Definitive Additional Proxy Materials

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrant  x

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

¨   Preliminary Proxy Statement
¨   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
¨   Definitive Proxy Statement
x   Definitive Additional Materials
¨   Soliciting Material Pursuant to §240.14a-12

CME GROUP INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x   No fee required
¨   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
  (1)  

Title of each class of securities to which transaction applies:

 

 

 

  (2)  

Aggregate number of securities to which transaction applies:

 

 

 

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

  (4)  

Proposed maximum aggregate value of transaction:

 

 

 

  (5)   Total fee paid:
   

 

¨   Fee paid previously with preliminary materials.
¨   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

 

 

  (2)  

Form, Schedule or Registration Statement No.:

 

 

 

  (3)  

Filing Party:

 

 

 

  (4)  

Date Filed:

 

 

 

 

 

 


On April 25, 2012, representatives of CME Group Inc. (the “Company”) met with representatives of ISS Proxy Advisory Services to discuss the Company’s 2012 annual meeting and related proposals. A copy of the materials from such meeting are attached hereto.


Presentation to ISS:
CME Group 2012 Annual
Meeting
April 25, 2012


2
©
2012 CME Group. All rights reserved
Enhancements to our Compensation Program
Enhancements to our Corporate Governance
Practices
Related Party Transactions
Agenda


Enhancements to our
Compensation Program


©
2012 CME Group. All rights reserved
Since our last annual meeting, we have implemented the following
improvements to our compensation program:
Performance
shares
added
to
our
2011
annual
equity
grants
In 2012, we have increased the performance period for such shares from
one
to
three
years,
linking
the
awards
to
long-term
performance
For 2012, we have added a new long-term performance measure
tied to
three-year growth in our cash earnings on a per share basis
For 2012, we have increased from 25% to 50%
the amount of the annual
equity award delivered in performance shares
4
We Have Enhanced Alignment
of Pay with Performance
Tied to our achievement of 2012 cash earnings and annual total shareholder return
relative to the S&P 500
Cash earnings is the measure we use to evaluate the overall
performance of the
Company and to determine dividend payouts


©
2012 CME Group. All rights reserved
5
Our CEO’s realized and potential compensation has been aligned with
our performance, measured by total shareholder return year-over-year
on an indexed basis, and we have achieved consistent growth in our
cash earnings.
See pages 40 and 41 of the proxy
statement for more detail


©
2012 CME Group. All rights reserved
6
The following table shows the increase in the portion of compensation
tied to cash earnings achievement and total relative shareholder
return
for our named executive officers.  We believe the composition of
this
performance-based pay will increase to approximately 50% in 2012
based on the increase in the awards from 25% to 50% of the annual
grant.
26%
39%
74%
61%
0%
20%
40%
60%
80%
100%
2010
2011
Percent of NEOs Target Compensation Tied to Cash
Earnings Achievement and Total Shareholder
Return Relative to the S&P 500


©
2012 CME Group. All rights reserved
7
Our short-term incentive program is performance based
and is tied to
our achievement of cash earnings:
2010 -
Cash earnings achievement was 110% of target
2011 -
Target
increased
11%
vs.
prior
year
actual
cash
earnings
Cash earnings achievement was 101% of target
Bonuses for all of our named executive officers decreased
from 2010


©
2012 CME Group. All rights reserved
We believe the ISS peer group should include other financial
exchanges
such as The NASDAQ OMX Group, Inc. and NYSE
Euronext, who are similarly sized in terms of revenue
8
Analysis of Pay Relative
to Peers
Ticker
Revenues
Assets
CME
$3.3B
$40.8B
NDAQ
$3.4B
$14.1B
NYX
$4.6B
$13.1B
Revenues better reflect the size of financial exchanges where the objective is to collect
clearing and transaction fees which are booked as revenues – not assets
Almost 25% of our assets consist of performance bonds and guaranty fund contributions
in the form of cash that are held as part of our clearing guarantee; our financial
statements include an equal and offsetting liability for the same amount of these assets
Approximately 40% of our assets relates to the intangible value of our trading products,
recorded as a result of our various mergers


Enhancements to our
Corporate Governance
Practices


©
2012 CME Group. All rights reserved
10
We Enhanced our
Corporate Governance
Practices
In response to shareholder concerns, we have instituted the
following improvements in our corporate governance:
We did not renew our shareholder rights plan and it expired in
accordance with its terms
Seeking shareholder approval at the 2012 Annual Meeting to declassify
our Board and move to annual elections as of the 2014 Annual Meeting
We are continuously evaluating ways to reduce the size of our Board
while ensuring that we maintain the appropriate expertise, industry
knowledge and skills to effectively oversee our complex, highly regulated
business and it will be reduced by two as of the 2012 Annual Meeting


©
2012 CME Group. All rights reserved
CME Group received a shareholder proposal from Norges Bank, the
central bank for the Government of Norway, for a binding bylaw
amendment providing for proxy access:
11
Proxy Access Proposal
Ownership
Threshold:
1%
or
more
of
our
outstanding
common
stock
beneficially owned by a shareholder or group of shareholders
Holding
Period:
Continuously
for
1
year
prior
to
the
submission
of
the
nomination with an intention to hold through the meeting date
Maximum
Proportion
of
Directors
Subject
to
Nomination:
25%


©
2012 CME Group. All rights reserved
We believe that ISS should recommend AGAINST
the proxy access
proposal at CME Group for the following reasons:
A 1% holder at CME Group is the owner of an investment of less than
$200 million
Proxy access combined with our existing Class B shareholder director
election
rights
would
result
in
40%
of
our
Board
being
subject
to
nomination outside of our independent Board Nominating Committee
As we move to decrease the size of our Board, this percentage would increase
This
could
result
in
significant
turnover
in
our
Board
which
other
recipients
of
the
proposal
are not subjected to
We are governed by the CFTC which has additional director
composition requirements we are required to satisfy that do not apply to
other public companies
CFTC proposed rules include a mandate that at least 35% of our Board be comprised of
“public”
directors as defined by the CFTC
12
Proxy Access Proposal


©
2012 CME Group. All rights reserved
We believe that ISS should recommend FOR
the election of Dennis H. 
Chookaszian:
In its 2011 advisory report, ISS noted that Dennis Chookaszian serves as a non-
independent member of the Audit Committee
Classification based on Mr. Chookaszian’s son being employed by a consultant CME Group has engaged
CME
Group
relationship
with
the
consulting
firm
pre-dated
Mr.
Chookaszian’s
service on our Board and his son’s affiliation with the firm
After an extensive sourcing process, we independently determined such consulting
firm had the best understanding of our unique business
As confirmed
by
Internal
Audit,
the
fees
charged
are
reasonable
and
available
to
other
companies 
Disclosure of a related party transaction in accordance with SEC regulations should not
be a substitute for assessing independence
Mr. Chookaszian has extensive experience benefiting the CME Group Board and its
Audit Committee
13
Related Party
Transactions


©
2012 CME Group. All rights reserved
In summary, we believe that ISS should recommend that its clients:
Questions regarding CME Group’s annual meeting and the related
proposals may be directed to meg.wright@cmegroup.com
14
Conclusion
Vote FOR the advisory approval of the compensation of our named
executive officers
Vote AGAINST the binding shareholder proposal for proxy access
Vote FOR the election of Dennis H. Chookaszian