PRE 14A 1 d484861dpre14a.htm PRELIMINARY PROXY STATEMENT Preliminary Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.    )

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Filed by a Party other than the Registrant ¨

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¨ Definitive Proxy Statement
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The NASDAQ OMX Group, Inc.

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LOGO

April •, 2013

Dear Fellow NASDAQ OMX Stockholder:

We are pleased to enclose this year’s proxy statement and to invite you to attend our 2013 annual meeting of stockholders. For your convenience, we will offer a live webcast of the annual meeting on our website at http://ir.nasdaqomx.com/events.cfm.

2013 is an important year for NASDAQ OMX, and we remain focused on our goal to be strategically positioned for strong long-term performance. The following highlights elements of our corporate governance, stockholder engagement and executive compensation that are described in more detail in this proxy statement.

Corporate Governance

NASDAQ OMX’s board of directors and nominating & governance committee continue to evaluate NASDAQ OMX’s corporate governance practices. As discussed in Proposal IV, we are seeking stockholder approval to amend NASDAQ OMX’s restated certificate of incorporation to remove and replace each supermajority voting requirement with a “majority of outstanding shares” voting requirement. We weighed the pros and cons of the supermajority voting requirements and ultimately decided that it is in the best interests of NASDAQ OMX and its stockholders to eliminate these requirements.

In addition, the board of directors, upon the recommendation of the nominating and governance committee, has approved amendments to our by-laws to allow stockholders holding 15% or more of our voting power to call a special meeting under certain circumstances. As described under “NASDAQ OMX’s Corporate Governance,” these amendments, as well the proposed charter amendments discussed above, are subject to filing and effectiveness with the U.S. Securities and Exchange Commission. We believe both sets of amendments serve to enhance further NASDAQ OMX’s corporate governance practices and demonstrate our responsiveness to stockholder concerns.

Stockholder Engagement

Stockholders are key participants in the governance of NASDAQ OMX, and investor feedback is extremely helpful in enabling us to achieve our mission. In 2012, management met with investors representing a substantial portion of our investor base to understand their perspectives. In addition, we invite stockholders to communicate directly with the board through the procedures outlined below in “Stockholder Communication with Directors.”

Executive Compensation

On the executive compensation front, our program and policies are designed to emphasize pay for performance. NASDAQ OMX’s performance was strong in 2012 against difficult market conditions. Several of our key financial results decreased as compared to 2011, largely due to lower industry trading volumes in the cash equity and derivative trading markets. As a result, none of the named executive officers received an increase in base salary, and on average, the annual performance-based cash incentive awards paid to our named executive officers decreased significantly from 2011.

At the same time, we are looking to the future, and we have implemented a new performance-based long-term incentive program for our CEO, executive vice presidents and senior vice presidents that focuses on total shareholder return over a three-year period. In 2012, equity awards to the named executive officers were granted under this program, and therefore, equity awards to our named executive officers are totally performance-based. As this demonstrates, we continue to look for ways to improve NASDAQ OMX’s executive compensation program.

We are optimistic about NASDAQ OMX’s strategy and long-term success. We look forward to sharing information with you about NASDAQ OMX at the annual meeting. Whether or not you plan to attend, we encourage you to vote your proxy as soon as possible so that your shares will be represented at the meeting.

The Board of Directors of The NASDAQ OMX Group, Inc.


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LOGO

THE NASDAQ OMX GROUP, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 22, 2013

To the Stockholders of The NASDAQ OMX Group, Inc.:

Please take notice that the annual meeting of stockholders of The NASDAQ OMX Group, Inc., a Delaware corporation, will be held at NASDAQ OMX’s principal executive offices located at One Liberty Plaza, 50th Floor, New York, New York 10006, on May 22, 2013, at 9:00 a.m. (E.D.T.), for the following purposes, all as described in the attached proxy statement:

 

  1. To elect 11 directors for a one-year term;

 

  2. To ratify the appointment of Ernst & Young LLP as NASDAQ OMX’s independent registered public accounting firm for the fiscal year ending December 31, 2013;

 

  3. To approve the company’s executive compensation on an advisory basis;

 

  4. To approve an amendment of NASDAQ OMX’s restated certificate of incorporation to remove and replace the supermajority voting requirements;

 

  5. To approve an amendment and restatement of NASDAQ OMX’s restated certificate of incorporation to make other non-substantive changes; and

 

  6. To transact such other business as may properly come before the annual meeting or any adjournment or postponement of the meeting.

We urge you to read carefully the attached proxy statement for additional information concerning the matters to be considered at this meeting.

Our board of directors has fixed the close of business on April 2, 2013 as the record date for the determination of stockholders entitled to vote at the annual meeting. Only holders of record at the close of business on the record date will be entitled to notice of, and to vote at, the annual meeting or any postponement or adjournment of the meeting. A list of these holders will be available at the annual meeting, and for at least 10 days prior to the annual meeting, at our principal executive offices at One Liberty Plaza, 50th Floor, New York, New York 10006.

To ensure your representation at the 2013 annual meeting of stockholders, you are urged to vote, whether or not you plan to attend the meeting, by proxy by one of the following methods as promptly as possible:

 

  1. Submit a proxy via the Internet or telephone pursuant to the instructions provided in the notice of Internet availability of proxy materials that we will mail no later than April •, 2013 to stockholders as of the record date; or

 

  2. Request printed copies of the proxy materials by mail pursuant to the instructions provided in the notice of Internet availability of proxy materials and complete, sign, date and return the proxy card that you will receive in response to your request.

If you attend the meeting, you may revoke your proxy and vote in person, even if you have previously submitted a proxy for your NASDAQ OMX shares.

By Order of the Board of Directors,

LOGO

Robert Greifeld

Chief Executive Officer

New York, New York

April •, 2013


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TABLE OF CONTENTS

 

EXECUTIVE SUMMARY

     1   

THE ANNUAL MEETING

     5   

PROPOSAL I: ELECTION OF DIRECTORS

     10   

DIRECTOR COMPENSATION

     20   

NASDAQ OMX’S CORPORATE GOVERNANCE

     24   
PROPOSAL II: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM      30   

AUDIT COMMITTEE REPORT

     32   
PROPOSAL III: APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION ON AN ADVISORY BASIS      33   

COMPENSATION DISCUSSION AND ANALYSIS

     34   

MANAGEMENT COMPENSATION COMMITTEE REPORT

     56   
MANAGEMENT COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION      56   

EXECUTIVE COMPENSATION

     57   
PROPOSAL IV: APPROVAL OF AN AMENDMENT OF NASDAQ OMX’S RESTATED CERTIFICATE OF INCORPORATION TO REMOVE AND REPLACE THE SUPERMAJORITY VOTING REQUIREMENTS      77   
PROPOSAL V: APPROVAL OF AN AMENDMENT AND RESTATEMENT OF NASDAQ OMX’S RESTATED CERTIFICATE OF INCORPORATION TO MAKE OTHER NON-SUBSTANTIVE CHANGES      80   

OTHER BUSINESS

     82   

EXECUTIVE OFFICERS OF NASDAQ OMX

     83   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     85   

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     89   

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     90   

STOCKHOLDER COMMUNICATION WITH DIRECTORS

     93   

ONLINE ANNUAL REPORT TO STOCKHOLDERS AND FORM 10-K

     93   

STOCKHOLDER PROPOSALS AND NOMINATIONS OF DIRECTORS

     94   

CORPORATE SUSTAINABILITY

     96   
ANNEX A: PROPOSED AMENDMENT AND RESTATEMENT OF NASDAQ OMX’S RESTATED CERTIFICATE OF INCORPORATION      97   


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EXECUTIVE SUMMARY

This summary highlights information contained elsewhere in this proxy statement. It does not contain all of the information that you should consider, and we invite you to read the entire proxy statement, as well as our annual report on Form 10-K, as filed with the SEC on February 21, 2013 (Form 10-K), carefully before voting.

ANNUAL MEETING INFORMATION

 

Time and Date:

  9:00 a.m. (E.D.T.) on Wednesday, May 22, 2013

Place:

 

NASDAQ OMX

One Liberty Plaza

50th Floor

New York, New York 10006

Record Date:

  April 2, 2013
       

You can

ensure that

your NASDAQ OMX shares

are

voted at the meeting by:

 

LOGO

 

Attending the meeting and voting in person

 

LOGO

 

Submitting your

proxy by Internet

(http://www.proxyvote.com) or telephone

 

LOGO

 

If you request a printed copy of

proxy materials,

completing, signing, dating and returning the proxy card in the envelope provided

 

LOGO

 

Scanning this QR code to access the voting site from your mobile device

ANNUAL MEETING AGENDA AND VOTING RECOMMENDATIONS

 

Proposal

 

Voting Standard

 

Effect of
Abstentions and
Broker Non-Votes

 

Board Voting
Recommendation

 

Page
Reference

                 

Election of 11 directors

  Majority of votes cast   Not counted as votes cast and therefore have no effect   FOR EACH NOMINEE       10
Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2013   Majority of votes present in person or represented by proxy   Abstentions have the effect of a vote against the proposal; there will not be broker non-votes   FOR       30

 

Advisory vote to approve the company’s executive compensation on an advisory basis

  Majority of votes present in person or represented by proxy   Abstentions have the effect of a vote against the proposal; broker non-votes have no effect   FOR       33
Approval of an amendment of NASDAQ OMX’s restated certificate of incorporation to remove and replace the supermajority voting requirements   At least 66 2/3% of the total voting power of NASDAQ OMX’s common stock   Have the effect of a vote against the proposal   FOR       78
Approval of an amendment and restatement of NASDAQ OMX’s restated certificate of incorporation to make other non-substantive changes   At least 66 2/3% of the total voting power of NASDAQ OMX’s common stock   Have the effect of a vote against the proposal   FOR       81

 

THE NASDAQ OMX GROUP, INC.    1


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BOARD NOMINEES

The following table provides summary information about each director nominee. Each director nominee is elected annually by a majority of votes cast.

 

Name

  Age          

Classification

  Director Since        
             

Steven D. Black

  60    Non-Industry; Public   2011

Börje E. Ekholm

  50    Non-Industry   2011

Robert Greifeld

  55    Staff   2003

Glenn H. Hutchins

  57    Industry   2005

Essa Kazim

  54    Non-Industry   2008

John D. Markese

  67    Non-Industry; Public   1996

Ellyn A. McColgan

  59    Non-Industry; Public   2012

Thomas F. O’Neill

  66    Non-Industry   2003

James S. Riepe

  69    Industry   2003

Michael R. Splinter

  62    Non-Industry; Issuer   2008

Lars R. Wedenborn

  54    Non-Industry   2008

FINANCIAL HIGHLIGHTS

NASDAQ OMX’s performance was strong in 2012 against difficult market conditions, including lower industry trading volumes in the cash equity and derivative trading markets. The chart below summarizes key NASDAQ OMX financial results for the fiscal year ended December 31, 2012 when compared with the same period in 2011. For additional information, see “Compensation Discussion and Analysis – Executive Summary – 2012 Business Highlights” on page 34.

 

     Year Ended December 31,         
                         
     2012     2011     Percentage
Change
 
                         
     (in millions, except per share amounts)         
Revenues less transaction rebates, brokerage, clearance and exchange fees    $ 1,663       $ 1,682        (1.1)%   

Operating income

   $ 690       $ 696        (0.9)%   

Diluted earnings per share

   $ 2.04       $ 2.15        (5.1)%   

Stock price per share(1)

   $ 24.99       $ 24.51        2.0%   

 

(1) Represents the closing market price of our common stock on the last trading day of each year.

 

THE NASDAQ OMX GROUP, INC.    2


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EXECUTIVE COMPENSATION HIGHLIGHTS

In line with our executive compensation program’s emphasis on pay for performance, compensation awarded to the named executive officers for 2012 reflected the decrease in several of our key financial results in 2012 as compared to 2011. The following table shows each named executive officer’s total cash compensation, including salary and cash incentive awards, for 2012 as compared to 2011. Total cash compensation does not include all of the elements of compensation that comprise “Total Compensation” as reported in the Summary Compensation Table. For additional information, see “Compensation Discussion and Analysis” on page 34 and “Executive Compensation” on page 57.

 

Named Executive Officer

  2012 Total
Cash
Compensation
($)
    2011 Total Cash
Compensation
($)
   

2012  Total Cash
Compensation vs.
2011 Total Cash
    Compensation    

                     

Robert Greifeld

  $     2,350,000      $ 4,591,000      (49)%

Chief Executive Officer

                   

Lee Shavel

  $ 1,378,625      $ 1,790,000 (1)    (23)%

Chief Financial Officer and Executive Vice President, Corporate Strategy

                   

Anna M. Ewing

  $ 1,074,125      $ 1,710,500      (37)%

Executive Vice President, Global Technology Solutions

                   

Hans-Ole Jochumsen

  $ 1,385,995      $ 1,376,543      1%

Executive Vice President, Transaction Services Nordic

                   

Eric W. Noll

  $ 1,188,500      $ 1,800,000      (34)%

Executive Vice President, Transaction Services U.S. and U.K.

                   

 

(1) Mr. Shavel began employment at NASDAQ OMX effective May 23, 2011. For comparison purposes, his 2011 total cash compensation is calculated on an annualized basis.

 

THE NASDAQ OMX GROUP, INC.    3


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EXECUTIVE COMPENSATION AND CORPORATE GOVERNANCE BEST PRACTICES

We regularly engage with our stockholders to discuss executive compensation, corporate governance and other issues. As detailed further in this proxy statement, the following executive compensation and corporate governance best practices are key aspects of our programs.

