BLC Belo Corp.

 

 

March 31, 2009

 

Dear Fellow Shareholder:

 

I invite you to attend our annual meeting of shareholders on May 12, 2009 in The Belo Building at 400 South Record Street, Dallas, Texas. The meeting will be held on the third floor in the auditorium. A map is included for your use.

 

At the meeting, you will hear a report on Belo’s operations and have a chance to meet your directors and executive officers. This package includes the formal notice, proxy statement, and proxy card for the meeting, together with Belo’s 2008 annual report. The proxy statement tells you more about the agenda and voting procedures for the meeting. It also describes how the Board operates and provides information about our directors, including those nominated for election at this year’s meeting.

 

We are using recently adopted Securities and Exchange Commission rules that allow Belo to furnish proxy materials on the Internet to participants in the Belo Savings Plan and the separate A. H. Belo Savings Plan maintained by A. H. Belo Corporation. Accordingly, these shareholders will not automatically receive paper copies of our proxy materials. We will mail a notice to these shareholders with instructions for accessing the proxy materials, including our proxy statement and annual report, and for voting via the Internet. This notice also provides information on how these shareholders may obtain paper copies of our proxy materials free of charge, if they so choose. We believe that these rules allow us to provide these shareholders with the information they need to vote their shares while reducing delivery costs and any environmental impact.

 

For those shareholders with access to the Internet, I encourage you to vote your shares over the Internet. Detailed instructions on how to vote over the Internet or by telephone are set forth on the proxy card. 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 reduces the Company’s printing and mailing costs.

 

Whether or not you attend the meeting, I encourage you to vote your shares as soon as possible either by returning your proxy card or by voting using the Internet or telephone voting procedures outlined in the enclosed materials or in the Notice of Internet Availability of Proxy Materials. Even if you own only a few shares, it is important that your shares be represented at the annual meeting. If you are unable to attend the annual meeting in person, you may listen to the meeting by online Webcast. Please see the notice on the next page for more information.

 

I hope to see you on May 12th.

 

Sincerely,

 

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 12, 2009

 

 

 

To Belo Shareholders:

 

Please join us for the 2009 annual meeting of shareholders of Belo Corp. (“Belo” or the “Company”). The meeting will be held in The Belo Building at 400 South Record Street, Dallas, Texas, on Tuesday, May 12, 2009, at 11:00 a.m., Dallas, Texas time. The meeting will be held on the third floor in the auditorium. The annual meeting of shareholders will be simultaneously Webcast on Belo’s Web site (www.belo.com/invest). Following the conclusion of the meeting, a replay of the Webcast will be archived on Belo’s Web site through May 26, 2009.

 

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 18, 2009 are entitled to vote at the meeting or at any postponement or adjournment of the meeting.

 

This year, we are using recently adopted Securities and Exchange Commission rules that allow Belo to furnish proxy materials on the Internet to participants in the Belo Savings Plan and the separate A. H. Belo Savings Plan maintained by A. H. Belo Corporation. Consequently, these shareholders will not automatically receive paper copies of our proxy materials. We will instead send to these shareholders a Notice of Internet Availability of Proxy Materials with instructions for accessing the proxy materials, including our proxy statement and annual report, and for voting via the Internet. The electronic delivery of our proxy materials will reduce our printing and mailing costs and any environmental impact.

 

The Notice of Internet Availability of Proxy Materials identifies the date, time and location of the annual meeting; the matters to be acted upon at the meeting and the Board of Directors’ recommendation with regard to each matter; a toll-free telephone number, an e-mail address, and a Web site where shareholders can request a paper or e-mail copy of their proxy materials, including our proxy statement, annual report to shareholders and a voting instruction card, free of charge.

 

By Order of the Board of Directors

 

GUY H. KERR

Secretary

 

March 31, 2009

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 12, 2009

 

This proxy statement contains information related to the annual meeting of shareholders of Belo Corp. (“Belo” or the “Company”) to be held on Tuesday, May 12, 2009, beginning at 11:00 a.m., Dallas, Texas time, in The Belo Building at 400 South Record Street, Dallas, Texas, and any postponement or adjournment of the meeting. The meeting will be held on the third floor in the auditorium.

 

This proxy statement and related proxy card will be distributed to shareholders beginning on or about April 3, 2009. For those shareholders receiving a Notice of Internet Availability of Proxy Materials (the “Notice”), the Notice will be distributed to those shareholders on or about March 31, 2009.

 

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, approval of the Belo Amended and Restated 2004 Executive Compensation Plan, the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm, consideration of a shareholder proposal relating to repeal of Belo’s classified Board of Directors, and attention to any other matters properly brought before the meeting. Management will report on Belo’s performance in 2008 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 18, 2009, 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 18, 2009, you are entitled to vote all of the shares that you held on that date at the meeting, or at 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 89,765,729 shares of Series A common stock and 12,722,312 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 the shares of A. H. Belo Corporation (“A. H. Belo”) I received in the spin-off?

 

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 annual meeting of shareholders on May 14, 2009. Only shares of Belo Corp. are eligible to vote at Belo’s May 12, 2009 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 are covered by a proxy card. 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.

 

Shares held in your Belo Savings Plan account or in your A. H. Belo Savings Plan account (maintained by A. H. Belo Corporation) may be voted only by the plan trustee, but you may instruct the plan trustee on how to vote them. Information on how to provide voting instructions to the plan trustee via the Internet is set out in the Notice of Internet Availability of Proxy Materials. The Notice also includes information on how to obtain paper copies of the proxy materials, including a voting instruction card, if you so desire. (For more information, please refer to the question and answer “ How do I vote my shares held in the Belo Savings Plan or in the A. H. Belo Savings Plan ” below.)

 

It is important that you follow the instructions on each proxy card or the Notice and vote the shares represented by each card or the Notice separately.

 

Why did I receive a Notice in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials?

 

Pursuant to rules adopted by the Securities and Exchange Commission, the Company has elected to provide access to its proxy materials over the Internet to participants in the Belo Savings Plan and the separate A. H. Belo Savings Plan maintained by A. H. Belo Corporation. Accordingly, a Notice of Internet Availability of Proxy Materials was sent to these shareholders. These shareholders will have the ability to access the proxy materials on the Web site referred to in the Notice or request to receive free of charge a printed set of the proxy materials, including a voting instruction card. Instructions on how to access the proxy materials over the Internet or to request a printed copy are set out in the Notice. The Notice also has instructions on how to provide voting instructions to the plan trustee via the Internet.

 

In addition, all shareholders may request to receive proxy materials in printed form by mail or electronically by e-mail on an ongoing basis by following the instructions in the paragraph captioned “How to Receive Future Proxy Statements and Annual Reports Online” in the “Annual Report and Additional Materials” section on page 61 of this proxy statement. The Company encourages shareholders to take advantage of the availability of the proxy materials on the Internet in order to help reduce printing and mailing costs and any environmental impact.

 

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 approval of the Belo Amended and Restated 2004 Executive Compensation Plan, 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 or the Notice and have the proxy card or the Notice 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 or the Notice.

 

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.

 

If you participate in either the Belo Savings Plan or the A. H. Belo Savings Plan and had full shares credited to your account as of the record date, please refer to the information set forth in the question and answer “ How do I vote my shares held in the Belo Savings Plan or in the A. H. Belo Savings Plan ” below.

 

How do I vote in person?

 

For shares registered in your name, 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 18, 2009. You must contact your brokerage firm directly in advance of the annual meeting to obtain a legal proxy. Voting instructions with respect to shares held in the Belo Savings Plan or the A. H. Belo Savings Plan must be submitted by May 10, 2009, and may not be provided at the meeting.

 

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. For shares registered in your name, 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.

 

For information on how to revoke or modify previously given voting instructions with respect to shares held through one of the Savings Plans, please see “ How do I vote my shares held in the Belo Savings Plan or in the A. H. Belo Savings Plan ” below.

