2012

minnesota board index

73240_Spencer.indd 1 12/6/12 11:49 AM About Spencer Stuart Spencer Stuart is one of the world’s leading executive search consulting firms. Privately held since 1956, Spencer Stuart applies its extensive knowledge of industries, functions and talent to advise select clients — ranging from major multinationals to emerging companies to nonprofit organizations — and address their leadership requirements. Through 53 offices in 29 countries and a broad range of practice groups, Spencer Stuart consultants focus on senior-level executive search, board director appointments, succession planning and in-depth senior executive management assessments.

73240_Spencer.indd 2 12/6/12 10:17 AM table of contents

Introduction 2

Five- and Ten-Year Trends Chart 4 Five-Year and Ten-Year Trends 4

Board Composition 6 Board Size 6 Average Age 6 Boardroom Leadership 6 Lead and Presiding Directors 7 Female Representation 7 Minority Representation 7 Director Turnover 7 New Director Snapshot 8 A Closer Look at the CEO 9 CEO Turnover 10 CEO Succession 10

Board Organization and Process 11 Board Meetings 11 Committee Structure 11 Term Length 11 Mandatory Retirement Age 11 A Closer Look at the Compensation Committee 13

Director Compensation 14 Board Retainers 14 Meeting Fees 14 Committee Retainers 14 Compensation for Board Leadership Roles 15

How Does your Board Measure Up? 16

Comparative Board Data 17

73240_Spencer.indd 3 12/6/12 10:17 AM introduction

Since 2000, Spencer Stuart has tracked the board governance practices of Minnesota-based companies in our annual 34 Minnesota Board Index. Over the years, the index has provided a unique window into the leadership changes of Minnesota’s largest public companies and the adoption of governance Number of new directors added to reform and its impact on boards in our state. Minnesota boards Highlights of this year’s index include the following:

Board turnover returning to historical levels. After about five years of minimal director departures and new additions, we saw a heightened level of turnover in Minnesota’s boardrooms in 2012. Thirty-four new directors joined Minnesota’s top 30 boards this year, up significantly from 10 new recruits last year. Thirty directors retired during the same time frame, marking the most departures in a single year since 2007.

CEO succession an ongoing issue for boards. Five new CEOs were named to Minnesota’s top companies over the past year. Since 2007, the companies we have studied in this index have gone through a total of 23 CEO transitions, for a variety of reasons. With director tenures outpacing those of CEOs, directors can expect to be called on to help with CEO succession planning at some point during their board service.

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73240_Spencer.indd 4 12/6/12 10:17 AM High stakes for the compensation committee. The stakes continue to be high for directors who sit on the compensation committee, as they are charged with overseeing both executive 33% compensation and CEO performance evaluations. This year, we take a closer look at the makeup of compensation committees 5-year increase in on Minnesota’s top 30 boards. average annual director retainer Annual retainers becoming more popular than meeting fees. Attendance fees for board and committee meetings have remained flat over the past five years, and fewer companies are choosing to pay them. Meanwhile, annual retainers for committee members are on the rise, growing in both popularity and dollar value.

About the Minnesota Board Index Spencer Stuart’s Minnesota Board Index examines the data and trends in board composition, board practices and director compensation for the 30 largest public companies based in Minnesota. Data were drawn from proxy statements and press releases published through August 31, 2012. This year, joined our study for the first time, replacing Alliant Techsystems, which relocated its headquarters to Arlington, Virginia, in late 2011.

We encourage you to compare your board to other Minnesota boards, as well as to data from companies in the S&P 500, as featured in the 2012 Spencer Stuart Board Index.

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73240_Spencer.indd 5 12/6/12 10:17 AM five-year and ten-year trends

Trends Ten-Year and Five-Year Index: Board Minnesota Minnesota Board Index: Five-Year and Ten-Year Trends

Comments 2002(c) 2007(b) 2012(a) 2012(a) 2007(b) 2002(c) Comments Composition Board Board Composition downward trend to continues size Board 10.9 10.6 10.1 size board Average Average board size 10.1 10.6 10.9 Board size continues to trend downward prevalent more becoming boards Smaller 33% 23% 43% directors fewer or 9 with Boards Boards with 9 or fewer directors 43% 23% 33% Smaller boards becoming more prevalent directors independent more have boards Today’s 79% 79% 87% directors Independent Independent directors 87% 79% 79% Today’s boards have more independent directors up inch to continues age Average 57.8 59.2 60.1 directors of age Average Average age of directors 60.1 59.2 57.8 Average age continues to inch up longer boards on staying are Directors 7.5 7.9 8.4 directors of tenure Average Average tenure of directors 8.4 7.9 7.5 Directors are staying on boards longer directors New New directors levels historical approaching directors new of intake decline, a After 49 41 34 number Total Total number 34 41 49 After a decline, intake of new directors approaching historical levels boards outside to attract to difficult more are executives top Active 59% 51% 29% CEOs/COOs/presidents Active Active CEOs/COOs/presidents 29% 51% 59% Active top executives are more difficult to attract to outside boards executives finance particularly demand, in are directors Non-CEO 20% 22% 44% executives corporate Other Other corporate executives 44% 22% 20% Non-CEO directors are in demand, particularly finance executives service board to devote to time more have executives Retired 2% 17% 24% executives Retired Retired executives 24% 17% 2% Retired executives have more time to devote to board service diversity Board Board diversity years 10 past over upward slightly Trending 15% 16% 18% directors all of percentage as Women Women as percentage of all directors 18% 16% 15% Trending slightly upward over past 10 years decade past the for woman one least at had have boards all Nearly 83% 100% 93% director woman one least at with Boards Boards with at least one woman director 93% 100% 83% Nearly all boards have had at least one woman for the past decade years 10 past over upward slightly Trending 8% 9% 11% directors all of percentage a as minorities Ethnic Ethnic minorities as a percentage of all directors 11% 9% 8% Trending slightly upward over past 10 years representation minority with boards of number the in year this decline sharp A 77% 63% 56% director minority one least at with Boards Boards with at least one minority director 56% 63% 77% A sharp decline this year in the number of boards with minority representation profile CEO CEO profile steady holding age CEO Average 54 54 55 age Average Average age 55 54 54 Average CEO age holding steady tenure director average the than lower but rise, the on tenure CEO 5.3 4.0 5.5 CEO as tenure Average Average tenure as CEO 5.5 4.0 5.3 CEO tenure on the rise, but lower than the average director tenure leadership Board Board leadership roles CEO and chairman separating are boards More n/a 56% 60% chairman also is CEO CEO is also chairman 60% 56% n/a More boards are separating chairman and CEO roles before ever than chairmen independent More n/a 27% 37% chairman nonexecutive with Boards Boards with nonexecutive chairman 37% 27% n/a More independent chairmen than ever before chairs nonexecutive in increase to due down is Prevalence n/a 87% 67% director presiding or lead with Boards Boards with lead or presiding director 67% 87% n/a Prevalence is down due to increase in nonexecutive chairs meetings Board Board meetings often more convening are Boards 6.3 6.4 7.1 meetings board of number Average Average number of board meetings 7.1 6.4 6.3 Boards are convening more often age Retirement Retirement age policies age retirement specific of prevalence in decrease Slight 43% 80% 77% age retirement mandatory a reporting Boards Boards reporting a mandatory retirement age 77% 80% 43% Slight decrease in prevalence of specific retirement age policies higher or 72 at age retirement setting boards More 23% 46% 83% 72+ of age retirement mandatory with Boards Boards with mandatory retirement age of 72+ 83% 46% 23% More boards setting retirement age at 72 or higher prevalence Committee Committee prevalence committee nominating/governance have boards all Nearly 80% 93% 97% committee Nominating/governance Nominating/governance committee 97% 93% 80% Nearly all boards have nominating/governance committee committee audit an have boards All 100% 100% 100% committee Audit Audit committee 100% 100% 100% All boards have an audit committee committee compensation a have boards All 100% 97% 100% committee Compensation Compensation committee 100% 97% 100% All boards have a compensation committee committee finance separate a have boards Fewer 53% 40% 40% committee Finance Finance committee 40% 40% 53% Fewer boards have a separate finance committee committee executive an have boards Fewer 43% 27% 13% committee Executive Executive committee 13% 27% 43% Fewer boards have an executive committee