 

Executive Compensation Best Practices

 

Corporate Governance Best Practices

     

Pay for Performance Philosophy

  Majority Voting for Directors in Uncontested Elections

Prohibition on Hedging and Pledging

  Annual Election of Directors

Stock Ownership Guidelines

  Separation of Board Chairman and CEO

Stock Holding Requirement

  Majority Independent Board

Elimination of Share Recycling Provision

  Three Fully Independent Board Committees

Frozen Pension Plan and SERP

  Board Meets Regularly in Executive Session

Limited Severance Arrangements

  No Director Attended Fewer Than 75% of Board and Committee
Meetings

“Double Trigger” Change in Control Agreements

  Annual Board and Committee Evaluations
Elimination of Tax Gross-Up Payments on Severance Arrangements   Corporate Governance Guidelines

Limited Perquisites

  Global Ethics and Compliance Program and Confidential Whistleblower Process

Incentive Recoupment Policy

  No “Poison Pill”

Limited Employment Agreements

  Comprehensive Succession Planning Program
Engagement of Independent Compensation Consultant   Strong Risk Management Program
Extensive Risk Assessment of Compensation Program   Corporate Sustainability Program

 

THE NASDAQ OMX GROUP, INC.    4


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LOGO

THE NASDAQ OMX GROUP, INC.

PROXY STATEMENT

FOR THE ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 22, 2013

We are furnishing this proxy statement to the stockholders of The NASDAQ OMX Group, Inc., a Delaware corporation, in connection with the solicitation of proxies by our board of directors for use in voting at the annual meeting of stockholders to be held at the time and place and for the purposes set forth in the accompanying notice of annual meeting, and at any and all adjournments or postponements of this meeting.

In accordance with rules of the United States Securities and Exchange Commission (SEC), instead of mailing printed copies of our proxy materials to each stockholder of record, we are furnishing the proxy materials for the 2013 annual meeting by providing access to these documents on the Internet. A notice of Internet availability of proxy materials is being mailed to our stockholders. We first mailed or delivered this notice on or about April •, 2013. The notice of Internet availability contains instructions for accessing and reviewing our proxy materials and submitting a proxy over the Internet. Our proxy materials were made available at www.proxyvote.com on the date that we first mailed or delivered the notice of Internet availability. The notice also will tell you how to request our proxy materials in printed form or by e-mail, at no charge. The notice contains a control number that you will need to submit a proxy for your shares.

THE ANNUAL MEETING

When and where is the meeting? The annual meeting is scheduled to be held at NASDAQ OMX’s principal executive offices located at One Liberty Plaza, 50th Floor, New York, New York 10006, on May 22, 2013, at 9:00 a.m. (E.D.T.).

What is the purpose of the meeting? At the annual meeting, NASDAQ OMX’s stockholders will be asked to consider and vote upon each of the following matters:

 

  1. To elect 11 directors for a one-year term;

 

  2. To ratify the appointment of Ernst & Young LLP as NASDAQ OMX’s independent registered public accounting firm for the fiscal year ending December 31, 2013;

 

  3. To approve the company’s executive compensation on an advisory basis;

 

  4. To approve an amendment of NASDAQ OMX’s restated certificate of incorporation to remove and replace the supermajority voting requirements;

 

  5. To approve an amendment and restatement of NASDAQ OMX’s restated certificate of incorporation to make other non-substantive changes; and

 

  6. To transact such other business as may properly come before the annual meeting or any adjournment or postponement of the meeting.

Who is entitled to vote? Only holders of record listed on the books of NASDAQ OMX at the close of business on April 2, 2013 (record date) of NASDAQ OMX’s common stock, par value $0.01 per share, will be entitled to notice of, and to vote at, the annual meeting. As of the record date, there were outstanding • shares of common stock.

 

THE NASDAQ OMX GROUP, INC.    5


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A list of holders entitled to vote at the annual meeting will be available at the annual meeting and for at least 10 days prior to the annual meeting, between the hours of 9:00 a.m. and 5:00 p.m. (E.D.T.), at our principal executive offices, One Liberty Plaza, 50th Floor, New York, New York 10006. You may arrange to review this list by contacting NASDAQ OMX’s corporate secretary, Joan C. Conley, The NASDAQ OMX Group, Inc., One Liberty Plaza, 50th Floor, New York, New York 10006, in writing or by email (corporatesecretary@nasdaqomx.com).

How many votes do I have? Each share of common stock has one vote, subject to the voting limitation in our restated certificate of incorporation that generally prohibits a stockholder from voting in excess of 5% of the total voting power of NASDAQ OMX.

Is my vote confidential? Your individual vote is confidential and will not be disclosed to third parties. Proxies, ballots and voting tabulations are handled on a confidential basis to protect your voting privacy. This information will not be displayed except as required by law.

What constitutes a quorum? The presence of the holders of a majority (greater than 50%) of the votes entitled to be cast at the meeting constitutes a quorum. Presence may be in person or by proxy. You will be considered part of the quorum if you submit a proxy by Internet, by telephone or by returning a signed and dated proxy card (if proxy materials are requested in printed form) or if you vote in person at the annual meeting. Abstentions and broker non-votes are counted as present and entitled to vote at the meeting for purposes of determining a quorum.

Who counts the votes? Broadridge Financial Solutions, Inc. tabulates the votes and acts as inspector of elections.

How do I vote? You can ensure that your NASDAQ OMX shares are voted at the meeting by:

 

   

attending the meeting and voting in person, as discussed below;

 

   

submitting your proxy by Internet (www.proxyvote.com) or telephone; or

 

   

if you request a printed copy of proxy materials, completing, signing, dating and returning the proxy card in the envelope provided.

Proxy Submission by Internet. You have the option to submit a proxy for your shares through the Internet. The notice of Internet availability of proxy materials contains the website address (www.proxyvote.com) for Internet proxy submission. Internet proxy submission is available 24 hours a day until 11:59 p.m. (E.D.T.) on May 21, 2013. You must enter your control number, which is printed in the lower right hand corner of the notice of Internet availability, and you will be given the opportunity to confirm that your instructions have been properly recorded.

Proxy Submission by Telephone. You have the option to submit a proxy for your shares by telephone. The notice of Internet availability of proxy materials will have information about Internet proxy submission, but is not permitted to include a telephone number for submitting a proxy by phone, because that would enable a stockholder to submit a proxy without first accessing the proxy materials.

The instructions for telephonic proxy submission are provided on the website where the proxy materials can be viewed. You will be provided with a telephone number for submitting your proxy at this site.

Alternatively, if you request paper copies of the proxy materials, your proxy card will list a toll-free telephone number that you may use to submit a proxy for your shares. Telephone proxy submission is available 24 hours a day until 11:59 p.m. (E.D.T.) on May 21, 2013. When you submit a proxy by telephone, you will be required to enter your control number. You will then receive easy-to-follow voice prompts allowing you to instruct the proxy holders how to vote your shares and to confirm that your instructions have been properly recorded. If you are located outside the United States or Canada, you should instruct the proxy holders how to vote your shares by Internet or by mail.

 

THE NASDAQ OMX GROUP, INC.    6


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Proxy Submission by Mail. If you choose to submit a proxy by mail after requesting and receiving printed proxy materials, simply complete, sign and date your proxy card and return it in the postage-paid envelope provided.

How do I complete the proxy? The proxy provides that each stockholder may vote his or her NASDAQ OMX shares “For” or “Against” or “Abstain” for individual nominees and for each of the other proposals. Whichever method you select to transmit your instructions, the proxy holders will vote your shares as provided by those instructions. IF YOU PROVIDE A PROXY WITHOUT SPECIFIC VOTING INSTRUCTIONS, YOUR NASDAQ OMX SHARES WILL BE VOTED BY THE PROXY HOLDERS “FOR” THE ELECTION OF THE DIRECTORS NAMED IN THIS PROXY STATEMENT AND “FOR” PROPOSALS II, III, IV and V.

If your NASDAQ OMX shares are held by a broker, bank or other nominee that does not have express authority to vote on a particular matter, you will receive instructions from your nominee, which you must follow to have your NASDAQ OMX shares voted. The broker, bank or other nominee may vote only the NASDAQ OMX shares that it holds for you as provided by your instructions, subject to certain exceptions described below.

What do I need to do to attend the annual meeting? If you are a holder of record, you should indicate that you plan to attend the meeting when submitting your proxy. For the safety and comfort of our stockholders, admission to the annual meeting will be restricted to holders of record and beneficial owners of NASDAQ OMX shares as of the close of business on April 2, 2013. You will need to provide a valid government-issued photo identification, such as a driver’s license or passport, to gain entry to the annual meeting. If you are a beneficial owner of NASDAQ OMX shares held by a bank, broker or other nominee, you also will need proof of ownership to be admitted to the meeting. A recent brokerage statement or letter from the bank, broker or other nominee are examples of proof of ownership. If you want to vote in person your NASDAQ OMX shares held by a bank, broker or other nominee, you will have to obtain a proxy, executed in your favor, from the holder of record. Directions to the annual meeting are available at http://ir.nasdaqomx.com/annuals.cfm.

Is there a webcast of the annual meeting? We will offer a live webcast of the annual meeting on our website at http://ir.nasdaqomx.com/events.cfm.

What are the board’s recommendations? The NASDAQ OMX board recommends that you vote “FOR” each of the nominees for director named in Proposal I and “FOR” Proposals II, III, IV and V.

What vote is required to elect each director? Our directors are elected by the holders of a majority of votes cast at any meeting for the election of directors at which a quorum is present and there is an uncontested election. Each of the 11 nominees must receive the affirmative vote of the holders of a majority of the votes cast for the election of directors to be duly elected to the board of directors in an uncontested election. Any shares not voted, for example by abstention or, if applicable, broker non-vote, will not impact the vote. Our by-laws and corporate governance guidelines require that, in an uncontested election, an incumbent director must submit an irrevocable resignation as a condition to his or her nomination for election. If an incumbent director fails to receive the requisite number of votes in an uncontested election, the irrevocable resignation becomes effective and such resignation will be considered by the nominating & governance committee. This committee will recommend to the full board whether or not to accept the resignation. The board is required to act on the recommendation and to disclose publicly its decision-making process with respect to the resignation. See “Proposal I: Election of Directors” and “NASDAQ OMX’s Corporate Governance” for full details of this policy. The 2013 election of directors is an uncontested election.

 

THE NASDAQ OMX GROUP, INC.    7


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What vote is required to approve the other proposals? The following proposals require an affirmative vote of the holders of a majority of the votes present in person or represented by proxy at the meeting and entitled to vote on the matter. Abstentions have the effect of a vote against these proposals. Broker non-votes, if applicable, have no effect on these proposals.

 

   

Ratification of appointment of Ernst & Young LLP; and

 

   

Approval of the company’s executive compensation on an advisory basis.

The stockholder vote to approve executive compensation is an advisory vote only and, therefore, the result of that vote will not be binding on our board of directors or management compensation committee. Our board and management compensation committee will, however, consider the outcome of the vote when evaluating our executive compensation program in the future.

The following proposals require the affirmative vote of the holders of at least 66 2/3% of the total voting power of NASDAQ OMX’s outstanding shares of capital stock, voting together as a single class. Abstentions and broker non-votes have the effect of a vote against these proposals.

 

   

Approval of an amendment of NASDAQ OMX’s restated certificate of incorporation to remove and replace the supermajority voting requirements; and

 

   

Approval of an amendment and restatement of NASDAQ OMX’s restated certificate of incorporation to make other non-substantive changes.

The proposed changes to NASDAQ OMX’s restated certificate of incorporation will not become effective until they are filed and effective with the SEC and the state of Delaware.

What is a broker non-vote? If you are a beneficial owner whose shares are held of record by a broker, you must instruct the broker how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have discretionary authority to vote. This is called a “broker non-vote.” The ratification of the appointment of Ernst & Young LLP as our registered independent public accounting firm is considered a “routine” matter. Accordingly, brokers may vote shares on this proposal without your instructions, and there will be no broker non-votes with respect to this proposal. The other proposals are considered “non-routine,” and brokers cannot vote shares on these proposals without your instructions.

If you hold your shares through a broker, it is important that you cast your vote if you want it to count on all of the matters to be considered at the annual meeting other than the ratification of the appointment of our independent registered public accounting firm. Thus, if you hold your shares in street name and you do not instruct your broker how to vote on these matters, no votes will be cast on your behalf.

What if other items come up at the annual meeting and I am not there to vote? We are not now aware of any matters to be presented at the annual meeting other than those described in this proxy statement. When you provide your voting instructions by Internet or telephone, or return a signed and dated proxy card, you give the proxy holders the discretionary authority to vote on your behalf on any other matter that is properly brought before the annual meeting. If the meeting is adjourned or postponed, your NASDAQ OMX shares may be voted by the proxy holders on the new meeting date, unless you have revoked your proxy instructions before that date.

Can I change my vote? You can change your vote by revoking your proxy at any time before it is exercised in one of three ways:

 

   

Submit a later dated proxy (including a proxy submitted through the Internet, by telephone or by proxy card);

 

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Notify NASDAQ OMX’s corporate secretary, Joan C. Conley, The NASDAQ OMX Group, Inc., One Liberty Plaza, 50th Floor, New York, New York 10006, in writing or by email (corporatesecretary@nasdaqomx.com), that you are revoking your proxy; or

 

   

Vote in person at the annual meeting.

If you are a beneficial owner of NASDAQ OMX shares held by a bank, broker or other nominee, you will need to contact the bank, broker or other nominee to revoke your proxy.

When will the results of the voting be available? Votes will be tabulated by Broadridge Financial Solutions, Inc., the independent inspector of elections appointed for the meeting. Preliminary results will be announced at the meeting and, thereafter, final results will be reported in a current report on Form 8-K, which is expected to be filed with the SEC within four business days after the meeting.

Who is paying the costs of this proxy solicitation? We will pay the cost of soliciting proxies. Proxies may be solicited on our behalf by directors, officers or employees (who will not receive any additional compensation for these solicitations), in person or by telephone, electronic transmission and facsimile transmission. NASDAQ OMX will, upon request, reimburse brokers, banks and other nominees for their reasonable expenses in sending proxy materials to their beneficial owners/customers and obtaining their proxies. We have hired AST Phoenix Advisors Partners to assist in soliciting proxies at a fee of $7,500 plus costs and expenses for these services. Your cooperation in promptly submitting your proxy through the Internet or by telephone, or, if proxy materials are requested by mail, by completing, signing, dating and returning the enclosed proxy card will help to avoid additional expense.

