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EdwardFerris,PartnerHedgeFundSolutionsLLC

.

. .

CEOSUCCESSIONPLANNINGANDSHAREHOLDERACTIVISM

NationalInvestorRelationsInstitute(NIRI)RegionalConference,NewOrleans;August19th,2010

8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism

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Wewillrunasearchasfastaswecan,butinsuringwegetthebest

August 6th at 6:00PM ETCNBC Special Report

possible

candidate.

We

will

look

at

both

internal

and

external

candidatesinthatprocess.

We ave ust orme acomm ttee,sowor w eg nont s

immediately.Butweregoingtodiverightintoit.

outstanding,whowecanpairupwithatrulygreatcompany.The

companyisingreatshape,itsextremelywellpositionedforthefuture.

Wereexecuting

on

the

strategy.

The

performance

is

strong,

so

were

lookatsomeonewhocanbothmaintainthatlevelofperformanceand

thenbuildonit.

NationalInvestorRelationsInstitute(NIRI)RegionalConference,NewOrleans;August19th,2010

8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism

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NationalInvestorRelationsInstitute(NIRI)RegionalConference,NewOrleans;August19th,2010

8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism

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42%ofcompanieshavenoCEOsuccessionplanCEOturnoveriscurrentlyrunnin at 14.4% er ear

46%of

successions

(in

2008)

were

unplanned

40%ofcompaniesarenotpreparedforanemergency

1,227CEOtransitionsin2009

48%ofdirectorscurrentlyseeCEOSuccessionasthesole

responsibilityof

the

CEO

Morethan60%ofcompaniesreportthattheCEO

recommendshis/hersuccessor

57%ofdirectorssaythattheydonotknowwhentheirCEO

plansto

step

down

Only16%ofdirectorsbelievetheirBoardiseffectiveatCEO

successionplanning

NationalInvestorRelationsInstitute(NIRI)RegionalConference,NewOrleans;August19th,2010Forcitations,seeExaminingtheImpactofSECGuidanceChangesonCEOSuccessionPlanning,TheConferenceBoard,April2010andTheRoleofTheBoardinTurbulentTimes,TheConferenceBoard,2009

8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism

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ExternalCEOsareoftenpaidsignificantlymorethaninternallygroomed

ones

(~75%+);

insiders

tend

to

deliver

better

results

40%ofCEOsarefiredorretiredwithin18months;64%nevermakeitto

t eir ourt anniversary

Itisestimatedthatthefaultyintegrationofaseniorexecutivecancosta

Theleadereffectcanaccountforupto40%ofvarianceinperformance

andvalue

CEOs tendtoachievemoreinthefirsthalfoftheirtenure

NationalInvestorRelationsInstitute(NIRI)RegionalConference,NewOrleans;August19th,2010Forcitations,seeExaminingtheImpactofSECGuidanceChangesonCEOSuccessionPlanning,TheConferenceBoard,April2010andTheRoleofTheBoardinTurbulentTimes,TheConferenceBoard,2009

8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism

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Executive Flameouts

Hurd

HP

Dunn

HP

Kozlowski

Tyco

Couglin

WalMart

Stonecipher

Boeing

Everson

RedCross

Albrecht

HBO

Heyer

Starwood

Brown

BP

Moffatt

IBM

Unplanned Transitions

uccess on ascos

NationalInvestor

Relations

Institute

(NIRI)

Regional

Conference,

New

Orleans;

August

19th,

2010

SeeAppendixfordetails

8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism

7/20

A Fr n i r f r r rn n

TheOctober2009SECreleasereframesCEOsuccessionasariskmanagement

issueandplaceditsresponsibilityfirmlyintheBoardroom

NolongerwilltheSECconsiderCEOsuccessionanoperationalmatter.Insteaditis

companyisnotadverselyaffectedbyavacancyinleadership

Oneoftheboard'skeyfunctionsistoprovideforsuccessionplanning.

SecuritiesandExchangeCommission,StaffLegalBulletinNo.14E;October27,2009

NationalInvestor

Relations

Institute

(NIRI)

Regional

Conference,

New

Orleans;

August

19th,

2010

Forcitations,seeExaminingtheImpactofSECGuidanceChangesonCEOSuccessionPlanning,TheConferenceBoard,April2010

8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism

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Aboardsbiggestresponsibilityissuccessionplanning.Itstheoneareawheretheboard is com letel accountable and the choice has si nificant conse uences ood

andbad,

for

the

corporations

future.

TheRoleoftheBoardinCEOSuccession:ABestPracticesStudy,NationalAssociationofCorporateDirectors(NACD)2006

Theresponsibilityforsuccessionplanningbelongsintheboardroom,andnowhereelse.TheRoleoftheBoardinTurbulentTimes,TheConferenceBoard2009

2010ProxySeasonCEOSuccessionNationalInvestorRelationsInstitute(NIRI)RegionalConference,NewOrleans;August19th,2010

Forcitations,seeExaminingtheImpactofSECGuidanceChangesonCEOSuccessionPlanning,TheConferenceBoard,April2010

PlanningShareholderProposals

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A(corporate)boardshouldapproveandmaintainadetailedCEO

successionplanandpubliclydisclosetheessentialfeatures.

