Executive Compensation Reporting in Proxy Statements Piecing Together

Executive Compensation Reporting in Proxy Statements Piecing Together All The Parts of the Puzzle

Retirement T? A H W Plans ? WHY Stock Options Another Executive Incentives ? WHO sponsored training program 12/21/06 Perks: Flowers, Jewelry, Cars, N? E Apartments H W W Executive Compensation Reporting in Proxy Statements Piecing Together All 11, The 2006 Parts of the Puzzle U. S. SEC August Final Ruling

Executive Compensation in Proxy Statements Why The Change? Shareholders demanding more accountability from corporate executives. • Pay-For-Performance measurements • Transparency in reporting to prevent abuse • Better information for shareholders to consider when voting on issues at annual meeting

Executive Compensation in Proxy Statements Why The Change? SEC’s growing irritation with companies’ failure to provide “full and fair” disclosure regarding executive compensation arrangements. “Item 402 always required disclosures of all compensation even if not specifically mentioned in the rules. ” -Allen Beller, SEC Director of Corporation Finance -October 2004

Executive Compensation in Proxy Statements Why The Change? 2006 final rule makes a major statement to corporate executives that the games must STOP! • Requires disclosure for ALL compensation; • Includes a new Compensation Disclosure & Analysis (CD&A) which becomes part of the CEO’s and CFO’s Sarbox Certification stating that there are no material misstatements or material omissions in the disclosures.

Executive Compensation in Proxy Statements Why The Change? 2006 final rule makes a major statement to corporate executives that the games must STOP! “You know what we mean by executive compensation… so don’t play games anymore…” The new requirements are “principles-based” rather than “rules-based”… “Principles matter. ” – John White, SEC Director of Corporation Finance, September 2006

Executive Compensation in Proxy Statements When Will You See The Changes? 2006 final rule is effective for all companies with fiscal years ending on or after 12/15/06. Proxy statements issued in 2007 will reflect the new format. Since most companies will not modify prior periods reported, it will take three years to get all the information to be on a comparable basis.

Executive Compensation in Proxy Statements What Changes Will You See? • Compensation Discussion & Analysis “CD&A” • Expanded Tabular Format

Executive Compensation in Proxy Statements What Changes Will You See? Compensation Discussion & Analysis “CD&A” Replaces the Compensation Committee Report • Details the objectives of the company’s compensation programs; • What the programs are designed to reward; • Explains each element of compensation; • Why the company chooses to pay each element; • Discloses how the company determines the amount (ie. , the formula) for each element to pay; and • Discusses how each compensation element and the company’s decisions regarding that element fit the overall compensation objectives and affect decisions regarding other elements.

Executive Compensation in Proxy Statements What Changes Will You See? Which narrative Compensation Discussion & Analysis “CD&A” Replaces document was the Compensationthe Committee CD&A Report modeled • Details the objectives of the company’safter? compensation programs; The MD&A in • What the programs are designed to reward; the 10 -K • Explains each element of compensation; is material, must beelement; • Why“If the it company chooses it to pay each. discussed. ” • Discloses how the company determines the amount (ie. , the formula) for each element to pay; and • Discusses how each compensation element and the company’s decisions regarding that element fit the overall compensation objectives and affect decisions regarding other elements.

Executive Compensation in Proxy Statements What Changes Will You See? Expanded Tabular Format Disclosure of Compensation over the last three years: • Summary Compensation Table Disclosure of Outstanding Equity Interests: • Grants of Plan-Based Awards Table • Outstanding Equity Awards at FYE Table • Option Exercises and Stock Vested Table Disclosure of Retirement Benefits: • Pension Benefits Table • Non-Qualified Deferred Compensation Table • Disclosure of Director Compensation and Related Party Transactions • Director Compensation Table • Related Party Transaction Narrative

Executive Compensation in Proxy Statements SUMMARY COMPENSATION TABLE Name and Principal Position Year (a) (b) Principal Executive Officer 2006 2005 2004 Salary ($) Bonus ($) (c) Stock Awards ($) (d) Non. Equity Incentive Plan Compensation ($) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (g) (h) (e) All other Compensation ($) Total ($) (i) (j) Principal Financial Officer Executive A Executive B Executive C Named Executive Officers (NEOs): • Two persons who served as PFO and PEO during the last fiscal year • Three most highly compensated executive officers (other than PEO or PFO) who were serving as executives at the end of the last fiscal year; and • Up to two additional executives who served during, but not at the end of, the fiscal year, with total comp higher than those executive officers described above.

