BLC Belo Corp.

 

 

April 4, 2008

 

Dear Fellow Shareholder:

 

On February 8, 2008, Belo Corp. completed the spin-off of its newspaper businesses and related assets through the creation of a separate, publicly-traded company called A. H. Belo Corporation and the distribution of shares of A. H. Belo common stock to Belo shareholders of record as of the close of business on January 25, 2008. On May 13, 2008, Belo will hold its annual meeting of shareholders to report on the spin-off and conduct its regular business of electing Belo directors and ratifying the appointment of independent auditors. A shareholder proposal will also be considered. The first annual meeting of A. H. Belo shareholders will be held in 2009.

 

We invite you to attend this year’s annual meeting, which will be held in The Pavilion of the Belo Mansion, 2101 Ross Avenue, Dallas, Texas. This package includes the formal notice, proxy statement, and proxy card for the meeting, together with Belo’s 2007 annual report. The proxy statement tells you more about the agenda and voting procedures for the meeting. It also describes how the Belo Board operates and provides information about Belo’s directors, including those nominated for election at this year’s meeting.

 

For those Belo shareholders with access to the Internet, we encourage you to vote your shares over the Internet. Detailed instructions on how to vote over the Internet or by telephone are set out on the proxy card. Also, we encourage you to elect to receive future annual reports, proxy statements, and other materials over the Internet, by following the instructions in the proxy statement. This electronic means of communication is quick and convenient and could save the Company a substantial amount of money in printing and postage costs.

 

Whether or not you attend the meeting, we encourage you to vote your shares as soon as possible prior to the meeting either by returning your proxy card or by voting using the Internet or telephone voting procedures outlined in the enclosed materials. Even if you own only a few shares, it is important that your shares be represented at the meeting.

 

We hope to see you on May 13th.

 

Sincerely,

 

 

Robert W. Decherd
Chairman of the Board

 

 

Dunia A. Shive
President and Chief Executive Officer

 

Belo Corp.   P. O. Box 655237 Dallas, Texas 75265-5237 Tel. 214.977.6606 Fax 214.977.6603

www.belo.com Deliveries: 400 South Record Street Dallas, Texas 75202-4841

 

Belo Corp.

P. O. Box 655237

Dallas, Texas 75265-5237

www.belo.com

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 13, 2008

 

 

 

To Belo Shareholders:

 

Please join us for the 2008 annual meeting of shareholders of Belo Corp. (“Belo”). The meeting will be held in The Pavilion of the Belo Mansion, 2101 Ross Avenue, Dallas, Texas, on Tuesday, May 13, 2008, at 11:00 a.m., Dallas, Texas time. Refreshments will be served prior to the meeting, starting at 10:00 a.m.

 

At the meeting, the holders of Belo Series A common stock and Belo Series B common stock will act on the following matters:

 

 

All record holders of shares of Belo Series A common stock and Belo Series B common stock at the close of business on March 19, 2008 are entitled to vote at the meeting or at any postponement or adjournment of the meeting.

 

By Order of the Board of Directors

 

GUY H. KERR

Secretary

 

April 4, 2008

TABLE OF CONTENTS

 

 

Belo Corp.

P. O. Box 655237

Dallas, Texas 75265-5237

www.belo.com

 

 

PROXY STATEMENT

 

 

For the Annual Meeting of Shareholders

To Be Held On May 13, 2008

 

This proxy statement contains information related to the annual meeting of shareholders of Belo Corp. (“Belo”) to be held on Tuesday, May 13, 2008, beginning at 11:00 a.m., Dallas, Texas time, in The Pavilion of the Belo Mansion, 2101 Ross Avenue, Dallas, Texas, and any postponement or adjournment of the meeting.

 

This proxy statement and related proxy card will be distributed to shareholders beginning on or about April 4, 2008.

 

What is the purpose of the annual meeting?

 

At the annual meeting, shareholders will act on matters outlined in the accompanying notice, including the election of three directors, the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm, voting upon a shareholder proposal relating to repeal of Belo’s classified Board of Directors, and any other matters properly brought before the meeting. Management will report on Belo’s performance in 2007 and the spin-off of its newspaper businesses and related assets and respond to questions and comments from shareholders.

 

Who can attend the annual meeting?

 

Shareholders and guests of Belo may attend the annual meeting.

 

Who may vote at the meeting?

 

Only shareholders who owned Belo shares at the close of business on March 19, 2008, the record date, or their duly appointed proxies, are entitled to vote at the meeting. If you owned Belo shares at the close of business on March 19, 2008, you are entitled to vote all of the shares that you held on that date at the meeting, or any postponement or adjournment of the meeting. Our common stock is divided into two series: Series A common stock and Series B common stock. Holders of either series of common stock as of the close of business on the record date will be entitled to vote at the meeting. At the close of business on the record date, a total of 87,958,521 shares of Series A common stock and 14,240,960 shares of Series B common stock were outstanding and entitled to vote.

 

What are the voting rights of the holders of Series A common stock and Series B common stock?

 

Holders of Belo Series A and Series B common stock vote together as a single class on all matters to be acted upon at the annual meeting. Each outstanding share of Series A common stock will be entitled to one vote on each matter. Each outstanding share of Series B common stock will be entitled to 10 votes on each matter.

 

Can I vote my newly acquired shares of A. H Belo Corporation (“A. H. Belo”)?

 

No, shares of A. H. Belo are not eligible for voting at this meeting. A. H. Belo is now a separate, public company and will hold its first annual meeting of shareholders in 2009. Only shares of Belo Corp. are eligible to vote at the May 13, 2008 meeting.

 

What constitutes a quorum to conduct business at the meeting?

 

In order to carry on the business of the meeting, we must have a quorum present in person or by proxy. A majority of the voting power of the outstanding shares eligible to vote and at least one-third of the outstanding shares entitled to vote must be present at the meeting, in person or by proxy, in order to constitute a quorum.

 

Abstentions and broker non-votes are counted as present at the meeting for purposes of determining whether we have a quorum. A broker non-vote occurs when a broker or other nominee returns a proxy but does not vote on a particular proposal because the broker or nominee does not have authority to vote on that particular item and has not received voting instructions from the beneficial owner.

 

How do I cast my vote?

 

You may vote by proxy, which gives the proxy holder the right to vote your shares on your behalf, or you may vote in person at the meeting.

 

You may receive more than one proxy card depending on how you hold your shares. Shares registered in your name and any shares held in your Belo Savings Plan account or in your A. H. Belo Savings Plan account are covered by separate proxy cards. Shares held in these Savings Plans may be voted only by the plan trustee. Also, if you hold shares indirectly through someone else, such as a broker, you may receive material from that person asking how you want to vote. It is important that you follow the instructions on each proxy card and vote the shares represented by each card separately.

 

How do I vote by proxy?

 

If you vote by proxy, you may vote online via the Internet, by telephone, or by completing and returning your enclosed proxy card in the envelope provided. All proxy cards that are properly completed and submitted will be voted as specified. However, if you sign, date, and return your proxy card but do not check any boxes, the shares represented by that card will be voted FOR all nominees standing for election as directors, FOR ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm, AGAINST the shareholder proposal relating to repeal of Belo’s classified Board, and, at the discretion of the proxy holders, on any other matter that properly may come before the meeting or any adjournment or postponement of the meeting.

 

If you want to vote using the Internet or telephone, please follow the instructions on each proxy card and have the proxy card available when you call in or access the voting site. In order to be included in the final tabulation of proxies, completed proxy cards must be received and votes cast using the Internet or telephone must be cast by the date and time noted on the card.

 

If your shares are held indirectly, your broker or nominee may not offer voting using the Internet or telephone. Please be certain to check your proxy card or contact your broker or nominee to determine available voting arrangements.

 

How do I vote in person?

 

You may vote in person by completing a ballot at the annual meeting. If you plan to vote in person but hold shares through a broker or other nominee, you must provide a legal proxy from the broker or nominee evidencing your authority to vote shares the broker held for your account at the close of business on March 19, 2008. You must contact your brokerage firm directly in advance of the annual meeting to obtain a legal proxy.

 

Blank ballots will be available at the registration table at the meeting. Completed ballots may be deposited at the registration table and a call for completed ballots will be made during the course of the meeting prior to the close of the polls.

 

Can I change my vote or revoke my proxy?

 

Yes. You may revoke your proxy (including an Internet or telephone vote) by:

 

 

 

If your shares are held through a broker or nominee, contact that broker or nominee if you wish to change your voting instructions.

 

Attendance at the meeting does not by itself revoke a previously granted proxy.

 

How do I vote my shares held in the Belo Savings Plan or in the A. H. Belo Savings Plan?

 

Fidelity Management Trust Company is the plan trustee for both the Belo Savings Plan and the A. H. Belo Savings Plan (together, the “Savings Plans”). Only the plan trustee can vote the shares held by the Savings Plans. If you participate in either of these Savings Plans and had full shares of Belo common stock credited to your account as of the record date, you will receive a separate voting instruction card for the purpose of instructing the plan trustee how to vote your plan shares. You may instruct the trustee using the Internet or the telephone or by signing and returning your card in the envelope provided. You will not be able to vote these shares in person at the annual meeting.

