Understanding Glass Lewis’ Approach to
Say on Pay Analysis

Below is an overview of Glass Lewis’ quantitative and qualitative approach to analyzing Say on Pay and related compensation proposals.

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Glass Lewis’ approach to say-on-pay has two main components: (i) a quantitative assessment reflected in our pay-for-performance grade and our compensation analysis page; and (ii) a qualitative assessment of the structure of a company’s compensation program and the accompanying disclosure.

Our quantitative approach is derived from Glass Lewis’ proprietary pay-for-performance model and our compensation analysis page.

The relationship between relative executive compensation and relative performance is the basis of the pay-for-performance model. Our model evaluates the three-year weighted average of granted compensation of the Company’s top five named executives against the three-year weighted average granted compensation of the top five officers at the peer companies disclosed by the company and then compares the company’s three-year weighted performance with those same peers.

On the other hand, our compensation analysis page considers realized CEO pay and company performance over each of the last three years compared to the median realized pay and performance of the Company’s industry and country peers as determined by Glass Lewis. The analysis also compares the pay mix of the Company’s CEO across Base Salary, STI, LTI, Other, Pension and Severance, over each of the last three years.

Through these analyses, we can determine whether from a quantitative perspective if we should consider supporting a Say on Pay or related compensation proposal. Concurrently, we also conduct a qualitative assessment of compensation. In considering the qualitative merits of a compensation program, we review industry, company size, maturity, financial position, historical pay practices and any other relevant internal and external factors. We generally highlight any compensation-related decisions or features we believe may be detrimental to shareholders’ interests, as well as any important information that has not been clearly provided.

Our review of a company’s practices also takes into consideration the compensation committee’s response to previous say-on-pay votes and the level of shareholder support. When a company receives low support for its say-on-pay proposal, we believe the compensation committee should provide some level of response to shareholders’ concerns, including engaging with large shareholders to identify the concerns driving the opposition. Shareholders should also expect adequate disclosure of any such engagement and any resulting feedback or changes being made to address outstanding concerns.

Our say-on-pay analysis includes two additional views of compensation for the chief executive officer that may differ from a company’s statutory disclosure of compensation. One figure is realizable pay; the other is a breakdown of CEO compensation granted but not necessarily earned for the year in review, presented in the CEO Compensation Breakdown table. This table excludes changes in pension value and non-qualified deferred compensation earnings (“NQDCE”). Neither of these figures is used in our pay-for-performance model.

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