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73240_Spencer.indd 6 12/6/12 10:17 AM Minnesota Board Index: Five-Year and Ten-Year Trends

2012(a) 2007(b) 2002(c) Comments 2012(a) 2007(b) 2002(c) Comments Board Composition Board compensation Average board size 10.1 10.6 10.9 Board size continues to trend downward Average annual cash retainer $67,000 $50,400 $29,824 Retainers have more than doubled since a decade ago Boards with 9 or fewer directors 43% 23% 33% Smaller boards becoming more prevalent Average board meeting fee $1,863 $1,863 $1,421 Average board meeting fee unchanged from five years ago Independent directors 87% 79% 79% Today’s boards have more independent directors Boards paying board meeting fee 33% 53% 73% Prevalence of board meeting fees continues to decline Average age of directors 60.1 59.2 57.8 Average age continues to inch up Boards offering stock option program for directors 30% 57% 67% Stock option plans losing favor Average tenure of directors 8.4 7.9 7.5 Directors are staying on boards longer Boards paying equity in addition to retainer 97% 90% 93% More boards prefer to issue stock grants or restricted stock New directors Committee compensation Total number 34 41 49 After a decline, intake of new directors approaching historical levels Boards paying committee chair retainer 97% 90% 50% Nearly all boards pay a retainer to committee chairs Active CEOs/COOs/presidents 29% 51% 59% Active top executives are more difficult to attract to outside boards Average committee chair retainer $13,385 $9,916 $4,328 Committee chair retainers up sharply over past 10 years Other corporate executives 44% 22% 20% Non-CEO directors are in demand, particularly finance executives Boards paying committee member retainer 40% 27% 10% Retainers for committee members continuing to gain favor Retired executives 24% 17% 2% Retired executives have more time to devote to board service Average committee member retainer $7,656 $4,556 $4,318 Committee member retainer amounts are rising Board diversity Boards paying committee meeting fees 37% 40% 67% Fewer boards paying committee meeting fees Women as percentage of all directors 18% 16% 15% Trending slightly upward over past 10 years Average committee meeting fee $1,538 $1,500 $1,078 Little change in committee meeting fee amounts over past five years Boards with at least one woman director 93% 100% 83% Nearly all boards have had at least one woman for the past decade Ethnic minorities as a percentage of all directors 11% 9% 8% Trending slightly upward over past 10 years (a) Data based on proxy statements released September 1, 2011 through August 31, 2012 (b) Data based on proxy statements released September 1, 2006 through August 31, 2007 Boards with at least one minority director 56% 63% 77% A sharp decline this year in the number of boards with minority representation (c) Data based on proxy statements released September 1, 2001 through August 31, 2002 CEO profile Average age 55 54 54 Average CEO age holding steady Average tenure as CEO 5.5 4.0 5.3 CEO tenure on the rise, but lower than the average director tenure Board leadership CEO is also chairman 60% 56% n/a More boards are separating chairman and CEO roles Boards with nonexecutive chairman 37% 27% n/a More independent chairmen than ever before Boards with lead or presiding director 67% 87% n/a Prevalence is down due to increase in nonexecutive chairs Board meetings Average number of board meetings 7.1 6.4 6.3 Boards are convening more often Retirement age Boards reporting a mandatory retirement age 77% 80% 43% Slight decrease in prevalence of specific retirement age policies Boards with mandatory retirement age of 72+ 83% 46% 23% More boards setting retirement age at 72 or higher Committee prevalence Nominating/governance committee 97% 93% 80% Nearly all boards have nominating/governance committee Audit committee 100% 100% 100% All boards have an audit committee Compensation committee 100% 97% 100% All boards have a compensation committee Finance committee 40% 40% 53% Fewer boards have a separate finance committee Executive committee 13% 27% 43% Fewer boards have an executive committee

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73240_Spencer.indd 7 12/6/12 10:17 AM board composition

Board size

> For the second year in a row, the average size of Minnesota’s top 30 public company boards is 10.1 directors. Board size has been gradually declining since we began this study 12 years ago, after reaching a high of 11.6 in 2001. Seven boards in our index have reduced their size since last year, and eight boards have increased their size.

> TCF Financial again has the largest board (with 15 directors) in our study, while Nash Finch and St. Jude Medical have the smallest boards, with seven directors each.

