2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 104 EXELIXIS, INC. FIRST AMERICAN FINANCIAL CORPORATION FLIR SYSTEMS, INC. GANNETT CO., INC. CompensationofExecutiveOfficers | CompensationDiscussionandAnalysis 2017CompensationProgramHighlights In2017,weachievedsignificantcorporateandfinancialmilestonesthathelpedpositionustobeabletodeliveruponour goalofdrivingtheexpansionanddepthofourproductofferings.TheCompensationCommitteebelievesthatthe2017 compensationofouremployees,includingourNamedExecutiveOfficers,reflectsnotonlythoseachievements,butwillalso encourageappropriateeffortstowardstheachievementofourcommercialobjectivesandbothshort-termandlong-term researchanddevelopmentgoals. Inlightoftheabove,theBoardandCompensationCommitteetookthefollowingkeyactionswithrespectto2017 compensationforourNamedExecutiveOfficers: KeyCompensationActions Description ModestSalaryIncreasesforNamed ExecutiveOfficers InFebruary2017,theCompensationCommitteeincreasedbasesalariesofour NamedExecutiveOfficersbybetween3.5%and6%oversalariesfor2016. GrantedSubstantialPortionofLong- TermIncentiveCompensationinthe FormofStockOptions InOctober2017,aspartofourongoingequityincentivecompensation program,theCompensationCommitteegrantedstockoptionsandrestricted stockunits,orRSUs,tofocusourNamedExecutiveOfficersonthecompany’s long-termperformance.ForDr.Morrissey,themixwas75%stockoptionsand 25%RSUs,andfortheotherNamedExecutiveOfficers,themixwas50%stock optionsand50%RSUs.StockoptionsareakeyaspectofaligningourNamed ExecutiveOfficers’compensationwiththeinterestsofourstockholders becausetheyprovideareturntoourNamedExecutiveOfficersonlyifthe marketpriceofourcommonstockappreciatesoverthestockoptionterm. ApprovedAnnualCashBonusesAligned withStrongCompanyPerformance InFebruary2018,theCompensationCommitteeapprovedthepaymentofcash bonusesintheamountof100%ofeachNamedExecutiveOfficer’s2017target cashbonusesresultingfromtheCompensationCommittee’sassessmentofthe overallachievementofourcorporategoalsduring2017,andthecontribution ofeachNamedExecutiveOfficertowardsuchachievements. CompensationPracticesandGovernanceHighlights PayforPerformance LinkthecompensationofourNamedExecutiveOfficerstothesuccessofour corporategoals StockholderAlignment AligntheinterestsofourNamedExecutiveOfficerswiththoseofour stockholdersthroughtheuseoflong-termequityincentives EquityPlanFeatures Applyamaximum7-yeartermforstockoptions Norepricingofunderwaterstockoptionswithoutpriorstockholderapproval 2017Planincludesminimumvestingrequirementsofnolessthanoneyearfor alltypesofawards,subjecttolimitedexceptions StockOwnershipGuidelines Applystockownershipguidelinestodirectorsandexecutiveofficerstofurther aligntheirinterestswiththoseofourstockholders ChangeinControlProvisions Noexcessivechangeincontrolorseverancepayments Provide“double-trigger”changeincontrolbenefits Notaxgross-upsonseveranceorchangeincontrolbenefits Perquisites,Retirementand PensionBenefits NamedExecutiveOfficersdonotreceiveexcessiveperquisitesorpost- terminationretirementorpensionbenefitsthatarenotavailabletoall employeesgenerally ProhibitiononHedgingand MarginLoans Prohibithedgingandpurchasesonmarginbyexecutiveofficersanddirectors. MeaningfulLimitsonPledging Limitpledgingofourcommonstockbyexecutiveofficersanddirectorsto circumstanceswheretheindividualcanclearlydemonstratethefinancial capacitytorepaytheloanwithoutresorttothepledgedsecurities.No executiveofficersordirectorspledgedourcommonstockduring2017. 2018ProxyStatement 35 CompensationDiscussionandAnalysis 22|2018ProxyStatement FirstAmericanFinancialCorporation SummaryofExecutiveCompensationPractices Thetablebelowhighlightscertainofourexecutivecompensationpractices,includingpracticeswehave implementedthatdriveperformanceaswellas thosewehaveprohibitedbecausewedonot believethey serveourstockholders’interests. WHATWEDO • Pay-for-performance. Tiepaytoperformancebyensuringthatasubstantialportionofexecutive officercompensationisat-riskandrelatedtotheCompany’sconsolidatedfinancialperformance. • Equity-basedcompensation. Asubstantialportionofcompensationis paidintheformofRSUsto encouragealignmentbetweenexecutivesandlong-termstockholdersandtodiscourageexcessive risktaking. • Stockownershipguidelines. Wehavestockownershipguidelines