Does NASDAQ OMX have a practice of householding? In a further effort to reduce printing and postage fees for the meeting notice, NASDAQ OMX has adopted a practice approved by the SEC known as “householding.” Under our practice, stockholders who have the same last name and address will receive one notice of Internet availability of proxy materials, unless one or more of these stockholders notifies us that he or she desires to continue to receive a separate copy of the proxy materials. Beneficial owners can request information about householding from their bank, broker or other nominee of record. If you would like to receive a separate copy of the proxy materials or, if you are a stockholder at a shared address to which we delivered multiple copies of proxy materials and you desire to receive one copy of proxy materials in the future, please contact the NASDAQ OMX Investor Relations Department, Attention: Edward Ditmire, One Liberty Plaza, 49th Floor, New York, New York 10006, in writing or by email (investor.relations@nasdaqomx.com).

 

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PROPOSAL I

Election of Directors

The business and affairs of NASDAQ OMX are managed under the direction of our board of directors. Our directors have diverse backgrounds and experience and represent a broad spectrum of viewpoints.

Pursuant to our restated certificate of incorporation and by-laws and based on our governance needs, the board may determine the total number of directors. Currently, the board is authorized to have 11 directors.

Each of the current members of the board has been nominated by our nominating & governance committee and board of directors for re-election to a one-year term. All nominees have consented to be named in this proxy statement and to serve on the NASDAQ OMX board, if elected.

In an uncontested election, our directors are elected by a majority of votes cast at any meeting for the election of directors at which a quorum is present. This election is an uncontested election, and therefore, each of the 11 nominees must receive the affirmative vote of a majority of the votes cast to be duly elected to the board of directors. Any shares not voted by abstention and broker non-votes will not impact the vote. Our corporate governance guidelines require that, in an uncontested election, an incumbent director must submit an irrevocable resignation as a condition to his or her nomination for election. If an incumbent director fails to receive the requisite number of votes in an uncontested election, the irrevocable resignation becomes effective and such resignation will be considered by the nominating & governance committee. This committee will recommend to the full board whether or not to accept the resignation. The board is required to act on the recommendation and to disclose publicly its decision-making process with respect to the resignation. All the nominees have submitted the irrevocable resignation.

BOARD RESPONSIBILITIES

In addition to its general oversight of management, the board also performs a number of specific functions, including:

 

   

Reviewing, approving and overseeing our corporate strategies and corporate actions including long-term strategic plans and evaluating the results;

 

   

Reviewing, approving and overseeing fundamental financial information and reporting;

 

   

Assessing major risks and reviewing options for their mitigation;

 

   

Overseeing management’s efforts to establish and maintain the highest legal, regulatory and ethical conduct of all businesses, including conformity with applicable global laws and regulations;

 

   

Selecting, evaluating and approving the compensation of the Chief Executive Officer and other senior officers and overseeing succession planning for these executives;

 

   

Evaluating the overall structure and effectiveness of the board, board members and committees and overseeing effective corporate governance;

 

   

Providing advice and counsel to senior management; and

 

   

Evaluating, selecting and recommending an appropriate slate of candidates to stockholders for election as directors.

SEPARATION OF ROLES OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER

NASDAQ OMX separates the roles of chairman of the board and Chief Executive Officer. NASDAQ OMX believes that this separation of roles promotes more effective communication channels for the board to express its views on management. NASDAQ OMX’s Chief Executive Officer, Robert Greifeld,

 

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who has over twenty years’ experience in the securities industry, is responsible for the strategic direction, day-to-day leadership and performance of NASDAQ OMX. The chairman of NASDAQ OMX’s board, Börje E. Ekholm, who brings to the board the perspective of a large stockholder, provides guidance to the Chief Executive Officer, presides over meetings and executive sessions of the board of directors and serves as the primary liaison between the Chief Executive Officer and the other directors. We believe that this separation of roles and allocation of distinct responsibilities to each role facilitates communication between senior management and the full board of directors about issues such as corporate governance, management development, succession planning, executive compensation and company performance.

DIRECTOR CLASSIFICATIONS

In accordance with SEC requirements to ensure that balanced viewpoints are represented on our board of directors, NASDAQ OMX’s by-laws require that all directors be classified as:

 

   

Industry Directors;

 

   

Non-Industry Directors, which are further classified as either Issuer Directors or Public Directors; or

 

   

Staff Directors.

The number of Non-Industry Directors shall equal or exceed the number of Industry Directors. The board shall include at least two Public Directors and at least one, but no more than two, Issuer Directors. The board shall include no more than one Staff Director, unless the board consists of ten or more directors. In that case, the board shall include no more than two Staff Directors.

We establish the classification of each director based on a questionnaire with specific questions relating to the classifications. NASDAQ OMX’s corporate secretary annually certifies to the nominating & governance committee the classification of each director. The following is a general description of NASDAQ OMX’s director classifications, which are detailed in our by-laws:

 

   

Industry Director means a director who is not a Staff Director and who (i) is, or within the last year was, or has an immediate family member who is, or within the last year was, a member of any of NASDAQ OMX’s self-regulatory subsidiaries; (ii) is, or within the last year was, employed by a member or a member organization of any of NASDAQ OMX’s self-regulatory subsidiaries; (iii) has an immediate family member who is, or within the last year was, an executive officer of a member or a member organization of any of NASDAQ OMX’s self-regulatory subsidiaries; (iv) has within the last year received from any member or member organization of any of NASDAQ OMX’s self-regulatory subsidiaries more than $100,000 per year in direct compensation, or received from such members or member organizations in the aggregate an amount of direct compensation that in any one year is more than 10% of the director’s annual gross compensation for such year, excluding in each case director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service); or (v) is affiliated, directly or indirectly, with a member or member organization of any of NASDAQ OMX’s self-regulatory subsidiaries;

 

   

Non-Industry Director means a director who is not a Staff Director and who is (i) a Public Director; (ii) an Issuer Director; or (iii) any other individual who would not be an Industry Director;

 

   

Issuer Director means a director who is not a Staff Director and who is an officer or employee of an issuer of securities listed on a national securities exchange operated by any of NASDAQ OMX’s self-regulatory subsidiaries, excluding any director who is a director of an issuer but is not also an officer or employee of the issuer;

 

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Public Director means a director who (i) is not an Industry Director; (ii) is not an Issuer Director; and (iii) has no material business relationship with a member or member organization of any of NASDAQ OMX’s self-regulatory subsidiaries, NASDAQ OMX or its affiliates or FINRA; and

 

   

Staff Director means an officer of NASDAQ OMX that is serving as a director.

DIRECTOR INDEPENDENCE

NASDAQ OMX’s common stock is currently listed on The NASDAQ Stock Market and NASDAQ Dubai Limited (NASDAQ Dubai). The rules of The NASDAQ Stock Market require that a majority of the members of our board of directors be independent. NASDAQ Dubai requires that at least two directors be independent. In order to qualify as independent under the listing rules of The NASDAQ Stock Market, a director must satisfy a two-part test. First, the director must not fall into any of several categories that would automatically disqualify the director from being deemed independent. These categories prohibit the finding of independence for:

 

   

a director who is, or at any time during the past three years was, employed by the company or by any parent or subsidiary of the company;

 

   

a director who accepted, or who has a family member who accepted, certain compensation from the company in excess of $120,000 during any period of twelve consecutive months within the three years preceding the determination of independence;

 

   

a director who is a family member of an individual who is, or at any time during the past three years was, employed by the company as an executive officer;

 

   

a director who is, or has a family member who is, a partner in, or a controlling stockholder or an executive officer of, any organization to which the company made, or from which the company received, certain payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is more;

 

   

a director of the company who is, or has a family member who is, employed as an executive officer of another entity where at any time during the past three years any of the executive officers of the company serve on the compensation committee of such other entity; or

 

   

a director who is, or has a family member who is, a current partner of the company’s outside auditor, or was a partner or employee of the company’s outside auditor who worked on the company’s audit at any time during any of the past three years.

Second, no director qualifies as independent unless the board affirmatively determines that the director has no direct or indirect relationship with the company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In assessing the independence of its members, the board examined the commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships of each member. The board’s inquiry extended to both direct and indirect relationships with the company.

NASDAQ OMX also is listed on NASDAQ Dubai and, as a result, is subject to the NASDAQ Dubai listing rules and the Markets Rules of the Dubai Financial Services Authority. Under these rules, a director is considered independent if the board determines the director to be independent in character and judgment and to have no relationship or circumstances that are likely to affect, or could appear to affect, the director’s judgment in a manner other than in the best interests of the company.

Based upon detailed written submissions by each individual, the board has determined that all of our current directors are independent, other than Messrs. Greifeld and Kazim. Mr. Greifeld is deemed not to be independent because he is the Chief Executive Officer of NASDAQ OMX. Mr. Kazim is deemed not to be independent because of his affiliations with Borse Dubai Limited (Borse Dubai), Dubai Financial Market PJSC (DFM) and NASDAQ Dubai.

 

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INFORMATION WITH RESPECT TO DIRECTOR NOMINEES

In evaluating candidates for nomination to the board, the nominating & governance committee reviews the skills, qualifications, characteristics and experience desired for the board as a whole and for its individual members, with the objective of having a board that reflects diverse backgrounds and senior level experience in the areas of global business, finance, legal and regulatory, technology and marketing. Characteristics of all directors include integrity and values, high personal and professional ethics, sound business judgment, the ability and willingness to commit sufficient time to fulfill their board responsibilities and a commitment to representing the long-term interests of our stockholders.

In evaluating the suitability of individual board nominees, the nominating & governance committee takes into account many factors, including general and diverse understanding of the global economy, capital markets, finance and other disciplines relevant to the success of a large publicly-traded financial services company; a general understanding of NASDAQ OMX’s business and technology; the individual’s educational and professional background and personal accomplishments; and factors such as geographic, gender, age and ethnic diversity. The committee evaluates each individual candidate in the context of the board as a whole, with the objective of maintaining a group of directors that can further the success of NASDAQ OMX’s business, while representing the interests of stockholders, employees and the communities in which the company operates. In determining whether to recommend a board member for re-election, the nominating & governance committee also considers the director’s past attendance at meetings, participation in and contributions to the activities of the board and the most recent board self-assessment. The nominating & governance committee reviews all candidates in the same manner, regardless of the source of the recommendation.

We are obligated by the terms of a stockholders’ agreement dated February 27, 2008 between NASDAQ OMX and Borse Dubai, as amended, to nominate and generally use best efforts to cause the election to the NASDAQ OMX board of one individual designated by Borse Dubai, subject to certain conditions. Mr. Kazim is the individual designated by Borse Dubai as its nominee.

Finally, we also are obligated by the terms of a stockholders’ agreement dated December 16, 2010 between NASDAQ OMX and Investor AB to nominate and generally use best efforts to cause the election to the NASDAQ OMX board of one individual designated by Investor AB, subject to certain conditions. Mr. Ekholm is the individual designated by Investor AB as its nominee.

Listed below are the nominees for directors. The information for each nominee includes the nominee’s principal occupation, business experience, directorships of publicly-traded companies in the past five years, age as of the date of this proxy statement and the year the nominee was first elected a director. Each nominee, if elected, will serve for a one-year term expiring at the 2014 annual meeting and until the election and qualification of his or her successor.

 

Name

 

 Age

 

 Classification

   Director Since
             

Steven D. Black

   60    Non-Industry; Public    2011

Börje E. Ekholm

   50    Non-Industry    2011

Robert Greifeld

   55    Staff    2003

Glenn H. Hutchins

   57    Industry    2005

Essa Kazim

   54    Non-Industry    2008

John D. Markese

   67    Non-Industry; Public    1996

Ellyn A. McColgan

   59    Non-Industry; Public    2012

Thomas F. O’Neill

   66    Non-Industry    2003

James S. Riepe

   69    Industry    2003

Michael R. Splinter

   62    Non-Industry; Issuer    2008

Lars R. Wedenborn

   54    Non-Industry    2008

 

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NOMINEES

 

LOGO

  

Steven D. Black was elected to NASDAQ OMX’s board of directors in December 2011. Since September 2012, Mr. Black has been the Co-CEO of Bregal Investments, a private equity firm. He was the Vice Chairman of J.P. Morgan Chase & Co. from March 2010 through February 2011 and a member of the firm’s Operating and Executive committees. Prior to that position, Mr. Black was the Executive Chairman of J.P. Morgan Investment Bank from October 2009 through March 2010. Mr. Black served as a Co-Chief Executive Officer of J.P. Morgan Investment Bank from 2004 through 2009. Mr. Black was the Deputy Co-Chief Executive Officer of J.P. Morgan Investment Bank since 2003. He also served as head of J. P. Morgan Investment Bank’s Global Equities business since 2000 following a career with Citigroup and its predecessor firms.

 

Skills and Qualifications

 

Mr. Black served in various financial and strategic roles at J.P. Morgan throughout his career and prior to that at Citigroup. Under his leadership, J.P. Morgan Chase achieved a number one ranking in top global capital raising league tables. Mr. Black’s depth of knowledge and experience in the global financial services industry brings a wealth of knowledge to the board.

 

LOGO

  

Börje E. Ekholm was elected to NASDAQ OMX’s board of directors effective February 17, 2011. Mr. Ekholm is the President and Chief Executive Officer, as well as a member of the board of directors, of Investor AB, which is an industrial holding company that invests in other companies in the ordinary course of business. Prior to becoming the President and Chief Executive Officer in 2005,
Mr. Ekholm was a Member of the Management Group of Investor AB, where he had oversight of the new investments business. Mr. Ekholm previously served as the President of Novare Kapital AB, an early-stage venture capital company. He also served in various positions at McKinsey & Co Inc. Mr. Ekholm is a member of the board and the remuneration committee of Telefonaktiebolaget LM Ericsson. In summary, as of April 11, 2013, Mr. Ekholm is a member of the boards of directors of Investor AB, of which he is the President and Chief Executive Officer, and two other public companies, NASDAQ OMX and Telefonaktiebolaget LM Ericsson.

 

Skills and Qualifications

 

Mr. Ekholm serves in a senior leadership role at Investor AB as President and Chief Executive Officer where he has gained invaluable experience in the financial sector. Mr. Ekholm brings an accounting background to the board from his current role at Investor AB.
Mr. Ekholm has broad knowledge of international markets and experience in the areas of corporate strategy, finance and technology. As a nominee designated by Investor AB, Mr. Ekholm also brings to the NASDAQ OMX board the perspective of a large stockholder.