Average age

> The typical Minnesota board director is 60 years old, an average that has fluctuated between 58 and 60 for over a decade. By comparison, the average age of directors sitting on S&P 500 company boards is 62.6. UnitedHealth Group’s board, with an average age of 66, is the oldest in our study. ’s board is the youngest, with an average age of 51. Of the 304 directors serving on Minnesota’s largest 30 boards, 78 (26 percent) are between the ages of 65 and 70, and 29 (10 percent) are 71 or older.

Boardroom leadership

> Today, 87 percent of directors sitting on Minnesota’s top boards are independent — the highest percentage of boardroom independence since we began tracking this statistic in 2001. This is slightly higher than the independence of S&P 500 boards, at 84 percent.

> Ten of Minnesota’s largest 30 companies (33 percent) have independent chairmen at the helm of their boards, the most in the history of our study. However, on 60 percent of boards, the chief executive officer also serves as chairman of the board, thus combining these two key leadership responsibilities in one person. An additional two companies appointed the former CEO as chairman, a number that is down significantly from previous years.

Who is chairing Minnesota’s Top Boards? 2012 2007 2002 Current CEO 60% 57% 73% Former CEO 7% 20% 17% Nonexecutive chair (independent) 33% 23% 10%

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73240_Spencer_u3.indd 8 12/11/12 2:44 PM Lead and presiding directors

> Nineteen companies in our study (63 percent) have designated lead or presiding directors on their boards, a figure that has been down in recent years after reaching a high of 93 percent in 2008. For a third of the companies in our study, nonexecutive chairmen are most likely fulfilling that role on the board. Among S&P 500 boards, 92 percent have a designated lead or presiding director.

Female representation

> For the second year in a row, women represent 18 percent of directors on Minnesota’s top 30 boards. This figure is up slightly from 17 percent over the previous three years and up significantly from 14 percent 10 years ago.

> and Target have the highest percentage of women on their boards, each with 36 percent. Two boards in our study — Nash Finch and Regis — do not have any female directors.

Minority representation

> Minority directors represent 11 percent of directors on Minnesota’s top 30 boards, a figure that has remained virtually unchanged since 2008. again has the highest percentage of minority directors, at 33 percent. Thirteen of the 30 boards (43 percent) in our study currently have no minority directors, the highest number we have observed in recent years.

Diversity Representation on Minnesota Boards 2012 2007 2002 5 10 15 20 25 30 35 40 45 50 18% Female directors 16% 15% 11% Minority directors 9% 8%

Director turnover

> Thirty directors have departed from Minnesota’s top boards in the past year, marking the highest level of board turnover among this group of companies since 2007.

> Interestingly, three directors departed during the first year of their tenure on the board. Nearly one-third of this year’s board retirements were non-independent directors, including eight former chairmen or CEOs of their companies.

> The average age of directors departing from Minnesota’s top boards over the past year was 64. For 10 of these retiring directors (30 percent), mandatory retirement age was cited as the reason for their departure.

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73240_Spencer.indd 9 12/6/12 10:17 AM board composition

New director snapshot

The 30 boards we surveyed added 34 new directors over the past year — the largest addition of new directors since 2007. This is consistent with director turnover levels we tracked among Minnesota’s top boards in the years prior to the economic downturn.

Key findings about this year’s new directors include the following:

> Twenty-eight (82 percent) are independent. Six new directors are non-independent, including three newly appointed CEOs.

> Twenty-one (62 percent) hail from outside Minnesota, bringing geographic diversity to Minnesota’s boardrooms.

> This year’s class of new directors includes six female directors (18 percent) and two minority directors (6 percent). By comparison, 26 percent of independent directors added to S&P 500 boards during the past year were women and 12 percent were minorities.

> The average age of new directors is 54, down from 58 last year.

> Sixteen (47 percent) of this year’s new directors currently serve on other corporate boards, bringing previous corporate governance experience to their new board role. The average number of other boards these new directors serve on is 2.5, the highest level of outside board service by a class of new directors in a decade.

> Of the independent directors added over the past year, 25 percent are active chairmen, presidents, CEOs or chief operating officers, which is in line with the new directors joining S&P 500 boards. Another 25 percent are chief financial officers or executives with finance backgrounds, while 21 percent are retired corporate executives.

New Independent Directors by Function MN 2012 S&P 500 2012 Active chair/CEO/president/COO 25% 25% Other corporate executives 14% 11% Retired corporate executives 21% 27% CFO/finance/investors/accountants 25% 22% Academics/nonprofit 4% 7% Others* 11% 8%

* Includes government and military officials, consultants and lawyers.

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73240_Spencer.indd 10 12/6/12 10:17 AM A closer look at the CEO

> Among the 30 companies in our index, 11 (37 percent) have CEOs who have been in the role three years or less. The average tenure of all 30 CEOs is just over five years.

> The average age of the CEOs of Minnesota’s largest companies is 55, five years younger than the average director age of 60.

> Forty percent of the CEOs in our study do not serve on any boards other than their own. Among CEOs who do sit on an outside board, over half (61 percent) are serving on the board of another Minnesota-based company. For many active CEOs, both in Minnesota and nationally, the time and travel requirements for outside board service can be great. As a result, some CEOs find that serving on the board of a company within their region or state is an attractive option.

Top 30 Minnesota CEOs on Minnesota Boards Company CEO Minnesota company board(s) C.H. Robinson Worldwide John Wiehoff , Polaris Industries Donaldson Company William Cook Corporation Douglas Baker U.S. Bancorp Company Willard Oberton Donaldson Company Kendall Powell Medtronic Hormel Foods Jeffrey Ettinger Company Scott Anderson C.H. Robinson Worldwide Gregg Steinhafel Toro Company Toro Company Michael Hoffman Donaldson Company U.S. Bancorp Richard Davis Valspar Corporation Gary Hendrickson Polaris Industries

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73240_Spencer_u2.indd 11 12/10/12 9:56 PM board composition

CEO Turnover

> Five new CEOs were named to companies in our study within the past year, including Company, Best Buy, Otter Tail Corporation, Regis and Supervalu.

CEO Tenure Among Minnesota’s Top 30 Companies* 17% Under 1 year 47% 1-5 years Over 5 years 37%

* Figures may not total 100% due to rounding.

CEO Succession

> Over the past five years, Minnesota companies in this index have gone through a total of 23 CEO transitions. Four companies have replaced their CEO twice during that time frame. The reasons for these departures are varied, though many were planned retirements and followed an orderly succession process. Others were sudden departures and required “all hands on deck” from the board and management team. In the majority of cases, a new CEO was promoted from within the company.