 

Because of the time required to tabulate voting instructions from participants in the Savings Plans before the annual meeting, the trustee must receive your voting instructions by May 11, 2008. If you sign, date, and return a card but do not check any boxes on the card, the trustee will vote your shares FOR all nominees standing for election as directors, FOR ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm, and AGAINST the shareholder proposal relating to repeal of Belo’s classified Board. In addition, at its discretion, the trustee of the Savings Plans will be authorized to vote on any other matter that properly may come before the meeting or any adjournment or postponement of the meeting. If the trustee does not receive instructions from you by that date, the trustee will vote your shares in the same proportion as the shares in your particular savings plan for which voting instructions have been received. You may revoke or modify previously given voting instructions by May 11, 2008, by filing with the trustee either a written notice of revocation or a properly completed and signed voting instruction card by that date.

 

What vote does the Board recommend?

 

The Board recommends a vote FOR all nominees standing for election as directors, FOR ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm, and AGAINST the shareholder proposal relating to repeal of Belo’s classified Board. With respect to any other matter that properly comes before the meeting, the proxy holders will vote in their own discretion.

 

What number of votes is required to approve each matter?

 

4    Election of directors — The affirmative vote of a plurality of the voting power represented at the annual meeting and entitled to vote is required for the election of directors. This means that the nominees receiving the highest number of votes cast for the number of positions to be filled are elected. You do not have the right to cumulate votes in the election of directors. In other words, you cannot multiply the number of shares you own by the number of directorships being voted on and then cast the total for only one candidate or among any number of candidates as you see fit. Broker non-votes have no effect on the outcome of the election. Votes that are instructed to be withheld with respect to the election of one or more directors will not be voted for the director or directors indicated, although they will be counted for purposes of determining whether a quorum is present.

 

Additionally, if an incumbent director does not receive the affirmative vote of at least a majority of the votes cast with respect to that director’s election at the annual meeting (which for this purpose includes votes cast “for” the director’s election and votes to withhold authority with respect to the director’s election), then that director is required to promptly tender his or her resignation and the Board will act on such resignation as provided in the Company’s Corporate Governance Guidelines, the applicable portion of which is attached to this proxy statement as Appendix A. All nominees standing for election at the 2008 annual meeting of shareholders are incumbent directors.

 

4    Ratification of appointment of independent registered public accounting firm — The affirmative vote of a majority of the voting power represented at the annual meeting and entitled to vote is required to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for the Company for 2008.

 

4    Shareholder proposal — The affirmative vote of a majority of the voting power represented at the annual meeting and entitled to vote is required to approve the shareholder proposal that Belo’s Board of Directors take the necessary steps to repeal its classified Board. The proposal, if approved by the shareholders, would not eliminate the classified Board by itself. Instead, the proposal would be an advisory recommendation to the Board.

 

4    Other matters — Unless otherwise required by law or the Company’s Certificate of Incorporation, the affirmative vote of a majority of the voting power represented at the annual meeting and entitled to vote is required for other matters that may properly come before the meeting.

 

For matters requiring majority approval, abstentions have the effect of negative votes, meaning that abstentions will be counted in the denominator, but not the numerator, in determining whether a matter has received sufficient votes to be approved. Broker non-votes are not treated as shares entitled to vote on matters requiring majority approval and are excluded from the calculation. Therefore, broker non-votes have no effect on the outcome of the vote with respect to these matters.

 

Your proxy is being solicited on behalf of Belo’s Board of Directors. In addition to use of the mails, the solicitation may also be made by use of facsimile, the Internet or other electronic means, or by telephone or personal contact by directors, officers, employees, and agents of Belo. Belo pays the costs of this proxy solicitation.

 

We have hired Morrow & Co., Inc. to assist in soliciting proxies from beneficial owners of shares held in the names of brokers and other nominees, and have agreed to pay Morrow & Co., Inc. a fee of $7,000 plus its related costs and expenses. We also supply brokers, nominees, and other custodians with proxy forms, proxy statements, and annual reports for the purpose of sending proxy materials to beneficial owners. We reimburse brokers, nominees, and other custodians for their reasonable expenses.

 

On February 8, 2008, Belo distributed all of the issued and outstanding shares of common stock of A. H. Belo to Belo shareholders of record at the close of business on January 25, 2008, the distribution record date. In the distribution, Belo shareholders received 0.20 shares of A. H. Belo Series A common stock for every share of Belo Series A common stock, and 0.20 shares of A. H. Belo Series B common stock for every share of Belo Series B common stock, that they owned on the record date. Each share of A. H. Belo common stock has attached to it one A. H. Belo preferred share purchase right. In lieu of a fractional share of A. H. Belo common stock, shareholders received cash for the market value thereof. A total of 17,603,397 shares of A. H. Belo Series A common stock and 2,848,496 shares of A. H. Belo Series B common stock were distributed to Belo shareholders in the distribution. This proxy statement does not include any information regarding the beneficial ownership of A. H. Belo common stock.

 

The following tables set forth information as of March 19, 2008, about the beneficial ownership of Belo common stock by our current directors, nominees for election as director, the executive officers named in the Summary Compensation Table in this 2008 proxy statement, all current directors and executive officers as a group, and by each person known to Belo to own more than 5% of the outstanding shares of Belo Series A or Series B common stock. At the close of business on March 19, 2008, there were 87,958,521 Belo Series A shares, 14,240,960 Belo Series B shares, and 102,199,481 combined Belo Series A and Series B shares, issued and outstanding.

 

Under the rules of the Securities and Exchange Commission (the “SEC”), the beneficial ownership of a person or group includes not only shares held directly or indirectly by the person or group but also shares the person or group has the right to acquire within 60 days of the record date (to and including May 18, 2008) pursuant to exercisable options and convertible securities. The information below, including the percentage calculations, is based on beneficial ownership of shares rather than direct ownership of issued and outstanding shares.

 

Unless otherwise indicated, each person listed below has sole voting power and sole dispositive power with respect to the shares of common stock indicated in the table as beneficially owned by such person. Series A common stock has one vote per share and Series B common stock has 10 votes per share. Consequently, the voting power of Series B holders is greater than the number of shares beneficially owned. For example, the shares of Belo common stock beneficially owned by all current directors and executive officers as a group, representing 16.7% of the outstanding shares of Series A and Series B common stock, have combined voting power of 60.9%.

 

Belo Stock Ownership of Directors and Executive Officers

 

 

 

 

 

 

 

Belo Stock Ownership of Other Principal Shareholders (greater than 5%)

 

 

 

 

 

Equity Compensation Plan Information

 

The following table provides information regarding Series A and Series B common stock authorized for issuance under Belo’s equity compensation plans as of December 31, 2007; the amounts set out in the table do not include any adjustment for risk of forfeiture:

 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Federal securities laws require that Belo’s executive officers and directors, and persons who own more than ten percent of a registered class of Belo common stock, file reports with the SEC within specified time periods disclosing their beneficial ownership of Belo common stock and any subsequent changes in beneficial ownership of Belo common stock. These reporting persons are also required to furnish us with copies of these reports. Based on information provided to us by these reporting persons or otherwise, we believe that all filings required to be made by the reporting persons during 2007 were timely filed, except for an administrative oversight causing an untimely reporting on Form 4 with respect to a December 2007 RSU award to Donald F. (Skip) Cass, Jr., who became an executive officer of Belo in 2007.

 

Belo’s bylaws provide that the Board of Directors is comprised of 5 to 10 directors, divided into three classes, approximately equal in number, with staggered terms of three years so that the term of one class expires at each annual meeting. The bylaws further provide that a director will retire on the date of the annual meeting of shareholders next following his or her 68th birthday.

 

On February 8, 2008, Belo distributed all of the issued and outstanding shares of common stock of A. H. Belo to Belo shareholders. As a result of the distribution, A. H. Belo became a separate public company, directors Louis E. Caldera, Douglas G. Carlston, Laurence E. Hirsch and J. McDonald Williams ceased to be directors of Belo, and the persons named below remained as directors of Belo. Robert W. Decherd and Dealey D. Herndon serve as directors of both Belo and A. H. Belo. Dunia A. Shive, president and Chief Executive Officer of Belo, and James M. Moroney III, an executive vice president of A. H. Belo and publisher and Chief Executive Officer of The Dallas Morning News , were elected directors of Belo effective February 8, 2008.

 

Effective February 8, 2008, each independent Belo director will serve on each of the three standing committees of the Board (Audit, Compensation, and Nominating and Corporate Governance); Messrs. Decherd and Moroney, Ms. Shive, and Mrs. Herndon will not serve on any standing committee of Belo’s Board of Directors.

 

In connection with her appointment as President of Purdue University, Dr. France Córdova tendered her resignation as a Belo director as provided in the Company’s corporate governance guidelines, citing time demands and potential schedule conflicts. At its meeting held on July 27, 2007, the Board of Directors considered and accepted Dr. Córdova’s resignation.

 

As previously announced, William T. Solomon, a Class I director, will retire from the Belo Board on the date of the 2008 annual meeting of shareholders.

