described in section 39(c) of the Federal Deposit Insurance Act (12 U.S.C. 1831p– 9 1(c)). (d) ENFORCEMENT.—The provisions of this section and the regu-

lations issued under this section shall be enforced under section

H. R. 4173—531

505 of the Gramm-Leach-Bliley Act and, for purposes of such sec-tion, a violation of this section or such regulations shall be treated as a violation of subtitle A of title V of such Act.

(e) DEFINITIONS.—As used in this section— (1) the term ‘‘appropriate Federal regulator’’ means the

Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Board of Directors of the Federal Deposit Insurance Corporation, the Director of the Office of Thrift Supervision, the National Credit Union Administration Board, the Securities and Exchange Commis-sion, the Federal Housing Finance Agency; and

(2) the term ‘‘covered financial institution’’ means— (A) a depository institution or depository institution

holding company, as such terms are defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813);

(B) a broker-dealer registered under section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o);

(C) a credit union, as described in section 19(b)(1)(A)(iv) of the Federal Reserve Act;

(D) an investment advisor, as such term is defined in section 202(a)(11) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11));

(E) the Federal National Mortgage Association; (F) the Federal Home Loan Mortgage Corporation; and (G) any other financial institution that the appropriate

Federal regulators, jointly, by rule, determine should be treated as a covered financial institution for purposes of this section.

(f) EXEMPTION FOR CERTAIN FINANCIAL INSTITUTIONS.—The requirements of this section shall not apply to covered financial institutions with assets of less than $1,000,000,000.

SEC. 957. VOTING BY BROKERS.

Section 6(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(b)) is amended—

(1) in paragraph (9)— (A) in subparagraph (A), by redesignating clauses (i)

through (v) as subclauses (I) through (V), respectively, and adjusting the margins accordingly;

(B) by redesignating subparagraphs (A) through (D) as clauses (i) through (iv), respectively, and adjusting the margins accordingly;

(C) by inserting ‘‘(A)’’ after ‘‘(9)’’; and (D) in the matter immediately following clause (iv),

as so redesignated, by striking ‘‘As used’’ and inserting the following: ‘‘(B) As used’’. (2) by adding at the end the following: ‘‘(10)(A) The rules of the exchange prohibit any member

that is not the beneficial owner of a security registered under section 12 from granting a proxy to vote the security in connec-tion with a shareholder vote described in subparagraph (B), unless the beneficial owner of the security has instructed the member to vote the proxy in accordance with the voting instruc-tions of the beneficial owner.

‘‘(B) A shareholder vote described in this subparagraph is a shareholder vote with respect to the election of a member

H. R. 4173—532

of the board of directors of an issuer, executive compensation, or any other significant matter, as determined by the Commis-sion, by rule, and does not include a vote with respect to the uncontested election of a member of the board of directors of any investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80b–1 et seq.).

‘‘(C) Nothing in this paragraph shall be construed to pro-hibit a national securities exchange from prohibiting a member that is not the beneficial owner of a security registered under section 12 from granting a proxy to vote the security in connec-tion with a shareholder vote not described in subparagraph (A).’’.

Subtitle F—Improvements to the Manage-ment of the Securities and Exchange Commission

SEC. 961. REPORT AND CERTIFICATION OF INTERNAL SUPERVISORY CONTROLS.

(a) ANNUAL REPORTS AND CERTIFICATION.—Not later than 90 days after the end of each fiscal year, the Commission shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the conduct by the Commission of examinations of registered entities, enforcement investigations, and review of corporate financial securities filings.

(b) CONTENTS OF REPORTS.—Each report under subsection (a) shall contain—

(1) an assessment, as of the end of the most recent fiscal year, of the effectiveness of—

(A) the internal supervisory controls of the Commis-sion; and

(B) the procedures of the Commission applicable to the staff of the Commission who perform examinations of registered entities, enforcement investigations, and reviews of corporate financial securities filings; (2) a certification that the Commission has adequate

internal supervisory controls to carry out the duties of the Commission described in paragraph (1)(B); and

(3) a summary by the Comptroller General of the United States of the review carried out under subsection (d). (c) CERTIFICATION.—

(1) SIGNATURE.—The certification under subsection (b)(2) shall be signed by the Director of the Division of Enforcement, the Director of the Division of Corporation Finance, and the Director of the Office of Compliance Inspections and Examina-tions (or the head of any successor division or office).

(2) CONTENT OF CERTIFICATION.—Each individual described in paragraph (1) shall certify that the individual—

(A) is directly responsible for establishing and maintaining the internal supervisory controls of the Divi-sion or Office of which the individual is the head;

(B) is knowledgeable about the internal supervisory controls of the Division or Office of which the individual is the head;

rkosciel

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certainty ingenuity advantage

Expert advice on proxy voting and trends related to corporate governance

Report

December 2, 2010

ISS 2011 Policy Updates Key Updates on Frequency of Management “Say-on-Pay”, Shareholder Ability to Act by Written Consent, Golden Parachute Arrangements, Director Elections and Problematic Pay Practices

As previewed in our last Georgeson Report (dated November 5, 2010), ISS has released its voting guideline updates for the 2011 proxy season, effective for meetings on or after February 1, 2011. In this report, we will discuss the key changes and their impact on you and your company.

A couple of the key proposed changes related to executive pay are being driven by the Dodd-Frank Act. Also, in response to certain practical considerations, ISS is modifying its policies on shareholder proposals on shareholder written consents, problematic pay practices, director attendance and board responsiveness.

REVIEW OF POLICY CHANGES

Management Say-on-Pay Frequency Proposals

As a result of the Dodd-Frank Act, the most important policy update for this year relates to the frequency of management say-on-pay proposals. As expected, ISS will support annual frequency for management say-on-pay proposals. Drawing a parallel to the election of directors where ISS supports annually elected rather than a classified board structure, ISS believes that an annual vote on compensation would similarly provide the highest level of accountability and direct communication with shareholders. According to ISS, having a biennial or triennial vote that would consider all the compensation issues between the votes may make it more difficult to understand the implications of the vote.

How Will the Policy Impact You?

Given ISS’s support for annual frequency, if issuers expect that their boards will recommend other than an annual vote, robust disclosure in proxy statements and active shareholder outreach as to the rationale of the preferred frequency will be important. In their analysis, issuers should consider the make-up and voting policies of their particular shareholder base. If the shareholder vote on the proposal favors annual frequency, issuers should consider the implications of adopting a biennial or triennial approach. ISS may likely adopt a policy next year that would consider such an action by an issuer as ignoring shareholder wishes warranting a negative vote recommendation on the board of directors. Conversely, in addition to avoiding possible future ISS action, companies that follow the plurality choice of their investors will be able to exclude future shareholder proposals that seek a different frequency.

Shareholder Ability to Act by Written Consent

To its current policy on shareholder proposals to act by written consent, ISS is adding a factor that would take into account the company’s governance and anti-takeover provisions. In evaluating such shareholder proposals, ISS currently looks at any existing shareholder right to act by written consent, the proposed consent threshold, inclusion of any exclusionary language, shareholder ownership structure and shareholder support of, and management’s response to, previous shareholder proposals. In addition to these considerations, ISS will now also take into account the existence of the following provisions at the company:

Shareholders’ right to call a special meeting at a ten percent threshold (with no restrictions, except a reasonable limit - no >greater than 30 days after the last annual meeting and no greater than 90 days prior to the next annual meeting - on when a meeting can be called);

A majority vote standard for director elections; >

No non-shareholder approved poison pill; and >

An annually elected board. >

http://www.georgeson.com/usa/download/georgeson_report/GeorgesonReport_110510.pdf


GEorGESoN rEPorT > DECEMbEr 2, 2010

The right to call a special meeting at an acceptable threshold can be seen as a reasonable alternative to the right to act by written consent. ISS, through this policy change, is expected not to support written consent shareholder proposals if the above-mentioned corporate governance provisions exist at the company.


This policy update introduces the possibility of avoiding ISS support for shareholder proposals to act by written consent. If an issuer is faced with this shareholder proposal, it should evaluate its existing anti-takeover provisions. While many companies, especially those in the S&P 500 index, may meet the other criteria, they are likely to fall short of the ten percent threshold requirement for the right to call a special meeting. Most of the companies with the right to call special meetings have thresholds higher than ten percent. Issuers should consider actively reaching out to their shareholders to discuss the appropriateness of their existing takeover defense profile in light of their specific circumstances, as well as noting many of the existing provisions that may meet ISS criteria.

Vote on Golden Parachute Proposals

Under the SEC’s proposed rules following the Dodd-Frank Act, the golden parachute compensation would be put to an advisory shareholder vote, if such compensation has previously not been subject to a shareholder vote in a management say-on-pay proposal. ISS will evaluate such golden parachute proposals on a case-by-case basis consistent with its existing policies on problematic pay practices related to severance packages. The key problematic features would be tax gross-up provisions, single-trigger arrangements and potentially excessive severance payments. Although ISS expects cases where it may recommend against the golden parachute proposal while supporting the underlying transaction, ISS does not expect the addition of this proposal to change its approach to merger analysis.


Subject to final SEC rulemaking and how related rules play out as a practical matter, issuers should pay increased attention to the pay practices outlined above related to such packages, as they would now be subject to a shareholder vote and therefore ISS’s enhanced review. In cases of new executive compensation arrangements related to a merger, the issuers may choose to include it as part of their regular advisory vote on management say-on-pay proposals or seek a separate advisory vote at the time of the vote on the transaction. on one hand, having a separate vote at the time of the transaction might draw additional scrutiny. on the other hand, the support for the transaction and its subsequent passage would likely carry the day over any compensation concerns. The frequency of management say-on-pay votes and the timing of the compensation agreements, though, would greatly affect whether or not an issuer would even have the opportunity to put new golden parachute agreements to a prior shareholder vote.

Problematic Pay Practices

ISS has reduced the list of egregious pay practices that on a stand-alone basis may cause it to recommend withhold or against votes. The list now includes only the following problematic practices:

re-pricing of underwater stock options/SArs without prior shareholder approval; >

Excessive perks or tax gross-ups; >

New or materially amended agreements that provide for: >

Change-in-control (CIC) payments exceeding 3 times base salary and bonus; >

CIC severance payments without involuntary job loss (“single” or “modified single” triggers); >

CIC payments with excise tax gross-ups (including “modified” gross-ups). >

While identifying these egregious issues that by themselves may warrant against votes in most circumstances, ISS notes that its policy to evaluate pay practices in determining its vote recommendation on management say-on-pay proposals and election of compensation committee members remains case-by-case.




While ISS has been recommending WITHHoLD/AGAINST votes on compensation committee members for these problematic pay issues in the past, as the focus shifts to the evaluation of management say-on-pay proposals, ISS has emphasized these practices to be of particular concern. The presence of any of these practices either alone or in conjunction with other compensation issues would greatly increase the risk of an AGAINST recommendation on a management say-on-pay proposal, and/or a negative recommendation on compensation committee members, in particularly egregious cases.

Problematic Pay Practices - Commitments

ISS will no longer be accepting prospective commitments by issuers addressing problematic pay practices as a way to avoid negative recommendations. Therefore, commitments to eliminate excise tax gross-ups, single triggers or modified single triggers in CIC agreements; excessive perks or tax gross-ups on perks; guaranteed multi-year awards; and dividend payments on unvested performance shares will no longer be considered by ISS in its analysis. The issuers should instead adopt progressive policies addressing such issues that would be considered by ISS in future reports. only in situations relating to equity plan proposals, a commitment made to address pay-for-performance, burn rate or plan language related to equity plan provisions would be acceptable. Note that this particular policy change is effective immediately, as of the date of the release of these ISS Policy Updates.


In the absence of the option to make a prospective commitment, issuers should carefully evaluate their compensation practices, particularly any changes made to their compensation arrangements. A review of the draft CD&A (Compensation Disclosure & Analysis) disclosure with the assistance of Georgeson’s expert team (listed at the end hereof) can alert issuers to potential risks. In the event of a negative ISS recommendation, issuers should consider active shareholder outreach.

Director Attendance

ISS will no longer accept private communications and will take into account the reasons for poor attendance only if disclosed in the proxy statement or in an SEC filing after the proxy statement has been filed. ISS will consider only medical issues/illness, family emergencies and the absence at only one meeting if the director’s total service was three meetings or less, as acceptable reasons for attendance below the 75% level.

ISS considers this change to align with the best practice of public disclosure. ISS also believes that achieving 75% attendance is not an unreasonable target and therefore exceptions for absenteeism should be allowed in only very limited circumstances.


As poor attendance can often result in high votes in opposition to a particular director’s election, issuers should consider providing additional public disclosure and even in cases where the reason(s) do not squarely fall within ISS’s list. Also, issuers should consider discussing such reason(s) directly with their shareholders during their shareholder engagement outside of and during the proxy season.

Responsiveness to Majority-Supported Shareholder Proposals

ISS is updating its policy to recommend a WITHHoLD/AGAINST vote for the entire board of directors if the board fails to respond to a shareholder proposal that received approval of the majority of the votes cast “in the past two years” to “two consecutive voting opportunities within the past three years.” This update is likely prompted due to the successful no-action requests obtained from SEC by issuers on the shareholder proposal for the right of shareholders to call special meetings, wherein the issuers presented a management proposal on the ballot providing the right to call special meetings at a higher threshold than that contemplated by the shareholder proposal.



How Will the Policy Impact You? As a result of this ISS policy update, issuers would continue to be faced with the prospect of a possible negative vote recommendation from ISS even if they were successful in excluding from the ballot a shareholder proposal that received support of a majority of the votes cast in the previous year. A reappearance of the proposal in the following year with a repeat support of the majority of the votes cast would trigger this ISS policy to recommend WITHHoLD/AGAINST for the entire board.

Increased Authorized Capital Proposals

ISS is making a key change to its current approach for evaluating proposals that seek an increase in authorized common or preferred stock by doing away with its quantitative model. In lieu of using its proprietary model, ISS will apply a threshold-based approach where issuers will generally be afforded an allowable increase of 100 percent of its existing authorized shares. The new methodology will be outlined in an FAQ, to be released prior to the policy becoming effective for meetings on or after February 1, 2011. Another change is to require that disclosure of risks of non-approval, such as bankruptcy or an auditor’s “going concern” opinion, be included in the company’s proxy statement. Also, ISS will support these proposals in cases where the shares are being requested in connection with a transaction that ISS supports. Lastly, ISS is formalizing its policy not to support an increase in authorized share proposals if on the same ballot ISS has recommended in favor of a reverse stock split that does not provide for a proportionate reduction in authorized shares.


While the above change may result in fewer additional authorized shares in certain cases than previously allowed under ISS’s model, the shift to a threshold-based approach is a welcome change. It should provide greater transparency and certainty as to the share increase that ISS would support. Companies should take this opportunity to review their current authorization and future equity capital needs against these guidelines.

Country of Incorporation vs. Country of Listing – Application of Policy

ISS will now apply the U.S. policies to issuers that are incorporated outside the U.S. but are considered domestic issuers by the SEC as they file proxy statements, 10-K annual reports and 10-Q quarterly reports. As a result of this change, ISS will now be using policies that are more compatible with an issuer’s market of operation instead of using the country of incorporation in determining the applicable policy standards.


ISS has identified approximately 74 companies that would be affected as a result of this policy change. Issuers may check with any of Georgeson’s expert team members (listed below) to confirm if they are on the list. The affected issuers should evaluate the impact of the newly applicable ISS’s U.S. policy guidelines on their existing corporate governance provisions and practices. If the policy transfer creates any transitional issues, the issuers may work with Georgeson to engage with ISS to seek relief.

* * *

If you have any questions, please feel free to contact your Account Executive or any of the following Georgeson executives:

David Drake, President212-440-9861, [email protected]

Rajeev Kumar, Senior Managing Director, research212-440-9812, [email protected]

Rachel Posner, Senior Managing Director and General Counsel212-440-9921, [email protected]

Rhonda Brauer, Senior Managing Director, Corporate Governance212-805-7168, [email protected]

http://www.georgeson.com/usa/bios/daviddrake.php

mailto:[email protected]

http://www.georgeson.com/usa/bios/rajeevkumar.php


http://www.georgeson.com/usa/bios/rachelposner.php


http://www.georgeson.com/usa/bios/rhondabrauer.php


2010ANNUAL CORPORATE

GOVERNANCE REVIEW> Annual Meetings

> Shareholder Initiatives> Proxy Contests

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> 3

CONTENTS

Executive Summary 4

Methodology 15

PART 1 — CORPORATE GOVERNANCE-RELATEd ShAREhOLdER PROPOSALS ANd SPONSORS

Figure 1 Corporate Governance Proposals Submitted – 2006 to 2010 (Chart) 18

Figure 2 Corporate Governance Proposals Voted On – 2006 to 2010 (Chart) 18

Figure 3 Corporate Governance Proposals Voted On – 2006 to 2010 (Table) 18

Figure 4 Sponsorship of Corporate Governance Proposals – 2009 to 2010 (Table) 19

Figure 5 Corporate Governance Proposals – 2009 to 2010 (Chart) 20

Figure 6 Corporate Governance Proposals Withdrawn or Omitted vs. Voted On – 2009 to 2010 (Chart) 21

Figure 7 Sponsors of Corporate Governance Proposals – 2009 to 2010 (Chart) 22

PART 2 — PROPOSAL VOTING RESULTS

Figure 8 Summary Average Voting Results for Selected Proposals, 2010 (Table) 24

Figure 9 Votes for Proposals on Independent Board Chairman/Separate Chair–CEO – 2006 to 2010 (Chart) 25

Figure 9 Votes for Proposals on Majority Vote to Elect Directors – 2006 to 2010 (Chart) 25

Figure 10 Shareholder Right to Vote on Supermajority Provision – 2006 to 2010 (Chart) 25

Figure 10 Votes for Proposals to Repeal Classified Board – 2006 to 2010 (Chart) 25

Figure 11 Votes for Proposals Related to Advisory Vote on Executive Compensation – 2006 to 2010 (Chart) 25

Figure 11 Votes for Proposals to Link Pay to Performance – 2006 to 2010 (Chart) 25

Figure 12 Binding Bylaw Provisions – 2001 to 2010 (Chart) 26

Figure 13 Binding Bylaw Provisions – 2010 (Table) 26

Figure 14 Voting Results (Sorted by Company) (Table) 27

Figure 15 Voting Results (Sorted by Proposal) (Table) 33

Figure 16 Voting Results (Sorted by Sponsor) (Table) 39

PART 3 — MANAGEMENT PROPOSALS - REPEAL CLASSIfIEd BOARd

Figure 17 Management Proposals – Repeal Classified Board, 2001 to 2010 (Chart) 46

Figure 18 Voting Results for Management Proposals – Repeal Classified Board, 2010 (Table) 47

PART 4 — PROxy CONTESTS

Figure 19 Contested Solicitation Trend – 1981 to 2010 (Chart) 50

Figure 20 Contested Solicitations – 2010 (Table) 50

> 4

ExECUTIVE SUMMARy

The 2010 Proxy Season: A Brave New World

A brief look back to the 2009 proxy season reveals one of the

most contentious seasons in recent memory. Investor support

for board nominees was at an all-time low, proxy contests were

at an all-time high and support for shareholder-sponsored

resolutions had dramatically risen. As the 2010 proxy season

approached, corporate directors knew that it was incumbent

on them to restore the trust that was shattered by the

market downturn.

The 2010 proxy season was the dawning of a new era in the

way director nominees are elected because, for the first time,

uncontested director elections were to be considered “non-

routine” under New York Stock Exchange (“NYSE”) rules

and thus could not be bolstered by the uninstructed broker

discretionary vote. Companies also had to make adjustments in

anticipation of the new legislation being drafted by Congress that

had squarely focused its attention on reforming our financial

system and that would impose new requirements on publicly

traded companies to rein in perceived egregious compensation

practices. Although companies knew that the reform efforts

could not be enacted during the current proxy season, they were

aware that the proposed changes could reshape the landscape

of corporate governance in the United States. The past season

demonstrated that companies are starting to prepare for the

brave new world that shareholder activism and congressional

reform are in the process of creating.

Activists Remained Focused on Executive Compensation as

Say-on-Pay Reached New Milestone

Executive compensation remained the focal point for activists

in 2010. Shareholder resolutions demanding advisory votes

on executive compensation continued to dominate. Allowing

shareholders to cast a non-binding vote on a company’s

executive compensation practices, commonly referred to as

say-on-pay, has been at the center of the debate on corporate

governance reform in the United States for the past few years.

First introduced as a shareholder proposal in 2006, say-on-pay

received a significant boost in momentum in 2007, when Aflac

Inc. announced that it would allow shareholders to vote annually

on its compensation practices, beginning in 2009 (although

Aflac Inc. accelerated its schedule and first allowed for the

vote in 2008). By the end of the 2008 proxy season, a total of

11 companies had agreed to submit management resolutions

to a shareholder vote beginning in 2009, though many did so

in response to majority-supported shareholder resolutions.

Today, the number of voluntary adopters has grown to nearly

70 companies,1 with another 280+ publicly traded companies

required to submit say-on-pay resolutions to shareholders as a

Advisory Vote on Executive Compensation

Link Pay to Performance

Votes for Selected Proposals Relating to Executive Compensation Issues, 2006 - 2010

39%

29%

39%

29%

39%

25%

63%

66%

67%

68%

65%

67%

35%

57%

27%

56%

29%

47%

25%

49%

28%

51%

2006 2007 20080%

10%

20%

30%

40%

50%

60%

0%

10%

20%

30%

40%

50%

2009 2010

2006 2007 2008 2009 2010

2006 2007 2008 2009 2010

70%

68%

73%

69%

44%

23%

42%

28%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Per

cen

tag

e o

f V

ote

s C

ast

Per

cen

tag

e o

f V

ote

s C

ast

Per

cen

tag

e o

f V

ote

s C

ast

> 5

condition for receiving government money under the Troubled

Asset Relief Program (“TARP”).2 Interestingly, a number of

TARP recipients that have already repaid their debts to the

government decided to continue say-on-pay votes even though

they were no longer legally required to do so. This included many

of the financial giants, including JPMorgan Chase & Co., Goldman

Sachs Group Inc., State Street Corp. and SunTrust Banks Inc.

Although there were concerns that small groups of activist

shareholders could use say-on-pay votes to advance political

agendas and create distractions for boards, support for

management resolutions has been extremely strong. In fact,

support for management-sponsored say-on-pay resolutions

remained high, averaging over 87% of votes cast in favor.

However, perhaps providing a harbinger of challenges to come,

the 2010 proxy season also saw the first management say-on-

pay resolution fail when the resolution at Motorola failed to

garner a majority of votes cast in favor. Resolutions also failed

on the ballots of Occidental Petroleum and KeyCorp. The results

of this year’s say-on-pay votes yielded many important clues

about how say-on-pay votes could evolve in the future.

First, although there were concerns that shareholders would

either misuse the system or uniformly vote down proposals

without any discernable reason (the “sledgehammer effect”),

results from the past two proxy seasons have thus far shown

that shareholders have wielded their votes cautiously. Of the 75+

management-sponsored resolutions that Georgeson tracked

during this proxy season (comprising both voluntary adopters

and TARP-mandated adopters), only seven companies had against

votes of 30% or more, including the three companies that

experienced failed referendums. This is similar to the 2009 results,

where only six companies had against votes of 30% or more.

Second, shareholders will not hesitate to vote against

a resolution if they have concerns about a company’s

compensation practices. In fact, the reasons that say-on-pay

proposals failed at the three companies mentioned above are

fact specific: at Motorola, shareholders seemed to be concerned

about compensation practices related to the business separation

(the CEO had been scheduled to receive a multimillion-dollar

payment even if Motorola’s planned split into two publicly traded

companies was unsuccessful) and responsiveness to shareholder

proposals; at Occidental Petroleum, shareholders seemed to

have focused on the magnitude of CEO pay and disclosure

around its peer comparisons; and at KeyCorp, a TARP company,

the against vote seemed to have focused on a perceived pay-for-

performance disconnect.

Finally, despite the challenges of high withhold/against votes,

say-on-pay may result in fewer majority withhold/against votes

on compensation committee and other board members. As

previously mentioned, compensation committee members

have been a common target for withhold/against votes for poor

compensation practices, and at least six of the 41 directors that

received majority withhold/against votes were targeted by one or

more of the larger proxy advisory firms (e.g., ISS, Glass Lewis and

PROXY Governance) for poor compensation practices. However,

notwithstanding the failed say-on-pay resolutions, none of the

nominees at these companies garnered less than a majority of

votes cast in favor. In fact, at KeyCorp, each of the directors was

elected with at least 80% of votes cast. This result lends itself to

the conclusion that, while directors may receive some withhold/

against votes on their ultimate confirmation, the number of

withhold/against votes may be reduced because say-on-pay

resolutions give shareholders an alternative outlet to voice

concerns about compensation practices.

Starting in 2011, all publicly traded companies will be required

not only to conduct say-on-pay referendums but also votes on

proposals to determine how often the referendum will occur

(discussed in greater detail below), subject to any exceptions

the Securities and Exchange Commission (the “SEC” or the

“Commission”) may create. Thereafter, many believe that

activists will turn their attention to other issues, including

refocusing on majority voting in uncontested director elections,

> 6

ExECUTIVE SUMMARy

which was not addressed in the recently enacted Dodd-Frank

Wall Street Reform and Consumer Protection Act (the “Dodd-

Frank Act” or the “Act”). While many large-cap companies

have already adopted majority voting, many more, particularly

mid-cap and small-cap companies, remain potential targets for

resolutions on this issue.

Equity Retention Policies in Focus

With say-on pay-becoming mandatory, it may be the case that

proposals relating to equity retention policies will be the primary

executive compensation-related shareholder resolutions next

season. Resolutions on this topic have sought to ensure that the

interests of executives are aligned with those of their shareholders

by proposing that companies adopt policies that would require

named executive officers (“NEOs”) to retain a significant portion

of the shares granted to them as part of their compensation

package (usually 75%) through their employment and for a

period following the end of their employment (usually two years).

In support of the resolution, proponents have argued that

rigorous stock ownership guidelines that require executives

to retain equity through retirement are essential to align

management’s interests with those of shareholders. Without

such policies in place, proponents have maintained that

executives will continue to be incentivized to engage in excessive

risk taking in the short term instead of focusing on superior long-

term stock performance. In response, most companies argued

that with the implementation of more traditional stock ownership

guidelines, significant steps have already been taken to ensure

that the interests of management are aligned with shareholders.

It is worthy to note that, of the 29 companies that received

proposals on equity retention policies, 22 had traditional holding

requirements for executives (most requiring the retention of five

to 10 times base salary for the CEO, with declining thresholds for

other NEOs). However, none of the policies reviewed contained

requirements for executives to retain their equity through

retirement. These statistics appear mostly consistent with recent

trends. According to recent reports, two-thirds of S&P companies

have implemented some form of stock ownership guidelines,3

including 87% of the top 250 companies within the S&P 500,4

yet very few mandate that executives’ equity be retained

through retirement.

Even with the lack of company guidelines requiring that equity

be retained through retirement and with support from the larger

proxy advisory firms, shareholder response to the resolution

was relatively modest, averaging only 24% of votes cast in favor.

These results seem to indicate that, for now, shareholders do not

believe that extending holding requirements beyond the period

of employment is necessary to ensure that management’s

interests are aligned with their own.

Shareholders’ Ability to Take Action Remains at the Forefront

The demand that shareholders have the right to call a special

meeting remained the most popular among takeover defense-

related shareholder proposals, with 43 proposals submitted to a

vote this year. The continued popularity of this proposal should

come as no surprise after the resolution received very high

support from shareholders in 2009, despite a significant change

in tactics (almost 40% of companies targeted had provisions

in place with a trigger between 20% and 33%). In 2010,

proponents (predominantly individual holders) moved forward

with a similar plan by submitting over 70 resolutions. However,

proponents were less successful than they had been previously,

suffering defeats both on the ballots and with the Commission.

Prior to the start of the annual meeting season, a number of

companies were able to keep the special meeting shareholder

resolutions off the ballot by taking a proactive approach with the

SEC. According to Georgeson’s research, 16 companies that had

received the proposal decided to submit a similar management-

sponsored resolution with higher ownership thresholds. Despite

opposition by the shareholder proponents, the SEC granted

no-action relief to companies under rule 14a-8(i)(9), as it

> 7

using the right to call a special meeting and, in some cases, to

remove directors. However, oftentimes an action by written

consent has a different vote requirement. Under Delaware law,

for example, the default standard permits shareholders to take

action by written consent on “any action which may be taken at

any annual or special meeting of such stockholders…if a consent

or consents in writing, setting forth the action so taken, shall

be signed by the holders of outstanding stock having not less

than the minimum number of votes that would be necessary to

authorize or take such action at a meeting at which all shares

entitled to vote thereon were present and voted.”6

The written consent shareholder resolution appeared on

the ballots of 16 companies in 2010, including 13 companies

that already provided shareholders with the right to call a

special meeting. Proponents of the resolution believe that

the implementation of anti-takeover defenses is significantly

correlated to a reduction in shareholder value and stated that

the right to act by written consent gives shareholders the

opportunity to raise important matters outside the normal

annual meeting cycle. Companies argued that allowing

shareholders the ability to act by written consent would

adversely affect minority shareholders. Specifically, companies

maintained that allowing action by written consent, including

possible removal of the entire board, could be taken without the

knowledge of smaller shareholders and their having had the

right to raise objections. For those companies that already gave

shareholders the right to call a special meeting, it was noted that

shareholders already had the right to raise important matters

outside the normal annual meeting cycle and with lower thresholds

than are required to take an action by written consent.

In spite of the fact that most targeted companies already

provided shareholders with the right to call a special meeting,

support for the shareholder resolution was strong, averaging

52% of votes cast in favor overall, including nine resolutions that

garnered a clear majority of votes cast in favor.

determined that the shareholder proposal would conflict with

the proposal submitted by management at the same meeting

and that “submitting both proposals to vote could provide

inconsistent and ambiguous results.”5 It will be interesting to

see whether shareholder proponents decide to approach the

same companies again next year and, if so, whether the newly

approved threshold has any effect on shareholder voting.

With respect to those shareholder proposals that were submitted

to a shareholder vote (43 resolutions), support was also lower.

Average support for the resolution dropped 5%, to 43% of

votes cast, with the number companies receiving a majority

of votes cast in favor falling from 25 in 2009 to just 13 in 2010.

Average support among the 24 companies that had previously

adopted the measure with a 25% or less threshold was less than

42% of votes cast in favor, seven percentage points lower than

the overall average and three percentage points lower than

similar proposals from last year. In the current environment, it

is not clear whether the current trend of lowered support was

simply an anomaly or indicative of lowered support overall.

Thus, companies faced with this issue are urged to examine the

proposal and its effects closely and to engage shareholders early

to gauge their sentiments about the companies’ given threshold.

Shareholders Seek Right to Act by Written Consent

The 2010 proxy season saw shareholder proponents introduce

a new (though, in some ways, redundant to the special meeting

proposal discussed above) resolution asking companies to

provide shareholders with the right to act by written consent.

An action by written consent gives shareholders the right to

approve certain corporate matters without having to call a

meeting of shareholders or to give notice to all shareholders

about the matters being approved. In some instances, an

action by written consent could be more efficient (the consent

solicitation ends when the vote requirement is met and consents

delivered to the corporate secretary) and cost-effective than

holding a special meeting. Shareholders could also use the

written consent process to try and effectuate change, including

> 8

ExECUTIVE SUMMARy

The irony of the relatively strong support for both the special

meeting and written consent proposals is that these purportedly

critical shareholder rights are rarely used even when they are

made available. The success of these proposals can be attributed

to two main factors: 1) the power and influence of the proxy

advisory firms that generally support them; and 2) the growing

belief on the part of the institutions that any enhancement of

shareholders’ ability to influence and control corporate boards,

no matter how obscure or arcane, is a good thing.

Despite Rule Change, Opposition to Director Nominees Declines

The 2010 proxy season marked the beginning of an important

change in the way public company director nominees are

elected in the United States. In July 2009, the SEC approved

an amendment to NYSE Rule 452 (“Rule 452”) that eliminated

the so-called broker discretionary vote in uncontested director

elections, beginning with director elections held on or after

January 1, 2010. The amendment re-categorized uncontested

director elections from a “routine” matter to a “non-routine”

S&P 1500 Withhold/Against Votes — 15% or Greater

2010: 748 directors at 314 companies

2009: 1,027 directors at 378 companies




S&P 1500 Director Withhold/Against Votes

565 directors had withhold/against votes of 20% or greater




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Director Withhold/Against Votes as % of Votes Cast

2009

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2006 2007 2008 2009 2010

565

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Director Withhold/Against Votes as % of Votes Cast

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> 9

matter, which meant that, for the first time since Rule 452 was

adopted in 1937, brokers no longer had the right to vote their

clients’ uninstructed shares in uncontested director elections.

The practice of most brokers had been to support the board’s

recommendations on routine matters (although recently some

brokers had adopted the practice of voting uninstructed shares

in proportion to the shares that received voting instructions),

thus providing companies with an automatic increase in the

number of votes cast in favor of the nominees. Heading into the

2010 proxy season, there was concern that the combined effect

of the elimination of Rule 452 in uncontested director elections

along with continued investor dissatisfaction would result in an

upward trend in withhold/against votes on director nominees. So

far, those concerns have proven to be unfounded.

Although some anticipated that director withhold/against votes

would increase again, the number actually decreased for the

first time since 2006. Among the companies tracked (Georgeson

tracks all S&P 1500 companies that hold their annual meeting

within the first six months of the calendar year), directors

receiving withhold/against votes of 15% or greater declined over

27% from 2009. Similar declines were experienced across the

board, with withhold/against votes of 20% or greater declining

28%, those garnering 30% or greater withhold/against votes

declining 32%, and those garnering 40% withhold/against votes

declining 41%. Finally, the number of directors who received

majority withhold/against votes dropped to 41 directors at 24

companies, a decrease of over 48%. It is worth noting, however,

that the number of directors who received majority withhold/

against votes would have been significantly lower if Rule 452

had not been eliminated. Georgeson estimates that 15 of the

41 directors who failed to receive majority support would have

received majority support had the discretionary vote been applied.7

The decline in director opposition can be attributed to a number

of factors. First, there appears to be an inverse correlation

between market conditions and director opposition. When

market conditions declined from their highs in mid-2007 to

their lows in early 2009, opposition to director nominees

soared. Then, as the 2009 proxy season came to a close,

market conditions began to improve and opposition to director

nominees subsided. Comparable trends can be found from

2004 through 2006, when opposition to director nominees

steadily fell amid strong performance and high stock returns.

Second, it seems that boards of directors are engaging with their

shareholders on a more consistent basis and are more aware of

shareholder concerns. For instance, it was reported that in the

wake of the market decline, both total CEO compensation and

executive perquisites, including excise tax gross-ups, dropped

at top U.S. companies in 2009.8 Finally, beyond executive

compensation reform, companies continue to make concessions

to shareholders on hot-button governance issues such as the

elimination of classified boards, the adoption of say-on-pay

provisions, the reduction of supermajority voting requirements

and, most recently, the allowance for shareholders to have

the right to call a special meeting or act by written consent.

While some of these changes have been prompted by majority-

supported shareholder resolutions, many others have been

the result of proactive boards seeking to adopt perceived best

governance practices, or at least willingness on the part of

boards to modify governance practices to avoid negative vote

recommendations from proxy advisory firms.

Although the decline in withhold/against votes is a noteworthy

development, companies should be cautioned against

complacency. It is apparent that shareholders have become

more engaged over the past few years and have shown a

willingness to voice their opposition to director nominees for

myriad of issues. Actually, those 41 directors who received

majority withhold/against votes from their shareholders faced

withhold recommendations from the larger proxy advisory

firms for a variety of reasons, ranging from implementing

a poison pill without shareholder approval, to poor meeting

attendance, to excessive fees paid to auditors for non-audit

services. Board members who serve on compensation

committees should be particularly cautious of shareholder

> 10

concerns relating to compensation. Specifically, shareholders

have shown a willingness to withhold their votes or vote against

compensation committee members who fail to properly link pay

to performance; provide executives with excessive perquisites,

including excise tax gross-ups; and allow for single-trigger

change-in-control provisions.

With corporate governance in its current state of flux, Georgeson

urges companies, their management teams and their directors

to remain vigilant. Companies should have a working knowledge

of their shareholder base and understand the voting patterns

of different groups of shareholders. To the extent a portion of

the shares are held by institutional investors, it is important to

know whether those institutions have developed internal voting

guidelines or follow the recommendations of one or more of the

proxy advisory firms. This is not to suggest that boards should

succumb to every whim expressed in the plethora of voting

guidelines and principles. But with an understanding of these

issues, companies can often avoid unnecessary surprises at their

annual meetings.

Proxy Contest Activity Surprisingly Declines

One of the most surprising developments from the 2010 proxy

season was the decline in the number of proxy contests. From

2005 to 2009, contest activity grew nearly 150%, from 23 in

2005 to 57 in 2009. In fact, the 57 contests tracked in 2009

were the most ever tracked by the Georgeson since we first

started tracking proxy contest activity in 1981. The 2009 proxy

season also marked a significant milestone for investors, as it

was the first time that dissident investors found more success

than did management in proxy contests, finding some measure

of success in 63% of the contests waged. Coming off last year’s

historic results, many believed that the 2010 proxy season would

be as busy as, if not busier than, the previous year. That proved not

to be the case, however, as the number of proxy contests dropped

almost 40%, to just 35. Even more surprising, the level of dissident

success dropped from 63% in 2009, to just 31% this year.

A number of factors could have contributed to the dramatic

reduction in proxy contests. Ironically, although the past few

years have been among the most successful for dissidents, one

potential reason for the decline may be that success was lacking

in some of the more high-profile contests. For example, Carl

Icahn has waged a number of high-profile contests, including

formal challenges to the boards of Motorola (2007) and Yahoo!

(2008). In the case of Yahoo!, Icahn presented a slate of 10

nominees, but (after spending large sums of money) he settled

for just one board seat. In the case of Motorola, Icahn’s nominees

were rejected outright at the company’s annual meeting.

Similarly, in 2009, Pershing Square Capital Management had its

nominees rebuked by the shareholders of Target Corp. In fact,

none of these investors chose to wage a formal proxy contest

in the United States this year (though Carl Icahn has waged

a prolonged campaign against Lions Gate Entertainment in

Canada). These high-profile defeats may have left dissidents

believing that the potential for gains did not justify the time and

cost of waging a proxy contest. Another possible reason for the

downturn in contest activity may be that market conditions were

not ideal for hostile activity. As the 2009 proxy season began in

March, the Dow Jones Industrial Average (“DJIA”) dipped to the

lowest levels it has seen since the late 1990s. However, the DJIA

rallied by more than 57% by the end of the calendar year, despite

only modest improvements in corporate balance sheets. The

market rally not only could have contributed to the decrease in

the number of contests, but it also may have helped to dampen

dissident success.

Proxy Access and Contests

Some have proffered that the decline in the number of proxy

contests may be linked to the fact that proxy access was not

implemented in time for the 2010 proxy season. Proxy access,

a concept that would allow shareholders to nominate directors

on corporate ballots (purportedly saving investors thousands of

dollars in proxy drafting, mailing and printing costs), has been the

subject of debate for quite some time. The SEC first proposed

ExECUTIVE SUMMARy

> 11

proxy access in 2003, but the measure was met with vigorous

opposition by companies and the SEC eventually dropped it.

In 2007, the SEC was forced to revisit the issue after a court

ruling challenged the SEC’s determination that companies could

omit proxy access resolutions under rule 14a-8(i)(8) because it

related to an election to office. However, the SEC commissioners

voted in November 2007 to let companies continue to reject

shareholder proposals that relate to board nominations. Then,

in May 2009, the SEC commissioners voted 3-2 to propose

rules that would require companies to place shareholder

board nominees on company proxy ballots, subject to certain

conditions and procedures. Although many believed that proxy

access would be in place for the 2010 proxy season, the proposed

rule on proxy access drew more than 500 comment letters,

many with conflicting views on the subject, as well as a second

comment period. Because of the complexity of the substantive

issues, concerns about legal challenges to the final rules and the

importance of proxy access to corporate governance generally,

the SEC has deferred action on proxy access until sometime in

2010. There is a general belief that proxy access will be in place

for the 2011 proxy season.

Assuming proxy access is in place for the 2011 proxy season, it

will be interesting to see whether it will have an effect on proxy

contests going forward. Although utilizing proxy access may be

less costly, the final rule will have its drawbacks. For example, any

adopted rule would likely include minimum time and ownership

requirements. Further, the proposed rule also limits the number

of nominees who can be included on the proxy to no more than

25% of directors and requires nominating investors to affirm that

they are not attempting to effect a change of control. With such

restrictive requirements, it is hard to imagine that proxy access

would be the preferred tool for hedge funds, which on average

wage more than 80% of all contests in the United States. That

being said, it seems reasonable to believe that groups that have

not waged formal contests likely because of the associated costs

(such as activist pension funds and social investment firms)

would use proxy access. Actually, it has already been reported

that such groups have been working to form pools of potential

candidates to serve on targeted boards. Activist pension funds

have promised that access will be used as a means of pressuring

companies to engage and communicate rather than as a tool

to wage frequent campaigns. While that seems likely, it still

remains to be seen. Proxy access could encourage activists to

closely examine target companies for holes in the board’s skill

sets. Some have speculated that activist pension funds may use

access to focus on board diversity issues. In any event, we think

an outcome of the advent of proxy access, combined with the

recently increased proxy disclosure on director qualifications,

may be to increase governance committees’ focus on who sits

on their boards.

Regardless of the status of proxy access, Georgeson expects proxy

contest activity to rebound in 2011. In fact, as cash flows increase

and corporate balance sheets improve, we may find activists

reverting to strategies of years past by requesting stock buybacks,

special dividends or other balance sheet restructuring activities.

The Road Ahead

Although a number of important milestones were reached this

past year, most notably the elimination of broker discretionary

voting in uncontested director elections and the first failed say-

on-pay votes in the United States, the 2010 proxy season was

largely overshadowed by the ongoing debates surrounding proxy

access and financial regulatory reform. The debates culminated

in July, when President Obama signed the Dodd-Frank Act into

law. While the primary purpose of the Dodd-Frank Act is to

bring reform to banks and the financial regulatory system, the

scope of the Act goes beyond bank reform and imposes new

requirements on public companies, particularly in the area of

executive compensation.

Looking ahead to the 2011 proxy season, the Dodd-Frank Act

provides shareholders with the right to vote on executive

compensation. Under the law, all publicly traded companies will

> 12

ExECUTIVE SUMMARy

be required to submit say-on-pay resolutions to a shareholder

vote beginning January 21, 2011, subject to any exceptions the

SEC may create. Moreover, the Act provides shareholders with

the opportunity to choose the frequency with which say-on-pay

votes should take place (now being referred to as “say-WHEN-on-

pay”). This section provides shareholders with the right to choose

annual, biennial or triennial votes on executive compensation.

These proposals must be submitted no less frequently than

once every six years. In addition to say-on-pay votes, the Act

requires that companies seek approval of all “golden parachute

compensation” (compensation paid in connection with any

acquisition, merger, consolidation, or proposed sale or other

disposition of all or substantially all the assets of an issuer) at

all meetings within six months of the enactment of the Dodd-

Frank Act unless such agreements or understandings have been

subject to a shareholder vote under say-on-pay. While these

votes are non-binding, the Dodd-Frank Act prohibits uninstructed

broker voting in both of these items.

Beyond mandating votes on executive compensation, the

Dodd-Frank Act imposes further requirements on companies

(in some cases, subject to SEC direction), including: (i) requiring

all directors who serve on compensation committees to

be independent, (ii) requiring greater disclosure about the

linkage between executive pay and company performance, (iii)

requiring comparisons between CEO pay and median employee

compensation, (iv) requiring companies to develop “clawback”

provisions that would recoup unearned executive compensation

in the event that there was a material misstatement, and (v)

determining whether employees and directors are permitted to

use hedging instruments.

Finally, the Dodd-Frank Act amended Section 14(a) of the

Exchange Act of 1934, the source of the Commission’s authority

over proxy rules, to explicitly provide the Commission with

the power to implement proxy access, thus likely negating the

arguments of some that proxy access is impermissible under

federal law.

Practical Advice

The actions by Congress will undoubtedly provide for a

challenging 2011 proxy season. Given the breadth of regulatory

reform during this past season, Georgeson offers the following

recommendations to companies:

> Know your shareholder base. Are a majority of your shares

held by institutional investors or retail shareholders? Have

your larger institutional holders developed their own proxy

voting guidelines or do they follow the recommendations

of a proxy advisory firm? How often do they engage with

companies and on what types of voting issues? Without

a working knowledge of the voting trends and policies of

your shareholder base, it is impossible to predict whether a

proposal will garner majority support.