CEO Transitions Among Minnesota’s Top 30 Companies 2007-2012 Total CEO departures 23 Internal successor 17 (74%) External successor 6 (26%) Departing CEO’s tenure (average) 6.5 years Departing CEO’s age upon exit (average) 59

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73240_Spencer.indd 12 12/6/12 10:17 AM board organization and process

Board meetings

> This year, the average number of board meetings held by Minnesota’s top boards jumped to 7.1 meetings annually, after hovering around an average of six meetings per year for the past five years. This figure includes both regular and special meetings, as described in the company’s proxy. S&P 500 boards meet more often, holding an average of 8.3 meetings per year.

Committee structure

> The average number of standing committees among Minnesota’s top 30 boards is 3.9, for the third year in a row. Seven boards (23 percent) in our study have five or more committees, while one board, Fastenal, has just two committees. Nearly all of Minnesota’s largest boards have the three standing committees mandated by the New York Stock Exchange: audit, compensation and governance.

Term length

> Many of Minnesota’s top boards are continuing to move away from a classified board structure in favor of annual elections. Fifty percent of the boards in our study reelect directors every year, a figure that is unchanged from the past two years but previously had increased steadily every year since we began tracking this statistic in 2002.

> Among the classified boards in our study, 87 percent elect directors to three- year terms. One board (Best Buy) has a two-year term for directors, and another () elected directors to two-year terms this year as part of an effort to declassify the board and will begin annual elections in 2013.

Mandatory retirement age

> Mandatory retirement ages for directors on Minnesota’s top boards continue to shift higher, allowing for longer director tenures. The average tenure among Minnesota directors is currently 8.4 years. Many directors sitting on Minnesota’s top boards today have witnessed the impact of Sarbanes-Oxley legislation, served their companies in times of prosperity, and helped lead their organizations through economic uncertainty. Given that the average tenure of Minnesota’s top 30 CEOs is just over five years, many also have helped lead their organizations through a CEO transition process.

> More than three-quarters (77 percent) of the companies in our index declare a mandatory retirement age for their directors. Among these companies, 83 percent set their mandatory retirement age at 72 or older, a percentage that has risen every year since we first began tracking retirement ages in 2001. For the second year in a row, no boards set their mandatory retirement age below 70. All boards retain the discretion to extend the service of a director who meets or exceeds the retirement age.

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73240_Spencer.indd 13 12/6/12 10:17 AM board organization and process

> Similarly, 73 percent of all S&P 500 boards set a mandatory retirement age for their directors. Of these, the majority (54 percent) set it at age 72, while another 25 percent list 74 or older.

Mandatory Retirement Ages for Minnesota’s Top 30 Boards* 2012 2007 2002 74 & over 17% 8% 0% 72 65% 38% 23% 70 17% 50% 62% 68 & younger 0% 4% 15%

Among boards that set a mandatory retirement age: 23 for 2012, 24 for 2007, and 13 for 2002. * Percentages may not equal 100% due to rounding.

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73240_Spencer.indd 14 12/6/12 10:17 AM A closer look at the compensation committee

> Compensation committees have been under increased scrutiny in recent years, as executive compensation and CEO performance have come under fire both by shareholders and the general public. Thus, it is not surprising that compensation committees are most often comprised of active or retired chairmen and CEOs — individuals who have firsthand experience with these issues.

> In fact, active or retired chairmen and CEOs make up 52 percent of all compensation committee members on Minnesota’s top 30 boards, and 63 percent of the compensation committee chairmen.

> Nearly half (43 percent) of the compensation committee chairs are retired CEOs, perhaps due to the increased time commitment required by committee chairs, as well as a decline in the availability of active CEOs for outside board leadership roles.

> Corporate executives below the CEO level, private investors, consultants, academicians, lawyers and finance executives make up the balance of the compensation committee.

Who Serves on the Compensation Committee? Background* Committee Members Committee Chairs Active chair/president/CEO 29% 20% Retired chair/president/CEO 23% 43% Other corporate executive 17% 13% Investor/investment manager 13% 13% Consultant 6% 3% Academic/nonprofit 5% 3% Financial executive/CFO 5% -- General counsel/attorney 3% 3%

Active or retired executives, unless otherwise noted * Percentages may not equal 100% due to rounding.

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73240_Spencer.indd 15 12/6/12 10:17 AM director compensation

Director Compensation for Minnesota’s Top 3o boards vs. S&P 500 MN 2012 S&P 500 2012 Average annual retainer $67,000 $96,649 Average board meeting fee* $1,863 $2,224 Percentage of boards paying board meeting fees 33% 33% Average committee meeting fee* $1,538 $1,703 Percentage of boards paying committee meeting fees 37% 33%

* Of those companies that pay meeting fees.

Board retainers

> The average annual retainer for a Minnesota director this year is $67,000. This is slightly higher than last year’s average of $64,550, and 33 percent more than the average retainer five years ago ($50,400). Annual director retainers for Minnesota’s top boards are 31 percent lower than the average director retainer of $96,649 for S&P 500 boards.

> Nine companies have increased their board’s retainer since last year, with increases ranging from an additional $2,500 to $20,000 annually.

Meeting fees

> The prevalence of meeting fees as an element of director compensation continues to decrease, with just 33 percent of Minnesota’s top boards electing to pay directors to attend board meetings and 37 percent paying for attendance at committee meetings. Five years ago, 53 percent of Minnesota’s top boards paid board meeting fees and 40 percent paid committee meeting fees.

> Among the boards that do pay meeting fees, directors receive an average of $1,863 per board meeting, a number that has remained virtually static over the past five years. The average committee meeting fee is $1,538, a figure that has also stayed more or less the same since 2007.

Committee retainers

> Forty percent of the boards in our study pay retainers to committee members in lieu of meeting fees, at an average of $7,656 annually. Unlike meeting fees, which have remained static over the past five years, annual retainers for committee members have risen steadily since 2007, when the average was $4,556.

> Among the boards in our study that pay committee member retainers, 50 percent limit them to the audit committee, and 33 percent pay the audit committee a higher amount than other committees — $8,591 annually, on average.