of5timesbasesalaryforthe CEOand3timesbasesalaryforourotherNEOswithbasesalariesequaltoorgreater than $500,000. • Clawbackpolicy. CompensationmaybeadjustedorrecoverediftheCompany’sreportedfinancial resultsarerestatedduetomaterialnoncompliancewithapplicablefinancialreportingrequirements. • Peergroupbenchmarking. Peergroupperformanceandcompensationdataisregularlyreviewed bytheCommitteetoinformcompensationdecisions. • Nopledgingofsharesortradingonmargin. OurtradingpoliciesgenerallyprohibitourNEOsand certainotheremployeesfromholdingCompanysecuritiesinamarginaccountorpledgingCompany securities as collateral. • Nohedging. HedgingownershipofCompanysecuritiesbyengaginginshortsalesortradingin optioncontractsinvolvingCompanysecuritiesis prohibited. • Independentcompensationconsultant. TheCommitteeuses anindependentcompensation consultantthatprovidesnootherservicestotheCompany. EXECUTIVE COMPENSATION Compensation Governance Compensation Governance TheBoard’scommitmenttostrongcorporategovernancepractices extends tothecompensationplans,principles, programsandpolicies established bytheCommittee.TheCompany’s notablecompensation-relatedgovernancepractices andpolicies includethefollowing: ✓ Pay-for-performance .Amajorityofthetargettotalcompensationofourseniorexecutives is provided intheformofperformance- based compensation. ✓ Clawback .TheCompany’s clawback policyenables theBoardtorequirecoveredexecutives torepayorforfeitcertainbonus, incentiveorequity-based compensationinanumberofspecified situations. ✓ Risk evaluation. TheCommitteeregularlyevaluates therisksassociated withourexecutive compensationplansandprogramsand considersthepotentialrelationshipbetween compensationandrisktaking. ✓ Stockownershipguidelines .Seniorexecutives mustholdatleast50%oftheafter-tax sharestheyreceive(assuming a50%taxrate) uponthevestingofawards grantedbytheCompany untiltheyhavemettheapplicable stockownershipguidelines. ✓ Moderateseverancearrangements .Change-in-controlrelatedcashseveranceis double-triggerandmarket-level. ✓ Double-triggerequity vestinguponachangeincontrol .Subject tocertainexceptions, theCompany grantsequity awards that accelerateuponachangeincontrolonlyif theawards arenotcontinuedorassumed ortherecipient hasaqualifying termination ofemploymentwithintwoyearsafterthechangeincontrol. ✕ Nounearneddividends .TheCompany doesnotpay dividends onunvestedequity awards anddoesnotpay dividend equivalents onunearnedPerformanceSharesorunpaid RSUsgrantedtoemployees. ✕ Noexcise taxgross-ups .InaccordancewiththeCompany’s severanceandchange-in-controlseveranceplans,executives arenot eligible foranexcise taxgross-up. ✕ Nohedging,short-sellingorpledging .TheBoardmaintains apolicythatprohibitstheCompany’s employeesanddirectorsfrom hedging,pledging orshort-sellingtheCompany’s shares. ✕ Noincometaxgross-ups .TheCompany doesnotofferincometaxgross-upsexcept initsrelocationprogramandinconnection withSharonRowlands’shousingallowance(whichwas discontinued in2017). How the Committee Determines NEO Compensation TheCommitteedetermines ourNEOs’compensationtargetandmix(including base salary,annualincentivetarget,long-termincentivemix andtarget,andothercompensationcomponents)based onitsbusiness judgment,inlightofourcompensationguiding principles. Its determinationtakes intoaccountthenatureandresponsibility oftheposition,executive officerandCompany performance(bothhistorically andintheprioryear),internalpay equity amongpositions,andtheinputofmanagementandtheCommittee’sindependent compensation consultant.Inaddition, theCommitteeconsiderscomparativepeergroupmarketdata andfeedback fromstockholdersas furtherdescribed below. COMPARATIVE MARKET DATA InOctober2016,Meridian provided theCommitteewithareportthat,amongotherthings,outlinedcurrentexecutive compensationtrends andpractices andcomparedeachofourseniorexecutive’s compensationtothecompensationofsimilarofficers atmarket,industryand revenue-sizepeercompanies (the“ComparativeMarketData”).TheComparative MarketDatawas drawnfromthefollowingsurveys(which rangedfrombroad-based toindustry-specific): the2015TowersWatsonMedia ExecutiveSurvey,the2016TowersWatsonGeneral IndustryExecutiveCompensationSurvey,the2016RadfordGlobalTechnologySurvey,andproxydata