Executive Compensation in Proxy Statements SUMMARY COMPENSATION TABLE Salary ($) Bonus ($) Stock Awards ($) Non. Equity Incentive Plan Compensation ($) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (c) (d) (e) (g) (h) Name and Principal Position Year All other Compensation ($) Total ($) (a) (b) (i) (j) Principal Executive Officer 2006 2005 2004 Principal Financial Officer Executive A Executive B Executive C Effective for fiscal years ending after 12/15/06, but restatement of prior years is not required; ‘ 05 and ‘ 04 values may not be comparable

Executive Compensation in Proxy Statements SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary ($) Bonus ($) (c) Stock Awards ($) (d) Non. Equity Incentive Plan Compensation ($) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (g) (h) (e) All other Compensation ($) Total ($) All compensation and bonuses (valued in $), paid and deferred. Deferred compensation detail disclosed in notes (a) (b) (i) (j) Principal Executive Officer 2006 2005 2004 Principal Financial Officer Executive A Executive B Executive C

Executive Compensation in Proxy Statements SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary ($) Bonus ($) (c) Stock Awards ($) (d) Non. Equity Incentive Plan Compensation ($) (e) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (g) All other Compensation ($) (h) Total ($) (a) (b) (i) (j) Principal Executive Officer 2006 2005 2004 Principal Financial Officer Executive A Executive B Executive C Contrary to prior years, 2006 awards must include all dividends earned; whether paid or not. Look for material disclosures in notes.

Executive Compensation in Proxy Statements SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary ($) (c) Bonus ($) Stock Awards ($) Non. Equity Incentive Plan Compensation ($) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) All other Compensation ($) Caution! (g) (h) (i) v. Full Grant Date Fair Value for stock awards is inconsistent with the value reported in the co. ’s financial statements v. YTD Compensation may seem overstated; v. Not consistent with the presentation of non-equity incentive plan compensation (d) Total ($) (a) (b) (e) (j) Principal Executive Officer 2006 2005 2004 Principal Financial Officer Executive A Executive B Executive C All awards (including restricted stock, phantom stock, etc) valued at grant date fair value; cross-referenced to 10 -K and FAS 123(R) discussion

Executive Compensation in Proxy Statements SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary ($) (c) Bonus ($) Stock Awards ($) Non. Equity Incentive Plan Compensation ($) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) All other Compensation ($) Caution! (g) (h) (i) v. Full Grant Date Fair Value for stock awards is inconsistent with the value reported in the co. ’s financial statements v. YTD Compensation may seem overstated; v. Not consistent with the presentation of non-equity incentive plan compensation (d) Total ($) (a) (b) (e) (j) Principal Executive Officer 2006 2005 2004 Principal Financial Officer Executive A Executive B Executive C Look for explanatory disclosures by companies that think these inconsistencies may mislead the users of the financial statements.

Executive Compensation in Proxy Statements SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary ($) Bonus ($) (c) Stock Awards ($) (d) Non. Equity Incentive Plan Compensation ($) (e) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (g) All other Compensation ($) (h) Total ($) (a) (b) (i) (j) Principal Executive Officer 2006 2005 2004 Principal Financial Officer Executive A Executive B Executive C The dollar value of all amounts earned during the fiscal year from nonequity incentive plans.

Executive Compensation in Proxy Statements SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary ($) Bonus ($) (c) Stock Awards ($) (d) Non. Equity Incentive Plan Compensation ($) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (g) (h) (e) All other Compensation ($) Total ($) (i) (j) (a) (b) Principal Executive Officer 2006 2005 2004 Principal Financial Officer Executive A Executive B Executive C Includes all awards from incentive plans except those that are equitybased (stock awards, option awards, etc) whether or not cash payment is actually made in that year. Reporting is based on the year that the executive was awarded the compensation – not when it was actually received

Executive Compensation in Proxy Statements SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary ($) Bonus ($) Stock Awards ($) Non. Equity Incentive Plan Compensation ($) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (a) (b) (c) (d) (e) (g) (h) Principal Executive Officer 2006 2005 2004 Principal Financial Officer Executive A Executive B Executive C All other Compensation ($) Total ($) (i) (j) Also includes earnings on nonqualified deferred compensation. The rate at which obligation grows annually must also be disclosed in the notes.