> Engage shareholders early. One common misconception

among companies is that their day-to-day institutional

contacts, including analysts and portfolio managers, have

significant say in voting proxies. In some cases that may be

true (particularly in the case of mergers and acquisitions and

proxy contests); however, many institutions have established

proxy voting or governance departments. If a company

does not have existing relationships with the proxy decision

makers at an institution, it is important to develop those

relationships. Also, to the extent that the company is aware of

a potential problematic issue on the ballot, it is best to engage

with institutions to gauge their stance on the matter early.

Sometimes a perceived issue may not be an issue at all. In

other cases, companies may be able to make concessions

to mitigate investors’ concerns. Early engagement can save

a company the time and energy required to fix the problem

during the course of a solicitation.

Conclusion

In this brave new world, companies will be faced with more

challenges than ever. Even with important shifts in the

way directors are elected and the types of proposals that

> 13

shareholders will be required to vote on, companies are often

handicapped by an inefficient proxy voting system. Most notably,

the current system engenders the over- and under-voting of

shares, provides no requirements for proxy vote confirmation,

and restricts issuers’ ability to identify and directly communicate

with a large percentage of their own shareholders. In some

instances, the current system can result in a company not being

able to directly contact the beneficial owners of up to 70% of the

total outstanding shares.

To help deal with many of the inefficiencies in the current

system, the SEC Commissioners voted unanimously to approve

the issuance of a concept release seeking public comment

on the U.S. proxy system (sometimes referred to as “proxy

plumbing” or “proxy mechanics”), specifically asking whether

rule revisions should be considered to promote greater

efficiency and transparency. This concept release marks the first

time in nearly 30 years that the Commission has conducted a

comprehensive review of the proxy voting infrastructure and

focused on the accuracy and transparency of the voting process.

Some of the issues that the concept release plans to address

include over-voting and under-voting of shares, the accuracy,

efficiency and transparency of the voting process, issuers’ ability

to communicate with beneficial owners and proxy distribution

fees. Primarily spearheaded by the efforts of the Shareholder

Communications Coalition, the concept release has received

support from the Business Roundtable, the National Association

of Corporate Directors, the Society of Corporate Secretaries

and Governance Professionals, the National Investor Relations

Institute, the Securities Transfer Association and others.

Some may argue that the current proxy voting system, while

large and cumbersome, has been around a long time and

produces a result, so why change it? The answer is that the SEC,

in its role of protector of shareholders’ interests, is introducing

initiatives at an increasingly rapid pace that puts pressure on

voting mechanics. The system is already showing cracks in the

form of a number of controversial voting occurrences. In a world

with Notice and Access, proxy access, mandatory say-on-pay,

majority voting in uncontested director elections, and limited

broker discretionary voting, the proxy voting system is under

real pressure to prevent failed or controversial votes. The only

way to reduce the risk of failed or controversial votes is to reform

the proxy voting system to allow companies greater access and

direct communication with its shareholders.

While the need for change is clearly necessary, there is a danger

that the proposed proxy plumbing initiatives will fall by the

wayside if individual companies do not actively press the SEC

to take action and encourage other companies to participate

in influencing the outcome of the concept release. It is not

only what is being voted on, but how the voting gets done

that is critically important. Comments can be submitted either

electronically or in paper form and should be received on or

before October 20, 2010.9

1 ISS Corporate Services

2 Cari Tuna, Investors Say ‘Yes’ on Pay at TARP Firms, Wall Street Journal (September 2, 2009).

3 The Corporate Executive, ‘Hold Through Retirement’: Maximizing the Benefits of Equity Awards While Minimizing Inappropriate Risk Taking (September- October 2008).

4 Frederic W. Cook & Co., Inc, Stock Ownership Guidelines: Prevalence and Design of Executive and Director Ownership Guidelines Among the Top 250 Companies (October 23, 2009).

5 Response of the Office of Chief Counsel, Division of Corporation Finance, to Baker Hughes’ request for no action relief, filed with the Securities and Exchange Commission on December 18, 2009.

6 Delaware General Corporation Law §228(a).

7 This statistic assumes that the brokers would have uniformly voted in favor of the director nominees, as opposed to voting on the shares proportionately.

8 Wall Street Journal/Hay Group, 2009 CEO Compensation Study (April 1, 2010).

9 For more information, please visit Georgeson’s website at www.georgeson.com/usa.

> 15

METhOdOLOGy

Management and Shareholder Proposals

Georgeson Inc. (Georgeson) independently researched companies that (1) were members of the S&P 1500 Supercomposite Index as of January 1, 2010, and (2) held annual meetings within the first six months of the calendar year. We obtained the number of votes that were cast for, against or withheld, and abstentions, as well as the number of broker non-votes from publicly available sources.

We then calculated for each proposal:The votes cast for, against, and abstentions as a percentage of shares voted >The votes cast for, against, and abstentions as a percentage of the company’s total voting power >

Contested Solicitations

Proxy contest information reflects Georgeson’s effort to track the contested elections that took place during the 2010 calendar year. Our search criteria are not limited to any specific benchmark index(e.g., S&P 1500 companies) or part of the calendar year (e.g., the first six months). Georgeson acted as an advisor in many of these contests.

For further information on how Georgeson defines “contested solicitation,” please refer to the footnote section of Figure 20.

Other Notes

Georgeson’s data collection and calculation methodologies ensure the accuracy and comparability of our statistics from company to company and from year to year. We thereby avoid the anomalies that result from companies’ and sponsors’ inconsistent treatment of abstentions, withholds and broker non-votes.

Georgeson has collected and published statistics on corporate governance proposals since 1987, the year institutional investors first sponsored shareholder proposals. If you have any questions, please call us at (212) 440-9800 or e-mail us at [email protected].

For further information on voting issues, please call us or, we suggest that you contact the ISS Corporate Services.

PART 1> Corporate Governance-Related Proposals and Sponsors

> 18

fIGURE 2> Corporate Governance Proposals Voted On – 2006 to 2010

fIGURE 1> Corporate Governance Proposals Submitted – 2006 to 2010

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Proposal Type 2006 % 2007 % 2008 % 2009 % 2010 %

Executive Compensation 96 24.9% 161 42.9% 132 38.9% 129 34.8% 116 33.9%

Board-Related 162 42.1% 99 26.4% 85 25.1% 80 21.6% 80 23.4%

Special Meetings 1 0.3% 17 4.5% 23 6.8% 51 13.7% 43 12.6%

Supermajority Provision 24 6.2% 19 5.1% 11 3.2% 14 3.8% 29 8.5%

Repeal Classified Board 46 11.9% 26 6.9% 52 15.3% 43 11.6% 22 6.4%

Cumulative Voting 23 6.0% 22 5.9% 19 5.6% 28 7.5% 16 4.7%

Reincorporation 0 0.0% 3 0.8% 0 0.0% 15 4.0% 5 1.5%

Recover Proxy Contest Costs 0 0.0% 2 0.5% 1 0.3% 1 0.3% 5 1.5%

Poison Pills 12 3.1% 17 4.5% 3 0.9% 2 0.5% 1 0.3%

Other 21 5.5% 9 2.5% 13 3.9% 8 2.2% 25 7.2%

Total 385 100.0% 375 100.0% 339 100.0% 371 100.0% 342 100.0%

fIGURE 3> Corporate Governance Proposals Voted On – 2006 to 2010

> 19

fIGURE 4> Sponsorship of Corporate Governance Proposals – 2009 to 2010

2009 2010

Labor Unions 122 104Amalg. Bank of New York's Labor Oriented Long View Collective Inv. Fund (Longview) 13 6American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) 17 16American Federation of State, County & Municipal Employees (AFSCME) 17 20Bricklayers 1 0Communications Workers of America (CWA) 3 1International Brotherhood of Dupont Workers (Dupont Workers) 1 0International Brotherhood of Electrical Workers (IBEW) 8 7International Brotherhood of Teamsters (Teamsters) 2 2Laborers' International Union (Laborers) 15 18Plumbers & Pipefitters 2 1Service Employees International Union (SEIU) 5 5Sheet Metal Workers 5 2Trowel Trades S&P Index Fund 3 5Unite Here 2 1United Brotherhood of Carpenters and Joiners of America (UBCJA) 27 16United Food and Commercial Workers 0 1Utility Workers of America (UWA) 1 3

Public Pensions 26 30California Public Employees' Retirement System (CalPERS) 5 4California State Teachers' Retirement System (CalSTRS) 0 2Connecticut Retirement Plans 5 3Firefighters’ Pension System of the City of Kansas City 3 3Florida State Board of Administration 0 1Miami Firefighters’ Relief and Pension Fund 1 2New York City Pension Funds 11 13Philadelphia Public Employees' Retirement System (PhiPERS) 0 2Railway Pension Investments 1 0

Religious Organizations 11 14Benedictine Sisters 1 1Christian Brothers Investment Services (CBIS) 0 1Congregation of the Sisters of St. Agnes 1 0Home Missioners of America 1 0Maryknoll 0 2Mercy Investment Program 0 1Nathan Cummings Foundation 1 4Sisters of Charity of the Incarnate Word 1 0Sisters of Charity of St. Elizabeth 0 2Sisters of the Holy Name of Jesus And Mary 0 1Sisters of Mercy Investment Program 1 0Sisters of St. Joseph of Nazareth 1 0Unitarian Universalist Association 4 2

Other Shareholder Groups 28 20Aetna Retirees Association 1 0Association of Bell Telephone Retirees 0 2SNET Retirees Association 1 1Boston Common Asset Management 2 1Christopher Reynolds Foundation 1 0Clean Yield Asset Management 0 1College Retirement Equity Fund (TIAA-CREF) 4 0CTW Investment Group 1 0Harrington Investments, Inc. 2 2Icahn Entities 2 0Legal and General 0 1National Legal & Policy Center 1 0Needmor Fund 2 2Norges Bank 0 1Northstar Asset Management 2 0P. Schoenfeld Asset Management 1 0Pax World Management Corp 0 1Ram Trust 3 1SC Employees 1 0Stichting Pensioenfonds ABP 0 1Trillium Asset Management 1 0United Association S&P 500 Index Fund 1 3Walden Asset Management 2 3

Individual Shareholders 181 162Not Disclosed 3 12

Total 371 342

> 20

fIGURE 5> Corporate Governance Proposals – 2009 to 2010

2009

2010

Other (25) 7.2%

Poison Pills (2) 0.5%

Cumulative Voting (28) 7.5%

Recover Proxy Contest Costs (1) 0.3%

Other (8) 2.2%

Repeal Classified Board (43) 11.6%

Board-Related (80) 23.4%

Executive Compensation (116) 33.9%



Reincorporation (15) 4.0%

Supermajority Provision (14) 3.8%

Special Meetings (51) 13.7%








Other (25) 7.2%




Other (8) 2.2%
















> 21

fIGURE 6> Corporate Governance Proposals Withdrawn or Omitted vs. Proposals Voted On – 2009 to 2010

2009

2010

Omitted or Withdrawn 36.8%

Proposals Voted On 63.2%







Other (25) 7.2%




Other (8) 2.2%
















> 22

fIGURE 7> Sponsors of Corporate Governance Proposals – 2009 to 2010

Public Pensions 9%

Religious Organizations 4%

Labor Unions 32%

Individual Shareholders 49%

Other Shareholder Groups 6%

Public Pensions 7%


Labor Unions 33%



Public Pensions 9%


Labor Unions 32%



Public Pensions 7%


Labor Unions 33%



2009

2010

PART 2> Proposal Voting Results

> 24

fIGURE 8> Corporate Governance Proposals — Summary Average Voting Results for Selected Proposals, 2010 Annual Meeting Season

Proposal TypeResults

Available

Votes as Percent of Cast Votes as Percent of Shares Outstanding

for Against Abstain for Against Abstain Non Vote

Executive Compensation 116 of 116 35% 62% 3% 26% 46% 2% 11%

Advisory Vote On Executive Compensation > 53 of 53 42% 53% 5% 31% 39% 4% 11%

Require Equity To Be Retained > 29 of 29 24% 75% 1% 17% 55% 1% 12%

Link Pay To Performance > 5 of 5 28% 70% 2% 21% 52% 1% 12%

Approve Or Limit Executive Death Benefits > 4 of 4 39% 60% 1% 30% 46% 1% 10%

Recoup Bonus If Restatement > 3 of 3 42% 57% 1% 31% 43% 1% 11%

Approve/Vote On Future Golden Parachutes > 3 of 3 64% 36% 0% 51% 30% 0% 6%

Board-Related 80 of 80 37% 62% 1% 28% 44% 1% 10%

Independent Board Chairman / Separate Chair- > CEO 35 of 35 27% 72% 1% 20% 52% 0% 9%

Majority Vote to Elect Directors > 29 of 29 56% 42% 2% 44% 33% 1% 8%

Have Not Implemented a Form of Majority Voting > 18 of 18 63% 36% 1% 50% 28% 1% 9%

Have Implemented a Form of Majority Voting > 11 of 11 45% 53% 2% 35% 41% 1% 8%

Adopt and Disclose > CEO Succession Planning Guidelines 4 of 4 29% 70% 1% 17% 36% 1% 13%

Shareholder Right to Call Special Meeting 43 of 43 43% 56% 1% 31% 41% 1% 11%

Eliminate or Reduce Supermajority Provision 29 of 29 73% 26% 1% 57% 20% 1% 9%

Repeal Classified Board 22 of 22 69% 30% 1% 54% 24% 1% 9%

Shareholder Right to Act by Written Consent 16 of 16 54% 45% 1% 41% 34% 1% 9%

Cumulative Voting 16 of 16 28% 72% 0% 19% 51% 0% 10%

Allow Shareholder To Recover Proxy Contest Costs 5 of 5 40% 58% 2% 30% 43% 2% 9%

Reincorporation 5 of 5 17% 82% 1% 13% 59% 1% 11%

> 25

fIGURE 9

Votes for Selected Proposals Relating to Board Issues, 2006 - 2010

Independent Board Chairman / Separate Chair-CEO

Majority Vote to Elect Directors

Eliminate or Reduce Supermajority Provision

Repeal Classified Board


Link Pay to Performance

Votes for Proposals Relating to Anti-Takeover Provisions, 2006 - 2010

Votes for Selected Proposals Relating to Executive Compensation Issues, 2006 - 2010

fIGURE 10

fIGURE 11

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fIGURE 12> Binding Bylaw Provisions – 2001 to 2010

3 4 5 8 9 13 12 17

2001 2002 2003 2004 2005 2006 2007 2008

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Company Proposal SponsorState of Inc.

As Percent of Votes Cast As Percent of Shares Outstanding

for Against Abstain for Against Abstain Non Vote

Anadarko Petroleum Corporation

Allow Shareholders to Recover Proxy Contest Costs

AFSCME DE 43.2% 53.6% 3.2% 32.5% 40.3% 2.4% 8.5%

Citigroup Inc. Allow Shareholders to Recover Proxy Contest Costs

AFSCME DE 30.9% 65.8% 3.3% 19.6% 41.8% 2.1% 14.3%

Hartford Financial Services Group, Inc.

Allow Shareholders to Recover Proxy Contest Costs

AFSCME DE 46.7% 50.6% 2.7% 34.2% 37.1% 2.0% 11.4%

Apple Inc.Board- Establish Committee on Sustainability

Harrington Investments, Inc.

CA 4.3% 78.4% 17.3% 2.8% 50.7% 11.2% 17.7%

BB&T CorporationBoard- Independent Board Chairman/Separate Chair-CEO

AFSCME NC 18.4% 79.4% 2.2% 12.3% 52.9% 1.5% 15.3%

Constellation Energy Group, Inc.

Board- Independent Board Chairman/Separate Chair-CEO

Norges Bank MD 18.3% 81.3% 0.4% 13.8% 61.5% 0.3% 8.2%

Pinnacle Entertainment, Inc.

Executive Compensation- Advisory Vote on Executive Compensation

AFL-CIO DE 42.8% 57.2% 0.0% 33.4% 44.6% 0.0% 3.6%

fIGURE 13> Binding Bylaw Provisions – 2010

> 27

fIGURE 14> Voting Results (Sorted by Company), 2010

As Percent of Votes Cast

As Percent of Shares Outstanding

Company Proposal Sponsor For Against Abstain For Against Abstain Non Vote

3M Company Shareholder Right to Call a Special Meeting Individual- Rossi Family 45.8% 53.4% 0.9% 31.0% 36.2% 0.6% 14.4%Abbott Laboratories Executive Compensation- Advisory Vote on Executive Compensation Unitarian Universalist Assn. of Congregations 41.8% 54.2% 4.0% 31.1% 40.3% 3.0% 10.7%Abbott Laboratories Shareholder Right to Call a Special Meeting Individual- Steiner, K. 38.3% 60.9% 0.8% 28.5% 45.3% 0.6% 10.7%Abercrombie & Fitch Co. Board- Independent Board Chairman/Separate Chair-CEO AFSCME 27.0% 72.5% 0.5% 22.5% 60.3% 0.4% 5.1%Abercrombie & Fitch Co. Repeal Classified Board Connecticut Retirement Plans 75.4% 24.1% 0.5% 62.7% 20.1% 0.4% 5.1%Aetna Inc. Board- Independent Board Chairman/Separate Chair-CEO United Assn. S&P 500 Index Fund 45.6% 54.1% 0.3% 37.4% 44.3% 0.2% 5.2%Aetna Inc. Cumulative Voting Individual- Davis, E. 34.6% 65.1% 0.3% 28.3% 53.4% 0.3% 5.2%Alaska Air Group, Inc. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 62.9% 35.8% 1.3% 52.1% 29.6% 1.1% 6.3%Alcoa Inc. Supermajority Provision- Eliminate or Reduce Individual- Steiner, W. 67.8% 31.6% 0.6% 38.9% 18.1% 0.4% 17.2%Allegheny Energy, Inc. Board- Independent Board Chairman/Separate Chair-CEO Individual- Chevedden, J. 38.2% 61.3% 0.5% 29.6% 47.5% 0.4% 7.2%Allstate Corporation Executive Compensation- Advisory Vote on Executive Compensation AFSCME 57.5% 40.1% 2.3% 42.5% 29.6% 1.7% 10.7%Allstate Corporation Shareholder Right to Act by Written Consent Individual- Rossi Family 66.8% 32.2% 1.0% 49.3% 23.7% 0.8% 10.7%Allstate Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 55.2% 44.2% 0.6% 40.8% 32.6% 0.5% 10.7%Altera Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 81.6% 18.1% 0.3% 69.0% 15.3% 0.2% 6.2%American Express Company Cumulative Voting Individual- Davis, E. 24.0% 75.7% 0.3% 19.1% 60.2% 0.3% 8.9%American Express Company Executive Compensation- Require Equity to be Retained AFSCME 33.0% 66.2% 0.8% 26.2% 52.6% 0.7% 8.9%American Express Company Shareholder Right to Call a Special Meeting Individual- Steiner, K. 43.8% 55.6% 0.6% 34.8% 44.2% 0.5% 8.9%American International Group, Inc. Cumulative Voting Individual- Steiner, K. 1.3% 98.6% 0.1% 1.1% 83.9% 0.1% 5.9%American International Group, Inc. Executive Compensation- Require Equity to be Retained AFL-CIO 1.1% 98.8% 0.1% 0.9% 84.1% 0.1% 5.9%Amgen Inc. Executive Compensation- Require Equity to be Retained PhiPERS 26.3% 72.4% 1.3% 19.5% 53.7% 1.0% 11.2%Amgen Inc. Shareholder Right to Act by Written Consent Individual- Steiner, W. 62.7% 36.7% 0.6% 46.4% 27.2% 0.5% 11.2%Anadarko Petroleum Corporation Allow Shareholders to Recover Proxy Contest Costs AFSCME 43.2% 53.6% 3.2% 32.5% 40.3% 2.4% 8.5%Apple Inc. Board- Establish Committee on Sustainability Harrington Investments, Inc. 4.3% 78.4% 17.3% 2.8% 50.7% 11.2% 17.7%AT&T Inc. Cumulative Voting Individual- Rossi Family 32.7% 65.8% 1.5% 20.2% 40.8% 0.9% 15.4%AT&T Inc. Executive Compensation- Advisory Vote on Executive Compensation Association of BellTell Retirees 45.6% 52.0% 2.4% 28.3% 32.2% 1.5% 15.4%AT&T Inc. Executive Comp.- Exclude Pension Credits/Surplus from Comp. Calculation SNET Retirees Association 41.3% 57.1% 1.6% 25.6% 35.4% 1.0% 15.4%AT&T Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, W. 42.6% 55.7% 1.7% 26.4% 34.5% 1.1% 15.4%AutoNation, Inc. Board- Independent Board Chairman/Separate Chair-CEO IBEW 15.1% 84.7% 0.2% 13.5% 75.3% 0.1% 5.5%AutoNation, Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 12.9% 86.9% 0.2% 11.5% 77.2% 0.2% 5.5%Avista Corporation Repeal Classified Board Individual- Armstrong, G. 81.9% 14.6% 3.5% 63.4% 11.3% 2.7% 13.1%Baker Hughes Incorporated Board- Majority Vote to Elect Directors* UBCJA 40.1% 59.8% 0.2% 31.4% 46.9% 0.1% 7.0%Ball Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 47.8% 49.0% 3.2% 40.0% 40.9% 2.7% 5.3%Ball Corporation Poison Pill- Redeem or Vote On CalSTRS 70.8% 28.3% 0.9% 59.2% 23.6% 0.8% 5.3%BancorpSouth, Inc. Repeal Classified Board Individual- Armstrong, G. 41.4% 55.6% 3.0% 31.7% 42.6% 2.3% 10.3%Bank of America Corporation Board- Adopt and Disclose CEO Succession Planning Guidelines Laborers 39.8% 59.4% 0.8% 26.3% 39.3% 0.5% 16.2%Bank of America Corporation Derivative Trading Policy and Procedure Maryknoll 38.4% 59.8% 1.8% 25.4% 39.5% 1.2% 16.2%Bank of America Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Steiner, K. 41.8% 53.1% 5.1% 27.7% 35.1% 3.4% 16.2%Bank of America Corporation Executive Compensation- Recoup Bonuses if Restatement SEIU 43.5% 55.7% 0.9% 28.8% 36.8% 0.6% 16.2%Bank of America Corporation Executive Comp.- Report on Tax Deductibility of Compensation under TARP AFL-CIO 33.3% 65.4% 1.4% 22.0% 43.3% 0.9% 16.2%Bank of America Corporation Shareholder Right to Call a Special Meeting Individual- Chevedden, R. 52.2% 46.9% 0.8% 34.6% 31.1% 0.5% 16.2%Bank of New York Mellon Corporation Cumulative Voting Individual- Davis, E. 35.9% 63.6% 0.4% 28.0% 49.7% 0.3% 7.0%Bank of New York Mellon Corporation Executive Compensation- Approve/Vote on Future Golden Parachutes Trowel Trades 77.5% 22.2% 0.3% 60.5% 17.3% 0.2% 7.0%Bank of New York Mellon Corporation Executive Compensation- Require Equity to be Retained AFL-CIO 37.8% 61.4% 0.8% 29.5% 47.9% 0.6% 7.0%Barnes Group Inc. Repeal Classified Board Individual- Armstrong, G. 66.9% 32.3% 0.8% 50.9% 24.6% 0.6% 6.7%Baxter International Inc. Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 75.4% 24.3% 0.3% 57.6% 18.5% 0.2% 7.6%BB&T Corporation Board- Independent Board Chairman/Separate Chair-CEO AFSCME 18.4% 79.4% 2.2% 12.3% 52.9% 1.5% 15.3%Becton, Dickinson and Company Board- Majority Vote to Elect Directors Individual- Armstrong, G. 49.1% 49.8% 1.1% 35.6% 36.1% 0.8% 10.2%Becton, Dickinson and Company Cumulative Voting Individual- Davis, E. 33.5% 65.5% 0.9% 24.3% 47.6% 0.7% 10.2%Bill Barrett Corp. Supermajority Provision- Eliminate or Reduce Individual- Armstrong, G. 73.8% 26.1% 0.1% 54.8% 19.4% 0.1% 11.9%Boeing Company Board- Independent Board Chairman/Separate Chair-CEO Sheet Metal Workers 28.6% 69.6% 1.8% 21.5% 52.3% 1.3% 12.1%Boeing Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Chevedden, R. 31.4% 65.5% 3.1% 23.6% 49.3% 2.3% 12.1%Boeing Company Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 30.6% 68.1% 1.3% 23.0% 51.2% 1.0% 12.1%Boston Properties, Inc. Board- Independent Board Chairman/Separate Chair-CEO Laborers 40.1% 59.8% 0.0% 34.6% 51.5% 0.0% 2.6%Bristol-Myers Squibb Company Executive Compensation- Greater Disclosure Individual- Davis, E. 8.3% 90.8% 0.9% 5.8% 63.1% 0.6% 15.7%Bristol-Myers Squibb Company Shareholder Right to Act by Written Consent Individual- Steiner, K. 49.0% 49.8% 1.2% 34.1% 34.6% 0.8% 15.7%Capital One Financial Corporation Executive Compensation- Require Equity to be Retained AFSCME 21.6% 78.1% 0.3% 16.2% 58.8% 0.3% 7.9%Capital One Financial Corporation Repeal Classified Board New York City Pension Funds 82.9% 16.9% 0.2% 62.4% 12.8% 0.1% 7.9%Caterpillar Inc. Board- Independent Board Chairman/Separate Chair-CEO SEIU 17.1% 82.3% 0.6% 12.2% 58.5% 0.4% 14.8%Caterpillar Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 34.0% 65.2% 0.8% 24.1% 46.4% 0.6% 14.8%CenturyTel, Inc. Executive Compensation- Advisory Vote on Executive Compensation AFL-CIO 44.0% 55.0% 1.0% 30.5% 38.1% 0.7% 15.3%CenturyTel, Inc. Executive Compensation- Require Equity to be Retained IBEW 24.8% 74.6% 0.6% 17.2% 51.7% 0.4% 15.3%CenturyTel, Inc. Executive Compensation- Restrict or Cap CWA 3.8% 95.8% 0.5% 2.6% 66.3% 0.3% 15.3%

> 28

fIGURE 14> Voting results (sorted by Company), 2010




Charles Schwab Corporation Executive Compensation- Approve or Limit Executive Death Benefits AFL-CIO 34.7% 65.0% 0.3% 28.6% 53.5% 0.2% 9.4%Chesapeake Energy Corporation Adopt Policy on Responsible Trading Practices LongView 36.4% 62.8% 0.8% 23.1% 39.9% 0.5% 18.7%Chesapeake Energy Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 49.4% 39.5% 11.1% 31.4% 25.1% 7.1% 18.7%Chesapeake Energy Corporation Executive Compensation- Advisory Vote on Executive Compensation Nathan Cummings Foundation 50.2% 39.5% 10.3% 31.9% 25.1% 6.6% 18.7%Chesapeake Energy Corporation Executive Compensation- Award Performance-Based Bonuses PhiPERS 25.8% 73.0% 1.2% 16.4% 46.4% 0.8% 18.7%Chevron Corporation Board- Establish Committee on Human Rights Individual- Zhao, J. 5.5% 74.9% 19.6% 3.8% 51.8% 13.5% 14.7%Chevron Corporation Board- Nominate Director with Environmental Expertise New York City Pension Funds 26.0% 71.2% 2.7% 18.0% 49.3% 1.9% 14.7%Chevron Corporation Executive Compensation- Require Equity to be Retained Not Named 26.1% 72.8% 1.1% 18.0% 50.4% 0.8% 14.7%Citigroup Inc. Allow Shareholders to Recover Proxy Contest Costs AFSCME 30.9% 65.8% 3.3% 19.6% 41.8% 2.1% 14.3%Citigroup Inc. Derivative Trading Policy and Procedure Sisters of Charity of St. Elizabeth 29.7% 69.1% 1.2% 18.9% 43.9% 0.8% 14.3%Citigroup Inc. Executive Compensation- Require Equity to be Retained AFL-CIO 25.3% 73.6% 1.2% 16.1% 46.8% 0.8% 14.3%Citigroup Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, W. 41.3% 58.1% 0.6% 26.3% 36.9% 0.4% 14.3%City National Corporation Repeal Classified Board Individual- Armstrong, G. 50.1% 48.8% 1.1% 43.8% 42.7% 1.0% 5.8%Cleco Corporation Repeal Classified Board Individual- Armstrong, G. 89.4% 6.9% 3.7% 70.2% 5.4% 2.9% 14.3%Coca-Cola Company Board- Independent Board Chairman/Separate Chair-CEO Teamsters 26.5% 72.9% 0.5% 19.5% 53.5% 0.4% 11.3%Coca-Cola Company Executive Compensation- Advisory Vote on Executive Compensation Benedictine Sisters 32.5% 62.8% 4.7% 23.9% 46.1% 3.4% 11.3%Coca-Cola Company Executive Compensation- Award Performance-Based Restricted Stock Individual- Shepherd, E. 9.7% 88.4% 1.9% 7.1% 64.8% 1.4% 11.3%Coca-Cola Enterprises Inc. Executive Compensation- Approve/Vote on Future Golden Parachutes Teamsters 42.9% 57.0% 0.1% 37.6% 50.0% 0.1% 3.5%Colgate-Palmolive Company Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 38.6% 60.8% 0.6% 28.4% 44.7% 0.5% 11.3%Comcast Corporation Board- Adopt and Disclose CEO Succession Planning Guidelines Laborers 14.5% 85.4% 0.1% 2.3% 13.9% 0.0% 1.0%Comcast Corporation Board- Independent Board Chairman/Separate Chair-CEO AFL-CIO 23.8% 76.1% 0.1% 3.9% 12.4% 0.0% 1.0%Comcast Corporation Cumulative Voting Individual- Davis, E. 21.8% 78.1% 0.1% 3.5% 12.7% 0.0% 1.0%Comerica Incorporated Executive Compensation- Link Pay to Performance Laborers 30.5% 67.8% 1.7% 23.9% 53.1% 1.3% 9.3%Comerica Incorporated Executive Compensation- Recoup Bonuses if Restatement SEIU 53.0% 45.3% 1.7% 41.5% 35.4% 1.4% 9.3%Comerica Incorporated Supermajority Provision- Eliminate or Reduce Individual- Armstrong, G. 85.6% 13.5% 0.9% 67.0% 10.6% 0.7% 9.3%Commerce Bancshares, Inc. Repeal Classified Board Individual- Armstrong, G. 43.7% 53.8% 2.4% 33.9% 41.7% 1.9% 12.2%ConocoPhillips Board- Report on Risk Oversight Management Sisters of the Holy Name of Jesus and Mary 4.9% 93.5% 1.6% 3.6% 68.3% 1.2% 11.4%Consolidated Edison, Inc. Executive Compensation- Greater Disclosure Individual- Davis, E. 12.1% 85.7% 2.2% 6.5% 46.0% 1.2% 28.5%Constellation Energy Group, Inc. Board- Independent Board Chairman/Separate Chair-CEO Norges Bank 18.3% 81.3% 0.4% 13.8% 61.5% 0.3% 8.2%Cooper Companies, Inc. Board- Majority Vote to Elect Directors New York City Pension Funds 82.6% 17.1% 0.3% 73.9% 15.3% 0.3% 2.9%Coventry Health Care, Inc. Executive Compensation- Establish Multiple Performance Metrics New York City Pension Funds 40.6% 59.3% 0.1% 34.7% 50.6% 0.1% 3.5%Danaher Corporation Repeal Classified Board Individual- Chevedden, J. 66.8% 33.1% 0.2% 55.6% 27.5% 0.2% 5.1%DaVita Inc. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 56.6% 43.2% 0.3% 48.8% 37.3% 0.2% 4.2%Dean Foods Company Executive Compensation- Establish Anti-Tax Gross-Up Policy LongView 44.7% 54.9% 0.4% 34.5% 42.4% 0.3% 7.1%Deere & Company Board- Independent Board Chairman/Separate Chair-CEO Not Named 42.5% 56.5% 0.9% 30.5% 40.6% 0.7% 11.4%Deere & Company Executive Compensation- Advisory Vote on Executive Compensation Not Named 43.4% 53.3% 3.3% 31.2% 38.3% 2.4% 11.4%Deere & Company Executive Compensation- Restrict or Cap Not Named 4.6% 93.8% 1.6% 3.3% 67.3% 1.1% 11.4%Devon Energy Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 71.9% 28.0% 0.1% 56.2% 21.8% 0.1% 9.7%DIRECTV Executive Compensation- Require Equity to be Retained IBEW 14.6% 85.2% 0.2% 12.1% 71.0% 0.2% 5.7%Dominion Resources Inc. Executive Compensation- Advisory Vote on Executive Compensation UWA 41.3% 57.5% 1.2% 28.5% 39.6% 0.8% 13.3%Dow Chemical Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Steiner, W. 36.8% 55.2% 8.0% 27.8% 41.8% 6.1% 10.4%Dow Chemical Company Executive Compensation- Require Equity to be Retained AFSCME 25.4% 73.2% 1.4% 19.2% 55.4% 1.0% 10.4%DTE Energy Company Repeal Classified Board UWA 73.1% 24.9% 1.9% 45.9% 15.7% 1.2% 13.6%Duke Energy Corporation Board- Majority Vote to Elect Directors Not Named 40.2% 58.8% 1.0% 23.6% 34.5% 0.6% 24.3%Duke Energy Corporation Executive Compensation- Require Equity to be Retained Not Named 24.2% 74.2% 1.6% 14.2% 43.6% 0.9% 24.3%Dun & Bradstreet Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 96.2% 3.4% 0.4% 84.6% 3.0% 0.4% 0.0%E. I. du Pont de Nemours and Co. Executive Compensation- Advisory Vote on Executive Compensation Individual- Steiner, W. 43.6% 53.8% 2.7% 28.4% 35.1% 1.7% 15.5%Eastman Chemical Company Repeal Classified Board Individual- Armstrong, G. 74.8% 24.6% 0.6% 57.1% 18.8% 0.5% 7.0%Ecolab Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 33.1% 66.6% 0.3% 25.7% 51.6% 0.2% 7.1%Edison International Executive Compensation- Advisory Vote on Executive Compensation Individual- Chevedden, J. 38.4% 57.7% 3.9% 27.6% 41.5% 2.8% 9.9%Eli Lilly and Company Board- Prohibit CEO from Serving on Compensation Committee AFL-CIO 7.5% 90.8% 1.7% 5.9% 71.5% 1.3% 9.1%Eli Lilly and Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Parrish, G. 27.3% 71.1% 1.6% 21.5% 56.0% 1.3% 9.1%Eli Lilly and Company Executive Compensation- Require Equity to be Retained AFSCME 15.9% 82.6% 1.5% 12.5% 65.1% 1.2% 9.1%Eli Lilly and Company Shareholder Right to Call a Special Meeting RAM Trust 37.9% 60.7% 1.4% 29.9% 47.8% 1.1% 9.1%EMC Corporation Executive Compensation- Advisory Vote on Executive Compensation Unitarian Universalist Assn. of Congregations 51.5% 47.1% 1.4% 36.1% 32.9% 1.0% 13.7%EMC Corporation Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 60.6% 37.9% 1.5% 42.4% 26.5% 1.1% 13.7%EOG Resources, Inc. Executive Compensation- Eliminate Accelerated Vesting in Change-of-Control LongView 28.3% 70.5% 1.2% 24.2% 60.1% 1.0% 3.2%EOG Resources, Inc. Executive Compensation- Require Equity to be Retained Miami Fire Fighters’ Relief & Pension Fund 20.7% 79.1% 0.3% 17.6% 67.4% 0.2% 3.2%EQT Corporation Board- Majority Vote to Elect Directors* UBCJA 54.5% 45.2% 0.3% 43.2% 35.8% 0.3% 8.2%Equity Residential Board- Majority Vote to Elect Directors* UBCJA 56.7% 43.2% 0.1% 48.9% 37.3% 0.1% 4.5%Express Scripts, Inc. Board- Independent Board Chairman/Separate Chair-CEO United Food and Commercial Workers 16.1% 83.8% 0.1% 13.3% 69.4% 0.1% 6.2%Exxon Mobil Corporation Executive Compensation- Advisory Vote on Executive Compensation Needmor Fund 40.3% 57.5% 2.2% 25.1% 35.8% 1.4% 18.2%

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Exxon Mobil Corporation Reincorporation- NJ to ND Individual- Rossi Family 2.9% 95.7% 1.3% 1.8% 59.5% 0.8% 18.2%Exxon Mobil Corporation Shareholder Right to Call a Special Meeting Individual- Steiner, K. 36.4% 62.5% 1.1% 22.6% 38.9% 0.7% 18.2%Fifth Third Bancorp Board- Independent Board Chairman/Separate Chair-CEO AFSCME 31.8% 67.6% 0.6% 23.9% 51.0% 0.5% 10.8%First Financial Bancorp Repeal Classified Board Individual- Armstrong, G. 76.4% 22.0% 1.6% 64.3% 18.5% 1.4% 6.7%FirstEnergy Corp. Board- Majority Vote to Elect Directors UBCJA 75.1% 23.1% 1.7% 56.7% 17.5% 1.3% 8.6%FirstEnergy Corp. Executive Compensation- Require Equity to be Retained Not Named 17.6% 80.3% 2.1% 13.3% 60.6% 1.6% 8.6%FirstEnergy Corp. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 55.1% 40.9% 4.0% 41.6% 30.9% 3.0% 8.6%FirstEnergy Corp. Shareholder Right to Call a Special Meeting Individual- Rossi Family 51.6% 46.5% 1.8% 39.0% 35.1% 1.4% 8.6%Fluor Corporation Board- Independent Board Chairman/Separate Chair-CEO Laborers 36.6% 62.4% 1.0% 26.0% 44.4% 0.7% 12.1%FMC Technologies, Inc. Board- Majority Vote to Elect Directors UBCJA 70.6% 29.1% 0.3% 59.4% 24.5% 0.2% 3.6%Ford Motor Company Eliminate Dual Class Voting Rights Individual- Chevedden, R. 29.1% 70.2% 0.6% 21.5% 51.8% 0.5% 16.2%Ford Motor Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Chevedden, J. 17.8% 80.5% 1.7% 13.1% 59.3% 1.2% 16.2%Fortune Brands, Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, K. 60.8% 38.3% 0.9% 45.8% 28.9% 0.7% 10.7%Franklin Street Properties Corp. Repeal Classified Board Individual- Armstrong, G. 66.9% 32.5% 0.6% 43.7% 21.3% 0.4% 16.4%Freeport-McMoRan Copper & Gold Inc. Board- Nominate Director with Environmental Expertise Stichting Pensioenfonds ABP 33.2% 64.4% 2.4% 23.0% 44.6% 1.7% 12.0%Freeport-McMoRan Copper & Gold Inc. Executive Compensation- Require Equity to be Retained Firefighter’s Pension Sys. of Kansas City 29.2% 70.0% 0.8% 20.2% 48.5% 0.5% 12.0%Frontier Communications Corp. Executive Compensation- Require Equity to be Retained Not Named 29.2% 68.0% 2.8% 14.7% 34.2% 1.4% 32.1%General Electric Company Board- Independent Board Chairman/Separate Chair-CEO Individual- Quirini, H. 34.9% 63.8% 1.3% 20.1% 36.8% 0.8% 19.0%General Electric Company Board- Restrict Director Participation on Board Committees Individual- Armstrong, G. 5.4% 92.4% 2.2% 3.1% 53.3% 1.3% 19.0%General Electric Company Cumulative Voting Individual- Davis, E. 24.9% 73.8% 1.2% 14.4% 42.6% 0.7% 19.0%General Electric Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Noyes, G. 40.9% 55.9% 3.2% 23.6% 32.3% 1.8% 19.0%General Electric Company Shareholder Right to Call a Special Meeting Individual- Steiner, W. 39.6% 59.0% 1.3% 22.9% 34.1% 0.8% 19.0%Gilead Sciences, Inc. Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 75.4% 15.4% 9.2% 63.4% 13.0% 7.7% 0.1%Goldman Sachs Group, Inc. Board- Independent Board Chairman/Separate Chair-CEO CBIS 19.1% 80.6% 0.4% 14.1% 59.4% 0.3% 9.2%Goldman Sachs Group, Inc. Cumulative Voting Individual- Davis, E. 25.2% 74.3% 0.4% 18.6% 54.8% 0.3% 9.2%Goldman Sachs Group, Inc. Derivative Trading Policy and Procedure Maryknoll 33.5% 65.9% 0.6% 24.7% 48.6% 0.4% 9.2%Goldman Sachs Group, Inc. Executive Compensation- Require Equity to be Retained Harrington Investments, Inc. 24.3% 73.8% 1.9% 17.9% 54.4% 1.4% 9.2%Graco Inc. Board- Majority Vote to Elect Directors CalPERS 63.2% 36.1% 0.7% 51.1% 29.1% 0.6% 7.5%Halliburton Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 48.5% 48.0% 3.5% 34.0% 33.7% 2.5% 10.1%Halliburton Company Shareholder Right to Call a Special Meeting Individual- Steiner, W. 43.0% 56.8% 0.3% 30.1% 39.8% 0.2% 10.1%Harley-Davidson, Inc. Supermajority Provision- Eliminate or Reduce Individual- Steiner, W. 86.6% 12.9% 0.5% 63.5% 9.5% 0.4% 6.0%Hartford Financial Services Group, Inc. Allow Shareholders to Recover Proxy Contest Costs AFSCME 46.7% 50.6% 2.7% 34.2% 37.1% 2.0% 11.4%HCP, Inc. Board- Majority Vote to Elect Directors* UBCJA 42.4% 45.0% 12.6% 37.5% 39.7% 11.2% 0.5%Health Net, Inc. Supermajority Provision- Eliminate or Reduce CalPERS 79.0% 20.9% 0.1% 67.8% 17.9% 0.1% 7.3%Home Depot, Inc. Board- Independent Board Chairman/Separate Chair-CEO Trowel Trades 22.4% 77.3% 0.3% 15.4% 53.1% 0.2% 14.8%Home Depot, Inc. Cumulative Voting Individual- Davis, E. 36.0% 63.7% 0.3% 24.7% 43.8% 0.2% 14.8%Home Depot, Inc. Executive Compensation- Advisory Vote on Executive Compensation New York City Pension Funds 42.1% 54.9% 3.1% 28.9% 37.7% 2.1% 14.8%Home Depot, Inc. Reincorporation- DE to ND Individual- Chevedden, J. 4.7% 94.8% 0.5% 3.2% 65.2% 0.3% 14.8%Home Depot, Inc. Shareholder Right to Act by Written Consent Individual- Steiner, K. 52.0% 46.0% 2.0% 35.8% 31.6% 1.3% 14.8%Home Depot, Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, W. 44.3% 55.4% 0.3% 30.5% 38.1% 0.2% 14.8%Honeywell International Inc. Board- Independent Board Chairman/Separate Chair-CEO Laborers 47.7% 51.7% 0.6% 36.7% 39.8% 0.5% 9.7%Honeywell International Inc. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 45.1% 54.1% 0.7% 34.8% 41.7% 0.6% 9.7%Hospitality Properties Trust Repeal Classified Board CalPERS 91.1% 8.3% 0.6% 72.3% 6.6% 0.5% 11.1%Hospitality Properties Trust Supermajority Provision- Eliminate or Reduce Florida State Board of Administration 88.4% 8.1% 3.5% 70.1% 6.5% 2.8% 11.1%International Business Machines Corp. Cumulative Voting Individual- Davis, E. 29.4% 69.3% 1.3% 19.4% 45.6% 0.9% 12.6%International Business Machines Corp. Executive Compensation- Advisory Vote on Executive Compensation Boston Common Asset Management 44.3% 53.5% 2.2% 29.2% 35.2% 1.4% 12.6%International Business Machines Corp. Shareholder Right to Call a Special Meeting Individual- Rossi Family 41.7% 56.6% 1.7% 27.5% 37.2% 1.1% 12.6%Interpublic Group of Companies, Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 34.2% 65.5% 0.3% 27.6% 53.0% 0.2% 4.0%ITT Corporation Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 52.6% 47.4% 0.0% 38.5% 34.7% 0.0% 9.1%Johnson & Johnson Executive Compensation- Advisory Vote on Executive Compensation Walden Asset Management 46.5% 50.5% 3.0% 31.5% 34.2% 2.0% 15.0%Johnson & Johnson Shareholder Right to Call a Special Meeting Individual- Steiner, W. 36.9% 62.3% 0.8% 25.0% 42.2% 0.6% 15.0%Johnson Controls, Inc. Board- Majority Vote to Elect Directors Laborers 77.7% 21.6% 0.7% 62.1% 17.2% 0.6% 7.2%JPMorgan Chase & Co. Board- Independent Board Chairman/Separate Chair-CEO Trowel Trades 34.0% 65.6% 0.4% 24.9% 48.1% 0.3% 9.7%JPMorgan Chase & Co. Derivative Trading Policy and Procedure Sisters of Charity of St. Elizabeth 33.4% 65.5% 1.2% 24.4% 48.0% 0.9% 9.7%JPMorgan Chase & Co. Executive Compensation- Require Equity to be Retained AFL-CIO 23.4% 76.0% 0.7% 17.1% 55.6% 0.5% 9.7%JPMorgan Chase & Co. Shareholder Right to Act by Written Consent Individual- Steiner, K. 54.3% 43.9% 1.8% 39.8% 32.2% 1.3% 9.7%JPMorgan Chase & Co. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 44.2% 55.3% 0.5% 32.4% 40.5% 0.4% 9.7%KB Home Board- Majority Vote-Shareholder Committee New York City Pension Funds 40.9% 42.5% 16.6% 28.5% 29.7% 11.6% 16.2%KB Home Executive Compensation- Advisory Vote on Executive Compensation New York City Pension Funds 35.4% 64.6% 0.1% 24.7% 45.0% 0.1% 16.2%KB Home Executive Compensation- Link Pay to Performance Laborers 35.2% 64.7% 0.1% 24.6% 45.1% 0.1% 16.2%Kellogg Company Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 46.4% 53.3% 0.3% 37.1% 42.7% 0.2% 7.2%Kimberly-Clark Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 44.7% 54.6% 0.7% 32.6% 39.8% 0.5% 13.2%