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73240_Spencer.indd 16 12/6/12 10:17 AM > Committee chairs have also seen their annual compensation rise in recent years. Audit committee chairs now receive an average of $17,220 annually for their service, while compensation committee chairs receive $12,899. Other committee chairs, including those overseeing governance committees, receive an average of $10,327 annually. Overall, retainers for committee chairs are up 35 percent from five years ago.

Committee Retainers MN 2012 Average* S&P 500 2012 Average* All committee members $7,656 $8,189 Audit committee members $8,591 $11,503 All committee chairs $13,385 $13,035 Audit committee chairs $17,220 $22,504 Compensation committee chairs $12,899 $18,079

*Of those companies that pay committee retainers.

Compensation for board leadership roles

> As previously stated, 10 companies (33 percent) in this year’s index have nonexecutive chairmen leading their boards. Compensation for this group varies greatly, with annual retainers ranging from $70,000 to $425,000. Many also receive an additional equity award.

> Additional compensation for the lead or presiding director role continues to rise. Thirteen companies in our study (43 percent) pay fees to their lead or presiding directors in addition to the board’s standard annual retainer, at an average of $26,667 — up 42 percent over last year’s average of $18,750.

Compensation for Board Leadership Roles

Median High Low Nonexecutive chairman $150,000 $425,000 $70,000 Lead/presiding director* $25,000 $90,000 $5,000

* Amounts are in addition to the annual retainer paid to non-employee directors.

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73240_Spencer.indd 17 12/6/12 10:17 AM board comparison

How does your board measure up?

How does your board compare in size and composition to Minnesota’s top 30 public companies? Use the following table to see how your board measures up to the largest public companies in the state, as well as the S&P 500 group of companies, as featured in the 2012 Spencer Stuart Board Index. You will see that in some cases, the averages mask wide variations among individual companies.

We hope you find this tool to be a useful benchmark. You might be surprised to find out how your board compares. If you have questions or would like more detailed information from the 2012 Minnesota Board Index, please contact us. Consultants within our Board Practice can help you analyze and evolve your board, and we are always happy to discuss emerging governance best practices.

Highlights of the 2012 Minnesota Board Index MN MN MN S&P 500 Your Board Average Highest Lowest Average Number of directors 10.1 15 7 10.7 Number of committees 3.9 6 2 4.2 Number of meetings per year 7.1 15 4 8.3 Percentage of independent directors 87% 93% 73% 84% Percentage of female directors 18% 36% 0% 17% Percentage of minority directors 11% 33% 0% 15%* Average director tenure (years) 8.4 16 1 8.6 Average director age 60.1 66 51 62.6**

*Average percentage of minorities for the top 200 companies of the S&P 500. **Average age of independent directors only.

Instructions:

1. Calculate the totals and averages for the above measures for your board. 2. To benchmark your board against the index, complete the information in the space provided and compare. 3. For objective counsel on your board composition and practices, or on board evaluation and director search, please contact consultants in our /St. Paul office at 1.612.313.2000.

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73240_Spencer.indd 18 12/6/12 10:17 AM comparative board data

73240_Spencer.indd 19 12/6/12 10:17 AM Comparative Board Data

number of board directors composition

total independent average average director (%) (years) mandatory length % % board committees compensation* director retirement (years) per 2011-2012

female minority

year

meetings

age of company tenure

changes 2012 revenues term age (billions) directors

3M Company 10 90% 9 65 72 1 20% 10% 6 Audit; Retainer: $115,000 NEW DIRECTOR: $29.6 billion Compensation; Lead director additional retainer: Inge G. Thulin Inge Thulin (Less than 1 year) Finance; $25,000 Chairman, President & Nominating & Governance Committee chair retainer: CEO, $20,000 (Audit, Comp.); 3M Company $15,000 (Others) Stock award: $130,000 value RETIRING DIRECTOR: George W. Buckley Former Chairman, President & CEO, 3M Company

Ameriprise Financial 9 89% 6 63 75 2 11% 0% 8 Audit; Retainer: $80,000 No Changes $10.2 billion Compensation & Benefits; Committee chair retainer: James Cracchiolo (7 years) Executive; $40,000 (Audit); $15,000 Nominating & Governance (Others except Executive) Committee member retainer: $15,000 (Audit); $10,000 (Others except Executive) Deferred share units: $115,000 value

Best Buy Co. 9 89% 7 56 75 2 22% 33% 4 Audit; Retainer: $75,000 NEW DIRECTOR: $50.7 billion Compensation & Human Lead director additional retainer: Hubert Joly Hubert Joly (Less than 1 year) Resources; $10,000 CEO, Best Buy Co. Finance & Investment Committee chair retainer: Policy; $15,000 (Audit, Compensation/ RETIRING DIRECTORS: Nominating, Corporate HR); $10,000 (Others) Brian J. Dunn Governance & Public Policy; Stock award: $119,000 value Former CEO, Best Buy Co. Global Strategy Rogelio M. Rebolledo Retired Chairman, Pepsi Bottling Group Mexico

Richard M. Schulze Chairman & Founder, Best Buy Co.

C.H. Robinson Worldwide 9 89% 8 58 70 3 11% 0% 4 Audit; Retainer: $80,000 NEW DIRECTOR: $10.3 billion or 12 Compensation; Committee chair retainer: Scott P. Anderson John Wiehoff (10 years) years Governance $20,000 (Audit); $10,000 President & CEO, (Others) Patterson Companies Committee member retainer: $10,000 (Audit); $5,000 (Others) Restricted stock grant: $50,000 value

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73240_Spencer.indd 20 12/6/12 10:17 AM number of board directors composition

total independent average average director (%) (years) mandatory length % % board committees compensation* director retirement (years) per 2011-2012

female minority

year

meetings

age of company tenure

changes 2012 revenues term age (billions) directors

Deluxe Corporation 9 89% 9 60 72 1 22% 11% 6 Audit; Retainer: $50,000 No Changes $1.4 billion Compensation; Nonexecutive chair retainer: Lee Schram (6 years) Corporate Governance; $100,000 Finance Committee chair retainer: $15,000 (Audit); $7,500 (Comp.); $5,000 (Others) Audit committee meeting fee: $2,000 (in person); $1,000 (phone) Other committee meeting fee: $1,500 (in person); $750 (phone) $1,500 for an approved site visit or director education program attended (max 5/year) Restricted stock: $80,000 value

