Washington, D.C. 20549

SCHEDULE 14A INFORMATION

 

THE E. W. SCRIPPS COMPANY

 

Scripps Center

312 Walnut Street

Cincinnati, Ohio 45202

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

TO BE HELD JUNE 13, 2008

 

TO THE SHAREHOLDERS OF THE E. W. SCRIPPS COMPANY

 

The Annual Meeting of the Shareholders of The E. W. Scripps Company (the “Company”) will be held at the Queen City Club, Cincinnati, Ohio, on Friday, June 13, 2008, at 10:00 a.m., local time, for the following purposes:

 

1. to fix the number of directors and to elect persons as directors of the Company;

 

2. to approve the spin-off of the Company’s networks and interactive businesses;

 

3. to amend the Company’s 1997 Long-Term Incentive Plan,

 

4. to amend the Company’s Executive Annual Incentive Plan,

 

5. to amend the Company’s Employee Stock Purchase Plan, and

 

6. to transact such other business as may properly come before the meeting.

 

The board of directors has fixed the close of business on May 5, 2008, as the record date for the determination of shareholders who are entitled to notice of and to vote at the meeting and any adjournment thereof.

 

We encourage you to attend the meeting and vote your shares in person. If you plan to attend the meeting and need special assistance because of a disability, please contact the corporate secretary’s office.

 

We have enclosed the 2007 Annual Report, including financial statements, and the Proxy Statement with this Notice of Annual Meeting.

 

It is important that your shares be represented at the meeting, whether or not you are personally able to attend. Registered shareholders can vote their shares by using a toll-free telephone number or the Internet. Instructions for using these convenient services are set forth on the enclosed proxy card. Of course, you may still vote your shares by marking your vote on the enclosed proxy card and signing, dating and mailing it in the envelope provided. Returning your executed proxy card, or voting your shares using the toll-free number or the Internet, will not affect your right to attend the meeting and vote your shares in person.

 

Your proxy is being solicited by the board of directors.

 

Mary Denise Kuprionis, Esq.

Vice President

Corporate Secretary/Director of Legal Affairs

 

May 13, 2008

 

The E. W. Scripps Company

 

312 Walnut Street

Cincinnati, Ohio 45202

 

 

PROXY STATEMENT

 

2008 ANNUAL MEETING

June 13, 2008

 

This proxy statement, together with the accompanying notice of meeting, proxy card and annual report, is being mailed to shareholders on or about May 13, 2008. It is furnished in connection with the solicitation of proxies by the Board of Directors of The E. W. Scripps Company, an Ohio corporation (the “Company”), for use at the Company’s Annual Meeting of Shareholders which will be held on Friday, June 13, 2008.

 

The close of business on May 5, 2008, has been fixed as the record date for the determination of shareholders entitled to notice of and to vote at the meeting.

 

On March 1, 2008, the Company had outstanding 126,526,017 Class A Common Shares, $.01 par value per share (“Class A Common Shares”), and 36,568,226 Common Voting Shares, $.01 par value per share (“Common Voting Shares”). Holders of Class A Common Shares are entitled to elect the greater of three or one-third of the directors of the Company but are not entitled to vote on any other matters except as required by Ohio law. Holders of Common Voting Shares are entitled to elect all remaining directors and to vote on all other matters requiring a vote of shareholders. Each Class A Common Share and Common Voting Share is entitled to one vote upon matters on which such class of shares is entitled to vote.

 

PROPOSAL 1

 

Election of Directors

 

A board of eleven directors is to be elected, four by the holders of Class A Common Shares voting separately as a class and seven by the holders of Common Voting Shares voting separately as a class. In the election, the nominees receiving the greatest number of votes will be elected.

 

Each proxy for Class A Common Shares executed and returned by a holder of such shares will be voted for the election of the four directors hereinafter shown as nominees for such class of shares, unless otherwise indicated on such proxy. Each proxy for Common Voting Shares executed and returned by a holder of such shares will be voted for the election of the seven directors hereinafter shown as nominees for such class of shares, unless otherwise indicated on such proxy. Although the board of directors does not contemplate that any of the nominees hereinafter named will be unavailable for election, in the event that any such nominee is unable to serve, the proxies will be voted for the remaining nominees and for such other person(s), if any, as the board may propose.

 

The Board of Directors of the Company has approved the spin-off of Scripps Networks Interactive, Inc. (“SNI”), a wholly-owned subsidiary of the Company. Following the spin-off, which is expected to be effective on July 1, 2008, the Company will focus on its market leading local media franchises and SNI will focus on its cable television networks and interactive media businesses. A preliminary information statement relating to the spin-off and SNI has been filed with the Securities and Exchange Commission as an exhibit to SNI’s registration statement on Form 10. A copy of the preliminary information statement accompanies this proxy statement. The preliminary information statement is subject to completion and is being reviewed by the Securities and Exchange Commission as part of its review of SNI’s registration statement on Form 10. We expect the review process to be completed in May and will distribute to the shareholders a supplement summarizing any material changes made to the preliminary information

statement as a result of further comments received from the staff of the Securities and Exchange Commission.

 

On the effective date of the spin-off, the following directors will resign from the board of directors; David A. Galloway, Kenneth W. Lowe, Jarl Mohn, Nicholas B. Paumgarten, Jeffrey Sagansky and Ronald W. Tysoe. Thereafter, the board of directors will fix the number of directors at ten and will elect the following directors in accordance with Ohio law: Richard A. Boehne, John W. Hayden, Roger Ogden, Mary Peirce and Kim Williams. We expect that these new directors would then stand as nominees for election by the holders of the Company’s Common Voting Shares or Class A Common Shares at the 2009 annual meeting of shareholders. The Edward W. Scripps Trust, which controls 87.7% of the Company’s Common Voting Shares and 31.0% of the Company’s Class A Common Shares, has agreed to this process and indicated its intention to vote for such directors in 2009. The following table gives a brief summary of the business experience of each these potential directors.

