2010 RR Donnelley SEC Hot Topics 2010 Proxy Season Year in Review September 14, 2010 Presenter: Thomas A. Germinario Senior Vice President D. F. King &

2010 RR Donnelley SEC Hot Topics

2010 Proxy Season Year in Review

September 14, 2010

Presenter:

Thomas A. Germinario

Senior Vice President

D. F. King & Co., Inc.


Important Changes for 2011: Dodd-Frank Wall Street Reform and Consumer Protection Act

Proxy Access: Shareholders permitted to include nominees for director elections within issuer’s proxy solicitation materials.

• Deadline to submit nominations: no later than 120 and no more than 150 days prior to anniversary of previous year’s mail date

• Ownership Threshold: limited to shareholders or groups with 3% ownership for at least three years

• Who will use?: pension funds, labor funds, individual activists

Say on Pay: Companies will be required to seek non-binding shareholder vote on compensation package of named executive officers at first meeting held on or after January 21, 2011. Companies will also be required to seek a vote on a frequency proposal of future “say-on-pay” votes - one, two or three years.

Elimination of the Broker Discretionary Vote on Executive Compensation: Brokers will not be able to vote client shares without instructions on say-on-pay proposals or any compensation proposals.

Golden Parachutes: On a merger agenda, shareholders will be permitted to vote on a separate non-binding proposal on any executive pay related to a change-in-control they have not previously approved in addition to the merger proposal itself.


Proxy Plumbing

Street Name Proxy Distribution: Review NYSE fee schedule and potentially eliminate it in favor of allowing market forces to determine appropriate fees.

Non-Objecting Beneficial Owner (“NOBO”) / Objecting Beneficial Owner (“OBO”): Cost of anonymity may be borne by the shareholder rather than by the issuer.

Stock Loan: Recall shares in time to vote on important matters.

Over Voting / Under Voting / Empty Voting: Disclosure of pre or post reconciliation.

Advance Notice of Meeting Agenda: Issuers should give advance notice of matters to be voted on to institutions.


Proxy Plumbing

Voting Audit: Require vote tabulators, securities intermediaries, and proxy service providers to provide each other with access to vote data so investors and issuers can confirm that votes have been received and tallied according to investors’ voting instructions.

Dual Record Date: One record date for determining who is entitled to receive notice of the meeting and a later one for determining who can vote at the meeting. Holders without an economic stake in the matter should not be able influence the outcome of a vote (issue of reconciliation is used in Europe).

Proxy Advisory Firms: Should proxy advisory firms register with SEC to alleviate potential conflicts of interest and lack of accuracy and transparency? Should they disclose any potential conflicts?

Enhance Fund Voting Disclosure: Provide actual shares voted in N-PX filing.


2010 showed a drop in number of contentious activist situations especially in large cap proxy contests.

51

58

70 71

42

100

108

125

91

33

134

56

0

20

40

60

80

100

120

140

160

2005 2006 2007 2008 2009 2010

Total- Definitive Filed

Total- All Proxy Fights

Source: FactSet Research Systems Inc.

As of August, 2010Proxy Fight Trend Analysis


# of Directors Receiving Against/Withhold Recommendations from ISS

1,685 1,724

2,708

1,174

-

500

1,000

1,500

2,000

2,500

3,000

2007 2008 2009* 2010

* Increased recommendations due to tax gross up policy

As of August, 2010


# of Directors with Less than 50% For Vote

16

43

84

0

10

20

30

40

50

60

70

80

90

2008 2009 2010

* Russell 3000

As of August, 2010


Management Compensation Proposals

631

193

681

254

527

165

0

100

200

300

400

500

600

700

Number of Companies

2008 2009 2010

Management Compensation ProposalsISS Recommendation Comparison

2008-2010

ISS- FOR

ISS- AGAINST

2008 2009 2010

ISS - FOR 85.53% 84.36% 85.21%

ISS - AGAINST 70.07% 71.76% 72.52%

Support Level

Source: Institutional Shareholder Services (ISS)

As of August, 2010


Shareholder Proposal: Say-On-Pay

0

10

20

30

40

50

60

70

80

2007 2008 2009 2010

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Number of Proposals

Average Support


As of August, 2010


Management Proposal: Say on Pay

0

20

40

60

80

100

120

Number of Companies

2006 2008 2009 2010

Say on PayISS Recommendation Comparison

2006-2010

ISS- FOR

ISS- AGAINST

2006 2008 2009 2010

ISS - FOR N/A 92.95% 92.15% 91.80%

ISS - AGAINST 51.60% 53.60% 74.61% 73.01%

Support Level


As of August, 2010


Shareholder Proposal: Majority Voting

0

20

40

60

80

100

120

140

2007 2008 2009 2010

30.00%

35.00%

40.00%

45.00%

50.00%

55.00%

60.00%

65.00%

70.00%

75.00%

80.00%

Number of Proposals

Average Support


As of August, 2010


Shareholder Proposal: Declassify Board

0

10

20

30

40

50

60

70

80

2007 2008 2009 2010

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Number of Proposals

Average Support


As of August, 2010


Shareholder Proposal: Call Special Meeting

All proposals in 2010 were at the 10% threshold

Issuers were granted a relief from the SEC on the shareholder proposal if there was a management proposal for 25%

0

10

20

30

40

50

60

70

80

2007 2008 2009 2010

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Number of Proposals

Average Support


As of August, 2010


Shareholder Proposal: Act by Written Consent

49.6%

56.7%

45.5%

55.3%

48.2%

53.6%

35.9%

67.70%

56.9%

67.50%

53.1%57.4%

63.1%63.80%

48.2%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

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0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%


As of August, 2010


Shareholder Proposal: Independent Board Chair

0

10

20

30

40

50

60

70

80

2007 2008 2009 2010

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Number of Proposals

Average Support


As of August, 2010


Independent Chairman of the Board (S&P 500)

32

43

66

74

85

47

57

0

10

20

30

40

50

60

70

80

90

2004 2005 2006 2007 2008 2009 2010

Source: The Corporate Library


Shareholder Proposal: Eliminate Supermajority Provision

0

10

20

30

40

50

60

70

80

2007 2008 2009 2010

30.00%

35.00%

40.00%

45.00%

50.00%

55.00%

60.00%

65.00%

70.00%

75.00%

80.00%

Number of Proposals

Average Support


As of August, 2010


Shareholder Profile Example

Shareholder Category Share Holdings % of O/S

Officers & Directors 490,421 1.8%

Registered Retail 449,844 1.7%

"Street" Retail 12,455,379 47.0%

# 1 Institutional Holder 1,968,405 7.4%



# 4 Institutional Holder 810,491 3.1%

# 5 Institutional Holder 800,000 3.0%

Hedge Funds & Proprietary Trading Desks 3,345,802 12.6%

Remaining Institutional Investors 3,082,687 11.6%

Total: 26,524,765 100.0%

Shareholder Profile

26,524,765 Shares Outstanding

Hedge Funds & Proprietary

Trading Desks12.61%

Remaining Institutional

Investors11.62% # 5 Institutional

Holder3.02%

# 4 Institutional Holder3.06%


Officers & Directors

1.85%

Registered Retail1.70%

"Street" Retail46.96%



2010 RR Donnelley SEC Hot Topics 2010 Proxy Season Year in Review September 14, 2010 Presenter: Thomas A. Germinario Senior Vice President D. F. King &

Documents

nonbinding shareholder

pay source

merger proposal

board source

majority voting source

corporate library slide

proxy distribution

vote tabulators