The Changing Profile of Directors and Trends in Corporate Governance

1. The Changing Profile of Directors and Trends in Corporate Governance Presented by: William B. Reeves, AtlantaSeptember, 2007

2. Spencer Stuart’s Board Index 2006 - Highlights • Board Composition: • Average board size stable at 10.7 • Demand for independent directors increased 17% since last year • 31% of new directors had never before served on a public company board • Average age and retirement age are increasing • Women account for 15% of directors, no change over previous year • 96% of boards have a lead or presiding director in place (up from 36% in ’03) • Minorities account for 14% of directors * • Financial expertise in greatest demand, followed by CEOs ** * Analysis of top 200 S&P 500 companies. ** From supplemental survey, 145 respondents.

3. Compliance Requirements Met: Board independence is a reality • 81% of directors are independent (only 2 insiders on average) • On 39% of S&P 500 boards, CEO is only insider • 33% of boards have separated the Chair and CEO roles, up from 26% in ’01; however, only 10% of chairs are independent • Independence of key committees: audit, compensation and nominating committees comprise only independent directors

4. Profile of new S&P 500 directors has changed (391 selected in 2006 for S&P 500) • Fewer active CEOs – 29% in ‘06; down from 47% in ‘01 • 31% are first-time public company directors –an impressive group (e.g., $50B CFO, $20B head of mktg/strategy, $30B division president) • More women – 23% in ’06 vs. 16% in ’01. (However, women make up only 15% of all directors, which reflects only a slight increase from 12% in ’01 and no change since ’05) • Greater diversity of skills and experience • International experience and perspective are increasingly important • Mandatory retirement age and higher age limit more prevalent • More boards have mandatory retirement: 78% vs. 58% in ’01 • But at older age: 62% at age 72+ vs. 34% in ’01

5. Audit Committees: More emphasis on true financial expertise • Boards with 11 or more audit committee meetings annually: 37% vs. 1% in ‘02 • Fewer active CEOs serve as members: 23% vs. 30% in ‘01 • 54% of boards designate more than one financial expert; 20% designate all audit committee members as financial experts • Audit chairs less likely to be CEOs • Fewer active CEOs: 19% vs. 27% in ‘01 • More retired CEOs: 25% vs. 16% in ‘01 • More active/retired CFOs: 10% vs. 2% in ‘01 • More active/retired accountants: 9% vs. 2% in ‘01

6. Board compensation has increased • Average cash retainer today of $63,600, is 12% greater than last year and 70% greater than it was in ‘01 • Fewer boards paying meeting fees: 57% vs. 72% in ’01 • But, meeting fees are higher: $1,955 vs. $1,535 in ‘01 • More pay equity in addition to retainer: 64% vs. 42% in ‘01 • Fewer pay with stock options: 51% vs. 72% in ’01 • Committee compensation has also increased • 70% increase in average committee chair retainer: $9,100 vs. $5,354 in ‘01 • More companies pay committee chair retainers: 84% vs. 57% in ‘01 • Although down from 2001, majority of boards still pay committee meeting fees: 58% vs. 68%. And meeting fees are $1,500, up from $1,200 • More companies have switched to paying committee member retainers: 29% vs. 13% in ‘01. Average retainers are $6,400, up from $5,600 in ‘01

7. Average total compensation (including committee fees) is $179,056 (per Supplemental Survey) • On average, 62% of this is paid in equity • Total compensation is up to $211,179 in 2007 survey (not yet released)

8. Spencer Stuart’s Board Index 2006Supplemental Survey • Boards seek new skills and more diversity (145 boards surveyed) • Financial expertise - 75% • Active CEO/COO – 71% • Retired CEO/COO – 35% • International expertise – 52% • Technology expertise – 40% • Marketing expertise – 27% • HR expertise – 5% • Minority – 62% • Women – 50%

9. CEO evaluation, succession, and compensation • Entire board increasingly responsible for CEO evaluation – 43% up from 13% in ‘01 • 94% of boards discuss CEO succession at least once a year • Responsibility for CEO succession lies with compensation (44%) or nominating committee (36%), although many boards now cite that multiple committees or the entire board are responsible • 31% of boards surveyed still do not have an emergency succession plan • CEO compensation includes restricted stock (79%) and options (81%); 74% of companies say at least a portion of equity awards is performance based

10. Shareholder engagement • 31% of boards have seen increase in shareholder efforts to contact the board • Majority voting and CEO compensation are the most frequently raised topics • 22% report that individual directors had direct contact with shareholders, most often the lead director

11. Preliminary Findings from the 2007 Survey * • The profile of new S&P 500 directors continues to shift away from active CEOs and toward other corporate executives and first-time public company directors • Fewer active CEOs – 33%; down from 41% in ’02 and 53% in ’00 • More active and retired senior corporate executives (e.g., division managers and functional unit leaders) – 21% vs. 7% in ’02 • 33% are first-time public company directors • Mandatory retirement age more prevalent and older • 35% of boards have separated the CEO/chair roles, up from 32% in ’06 and 25% in ’02 • More boards shifting toward lead director designation; 40% designate lead director, up from 28% in ‘04 • Total director compensation is now disclosed in proxies; all-inclusive average total compensation is $211,179 • Committees meeting more; number of meetings for Big 3 committees all up from last year * Not yet released

12. Future Trends • More first-time directors • Greater need for director education • More new directors are likely to be heir-apparent executives versus active CEOs • More diversity in the boardroom • More strategic focus in board composition • Board agenda: succession and strategy