 

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 separate A. H. Belo Savings Plan maintained by A. H. Belo (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 Corp. common stock credited to your account as of the record date, you received a Notice of Internet Availability of Proxy

Materials in lieu of paper copies of our proxy materials. The Notice includes instructions on how to access the proxy materials over the Internet and how to request a printed set of the proxy materials, including a voting instruction card, if you desire to do so. The Notice also has information on how to provide your voting instructions to the plan trustee via the Internet. 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 10, 2009. If you sign, date, and return a paper voting instruction 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 approval of the Belo Amended and Restated 2004 Executive Compensation Plan, 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 Internet, telephone or voting instruction card) by May 10, 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 10, 2009, by submitting a new voting instruction by Internet or telephone, filing with the trustee either a written notice of revocation or submitting 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 approval of the Belo Amended and Restated 2004 Executive Compensation Plan, 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 2009 annual meeting of shareholders are incumbent directors.

 

4    Approval of the Belo Amended and Restated 2004 Executive Compensation Plan — The affirmative vote of a majority of the voting power represented at the annual meeting and entitled to vote is required to approve the Belo Amended and Restated 2004 Executive Compensation Plan.

 

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 2009.

 

4    Consideration of 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 properly may 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.

 

The following tables set forth information as of March 18, 2009, about the beneficial ownership of Belo Corp. common stock by our current directors, nominees for election as director, the executive officers named in the Summary Compensation Table in this 2009 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 18, 2009, there were 89,765,729 Series A shares, 12,722,312 Series B shares, and 102,488,041 combined 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 17, 2009) 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 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 60.8%.

 

Belo Corp. Stock Ownership of Directors and Executive Officers

 

 

 

 

 

Belo Corp. 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, 2008; 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 2008 were timely filed, except for (1) the reporting on Form 4 of one transaction involving the conversion of shares of Series B common stock into shares of Series A common stock in August 2008 by Peter Diaz and (2) the reporting on Form 5 by Henry Becton of his appointment in September 2008 as trustee of a trust that holds Series A common stock and of which Mr. Becton is a contingent beneficiary.

 

Belo’s bylaws provide that the Board of Directors comprises 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.

 

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 28. Class II directors will be eligible to serve a three-year term until the 2012 annual meeting.

 

Each independent director serves on each of the three standing committees of the Board (Audit, Compensation, and Nominating and Corporate Governance); Mr. Decherd, Mr. Moroney, Mrs. Herndon and Ms. Shive do not serve on any standing committee of Belo’s Board of Directors.

Class II Directors (Current terms expire at Belo’s 2009 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 III Directors (Terms expire at Belo’s 2010 annual meeting)

 

Class I Directors (Terms expire at Belo’s 2011 annual meeting)

 

PROPOSAL TWO: APPROVAL OF THE BELO AMENDED AND RESTATED
2004 EXECUTIVE COMPENSATION PLAN

 

In 2004, our Board of Directors adopted, and the Company’s shareholders approved, the Belo 2004 Executive Compensation Plan, which was designed to provide long-term and short-term incentives to executives, key employees and directors. The Belo 2004 Executive Compensation Plan has subsequently been amended four times by the Compensation Committee of the Board of Directors to make certain minor changes. The 2004 plan has been amended and restated to incorporate the four previously-adopted amendments as well as an additional technical amendment to express the Company’s intent that the plan and awards made thereunder comply with Section 409A of the Internal Revenue Code. The full text to the Belo Amended and Restated 2004 Executive Compensation Plan (referenced herein as the 2004 plan or ECP) is set forth in Exhibit I to this proxy statement.

 

On March 3, 2009, the Board resolved that the 2004 plan be submitted to the Company’s shareholders for approval. The 2004 plan permits grants of stock-based awards and performance-based cash bonus opportunities to directors, executive officers and other key employees. The number of shares reserved for award under the 2004 plan is 10 million, of which 5,287,659 shares remain available for future awards as of March 18, 2009.

 

The Company desires to continue its policy of providing incentive compensation to the Company’s Chief Executive Officer and other designated executive officers of the Company under a plan that will meet the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Generally, Section 162(m) prevents a company from receiving a federal income tax deduction for compensation paid to certain executive officers in excess of $1 million for any year, unless that compensation is “performance-based.” In order to qualify as performance-based compensation for purposes of Section 162(m) of the Code, the material terms of the performance goal under which the compensation is to be paid must be disclosed to and approved by a company’s shareholders, and the material terms of the performance goal must be reapproved by the company’s shareholders every five years.

 

In light of Section 162(m)’s five-year shareholder reapproval requirement, and in order to continue to provide incentive compensation to the Company’s Chief Executive Officer and other designated executive officers under a plan that will meet the requirements of Section 162(m), the Board has recommended that the 2004 plan be submitted to the Company’s shareholders for approval at the Company’s 2009 annual meeting of shareholders.

 

The following summary of the principal provisions of the 2004 plan is not intended to be exhaustive and is qualified in its entirety by reference to the full text of the 2004 plan, a copy of which is set forth in Exhibit I to this proxy statement.

 

General

 

The goal of the 2004 plan is to provide appropriate incentives that will allow the Company to attract and retain the best available talent and to encourage the directors and participating employees to put forth their maximum efforts for the success of the Company’s business, thereby serving the best interests of the Company and its shareholders.

 

All executive officers and other key employees of the Company and its subsidiaries and the Company’s non-employee directors are eligible to participate in the 2004 plan. Approximately 60 individuals currently participate in the 2004 plan, including the Company’s non-employee directors and the senior executives named in the Summary Compensation Table on page 43 of this proxy statement.

 

The 2004 plan is a flexible plan that provides the Compensation Committee with discretion to fashion the terms of awards to provide eligible participants with stock-based incentives and performance-based bonus opportunities, payable in cash or stock as the Compensation Committee deems appropriate. The 2004 plan permits the issuance of awards in a variety of forms, including: (1) non-qualified and incentive stock options, (2) appreciation rights, (3) restricted stock, (4) deferred shares, (5) performance shares and performance units, and (6) performance bonus opportunities (which we refer to as Executive Compensation Plan Bonuses) that become payable annually upon achievement of specified Management Objectives (as defined below).

 

Under the 2004 plan, 5,287,659 shares of common stock, subject to adjustment, are available for future awards as of March 18, 2009. See “Adjustments” below. Shares issued or transferred pursuant to the 2004 plan will be shares of

Series A common stock or Series B common stock, as determined by the Compensation Committee in its discretion. The number of shares of common stock available under the 2004 plan will be adjusted to include shares that relate to awards that expire or are forfeited, or are transferred, surrendered or relinquished to or withheld by the Company in satisfaction of the exercise price of an option or in satisfaction of any tax withholding amount, or are paid in cash in lieu of shares.

 

On March 18, 2009, the market value of a share of Series A common stock was $0.75, and the market value of a share of Series B common stock is assumed to be the same as a Series A share.

 

The 2004 plan will expire on May 11, 2014, which is the tenth anniversary of the date on which the 2004 plan was approved by Belo shareholders. No further awards will be made under the 2004 plan on or after such tenth anniversary.

 

Administration of the 2004 Plan

 

Unless the administration of the 2004 plan has been expressly assumed by the Board pursuant to a resolution of the Board, the 2004 plan will be administered by the Compensation Committee, which at all times will consist of two or more directors appointed by the Board, all of whom will (1) meet all applicable independence requirements of the New York Stock Exchange and (2) qualify as “non-employee directors” as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and as “outside directors” as defined in regulations adopted under Section 162(m) of the Code, as such terms are amended from time to time. Except as described herein, the Compensation Committee has the full authority and discretion to administer the 2004 plan and to take any action that is necessary or advisable in connection with the administration of the 2004 plan, including, without limitation, the authority and discretion to interpret and construe any provision of the 2004 plan or of any agreement, notification or document evidencing the grant of an award.