 

Richard A. Boehne

 

Rich Boehne is executive vice president and chief operating officer of The E.W. Scripps Company. On the effective date of the spin-off, he will be President and Chief Executive Officer, overseeing all of the Scripps operating divisions and administrative functions. He will also serve as a director of the company. He began his media career as a part-time reporter for The Cincinnati Enquirer. He later graduated from college and joined a growing chain of regional community newspapers. Before moving to Scripps headquarters, he was a business reporter and editor at The Cincinnati Post, a Scripps newspaper. Mr. Boehne joined the corporate staff in early 1988 as manager of investor relations. Several years later, he became director of all of the company’s communication efforts. In addition to investor relations and media relations, he took on responsibility for employee communications and the Scripps Howard National Spelling Bee. He also joined the company’s long-range strategic planning and development group and in May 1995 became a vice president of the corporation. He was elected executive vice president in February 1999 and named chief operating officer in April 2006.

 

John W. Hayden

 

John Hayden is President and Chief Executive Officer of The Midland Company. Midland’s insurance operations do business as the American Modern Insurance Group. Mr. Hayden also serves as American Modern’s Chairman, President, and Chief Executive Officer. Mr. Hayden joined Midland/American Modern in June of 1981. He has served on Midland’s Board of Directors since 1991 and as its President and Chief Executive Officer since March, 1998.

 

Roger L. Ogden

 

Roger Ogden is the retired President and Chief Executive Officer of Gannett Broadcasting. Previously he served as General Manager for K*USA-TV in Denver, Colorado, and as Senior Vice President, Gannett Television. Mr. Ogden spent 17 years with GE/NBC in various capacities including President and General Manager of KCNC in Denver as well President and Managing director of NBC/CNBC Europe. Ogden began his broadcast career at age 13 as an announcer at KPOF in Denver.

 

Mary McCabe Peirce

 

Mary Peirce serves as a trustee of The Edward W. Scripps Trust, the controlling shareholder of The E. W. Scripps Company. Ms. Peirce has held prominent leadership roles in Scripps family affairs, including past chairmanship of the family’s annual business meeting and current service on the family’s media relations and ethics committees. She is a long-time advocate of health- and youth-related community services. In Sarasota, Florida, she has served on the board of Project Rebound, a program designed to provide an education for disadvantaged and court-remanded youth. She previously served on the board of Visiting Nurse Services of Long Island, NY.

 

Kim Williams

 

Kim Williams is a retired Senior Vice President, Partner, and Associate Director of Global Industry Research at Wellington Management Company, LLP. From 1995-2001, she served as Senior Vice President, Partner, Global Industry Analyst. From 1986-1995, Ms. Williams served as Vice President, Global Industry Analyst. From 1982-1985, she was Vice President, Industry Analyst at Loomis, Sayles & Co., Inc. in Boston, Massachusetts. Prior to that, Ms. Williams was an Investment Analyst at Imperial Chemical Industries (ICI) Pension Fund in London, England. Ms. Williams serves on the board of directors of Weyerhauser Company.

 

Ms. Julie A. Wrigley, a director of the Company since 1997, is retiring from the board on completion of her term in 2008. Mr. Edward W. Scripps, a director of the Company since 1998, retired from the board of directors in February 2008.

 

REPORT ON THE NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS

 

The following table sets forth certain information as to each of the nominees for election to the board of directors.

 

 

 

REPORT ON THE SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

 

The following table sets forth certain information with respect to persons known to management to be the beneficial owners, as of December 31, 2007, of more than 5 percent of the Company’s outstanding Class A Common Shares or Common Voting Shares. Unless otherwise indicated, the persons named in the table have sole voting and investment power with respect to all shares shown therein as being beneficially owned by them.

 

 

 

 

REPORT ON THE SECURITY OWNERSHIP OF MANAGEMENT

 

The following information is set forth with respect to the Company’s Class A Common Shares and Common Voting Shares beneficially owned as of January 31, 2008, by each director and each nominee for election as a director of the Company, by each named executive, and by all directors and executive officers of the Company as a group. Unless otherwise indicated, the persons named in the table have sole voting and investment power with respect to all shares shown therein as being beneficially owned by them. Also included in the table are shares owned by The Edward W. Scripps Trust, the trustees of which are directors of the Company.

 

 

 

 

 

REPORT ON THE BOARD OF DIRECTORS AND ITS COMMITTEES

 

2007 Board Meetings

 

During 2007, the board held four regularly scheduled meetings and four special meetings. All directors attended at least 75 percent of the meetings of the board and of the committees on which they served during the year ended December 31, 2007.

 

Executive Sessions of Directors

 

Executive sessions of nonmanagement directors are held regularly. The director who presides at these meetings is the chairman of the board of directors or another director selected by the board at the time of such meeting.

 

Committee Charters

 

The charters of the audit, compensation and nominating & governance committees are available for review on the Company’s Web site at www.scripps.com by first clicking on “Shareholders,” and then on, “Corporate Governance,” and then on “Highlights.” Copies are available in print to any shareholder who requests a copy by contacting the corporate secretary at 312 Walnut Street, Suite 2800, Cincinnati, Ohio, 45202.

 

Committees of the Board of Directors

 

Executive Committee.  William R. Burleigh (chair), John H. Burlingame and Kenneth W. Lowe are the members of the executive committee. This committee may exercise all of the powers of the board in the management of the business and affairs of the Company between board meetings except the power to fill vacancies on the board or its committees. The executive committee did not hold any meetings in 2007.

