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22001144 Executive Compensation Policies:

Stock Ownership Guidelines & Holding Requirements

Anti-Hedging & Anti-Pledging Policies

Clawbacks

TABLE OF CONTENTS

Executive Summary ................................................................................................................................ 1

Introduction ............................................................................................................................................. 2

Overview of the ClearBridge 100 .................................................................................................... 2

Analysis Scope and Methodology ................................................................................................. 2

Definitions ............................................................................................................................................... 3

Executive Stock Ownership Guidelines and Holding Requirements .................................................. 4

Anti-Hedging and Anti-Pledging Policies .............................................................................................. 9

Clawback Policies ................................................................................................................................. 11

ClearBridge 100 Companies ................................................................................................................ 14

About ClearBridge ................................................................................................................................ 20

1

EXECUTIVE SUMMARY

This ClearBridge 100 Report presents findings on various executive compensation policies, including stock

ownership guidelines and holding requirements, anti-hedging and anti-pledging policies, and compensation

recovery (or “clawback”) policies among the “ClearBridge 100”. The ClearBridge 100 is comprised of 100 S&P

500® companies to provide a database representative of compensation practices and trends across the broad US

market.

These compensation policies have become increasingly important tools as part of the overall executive

compensation program to further enhance executives’ alignment with shareholders and encourage appropriate

behaviors. In addition, these policies, which reflect strong governance practices, are often a focal point for many

investors and proxy advisory firms as they evaluate a company’s compensation program.

Key Findings

Key findings from this ClearBridge 100 Report include:

Executive Stock Ownership Guidelines and Holding Requirements

96% of companies have stock ownership guidelines

Stock ownership guidelines are typically expressed as a multiple of salary. CEOs’ multiple at median is 5x

salary and other NEOs’ multiple at median is 3x salary

Companies have a slight preference for having a combination of stock ownership guidelines and holding

requirements (50%) as opposed to only stock ownership guidelines (46%)

Of companies that have holding requirements, most (81%) require stock to be held until the stock

ownership guidelines are met

Anti-Hedging and Anti-Pledging Policies

92% of companies disclose having an anti-hedging policy and 69% of companies disclose an anti-pledging

policy, representing an increase in disclosure over the prior year (vs. 87% and 56%, respectively, in 2013)

Clawback Policies

91% of companies disclose having clawback policies

The three most prevalent factors that trigger a clawback policy are if the executive is at fault for financial

restatements (57%), fraud/willful misconduct (47%) and any financial restatement (45%)

Clawbacks most typically apply to cash (92%), vested equity (92%) and unvested equity (87%)

The following pages present the detailed analyses underlying these key findings.

Standard & Poor's S&P 500®

Index is a registered trademark of Standard & Poor's, a division of the McGraw-Hill Companies Inc

2

INTRODUCTION

Overview of the ClearBridge 100

The ClearBridge 100 consists of 100 companies in the S&P 500® Index, selected to roughly approximate

the industry composition and size of the S&P 500® in order to provide a representation of the broad US market.

See the “ClearBridge 100 Companies” section of this report for a list of the companies included in the analysis.

Characteristics of ClearBridge 100

FY2013 Revenue

($ Millions)

Market Value as of 12/31/2013

($ Millions)

75th

Percentile $22,665 $59,597

Median $10,748 $25,231

25th

Percentile $5,211 $12,239

ClearBridge 100 Industry Composition

Analysis Scope and Methodology

This report analyzes executive stock ownership guidelines, holding requirements, anti-hedging policies and

anti-pledging policies, and compensation clawback policies, as disclosed in 2013 and 2014 proxy statements for

each of the ClearBridge 100 companies. The results have been aggregated in this report to provide a broad-

market view of practices and trends.

Design features in this report are either expressed as a percentage of ClearBridge 100 companies in total,

or as a percentage of companies with a particular type of practice. In certain charts and tables, totals may not add

up to 100% due to companies that incorporate more than one form of practice.

16%

9%

8%

16% 11%

11%

15%

6% 2%

6% Consumer Discretionary

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Technology

Materials

Telecommunication Services

Utilities

3

DEFINITIONS

This section provides definitions for terms used throughout this report.