 

Nominees for Belo Directors

 

The following candidates are nominated by the Board and each is an incumbent director. The independence of each director is addressed under “Corporate Governance — Director Independence”; see page 19. Class I directors will be eligible to serve a three-year term until the 2011 annual meeting.

Class I Directors (Current terms expire at Belo’s 2008 annual meeting)

 

 

The Board of Directors recommends a vote FOR Proposal One for the election of each of the nominees.

 

Directors Continuing in Office

 

Information regarding our directors continuing in office is provided below.

 

Class II Directors (Terms expire at Belo’s 2009 annual meeting)

 

Class III Directors (Terms expire at Belo’s 2010 annual meeting)

 

 

Ernst & Young LLP served as Belo’s independent auditors for the fiscal year ended December 31, 2007. The Audit Committee has appointed Ernst & Young LLP to serve in such capacity for 2008, and as a matter of good corporate governance has determined to submit the appointment of Ernst & Young LLP for ratification by the shareholders. If the shareholders do not ratify the appointment of Ernst & Young LLP, the Audit Committee will consider the appointment of other independent registered public accounting firms.

 

Representatives of Ernst & Young LLP will be present at the annual meeting. They will have the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions presented at the annual meeting.

 

The table below sets forth the Ernst & Young LLP fees related to the audits of our financial statements for the fiscal years ended December 31, 2007 and December 31, 2006 and the reviews of our financial statements for the quarterly periods within those fiscal years, and all other fees Ernst & Young LLP has billed us for services rendered during the fiscal years ended December 31, 2007 and December 31, 2006:

 

 

 

 

The Audit Committee has adopted a policy and procedures that set forth the manner in which the Audit Committee will review and approve all services to be provided by Ernst & Young LLP before the firm is retained to provide such services. The policy requires Audit Committee pre-approval of the terms and fees of the annual audit services engagement, as well as any changes in terms and fees resulting from changes in audit scope or other items. The Audit Committee also pre-approves, on an annual basis, other audit services, and audit-related and tax services set forth in the policy, subject to estimated fee levels pre-approved by the Committee. Any other services to be provided by the independent auditors must be separately pre-approved by the Audit Committee. In addition, if the fees for any pre-approved services are expected to exceed by 5% or more the estimated fee levels previously approved by the Audit Committee, the services must be separately pre-approved by the Committee. As a general guideline, annual fees paid to the independent auditors for services other than audit, audit-related, and tax services should not exceed one-half the dollar amount of fees to be paid for these three categories of services collectively. The Audit Committee has delegated to the Committee chairman and other Committee members the authority to pre-approve services in amounts up to $500,000 per engagement. Services pre-approved pursuant to delegated authority must be reported to the full Committee at its next scheduled meeting. The Chief Financial Officer reports periodically to the Audit Committee on the status of pre-approved services, including projected fees. All of the services reflected in the above table were approved by the Audit Committee.

Vote Required for Approval

 

The affirmative vote of a majority of the voting power represented at the annual meeting and entitled to vote on this proposal is required for approval.

 

The Board of Directors recommends a vote FOR Proposal Two for the ratification of the appointment of Ernst & Young LLP as Belo’s independent registered public accounting firm.

PROPOSAL THREE: SHAREHOLDER PROPOSAL RELATING TO
REPEAL OF BELO’S CLASSIFIED BOARD

 

William C. Thompson, Jr., Comptroller, City of New York, on behalf of the Boards of Trustees of the New York City Pension Funds, 1 Centre Street, Room 736, New York, New York 10007-2341, together owning 267,079 shares of the Company’s common stock, has notified the Company that the boards of trustees of the New York City Employees’ Retirement System, the New York City Teachers’ Retirement System, the New York City Police Pension Fund, the New York City Fire Department Pension, and the New York City Board of Education Retirement System, intend to present the following proposal for consideration at the meeting. The Board of Directors opposes such shareholder proposal for the reasons set forth below.

 

Shareholder Proposal

 

“BE IT RESOLVED, that the stockholders of Belo Corporation request that the Board of Directors take the necessary steps to declassify the Board of Directors and establish annual elections of directors, whereby directors would be elected annually and not by classes. This policy would take effect immediately, and be applicable to the re-election of any incumbent director whose term, under the current classified system, subsequently expires.”

 

“SUPPORTING STATEMENT: We believe that the ability to elect directors is the single most important use of the shareholder franchise. Accordingly, directors should be accountable to shareholders on an annual basis. The election of directors by classes, for three-year terms, in our opinion, minimizes accountability and precludes the full exercise of the rights of shareholders to approve or disapprove annually the performance of a director or directors.”

 

“In addition, since only one-third of the Board of Directors is elected annually, we believe that classified boards could frustrate, to the detriment of long-term shareholder interest, the efforts of a bidder to acquire control or a challenger to engage successfully in a proxy contest.”

 

“We urge your support for the proposal to repeal the classified board and establish that all directors be elected annually.”

 

Statement Against Shareholder Proposal

 

The Belo Board of Directors unanimously recommends a vote AGAINST the proposal for the following reasons:

 

The Board and the Nominating and Corporate Governance Committee have given this proposal careful consideration and believe that it should not be implemented. Substantially the same shareholder proposal, submitted by substantially the same shareholders, was considered at Belo’s 2007 annual meeting of shareholders and rejected by over 70% of the votes cast at that meeting.

 

Under the Company’s bylaws, the Board of Directors consists of three classes of directors with three-year staggered terms. One-third of the directors are elected each year. This classified structure has been in place since 1983 and has been and continues to be an integral part of the Company’s overall governance.

 

The Board and the Nominating and Corporate Governance Committee believe that a classified board is more advantageous to, and better serves the interests of, the Company and its shareholders than a board elected annually for the following reasons:

 

 

 

For these reasons, the Board recommends a vote AGAINST this shareholder proposal.

 

Introduction

 

Our Board periodically reviews and evaluates Belo’s corporate governance policies and practices in light of the Sarbanes-Oxley Act of 2002, SEC regulations implementing this legislation, corporate governance listing standards adopted by the New York Stock Exchange (“NYSE”), and evolving best practices. The Board has formalized its corporate governance guidelines, approved a code of business conduct and ethics applicable to Belo’s directors, management and other Belo employees, and adopted a charter for each Board committee. The Nominating and Corporate Governance Committee reviews Belo’s corporate governance guidelines and Board committee charters annually and recommends changes to the Board as appropriate. Our corporate governance documents are posted on our Web site at www.belo.com under “About Belo — Corporate Governance,” and are available in print, without charge, upon written or oral request to Belo Corp., Attention: Guy H. Kerr, Secretary, P.O. Box 655237, Dallas, Texas 75265-5237, (214) 977-6606. Belo’s corporate governance documents codify our existing corporate governance practices and policies.

 

Director Independence

 

To assist it in making determinations of a director’s independence, the Board has adopted independence standards, which are set forth in Belo’s corporate governance guidelines, the applicable portion of which is attached to this proxy statement as Appendix B. These standards incorporate the director independence criteria included in the NYSE listing standards, as well as additional, more stringent criteria established by the Board. The Board has determined that the following directors are independent under these standards: Henry Becton, Judy Craven, Wayne Sanders, Bill Solomon, Anne Szostak, and Lloyd Ward. In assessing director independence, the Board considered in particular with respect to Bill Solomon that he was, when the contract was entered into, Chairman of Austin Industries, Inc., the parent company of an entity with which Belo entered into a construction contract in 2005. The Belo Board concluded, based on all the facts and circumstances, that this relationship (which is discussed in more detail under “Certain Relationships” below) is not a material relationship with Belo and does not affect Bill’s independence as a director. In determining the independence of Anne Szostak, the Board considered that her husband, Michael Szostak, is a sportswriter and columnist for The Providence Journal , a newspaper published by The Providence Journal Company, a subsidiary of Belo prior to February 8, 2008. The Board concluded, based on all the facts and circumstances, that this relationship is not a material relationship with Belo after the spin-off and does not affect Anne’s independence as a Belo director going forward. Each of the Audit, Compensation, and Nominating and Corporate Governance Committees is composed entirely of independent directors. In accordance with SEC requirements, NYSE listing standards and the independence standards set forth in Belo’s corporate governance guidelines, all members of the Audit Committee meet additional independence standards applicable to audit committee members.

 

Meetings of the Board

 

The Board held six meetings in 2007 and took action by unanimous written consent once. Each director attended at least 75% of the aggregate of (1) the total number of meetings held by the Board and (2) the total number of meetings held by all committees on which he or she served. Directors are expected to attend annual meetings of shareholders, and all of the current directors attended the 2007 Annual Meeting of Shareholders.

 

Committees of the Board

 

Effective February 8, 2008, each of the Board’s standing committees consists of Henry Becton, Judy Craven, Wayne Sanders, Bill Solomon, Anne Szostak, and Lloyd Ward, each of whom is an independent director under the NYSE listing standards and under the independence standards set forth in Belo’s corporate governance guidelines.