 

Audit Committee.  Ronald W. Tysoe (chair), David M. Moffett, Jeffrey Sagansky and Julie A. Wrigley are the members of the audit committee. The purpose of the committee is to assist the board in fulfilling its oversight responsibility relating to (1) the integrity of the company’s financial statements and financial reporting process and the company’s systems of internal accounting and financial controls; (2) the performance of the internal audit services function; (3) the annual independent audit of the Company’s financial statements, the engagement of the independent auditors and the evaluation of the independent auditors’ qualifications, independence, performance and fees; (4) the compliance by the company with legal and regulatory requirements, including the Company’s disclosure controls and procedures; (5) the evaluation of enterprise risk issues; and (6) the fulfillment of all other responsibilities as outlined in its charter. The internal and independent auditors have unrestricted access to the audit committee. The committee meets privately with each of the independent auditors, the internal auditors and management. During 2007, the audit committee held six meetings.

 

Compensation Committee.  David A. Galloway (chair), John H. Burlingame, Jarl Mohn and Ronald W. Tysoe are the members of the compensation committee. Mr. Edward W. Scripps was a member of the compensation committee until his retirement in February 2008. The committee is appointed by the board of directors to discharge the board’s responsibilities relating to compensation of the company’s directors and officers. The committee reviews and approves the company’s goals and objectives relevant to compensation of senior management and evaluates the performance of senior management in light of

those goals and objectives. With respect to the senior managers, the committee establishes base compensation levels, the terms of incentive compensation plans and equity-based plans and post-service arrangements. The committee approves all awards under the Company’s Long-Term Incentive Plan and approves awards under the Company’s Executive Annual Incentive Plan. The committee reviews all of the components of the chief executive officer’s compensation, including goals and objectives and makes recommendations to the board of directors.

 

With respect to any funded employee benefit plans, the committee appoints and monitors named fiduciaries. On an annual basis, the committee reviews the operation of the Company’s compensation program to evaluate its coordination and execution and reviews any management perquisites. The committee reviews succession planning relating to positions held by senior officers of the Company and reviews director compensation and makes recommendations with respect thereto to the board of directors. The committee has the authority to engage outside consultants to assist in determining appropriate compensation levels for the chief executive officer, other senior managers or directors. In 2007, the committee did not engage any consultants but received survey data from a consultant engaged by management. The committee is also responsible for producing an annual report for inclusion in the Company’s proxy statement and reviewing and approving the Compensation Discussion and Analysis and related compensation disclosure included in the Company’s proxy statement. During 2007, the compensation committee held five meetings.

 

Nominating & Governance Committee.  Nackey E. Scagliotti (chair), William R. Burleigh, John H. Burlingame, Nicholas B. Paumgarten, Paul K. Scripps and Julie A. Wrigley are the members of the nominating & governance committee. The purpose of the committee is (1) to assist the board by identifying individuals qualified to become board members and to recommend director nominees to the board; (2) to recommend to the board the Corporate Governance Guidelines applicable to the Company; (3) to lead the board in its annual review of the board’s performance; and (4) to recommend to the board nominees for each committee of the board. During 2007, the nominating & governance committee held four meetings.

 

CORPORATE GOVERNANCE

 

The board of directors is committed to good corporate governance, good business practices and transparency in financial reporting. The nominating & governance committee annually reviews the Company’s corporate governance principles, a copy of which is available on the Company’s Web site by first clicking on “Shareholders,” and then on, “Corporate Governance,” and then on “Highlights.” Copies are available in print to any shareholder who requests a copy by contacting the corporate secretary at 312 Walnut Street, Suite 2800, Cincinnati, Ohio, 45202.

 

Code of Ethics

 

The Company demonstrates its commitment to operate at the highest ethical standards by enforcing the principles in its Code of Ethics which is applicable to all employees. The Company’s corporate ethics program director is responsible for implementation and oversight of the ethics program. Additionally, the Company has in place a Code of Business Conduct and Ethics for the Chief Executive Officer and the Senior Financial and Accounting Officers. It is the responsibility of the audit committee and the chief financial officer to make sure that this policy is operative and has effective reporting and enforcement mechanisms. Both the Code of Business Conduct and Ethics for the Chief Executive Officer and Senior Financial Officers and the Code of Ethics are available for review on the Company’s Web site and to any shareholder who requests a printed copy.

 

The Company believes it has an obligation to provide employees with the guidance and support needed to ensure that the best, most ethical choices are made at work. To support this commitment, the Company established a means for employees to submit confidential and anonymous reports of suspected or actual violations of the Company’s Code of Ethics relating, among other things, to: accounting and auditing matters; antitrust activity; confidentiality & misappropriation; conflict of interest, discrimination or harassment; diverting of product or business activity; embezzlement; falsification of contracts, reports

or records; gifts or entertainment; improper supplier or contractor activity; securities violations; sexual harassment; substance abuse; theft; or unsafe working conditions. To submit a report, an employee may call a toll-free number that is answered by a trained professional of EthicsPoint, an independent firm. This number (888-397-4911) is operational 24 hours a day, seven days a week. Employees may also raise questions online through the Internet (www.ethicspoint.com).

 

Charitable Contributions

 

The Company has not made any charitable contributions, where the amount has exceeded $1 million or two percent of such charity’s consolidated gross revenues, to any charitable organization of which a director is an executive officer.