 

Awards under the 2004 Plan

 

Stock Options.   The Compensation Committee may from time to time authorize grants of stock options to any employee participant upon such terms and conditions as it may determine in accordance with the provisions of the 2004 plan. The Compensation Committee in its discretion will determine the number of shares of common stock subject to stock options to be granted to each participant. The Compensation Committee may grant non-qualified stock options, incentive stock options or a combination thereof to the participants. Stock options granted under the 2004 plan will provide for the purchase of common stock at a price not less than 100% of the market value thereof on the date the stock option is granted. No stock option will be exercisable more than ten years from the date of grant.

 

Stock options granted under the 2004 plan will be exercisable at such times and subject to such restrictions and conditions as the Compensation Committee shall approve. Each grant will specify that the exercise price is payable (1) in cash or by check acceptable to Belo, (2) by the actual or constructive transfer to Belo of shares of common stock already owned by the participant, (3) with the consent of the Compensation Committee, by withholding a number of shares otherwise issuable to a participant having a market value equal to the exercise price, or (4) in a combination of such methods of payment.

 

Each grant may also specify the required periods of continuous service by the participant with Belo or any subsidiary and/or the Management Objectives to be achieved before the stock options or installments thereof will become exercisable, and any grant may provide for the earlier exercise of the stock options in the event of a change in control (as defined below) or other similar transaction or event.

 

Neither the Compensation Committee nor the Board of Directors will authorize the amendment of any outstanding stock option to reduce the exercise price without the further approval of the shareholders of the Company, and no stock option will be cancelled and replaced with stock options having a lower exercise price without the further approval of the shareholders of the Company. The limitations described in this paragraph are not intended to prohibit adjustments permitted in the event of a stock split, stock dividend, merger, consolidation, or other corporate event or transaction as described in the 2004 plan. See “Adjustments” below.

Appreciation Rights.   The Compensation Committee may from time to time authorize grants of appreciation rights to any employee participant upon such terms and conditions as it may determine in accordance with the provisions of the 2004 plan. Appreciation rights may be granted in tandem with stock options or separate and apart from a grant of stock options. An appreciation right will be a right of the participant to receive from the Company upon exercise an amount which will be determined by the Compensation Committee at the date of grant and will be expressed as a percentage of the Spread (not exceeding 100%) at the time of exercise. “Spread” means the excess of the market value per share of the common stock on the date the appreciation right is exercised over (1) the exercise price of the related stock option or (2) if there is no tandem stock option, the grant price provided for in the appreciation right, multiplied by the number of shares of common stock in respect of which the appreciation right is exercised.

 

Each grant of an appreciation right made in tandem with stock options will specify the exercise price and any grant not made in tandem with stock options will specify the grant price, which in either case will not be less than 100% of market value of the common stock on the date of grant. No appreciation right will be exercisable more than ten years from the date of grant.

 

Any grant may specify that the amount payable upon exercise of an appreciation right may be paid by the Company in cash, shares of common stock having an aggregate market value per share equal to the Spread or any combination thereof, as determined by the Compensation Committee in its sole discretion. Any grant may also specify that the amount payable on exercise of an appreciation right may not exceed a maximum amount specified by the Compensation Committee at the date of grant.

 

Each grant will specify the required periods of continuous service by the participant with the Company or any subsidiary and/or the Management Objectives to be achieved before the appreciation rights or installments thereof will become exercisable, and will provide that no appreciation right may be exercised except at a time when the Spread is positive and, with respect to any grant made in tandem with stock options, when the related stock option is also exercisable. The Compensation Committee may also grant limited stock appreciation rights, which would become exercisable in the event of a change in control or other similar transaction or event.

 

Deferred Shares.   The Compensation Committee may from time to time authorize grants or sales to any employee participant of deferred shares upon such terms and conditions as it may determine in accordance with the provisions of the 2004 plan. Each grant or sale will constitute the agreement by Belo to issue or transfer shares of common stock to the participant in the future in consideration of the performance of services, subject to the fulfillment during the deferral period of such conditions as the Compensation Committee specifies. Each grant or sale will provide that the deferred shares will be subject to a deferral period fixed by the Compensation Committee on the date of grant, and any grant or sale may provide for early termination of the deferral period in the event of a change in control or other similar transaction or event. Each such grant or sale may be made without additional consideration or in consideration of a payment by the participant of an amount that is less than the market value of the common stock on the date of grant.

 

During the deferral period, the participant will not have any right to transfer any rights under the deferred shares, any rights of ownership in the deferred shares, or any right to vote the deferred shares. The Compensation Committee can authorize the payment of dividend equivalents on the deferred shares in cash or shares of common stock on a current, deferred, or contingent basis.

 

Restricted Stock.   The Compensation Committee may from time to time authorize grants or sales to any participant of restricted stock upon such terms and conditions as it may determine in accordance with the provisions of the 2004 plan. Each grant or sale will constitute an immediate transfer of the ownership of shares of common stock to the participant in consideration of the performance of services, entitling such participant to voting and other ownership rights, but subject to the restrictions hereinafter referred to. Each grant or sale may limit the participant’s dividend rights during the period in which the shares of restricted stock are subject to any such restrictions. Each such grant or sale may be made without additional consideration or in consideration of a payment by such participant that is less than the market value of the common stock on the date of grant or sale.

 

Each such grant or sale will establish restrictions, such as required periods of continuous service, or other restrictions, including restrictions that constitute a “substantial risk of forfeiture” within the meaning of Section 83 of the Code and the regulations of the Internal Revenue Service thereunder. Any grant or sale may provide for the

earlier termination of any such restrictions in the event of a change in control or other similar transaction or event. Each grant or sale may specify the Management Objectives, if any, that are to be achieved in order for the ownership restrictions to lapse.

 

Each grant or sale will provide that during the period for which such restriction or restrictions are to continue, the transferability of the restricted stock will be prohibited or restricted in a manner and to the extent prescribed by the Compensation Committee at the date of grant (which restrictions may include, without limitation, rights of repurchase or first refusal of Belo or provisions subjecting the restricted stock to continuing restrictions in the hands of any transferee).

 

Performance Shares and Performance Units.   The Compensation Committee may from time to time authorize grants to any employee participant of performance shares and performance units, which will become payable upon achievement of specified Management Objectives, upon such other terms and conditions as it may determine in accordance with the provisions of the 2004 plan.

 

Each grant will specify the time and manner of payment of performance shares or performance units that have become payable, which payment may be made in (1) cash, (2) shares of common stock having a market value equal to the aggregate value of the performance shares or performance units that have become payable, or (3) any combination thereof, as determined by the Compensation Committee in its discretion at the time of payment.

 

Each grant of a performance share or a performance unit may also contain such terms and provisions, consistent with the 2004 plan, as the Compensation Committee may approve, including provisions relating to the payment of performance shares or performance units upon a change in control or other similar transaction or event.

 

Any grant of performance shares may specify that the amount payable with respect to such performance shares may not exceed a maximum amount specified by the Compensation Committee on the date of grant. Any grant of performance units may specify that the amount payable, or the number of shares of common stock issued, with respect to such performance units may not exceed maximums specified by the Compensation Committee on the date of grant.

 

Executive Compensation Plan Bonuses.   The Compensation Committee may from time to time authorize payment of annual incentive compensation in the form of an Executive Compensation Plan Bonus to an employee participant, which will become payable upon achievement of specified Management Objectives during a 12-month performance period. Executive Compensation Plan Bonuses will be payable upon such terms and conditions as the Compensation Committee may determine in accordance with the provisions of the 2004 plan. The Compensation Committee will specify the time and manner of payment of an Executive Compensation Plan Bonus that becomes payable, which payment may be made in (1) cash, (2) shares of common stock having a market value equal to the aggregate value of the bonus that has become payable or (3) any combination thereof, as determined by the Compensation Committee in its discretion at the time of payment. In the event of a change in control during a performance period, each Executive Compensation Plan Bonus will be determined at the greater of the target level of achievement or the actual level of achievement of the Management Objectives at the time of the change in control, without proration for a performance period of less than 12 months.