PoorCEOsuccessionplanningandinadequateinternaldevelopment

ofmanagerialtalentcouldresultinapanickedboardvastly

overpayingareplacementchiefexecutive.

Shareownerswould

be

able

to

assess

the

strength

and

suchpolicieswerepubliclydisclosed.

NationalInvestor

Relations

Institute

(NIRI)

Regional

Conference,

New

Orleans;

August

19th,

2010

Forcitations,seeExaminingtheImpactofSECGuidanceChangesonCEOSuccessionPlanning,TheConferenceBoard,April2010

8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism

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Connecticut Retirement Plans and Trust Funds CRTPF

Becausepoorlyplannedtransitionscanbehighlydisruptiveandmayputthecompanyatrisk,failure

toengageinsuccessionplanninghasrealconsequencesforshareholders.

Ananalysisoftheboardsroleinsuccessionplanningwouldbeusefulinenablinginvestorsto

en se . app er

ConnecticutStateTreasurerand

ConnecticutRetirementPlansandTrustFunds(CRPTF)PrincipalFiduciary

understandhowtheboardmanagesrisk.The(SEC)shouldrequirecompaniestodisclosewhetherit

hasapprovedandmaintainsaCEOsuccessionplanand,ifithas,todescribethekeytermsofthat

plan.Also

of

value

to

investors

would

be

disclosure

about

whether

CEO

succession

planning

has

Inadequatesuccessionplanningcancertainlyresultinhighlevelsofexternalhirestartingpay,but

canalsobeindicativeofBoardsthatarereticenttochallengesittingCEOsandthatinturncan

, , ,

manifestin

disproportionate

CEO

pay

slice,

over

generous

change

in

control/severance

provisions

andentrenchedmanagement.

CRPTFadvocatestyingsuccessionplanningtoCEOandboardperformancemetrics,and

NationalInvestor

Relations

Institute

(NIRI)

Regional

Conference,

New

Orleans;

August

19th,

2010

disclosingthesetoshareholders.Forcitations,seeExaminingtheImpactofSECGuidanceChangesonCEOSuccessionPlanning,TheConferenceBoard,April2010

8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism

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ActivistHedgeFunds: 2009wasayearforactivistfundstorestructure,rebalance,rebuildandrefocus

Newmarketing

campaigns

to

raise

capital

and

create

awareness

are

underway

Recentexamplesofresurgence(JanaPartners,Ramius,SpotlightAdvisors,Barington

Capital,RileyInvestmentManagement,newactivists)

HybridFunds Private+PublicEquity:

Increasingnumberofprivateequityfundsfiling13Ds

ImprovedM&AenvironmentwillpositionPEaswhiteknightonceagain

TraditionallyPassiveFunds: Increasedlevelofactiveinvolvement:Governance,DirectorandManagement

NationalInvestor

Relations

Institute

(NIRI)

Regional

Conference,

New

Orleans;

August

19th,

2010

, , ,

8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism

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EconomicRecovery:

esp e ow , : rongcorpora e a ances ee san access ecre mar e sw

driveactivist

efforts

to

return

cash,

boost

dividend

payouts

and

examine

strategic

alternatives

o t ca egu atory an scape: Midtermelections;DoddFrankAct;andtheperceptionofcorporategreedand

malfeasancewill

continue

to

encourage

activism

SECiscontinuingtoshiftthebalanceofpoweroutoftheboardroomandtoward

shareholders

Levera eO ortunities: RiskoversightandCEOsuccessionplanningwillbeaddedtoshareholderproposals

Activistswillleveragegovernancedeficienciestosecureagendavotes

NationalInvestor

Relations

Institute

(NIRI)

Regional

Conference,

New

Orleans;

August

19th,

2010

8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism

13/20

Wynnefield Group Proxy to Crown Crafts Inc.

July 2010

NationalInvestor

Relations

Institute

(NIRI)

Regional

Conference,

New

Orleans;

August

19th,

2010

8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism

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Spotlight/Clinton Settlement Agreement with Red Robin

March 2010

NationalInvestor

Relations

Institute

(NIRI)

Regional

Conference,

New

Orleans;

August

19th,

2010

8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism

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CALSTRS/Relational Investors to Occidental

July 2010

NationalInvestor

Relations

Institute

(NIRI)

Regional

Conference,

New

Orleans;

August

19th,

2010

8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism

16/20

Know(andinfluence)Providehighlevel

disclosureofyourCEO

ShareholderDisclosurewhattheBoardsrole

inCEO

succession

planningshouldbe

successionplanning

processto

reassure

shareholdersofthe

BoardOversightPractices

CEOSuccessionProcess

Understandwhy Knowthatthereisno

s are o ers

care

aboutCEOsuccession

planning

ot er

o

e

t e

andthatinternal

developmentisa

multi ear rocess

NationalInvestor

Relations

Institute

(NIRI)

Regional

Conference,

New

Orleans;

August

19th,

2010Forguidance,seeExaminingtheImpactofSECGuidanceChangesonCEOSuccessionPlanning,TheConferenceBoard,April2010

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UnplannedTransitions

SuccessionFiascos

NationalInvestor

Relations

Institute

(NIRI)

Regional

Conference,

New

Orleans;

August

19th,

2010

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