Corporate Governance Provisions of Dodd-Frank

1. Corporate Governance Provisions of Dodd-Frank Board of Directors XYZ, Inc. August 25, 2010 01492662-2.ppt

2. Dodd-Frank • Short Title: “Dodd-Frank Wall Street Reform and Consumer Protection Act” • 2300 pages, 16 titles change regulation of financial services industry, banks, financial institutions, credit rating agencies, Fed, SEC, Consumer Affairs and • Two subtitles on Corporate Governance with other provisions sprinkled throughout.

3. Agenda • Corporate Governance Provisions • Shake and Bake Compliance Provisions • Paradigm Shift Compliance Provisions • No Change in Fiduciary Duties • How to Respond • Compliance • Back to Basics • Corporate Governance Review and Update • Increased Need for Investor Relations • Be Prepared for Trickle Down of Shareholder Activism

4. “Shake & Bake” Compliance & Control Provisions • Board Leadership Disclosure • Broker Discretionary Voting • Swap Committee • Compensation Committee Composition, Consultants, Budget and Authority • Clawback Policy • Hedging Policy • Whistleblowers • Reg. FD Disclosures re credit rating agencies • Credit rating agency consents • Accelerated filing deadlines for Forms 3 and 13D

5. Compliance & Paradigm Shift Provisions • Proxy Access (3% - 3 years; > 1 nominee or 25% of board) • No Majority Voting • Say on Pay & Parachutes (only 3 out of 250 companies lost in 2010) • Pay for Performance Disclosure • Internal Pay Ratio Disclosure • Broker Voting • Institutional Investment Mgr Vote Disclosure

6. Basics: Shareholder Objectives • For Retail and Institutional Investors: Total Shareholder Return (“TSR”) • For Special Interest Shareholders: A Seat at the Table (Power)

7. Special Interest Shareholder Issues • Sustained poor performance • “Excessive” executive compensation • “Over boarding” • Board Meeting Truancy • Board Diversity • Majority Voting (31@57%) • Separate Chair (35@28%) • Declassify Board (43@62%) • Shareholder Right to Call Special Meetings (43@43%) Succession Planning • Risk Management

8. Basics: Board Objectives (from XYZ Board Corporate Governance Principles) • “….represents the stockholders’ interest in perpetuating a successful business and optimizing long-term financial returns…” (TSR) • “…in a manner consistent with …legal requirements and ethical considerations.” (Compliance) • “….the best interests of the Company and the stockholders.” (All Shareholders as a Group)

9. Three Key Divisions to Maximize TSR and Shareholder Best Interests To maximize TSR and to protect and enhance the interests of all shareholders requires good operating results, successful investor relations and effective corporate governance – in difference proportions.

10. Corporate Governance Initiatives • Check By-Laws re advance notice, shareholder qualifications, descriptions, nominee info, voting requirements for say-on-pay & other votes; • Monitor SEC “proxy plumbing;” incorporate in By-Laws/other Corporate Governance docs; • Check Poison Pill status; • Evaluate Staggered Board Structure after SEC release on proxy access; • Review (and Amend) Guidelines & Charters; • Evaluate 1, 2 or 3 year say on pay votes

11. Investor Relations Initiatives • Personal 1 on 1 relationship and communication with enough vote decision makers, investment decision makers & influencers if possible, otherwise mass communication techniques. • Board Awareness & Support • Level of Engagement will increase • Need to carry all management proposals. (Losing any vote or having any major business problem in a proxy season opens Pandora’s Box in the next one).

12. Occidental Petroleum: Consequences of losing say-on-pay vote • TSR is outstanding. • Still lost say-on-pay vote. • Now CalSTRS (2d largest) and Relational Investors (hedge fund) sent letter seeking 4 board seats. • Nominally complaining about executive compensation and succession planning. • Hold only 1% together.

13. Massey Energy example • Heavy Shareholder campaign in 2010 • Will hold Oct 6 special meeting • Declassify board • Remove supermajority voting • Eliminate cumulative voting • Eliminate prohibition on shareholder called special meetings. • Other changes • CEO board members cannot serve on more than 2 other boards • No director may serve on more than 5 other boards • Tax gross-ups to be eliminated • Safety & Environment committee to consist only of outside directors • Public Policy Committee must have majority of outside directors • Already has Majority Voting Policy

14. What is the Shareholder Profile? • No. shares and percent owned: current, hi & lo; first ownership date • Compliance/Corporate Governance Contact • Investment Contact • Proxy Advisers • Proxy Voter • Type: Mutual, GovPnsn, Union, Social, Hedge • Values • Shareholder’s Voting Policy & “Hot” Buttons

15. 1 on 1 Determinants of Scale of Diplomatic Effort • Size of Company • Number, Complexity & Activism of Key Investors and Proxy Voting Advisers • Company’s Personnel and Organizational Structure • Personal Styles and Philosophies of Participants

16. Scaleable Investor Relations • IR Group • External Advisers • IR Multi Group Task Force • C-Suite Involvement (including Division heads) • Board Involvement

17. Examples of Investor Relations at Different Market Caps • See Investor Relations Examples

18. Board and Management Timeline • Ongoing Developments Throughout the next 2 years. See Timeline. • Compliance Aspects Easy But Time Consuming. • Board Basics: TSR, Best Interests of Company and Shareholders. • Key to Success: Genuine, Personal, 2-Way Communication With Critical Number of Key Constituents by Whatever Method Mutually Works.