Stock Ownership Guidelines are requirements for executives to own a specific number or value of shares

Holding Requirements are requirements for executives to retain a certain amount or percentage of vested

shares

Anti-pledging policies disallow executives from using compensation as collateral

Anti-hedging policies restrict executives from using compensation to hedge against company stock

Clawback policies allow companies to recoup compensation in connection with certain events

EXECUTIVE STOCK OWNERSHIP GUIDELINES

AND

HOLDING REQUIREMENTS

5

EXECUTIVE STOCK OWNERSHIP GUIDELINES AND HOLDING REQUIREMENTS

Executive Stock Ownership Guidelines and Holding Requirements

Prevalence of Executive Stock Ownership Guidelines and Holding Requirements

The prevalence of executive stock ownership guidelines has increased slightly from 2013 to 2014 (94% to

96%). Holding requirements have also increased in prevalence from 46% to 52%.

Companies are steadily moving towards having a combination of stock ownership guidelines and holding

requirements from just having stock ownership guidelines. In 2013, 51% of companies had stock ownership

guidelines only, while 43% of companies had both stock ownership guidelines and holding requirements. In 2014,

half of companies (50%) had both stock ownership guidelines and holding requirements, while 46% had stock

ownership guidelines only.

43%50%

51%

46%

3% 2%1% 1%

2013 2014

ClearBridge 100 Stock Ownership Policy Prevalence

Neither

Holding Requirements Only

Ownership Guidelines Only

Ownership Guidelines and Holding Requirements

94% 96%

2013 2014

Prevalence of Stock Ownership Guidelines

46%52%

2013 2014

Prevalence of Holding Requirements

6

EXECUTIVE STOCK OWNERSHIP GUIDELINES AND HOLDING REQUIREMENTS

Stock Ownership Guidelines Design

The most typical way to express stock ownership guidelines is as a multiple of salary (85% of companies

with stock ownership guidelines). 13% of companies with stock ownership guidelines express the guideline as a

number of shares, while 2% express the guideline as the lesser of a multiple of salary or number of shares in terms

of value.

Of companies that express the guideline as a multiple of salary, the most typical CEO stock ownership

guideline is 5x or 6x. For other NEOs, guidelines range from 1x to 5x, the most typical being 3x.

7%

37%

45%

11%

3x-4x

5x

6x

7x-10x

CEO Stock Ownership Guidelines: Multiple of Salary Prevalence

84%

14%

2%

85%

13%

2%

Multiple of Salary Number of Shares Lesser of Multiple of Salary or Number of Shares

Ownership Guideline Design Prevalence

2013 (n=94)

2014 (n=96)

7

EXECUTIVE STOCK OWNERSHIP GUIDELINES AND HOLDING REQUIREMENTS

Most companies (99%) count direct shares held towards meeting stock ownership guidelines. 401(k)

shares and unvested restricted stock and restricted stock units are also commonly included in stock ownership

guidelines (58% and 44%, respectively).

The most common timeframe required to achieve stock ownership guidelines is 5 years (83% of

companies).

6%

8%

83%

3%

Required Timeframe to Achieve

Stock Ownership Guidelines (n=72)

Holding Period in lieu of Requirement

<5 Years

5 Years

>5 Years

5%

6%

10%

44%

58%

99%

Deferred Shares

Unvested Options

Unvested Performance Shares

Unvested RS/RSUs

401(K) Shares

Direct Shares Held

Type of Stock Counting Towards Ownership Guidelines (n=84)

8

EXECUTIVE STOCK OWNERSHIP GUIDELINES AND HOLDING REQUIREMENTS

Holding Requirements Design

Of companies with holding requirements, most (81%) require executives to hold all or a portion of vested

and/or exercised shares, net of taxes, until stock ownership guidelines are met.

The majority of companies (85%) require at least 50% of net shares to be held for the specified time period.

