lemark international ShareholderProposalDiscussion
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lemark international ShareholderProposalDiscussion lemark international ShareholderProposalDiscussion Presentation Transcript

  • Shareholder Proposal Discussion
  • Shareholder Proposal RESOLVED, that the shareholders of Lexmark International, Inc. (“Lexmark” or the “Company”) urge the board of directors to adopt a policy under which shareholders could vote at each annual meeting on an advisory resolution, to be proposed by Lexmark’s management, to ratify the compensation of the named executive officers (“NEOs”) set forth in the proxy statement’s Summary Compensation Table (the “SCT”) and the accompanying narrative disclosure of material factors provided to understand the SCT (but not the Compensation Discussion and Analysis). The proposal submitted to shareholders should make clear that the vote is non-binding and would not affect any compensation paid or awarded to any NEO. 1
  • Board Recommends a Vote Against Adoption could put your company at a competitive disadvantage and impact our ability to recruit and retain critical personnel Advisory vote is not effective for conveying meaningful shareholder opinions to the Compensation Committee or your Board Shareholders already have an effective mechanism for expressing their views to the Compensation Committee or your Board The Compensation Committee’s compensation practices and programs serve shareholders’ interests 2
  • Competitive Disadvantage Issue: Perception of Less Compensation Opportunity Key Competitors for Talent* HP Xerox Kodak Brother Epson Canon Samsung Peer Ricoh Oki Kyocera Companies *To our knowledge none of these competitors has adopted an advisory vote. 3
  • Not an Effective Communication Vehicle Shareholders Already Have Advisory Vote is Not an an Effective Mechanism Effective Mechanism • Would not provide: • Shareholders already have direct access to their Board – Any clear indication of the meaning of vote – Shareholder views of • Allows shareholders to: merits, limitations, or – Voice specific observations preferred enhancements or concerns – Communicate clearly and • Instead, requires Committee effectively with the Board to speculate about the • An advisory vote does not meaning of shareholder provide that communication approval or disapproval 4
  • Lexmark Compensation Practices Do Serve Shareholder Interests Correct Peer Group for Benchmarking is Very Important • Needs to Be – Same Industry – Similar Size – Compete for Same Group of Talent The Lexmark Compensation Committee Believes It Uses the Correct Peer Group* • Committee Directly Engages Consultants That Are Independent of Management – Pearl Meyer & Partners – Mellon • Further Validation by General Surveys 5 *Reference slide 9
  • Lexmark Compensation Practices Do Serve Shareholder Interests Lexmark Compensation is Aligned With Shareholder Interests* • Market Competitive Opportunity (Attract / Retain Talent) – Opportunity is competitive, not excessive – Generally at or below peer median • Compensation Opportunity is Significantly “At Risk” – At risk % for 2003 – 2007 CEO compensation opportunity ranges from 84% to 89% – Only fixed portion is Base Salary • Pay for Performance That Reflects Shareholder Returns – Measured by a comparison of realized vs. opportunity – Tracks financial results and shareholder returns “ In a company, many times investors get frustrated because it seems management gets rewarded regardless of financial performance or a firm’s share price. In this case, the board chose not to reward management, and this accurately reflects Lexmark’s struggles the past two years.” Tom Carpenter, vice president and senior equity analyst at Hilliard Lyons, Lexington Herald-Leader, March 19, 2008 6 *Reference slide 10 on 2003 – 2007 CEO Compensation
  • Board Recommends a Vote Against Adoption could put your company at a competitive disadvantage and impact our ability to recruit and retain critical personnel Advisory vote is not effective for conveying meaningful shareholder opinions to the Compensation Committee or your Board Shareholders already have an effective mechanism for expressing their views to the Compensation Committee or your Board The Compensation Committee’s compensation practices and programs serve shareholders’ interests 7
  • Additional Data 8
  • Executive Compensation Peer Groups 2006 2007 Advanced Micro Devices * * Agilent Technologies * * Analog Devices * * Apple Computer * * Applied Materials * * Avaya * * Computer Sciences * * EMC * * Gateway * KLA-Tencor * * LSI Logic * * Maxtor * National Semiconductor * * NCR * * Qualcomm * * Sanmina-SCI * * Scientific Atlanta * Seagate Technology * * Silicon Graphics * Solectron * * Sun Microsystems * * Tektronix * * Western Digital * * Xerox * * Xilinx * * 9
  • 2003-2007 CEO Compensation Pay For Performance: Realized CEO CEO Total Compensation Opportunity1 Compensation vs. Opportunity (as of 3/18/08) Total Return 75th Percentile 30% 8% - 47% 63% - 52% to Shareholders Op Inc* / Share 65th Percentile 18% 22% - 19% 23% - 29% Change * Without Restructuring Median 100% % Opportunity 75% Realized 25th Percentile 50% 25% 2003 2004 2005 2006 2007 0% % At Risk 88% 84% 84% 89% 86% 2003 2004 2005 2006 2007 Note Notes (1) Compensation opportunity is composed of base salary, short term (1) 2003-2007 stock option grants have a strike price ranging incentive, long term incentive and equity incentive. from $48.05 to $84.80. All grants are unexercised and are currently out of the money. (2) 2006 performance based RSU retention grant is valued at $1,071K using the March 18, 2008 closing stock price of $32.45. Performance triggers were achieved in 2006. The outstanding RSUs will vest 50% on February 22, 2009 and 50% on February 22, 2010. 10
  • Compensation Philosophy Serves Shareholder Interests Put pay Pay for significantly performance “at risk” Aligned with shareholder interests Balance Provide market short-term and competitive long-term opportunities objectives 11