The Belo Board has the following committees:

 

Audit Committee.   Wayne Sanders chairs the Audit Committee. The Audit Committee is responsible for the appointment, compensation, and oversight of the independent auditors. The Audit Committee also represents the Board in overseeing Belo’s financial reporting processes, and, as part of this responsibility, consults with our independent auditors and with personnel from Belo’s internal audit and financial staffs with respect to corporate accounting, reporting, and internal control practices. The Audit Committee met six times during 2007.

 

The Board has determined that each member of the Audit Committee meets both the SEC and the NYSE standards for independence. In addition, the Board has determined that at least one member of the Audit Committee meets the NYSE standard of having accounting or related financial management expertise. The Board has also determined that at least one member of the Audit Committee, Wayne Sanders, the chairman of the Audit Committee, meets the SEC criteria of an “audit committee financial expert.”

 

Compensation Committee.   Judy Craven chairs the Compensation Committee. The Compensation Committee evaluates the performance of the Chief Executive Officer and sets his or her compensation level based on this evaluation. The Compensation Committee makes recommendations to the Board for base salaries of other executive officers and compensation for non-management directors, approves bonus levels and stock option awards for executive officers, and administers, among other plans, the Company’s 1995 Executive Compensation Plan, 2000 Executive Compensation Plan, 2004 Executive Compensation Plan (collectively, “Executive Compensation Plans”), The G. B. Dealey Retirement Pension Plan, the Belo Savings Plan, the Change in Control Severance Plan, the Pension Transition Supplement Plan, and the Pension Transition Supplement Restoration Plan. The Committee also has responsibility for senior executive succession planning. The Compensation Committee met 10 times during 2007.

 

To assist the Committee and management in assessing and determining appropriate, competitive compensation for our executive officers, the Committee annually engages an outside compensation consultant. Hewitt was retained through February 2007 with respect to prospective 2007 executive compensation recommendations. The scope of Hewitt’s engagement was to provide ongoing recommendations regarding executive compensation consistent with Belo’s business needs, its pay philosophy, market trends and the latest legal and regulatory considerations; to provide market data as background to annual decisions regarding CEO and senior management base salary, bonus and long-term incentive amounts; to advise the Committee as to best practices for working effectively with management while representing shareholders’ interests; and to provide other services as the Committee may request. The Compensation Committee uses supplemental survey information compiled by its compensation consultant, along with other survey information, to develop recommendations for base salary, short-term cash compensation, and long-term incentive compensation for the Company’s executive officers, including the chief executive officer. The Compensation Committee develops these compensation recommendations with input from its compensation consultant. When considering these recommendations, the Compensation Committee has full access to the compensation consultant during meetings at which compensation recommendations are considered. In February 2007, the Compensation Committee engaged Mercer as its compensation consultant going forward. The scope of Mercer’s engagement was to undertake a comprehensive review of Belo’s executive compensation programs, and to assist in executive compensation recommendations for year-end 2007 and for 2008. For additional information regarding the operation of the Compensation Committee, including the role of consultants and management in the process of determining the amount and form of executive compensation, see the Company’s Compensation Discussion and Analysis (CD&A) below.

 

Nominating and Corporate Governance Committee.   The Nominating and Corporate Governance Committee is chaired by Henry Becton, who also serves as the Board’s Lead Director. The responsibilities of the Nominating and Corporate Governance Committee include the identification and recommendation of director candidates and the review of qualifications of directors for continued service on the Board. The Nominating and Corporate Governance Committee also has responsibility for shaping Belo’s corporate governance practices, including the development and periodic review of the corporate governance guidelines and the Board committee charters. The Nominating and Corporate Governance Committee met twice in 2007.

In evaluating director nominees, the Nominating and Corporate Governance Committee considers a variety of criteria, including an individual’s character and integrity; business, professional, and personal background; skills; current employment; community service; and ability to commit sufficient time and attention to the activities of the Board. The Committee considers these criteria in the context of the perceived needs of the Board as a whole and seeks to achieve a diversity of backgrounds and perspectives on the Board.

 

The Nominating and Corporate Governance Committee employs a variety of methods for identifying and evaluating director nominees. The Committee reviews the size and composition of the Board as part of the annual Board evaluation process and makes recommendations to the Board as appropriate. If vacancies on the Board are anticipated, or otherwise arise, the Nominating and Governance Committee considers various potential candidates for director. Candidates may come to the Committee’s attention through current Board members, shareholders, or other persons.

 

The policy of the Nominating and Corporate Governance Committee, as set forth in Belo’s corporate governance guidelines, is to consider a shareholder’s recommendation for nominee(s) when the shareholder supplies the information required for director nominations under the advance notice provisions set forth in Article II, Section 13 of Belo’s bylaws within the time periods set forth in such section of the bylaws. Shareholders desiring to submit a nomination for director should consult Belo’s bylaws, which are available upon request, for more specific information prior to submitting a nomination. The Committee evaluates shareholder-recommended nominees based on the same criteria it uses to evaluate nominees from other sources.

 

After the Nominating and Corporate Governance Committee identifies a potential candidate, there is generally a mutual exploration process, during which Belo seeks to learn more about a candidate’s qualifications, background, and level of interest in Belo, and the candidate has the opportunity to learn more about Belo. A candidate may meet with members of the Nominating and Corporate Governance Committee, other directors, and senior management. Based on information gathered during the course of this process, the Nominating and Corporate Governance Committee makes its recommendation to the Board. If the Board approves the recommendation, the candidate is nominated for election by Belo’s shareholders.

 

Executive Committee.   The Executive Committee dissolved effective February 2008. Its responsibilities for reviewing Belo’s long-range financial and strategic planning initiatives reverted to the Board and its responsibility for senior executive succession planning was assumed by the Compensation Committee. The Committee met three times in 2007.

 

The Board convenes executive sessions of non-management directors without Company management at each regularly-scheduled meeting. The Lead Director is responsible for presiding at the executive sessions of the non-management directors. In addition, the independent directors meet in executive session at least annually. Board committee chairs preside at executive sessions of their respective committees.

Audit Committee Report

 

As described more fully in our written charter, which is posted on our Web site at www.belo.com under “About Belo — Corporate Governance,” the Audit Committee represents the Board in its oversight of Belo’s financial reporting processes. In this context, the Audit Committee has reviewed and discussed with management and Ernst & Young LLP, our independent auditors, Belo’s audited consolidated financial statements and the audit of the effectiveness of Belo’s internal control over financial reporting. The Audit Committee has discussed with Ernst & Young LLP various matters, including the firm’s judgments as to the quality of Belo’s accounting principles and other matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T. In addition, the Audit Committee has received from Ernst & Young LLP the written disclosures and the letter required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), as adopted by the PCAOB in Rule 3600T, and discussed with the firm its independence from Belo and our management team.

 

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board has approved, that the audited consolidated financial statements be included in Belo’s annual report on Form 10-K for the fiscal year ended December 31, 2007, for filing with the SEC.

 

Respectfully submitted,

 

Audit Committee

Wayne R. Sanders, Chairman

Henry P. Becton, Jr.

Judith L. Craven, M.D., M.P.H.

William T. Solomon

M. Anne Szostak

Lloyd D. Ward

 

Communications with the Board

 

The Company has a process for shareholders and other interested parties to communicate with the Board. These parties may communicate with the Board by writing c/o the corporate Secretary, P.O. Box 655237, Dallas, Texas 75265-5237. Communications intended for a specific director or directors (such as the Lead Director or non-management directors) should be addressed to his, her, or their attention c/o the corporate Secretary at this address. Communications received from shareholders are provided directly to Board members at, or as part of the materials mailed in advance of, the next scheduled Board meeting following receipt of the communications. The Board has authorized management, in its discretion, to forward communications on a more expedited basis if circumstances warrant or to exclude a communication if it is illegal, unduly hostile or threatening, or similarly inappropriate. Advertisements, solicitations for periodical or other subscriptions, and other similar communications generally are not forwarded to the directors.

EXECUTIVE OFFICERS

 

On February 8, 2008, Belo completed the distribution of all of the issued and outstanding shares of common stock of A. H. Belo Corporation to Belo shareholders. As a result of the distribution, A. H. Belo became a separate public company with its own directors and executive officers. After the distribution, Belo’s executive officers became as follows:

 

 

 

 

Compensation Discussion and Analysis

 

Executive Summary

 

The following executive summary highlights and summarizes information from this Compensation Discussion and Analysis and does not purport to contain all of the information that is necessary to gain an understanding of our executive compensation policies and decisions. Please carefully read the entire Compensation Discussion and Analysis section and the compensation tables that follow for a more complete understanding of our executive compensation program.

