Washington Update: Impact & Analysis: IR in 2014

1. Washington Update:Impact & Analysis: IR in 2014 Jeff Morgan President & CEO National Investor Relations Institute jmorgan@niri.org

2. It’s an Election Year! Midterm Elections: • November 4, 2014 • 435 House seats • 36 Senate seats

3. It’s an Election Year! What matters: • Politics are quieter in DC until... • Change in majority in House or Senate? • The twist: many members not seeking reelection. • A referendum on Affordable Care Act & President vs. Republican’s as obstructionists & disconnected.

4. The SEC Decision makers • Chair White as a taskmaster, yes but… • SEC Commissioners Commissioner White (2019) D Chair Commissioner Stein (2017) D [Senate staff] Commissioner Piwowar (2018) R [Senate staff] Commissioner Aguilar (2015) D [Lawyer/Invesco] Commissioner Gallagher (2016) R [Lawyer/SEC]

5. 2014 SEC Agenda • Dodd-Frank (Congress mandated 7/2010) • JOBS Act (Congress mandated 5/2012) • Corporate Disclosure Overhaul • Market Stability-keep regulation at a pace with market evolution. • HFT, Dark Pools, Broker-Exchange volume • Companies: Shareholder Engagement, Proxy Mechanics, Proxy Advisors • Shareholder Rights: Board & CEO accountability.

6. Dodd-Frank (Law: July 2010) As of April 1, 2014: 398 rulemaking requirements (all agencies): • 51.8% completed (SEC:42/44.2%) • 23.6% proposed (SEC:35/36.8%) • 24.6% not yet proposed (SEC:18/19.0%)

7. Dodd-Frank:Pay Ratio Proposal • Proposed Sept. 18, 2013, Comments ended Dec. 1, 2013 • Final rules in 2014 expected. 2015 start likely so 2016 will be first for YE 2015! • Proposed: • - Median employee compensation vs. CEO • - Ratio will likely put your CEO in headlines • - Sampling allowed for median comp calculation • - Includes all (U.S. and global) employees • - Includes part-time, seasonal and temporary • - Potentially costly (to calculate, extra audit fees, etc.) • - Will ISS & Glass Lewis use for say-on-pay evaluation?

8. Dodd-Frank: IR Noteworthy • §953: Propose & adopt rules regarding disclosure of pay-for-performance. [CEO pay vs. company stock price for 5 years?] • §955: Propose & adopt listing rules regarding hedging by employees and directors [Hedging by insiders – only company stock?] • §954: Propose & adopt rules regarding recovery of executive compensation-Clawbacks [how does company enforce?]

9. Dodd-Frank: noteworthy in 2014 • §417: Report to Congress on the study of the costs & benefits of real time reporting on short sale positions • §§763 and 766:Consider adopting rules on trade reporting, data elements, and real-time public reporting for security-based swaps -Beneficial Ownership

10. Shareholder engagement Engaging someone you think is a shareholder, but has sold stake 13D and 13F reporting Shareholder Transparency

11. 2013 SEC Petition by NIRI, Society & NYSE Change 13F from 45 days to 2 days after EOQ Why: 1. Withholds timely release of material info 2. Desires of SEC for 13f in 1978 was 30 days. to “facilitate the consideration of the influence and impact of institutional investors on markets…” 3. Better align dissemination with public governance practices. Shareholder Transparency

12. JOBS Act (2012) IR Outcomes? • Private company IR or at least upgraded financial communications as shareholders increase from 500 to 2000? • Larger hedge funds due to larger shareholder base? • IPO’s are easier based on confidentiality and lower filing requirements. More IR jobs? • Crowdfunding- more fraud/boiler rooms pumping investments?

13. Corporate Disclosure Overhaul • Dodd-Frank started it, but SEC sees a need to gut it. • Considerations: • - Type of information company discloses (quality & usefulness) • - How information is presented by company • - Where/how company discloses information • - Consider reducing repetitive information through layering • - Consider industry specific disclosures • - Focus on company’s financial condition, operations, risk management, governance and executive compensation. • - How can technology be used to facilitate investor access • - While making corporate disclosure more meaningful

14. Proxy Mechanics Update

15. Proxy Mechanics Issues (2010 & counting) Proxy Fees Proxy Advisors Direct Shareholder Communications - NOBO/OBO End to End Proxy Voting Integrity

16. Proxy Fees Changes for 2014 NYSE Proxy Fee Advisory Committee • 1. Proxy Fees-new fee nomenclature • (lower fees for large issuers, higher fees for smaller, change wording for clarity (suppression fees) • 2. Notice & Access Fees-fee alignment/oversight • 3. NEW: Stratified NOBO lists • 4. NEW: Enhanced Broker Internet Platform – incentives NIRI DESIRE: Fee Transparency & We are not yet there! Next review in 3 years.

17. Proxy Advisors 1. Lack of Accuracy and Transparency in Formulating Voting Recommendations 2. Conflicts of Interest 3. The Role and Legal Status of Proxy Advisory Firms

18. And what about NIRI in 2014? Strategic Plan Dev. 2015-18 New NIRI Website IR Certification

19. IR Certification 1. IR Strategy Formulation 2. IR Planning, Implementation & Measurement 3. Messaging Development 4. Marketing & Outreach 5. Financial Reporting & Analysis 6. Business Insight 7. Strategic Advisement & Leadership 8. Capital Markets & Capital Structure 9. Regulatory Compliance 10 Corporate Governance

20. The NIRI Community Member Engagement Opportunities • - Help your chapter • - Complete a survey • - Answer an eGroup question • - Serve on a National Task Force/advisory group • - Be a speaker • - Help plan the Annual Conference • - Become a National Board member

21. Open Discussion Jeff Morgan jmorgan@niri.org