 

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LOGO

 

  

Robert Greifeld was elected to the board of directors and appointed Chief Executive Officer of NASDAQ OMX in May 2003. Prior to joining NASDAQ OMX, Mr. Greifeld was an Executive Vice President at SunGard Data Systems, Inc., a global provider of integrated software and processing solutions for financial services and a provider of information availability services. Mr. Greifeld joined SunGard in 1999 through SunGard’s acquisition of Automated Securities Clearance, Inc., where from 1991 through 1999, Mr. Greifeld was the President and Chief Operating Officer.

 

Skills and Qualifications

 

Mr. Greifeld has led NASDAQ OMX through a series of complex, innovative acquisitions that have extended its footprint across the world, spanning all asset classes. Mr. Greifeld also has broad experience in the areas of technology, finance, risk management, human resources and corporate strategy.

 

 

LOGO

  

 

Glenn H. Hutchins was elected to NASDAQ OMX’s board of directors in May 2005. Mr. Hutchins is a Co-Founder of Silver Lake, a technology investment firm that was established in January 1999. Mr. Hutchins is the Chairman of the board of SunGard Capital Corp. and serves as a member of the Availability Services Committee and the Nominating and Governance Committee of SunGard Capital Corp.

 

Skills and Qualifications

 

Mr. Hutchins has extensive transactional experience as a private equity investor, particularly in the area of evaluating, negotiating and structuring mergers and acquisitions. Mr. Hutchins also holds a law degree and has extensive experience in the financial, technology and public policy sectors.

 

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LOGO

  

Essa Kazim was elected to NASDAQ OMX’s board of directors effective March 1, 2008. Since 2006, Mr. Kazim has been the Chairman of Borse Dubai and Managing Director and Chief Executive Officer of the Dubai Financial Market. Mr. Kazim began his career as a Senior Analyst in the Research and Statistics Department of the UAE Central Bank in 1988 and then moved to the Dubai Department of Economic Development as Director of Planning and Development in 1993. He was then appointed Director General of the DFM from 1999 through 2006.

 

Skills and Qualifications

 

Through his roles at Dubai Financial Market and Borse Dubai, Mr. Kazim has experience in all aspects of the operation of stock exchanges, including regulatory compliance. He brings global experience to the board through his experience with financial markets in the Middle East. As a nominee designated by Borse Dubai, Mr. Kazim also brings to the NASDAQ OMX board the perspective of a large stockholder.

 

LOGO

  

John D. Markese was elected to NASDAQ OMX’s board of directors in May 1996. Dr. Markese served on FINRA’s board of governors from 1998 to 2002. Since his retirement in October 2010, Dr. Markese has been the Vice Chairman of the American Association of Individual Investors, a not-for-profit organization providing investment education to individual investors founded in 1978. Previously, Dr. Markese was the President and Chief Executive Officer of the American Association of Individual Investors.

 

Skills and Qualifications

 

As a result of his over 40 years of work in finance, Dr. Markese meets the criteria of an audit committee financial expert and serves as the chairman of the audit committee of NASDAQ OMX’s board. Dr. Markese has a doctoral degree in Finance and has taught business school classes in the areas of Corporate Finance, Financial Case Analysis, Portfolio Management and Investment Analysis. Dr. Markese also brings to the NASDAQ OMX board the perspective of the individual investor community.

 

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LOGO

  

Ellyn A. McColgan was elected to NASDAQ OMX’s board of directors in May 2012. Since September 2010, she has been an Executive Advisor at Aquiline Capital Partners, LLC, a private equity firm that invests in the financial services sector. Ms. McColgan worked as a private consultant from February 2009 through September 2010. From April 2008 through January 2009, Ms. McColgan was the President and Chief Operating Officer of the Global Wealth Management Group of Morgan Stanley. Prior to that, Ms. McColgan served in various senior management positions at Fidelity Investments from 1990 through 2007. Ms. McColgan was a director and member of the audit committee of Primerica from 2010 through 2011.

 

Skills and Qualifications

 

Ms. McColgan has been a senior executive in the financial services industry for over 25 years. She is a transformational leader who built the Fidelity Brokerage Company to be the largest brokerage company in the United States as measured by client assets and client accounts, growing the business to $1.9 trillion in assets. She also has substantial experience with managing large enterprises and service delivery.

 

LOGO

  

Thomas F. O’Neill was elected to NASDAQ OMX’s board of directors in May 2003. Mr. O’Neill has been chairman of Ranieri Partners Financial Services Group, which acquires and manages financial services companies, since December 2010. In November 2010, Mr. O’Neill retired as a principal of Sandler O’Neill + Partners L.P., an investment bank that he co-founded in 1988. Mr. O’Neill is also a director of BankFinancial Corporation, Misonix, Inc. and Archer-Daniels-Midland Company. Mr. O’Neill serves as chairman of the audit committee of Archer-Daniels-Midland Company and is a member of the audit committee of Misonix.

 

Skills and Qualifications

 

Mr. O’Neill has worked on Wall Street since 1972, and as a founding principal of a nationally-recognized investment bank, he has broad experience in the areas of finance, mergers and acquisitions and business development. Mr. O’Neill specializes in working with financial institutions, and his substantial experience in the finance community contributes to his role as chairman of the finance committee of NASDAQ OMX’s board.

 

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LOGO

  

James S. Riepe was elected to NASDAQ OMX’s board of directors in May 2003. Mr. Riepe is a Senior Advisor at T. Rowe Price Group, Inc., an investment management firm, from which Mr. Riepe retired from active management in 2006. Previously, Mr. Riepe served as Vice Chairman of the board of directors of T. Rowe Price and Chairman of the T. Rowe Price Mutual Funds. He was a member of the firm’s management committee and was responsible for overseeing mutual fund activities, including global marketing and service operations. Mr. Riepe joined T. Rowe Price in 1982 as a Vice President and Director of the firm. Mr. Riepe served as Chairman of the board of governors of the Investment Company Institute and on FINRA’s board of governors. He also serves on the boards of directors, audit committees and compensation committees of Genworth Financial, Inc., where he is the non-executive Chairman, and LPL Financial Holdings, Inc.

 

Skills and Qualifications

 

Mr. Riepe has experience in risk management as a result of his management oversight of financial, operational and investment activities and through his participation on audit, compensation and investment committees. He also has a broad knowledge of the securities business as a result of his 37 years in the asset management field.

 

LOGO

  

Michael R. Splinter was elected to NASDAQ OMX’s board of directors effective March 1, 2008. Mr. Splinter has served as the Chief Executive Officer, as well as a member of the Board of Directors, of Applied Materials, Inc., the global leader in nanomanufacturing technology solutions for the electronics industry, since April 2003 and as Chairman since 2009. He served as President of Applied Materials from April 2003 through June 2012. An engineer and technologist, Mr. Splinter is a 30-year veteran of the semiconductor industry. Prior to joining Applied Materials, Mr. Splinter was an executive at Intel Corporation.

 

Skills and Qualifications

 

As the Chairman and Chief Executive Officer of Applied Materials, Mr. Splinter brings to the NASDAQ OMX board the perspective of a company listed on The NASDAQ Stock Market. Mr. Splinter also has significant experience in technology/information technology, finance, risk management and corporate strategy.

 

 

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LOGO

  

Lars R. Wedenborn was elected to NASDAQ OMX’s board of directors effective March 1, 2008. Mr. Wedenborn was elected Chairman of the NASDAQ OMX Nordic Ltd. board in October 2009. Previously, he was a member of the OMX board since 2007. Mr. Wedenborn has been CEO of FAM (Foundation Asset Management), which is fully owned by Wallenberg Foundations, since September 2007. Mr. Wedenborn started his career as an auditor followed by an assignment as CFO at Cabanco. During 1991 through 2000, he was Deputy Managing Director and CFO at Alfred Berg, a Scandinavian investment bank. He served with Investor AB, a Swedish holding company, as Executive Vice President and CFO from 2000 through 2007.

 

Skills and Qualifications

 

Mr. Wedenborn gained senior leadership experience through his work at FAM, Investor AB and Alfred Berg. He also possesses significant regulatory, finance and technology experience, and adds a global perspective to the NASDAQ OMX board.

RECOMMENDATION OF THE BOARD OF DIRECTORS

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES NAMED HEREIN FOR ELECTION AS DIRECTORS.

 

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DIRECTOR COMPENSATION

OVERVIEW OF DIRECTOR COMPENSATION

Annual non-employee director compensation is based upon a compensation year beginning and ending in May. Staff directors do not receive compensation for serving on the board of directors. The following table shows the compensation policy for non-employee directors that is in effect from May 2012 through May 2013. The board compensation policy has been unchanged since May 2011.

 

   

Item

  May 2012 – May 2013  
         
Annual retainer for board members (other than the chairman and deputy chairman)   $                   80,000   
Annual retainer for board chairman   $ 155,000   
Annual retainer for board deputy chairman(1)   $ 100,000   
Annual equity award for all board members (grant date market value)   $ 115,000   
Annual committee chair compensation (other than audit, executive and management compensation)(2)   $ 15,000   
Annual audit committee chair compensation   $ 25,000   
Annual audit committee member compensation   $ 5,000   
Annual management compensation committee chair compensation   $ 25,000   
Annual management compensation committee member compensation   $ 5,000   
Board meeting attendance fee (per meeting)   $ 1,500   
Committee meeting attendance fee (per meeting)   $ 1,500   

 

(1) The board did not appoint a deputy chairman for the compensation year beginning in May 2012.
(2) The executive committee chair does not receive any compensation for this chairmanship.

Each non-employee director may elect to receive the annual retainer in cash (payable in equal quarterly installments), equity or a combination of one-half in cash and one-half in equity. The annual equity award and any equity elected as part of the annual retainer are awarded automatically on the date of the annual meeting of stockholders immediately following election and appointment to the board. Equity vests in full one year from the date of grant. Equity paid to board members consists of restricted stock. The amount of equity to be awarded is calculated based on the closing market price of our common stock on the date of grant. Unvested equity is forfeited in certain circumstances upon termination of the director’s service on the board of directors.

The payments to committee chairs and members of the audit and management compensation committees are made in cash in a lump sum in conjunction with our annual meeting of stockholders. Board and committee meeting fees are paid in arrears on a quarterly basis. Non-employee directors do not receive retirement, health or life insurance benefits. NASDAQ OMX provides each non-employee director with director and officer liability insurance coverage, as well as accidental death and dismemberment and travel insurance for and only when traveling on behalf of NASDAQ OMX.

STOCK OWNERSHIP GUIDELINES

Under our corporate governance guidelines, non-employee directors must maintain a minimum ownership level of three times the annual cash retainer in NASDAQ OMX common stock. All shares owned outright

 

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and unvested restricted stock units are taken into consideration in determining compliance with these stock ownership guidelines. Exceptions to this policy may be necessary or appropriate in individual situations, and the board of directors may approve such exceptions from time to time. New directors have until four years after their initial election to the board to obtain the minimum ownership level. All of the directors who were required to be in compliance with the guidelines on December 31, 2012 were in compliance with the guidelines as of that date.

DIRECTOR COMPENSATION TABLE

The table below summarizes the compensation paid by NASDAQ OMX to our current and former non-employee directors for services rendered during the fiscal year ended December 31, 2012.

2012 Director Compensation Table

 

               

Name(1)

  Fees Earned
or Paid in Cash
($)(2)
    Stock Awards
($)(3)(4)(5)
    Option
 Awards 
($)
  Non-Equity
 Incentive Plan 
 Compensation 
($)
  Change
in Pension
Value and
Nonqualified
Deferred
 Compensation 
Earnings
($)
  All Other
 Compensation 
($)(6)
  Total
($)
 
                                         

Urban Bäckström(7)

  $ 57,500                     $ 57,500   

H. Furlong Baldwin(7)

  $ 12,000                     $ 12,000   

Steven D. Black

  $ 141,167      $ 115,015              $ 256,182   

Michael Casey(7)

  $ 62,500                     $ 62,500   

Börje E. Ekholm

  $ 128,266      $ 195,032              $ 323,298   

Lon Gorman(7)

  $ 41,500                     $ 41,500   

Glenn H. Hutchins

  $ 51,500      $ 195,032              $     246,532   

Birgitta Kantola(7)

  $ 62,718 (8)                   $ 62,718   

Essa Kazim

  $ 137,000      $ 115,015              $ 252,015   

John D. Markese

  $ 230,750 (9)    $ 115,015              $ 345,765   

Ellyn A. McColgan

  $ 64,398      $ 195,032              $ 259,430   

Hans Munk Nielsen(7)

  $ 55,000                     $ 55,000   

Thomas F. O’Neill

  $ 146,000      $ 115,015              $ 261,015   

James S. Riepe

  $ 128,000      $ 115,015              $ 243,015   

Michael R. Splinter

  $ 79,000      $ 195,032              $ 274,032   

Lars R. Wedenborn

  $ 99,801 (10)    $     195,032              $ 294,833   

Deborah L. Wince-Smith(7)

  $ 28,500                     $ 28,500   

 

 

(1) Robert Greifeld, our Chief Executive Officer, is not included in this table as he is an employee of NASDAQ OMX and thus receives no compensation for his service as a director. For information on the compensation received by Mr. Greifeld as an employee of the company, see “Compensation Discussion and Analysis” and “Executive Compensation.”

 

(2) The differences in fees earned or paid in cash reported in this column largely reflect differences in each individual director’s election to receive the annual retainer in cash, restricted stock or a combination of cash and restricted stock. This election is made at the beginning of the board compensation year in May and applies throughout the year. In addition, the difference in fees earned or paid also reflects committee service and meeting attendance.

 

(3) The amounts reported in this column reflect the grant date fair value of the stock awards computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, “Stock Compensation” (FASB ASC Topic 718). The assumptions used in the calculation of these amounts are included in footnote 12 to the company’s audited financial statements for the fiscal year ended December 31, 2012 included in our Form 10-K. The differences in the amounts reported among non-employee directors reflect differences in each individual director’s election to receive a portion of the annual retainer in cash or restricted stock.