Donaldson Company 1 11 91% 11 61 72 3 9% 9% 7 Audit; Retainer: $38,000 No Changes $2.3 billion or 18 Corporate Governance; Committee chair retainer: William Cook (8 years) years Human Resources $10,000 (Audit); $8,500 (HR); $7,500 (Corp. Gov.) Board meeting fee: $2,500 Committee meeting fee: $1,500 (Audit); $1,000 (Others) Stock options: 7,200 shares annually

Ecolab 14 93% 8 60 72 3 21% 0% 12 Audit; Retainer: $100,000 NEW DIRECTORS: $6.8 billion Compensation; Presiding director additional Michael Larson Douglas Baker (8 years) Finance; retainer: $25,000 Manager of Cascade Governance; Committee chair retainer: Investment Safety, Health and $20,000 (Audit); $15,000 Environment (Comp.); $10,000 (Others) Mary M. VanDeWeghe Audit committee member Former President & CEO, retainer: $10,000 Forte Consulting Stock units: $50,000 value Stock options: $55,000 value Daniel S. Sanders Retired President, ExxonMobil Chemical Company & VP, Exxon Mobil Corporation

RETIRING DIRECTOR: Paul J. Norris Former Chairman & CEO, W.R. Grace & Company

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number of board directors composition

total independent average average director (%) (years) mandatory length % % board committees compensation* director retirement (years) per 2011-2012

female minority

year

meetings

age of company tenure

changes 2012 revenues term age (billions) directors

Fastenal Company 11 82% 16 58 --- 1 18% 0% 4 Audit; Retainer: $15,000 NEW DIRECTORS: $2.8 billion Compensation Chairman monthly retainer: Rita J. Heise Willard Oberton (10 years) $5,000 (in lieu of meeting fees) Independent Consultant Committee chair retainer: and Former Corporate VP & $15,000 (Audit); $10,000 Chief Information Officer, (Compensation) Board or committee meeting fee: $4,000 Darren R. Jackson President & CEO, Advance Auto Parts

General Mills 13 92% 11 65 74 1 31% 23% 8 Audit; Retainer: $75,000 No Changes $14.9 billion Compensation; Committee chair retainer: Kendall Powell (5 years) Corporate Governance; $15,000 (Audit); $10,000 Finance; (Others) Public Responsibility Audit committee member retainer: $5,000 Restricted stock units: $90,000 value upon election & annually Stock options: $62,000 value in fiscal 2012

H.B. Fuller Company 8 88% 8 60 72 3 13% 13% 8 Audit; Retainer: $40,000 No Changes $1.6 billion Compensation; Nonexecutive chair retainer: James Owens (2 years) Corporate Governance & $70,000 Nominating Vice chair retainer: $30,000 Committee chair retainer: $10,000 (Audit); $7,500 (Others) Board meeting fee: $1,000 Committee meeting fee: $1,000 Committee ad-hoc telephone meeting fee: $500 Restricted stock: Target value of $70,000

20

73240_Spencer.indd 22 12/6/12 10:17 AM number of board directors composition

total independent average average director (%) (years) mandatory length % % board committees compensation* director retirement (years) per 2011-2012

female minority

year

meetings

age of company tenure

changes 2012 revenues term age (billions) directors

Hormel Foods Corporation2 11 82% 6 58 72 1 36% 27% 6 Audit; Retainer: $70,000 NEW DIRECTORS: $7.9 billion Compensation; Lead director additional retainer: Glenn S. Forbes, M.D. Jeffrey Ettinger (6 years) Contingency; $25,000 Former President & CEO, Governance Committee chair retainer: Mayo Clinic Rochester $15,000 (Audit and Comp.); $10,000 (Gov.) Stephen M. Lacy Committee meeting fee: $1,000 Chairman, President & ($500 phone) CEO, Stock: 6,600 options & 4,500 Meredith Corporation restricted stock units RETIRING DIRECTORS: Michael J. Mendes Former Chairman, President & CEO, Diamond Foods

Ronald D. Pearson Chairman Emeritus, Hy-Vee

Hugh C. Smith, M.D. Former Professor of Medicine, Mayo Clinic College of Medicine; Consultant, Cardiovascular Division, Mayo Clinic

John G. Turner Chairman, Hillcrest Capital Partners

Imation Corporation 8 88% 6 61 70 3 13% 0% 7 Audit & Finance; Retainer: $50,000 NEW DIRECTOR: $1.3 billion or 15 Compensation; Nonexecutive chair David B. Stevens Mark Lucas (2 years) years Nominating & Governance compensation: $87,500 cash + CTO, Brocade $87,500 equity grant Communications Systems Committee chair retainer: $10,000 (Audit & Finance; RETIRING DIRECTOR: Comp.); $7,500 (Nom. & Gov.) Ronald T. LeMay Board or committee meeting fee: Former President & CEO, $1,500; $1,000 (phone or video) AirCell, and Chairman, Interview of board candidates OpenAir Ventures fee: $1,500 per interview Annual equity grant: $175,000 value (50% as stock options, 50% as restricted stock)

21

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number of board directors composition

total independent average average director (%) (years) mandatory length % % board committees compensation* director retirement (years) per 2011-2012

female minority

year

meetings

age of company tenure

changes 2012 revenues term age (billions) directors

Life Time Fitness 8 88% 7 62 --- 1 13% 0% 6 Audit; Retainer: $60,000 No Changes $1 billion Compensation; Lead director additional retainer: Bahram Akradi (16 years) Finance; $90,000 Governance and Committee chair retainer: Nominating $10,000 (Gov.); $15,000 (Other) Restricted stock: $100,000 value upon initial election and $100,000 value annually Lead director additional restricted stock: $25,000 value

Medtronic 10 90% 8 62 72 1 20% 30% 8 Audit; Retainer: $80,000 NEW DIRECTOR: $16.2 billion Compensation; Lead director additional retainer: Michael O. Leavitt Omar Ishrak (1 year) Finance; $20,000 Founder & Chairman, Nominating & Corporate Committee chair retainer: Leavitt Partners Governance; $19,000 (Audit); $10,000 Quality & Technology (Others) RETIRING DIRECTORS: Audit committee member David L. Calhoun retainer: $5,000 CEO, The Nielsen Company Deferred stock: $140,000 value Jean-Pierre Rosso Chairman, World Economic Forum USA