(1) Company requirements typically one year post retirement (2) Company requirements range from 1 to 10 years

Timeframe to Hold

% of Cos. with

Requirement

Until SOG is met 81%

Post-retirement(1) 8%

Fixed Number of Years(2) 8%

Until retirement 3%

2014 Holding Requirement Policy Design (n=52)

8%

8%

25%

23%

37%

% of Net Shares

Required to be

Held

(n=52)

25% of net shares

~33% of net shares

50% of net shares

75% of net shares

100% of net shares

ANTI-HEDGING AND ANTI-PLEDGING POLICIES

10

ANTI-HEDGING AND ANTI-PLEDGING POLICIES

Anti-Hedging and Anti-Pledging Policies

92% of CB100 companies disclosed an anti-hedging policy in 2014, representing a modest increase from

87% in 2013. In comparison, 69% of companies disclosed an anti-pledging policy in 2014, representing a more

meaningful increase from 56% in 2013.

87%

92%

2013 2014

Disclosure of Anti-Hedging Policies (n=100)

56%

69%

2013 2014

Disclosure of Anti-Pledging Policies (n=100)

CLAWBACK POLICIES

12

CLAWBACK POLICIES

Clawback Policies

91% of companies disclosed a clawback policy in 2014 which is a slight increase from 2013 (87%). Among

companies that had a clawback policy in 2014, 93% had the clawback policy apply to current named executive

officers (“NEOs”), while 24% had the policy apply to other employees and 8% applied to former NEOs.

The main trigger for a clawback policy is if the executive is at fault for a financial restatement (57%),

fraud/willful misconduct (47%) and any financial restatement regardless of fault (45%). Less prevalent triggers are

executive misbehavior (21%) and non-compete/confidentiality (16%).

93%

26%

7%

93%

24%

8%

Current NEOs Other Current Employees Former NEOs

Executives Covered by Clawback Policy

2013 (n=86)

2014 (n=91)

17%

20%

43%

47%

55%

16%

21%

45%

47%

57%

Non-Compete/Conf identiality

Executive Misbehavior

Any Financial Restatement

Fraud or Willful Misconduct

At Fault for Financial Restatement

Prevalence of Clawback Policy Triggers

2014 (n=91)

2013 (n=86)

13

CLAWBACK POLICIES

Cash, vested equity and unvested equity are largely covered under companies’ clawback policies.

92% 91%

86%

92% 92%

87%

Cash Vested Equity Unvested Equity

Vehicles to be recovered under Clawback Policy

2013 (n=86)

2014 (n=91)