 

Management Objectives.   The Compensation Committee has broad discretion in its establishment of performance criteria for participants under the 2004 plan. As used in the 2004 plan, “Management Objectives” means the measurable performance objectives, if any, established by the Committee for a performance period that are to be achieved with respect to an award under the 2004 plan. Management Objectives may be described in terms of Company-wide objectives (in other words , the performance of Belo and all of its subsidiaries) or in terms of objectives that are related to the performance of the individual participant or of the division, subsidiary, department, region or function within Belo or a subsidiary in which the participant receiving the award is employed or on which the participant’s efforts have the most influence. The achievement of Management Objectives will be determined without regard to the effect on the Management Objectives of any acquisition or disposition by Belo of a trade or business, or of substantially all of the assets of a trade or business, during the performance period and without regard to any change in accounting standards or applicable tax laws.

 

The Management Objectives applicable to any award to a participant who is, or is determined by the Compensation Committee to be likely to become, a “covered employee” within the meaning of Section 162(m) of the Code (or any

successor provision) will be limited to specified levels of, growth in, or performance relative to performance standards set by the Compensation Committee relating to or peer company performance in, one or more of the following performance measures (excluding the effect of extraordinary or nonrecurring items):

 

 

If the Compensation Committee determines that, as a result of a change in the business, operations, corporate structure or capital structure of Belo (other than an acquisition or disposition by Belo of a trade or business), or the manner in which Belo conducts its business, or any other events or circumstances, the Management Objectives are no longer suitable, the Compensation Committee may in its discretion modify the Management Objectives or the related minimum acceptable level of achievement, in whole or in part, with respect to a performance period as the Compensation Committee deems appropriate and equitable, except where taking action would result in the loss of the otherwise available exemption of an award under Section 162(m) of the Code. In those cases, the Compensation Committee will not make any modification of the Management Objectives or minimum acceptable level of achievement.

 

Awards for Non-employee Directors

 

On the date of each annual meeting of the Company’s shareholders, each non-employee director of the Company will be granted an award under the 2004 plan that has a fair market value equal to 50% of the director’s annual compensation from the Company. The form and terms of awards to non-employee directors will be determined by the Compensation Committee in its discretion subject to the terms of the 2004 plan, but unless the Compensation Committee decides otherwise, awards to non-employee directors under the 2004 plan will be in the form of deferred shares. To the extent permitted by Section 409A of the Code, the Compensation Committee may permit a non-employee director to elect the date or dates on which an award will be paid. Any portion of the non-employee director’s compensation that is not paid in an award will be paid in cash.

 

For awards to non-employee directors, fair market value is determined as follows:

 

 

 

If an individual is elected to the Board of Directors on a date other than the date of an annual shareholders meeting, the director’s compensation will be pro-rated for less than a full year of service as a director, and the pro-rated compensation will be paid in the form of an award valued as of the date of the director’s election to the Board and cash as described in the preceding paragraphs.

 

General Terms for Awards

 

Adjustments.   The Compensation Committee will make adjustments in the maximum number of shares reserved for issuance under the 2004 plan or that may be issued as part of any award, in the numbers of shares of common stock covered by outstanding stock options, appreciation rights, deferred shares or performance shares granted thereunder, in the exercise price or grant price applicable to any stock options and appreciation rights, and/or in the kind of shares covered by awards (including shares of another issuer) as is equitably required to prevent dilution or enlargement of the rights of participants that otherwise would result from (1) any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of Belo, or (2) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (3) any other corporate transaction or event having an effect similar to any of the foregoing. Moreover, in the event of any such transaction or event, the Compensation Committee, in its discretion, may provide in substitution for any or all outstanding awards under the 2004 plan such alternative consideration as it, in good faith, may determine to be equitable in the circumstances and may require in connection with such substitution the surrender of all awards that are replaced.

 

Effect of Termination.   Each agreement evidencing an award may contain provisions relating to the effect upon the award of an employee participant’s termination of employment or a director’s termination of service by reason of retirement, death, disability or otherwise.

 

Change in Control.   Under the 2004 plan, a change in control means the first to occur of the following events:

 

 

 

For purposes of applying the provisions of items (2) and (4) above at any time on or after July 24, 2008, neither Robert W. Decherd nor any person or entity holding voting securities of the Continuing Entity or the Company, as applicable, over which Robert W. Decherd has sole or shared voting power will be considered to be the beneficial owner of 30% or more of such voting securities.

 

Limitation on Awards

 

Awards under the 2004 plan will be subject to the following limitations:

 

 

Transferability; Amendments; Termination

 

Unless the Compensation Committee determines otherwise, (1) no award will be transferable by a participant other than by will or the laws of descent and distribution and (2) no stock option or appreciation right granted to a participant will be exercisable during the participant’s lifetime by any person other than the participant or his or her guardian or legal representative.

 

The 2004 plan may be amended from time to time by the Compensation Committee or the Board of Directors, but may not be amended without further approval by the shareholders of the Company if such amendment would result in the 2004 plan failing to satisfy any applicable requirements of the New York Stock Exchange, Rule 16b-3 of the Exchange Act or Section 162(m) of the Code. The Board of Directors may terminate the 2004 plan at any time; provided, that no such termination will adversely affect any outstanding awards under the 2004 plan.

 

Benefits under the 2004 Plan

 

Grants were made during the year ended December 31, 2008 under the 2004 plan for performance in 2008. Please see the “Compensation Discussion and Analysis” section of this proxy statement and the “Grants of Plan-Based Awards in 2008” table for information regarding the 2008 grants to the named executive officers for 2008 performance and the “Belo Corp. Outstanding Equity Awards at Fiscal Year-End 2008” table in the “Executive

Compensation” section of this proxy statement for information regarding all awards held by named executive officers under the 2004 plan as of December 31, 2008. All executive officers as a group (5 persons), the non-executive officer employee group and the non-executive director group held 361,000 stock options and 483,847 restricted stock unit awards, 1,301,480 stock options and 717,136 restricted stock unit awards, and 275,280 stock options and 52,186 restricted stock unit awards, respectively, as of December 31, 2008 under the 2004 plan. Please see the “Director Compensation” table of this proxy statement for information about awards held by each non-employee director as of December 31, 2008 under the 2004 plan. No determination has yet been made as to the future awards, if any, that any individual who is eligible to participate in the 2004 plan will be granted.

 

Federal Income Tax Consequences

 

The following summary of the federal income tax consequences of the 2004 plan is not comprehensive and is based on current income tax laws, regulations and rulings.

 

Non-Qualified Stock Options.   Non-qualified stock options do not qualify for the special tax treatment accorded to incentive stock options under the Code. Although an optionee does not recognize income at the time of the grant of the option, he or she recognizes ordinary income upon the exercise of a non-qualified option in an amount equal to the difference between the fair market value of the stock on the date of exercise of the option and the amount of the exercise price.

 

As a result of the optionee’s exercise of a non-qualified stock option, the Company will be entitled to deduct as compensation an amount equal to the amount included in the optionee’s gross income. The Company’s deduction will be taken in the Company’s taxable year in which the option is exercised.

 

The excess of the fair market value of the stock on the date of exercise of a non-qualified stock option over the exercise price is not an item of tax preference for alternative minimum tax purposes.

 

Incentive Stock Options.   An optionee does not recognize income upon the grant of an incentive stock option. Subject to the effect of the alternative minimum tax, discussed below, if an optionee exercises an incentive stock option in accordance with the terms of the option and does not dispose of the shares acquired within two years from the date of the grant of the option or within one year from the date of exercise, the optionee will not recognize any income by reason of the exercise and the Company will be allowed no deduction by reason of the grant or exercise. The optionee’s basis in the shares acquired upon exercise will be the amount paid upon exercise. If the optionee holds the shares as a capital asset at the time of sale or other disposition of the shares, his or her gain or loss, if any, recognized on the sale or other disposition will be capital gain or loss. The amount of his or her gain or loss will be the difference between the amount realized on the disposition of the shares and his or her basis in the shares. Belo generally will not be entitled to any income tax deduction upon disposition of the shares.