 

The media industry is experiencing substantial change caused by factors such as the effect of the Internet and other transformational technologies on consumers and advertisers, the consolidation of media ownership and the rapid ascent of new media businesses. From an executive compensation perspective, this challenging business environment underscores the importance of retaining both experienced and high-potential executives and rewarding superior individual and Company performance that may not be reflected in the performance of the Company’s stock price. As a result, in February 2007, the Compensation Committee (the “Committee”) decided to undertake a comprehensive review of the Company’s executive compensation programs. Working with Mercer LLC (“Mercer”), which became its compensation consultant in February 2007, the Committee conducted a comprehensive review of the Company’s executive compensation structure to ensure that the Committee and the Company are aligned with compensation goals, objectives and methodologies. In addition, the Committee wanted the design of the Company’s executive compensation framework to offer measures to retain and reward its executives who are managing against the challenges the Company faces. The study was completed in July 2007 and concluded that the Company and the Committee are generally aligned with the goals, objectives and methodologies of the compensation program, but recommended several changes. As a result, the Committee and the Board of Directors approved changes that the Company expects to implement in 2008, including the consideration of comparative peer performance data when determining annual bonuses for Management Committee members and a discretionary bonus component for Management Committee members related to the achievement of non-financial objectives, both of which enhance the Company’s goals for individual executive performance and retention.

 

On October 1, 2007, the Company announced a plan to spin off its newspaper businesses and related assets into A. H. Belo Corporation, creating separate newspaper and television companies. This strategy, designed to allow these businesses to focus on the distinct changes occurring in their respective industries, also intensified the Company’s and the Committee’s focus on taking measures involving compensation aimed at retaining executives and other key employees and motivating them towards the successful completion of the spin-off transaction. The Company instituted selective retention bonuses payable in 2008 for executive officers and others who were not members of its then-current Management Committee, and the Company made special cash bonus awards for 2007 to executive officers and others, including Management Committee members, in recognition of the roles they played in formulating and completing the spin-off transaction. It also granted long-term incentive awards to executive officers of Belo and A. H. Belo in the form of time-based restricted stock units (“TBRSUs”) to encourage the retention of these individuals, who are key to the successful transition of the Company and A. H. Belo following the spin-off.

 

The Company also adopted a Change in Control Severance Plan, which provides for severance benefits for its executive officers and other designated participants in the event of a change in control of Belo and a termination of employment under specified circumstances, as described below. The Board believes that the plan will promote the retention of covered executives and permit them to focus on the operations of the Company in an uncertain business environment.

 

This Compensation Discussion and Analysis reflects compensation of the Company’s named executive officers for the calendar year 2007. Effective with the spin-off on February 8, 2008, the Company’s then-Chief Executive Officer, Robert Decherd, ceased being an executive officer of the Company and became an executive officer of A. H. Belo. At that time, Dunia Shive became the Company’s president and Chief Executive Officer and Peter Diaz, executive vice president/Television Operations, became a member of the Company’s Management Committee.

Overview of Compensation Program

 

The Compensation Committee of the Belo Board of Directors oversees the Company’s overall compensation structure, policies and programs, and has responsibility for establishing, implementing and continually monitoring adherence to the Company’s compensation philosophy. The primary management liaisons to the Committee in 2007 were the Company’s Chief Executive Officer, Robert Decherd, and its senior vice president/Human Resources, Marian Spitzberg.

 

Compensation Objectives

 

The Company has adopted compensation policies to achieve the following objectives:

 

 

In February 2007, prior to the Company’s decision to create separate television and newspaper companies through the spin-off, the Committee began a comprehensive review of the Company’s executive compensation structure. The review was undertaken to assure (1) that the Committee and the Company are aligned with respect to the philosophy, objectives and design of the Company’s executive compensation program and (2) that the Company’s executive compensation structure achieves its objectives in light of the changing business environment for media companies. This review was completed in July 2007 shortly before the spin-off decision was made. The review generally confirmed that the Company’s executive compensation program and philosophy are appropriate and competitive with market practices. However, as a result of the review, the Committee expects to make changes to certain aspects of the executive compensation program to give the Company more flexibility to reward superior individual performance or to acknowledge exceptional performance by the Company relative to its peers in a transitional industry operating environment. These measures may include a discretionary bonus component for Management Committee members related to the achievement of non-financial objectives.

 

Setting Executive Compensation

 

To assist the Committee and management in assessing and determining appropriate, competitive compensation for our executive officers, the Committee annually engages an outside compensation consultant. Hewitt Associates LLC (“Hewitt”) was retained for this purpose in 2006. Mercer provided consultation beginning in February 2007. The Committee, which had worked with Hewitt for approximately eight years, changed consultants to gain a different perspective on executive compensation. Each of the consultants provided information, analyses, and objective advice regarding executive and director compensation, as described below. The consultant who performed these services during each of the respective years reported directly to the chair of the Committee.

 

Surveys and Determination of the Median.   The Company used several different compensation surveys to prepare 2007 compensation recommendations for consideration by the Committee. For base salary and total target cash compensation, the Company referenced the Towers Perrin Media Industry CDB Executive Compensation Database, referred to as the Towers Perrin Media Survey. The Towers Perrin Media Survey consisted of compensation survey information from 118 companies with media operations that include newspapers, television stations, television networks, magazines, radio stations, information publishing, and Internet/online services commonly classified as media. The median annual revenue for all participants in the Towers Perrin Media Survey was $897 million. Belo does not choose the participants in the Towers Perrin Media Survey, nor does it provide to the Committee the individual names of the 118 participant companies, other than the peer group selections discussed below.

Belo identified 27 companies within the Towers Perrin Media Survey that share with the Company similar characteristics in terms of focus on media operations (i.e., newspaper, television stations, and Internet operations). Survey data from this group of peer companies, referred to as the Towers Perrin Peer Group, provides the Company with supplemental information for both base salary and total target cash compensation for the executive officers. The companies included in the Towers Perrin Peer Group, the median annual revenue of which is $5.3 billion, were:

 

 

For December 2006 and February 2007 long-term incentive compensation recommendations, the Company referenced the Towers Perrin CDB Executive Compensation Database for General Industry participants, referred to as the Towers Perrin General Survey. The Towers Perrin General Survey is a database of approximately 820 companies that participate in Towers Perrin’s compensation survey, with 113 companies that have revenues in the $1 billion to $3 billion range. Of these 113 companies, the median revenue for which was $1.9 billion, 86 companies submitted long-term incentive data. The Company did not choose the participants in the Towers Perrin General Survey, nor did Towers Perrin disclose to the Company the names of the companies that comprise the subsets. The Committee found that the larger sample pool of similarly-sized companies in the subset provided a better source of long-term incentive data than was available by limiting such information strictly to the Towers Perrin Peer Group because of the widely varying compensation practices in the media industry. Long-term incentive grant practices in the media industry have undergone change in the past several years that is, in part, a result of the shift in advertising dollars away from newspapers and the consolidation of advertising providers throughout the industry. The Committee believes that a larger population of survey respondents from across industries provided a more reliable basis for recommending long-term compensation, and that assessing long-term incentive grant practices from a broader group provided more stability to its long-term incentive compensation analysis. The Company did not observe the same volatility in base salary and annual incentive compensation practices from the results of the Tower Perrin Media Survey. Representative industries in the Towers Perrin General Survey include aerospace/defense; automotive and transportation; chemicals; computers, hardware, software and services; consumer products; electronics and scientific equipment; food and beverage; metals and mining; oil and gas; pharmaceuticals; and telecommunications.

 

In December 2007, under the guidance of Mercer and following the completion of the Committee’s reassessment of the Company’s overall executive compensation framework, long-term incentive compensation recommendations were determined using position-based data contained in the Towers Perrin Media Survey, along with supplemental compensation information from a select group of public media companies’ proxy filings, referred to as the Proxy Study. This study provided total compensation information for executive officers from the Company’s peer companies. The Committee considers the companies in the Proxy Study to be similarly situated peer media companies that have operational characteristics similar to the Company. The Committee uses the Proxy Study as a retrospective comparison of the average and 50th percentile compensation levels for similar industry executive officer positions. The companies included in the Proxy Study were:

 

Process and Role of Management.   The Company used each of these referenced surveys in the manner described to develop recommendations for base salary, annual cash incentive compensation, and long-term incentive compensation for the Company’s executive officers, including the Chief Executive Officer. These median-level recommendations, which were developed with input from the Committee’s then-current compensation consultant, were presented by Marian Spitzberg, our senior vice president/Human Resources, to our Chief Executive Officer, Robert Decherd. Robert and Marian adjusted these recommendations after taking into account each individual executive officer’s recent performance, as well as his or her experience, level of responsibility and contributions to the Company’s long-term goals during the current year. The compensation recommendations, together with the compensation histories and the percentile rankings for base salary and total cash compensation of the executive officers relative to the Towers Perrin Peer Group, were then presented to the Committee, which had full access to its compensation consultant, Robert Decherd, Marian Spitzberg and the Human Resources staff who were involved in the formulation of recommendations. After consideration of the recommendations and adequate opportunity to address specific questions and concerns, the Committee made final compensation recommendations for the named executive officers, excluding the Chief Executive Officer, to the non-management members of the Company’s Board of Directors for their approval. In its deliberations, the Board considered the compensation objectives and philosophy of the Company in light of the recommendations. Based on its review and analysis, the non-management members of the Board approved the final compensation to be awarded to each named executive officer, with the exception of the Chief Executive Officer. The Committee evaluated and determined the Chief Executive Officer’s compensation after following the same process. In this regard, the Committee reviewed and received the same peer group information, except that market data for chief executive officer compensation was provided to the Committee without any specific compensation recommendation.