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Kindred Healthcare, Inc. Executive Compensation- Require Equity to be Retained Firefighter’s Pension Sys. of Kansas City 35.6% 64.2% 0.2% 32.1% 58.0% 0.2% 2.7%King Pharmaceuticals, Inc. Supermajority Provision- Eliminate or Reduce Individual- Steiner, W. 81.0% 19.0% 0.1% 68.0% 15.9% 0.1% 5.5%Kohl’s Corporation Board- Independent Board Chairman/Separate Chair-CEO Trowel Trades 16.8% 82.6% 0.6% 13.8% 67.7% 0.5% 4.2%Kohl’s Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 74.3% 25.6% 0.2% 60.9% 21.0% 0.1% 4.2%Kraft Foods Inc. Shareholder Right to Act by Written Consent Individual- Steiner, W. 51.4% 45.4% 3.2% 35.2% 31.0% 2.2% 12.6%Loews Corporation Cumulative Voting Individual- Davis, E. 17.1% 82.7% 0.2% 14.7% 71.5% 0.2% 5.4%Lowe’s Companies, Inc. Board- Independent Board Chairman/Separate Chair-CEO Laborers 18.0% 81.3% 0.7% 13.9% 63.0% 0.5% 10.6%Macy’s, Inc. Board- Majority Vote to Elect Directors Individual- Steiner, W. 60.8% 38.6% 0.6% 50.0% 31.8% 0.5% 4.1%Marathon Oil Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Rossi Family 47.6% 44.9% 7.5% 34.0% 32.1% 5.3% 9.9%Marathon Oil Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 50.3% 49.5% 0.2% 35.9% 35.3% 0.1% 9.9%Marsh & McLennan Companies, Inc. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 45.3% 48.6% 6.1% 36.4% 39.0% 4.9% 6.7%Massey Energy Company Board- Majority Vote to Elect Directors Not Named 63.9% 35.9% 0.2% 50.3% 28.2% 0.2% 6.7%Massey Energy Company Repeal Classified Board New York City Pension Funds 95.1% 3.5% 1.4% 72.1% 2.7% 1.1% 9.5%McDonald’s Corporation Executive Compensation- Advisory Vote on Executive Compensation Needmor Fund 40.8% 54.3% 4.9% 29.0% 38.7% 3.5% 12.8%McDonald’s Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 70.7% 28.9% 0.4% 50.4% 20.6% 0.3% 12.8%McGraw-Hill Companies, Inc. Shareholder Right to Act by Written Consent Individual- Steiner, K. 47.9% 51.6% 0.5% 37.8% 40.7% 0.4% 5.7%McGraw-Hill Companies, Inc. Shareholder Right to Call a Special Meeting Individual- Rossi Family 44.8% 54.8% 0.4% 35.3% 43.2% 0.3% 5.7%MDC Holdings, Inc. Board- Independent Board Chairman/Separate Chair-CEO Laborers 22.1% 77.8% 0.0% 20.0% 70.3% 0.0% 5.0%MeadWestvaco Corporation Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 58.8% 40.8% 0.5% 49.2% 34.1% 0.4% 4.7%Metlife, Inc. Cumulative Voting Individual- Davis, E. 20.8% 78.7% 0.5% 17.3% 65.5% 0.4% 4.2%Moody’s Corporation Board- Independent Board Chairman/Separate Chair-CEO Legal & General 33.1% 66.2% 0.7% 18.0% 36.0% 0.4% 3.7%Morgan Stanley Board- Independent Board Chairman/Separate Chair-CEO Laborers 27.0% 72.4% 0.6% 21.5% 57.7% 0.5% 8.6%Morgan Stanley Executive Compensation- Recoup Bonuses if Restatement SEIU 29.8% 69.3% 0.8% 23.8% 55.3% 0.7% 8.6%Morgan Stanley Executive Compensation- Require Equity to be Retained AFL-CIO 18.9% 80.3% 0.7% 15.1% 64.0% 0.6% 8.6%Morgan Stanley Shareholder Right to Call a Special Meeting Individual- Rossi Family 31.8% 67.5% 0.7% 25.4% 53.8% 0.5% 8.6%Motorola, Inc. Reincorporation- DE to ND Individual- Steiner, K. 33.4% 66.3% 0.4% 24.6% 48.8% 0.3% 10.4%Mylan Inc. Executive Compensation- Advisory Vote on Executive Compensation Nathan Cummings Foundation 48.8% 49.9% 1.3% 35.0% 35.8% 0.9% 13.3%Mylan Inc. Executive Compensation- Require Equity to be Retained AFSCME 34.0% 65.2% 0.8% 24.4% 46.8% 0.6% 13.3%Nabors Industries Ltd. Board- Independent Board Chairman/Separate Chair-CEO AFSCME 24.9% 74.9% 0.2% 20.1% 60.4% 0.1% 6.5%Nabors Industries Ltd. Executive Compensation- Advisory Vote on Executive Compensation Nathan Cummings Foundation 38.1% 49.2% 12.7% 30.7% 39.7% 10.2% 6.5%Nabors Industries Ltd. Executive Compensation- Link Pay to Performance Laborers 40.1% 59.8% 0.2% 32.3% 48.2% 0.1% 6.5%Nabors Industries Ltd. Repeal Classified Board Connecticut Retirement Plans 74.8% 25.0% 0.2% 60.3% 20.1% 0.2% 6.5%Newmont Mining Corporation Board- Majority Vote to Elect Directors* UBCJA 52.4% 47.3% 0.3% 38.1% 34.4% 0.2% 6.5%Newmont Mining Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 49.5% 49.7% 0.8% 36.0% 36.2% 0.6% 6.5%NiSource, Inc. Executive Compensation- Require Equity to be Retained UWA 23.6% 74.9% 1.6% 17.2% 54.6% 1.1% 10.2%Northrop Grumman Corporation Reincorporation- DE to ND Individual- Chevedden, J. 5.5% 93.7% 0.8% 4.4% 75.2% 0.7% 7.4%Nucor Corporation Board- Majority Vote to Elect Directors* UBCJA 39.4% 59.8% 0.8% 29.3% 44.5% 0.6% 11.0%NV Energy, Inc. Supermajority Provision- Eliminate or Reduce Individual- Armstrong, G. 85.2% 14.5% 0.2% 70.9% 12.1% 0.2% 6.9%NYSE Euronext Allow for Issuance of Physical Stock Certificates Individual- Davis, E. 4.3% 95.0% 0.7% 2.4% 53.6% 0.4% 17.9%NYSE Euronext Supermajority Provision- Eliminate or Reduce Individual- Steiner, K. 75.6% 15.6% 8.9% 42.6% 8.8% 5.0% 17.9%Occidental Petroleum Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 41.8% 57.9% 0.3% 33.2% 46.1% 0.3% 5.7%Omnicom Group Inc. Allow Shareholders to Recover Proxy Contest Costs AFSCME 47.0% 51.2% 1.8% 38.8% 42.3% 1.5% 5.5%Omnicom Group Inc. Executive Compensation- Approve or Limit Executive Death Benefits LongView 40.6% 59.1% 0.2% 33.6% 48.9% 0.2% 5.5%Omnicom Group Inc. Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 82.4% 17.2% 0.4% 68.1% 14.2% 0.4% 5.5%Oshkosh Corporation Board- Majority Vote to Elect Directors Individual- Chevedden, J. 51.6% 48.0% 0.4% 38.8% 36.1% 0.3% 16.2%PACCAR Inc Board- Majority Vote to Elect Directors UBCJA 44.3% 55.4% 0.3% 37.6% 47.1% 0.3% 0.0%PACCAR Inc Board- Prohibit CEO from Serving on Compensation Committee AFL-CIO 8.5% 91.1% 0.4% 7.2% 77.4% 0.4% 0.0%PACCAR Inc Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 48.1% 51.6% 0.3% 40.9% 43.8% 0.3% 0.0%People’s United Financial, Inc. Board- Majority Vote to Elect Directors UBCJA 80.7% 14.2% 5.1% 58.2% 10.2% 3.7% 10.7%Pep Boys-Manny, Moe & Jack Supermajority Provision- Eliminate or Reduce Individual- Treumann, R. 55.9% 41.8% 2.4% 44.1% 33.0% 1.9% 14.8%PepsiCo, Inc. Shareholder Right to Call a Special Meeting Individual- Treumann, R. 49.1% 50.4% 0.5% 32.0% 32.9% 0.3% 15.3%Pfizer Inc. Executive Compensation- Abolish Stock Options Individual- Davis, E. 4.1% 95.3% 0.7% 2.8% 65.0% 0.4% 12.3%PG&E Corporation Board- Independent Board Chairman/Separate Chair-CEO Individual- Levine, S. 27.6% 72.0% 0.5% 9.7% 25.3% 0.2% 5.9%PG&E Corporation Board- Limits for Directors Involved in Bankruptcy Individual- Chevedden, R. 3.2% 96.0% 0.9% 1.1% 33.7% 0.3% 5.9%Pinnacle Entertainment, Inc. Executive Compensation- Advisory Vote on Executive Compensation AFL-CIO 42.8% 57.2% 0.0% 33.4% 44.6% 0.0% 3.6%Pioneer Natural Resources Company Board- Majority Vote to Elect Directors UBCJA 84.4% 14.4% 1.2% 60.9% 10.4% 0.9% 14.9%Pitney Bowes Inc. Supermajority Provision- Eliminate or Reduce CalPERS 98.0% 1.6% 0.3% 83.0% 1.4% 0.3% 0.0%Plum Creek Timber Company, Inc. Supermajority Provision- Eliminate or Reduce Individual- Herbert, N. 17.6% 81.2% 1.2% 11.1% 51.1% 0.7% 22.4%PNC Financial Services Group, Inc. Executive Compensation- Approve/Vote on Future Golden Parachutes Trowel Trades 70.2% 29.2% 0.6% 54.9% 22.8% 0.5% 8.6%PNC Financial Services Group, Inc. Executive Comp.- Report on Tax Deductibility of Compensation under TARP AFL-CIO 34.7% 64.1% 1.2% 27.2% 50.2% 0.9% 8.6%PPL Corporation Board- Majority Vote to Elect Directors* Plumbers & Pipefitters 32.7% 66.1% 1.2% 23.0% 46.3% 0.9% 11.4%PPL Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 51.8% 47.0% 1.2% 36.3% 32.9% 0.9% 11.4%

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priceline.com Incorporated Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 52.6% 47.4% 0.1% 40.2% 36.2% 0.0% 10.8%Progress Energy, Inc. Executive Compensation- Require Equity to be Retained Not Named 23.2% 75.3% 1.4% 13.0% 42.1% 0.8% 22.3%Prosperity Bancshares, Inc. Repeal Classified Board Individual- Armstrong, G. 66.9% 31.9% 1.2% 53.3% 25.5% 0.9% 8.1%PulteGroup, Inc. Allow Shareholders to Recover Proxy Contest Costs AFSCME 30.7% 66.5% 2.8% 25.7% 55.5% 2.3% 6.7%PulteGroup, Inc. Board- Independent Board Chairman/Separate Chair-CEO AFL-CIO 30.2% 69.2% 0.6% 25.2% 57.7% 0.5% 6.7%PulteGroup, Inc. Board- Majority Vote to Elect Directors Sheet Metal Workers 45.9% 54.0% 0.1% 38.3% 45.1% 0.1% 6.7%PulteGroup, Inc. Executive Compensation- Advisory Vote on Executive Compensation Miami Fire Fighters’ Relief & Pension Fund 39.6% 45.4% 15.1% 33.0% 37.9% 12.6% 6.7%PulteGroup, Inc. Executive Compensation- Award Performance-Based Stock Options Laborers 33.9% 66.0% 0.1% 28.3% 55.1% 0.1% 6.7%PulteGroup, Inc. Executive Compensation- Require Equity to be Retained IBEW 24.7% 75.1% 0.2% 20.6% 62.7% 0.2% 6.7%Quanta Services, Inc. Board- Majority Vote to Elect Directors United Association S&P 500 Index Fund 65.2% 31.5% 3.3% 48.8% 23.6% 2.5% 6.7%Questar Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 47.6% 50.8% 1.6% 36.2% 38.7% 1.2% 8.7%Qwest Communications Intl. Inc. Board- Independent Board Chairman/Separate Chair-CEO Individual- Steiner, K. 28.9% 70.8% 0.3% 21.9% 53.8% 0.2% 8.7%Qwest Communications Intl. Inc. Executive Compensation- Advisory Vote on Executive Compensation Individual- Neuman, M. 31.2% 50.9% 17.9% 23.7% 38.7% 13.6% 8.7%Qwest Communications Intl. Inc. Executive Compensation- Link Pay to Perfornace Individual- Floyd, H. 7.0% 91.1% 1.9% 5.3% 69.2% 1.4% 8.7%Qwest Communications Intl. Inc. Shareholder Right to Call a Special Meeting Individual- Armstrong, G. 52.1% 47.6% 0.3% 39.6% 36.2% 0.2% 8.7%R. R. Donnelley & Sons Company Executive Compensation- Limit Golden Parachutes New York City Pension Funds 51.7% 46.8% 1.6% 42.6% 38.5% 1.3% 4.7%Raytheon Company Executive Compensation- Advisory Vote on Executive Compensation AFSCME 45.0% 50.0% 5.0% 36.4% 40.5% 4.0% 8.3%Raytheon Company Executive Compensation- Approve/Disclose Supplemental Retirement Plans AFL-CIO 41.9% 57.4% 0.7% 34.0% 46.5% 0.5% 8.3%Raytheon Company Shareholder Right to Act by Written Consent Individual- Chevedden, R. 52.4% 45.5% 2.1% 42.5% 36.8% 1.7% 8.3%Regions Financial Corporation Executive Compensation- Establish Anti-Tax Gross-Up Policy AFSCME 35.1% 63.9% 1.0% 23.6% 42.9% 0.7% 16.8%Reliance Steel & Aluminum Co. Repeal Classified Board Individual- Armstrong, G. 69.9% 29.9% 0.2% 59.1% 25.3% 0.2% 5.1%Reynolds American Inc. Executive Compensation- Require Equity to be Retained Not Named 10.5% 89.3% 0.2% 7.8% 66.3% 0.1% 5.7%Reynolds American Inc. Repeal Classified Board Not Named 34.1% 65.7% 0.1% 25.4% 48.8% 0.1% 5.7%Rockwell Collins, Inc. Executive Compensation- Advisory Vote on Executive Compensation Clean Yield Asset Management 44.3% 54.3% 1.4% 33.1% 40.7% 1.0% 12.9%Ryland Group, Inc. Executive Compensation- Advisory Vote on Executive Compensation New York City Pension Funds 37.1% 45.0% 17.9% 31.5% 38.3% 15.3% 4.4%Safeway Inc. Cumulative Voting Individual- Davis, E. 27.2% 72.8% 0.1% 21.1% 56.4% 0.0% 6.5%Safeway Inc. Executive Compensation- Approve or Limit Executive Death Benefits AFSCME 40.6% 59.4% 0.1% 31.5% 46.0% 0.0% 6.5%Saks Inc. Cumulative Voting Individual- Davis, E. 37.7% 62.1% 0.1% 24.6% 40.5% 0.1% 9.5%Sempra Energy Executive Compensation- Advisory Vote on Executive Compensation Individual- Chevedden, R. 51.4% 46.1% 2.4% 36.2% 32.5% 1.7% 12.1%Sherwin-Williams Company Board- Majority Vote to Elect Directors* UBCJA 37.2% 61.2% 1.6% 28.4% 46.8% 1.2% 9.3%Sigma-Aldrich Corporation Supermajority Provision- Eliminate or Reduce Individual- Treumann, R. 50.0% 41.0% 8.9% 43.8% 35.9% 7.8% 0.5%Southwest Airlines Co. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 35.5% 63.3% 1.2% 28.8% 51.3% 1.0% 11.3%Southwestern Energy Company Board- Majority Vote to Elect Directors* UBCJA 50.1% 49.5% 0.4% 40.4% 40.0% 0.3% 5.9%Spectra Energy Corp Board- Majority Vote to Elect Directors* UBCJA 48.2% 51.2% 0.6% 32.7% 34.8% 0.4% 15.9%Sprint Nextel Corporation Executive Compensation- Advisory Vote on Executive Compensation New York City Pension Funds 52.3% 33.9% 13.8% 40.1% 26.0% 10.5% 9.5%Sprint Nextel Corporation Shareholder Right to Act by Written Consent Individual- Steiner, K. 67.6% 32.2% 0.1% 51.8% 24.7% 0.1% 9.5%Staples, Inc. Shareholder Right to Act by Written Consent Individual- Steiner, W. 56.7% 43.0% 0.3% 47.3% 35.9% 0.2% 6.3%Staples, Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 37.4% 62.2% 0.4% 31.2% 51.9% 0.3% 6.3%State Street Corporation Board- Independent Board Chairman/Separate Chair-CEO Walden Asset Management 16.5% 82.9% 0.6% 13.3% 66.7% 0.5% 6.2%Sterling Bancshares, Inc. Supermajority Provision- Eliminate or Reduce Individual- Armstrong, G. 86.0% 13.3% 0.6% 66.8% 10.3% 0.5% 9.0%Superior Industries Intl., Inc. Board- Majority Vote to Elect Directors* New York City Pension Funds 43.8% 54.8% 1.3% 36.6% 45.8% 1.1% 6.8%Target Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Hancock, A.E. 49.4% 45.6% 4.9% 40.5% 37.4% 4.1% 7.7%TCF Financial Corporation Supermajority Provision- Eliminate or Reduce Individual- Armstrong, G. 71.3% 28.4% 0.3% 54.7% 21.8% 0.2% 13.4%Telephone and Data Systems, Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 21.7% 78.3% 0.1% 13.6% 49.2% 0.0% 1.3%Time Warner Inc. Executive Compensation- Advisory Vote on Executive Compensation Mercy Investment Program 44.9% 52.4% 2.7% 35.7% 41.7% 2.2% 7.1%Time Warner Inc. Executive Compensation- Require Equity to be Retained IBEW 23.3% 76.3% 0.5% 18.5% 60.7% 0.4% 7.1%Time Warner Inc. Supermajority Provision- Eliminate or Reduce Individual- Steiner, K. 70.1% 29.7% 0.2% 55.7% 23.6% 0.2% 7.1%TJX Companies, Inc. Executive Compensation- Advisory Vote on Executive Compensation UNITE-HERE 48.5% 41.5% 10.0% 40.7% 34.8% 8.4% 4.9%Toll Brothers, Inc. Board- Independent Board Chairman/Separate Chair-CEO Laborers 24.9% 74.8% 0.2% 18.5% 55.6% 0.2% 9.1%tw telecom inc. Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 25.8% 65.8% 8.4% 23.5% 60.0% 7.6% 2.8%UMB Financial Corporation Repeal Classified Board Individual- Armstrong, G. 48.5% 50.7% 0.8% 43.2% 45.2% 0.7% 4.6%Union Pacific Corporation Board- Independent Board Chairman/Separate Chair-CEO Pax World Management Corp 20.3% 79.4% 0.3% 16.0% 62.6% 0.2% 8.1%Union Pacific Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 82.9% 16.7% 0.4% 65.3% 13.2% 0.3% 8.1%United Technologies Corporation Executive Compensation- Advisory Vote on Executive Compensation AFL-CIO 40.2% 54.0% 5.8% 31.2% 41.9% 4.5% 8.3%UnitedHealth Group Incorporated Executive Compensation- Advisory Vote on Executive Compensation Nathan Cummings Foundation 46.0% 47.6% 6.5% 36.1% 37.3% 5.1% 6.0%Valero Energy Corporation Executive Compensation- Require Equity to be Retained AFSCME 24.2% 74.8% 0.9% 16.8% 51.8% 0.6% 12.4%Ventas, Inc. Board- Majority Vote to Elect Directors United Association S&P 500 Index Fund 74.1% 25.8% 0.1% 59.3% 20.7% 0.1% 8.3%Verizon Communications Inc. Board- Adopt and Disclose CEO Succession Planning Guidelines Laborers 31.3% 65.5% 3.2% 20.6% 43.1% 2.1% 17.1%Verizon Communications Inc. Executive Compensation- Abolish Stock Options Individual- Davis, E. 8.5% 90.0% 1.5% 5.6% 59.3% 1.0% 17.1%Verizon Communications Inc. Executive Compensation- Approve or Limit Executive Death Benefits Firefighter’s Pension Sys. of Kansas City 41.5% 55.7% 2.8% 27.3% 36.7% 1.9% 17.1%Verizon Communications Inc. Executive Compensation- Link Pay to Perfornace Association of BellTell Retirees 29.4% 67.6% 3.0% 19.4% 44.5% 2.0% 17.1%Verizon Communications Inc. Executive Compensation- Require Equity to be Retained IBEW 29.2% 69.2% 1.6% 19.2% 45.6% 1.1% 17.1%

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* Issuer has implemented a form of majority voting.




Verizon Communications Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, K. 42.6% 55.9% 1.6% 28.0% 36.8% 1.0% 17.1%Vishay Intertechnology, Inc. Study Spinoff/Sale of Company Individual- Steiner, W. 1.5% 98.4% 0.1% 1.3% 87.8% 0.1% 6.0%Vornado Realty Trust Board- Independent Board Chairman/Separate Chair-CEO Laborers 41.0% 59.0% 0.1% 33.6% 48.3% 0.1% 4.8%Vornado Realty Trust Board- Majority Vote to Elect Directors UBCJA 72.3% 27.6% 0.1% 59.2% 22.6% 0.1% 4.8%Vornado Realty Trust Repeal Classified Board Individual- Armstrong, G. 79.3% 20.6% 0.1% 64.9% 16.9% 0.1% 4.8%Vulcan Materials Company Board- Majority Vote to Elect Directors UBCJA 39.2% 60.4% 0.3% 30.0% 46.2% 0.3% 10.0%Waddell & Reed Financial, Inc. Executive Compensation- Advisory Vote on Executive Compensation CalSTRS 41.2% 56.2% 2.6% 37.4% 51.0% 2.4% 3.8%Walgreen Co. Executive Compensation- Award Performance-Based Stock Options Laborers 42.5% 55.4% 2.1% 29.6% 38.6% 1.4% 16.4%Walgreen Co. Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 73.6% 25.5% 0.9% 51.2% 17.8% 0.6% 16.4%Wal-Mart Stores, Inc. Executive Compensation- Advisory Vote on Executive Compensation LongView 19.6% 79.2% 1.2% 16.2% 65.3% 1.0% 6.4%Wal-Mart Stores, Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, W. 21.6% 78.3% 0.2% 17.8% 64.6% 0.1% 6.4%Walt Disney Company Executive Compensation- Advisory Vote on Executive Compensation Walden Asset Management 47.5% 45.0% 7.6% 34.8% 33.0% 5.5% 11.4%Waste Management, Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, W. 42.6% 57.2% 0.2% 33.6% 45.1% 0.2% 9.7%WellPoint, Inc. Executive Compensation- Advisory Vote on Executive Compensation Connecticut Retirement Plans 60.2% 35.6% 4.3% 46.0% 27.2% 3.3% 4.7%WellPoint, Inc. Reincorporation- IN to DE AFSCME 37.6% 60.5% 1.8% 28.8% 46.2% 1.4% 4.7%WellPoint, Inc. Study Feasibility of Converting to Nonprofit Status Individual- Stone, R. 9.2% 88.8% 2.0% 7.1% 67.8% 1.5% 4.7%Wells Fargo & Company Board- Independent Board Chairman/Separate Chair-CEO SEIU 26.8% 72.8% 0.3% 20.7% 56.1% 0.3% 8.1%Wells Fargo & Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 30.0% 63.1% 6.9% 23.1% 48.6% 5.3% 8.1%Weyerhaeuser Company Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 54.8% 44.7% 0.5% 44.6% 36.3% 0.4% 8.6%WGL Holdings, Inc. Cumulative Voting Individual- Davis, E. 39.1% 59.5% 1.4% 27.6% 42.0% 1.0% 18.2%Whole Foods Market Inc. Board- Adopt and Disclose CEO Succession Planning Guidelines Laborers 29.1% 69.9% 1.0% 20.1% 48.3% 0.7% 17.0%Whole Foods Market Inc. Board- Amend Bylaws to Allow Director Removal With or Without Cause LongView 52.7% 46.1% 1.2% 36.4% 31.8% 0.8% 17.0%Whole Foods Market Inc. Board- Majority Vote-Shareholder Committee Individual- McRitchie, J. 37.6% 60.9% 1.4% 26.0% 42.1% 1.0% 17.0%Whole Foods Market Inc. Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 57.7% 42.0% 0.3% 39.8% 29.0% 0.2% 17.0%Williams Companies, Inc. Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 51.7% 46.4% 1.9% 38.5% 34.5% 1.4% 12.0%Windstream Corporation Executive Compensation- Require Equity to be Retained IBEW 27.1% 71.8% 1.2% 14.6% 38.7% 0.6% 29.8%Woodward Governor Company Repeal Classified Board Individual- Armstrong, G. 67.3% 31.1% 1.6% 53.7% 24.8% 1.3% 11.3%Xcel Energy Inc. Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 45.0% 53.9% 1.1% 29.6% 35.4% 0.7% 16.8%Yahoo! Inc. Executive Compensation- Advisory Vote on Executive Compensation Individual- Loeb, M. 28.0% 70.1% 1.8% 21.3% 53.2% 1.4% 11.3%YUM! Brands, Inc. Shareholder Right to Call a Special Meeting Individual- Treumann, R. 55.0% 44.5% 0.5% 39.5% 32.0% 0.3% 11.4%Zions Bancorporation Board- Independent Board Chairman/Separate Chair-CEO New York City Pension Funds 8.0% 89.6% 2.4% 3.7% 41.5% 1.1% 37.3%Zions Bancorporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 31.5% 66.8% 1.7% 21.1% 44.6% 1.1% 16.9%

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fIGURE 15> Voting results (sorted by Proposal), 2010




Chesapeake Energy Corporation Adopt Policy on Responsible Trading Practices LongView 36.4% 62.8% 0.8% 23.1% 39.9% 0.5% 18.7%NYSE Euronext Allow for Issuance of Physical Stock Certificates Individual- Davis, E. 4.3% 95.0% 0.7% 2.4% 53.6% 0.4% 17.9%Anadarko Petroleum Corporation Allow Shareholders to Recover Proxy Contest Costs AFSCME 43.2% 53.6% 3.2% 32.5% 40.3% 2.4% 8.5%Citigroup Inc. Allow Shareholders to Recover Proxy Contest Costs AFSCME 30.9% 65.8% 3.3% 19.6% 41.8% 2.1% 14.3%Hartford Financial Services Group, Inc. Allow Shareholders to Recover Proxy Contest Costs AFSCME 46.7% 50.6% 2.7% 34.2% 37.1% 2.0% 11.4%Omnicom Group Inc. Allow Shareholders to Recover Proxy Contest Costs AFSCME 47.0% 51.2% 1.8% 38.8% 42.3% 1.5% 5.5%PulteGroup, Inc. Allow Shareholders to Recover Proxy Contest Costs AFSCME 30.7% 66.5% 2.8% 25.7% 55.5% 2.3% 6.7%Bank of America Corporation Board- Adopt and Disclose CEO Succession Planning Guidelines Laborers 39.8% 59.4% 0.8% 26.3% 39.3% 0.5% 16.2%Comcast Corporation Board- Adopt and Disclose CEO Succession Planning Guidelines Laborers 14.5% 85.4% 0.1% 2.3% 13.9% 0.0% 1.0%Verizon Communications Inc. Board- Adopt and Disclose CEO Succession Planning Guidelines Laborers 31.3% 65.5% 3.2% 20.6% 43.1% 2.1% 17.1%Whole Foods Market Inc. Board- Adopt and Disclose CEO Succession Planning Guidelines Laborers 29.1% 69.9% 1.0% 20.1% 48.3% 0.7% 17.0%Whole Foods Market Inc. Board- Amend Bylaws to Allow Director Removal With or Without Cause LongView 52.7% 46.1% 1.2% 36.4% 31.8% 0.8% 17.0%Chevron Corporation Board- Establish Committee on Human Rights Individual- Zhao, J. 5.5% 74.9% 19.6% 3.8% 51.8% 13.5% 14.7%Apple Inc. Board- Establish Committee on Sustainability Harrington Investments, Inc. 4.3% 78.4% 17.3% 2.8% 50.7% 11.2% 17.7%Abercrombie & Fitch Co. Board- Independent Board Chairman/Separate Chair-CEO AFSCME 27.0% 72.5% 0.5% 22.5% 60.3% 0.4% 5.1%Aetna Inc. Board- Independent Board Chairman/Separate Chair-CEO United Association S&P 500 Index Fund 45.6% 54.1% 0.3% 37.4% 44.3% 0.2% 5.2%Allegheny Energy, Inc. Board- Independent Board Chairman/Separate Chair-CEO Individual- Chevedden, J. 38.2% 61.3% 0.5% 29.6% 47.5% 0.4% 7.2%AutoNation, Inc. Board- Independent Board Chairman/Separate Chair-CEO IBEW 15.1% 84.7% 0.2% 13.5% 75.3% 0.1% 5.5%BB&T Corporation Board- Independent Board Chairman/Separate Chair-CEO AFSCME 18.4% 79.4% 2.2% 12.3% 52.9% 1.5% 15.3%Boeing Company Board- Independent Board Chairman/Separate Chair-CEO Sheet Metal Workers 28.6% 69.6% 1.8% 21.5% 52.3% 1.3% 12.1%Boston Properties, Inc. Board- Independent Board Chairman/Separate Chair-CEO Laborers 40.1% 59.8% 0.0% 34.6% 51.5% 0.0% 2.6%Caterpillar Inc. Board- Independent Board Chairman/Separate Chair-CEO SEIU 17.1% 82.3% 0.6% 12.2% 58.5% 0.4% 14.8%Coca-Cola Company Board- Independent Board Chairman/Separate Chair-CEO Teamsters 26.5% 72.9% 0.5% 19.5% 53.5% 0.4% 11.3%Comcast Corporation Board- Independent Board Chairman/Separate Chair-CEO AFL-CIO 23.8% 76.1% 0.1% 3.9% 12.4% 0.0% 1.0%Constellation Energy Group, Inc. Board- Independent Board Chairman/Separate Chair-CEO Norges Bank 18.3% 81.3% 0.4% 13.8% 61.5% 0.3% 8.2%Deere & Company Board- Independent Board Chairman/Separate Chair-CEO Not Named 42.5% 56.5% 0.9% 30.5% 40.6% 0.7% 11.4%Express Scripts, Inc. Board- Independent Board Chairman/Separate Chair-CEO United Food and Commercial Workers 16.1% 83.8% 0.1% 13.3% 69.4% 0.1% 6.2%Fifth Third Bancorp Board- Independent Board Chairman/Separate Chair-CEO AFSCME 31.8% 67.6% 0.6% 23.9% 51.0% 0.5% 10.8%Fluor Corporation Board- Independent Board Chairman/Separate Chair-CEO Laborers 36.6% 62.4% 1.0% 26.0% 44.4% 0.7% 12.1%General Electric Company Board- Independent Board Chairman/Separate Chair-CEO Individual- Quirini, H. 34.9% 63.8% 1.3% 20.1% 36.8% 0.8% 19.0%Goldman Sachs Group, Inc. Board- Independent Board Chairman/Separate Chair-CEO CBIS 19.1% 80.6% 0.4% 14.1% 59.4% 0.3% 9.2%Home Depot, Inc. Board- Independent Board Chairman/Separate Chair-CEO Trowel Trades 22.4% 77.3% 0.3% 15.4% 53.1% 0.2% 14.8%Honeywell International Inc. Board- Independent Board Chairman/Separate Chair-CEO Laborers 47.7% 51.7% 0.6% 36.7% 39.8% 0.5% 9.7%JPMorgan Chase & Co. Board- Independent Board Chairman/Separate Chair-CEO Trowel Trades 34.0% 65.6% 0.4% 24.9% 48.1% 0.3% 9.7%Kohl’s Corporation Board- Independent Board Chairman/Separate Chair-CEO Trowel Trades 16.8% 82.6% 0.6% 13.8% 67.7% 0.5% 4.2%Lowe’s Companies, Inc. Board- Independent Board Chairman/Separate Chair-CEO Laborers 18.0% 81.3% 0.7% 13.9% 63.0% 0.5% 10.6%MDC Holdings, Inc. Board- Independent Board Chairman/Separate Chair-CEO Laborers 22.1% 77.8% 0.0% 20.0% 70.3% 0.0% 5.0%Moody’s Corporation Board- Independent Board Chairman/Separate Chair-CEO Legal & General 33.1% 66.2% 0.7% 18.0% 36.0% 0.4% 3.7%Morgan Stanley Board- Independent Board Chairman/Separate Chair-CEO Laborers 27.0% 72.4% 0.6% 21.5% 57.7% 0.5% 8.6%Nabors Industries Ltd. Board- Independent Board Chairman/Separate Chair-CEO AFSCME 24.9% 74.9% 0.2% 20.1% 60.4% 0.1% 6.5%PG&E Corporation Board- Independent Board Chairman/Separate Chair-CEO Individual- Levine, S. 27.6% 72.0% 0.5% 9.7% 25.3% 0.2% 5.9%PulteGroup, Inc. Board- Independent Board Chairman/Separate Chair-CEO AFL-CIO 30.2% 69.2% 0.6% 25.2% 57.7% 0.5% 6.7%Qwest Communications Intl. Inc. Board- Independent Board Chairman/Separate Chair-CEO Individual- Steiner, K. 28.9% 70.8% 0.3% 21.9% 53.8% 0.2% 8.7%State Street Corporation Board- Independent Board Chairman/Separate Chair-CEO Walden Asset Management 16.5% 82.9% 0.6% 13.3% 66.7% 0.5% 6.2%Toll Brothers, Inc. Board- Independent Board Chairman/Separate Chair-CEO Laborers 24.9% 74.8% 0.2% 18.5% 55.6% 0.2% 9.1%Union Pacific Corporation Board- Independent Board Chairman/Separate Chair-CEO Pax World Management Corp 20.3% 79.4% 0.3% 16.0% 62.6% 0.2% 8.1%Vornado Realty Trust Board- Independent Board Chairman/Separate Chair-CEO Laborers 41.0% 59.0% 0.1% 33.6% 48.3% 0.1% 4.8%Wells Fargo & Company Board- Independent Board Chairman/Separate Chair-CEO SEIU 26.8% 72.8% 0.3% 20.7% 56.1% 0.3% 8.1%Zions Bancorporation Board- Independent Board Chairman/Separate Chair-CEO New York City Pension Funds 8.0% 89.6% 2.4% 3.7% 41.5% 1.1% 37.3%PG&E Corporation Board- Limits for Directors Involved in Bankruptcy Individual- Chevedden, R. 3.2% 96.0% 0.9% 1.1% 33.7% 0.3% 5.9%Baker Hughes Incorporated Board- Majority Vote to Elect Directors* UBCJA 40.1% 59.8% 0.2% 31.4% 46.9% 0.1% 7.0%Becton, Dickinson and Company Board- Majority Vote to Elect Directors Individual- Armstrong, G. 49.1% 49.8% 1.1% 35.6% 36.1% 0.8% 10.2%Cooper Companies, Inc. Board- Majority Vote to Elect Directors New York City Pension Funds 82.6% 17.1% 0.3% 73.9% 15.3% 0.3% 2.9%Duke Energy Corporation Board- Majority Vote to Elect Directors Not Named 40.2% 58.8% 1.0% 23.6% 34.5% 0.6% 24.3%EQT Corporation Board- Majority Vote to Elect Directors* UBCJA 54.5% 45.2% 0.3% 43.2% 35.8% 0.3% 8.2%Equity Residential Board- Majority Vote to Elect Directors* UBCJA 56.7% 43.2% 0.1% 48.9% 37.3% 0.1% 4.5%FirstEnergy Corp. Board- Majority Vote to Elect Directors UBCJA 75.1% 23.1% 1.7% 56.7% 17.5% 1.3% 8.6%FMC Technologies, Inc. Board- Majority Vote to Elect Directors UBCJA 70.6% 29.1% 0.3% 59.4% 24.5% 0.2% 3.6%Graco Inc. Board- Majority Vote to Elect Directors CalPERS 63.2% 36.1% 0.7% 51.1% 29.1% 0.6% 7.5%HCP, Inc. Board- Majority Vote to Elect Directors* UBCJA 42.4% 45.0% 12.6% 37.5% 39.7% 11.2% 0.5%Johnson Controls, Inc. Board- Majority Vote to Elect Directors Laborers 77.7% 21.6% 0.7% 62.1% 17.2% 0.6% 7.2%Macy’s, Inc. Board- Majority Vote to Elect Directors Individual- Steiner, W. 60.8% 38.6% 0.6% 50.0% 31.8% 0.5% 4.1%

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Massey Energy Company Board- Majority Vote to Elect Directors Not Named 63.9% 35.9% 0.2% 50.3% 28.2% 0.2% 6.7%Newmont Mining Corporation Board- Majority Vote to Elect Directors* UBCJA 52.4% 47.3% 0.3% 38.1% 34.4% 0.2% 6.5%Nucor Corporation Board- Majority Vote to Elect Directors* UBCJA 39.4% 59.8% 0.8% 29.3% 44.5% 0.6% 11.0%Oshkosh Corporation Board- Majority Vote to Elect Directors Individual- Chevedden, J. 51.6% 48.0% 0.4% 38.8% 36.1% 0.3% 16.2%PACCAR Inc Board- Majority Vote to Elect Directors UBCJA 44.3% 55.4% 0.3% 37.6% 47.1% 0.3% 0.0%People’s United Financial, Inc. Board- Majority Vote to Elect Directors UBCJA 80.7% 14.2% 5.1% 58.2% 10.2% 3.7% 10.7%Pioneer Natural Resources Company Board- Majority Vote to Elect Directors UBCJA 84.4% 14.4% 1.2% 60.9% 10.4% 0.9% 14.9%PPL Corporation Board- Majority Vote to Elect Directors* Plumbers & Pipefitters 32.7% 66.1% 1.2% 23.0% 46.3% 0.9% 11.4%PulteGroup, Inc. Board- Majority Vote to Elect Directors Sheet Metal Workers 45.9% 54.0% 0.1% 38.3% 45.1% 0.1% 6.7%Quanta Services, Inc. Board- Majority Vote to Elect Directors United Association S&P 500 Index Fund 65.2% 31.5% 3.3% 48.8% 23.6% 2.5% 6.7%Sherwin-Williams Company Board- Majority Vote to Elect Directors* UBCJA 37.2% 61.2% 1.6% 28.4% 46.8% 1.2% 9.3%Southwestern Energy Company Board- Majority Vote to Elect Directors* UBCJA 50.1% 49.5% 0.4% 40.4% 40.0% 0.3% 5.9%Spectra Energy Corp Board- Majority Vote to Elect Directors* UBCJA 48.2% 51.2% 0.6% 32.7% 34.8% 0.4% 15.9%Superior Industries Intl., Inc. Board- Majority Vote to Elect Directors* New York City Pension Funds 43.8% 54.8% 1.3% 36.6% 45.8% 1.1% 6.8%Ventas, Inc. Board- Majority Vote to Elect Directors United Association S&P 500 Index Fund 74.1% 25.8% 0.1% 59.3% 20.7% 0.1% 8.3%Vornado Realty Trust Board- Majority Vote to Elect Directors UBCJA 72.3% 27.6% 0.1% 59.2% 22.6% 0.1% 4.8%Vulcan Materials Company Board- Majority Vote to Elect Directors UBCJA 39.2% 60.4% 0.3% 30.0% 46.2% 0.3% 10.0%KB Home Board- Majority Vote-Shareholder Committee New York City Pension Funds 40.9% 42.5% 16.6% 28.5% 29.7% 11.6% 16.2%Whole Foods Market Inc. Board- Majority Vote-Shareholder Committee Individual- McRitchie, J. 37.6% 60.9% 1.4% 26.0% 42.1% 1.0% 17.0%Chevron Corporation Board- Nominate Director with Environmental Expertise New York City Pension Funds 26.0% 71.2% 2.7% 18.0% 49.3% 1.9% 14.7%Freeport-McMoRan Copper & Gold Inc. Board- Nominate Director with Environmental Expertise Stichting Pensioenfonds ABP 33.2% 64.4% 2.4% 23.0% 44.6% 1.7% 12.0%Eli Lilly and Company Board- Prohibit CEO from Serving on Compensation Committee AFL-CIO 7.5% 90.8% 1.7% 5.9% 71.5% 1.3% 9.1%PACCAR Inc Board- Prohibit CEO from Serving on Compensation Committee AFL-CIO 8.5% 91.1% 0.4% 7.2% 77.4% 0.4% 0.0%ConocoPhillips Board- Report on Risk Oversight Management Sisters of the Holy Name of Jesus and Mary 4.9% 93.5% 1.6% 3.6% 68.3% 1.2% 11.4%General Electric Company Board- Restrict Director Participation on Board Committees Individual- Armstrong, G. 5.4% 92.4% 2.2% 3.1% 53.3% 1.3% 19.0%Aetna Inc. Cumulative Voting Individual- Davis, E. 34.6% 65.1% 0.3% 28.3% 53.4% 0.3% 5.2%American Express Company Cumulative Voting Individual- Davis, E. 24.0% 75.7% 0.3% 19.1% 60.2% 0.3% 8.9%American International Group, Inc. Cumulative Voting Individual- Steiner, K. 1.3% 98.6% 0.1% 1.1% 83.9% 0.1% 5.9%AT&T Inc. Cumulative Voting Individual- Rossi Family 32.7% 65.8% 1.5% 20.2% 40.8% 0.9% 15.4%Bank of New York Mellon Corporation Cumulative Voting Individual- Davis, E. 35.9% 63.6% 0.4% 28.0% 49.7% 0.3% 7.0%Becton, Dickinson and Company Cumulative Voting Individual- Davis, E. 33.5% 65.5% 0.9% 24.3% 47.6% 0.7% 10.2%Comcast Corporation Cumulative Voting Individual- Davis, E. 21.8% 78.1% 0.1% 3.5% 12.7% 0.0% 1.0%General Electric Company Cumulative Voting Individual- Davis, E. 24.9% 73.8% 1.2% 14.4% 42.6% 0.7% 19.0%Goldman Sachs Group, Inc. Cumulative Voting Individual- Davis, E. 25.2% 74.3% 0.4% 18.6% 54.8% 0.3% 9.2%Home Depot, Inc. Cumulative Voting Individual- Davis, E. 36.0% 63.7% 0.3% 24.7% 43.8% 0.2% 14.8%International Business Machines Corp. Cumulative Voting Individual- Davis, E. 29.4% 69.3% 1.3% 19.4% 45.6% 0.9% 12.6%Loews Corporation Cumulative Voting Individual- Davis, E. 17.1% 82.7% 0.2% 14.7% 71.5% 0.2% 5.4%Metlife, Inc. Cumulative Voting Individual- Davis, E. 20.8% 78.7% 0.5% 17.3% 65.5% 0.4% 4.2%Safeway Inc. Cumulative Voting Individual- Davis, E. 27.2% 72.8% 0.1% 21.1% 56.4% 0.0% 6.5%Saks Inc. Cumulative Voting Individual- Davis, E. 37.7% 62.1% 0.1% 24.6% 40.5% 0.1% 9.5%WGL Holdings, Inc. Cumulative Voting Individual- Davis, E. 39.1% 59.5% 1.4% 27.6% 42.0% 1.0% 18.2%Bank of America Corporation Derivative Trading Policy and Procedure Maryknoll 38.4% 59.8% 1.8% 25.4% 39.5% 1.2% 16.2%Citigroup Inc. Derivative Trading Policy and Procedure Sisters of Charity of St. Elizabeth 29.7% 69.1% 1.2% 18.9% 43.9% 0.8% 14.3%Goldman Sachs Group, Inc. Derivative Trading Policy and Procedure Maryknoll 33.5% 65.9% 0.6% 24.7% 48.6% 0.4% 9.2%JPMorgan Chase & Co. Derivative Trading Policy and Procedure Sisters of Charity of St. Elizabeth 33.4% 65.5% 1.2% 24.4% 48.0% 0.9% 9.7%Ford Motor Company Eliminate Dual Class Voting Rights Individual- Chevedden, R. 29.1% 70.2% 0.6% 21.5% 51.8% 0.5% 16.2%Pfizer Inc. Executive Compensation- Abolish Stock Options Individual- Davis, E. 4.1% 95.3% 0.7% 2.8% 65.0% 0.4% 12.3%Verizon Communications Inc. Executive Compensation- Abolish Stock Options Individual- Davis, E. 8.5% 90.0% 1.5% 5.6% 59.3% 1.0% 17.1%Abbott Laboratories Executive Compensation- Advisory Vote on Executive Compensation Unitarian Universalist Assn. of Congregations 41.8% 54.2% 4.0% 31.1% 40.3% 3.0% 10.7%Allstate Corporation Executive Compensation- Advisory Vote on Executive Compensation AFSCME 57.5% 40.1% 2.3% 42.5% 29.6% 1.7% 10.7%AT&T Inc. Executive Compensation- Advisory Vote on Executive Compensation Association of BellTell Retirees 45.6% 52.0% 2.4% 28.3% 32.2% 1.5% 15.4%Ball Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 47.8% 49.0% 3.2% 40.0% 40.9% 2.7% 5.3%Bank of America Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Steiner, K. 41.8% 53.1% 5.1% 27.7% 35.1% 3.4% 16.2%Boeing Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Chevedden, R. 31.4% 65.5% 3.1% 23.6% 49.3% 2.3% 12.1%CenturyTel, Inc. Executive Compensation- Advisory Vote on Executive Compensation AFL-CIO 44.0% 55.0% 1.0% 30.5% 38.1% 0.7% 15.3%Chesapeake Energy Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 49.4% 39.5% 11.1% 31.4% 25.1% 7.1% 18.7%Chesapeake Energy Corporation Executive Compensation- Advisory Vote on Executive Compensation Nathan Cummings Foundation 50.2% 39.5% 10.3% 31.9% 25.1% 6.6% 18.7%Coca-Cola Company Executive Compensation- Advisory Vote on Executive Compensation Benedictine Sisters 32.5% 62.8% 4.7% 23.9% 46.1% 3.4% 11.3%Deere & Company Executive Compensation- Advisory Vote on Executive Compensation Not Named 43.4% 53.3% 3.3% 31.2% 38.3% 2.4% 11.4%Dominion Resources Inc. Executive Compensation- Advisory Vote on Executive Compensation UWA 41.3% 57.5% 1.2% 28.5% 39.6% 0.8% 13.3%Dow Chemical Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Steiner, W. 36.8% 55.2% 8.0% 27.8% 41.8% 6.1% 10.4%E. I. du Pont de Nemours and Co. Executive Compensation- Advisory Vote on Executive Compensation Individual- Steiner, W. 43.6% 53.8% 2.7% 28.4% 35.1% 1.7% 15.5%