 

If an optionee disposes of the shares within two years from the date of grant of the option or within one year from the date of exercise (an “Early Disposition”), the optionee generally will recognize ordinary income at the time of such Early Disposition which will equal the excess, if any, of the lesser of (1) the amount realized on the Early Disposition, or (2) the fair market value of the shares on the date of exercise, over the optionee’s basis in the shares. The Company will be entitled to a deduction in an amount equal to such income. The excess, if any, of the amount realized on the Early Disposition of such shares over the fair market value of the shares on the date of exercise will be long-term or short-term capital gain, depending upon the holding period of the shares, provided the optionee holds the shares as a capital asset at the time of Early Disposition. Belo generally will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the optionee upon an Early Disposition.

 

The excess of the fair market value of the shares at the time the incentive stock option is exercised over the exercise price for the shares is an item of “tax preference” for alternative minimum tax purposes.

 

Appreciation Rights.   Recipients of appreciation rights do not recognize income upon the grant of awards. When a recipient elects to receive payment under an appreciation right, he or she recognizes ordinary income in an amount equal to the cash and/or fair market value of shares received, and the Company is entitled to a deduction equal to such amount.

Deferred Shares.   Recipients of deferred shares will generally recognize ordinary income equal to the fair market value of deferred shares on the date that the shares are distributed to the recipient. Belo will be entitled to a tax deduction for the same amount. The holding period to determine whether a recipient has long-term or short-term capital gain or loss on a subsequent sale will generally begin when the shares are transferred to the recipient, and a recipient’s tax basis for the shares will generally equal the fair market value of the shares on the same date.

 

Restricted Stock.   Grantees of restricted stock generally do not recognize income at the time of the grant. However, when shares of restricted stock become free from any restrictions, grantees recognize ordinary income in an amount equal to the fair market value of the stock on the date all restrictions are satisfied, and Belo will receive a corresponding deduction. Alternatively, a grantee of restricted stock may, pursuant to Section 83(b) of the Code, elect to recognize income upon the grant of the stock and not at the time the restrictions lapse, in which event Belo would receive a corresponding deduction at that time.

 

Performance Shares and Performance Units.   Grantees of performance shares and performance units do not recognize income at the time of grant. When performance shares or performance units are paid, grantees recognize ordinary income in an amount equal to the fair market value of the shares or units paid, and Belo will receive a corresponding deduction.

 

Change in Control.   If there is an acceleration of the vesting of benefits and/or an acceleration of the exercisability of stock options upon a change in control, all or a portion of the accelerated benefits may constitute “excess parachute payments” under Section 280G of the Code. The employee receiving an excess parachute payment incurs an excise tax of 20% of the amount of the payment in excess of the employee’s average annual compensation over the five calendar years preceding the year of the change in control, and the Company is not entitled to a deduction for a similar amount.

 

Limitation on Deduction.   Section 162(m) of the Code provides that no deduction will be allowed for certain remuneration with respect to a covered employee (within the meaning of Section 162(m) of the Code) to the extent such remuneration exceeds $1 million per taxable year. Section 162(m) of the Code does not apply to compensation payable solely on account of the attainment of one or more performance goals if (1) the goals are determined by a committee of two or more outside directors, (2) the material terms under which the remuneration will be paid, including the goals, are disclosed to shareholders and approved by a majority of the shareholders, and (3) except in the case of appreciation rights and eligible stock options, the Compensation Committee certifies that the goals have been met before the compensation is paid to the covered employee. Compensation arising from appreciation rights and stock options in which the exercise price is no less than the fair market value on the date of grant constitutes compensation on account of attainment of a performance goal as long as the shareholders approve the 2004 plan, including the maximum number of shares per participant over a specific time period.

 

Vote Required for Approval

 

The affirmative vote of a majority of the voting power represented at the annual meeting and entitled to vote is required for approval of the Belo Amended and Restated 2004 Executive Compensation Plan.

 

The Board of Directors recommends a vote FOR approval of the Belo Amended and Restated 2004 Executive Compensation Plan.

 

Ernst & Young LLP served as Belo’s independent auditors for the fiscal year ended December 31, 2008. The Audit Committee has appointed Ernst & Young LLP to serve in such capacity for 2009, 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, 2008 and December 31, 2007 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, 2008 and December 31, 2007:

 

 

 

 

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 Company’s 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 Three for the ratification of the appointment of Ernst & Young LLP as Belo’s independent registered public accounting firm.

PROPOSAL FOUR: CONSIDERATION OF A 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, as of November 18, 2008, 253,805 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, 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 a fraction 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 and 2008 annual meetings of shareholders and rejected by over 70% and 72%, respectively, of the votes cast at those meetings.

 

Under the Company’s Bylaws, the Board of Directors consists of three classes of directors with three-year staggered terms. Each year, shareholders elect one-third of the Company’s directors. 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.

 

For the reasons discussed below, the Board and the Nominating and Corporate Governance Committee believe that a classified board is more advantageous to and better serves the long-term interests of the Company and its shareholders, in contrast to a board that is elected annually. The Board and the Nominating and Corporate Governance Committee believe that each of the benefits of a classified board discussed below are particularly important currently, in light of the refocusing of the Company’s business as a result of the recent spin-off of the newspaper business, and the depressed stock prices that currently prevail in the marketplace.

 

 

 

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, Anne Szostak, and Lloyd Ward. 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 2008. Each incumbent 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 2008 annual meeting of shareholders.

 

Committees of the Board

 

Each of the Board’s standing committees consists of Henry Becton, Judy Craven, Wayne Sanders, 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 2008.

 

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. Anne Szostak will become chair of the Compensation Committee effective with the annual meeting of shareholders. 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 six times during 2008.

 

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. In February 2007, the Compensation Committee engaged Mercer as its compensation consultant. 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 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 four times in 2008.

 

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 of Belo’s bylaws within the time periods set forth in such Article 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.

 

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 the Company’s 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, the Company’s 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 applicable requirements of the PCAOB regarding Ernst & Young LLP’s communications with the Audit Committee concerning independence, and has 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, 2008, 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.

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

 

Belo’s executive officers as of December 31, 2008 were as follows:

 

 

 

 

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.

 

On February 8, 2008, the Company spun off its newspaper businesses and related assets into A. H. Belo Corporation. As a result, the Company became a separate publicly-held television company. Prior to the spin-off, the Compensation Committee (the “Committee”) took 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 officers and others who were not members of its then-current Management Committee.

 

Prior to the spin-off, the Committee worked with Mercer LLC (“Mercer”), its executive compensation consultant, on a comprehensive review of the Company’s executive compensation structure. This resulted in changes to the bonus structure for members of the Company’s Management Committee designed to give the Company more flexibility to reward individual performance or to acknowledge exceptional performance by the Company relative to its peers in a transitional industry operating environment. These measures included a discretionary bonus component for Management Committee members related to the achievement of non-financial objectives and a potential discretionary upwards adjustment of earned annual performance bonus if merited by the Company’s performance in comparison to its peers. However, as the U.S. economy continued to deteriorate and the effects were felt in the media industry generally and the Company specifically, the Committee determined not to make discretionary bonus awards for 2008. The Compensation Committee throughout 2008 continued to meet to discuss and review compensation trends. In light of economic conditions, and considering the challenge of collecting data related to peer company performance, the Committee decided to consider performance relative to peers, if available, when evaluating the non-financial discretionary component of cash incentives.

 

The significant downturn in the U. S. economy during 2008 negatively affected both the Company’s revenues and its stock price. For this reason, the Company took action to align expenses with expected lower 2009 revenue levels. In November 2008, the Company instituted a twelve-month wage freeze affecting all employees, including its executive officers. Subsequently, on March 10, 2009, the Company announced that all participants in the Executive Compensation Plan, including each of the named executive officers, will be subject to a 5% decrease in base salary beginning in April 2009. The reduction in base salary is expected to remain in place at least through the end of the year. In December 2008, the Company departed from its past approach of targeting the median of available market data in determining the size and type of long-term incentive awards to Executive Compensation Plan participants, including the named executive officers. Instead, the total value of long-term incentive awards made in December 2008 was significantly less than the prior year awards and the median market values in consideration of the Committee’s desire to moderate the level of share utilization given the Company’s recent stock price decline and the general downward trend in the size of long-term awards reflected in compensation survey data used by the Company.