 

Timing of Decisions.   Typically, the Compensation Committee has three regularly-scheduled meetings each year in or around February, July and December. The Committee may also have special meetings by telephone or in person periodically as necessary to address compensation issues that may arise from time to time. With respect to 2007 compensation for our executive officers, the Committee held the following meetings to review, discuss, and set or recommend compensation levels:

 

 

Elements of 2007 Executive Compensation

 

For 2007, the principal elements of compensation for named Belo executive officers were:

 

 

 

The structure of the Company’s executive compensation program is set forth in the 2004 Executive Compensation Plan, as amended, or ECP, which was approved by the Company’s shareholders and is administered by the Committee. The ECP provides for two elements of compensation: short-term cash incentives (performance bonuses), and long-term equity-based compensation. Awards under the ECP supplement ECP participants’ base salaries.

 

Officers of the Company and its subsidiaries, including Belo’s Chief Executive Officer and its other executive officers, are eligible to participate in the ECP. Additional ECP participants are selected by the Committee based on management’s evaluation of an individual’s ability to affect significantly the Company’s profitability.

 

Base Salary.   Base salaries for executive officers are reviewed annually. In determining base salaries for 2007, the Company gathered base salary data from the Towers Perrin Media Survey and the Towers Perrin Peer Group for compensation comparisons. The data provided by these two surveys includes certain statistical factors that make it possible to predict the median (50th percentile data) for both base salary and total target cash compensation.

 

The Company used this survey data, along with the revenues earned by each executive officer’s organization, to prepare estimates of median pay for base salary and total target cash compensation for each executive officer, including the Chief Executive Officer. Because the survey data provided to the Company by Towers Perrin and our compensation consultant each year generally relates to the prior year, and current year information is not yet available, the compensation survey data was “aged” by 3% to take into account the Company’s general merit increase guideline that factors in increases in the consumer price index and inflation. Recommendations above the median may be made when warranted on account of an individual executive’s outstanding performance, promotion, or retention concerns. Recommendations below the median may also be made when warranted.

 

As discussed above, the Committee reviewed the base salary recommendations for 2007 and made final recommendations to the Board, except with respect to the Chief Executive Officer, for which the Committee had final approval. The 2007 base salaries of our executive officers listed in the Summary Compensation Table reflect the following relationship to the estimated median in each case: Robert Decherd — 92% of the median; Dunia Shive — 111% of the median; Dennis Williamson — 90% of the median; Guy Kerr — 111% of the median; and Marian Spitzberg — 108% of the median. Dunia Shive’s increase in base salary reflected her promotion to president and Chief Operating Officer of the Company in 2007. Robert Decherd’s base salary was established at a level consistent with his historical level for that component of compensation.

 

Annual Cash Incentive Opportunity.   Consistent with our objective of motivating and rewarding executives for achievement of the Company’s financial and non-financial performance objectives, each executive officer is eligible to receive annual cash incentive compensation based on financial performance objectives established in the annual financial plan (the Plan), approved by the Board at the beginning of each year. These performance goals are communicated to our executive officers at the beginning of each year. The financial performance objectives vary from year to year and reflect the cyclical nature of the Company’s businesses due to fluctuating advertising demand, for example, relating to election years, the Olympics and other U.S. sports events, in addition to taking into consideration industry factors that include decreases in newspaper circulation, significant changes in demand for print classified advertising, changes in media use habits by consumers and advertisers, and other competitive conditions, including recruiting and retaining talent.

 

The Committee establishes an annual performance-based incentive pool for each senior executive, as permitted by the ECP and in compliance with the performance-based compensation exemption under Section 162(m) of the Internal Revenue Code of 1986, as amended, referred to as the Code. This performance pool (3% of Belo’s consolidated net income for Robert Decherd and 1.5% of Belo’s consolidated net income for each of Dunia Shive, Dennis Williamson, Guy Kerr and Marian Spitzberg) provides a maximum for the award of cash and equity incentives under the ECP, described below, and is designed to allow for tax deductibility of the compensation awarded within the pool.

Based upon 2007 financial performance, cash bonuses were awarded to senior executives by first considering the amounts that would have been paid to the senior executives under the method described below for calculating bonuses for other ECP participants. Under the ECP, the Committee establishes a target bonus opportunity expressed as a percentage of base salary based on competitive market information using the Towers Perrin Media Survey. The Committee targets the median, or 50th percentile, of the Towers Perrin Media Survey and the Towers Perrin Peer Group for annual cash incentives. Target bonus opportunities for 2007 for each of the named executive officers were set as a percent of base salary as follows: Robert Decherd, 90%; Dunia Shive, 75%; Dennis Williamson, 65%; Guy Kerr, 55%; and Marian Spitzberg, 55%. Target bonus opportunities for 2008 for each of the named executive officers are shown in the “Grants of Plan-Based Awards in 2007” table in the “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” column.

 

The target bonus of 90% of base salary for Robert Decherd for 2007 was below the median target bonus of 100% as indicated by the Towers Perrin Media Survey. Dunia Shive’s target bonus of 75% of base salary was greater than the survey-indicated median of 60%, which greater percentage the Committee believes to be appropriate in light of her past achievements, her potential for future roles in the Company and retention considerations. The target bonus opportunity of 65% of base salary for Dennis Williamson was above the survey-indicated median of 60% due primarily to the Committee’s consideration of his performance as Chief Financial Officer and the broad scope of his duties, which also included responsibility for technology and corporate operations such as centralized purchasing and security. Guy Kerr’s target bonus of 55% of base salary was greater than the median of 50% because of his high level of performance and the scope of his duties, which include serving as the Company’s chief legal officer, with additional responsibility for Governmental Relations and Internal Audit functions, as well as serving on the Management Committee. Marian Spitzberg’s target bonus of 55% of base salary was above the median of 50% out of consideration for her legal background and participation on the Management Committee.

 

Actual bonus amounts earned by ECP participants may range from zero to a maximum bonus of 200 percent of the target bonus opportunity established by the Committee, depending on the level of achievement of Plan target. For 2007, the Committee approved financial performance ranges for the Company’s named executive officers based on the Company’s Plan, as shown in the table below. The 2007 EPS goals are below those established for 2006 primarily for two reasons. First, as described above, the Company’s television business tends to be cyclical, producing higher revenues in years when certain events increase the demand for advertising on the Company’s television stations. Fewer of such events were scheduled for 2007 than in 2006. Second, it was anticipated that newspaper revenues would continue to decline as they have recently due to the challenges that industry is facing from factors such as increased competition from other media, particularly the Internet, and shifting preferences among some consumers to receive all or a portion of their news and information other than from a newspaper. Bonus payout for performance between the points shown below is prorated.

 

 

The above goals were applicable for non-equity incentive awards under the ECP for each of the named executive officers. The Committee believes that linking bonus opportunity directly to financial performance, with an opportunity to earn a 200% payout of target bonus amount if maximum performance is achieved, provides participants with significant motivation to achieve the Company’s financial objectives.

 

Actual EPS of ($2.57) for the year ended December 31, 2007 was adjusted at the Committee’s discretion. The primary adjustments included the elimination of the effect of expenses related to the spin-off of A. H. Belo and non-cash charges related to goodwill impairment. Negative adjustments to reported EPS included share-based compensation expense and variances related to changes in newsprint prices. The adjusted EPS of $0.97, which was approved by the Committee, was then compared to the EPS target of $0.97 and an achievement of 100% of target resulted. A proposed cash bonus under the ECP formula was then calculated for each executive officer by applying this achievement percentage to each individual’s target bonus opportunity. For example, in 2007, Robert Decherd’s

base salary of $985,000 and target bonus percentage of 90% would qualify him for a 100% target bonus payout of $886,500. Accordingly, based on the Company’s financial performance and each individual’s performance and contributions to the completion of the spin-off transaction, our named executive officers earned cash incentive payments in respect of 2007 performance that were paid to the executives in the first quarter of 2008 prior to the completion of the spin-off. The incentive payments are quantified below in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

 

The Committee then also assessed the performance and the substantial roles of each of the named executive officers with respect to the spin-off, which was not contemplated when the financial goals were established. In recognition of their extraordinary effort and commitment in the successful planning, execution and implementation of the complex details of the spin-off while at the same time continuing to guide, manage and operate the Company in a rapidly evolving and challenging operating environment, the Compensation Committee awarded each named executive officer a cash bonus. The Committee considered each named executive officer’s role in connection with the spin-off and performance as follows:

 

 

Amounts in excess of the ECP formula are reflected in the “Bonus” column of the Summary Compensation Table. Amounts in the “Bonus” column generally reflect the Committee’s assessment of the contributions of each individual to the spin-off transaction. As reflected in the Summary Compensation Table, Robert Decherd received a total cash bonus of $3 million. This cash bonus, $2,113,500 of which was contingent on the completion of the spin-off, was awarded by the Committee in consideration of Robert’s 2007 performance, his leadership in formulating and guiding the spin-off, and his significant contributions during his 21 years as chairman and CEO of the Company. Cash awards to other named executives in excess of ECP formula levels generally reflect the levels of their contributions to the spin-off and include the amount earned under the ECP formula. Robert Decherd’s and Dunia Shive’s bonuses, taken together with their award of TBRSUs, discussed below, exceed the incentive pool of 3% and 1.5%, respectively of the Company’s adjusted consolidated net income, or $2,987,370 and $1,493,685, respectively, established for them by the Committee in February 2007. The primary adjustments to net income were the same as described above with respect to adjustment of EPS. Although the excess amounts, $2,632,630 and $556,315, respectively, will be not be tax deductible to the Company, the Committee believes the extraordinary circumstances of the spin-off, coupled with the uncertain business environment for media businesses, merits special awards to Robert and Dunia for their past contributions and for their roles in planning and implementing the spin-off transaction.