 

Communications with the Directors

 

Shareholders and other interested parties wishing to communicate with the board of directors may do so by addressing letters to the corporate secretary at 312 Walnut Street, Suite 2800, Cincinnati, Ohio, 45202. For those who wish to send such communications via e-mail, they can do so at kuprionis@scripps.com. The board has instructed the corporate secretary to review all communications so received (via regular mail or e-mail), and to exercise her discretion not to forward to the directors correspondence that is not germane to the business affairs of the Company. Correspondence not forwarded will be retained for one year and any director may request the secretary to forward any and all such communications to the directors.

 

Director Attendance at Annual Meetings of Shareholders

 

The Company does not have a policy with regard to attendance by board members at the Annual Meeting of Shareholders. Messrs. Burleigh, Burlingame and Lowe attended the Company’s 2007 annual meeting of shareholders.

 

Director Education

 

New directors attend a training session that introduces them to the Company’s operations and to the members of management. Thereafter, directors are informed on a regular basis of various director educational programs offered by governance and director organizations. The Company pays for the continuing education of its directors. The director orientation policy is reviewed by the nominating & governance committee annually.

 

Director Independence — Audit Committee

 

The board of directors of the Company has determined that none of the current members of the audit committee has any relationship with the Company that could interfere with his or her exercise of independence from management and the Company. Each of the members satisfies the definitions of independence set forth in the rules promulgated under the Sarbanes-Oxley Act and in the listing standards of the New York Stock Exchange. The board determined that each member of the committee is financially literate as defined under the current NYSE rules and that Mr. Tysoe is an audit committee financial expert as defined in the SEC rules adopted under the Sarbanes-Oxley Act.

 

Director Independence — Controlled Company Status

 

The New York Stock Exchange requires listed companies to have a majority of independent directors on their boards and to ensure that their compensation committee and governance committee are composed of a majority of independent directors as well. A company that qualifies as a “controlled company” does not have to comply with these strictures so long as it discloses to shareholders that the company qualifies as a “controlled company” and is relying on this exemption in not having a majority of independent directors on the board or a majority of independent directors on either of the aforementioned committees. A “controlled company” is a listed company of which more than 50 percent of the voting power is held by an individual, a group, or another company. The Edward W. Scripps Trust holds a majority

of the Company’s outstanding Common Voting Shares, and as such the Company qualifies as a “controlled company” and may rely on the NYSE exemption. The Company is not relying at present on that exemption.

 

Director Independence

 

The Company has determined that the following directors are independent under the standards established by the NYSE: William R. Burleigh, John H. Burlingame, David M. Moffett, David A. Galloway, Jarl Mohn, Nicholas B. Paumgarten, Jeffrey Sagansky, Nackey E. Scagliotti, Paul K. Scripps, Edward W. Scripps, Ronald W. Tysoe and Julie A. Wrigley. Additionally, all of the members of its nominating & corporate governance committee and its compensation committee are independent under such standards.

 

Director Service on Other Audit Committees

 

Mr. Ronald W. Tysoe currently serves on the audit committees of four public companies, in addition to service on the audit committee of the Company. The Company’s board of directors reviewed this service commitment and determined that such simultaneous service does not impair his ability to effectively serve on the Company’s audit committee.

 

Nominations for Directors

 

The nominating & governance committee will review any candidate recommended by the shareholders of the Company in light of the committee’s criteria for selection of new directors. If a shareholder wishes to recommend a candidate, he or she should send the recommendation, with a description of the candidate’s qualifications, to: Chair, Nominating & Governance Committee, c/o Mrs. Mary Denise Kuprionis, The E. W. Scripps Company, 312 Walnut Street, Suite 2800, Cincinnati, Ohio 45202. In the past, the committee has hired an independent consultant to assist with the identification and evaluation of director nominees and may do so in the future.

 

Nomination for Directors — Qualification Standards

 

When selecting new director nominees, the nominating & governance committee considers requirements of applicable law and listing standards, as well as the director qualification standards highlighted in the Company’s corporate governance principles. The committee is responsible for reviewing with the board the requisite skills and characteristics of new board candidates as well as the diversity and composition of the board as a whole. A person considered for nomination to the board must be a person of high integrity. Other factors considered are independence, age, skills, and experience in the context of the needs of the board. The nominating & governance committee makes recommendations to the board regarding the selection of director nominees.

 

NYSE Annual Written Affirmation

 

On May 14, 2007, the Company filed with the New York Stock Exchange the Annual Written Affirmation and the CEO Certification required under NYSE rules.

 

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

 

Responsibilities

 

The audit committee is comprised solely of independent directors and, among other things, is responsible for the following reviews, approvals and processes. Additionally, the audit committee members have reviewed the Company’s Code of Ethics and have established guidelines for receiving and reviewing reports on issues raised by employees using the Company’s HelpLine.

 

 

 

In discharging its oversight responsibility as to the audit process, the audit committee reviewed and discussed the audited financial statements of the Company for the year ended December 31, 2007, with the Company’s management, including a discussion of the quality, not just the acceptability, of the accounting principles; the reasonableness of significant judgments; and the clarity of disclosures in the financial statements. The committee also discussed with the Company’s internal auditor and with Deloitte Touche Tohmatsu, and its respective affiliates (collectively the “Deloitte Entities”), the overall scope and plan for their respective audits. The committee meets with the internal auditor and the Deloitte Entities, with and without management present, to discuss the results of their examination, their evaluation of the Company’s internal controls, and the overall quality of the Company’s financial reporting.

 

Independence of the External Auditors

 

The committee has established a pre-approval policy and procedures for audit, audit-related and tax services that can be performed by the independent auditors without specific authorization from the committee subject to certain restrictions. The policy sets out the specific services pre-approved by the committee and the applicable limitations, while ensuring the independence of the independent auditors to audit the Company’s financial statements is not impaired.