Executive Compensation in Proxy Statements SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary ($) Bonus ($) (c) Stock Awards ($) (d) Non. Equity Incentive Plan Compensation ($) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (g) (h) (e) All other Compensation ($) Total ($) (i) (j) Aggregate increase in actuarial value of all defined benefit and actuarial plans accrued during the year. (a) (b) Principal Executive Officer 2006 2005 2004 Principal Financial Officer Executive A Executive B Executive C Caution! v. Negative changes in actuarial value should be disclosed and discussed in the notes, but not included in the table. Using same measurement dates for financial reporting purposes.

Executive Compensation in Proxy Statements SUMMARY COMPENSATION TABLE Name and Principal Position Change in Salary Bonus Stock Non. Pension All other ($) Awards Equity Value and Compensa($) Incentive Nonqualition Plan fied ($) Compen. Deferred sation Compen($) sation Earnings ($) Perquisites (Perks) and Other Personal Year Benefits v. Not directly and integrally related to the (c) (d) (e) (h) (i) job. (g) v. Conveys a benefit not generally available to all employees of the company. Total ($) Each item included in All Other Compensation that exceeds $10, 000 must be disclosed and quantified in a footnote. Includes amounts paid or accrued per termination agreement (a) (b) (j) Principal Executive Officer 2006 2005 2004 Principal Financial Officer Executive A Executive B Executive C Includes company contributions to defined benefit contribution plans Includes the dollar value of any dividends paid on stock or option awards not factored into the reported grant date fair value.

Executive Compensation in Proxy Statements SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary ($) Bonus ($) Stock Awards ($) Non. Equity Incentive Plan Compen sation ($) Change in Pension Value and Nonqualifie d Deferred Compensa tion Earnings ($) All other Compensati on ($) Total ($) (a) (b) (c) (d) (e) (g) (h) (i) (j) Principal Executive Officer 2006 2005 2004 Principal Financial Officer Executive A Executive B Executive C The sum of all values reported in columns (a) through (i).

Executive Compensation in Proxy Statements Other Tabular Presentations and Disclosures Disclosure of Outstanding Equity. Which Interests: of these • Grants of Plan-Based Awards tables Table are completely • Outstanding Equity Awards at FYE Table new? • Option Exercises and Stock Vested Table All are “essentially new”. . . Disclosure of Retirement Benefits: Some names are • Pension Benefits Table similar but definitions are • Non-Qualified Deferred Compensation Table new. . • Disclosure of Director Compensation and Related Party Transactions • Director Compensation Table • Related Party Transaction Narrative

Executive Compensation in Proxy Statements Disclosure of Outstanding Equity Interests Grants of Plan-Based Awards Table Name (a) Principal Executive Officer Principal Financial Officer Executive A Executive B Executive C Grant Date (b) Estimated Future Payouts Under Non-Equity Incentive Plan Awards Threshold ($) Target ($) (c) (d) Estimated Future Payouts Under Equity Incentive Plan Awards Maximum Threshold ($) (e) (f) Target ($) (g) All Other Stock Awards: Number of Shares of Stock or Maximum Units ($) (#) (h) (i) All Other Stock Awards: Number of Securities Underlying Options (#) (j) Add’l column and footnote needed if the exercise price Exercise or Base is less than Price of Option closing market Awards ($/Sh) price of the underlying stock on the FAS 123(R) (k) grant date. Classifies awards as (1) an equity or non-equity award, and (2) performance incentive plan or non-incentive based (ie, tenure status). A supplemental column next to Grant Date column is required if the FAS 123 R grant date is different from the grant date (the date on which the compensation committee took action).