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Edison International Executive Compensation- Advisory Vote on Executive Compensation Individual- Chevedden, J. 38.4% 57.7% 3.9% 27.6% 41.5% 2.8% 9.9%Eli Lilly and Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Parrish, G. 27.3% 71.1% 1.6% 21.5% 56.0% 1.3% 9.1%EMC Corporation Executive Compensation- Advisory Vote on Executive Compensation Unitarian Universalist Assn. of Congregations 51.5% 47.1% 1.4% 36.1% 32.9% 1.0% 13.7%Exxon Mobil Corporation Executive Compensation- Advisory Vote on Executive Compensation Needmor Fund 40.3% 57.5% 2.2% 25.1% 35.8% 1.4% 18.2%Ford Motor Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Chevedden, J. 17.8% 80.5% 1.7% 13.1% 59.3% 1.2% 16.2%General Electric Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Noyes, G. 40.9% 55.9% 3.2% 23.6% 32.3% 1.8% 19.0%Halliburton Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 48.5% 48.0% 3.5% 34.0% 33.7% 2.5% 10.1%Home Depot, Inc. Executive Compensation- Advisory Vote on Executive Compensation New York City Pension Funds 42.1% 54.9% 3.1% 28.9% 37.7% 2.1% 14.8%International Business Machines Co. Executive Compensation- Advisory Vote on Executive Compensation Boston Common Asset Management 44.3% 53.5% 2.2% 29.2% 35.2% 1.4% 12.6%Johnson & Johnson Executive Compensation- Advisory Vote on Executive Compensation Walden Asset Management 46.5% 50.5% 3.0% 31.5% 34.2% 2.0% 15.0%KB Home Executive Compensation- Advisory Vote on Executive Compensation New York City Pension Funds 35.4% 64.6% 0.1% 24.7% 45.0% 0.1% 16.2%Marathon Oil Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Rossi Family 47.6% 44.9% 7.5% 34.0% 32.1% 5.3% 9.9%McDonald’s Corporation Executive Compensation- Advisory Vote on Executive Compensation Needmor Fund 40.8% 54.3% 4.9% 29.0% 38.7% 3.5% 12.8%Mylan Inc. Executive Compensation- Advisory Vote on Executive Compensation Nathan Cummings Foundation 48.8% 49.9% 1.3% 35.0% 35.8% 0.9% 13.3%Nabors Industries Ltd. Executive Compensation- Advisory Vote on Executive Compensation Nathan Cummings Foundation 38.1% 49.2% 12.7% 30.7% 39.7% 10.2% 6.5%Pinnacle Entertainment, Inc. Executive Compensation- Advisory Vote on Executive Compensation AFL-CIO 42.8% 57.2% 0.0% 33.4% 44.6% 0.0% 3.6%PulteGroup, Inc. Executive Compensation- Advisory Vote on Executive Compensation Miami Fire Fighters’ Relief & Pension Fund 39.6% 45.4% 15.1% 33.0% 37.9% 12.6% 6.7%Questar Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 47.6% 50.8% 1.6% 36.2% 38.7% 1.2% 8.7%Qwest Communications Intl. Inc. Executive Compensation- Advisory Vote on Executive Compensation Individual- Neuman, M. 31.2% 50.9% 17.9% 23.7% 38.7% 13.6% 8.7%Raytheon Company Executive Compensation- Advisory Vote on Executive Compensation AFSCME 45.0% 50.0% 5.0% 36.4% 40.5% 4.0% 8.3%Rockwell Collins, Inc. Executive Compensation- Advisory Vote on Executive Compensation Clean Yield Asset Management 44.3% 54.3% 1.4% 33.1% 40.7% 1.0% 12.9%Ryland Group, Inc. Executive Compensation- Advisory Vote on Executive Compensation New York City Pension Funds 37.1% 45.0% 17.9% 31.5% 38.3% 15.3% 4.4%Sempra Energy Executive Compensation- Advisory Vote on Executive Compensation Individual- Chevedden, R. 51.4% 46.1% 2.4% 36.2% 32.5% 1.7% 12.1%Sprint Nextel Corporation Executive Compensation- Advisory Vote on Executive Compensation New York City Pension Funds 52.3% 33.9% 13.8% 40.1% 26.0% 10.5% 9.5%Target Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Hancock, A.E. 49.4% 45.6% 4.9% 40.5% 37.4% 4.1% 7.7%Time Warner Inc. Executive Compensation- Advisory Vote on Executive Compensation Mercy Investment Program 44.9% 52.4% 2.7% 35.7% 41.7% 2.2% 7.1%TJX Companies, Inc. Executive Compensation- Advisory Vote on Executive Compensation UNITE-HERE 48.5% 41.5% 10.0% 40.7% 34.8% 8.4% 4.9%tw telecom inc. Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 25.8% 65.8% 8.4% 23.5% 60.0% 7.6% 2.8%United Technologies Corporation Executive Compensation- Advisory Vote on Executive Compensation AFL-CIO 40.2% 54.0% 5.8% 31.2% 41.9% 4.5% 8.3%UnitedHealth Group Incorporated Executive Compensation- Advisory Vote on Executive Compensation Nathan Cummings Foundation 46.0% 47.6% 6.5% 36.1% 37.3% 5.1% 6.0%Waddell & Reed Financial, Inc. Executive Compensation- Advisory Vote on Executive Compensation CalSTRS 41.2% 56.2% 2.6% 37.4% 51.0% 2.4% 3.8%Wal-Mart Stores, Inc. Executive Compensation- Advisory Vote on Executive Compensation LongView 19.6% 79.2% 1.2% 16.2% 65.3% 1.0% 6.4%Walt Disney Company Executive Compensation- Advisory Vote on Executive Compensation Walden Asset Management 47.5% 45.0% 7.6% 34.8% 33.0% 5.5% 11.4%WellPoint, Inc. Executive Compensation- Advisory Vote on Executive Compensation Connecticut Retirement Plans 60.2% 35.6% 4.3% 46.0% 27.2% 3.3% 4.7%Wells Fargo & Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 30.0% 63.1% 6.9% 23.1% 48.6% 5.3% 8.1%Williams Companies, Inc. Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 51.7% 46.4% 1.9% 38.5% 34.5% 1.4% 12.0%Xcel Energy Inc. Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 45.0% 53.9% 1.1% 29.6% 35.4% 0.7% 16.8%Yahoo! Inc. Executive Compensation- Advisory Vote on Executive Compensation Individual- Loeb, M. 28.0% 70.1% 1.8% 21.3% 53.2% 1.4% 11.3%Zions Bancorporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 31.5% 66.8% 1.7% 21.1% 44.6% 1.1% 16.9%Charles Schwab Corporation Executive Compensation- Approve or Limit Executive Death Benefits AFL-CIO 34.7% 65.0% 0.3% 28.6% 53.5% 0.2% 9.4%Omnicom Group Inc. Executive Compensation- Approve or Limit Executive Death Benefits LongView 40.6% 59.1% 0.2% 33.6% 48.9% 0.2% 5.5%Safeway Inc. Executive Compensation- Approve or Limit Executive Death Benefits AFSCME 40.6% 59.4% 0.1% 31.5% 46.0% 0.0% 6.5%Verizon Communications Inc. Executive Compensation- Approve or Limit Executive Death Benefits Firefighter’s Pension Sys. of Kansas City 41.5% 55.7% 2.8% 27.3% 36.7% 1.9% 17.1%Raytheon Company Executive Compensation- Approve/Disclose Supplemental Retirement Plans AFL-CIO 41.9% 57.4% 0.7% 34.0% 46.5% 0.5% 8.3%Bank of New York Mellon Corporation Executive Compensation- Approve/Vote on Future Golden Parachutes Trowel Trades 77.5% 22.2% 0.3% 60.5% 17.3% 0.2% 7.0%Coca-Cola Enterprises Inc. Executive Compensation- Approve/Vote on Future Golden Parachutes Teamsters 42.9% 57.0% 0.1% 37.6% 50.0% 0.1% 3.5%PNC Financial Services Group, Inc. Executive Compensation- Approve/Vote on Future Golden Parachutes Trowel Trades 70.2% 29.2% 0.6% 54.9% 22.8% 0.5% 8.6%Chesapeake Energy Corporation Executive Compensation- Award Performance-Based Bonuses PhiPERS 25.8% 73.0% 1.2% 16.4% 46.4% 0.8% 18.7%Coca-Cola Company Executive Compensation- Award Performance-Based Restricted Stock Individual- Shepherd, E. 9.7% 88.4% 1.9% 7.1% 64.8% 1.4% 11.3%PulteGroup, Inc. Executive Compensation- Award Performance-Based Stock Options Laborers 33.9% 66.0% 0.1% 28.3% 55.1% 0.1% 6.7%Walgreen Co. Executive Compensation- Award Performance-Based Stock Options Laborers 42.5% 55.4% 2.1% 29.6% 38.6% 1.4% 16.4%EOG Resources, Inc. Executive Compensation- Eliminate Accelerated Vesting in Change-of-Control LongView 28.3% 70.5% 1.2% 24.2% 60.1% 1.0% 3.2%Dean Foods Company Executive Compensation- Establish Anti-Tax Gross-Up Policy LongView 44.7% 54.9% 0.4% 34.5% 42.4% 0.3% 7.1%Regions Financial Corporation Executive Compensation- Establish Anti-Tax Gross-Up Policy AFSCME 35.1% 63.9% 1.0% 23.6% 42.9% 0.7% 16.8%Coventry Health Care, Inc. Executive Compensation- Establish Multiple Performance Metrics New York City Pension Funds 40.6% 59.3% 0.1% 34.7% 50.6% 0.1% 3.5%AT&T Inc. Executive Compensation- Exclude Pension Credits/Surplus from Comp. Calculation SNET Retirees Association 41.3% 57.1% 1.6% 25.6% 35.4% 1.0% 15.4%Bristol-Myers Squibb Company Executive Compensation- Greater Disclosure Individual- Davis, E. 8.3% 90.8% 0.9% 5.8% 63.1% 0.6% 15.7%Consolidated Edison, Inc. Executive Compensation- Greater Disclosure Individual- Davis, E. 12.1% 85.7% 2.2% 6.5% 46.0% 1.2% 28.5%R. R. Donnelley & Sons Company Executive Compensation- Limit Golden Parachutes New York City Pension Funds 51.7% 46.8% 1.6% 42.6% 38.5% 1.3% 4.7%Comerica Incorporated Executive Compensation- Link Pay to Performance Laborers 30.5% 67.8% 1.7% 23.9% 53.1% 1.3% 9.3%KB Home Executive Compensation- Link Pay to Performance Laborers 35.2% 64.7% 0.1% 24.6% 45.1% 0.1% 16.2%Nabors Industries Ltd. Executive Compensation- Link Pay to Performance Laborers 40.1% 59.8% 0.2% 32.3% 48.2% 0.1% 6.5%

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Qwest Communications Intl. Inc. Executive Compensation- Link Pay to Performance Individual- Floyd, H. 7.0% 91.1% 1.9% 5.3% 69.2% 1.4% 8.7%Verizon Communications Inc. Executive Compensation- Link Pay to Performance Association of BellTell Retirees 29.4% 67.6% 3.0% 19.4% 44.5% 2.0% 17.1%Bank of America Corporation Executive Compensation- Recoup Bonuses if Restatement SEIU 43.5% 55.7% 0.9% 28.8% 36.8% 0.6% 16.2%Comerica Incorporated Executive Compensation- Recoup Bonuses if Restatement SEIU 53.0% 45.3% 1.7% 41.5% 35.4% 1.4% 9.3%Morgan Stanley Executive Compensation- Recoup Bonuses if Restatement SEIU 29.8% 69.3% 0.8% 23.8% 55.3% 0.7% 8.6%Bank of America Corporation Executive Comp.- Report on Tax Deductibility of Compensation under TARP AFL-CIO 33.3% 65.4% 1.4% 22.0% 43.3% 0.9% 16.2%PNC Financial Services Group, Inc. Executive Comp.- Report on Tax Deductibility of Compensation under TARP AFL-CIO 34.7% 64.1% 1.2% 27.2% 50.2% 0.9% 8.6%American Express Company Executive Compensation- Require Equity to be Retained AFSCME 33.0% 66.2% 0.8% 26.2% 52.6% 0.7% 8.9%American International Group, Inc. Executive Compensation- Require Equity to be Retained AFL-CIO 1.1% 98.8% 0.1% 0.9% 84.1% 0.1% 5.9%Amgen Inc. Executive Compensation- Require Equity to be Retained PhiPERS 26.3% 72.4% 1.3% 19.5% 53.7% 1.0% 11.2%Bank of New York Mellon Corporation Executive Compensation- Require Equity to be Retained AFL-CIO 37.8% 61.4% 0.8% 29.5% 47.9% 0.6% 7.0%Capital One Financial Corporation Executive Compensation- Require Equity to be Retained AFSCME 21.6% 78.1% 0.3% 16.2% 58.8% 0.3% 7.9%CenturyTel, Inc. Executive Compensation- Require Equity to be Retained IBEW 24.8% 74.6% 0.6% 17.2% 51.7% 0.4% 15.3%Chevron Corporation Executive Compensation- Require Equity to be Retained Not Named 26.1% 72.8% 1.1% 18.0% 50.4% 0.8% 14.7%Citigroup Inc. Executive Compensation- Require Equity to be Retained AFL-CIO 25.3% 73.6% 1.2% 16.1% 46.8% 0.8% 14.3%DIRECTV Executive Compensation- Require Equity to be Retained IBEW 14.6% 85.2% 0.2% 12.1% 71.0% 0.2% 5.7%Dow Chemical Company Executive Compensation- Require Equity to be Retained AFSCME 25.4% 73.2% 1.4% 19.2% 55.4% 1.0% 10.4%Duke Energy Corporation Executive Compensation- Require Equity to be Retained Not Named 24.2% 74.2% 1.6% 14.2% 43.6% 0.9% 24.3%Eli Lilly and Company Executive Compensation- Require Equity to be Retained AFSCME 15.9% 82.6% 1.5% 12.5% 65.1% 1.2% 9.1%EOG Resources, Inc. Executive Compensation- Require Equity to be Retained Miami Fire Fighters’ Relief & Pension Fund 20.7% 79.1% 0.3% 17.6% 67.4% 0.2% 3.2%FirstEnergy Corp. Executive Compensation- Require Equity to be Retained Not Named 17.6% 80.3% 2.1% 13.3% 60.6% 1.6% 8.6%Freeport-McMoRan Copper & Gold Inc. Executive Compensation- Require Equity to be Retained Firefighter’s Pension Sys. of Kansas City 29.2% 70.0% 0.8% 20.2% 48.5% 0.5% 12.0%Frontier Communications Corp. Executive Compensation- Require Equity to be Retained Not Named 29.2% 68.0% 2.8% 14.7% 34.2% 1.4% 32.1%Goldman Sachs Group, Inc. Executive Compensation- Require Equity to be Retained Harrington Investments, Inc. 24.3% 73.8% 1.9% 17.9% 54.4% 1.4% 9.2%JPMorgan Chase & Co. Executive Compensation- Require Equity to be Retained AFL-CIO 23.4% 76.0% 0.7% 17.1% 55.6% 0.5% 9.7%Kindred Healthcare, Inc. Executive Compensation- Require Equity to be Retained Firefighter’s Pension Sys. of Kansas City 35.6% 64.2% 0.2% 32.1% 58.0% 0.2% 2.7%Morgan Stanley Executive Compensation- Require Equity to be Retained AFL-CIO 18.9% 80.3% 0.7% 15.1% 64.0% 0.6% 8.6%Mylan Inc. Executive Compensation- Require Equity to be Retained AFSCME 34.0% 65.2% 0.8% 24.4% 46.8% 0.6% 13.3%NiSource, Inc. Executive Compensation- Require Equity to be Retained UWA 23.6% 74.9% 1.6% 17.2% 54.6% 1.1% 10.2%Progress Energy, Inc. Executive Compensation- Require Equity to be Retained Not Named 23.2% 75.3% 1.4% 13.0% 42.1% 0.8% 22.3%PulteGroup, Inc. Executive Compensation- Require Equity to be Retained IBEW 24.7% 75.1% 0.2% 20.6% 62.7% 0.2% 6.7%Reynolds American Inc. Executive Compensation- Require Equity to be Retained Not Named 10.5% 89.3% 0.2% 7.8% 66.3% 0.1% 5.7%Time Warner Inc. Executive Compensation- Require Equity to be Retained IBEW 23.3% 76.3% 0.5% 18.5% 60.7% 0.4% 7.1%Valero Energy Corporation Executive Compensation- Require Equity to be Retained AFSCME 24.2% 74.8% 0.9% 16.8% 51.8% 0.6% 12.4%Verizon Communications Inc. Executive Compensation- Require Equity to be Retained IBEW 29.2% 69.2% 1.6% 19.2% 45.6% 1.1% 17.1%Windstream Corporation Executive Compensation- Require Equity to be Retained IBEW 27.1% 71.8% 1.2% 14.6% 38.7% 0.6% 29.8%CenturyTel, Inc. Executive Compensation- Restrict or Cap CWA 3.8% 95.8% 0.5% 2.6% 66.3% 0.3% 15.3%Deere & Company Executive Compensation- Restrict or Cap Not Named 4.6% 93.8% 1.6% 3.3% 67.3% 1.1% 11.4%Ball Corporation Poison Pill- Redeem or Vote On CalSTRS 70.8% 28.3% 0.9% 59.2% 23.6% 0.8% 5.3%Home Depot, Inc. Reincorporation- DE to ND Individual- Chevedden, J. 4.7% 94.8% 0.5% 3.2% 65.2% 0.3% 14.8%Motorola, Inc. Reincorporation- DE to ND Individual- Steiner, K. 33.4% 66.3% 0.4% 24.6% 48.8% 0.3% 10.4%Northrop Grumman Corporation Reincorporation- DE to ND Individual- Chevedden, J. 5.5% 93.7% 0.8% 4.4% 75.2% 0.7% 7.4%WellPoint, Inc. Reincorporation- IN to DE AFSCME 37.6% 60.5% 1.8% 28.8% 46.2% 1.4% 4.7%Exxon Mobil Corporation Reincorporation- NJ to ND Individual- Rossi Family 2.9% 95.7% 1.3% 1.8% 59.5% 0.8% 18.2%Abercrombie & Fitch Co. Repeal Classified Board Connecticut Retirement Plans 75.4% 24.1% 0.5% 62.7% 20.1% 0.4% 5.1%Avista Corporation Repeal Classified Board Individual- Armstrong, G. 81.9% 14.6% 3.5% 63.4% 11.3% 2.7% 13.1%BancorpSouth, Inc. Repeal Classified Board Individual- Armstrong, G. 41.4% 55.6% 3.0% 31.7% 42.6% 2.3% 10.3%Barnes Group Inc. Repeal Classified Board Individual- Armstrong, G. 66.9% 32.3% 0.8% 50.9% 24.6% 0.6% 6.7%Capital One Financial Corporation Repeal Classified Board New York City Pension Funds 82.9% 16.9% 0.2% 62.4% 12.8% 0.1% 7.9%City National Corporation Repeal Classified Board Individual- Armstrong, G. 50.1% 48.8% 1.1% 43.8% 42.7% 1.0% 5.8%Cleco Corporation Repeal Classified Board Individual- Armstrong, G. 89.4% 6.9% 3.7% 70.2% 5.4% 2.9% 14.3%Commerce Bancshares, Inc. Repeal Classified Board Individual- Armstrong, G. 43.7% 53.8% 2.4% 33.9% 41.7% 1.9% 12.2%Danaher Corporation Repeal Classified Board Individual- Chevedden, J. 66.8% 33.1% 0.2% 55.6% 27.5% 0.2% 5.1%DTE Energy Company Repeal Classified Board UWA 73.1% 24.9% 1.9% 45.9% 15.7% 1.2% 13.6%Eastman Chemical Company Repeal Classified Board Individual- Armstrong, G. 74.8% 24.6% 0.6% 57.1% 18.8% 0.5% 7.0%First Financial Bancorp Repeal Classified Board Individual- Armstrong, G. 76.4% 22.0% 1.6% 64.3% 18.5% 1.4% 6.7%Franklin Street Properties Corp. Repeal Classified Board Individual- Armstrong, G. 66.9% 32.5% 0.6% 43.7% 21.3% 0.4% 16.4%Hospitality Properties Trust Repeal Classified Board CalPERS 91.1% 8.3% 0.6% 72.3% 6.6% 0.5% 11.1%Massey Energy Company Repeal Classified Board New York City Pension Funds 95.1% 3.5% 1.4% 72.1% 2.7% 1.1% 9.5%Nabors Industries Ltd. Repeal Classified Board Connecticut Retirement Plans 74.8% 25.0% 0.2% 60.3% 20.1% 0.2% 6.5%Prosperity Bancshares, Inc. Repeal Classified Board Individual- Armstrong, G. 66.9% 31.9% 1.2% 53.3% 25.5% 0.9% 8.1%Reliance Steel & Aluminum Co. Repeal Classified Board Individual- Armstrong, G. 69.9% 29.9% 0.2% 59.1% 25.3% 0.2% 5.1%

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Reynolds American Inc. Repeal Classified Board Not Named 34.1% 65.7% 0.1% 25.4% 48.8% 0.1% 5.7%UMB Financial Corporation Repeal Classified Board Individual- Armstrong, G. 48.5% 50.7% 0.8% 43.2% 45.2% 0.7% 4.6%Vornado Realty Trust Repeal Classified Board Individual- Armstrong, G. 79.3% 20.6% 0.1% 64.9% 16.9% 0.1% 4.8%Woodward Governor Company Repeal Classified Board Individual- Armstrong, G. 67.3% 31.1% 1.6% 53.7% 24.8% 1.3% 11.3%Alaska Air Group, Inc. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 62.9% 35.8% 1.3% 52.1% 29.6% 1.1% 6.3%Allstate Corporation Shareholder Right to Act by Written Consent Individual- Rossi Family 66.8% 32.2% 1.0% 49.3% 23.7% 0.8% 10.7%Amgen Inc. Shareholder Right to Act by Written Consent Individual- Steiner, W. 62.7% 36.7% 0.6% 46.4% 27.2% 0.5% 11.2%Bristol-Myers Squibb Company Shareholder Right to Act by Written Consent Individual- Steiner, K. 49.0% 49.8% 1.2% 34.1% 34.6% 0.8% 15.7%DaVita Inc. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 56.6% 43.2% 0.3% 48.8% 37.3% 0.2% 4.2%FirstEnergy Corp. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 55.1% 40.9% 4.0% 41.6% 30.9% 3.0% 8.6%Home Depot, Inc. Shareholder Right to Act by Written Consent Individual- Steiner, K. 52.0% 46.0% 2.0% 35.8% 31.6% 1.3% 14.8%Honeywell International Inc. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 45.1% 54.1% 0.7% 34.8% 41.7% 0.6% 9.7%JPMorgan Chase & Co. Shareholder Right to Act by Written Consent Individual- Steiner, K. 54.3% 43.9% 1.8% 39.8% 32.2% 1.3% 9.7%Kraft Foods Inc. Shareholder Right to Act by Written Consent Individual- Steiner, W. 51.4% 45.4% 3.2% 35.2% 31.0% 2.2% 12.6%Marsh & McLennan Companies, Inc. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 45.3% 48.6% 6.1% 36.4% 39.0% 4.9% 6.7%McGraw-Hill Companies, Inc. Shareholder Right to Act by Written Consent Individual- Steiner, K. 47.9% 51.6% 0.5% 37.8% 40.7% 0.4% 5.7%Raytheon Company Shareholder Right to Act by Written Consent Individual- Chevedden, R. 52.4% 45.5% 2.1% 42.5% 36.8% 1.7% 8.3%Southwest Airlines Co. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 35.5% 63.3% 1.2% 28.8% 51.3% 1.0% 11.3%Sprint Nextel Corporation Shareholder Right to Act by Written Consent Individual- Steiner, K. 67.6% 32.2% 0.1% 51.8% 24.7% 0.1% 9.5%Staples, Inc. Shareholder Right to Act by Written Consent Individual- Steiner, W. 56.7% 43.0% 0.3% 47.3% 35.9% 0.2% 6.3%3M Company Shareholder Right to Call a Special Meeting Individual- Rossi Family 45.8% 53.4% 0.9% 31.0% 36.2% 0.6% 14.4%Abbott Laboratories Shareholder Right to Call a Special Meeting Individual- Steiner, K. 38.3% 60.9% 0.8% 28.5% 45.3% 0.6% 10.7%Allstate Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 55.2% 44.2% 0.6% 40.8% 32.6% 0.5% 10.7%American Express Company Shareholder Right to Call a Special Meeting Individual- Steiner, K. 43.8% 55.6% 0.6% 34.8% 44.2% 0.5% 8.9%AT&T Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, W. 42.6% 55.7% 1.7% 26.4% 34.5% 1.1% 15.4%AutoNation, Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 12.9% 86.9% 0.2% 11.5% 77.2% 0.2% 5.5%Bank of America Corporation Shareholder Right to Call a Special Meeting Individual- Chevedden, R. 52.2% 46.9% 0.8% 34.6% 31.1% 0.5% 16.2%Boeing Company Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 30.6% 68.1% 1.3% 23.0% 51.2% 1.0% 12.1%Caterpillar Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 34.0% 65.2% 0.8% 24.1% 46.4% 0.6% 14.8%Citigroup Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, W. 41.3% 58.1% 0.6% 26.3% 36.9% 0.4% 14.3%Colgate-Palmolive Company Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 38.6% 60.8% 0.6% 28.4% 44.7% 0.5% 11.3%Ecolab Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 33.1% 66.6% 0.3% 25.7% 51.6% 0.2% 7.1%Eli Lilly and Company Shareholder Right to Call a Special Meeting RAM Trust 37.9% 60.7% 1.4% 29.9% 47.8% 1.1% 9.1%EMC Corporation Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 60.6% 37.9% 1.5% 42.4% 26.5% 1.1% 13.7%Exxon Mobil Corporation Shareholder Right to Call a Special Meeting Individual- Steiner, K. 36.4% 62.5% 1.1% 22.6% 38.9% 0.7% 18.2%FirstEnergy Corp. Shareholder Right to Call a Special Meeting Individual- Rossi Family 51.6% 46.5% 1.8% 39.0% 35.1% 1.4% 8.6%Fortune Brands, Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, K. 60.8% 38.3% 0.9% 45.8% 28.9% 0.7% 10.7%General Electric Company Shareholder Right to Call a Special Meeting Individual- Steiner, W. 39.6% 59.0% 1.3% 22.9% 34.1% 0.8% 19.0%Halliburton Company Shareholder Right to Call a Special Meeting Individual- Steiner, W. 43.0% 56.8% 0.3% 30.1% 39.8% 0.2% 10.1%Home Depot, Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, W. 44.3% 55.4% 0.3% 30.5% 38.1% 0.2% 14.8%International Business Machines Corp. Shareholder Right to Call a Special Meeting Individual- Rossi Family 41.7% 56.6% 1.7% 27.5% 37.2% 1.1% 12.6%Interpublic Group of Companies, Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 34.2% 65.5% 0.3% 27.6% 53.0% 0.2% 4.0%ITT Corporation Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 52.6% 47.4% 0.0% 38.5% 34.7% 0.0% 9.1%Johnson & Johnson Shareholder Right to Call a Special Meeting Individual- Steiner, W. 36.9% 62.3% 0.8% 25.0% 42.2% 0.6% 15.0%JPMorgan Chase & Co. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 44.2% 55.3% 0.5% 32.4% 40.5% 0.4% 9.7%Kimberly-Clark Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 44.7% 54.6% 0.7% 32.6% 39.8% 0.5% 13.2%Marathon Oil Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 50.3% 49.5% 0.2% 35.9% 35.3% 0.1% 9.9%McGraw-Hill Companies, Inc. Shareholder Right to Call a Special Meeting Individual- Rossi Family 44.8% 54.8% 0.4% 35.3% 43.2% 0.3% 5.7%MeadWestvaco Corporation Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 58.8% 40.8% 0.5% 49.2% 34.1% 0.4% 4.7%Morgan Stanley Shareholder Right to Call a Special Meeting Individual- Rossi Family 31.8% 67.5% 0.7% 25.4% 53.8% 0.5% 8.6%Newmont Mining Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 49.5% 49.7% 0.8% 36.0% 36.2% 0.6% 6.5%Occidental Petroleum Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 41.8% 57.9% 0.3% 33.2% 46.1% 0.3% 5.7%PepsiCo, Inc. Shareholder Right to Call a Special Meeting Individual- Treumann, R. 49.1% 50.4% 0.5% 32.0% 32.9% 0.3% 15.3%PPL Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 51.8% 47.0% 1.2% 36.3% 32.9% 0.9% 11.4%priceline.com Incorporated Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 52.6% 47.4% 0.1% 40.2% 36.2% 0.0% 10.8%Qwest Communications Intl. Inc. Shareholder Right to Call a Special Meeting Individual- Armstrong, G. 52.1% 47.6% 0.3% 39.6% 36.2% 0.2% 8.7%Staples, Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 37.4% 62.2% 0.4% 31.2% 51.9% 0.3% 6.3%Telephone and Data Systems, Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 21.7% 78.3% 0.1% 13.6% 49.2% 0.0% 1.3%Verizon Communications Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, K. 42.6% 55.9% 1.6% 28.0% 36.8% 1.0% 17.1%Wal-Mart Stores, Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, W. 21.6% 78.3% 0.2% 17.8% 64.6% 0.1% 6.4%Waste Management, Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, W. 42.6% 57.2% 0.2% 33.6% 45.1% 0.2% 9.7%Weyerhaeuser Company Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 54.8% 44.7% 0.5% 44.6% 36.3% 0.4% 8.6%

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YUM! Brands, Inc. Shareholder Right to Call a Special Meeting Individual- Treumann, R. 55.0% 44.5% 0.5% 39.5% 32.0% 0.3% 11.4%WellPoint, Inc. Study Feasibility of Converting to Nonprofit Status Individual- Stone, R. 9.2% 88.8% 2.0% 7.1% 67.8% 1.5% 4.7%Vishay Intertechnology, Inc. Study Spinoff/Sale of Company Individual- Steiner, W. 1.5% 98.4% 0.1% 1.3% 87.8% 0.1% 6.0%Alcoa Inc. Supermajority Provision- Eliminate or Reduce Individual- Steiner, W. 67.8% 31.6% 0.6% 38.9% 18.1% 0.4% 17.2%Altera Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 81.6% 18.1% 0.3% 69.0% 15.3% 0.2% 6.2%Baxter International Inc. Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 75.4% 24.3% 0.3% 57.6% 18.5% 0.2% 7.6%Bill Barrett Corp. Supermajority Provision- Eliminate or Reduce Individual- Armstrong, G. 73.8% 26.1% 0.1% 54.8% 19.4% 0.1% 11.9%Comerica Incorporated Supermajority Provision- Eliminate or Reduce Individual- Armstrong, G. 85.6% 13.5% 0.9% 67.0% 10.6% 0.7% 9.3%Devon Energy Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 71.9% 28.0% 0.1% 56.2% 21.8% 0.1% 9.7%Dun & Bradstreet Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 96.2% 3.4% 0.4% 84.6% 3.0% 0.4% 0.0%Gilead Sciences, Inc. Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 75.4% 15.4% 9.2% 63.4% 13.0% 7.7% 0.1%Harley-Davidson, Inc. Supermajority Provision- Eliminate or Reduce Individual- Steiner, W. 86.6% 12.9% 0.5% 63.5% 9.5% 0.4% 6.0%Health Net, Inc. Supermajority Provision- Eliminate or Reduce CalPERS 79.0% 20.9% 0.1% 67.8% 17.9% 0.1% 7.3%Hospitality Properties Trust Supermajority Provision- Eliminate or Reduce Florida State Board of Administration 88.4% 8.1% 3.5% 70.1% 6.5% 2.8% 11.1%Kellogg Company Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 46.4% 53.3% 0.3% 37.1% 42.7% 0.2% 7.2%King Pharmaceuticals, Inc. Supermajority Provision- Eliminate or Reduce Individual- Steiner, W. 81.0% 19.0% 0.1% 68.0% 15.9% 0.1% 5.5%Kohl’s Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 74.3% 25.6% 0.2% 60.9% 21.0% 0.1% 4.2%McDonald’s Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 70.7% 28.9% 0.4% 50.4% 20.6% 0.3% 12.8%NV Energy, Inc. Supermajority Provision- Eliminate or Reduce Individual- Armstrong, G. 85.2% 14.5% 0.2% 70.9% 12.1% 0.2% 6.9%NYSE Euronext Supermajority Provision- Eliminate or Reduce Individual- Steiner, K. 75.6% 15.6% 8.9% 42.6% 8.8% 5.0% 17.9%Omnicom Group Inc. Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 82.4% 17.2% 0.4% 68.1% 14.2% 0.4% 5.5%PACCAR Inc Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 48.1% 51.6% 0.3% 40.9% 43.8% 0.3% 0.0%Pep Boys-Manny, Moe & Jack Supermajority Provision- Eliminate or Reduce Individual- Treumann, R. 55.9% 41.8% 2.4% 44.1% 33.0% 1.9% 14.8%Pitney Bowes Inc. Supermajority Provision- Eliminate or Reduce CalPERS 98.0% 1.6% 0.3% 83.0% 1.4% 0.3% 0.0%Plum Creek Timber Company, Inc. Supermajority Provision- Eliminate or Reduce Individual- Herbert, N. 17.6% 81.2% 1.2% 11.1% 51.1% 0.7% 22.4%Sigma-Aldrich Corporation Supermajority Provision- Eliminate or Reduce Individual- Treumann, R. 50.0% 41.0% 8.9% 43.8% 35.9% 7.8% 0.5%Sterling Bancshares, Inc. Supermajority Provision- Eliminate or Reduce Individual- Armstrong, G. 86.0% 13.3% 0.6% 66.8% 10.3% 0.5% 9.0%TCF Financial Corporation Supermajority Provision- Eliminate or Reduce Individual- Armstrong, G. 71.3% 28.4% 0.3% 54.7% 21.8% 0.2% 13.4%Time Warner Inc. Supermajority Provision- Eliminate or Reduce Individual- Steiner, K. 70.1% 29.7% 0.2% 55.7% 23.6% 0.2% 7.1%Union Pacific Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 82.9% 16.7% 0.4% 65.3% 13.2% 0.3% 8.1%Walgreen Co. Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 73.6% 25.5% 0.9% 51.2% 17.8% 0.6% 16.4%Whole Foods Market Inc. Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 57.7% 42.0% 0.3% 39.8% 29.0% 0.2% 17.0%

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fIGURE 16> Voting results (sorted by Sponsor), 2010




Comcast Corporation Board- Independent Board Chairman/Separate Chair-CEO AFL-CIO 23.8% 76.1% 0.1% 3.9% 12.4% 0.0% 1.0%Eli Lilly and Company Board- Prohibit CEO from Serving on Compensation Committee AFL-CIO 7.5% 90.8% 1.7% 5.9% 71.5% 1.3% 9.1%PACCAR Inc Board- Prohibit CEO from Serving on Compensation Committee AFL-CIO 8.5% 91.1% 0.4% 7.2% 77.4% 0.4% 0.0%CenturyTel, Inc. Executive Compensation- Advisory Vote on Executive Compensation AFL-CIO 44.0% 55.0% 1.0% 30.5% 38.1% 0.7% 15.3%Pinnacle Entertainment, Inc. Executive Compensation- Advisory Vote on Executive Compensation AFL-CIO 42.8% 57.2% 0.0% 33.4% 44.6% 0.0% 3.6%United Technologies Corporation Executive Compensation- Advisory Vote on Executive Compensation AFL-CIO 40.2% 54.0% 5.8% 31.2% 41.9% 4.5% 8.3%Charles Schwab Corporation Executive Compensation- Approve or Limit Executive Death Benefits AFL-CIO 34.7% 65.0% 0.3% 28.6% 53.5% 0.2% 9.4%Raytheon Company Executive Compensation- Approve/Disclose Supplemental Retirement Plans AFL-CIO 41.9% 57.4% 0.7% 34.0% 46.5% 0.5% 8.3%Bank of America Corporation Executive Comp.- Report on Tax Deductibility of Compensation under TARP AFL-CIO 33.3% 65.4% 1.4% 22.0% 43.3% 0.9% 16.2%PNC Financial Services Group, Inc. Executive Comp.- Report on Tax Deductibility of Compensation under TARP AFL-CIO 34.7% 64.1% 1.2% 27.2% 50.2% 0.9% 8.6%Bank of New York Mellon Corporation Executive Compensation- Require Equity to be Retained AFL-CIO 37.8% 61.4% 0.8% 29.5% 47.9% 0.6% 7.0%Citigroup Inc. Executive Compensation- Require Equity to be Retained AFL-CIO 25.3% 73.6% 1.2% 16.1% 46.8% 0.8% 14.3%JPMorgan Chase & Co. Executive Compensation- Require Equity to be Retained AFL-CIO 23.4% 76.0% 0.7% 17.1% 55.6% 0.5% 9.7%Morgan Stanley Executive Compensation- Require Equity to be Retained AFL-CIO 18.9% 80.3% 0.7% 15.1% 64.0% 0.6% 8.6%PulteGroup, Inc. Board- Independent Board Chairman/Separate Chair-CEO AFL-CIO 30.2% 69.2% 0.6% 25.2% 57.7% 0.5% 6.7%American International Group, Inc. Executive Compensation- Require Equity to be Retained AFL-CIO 1.1% 98.8% 0.1% 0.9% 84.1% 0.1% 5.9%Anadarko Petroleum Corporation Allow Shareholders to Recover Proxy Contest Costs AFSCME 43.2% 53.6% 3.2% 32.5% 40.3% 2.4% 8.5%Citigroup Inc. Allow Shareholders to Recover Proxy Contest Costs AFSCME 30.9% 65.8% 3.3% 19.6% 41.8% 2.1% 14.3%Hartford Financial Services Group, Inc. Allow Shareholders to Recover Proxy Contest Costs AFSCME 46.7% 50.6% 2.7% 34.2% 37.1% 2.0% 11.4%Omnicom Group Inc. Allow Shareholders to Recover Proxy Contest Costs AFSCME 47.0% 51.2% 1.8% 38.8% 42.3% 1.5% 5.5%PulteGroup, Inc. Allow Shareholders to Recover Proxy Contest Costs AFSCME 30.7% 66.5% 2.8% 25.7% 55.5% 2.3% 6.7%Abercrombie & Fitch Co. Board- Independent Board Chairman/Separate Chair-CEO AFSCME 27.0% 72.5% 0.5% 22.5% 60.3% 0.4% 5.1%BB&T Corporation Board- Independent Board Chairman/Separate Chair-CEO AFSCME 18.4% 79.4% 2.2% 12.3% 52.9% 1.5% 15.3%Fifth Third Bancorp Board- Independent Board Chairman/Separate Chair-CEO AFSCME 31.8% 67.6% 0.6% 23.9% 51.0% 0.5% 10.8%Nabors Industries Ltd. Board- Independent Board Chairman/Separate Chair-CEO AFSCME 24.9% 74.9% 0.2% 20.1% 60.4% 0.1% 6.5%Allstate Corporation Executive Compensation- Advisory Vote on Executive Compensation AFSCME 57.5% 40.1% 2.3% 42.5% 29.6% 1.7% 10.7%Raytheon Company Executive Compensation- Advisory Vote on Executive Compensation AFSCME 45.0% 50.0% 5.0% 36.4% 40.5% 4.0% 8.3%Safeway Inc. Executive Compensation- Approve or Limit Executive Death Benefits AFSCME 40.6% 59.4% 0.1% 31.5% 46.0% 0.0% 6.5%Regions Financial Corporation Executive Compensation- Establish Anti-Tax Gross-Up Policy AFSCME 35.1% 63.9% 1.0% 23.6% 42.9% 0.7% 16.8%American Express Company Executive Compensation- Require Equity to be Retained AFSCME 33.0% 66.2% 0.8% 26.2% 52.6% 0.7% 8.9%Capital One Financial Corporation Executive Compensation- Require Equity to be Retained AFSCME 21.6% 78.1% 0.3% 16.2% 58.8% 0.3% 7.9%Dow Chemical Company Executive Compensation- Require Equity to be Retained AFSCME 25.4% 73.2% 1.4% 19.2% 55.4% 1.0% 10.4%Eli Lilly and Company Executive Compensation- Require Equity to be Retained AFSCME 15.9% 82.6% 1.5% 12.5% 65.1% 1.2% 9.1%Mylan Inc. Executive Compensation- Require Equity to be Retained AFSCME 34.0% 65.2% 0.8% 24.4% 46.8% 0.6% 13.3%Valero Energy Corporation Executive Compensation- Require Equity to be Retained AFSCME 24.2% 74.8% 0.9% 16.8% 51.8% 0.6% 12.4%WellPoint, Inc. Reincorporation- IN to DE AFSCME 37.6% 60.5% 1.8% 28.8% 46.2% 1.4% 4.7%AT&T Inc. Executive Compensation- Advisory Vote on Executive Compensation Association of BellTell Retirees 45.6% 52.0% 2.4% 28.3% 32.2% 1.5% 15.4%Verizon Communications Inc. Executive Compensation- Link Pay to Performance Association of BellTell Retirees 29.4% 67.6% 3.0% 19.4% 44.5% 2.0% 17.1%Coca-Cola Company Executive Compensation- Advisory Vote on Executive Compensation Benedictine Sisters 32.5% 62.8% 4.7% 23.9% 46.1% 3.4% 11.3%International Business Machines Corp. Executive Compensation- Advisory Vote on Executive Compensation Boston Common Asset Management 44.3% 53.5% 2.2% 29.2% 35.2% 1.4% 12.6%Graco Inc. Board- Majority Vote to Elect Directors CalPERS 63.2% 36.1% 0.7% 51.1% 29.1% 0.6% 7.5%Hospitality Properties Trust Repeal Classified Board CalPERS 91.1% 8.3% 0.6% 72.3% 6.6% 0.5% 11.1%Health Net, Inc. Supermajority Provision- Eliminate or Reduce CalPERS 79.0% 20.9% 0.1% 67.8% 17.9% 0.1% 7.3%Pitney Bowes Inc. Supermajority Provision- Eliminate or Reduce CalPERS 98.0% 1.6% 0.3% 83.0% 1.4% 0.3% 0.0%Waddell & Reed Financial, Inc. Executive Compensation- Advisory Vote on Executive Compensation CalSTRS 41.2% 56.2% 2.6% 37.4% 51.0% 2.4% 3.8%Ball Corporation Poison Pill- Redeem or Vote On CalSTRS 70.8% 28.3% 0.9% 59.2% 23.6% 0.8% 5.3%Goldman Sachs Group, Inc. Board- Independent Board Chairman/Separate Chair-CEO CBIS 19.1% 80.6% 0.4% 14.1% 59.4% 0.3% 9.2%Rockwell Collins, Inc. Executive Compensation- Advisory Vote on Executive Compensation Clean Yield Asset Management 44.3% 54.3% 1.4% 33.1% 40.7% 1.0% 12.9%WellPoint, Inc. Executive Compensation- Advisory Vote on Executive Compensation Connecticut Retirement Plans 60.2% 35.6% 4.3% 46.0% 27.2% 3.3% 4.7%Abercrombie & Fitch Co. Repeal Classified Board Connecticut Retirement Plans 75.4% 24.1% 0.5% 62.7% 20.1% 0.4% 5.1%Nabors Industries Ltd. Repeal Classified Board Connecticut Retirement Plans 74.8% 25.0% 0.2% 60.3% 20.1% 0.2% 6.5%CenturyTel, Inc. Executive Compensation- Restrict or Cap CWA 3.8% 95.8% 0.5% 2.6% 66.3% 0.3% 15.3%Verizon Communications Inc. Executive Compensation- Approve or Limit Executive Death Benefits Firefighter’s Pension Sys. of Kansas City 41.5% 55.7% 2.8% 27.3% 36.7% 1.9% 17.1%Freeport-McMoRan Copper & Gold Inc. Executive Compensation- Require Equity to be Retained Firefighter’s Pension Sys. of Kansas City 29.2% 70.0% 0.8% 20.2% 48.5% 0.5% 12.0%Kindred Healthcare, Inc. Executive Compensation- Require Equity to be Retained Firefighter’s Pension Sys. of Kansas City 35.6% 64.2% 0.2% 32.1% 58.0% 0.2% 2.7%Hospitality Properties Trust Supermajority Provision- Eliminate or Reduce Florida State Board of Administration 88.4% 8.1% 3.5% 70.1% 6.5% 2.8% 11.1%Apple Inc. Board- Establish Committee on Sustainability Harrington Investments, Inc. 4.3% 78.4% 17.3% 2.8% 50.7% 11.2% 17.7%Goldman Sachs Group, Inc. Executive Compensation- Require Equity to be Retained Harrington Investments, Inc. 24.3% 73.8% 1.9% 17.9% 54.4% 1.4% 9.2%AutoNation, Inc. Board- Independent Board Chairman/Separate Chair-CEO IBEW 15.1% 84.7% 0.2% 13.5% 75.3% 0.1% 5.5%CenturyTel, Inc. Executive Compensation- Require Equity to be Retained IBEW 24.8% 74.6% 0.6% 17.2% 51.7% 0.4% 15.3%DIRECTV Executive Compensation- Require Equity to be Retained IBEW 14.6% 85.2% 0.2% 12.1% 71.0% 0.2% 5.7%PulteGroup, Inc. Executive Compensation- Require Equity to be Retained IBEW 24.7% 75.1% 0.2% 20.6% 62.7% 0.2% 6.7%