Service Fees Paid to the Independent Registered Public Accounting Firm

 

The following table sets forth fees for all professional services rendered by Deloitte Entities to the Company for the years ended December 31, 2007 and 2006.

 

 

 

 

Report of the Audit Committee

 

In connection with the financial statements for the fiscal year ended December 31, 2007, the Audit Committee has:

 

 

Based upon these reviews and discussions, the audit committee at its February 20, 2008, meeting, approved the filing of the Company’s annual report on Form 10-K for the year ended December 31, 2007, with the United States Securities and Exchange Commission.

 

The Audit Committee

 

Ronald W. Tysoe, Chairman

David M. Moffett

Jeffrey Sagansky

Julie A. Wrigley

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

 

The compensation committee of the Company’s board of directors (the “Compensation Committee”) has submitted the following report for inclusion in this Proxy Statement:

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management. Based on our Committee’s review of and the discussions with management with respect to the Compensation Discussion and Analysis, our Committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, for filing with the Securities and Exchange Commission.

 

The foregoing report is provided by the following directors, who constitute the Compensation Committee:

 

The Compensation Committee

 

David A. Galloway, Chairman

John H. Burlingame

Jarl Mohn

Ronald W. Tysoe

 

COMPENSATION DISCUSSION AND ANALYSIS

 

This Compensation Discussion and Analysis explains the Company’s compensation program for its President and Chief Executive Officer (CEO), Mr. Kenneth W. Lowe, its Executive Vice President and Chief Financial Officer (CFO), Mr. Joseph G. NeCastro, and its other three most highly compensated executive officers, Mr. Richard W. Boehne, Executive Vice President and Chief Operating Officer, Mr. John F. Lansing, Senior Vice President/Scripps Networks and A. B. Cruz, Executive Vice President and General Counsel. These individuals are referred to collectively as the named executive officers (NEOs).

 

Overview of Compensation Program

 

Objectives

 

The compensation program for the NEOs is designed to meet the following three objectives that align with and support the Company’s strategic business goals:

 

 

Compensation Elements

 

The key elements of the Company’s executive compensation program for NEOs are base salary, annual incentives, long-term incentives consisting of stock options and performance-based restricted stock, and retirement benefits. The NEOs also receive certain perquisites, but these perquisites are not a key element of compensation. The chart below illustrates how each element of compensation fulfills the Company’s compensation objectives discussed above.

 

 

Use of Market Data

 

The Company believes that each element of the compensation program should remain competitive in order to attract and retain key executive talent. To help determine the competitive market, the

Compensation Committee relies, in part, on market compensation data of comparable executive positions within similarly-sized media companies.

 

The Company considers this market information when establishing base salary, annual incentive and long-term equity opportunities, and generally strives to structure each element close to the median of the market data. However, the Compensation Committee retains the flexibility to make adjustments in order to respond to market conditions, promotions, individual performance or other circumstances. In addition, the Compensation Committee considers the value of the total compensation package when making decisions for each element of compensation. The Compensation Committee also monitors the competitiveness of the Company’s retirement and perquisite programs on an annual basis; although, these benefit programs generally do not change from year-to-year.

 

As in prior years, the corporate compensation department prepared a market analysis for each of the NEO positions using the media industry survey data. The market analysis included compensation at the median and 75th percentile for each of the following elements:

 

 

The Compensation Committee selected a peer group of companies from the survey that were comparable in size and business focus to the Company and therefore compete with the Company for executive talent. A revenue-based regression analysis for each NEO position was included in the market analysis to further refine the comparison. The following table lists the companies included in this group as of 2007:

 

 

The market analysis included market data for each component described above, plus historical base salary, annual incentive and equity grants of the NEOs for the prior three years. The Compensation Committee used this report in establishing each component of compensation, as described in more detail under “Analysis of Each Compensation Element”.

 

Variable Compensation

 

The Company’s long-term success is based on achieving key strategic, financial and operational goals from year-to-year. As a result, a significant portion of the NEOs’ compensation is “variable” or “at risk”. This means that a significant portion of their compensation is directly contingent upon achieving specific results that are essential to the Company’s long-term success and growth in stockholder value. As

described in the table above, the variable components of the compensation program include annual incentives, performance-based restricted shares and stock options. Each of these components is described in more detail under the heading “Analysis of Each Compensation Element”.

 

The Compensation Committee has not established a specific formula for the allocation of fixed and variable compensation components and instead retains the discretion to modify the allocation from year to year. For 2007, an average of 67 percent of the total pay mix for the NEOs was weighted towards variable components. The pay mix for the CEO was roughly 81 percent variable which reflects a greater focus on performance-based pay as a percent of total compensation. The Compensation Committee believes this approach directly aligns the CEO with shareholder interests and is reflective of his greater responsibilities.

 

As illustrated below for the NEOs, the Company’s pay mix between fixed and variable is relatively consistent with the market:

 

 

Analysis of Each Compensation Element

 

Following is a brief summary of each element of the compensation program for NEOs.

 

Base Salary

 

The Company provides competitive base salaries to attract and retain key executive talent. The Compensation Committee believes that a competitive base salary is an important component of total compensation because:

 

 

Base salary also forms the basis for calculating other compensation opportunities for NEOs:

 

 

Base salaries are designed to be competitive with those paid by the companies in the market survey data to executives with similar responsibilities. In order to ensure that the Company paid a competitive base salary in 2007, the Compensation Committee considered the market analysis prepared for each NEO, which reflected the median and 75th percentile base salary levels.