 

This Compensation Discussion and Analysis reflects compensation of the Company’s named executive officers for the calendar year 2008. To the extent that the 2009 compensation practices are expected to differ from 2008 compensation, it summarizes the anticipated differences for next year. 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 and the non-executive chair of the Belo Corp. Board of Directors. At that time, Dunia Shive became the Company’s president and Chief Executive Officer and Peter Diaz became a member of the Company’s Management Committee. Thus, the compensation tables that follow contain, with respect to Mr. Decherd, only that six-week portion of 2008 compensation that relates to Mr. Decherd’s service as a Belo executive officer prior to the spin-off along with his compensation received for board service. Marian Spitzberg, senior vice president/Human Resources and a member of the Management Committee, retired from the Company effective January 2, 2009.

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. Prior to the spin-off in February 2008, the primary management liaisons to the Committee were the Company’s then Chief Executive Officer, Robert Decherd, and its senior vice president/Human Resources, Marian Spitzberg. Following the spin-off, the Company’s president and Chief Executive Officer, Dunia Shive, became the primary liaison along with Ms. Spitzberg. In addition, in October 2008, Kim Besse joined Belo Corp. as its vice president/Human Resources, and effective as of January 2, 2009, upon Ms. Spitzberg’s retirement, became the primary management liaison along with Ms. Shive.

 

Compensation Objectives

 

The Company has adopted compensation policies to achieve the following 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. Beginning in February 2007, Mercer was retained for this purpose. Mercer provides information, analyses, and objective advice regarding executive and director compensation, as described below. Mercer reports directly to the chair of the Compensation Committee, and also works with the Company’s management liaisons in developing market information to assist the Committee in making its decisions.

 

Surveys and Determination of the Market.   Following the spin-off, Belo became a television-focused organization, and beginning in 2008, its compensation programs were designed to be competitive in that market. The Company’s compensation consultant assisted management in determining a peer group consisting of companies in the television industry (the “Peer Survey”). Peer selection was focused on size of the company in terms of revenue because revenues provide a reasonable point of reference for comparing like positions and scope of responsibility of individual officers. For 2008, we used a limited peer group of television companies with whom we compete for executive talent. The Peer Survey included the following companies:

 

 

To establish pay levels for our named executive officers, including Belo’s Chief Executive Officer, all components of direct compensation, including base salary, incentive cash bonus, and long-term incentives of the Peer Survey companies were reviewed. The Company’s compensation consultant noted the median (50th percentile) and the 75th percentile of the Peer Survey for each element of compensation.

 

As an additional point of reference for purposes of determining long-term incentive compensation, data from general industry (“General Industry Data”) compiled by our compensation consultant was used as supplemental information in cases where the sample size of comparable data was too small for a given executive position. Companies selected by the Company’s compensation consultant were those with revenues ranging from

$500 million up to $3 billion. Our compensation consultant used three survey sources to compile this General Industry Data, but did not provide the specific company names to management or the Compensation Committee. The three survey sources were the Mercer Benchmark Database, the Towers Perrin Executive Compensation Database for General Industry participants, and the Towers Perrin Media Survey.

 

The Mercer Benchmark Database consisted of compensation survey information from 107 companies with revenues in the $500 million to $1.5 billion range. The Towers Perrin Executive Compensation Database for General Industry participants is a database of 42 companies that participate in Towers Perrin’s compensation surveys, with revenues of less than $1 billion. The Towers Perrin Media Industry CDB Executive Compensation Database, referred to as the Towers Perrin Media Survey, consisted of compensation survey information from 27 companies with media operations, with revenues of less than $3 billion.

 

Process and Role of Management.   The Company used the Peer Survey in the manner described to develop recommendations in December 2007 for base salary and annual cash incentive compensation levels for the Company’s executive officers in 2008, including Dunia Shive, the Company’s president and Chief Executive Officer following the spin-off. Using the estimated median and 75th percentile of the Peer Survey market data provided by our compensation consultant as a guide, the 2008 base salary recommendations were developed with input from our compensation consultant and were presented by Marian Spitzberg, our senior vice president/Human Resources, to our then-Chief Executive Officer, Robert Decherd. Mr. Decherd and Ms. Spitzberg 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 base salary and annual cash incentive compensation recommendations, together with ranges where such base salary recommendations fell with respect to the median and 75th percentile of the Peer Survey results, compensation histories, and total cash compensation of the executive officers, were then presented to the Committee, which had full access to its compensation consultant, Robert Decherd and Marian Spitzberg. After consideration of the recommendations and adequate opportunity to address specific questions and concerns, the Committee made final base salary and annual cash incentive compensation recommendations for the named executive officers, excluding Robert Decherd and Dunia Shive, 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 their 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 Robert Decherd and Dunia Shive. The Committee evaluated and determined Robert’s and Dunia’s compensation after following the same process.

 

Long-term incentive recommendations were developed initially in October 2008 by Marian Spitzberg and Kim Besse, with input from the Company’s compensation consultant. In putting together the LTI recommendations, it became clear that due to the significant decline in the Company’s stock price, the Company had to change its past approach of targeting the median value in determining the size of long-term incentive awards to ECP participants. Otherwise, the resulting awards would have had an excessive dilutive effect on the Company’s outstanding equity. Given the Company’s stock price and the unprecedented decline in the television industry sector, management decided that, upon the advice and guidance of its compensation consultant, it needed to look beyond the Peer Survey to set appropriate long-term incentive compensation levels and in doing so, referenced General Industry Data as described previously.

 

Using a compilation of the market data provided by our compensation consultant, the Company targeted aggregate LTI awards for ECP participants, including the named executive officers, that would not result in more than 2% dilution of the Company’s outstanding Series A Common Stock. Utilizing that pool of LTI awards, the Company then developed LTI award recommendations for its named executive officers that would result in awards in the range of 25 to 50 percent of the median value. LTI recommendations were presented to Dunia Shive, our president and Chief Executive Officer. Dunia Shive, Marian Spitzberg and Kim Besse further adjusted these recommendations to reflect the appropriate level of share utilization given the Company’s stock price and the expense of such awards in light of the continuing deterioration of economic conditions. These recommendations were presented to the Committee, which had full access to its compensation consultant, Dunia Shive, Marian Spitzberg, and Kim Besse who were involved in the formulation of recommendations. The Committee and the non-management

members of the Board evaluated the recommendations and determined the long-term incentive awards for the named executive officers.

 

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 2008 compensation for our executive officers, the Committee held the following meetings, in person or telephonically, to review, discuss, and set or recommend compensation levels:

 

 

Elements of 2008 Executive Compensation

 

For 2008, 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 (referred to as the ECP or the 2004 plan), which was approved by the Company’s shareholders in 2004 and is subject to shareholder re-approval at the 2009 annual meeting of shareholders. For more information, see “Proposal Two: Approval of the Belo Amended and Restated 2004 Executive Compensation Plan” on page 15 of this proxy statement. The ECP 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’, including executive officers’, 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 2008, the Company used the base salary median and 75th percentile data from the Peer Survey as reference points for determining appropriate compensation levels. Further consideration was then given to each executive’s current position and the anticipated future role he or she would play in the stand-alone television company following the spin-off. In consideration of each of their significant years of experience in the roles they currently held, recommendations for Dennis Williamson, Guy Kerr and Marian Spitzberg were presented to the Committee at levels that were slightly above the 75th percentile of the Peer Survey data. These relatively higher salary

recommendations were considered appropriate in light of the complexity of leading the Company through the transition following the spin-off and in recognition of their proven experience in those roles. Further, an emphasis on retention was a key factor in securing the executive leadership necessary for the transition. Dunia Shive and Peter Diaz each received significant increases in base salary as compared with 2007. The Committee considered that each of them was entering a new role with expanded levels of responsibility at the time of the spin-off, and also considered their limited tenure in the expanded role. As a result, their base salaries were set below the median of the reported survey data. As described in “Process and Role of Management,” the Company presented these recommendations to the Committee, who, upon further review and discussion with the management liaisons, presented them to the Board for final approval, except with respect to the recommendation for Dunia Shive as Chief Executive Officer, for which the Committee had the final authority for approving compensation.