 

Long-Term Equity Incentive Compensation.   The Company awards long-term equity incentive grants, or LTI compensation, to executive officers as part of its overall compensation package. These awards are designed to offer competitive compensation that encourages the retention and motivation of key executives, and rewards them based upon market-driven results. The ECP provides the Committee with discretion to require performance-based standards to be met before awards vest. Generally, the Committee determines each executive officer’s intended annual LTI compensation value, and then determines the allocation of the LTI compensation award among three types of equity instruments available under the ECP: stock options, time-based RSUs, referred to as TBRSUs, and performance-related RSUs, referred to as PBRSUs. The types of LTI equity awards described below are designed to meet its compensation objectives in three ways. First, stock options encourage and reward strong stock price

performance, thus aligning the executive’s interests with those of shareholders. Second, PBRSUs reward the achievement of the Company’s cumulative annual financial performance goals. Finally, TBRSUs encourage executives to remain with the Company and to focus on its long-term success.

 

Stock Option Awards.   No stock option awards were made to the Company’s named executive officers during 2007. Generally, stock option awards are granted for shares of Belo Series B common stock at an exercise price equal to the closing market price of Belo’s Series A common stock on the date of grant. Option awards vest 40% on the first anniversary of the date of grant, an additional 30% on the second anniversary, and the remaining 30% on the third anniversary of the date of grant. All options expire on the tenth anniversary of the date of grant. The amounts in the Summary Compensation Table, under the column “Option Awards,” include the accounting expense recognized in 2007 by the Company in accordance with FAS 123R for prior year option grants to the named executive officers. See also the “Option Exercises and Stock Vested in 2007” table on page 41 for the amounts realized by the named executive officers from option exercises in 2007.

 

Time-Based Restricted Stock Unit Awards.   TBRSUs awarded to ECP participants, including executive officers, are based on continued employment with the Company and vest at the end of a three-year period. The Committee believes that the three-year cliff vesting feature of the TBRSUs optimizes their retention effect, and because the ultimate value of the award depends on Belo’s stock price, aligns the recipient’s interest with the maximization of shareholder value. TBRSU awards made to executive officers are granted out of a performance incentive pool amount set for each executive, as discussed previously. These awards are generally made in February of the year following the performance period when the Company’s financial results for the prior fiscal year can be determined, the incentive pool amount established, and individual performance considerations can be assessed. However, this past year TBRSU awards were made in December rather than February, in light of the spin-off transaction.

 

Performance-Related Restricted Stock Unit Awards.   PBRSUs may be awarded to ECP participants, including executive officers. These awards are earned based upon the same performance criteria, financial performance achievement levels, and payout levels established annually for short-term cash incentives. After the actual number of PBRSUs earned is determined following the close of the fiscal year, the PBRSUs vest at a rate of 33 1 / 3 % per year over a three-year period.

 

December 2006 Grants.   In December 2006, the Committee made certain LTI compensation grants in the form of PBRSUs to be earned based on 2007 financial performance. The amount of the award earned was determined in February 2008 when actual 2007 financial performance was determined. The Committee strove to set LTI compensation levels near the median of the Towers Perrin General Survey. That survey data is presented in terms of a multiple of an ECP participant’s (including executive officers) base salary. The resulting LTI compensation recommendations at the median level for executive officers other than Robert Decherd were then provided to Robert and Marian Spitzberg for their review and consideration. Based on their review of the information available for each of the executive officers, and after consideration of retention and succession planning issues and the performance and potential of each individual, an LTI compensation recommendation for each executive officer was prepared for the Committee’s review and approval. These recommendations were at or only slightly above the median. Hewitt, the Committee’s then-current compensation consultant, determined that 2007 survey data for Robert Decherd’s long-term compensation had perceived limitations because the survey-indicated median levels appeared to deviate substantially from historical market trends, and would have resulted in an award recommendation significantly above prior year percentage increases. As a result, the LTI compensation level for Robert indicated in December 2006 was provided to the Committee without any recommended upward adjustment from his award level for the previous year, which was approximately at the median level at the time of the award in December 2005.

 

The Committee determined that one-half of the median-level LTI compensation would be awarded in the form of PBRSUs as follows: Dunia Shive — 29,250, Dennis Williamson — 24,460, Guy Kerr — 21,270 and Marian Spitzberg — 11,700. These target level awards were subject to 2007 financial performance criteria as established by the Committee. The remaining one-half of the recommended LTI compensation was reserved for awards of TBRSUs that were made in February 2007 in recognition of final 2006 performance. Robert Decherd’s LTI compensation, which was equivalent to the previous year’s market median, was divided into thirds: 157,320 options awarded for 2006 performance, 52,440 PBRSUs to be earned in 2007 and the remaining one-third in the form of

TBRSUs awarded in February 2007, also in recognition of final 2006 performance. See discussion of February 2007 TBRSU Grants below.

 

February 2007 TBRSU Grants.   In February 2007, the Committee made LTI compensation awards in the form of TBRSUs based on a review of actual 2006 financial performance using the median-level LTI recommendations previously approved by the Committee in December 2006. The grant date fair value of these awards is reported under the column “Grant Date Fair Value of Stock and Option Awards” in the “Grants of Plan-Based Awards in 2007” table. Additionally, the amounts in the Summary Compensation Table, under the column “Stock Awards,” include the accounting expense recognized in 2007 by the Company in accordance with FAS 123R for these TBRSU awards.

 

December 2007 Grants.   In December 2007, in light of the impending spin-off, the Committee made LTI compensation awards to the executive officers and to certain other officers of the Company, including those who would become executive officers of A. H. Belo. To emphasize the importance of retaining these executives in the smaller post-spin company in a changing business environment, and to encourage focus on the Company’s business goals during the transition period following the spin-off, the Committee determined that the December 2007 LTI compensation awards would be made in the form of TBRSUs. Because a large portion of the ultimate value of the LTI compensation awards depends upon the performance of Belo common stock, the interests of the executive officers are aligned with the financial interests of Belo’s shareholders. A portion of the ultimate value of LTI awards will also depend upon the stock price of A. H. Belo to the extent awards were subject to the distribution of A. H. Belo common stock at the time of the spin-off.

 

The Committee made recommendations for LTI compensation levels in December 2007 through the matching of the positions of Belo’s executives with data for similar positions in companies the size of Belo prior to the spin-off. The data for the named executives was obtained primarily from the Proxy Study with information presented on median-level and 75 ^th percentile grants. Recommendations for the December 2007 LTI awards were presented to the Committee for each of the named executives that were at or above the median level. Actual awards were between the 50 ^th and 75 ^th percentile, except for Guy Kerr who was slightly above the 75 ^th percentile. These above median awards were considered appropriate in light of each executive officer’s performance and substantial role in the spin-off. The Committee awarded a total of 362,210 TBRSUs to the named executive officers under the ECP based upon 2007 performance. The grant date fair value of these awards is reported under the column “Grant Date Fair Value of Stock and Option Awards” in the “Grants of Plan-Based Awards in 2007” table. The Committee currently does not intend to make additional grants of LTI awards to recipients of December 2007 LTI awards, including the named executive officers staying with Belo after the spin-off, until December 2008.

 

The Company did not make any grants of PBRSUs to the named executive officers during 2007 in respect of 2008 financial performance in light of the spin-off.

 

February 2008 Grants.   In February 2008, the Company assessed the December 2006 target grant of PBRSUs against 2007 financial performance and PBRSUs were paid to the named executive officers at 100% of target. The amounts in the Summary Compensation Table, under the column “Stock Awards,” include the accounting expense recognized in 2007 by the Company in accordance with FAS 123R for PBRSU awards to the named executive officers.

 

Retirement Benefits.   Through March 31, 2007, the Company offered pension benefits to certain employees through its tax qualified Pension Plan. Effective March 31, 2007, the Pension Plan was frozen and all affected employees were provided with transition benefits, including the granting of five years of additional credited service. In addition, the Company had maintained the Belo Supplemental Executive Retirement Plan, or SERP, for key executives approved by the Committee, including the named executive officers. The Company’s SERP is an account-balance plan, and does not guarantee a specific benefit amount to participants. The primary purpose of the SERP has been to provide retirement benefits to key executives that are intended to restore retirement benefits restricted by IRS limits on qualified plans, such as the Pension Plan and the Belo Savings Plan (401(k) Plan) in which our executive officers also participate. In December 2007, the Committee and the Company’s Board of Directors approved the distribution of amounts in the SERP accounts to all participants, including the named executive officers, and the suspension of contributions to the SERP to permit the Company to determine the suitability of the SERP to Belo’s compensation objectives following the spin-off. Through 2007, the Company

made annual contributions to the SERP on behalf of each of the named executive officers. For additional discussion of the Pension Plan and the SERP, see “Post-Employment Benefits — Pension Plan” and “Non-Qualified Deferred Compensation — Supplemental Executive Retirement Plan” below.