 

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(4) These stock awards, which were awarded on May 22, 2012, represent the annual equity award and any portion of the annual retainer that the director elected to receive in equity. Each non-employee director received the annual equity award, which consisted of 5,153 units of restricted stock with a grant date fair value of $115,015. Messrs. Ekholm, Hutchins, Splinter and Wedenborn and Ms. McColgan elected to receive all of their annual retainers in equity, so they each received an additional 3,585 units of restricted stock with a grant date fair value of $80,017 for a total grant date fair value of $195,032.

 

(5) The aggregate number of unvested and vested shares and units of restricted stock held by each non-employee director as of December 31, 2012 is summarized in the following table:

 

     

Director

   Number of Unvested
Restricted Shares
and Units
     Number of Vested
Restricted Shares
and Units
 
                   

Urban Bäckström

     —                 18,029     

H. Furlong Baldwin

     —                 55,697     

Steven D. Black

     5,153                 —     

Michael Casey

     —                 36,664     

Börje E. Ekholm

     8,738                 7,999     

Lon Gorman

     —                 —     

Glenn H. Hutchins(A)

     8,738                 24,563     

Birgitta Kantola

     —                 15,151     

Essa Kazim

     5,153                 15,151     

John D. Markese

     5,153                 47,915     

Ellyn A. McColgan

     8,738                 —     

Hans Munk Nielsen

     —                 —     

Thomas F. O’Neill

     5,153                 8,678     

James S. Riepe

     5,153                 22,911     

Michael R. Splinter

     8,738                 24,494     

Lars R. Wedenborn

     8,738                 28,867     

Deborah L. Wince-Smith

     —                 32,497     

 

  (A) Under Mr. Hutchins’ arrangements with Silver Lake or its affiliates with respect to director compensation, 16,564 shares or proceeds therefrom are expected to be assigned to Silver Lake or its affiliates. Mr. Hutchins disclaims beneficial ownership of any NASDAQ OMX securities that may be held by Silver Lake or its affiliates, except to the extent of any pecuniary interest he may have therein.

For further information on our non-employee directors’ security ownership, see “Security Ownership of Certain Beneficial Owners and Management.”

 

(6) No perquisites were paid to non-employee directors in the fiscal year ended December 31, 2012. Directors are reimbursed for business expenses and reasonable travel expenses for attending NASDAQ OMX board and committee meetings.

 

(7) Messrs. Bäckström, Baldwin, Casey, Gorman and Nielsen and Mses. Kantola and Wince-Smith did not stand for reelection to the board of directors at NASDAQ OMX’s 2012 annual meeting of stockholders, and therefore, their terms as a director expired on May 22, 2012.

 

(8)

Fees earned by Ms. Kantola include $7,718 (6,000) for her service as chair of the surveillance committees of NASDAQ OMX Copenhagen A/S, NASDAQ OMX Helsinki Ltd and NASDAQ OMX

 

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Stockholm AB. This amount was converted to U.S. dollars from euros at an exchange rate of $1.2864 per euro, which was the average exchange rate for 2012.

 

(9) Fees earned by Dr. Markese include $70,000 for his service as a director of our U.S. exchange subsidiaries The NASDAQ Stock Market LLC, NASDAQ OMX BX, Inc. and NASDAQ OMX PHLX LLC.

 

(10) Fees earned by Mr. Wedenborn include $28,301 (22,000) for his service as chairman of the board of NASDAQ OMX Nordic Ltd. This amount was converted to U.S. dollars from euros at an exchange rate of $1.2864 per euro, which was the average exchange rate for 2012.

 

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NASDAQ OMX’S CORPORATE GOVERNANCE

BOARD AND COMMITTEE MEETINGS

The NASDAQ OMX board held 29 meetings during the year ended December 31, 2012, and the board met in executive session without management present during 27 of those meetings. None of the current directors attended fewer than 75% of the meetings of the board and those committees on which the director served during the 2012 calendar year.

BOARD COMMITTEES

Pursuant to NASDAQ OMX’s by-laws, the board of directors has established five standing committees. The table below shows the standing committee membership.

 

Committee

 

Current Members

 

Number of Meetings in 2012

         

Audit

 

John D. Markese (Chair)

Ellyn A. McColgan

James S. Riepe

Lars R. Wedenborn

  10

Executive

 

Börje E. Ekholm

Robert Greifeld

Glenn H. Hutchins (Chair)

Essa Kazim

John D. Markese

Thomas F. O’Neill

Michael R. Splinter

  0

Finance

 

Börje E. Ekholm

Robert Greifeld

Essa Kazim

Thomas F. O’Neill (Chair)

James S. Riepe

  9

Management Compensation

 

Steven D. Black

Glenn H. Hutchins

Michael R. Splinter (Chair)

Lars R. Wedenborn

  8

Nominating & Governance

 

Steven D. Black

Börje E. Ekholm (Chair)

John D. Markese

Ellyn A. McColgan

  7

Included below are summary descriptions of the standing committees. Each committee has adopted a charter, which is available on NASDAQ OMX’s website at http://ir.nasdaqomx.com/nasdaq-omx-group.cfm. The board and committees may hire outside experts to assist them when necessary.

Audit Committee. The audit committee, which is comprised of independent board members, has the primary responsibility for engaging the independent registered public accounting firm and assists the board by reviewing and discussing the quality and integrity of accounting, auditing and financial reporting and practices at NASDAQ OMX. In addition, the audit committee assists the board by reviewing the effectiveness of controls over NASDAQ OMX’s risk management and regulatory program. The audit committee also assists the board in reviewing and discussing NASDAQ OMX’s global ethics and compliance program and confidential whistleblower process.

 

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The audit committee assists the board in reviewing and discussing our financial reporting process and reports to the board the results of these activities. This includes the systems of internal controls that management and the board of directors have established, our audit and compliance process and financial reporting. The audit committee, among other duties, engages the independent registered public accounting firm, pre-approves all audit and non-audit services provided by the independent public accounting firm, reviews with the independent public accounting firm the plans and results of the audit engagement, considers the compatibility of any non-audit services provided by the independent public accounting firm with the independence of such firm, reviews the independence of the independent public accounting firm and reviews and approves all related party transactions. Audit committee members must meet the independence standards applicable to audit committee members of companies listed on The NASDAQ Stock Market, and our board has concluded that each member of the audit committee satisfies these independence standards. Each member of the audit committee meets the standard for financial knowledge for audit committee members of companies listed on The NASDAQ Stock Market. In addition, the board of directors has determined that Dr. Markese and Ms. McColgan are each qualified as an audit committee financial expert within the meaning of SEC regulations and that each has accounting and related financial management expertise that meets the standard for “financial sophistication” set forth in the rules of The NASDAQ Stock Market.

Executive Committee. Subject to the limitations in our by-laws, the executive committee has the general power and authority of the board of directors to act in the management of our business and affairs.

Finance Committee. The finance committee advises the board of directors with respect to the oversight of our financial operations and conditions, including recommendations for our annual operating and capital budgets.

Management Compensation Committee. Among other duties, the management compensation committee establishes a compensation philosophy and reviews annually, and recommends to the full board of directors for approval all material changes to, compensation and benefit plans for officers and staff of the company. The management compensation committee reviews and refers to the board for approval the base salary, incentive compensation awards, performance goals and equity awards for the chief executive officer and all executive vice presidents. For other Section 16 officers, the management compensation committee reviews and approves the base salary, incentive compensation awards, performance goals and equity awards. The management compensation committee also reviews and approves the base salary and incentive compensation awards for other officers whose compensation exceeds certain thresholds, which currently are set at base compensation in excess of $350,000 and/or total annual cash compensation (including targeted incentive compensation) in excess of $650,000. In addition, the management compensation committee reviews and approves equity awards granted to other officers valued at $100,000 or greater. Finally, the management compensation committee reviews annually the peer groups used for competitive market analysis and a succession plan for the development, retention and replacement of Section 16 officers and other selected officers.

Each member of the management compensation committee is independent, as required by the rules of The NASDAQ Stock Market, and meets the additional eligibility requirements set forth in NASDAQ Listing Rule 5605(d)(2)(A). Specifically, none of the members of the management compensation committee accepts directly or indirectly any consulting, advisory or other compensatory fee from NASDAQ OMX or any subsidiary. In addition, none of the members of the management compensation committee is affiliated with NASDAQ OMX, any subsidiary or any affiliate of a subsidiary in a way that would impair the director’s judgment as a member of the compensation committee.

Nominating & Governance Committee. Pursuant to NASDAQ OMX’s by-laws, this committee serves as the nominating committee with additional responsibilities related to corporate governance. The nominating & governance committee has the authority to identify and nominate candidates for vacancies on the NASDAQ OMX board. Additionally, if a director position becomes vacant because of death,

 

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disability, disqualification, removal, resignation or increase in the number of directors, the nominating & governance committee will nominate, and the board of directors will elect by majority vote, a person satisfying the classification (Industry, Non-Industry, Issuer or Public Director) of the directorship, if applicable, to fill such vacancy, except that if the remaining term is not more than six months, no replacement is required.

The nominating & governance committee considers possible candidates suggested by board and committee members, industry groups, stockholders or senior management. In addition to submitting suggested nominees to the nominating & governance committee, a NASDAQ OMX stockholder may nominate a person for election as a director at NASDAQ OMX’s annual meeting or at a special meeting, provided the stockholder follows the procedures specified in NASDAQ OMX’s by-laws.

The nominating & governance committee annually evaluates and makes recommendations to the board on the overall effectiveness of the board through an annual review and evaluation of the structure, size, composition, development, selection and process of the board and its committees. The committee annually reviews and recommends to the board the assignment of board members to each of the board committees, including rotation, reassignment and removal of any committee member. The nominating & governance committee considers matters of corporate governance and periodically reviews, reassesses and recommends proposed changes for board approval of the following documents: the Board of Directors Duties and Obligations and the NASDAQ OMX Corporate Governance Guidelines (including the criteria used in selecting director nominees). Both documents are available on NASDAQ OMX’s website at http://ir.nasdaqomx.com/nasdaq-omx-group.cfm.

This committee also monitors NASDAQ OMX compliance in the areas of corporate governance pursuant to The NASDAQ Stock Market LLC listing rules and best practices, in order to report and make recommendations to the board with respect to such requirements and practices. This committee identifies current and emerging corporate governance trends and issues that may affect the business operations, performance and public image of NASDAQ OMX. It prepares, and reports to the board the results of, the annual performance evaluation of the committee, which compares the performance of the committee with the requirements of the committee charter. Finally, the committee reviews, at least annually, its charter.

Each member of the nominating & governance committee is independent, as required by the rules of The NASDAQ Stock Market.

NASDAQ OMX BOARD’S RISK OVERSIGHT ROLE

NASDAQ OMX’s management has day-to-day responsibility for: (i) identifying risks and assessing them in relation to NASDAQ OMX’s strategies and objectives, (ii) implementing suitable risk mitigation plans, processes and controls and (iii) appropriately managing risks in a manner that serves the best interests of NASDAQ OMX, its stockholders and other stakeholders. NASDAQ OMX has a risk steering committee, comprised of employees, that regularly reviews risks for materiality and refers significant risks to the board of directors or specific board committees.

NASDAQ OMX’s board of directors has ultimate responsibility for overseeing risk management with a focus on the most significant risks facing the company.

The board is assisted with this responsibility by the following board committees.

Audit Committee. The primary function of the audit committee is to assist the board of directors in fulfilling its oversight responsibilities by reviewing and discussing the financial information, the systems of internal controls, financial reporting and the legal and compliance process. Additionally, the committee reviews and discusses the Enterprise Risk Management (ERM) structure and process.

Finance Committee. The finance committee monitors the risks associated with the financial operations of the company.

 

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Management Compensation Committee. The management compensation committee monitors the risks associated with elements of the compensation program, including organizational structure, compensation plans and goals, succession planning, organizational development and selection processes. The management compensation committee also evaluates and opines on the effect the compensation structure may have on risk-related decisions.

Nominating & Governance Committee. The nominating & governance committee oversees risks related to the company’s governance structure, policies and processes.

Furthermore, non-management directors meet in executive session on a regular basis without the presence of management with discussions that include matters pertaining to risk. NASDAQ OMX does not believe that the board’s role in risk oversight has affected its leadership structure.

RISK ASSESSMENT OF COMPENSATION PROGRAM

We monitor the risks associated with our compensation program on an ongoing basis. In March 2013, the management compensation committee and audit committee were presented with the results of an annual formal assessment of our employee compensation program in order to evaluate the risks arising from our compensation policies and practices. This risk assessment report reflected a comprehensive review and analysis of the components of our compensation program, including the performance measures established under the 2013 cash performance-based incentive award program and the sales plans for various business units. The management compensation committee and the audit committee each agreed with the report’s findings that the risks associated with our compensation program were manageable and within our ability to effectively monitor, and that these risks are not reasonably likely to have a material adverse effect on the company.

The risk assessment was performed by an internal working group consisting of employees in the human resources, risk management, internal audit and corporate finance departments, as well as the offices of general counsel and corporate secretary. The findings were presented to the risk steering committee, which concurred with the working group’s report. The risk assessment included the following steps:

 

   

collection and review of existing NASDAQ OMX compensation policies and pay structures;

 

   

development of a risk assessment scorecard, analysis approach and timeline;

 

   

conduct of a qualitative risk assessment of performance goals to determine overall risk level; and

 

   

review and evaluation of controls that might mitigate risk taking (e.g., equity vesting structure, incentive recoupment policy and stock ownership guidelines).

The audit and management compensation committees of our board of directors both concluded, based on the risk assessment report’s findings, that any risks arising from our compensation program are not reasonably likely to have a material adverse effect on the company.

CORPORATE GOVERNANCE GUIDELINES

The NASDAQ OMX board has adopted corporate governance guidelines that set forth a flexible framework within which the board of directors and its committees operate. These guidelines cover a number of areas including the selection, composition and functions of our board, committee assignments and rotation, executive sessions, director orientation and continuing education, stock ownership guidelines for directors, evaluation of senior management and succession planning. Additionally, the guidelines set forth procedures in the event one or more nominees to the company’s board do not receive the affirmative vote of a majority of the votes cast in an uncontested election.