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Time Warner Inc. Executive Compensation- Require Equity to be Retained IBEW 23.3% 76.3% 0.5% 18.5% 60.7% 0.4% 7.1%Verizon Communications Inc. Executive Compensation- Require Equity to be Retained IBEW 29.2% 69.2% 1.6% 19.2% 45.6% 1.1% 17.1%Windstream Corporation Executive Compensation- Require Equity to be Retained IBEW 27.1% 71.8% 1.2% 14.6% 38.7% 0.6% 29.8%Becton, Dickinson and Company Board- Majority Vote to Elect Directors Individual- Armstrong, G. 49.1% 49.8% 1.1% 35.6% 36.1% 0.8% 10.2%General Electric Company Board- Restrict Director Participation on Board Committees Individual- Armstrong, G. 5.4% 92.4% 2.2% 3.1% 53.3% 1.3% 19.0%Ball Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 47.8% 49.0% 3.2% 40.0% 40.9% 2.7% 5.3%Chesapeake Energy Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 49.4% 39.5% 11.1% 31.4% 25.1% 7.1% 18.7%Halliburton Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 48.5% 48.0% 3.5% 34.0% 33.7% 2.5% 10.1%Questar Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 47.6% 50.8% 1.6% 36.2% 38.7% 1.2% 8.7%tw telecom inc. Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 25.8% 65.8% 8.4% 23.5% 60.0% 7.6% 2.8%Wells Fargo & Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 30.0% 63.1% 6.9% 23.1% 48.6% 5.3% 8.1%Williams Companies, Inc. Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 51.7% 46.4% 1.9% 38.5% 34.5% 1.4% 12.0%Xcel Energy Inc. Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 45.0% 53.9% 1.1% 29.6% 35.4% 0.7% 16.8%Zions Bancorporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Armstrong, G. 31.5% 66.8% 1.7% 21.1% 44.6% 1.1% 16.9%Avista Corporation Repeal Classified Board Individual- Armstrong, G. 81.9% 14.6% 3.5% 63.4% 11.3% 2.7% 13.1%BancorpSouth, Inc. Repeal Classified Board Individual- Armstrong, G. 41.4% 55.6% 3.0% 31.7% 42.6% 2.3% 10.3%Barnes Group Inc. Repeal Classified Board Individual- Armstrong, G. 66.9% 32.3% 0.8% 50.9% 24.6% 0.6% 6.7%City National Corporation Repeal Classified Board Individual- Armstrong, G. 50.1% 48.8% 1.1% 43.8% 42.7% 1.0% 5.8%Cleco Corporation Repeal Classified Board Individual- Armstrong, G. 89.4% 6.9% 3.7% 70.2% 5.4% 2.9% 14.3%Commerce Bancshares, Inc. Repeal Classified Board Individual- Armstrong, G. 43.7% 53.8% 2.4% 33.9% 41.7% 1.9% 12.2%Eastman Chemical Company Repeal Classified Board Individual- Armstrong, G. 74.8% 24.6% 0.6% 57.1% 18.8% 0.5% 7.0%First Financial Bancorp Repeal Classified Board Individual- Armstrong, G. 76.4% 22.0% 1.6% 64.3% 18.5% 1.4% 6.7%Franklin Street Properties Corp. Repeal Classified Board Individual- Armstrong, G. 66.9% 32.5% 0.6% 43.7% 21.3% 0.4% 16.4%Prosperity Bancshares, Inc. Repeal Classified Board Individual- Armstrong, G. 66.9% 31.9% 1.2% 53.3% 25.5% 0.9% 8.1%Reliance Steel & Aluminum Co. Repeal Classified Board Individual- Armstrong, G. 69.9% 29.9% 0.2% 59.1% 25.3% 0.2% 5.1%UMB Financial Corporation Repeal Classified Board Individual- Armstrong, G. 48.5% 50.7% 0.8% 43.2% 45.2% 0.7% 4.6%Vornado Realty Trust Repeal Classified Board Individual- Armstrong, G. 79.3% 20.6% 0.1% 64.9% 16.9% 0.1% 4.8%Woodward Governor Company Repeal Classified Board Individual- Armstrong, G. 67.3% 31.1% 1.6% 53.7% 24.8% 1.3% 11.3%Qwest Communications Int. Inc. Shareholder Right to Call a Special Meeting Individual- Armstrong, G. 52.1% 47.6% 0.3% 39.6% 36.2% 0.2% 8.7%Bill Barrett Corp. Supermajority Provision- Eliminate or Reduce Individual- Armstrong, G. 73.8% 26.1% 0.1% 54.8% 19.4% 0.1% 11.9%Comerica Incorporated Supermajority Provision- Eliminate or Reduce Individual- Armstrong, G. 85.6% 13.5% 0.9% 67.0% 10.6% 0.7% 9.3%NV Energy, Inc. Supermajority Provision- Eliminate or Reduce Individual- Armstrong, G. 85.2% 14.5% 0.2% 70.9% 12.1% 0.2% 6.9%Sterling Bancshares, Inc. Supermajority Provision- Eliminate or Reduce Individual- Armstrong, G. 86.0% 13.3% 0.6% 66.8% 10.3% 0.5% 9.0%TCF Financial Corporation Supermajority Provision- Eliminate or Reduce Individual- Armstrong, G. 71.3% 28.4% 0.3% 54.7% 21.8% 0.2% 13.4%Allegheny Energy, Inc. Board- Independent Board Chairman/Separate Chair-CEO Individual- Chevedden, J. 38.2% 61.3% 0.5% 29.6% 47.5% 0.4% 7.2%Oshkosh Corporation Board- Majority Vote to Elect Directors Individual- Chevedden, J. 51.6% 48.0% 0.4% 38.8% 36.1% 0.3% 16.2%Edison International Executive Compensation- Advisory Vote on Executive Compensation Individual- Chevedden, J. 38.4% 57.7% 3.9% 27.6% 41.5% 2.8% 9.9%Ford Motor Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Chevedden, J. 17.8% 80.5% 1.7% 13.1% 59.3% 1.2% 16.2%Home Depot, Inc. Reincorporation- DE to ND Individual- Chevedden, J. 4.7% 94.8% 0.5% 3.2% 65.2% 0.3% 14.8%Northrop Grumman Corporation Reincorporation- DE to ND Individual- Chevedden, J. 5.5% 93.7% 0.8% 4.4% 75.2% 0.7% 7.4%Danaher Corporation Repeal Classified Board Individual- Chevedden, J. 66.8% 33.1% 0.2% 55.6% 27.5% 0.2% 5.1%Alaska Air Group, Inc. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 62.9% 35.8% 1.3% 52.1% 29.6% 1.1% 6.3%DaVita Inc. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 56.6% 43.2% 0.3% 48.8% 37.3% 0.2% 4.2%FirstEnergy Corp. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 55.1% 40.9% 4.0% 41.6% 30.9% 3.0% 8.6%Honeywell International Inc. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 45.1% 54.1% 0.7% 34.8% 41.7% 0.6% 9.7%Marsh & McLennan Companies, Inc. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 45.3% 48.6% 6.1% 36.4% 39.0% 4.9% 6.7%Southwest Airlines Co. Shareholder Right to Act by Written Consent Individual- Chevedden, J. 35.5% 63.3% 1.2% 28.8% 51.3% 1.0% 11.3%AutoNation, Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 12.9% 86.9% 0.2% 11.5% 77.2% 0.2% 5.5%Boeing Company Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 30.6% 68.1% 1.3% 23.0% 51.2% 1.0% 12.1%Caterpillar Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 34.0% 65.2% 0.8% 24.1% 46.4% 0.6% 14.8%Colgate-Palmolive Company Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 38.6% 60.8% 0.6% 28.4% 44.7% 0.5% 11.3%Ecolab Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 33.1% 66.6% 0.3% 25.7% 51.6% 0.2% 7.1%EMC Corporation Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 60.6% 37.9% 1.5% 42.4% 26.5% 1.1% 13.7%Interpublic Group of Companies, Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 34.2% 65.5% 0.3% 27.6% 53.0% 0.2% 4.0%ITT Corporation Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 52.6% 47.4% 0.0% 38.5% 34.7% 0.0% 9.1%JPMorgan Chase & Co. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 44.2% 55.3% 0.5% 32.4% 40.5% 0.4% 9.7%MeadWestvaco Corporation Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 58.8% 40.8% 0.5% 49.2% 34.1% 0.4% 4.7%priceline.com Incorporated Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 52.6% 47.4% 0.1% 40.2% 36.2% 0.0% 10.8%Staples, Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 37.4% 62.2% 0.4% 31.2% 51.9% 0.3% 6.3%Telephone and Data Systems, Inc. Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 21.7% 78.3% 0.1% 13.6% 49.2% 0.0% 1.3%Weyerhaeuser Company Shareholder Right to Call a Special Meeting Individual- Chevedden, J. 54.8% 44.7% 0.5% 44.6% 36.3% 0.4% 8.6%Altera Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 81.6% 18.1% 0.3% 69.0% 15.3% 0.2% 6.2%

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Baxter International Inc. Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 75.4% 24.3% 0.3% 57.6% 18.5% 0.2% 7.6%Devon Energy Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 71.9% 28.0% 0.1% 56.2% 21.8% 0.1% 9.7%Dun & Bradstreet Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 96.2% 3.4% 0.4% 84.6% 3.0% 0.4% 0.0%Gilead Sciences, Inc. Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 75.4% 15.4% 9.2% 63.4% 13.0% 7.7% 0.1%Kellogg Company Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 46.4% 53.3% 0.3% 37.1% 42.7% 0.2% 7.2%Kohl’s Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 74.3% 25.6% 0.2% 60.9% 21.0% 0.1% 4.2%McDonald’s Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 70.7% 28.9% 0.4% 50.4% 20.6% 0.3% 12.8%Omnicom Group Inc. Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 82.4% 17.2% 0.4% 68.1% 14.2% 0.4% 5.5%PACCAR Inc Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 48.1% 51.6% 0.3% 40.9% 43.8% 0.3% 0.0%Union Pacific Corporation Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 82.9% 16.7% 0.4% 65.3% 13.2% 0.3% 8.1%Walgreen Co. Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 73.6% 25.5% 0.9% 51.2% 17.8% 0.6% 16.4%Whole Foods Market Inc. Supermajority Provision- Eliminate or Reduce Individual- Chevedden, J. 57.7% 42.0% 0.3% 39.8% 29.0% 0.2% 17.0%PG&E Corporation Board- Limits for Directors Involved in Bankruptcy Individual- Chevedden, R. 3.2% 96.0% 0.9% 1.1% 33.7% 0.3% 5.9%Ford Motor Company Eliminate Dual Class Voting Rights Individual- Chevedden, R. 29.1% 70.2% 0.6% 21.5% 51.8% 0.5% 16.2%Boeing Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Chevedden, R. 31.4% 65.5% 3.1% 23.6% 49.3% 2.3% 12.1%Sempra Energy Executive Compensation- Advisory Vote on Executive Compensation Individual- Chevedden, R. 51.4% 46.1% 2.4% 36.2% 32.5% 1.7% 12.1%Raytheon Company Shareholder Right to Act by Written Consent Individual- Chevedden, R. 52.4% 45.5% 2.1% 42.5% 36.8% 1.7% 8.3%Bank of America Corporation Shareholder Right to Call a Special Meeting Individual- Chevedden, R. 52.2% 46.9% 0.8% 34.6% 31.1% 0.5% 16.2%NYSE Euronext Allow for Issuance of Physical Stock Certificates Individual- Davis, E. 4.3% 95.0% 0.7% 2.4% 53.6% 0.4% 17.9%Aetna Inc. Cumulative Voting Individual- Davis, E. 34.6% 65.1% 0.3% 28.3% 53.4% 0.3% 5.2%American Express Company Cumulative Voting Individual- Davis, E. 24.0% 75.7% 0.3% 19.1% 60.2% 0.3% 8.9%Bank of New York Mellon Corporation Cumulative Voting Individual- Davis, E. 35.9% 63.6% 0.4% 28.0% 49.7% 0.3% 7.0%Becton, Dickinson and Company Cumulative Voting Individual- Davis, E. 33.5% 65.5% 0.9% 24.3% 47.6% 0.7% 10.2%Comcast Corporation Cumulative Voting Individual- Davis, E. 21.8% 78.1% 0.1% 3.5% 12.7% 0.0% 1.0%General Electric Company Cumulative Voting Individual- Davis, E. 24.9% 73.8% 1.2% 14.4% 42.6% 0.7% 19.0%Goldman Sachs Group, Inc. Cumulative Voting Individual- Davis, E. 25.2% 74.3% 0.4% 18.6% 54.8% 0.3% 9.2%Home Depot, Inc. Cumulative Voting Individual- Davis, E. 36.0% 63.7% 0.3% 24.7% 43.8% 0.2% 14.8%International Business Machines Corp. Cumulative Voting Individual- Davis, E. 29.4% 69.3% 1.3% 19.4% 45.6% 0.9% 12.6%Loews Corporation Cumulative Voting Individual- Davis, E. 17.1% 82.7% 0.2% 14.7% 71.5% 0.2% 5.4%Metlife, Inc. Cumulative Voting Individual- Davis, E. 20.8% 78.7% 0.5% 17.3% 65.5% 0.4% 4.2%Safeway Inc. Cumulative Voting Individual- Davis, E. 27.2% 72.8% 0.1% 21.1% 56.4% 0.0% 6.5%Saks Inc. Cumulative Voting Individual- Davis, E. 37.7% 62.1% 0.1% 24.6% 40.5% 0.1% 9.5%WGL Holdings, Inc. Cumulative Voting Individual- Davis, E. 39.1% 59.5% 1.4% 27.6% 42.0% 1.0% 18.2%Pfizer Inc. Executive Compensation- Abolish Stock Options Individual- Davis, E. 4.1% 95.3% 0.7% 2.8% 65.0% 0.4% 12.3%Verizon Communications Inc. Executive Compensation- Abolish Stock Options Individual- Davis, E. 8.5% 90.0% 1.5% 5.6% 59.3% 1.0% 17.1%Bristol-Myers Squibb Company Executive Compensation- Greater Disclosure Individual- Davis, E. 8.3% 90.8% 0.9% 5.8% 63.1% 0.6% 15.7%Consolidated Edison, Inc. Executive Compensation- Greater Disclosure Individual- Davis, E. 12.1% 85.7% 2.2% 6.5% 46.0% 1.2% 28.5%Qwest Communications Intl. Inc. Executive Compensation- Link Pay to Performance Individual- Floyd, H. 7.0% 91.1% 1.9% 5.3% 69.2% 1.4% 8.7%Target Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Hancock, A.E. 49.4% 45.6% 4.9% 40.5% 37.4% 4.1% 7.7%Plum Creek Timber Company, Inc. Supermajority Provision- Eliminate or Reduce Individual- Herbert, N. 17.6% 81.2% 1.2% 11.1% 51.1% 0.7% 22.4%PG&E Corporation Board- Independent Board Chairman/Separate Chair-CEO Individual- Levine, S. 27.6% 72.0% 0.5% 9.7% 25.3% 0.2% 5.9%Yahoo! Inc. Executive Compensation- Advisory Vote on Executive Compensation Individual- Loeb, M. 28.0% 70.1% 1.8% 21.3% 53.2% 1.4% 11.3%Whole Foods Market Inc. Board- Majority Vote-Shareholder Committee Individual- McRitchie, J. 37.6% 60.9% 1.4% 26.0% 42.1% 1.0% 17.0%Qwest Communications Intl. Inc. Executive Compensation- Advisory Vote on Executive Compensation Individual- Neuman, M. 31.2% 50.9% 17.9% 23.7% 38.7% 13.6% 8.7%General Electric Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Noyes, G. 40.9% 55.9% 3.2% 23.6% 32.3% 1.8% 19.0%Eli Lilly and Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Parrish, G. 27.3% 71.1% 1.6% 21.5% 56.0% 1.3% 9.1%General Electric Company Board- Independent Board Chairman/Separate Chair-CEO Individual- Quirini, H. 34.9% 63.8% 1.3% 20.1% 36.8% 0.8% 19.0%AT&T Inc. Cumulative Voting Individual- Rossi Family 32.7% 65.8% 1.5% 20.2% 40.8% 0.9% 15.4%Marathon Oil Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Rossi Family 47.6% 44.9% 7.5% 34.0% 32.1% 5.3% 9.9%Exxon Mobil Corporation Reincorporation- NJ to ND Individual- Rossi Family 2.9% 95.7% 1.3% 1.8% 59.5% 0.8% 18.2%Allstate Corporation Shareholder Right to Act by Written Consent Individual- Rossi Family 66.8% 32.2% 1.0% 49.3% 23.7% 0.8% 10.7%3M Company Shareholder Right to Call a Special Meeting Individual- Rossi Family 45.8% 53.4% 0.9% 31.0% 36.2% 0.6% 14.4%Allstate Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 55.2% 44.2% 0.6% 40.8% 32.6% 0.5% 10.7%FirstEnergy Corp. Shareholder Right to Call a Special Meeting Individual- Rossi Family 51.6% 46.5% 1.8% 39.0% 35.1% 1.4% 8.6%International Business Machines Corp. Shareholder Right to Call a Special Meeting Individual- Rossi Family 41.7% 56.6% 1.7% 27.5% 37.2% 1.1% 12.6%Kimberly-Clark Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 44.7% 54.6% 0.7% 32.6% 39.8% 0.5% 13.2%Marathon Oil Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 50.3% 49.5% 0.2% 35.9% 35.3% 0.1% 9.9%McGraw-Hill Companies, Inc. Shareholder Right to Call a Special Meeting Individual- Rossi Family 44.8% 54.8% 0.4% 35.3% 43.2% 0.3% 5.7%Morgan Stanley Shareholder Right to Call a Special Meeting Individual- Rossi Family 31.8% 67.5% 0.7% 25.4% 53.8% 0.5% 8.6%Newmont Mining Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 49.5% 49.7% 0.8% 36.0% 36.2% 0.6% 6.5%Occidental Petroleum Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 41.8% 57.9% 0.3% 33.2% 46.1% 0.3% 5.7%PPL Corporation Shareholder Right to Call a Special Meeting Individual- Rossi Family 51.8% 47.0% 1.2% 36.3% 32.9% 0.9% 11.4%

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Coca-Cola Company Executive Compensation- Award Performance-Based Restricted Stock Individual- Shepherd, E. 9.7% 88.4% 1.9% 7.1% 64.8% 1.4% 11.3%Qwest Communications Intl. Inc. Board- Independent Board Chairman/Separate Chair-CEO Individual- Steiner, K. 28.9% 70.8% 0.3% 21.9% 53.8% 0.2% 8.7%American International Group, Inc. Cumulative Voting Individual- Steiner, K. 1.3% 98.6% 0.1% 1.1% 83.9% 0.1% 5.9%Bank of America Corporation Executive Compensation- Advisory Vote on Executive Compensation Individual- Steiner, K. 41.8% 53.1% 5.1% 27.7% 35.1% 3.4% 16.2%Motorola, Inc. Reincorporation- DE to ND Individual- Steiner, K. 33.4% 66.3% 0.4% 24.6% 48.8% 0.3% 10.4%Bristol-Myers Squibb Company Shareholder Right to Act by Written Consent Individual- Steiner, K. 49.0% 49.8% 1.2% 34.1% 34.6% 0.8% 15.7%Home Depot, Inc. Shareholder Right to Act by Written Consent Individual- Steiner, K. 52.0% 46.0% 2.0% 35.8% 31.6% 1.3% 14.8%JPMorgan Chase & Co. Shareholder Right to Act by Written Consent Individual- Steiner, K. 54.3% 43.9% 1.8% 39.8% 32.2% 1.3% 9.7%McGraw-Hill Companies, Inc. Shareholder Right to Act by Written Consent Individual- Steiner, K. 47.9% 51.6% 0.5% 37.8% 40.7% 0.4% 5.7%Sprint Nextel Corporation Shareholder Right to Act by Written Consent Individual- Steiner, K. 67.6% 32.2% 0.1% 51.8% 24.7% 0.1% 9.5%Abbott Laboratories Shareholder Right to Call a Special Meeting Individual- Steiner, K. 38.3% 60.9% 0.8% 28.5% 45.3% 0.6% 10.7%American Express Company Shareholder Right to Call a Special Meeting Individual- Steiner, K. 43.8% 55.6% 0.6% 34.8% 44.2% 0.5% 8.9%Exxon Mobil Corporation Shareholder Right to Call a Special Meeting Individual- Steiner, K. 36.4% 62.5% 1.1% 22.6% 38.9% 0.7% 18.2%Fortune Brands, Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, K. 60.8% 38.3% 0.9% 45.8% 28.9% 0.7% 10.7%Verizon Communications Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, K. 42.6% 55.9% 1.6% 28.0% 36.8% 1.0% 17.1%NYSE Euronext Supermajority Provision- Eliminate or Reduce Individual- Steiner, K. 75.6% 15.6% 8.9% 42.6% 8.8% 5.0% 17.9%Time Warner Inc. Supermajority Provision- Eliminate or Reduce Individual- Steiner, K. 70.1% 29.7% 0.2% 55.7% 23.6% 0.2% 7.1%Macy’s, Inc. Board- Majority Vote to Elect Directors Individual- Steiner, W. 60.8% 38.6% 0.6% 50.0% 31.8% 0.5% 4.1%E. I. du Pont de Nemours and Co. Executive Compensation- Advisory Vote on Executive Compensation Individual- Steiner, W. 43.6% 53.8% 2.7% 28.4% 35.1% 1.7% 15.5%Kraft Foods Inc. Shareholder Right to Act by Written Consent Individual- Steiner, W. 51.4% 45.4% 3.2% 35.2% 31.0% 2.2% 12.6%Staples, Inc. Shareholder Right to Act by Written Consent Individual- Steiner, W. 56.7% 43.0% 0.3% 47.3% 35.9% 0.2% 6.3%AT&T Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, W. 42.6% 55.7% 1.7% 26.4% 34.5% 1.1% 15.4%Citigroup Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, W. 41.3% 58.1% 0.6% 26.3% 36.9% 0.4% 14.3%General Electric Company Shareholder Right to Call a Special Meeting Individual- Steiner, W. 39.6% 59.0% 1.3% 22.9% 34.1% 0.8% 19.0%Halliburton Company Shareholder Right to Call a Special Meeting Individual- Steiner, W. 43.0% 56.8% 0.3% 30.1% 39.8% 0.2% 10.1%Home Depot, Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, W. 44.3% 55.4% 0.3% 30.5% 38.1% 0.2% 14.8%Johnson & Johnson Shareholder Right to Call a Special Meeting Individual- Steiner, W. 36.9% 62.3% 0.8% 25.0% 42.2% 0.6% 15.0%Wal-Mart Stores, Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, W. 21.6% 78.3% 0.2% 17.8% 64.6% 0.1% 6.4%Waste Management, Inc. Shareholder Right to Call a Special Meeting Individual- Steiner, W. 42.6% 57.2% 0.2% 33.6% 45.1% 0.2% 9.7%Vishay Intertechnology, Inc. Study Spinoff/Sale of Company Individual- Steiner, W. 1.5% 98.4% 0.1% 1.3% 87.8% 0.1% 6.0%Alcoa Inc. Supermajority Provision- Eliminate or Reduce Individual- Steiner, W. 67.8% 31.6% 0.6% 38.9% 18.1% 0.4% 17.2%Harley-Davidson, Inc. Supermajority Provision- Eliminate or Reduce Individual- Steiner, W. 86.6% 12.9% 0.5% 63.5% 9.5% 0.4% 6.0%King Pharmaceuticals, Inc. Supermajority Provision- Eliminate or Reduce Individual- Steiner, W. 81.0% 19.0% 0.1% 68.0% 15.9% 0.1% 5.5%Dow Chemical Company Executive Compensation- Advisory Vote on Executive Compensation Individual- Steiner, W. 36.8% 55.2% 8.0% 27.8% 41.8% 6.1% 10.4%Amgen Inc. Shareholder Right to Act by Written Consent Individual- Steiner, W. 62.7% 36.7% 0.6% 46.4% 27.2% 0.5% 11.2%WellPoint, Inc. Study Feasibility of Converting to Nonprofit Status Individual- Stone, R. 9.2% 88.8% 2.0% 7.1% 67.8% 1.5% 4.7%PepsiCo, Inc. Shareholder Right to Call a Special Meeting Individual- Treumann, R. 49.1% 50.4% 0.5% 32.0% 32.9% 0.3% 15.3%YUM! Brands, Inc. Shareholder Right to Call a Special Meeting Individual- Treumann, R. 55.0% 44.5% 0.5% 39.5% 32.0% 0.3% 11.4%Pep Boys-Manny, Moe & Jack Supermajority Provision- Eliminate or Reduce Individual- Treumann, R. 55.9% 41.8% 2.4% 44.1% 33.0% 1.9% 14.8%Sigma-Aldrich Corporation Supermajority Provision- Eliminate or Reduce Individual- Treumann, R. 50.0% 41.0% 8.9% 43.8% 35.9% 7.8% 0.5%Chevron Corporation Board- Establish Committee on Human Rights Individual- Zhao, J. 5.5% 74.9% 19.6% 3.8% 51.8% 13.5% 14.7%Bank of America Corporation Board- Adopt and Disclose CEO Succession Planning Guidelines Laborers 39.8% 59.4% 0.8% 26.3% 39.3% 0.5% 16.2%Verizon Communications Inc. Board- Adopt and Disclose CEO Succession Planning Guidelines Laborers 31.3% 65.5% 3.2% 20.6% 43.1% 2.1% 17.1%Boston Properties, Inc. Board- Independent Board Chairman/Separate Chair-CEO Laborers 40.1% 59.8% 0.0% 34.6% 51.5% 0.0% 2.6%Honeywell International Inc. Board- Independent Board Chairman/Separate Chair-CEO Laborers 47.7% 51.7% 0.6% 36.7% 39.8% 0.5% 9.7%MDC Holdings, Inc. Board- Independent Board Chairman/Separate Chair-CEO Laborers 22.1% 77.8% 0.0% 20.0% 70.3% 0.0% 5.0%Morgan Stanley Board- Independent Board Chairman/Separate Chair-CEO Laborers 27.0% 72.4% 0.6% 21.5% 57.7% 0.5% 8.6%Johnson Controls, Inc. Board- Majority Vote to Elect Directors Laborers 77.7% 21.6% 0.7% 62.1% 17.2% 0.6% 7.2%PulteGroup, Inc. Executive Compensation- Award Performance-Based Stock Options Laborers 33.9% 66.0% 0.1% 28.3% 55.1% 0.1% 6.7%Walgreen Co. Executive Compensation- Award Performance-Based Stock Options Laborers 42.5% 55.4% 2.1% 29.6% 38.6% 1.4% 16.4%Comerica Incorporated Executive Compensation- Link Pay to Performance Laborers 30.5% 67.8% 1.7% 23.9% 53.1% 1.3% 9.3%Nabors Industries Ltd. Executive Compensation- Link Pay to Performance Laborers 40.1% 59.8% 0.2% 32.3% 48.2% 0.1% 6.5%Comcast Corporation Board- Adopt and Disclose CEO Succession Planning Guidelines Laborers 14.5% 85.4% 0.1% 2.3% 13.9% 0.0% 1.0%Whole Foods Market Inc. Board- Adopt and Disclose CEO Succession Planning Guidelines Laborers 29.1% 69.9% 1.0% 20.1% 48.3% 0.7% 17.0%Fluor Corporation Board- Independent Board Chairman/Separate Chair-CEO Laborers 36.6% 62.4% 1.0% 26.0% 44.4% 0.7% 12.1%Lowe’s Companies, Inc. Board- Independent Board Chairman/Separate Chair-CEO Laborers 18.0% 81.3% 0.7% 13.9% 63.0% 0.5% 10.6%Toll Brothers, Inc. Board- Independent Board Chairman/Separate Chair-CEO Laborers 24.9% 74.8% 0.2% 18.5% 55.6% 0.2% 9.1%Vornado Realty Trust Board- Independent Board Chairman/Separate Chair-CEO Laborers 41.0% 59.0% 0.1% 33.6% 48.3% 0.1% 4.8%KB Home Executive Compensation- Link Pay to Performance Laborers 35.2% 64.7% 0.1% 24.6% 45.1% 0.1% 16.2%Moody’s Corporation Board- Independent Board Chairman/Separate Chair-CEO Legal & General 33.1% 66.2% 0.7% 18.0% 36.0% 0.4% 3.7%Chesapeake Energy Corporation Adopt Policy on Responsible Trading Practices LongView 36.4% 62.8% 0.8% 23.1% 39.9% 0.5% 18.7%Whole Foods Market Inc. Board- Amend Bylaws to Allow Director Removal With or Without Cause LongView 52.7% 46.1% 1.2% 36.4% 31.8% 0.8% 17.0%

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Wal-Mart Stores, Inc. Executive Compensation- Advisory Vote on Executive Compensation LongView 19.6% 79.2% 1.2% 16.2% 65.3% 1.0% 6.4%Omnicom Group Inc. Executive Compensation- Approve or Limit Executive Death Benefits LongView 40.6% 59.1% 0.2% 33.6% 48.9% 0.2% 5.5%EOG Resources, Inc. Executive Compensation- Eliminate Accelerated Vesting in Change-of-Control LongView 28.3% 70.5% 1.2% 24.2% 60.1% 1.0% 3.2%Dean Foods Company Executive Compensation- Establish Anti-Tax Gross-Up Policy LongView 44.7% 54.9% 0.4% 34.5% 42.4% 0.3% 7.1%Bank of America Corporation Derivative Trading Policy and Procedure Maryknoll 38.4% 59.8% 1.8% 25.4% 39.5% 1.2% 16.2%Goldman Sachs Group, Inc. Derivative Trading Policy and Procedure Maryknoll 33.5% 65.9% 0.6% 24.7% 48.6% 0.4% 9.2%Time Warner Inc. Executive Compensation- Advisory Vote on Executive Compensation Mercy Investment Program 44.9% 52.4% 2.7% 35.7% 41.7% 2.2% 7.1%PulteGroup, Inc. Executive Compensation- Advisory Vote on Executive Compensation Miami Fire Fighters’ Relief & Pension Fund 39.6% 45.4% 15.1% 33.0% 37.9% 12.6% 6.7%EOG Resources, Inc. Executive Compensation- Require Equity to be Retained Miami Fire Fighters’ Relief & Pension Fund 20.7% 79.1% 0.3% 17.6% 67.4% 0.2% 3.2%Chesapeake Energy Corporation Executive Compensation- Advisory Vote on Executive Compensation Nathan Cummings Foundation 50.2% 39.5% 10.3% 31.9% 25.1% 6.6% 18.7%Nabors Industries Ltd. Executive Compensation- Advisory Vote on Executive Compensation Nathan Cummings Foundation 38.1% 49.2% 12.7% 30.7% 39.7% 10.2% 6.5%UnitedHealth Group Incorporated Executive Compensation- Advisory Vote on Executive Compensation Nathan Cummings Foundation 46.0% 47.6% 6.5% 36.1% 37.3% 5.1% 6.0%Mylan Inc. Executive Compensation- Advisory Vote on Executive Compensation Nathan Cummings Foundation 48.8% 49.9% 1.3% 35.0% 35.8% 0.9% 13.3%Exxon Mobil Corporation Executive Compensation- Advisory Vote on Executive Compensation Needmor Fund 40.3% 57.5% 2.2% 25.1% 35.8% 1.4% 18.2%McDonald’s Corporation Executive Compensation- Advisory Vote on Executive Compensation Needmor Fund 40.8% 54.3% 4.9% 29.0% 38.7% 3.5% 12.8%Zions Bancorporation Board- Independent Board Chairman/Separate Chair-CEO New York City Pension Funds 8.0% 89.6% 2.4% 3.7% 41.5% 1.1% 37.3%Cooper Companies, Inc. Board- Majority Vote to Elect Directors New York City Pension Funds 82.6% 17.1% 0.3% 73.9% 15.3% 0.3% 2.9%Superior Industries Intl., Inc. Board- Majority Vote to Elect Directors* New York City Pension Funds 43.8% 54.8% 1.3% 36.6% 45.8% 1.1% 6.8%KB Home Board- Majority Vote-Shareholder Committee New York City Pension Funds 40.9% 42.5% 16.6% 28.5% 29.7% 11.6% 16.2%Chevron Corporation Board- Nominate Director with Environmental Expertise New York City Pension Funds 26.0% 71.2% 2.7% 18.0% 49.3% 1.9% 14.7%Home Depot, Inc. Executive Compensation- Advisory Vote on Executive Compensation New York City Pension Funds 42.1% 54.9% 3.1% 28.9% 37.7% 2.1% 14.8%KB Home Executive Compensation- Advisory Vote on Executive Compensation New York City Pension Funds 35.4% 64.6% 0.1% 24.7% 45.0% 0.1% 16.2%Ryland Group, Inc. Executive Compensation- Advisory Vote on Executive Compensation New York City Pension Funds 37.1% 45.0% 17.9% 31.5% 38.3% 15.3% 4.4%Sprint Nextel Corporation Executive Compensation- Advisory Vote on Executive Compensation New York City Pension Funds 52.3% 33.9% 13.8% 40.1% 26.0% 10.5% 9.5%Coventry Health Care, Inc. Executive Compensation- Establish Multiple Performance Metrics New York City Pension Funds 40.6% 59.3% 0.1% 34.7% 50.6% 0.1% 3.5%R. R. Donnelley & Sons Company Executive Compensation- Limit Golden Parachutes New York City Pension Funds 51.7% 46.8% 1.6% 42.6% 38.5% 1.3% 4.7%Capital One Financial Corporation Repeal Classified Board New York City Pension Funds 82.9% 16.9% 0.2% 62.4% 12.8% 0.1% 7.9%Massey Energy Company Repeal Classified Board New York City Pension Funds 95.1% 3.5% 1.4% 72.1% 2.7% 1.1% 9.5%Constellation Energy Group, Inc. Board- Independent Board Chairman/Separate Chair-CEO Norges Bank 18.3% 81.3% 0.4% 13.8% 61.5% 0.3% 8.2%Deere & Company Board- Independent Board Chairman/Separate Chair-CEO Not Named 42.5% 56.5% 0.9% 30.5% 40.6% 0.7% 11.4%Duke Energy Corporation Board- Majority Vote to Elect Directors Not Named 40.2% 58.8% 1.0% 23.6% 34.5% 0.6% 24.3%Massey Energy Company Board- Majority Vote to Elect Directors Not Named 63.9% 35.9% 0.2% 50.3% 28.2% 0.2% 6.7%Deere & Company Executive Compensation- Advisory Vote on Executive Compensation Not Named 43.4% 53.3% 3.3% 31.2% 38.3% 2.4% 11.4%Chevron Corporation Executive Compensation- Require Equity to be Retained Not Named 26.1% 72.8% 1.1% 18.0% 50.4% 0.8% 14.7%Duke Energy Corporation Executive Compensation- Require Equity to be Retained Not Named 24.2% 74.2% 1.6% 14.2% 43.6% 0.9% 24.3%FirstEnergy Corp. Executive Compensation- Require Equity to be Retained Not Named 17.6% 80.3% 2.1% 13.3% 60.6% 1.6% 8.6%Frontier Communications Corp. Executive Compensation- Require Equity to be Retained Not Named 29.2% 68.0% 2.8% 14.7% 34.2% 1.4% 32.1%Progress Energy, Inc. Executive Compensation- Require Equity to be Retained Not Named 23.2% 75.3% 1.4% 13.0% 42.1% 0.8% 22.3%Reynolds American Inc. Executive Compensation- Require Equity to be Retained Not Named 10.5% 89.3% 0.2% 7.8% 66.3% 0.1% 5.7%Deere & Company Executive Compensation- Restrict or Cap Not Named 4.6% 93.8% 1.6% 3.3% 67.3% 1.1% 11.4%Reynolds American Inc. Repeal Classified Board Not Named 34.1% 65.7% 0.1% 25.4% 48.8% 0.1% 5.7%Union Pacific Corporation Board- Independent Board Chairman/Separate Chair-CEO Pax World Management Corp 20.3% 79.4% 0.3% 16.0% 62.6% 0.2% 8.1%Chesapeake Energy Corporation Executive Compensation- Award Performance-Based Bonuses PhiPERS 25.8% 73.0% 1.2% 16.4% 46.4% 0.8% 18.7%Amgen Inc. Executive Compensation- Require Equity to be Retained PhiPERS 26.3% 72.4% 1.3% 19.5% 53.7% 1.0% 11.2%PPL Corporation Board- Majority Vote to Elect Directors* Plumbers & Pipefitters 32.7% 66.1% 1.2% 23.0% 46.3% 0.9% 11.4%Eli Lilly and Company Shareholder Right to Call a Special Meeting RAM Trust 37.9% 60.7% 1.4% 29.9% 47.8% 1.1% 9.1%Caterpillar Inc. Board- Independent Board Chairman/Separate Chair-CEO SEIU 17.1% 82.3% 0.6% 12.2% 58.5% 0.4% 14.8%Wells Fargo & Company Board- Independent Board Chairman/Separate Chair-CEO SEIU 26.8% 72.8% 0.3% 20.7% 56.1% 0.3% 8.1%Bank of America Corporation Executive Compensation- Recoup Bonuses if Restatement SEIU 43.5% 55.7% 0.9% 28.8% 36.8% 0.6% 16.2%Comerica Incorporated Executive Compensation- Recoup Bonuses if Restatement SEIU 53.0% 45.3% 1.7% 41.5% 35.4% 1.4% 9.3%Morgan Stanley Executive Compensation- Recoup Bonuses if Restatement SEIU 29.8% 69.3% 0.8% 23.8% 55.3% 0.7% 8.6%Boeing Company Board- Independent Board Chairman/Separate Chair-CEO Sheet Metal Workers 28.6% 69.6% 1.8% 21.5% 52.3% 1.3% 12.1%PulteGroup, Inc. Board- Majority Vote to Elect Directors Sheet Metal Workers 45.9% 54.0% 0.1% 38.3% 45.1% 0.1% 6.7%Citigroup Inc. Derivative Trading Policy and Procedure Sisters of Charity of St. Elizabeth 29.7% 69.1% 1.2% 18.9% 43.9% 0.8% 14.3%JPMorgan Chase & Co. Derivative Trading Policy and Procedure Sisters of Charity of St. Elizabeth 33.4% 65.5% 1.2% 24.4% 48.0% 0.9% 9.7%ConocoPhillips Board- Report on Risk Oversight Management Sisters of the Holy Name of Jesus and Mary 4.9% 93.5% 1.6% 3.6% 68.3% 1.2% 11.4%AT&T Inc. Executive Comp.- Exclude Pension Credits/Surplus from Comp. Calculation SNET Retirees Association 41.3% 57.1% 1.6% 25.6% 35.4% 1.0% 15.4%Freeport-McMoRan Copper & Gold Inc. Board- Nominate Director with Environmental Expertise Stichting Pensioenfonds ABP 33.2% 64.4% 2.4% 23.0% 44.6% 1.7% 12.0%Coca-Cola Company Board- Independent Board Chairman/Separate Chair-CEO Teamsters 26.5% 72.9% 0.5% 19.5% 53.5% 0.4% 11.3%Coca-Cola Enterprises Inc. Executive Compensation- Approve/Vote on Future Golden Parachutes Teamsters 42.9% 57.0% 0.1% 37.6% 50.0% 0.1% 3.5%Home Depot, Inc. Board- Independent Board Chairman/Separate Chair-CEO Trowel Trades 22.4% 77.3% 0.3% 15.4% 53.1% 0.2% 14.8%JPMorgan Chase & Co. Board- Independent Board Chairman/Separate Chair-CEO Trowel Trades 34.0% 65.6% 0.4% 24.9% 48.1% 0.3% 9.7%

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Kohl’s Corporation Board- Independent Board Chairman/Separate Chair-CEO Trowel Trades 16.8% 82.6% 0.6% 13.8% 67.7% 0.5% 4.2%Bank of New York Mellon Corporation Executive Compensation- Approve/Vote on Future Golden Parachutes Trowel Trades 77.5% 22.2% 0.3% 60.5% 17.3% 0.2% 7.0%PNC Financial Services Group, Inc. Executive Compensation- Approve/Vote on Future Golden Parachutes Trowel Trades 70.2% 29.2% 0.6% 54.9% 22.8% 0.5% 8.6%Baker Hughes Incorporated Board- Majority Vote to Elect Directors* UBCJA 40.1% 59.8% 0.2% 31.4% 46.9% 0.1% 7.0%EQT Corporation Board- Majority Vote to Elect Directors* UBCJA 54.5% 45.2% 0.3% 43.2% 35.8% 0.3% 8.2%Equity Residential Board- Majority Vote to Elect Directors* UBCJA 56.7% 43.2% 0.1% 48.9% 37.3% 0.1% 4.5%FirstEnergy Corp. Board- Majority Vote to Elect Directors UBCJA 75.1% 23.1% 1.7% 56.7% 17.5% 1.3% 8.6%FMC Technologies, Inc. Board- Majority Vote to Elect Directors UBCJA 70.6% 29.1% 0.3% 59.4% 24.5% 0.2% 3.6%HCP, Inc. Board- Majority Vote to Elect Directors* UBCJA 42.4% 45.0% 12.6% 37.5% 39.7% 11.2% 0.5%Newmont Mining Corporation Board- Majority Vote to Elect Directors* UBCJA 52.4% 47.3% 0.3% 38.1% 34.4% 0.2% 6.5%Nucor Corporation Board- Majority Vote to Elect Directors* UBCJA 39.4% 59.8% 0.8% 29.3% 44.5% 0.6% 11.0%PACCAR Inc Board- Majority Vote to Elect Directors UBCJA 44.3% 55.4% 0.3% 37.6% 47.1% 0.3% 0.0%People’s United Financial, Inc. Board- Majority Vote to Elect Directors UBCJA 80.7% 14.2% 5.1% 58.2% 10.2% 3.7% 10.7%Pioneer Natural Resources Company Board- Majority Vote to Elect Directors UBCJA 84.4% 14.4% 1.2% 60.9% 10.4% 0.9% 14.9%Sherwin-Williams Company Board- Majority Vote to Elect Directors* UBCJA 37.2% 61.2% 1.6% 28.4% 46.8% 1.2% 9.3%Southwestern Energy Company Board- Majority Vote to Elect Directors* UBCJA 50.1% 49.5% 0.4% 40.4% 40.0% 0.3% 5.9%Spectra Energy Corp Board- Majority Vote to Elect Directors* UBCJA 48.2% 51.2% 0.6% 32.7% 34.8% 0.4% 15.9%Vornado Realty Trust Board- Majority Vote to Elect Directors UBCJA 72.3% 27.6% 0.1% 59.2% 22.6% 0.1% 4.8%Vulcan Materials Company Board- Majority Vote to Elect Directors UBCJA 39.2% 60.4% 0.3% 30.0% 46.2% 0.3% 10.0%Abbott Laboratories Executive Compensation- Advisory Vote on Executive Compensation Unitarian Universalist Assn. of Congregations 41.8% 54.2% 4.0% 31.1% 40.3% 3.0% 10.7%EMC Corporation Executive Compensation- Advisory Vote on Executive Compensation Unitarian Universalist Assn. of Congregations 51.5% 47.1% 1.4% 36.1% 32.9% 1.0% 13.7%Aetna Inc. Board- Independent Board Chairman/Separate Chair-CEO United Association S&P 500 Index Fund 45.6% 54.1% 0.3% 37.4% 44.3% 0.2% 5.2%Quanta Services, Inc. Board- Majority Vote to Elect Directors United Association S&P 500 Index Fund 65.2% 31.5% 3.3% 48.8% 23.6% 2.5% 6.7%Ventas, Inc. Board- Majority Vote to Elect Directors United Association S&P 500 Index Fund 74.1% 25.8% 0.1% 59.3% 20.7% 0.1% 8.3%Express Scripts, Inc. Board- Independent Board Chairman/Separate Chair-CEO United Food and Commercial Workers 16.1% 83.8% 0.1% 13.3% 69.4% 0.1% 6.2%TJX Companies, Inc. Executive Compensation- Advisory Vote on Executive Compensation UNITE-HERE 48.5% 41.5% 10.0% 40.7% 34.8% 8.4% 4.9%Dominion Resources Inc. Executive Compensation- Advisory Vote on Executive Compensation UWA 41.3% 57.5% 1.2% 28.5% 39.6% 0.8% 13.3%NiSource, Inc. Executive Compensation- Require Equity to be Retained UWA 23.6% 74.9% 1.6% 17.2% 54.6% 1.1% 10.2%DTE Energy Company Repeal Classified Board UWA 73.1% 24.9% 1.9% 45.9% 15.7% 1.2% 13.6%State Street Corporation Board- Independent Board Chairman/Separate Chair-CEO Walden Asset Management 16.5% 82.9% 0.6% 13.3% 66.7% 0.5% 6.2%Johnson & Johnson Executive Compensation- Advisory Vote on Executive Compensation Walden Asset Management 46.5% 50.5% 3.0% 31.5% 34.2% 2.0% 15.0%Walt Disney Company Executive Compensation- Advisory Vote on Executive Compensation Walden Asset Management 47.5% 45.0% 7.6% 34.8% 33.0% 5.5% 11.4%

PART 3> Management Proposals — Repeal Classified Board

> 46

fIGURE 17> Management Proposals – Repeal Classified Board, 2001 to 2010

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fIGURE 18> Voting Results (Management Proposals – Repeal Classified Board), 2010

As Percent of Votes Cast As Percent of Shares Outstanding

Company Vote RequirementMgt. Rec.