 

Change in Control and Severance Benefits

 

Change In Control Severance Plan.   The Company does not presently have any individual employment severance agreements with executive officers. However, effective October 1, 2007, following a review performed by Mercer of change in control severance plans at peer media companies and based on general industry data, the Committee recommended and Belo’s Board adopted a Change in Control Severance Plan (the “Severance Plan”). In July 2007, at the Committee’s direction, Mercer presented a summary of market practices regarding severance programs related to the termination of employment upon a change in control. The presentation included information on change in control programs at the eleven peer companies in the Proxy Study. General industry data was obtained from the Mercer 350 study, a study of compensation trends and market practices conducted for The Wall Street Journal that analyzes 350 of the largest United States public companies with median 2006 revenue of $7.9 billion. The study indicated that change in control arrangements are common and are generally viewed as an important tool for attracting and retaining executive talent. Over 70 percent of the companies in each group provide participation in change in control plans to key executives. The Committee directed Mercer to recommend a change in control plan that would be appropriate for the Company, given its industry and size. Belo’s plan was adopted in light of media industry consolidation, including a number of notable industry mergers, in order to promote executive retention and reduce the level of uncertainty and distraction that is likely to result from a change in control or potential change in control of Belo. Belo does not design its other elements of compensation in anticipation of a change in control, but instead change in control payments are designed to provide security to executives in the event of job loss in a triggering transaction.

 

At its September 2007 meeting, the Committee reviewed the proposed plan and determined that payment and benefit levels were appropriate in light of survey data for media companies the size of the Company following the spin-off. The severance multiples for participants in the Severance Plan are in the range of typical multiples of plans surveyed by Mercer. It also determined that a variation of .5 in severance multiples between each category of covered individuals was appropriate to acknowledge the distinctions in responsibility and experience among them. The Severance Plan provides for severance benefits for designated participants. The initial participants, as designated by the Compensation Committee, are the executive officers of Belo, including the Company’s continuing named executive officers. Additional participants may be designated by the Committee from time to time. The triggering change in control events under the Severance Plan are similar to those described below in reference to the ECP change in control benefits.

 

Participants in the Severance Plan are approved by the Committee and are entitled to benefits upon termination of employment within 24 months of a change in control of Belo if their termination is (i) involuntary other than for “cause” as defined in the Severance Plan or (ii) voluntary for “good reason” as defined in the Severance Plan. In addition, a participant may voluntarily terminate employment for any reason or without reason during the 30-day period immediately following the first anniversary of a change in control and be entitled to receive payments and benefits under the Severance Plan. The triggering of severance benefits upon the occurrence of both a change in control and termination of employment is a common feature of change in control benefits surveyed. Belo also believes that the ability of a participant to trigger change in control benefits during the one-month period following the first anniversary of a change in control assures continuity of senior management by giving senior executives an incentive to stay following a change in control, knowing that they will not experience a loss of severance benefits should there be incompatibility with new management. Upon such termination, a participant will receive his or her base salary in effect at the time of change in control, plus the greater of (i) current target bonus in effect prior to the

change in control or (ii) actual bonus (defined as the average of the last three years’ bonus payments), multiplied by the severance multiple set forth below:

 

 

In addition, a participant will receive a cash payment in lieu of (1) employer-provided contributions to the Belo Savings Plan and the Pension Transition Supplement Plan for a number of years equal to the participant’s severance multiple; (2) employer cost of medical and dental benefits in excess of employee premiums for a number of years equal to the participant’s severance multiple; and (3) reimbursement for employment outplacement services up to $25,000 and legal expenses incurred to enforce the participant’s rights under the Severance Plan. If all or a portion of any payment or distribution by Belo under the Severance Plan is subject to excise tax, Belo will make a gross-up payment to the terminated employee.

 

ECP Change in Control Benefits.   Compensation and benefits under the Company’s ECP may also be affected by a change in control of the Company. Generally under the ECP, a change in control event means the first of the following to occur, unless the Board has adopted a resolution stipulating that such event will not constitute a change in control for purposes of the ECP:

 

 

Following a change in control, ECP bonuses are paid in full at the higher of target or forecasted full-year results in the year of the change in control; stock options held by management, including sales executives and non-employee directors, become fully vested and are immediately exercisable; TBRSUs vest and are payable in full immediately; and PBRSUs vest at the higher of target or forecasted full-year results in the year of the change in control; and all vested units are payable in full immediately.

 

Pension Transition Supplement Restoration Plan.   Effective April 1, 2007, the Company adopted the Pension Transition Supplement Restoration Plan, or the Restoration Plan, as a non-qualified plan, to provide the portion of PTS Plan benefit that cannot be provided under the PTS Plan because of Code limitations on the amount of qualified plan benefits. Generally under the Restoration Plan, a change in control will occur on the date that:

 

 

Upon the occurrence of a change in control, the Compensation Committee has the right, but not the obligation, to terminate the Restoration Plan and distribute the entire balance of participants’ accounts to the participants. Since

there were zero account balances in the Restoration Plan as of December 31, 2007, no benefits are listed in the “Non-Qualified Deferred Compensation for 2007” table.

 

Other.   Also, upon a change in control, the trust that held assets to fund SERP benefits would have become irrevocable and, subject to the prior claims of Belo’s creditors, the assets of the trust may not be recovered by Belo until all SERP benefits have been paid. Because all Pension Plan participants are fully vested in their benefits under that plan, a change in control would have no effect upon participants’ benefits under the Pension Plan. In addition, the ECP provides for accelerated vesting of equity awards for terminating employees who meet the criteria for early retirement (age 55 or more with three years service). Except in connection with the recently adopted Severance Plan, our named executive officers do not receive tax “gross up” payments to compensate them for taxes incurred as a result of payments or benefits received in connection with a change in control or termination of employment.

 

The spin-off of A. H. Belo was not a change in control under the Belo plans. In addition to the change in control provisions in these plans discussed above, the Company has general severance guidelines that may or may not be followed in any particular instance when an executive officer leaves the Company. These guidelines do not entitle executive officers to any specific severance benefit or amount of benefit in the event of termination of employment with the Company. For additional discussion, see “Termination of Employment and Change in Control Arrangements” and the “Potential Payments on Termination or Change in Control at December 31, 2007” table, below.

 

Compensation Committee Interlocks and Insider Participation

 

Judy Craven (Chair), Larry Hirsch and Lloyd Ward served as members of the Compensation Committee during 2007. No member of the Compensation Committee during 2007 was a current or former officer or employee of Belo or had any relationship with Belo requiring disclosure under the caption “Director Compensation — Certain Relationships.” None of Belo’s executive officers served as a director or as a member of the compensation committee (or other committee serving an equivalent function) of any other entity that had an executive officer serving as a director or as a member of Belo’s Compensation Committee during 2007.

 

Compensation Committee Report

 

In accordance with its written charter adopted by our Board, the Compensation Committee has oversight of the Company’s overall compensation structure, policies and programs. In exercising its oversight responsibility, the Committee has retained a compensation consultant to advise the Committee regarding market and general compensation trends.

 

The Committee, after consultation with its compensation consultant, has reviewed and discussed the Compensation Discussion and Analysis with management, which has the responsibility for preparing the Compensation Discussion and Analysis. Based upon this review and discussion, the Committee recommended to our Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2007.

 

COMPENSATION COMMITTEE

 

Judith L. Craven, M.D., M.P.H., Chair

Henry P. Becton, Jr.

Wayne R. Sanders

William T. Solomon

M. Anne Szostak

Lloyd D. Ward

SUMMARY COMPENSATION TABLE

 

The following information summarizes annual and long-term compensation awarded to, earned by or paid to Belo’s principal executive officer, principal financial officer and its three other most highly-paid executive officers (the “named executive officers”) for services in all capacities to Belo for the years ended December 31, 2007 and 2006, respectively.

 

 

 

 

 

The following table summarizes cash-based and equity awards that were granted under the ECP during 2007.

 

 

 

For 2007, the proportion of equity-based compensation in relation to total compensation, excluding changes in pension value and above-market interest from non-qualified deferred compensation plans, for each of the named executive officers was as follows: Robert Decherd 55%; Dennis Williamson 63%; Dunia Shive 42%; Guy Kerr 57%; and Marian Spitzberg 58%. See “Compensation Discussion and Analysis” on page 24 of this proxy statement for a discussion of all components of total direct compensation and objectives for each element, both cash and equity-based awards.

 

Equity Holdings and Value Realization

 

The following table contains information on all equity awards that were outstanding as of December 31, 2007.