1. What Shareholders Click to edit Master title style Should Know About CEO Succession Plans, and Why. Master subtitle style Click to edit What Shareholders Should Know About CEO Succession Plans, and Why. about1/23/2013 1

2. Setting the Stage The responsibility for succession planning belongs in the boardroom, and nowhere else. - The Conference Board Clickistojob that is more important for the Board than There no edit Master title style selecting the companys CEO and planning for his/her succession. - Wachtell, Lipton, Rosen & Katz A boards biggest responsibility is succession planning. Its the Click to edit Master subtitle style the one area where the board is completely accountable, and choice has significant consequences, good and bad, for the corporations future. - National Association of Corporate Directors (NACD) Report For citations, see Examining the Impact of SEC Guidance Changes on CEO Succession Planning, by Edward Ferris and Justus OBrien, The Conference Board Director Notes, Vol. 2, No. 7, 2010 What Shareholders Should Know About CEO Succession Plans, and Why. about1/23/2013 2

3. Setting the Stage Securities and Exchange Commission Staff Bulletin (SLB 14E), October 27, 2009 Click to edit Master title style CEO Succession no longer ordinary business operations Succession planning responsibilities are redefined as a key board function and aMaster policy (and governance) issue Click to edit significant subtitle style so that a company is not adversely affected by a vacancy in leadership. What Shareholders Should Know About CEO Succession Plans, and Why. about1/23/2013 3

4. Setting the Stage At The Time: 42% of companies had no CEO succession plan Click to edit Master title style 46% of successions were unplanned 40% of companies were not prepared for an emergency succession 48% of directors saw CEO succession as the sole responsibility of the CEO More than 60% of companies reported that the CEO recommended his/her Click to edit Master subtitle style successor 57% of directors said they did not know when their CEO planned to step down Only 16% of directors believed their board to be effective at CEO succession planning For citations, see Examining the Impact of SEC Guidance Changes on CEO Succession Planning, by Edward Ferris and Justus OBrien, The Conference Board Director Notes, Vol. 2, No. 7, 2010 What Shareholders Should Know About CEO Succession Plans, and Why. about1/23/2013 4

5. Setting the Stage Its Important to Note External CEOs are often paid significantly more than internally groomed Click to edit Master title style ones; insiders tend to perform better and stay longer 40% of CEOs leave within 18 months; 64% never make it to their fourth anniversary It is commonly estimated that the faulty integration of a senior executive can cost a company 10 to 20 times the executive salary in opportunity costs Click to edit Master subtitle style The leader effect can account for up to 40% of variance in corporate performance and value CEOs tend to achieve more in the first half of their tenure For citations, see Examining the Impact of SEC Guidance Changes on CEO Succession Planning, by Edward Ferris and Justus OBrien, The Conference Board Director Notes, Vol. 2, No. 7, 2010 What Shareholders Should Know About CEO Succession Plans, and Why. about1/23/2013 5

6. Reputation Matters The Reputation of a New CEO Matters to Investors. Click to edit Master title style 32% base decision on perception of CEO Click to edit Master subtitle style CEO Transitions and the Risk to Enterprise Value, FTI Consulting, October 2011 What Shareholders Should Know About CEO Succession Plans, and Why. about1/23/2013 6

7. Value at Risk With Greater Surprise Comes Greater Value at Risk Click to edit Master title style Click to edit Master subtitle style Planned successions present the lowest risk and can even have a positive impact on stock prices at the time of the announcement. CEO Transitions and the Risk to Enterprise Value, FTI Consulting, October 2011 What Shareholders Should Know About CEO Succession Plans, and Why. about1/23/2013 7

8. H-P after Mark Hurd Marc Andreessen to Maria Bartiromo CNBC Special Report, August 6, 2010 Click to edit Master title style We will run a search as fast as we can, but insuring we get the best possible candidate. We will look at both internal and external candidates in that process. We have just formed a committee, so work will begin on this immediately. But were going to dive right into it. And fundamentally, you know, were looking for someone who is outstanding, Click to edit Master subtitle style who we can pair up with a truly great company. The company is in great shape, its extremely well positioned for the future. Were executing on the strategy. The performance is strong, so were look at someone who can both maintain that level of performance and then build on it. What Shareholders Should Know About CEO Succession Plans, and Why. about1/23/2013 8