 

The base salaries for the NEOs are targeted at the median level within the survey data, adjusted to reflect the individual’s scope of responsibilities, level of experience and skill, and the caliber of his or her performance over time. When making these adjustments, the Compensation Committee considers the historical base salary level for each NEO for the past three years and the impact that base salary increases would have on the amount of NEOs’ retirement benefits. The Compensation Committee also takes into

account the total direct compensation levels which includes base salary, annual and long-term incentives, when setting the base salary or any of the other elements of total direct compensation. Mr. Lowe, as Chief Executive Officer, also provides the Compensation Committee an annual evaluation of the performance of each executive officer that reports to him and his recommendations for base salary adjustments.

 

After discussing the individual performance of each NEO and pay recommendations, and after making its own assessment of the performance of each such executive officer, the Compensation Committee established the base salaries for each NEO. As seen in the chart below, base salary increases are larger for those NEOs whose base salary is substantially lower than the market median (Messrs. NeCastro, Lansing and Cruz) in order to be more competitive with the market and in the case of Mr. Cruz to reflect his promotion to executive vice president. Each of Mr. Lowe and Mr. Boehne received a base salary increase that maintains his base salary at a level close to the market median.

 

 

Please refer to the “Salary” column of the Summary Compensation Table of this proxy statement for the 2007 base salaries of the NEOs.

 

Annual Incentive

 

The Company maintains the Executive Annual Incentive Plan under which NEOs are eligible to receive annual cash payments based on the extent to which certain operational goals are achieved. This plan was most recently approved by the Company’s shareholders in 2005. The Compensation Committee believes that a competitive annual incentive program is an important component of total compensation because:

 

 

Target Incentive Opportunities

 

Under the Executive Annual Incentive Plan, NEOs have the opportunity to earn targeted incentive cash payments that are calculated as a percentage of each executive’s annual base salary. These percentages are developed by the Compensation Committee according to each executive’s position and level of responsibility.

 

In order to ensure that the Company offered competitive annual incentive opportunities in 2007, the Compensation Committee considered the overall performance of each NEO as well as the market survey data and recommendations of the CEO. The survey data reflected the median and 75th percentile total cash compensation, which is base salary plus actual cash incentive compensation.

 

In general, the Compensation Committee attempted to target the total cash compensation of the NEOs to the median total cash compensation levels of the survey data. However, the Compensation Committee also believes that it is important to provide similar annual incentive opportunities for each group of NEOs that has similar levels of operational responsibility within the Company.

Performance Goals

 

The annual incentive awards are based on a formula that takes into consideration the achievement of segment profit and earnings per share goals during the year. The goals are established by the compensation committee in the February meeting and take into account the strategic business plans approved by the Board. In 2007, the target segment profit and earnings per share goals, and the weighting for each goal, were:

 

 

 

 

These performance goals were used because:

 

 

Payout Percentages

 

For 2007, the annual incentive opportunity could vary from 0 percent to 165 percent of the targeted percentage of base salary, according to the level of overall performance achieved for the year relative to the established performance goal. This payout schedule is a sliding scale that is designed to motivate and reward exceptional performance. The payout percentage decreases if targeted performance is not achieved, and the payout percentage increases if the Company surpasses its targeted goals. For example:

 

 

Achievement at maximum performance results in total cash compensation levels at approximately the 75^th percentile of the market survey data. The following table reflects the actual achievement level for each performance goal along with the payout percentage for each performance goal for 2007. Based on criteria established at the beginning of the performance period, the Compensation Committee was required to adjust the consolidated segment profit and earnings per share results in 2007 to take into account severance costs associated with staff reductions at several of the Company’s newspapers, costs related to the upcoming company separation, and an impairment charge related to losses and challenging business conditions at uSwitch. Furthermore, the Compensation Committee exercised negative discretion by decreasing the earnings per share portion of the annual incentive payout for Messrs. Lowe, Boehne, NeCastro and Cruz by 50 percent to reflect the disappointing business results that led to the impairment charge.

 

 

Additional Information

 

For more information on the 2007 annual incentive opportunity for NEOs, please refer to the “Grants of Plan-Based Awards” table in this proxy statement. The “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” column of that table provides the estimated payouts for NEOs at Threshold, Target and Maximum performance levels. Please refer to the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for the actual amounts earned by each NEO under the Executive Annual Incentive Plan for the 2007 performance period.

 

Long-Term Incentives

 

The Company maintains the 1997 Long-Term Incentive Plan, which was most recently approved by the Company’s shareholders in 2005. In 2007, the Compensation Committee granted awards of performance-based restricted shares and stock options to the NEOs under this plan. The Compensation Committee believes that a competitive long-term incentive program is an important component of total compensation because it:

 

 

Long-Term Incentive Opportunities

 

Under the long-term incentive program, the NEOs are granted equity awards as recommended by the CEO and approved by the Compensation Committee. The Compensation Committee approves the target value of the equity award for each NEO based on each NEOs position and level of responsibility, the historical equity grants and a total assessment of the market analysis. The Compensation Committee does not consider existing ownership levels in establishing long-term incentive opportunities, as it wants to encourage stock ownership among the NEOs. Decisions regarding long-term incentive grants are made based on role, amount of impact and retention objectives. Survey data is referenced but is unreliable since it fluctuates from year-to-year.

For 2007 the target value of the equity award for each executive was as follow:

 

 

Once the Compensation Committee establishes the target value of each NEO’s equity award, one half of the value is awarded as stock options while the other half is awarded as performance-based restricted shares. The Compensation Committee believes that using a combination of performance-based restricted shares and stock options strikes an appropriate balance between focusing executives on achieving specified operational goals and increasing long-term shareholder value, as more fully described below.

 

Stock Options

 

Stock options are granted with an exercise price equal to the fair market value of the Company’s Class A common shares on the date of grant, have an eight-year term and vest in three annual installments, beginning on the first anniversary of the date of grant.