Mosaic Company 12 83% 5 61 72 3 17% 0% 6 Audit; Retainer: $90,000 NEW DIRECTORS: $9.9 billion Compensation; Nonexecutive chair retainer: Nancy E. Cooper James Prokopanko (4 years) Corporate Governance & $180,000 Former EVP & CFO, CA Nominating; Committee chair retainer: Technologies Environmental, Health, $20,000 (Audit), $15,000 Safety and Sustainable (Comp.), $10,000 (Others) Gregory L. Ebel Development Restricted stock units: $155,000 CEO, Spectra Energy value (Chairman: $260,000) Corporation

RETIRING DIRECTORS: David B. Mathis Chairman, Kemper Insurance Companies

Sergio A. Lires Rial EVP & CFO, Cargill

22

73240_Spencer.indd 24 12/6/12 10:17 AM number of board directors composition

total independent average average director (%) (years) mandatory length % % board committees compensation* director retirement (years) per 2011-2012

female minority

year

meetings

age of company tenure

changes 2012 revenues term age (billions) directors

Nash Finch Company 7 86% 6 59 None 1 0% 14% 12 Audit & Finance; Retainer: $50,000 No Changes $4.8 billion Compensation & Nonexecutive chair retainer: Alec Covington (6 years) Management Development; $150,000 Corporate Governance Committee chair retainer: $15,000 (Audit & Comp.); $7,500 (Corp. Gov.) Board meeting fee: $1,500 Committee meeting fee: $1,250 Restricted stock units: $50,000 value

Otter Tail Corporation 9 78% 9 62 72 3 22% 0% 11 Audit; Retainer: $60,000 NEW DIRECTOR: $1.1 billion Compensation; Nonexecutive chair retainer: Mark W. Olson Edward McIntyre Corporate Governance $84,000 Co-Chairman, Treliant Risk (Less than 1 year) Committee chair retainer: Advisors $7,000 Restricted stock: 3,000 shares RETIRING DIRECTOR: ($67,530 value in 2011) John C. MacFarlane Former Chairman, Otter Tail Corporation

Patterson Companies 11 73% 10 63 ... 3 18% 0% 4 Audit; Retainer: $35,000 NEW DIRECTOR: $3.5 billion Compensation; Audit committee member Jody H. Feragen Scott Anderson (2 years) Governance retainer: $4,000 EVP & CFO, Hormel Foods Board meeting fee: $1,500 Restricted stock: $80,000 value Stock options: 12,000 shares upon initial election

Pentair 10 90% 9 58 72 3 20% 30% 7 Audit; Retainer: $40,000 No Changes $3.5 billion Compensation; Lead director additional retainer: Randall Hogan (12 years) Governance; $20,000 International Committee chair retainer: $20,000 (Audit ); $10,000 (Comp.); $5,000 (Others) Committee member retainer: $9,000 (Audit); $4,000 (Others) Board meeting fee: $2,000 ($500 phone/video) Committee meeting fee: over 2 hrs: $2,500; $3,000 (Chairs); $1,000 (video/phone); under 2 hrs: $1,500; $2,000 (Chairs); $500 (video/phone) Restricted stock units: $43,000 value in 2011 Stock options: $42,500 value in 2011

23

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number of board directors composition

total independent average average director (%) (years) mandatory length % % board committees compensation* director retirement (years) per 2011-2012

female minority

year

meetings

age of company tenure

changes 2012 revenues term age (billions) directors

Polaris Industries 9 89% 7 55 72 3 11% 0% 4 Audit; Retainer: $57,000 (at least $5,000 No Changes $2.7 billion Compensation; in common stock) Scott Wine (4 years) Corporate Governance & Nonexecutive chair retainer: Nominating; $157,000 Technology Committee chair retainer: $15,000 (Audit); $10,000 (others) Committee meeting fee: $1,000 Restricted stock units: $85,000 value

Regis Corporation3 8 88% 1 51 None 1 0% 0% 15 Audit; Retainer: $75,000 NEW DIRECTORS: $2.3 billion Compensation; Audit committee chair retainer: Daniel Beltzman Daniel Hanrahan (Less than Nominating & Corporate $10,000 Managing Partner, 1 year) Governance Restricted stock: 7,000 shares Birch Run Capital

James P. Fogarty Former President & CEO, Charming Shoppes

Daniel J. Hanrahan President & CEO, Regis Corporation

Michael J. Merriman, Jr. Operating Advisor, Resilience Capital Partners

Jeffrey C. Smith Managing Member, CEO & CIO, Starboard Value

David P. Williams EVP & CFO, Chemed Corporation

RETIRING DIRECTORS: Rolf F. Bjelland Retired President, Chairman & CIO, Lutheran Brotherhood Mutual Funds

Paul D. Finkelstein Former Chairman & CEO, Regis Corporation

Van Zandt Hawn Managing Director & Founder, Goldner Hawn Johnson & Morrison

Susan S. Hoyt Former EVP, Human Resources, Staples

David Kunin CEO, Beautopia

24

73240_Spencer.indd 26 12/6/12 10:17 AM number of board directors composition

total independent average average director (%) (years) mandatory length % % board committees compensation* director retirement (years) per 2011-2012

female minority

year

meetings

age of company tenure

changes 2012 revenues term age (billions) directors

St. Jude Medical 7 86% 10 60 --- 3 29% 0% 5 Audit; Retainer: $60,000 No Changes $5.6 billion Compensation; Presiding director retainer: Daniel Starks (8 years) Governance & Nominating $5,000 Committee chair retainer: $14,200 (Audit); $9,000 (Others) Committee member retainer: $4,000 Board meeting fee: $2,000 Stock options: 9,700 shares at $52.17 per share

SUPERVALU 10 90% 9 63 74 1 20% 20% 5 Audit; Corporate Retainer: $80,000 RETIRING DIRECTOR: $36.1 billion or 15 Governance & Nominating; Nonexecutive chair retainer: Craig Herkert Wayne Sales (Less than 1 year) years Finance; $155,000 Former President and CEO, Leadership Development & Committee chair retainer: SUPERVALU Compensation $25,000 (Audit & Comp.); $20,000 (Others) Committee member retainer: $15,000 (Audit & Comp.); $10,000 (Others) Deferred stock: $100,000 value

Target Corporation 11 91% 10 57 72 or 1 36% 27% 5 Audit; Retainer: $90,000 No Changes $69.9 billion 20 Compensation; Lead director additional retainer: Gregg Steinhafel (4 years) years Corporate Responsibility; $25,000 Finance; Committee chair retainer: Nominating & Corporate $29,168 (Audit); $16,668 Governance (Comp.); $12,500 (Other) Restricted stock units: $50,000 value upon initial election; $90,000 value annually Stock options: $80,000 value

