1. Role and Impact of Shareholder Activism on Achieving Good Governance

2. CORPORATE GOVERNANCE CONFERENCE 2006 Enhancing Board performance through best practice Robert A.G. Monks, Founder Lens Governance Advisors & Chairman, Governance for Owners, LLP

4. Robert A.G. Monks 4 Governance Activism REAL VALUE requires an AGENT OF CHANGE

5. Robert A.G. Monks 5 Governance Activism REAL VALUE requires an AGENT OF CHANGE

6. Robert A.G. Monks6 Governance Activism REAL VALUE requires an AGENT OF CHANGE

7. Robert A.G. Monks 7 Governance Activism REAL VALUE requires an AGENT OF CHANGE

8. Robert A.G. Monks 8 Governance Activism REAL VALUE requires an AGENT OF CHANGE

9. Robert A.G. Monks 9 Governance Activism REAL VALUE requires an AGENT OF CHANGE

10. Robert A.G. Monks 10 Governance Activism REAL VALUE requires an AGENT OF CHANGE

11. Robert A.G. Monks 11 Governance Activism REAL VALUE requires an AGENT OF CHANGE

12. Robert A.G. Monks 12 Governance Activism REAL VALUE requires an AGENT OF CHANGE

13. Forms of Hedge Fund Activism Influence Decision Making Process Increase Capital Distribution (Leverage) Monetize Other Assets (Real Estate)  Wendy’s International & Pershing  Kerr-McGee & Carl Icahn Frustrate / Complicate M&A  Temple-Inland & Carl Icahn  Bally Total Fitness Holding Corp & Liberation Investment Group  Mylan/King & Icahn/Perry  Deutsche Boerse & TCA/Atticus  Marathon/Ashland &Atticus Take Over / Sell Company  Creo Inc Burton & Capital Management  Circuit City & Highfields  Kmart/Sears & ESL Robert A. G. Monks, Adapted from a chart by Citigroup “Hedge funds at the Gate”, Sept ‘05 13

14. Abnormal Returns from the “Event Window’  Abnormal  Abnormal return defined as: actual return of the security over the event window minus minus the benchmark return Robert A.G. Monks 14 HERMES FOCUS FUND

15. All Observed Events Robert A.G. Monks, adapted from a chart by Becht, Franks, Mayer and Rossi 8.5 8 7.5 7 0 1 3 4 5 6 2 6.5 5.5 4.5 3.5 2.5 -0.5 1.5 -5-4-2-3 04 1 3 2 5 0.5 Estimate of permanent change in market value of company induced by event Cumulative average Abnormal Return (%) Trading Days in Event Time All Events Clean Events 15

16. LENSPerformance 7/31/92 – 9/30/00 562.8% vs. S&P 302.01% Robert A.G. Monks 16 SWIB 8/12/96 – 10/26/00 174.9% vs. S&P 104.9%

17. Relational Investors LLC Schedule of Investment Performance Statistics Robert A.G. Monks 17 2006 YTD Net of Fees Gross of Fees S&P 500 TR Index Cumulative since inception Cumulative annualized 0.4%0.38%2.65% 446.21% 19.36% 723.62%122.24% 24.58%8.68% From July 1, 1996 (inception through January 31, 2006)

18. Corporate Governance and Value The Appearance of Governance vs. Real Governance. 18 Robert A.G. Monks

19. 19 Shareholder Rights Are shareholder rights in the U.S. just a pot of gold at the end of a rainbow? Robert A.G. Monks

20. Shareholder Activism: A Reality Check :Golden Rule Copyright 2001 / Robert A.G. Monks 20

21. Robert A.G. Monks Alternatives for Effective Owner Obstacles to Effective Ownership Money Managers Have it Too GoodMoney Managers Have it Too Good Conflict of InterestConflict of Interest Collective ActionCollective Action Remedies: 1. Enforcement of trust law for the benefit of pension plan participants 2. creation of special purpose trustees who will have no conflicting commercial interests Remedy: Remedy: Provide incentive 21

22. 22 CEO Compensation s h a r e h o l d e r s e f f e c t l i t t l e c o n t r o l Robert AG Monks

23. 23 Greenhouse Gas Emissions for 2004 Absolute Carbon Dioxide Emissions Carbon Intensity Exxon is 41% more carbon intensive than Shell Exxon produces 31 million tons more CO 2 than Shell

24. External Costs of Greenhouse Gas Emissions External Costs are used to estimate the impact on society of environmental and social impacts Cost of Carbon Emissions to Society Note: External cost calculated using UK Government’s central estimate of the cost to society of CO 2 emissions. The cost to society of Exxon’s carbon emissions is 29% higher than Shell’s 24

25. EU Emissions Trading Scheme Installations have to submit permits (EUAs) equivalent to the amount of carbon dioxide they emitted during the trading period Each installation is given a free allocation of EUAs Excess EUAs can be sold Demand and supply of EUAs determines the price Prices reached nearly €30 per tonne in June but have settled at €22 recently Exxon has four UK sites with 4.3 million free allowances * Shell has five UK sites with 3.5 million free allowances * Similar schemes are being implemented in Canada and considered in some US states The EU Emissions Trading Scheme puts a price on carbon dioxide emissions that is designed to make companies take account of these emissions *Excludes joint ventures 25

26. Disclosure of Carbon Dioxide Emissions Exxon – pp17 of Corporate Citizenship Report 2004 Shell – pp32 of the Shell Report 2004 Shell’s disclosure is more precise: Shows exact emissions numbers for each greenhouse gas as well as an aggregated total. Extracting useful information from Exxon’s greenhouse gas disclosure is difficult: CO 2 is not reported separately exact numbers are not given, just a graph The activity breakdown is useful however. 26