mmm Executive Compensation in Proxy Statements Disclosure of Outstanding Equity Interests Outstanding Equity Awards at Fiscal Year-End Option Awards Name (a) Principal Executive Officer Principal Financial Officer Executive A Executive B Executive C Stock Awards Number of Option Number of Market Equity Securities Equity Exercise Shares or Value of Incentive Underlying Incentive s or Price Date Units of shares or Plan Awards: Unexercised Plan Awards: ($) Stock Units of Number of Options Number of That Have Stock Unearned (#) Securities Not That Have Shares, Units Exercisable Unexerc. Underlying Vested Not or Other Unexercised (#) Vested Rights That Unearned ($) Have Not Options Vested (#) (b) (c) (d) (e) (f) (g) (h) (i) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (j) Instead of disclosing awards on an aggregate basis, all awards held by NEOs must be reported. Multiple awards are aggregated only when the expiration date and the exercise price are identical. Options must be presented on a grant-by-grant basis. The aggregate value and the number of shares subject to outstanding stock awards and Equity Incentive Plan Awards may be reported on a single line.

mmm Executive Compensation in Proxy Statements Disclosure of Outstanding Equity Interests Outstanding Equity Awards at Fiscal Year-End Option Awards Name (a) Stock Awards Number of Option Number of Market Equity Securities Equity Exercise Shares or Value of Incentive Underlying Incentive s or Price Date Units of Plan Awards: Unexercised Plan Awards: ($) Stock Units of Number of Options Number of That Have Stock Unearned (#) Securities Not That Have Shares, Units Exercisable Unexerc. Underlying Vested Not or Other Unexercised (#) Vested Rights That Unearned ($) Have Not Options Vested (#) (b) (c) (d) (e) (f) (g) (h) (i) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (j) Principal Executive Officer Principal Financial Officer Executive A Executive B Executive C Specific footnote disclosure is required: (1) Explain the vesting dates for options, other stock awards (such as restricted stock) and awards under incentive plans; (2) Explain the nature of a transfer when an award is transferred by the NEO other than “for value”.

Executive Compensation in Proxy Statements Disclosure of Outstanding Equity Interests Option Exercises and Stock Vested Table Discloses each NEO’s options exercised and other types of equity awards that vested during the year (restricted stock, or restricted stock units). Shows amounts realized on equity compensation during the last fiscal year. Footnotes to this table must include the values and the terms of any amount deferred upon exercise of an option or vesting of a stock award.

Executive Compensation in Proxy Statements Disclosure of Retirement Benefits Pension Benefits Table A separate row must be included in the table for each different plan in which the NEO participates. Pension Benefits includes Supplemental Executive Retirement Plans (SERPS) in addition to traditional pension plans, but does not require disclosure of defined contribution plans, such as 401(k) plans. The values are computed as of the pension plan measurement date, for financial statement reporting purposes, of the company’s last completed fiscal year.

Executive Compensation in Proxy Statements Disclosure of Retirement Benefits Non-Qualified Deferred Compensation In some cases, portions of “contributions” and “earnings” may also be reported on the same year’s Summary Compensation Table. In these cases, a footnote is required. Similarly, a footnote is required for portions of the “aggregate balance” entry that had been reported on the Summary Compensation Table for the NEO in prior years. Additional footnotes are required to explain the nature of certain deferred compensation arrangements.

Executive Compensation in Proxy Statements Disclosure of Director Compensation and Related Party Transactions Director Compensation Table Director Name Fees Earned or Paid in Cash ($) A B C D E Stock Awards ($) Option Awards ($) Non-Equity Incentive Plan Compensation ($) Change in Pension Value and Non. Qualified Deferred Compensation Earnings ($) “All Other Compensation” example: • Perks and personal benefits (for aggregate greater than $10, 000) • Consulting fees • Director legacy programs and charitable awards All Other Compensation ($) Total ($) • Only compensation for last fiscal year is required • Directors may be listed in single row if all elements of compensation are identical • Footnote for each director required showing aggregate number of stock awards and aggregate number of option awards outstanding at FYE

What do these two men have in common? Both have brought “music to the ears” of analysts who are wrestling with the puzzle of executive Both are wearing red ties compensation Both 2007. . . are wearing whitelook shirts black jackets A different to and the proxies. . . Both have high foreheads and strong chins So many new parts of the puzzle to study. . . A reason for investors to celebrate. . . Both have great looking hair. . .

Stock Options Retirement Plans melodies “Celebrating the harmony and of financial reporting” Executive Incentives Christopher Cox US SEC Chairman Perks: Flowers, Jewelry, Cars, Apartments Ludwig van Beethoven German Composer 1770 -1827 Executive Compensation Reporting in Proxy Statements U. S. SEC August 11, 2006 Final Ruling