9. Market Reaction Click to edit Master title style Click to edit Master subtitle style HPs market value fell by $10 billion, close to a 10 percent decline, following the resignation. What Shareholders Should Know About CEO Succession Plans, and Why. about1/23/2013 9

10. Shareholder Proposals The Board of Directors will review the plan annually; Click to edit Master title style The Board will develop criteria for the CEO position which will reflect the Companys business strategy and will use a formal assessment process to evaluate candidates; The Board will identify and develop internal candidates; The Board will begin non-emergency CEO succession planning at least three Click to edit Master subtitle style years before an expected transition and will maintain an emergency succession plan that is reviewed annually; The Board will annually produce a report on its succession plan to shareholders. What Shareholders Should Know About CEO Succession Plans, and Why. about1/23/2013 10

11. Institutional Investors A (corporate) board should approve and maintain a detailed CEO succession plan and publicly disclose the essential features. Click to edit Master title style Poor CEO succession planning and inadequate internal development of managerial talent could result in a panicked board vastly overpaying a replacement chief executive. Shareowners would be able to assess the strength and appropriateness of CEO succession plans if the essential features of such policies were publicly disclosed. Click to edit Master subtitle style What Shareholders Should Know About CEO Succession Plans, and Why. about1/23/2013 11

12. What Shareholders Should Know Succession Planning Disclosure Should Include: Assurance that a CEO succession planning process is in place; Click to edit Master title style Identification of the board committee that is responsible for CEO succession planning, and its charter; Assurance that the committee members are qualified to oversee the CEO succession planning process; The frequency with which this committee meets to discuss CEO succession Click to edit Master subtitle style and the process; in general terms, what this review looks like; The frequency with which the full board discusses CEO succession and reviews the CEO succession plan and process; in general terms what this review consists of. Copyright 2012 Charlesmore Partners International, LLC. All Rights Reserved. What Shareholders Should Know About CEO Succession Plans, and Why. about1/23/2013 12

13. What Shareholders Should Know The Board Should Publicly Verify: Click to edit Master title style That a candidate profile for the next CEO has been developed and approved, and that this profile incorporates qualifications necessary to lead the companys business strategy in the time frame anticipated; That it is satisfied with the quality and effectiveness of the CEO succession planning process, and that a timeframe for CEO succession has been developed and approved; Click to edit Master subtitle style That viable successor candidates have been identified who are either currently qualified, or who are on customized development programs to gain those experiences and competencies necessary to meet the successor profile criteria within the anticipated time frame; Copyright 2012 Charlesmore Partners International, LLC. All Rights Reserved. What Shareholders Should Know About CEO Succession Plans, and Why. about1/23/2013 13

14. What Shareholders Should Know The Board Should Publicly Verify: Click to edit Master title style That external searches are underway (or scheduled) to deepen executive bench strength, supplement the CEO succession pipeline, or fill perceived capability gaps, should the board deem it necessary; That a program of board exposure to succession candidates is in place; That a CEO selection process has been defined, and that valid measures have Click to edit Master subtitle style been developed to assess and select the next CEO of the company; That an emergency CEO succession plan has been developed and approved, including the process for immediate appointment and communication of a successor, and how frequently this plan is reviewed and updated. Copyright 2012 Charlesmore Partners International, LLC. All Rights Reserved. What Shareholders Should Know About CEO Succession Plans, and Why. about1/23/2013 14

15. What Shareholders Click to edit Master title style Should Know About CEO Succession Plans, and Why. Master subtitle style Click to edit Edward Ferris - (215) 353-6472 What Shareholders Should Know About CEO Succession Plans, and Why. about eferris@charlesmore.com1/23/2013 15 www.charlesmore.com