foraselectgroupofmedia peers. TheCommitteeuses theComparative MarketDatatoobtainageneralunderstandingofthecompensationstructuresmaintained bysimilarly- situated companies andtoverifythatourNEOs’compensationtargetandmixfallwithinanappropriate rangebased onthebroadmarket referencepointsprovided bytheComparative MarketData.TheCommitteedoesnot,however,targetelementsofcompensationtoacertain percentage orpercentilewithintheComparative MarketData. SAY-ON-PAY RESULTS AND STOCKHOLDER ENGAGEMENT EFFORTS Inevaluatingexecutive compensationprograms,policies andpractices, andinmakingdecisions impacting 2017NEOcompensation,the CommitteenotedthattheCompany’s existing executive compensationprogramhasbeenwellreceived bystockholders.AttheCompany’s 2017AnnualMeeting, approximately 94%ofthevotescastwere“for”theadvisoryresolutiontoapprovetheCompany’s executive compensationprogram(the“Say-on-Pay”proposal).TheCommitteewillcontinuetoconsidertheoutcomeofupcomingSay-on-Pay voteswhen makingfutureNEOcompensationdecisions. TheCompany is committedtotheinterestsofitsstockholdersandrecognizesthatcommunicatingwithstockholdersonaregularbasis is a criticalcomponentoftheCompany’s corporategovernanceprogram.Aspartofthiscommitment,theCompany activelyengages withits 26 2018ProxyStatement GANNETTCO.,INC. COMPENSATIONDISCUSSIONANDANALYSIS Other Key Compensation Practices Webelieveweengageinbestpracticeexecutivecompensationpoliciesandprograms: ✓ ✗ Whatwedo ✓ IndependentCompensationCommittee .The CompensationCommitteeismadeupofallindependent directors. ✓ IndependentCompensationCommitteeAdvisor .The CompensationCommitteeengageditsownindependent compensationconsultanttoassistwiththedesignofthe 2017compensationprogram. ✓ AnnualExecutiveCompensationReview. The CompensationCommitteeconductsanannualreviewof compensationforourexecutiveofficersandareviewof compensation-relatedrisks. ✓ CompensationAt-Risk .Theexecutivecompensation programisdesignedsothatasignificantportionof executiveannualcompensationis“atrisk”toalignthe interestsofourNEOsandourshareholders.For2017 AIPachievementforNEOswas92%oftargetbasedon thechallenginggoalssetbyourCompensation Committee. ✓ MixedPerformance-BasedIncentivesandIncentive Caps .Ourexecutivecompensationprogramutilizesa mixofperformance-basedcashincentives(short-term) andtime-andperformance-basedequityincentives(long- term)havingdifferentperformance-basedmetrics.We alsocapmaximumannualperformance-basedcash incentivesat200%ofthepayouttargetandperformance- basedequitycompensationat200%ofthepayouttarget forthePerformanceGrant,asdiscussedbelow. ✓ Multi-YearVestingRequirements .Theperformance- basedequityawardsgrantedtotheexecutiveofficers vestorareearnedoverathree-yearperiod,consistent withcurrentmarketpracticeandourretentionobjectives. ✓ ClawbackPolicy .Weadoptedaclawbackpolicywith respecttocashincentiveawardsthatrequiresthatsuch awardsberepaidtotheCompanyintheeventofcertain actsofmisconductorgrossnegligence. ✓ StockOwnershipGuidelines .Wemaintainstock ownershipguidelinesforourdirectorsandourexecutive officers.WithinfiveyearsofjoiningtheCompany, directorsandexecutiveofficersarerequiredtohold sharesoftheCompany’scommonstockorinthemoney optionsequaltoorgreaterthanfourtimesthedirector’s annualboardretainer(greaterthanorequaltoonetimes salaryforexecutiveofficers,otherthantheCEO).The CEOisrequiredtoholdvestedsharesoftheCompany’s commonstockequaltoorgreaterthanthreetimesthe CEO’sannualsalary. Whatwedon’tdo ✗ LimitedPerquisites .Weprovideminimalperquisitesand otherpersonalbenefitstotheNEOs. ✗ No“GoldenParachute”TaxReimbursements .Wedo notprovideanytaxreimbursementpayments(including “gross-ups”)onanytaxliabilitythattheNEOsmightowe asaresultoftheapplicationofSections280Gor4999of theInternalRevenueCode(the“Code”). ✗ HedgingandPledgingProhibited .Employeesmaynot hedgeorpledgeCompanysecuritiesascollateral. ✗ NoRepricingofUnderwaterOptions .Ourplanprohibits therepricingofstockoptionsorotherdownward adjustmentintheoptionpriceofpreviouslygrantedstock options(otherthantoreflectcorporatetransactionssuch asmergers). ✗ NoStockOptionsGrantedwithanExercisePrice LessThanFairMarketValue .Allstockoptionsare grantedwithanexercisepriceattheclosingpriceonthe dateofgrant. 2018PROXYSTATEMENT FLIR 17