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2011 U.S. Proxy Season Review and 2012 Preview

2011 U.S. Proxy Season Review and 2012 Preview. Patrick McGurn Special Counsel. 2011 Proxy Season Headlines. Focus Shifted Back to Annual Meetings Budgetary woes put SEC behind schedule on Dodd-Frank rules Access Stay and Say on Pay Limited Heat on Directors

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2011 U.S. Proxy Season Review and 2012 Preview

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  1. 2011 U.S. Proxy Season Review and 2012 Preview Patrick McGurn Special Counsel

  2. 2011 Proxy Season Headlines Focus Shifted Back to Annual Meetings Budgetary woes put SEC behind schedule on Dodd-Frank rules Access Stay and Say on Pay Limited Heat on Directors Average “No” vote declined; fewer failed elections Activists targeted S&P 500 classified boards and small-cap governance gap Say-on-Pay Dominated Proxy Ballots Pay-for-performance disconnects drew heat Annual advisory votes attracted widespread support M&A and DE Decisions Toggled TO Defense Debate to High Board fights fell; contested deals returned More scrutiny for special meeting/written consent proposals Concerns Over Risk Energized ESG Campaigns Support swelled for perennials; safety and “fracking” proposals hit nerve

  3. Access Delay and MSOP Holiday Boosted Support

  4. Most MSOPs Drew Strong Shareholder Support 91.26% Average Support for MSOP at Russell 3000 Firms (As of June 30) Nearly three-quarter of proposals draw 90% support or higher Only 1.62% Fail to Win Majority Support

  5. No Rebound in Operating/Governance Activism Source: ISS Data

  6. ESG Issues Continued to Gain Ground Average Support Grew for Risk-Related Topics

  7. 2012 Proxy Season Predictions Communications Upgrades Expected for MSOP 2.0 Voting workload will remain high; expect more demand for engagement Where will investors draw line for possible “red card” director votes? Access Knockdown Might Produce Flurry of Bylaw Jabs Proposals with lower threshold/shorter duration than vacated SEC rule Activists will refocus on MTV, annual elections and independent chairs M&A Wave Will Breed Boardroom Challenges Look for surge in traditional proxy fights; corporate cash hordes Conflicts over preemptive adoptions of takeover defenses Impact of Presidential Campaign Expect more shareholder proposals concerning political contributions DC gridlock over Dodd-Frank rules will continue

  8. Disclaimer This document and all of the information contained in it, including without limitation all text, data, graphs, charts (collectively, the “Information”) is the property of Institutional Shareholder Services Inc. (“ISS”), its subsidiaries, or in some cases third party suppliers. The Information may not be reproduced or redisseminated in whole or in part without prior written permission of ISS. The Information has not been submitted to, nor received approval from, the United States Securities and Exchange Commission or any other regulatory body. None of the Information constitutes an offer to sell (or a solicitation of an offer to buy), or a promotion or recommendation of, any security, financial product or other investment vehicle or any trading strategy, and ISS does not endorse, approve or otherwise express any opinion regarding any issuer, securities, financial products or instruments or trading strategies. Issuers mentioned in this document may have purchased self-assessment tools and publications from ISS Corporate Services, Inc. (“ICS”), a wholly-owned subsidiary of ISS, or ICS may have provided advisory or analytical services to the issuer. No employee of ICS played a role in the preparation of this document. Any issuer that is mentioned in this document may be a client of ISS, ICS, ISS’ parent company, MSCI Inc., or a subsidiary of MSCI Inc., or may be the parent of, or affiliated with, a client of ISS, ICS, MSCI Inc., or another MSCI Inc. subsidiary. The user of the Information assumes the entire risk of any use it may make or permit to be made of the Information. ISS MAKES NO EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE INFORMATION AND EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF ORIGINALITY, ACCURACY, TIMELINESS, NON-INFRINGEMENT, COMPLETENESS, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE) WITH RESPECT TO ANY OF THE INFORMATION. Without limiting any of the foregoing and to the maximum extent permitted by law, in no event shall ISS have any liability regarding any of the Information for any direct, indirect, special, punitive, consequential (including lost profits) or any other damages even if notified of the possibility of such damages. The foregoing shall not exclude or limit any liability that may not by applicable law be excluded or limited.

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