For Against Abstain For Against Abstain Non Vote

AGL Resources Inc. Majority of Votes Cast For 98.00% 1.05% 0.95% 82.92% 0.89% 0.80% 0.00%

Ameriprise Financial Inc. 75% of Outstanding Shares For 76.95% 22.92% 0.13% 62.90% 18.74% 0.11% 6.06%

Assurant Inc. Two-Thirds of Outstanding Shares For 99.74% 0.23% 0.03% 87.20% 0.20% 0.02% 0.00%

Atmos Energy Corp. Two-Thirds of Outstanding Shares For 96.72% 2.15% 1.14% 85.09% 1.89% 1.00% 0.00%

Bill Barrett Corp. 80% of Outstanding Shares For 84.07% 15.92% 0.01% 62.46% 11.83% 0.01% 11.89%

BLYTH Inc. Two-Thirds of Outstanding Shares For 98.89% 1.04% 0.07% 94.30% 0.99% 0.07% 0.00%

Boston Properties Inc.* 75% of Outstanding Shares For 96.23% 3.74% 0.03% 85.40% 3.32% 0.03% 0.00%

Caterpillar Inc. 75% of Outstanding Shares For 96.84% 2.49% 0.67% 83.18% 2.14% 0.57% 0.00%

CEC Entertainment Inc. Two-Thirds of Outstanding Shares For 99.23% 0.77% 0.00% 83.97% 0.65% 0.00% 4.94%

Cincinnati Financial Corp. 75% of Outstanding Shares For 97.90% 1.87% 0.24% 82.67% 1.58% 0.20% 0.00%

Community Health Systems Inc. Majority of Outstanding Shares For 99.96% 0.02% 0.02% 90.79% 0.02% 0.02% 0.00%

Convergys Corp. Two-Thirds of Outstanding Shares For 98.94% 0.85% 0.22% 89.67% 0.77% 0.20% 0.00%

Corn Products International Inc. Two-Thirds of Outstanding Shares For 99.14% 0.71% 0.15% 89.31% 0.64% 0.14% 0.00%

Corning Inc. Majority of Outstanding Shares For 98.58% 0.97% 0.45% 87.34% 0.86% 0.40% 0.00%

Deere & Co. Majority of Outstanding Shares For 98.94% 0.79% 0.27% 82.29% 0.66% 0.22% 0.00%

Dollar Tree Inc. Majority of Quorum For 99.74% 0.21% 0.04% 86.92% 0.18% 0.04% 0.00%

Ecolab Inc. Majority of Outstanding Shares For 99.11% 0.60% 0.29% 83.92% 0.51% 0.24% 0.00%

Eli Lilly & Co. 80% of Outstanding Shares For 84.99% 14.57% 0.44% 74.71% 12.80% 0.39% 0.00%

Federal Signal Corp.* Majority of Outstanding Shares For 98.86% 1.00% 0.14% 87.76% 0.89% 0.12% 0.00%

Fossil Inc. Majority of Outstanding Shares For 99.95% 0.04% 0.01% 90.38% 0.04% 0.01% 2.74%

Harley-Davidson Inc. Majority of Votes Cast For 99.13% 0.59% 0.29% 78.65% 0.47% 0.23% 0.00%

Hill-Rom Holdings Inc. Two-Thirds of Outstanding Shares For 86.43% 13.57% 0.00% 76.64% 12.03% 0.00% 0.03%

Ingram Micro Inc. (Cl A) Two-Thirds of Outstanding Shares For 99.56% 0.35% 0.09% 92.53% 0.32% 0.09% 0.00%

Invacare Corp. Majority of Outstanding Shares For 99.56% 0.32% 0.12% 94.73% 0.31% 0.11% 0.00%

Liberty Property Trust Majority of Outstanding Shares For 99.74% 0.18% 0.08% 86.25% 0.16% 0.07% 0.00%

McGraw-Hill Cos. 80% of Outstanding Shares For 99.25% 0.48% 0.27% 83.94% 0.41% 0.23% 0.00%

NBT Bancorp Inc. 80% of Outstanding Shares Against 57.62% 39.89% 2.49% 35.90% 24.86% 1.55% 12.10%

Newport Corp. Majority of Outstanding Shares Against 82.29% 17.58% 0.14% 62.47% 13.35% 0.10% 16.41%

Norfolk Southern Corp. Majority of Outstanding Shares For 97.65% 1.66% 0.69% 81.99% 1.40% 0.58% 0.00%

Nucor Corp. Two-Thirds of Votes Cast For 98.87% 0.58% 0.54% 84.36% 0.50% 0.46% 0.00%

NVR Inc. Majority of Outstanding Shares For 99.53% 0.19% 0.28% 95.84% 0.18% 0.27% 0.00%

OGE Energy Corp. 80% of Outstanding Shares For 97.81% 1.37% 0.82% 84.39% 1.19% 0.71% 0.00%

Pitney Bowes Inc. 80% of Outstanding Shares For 99.21% 0.55% 0.24% 84.01% 0.47% 0.20% 0.00%

PPL Corp. Majority of Votes Cast For 96.54% 2.74% 0.72% 78.72% 2.23% 0.59% 0.00%

Pulte Homes Inc. Majority of Outstanding Shares For 99.47% 0.45% 0.08% 89.72% 0.41% 0.07% 0.00%

Saks Inc. Majority of Votes Cast For 99.33% 0.57% 0.10% 74.31% 0.42% 0.07% 0.00%

Selective Insurance Group Inc. Two-Thirds of Outstanding Shares For 98.02% 1.72% 0.27% 83.62% 1.46% 0.23% 0.00%

Target Corp. 75% of Outstanding Shares For 98.69% 0.59% 0.73% 88.46% 0.53% 0.65% 0.00%

Technitrol Inc.* 75% of Outstanding Shares For 97.35% 0.67% 1.98% 87.58% 0.60% 1.78% 0.00%

Technitrol Inc.* 75% of Outstanding Shares For 97.30% 0.71% 1.99% 87.53% 0.64% 1.79% 0.00%

Textron Inc. Majority of Outstanding Shares For 96.67% 2.58% 0.75% 84.55% 2.26% 0.66% 0.00%

Timken Co. Majority of Outstanding Shares For 97.75% 1.29% 0.96% 89.49% 1.19% 0.88% 0.00%

Walt Disney Co. Majority of Outstanding Shares For 98.60% 0.98% 0.42% 83.47% 0.83% 0.36% 0.00%

Weyerhaeuser Co.* Two-Thirds of Outstanding Shares For 98.22% 1.51% 0.27% 88.18% 1.35% 0.24% 0.14%

Williams Cos. Majority of Votes Cast For 99.31% 0.51% 0.19% 85.80% 0.44% 0.16% 0.00%

* Combined Proposal

PART 4> Proxy Contests

> 50

fIGURE 19> Contested Solicitation Trend, 1981 to 2010

Company Dissident Contested Issues Winner

Agilysys, Inc. MAK Capital One LLC Authorization of Ohio Control Share Acquisition Statute DissidentAuthenTec, Inc. UPEK, Inc. Consent to Call Special Meeting WithdrawnBlockbuster Inc. Gregory S. Meyer Director SettledCFS Bancorp, Inc. PL Capital Group Director DissidentCLST Holdings, Inc. Red Oak Partners, LLC Directors None1

Coachmen Industries, Inc. GAMCO Asset Management Inc. Directors ManagementCrown Crafts, Inc. Wynnefield Group Directors DissidentDenny’s Corporation Oak Street Capital Master Fund and Dash Acquisitions Directors ManagementDWS Dreman Value Income Edge Fund, Inc. Western Investment LLC Directors/Repeal Classified Board None2

DWS Enhanced Commodity Strategy Fund, Inc. Western Investment LLC Directors None2

DWS High Income Trust Western Investment LLC Director None2

DWS Multi-Market Income Trust Western Investment LLC Director None2

DWS RREEF World Real Estate Fund, Inc. Western Investment LLC Directors/Repeal Classified Board None2

DWS Strategic Income Trust Western Investment LLC Director None2

EMAK Worldwide, Inc. Crown EMAK Partners, LLC Consent to Reduce Size of the Board Dissident3

EMAK Worldwide, Inc. Take Back EMAK, LLC Consent to Remove and Nominate Directors Management4

Equus Total Return, Inc. Committee to Enhance Equus Directors ManagementFirst Franklin Corporation Lenox Wealth Management, Inc. Directors/Repeal Classified Board ManagementGabelli Global Multimedia Trust, Inc. Western Investment LLC Directors PendingGateway Energy Corporation GEC Holding, LLC Directors SettledGenzyme Corporation Carl C. Icahn et al Directors SettledKona Grill, Inc. Mill Road Capital, L.P. Directors ManagementLiberty All-Star Growth Fund, Inc. Full Value Partners L.P. Directors/Vote Against Investment Management Agreement DissidentLions Gate Entertainment Corp. Carl C. Icahn et al Vote AGAINST Shareholder Rights Plan ManagementMCG Capital Corporation Western Investment LLC Director ManagementMyers Industries, Inc. GAMCO Asset Management Inc. Directors ManagementPamrapo Bancorp, Inc. William J. Campbell and James P. Dugan Vote AGAINST Merger WithdrawnPenwest Pharmaceuticals Co. Tang Capital Partners, LP Directors DissidentPinnacle Entertainment, Inc. AFL-CIO Support Shareholder Proposal on Say-on-Pay Management

fIGURE 20> Contested Solicitations,* 2010

Contested Solicitations 5-Year Moving Average328

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> 51

fIGURE 20> Contested Solicitations,* 2010

1 Company filed a certificate of dissolution.

2 None of the nominees received a sufficient number of votes to be elected, therefore the incumbent Directors/Trustees will continue serving.

3 Dissident also entered into agreement with company regarding composition of the board.

4 Dissident’s consent was declared invalid by the Supreme Court of Delaware.

* Contested Solicitations are defined as campaigns where dissidents distribute a separate proxy card. Also, only solicitation where materials were filed under Section 14 of the United States Securities Exchange Act of 1934 were included, so that the proxy fights in foreign jurisdictions were excluded.

** Other activist campaigns include publicized disputes where persons attempted to influence the results of a proxy solicitation without distributing opposition proxy material

Other Activist Campaigns, 2010**

Company Dissident Contested Issues

Bank of America Corporation Finger Interests Number One, Ltd. Withhold on Director and Vote For Shareholder ProposalsCedar Fair, L.P. Q Funding III, L.P. and Q4 Funding, L.P. Against Proposed AcquisitionCenturyTel, Inc. Trillium Asset Management Corporation Vote For Shareholder ProposalCharles River Laboratories International, Inc. JANA Partners LLC Against Proposed AcquisitionChesapeake Energy Corporation Green Century Capital Management Vote For Shareholder ProposalCMS Energy Corporation As You Sow Vote For Shareholder ProposalConocoPhillips Trillium Asset Management Corporation Vote For Shareholder ProposalExxon Mobil Corporation As You Sow Vote For Shareholder ProposalFord Motor Company Trillium Asset Management Corporation Vote For Shareholder ProposalGoogle Inc. Trillium Asset Management Corporation Vote For Shareholder ProposalGraco Inc. CalPERS Vote For Shareholder ProposalHalliburton Company Trillium Asset Management Corporation Vote For Shareholder ProposalHealth Net, Inc. CalPERS Vote For Shareholder ProposalHospitality Properties Trust CalPERS Vote For Shareholder ProposalsLa-Z-Boy Incorporated CalPERS Vote For Shareholder ProposalMassey Energy Company CalSTRS Withhold on DirectorsMassey Energy Company CtW Investment Group Withhold on DirectorsMassey Energy Company New York State Common Retirement Fund Withhold on DirectorsRowan Companies, Inc. C.R. Palmer Vote Against Management ProposalThe Southern Company Green Century Capital Management Vote For Shareholder ProposalUnion Pacific Corporation CtW Investment Group Withhold on Director and Vote For Shareholder ProposalWilliams Companies, Inc. Green Century Capital Management Vote For Shareholder Proposal

Company Dissident Contested Issues Winner

Presidential Life Corporation Herbert Kurz Consent to Remove and Nominate Directors ManagementPutnam Municipal Opportunities Trust Karpus Management, Inc. Directors ManagementThe IMH Secured Loan Fund, LLC The Committee to Protect IMH Secured Loan Fund Vote AGAINST Conversion Transactions ManagementTS&W/Claymore Tax-Advantaged Balanced Fund Western Investment LLC Directors/Repeal Classified Board None2/DissidentUSA Technologies, Inc. Shareholder Advocates For Value Enhancement Directors SettledVitacost.com Inc. Great Hill Investors, LLC Consent to Remove and Nominate Directors Dissident

EXEQUITY

Independent Board and

Management Advisors

Top Ten Disclosure Changes to Make in Light of Say on Pay

September 10, 2010

Contents

Top Ten Disclosure Changes to Make in Light of Say on Pay .................................................... 1

Demonstrate Relationship of Pay to Performance ...................................................................... 2

Include Executive Summary in the CD&A .................................................................................. 5

Consider Use of Supplemental Tables ....................................................................................... 7

Increase Use of Graphics and Tables .......................................................................................10

Highlight Best Practices the Company Has Implemented and Controversial Pay Practices That Have Been Addressed and Modified .........................................................15

Address Controversial Pay Practices ―Head-On‖ .......................................................................19

Advisory Vote on Executive Compensation Proposals ..............................................................24

Advisory Vote Proposals that Explain Rationale for Biennial or Triennial Vote ..........................29

Compensation Risk Discussion .................................................................................................31

Evaluate Disclosure in Light of Shareholder ―Hot Buttons‖ ........................................................32


P a g e | 1


1. Demonstrate the relationship between pay and performance

2. Include an executive summary in the CD&A

3. Consider the use of supplemental tables (e.g., pay realized)

4. Increase the use of graphics and tables

5. Highlight best practices the company has implemented and controversial pay practices that have been addressed and modified. There are companies that already have best practices in place that should do a better job of taking credit for practices like:

a. CEO who has forgone or reduced a bonus or an equity grant

b. Hold through retirement policy

c. No severance

d. No SERP

e. No change in control

f. No perks

g. No employment contracts

h. Using best practice analytic tools: tally sheets, full walkaway, internal pay equity analysis

6. Tackle ―head-on‖ controversial pay practices that you have decided are appropriate for your company to maintain

7. Make sure the Advisory Vote Proposal explains why shareholders should support Say on Pay

8. Explain rationale for recommending annual, biennial, or triennial vote frequency

9. Ensure there is a complete discussion of the impact of compensation decisions on the risk to the company and the process used to determine that compensation actions do not create a material adverse effect on the company

10. Evaluate disclosure in the context of your shareholder base and their ―hot‖ buttons (run rate)

And Another Five…. 1. Ensure that analysis is provided for compensation decisions and actions taken

2. Eliminate extraneous ―facts‖ from the CD&A and incorporate, if necessary, into tabular disclosure

3. Consider impact of new disclosures under Dodd-Frank on effect on say on pay vote (pay for performance and internal equity)

4. Think like a shareholder when writing the CD&A and avoid legalese

5. Use plain, simple English


P a g e | 2

Demonstrate Relationship of Pay to Performance

Eli Lilly & Co. Proxy March 8, 2010 Summary Executive compensation for 2009 aligned well with the objectives of our compensation philosophy and with our performance, driven by these factors:


P a g e | 3

Intel Corp. Proxy April 3, 2009 The following graph illustrates how the amount of the average annual and semiannual incentive cash payments to listed officers varies with changes to Intel’s net income.

Phillips Van Heusen Proxy May 24, 2010

(1) Excludes extraordinary items and accounting charges permitted under GAAP and reported as such. (2) Excludes total stockholder return vs. S&P 1500.


P a g e | 4

(1)

The actual total cash compensation percentiles for Mr. Murry are 99% versus the peer group and 99% versus the ICR Luxury Goods Survey; total compensation is not available for the ICR Luxury Goods Survey.

These charts show that our 2009 performance was close to or above the 75th percentiles on all measures and total cash compensation of our Named Executive Officers was close to or above the 75th percentile, reflecting our strong performance in 2009. Our performance for the three-year period was between the 50th and 75th percentiles on all measures, except that total stockholder return versus the S&P 1500 was below the 50th percentile and earnings per share growth was above the 75th percentile. Total compensation was between the 50th and 75th percentiles for two of our Named Executive Officers and above the 75th percentile for three of our Named Executive Officers, reflecting our strong performance during this three-year period. This demonstrates a link between our Named Executive Officers’ compensation and our performance, thus supporting our pay for performance philosophy, and that compensation is being paid consistently with our target levels, thus demonstrating our program pays compensation as intended. It should be noted in this regard that the higher levels of compensation for Mr. Sirkin is reflective, in part, of his seniority with us and that the higher levels for Messrs. Duane and Murry reflect the performance of the businesses or divisions they head, as only a small percentage of their compensation is based on overall corporate performance.


P a g e | 5

Include Executive Summary in the CD&A

FedEx Corp., Proxy August 16, 2010 2010 Compensation Highlights

The key components of our executive compensation program have remained substantially the same for many years, and we believe the program has been an important factor in our success. During fiscal 2010, however, we conducted a comprehensive review of our executive pay program and philosophy. As a result of our review, we made the following improvements to certain elements of the program to better align our executive compensation structure with current market practices:

• In March 2010, our Management Retention Agreements (―MRAs‖) with executive officers were amended to significantly reduce the post-change-of-control benefits, including eliminating the tax gross-ups, available to the officers under the agreements. For a description of these revisions, see ―Compensation Elements and Fiscal 2010 Amounts — Post-Employment Compensation‖ below.

• Effective May 1, 2010, we discontinued tax reimbursement payments to executive officers relating to tax return preparation and financial counseling services, umbrella insurance premiums, and benefits accrued under our supplemental non-tax-qualified pension plan. Each executive officer received a one-time base salary increase in an amount that approximated (or, in the case of Mr. Smith, was less than) the eliminated tax reimbursement payments.

Additionally, as a result of our review, we reaffirmed several important executive compensation components that we believe are effectively designed and working well in alignment with the best interests of our shareowners. For example, we continue to support our highly successful restricted stock program, which for many years has permitted and encouraged FedEx executives to own and retain company stock. Under this program, FedEx pays the taxes resulting from a restricted stock award on behalf of the recipient to prevent the need for the officer to sell a portion of a stock award to pay the corresponding tax obligation. While SEC disclosure rules require that these payments be included with tax reimbursement payments and reported as ―other compensation‖ in the Summary Compensation Table, we do not believe these payments are ―tax gross-ups‖ in the traditional sense, since their value is fully reflected in the number of shares ultimately delivered to recipients.

When granting restricted stock, FedEx first determines the total target value of the award and then delivers that value in two components: restricted shares and cash payment of taxes due. Therefore, the total target value of the award is the same as it would be if there were no tax payments. In particular, because the amount of the tax payment is included in the calculation of the target value of the restricted stock award, the officers receive fewer shares in each award than they would in the absence of the tax payment: fewer by an amount equal in value to the tax payment. Conversely, absent the tax payment, the number of shares received in each award would be larger by an amount equal in value to the forgone tax payment. Not only is the value to the officer (as well as the cost to the company) generally the same as it would be otherwise, this longstanding practice is simple to administer and has proved extremely successful in retaining executives and enabling them to retain their shares. During fiscal 2010, the Compensation Committee reviewed our restricted stock program and, for all of the above reasons, determined that it continues to be appropriate for FedEx.

Finally, consistent with our strong pay for performance philosophy and reflecting FedEx’s better-than-expected financial performance during fiscal 2010, we made partial payouts under our annual incentive compensation (―AIC‖) program to all participants. In addition, effective January 1, 2010, we began reinstating annual merit-based salary increases and partial 401(k) company matching contributions for employees, including the named executive officers, for whom these compensation items had been eliminated during fiscal 2009. We plan to fully restore the 401(k) company matching contributions effective January 1, 2011. At the same time, the unprecedented global recession and the resulting negative effects on our financial and stock price performance continued to negatively impact long-term executive compensation during fiscal 2010:

•

There were no payouts for fiscal 2010 to any participant, including the named executive officers, under our long-term incentive compensation (―LTI‖) program; and

• As of May 31, 2010, the stock options awarded to our named executive officers in four of the past five annual grants

were still ―underwater‖ (or ―out of the money‖) — our stock price was less than the exercise price of the options.


P a g e | 6

Executive Summary FedEx is consistently ranked among the world’s most admired and trusted employers and respected brands. Maintaining this

reputation and continuing to position FedEx for future success requires high caliber talent to protect and grow the company in support of our mission of producing superior financial returns for our shareowners. We design our executive compensation program to provide a competitive and internally equitable compensation and benefits package that reflects individual and company performance, job complexity, and strategic value of the position while ensuring long-term retention and motivation.

Each of the named executive officers is a longstanding member of our management, and our Chairman of the Board, President and Chief Executive Officer, Frederick W. Smith, founded the company and pioneered the express transportation industry over 35 years ago. As a result, our named executive officers are especially knowledgeable about our business and our industry and thus particularly valuable to the company and our shareowners as we continue to manage through economic uncertainty.

As with tenure, position and level of responsibility are important factors in the compensation of any FedEx employee, including our named executive officers. There are internal salary ranges for each level, and annual target bonus percentages, long-term bonus amounts, and the number of options and restricted shares awarded are all closely tied to management level and responsibilities. For instance, all FedEx Corporation executive vice presidents have the same salary range and annual target bonus percentages and receive the same long-term bonus and the same number of options and restricted shares in the annual grant.

Our philosophy is to (i) closely align the compensation paid to our executives with the performance of the company on both a short-term and long-term basis, and (ii) set performance goals that do not promote excessive risk while supporting the company’s core long-term financial goals of:

• Growing revenue by 10% per year; • Achieving a 10%+ operating margin; • Increasing EPS by 10% to 15% per year; • Improving cash flow; and • Increasing returns, such as return on invested capital.

Our executive compensation is, in large measure, highly variable and directly linked to the above goals and the performance of the FedEx stock price over time.


P a g e | 7

Consider Use of Supplemental Tables

Viacom, Inc. Proxy April 16, 2010 2009 SUMMARY COMPENSATION TABLE

The following table presents information on the total compensation in 2009 and 2008, and in 2007 as applicable, for our named executive officers (―NEOs‖).

Name and Principal Position(1)

Year

Salary ($)

Stock Awards

($)(3)

Option Awards

($)(3)

Non-Equity Incentive Plan Compensation

($)(4)

Change in Pension Value and

Nonqualified Deferred

Compensation Earnings

($)(5)

All Other Compensation

($)(6)

Total ($)

Sumner M. Redstone Executive Chairman and Founder

2009 $ 1,250,000 $ 6,344,447 $ 3,000,005 $ 6,270,000 $ 13,061 $ 6,002 $ 16,883,515 2008 $ 1,250,000 $ 5,619,374 $ 3,000,005 $ 3,942,500 $ 20,891 $ 151,937 $ 13,984,707

2007

$ 1,000,000 $ 5,418,227

$ 2,999,997

$ 3,500,000

$ 2,543,500 (7)

$ 140,451

$ 15,602,175

Philippe P. Dauman President and Chief Executive Officer

2009 $ 2,500,000 $ 12,688,932 $ 5,999,997 $ 12,540,000 $ 37,911 $ 243,150 $ 34,009,990 2008 $ 2,500,000 $ 11,238,665 $ 5,999,999 $ 7,885,000 $ 74,348 (8) $ 296,820 $ 27,994,832

2007

$ 2,000,000 $ 10,836,383

$ 5,999,994

$ 7,000,000

$ 16,380 (8)

$ 264,326

$ 26,117,083

Thomas E. Dooley Senior Executive Vice President, Chief Administrative Officer and Chief Financial Officer

2009 $ 2,000,000 $ 10,151,123 $ 4,799,997 $ 10,032,000 $ 31,318 $ 11,982 $ 27,026,420 2008 $ 2,000,000 $ 8,990,949 $ 4,799,997 $ 6,308,000 $ 63,817 (8) $ 11,532 $ 22,174,295

2007

$ 1,600,000 $ 8,669,107

$ 4,799,995

$ 5,600,000

$ 13,957 (8)

$ 32,809

$ 20,715,868

Michael D. Fricklas Executive Vice President, General Counsel and Secretary

2009 $ 1,050,000 $ 1,799,997 $ 1,199,999 $ 2,000,000 $ 26,501 $ 13,295 $ 6,089,792 2008 $ 1,050,000 $ 1,259,290 $ 1,499,991 $ 1,390,300 $ 126,832 $ 11,950 $ 5,338,363

2007

$ 1,084,875 (2) $ 4,017,350

$ 1,499,999

$ 1,725,000

$ 20,415

$ 30,125

$ 8,377,764

Denise White Executive Vice President, Human Resources and Administration

2009 $ 825,000 $ 419,995 $ 279,999 $ 625,000 $ 36,990 $ 7,298 $ 2,194,282 2008 $ 768,173 $ 314,323 $ 378,005 $ 410,900 $ 18,927 (9) $ 74,106 $ 1,964,434

(1) Supplemental 2009 Summary Compensation Table The following table presents information on the compensation of our NEOs during the periods presented using, in the ―Stock Awards‖ column, the market value of the shares underlying the RSUs and PSUs granted during the respective year and, in the ―Option Awards‖ column, the intrinsic value (the difference between the market value of the shares and the exercise price of the option) of the stock option grants during the respective year. The corresponding grant date fair value for the awards is shown in the above Summary Compensation Table. The other columns in the tables are the same.

The table below assumes that the stock option and RSU awards were vested, and that they were exercised/settled as of December 31 of each year. For PSUs, since they have a multi-year measurement period, the table below assumes that the target number of PSUs was received on December 31, 2009, 2008 and 2007. The actual number of PSUs the executive will receive cannot be determined until the end of the measurement period when the relative performance of our stock compared to other companies in the S&P 500 as well as our achievement of the EPS threshold can be determined. Values were calculated for each year using the closing price of our Class B common stock of $29.73 at December 31, 2009, $19.06 at December 31, 2008 and $43.92 at December 31, 2007.


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This table is not intended to be a substitute for the Summary Compensation Table shown above. However, we believe the table provides a useful comparison of the difference between the grant date fair value for an award under applicable accounting standards and the value that an executive might actually receive from an award. The actual value an executive might receive fluctuates daily with the price of our stock. In addition, the awards shown are not vested or exercisable, and have multi-year vesting and/or performance periods. Please see the table ―Outstanding Equity Awards at Fiscal Year End‖ below for a list of each NEO’s outstanding equity awards and their vesting/exercisable schedules.

Year

Salary ($)

Stock Awards

($)

Option Awards

($)

Non-Equity Incentive Plan Compensation

($)

Change in Pension Value and

Nonqualified Deferred

Compensation Earnings

($)

All Other Compensation

($)

Total ($)

Sumner M. Redstone 2009 $ 1,250,000 $ 5,044,676 $ 1,609,926 $ 6,270,000 $ 13,061 $ 6,002 $ 14,193,665

2008 $ 1,250,000 $ 1,307,916 $ 0 $ 3,942,500 $ 20,891 $ 151,937 $ 6,673,244

2007 $ 1,000,000 $ 3,323,119 $ 14,742 $ 3,500,000 $ 2,543,500 $ 140,451 $ 10,521,812

Philippe P. Dauman

2009 $ 2,500,000 $ 10,089,381 $ 3,219,845 $ 12,540,000 $ 37,911 $ 243,150 $ 28,630,287

2008 $ 2,500,000 $ 2,615,813 $ 0 $ 7,885,000 $ 74,348 $ 296,820 $ 13,371,981

2007 $ 2,000,000 $ 6,646,194 $ 29,484 $ 7,000,000 $ 16,380 $ 264,326 $ 15,956,384

Thomas E. Dooley

2009 $ 2,000,000 $ 8,071,487 $ 2,575,876 $ 10,032,000 $ 31,318 $ 11,982 $ 22,722,663

2008 $ 2,000,000 $ 2,092,655 $ 0 $ 6,308,000 $ 63,817 $ 11,532 $ 10,476,004

2007 $ 1,600,000 $ 5,316,955 $ 23,587 $ 5,600,000 $ 13,957 $ 32,809 $ 12,587,308

Michael D. Fricklas

2009 $ 1,050,000 $ 2,357,440 $ 643,969 $ 2,000,000 $ 26,501 $ 13,295 $ 6,091,205

2008 $ 1,050,000 $ 697,329 $ 0 $ 1,390,300 $ 126,832 $ 11,950 $ 3,276,411

2007 $ 1,084,875 $ 4,019,031 $ 7,371 $ 1,725,000 $ 20,415 $ 30,125 $ 6,886,817

Denise White 2009 $ 825,000 $ 550,064 $ 150,259 $ 625,000 $ 36,990 $ 7,298 $ 2,194,611

2008 $ 768,173 $ 174,056 $ 0 $ 410,900 $ 18,927 $ 74,106 $ 1,446,162

(2) Mr. Fricklas’ 2007 base salary includes $41,346 of compensation deferred in accordance with his employment agreement prior to the

time his agreement was amended to eliminate the deferral.

(3) Reflects the aggregate grant date fair value of the equity awards granted in the respective year calculated in accordance with FASB ASC Topic 718 – Stock Compensation, not including assumed forfeitures. Grant date fair value assumptions are consistent with those disclosed in the Stock Based Compensation Note to our Consolidated Financial Statements in our 2009, 2008 and 2007 Annual Reports on Form 10-K. The amounts reported in the ―Stock Awards‖ and ―Option Awards‖ columns for 2007 and 2008 in prior years’ proxy statements reflected equity compensation expense recognized in the respective year (not including assumed forfeitures), including expense we incurred in connection with the equity awards granted in the respective year, as well as continuing accounting expense for awards from prior years, in accordance with SEC rules in effect at the time of filing those proxy statements. Therefore, the amounts reported here for 2007 and 2008 are not the same as amounts reported in previous proxy statements for those years.

(4) Represents annual cash bonus amounts under the Senior Executive STIP for performance during the respective year.

(5) Change in pension value only, except as discussed in footnote (7) with respect to Mr. Redstone.


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Intel Corp. Proxy April 3, 2009 While the graphs and table above show some of the costs of Intel’s equity compensation program, the next two graphs show the economic benefit of equity compensation to the listed officers. Additionally, the graphs show how the value of the listed officers’ equity awards is directly affected by changes in the price of Intel common stock. The price of Intel common stock decreased 47% from the beginning of the fiscal year to year-end. This decrease in stock price translated into an unrealized loss of $47.2 million for the listed officers and illustrates the performance-based nature of Intel’s equity compensation program. Currently, none of the stock option awards that were granted in 2008 have any economic value. To promote comparability from year to year, the Unrealized Gain/Loss on Equity Awards graph includes only awards that were outstanding at both the beginning and the end of the fiscal year (awards that were granted or that were exercised or settled during the year are excluded).

The Realized Gains graph below shows the aggregate value of the stock options that were exercised and RSUs that vested for the listed officers for each of the past three years. This graph shows the gains that the listed officers actually received from their equity awards, while the Unrealized Gain/Loss on Equity Awards graph shows unrealized gains (losses) measured as of the end of each fiscal year (which may or may not ever be realized).


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Increase Use of Graphics and Tables

FedEx Corp. Proxy August 16, 2010 The following chart illustrates for each named executive officer (other than Mr. Carter, as described below) the relationship

between his fiscal 2010 target TDC and market reference point discussed above:

Various factors affect the relationship between target TDC and our market reference, including: specific retention concerns; the important role of tenure and job responsibilities; the year-over-year volatility of the market data; the degree of accuracy in our job matches; and the difference in the strategic value of a position among the companies in the survey group. No single position in the referenced surveys fully captures the breadth of the responsibilities of certain of our executive officers. Consistent with market practice, this disparity may be partially mitigated by applying a premium to the survey data, as we have done for Mr. Glenn in the position of top sales and marketing executive. In the case of Mr. Carter, we believe his scope of responsibilities is far broader and the nature of his role is much more strategic than that of the typical top information officer reflected in the survey data. Therefore, his compensation is not referenced against the survey data.

* * * * *

The following chart illustrates for each named executive officer the allocation of fiscal 2010 target TDC between base salary and incentive and equity-oriented compensation elements (restricted stock value includes tax reimbursement payment):


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We believe that long-term performance is the most important measure of our success, as we manage FedEx’s operations and business affairs for the long-term benefit of our shareowners. Accordingly, not only is our executive compensation program weighted towards variable, at-risk pay components, but we emphasize incentives that are dependent upon long-term corporate performance and stock price appreciation. These long-term incentives include LTI cash compensation and equity awards (stock options and restricted stock), which comprise a significant portion of an executive officer’s total compensation. These incentives are designed to motivate and reward our executive officers for achieving long-term corporate financial performance goals and maximizing long-term shareowner value.

* * * * *

The following chart illustrates for each named executive officer the allocation of fiscal 2010 target TDC between long-term incentives — LTI, stock options and restricted stock, including the related tax reimbursement payment — and short-term components — base salary and AIC:

We include target AIC and LTI payouts (discounted to present value to be consistent with the valuation methodology used in the survey data) in the TCC and TDC formula, so the actual compensation paid out in a given year may vary widely from targeted levels because compensation earned under the AIC and LTI programs is variable and commensurate with the level of achievement of pre-established financial performance goals. When we achieve superior results, we reward our executives accordingly under the terms of these programs. Conversely, when we fall short of our business objectives, payments under these variable programs decrease correspondingly. As an example, as shown by the chart below, the actual fiscal 2010 TDC of our named executive officers was below targeted levels because our financial performance for fiscal 2010 and the preceding two years fell short of our pre-established goals.

(1) Actual TDC includes actual AIC and LTI payouts (if any) and equity valued at grant date.


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Cash Payments Under LTI Program. The primary objective of our LTI program is to motivate management to contribute to our future success and to build long-term shareowner value and reward them accordingly. The program provides a long-term cash payment opportunity to members of management, including the named executive officers, based upon achievement of aggregate EPS goals for the preceding three-fiscal-year period. The LTI plan design provides for payouts that correspond to specific EPS goals established by the Board of Directors. The EPS goals represent total growth in EPS (over a base year) for the three-year term of the LTI plan. The following chart illustrates the relationship between EPS growth and payout:

As illustrated by the above chart, the LTI program provides for:

• Target payouts if the three-year average annual EPS growth rate is 12.5%;

• Above-target payouts if the growth rate is above 12.5% up to a maximum amount (equal to 150% of the target

payouts) if the growth rate is 15% or higher; and

• Below-target payouts if the growth rate is below 12.5% down to a threshold amount (equal to 25% of the target

payouts) if the growth rate is 5%. No LTI payment is made unless the three-year average annual EPS growth rate is at least 5%.


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BMC Software Inc., Proxy June 17, 2010 Table of Compensation Elements Compensation Elements

The following table describes each executive compensation element utilized in fiscal 2010 for our Named Executive Officers based on the philosophy and process described above as well as each element’s link to our compensation philosophy.

Compensation Element Philosophy Statement Retain

Reward short-term

performance

Reward long-term

performance

Align to Shareholder

Interests Base Pay

We intend to provide base pay competitive to the market of industry peers and across other industries where appropriate. Base pay maintains a standard of living, is used to compete in the market for talent and forms the foundation for our other reward vehicles.

x

Short-Term Incentive Plan (STIP)

STIP rewards specific quarterly and annual performance against business measures set by the Board. The amount of the reward is determined by formula and can vary from 0% to 200% of an individual executive’s target incentive. To achieve top payout, our performance must significantly outperform targets set above external expectations.

x

x

Total Target Cash (Base + STIP)

We manage total target cash to ensure a proper balance of cash payouts annually. The mix of base and STIP is determined for each position to encourage the right motivation in the short run

x

x

x

Long-Term Incentive Plan (LTIP)

The LTIP is a long-term cash incentive award that rewards total stockholder return relative to industry peers, typically over a three-year period. For LTIP awards in fiscal 2010, our total stockholder return must be at or above the 65th percentile of the peer group to receive target awards. Threshold performance must be at least in the middle third of the peer group to warrant a payout. For LTIP awards in fiscal 2010, industry peers were determined by the Compensation Committee as the most relevant business comparators.

x

x

x

Performance- Based RSUs

Performance-based RSUs have been awarded in the past to executives and other key employees. The RSUs vest in full only if we achieve the pre-established performance targets, assuming continued employment.

x

x

x

Time-Based RSUs

Time-based RSUs directly focus on retention while providing an opportunity for increased rewards as stockholder return increases. Typically, these awards vest over three years, assuming continued employment.

x

x

x

Other Compensation and Benefits Programs

BMC offers all employees benefits programs that provide protections for health, welfare and retirement. These programs are standard within a country and include healthcare, life, disability, dental and vision benefits as well as a 401(k) program or other federally provided programs outside of the U.S. A deferred compensation program is also provided for tax advantaged savings beyond the limits of qualified plans under Section 401(k). Investment choices are market based.

x


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Intel Corp. Proxy April 3, 2009 Peer Group The peer group consists of the following companies:

Reported Revenue Net Income (Loss) Market Capitalization on Company Fiscal Year ($ in billions) ($ in billions) March 3, 2009 ($ in billions) Advanced Micro Devices, Inc. 12/27/08 5.8 (3.1 ) 1.3 Apple Inc. 9/27/08 32.5 4.8 78.7 Applied Materials, Inc. 10/26/08 8.1 1.0 11.8 AT&T Corporation 12/31/08 124.0 12.9 133.6 Cisco Systems, Inc. 7/26/08 39.5 8.1 84.0 Dell Inc. 2/1/08 61.1 2.9 17.8 The Dow Chemical Company 12/31/08 57.5 0.6 6.4 EMC Corporation 12/31/08 14.9 1.3 20.4 General Electric Company 12/31/08 182.5 17.4 74.0 Google Inc. 12/31/08 21.8 4.2 102.6 Hewlett-Packard Company 10/31/08 118.4 8.3 67.9

International Business Machines Corporation 12/31/08 103.6 12.3 117.8

Johnson & Johnson 12/28/08 63.7 12.9 131.8 Merck & Co., Inc. 12/31/08 23.9 7.8 48.7 Microsoft Corporation 6/30/08 60.4 17.7 141.2 Motorola, Inc. 12/31/08 30.1 (4.2 ) 7.5 Oracle Corporation 5/31/08 22.4 5.5 75.7 Pfizer Inc. 12/31/08 48.3 8.1 80.0 Qualcomm Incorporated 9/28/08 11.1 3.2 55.2 Texas Instruments

Incorporated 12/31/08 12.5 1.9 18.1 Tyco International Ltd. 9/26/08 20.2 1.6 9.0 United Parcel Service, Inc. 12/31/08 51.5 3.0 38.3 United Technologies

Corporation 12/31/08 58.7 4.7 36.3 Verizon Communications Inc. 12/31/08 97.4 6.4 77.6 Yahoo! Inc. 12/31/08 7.2 0.4 17.4 Intel 2008 12/27/08 37.6 5.3 68.3 Intel 2008 Peer Group

Percentile Rank 48th 57th 54th


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Highlight Best Practices the Company Has Implemented and Controversial Pay Practices That Have Been Addressed and Modified

Pfizer Inc. Proxy March 16, 2010 MODIFICATIONS TO OUR EXECUTIVE COMPENSATION PROGRAM The Committee continues to refine our executive compensation structure and process, consistent with evolving governance practices and reflecting shareholder input.

In 2009, management continued its practice of meeting with investors and shareholder groups to gain insights about how to enhance not only the disclosure of our compensation plans and programs, but also the substantive terms of those plans and programs. The following summarizes the major changes made in 2009 and recent years to our executive compensation program, including changes made in response to our investors’ suggestions.

Our executive compensation program is structured to support the ongoing transformation of Pfizer’s business and is designed to ensure that total direct compensation is competitive and tied to performance. Our restructured program became effective in 2008 and has three key principles:

1. Positioning total direct compensation (the sum of salary, annual incentive awards and long-term incentive awards), as well as each individual compensation element, at approximately the median of our peer companies, with emphasis on pharmaceutical companies with large market capitalization.

2. Placing greater emphasis on aligning short-term incentive awards with our annual operating financial objectives.

3. Rewarding both absolute and relative performance in total shareholder return through long-term equity incentive awards.

Applying these principles resulted in three significant changes to our executive compensation program beginning in 2008:

• First, both individual compensation elements and total direct compensation were structured to be more closely aligned with the median compensation of similarly sized pharmaceutical companies. Our salary midpoints and target annual short- and long-term incentives continue to approximate competitive medians.

• Second, the annual incentive program (the ―Global Performance Plan‖ or ―GPP‖) was modified to utilize a pool that is funded based on Pfizer’s performance on three financial metrics: Total Revenue, Adjusted Diluted EPS, and Cash Flow from Operations. The pool funding percentage ranges from 0% to 200% of target award levels (performance must exceed a threshold level of performance or the pool is not funded; the threshold levels are shown in the ―Financial Objective‖ chart under ―Evaluating CEO Performance—CEO Performance Assessment—Financial Results‖ below). Earned individual payouts also range from 0% to 200% of target and reflect allocations from the available earned pool based on corporate, business unit, and individual performance, as discussed later in further detail.