CLEARBRIDGE 100 COMPANIES

16

CLEARBRIDGE 100 COMPANIES

Company Industry

ACTAVIS PLC Health Care

ADOBE SYSTEMS INC Information Technology

AETNA INC Health Care

AGL RESOURCES INC Utilities

AKAMAI TECHNOLOGIES INC Information Technology

AMAZON.COM INC Consumer Discretionary

AMERICAN EXPRESS CO Financials

AMGEN INC Health Care

ANADARKO PETROLEUM CORP Energy

AON PLC Financials

AT&T INC Telecommunication Services

AVON PRODUCTS Consumer Staples

BAKER HUGHES INC Energy

BALL CORP Materials

BANK OF NEW YORK MELLON CORP Financials

BARD (C.R.) INC Health Care

BB&T CORP Financials

BIOGEN IDEC INC Health Care

BLACKROCK INC Financials

BORGWARNER INC Consumer Discretionary

BOSTON PROPERTIES INC Financials

BOSTON SCIENTIFIC CORP Health Care

BRISTOL-MYERS SQUIBB CO Health Care

CBRE GROUP INC Financials

CHUBB CORP Financials

CINCINNATI FINANCIAL CORP Financials

COCA-COLA CO Consumer Staples

COLGATE-PALMOLIVE CO Consumer Staples

CONSOL ENERGY INC Energy

CONSOLIDATED EDISON INC Utilities

CORNING INC Information Technology

CVS CAREMARK CORP Consumer Staples

DANAHER CORP Industrials

DENBURY RESOURCES INC Energy

DISCOVERY COMMUNICATIONS INC Consumer Discretionary

DOMINION RESOURCES INC Utilities

17

CLEARBRIDGE 100 COMPANIES

Company Industry

DOW CHEMICAL Materials

EATON CORP PLC Industrials

EBAY INC Information Technology

ECOLAB INC Materials

EMC CORP/MA Information Technology

EQUIFAX INC Industrials

EXELON CORP Utilities

EXXON MOBIL CORP Energy

FIRST HORIZON NATIONAL CORP Financials

FMC TECHNOLOGIES INC Energy

FOSSIL GROUP INC Consumer Discretionary

FRONTIER COMMUNICATIONS CORP Telecommunication Services

GENERAL ELECTRIC CO Industrials

GOLDMAN SACHS GROUP INC Financials

GOOGLE INC Information Technology

HARLEY-DAVIDSON INC Consumer Discretionary

HERSHEY CO Consumer Staples

HESS CORP Energy

ILLINOIS TOOL WORKS Industrials

INTEL CORP Information Technology

INTL BUSINESS MACHINES CORP Information Technology

JPMORGAN CHASE & CO Financials

JUNIPER NETWORKS INC Information Technology

KELLOGG CO Consumer Staples

KRAFT FOODS GROUP INC Consumer Staples

L BRANDS INC Consumer Discretionary

M & T BANK CORP Financials

MASCO CORP Industrials

MATTEL INC Consumer Discretionary

MCDONALD'S CORP Consumer Discretionary

MEADWESTVACO CORP Materials

MERCK & CO Health Care

MOODY'S CORP Financials

MOTOROLA SOLUTIONS INC Information Technology

MYLAN INC Health Care

NASDAQ OMX GROUP INC Financials

18

CLEARBRIDGE 100 COMPANIES

Company Industry

NEWELL RUBBERMAID INC Consumer Discretionary

NEWMONT MINING CORP Materials

NISOURCE INC Utilities

NVIDIA CORP Information Technology

PACCAR INC Industrials

PENTAIR LTD Industrials

PEPSICO INC Consumer Staples

PFIZER INC Health Care

PIONEER NATURAL RESOURCES CO Energy

PPL CORP Utilities

PRICELINE.COM INC Consumer Discretionary

QUANTA SERVICES INC Industrials

QUEST DIAGNOSTICS INC Health Care

SCHWAB (CHARLES) CORP Financials

SHERWIN-WILLIAMS CO Materials

STARWOOD HOTELS&RESORTS WRLD Consumer Discretionary

TARGET CORP Consumer Discretionary

TERADATA CORP Information Technology

TEXAS INSTRUMENTS INC Information Technology

TIFFANY & CO Consumer Discretionary

TIME WARNER INC Consumer Discretionary

UNITED PARCEL SERVICE INC Industrials

UNITED TECHNOLOGIES CORP Industrials

VF CORP Consumer Discretionary

WAL-MART STORES INC Consumer Staples

XEROX CORP Information Technology

YAHOO INC Information Technology

YUM BRANDS INC Consumer Discretionary

20

ABOUT CLEARBRIDGE

ClearBridge Compensation Group is an independent consulting firm providing advice to boards of

directors and senior management on the design of effective executive and incentive compensation programs with a

focus on alignment with shareholders, linkage with business strategy, and adherence to strong governance

standards.

Our consultants have extensive experience and expertise in executive compensation program design. Our

work spans across industries for both publicly-traded and privately-held companies. Our aim is to establish

transparent connections between management and shareholders and understandable links between

performance and compensation.

We provide an array of compensation services to meet the individual needs of our clients. A sample of our

consulting services includes:

Total Compensation Review and Design

Annual Incentive Design

Long-term Incentive Design

Performance Measurement and Goal Setting

Pay-for-Performance Assessment

Board of Director Compensation

Stock Ownership Programs

Employment Agreements

Severance / Change in Control Arrangements

Compensation Governance Review™

Proxy/CD&A Disclosure

Say-on-Pay Preparation and Shareholder Engagement

Transactional Compensation Design (e.g., M&A, IPOs)

This report was authored by Johna Seo and Urboshi Pal. For questions specific to this ClearBridge 100

report, or for more information on ClearBridge Compensation Group or any of the services outlined above, please

visit our website or contact our New York City office at:

515 Madison Avenue

32nd

Floor

New York, NY 10022

212-886-1022

www.ClearBridgeComp.com