 

These 2008 base salary amounts were initially frozen for 2009 as part of a Company-wide effort to control operating expenses. However, based on continuing economic challenges that have persisted throughout the first months of 2009, a determination was made to reduce the base salaries of all ECP participants by 5%, including the named executive officers. This salary reduction is to be effective in April 2009 and is expected to remain in place at least through the end of the year.

 

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 changes in media use habits by consumers and advertisers.

 

Under the ECP, in 2008, the Committee established a target bonus opportunity expressed as a percentage of base salary based on competitive market information using the Peer Survey. For 2008, the Committee considered but did not grant awards at the median, or 50th percentile, of the Peer Survey for annual cash incentives. Target bonus opportunities for 2008 for each of the named executive officers were set as a percentage of base salary as follows: Dunia Shive, 85%; Dennis Williamson, 65%; Guy Kerr, 55%; Peter Diaz 55%; and Marian Spitzberg, 55%. The named executive officers’ 2008 target bonus opportunities were all within a 10% range of the median. The target bonus of 85% of base salary for Dunia Shive for 2008 was at the median target bonus for her position as indicated by the Peer Survey. The target bonus opportunity of 65% of base salary for Dennis Williamson was above the survey-indicated median of 55% 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. 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 Government Relations and Internal Audit functions, as well as serving on the Management Committee. Peter Diaz’s target bonus of 55% was greater than the median of 50% in light of his recent assumption of additional executive responsibility, his performance and retention considerations. Marian Spitzberg’s target bonus of 55% of base salary was above the median of 45% out of consideration for her legal background and participation on the Management Committee. These percentages will remain unchanged in 2009 for continuing executive officers. The target bonus opportunities for 2009 for each of the named executive officers are shown in the “Grants of Plan-Based Awards in 2008” table in the “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” columns.

 

For 2008, 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 2008, 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. Bonus payout for performance between the points shown below is pro-rated.

 

The 2008 EPS goals were established at a level the Company considered to be reasonable, taking into account factors including its transformation to a separate publicly-traded television company following the spin-off. In addition, 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. At the time EPS goals were established, the Summer Olympics and the U.S. Presidential and other elections and political contests were expected to generate substantial additional revenue.

 

 

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 ($3.21) for the year ended December 31, 2008 was adjusted at the Committee’s discretion. The primary adjustments included the elimination of the effect of expenses related to the impairment of intangible assets. Negative adjustments to reported EPS included share-based compensation expense and the gain on bond repurchases. The adjusted EPS of $0.40, which was approved by the Committee, was then compared to the EPS target of $0.86, with the result that achievement was below the minimum performance threshold. As reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table, no cash incentive payments were earned by the executive officers with respect to 2008 performance.

 

In October 2007, in connection with the spin-off of A. H. Belo, the Company agreed to pay certain officers and managers special 2008 retention bonuses payable 90 days after completion of the spin-off. Although none of the Company’s then-current Management Committee members received a special guaranteed bonus in connection with the spin-off transaction, Peter Diaz, who became a Management Committee member and executive officer of the Company effective with the spin-off, received a special bonus in connection with the spin-off in the amount of $50,000 that was paid in August 2008. In addition, in recognition of her 17 years of service to the Company in the Legal and Human Resources areas, the Committee awarded Marian Spitzberg a special bonus in the amount of $150,000 upon her retirement. These amounts are reported in the “Bonus” column of the Summary Compensation Table.

 

Additionally, for 2009, the Company has determined that financial performance equal to the Company Plan will result in a reduced payout of 50% of each executive’s target bonus amount. Financial achievement at the maximum level will still result in a 200% payout with appropriate proration for performance between Plan and Maximum. However, financial performance below Plan will not result in a bonus payout of any amount for 2009.

 

Discretionary Cash Incentive Bonuses.   In addition to the annual cash incentive opportunity, 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 Dunia Shive and 1.5% of Belo’s consolidated net income for each of Dennis Williamson, Guy Kerr, Peter Diaz and Marian Spitzberg) provides a maximum for the grant of additional awards of cash and equity incentives under the ECP, and is designed to allow for tax deductibility of the compensation awarded within the pool.

 

In connection with the Committee’s review of the Company’s executive compensation structure in 2007, the Committee decided to add discretionary components to the consideration of cash incentives for the named executives. The Committee had the discretion to award up to 25% of each named executive’s total bonus opportunity to recognize individual performance against non-financial objectives. In addition, the Committee had the discretion to consider the Company’s performance against its peer companies and could have adjusted each individual’s earned cash incentive bonus award by up to 20% if the Company’s performance had been positive relative to its peers as determined by a comparison of specific financial measures. However, due to the continuing economic downturn that affected the Company’s performance in 2008 and in light of the expense reduction measures taken at the end of the year, the Committee determined not to make discretionary cash incentive awards to

the named executives. The Committee decided for 2009 that it would suspend the discretionary component tied to peer company comparison first introduced in 2008, but would retain the 25% non-financial objective component.

 

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. 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 of the 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 annual financial performance goals. Finally, TBRSUs encourage executives to remain with the Company and to focus on its long-term success.

 

Stock Option Awards.   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 to Company employees 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 2008 by the Company in accordance with FAS 123R for prior year option grants to the named executive officers, including unvested options granted in prior years.

 

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 or March 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.

 

Performance-Related Restricted Stock Unit Awards.   Although PBRSUs may be awarded to ECP participants, including executive officers, no PBRSUs were awarded in 2008. Generally, PBRSU 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 2008 Grants.   In the past, the Committee has made recommendations for LTI compensation levels by matching the positions of Belo’s executives with data for similar positions in companies the size of Belo prior to the spin-off and generally setting grants at the market median value. However, due primarily to the significant decline in the Company’s stock price during 2008 and an analysis by the Committee’s compensation consultant reflecting a general downward trend in the size of LTI awards to executives among peer companies and similarly-sized companies in 2007, the Committee concluded that using prior methodology for determining the size of LTI awards would result in an unacceptably high rate of share utilization. The Committee directed the Company to work with the Committee’s compensation consultant to determine an alternate approach to establishing LTI award levels.

 

The Company first determined the maximum desired share utilization rate for the awards to ECP participants was 2%. It then considered several alternatives for moderating the size of awards, including reducing the overall value of award amounts, reducing the number of ECP participants receiving awards and substituting time-based cash awards. Based on these considerations, the Company elected to recommend reduced amounts of share-based awards to approximately the same number of ECP participants as in the previous year to further its objectives of motivating performance and retention of key executives. To emphasize these objectives and because of the difficulty of setting performance goals in an uncertain economic environment, the Company recommended that LTI awards be allocated 50% in stock options and 50% in TBRSUs.

Given the maximum number of shares desired to be issued, management then determined an allocation of awards that was in the range of 25% to 50% of the market median for each named executive officer. An option award recommendation for each named executive officer was then presented to the Committee in December 2008. The Peer Survey was the primary source of survey data for these recommendations, but in determining recommendations the Company also used the General Industry Data provided by its compensation consultant as a guide. The information considered by the Compensation Committee reflected the total estimated value of each award, including the TBRSU component, that was to be considered by the Compensation Committee in March 2009. Based on its discussions of the Company’s need to retain and motivate key leadership, especially during difficult economic periods, the Committee rounded the recommendations up slightly. The Committee awarded a total of 452,500 stock options in December 2008 to the named executive officers as follows: Dunia Shive, 200,000; Dennis Williamson, 62,500; Guy Kerr, 90,000; and Peter Diaz, 100,000. No LTI award was made to Marian Spitzberg in view of her retirement from the Company at the end of 2008. The amounts in the Summary Compensation Table, under the column “Option Awards,” include the accounting expense recognized in 2008 by the Company in accordance with FAS 123R for these option grants to the named executive officers, and are also reflected in the “Grants of Plan Based Awards in 2008” table under the column, “All Other Option Awards: Number of Securities Underlying Options.”