• Third, we modified our Executive Long-Term Incentive Program by moving 25% of the target value of our long-term incentive awards to a Short-Term Incentive Shift Award, the ―STI Shift Award‖, determined on the same basis as short-term incentive awards for the applicable performance year. This approach was adopted to promote the achievement of Pfizer’s annual financial, operating and strategic objectives as we transformed our business model while strengthening the link between individual performance and shareholder value. Consistent with the Committee’s strategy to use this approach for a three-year period, it intends to reevaluate this approach for long-term incentive awards granted in 2011. The STI Shift Award has the following features:

– The STI Shift Award is performance-based, denominated in dollars, and determined in the same manner as the annual

incentive.

– Unlike current annual incentive awards, which are paid entirely in cash, the STI Shift Award is paid 50% in cash and 50% in

restricted stock units (RSUs) that are subject to three-year vesting; however the Named Executive Officers may elect to receive 100% of this award in RSUs.

– This STI Shift Award is treated for all purposes as part of the long-term incentive award and is not included in determining

pensionable earnings.

The following charts summarize the significant actions taken by the Committee to implement the program outlined above through 2009, as well as the rationale for these actions.


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2009 Compensation Committee Actions

ACTION PRIOR PRACTICE REASON FOR ACTION • For 2009, froze salaries of the Executive

Leadership Team (ELT) – those executives reporting directly to the CEO (other than in the case of promotions)

• Reduced 2008 annual short-term incentive

payments paid in 2009 for the executive officer group as compared to awards paid in 2008 for 2007 performance

• Reduced 2009 long-term incentive target

grant amounts by 10%

• Executive officers were eligible for annual salary increases to reflect performance, market conditions and competitiveness

• Prior to adoption of the short-term incentive

funding pool, short-term incentives were based on an individual’s performance against objectives but were not specifically based on Pfizer’s overall financial performance

• Long-term incentive award levels were set

based on an evaluation of market data

• To ensure alignment with shareholders’ interests and to recognize economic conditions, stock price performance and other factors

• Eliminated change-in-control severance

agreements and adopted an Executive Severance Plan based on our broad-based severance program for U.S.-based employees

• In February 2009, all executive officers

voluntarily terminated their change-in-control severance agreements and each (other than Mr. D’Amelio) became a participant in the Executive Severance Plan

• The separate severance agreement

with Mr. D’Amelio, established as part of his hiring arrangements, expired on September 10, 2009 and was not renewed. At that time, he became a participant in the Executive Severance Plan

• Entered into change-in-control agreements with all executive officers

• To reduce severance levels upon a termination of employment on a change-in-control; eliminate potential gross-up on certain severance payments; and offer a consistent and competitive severance program

• Amended and restated the 2004 Stock

Plan to provide shares for future grants of equity-based compensation and to add safeguards for shareholders, including:

• A prohibition against ―cash outs‖ of

underwater stock options/stock appreciation rights (SARs) without shareholder approval

• Established rules relating to time-based

awards (i.e., no more than 5% of awards may have a vesting term of less than 3 years)

• Imposed a minimum performance period

of one year for performance-based awards

• Plan did not require shareholder approval for the ―cash out‖ of underwater stock options/SARs even though no such ―cash outs‖ have occurred

• Plan did not provide minimum vesting or

performance periods for equity awards

• To ensure that the 2004 Stock Plan, as amended and restated, incorporates evolving practices of U.S. equity plans, reflecting shareholder input and interests


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ACTION PRIOR PRACTICE REASON FOR ACTION

• Approved submitting executive

compensation to an advisory shareholder vote

• Shareholders were not provided with an advisory vote on executive compensation

• In response to the passage of a shareholder proposal at the 2009 Annual Meeting and to implement evolving practices and reflect shareholder input

• Approved changes in the composition of the

pharmaceutical peer group and general industry comparator group (described below) used to measure performance and benchmark compensation

• Due to the elimination of Schering-

Plough and Wyeth as a result of their acquisitions, we added Novartis, Roche and Sanofi-Aventis to the pharmaceutical peer group effective for 2010 performance share awards

• Reduced the general industry

comparator group to 23 companies to reflect mergers, differences in pay models, unavailability of compensation data and other factors

• Pharmaceutical peer group consisted of ten comparator companies, eight of which were U.S.-based

• General industry comparator group

consisted of 46 Fortune 100 companies

• To ensure that our pharmaceutical peer group more closely aligns with the companies against which we compete for executive talent

• To ensure that our general

industry comparator group is more reflective of the companies most similar to Pfizer, companies that use similar pay models, and companies for which we can obtain comparative pay data

Recent Compensation Committee Actions


• After a comprehensive evaluation, including

feedback from shareholders, implemented a redesigned short-term annual incentive program that now includes:

• An annual short-term incentive pool

funded based on Pfizer’s financial performance

• Annual short-term incentives determined by the Committee based on target award levels expressed as a percentage of salary midpoint, adjusted for performance

• Individual annual short-term incentives determined by objective performance measures for the Company, division and business unit and performance against individual goals

• Annual short-term incentive target award levels were set based on market data, expressed as a percentage of salary, adjusted based on a subjective evaluation of the executive’s performance against pre-set goals and other factors

• To ensure that our executive compensation program is aligned with our pay-for-performance philosophy as well as our shareholders’ interests and to assure that the program is also an effective tool to attract, motivate and retain executive talent

• To more closely align annual

incentives with the achievement of Pfizer’s annual financial and strategic goals


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• Implemented a redesigned long-term incentive program for executives providing for annual grants as follows: 25% of the grant value denominated as RSUs aligned with share price; 25% as Performance Share Awards (PSAs) tied to relative total shareholder return as compared to the pharmaceutical peer group; 25% as Total Shareholder Return Units (TSRUs) tied to absolute shareholder return (change in stock price plus accumulated dividend equivalents); and 25% as an STI Shift Award paid 50% in cash and 50% in RSUs, initially aligned with short-term performance and ultimately share price

• Long-term awards were more heavily weighted toward stock options (50% of target award)

• To promote the achievement of Pfizer’s annual objectives during our transformation period while maintaining close alignment with our shareholders’ return on their investment

• Continued active involvement in the

development of compensation arrangements for new members of our ELT– those executives reporting directly to the CEO

• Committee reviewed and approved all compensation arrangements for the ELT

• To ensure that reasonable compensation arrangements are competitive, to facilitate Pfizer’s ability to recruit top talent and to ensure consistency in compensation throughout the organization

• Expanded long-established policies to

recapture compensation from executives if certain acts occur

• Recapture agreements were limited to gains attributable to long-term incentive compensation recognized during the prior 12 months

• To ensure that shareholders’ interests are served by allowing the expanded recovery of compensation in certain circumstances. Our policies are aligned with evolving governance and compensation practices

• Instituted a detailed annual review of all

elements of compensation for the ELT using tally sheets

• Less formalized practice to review compensation paid to the ELT

• Useful in evaluating total compensation opportunities relative to market practice and performance and consistent with evolving practices

• Aligned compensation structure with

50th percentile target pay of both a peer group of pharmaceutical companies and a general industry comparator group (see ―General Overview—Competitive Positioning‖ below)

• Compensation structure was aligned with 75th percentile target pay

• To better align compensation with market-based pay


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Address Controversial Pay Practices “Head-On”

FedEx Corp. Proxy August 16, 2010 Tax Gross-up of Income Taxes on Restricted Stock

Additionally, as a result of our review, we reaffirmed several important executive compensation components that we believe are effectively designed and working well in alignment with the best interests of our shareowners. For example, we continue to support our highly successful restricted stock program, which for many years has permitted and encouraged FedEx executives to own and retain company stock. Under this program, FedEx pays the taxes resulting from a restricted stock award on behalf of the recipient to prevent the need for the officer to sell a portion of a stock award to pay the corresponding tax obligation. While SEC disclosure rules require that these payments be included with tax reimbursement payments and reported as ―other compensation‖ in the Summary Compensation Table, we do not believe these payments are ―tax gross-ups‖ in the traditional sense, since their value is fully reflected in the number of shares ultimately delivered to recipients.

When granting restricted stock, FedEx first determines the total target value of the award and then delivers that value in two components: restricted shares and cash payment of taxes due. Therefore, the total target value of the award is the same as it would be if there were no tax payments. In particular, because the amount of the tax payment is included in the calculation of the target value of the restricted stock award, the officers receive fewer shares in each award than they would in the absence of the tax payment: fewer by an amount equal in value to the tax payment. Conversely, absent the tax payment, the number of shares received in each award would be larger by an amount equal in value to the forgone tax payment. Not only is the value to the officer (as well as the cost to the company) generally the same as it would be otherwise, this longstanding practice is simple to administer and has proved extremely successful in retaining executives and enabling them to retain their shares. During fiscal 2010, the Compensation Committee reviewed our restricted stock program and, for all of the above reasons, determined that it continues to be appropriate for FedEx.

Level 3 Communications, Inc. Proxy April 2, 2010 Rationale for Single Trigger Vesting on Equity Vehicles and 280G Gross-Up We have a so-called "single" trigger treatment for equity vehicles for the following reasons:

• To keep employees relatively whole for a reasonable period, but avoid creating a "windfall." • Single trigger vesting ensures that ongoing employees are treated the same as terminated employees with

respect to outstanding equity grants. • Single trigger vesting provides employees with the same opportunities as stockholders, who are free to sell

their equity at the time of the change in control event and thereby realize the value created at the time of the transaction.

• The employing company that made the original equity grant will no longer exist after a change in control and employees should not be required to have the fate of their outstanding equity tied to the new company's future success.

• Single trigger vesting on performance-contingent equity, in particular, is appropriate given the difficulty of replicating the underlying performance goals.

• To support the compelling business need to retain key employees during the uncertain times preceding a change in control.

• A single trigger on equity vesting can be a powerful retention device during change in control discussions, especially for more senior executives where equity represents a significant portion of their total pay package.

In addition, we will provide gross-ups for our employees from any taxes due under Section 4999 of the Internal Revenue Code of 1986. The effects of Section 4999 generally are unpredictable and can have widely divergent and unexpected effects based on an executive's personal compensation history. We determined that the potential for Section 4999 gross up payments are appropriate for all of our employees, because it is uncertain at the time an employee joins the company whether he or she will be affected by Section 4999 at the time of a change of control and to provide an equal level of benefit across individuals without regard to the effect of the excise tax.


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Capital One Financial Corp. Proxy March 4, 2010 Rationale for Modified 280G Gross-Up Our change of control agreements for NEOs provide for excise tax and ―gross up‖ payments in certain circumstances. These payments are only intended to place the NEO in the same after-tax position that they would have been in if they had received their severance payments for reasons other than a change of control, and are not intended to pay the NEO’s normal income tax amounts. If severance payments made to an NEO following a change of control termination exceed a certain threshold, those amounts are not tax deductible by the Company, and the NEO may be subject to a 20% excise tax on the payments in addition to the NEO’s normal payroll and income taxes. In this scenario, Capital One will make payments to reimburse the NEO for this excise tax, as well as additional amounts to cover the tax imposed on the reimbursement itself (commonly called a ―gross up‖).

Our change of control agreements contain a feature intended to minimize the additional cost to the Company of these excise tax and gross up payments. If the value of the payments exceed the safe harbor amount by 10% or less, the agreements call for the payments to be reduced by an amount that would result in the payment value being exactly equal to the safe harbor, thereby eliminating the need for excise tax or gross up payments.

Ameriprise Financial Inc. Proxy March 2, 2010 Rationale for 280G Gross-Up and Accelerated Vesting of Equity

Payment of excise tax and gross-up

We reimburse (gross-up) our named executive officers for any Section 280(G) excise taxes imposed under federal income tax law in the event of a change in control. We believe that the mitigation of the cost of the Section 280(G) excise tax for our executives is necessary to preserve the benefits to which he or she is entitled. This approach protects the value of compensation already awarded to the executive, and eliminates any potential personal bias against a change in control transaction. Nonetheless, we are aware that such tax gross-up payments could be significant. Therefore, at the committee's discretion, we have retained the ability to limit the value of certain change in control benefits that any individual or group of individuals may receive in order to avoid potential excise taxes and the need for gross-up payments.

Accelerated vesting of equity We accelerate the vesting of outstanding restricted stock awards and stock options upon death, disability, retirement and a change in control. Death and disability are events that are completely outside of the control of our executives. In such circumstances, we believe that it would be unfair for our executives to forfeit the compensation and benefits that they have earned. For retirement, we believe it runs contrary to the retention and reward of long-term incentive awards to compel an executive to choose between retirement and the loss of all unvested awards.

In the event of a change in control transaction, we believe that accelerating the vesting of outstanding stock options and restricted stock awards is appropriate because, depending on the structure of the transaction, continuing such awards may unnecessarily complicate a potentially beneficial transaction. It may not be possible to replace these awards with comparable awards of the acquiring company's stock and we believe that it would not be fair to our executives to lose the benefit of these outstanding awards. The acceleration of such awards may allow the executive to exercise the awards and possibly participate in the change in control transaction for the shares received. In addition, the acceleration of vesting aligns the interests of executives in a potential change in control transaction with those of our shareholders, by motivating them to work towards the completion of the transaction.


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General Electric Co., Proxy February 18, 2009 Rationale for Dividend Equivalents on RSUs We also award restricted stock units (RSUs) to executives other than the CEO. RSUs offer executives the opportunity to receive shares of GE stock on the date the restriction lapses. In this regard, RSUs serve to both reward and retain executives, as the final amount of any compensation received is linked to the price of GE stock. During the restricted period, each RSU entitles the executive to receive quarterly payments from GE equal to the quarterly dividends on one share of GE stock. The objective of providing such dividend equivalent payments is to help focus our executives on, and to reward them for, managing the business to produce cash that is capable of being distributed to shareowners in the form of a dividend. Dividend equivalents also mirror the income generation associated with stock ownership. We believe our practices regarding the provision of dividend equivalent payments are competitive and provide the appropriate risk-reward balance for our senior executives.

Saks Inc., Proxy May 7, 2010 Rationale for Employment Agreements

The Company has entered into employment agreements with each of the Named Executive Officers and with certain other executive officers. These agreements generally provide for payments and other benefits if the officer’s employment terminates for a qualifying event or circumstance, such as being terminated without ―cause‖ or leaving employment for ―good reason,‖ as these terms are defined in the employment agreements. For the Named Executive Officers, upon a ―Change in Control‖ (as defined in the agreements) of the Company, each may terminate his or her employment for ―good reason.‖ Additional information regarding the employment agreements is found under the heading ―Employment Agreements‖ below and a quantification of benefits that would have been received by the Named Executive Officers had termination occurred on January 30, 2010 is found under the heading ―Potential Payments upon Termination or Change-in-Control‖ below. See ―—Potential Payments upon Termination or Change in Control.‖

The HRCC believes that these agreements are an important part of a competitive overall compensation arrangement for the Named Executive Officers. The HRCC also believes that these agreements will help to secure the continued employment and dedication of the Named Executive Officers, and mitigate concern that they might have regarding their continued employment prior to or following a change in control, thereby allowing the executive to focus his or her undivided attention to serving the interests of the Company. The HRCC also believes that these agreements are important as a recruitment and retention device, as many of the companies with which the Company competes for executive talent have similar agreements in place for their senior executives. Finally, the HRCC believes that these agreements are beneficial to the Company because, in consideration for these severance arrangements, the executives agree to non-competition and non-solicitation covenants for a period of time following termination of employment.


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Dean Foods Co., Proxy April 16, 2010 Rationale for Tax Gross-ups (Relocation and 280G)

Like many companies, we use tax gross-ups as a discrete element of our executive compensation program pursuant to our company-wide relocation policy and to address excise tax inequities in the event of a change in control. The purpose of using tax gross-ups as part of our relocation policy is to encourage our employees to accept promotions or reassignments without disadvantaging them from a tax standpoint. Similarly, the reason we provide for an excise tax gross-up in the event of a change in control is to equalize payments for similarly situated employees who may otherwise face disparate tax treatment. The Internal Revenue Code (the ―Code‖) imposes a 20% excise tax on employees who receive benefits in connection with a change in control that equal or exceed three times the employee’s ―base amount‖ of compensation (the average W-2 income over the preceding five years). Similarly situated executives may have substantially different ―base amounts‖ of compensation based on length of service, timing of stock option exercises, or permitted deferrals of cash or equity compensation. A large portion of our senior executives’ compensation is in the form of incentive awards which vest over multiple years of service and seek to reward long-term performance. Applicable tax rules can impose excise taxes when awards vest in connection with a change in control or a termination of employment coincident to a change in control. Consequently, the Code can have significantly varying and arbitrary effects on an individual’s tax obligations based on the individual’s personal compensation history and decisions, which are unlikely to have been made with the Code in mind. Moreover, without the offsetting benefit of an excise tax gross-up, executives may be incentivized to divest their equity ownership in the Company as soon as they are able, thereby diminishing the alignment between equity grants and long-term performance.

Therefore, the Board and the Compensation Committee believe that tax gross-up payments can be appropriate in limited circumstances in order to prevent the intended value of a benefit from being significantly and arbitrarily reduced and to equalize payouts across similarly situated executives, officers and key employees who may have different exposure to excise tax.

Eli Lilly & Co., Proxy March 8, 2010 Explaining Adjustments Adjustments for Certain Items Consistent with past practice, the committee adjusted the results on which 2009 bonuses and PAs were determined to eliminate the distorting effect of certain unusual income or expense items on year-over-year growth percentages. The adjustments are intended to: • align award payments with the underlying growth of the core business • avoid volatile, artificial inflation or deflation of awards due to the unusual items in either the award year

or the previous (comparator) year • eliminate certain counterproductive short-term incentives—for example, incentives to refrain from

acquiring new technologies or to defer disposing of underutilized assets or settling legacy legal proceedings to protect current bonus payments.

To assure the integrity of the adjustments, the committee establishes adjustment guidelines at the beginning of the year. These guidelines are consistent with the company guidelines for reporting adjusted earnings to the investment community, which are reviewed by the audit committee of the board. The adjustments apply equally to income and expense items. The compensation committee reviews all adjustments and retains ―downward discretion‖—i.e., discretion to reduce compensation below the amounts that are yielded by the adjustment guidelines.


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For the 2009 awards calculation, the committee made these adjustments to EPS: • For both 2009 and 2008: Eliminated the impact of (i) significant asset impairments and restructuring

charges and (ii) one-time accounting charges for the acquisition of in-process research and development

• For 2009: Eliminated the impact of special charges related to litigation and the government investigations noted below

• For 2008: Eliminated the impact of (i) the ImClone Systems Incorporated acquisition, (ii) a one-time benefit to income resulting from settlement of a tax audit, and (iii) special charges related to the resolution of government investigations of prior sales and marketing practices of the company.

In addition, to eliminate the distorting effect of the acquisition of ImClone Systems Incorporated (completed in late November 2008) on year-over-year growth rates, the committee adjusted sales and EPS for 2008 on a pro forma basis as if the acquisition had been completed at the beginning of 2008.

The adjustments were intended to align award payments more closely with underlying business growth trends and eliminate volatile swings (up or down) caused by the unusual items. This is demonstrated by the 2007, 2008, and 2009 adjustments:


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Advisory Vote on Executive Compensation Proposals

Verizon Communications, Proxy March 22, 2010 Advisory Vote Related to Executive Compensation

(Item 3 on Proxy Card) The Board of Directors of Verizon is committed to excellence in governance. As part of that commitment, the Board provides Verizon’s shareholders with an annual opportunity to provide an advisory vote related to executive compensation. The Human Resources Committee of the Board has overseen the development of a compensation program that is described more fully in the ―Executive Compensation‖ section of this proxy statement, including the ―Compensation Discussion and Analysis‖ and the related tables and narrative. The program promotes a performance-based culture and aligns the interests of executives with those of shareholders by linking a substantial portion of compensation to the Company’s performance. It balances short-term and longer-term compensation opportunities to ensure that the Company meets short-term objectives while continuing to produce value for its shareholders over the long term. The program is also designed to attract and to retain highly-talented executives who are critical to the successful implementation of Verizon’s strategic business plan.

More specifically:

Incentive-based pay represents approximately 90% of a senior executive’s total compensation opportunity, with approximately 70% tied to Verizon’s relative shareholder return over the long term and the remaining approximately 20% tied to achievement of challenging annual performance metrics.

Base salary represents only approximately 10% of a senior executive’s total compensation opportunity.

The Committee continually reviews best practices in governance and executive compensation and has revised Verizon’s practices to:

o Eliminate an employment agreement for the CEO and not renew any outstanding executive

employment agreements;

o Eliminate guaranteed pension and supplemental retirement benefits;

o Eliminate executive perquisite allowances;

o Eliminate personal use of corporate aircraft following retirement as an employment benefit for the

current and all subsequent CEOs;

o Eliminate tax gross-up payments with respect to life insurance premium contributions, spousal travel to

business-related events and the excise tax liability under Internal Revenue Code Section 4999 related to any Section 280G excess parachute payment;

o Adopt a policy requiring shareholder approval of certain executive severance agreements;

o Adopt a policy prohibiting the Committee’s independent compensation consultant from doing any work

for the Company;

o Require executive officers to maintain certain stock ownership levels; and

o Adopt a policy that allows the Company to recapture and cancel incentive payments paid to an

executive who engages in financial misconduct. For the reasons discussed above, the Board recommends that shareholders vote in favor of the following resolution:

―Resolved, that the shareholders approve the overall executive pay-for-performance compensation policies and procedures employed by the Company, as described in the Compensation Discussion and Analysis and the tabular disclosure regarding named executive officer compensation, together with the accompanying narrative disclosure, in the proxy statement.‖

While the resolution is non-binding, the Board values the opinions that shareholders express in their votes and in any additional dialogue. It will consider the outcome of the vote and those opinions when making future compensation decisions.

The Board of Directors recommends that you vote FOR this proposal.


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Apple Inc., Proxy January 12, 2010 PROPOSAL NO. 4


As previously announced, the Company is providing its shareholders with the opportunity to cast an advisory vote on executive compensation as described below. The Company believes that it is appropriate to seek the views of shareholders on the design and effectiveness of the Company’s executive compensation program.

The Company’s goal for its executive compensation program is to attract and retain a talented, entrepreneurial and creative team of executives who will provide leadership for the Company’s success in dynamic, competitive markets. The Company seeks to accomplish this goal in a way that is aligned with the long-term interests of the Company’s shareholders. The Company believes that its executive compensation program, which emphasizes long-term equity awards, satisfies this goal and is strongly aligned with the long-term interests of its shareholders. The Company’s total shareholder return over the prior 1-, 3- and 5-year periods was 63%, 141% and 857%, respectively.

The Compensation Discussion and Analysis beginning on page 19 of this Proxy Statement, describes the Company’s executive compensation program and the decisions made by the Compensation Committee in 2009 in more detail. Highlights of the program include the following:

• Mr. Jobs’s total compensation consists of a salary of $1 per year. Mr. Jobs has not received an equity award since 2003.

• Mr. Jobs owns approximately 5.5 million shares of the Company’s common stock, which significantly aligns his interests with those of the Company’s shareholders.

• Cash compensation (base salary and annual performance-based cash bonus award) levels for the other named

executive officers are substantially below the levels generally provided by peer companies. The Company has no long-term cash compensation program for its named executive officers.

• The named executive officers, other than Mr. Jobs, receive long-term equity awards in the form of RSUs subject to long-term vesting requirements. RSUs constitute the majority of each executive’s total compensation opportunity. The Company believes these awards ensure that a significant portion of the executives’ compensation is tied to long-term stock price performance.

• None of the named executive officers has an employment agreement or severance arrangement. In addition, the

Company generally does not provide any perquisites, tax reimbursements, or change in control benefits to the named executive officers that are not available to other employees.

• Each of the named executive officers is employed at will and is expected to demonstrate exceptional personal performance in order to continue serving as a member of the executive team.

The Company believes the compensation program for the named executive officers was instrumental in helping the Company achieve strong financial performance in the challenging macroeconomic environment. In addition to the 1-, 3- and 5-year performance of the Company’s stock noted above, in 2009 the Company’s revenue grew to $36.5 billion, representing an increase of $4.1 billion or 12% over the prior year. Net income also increased to $5.7 billion in 2009, an increase of $870 million or 18% over the prior year, and the Company’s gross margin in 2009 was 36.0%, up from 34.3% in the prior year. The Company’s strong earnings and operational excellence helped drive a cash balance at the end of 2009 of $34 billion, an increase of $9.5 billion over the prior year.

The Company requests shareholder approval of the compensation of the Company’s named executive officers as disclosed pursuant to the SEC’s compensation disclosure rules (which disclosure includes the Compensation Committee Report, the Compensation Discussion and Analysis, and the compensation tables).

As an advisory vote, this proposal is not binding upon the Company. However, the Compensation Committee, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by shareholders in their vote on this proposal, and will consider the outcome of the vote when making future compensation decisions for named executive officers.

Vote Required

Approval of Proposal No. 4 requires the affirmative vote of (i) a majority of the shares present or represented by proxy and voting at the Annual Meeting and (ii) a majority of the shares required to constitute the quorum.

Recommendation of the Board

The Board recommends a vote FOR Proposal No. 4.


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General Mills Inc. Proxy August 16, 2010

PROPOSAL NUMBER 4 ADVISORY VOTE ON EXECUTIVE COMPENSATION

General Mills’ guiding compensation philosophy is to maintain programs that will attract, motivate, reward and retain competitively superior leaders who are able to consistently achieve top tier corporate performance and total stockholder return. The compensation committee bases its executive compensation decisions on the following core principles:

• compensation should be tightly linked to company performance, with base salaries that are at or below the median combined with performance-based (at risk) compensation that varies significantly with company performance;

• broad and deep stock ownership best aligns the interests of management with those of our investors; and

• compensation must be competitive in order to attract and retain superior leaders who are consistently able to achieve corporate performance that is in the top tier of the consumer packaged goods industry.

We believe that the company’s long-standing executive compensation programs have been effective at incenting the achievement of superior results, appropriately aligning pay and performance, creating an ownership culture in which company managers think and act like stockholders, and in enabling General Mills to attract and retain some of the most talented executives in the global consumer products industry.

Fiscal 2010 was a very strong year for General Mills. Our performance was generally superior to that of the consumer packaged goods industry peer group, and especially so against food companies in that industry peer group. Performance also met or exceeded General Mills’ publicly stated long-term performance goals of low single-digit net sales growth, mid-single-digit segment operating profit growth, high single-digit earnings per share growth and improvement in return on average total capital. Our financial performance in fiscal 2010 resulted in superior returns to General Mills stockholders. For the year, stock price appreciation plus reinvested dividends represented a 43% return. This was well above our consumer packaged goods industry peer group’s return of 29%, and it was double the 21% return generated by the Standard & Poor’s 500 Index over this same time period.

Compensation actions taken in fiscal 2010 for the named executive officers featured:

• the compensation committee’s mid-year use of judgment to increase financial thresholds for what would be considered superior performance for the fiscal year, once stronger performance was projected for our industry peer group;

• strong performance-based awards resulting from superior company and individual performance and from the compensation structure approved prior to the start of the fiscal year; and

• adoption or continued use of governance practices designed to enhance compensation evaluation and decision making processes, including provision of tally sheets at every compensation committee meeting, placing current and accumulated compensation within context; implementation of a compensation risk assessment process; and voluntary adoption of this advisory vote on executive compensation.

Stockholders are encouraged to read the Compensation Discussion and Analysis section of this proxy statement for a more detailed discussion of how the company’s compensation programs reflect our overarching compensation philosophy and core principles.

Our board has a long standing commitment to good corporate governance and recognizes the interest that investors have in executive compensation. At our 2009 Annual Meeting of Stockholders, a stockholder proposal seeking an advisory vote on compensation was approved by a majority of the votes cast. In response to the vote and in recognition of growing support for advisory votes on compensation, the board approved a policy to provide stockholders with an opportunity to vote on an advisory resolution concerning our executive compensation


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philosophy, policies and practices every two years beginning at the 2010 Annual Meeting of Stockholders. While the provisions of the recently enacted Wall Street Reform and Consumer Protection Act of 2010 (the ―Financial Reform Act‖) will require all public companies to hold advisory votes on compensation beginning in 2011, we are proceeding with our planned vote at this year’s Annual Meeting. Future advisory votes will be held according to the terms of the Financial Reform Act and any related rules or guidance.

Accordingly, stockholders are being asked to vote on the following resolution:

RESOLVED, that the stockholders of General Mills, Inc. approve, on an advisory basis, the overall executive compensation philosophy, policies and practices described in the Compensation Discussion and Analysis set forth in this proxy statement.

The advisory vote will not be binding on the compensation committee or the board of directors. However, they will carefully consider the outcome of the vote and take into consideration any concerns raised by investors when determining future compensation arrangements.

The board of directors unanimously recommends a vote FOR the advisory resolution approving the overall executive compensation philosophy, policies and practices described in the Compensation Discussion and Analysis section of this proxy statement.

Sysco Corp. Proxy October 8, 2009 ADVISORY VOTE ON EXECUTIVE COMPENSATION

PHILOSOPHY, POLICIES AND PROCEDURES ITEM NO. 6 ON THE PROXY CARD

We believe that our compensation policies and procedures are centered on a pay-for-performance philosophy and are strongly aligned with the long-term interests of our stockholders.

We also believe that both Sysco and its stockholders benefit from corporate governance policies that are responsive to stockholder concerns. A number of our stockholders have expressed an interest in a non-binding advisory vote on the overall executive compensation philosophy, policies and procedures employed by the Company. Thus, with the approval of the Board of Directors and its Compensation Committee, the Company is voluntarily providing stockholders with the right to cast an advisory vote on our executive compensation philosophy, policies and procedures at the 2009 annual meeting of stockholders.

This proposal, commonly known as a ―Say-on-Pay‖ proposal, gives you as a stockholder the opportunity to endorse or not endorse our executive pay philosophy, policies and procedures. This vote is intended to provide an overall assessment of our executive compensation program rather than focus on any specific item of compensation. The Compensation Committee and the Board intend to take into account the outcome of the vote when considering future executive compensation arrangements. However, because your vote is an advisory, non-binding vote, it will not directly affect or otherwise limit any existing compensation or award arrangements of any of our named executive officers. As described in the ―Compensation Discussion and Analysis‖, the following key principles remain the cornerstone of Sysco’s executive compensation philosophy:

• Pay for performance

• Enhance stockholder value

• Strike appropriate balance between short-term and long-term compensation and short-term and long-term interests of the business

• Provide competitive executive compensation and benefits

By adhering to these key principles, we believe that the application of our compensation philosophy, policies and procedures have resulted in executive compensation decisions that are appropriate and that have benefitted the Company over time. Sysco’s executive compensation program has resulted in a corporate culture that recognizes


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and incents individual and team performance and that aligns the interests of stockholders and executives by linking a substantial portion of compensation to the Company’s performance. For example:

• The named executive officers did not receive an annual bonus for fiscal 2009 because the minimum performance criteria of a 4% increase in diluted earnings per share was not satisfied;

• Approximately 83% of the total fiscal 2008 compensation disclosed in the 2008 Summary Compensation Table for our named executive officers (excluding the increase in the value of retirement benefits and earnings on deferred compensation), were annual and longer-term incentives, including MIP bonus, supplemental bonus, cash performance unit grants and stock option grants, that were at risk if certain performance criteria were not satisfied or were subject to our future performance; and

• Despite the fact that our corporate officers earned no MIP bonus for fiscal 2009, approximately 59% of the total fiscal 2009 compensation disclosed in the Summary Compensation Table for our named executive officers (excluding the increase in the value of retirement benefits and earnings on deferred compensation), were annual and longer-term incentives, including cash performance unit grants and stock option grants, that were at risk if certain performance criteria were not satisfied or were subject to our future performance.

The Compensation Committee of our Board of Directors, which is responsible for determining the compensation of our executive officers, is composed solely of outside directors who satisfy the independence requirements of the New York Stock Exchange. To assist it, the Compensation Committee engages Mercer, an independent compensation consultant. As a result, the Compensation Committee provides independent oversight and engages in an ongoing independent review of all aspects of our executive compensation programs.

In addition, during fiscal 2009, the Compensation Committee and Board adopted a policy that requires the Company to recapture incentive payments paid to an executive if, within 36 months after the payment and following certain specified restatements of financial results, it is determined that such incentive payments would have been lower had they been calculated based on such restated results. Specific provisions enforcing this clawback policy were included in the fiscal 2010 MIP awards granted in May 2009 and are expected to be included in the CPU awards to be issued in November 2009.

We invite you to consider the details provided in the ―Compensation Discussion and Analysis‖, as well as the Summary Compensation Table and the tables and other information that follow it. These will provide you with the breadth of the considerations that are taken into account when setting compensation, as well as details of the valuation of the individual elements of the compensation program. The Summary Compensation Table and its footnotes allow you to view the trends in compensation and application of our philosophies and practices for the years presented.

Given the information provided above and elsewhere in this proxy statement, the Board of Directors asks you to approve the following resolution:

Resolved, that Sysco’s stockholders approve the compensation philosophy, policies and procedures employed by Sysco’s Compensation Committee, as described in the “Compensation Discussion and Analysis” and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this proxy statement”

The Board of Directors recommends that you vote “FOR” this proposal

approving the compensation philosophy, policies and procedures of the Compensation Committee.


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Advisory Vote Proposals that Explain Rationale for Biennial or Triennial Vote

Pfizer Inc. Proxy March 16, 2010—Biennial ITEM 3—ADVISORY VOTE ON EXECUTIVE COMPENSATION Pfizer’s compensation philosophy is designed to align each executive’s compensation with Pfizer’s short-term and long-term performance and to provide the compensation and incentives needed to attract, motivate and retain key executives who are crucial to Pfizer’s long-term success. Consistent with this philosophy, a significant portion of the total compensation opportunity for each of our executives is directly related to Pfizer’s stock price performance and to other performance factors that measure our progress against the goals of our strategic and operating plans, as well as our performance against that of our peer companies.

Shareholders are urged to read the Compensation Discussion and Analysis (―CD&A‖) section of this Proxy Statement, which discusses how our compensation policies and procedures implement our compensation philosophy. The Compensation Committee and the Board of Directors believe that these policies and procedures are effective in implementing our compensation philosophy and in achieving its goals.

Pfizer believes it has an unmatched record of engagement with shareholders. Pfizer not only listens to shareholder concerns; we consistently respond to them. Over the years, Pfizer has made a number of changes to its disclosures concerning executive compensation, as well as to its executive compensation program, in response to shareholder input, including a number of the enhancements mentioned in the CD&A.

We received a shareholder proposal in connection with the 2009 Annual Meeting of Shareholders asking that we implement an annual advisory vote on executive compensation. The proposal was approved by a majority of the votes cast at the 2009 Annual Meeting. Following discussions with shareholders, the Board of Directors determined that providing shareholders with the opportunity to cast an advisory vote on our executive compensation policies and procedures will facilitate our shareholder outreach activities and provide another means by which to receive input on our compensation policies and practices. The Board also decided to submit the advisory vote to shareholders biennially to foster a more long-term approach to evaluating our executive compensation policies and procedures. Accordingly, the following resolution will be submitted for a shareholder vote at the 2010 Annual Meeting:

―RESOLVED, that the shareholders of Pfizer Inc. (the ―Company‖) approve, on an advisory basis, the overall executive compensation policies and procedures employed by the Company for its named executive officers listed in the 2009 Summary Compensation Table included in the Proxy Statement for this Annual Meeting, as described in the Compensation Discussion and Analysis set forth in such Proxy Statement.‖

Although the advisory vote is non-binding, the Compensation Committee and the Board will review the results of the vote. Consistent with Pfizer’s record of shareholder responsiveness, the Compensation Committee will consider our shareholders’ concerns and take them into account in future determinations concerning our executive compensation program. The Board of Directors therefore recommends that you indicate your support for the Company’s compensation policies and procedures for its named executive officers, as outlined in the above resolution.

Your Board of Directors unanimously recommends a vote FOR the approval, on an advisory basis, of the overall executive compensation policies and procedures employed by the Company for its named executive officers.


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Microsoft Corp. Proxy September 29, 2009—Triennial

PROPOSAL 4: ADVISORY VOTE ON EXECUTIVE COMPENSATION

As described in the Compensation Discussion and Analysis, we design our executive officer compensation programs to attract, motivate, and retain the key executives who drive our success and industry leadership. Pay that reflects performance and alignment of that pay with the interests of long-term shareholders are key principles that underlie our compensation program design.

The Board of Directors values and encourages constructive dialogue on compensation and other important governance topics with our shareholders, to whom it is ultimately accountable. In connection with the 2009 Annual Meeting of Shareholders, we received two shareholder proposals asking that we implement an advisory vote on executive compensation (commonly referred to as ―say-on-pay‖). We engaged in discussions with the proposing shareholders and considered the merits of the proposals. The Board of Directors concluded that providing shareholders with an advisory vote on executive compensation every three years will enhance shareholder communication by providing another avenue to obtain information on investor sentiment about our executive compensation philosophy, policies, and procedures. We have adopted an advisory vote every three years (a ―triennial‖ vote), which we believe will be the most effective means for conducting and responding to a say-on-pay vote.

Although the vote is non-binding, Board and the Compensation Committee will review the voting results. To the extent there is any significant negative say-on-pay vote, we would consult directly with shareholders to better understand the concerns that influenced the vote. The Board and the Compensation Committee would consider constructive feedback obtained through this process in making future decisions about executive compensation programs.

Accordingly, the Board of Directors proposes that you indicate your support for the Company’s compensation philosophy, policies, and procedures and their implementation in fiscal year 2009 as described in the Compensation Discussion and Analysis section of this Proxy Statement.

The Board of Directors recommends a vote FOR the proposal.


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Compensation Risk Discussion

Brown-Forman Proxy June 25, 2010 COMPENSATION RISK ASSESSMENT. To determine the level of risk arising from our compensation policies and practices, the Company conducted a thorough risk assessment and evaluation process during fiscal 2010 with oversight by the independent advisors to the Compensation Committee, the committee members, and our internal auditors. The risk assessment was based on a framework provided by the independent advisors to the Compensation Committee and examined the compensation programs applicable to all of our employees, not just our NEOs. We evaluated the following areas of potential risk and reviewed suggested practices intended to mitigate risk related to compensation. Based upon the affirmative responses to the questions set forth below, as well as other qualitative and quantitative results, the Company concluded that the risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

Risk Category Element of Risk

Strategic Risk

•

Are performance metrics and measurement periods well-aligned with the Company’s business strategy and objective for long-term value creation for stockholders?

•

Is the Committee aware of the Company’s conservative risk tolerance, and does it have the ability to identify behaviors or performance outcomes that are excessive or contrary to the Company’s long-term strategy?

Cultural Risk

•

Does the Company have a strong set of corporate values that emphasize ethical behavior, actions that contribute to building long-term value (rather than short-term performance), teamwork and individual sacrifice for common good, the importance of non-financial and strategic performance, and investment in people and infrastructure?

Governance Risk •

Is the Compensation Committee independent? Do members have an appropriate level of expertise?

•

Does the Committee have access to and receive input from an independent and proactive compensation consultant?

Pay-Mix Risk • Does the Company have reasonable, market-competitive salaries? • Does the Company have a balanced mix of annual and longer-term incentive opportunities?

•

Does equity compensation make up an appropriate portion of total pay, sufficient to align the executive’s economic interest with those of long-term shareholders?

Performance Measurement Risk

•

Do incentive opportunities relate primarily to the performance of the Company as a whole for senior-level executives?

•

Do incentive programs reward a mix of different performance measures that consider all aspects of the Company’s financial health?

•

Does the Compensation Committee have a rigorous process for establishing goals and evaluating CEO performance?

Risk Management

•

Do executives in charge of risk management have direct access to the Compensation Committee for pay-risk assessments?

Other Compensation Risk

•

Do executives have reasonable severance arrangements, rather than severance packages that would offset or mitigate the consequences of poor performance or risky behavior?

•

Do the Company’s compensation programs hold management accountable for results after retirement through continued, rather than accelerated vesting of unvested awards upon retirement?


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Evaluate Disclosure in Light of Shareholder “Hot Buttons”

Intel Corp. Proxy April 3, 2009—Run Rate and Overhang Background on Equity Compensation at Intel We have been granting stock options to our officers and other key employees for more than 25 years to align employees’ economic interests with those of stockholders. In 1997, we expanded the eligibility of our stock option program to cover nearly all full-time and part-time employees, which is what Intel refers to as a broad-based program. Intel grants equity awards to approximately 95% of our employees annually. While we grant equity awards on a pre-established quarterly schedule, we make most of our grants in the second quarter of each year as part of our company-wide employee performance evaluation. In 2008, Intel granted 57.8 million shares under the 2006 Equity Incentive Plan, of which 2.2 million shares, or 3.8%, were awarded to Intel’s listed officers; 64,910 RSUs, or 0.1%, were awarded to Intel’s non-employee directors; and the remaining 55.5 million shares, or 96.1%, were awarded to Intel’s broad-based employee population. We believe that share-based compensation should not be limited to executive officers and that all employees should be aligned with our stockholders. To aid in this practice, the Compensation Committee instituted a policy that limits grants to our listed officers to no more than 5% of the total equity awards granted in any one year. Over the past five years, on average we awarded 2.5% of all equity grants to our listed officers.

Intel’s long-term goal is to limit the average annual dilution from our equity programs to less than 2%. Dilution is total equity awards granted less cancellations, divided by total common shares outstanding at the beginning of the year. Over the past five years, the average annual dilution was 0.6% (0.1% in 2008). Intel manages our long-term dilution goal by limiting the number of equity awards that we grant annually, commonly referred to as burn rate. Burn rate differs from dilution, as it does not account for equity awards that have been cancelled. Over the past five years, Intel’s annual burn rate has averaged 1.4% (1.0% in 2008). Notably, Intel’s 2008 dilution and burn rates continue to decline from 2006 levels, primarily due to the introduction of RSUs. A pattern of decreased hiring and headcount also contributed to the reductions in dilution and burn rates from 2004 through 2008. For 2009, the estimated shares to be awarded through May, as shown in the table above, includes an additional grant, called the Investment Grant (see ―Compensation Discussion and Analysis; Additional Investment Grants for 2009 and 2010‖), that Intel will make to approximately 95% of our employees as determined by our performance review process.

Awarding the Investment Grant is expected to impact our burn rate by approximately 0.9%; we anticipate that the number of stock options and RSUs that we grant as part of our annual employee performance evaluation and compensation adjustment process, when combined with the Investment Grant, will remain below our annual dilution goal of 2%. The intent of the Investment Grant is to focus employees at this critical inflection point on creating sustained increases in our stock price as the macro-economic climate improves. On December 26, 2008, the closing market price per share of Intel common stock was $14.18, and more than 99% of our stock option awards were underwater. In addition to the Employee Option Exchange Program proposed in Proposal 4, the Investment Grant further helps address employee retention and motivation concerns, drive positive employee experience in our equity award program, and reinvigorate a culture based on employee stock ownership. It should also be noted that while this grant is incremental to normal annual compensation, there will be significant cost savings realized in 2009 as a result of compensation program reductions, including no salary increases, a reduction in company contributions to retirement savings plans, and a reduction in the employee stock purchase program. The Investment Grants for executive officers will be in the form of stock options. In 2010, we expect to make an additional Investment Grant with a similar total value. For the rest of the employee population, these grants will vest equally over four years from the date of grant and have a seven-year term.


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An additional metric that Intel uses to measure the cumulative impact of our equity program is overhang (equity awards outstanding but not exercised, plus equity awards available to be granted, divided by total common shares outstanding at the end of the year). Over the past five years, Intel’s overhang has averaged 17.2% (15.3% in 2008). Intel’s 2008 overhang was less than our five-year average, mainly due to our reducing the term of our equity plan in 2004. A shorter term translates into fewer awards outstanding, which reduces overhang.

Equity Compensation Plan Key Metrics

2008

2007

2006

2005

2004

Average

(%) (%) (%) (%) (%) (%)

Percentage of Equity-Based Awards Granted to Listed Officers 3.8 4.6 1.6 1.4 1.1 2.5

Dilution 0.1 0.0 0.2 1.3 1.3 0.6

Burn Rate 1.0 1.0 1.4 1.9 1.8 1.4

Overhang 15.3 16.2 17.8 19.2 17.7 17.2

In this proposal, we are requesting that an additional 134 million shares be made available so that the total number of shares estimated to be available for issuance over the next three years is 206 million shares (excluding the shares requested solely for use with the proposed Option Exchange). This reduction is due primarily to decreases in headcount and hiring since our last request.

RSUs allow for employee and stockholder alignment with both increases and decreases in Intel’s stock price. RSUs also provide for more stable value than stock options. Since 2006, many of Intel’s non-exempt employees through our mid-level exempt employees have received RSUs exclusively. This allows Intel to maintain a broad-based equity program with fewer shares, provide more stable value from these grants, and maintain employee and stockholder alignment. For employees with higher levels of responsibility, Intel uses a combination of RSUs and stock options. As an employee’s level of responsibility increases, the percentage of stock options is a greater portion of the equity grant, equating to more at-risk compensation. This at-risk compensation provides management with a strong incentive to improve Intel’s performance. Beginning in 2009, Intel is reducing its use of long-term, time-vested RSU grants and is implementing the use of performance-based RSUs, called OSUs, for our senior officers (a group of approximately 21 employees) that will provide a tight link between pay and performance. For more information on our OSU Plan, see ―Compensation Discussion and Analysis; Changes to Equity Incentive Programs for 2009.‖

We are requesting the ability to use up to 300,000 shares for employee recognition stock awards having no minimum vesting period; these awards are typically granted in small amounts of 100 to 150 shares per recipient and vest immediately. We are also requesting the ability to use up to 10 million shares for long-term grants; these awards have a longer vesting schedule (typically beginning five years after the grant date) and a maximum life of 10 years.