 

Because the value of stock options increases when the stock price increases, stock options align the interests of NEOs with those of shareholders. In addition, stock options are intended to help retain key executives because they vest over three years and, if not vested, are forfeited if the employee leaves the Company before retirement.

 

For more information on the stock options granted to NEOs in 2007, including the number of shares underlying each option grant and its exercise price, please refer to the “Grants of Plan-Based Awards” table in this proxy statement. For information about the total number of stock options outstanding as of the end of 2007 with respect to each NEO, please refer to the “Outstanding Equity Awards at Fiscal Year-End” table in this proxy statement.

 

Performance-Based Restricted Stock Awards

 

The performance-based restricted stock awards provide NEOs with an opportunity to receive restricted shares. The performance-based restricted shares are consistent with the overall objective of rewarding operational performance, since the number of shares earned depends on the extent to which the Company attains specified levels of segment profit during the year. The restricted shares that are earned vest in installments on each March 15 of the succeeding three years (25 percent in the year after the end of the performance period, 25 percent in the second year, and 50 percent in the third year). Half of the vesting occurs in the third year to further enhance retention and helps focus NEOs on increasing the value of the Company over time.

 

The segment profit goal was based on the consolidated performance of all the divisions of the Company. This goal was selected for all of the NEOs instead of a combination of consolidated and divisional because, as a long-term reward vehicle, the Company wanted the focus to be on increasing the value of the Company as a whole. This approach encourages cooperation among the operating divisions of the Company. For 2007, the goal for consolidated segment profit was $890.3 million.

 

The actual number of restricted shares earned is determined based on the achievement of the consolidated segment profit goal for the year. The number of restricted shares earned may vary, from 0 percent to 165 percent of the targeted number of shares granted, according to the level of consolidated performance achieved for the year relative to the performance goal. The payout schedule is the same as the one used for the annual incentive program. It is designed to motivate and reward superior performance. The payout percentage decreases if targeted performance is not achieved, and the payout percentage increases if the Company surpasses its targeted goals. For 2007, the earned number of restricted shares

was 83.37 percent of the targeted number of restricted shares. This was based on a consolidated segment profit achievement of 92.79 percent of the targeted consolidated segment profit goal.

 

In addition, Mr. Cruz received a second grant, valued at $495,800 in recognition of his promotion to Executive Vice President and General Counsel, effective June 1, 2007. This grant was a combination of stock options and restricted shares that vest equally over three years.

 

Additional Information

 

For more information on the performance-based restricted stock awards granted to NEOs in 2007, please refer to the “Grants of Plan-Based Awards” table in this proxy statement. The “Estimated Future Payouts Under Equity Incentive Plan Awards” column of that table provides the estimated number of restricted shares earned for each NEO at Threshold, Target and Maximum performance levels. For information about the total number of restricted shares outstanding as of the end of 2007 with respect to each NEO, please refer to the “Outstanding Equity Awards at Fiscal Year-End” table of this proxy statement.

 

Equity Grant Practices

 

The Compensation Committee grants annual equity awards at its February meeting. This meeting date is set typically two years in advance. The Compensation Committee does not grant equity compensation awards in anticipation of the release of material nonpublic information. Similarly, the Company does not time the release of material nonpublic information based on equity award grant dates.

 

Retirement Plans

 

The Company maintains a defined benefit pension plan and a 401(k) plan, which cover NEOs along with substantially all other non-union employees of the Company and its subsidiaries.

 

In order to attract and retain key executive talent at the Company, the Compensation Committee believes that it is important to provide the executive officers, including NEOs, with retirement benefits that are in addition to those generally provided to its employees. As a result:

 

 

The Compensation Committee believes that the SERP and the Executive Deferred Compensation Plan are important retention and recruitment tools, as many of the companies in which the Company competes for executive talent provide similar benefits to their senior executives.

 

Health, Welfare and Other Personal Benefits

 

In addition to the principal compensation components described above, NEOs are entitled to participate in all health, welfare, fringe benefit and other arrangements generally available to other employees.

 

The Company may also, as considered reasonable and appropriate on a case-by-case basis, provide its officers, including its NEOs, with limited additional perquisites and other personal benefits. For example, NEOs are provided with a financial planning benefit pursuant to the terms of their employment agreements, plus an additional payment to cover taxes associated with the compensation value of this benefit. The Company also provides perquisites that facilitate involvement of executive officers in the business community by sponsoring membership in luncheon and business clubs, and with respect to Mr. Lowe, a country club membership per his employment agreement.

For more information about the perquisites provided in 2007 to each NEOs, please refer to the “All Other Compensation” column of the Summary Compensation Table of this proxy statement.

 

Employment Agreements and Change in Control Plan

 

The Compensation Committee believes that employment agreements convey the Company’s commitment to each NEO while offering flexibility for any potential changes. Accordingly, the Company provides severance protections for NEOs under their respective employment agreements and the Change in Control Plan.

 

Employment Agreements

 

Each NEO would be entitled to severance benefits under his employment agreement in the event of a termination of employment by the Company without “cause” or a termination by the executive for “good reason”, death or disability. The severance benefits are generally determined as if the executive continued to remain employed by the Company through the remainder of the term covered by his employment agreement, consistent with market practices.

 

In exchange for the severance benefits, the NEOs agree not to disclose the Company’s confidential information and agree not to compete against the Company or solicit its employees or customers for a period of time after termination. These provisions protect the Company’s interests and help to ensure its long-term success.

 

Please refer to the “Potential Payments Upon Termination or Change in Control” section of this proxy statement for information regarding potential payments and benefits, if any, that each NEO is entitled to receive under his employment agreement in connection with his termination of employment. Please refer to the narrative following the Summary Compensation Table of this proxy statement for a description of the compensation and benefits provided under the employment agreements.