 

March 2009 Grants.   At its March 2009 meeting, the Compensation Committee certified the amount of the annual incentive pool for each named executive officer and determined the awards that would be made from this pool. The Committee supports the use of equity based awards to serve as retention and recognition for executive officers and therefore determined to award TBRSUs from the pool. The Committee reviewed the preliminary TBRSU recommendations first evaluated in December 2008. Based on the unpredictable market conditions and the belief that current market values of Belo stock are significantly understated, the Committee determined that the value-based equity award approach used in previous years, which relied heavily on relative market data from industry surveys, should be replaced by a share-based approach to compensation. The resulting TBRSU awards, together with the value of the options awarded in December 2008, were considerably below median market values. However, the number of actual units awarded was considered appropriate by the Committee as increases in future stock prices may deliver significant value to the executives upon vesting of the TBRSUs in approximately three years. Awards made effective March 3, 2009 to the named executive officers were as follows: Dunia Shive — 65,000; Dennis Williamson — 22,500; Guy Kerr — 30,000; and Peter Diaz — 32,500.

 

Retirement Benefits.   Through March 31, 2007, the Company offered pension benefits to certain employees through its tax qualified pension plan, The G. B. Dealey Retirement Pension Plan (the “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 for many years the Belo Supplemental Executive Retirement Plan, or SERP, for key executives approved by the Committee, including the named executive officers. The Company’s SERP was an account-balance plan, and did not guarantee a specific benefit amount to participants. The primary purpose of the SERP was to provide retirement benefits to key executives 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 Compensation 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. The distribution of the accumulated SERP benefits, all of which were earned by the named executive officers in previous years with the Company, is included in the “Non-Qualified Deferred Compensation for 2008” table under the column, “Aggregate Withdrawals/Distributions.” No additional SERP benefits have been earned or accrued.

 

In connection with the freeze of the Pension Plan, Belo adopted two separate defined contribution plans, which are designed to provide supplemental pension benefits for all employees who were participants in the Pension Plan at the time it was frozen. The Belo Pension Transition Supplement Plan, or PTS Plan, is an account-balance plan intended to qualify under the provisions of Section 401(a) of the Internal Revenue Code. The Belo Pension Transition Supplement Restoration Plan (Restoration Plan) is a non-qualified plan and is intended to cover any pension supplement payments that exceed IRS limits to all qualified plan accounts. A participant in either plan must be actively employed on the last day of the plan year in which the contribution was earned in order to receive a

contribution. The amount of the contribution is determined by applying an actuarially determined factor to the participant’s eligible compensation earned during a given plan year. Participant accounts are funded following any plan year or period in which a benefit is earned. Participants are fully vested in their account balances at all times and are able to direct the investment of their accounts in the same manner as under the Belo Savings Plan. Upon termination of employment, a participant’s benefit is distributed in a single lump sum payment. Distributions from the PTS are subject to IRS early withdrawal restrictions associated with qualified plans. Amounts sets forth in the Summary Compensation Table under the column, “All Other Compensation,” include amounts contributed by the Company to our named executive officers under the PTS Plan during 2008, the specific amounts of which are set forth in footnote 5 to that column. Since there were zero account balances in the Restoration Plan as of December 31, 2008, no Restoration Plan benefit payments are included in that column or in the “Non-Qualified Deferred Compensation for 2008” table.

 

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 in September 2007, the Compensation Committee recommended and Belo’s Board adopted a Change in Control Severance Plan (the “Severance Plan”). The adoption of the plan was preceded by a comprehensive review by our compensation consultant of change in control severance plans at peer media companies and in general industry. The study indicated that change in control arrangements were common and are generally viewed as an important tool for attracting and retaining executive talent. Over 70 percent of the companies in the peer and general industry groups reviewed provided participation in change in control plans to key executives. Based upon this review, 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. The Severance Plan provides for severance benefits for designated participants. The current participants, as designated by the Compensation Committee, are the continuing named executive officers of Belo. Additional participants may be designated by the Committee from time to time. 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.

 

When the Compensation Committee first approved the Severance Plan, it determined that payment and benefit levels set forth in the plan were appropriate in light of survey data for media companies the size of the Company following the spin-off, and the initial severance multiples for participants in the Severance Plan were set in the range of 3.0 to 1.5. However, based upon further review during 2008, management recommended the Compensation Committee and the Board approve an amendment to the Severance Plan effective December 31, 2008 to reduce the severance multiple to 2 for the Chief Executive Officer and 1.5 for all other designated participants in light of general economic conditions.

 

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. If triggered, designated participants in the Severance Plan 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 the severance multiple applicable to 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. In addition, a

participant will receive a cash payment in lieu of (1) employer-provided contributions to the Belo Savings Plan, the PTS Plan, and the Restoration Plan for a number of years equal to the severance multiple; (2) employer cost of medical and dental benefits in excess of employee premiums for a number of years equal to the 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 participants, including senior management, 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.

 

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 “Change in Control Arrangements and Other Agreements Upon Termination of Employment” and the “Potential Payments on Change in Control or Termination of Employment at December 31, 2008” table on page 56 of this proxy statement.

 

Compensation Committee Interlocks and Insider Participation

 

Judy Craven (Chair), Henry Becton, Wayne Sanders, Anne Szostak, and Lloyd Ward served as members of Belo’s Compensation Committee during 2008. No member of the Compensation Committee during 2008 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 2008.

 

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, 2008.

 

COMPENSATION COMMITTEE

 

Judith L. Craven, M.D., M.P.H., Chair

Henry P. Becton, Jr.

Wayne R. Sanders

M. Anne Szostak

Lloyd D. Ward

 

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, 2008, 2007 and 2006, respectively.

 

Robert Decherd served as Chief Executive Officer of Belo Corp. through February 8, 2008, at which time, Belo Corp. spun off its newspaper businesses into a separate publicly traded company, A. H. Belo Corporation. Compensation information for Robert Decherd that is shown in the table below for 2008 has been pro-rated to reflect his actual period of service as Chief Executive Officer of Belo Corp. The table below also reflects the compensation received by Robert Decherd in 2008 for his services as non-executive Chairman of the Board of Belo Corp.

 

It is important to note that the executive compensation information in the table below includes required SEC disclosures about long-term equity awards that are valued at SEC-prescribed amounts. The amounts in columns (e) and (f) below reflect accounting expense and not actual award value that may be received by the executive officer upon vesting.

 

The 2008 compensation information for Dunia Shive, current Chief Executive Officer of the Company, represents a full year of service to the Company, as she was also an executive officer prior to her promotion to Chief Executive Officer effective with the spin-off on February 8, 2008.

 

 

 

		Ordinary				Change in				Dividend				Total Stock
		Expense				Fair Market Value				Equivalents				Awards Expense
Dunia Shive		$	1,038,304			$	(531,042	)		$	56,717			$	563,979
Dennis Williamson		$	88,890			$	(668,579	)		$	36,536			$	(543,153	)
Guy Kerr		$	590,284			$	(588,025	)		$	31,069			$	33,328
Peter Diaz		$	399,698			$	(200,783	)		$	21,436			$	220,351
Marian Spitzberg		$	44,454			$	(326,292	)		$	17,851			$	(263,987	)
Robert Decherd		$	62,621			$	(136,646	)		$	38,236			$	(35,789	)

 

 

 

 

 

 

The following table summarizes cash-based and equity awards that were granted under the ECP during 2008. Robert Decherd, as Chief Executive Officer of Belo Corp. until February 8, 2008, did not receive any plan-based awards from Belo Corp. during 2008 for his services as an executive officer. Mr. Decherd did receive equity awards in 2008 for his services as non-executive Chairman of the Board.