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November 19, 2010

EXEQUITY


Management Advisors

Client Alert Quick Summary of ISS’s 2011 Policy Updates Related to Compensation

Today, Institutional Shareholder Services, Inc. (ISS) released its 2011 Policy Updates to its proxy voting guidelines. The purpose of this Alert is to provide a quick summary of these Policy Updates as they relate to compensation issues.

The 2011 Policy Updates will apply to companies with shareholder meetings occurring on or after February 1, 2011. There are not really any ―new‖ policies included this year (other than those as a result of the new Dodd-Frank requirements which the draft policy updates released in late October addressed), but definitely some refinements that might cause some companies a bit of angst (if not trouble). Here is a quick summary of the 2011 Policy Updates related to compensation:

Equity Compensation Plans: Burn Rate—ISS is making a change to the Burn Rate Policy so that the burn rate caps cannot increase or decrease by more than two percentage points from year to year. The 2011 Burn Rate Table will be released as part of ISS’s 2011 Summary Guidelines in December 2010.

Say When on Pay Vote—ISS will support annual advisory votes on compensation, as its draft policies released at the end of October suggested. However, it still remains unclear what ISS will do if a company recommends or implements a different frequency or the shareholder vote supports a different frequency.

Problematic Pay Practices—ISS is revising the list of ―major‖ problematic pay practices which alone could trigger application of the policy. The major problematic pay practices are now identified as:

Repricing or replacing of underwater stock options/stock appreciation rights without prior shareholder approval (including cash buyouts and voluntary surrender of underwater options);

Excessive perquisites or tax gross-ups, including any gross-up related to a secular trust or restricted stock vesting; and

New or extended agreements that provide for:

– Change-in-control (CIC) payments exceeding 3x base salary and average/target/most recent bonus;

– CIC severance payments without involuntary job loss or substantial diminution of duties (―single‖ or ―modified single‖ triggers); and

– CIC payments with excise tax gross-ups (including ―modified‖ gross-ups).

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As before in such cases, the presence of problematic pay practices will influence ISS’s vote recommendations, as follows:

First, ISS will recommend against management say on pay (MSOP) proposals;

Then, ISS will recommend against/withhold on compensation committee members (or in rare cases the full board) in: (i) egregious situations, (ii) when no MSOP item is on the ballot, or (iii) when the board has failed to respond to concerns raised in prior MSOP evaluations; and/or

ISS will recommend against an equity incentive plan proposal if excessive non-performance-based equity awards are the major contributors to a pay-for-performance misalignment.

Problematic Pay Practices Commitments—ISS will no longer accept future commitments on problematic pay practices as a way of preventing or reversing a negative vote recommendation.

Voting on Golden Parachutes—ISS sticks pretty close to the draft policy issued in late October 2010. Such proposals will be evaluated on a case-by-case basis, but the presence of certain practices could lead ISS to recommend against the proposal.

If you have any questions about this Client Alert, please contact Ed Hauder ((847) 996-3990 or [email protected]) or any of the following:

Robbi Fox (847) 948-8655 [email protected] Mark Gordon (925) 478-8294 [email protected] Jeff Hyman (203) 210-7046 [email protected] Lynn Joy

Stacey Joy (847) 996-3963 (847) 996-3969

[email protected] [email protected]

Chad Mitchell (949) 748-6169 [email protected] Perry Papantonis (908) 849-4858 [email protected]

Jeff Pullen (847) 996-3967 [email protected] Dianna Purcell (908) 849-4878 [email protected]

Bob Reilley (908) 849-4857 [email protected] Dmitry Shmoys (949) 748-6132 [email protected] Mike Sorensen (847) 996-3996 [email protected] Jim Woodrum (847) 996-3971 [email protected]

Ross Zimmerman (847) 996-3999 [email protected]




You are receiving this Client Alert as a client or friend of Exequity LLP. This Client Alert provides general information and not legal advice or opinions on specific facts. If you did not receive this directly from us and you would like to be sure you will receive future Client Alerts and our other publications, please click on the following link to add yourself to our subscription list: http://www.exqty.com/References/Subscribe.aspx. If you want to unsubscribe from our list, please click on ―Manage Subscription‖ at the bottom of the e-mail sent to you.

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November 5, 2010

EXEQUITY


Management Advisors

Client Alert SEC Proposes Rules Regarding Shareholder Approval of Executive Compensation and Golden Parachute Compensation

On October 18, 2010, the Securities and Exchange Commission (the ―SEC‖) issued proposed rules to implement the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (―Dodd-Frank‖) with respect to:

―Say on Pay‖—Nonbinding shareholder advisory vote on the executive compensation disclosures in the proxy;

―Say When on Pay‖—Nonbinding shareholder advisory vote on the frequency with which shareholders will vote on the executive compensation disclosures; and

―Say on Golden Parachutes‖—Disclosure and nonbinding shareholder advisory vote on golden parachute arrangements when shareholders are asked to approve a merger or other corporate transaction.

The purpose of this Client Alert is to summarize the key provisions of the proposed rules and briefly discuss potential implementation issues.

Comments on the proposed rules are due by November 18, 2010 and the SEC is expected to issue final rules in the first quarter of 2011.

Exequity Comment: The SEC’s proposed rules provide companies with guidance on some of the most pressing questions, particularly with respect to the “Say When on Pay” vote. Calendar-year companies are in the process of preparing drafts of their proxy statements and companies with fiscal year-ends ending on or after September 30, 2010 are in the final stages of getting their proxies out the door—thus, some guidance from the SEC was sorely needed. However, a number of questions remain unanswered and the proposed rules have raised additional questions. Hopefully, many of these will be addressed in the final rules. In the meantime, companies subject to the effective date for including “Say on Pay” and “Say When on Pay” resolutions in their proxies should follow the guidance in the proposed rules even if proxy statements need to be filed before final rules are adopted.

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Effective Date Dodd-Frank requires separate resolutions on ―Say on Pay‖ and ―Say When on Pay‖ in a company’s proxy statement relating to its first annual meeting (or special meeting in lieu of an annual meeting) that occurs on or after January 21, 2011. The ―Say on Golden Parachutes‖ will not become effective until the SEC issues its final rules. The effective dates apply regardless of when the proxy is filed, whether the proxy filed is preliminary or final, and whether the SEC has adopted final rules.

Highlights of the Proposed Rules The Say on Pay vote must be a vote to approve all of the executive compensation disclosures included in the proxy.

The Say When on Pay vote must provide for a choice among every year, every two years, every three years, or abstain.

The SEC is not prescribing any specific language or form for the resolutions.

The CD&A must discuss whether (and, if so, how) the compensation policies and programs have taken into account the results of a prior required Say on Pay vote.

The company must disclose in its 10-Q (or 10-K, if applicable) its decision with respect to the Say When on Pay vote.

Say on Pay or Say When on Pay vote resolutions do not require the filing of a preliminary proxy.

Disclosure with respect to Say on Golden Parachutes requires a formatted and more comprehensive disclosure than what is currently required.

Say on Pay Dodd-Frank amends the Securities Exchange Act of 1934 (the ―Exchange Act‖) by adding new Section 14A(a)(1) which requires, no less frequently than once every three years, a separate, nonbinding shareholder advisory vote on the executive compensation disclosures required in the proxy. The separate shareholder vote is only required when proxies are solicited for the election of directors with respect to an annual meeting of shareholders (or special meeting in lieu of an annual meeting). The SEC’s proposed rules provide further:

Shareholders would vote to approve all of the items covered by the executive compensation disclosures, including the Compensation Discussion and Analysis (―CD&A‖), the compensation tables, and other narrative explanations. Director compensation is excluded as well as the disclosure required by Item 402(s) of Regulation S-K relating to the issuer’s compensation policies and practices as they pertain to risk management and risk-taking incentives for employees generally.

The SEC is not prescribing any specific language or form for the resolution.

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Companies must disclose in the proxy that they are providing a separate Say on Pay vote and briefly explain the general effect of the vote (e.g., that it is nonbinding).

The CD&A would be required to include a discussion of whether and, if so, how a company’s compensation policies and decisions have taken into account the results of a previous Say on Pay vote that is required under new Section 14A(a)(1).

Exequity Comment: The only surprise (and additional rule not mandated by Dodd-Frank) is the requirement to discuss in the CD&A whether compensation policies and decisions have taken into account the results of the prior Say on Pay vote. Note that this disclosure will not be required until 2012 proxies (discussing the Say on Pay vote in 2011). This is the case even if a company voluntarily included a Say on Pay vote in its proxies before the mandatory effective date.

However, it is unclear what is intended to be discussed, particularly since the vote is an “up” or “down” vote that does not provide the company with any information on the compensation policies shareholders like or dislike. Also, shareholders are a diverse group and their views and/or reasons for voting for or against the Say on Pay proposal are likely equally diverse. In addition, some shareholders may vote against a Say on Pay proposal to express their dissatisfaction with other company policies and not necessarily executive pay.

It is important to also note that Institutional Shareholder Services, Inc. (ISS) and other proxy advisory firms are likely to be influential for many institutional shareholders who will outsource the analysis because they lack the staff to fully analyze a Say on Pay vote.

Say When on Pay New Section 14A(a)(2) of the Exchange Act requires that issuers provide a separate, nonbinding advisory vote to determine the frequency of the Say on Pay vote at least once every six years. As with the Say on Pay vote, the separate shareholder Say When on Pay vote would be required only with respect to an annual meeting of shareholders for which proxies are solicited for the election of directors (or a special meeting in lieu of such annual meeting). The SEC’s proposed rules provide further:

Shareholders must be given four choices on a single ballot: specifically, do they prefer to be presented with a Say on Pay vote every one, two, or three years or do they abstain from voting.

Companies must disclose that they are providing a separate Say When on Pay vote and they must explain the general effect of the vote, such as whether the vote is nonbinding.

A company’s board of directors may include a recommendation as to how shareholders should vote on frequency; however, the resolution must make it clear that the proxy card provides for four choices and that shareholders are not voting to approve or disapprove the board’s recommendation.

The SEC refused to prescribe a standard for determining which frequency has been adopted by the shareholders. Because four choices are presented, it is very possible that no choice will result in a majority vote. Rather, the SEC proposed rules for determining whether a company can exclude a shareholder proposal relating to Say on Pay or Say When on Pay votes. The SEC is proposing that a company can exclude as ―substantially implemented‖ a shareholder proposal that seeks a Say on Pay vote or relates to the frequency of Say on Pay votes if the company has implemented the frequency that is consistent with the plurality of the votes cast.

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The company must disclose in the Form 10-Q that covers the period during which the Say When on Pay vote occurs (or Form 10-K if the vote occurs during the fourth quarter) its decision regarding frequency. Note that the actual results of the vote are still required to be reported on Form 8-K within four business days following the day of the shareholder meeting.

Exequity Comment: Many companies are wrestling with the decision of the voting frequency they will recommend and based on our conversations with our clients, companies seem to be falling primarily into one of two camps, either annual or triennial. The argument for an annual frequency is that the Say on Pay vote will be viewed by shareholders as part of the normal course and, thus, may be subject to less scrutiny. Some companies have also expressed concern that if shareholders are dissatisfied with executive compensation and a Say on Pay vote is not conducted annually, there is greater risk that shareholders may instead withhold or vote against compensation committee members in the “off years” (when a Say on Pay vote is not on the ballot). However, this concern may be overblown because for companies that have a majority vote standard for the election of directors, it is rare that directors fail to receive majority support (as of September 1, 2010, only 88 directors failed to earn majority support and this was down from 93 for the same time period during the previous year).

The argument for a longer frequency, such as triennial, is that an annual vote further promotes “short-term” thinking with respect to executive compensation. Because the majority of compensation is long-term, a shareholder vote with a longer frequency is more consistent with and more aligned with longer-term compensation objectives. Keep in mind that a decision with respect to the vote frequency does not need to be made until after the votes come in. If triennial is recommended but the results show a majority support or even plurality for annual, the company can make a decision to adopt annual. It would likely be more difficult for a company to make a decision to adopt triennial after it had recommended for an annual frequency.

It should be noted that ISS recently released for comment its initial policy position on Say When on Pay, which is to vote in favor of companies providing for annual proposals. ISS believes that an annual frequency provides for the highest level of accountability and direct communication by enabling the vote to correspond to the information presented in the accompanying proxy statement. Having Say on Pay votes only every two or three years, potentially covering all actions occurring between the votes, would make it difficult to create meaningful and coherent communication that the votes are intended to provide. Nevertheless, regardless of the policy ISS adopts, we believe that companies should recommend the frequency that is best for their business and clearly articulate their rationale in the resolution. With respect to frequency, we believe this is one area where institutional shareholders will not necessarily lock-step with the ISS recommendation for the following reasons:

The work required to determine a voting position on frequency is not nearly as intensive as what is required to determine a voting position on Say on Pay, and many institutional investors will be able to determine or develop their own policies without outsourcing to ISS.

There are a number of institutional investors that oppose an annual frequency.

Many institutional investors do not favor a vote frequency that is applied to all companies, regardless of circumstances. Rather, they will evaluate Say When on Pay resolutions on a case-by-case basis after evaluating a company’s rationale for its recommendation.

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Issues Relating to Both Say on Pay and Say When on Pay Votes The SEC’s proposed rules would also provide:

The Say on Pay and Say When on Pay votes would be added to the list of items that would not trigger a preliminary proxy filing.

Brokers would be precluded from voting instructed shares for either a Say on Pay or Say When on Pay vote.

Companies which have received financial assistance under the Troubled Asset Relief Program (TARP) would not conduct a separate Say on Pay vote because they are already required to provide effectively the same vote pursuant to the Emergency Economic Stabilization Act of 2008 (EESA). Also, because EESA requires an annual vote, companies would not be required to conduct the Say When on Pay Vote until they are no longer subject to TARP. TARP companies would be required to include the Say When on Pay vote for the first annual meeting of shareholders after the company has repaid all its outstanding indebtedness under the TARP.

Disclosure of Golden Parachutes and Say on Golden Parachutes New Section 14A(b) of the Exchange Act addresses disclosure and voting requirements if a company is soliciting the approval of an acquisition, merger, consolidation, or proposed sale of all or substantially all of a company’s assets (―Proposed Transaction‖).

Disclosure Section 14A(b)(1) proposes a broad disclosure requirement. All companies making a proxy or consent solicitation seeking shareholder approval of a Proposed Transaction must provide disclosure of any agreements or understandings they have with their named executive officers (NEOs) or with the NEOs of the acquiring issuer concerning compensation, whether present, deferred, or contingent, that is based on or relates to the Proposed Transaction (―Golden Parachute Compensation‖). A target company soliciting shareholder approval of a Proposed Transaction is not required to disclose Golden Parachute Compensation between its NEOs and the acquiring issuer. If the acquiring issuer is making a proxy or consent solicitation, it must disclose Golden Parachute Compensation it has with its NEOs or with the NEOs of the target company. Compensation related to post-transaction agreements is not considered Golden Parachute Compensation.

Disclosure must be in a ―clear and simple form‖ and must include the aggregate total of all compensation that may be paid or become payable to the NEO. Accordingly, the SEC is proposing to add Item 402(t) to Regulation S-K. Item 402(t) would require the disclosure, in both a tabular and narrative format, of all Golden Parachute Compensation relating to the Proposed Transaction among the target and acquiring companies and the NEOs of each. Thus, Item 402(t) requires disclosure of a broader group of Golden Parachute Compensation than is required by Exchange Act 14A(b)(1) as described above.1 In other words, the Item 402(t) disclosure will require the disclosure of arrangements between an acquiring company and the NEOs of the target company. Thus, in cases where the 402(t) disclosure 1 Item 402(t) disclosure would also be required in information statements filed pursuant to Regulation 14C, proxy or

consent solicitations that do not contain merger proposals but require disclosure of information under Item 14 of Schedule 14A, registration statements on Forms S-4 and F-4 containing disclosure relating to mergers and similar transactions, going-private transactions on Schedule 13E-3, and third-party tender offers on Schedule TO and Schedule 14D-9 solicitation/recommendation statements.

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Buyer’s Disclosures

Buyer Target

NEOs NEOs

Red line connotes Golden Parachute Compensation

requiring disclosure and vote

Target’s Disclosures

Buyer Target

NEOs NEOs

Red line connotes Golden Parachute Compensation

requiring disclosure and vote

includes arrangements between an acquiring company and the target company NEOs, a separate table must be provided of the arrangements required to be disclosed under Section 14A(b)(1) and subject to the shareholder advisory vote. The graphic below illustrates the required disclosures:

The format of the proposed table follows:

Name (a)

Cash ($) (b)

Equity ($) (c)



Tax Reimbursement ($) (f)

Other ($) (g)

Total ($) (h)

PEO

PFO

A

B

C The following provides a description of what is required for each column:

Cash—Any cash severance payment (e.g., base salary, bonus, nonequity incentive plan compensation).

Equity—Dollar value of accelerated stock awards, in-the-money option awards for which vesting is accelerated, and payments for cancelled stock or option awards.

Pension/NQDC—Benefit enhancements related to pension or nonqualified deferred compensation.

Perquisites/Benefits—Perquisites and other personal benefits and health and welfare benefits.

Tax Reimbursements—Include 280G tax gross-ups.

Other—Any additional elements of compensation not specifically includable in the other columns.

Total—The aggregate total of the amounts in the preceding columns.

Disclosures and Votes Required

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All of the columns would require footnote identification of each separate form of compensation reported. Also, footnotes would be required to identify amounts attributable to ―single trigger‖ and ―double trigger‖ arrangements.

The narrative disclosure would require companies to describe any material conditions or obligations applicable to the receipt of the Golden Parachute Compensation (e.g., noncompete, nonsolicitation, nondisparagement, or confidentiality agreements, their duration, and provisions regarding waiver or breach). Companies must also disclose the circumstances that would trigger payment, whether the payments are lump-sum or annual and their duration, and any other material factor.

It is important to note that new Item 402(t) (applying only to disclosures related to a Proposed Transaction) differs from the current 402(j) disclosure requirements (applying to regular, annual proxy disclosures) relating to termination and change-in-control payments:

Existing Item 402(j) does not apply to proxies related to Proposed Transactions.

New Item 402(t) only relates to Golden Parachute Compensation whereas Item 402(j) relates to payments in connection with any termination or a change in control.

Existing Item 402(j) does not require a tabular disclosure, does not require disclosure of an aggregate total, and does not require disclosure about arrangements that do not discriminate in scope, terms, or operation in favor of executive officers and that are generally available to all salaried employees. Item 402(j) also permits the exclusion of perquisites or other personal benefits if the aggregate amount of such compensation is less than $10,000.

Exequity Comment: The disclosure requirements are beyond confusing and shareholders will have trouble navigating through the disclosures in Item 402(t) compared to the disclosures that are required under Section 14A(b)(1) and which are the subject of the shareholder vote related to a Proposed Transaction. On top of that, the disclosures in current Item 402(j) will be different still from the Item 402(t) disclosures. Also, one area of continuing debate and discussion has been whether the annual Item 402(j) disclosure should include only the incremental amounts related to the termination event or change in control or the “all in” amount which includes already vested amounts that are reported in other tables. The SEC makes clear in this proposed release that only incremental disclosure is required under Item 402(t). We expect that this will give companies additional comfort in only including incremental disclosure in Item 402(j) disclosures.

Shareholder Vote Section 14A(b)(2) requires a separate, nonbinding shareholder advisory vote on Golden Parachute Compensation in connection with mergers and similar transactions. Companies are not required to use any specific language or form for the resolution. The vote under Section 14A(b)(2) only relates to the disclosures required under Section 14A(b)(1) (i.e., if the target is soliciting shareholder approval, the Golden Parachute Compensation payable between it and its NEOs and the NEOs of the acquiring company, but not the Golden Parachute Compensation that is payable to its NEOs by the acquiring company).

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An exception from the separate shareholder vote requirement is provided if disclosure of the Golden Parachute Compensation had been included in the executive compensation disclosure that was subject to a prior Say on Pay vote. For the exception to be applicable, however, the executive compensation disclosure subject to the Say on Pay vote would need to have included the new Item 402(t) disclosure—the existing Item 402(j) disclosure would not be sufficient. The exception is also only applicable to the extent that the same Golden Parachute Compensation previously subject to a Say on Pay vote remains in effect and the terms have not been modified subsequent to the Say on Pay vote. If the Golden Parachute Compensation has been modified or new arrangements are entered into, only the new or modified arrangements would be subject to the Say on Golden Parachute vote. In this instance, two tables would be provided, the first table would disclose all Golden Parachute Compensation (i.e., the table previously disclosed and subject to the Say on Pay vote modified to include the new or revised arrangements) and a second table would only disclose the new or revised arrangements.

Exequity Comment: Although the new Item 402(t) disclosure is broader than what is required under existing Item 402(j), most companies already include a tabular disclosure and provide an aggregate total in their Item 402(j) disclosure (even though it is not required). To include de minimis perquisites or benefits or nondiscriminatory benefits will likely not be viewed as onerous. Accordingly, we expect some companies to opt to include the new Item 402(t) disclosure in their proxies that are subject to the Say on Pay vote, simply because it is not that difficult to do so and they might be able to avoid separate disclosure if there is a Proposed Transaction. However, how often companies will be able to utilize the exception when it comes time to vote on a Proposed Transaction remains to be seen (since many companies will have either modified or introduced new compensation arrangements since the most recent Say on Pay vote).

Transition Matters As discussed, the SEC’s rules are proposed and unlikely to be finalized by the time some companies are required to issue their proxies. The SEC stated, however, that if the annual meeting takes place on or after January 21, 2011, any proxy statement relating to the annual meeting must include the Say on Pay and Say When on Pay separate resolutions regardless of whether rules are finalized.

To facilitate compliance with the new statute, the SEC is addressing the following first-year transition issues:

A preliminary proxy statement will not be required.

The form of proxy for a Say When on Pay vote may provide the choice between 1, 2, 3 years, or abstain by boxes using a single proxy ballot. If proxy service providers cannot reprogram their systems to allow for a vote among four choices, the proxy may offer a choice between 1, 2, or 3 years and proxies are not voted on the frequency if one of those choices is not selected.

TARP participants do not need to include a Say When on Pay vote.

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If you have any questions about this Client Alert, please contact Robbi Fox ((847) 948-8655 or [email protected]) or any of the following:

Mark Gordon (925) 478-8294 [email protected] Edward Hauder (847) 996-3990 [email protected]

Jeff Hyman (203) 210-7046 [email protected] Lynn Joy

Stacey Joy (847) 996-3963 (847) 996-3969

[email protected] [email protected]

Chad Mitchell (949) 748-6169 [email protected] Perry Papantonis (908) 849-4858 [email protected]

Jeff Pullen (847) 996-3967 [email protected] Dianna Purcell (908) 849-4878 [email protected]

Bob Reilley (908) 849-4857 [email protected] Dmitry Shmoys (949) 748-6132 [email protected] Mike Sorensen (847) 996-3996 [email protected] Jim Woodrum (847) 996-3971 [email protected]

Ross Zimmerman (847) 996-3999 [email protected]




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PUB/CA/Proposed Rules-Dodd Frank Implementation


















EXEQUITY


Management Advisors

The Impact of Dodd-Frank on Executive Compensation

September 10, 2010

Contents

Introduction ................................................................................................................................ 1

Say on Pay Provisions ............................................................................................................... 2

Golden Parachute Votes ............................................................................................................ 4

Compensation Committee Independence .................................................................................. 6

Independence of Compensation Consultants and Other Compensation Committee Advisers .... 7

Executive Compensation Disclosures ........................................................................................ 9

Clawback Provision—Recovery of Erroneously Awarded Compensation Policy ........................11

Disclosure Regarding Employee and Director Hedging .............................................................13

Enhanced Compensation Structure Reporting for Financial Companies ...................................14

Voting by Brokers ......................................................................................................................16

Corporate Governance ..............................................................................................................17

Conclusion ................................................................................................................................19


P a g e | 1

Introduction

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) was signed into law by President Obama on July 21, 2010. Dodd-Frank has several provisions that impact executive compensation, including requirements for:

A nonbinding shareholder vote on the compensation of executives as disclosed in the proxy (―say on pay vote‖) at least once every 3 years.

A nonbinding shareholder vote on the frequency of the say on pay vote at least once every 6 years.

A nonbinding shareholder vote on golden parachutes.

Most public companies to have only independent directors on their compensation committees.

Most public companies’ compensation committees to utilize only independent compensation consultants and other advisers.

Most compensation committees to be given authority to retain a compensation consultant and independent legal counsel and other advisers, including fiscal authority.

Companies to disclose more information about executive compensation, including:

Enhanced disclosure of pay versus performance;

Disclosure of median annual total compensation of all employees;

Disclosure of CEO’s annual total compensation; and

Disclosure of the ratio of median annual total compensation of all employees to that of the CEO.

Public companies to implement a clawback policy.

Companies to disclose their policy with respect to executive and director hedging of company equity securities.

Making covered financial institutions subject to enhanced compensation structure reporting and prohibitions.

Eliminating broker votes on director elections, executive compensation, or any other significant matter, as determined by the Securities and Exchange Commission (SEC), for uninstructed shares held by beneficial owners.


P a g e | 2

Say on Pay Provisions

The Dodd-Frank Act has several requirements with respect to say on pay:

Separate shareholder vote in proxy at least once every 3 years to approve the compensation of executives as disclosed in the proxy (CD&A, tabular and narrative disclosures), i.e., ―say on pay.‖

Separate shareholder vote in proxy at least once every 6 years to determine whether shareholder vote on compensation will occur every 1, 2, or 3 years.

Both the shareholder say on pay vote and the say on pay frequency vote are not binding on the company or the company’s board of directors.

Effective for shareholder meetings occurring more than 6 months after Dodd-Frank is enacted.

Institutional shareholders will be required to disclose their votes on say on pay and say on pay frequency.

Issues/Concerns Companies will need to present both of the above shareholder votes in their first proxy filed more than 6 months after the enactment of Dodd-Frank.

2011 will be a banner year for management say on pay proposals.

As currently written, requires say on pay vote next year even if previously agreed to biennial or triennial votes and otherwise not scheduled next year.

Both the actual say on pay vote and the frequency vote are not binding. Theoretically, companies can decide on the frequency they’d like to utilize. Practically, if a company chooses a frequency other than what shareholders vote for, could be in for some shareholder attention. Similarly, ignoring a negative say on pay vote is likely to cause greater shareholder scrutiny/action.

Likely to increase the influence of proxy advisory firms less than if annual say on pay votes had been mandated, but that might be a moot point if majority practice remains providing an annual say on pay vote.

Say on pay vote is on historic pay that is disclosed in the proxy, not necessarily on the compensation plans and programs for the upcoming year as is the case in the U.K.

Say on pay vote likely to become a ―check-the-box‖ exercise in compliance.


P a g e | 3

Action Items Create say on pay stakeholder team.

Determine how your compensation plan, design, and program compare to your institutional shareholders’ guidelines.

Review the 2010 (2011, if available) policies of your institutional shareholders.

Start reaching out to your shareholders to find out what they think of current compensation design and identify any ―hot button‖ issues that could impact their vote on say on pay.

Review past recommendations from ISS, Glass Lewis, and others regarding companies in your peer group.

Determine your say on pay philosophy and approach:

Aggressive Approach:

– Noticeable move to more performance-based pay.

– Move to annual shareholder votes.

Passive Approach:

– Wait for others in your peer group to announce their position.

– Push for vote triennially.


P a g e | 4

Golden Parachute Votes

The Dodd-Frank Act requires:

In any proxy for a meeting where shareholders will be asked to approve an acquisition, merger, consolidation, or proposed sale or other disposition of all or substantially all the assets of an issuer (CIC), the following must be disclosed and a separate, nonbinding shareholder vote must be held to approve:

Any agreements or understandings with named executive officers concerning any type of compensation that is based on or otherwise relates to the acquisition, merger, consolidation, sale, or other disposition of all or substantially all the assets of the issuer (―CIC Compensation‖); and

The aggregate total of all such compensation that may (and the conditions upon which it may) be paid or become payable to or on behalf of such executive officer.

Effective for shareholder meetings occurring more than 6 months after Dodd-Frank is enacted.

This vote is not required if agreements or understandings were previously subject to a say on pay vote.

Issues/Concerns Broad definition of CIC Compensation; seems to include vesting of prior awards like IRC Section 280G. Thus, disclosure and vote seems expansive.

The rules specifically provide that no vote is necessary if previously approved in say on pay vote. If no design changes occur, will a prior vote eliminate need to have vote in merger proxy? Can the ―aggregate total‖ be adequately disclosed and approved in a prior proxy?

How (if at all) will this relate to the termination disclosures for named executive officers in proxies? Will this change the current form of disclosure, either by rule or practice?

What happens if the board has authorized CIC Compensation and contractually bound the company but shareholders don’t agree? The shareholder vote is nonbinding—what will the practical consequence be? Can or will companies guard against such a scenario, e.g., will contracts contain shareholder approval contingency clauses?


P a g e | 5

Action Items Review CIC provisions in all compensation programs and ensure that they represent your current philosophy.

Determine go-forward philosophy in regard to golden parachutes.

Determine current golden parachute liability assuming a CIC event in the next 12 months; use different deal price assumptions to get a feel for the sensitivity of your golden parachutes to the deal price.

Determine Top 5 NEO golden parachute liability as a percentage of deal price and premium over current and 200-day average stock price.

Do the same calculations for your peers.


P a g e | 6

Compensation Committee Independence

Companies will not be permitted to be publicly listed unless their compensation committees are composed entirely of independent directors.

Definition of ―independence‖ will be issued by the national securities exchanges and associations, taking into consideration relevant factors, including:

The source of compensation of a director, including any consulting, advisory, or other compensatory fee paid by the company to such director; and

Whether the director is affiliated with the company, a subsidiary, or an affiliate of a subsidiary.

The SEC shall permit national securities exchanges and associations to exempt a particular relationship from the above requirements, taking into consideration the size of the company and any other relevant factors.

Issues/Concerns We expect the definition of independence to be largely the existing definitions used by the national securities exchanges and associations for audit committee members, tailored to members of the compensation committee.

This requirement will put a final nail in the coffin of having nonindependent directors sit on a compensation committee (which is now only a minority practice).

Action Items Review independence standard for audit committee members.

Review how the audit committee independence standards might apply to your current compensation committee members.

Review independence of compensation committee members and adjust as needed.

Move to switch out non-independent directors before next applicable proxy period.


P a g e | 7

Independence of Compensation Consultants and Other Compensation Committee Advisers

Compensation committees of public companies may only select a compensation consultant, legal counsel, or other adviser (―advisers‖) after taking into consideration the factors identified by the SEC.

The SEC must identify factors that affect the independence of an adviser.

Such factors shall be competitively neutral among categories of advisers and preserve the ability of compensation committees to retain the services of members of any such category, and shall include:

– The provisions of other services to the company by the person that employs the adviser;

– The amount of fees received from the company by the person that employs the adviser, as a percentage of the total revenue of the person that employs the adviser;

– The policies and procedures of the person that employs the adviser that are designed to prevent conflicts of interest;

– Any business or personal relationship of the adviser with a member of the compensation committee; and

– Any stock of the company owned by the adviser.

The compensation committee, at its discretion, may retain the services of an adviser. However, this does not:

Require the compensation committee to implement or act consistently with the advice or recommendations of the adviser; or

Affect the ability or obligation of a compensation committee to exercise its own judgment in fulfillment of the duties of the compensation committee.

Required disclosures—for any shareholder meeting occurring on or after the 1-year anniversary of the date of enactment of Dodd-Frank (i.e., July 21, 2011), public companies will be required to disclose in their proxies whether:

The compensation committee retained or obtained the advice of a compensation consultant; and

The work of the compensation consultant has raised any conflict of interest and, if so, the nature of the conflict and how it is being addressed.

Companies that fail to comply with the requirements of this section of Dodd-Frank will be prohibited from being publicly listed; those failing to comply will be given a ―reasonable opportunity to cure any defects‖ before their listing is prohibited.


P a g e | 8

The SEC will permit the national securities exchanges and associations to exempt a category of issuers from the compensation committee independence and independent adviser requirements.

Shall take into account the potential impact on smaller reporting companies.

Controlled companies shall be exempt from these requirements.

– Controlled company is a company that is listed on a national securities exchange or association and holds an election for the board of directors in which more than 50% of the voting power is held by an individual, a group, or another company.

The SEC must conduct a study and review of the use of compensation consultants and the effects of such use and submit a report to Congress within 2 years after enactment of Dodd-Frank on the results of such study and review.

Issues/Concerns The language does permit compensation committees to engage any adviser they like so long as they at least consider the factors to be promulgated by the SEC.

However, consistent with current trends, these requirements will likely persuade a majority of companies to engage independent advisers to advise their compensation committees.

Unclear just how the factors mentioned in Dodd-Frank will be applied by the SEC.

The SEC regulations are unlikely to outright prohibit the consultant from providing any other services to the company, but this may in practice become a compensation committee requirement. Note, this also applies to other advisers such as legal counsel; this could result in committees engaging different legal counsel than the counsel involved in other corporate matters.

Action Items Determine what independence standard the compensation committee will apply to its advisers.

Create a list of qualified compensation consultants who do not provide any other services to the company.

Review current compensation consultants for independence as related to the new rules.

Review with your compensation committee possible advisers that may suit their needs.

Determine whether the compensation committee wants to change any of its advisers as a result of reviewing their independence.

Review the independence factors to be issued by the SEC.


P a g e | 9

Executive Compensation Disclosures

Pay vs. Performance—The SEC must require each company to disclose in any proxy for an annual meeting a clear description of any compensation required to be disclosed under the proxy disclosure rules, including:

Information that shows the relationship between executive compensation actually paid and the financial performance of the company, taking into account any change in the value of shares of stock and dividends and any distributions; this disclosure may include a graphic.

Additional Disclosures—The SEC shall require companies to disclose in any filing which requires disclosure regarding the compensation of a company’s named executive officers:

The median of the annual total compensation of all employees, except the CEO (Median Employee Annual Compensation);

The annual total compensation of the CEO (CEO Annual Compensation); and

The ratio of the Median Employee Annual Compensation to the CEO Annual Compensation.

– Total compensation is defined as it is for purposes of the Total Compensation column in the Summary Compensation Table.

Issues/Concerns Determining the Median Employee Annual Compensation will take a significant amount of work for companies with large employee bases and/or operations in multiple countries. For example, total compensation includes annual pension increases which can significantly increase the disclosure burden.

Since ratios will almost always be a sizeable multiple, it is likely to spark shareholder ire where company performance is subpar. Note, again, that this ratio is done largely based on pay opportunity rather than actual pay realized, particularly with respect to equity incentives.

This pay ratio concept has historically been used to compare executive pay across various countries. However, it is unlikely to guide future pay decisions or allow for solid comparisons across companies. For example, outsourcing decisions can have a material impact on the calculation.


P a g e | 10

Action Items As part of say on pay review and philosophy, document relationship between pay and performance.

Consider whether a historical look at pay versus performance of your company and its peers would assist the development of disclosure and/or message to shareholders.

Consider utilizing Exequity’s Return on Executives (ROX) methodology.

Determine the tools, time, and budget required to calculate employee annual compensation in the same manner as required for the Summary Compensation Table (SCT).

Determine current ratio of CEO pay to employee pay.

Determine if any other pay ratios should be considered for disclosure purposes, i.e., CEO to other NEOs, CEO as a percent of total compensation expense, CEO’s W-2 compensation to all employee W-2 compensation, CEO W-2 compensation to average W-2 compensation per employee.

Address any possible communication issues for employees of companies who report total rewards or total compensation to employees in a manner different than required by the SCT.

Review peer group ratios, using compensation survey data as a guideline.

Evaluate if your ratio is ―media worthy‖—will news outlets report on your ratio as a positive or negative?


P a g e | 11

Clawback Provision—Recovery of Erroneously Awarded Compensation Policy

Public companies can only be listed if they comply with the following requirements:

Each company shall:

– Disclose its policy on incentive-based compensation that is based on financial information required to be reported under the securities laws; and

– In the event that the company is required to prepare an accounting restatement due to the material noncompliance of the company with any financial reporting requirement under the securities laws, recover from any current or former executive officer who received incentive-based compensation (including stock options awarded as compensation) during the 3-year period preceding the date on which the company is required to prepare an accounting restatement, based on the erroneous data, in excess of what would have been paid to the executive officer under the accounting restatement.

Issues/Concerns How will compensation that is based on or related to the movement in the company’s stock price be treated under this required clawback policy? In other words, with respect to such awards, how can a company determine what ―excess amount‖ was paid if the stock price reflected the market’s understanding of the financial reporting information that was restated?

Will shareholders have the right to bring a derivative action under this provision if a company does not?

How will this clawback provision interact with any mandatory holding periods a company has imposed on company securities received by executives or directors, especially where the amounts held relate to a period prior to the 3-year period prior to any required restatement?

Can the ―appropriate‖ clawback amount be defined or must this by its nature require significant discretion?

How will other legal challenges be addressed (e.g., wage laws), if at all?


P a g e | 12

Action Items Evaluate your current philosophy on clawback provisions:

Can your current position be communicated as supporting the new regulations?

If not, what changes must be made to comply?

Determine if those changes can be made (some may require significant legal work or plan redesign).

If you currently have clawback provisions:

Review your clawbacks to determine any necessary changes.

Set out a plan to get necessary changes implemented so your clawbacks comply with the new requirements.


P a g e | 13

Disclosure Regarding Employee and Director Hedging

The SEC shall require companies to disclose in any proxy for an annual meeting whether any employee or member of the board of directors, or any designee of such employee or director, is permitted to purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) that are designed to hedge or offset any decrease in the market value of equity securities:

Granted to the employee or director by the company as part of his compensation; or

Held, directly or indirectly, by the employee or director.

Issues/Concerns Given the Section 16 insider trading rules, hedging activities by officers and directors were not prevalent practice.

However, this will cause companies to formalize an anti-hedging policy (if they have not already done so) and apply the policy to all employees.

To the extent any employee or director is hedging, and the company is concerned about disclosing such transactions, they may wish to undo these transactions prior to the filing of their next proxy.

Action Items Review current hedging positions with all executives, directors, and employees.

Evaluate the disclosure requirements for each individual’s current transactions.

Determine the modifications, if any, that each individual must make.

Define a clear anti-hedging policy as part of your insider trading policy.

Create a communication program explaining the variants of hedging and how your anti-hedging policy works.


P a g e | 14

Enhanced Compensation Structure Reporting for Financial Companies

Covered financial institutions will be subject to new rules and regulations to be promulgated by the appropriate Federal regulators within 9 months after enactment of Dodd-Frank.

These regulations will require each covered financial institution to disclose to the appropriate Federal regulator the structures of all incentive-based compensation arrangements offered by such covered financial institutions sufficient to determine whether the compensation structure:

Provides an executive officer, employee, director, or principal shareholder with excessive compensation, fees, or benefits; or

Could lead to material financial loss to the covered financial institution.

Covered financial institutions with less than $1 billion of assets will be exempt from these requirements.

Issues/Concerns Based on the review conducted by the Federal Reserve of large, complex banking organizations, it is safe to assume that the appropriate Federal regulators will be looking to make significant changes with respect to compensation, including requiring:

Mandatory holding periods;

A significant portion of compensation to be deferred; and

Introducing an absolute metric governing payouts of any performance-based compensation subject to relative performance measures, e.g., relative total shareholder returns.

We believe compensation at covered financial institutions will be transformed as a result of this provision and the Federal Reserve’s recent review. It remains to be seen how compensation programs will be changed and the impact this may have on financial institutions’ ability to attract, motivate, and retain key talent.


P a g e | 15

Action Items If you are not a financial company, disregard for now, but keep an eye on this so you know what some shareholders might ask you to adopt if the changes are viewed as beneficial by shareholders

If you are a covered financial company with more than $1 billion in assets:

– Start evaluating your compensation programs now.

– Determine how you will communicate the structure of these arrangements to determine:

Possibility of providing excessive compensation fees or benefits; and

Risk profile and association with possible material loss to the company.

– Prepare initial approach to modifications such as:

Mandatory holding periods;

A significant portion of compensation to be deferred; and

Introducing an absolute metric governing payouts of any performance-based compensation subject to relative performance measures, e.g., relative total shareholder returns.


P a g e | 16

Voting by Brokers

Dodd-Frank prohibits brokers from voting securities unless the beneficial owner has instructed the broker how to vote the proxy on the following matters:

Election of directors;

Executive compensation; or

Any other significant matter, as determined by the SEC.

But does not include the uncontested election of directors of any investment company.

Dodd-Frank specifically does not prohibit a national securities exchange from promulgating rules that would expand the list of such matters regarding which brokers are prohibited from voting without instructions from the beneficial owner.

Issues/Concerns This provision will apply to the new mandatory say on pay votes regarding executive compensation, which will have a negative impact on vote outcomes and likely will force companies to evaluate whether a proxy solicitation campaign targeted at retail beneficial owners is warranted.

Likely will increase the influence of proxy advisory firms as the broker votes are not counted on the above issues.

Action Items Evaluate employee equity compensation accounts to determine if the individuals can and do vote their shares.

If you have a strong employee ownership culture, take the time to create a communication program that explains the importance of employee voting.

Determine the potential need for a proxy solicitation campaign, based on the likelihood of un-voteable, broker-held shares.


P a g e | 17

Corporate Governance

Proxy access

Requires: (1) companies to include a shareholder nominee to serve on the board of directors, and (2) companies to follow a certain procedure with respect to the solicitation of proxies.

– The SEC may issue rules permitting shareholders to use proxy solicitation materials supplied by an issuer for the purpose of nominating directors, under such terms and conditions as the SEC determines are ―in the interests of shareholders and for the protection of investors.‖

– The SEC may exempt an issuer or class of issuers from these requirements, taking into account whether the requirement disproportionately burdens small issuers.

The SEC quickly acted on proxy access and adopted proposed rules on August 25, 2010. The highlights for the proposal are:

– Shareholders (or a group of shareholder) who hold 3% of a company’s outstanding shares, and have held them for three (3) years continuously may nominate, and include in the company’s proxy, up to 25% of the board or one (1) director, whichever is greater.

– In determining whether a shareholder or group has continuously held 3% of voting and economic ownership of the shares, loaned shares will be counted, borrowed shares will not be counted, and shares sold short will not be counted.

– Companies can use the no-action process to exclude nominees if they believe a nominee or nominating shareholder does not satisfy the requirements.

– Only shareholders who have disclaimed any intent to change control or to gain a number of seats greater than that allowed under the rule will be allowed to nominate director(s).

– Companies cannot opt out of the rule.

– Other changes and rules regarding application of these new provisions were also adopted.

Disclosures regarding chairman and CEO:

Not later than 180 days after enactment of the Dodd-Frank Act, the SEC shall issue rules that require issuers to disclose in their annual proxy sent to investors the reasons why the issuer has chosen:

– The same person to serve as chairman of the board and CEO; or

– Different individuals to serve as chairman of the board and CEO.


P a g e | 18

Issues/Concerns Will proxy access be subject to a court challenge? If so, this could create some ambiguity until a final determination is made.

As for the disclosures regarding chairman and CEO, public companies were already subject to similar requirements imposed by the SEC in its December 2009 proxy disclosure amendments. So as a practical matter, these requirements don’t add anything substantially new to companies’ disclosures.

Action Items Analyze how the proposed Proxy Access rules could impact your company, e.g., are there any shareholders or groups that satisfy the 3% and 3-year requirements?

Draft the rationale for your company having the Chairman/CEO structure it has:

Why was this structure selected?

What does it enable the company to do?

How does this structure impact your company’s corporate governance?

Does this structure increase or decrease your company’s risk profile?

Did you consider alternatives?

– If so, why were they not selected?

How often does the company review its Chairman/CEO structure?


P a g e | 19

Conclusion

Dodd-Frank has many requirements that will directly and indirectly impact executive compensation at U.S. public companies. To what extent we will not know fully until after all companies have lived through a proxy season or two under these new requirements. At the very least, things will be different. Whether that difference will be an overall positive or negative experience remains to be seen. Additionally, there could be unintended consequences from the Dodd-Frank requirements that impact executive compensation which only reveal themselves after a much longer period. Hopefully legislators will be receptive to comments from public companies and commentators about some of the less desirable aspects of the Dodd-Frank requirements such as the ratio of the median employee compensation to the CEO’s compensation, and then act to make appropriate changes to ensure that public company shareholders receive a true benefit from the Dodd-Frank requirements.

If you have any questions about this summary, please contact Ed Hauder at (847) 996-3990 or [email protected].

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