25

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number of board directors composition

total independent average average director (%) (years) mandatory length % % board committees compensation* director retirement (years) per 2011-2012

female minority

year

meetings

age of company tenure

changes 2012 revenues term age (billions) directors

TCF Financial Corporation 15 73% 7 63 None 1 7% 13% 6 Audit; Retainer: $25,000 NEW DIRECTORS: $1.4 billion Bank Secrecy Act Committee chair retainer: Craig R. Dahl William Cooper (4 years; Compliance; $20,000 Vice Chairman & EVP, formerly CEO from 1987-2005) Compensation, Nominating Board meeting fee: $1,000 Lending, & Corporate Governance; Committee meeting fee: $1,000 TCF Financial Executive; Stock grant: $45,000 value Finance; annually Thomas F. Jasper Risk Vice Chairman & EVP, Funding, Operations and Finance, TCF Financial

James M. Ramstad Former Minnesota Congressman

RETIRING DIRECTORS: Luella G. Goldberg Life Trustee, University of Minnesota Foundation

Ralph Strangis Founder, Kaplan, Strangis and Kaplan, P.A.

Toro Company 10 90% 11 59 70 3 20% 0% 6 Audit; Retainer: $42,500 NEW DIRECTOR: $1.9 billion Compensation & Human Lead director additional retainer: James “Joc” O’Rourke Michael Hoffman (7 years) Resources; $15,000 VP, Operations and COO, Finance; Committee chair retainer: Mosaic Company Nominating & Governance $15,000 (Audit); $10,000 (Comp./HR); $5,000 RETIRING DIRECTOR: (Nominating/Gov. & Finance) Inge G. Thulin Board meeting fee: $1,625 ($500 Chairman, President & phone) CEO, 3M Company Committee meeting fee: $1,250 ($500 phone) Stock options: $44,000 value Stock grant: $44,000 value

26

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total independent average average director (%) (years) mandatory length % % board committees compensation* director retirement (years) per 2011-2012

female minority

year

meetings

age of company tenure

changes 2012 revenues term age (billions) directors

U.S. Bancorp 14 93% 11 61 72 1 21% 29% 9 Audit; Retainer: $90,000 NEW DIRECTORS: $21.4 billion Community Reinvestment & Lead director additional retainer: Roland A. Hernandez Richard Davis (5 years) Public Policy; $25,000 Founding Principal and Compensation & Human Committee chair retainer: CEO, Hernandez Media Resources; $25,000 (Audit & Risk); $15,000 Ventures Executive; (Others) Governance; Audit committee member Doreen Woo Ho Risk Management retainer: $7,500 President, San Francisco Restricted stock: $130,000 value Port Commission

RETIRING DIRECTOR: Richard G. Reiten Retired Chairman & CEO, Northwest Natural Gas Company

UnitedHealth Group 10 90% 13 66 None 1 20% 10% 12 Audit; Retainer: $125,000 No Changes $101.9 billion Compensation & Human Nonexecutive chair retainer: Stephen Hemsley (6 years) Resources; $425,000 Nominating & Corporate Committee chair retainer: Governance; $15,000 (Audit & Comp.), Public Policy Strategies & $10,000 (Public Policy & Responsibility Governance) Stock options: $6,250 deferred stock units initially; $150,000 aggregate fair value of deferred stock units annually

Valspar Corporation 9 89% 7 57 72 3 22% 11% 5 Audit; Retainer: $82,500 NEW DIRECTOR: $4 billion or 18 Compensation; Lead director additional retainer: Jack J. Allen Gary Hendrickson (1 year) years Executive; $35,000 President, North American Governance Committee chair retainer: Truck Group, Navistar $15,000 (Audit & Comp. only) Sub-committee member RETIRING DIRECTORS: retainer: $5,000 William L. Mansfield Stock award: $82,500 value Former Chairman, Valspar New director restricted stock Corporation award: $82,500 value Stephen D. Newlin Chairman, President & CEO, PolyOne Corporation

27

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number of board directors composition

total independent average average director (%) (years) mandatory length % % board committees compensation* director retirement (years) per 2011-2012

female minority

year

meetings

age of company tenure

changes 2012 revenues term age (billions) directors

Xcel Energy 12 92% 6 59 72 1 25% 17% 7 Audit; Retainer: $80,000 NEW DIRECTORS: $10.7 billion or 15 Finance; Lead director additional retainer: Gail Koziara Boudreaux Benjamin Fowke (1 year) years Governance, Compensation $25,000 CEO, United Healthcare & & Nominating; Committee chair retainer: EVP, UnitedHealth Group Nuclear, Environmental & $15,000 (Audit); $10,000 Safety (Others) Richard T. O’Brien Audit committee member CEO, Newmont Mining retainer: $10,000 Corporation Stock equivalent units: $120,000 restricted stock units

Footnotes:

1 Data taken from Donaldson Company’s October 2011 proxy statement. 2 Data taken from Hormel Foods’ December 2011 proxy statement. 3 Data taken from Regis Corporation’s September 2011 proxy statement.

*Notes on director compensation:

Compensation figures and board meeting information have been recorded as accurately as possible from the company proxy statements.

Retainers and stock compensation are annual unless otherwise specified.

Nonexecutive chair retainers are in lieu of the annual retainers listed for outside directors; retainers for lead/presiding directors and committee chairs are in addition to the annual retainer.

Retainers may not be strictly cash awards; some may include a stock component (noted wherever known).

Many companies also include deferred compensation and retirement plans as part of their board compensation.

Sources: company proxy statements, SEC filings and press releases through August 31, 2012

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73240_Spencer.indd 30 12/6/12 10:17 AM Spencer Stuart — Minnesota Spencer Stuart’s Minneapolis/St. Paul office opened in 1997 to respond to the growing demand for senior-level leadership by local and regional organizations. The Minneapolis/ St. Paul office has served public and private companies as well as nonprofit organizations seeking board directors and senior executives. Susan Boren, a member of the firm’s board of directors and a member of Spencer Stuart’s Board Practice, also provides board consultation services to a wide range of clients who seek to improve their boards’ effectiveness through structural and process change. If you are considering a board director or executive search, or would like counsel on your board or leadership practices, please call us.

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