 

Change in Control Plan

 

All NEOs are provided change in control protection. For Mr. Lowe, the terms of his change in control protection are covered in his employment agreement. The other NEOs are covered under the Senior Executive Change in Control Plan. Under this plan, a NEO would be entitled to certain severance benefits if a “change in control” were to occur and the Company terminated the executive’s employment without “cause” or the executive terminated his employment with the Company for “good reason” within a two-year period following the change in control. For Mr. Lansing, whose primary responsibility is managing Scripps Networks, his employment agreement also provides change in control protection in the event of a sale of Scripps Networks. The severance levels were established by the Compensation Committee.

 

The Compensation Committee believes that the occurrence, or potential occurrence, of a change in control transaction will create uncertainty regarding the continued employment of NEOs. The Change in Control Plan allows NEOs to focus on the Company’s business and objectively evaluate any future proposals during potential change in control transactions without being distracted by potential job loss. It also enhances retention following a change in control, as the severance benefits are payable only if the executive incurs a qualifying termination within a certain period following a change in control, rather than merely as a result of the change in control.

 

All equity awards held by NEOs would immediately vest upon a change in control. Unlike the cash severance described above, the vesting is not contingent upon a qualifying termination within a certain period following a change in control. This “single trigger” is appropriate because the Compensation Committee believes NEOs should have the same opportunity to realize value as common shareholders.

 

Please refer to the “Potential Payments Upon Termination or Change in Control” section of this proxy statement for information regarding potential payments and benefits, if any, that each executive is entitled to receive in connection with a change in control.

Summary Compensation Table

 

The following table sets forth certain information regarding the compensation earned in 2006 and 2007 by the Named Executive Officers (NEOs) of the Company:

 

 

 

 

 

 

Salary and Bonus in Proportion to Total Compensation

 

The Company’s NEOs generally receive 37% to 55% of their total direct compensation in the form of base salary and cash incentive awards under the Executive Annual Incentive Plan. Please see the CD&A section of this proxy statement for a description of the objectives of the Company’s compensation program and overall compensation philosophy.

 

Employment Agreements

 

All five of the NEOs have entered into employment agreements with the Company. These employment agreements enhance retention incentives for NEOs and also protect the Company’s interests by imposing confidentiality, noncompetition, nonsolicitation and other restrictive covenants on the executives. Following is a brief summary of the employment agreements.

 

Employment Agreement for Mr. Lowe

 

On June 16, 2003, the Company entered into an employment agreement with Mr. Lowe, pursuant to which he serves as President and Chief Executive Officer and as a member of the board of directors. On July 31, 2007, the agreement was extended through June 30, 2010. During the term, Mr. Lowe is entitled to: (i) a base salary that is not less than that paid to him for the immediately preceding year and an annual target bonus opportunity equal to no less than 80% of his salary; (ii) participate in all equity incentive, employee pension, welfare benefit plans and fringe benefit programs on a basis no less favorable than the most favorable basis provided other senior executives of the Company; (iii) life insurance equal to his base salary; and (iv) reimbursement for tax and financial planning up to maximum of $15,000 per year, the annual membership fees and other dues associated with one country club and one luncheon club, and the costs of an annual physical examination.

 

Employment Agreement for Mr. Lansing

 

Effective January 1, 2004, the Company entered into an employment agreement with Mr. Lansing. The term of the agreement expires on December 31, 2008. During the term, Mr. Lansing is entitled to an annual base salary of no less than $550,000 and a target annual incentive opportunity of no less than 50% of base

salary. Mr. Lansing is also entitled to all benefits provided to senior level executives in accordance with the Company’s policies from time to time in effect.

 

Other Employment Agreements

 

In June 2006, the Company entered into an employment agreement with each of Mr. Boehne and Mr. NeCastro. On July 31, 2007, the Company entered into an employment agreement with Mr. Cruz in connection with his promotion to the position of Executive Vice President. The agreements have a three year term that extends for an additional year on each anniversary of the first day of the terms, unless the Company provides notice not to extend. During the term, (i) the annual base salary for each executive will be no less than $650,000 for Mr. Boehne, $550,000 for Mr. NeCastro, and $525,000 for Mr. Cruz; (ii) the target bonus opportunity will be 70% of base salary for Mr. Boehne, 60% of base salary for Mr. NeCastro and 55% of base salary for Mr. Cruz; (iii) each executive is eligible to participate in all equity incentive plans, employee retirement, pension and welfare benefit plans available to similarly situated executives of the Company; and (iv) each executive is also entitled to reimbursement for tax and financial planning up to a maximum of $15,000 per year, the annual membership fees and other dues associated with one luncheon club, and the costs of an annual physical examination.

 

Please refer to the “Potential Payments Upon Termination or Change in Control” section of this proxy statement for information regarding potential payments and benefits, if any, that each executive is entitled to receive under his employment agreement in connection with his termination of employment or change in control, along with a brief description of the applicable non-competition, non-solicitation, confidentiality and other restrictions applicable to each executive.

 

Grants of Plan-Based Awards

 

The following table sets forth information for each NEO regarding (i) estimated payouts of the annual cash incentive opportunities granted under the Executive Annual Incentive Plan during 2007, (ii) estimated number of restricted shares that could be delivered under the performance-based restricted stock awards granted during 2007, (iii) restricted stock awards granted during 2007, and (iv) stock options granted in 2007:

 

 

 

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table sets forth information for each NEO with respect to (i) each option to purchase stock that had not been exercised and remained outstanding as of December 31, 2007, and (ii) each award of restricted stock that had not vested and remained outstanding as of December 31, 2007: