Corporate Governance

Shearman & Sterling LLP We are pleased to share Shearman & Sterling's 11th Annual Survey of Corporate Governance Practices of the Largest US Public Companies (the "Survey"). The 2013 proxy season was the first in a number of years in which companies did not need to focus on any significant new compensation-related disclosure requirements. This created an opportunity for companies to look back at prior disclosures to determine what worked and what did not in the context of say-on- pay, as well as to conduct shareholder outreach to ensure that their compensation programs were properly understood. What follows is a description of a few of the highlights of this year's disclosure and a discussion of what we anticipate in the year to come. SAY-ON-PAY RESULTS FOR 2013 Ninety-five of the Top 100 Companies 1 held a say-on-pay vote during the 2013 proxy season, and all but one passed. In the three proxy seasons with mandatory say-on-pay, no Top 100 Company has failed to receive say-on-pay approval two years in a row. The average levels of shareholder support for say-on-pay proposals at the Top 100 Companies have remained fairly constant since 2011, with 63% of the companies receiving approval levels greater than 90% and 11% receiving approval levels below 70% in 2013, compared to 67% and 17% in 2012 and 62% and 13% in 2011, respectively. INTRODUCTION ALTERNATIVE PAY DISCLOSURE For the first time, we surveyed which of the Top 100 Companies include alternative pay disclosure in their Compensation Disclosure and Analysis ("CD&A"). We found that 40 of the Top 100 Companies provided some alternative pay disclosure to that provided in the Summary Compensation Table, with seven reporting "realizable" pay, 14 reporting "realized" pay and 24 providing other related disclosure. Proponents of alternative pay disclosure believe that the figures in the Summary Compensation Table reflect "pay opportunity" rather than actual pay and that providing alternative disclosure better allows shareholders to compare amounts actually paid to named executive officers ("NEOs") over a multi-year period with the company's financial performance for the same period. SHAREHOLDER PROPOSALS Compensation-related shareholder activism was fairly low during 2011 and 2012, with only 29 compensation-related shareholder proposals raised at the Top 100 Companies in 2012 and 28 in 2011. Last year, in the Introduction to this Survey, we wondered whether compensation- related shareholder activism would increase in 2013, particularly for companies with low say-on- pay approval rates. And, indeed, that proved to be the case. In 2013, there were 41 shareholder proposals related to compensation. Twenty-three 1 See "Survey Methodology" on page 52 of this Survey for the list of the Top 100 Companies.

• Cover