If an incumbent director desires to become a nominee of the board, the incumbent director must submit an irrevocable resignation contingent on (i) the incumbent not receiving a majority of the votes cast in

 

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an uncontested election and (ii) acceptance of that resignation by the board. If the incumbent director does not receive the affirmative vote of a majority of the votes cast, the nominating & governance committee will consider the resignation and recommend acceptance or rejection of the resignation to the board. The board will act on the resignation, taking the nominating & governance committee’s recommendation into account, within 90 days following certification of the stockholder vote.

Thereafter, the board will promptly disclose its decision whether to accept or reject the director’s resignation (and the reasons for rejecting the resignation, if applicable) in a press release to be disseminated in the manner that NASDAQ OMX’s press releases typically are distributed.

Any incumbent director who fails to receive the votes required for re-election in an uncontested election and who tenders his or her resignation will remain active and engaged in board activities while the nominating & governance committee considers his or her resignation. However, the incumbent director is expected to voluntarily recuse himself or herself from participation in any proceedings or consideration by the nominating & governance committee or the board regarding the incumbent director.

CODE OF ETHICS

We also have adopted the NASDAQ OMX Code of Ethics, which is applicable to all of our employees, including the principal executive officer, the principal financial officer and the controller and principal accounting officer (senior executive and financial officers). We have a separate NASDAQ OMX Code of Conduct for the Board of Directors, which contains provisions specifically applicable to directors. We post amendments to or waivers from the NASDAQ OMX Code of Ethics (to the extent applicable to the senior executive and financial officers) or to the NASDAQ OMX Code of Conduct for the Board of Directors on our website at the location listed below. We also disclose amendments or waivers to the codes in any manner otherwise required by the standards applicable to companies listed on The NASDAQ Stock Market.

The following materials related to our corporate governance are available publicly on our web site at http://ir.nasdaqomx.com/nasdaq-omx-group.cfm.

 

   

Corporate Governance Guidelines

 

   

NASDAQ OMX Code of Ethics

 

   

NASDAQ OMX Code of Conduct for the Board of Directors

 

   

Procedures to Report Concerns

 

   

Procedures for Communicating with the Board of Directors

 

   

Board of Directors Duties and Obligations

Copies also may be obtained, free of charge, by writing to our corporate secretary at the address listed below under “Stockholder Communication With Directors.” Please specify the document that you would like to receive. Our charter, by-laws and committee charters also are online at the same web address.

PROPOSED BY-LAW AMENDMENTS

At last year’s annual meeting, our stockholders considered a stockholder proposal requesting that the board of directors amend our by-laws to enable stockholders to call a special meeting. While that proposal was not approved by stockholders, our nominating & governance committee and board of directors considered the feedback received from stockholders on the proposal and decided to respond to this feedback. Accordingly, the committee and board have approved proposed amendments to our by-laws to allow stockholders holding at least 15% of NASDAQ OMX’s voting power to call a special meeting under the following circumstances.

 

   

The stockholders calling the special meeting must be record holders and must have held a “net long position” equivalent to 15% of the outstanding common stock entitled to vote continuously for one year prior to the request to call a special meeting.

 

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Upon receipt of a stockholder request to call a special meeting, NASDAQ OMX’s board of directors must set the meeting within 120 days.

 

   

A special meeting request will not be valid if it relates to an item of business that is not a proper subject for stockholder action under applicable law.

 

   

A special meeting request will not be valid if it is delivered: (i) within 90 days before an annual meeting; (ii) within 120 days after a meeting at which a similar item was considered; or (iii) when a similar item is to be presented at a meeting that has been called by NASDAQ OMX, but not yet held.

 

   

To be in proper form, a special meeting request must include certain disclosures about the proposing stockholders, any proposed nominees for director and any proposed items of business to be brought before a meeting.

The proposed amendments to NASDAQ OMX’s by-laws will not become effective until they are filed and effective with the SEC.

NASDAQ OMX BOARD ATTENDANCE AT MEETINGS OF STOCKHOLDERS

NASDAQ OMX’s policy is to encourage all directors to attend annual and special meetings of our stockholders. Nine of the current members of NASDAQ OMX’s board attended the annual meeting held on May 22, 2012.

 

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PROPOSAL II

RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The audit committee of the board of directors has selected Ernst & Young LLP as our independent registered public accounting firm to audit our financial statements for fiscal year 2013. We are asking the stockholders to ratify the audit committee’s selection of Ernst & Young LLP to serve as our independent registered public accounting firm for fiscal year 2013. In the event the stockholders fail to ratify the selection of Ernst & Young LLP, the audit committee will reconsider this selection. Even if the selection of Ernst & Young LLP is ratified, the audit committee, in its discretion, may direct the selection of a different independent registered public accounting firm at any time during the year if the audit committee determines that such a change would be in the company’s and its stockholders’ best interests.

Ernst & Young LLP has audited NASDAQ OMX’s financial statements since fiscal year 1986. Representatives of Ernst & Young LLP are expected to be present at the annual meeting with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.

The table below shows the amount of fees NASDAQ OMX paid to Ernst & Young LLP for fiscal years 2012 and 2011 (including expenses), which totaled $6,987,765 and $6,814,170 respectively. Details of the fees are based on the categories provided by the SEC auditor independence rules that became effective in 2003.

 

     2012     2011  
                 

Audit fees(1)

   $         6,408,642                        $         6,445,095                    

Audit-related fees(2)

    389,000                        95,000                   
   

 

 

   

 

 

 
   

 

 

   

 

 

 

Audit and audit-related fees

    6,797,642                        6,540,095                   

Tax fees(3)

    3,200                        3,450                   

All other fees(4)

    186,923                        270,625                   
   

 

 

   

 

 

 
   

 

 

   

 

 

 

Total(5)

   $         6,987,765                        $         6,814,170                    
   

 

 

   

 

 

 

 

(1) Audit services were provided globally in 2012 and 2011, and the fees related to the audits of international subsidiaries are translated into U.S. dollars at the date of the pre-approval.

 

(2) The 2012 and 2011 audit-related fees primarily include due diligence on strategic initiatives, including mergers and acquisitions.

 

(3) The 2012 and 2011 tax fees relate to tax compliance services provided to certain of NASDAQ OMX’s non-U.S. subsidiaries.

 

(4) The 2012 and 2011 other fees primarily relate to Swedish Financial Supervisory Authority listing requirements for companies applying for a listing on NASDAQ OMX Stockholm AB. The validation of the company is required to be performed by an external accounting firm. The fees are collected from the listing company by NASDAQ OMX and paid to Ernst & Young LLP on behalf of the listing company.

 

(5) Fees exclude services provided to NASDAQ OMX’s non-profit entities and services provided in relation to NASDAQ OMX’s role as the Securities Information Processor under the Unlisted Trading Privileges Plan.

Audit fees primarily represent fees for the audit of NASDAQ OMX’s annual financial statements included in our annual report on Form 10-K, the review of NASDAQ OMX’s quarterly reports on

 

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Form 10-Q, statutory audits of subsidiaries as required by statutes and regulations, accounting consultations on matters addressed during the audit or interim reviews, comfort letters and consents, and internal control attestation and reporting requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Audit-related fees primarily represent fees for consultations associated with strategic initiatives, including mergers and acquisitions.

Under the Sarbanes-Oxley Act, the audit committee is responsible for the appointment, compensation and oversight of the services provided by NASDAQ OMX’s independent registered public accounting firm. The audit committee is required to pre-approve both audit and non-audit services performed by the independent registered public accounting firm, and NASDAQ OMX’s audit committee pre-approved all such services in 2012 and 2011. See also “Audit Committee Report.”

RECOMMENDATION OF THE BOARD OF DIRECTORS

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS NASDAQ OMX’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDED DECEMBER 31, 2013.

 

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AUDIT COMMITTEE REPORT

In accordance with its written charter, the audit committee of the board of directors assists the board in fulfilling its responsibility for oversight of the quality and integrity of NASDAQ OMX’s accounting, auditing, financial reporting practices and risk management. The audit committee also assists the board by reviewing and discussing the effectiveness of controls over NASDAQ OMX’s regulatory and ERM structure and process. The audit committee also assists the board by reviewing and discussing NASDAQ OMX’s global ethics and compliance program and confidential whistleblower process. The audit committee charter complies with the applicable provisions of the Sarbanes-Oxley Act of 2002 and related rules of the SEC and The NASDAQ Stock Market. The complete text of the charter is available on NASDAQ OMX’s website at http://ir.nasdaqomx.com/nasdaq-omx-group.cfm.

Each of the audit committee members meets the independence criteria prescribed by applicable law and the rules of the SEC and is an “independent director” as defined in the rules of The NASDAQ Stock Market. Each of the audit committee members meets the financial knowledge requirements of The NASDAQ Stock Market, and Dr. Markese and Ms. McColgan have been designated by the board of directors as “audit committee financial experts” under SEC rules.

The audit committee obtained from the independent registered public accounting firm a formal written statement describing all relationships between the firm and NASDAQ OMX that might bear on the firm’s independence, consistent with the applicable requirements of the Public Company Accounting Oversight Board. The audit committee discussed with the independent registered public accounting firm any relationships that may impact the firm’s objectivity and independence and satisfied itself as to the firm’s independence. The audit committee discussed and reviewed with the independent registered public accounting firm all communications required by generally accepted auditing standards, including those described in Statement on Auditing Standards No. 61, as amended, “Communication with Audit Committees” as adopted by the Public Company Accounting Oversight Board in Rule 3200T, and with and without management present, discussed and reviewed the results of the independent registered public accounting firm’s examination of the financial statements. The audit committee also discussed the results of the internal audit examinations and ERM program results. The audit committee approved all audit and allowable non-audit services.

The audit committee discussed with management, the internal auditors and the independent registered public accounting firm the quality and adequacy of NASDAQ OMX’s internal controls and the internal audit function’s organization, responsibilities, budget and staffing. The audit committee reviewed with both the independent registered public accounting firm and the internal auditors their audit plans, audit scope and identification of audit risks. In addition, the audit committee reviewed and approved all related party transactions.

The audit committee reviewed and discussed NASDAQ OMX’s audited financial statements as of and for the fiscal year ended December 31, 2012, with management and the independent registered public accounting firm. Management has the responsibility for the preparation of NASDAQ OMX’s financial statements and the independent registered public accounting firm has the responsibility for the examination of those statements. Also, the audit committee completed its oversight of the global ethics and compliance program and confidential whistleblower process.

Based on the above-mentioned reviews and discussions, the audit committee recommended to the board of directors that the audited financial statements be included in NASDAQ OMX’s annual report on Form 10-K for the fiscal year ended December 31, 2012 for filing with the SEC. The audit committee also recommended the reappointment, subject to stockholder ratification, of the independent registered public accounting firm and the board of directors concurred in such recommendation.

The Audit Committee

John D. Markese, Chair

Ellyn A. McColgan

James S. Riepe

Lars R. Wedenborn

 

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PROPOSAL III

APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION ON AN ADVISORY BASIS

We are asking stockholders to approve, on an advisory basis, the company’s executive compensation as reported in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the executive compensation program and practices described in this proxy statement.

We urge stockholders to read the Compensation Discussion and Analysis beginning on page 34 of this proxy statement, as well as the executive compensation tables and narrative beginning on page 57. The Compensation Discussion and Analysis describes our executive compensation program and the decisions made by our management compensation committee in 2012 in more detail and the compensation tables provide detailed information on the compensation of our named executive officers. The board of directors and the management compensation committee believe that the compensation program for our named executive officers has been effective in meeting the core principles described in the Compensation Discussion and Analysis in this proxy statement, and has contributed to the company’s long-term success.

In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (Exchange Act), and as a matter of good corporate governance, we are asking stockholders to approve the following advisory resolution at the 2013 annual meeting of stockholders:

RESOLVED, that the stockholders of The NASDAQ OMX Group, Inc. approve, on an advisory basis, the compensation of NASDAQ OMX’s named executive officers, as disclosed in the proxy statement for NASDAQ OMX’s 2013 annual meeting of stockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the executive compensation tables and other related tables and narrative disclosure.

This advisory vote is not binding on the board of directors and the management compensation committee. Although non-binding, the board of directors and the management compensation committee will review and consider the outcome of the vote when making future decisions regarding our executive compensation program.

The board of directors has adopted a policy providing for annual advisory votes to approve the company’s executive compensation. The next advisory vote to approve executive compensation will occur at the 2014 annual meeting of stockholders.

RECOMMENDATION OF THE BOARD OF DIRECTORS

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION ON AN ADVISORY BASIS.

 

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COMPENSATION DISCUSSION AND ANALYSIS

OVERVIEW

This Compensation Discussion and Analysis describes the compensation program for the year ended December 31, 2012 for our named executive officers:

 

   

Robert Greifeld, Chief Executive Officer;

 

   

Lee Shavel, Chief Financial Officer and Executive Vice President, Corporate Strategy;

 

   

Anna M. Ewing, Executive Vice President, Global Technology Solutions;

 

   

Hans-Ole Jochumsen, Executive Vice President, Transaction Services Nordic; and

 

   

Eric W. Noll, Executive Vice President, Transaction Services U.S and U.K.

The independent members of NASDAQ OMX’s board of directors are responsible for overseeing our executive compensation program, and the board has delegated to its management compensation committee the primary responsibility for administering the program. Among other things, the management compensation committee is responsible for establishing the principles that underlie our executive compensation program and, in conjunction with the board, evaluating the performance and determining the compensation of our CEO and other executive officers. For additional information on the committee and its members, see “NASDAQ OMX’s Corporate Governance – Board Committees.” The committee’s charter can be found on NASDAQ OMX’s website at http://ir.nasdaqomx.com/nasdaq-omx-group.cfm.

EXECUTIVE SUMMARY

2012 Business Highlights

NASDAQ OMX’s performance was strong in 2012 against difficult market conditions. We achieved many operational, financial and transactional successes during the year. Operationally, we launched NASDAQ OMX BX Options, our third U.S. options market, and announced several new products in our Access Services and Market Data business units. We attracted significant listing transfers, announcing that companies with more than $135 billion in market capitalization, including Kraft Foods, Texas Instruments, Goodyear Tire & Rubber and Analog Devices, switched their listing to The NASDAQ Stock Market. We also established an enterprise-wide operational excellence program to strengthen the way we develop, deploy and maintain technology products in the marketplace.

As part of our strategy of delivering strong returns to stockholders, we completed share repurchases totaling $275 million, or 11.5 million shares, during 2012. We also returned $65 million to our investors through the payment of quarterly cash dividends.

In connection with our continued efforts to expand and diversify our franchise, we announced an agreement with Thomson Reuters to acquire its Investor Relations, Public Relations and Multimedia Solutions businesses, as well as an agreement to acquire a 25% stake in The Order Machine. Both proposed acquisitions are subject to customary regulatory approvals. We also closed the acquisitions of NOS Clearing ASA, a majority interest in BWise Beheer B.V. and its subsidiaries, and the index business of Mergent, Inc., including Indxis.

We also continued to diversify our revenue stream with an emphasis on our subscription and recurring revenues. Specifically:

 

   

Issuer Services revenues increased $19 million, primarily from Corporate Solutions and Global Index Group revenues;

 

   

Access Services revenues increased $16 million, primarily from increased demand for services and revenues from new products;

 

   

Market Data revenues increased $15 million, primarily from U.S. market data products; and

 

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Market Technology revenues increased $7 million, primarily from delivery project and change request, advisory and broker surveillance revenues.

We also generated pre-tax savings of approximately $60 million in 2012 from our restructuring actions, and we expect an annualized savings of $60 million beginning in 2013.

On the other hand, the successes described above occurred against a backdrop of investors’ cautious outlook about the pace of the global economic recovery and governments’ ability to fund their sovereign debt. In 2012, both the U.S. and European cash equity trading and derivative trading and clearing businesses were negatively impacted by significantly lower industry trading volumes. In addition, the global IPO market in 2012 remained flat when compared to 2011. These factors negatively affected our financial results in 2012 as compared to 2011. For additional information on the economic and market considerations that influenced our 2012 financial results, please refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Form 10-K. In addition, we also experienced widely publicized systems issues in connection with the IPO by Facebook on May 18, 2012.

The table below summarizes key NASDAQ OMX financial results for the fiscal year ended December 31, 2012 when compared with the same period in 2011.

 

     Year Ended December 31,         
                         
     2012     2011     Percentage
Change
 
                         
     (in millions, except per share amounts)         
Revenues less transaction rebates, brokerage, clearance and exchange fees    $ 1,663       $ 1,682        (1.1)%   

Operating income

   $ 690       $ 696        (0.9)%   

Diluted earnings per share

   $ 2.04       $ 2.15        (5.1)%   

Stock price per share(1)

   $ 24.99       $ 24.51        2.0%   

 

(1) Represents the closing market price of our common stock on the last trading day of each year.

2012 Executive Compensation Highlights

In line with our executive compensation program’s emphasis on pay for performance, compensation awarded to the named executive officers decreased on average in 2012 as compared to 2011. Listed below are some highlights of our 2012 executive compensation program.

Annual Base Salaries. For 2012, the base salaries of the named executive officers remained at the same levels as for 2011.

Annual Performance-Based Cash Incentive Awards. In 2012, the annual performance-based cash incentive awards for our named executive officers were tied to two corporate performance measures, operating income (run rate) and net revenue, as well as business unit strategic performance objectives and the results of a “business effectiveness survey” (BES). NASDAQ OMX’s operating income (run rate) exceeded the target range, but fell below the maximum performance level, for this goal. Our 2012 net revenue exceeded the minimum performance level, but fell below the target range. These results influenced final payouts for each of our named executive officers under our annual performance-based cash incentive program. On average, final payments were significantly lower than 2011 levels based on 2012 performance.

 

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Long-Term Stock-Based Compensation. In 2012, the management compensation committee and board of directors approved a new performance-based long-term incentive program for our CEO, executive vice presidents and senior vice presidents that focuses on total shareholder return (TSR). Each of our named executive officers received an equity award under this program in 2012. In addition, in early 2013, the committee and board determined the number of shares that our CEO was entitled to receive upon vesting in connection with his 2010 grant of performance share units (PSUs). Because the company exceeded the minimum, but fell below the target, performance level for non-GAAP earnings per share (EPS) growth over a three-year performance period from January 1, 2010 through December 31, 2012, Mr. Greifeld received a 95% payout of the target amount of PSUs awarded under his 2010 PSU grant.

New CEO Employment Agreement. As described further below, on February 22, 2012, NASDAQ OMX entered into a new employment agreement with Robert Greifeld, our CEO. The terms of the new agreement are similar in most respects to the terms of Mr. Greifeld’s prior agreement. However, the new agreement eliminates a provision from Mr. Greifeld’s prior employment agreement that provided, in limited circumstances, for a modified excise tax reimbursement with a gross-up payment.

Elimination of Share Recycling. In 2012, the committee amended and restated Section 4(a) of the NASDAQ OMX Equity Incentive Plan (Equity Plan) to eliminate a share recycling provision applicable to shares deliverable to participants but withheld by the company, by “net settlement” or otherwise, for the payment of taxes or exercise costs. As a result, shares used to pay taxes or exercise costs are no longer returned to the available share pool for future grants under the Equity Plan.

2013 Significant Executive Compensation Events

In early 2013, the committee and board adopted a policy prohibiting NASDAQ OMX’s directors and Section 16 officers from hedging or pledging NASDAQ OMX’s common stock. These individuals may not engage in securities transactions that allow them either to insulate themselves, or profit, from a decline in NASDAQ OMX’s stock price (with the exception of selling shares outright). Specifically, these individuals may not enter into hedging transactions with respect to NASDAQ OMX’s common stock, including short sales and transactions in derivative securities. Finally, these individuals may not pledge, hypothecate or otherwise encumber their shares of NASDAQ OMX common stock.

Executive Compensation Best Practices

Over the past several years, we have implemented several best practices to align with emerging market practices and stockholder expectations. Our executive compensation program is detailed over the next few pages; however, the following executive compensation practices are key aspects of our program.

 

   

Pay for Performance Philosophy. The primary focus of NASDAQ OMX’s executive compensation program is on pay for performance. As a result, a significant portion of compensation is performance-based and varies based on overall NASDAQ OMX performance.

 

   

Prohibition on Hedging and Pledging. NASDAQ OMX does not allow directors or Section 16 officers to hedge the economic risk of their ownership of NASDAQ OMX common stock, or to pledge, hypothecate or otherwise encumber their shares of NASDAQ OMX common stock.

 

   

Stock Ownership Guidelines. To align our executives with our stockholders, we have in place stock ownership guidelines. All of the named executive officers were in compliance with the guidelines as of December 31, 2012.

 

   

Stock Holding Requirement. Our stock ownership guidelines encourage the CEO, CFO, executive vice presidents and senior vice presidents to hold specified dollar amounts of

 

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stock grants until the stock ownership guidelines are met. Further, the guidelines require that these executives hold the specified dollar amounts of stock through the end of their employment with NASDAQ OMX.

 

   

Elimination of Share Recycling Provision. As discussed above, the committee eliminated from the Equity Plan a share recycling provision. This change ensures that our stockholders are asked to approve the available shares for grant under the Equity Plan more frequently.

 

   

Frozen Pension Plan and SERP. We do not accrue supplemental retirement benefits for our named executive officers. Our tax-qualified defined benefit pension plan (Pension Plan) and non-qualified supplemental executive retirement plan (SERP) have been frozen since 2007. Since then, no new participants may enter the Pension Plan or SERP, and no additional benefits may accrue under these plans.

 

   

Limited Severance Arrangements. We are not obligated to pay severance or other enhanced benefits to any named executive officer upon termination of his or her employment, except as described below in the case of a change in control of the company and in certain circumstances under the employment agreements with Messrs. Greifeld and Jochumsen and the employment offer letter with Mr. Shavel.

 

   

“Double Trigger” Change In Control Agreements. We do not pay severance benefits solely upon the occurrence of a change in control of the company. Rather, severance benefits are payable only upon a “double trigger,” which occurs if a named executive officer incurs a qualifying termination of employment following a change in control of the company.

 

   

Elimination of Tax Gross-Up Payments on Severance Arrangements. We do not provide any tax gross-up payments on severance arrangements, and we do not intend to do so in the future.

 

   

Limited Perquisites. Our executive compensation program includes very few perquisites for our executives. We do not provide tax gross-up payments on perquisites.

 

   

Incentive Recoupment Policy. We maintain an incentive recoupment or “clawback” policy that allows the company to recoup incentive payments to the named executive officers and other executive vice presidents in certain circumstances. In addition, Mr. Greifeld’s employment agreement contains an incentive recoupment provision.

 

   

Limited Employment Agreements. We typically provide an offer letter to executive officers upon hire or promotion noting that the executive is employed “at will.” Of our named executive officers, only Messrs. Greifeld and Jochumsen have employment agreements.

 

   

Engagement of Independent Compensation Consultant. The management compensation committee engages an independent compensation consultant to assist the committee, as requested, in fulfilling various aspects of the committee’s charter. The independent compensation consultant reports directly to the committee, and not to management.

 

   

Extensive Risk Assessment of Compensation Program. We monitor the risks associated with our compensation program on an ongoing basis. In addition, on an annual basis, the audit and management compensation committees of our board of directors are presented with the results of an assessment of our employee compensation program, including the performance goals set under the annual performance-based cash incentive plans, in order to evaluate the risks arising from our compensation policies and practices.

Approval of the Company’s Executive Compensation on an Advisory Basis

At our most recent annual meeting of stockholders, held on May 22, 2012, NASDAQ OMX conducted an advisory vote to approve the company’s executive compensation for the year ended December 31, 2011. Stockholders expressed substantial support for the compensation of our named executive officers, with approximately 97% of the votes present in person or represented by proxy at the meeting

 

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and entitled to vote on the matter cast to approve the advisory vote. The committee took into account the results of this advisory vote when making compensation decisions through the remainder of 2012 and into early 2013. The committee also considered many other factors in evaluating our executive compensation programs, including the company’s pay for performance philosophy and a competitive market analysis of peer companies. While each of these factors influenced the committee’s recommendations regarding our named executive officers’ compensation in 2012, the committee did not make any changes to our executive compensation program, policies and decisions as a result of the advisory vote.

Opportunity for Stockholder Feedback

The committee carefully considers feedback from NASDAQ OMX’s regular engagement with our stockholders on executive compensation, corporate governance and other issues. The committee welcomes input from our stockholders on NASDAQ OMX’s compensation program through the communication process discussed in “Stockholder Communication With Directors.”

COMPENSATION PHILOSOPHY

The management compensation committee recognizes its important responsibilities to our stockholders. The committee has endeavored to create a performance-based compensation program that meets the needs of our global company and its stockholders.

On an annual basis, the committee reviews NASDAQ OMX’s compensation philosophy, programs and practices. The following core principles reflect the committee’s current compensation philosophy.

 

   

The compensation program creates long-term stockholder value by fostering an ownership culture.

 

   

All employees are eligible to participate in NASDAQ OMX’s equity programs.

 

   

Programs support an ownership culture that is focused on integrity and the key drivers of stockholder value.

 

   

Ownership guidelines applicable to the CEO, CFO, executive vice presidents and senior vice presidents are used to encourage executive stock ownership.

 

   

The compensation program supports a high-performance environment via performance-based rewards.

 

   

Variable pay is emphasized over fixed pay through participation in annual and long-term incentive plans.

 

   

A significant portion of compensation is performance-based and varies based on NASDAQ OMX’s performance, which enables participation in the short- and long-term growth and financial success of the company.

 

   

The program reinforces the importance of meeting and/or exceeding performance targets through superior awards for superior performance and through differentiated awards based on performance achieved.

 

   

Goal setting and achievement tracking are highly structured and measurable, with few discretionary adjustments.

 

   

Select employee benefits are performance-based.

 

   

Compensation plans and arrangements do not encourage excessive risk-taking by management.

 

   

The compensation program focuses on key business goals.

 

   

The program encourages decision-making to align the business strategy with goals set to drive industry-leading performance.

 

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Goal setting at NASDAQ OMX is based on a continuous improvement philosophy.

 

   

Management is rewarded for maintaining a premier regulatory, ethics and compliance program.

 

   

The compensation program enables NASDAQ OMX to compete effectively for talent.

 

   

The program is designed to attract, motivate and retain talented, high-performing individuals who are willing to commit to NASDAQ OMX’s success and to build long-term stockholder value.

 

   

The compensation program at NASDAQ OMX is reflective of industry practices and competitive global markets while remaining responsive to local market conditions, offering both competitive programs and compensation opportunities, while balancing the need for talent with the need to maintain reasonable compensation costs.

 

   

NASDAQ OMX communicates its compensation objectives and program clearly.

 

   

Ongoing employee educational programs ensure that the compensation objectives and program are well understood and serve as an effective motivational tool.

 

   

The value of total rewards is emphasized, versus only specific components of pay.

 

   

NASDAQ OMX ensures that its compensation program is straightforward and transparent so it is clear how organizational and individual actions translate into NASDAQ OMX performance and rewards.

 

   

NASDAQ OMX uses structured goal setting and achievement tracking.

DETERMINING EXECUTIVE COMPENSATION

Elements of Our Executive Compensation Program

The primary elements of our executive compensation program are:

 

   

annual base salaries;

 

   

annual performance-based cash incentive awards;

 

   

long-term stock-based compensation (i.e., equity awards);

 

   

retirement savings plans;

 

   

limited severance arrangements;

 

   

health and welfare benefits; and

 

   

limited perquisites.

Role of Our CEO

Mr. Greifeld, our CEO, regularly attends management compensation committee meetings at the invitation of the committee. Mr. Greifeld provides his perspective to the committee regarding executive compensation matters generally and the specific performance of the executives reporting to him, as discussed above.

However, in accordance with the listing rules of The NASDAQ Stock Market, Mr. Greifeld does not vote on executive compensation matters or attend executive sessions of the committee or board, and Mr. Greifeld is not present when his own compensation is being discussed or approved.

Mr. Essa Kazim, NASDAQ OMX’s other director who has been deemed by the board of directors not to be independent, also does not vote on executive compensation matters when such matters are considered by the board.

 

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Role of Compensation Consultants

In early 2013, the management compensation committee engaged Exequity LLP, an outside, independent compensation consultant, to assist the committee, as requested, in fulfilling various aspects of the committee’s charter. Exequity LLP is independent from NASDAQ OMX, has not provided any services to NASDAQ OMX other than to the committee, and receives compensation from NASDAQ OMX, as approved by the committee chair, only for services provided to the committee. Exequity LLP reports directly to the committee, and not to management.

In 2012, the management compensation committee engaged Frederic W. Cook & Co., Inc. (Cook & Co.), an outside, independent compensation consultant, to assist the committee, as requested, in fulfilling various aspects of the committee’s charter. When requested by the committee, Cook & Co. reviewed committee materials and attended committee meetings and executive sessions. During its engagement, Cook & Co. was independent from NASDAQ OMX, did not provide any services to NASDAQ OMX other than to the committee, and received compensation from NASDAQ OMX, as approved by the committee chair, only for services provided to the committee. Cook & Co. reported directly to the committee, and not to management.

NASDAQ OMX’s human resources department engages Meridian Compensation Partners to assist staff in gathering data, reviewing best practices and making recommendations to the committee about our executive compensation program. At the invitation of management, Meridian Compensation Partners occasionally attends committee meetings and reviews committee materials.

NASDAQ OMX’s human resources department also engages Towers Watson to collect, tabulate and analyze the BES, which compiles feedback and other data from employees on a wide range of issues that impact the company’s effectiveness as an organization. As discussed below, the results of this survey impact each named executive officer’s annual performance-based cash incentive award.

Compensation of Our CEO

Consistent with his employment agreement, our CEO’s compensation is determined on an annual basis by the board of directors and the management compensation committee. On a semiannual basis, the board and committee review Mr. Greifeld’s performance in executive session as part of the deliberative process to evaluate CEO performance against corporate goals and determine appropriate CEO compensation. The factors considered by the board and the committee include Mr. Greifeld’s performance against his annual performance objectives, the performance of the company, the quality and development of the management team and the management of the CEO and executive succession plan. The semiannual review process is led by the chairman of the board of directors and the chairman of the management compensation committee.

Compensation of Our Other Named Executive Officers

With the support of NASDAQ OMX’s human resources department, our CEO develops compensation recommendations for each of the executive vice presidents for consideration by the management compensation committee and the board of directors. As part of this process, our CEO meets individually with each executive to discuss his or her performance against pre-established objectives determined during the previous year, as well as performance objectives and development plans for the coming year. This meeting gives each executive an opportunity to present his or her perspective of his or her performance and potential objectives and challenges for the upcoming year. Our CEO presents the results of the meetings with each executive to the management compensation committee for their review and consideration as part of the committee’s deliberation process.

Tally Sheets

When recommending compensation for the CEO and the other named executive officers, the committee reviews a peer group analysis, which is discussed further below, and tally sheets that detail the various elements of compensation, including equity compensation, for each executive. The

 

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committee uses these tally sheets to evaluate the appropriateness of the total compensation package, to compare each executive’s total compensation opportunity with his or her actual payout and to ensure that the compensation appropriately reflects the compensation program’s focus on pay for performance.

General Principles of the Committee When Recommending Executive Compensation

To determine the recommended amounts and mix of compensation elements, the management compensation committee considers the following general principles.

 

   

Pay for Performance. The primary focus of NASDAQ OMX’s executive compensation program is on pay for performance. Therefore, the committee considers the executive’s contribution to our short- and long-term financial performance, as well as his or her performance on other critical aspects of management that are qualitative in nature and may not be easily quantified into dollars (such as building our brand, employee development and regulatory excellence).

 

   

Retention. In addition to rewarding employees through a pay for performance philosophy, the executive compensation program also focuses on retaining employees, particularly those in roles critical to the company’s long-term success. To this end, equity grants generally have performance-based and/or time-based vesting features to ensure that an employee must remain with the company for a period of time to receive value from the grant.

 

   

Competitive Market Analysis. The committee identifies compensation amounts that peers/competitors within the industry are paying to executives with similar positions and levels of experience, skills, education and responsibilities. The committee also considers industry and general economic conditions in assessing market competitiveness. However, while the committee uses this analysis as one of several tools in making executive compensation recommendations, the committee does not set the compensation levels of our executives based solely upon this analysis.

 

   

Internal Equity. Our executives’ compensation generally increases with position and responsibility. The committee believes that compensation amounts should reflect the different levels of responsibilities and performance among our executives and between our CEO, who is responsible for the entire organization, and our other executives, who are responsible for a functional area or a line of business.

 

   

Collateral Implications. The committee designs our total compensation mix to encourage our executives to take appropriate risks aimed at improving the company’s performance and building long-term stockholder value. In addition, to mitigate any incentive to take inappropriate risks, each of our named executive officers is subject to the stock ownership guidelines and incentive recoupment policy discussed further below. The committee also considers the tax and accounting impact of the compensation program, as well as any regulatory compliance issues. Furthermore, the compensation program is subject to a comprehensive risk assessment process that is intended to identify any areas of the compensation structure that may unintentionally encourage inappropriate risk-taking.

The committee considers all of these principles in recommending compensation packages structured to reward the individual executive. Each individual component of compensation is considered independently and is not based on a formula; however, each component is intended to be complementary to the overall compensation package awarded to the executive.

Pay for Performance

The management compensation committee believes the compensation for NASDAQ OMX’s executives should be performance-based. Therefore, there were no guaranteed cash incentive awards for any named executive officer in 2012.

 

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The management compensation committee and board of directors set target compensation levels for the performance-based elements of the compensation program. With respect to cash compensation, the allocation between base salary and annual cash incentives is determined based on the amount of cash compensation that the committee and board wish to place “at risk.” “At risk” means that the executive will not realize any economic benefit unless the applicable objectives, most of which are tied to our overall company or business unit financial performance, are met or exceeded. Consistent with our compensation philosophy, our annual performance-based cash incentive plans are structured to ensure that a significant portion of each executive’s total cash compensation is contingent on performance and continued employment and, therefore, “at risk.”

Competitive Market Analysis

To evaluate the external competitiveness of our executive compensation program, the management compensation committee compares certain elements of the program to similar elements used by peer companies. The committee uses a comprehensive peer group, consisting of 20 companies, for competitive market analysis of the compensation program for our named executive officers. The committee believes that the usage and disclosure of a peer group supports good governance and provides valuable input to compensation design and amount decisions.

In initially selecting the comprehensive peer group in 2011, the committee considered potential peers among both direct industry competitors and companies in related industries with similar talent needs. After identifying potential peers on this basis, the committee used the following seven screening criteria to select appropriate peer companies:

 

   

revenue size;

 

   

market capitalization size;

 

   

financial performance;

 

   

direct exchange competitors;

 

   

financial services companies;

 

   

technology-dependent companies; and

 

   

companies with global complexity.

Each of these factors was initially weighted equally to develop a more refined list of companies for consideration. The committee then further reviewed each remaining company to determine its appropriateness for our final peer group with a particular focus on identifying meaningful talent peers. Certain companies were eliminated because of factors such as a significantly different market capitalization, their limited competitive position for executive talent or their limited global complexity relative to NASDAQ OMX.

In 2012, the committee reviewed the comprehensive peer group against the criteria described above but did not modify the group. The committee believes that the peer group includes an accurate representation of NASDAQ OMX’s industry competitors and size-relevant, talent-focused comparators. In addition, the committee believes that year-over-year consistency in peer group usage is desirable for reviewing trends in market pay movement.

 

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The peer group consists of the following 20 companies.

 

     Automatic Data Processing, Inc.

     CBOE Holdings, Inc.

      Deutsche Börse AG

      DST Systems, Inc.

     Fidelity National Information Services, Inc.

     IntercontinentalExchange, Inc.

      Legg Mason, Inc.

     MasterCard Incorporated

     TD Ameritrade Holding Corporation

      TMX Group Inc.

  

     BGC Partners Inc.

     CME Group Inc.

      Discover Financial Services

      E*TRADE Financial Corporation

      Fiserv, Inc.

     Invesco Ltd.

     London Stock Exchange Group plc

      NYSE Euronext

     The Charles Schwab Corporation

     Visa Inc.

In addition, the committee takes into account that NASDAQ OMX faces competition for talent from private firms, such as high frequency and other small trading firms and private equity funds, for which public compensation data is not available.

Peer group data serves as only one reference point that the committee considers in evaluating our executive compensation program. The committee uses this data to see how various elements of our executive compensation program compare to other companies. However, the committee does not set the compensation of our executives based on this data or target NASDAQ OMX’s executive compensation to a specific percentile of the compensation set by our competitors. Instead, the comparison is conducted solely to determine if the compensation is competitive to the market, as represented by the peer group. Therefore, each executive is evaluated individually based on skills, knowledge, performance, development potential and, in the committee’s business judgment, the value he or she brings to the organization and NASDAQ OMX’s retention risk.

ANALYSIS OF 2012 EXECUTIVE COMPENSATION ELEMENTS

Annual Base Salaries

The management compensation committee normally reviews base salaries on an annual basis before the beginning of each year so that any changes will be effective on January 1. Occasionally, the committee may recommend adjustments to base salaries during the year in response to significant changes in an executive’s responsibilities or events that would impact the long-term retention of a key executive. The committee and board establish salaries at levels commensurate with each executive’s title, position and experience, recognizing that each executive is managing a component of a complex global company.

Under the terms of Mr. Greifeld’s employment agreement, his base salary for 2012 was $1 million, which has remained unchanged since 2006. The management compensation committee and board decided that leaving his salary unchanged for 2012 was consistent with the terms of his employment agreement and the provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended (Code), that limit to $1 million the amount of non-performance-based compensation paid to the CEO that the company may deduct for federal income tax purposes.

Following its compensation review at the end of 2011, the committee and board did not change the base salaries for any of the other named executive officers for 2012. The committee and board believed that each base salary is within a competitive range of the market median for base salary for a comparable position.

 

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The following table shows each named executive officer’s base salary at December 31, 2012 and 2011.

 

 Named Executive  Officer

  Base Salary at
    December 31, 2012    
    Base Salary at
    December 31, 2011    
 
                 

 Robert Greifeld

  $ 1,000,000      $ 1,000,000   

 Lee Shavel

  $ 500,000      $ 500,000   

 Anna M. Ewing

  $ 500,000      $ 500,000   

 Hans-Ole Jochumsen(1)

  $ 496,608      $ 518,112   

 Eric W. Noll

  $ 500,000      $ 500,000   

 

(1) Mr. Jochumsen’s base salary of 3,360,000 Swedish krona did not change between December 31, 2011 and December 31, 2012. The difference in the above table is due to the difference in the average foreign exchange rate, which was $0.1478 per krona for 2012 and $0.1542 per krona for 2011. These exchange rates are used throughout the “Compensation Discussion and Analysis” and “Executive Compensation” sections to convert Swedish krona to U.S. dollars.

Annual Performance-Based Cash Incentive Awards

Annual performance-based cash incentives are an integral part of our executive compensation program. Mr. Greifeld and all of NASDAQ OMX’s executive vice presidents receive such awards through our stockholder-approved Executive Corporate Incentive Plan (ECIP).

Plan-Based Target Award Opportunities

At the beginning of each year, the management compensation committee and board of directors establish the target annual cash incentive award opportunity for our named executive officers. As provided under his employment agreement, Mr. Greifeld’s target annual cash incentive award opportunity for 2012 was 210% of base salary. For 2012, the committee and board set the target annual cash incentive award opportunity for each of the other named executive officers at approximately 150% of base salary, based on an assessment of each officer’s position and responsibilities, the competitive market analysis and the company’s retention objectives.

Performance Goals

The annual cash incentive award payments for our executives are based on the achievement of pre-established performance goals. The CEO selects and recommends goals for each executive vice president based on their areas of responsibility and on input from each executive. The management compensation committee and the board of directors review and consider our CEO’s recommendations and approve the goals for the coming year after identifying the objectives most critical to our future growth and most likely to hold executives accountable for the operations for which they are responsible.

The annual cash incentive awards are tied to results in the following areas:

 

   

two corporate objectives, including:

 

   

operating income (run rate), which measures business efficiency and profitability; and

 

   

net revenue, which measures the ability to drive revenue growth;

 

   

business unit strategic objectives, which are defined business unit-specific goals that contribute to the company’s short and long-term performance; and

 

   

the BES, which is survey-compiled feedback from employees on a wide range of issues that impact the company’s effectiveness as an organization.

 

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Operating income (run rate) and net revenue are the company’s primary measures of short-term business success and the key drivers of long-term stockholder value. Operating income (run rate) and net revenue targets are set at the beginning of each year, as part of the company’s annual budgeting process.

Business unit strategic objectives also are established at the beginning of the year, and consist of financial and non-financial strategic objectives specific to the business unit. The committee and board set the business unit strategic objectives to reflect the key responsibilities of each executive and incent focus on particular objectives in 2012.

The business unit strategic objectives are described below.

 

   

Mr. Shavel’s strategic objectives related to: Corporate Strategy initiatives, including transactions; and Corporate Finance goals relating to expense management, stock price performance, risk management, NASDAQ OMX’s Growth Initiative Fund Team and return on investment capital analysis.

 

   

Ms. Ewing’s strategic objectives related to: Global Technology Services financial results, service delivery and compliance; and Market Technology financial results and strategic initiatives goals.

 

   

Mr. Jochumsen’s strategic objectives related to: Transaction Services Nordic financial results; and Global Data Products financial results.

 

   

Mr. Noll’s strategic objectives related to: Transaction Services U.S. financial results and strategic goals; and a NASDAQ OMX NLX Limited strategic goal.

The BES is conducted at the end of each year by Towers Watson, a national human resources consulting firm. The survey compiles feedback from employees on a wide range of issues that impact the company’s effectiveness as an organization. Management uses the BES on an annual basis to assess past decisions and provide an opportunity for employees to voice their views on how management is doing and how improvements to the organization can be made. This goal is measured on a sliding scale of 1 to 100 based on survey goals. A score of less than 50 resulted in 0% payout, a score of 67 to 72 resulted in a 100% payout and a score of 90 or higher resulted in a 200% payout.

The management compensation committee and board of directors set the targets for each of the goals at levels where the maximum payout would be difficult to achieve and beyond budget assumptions. The following table shows each named executive officer’s performance objectives for 2012 and the relative weighting of these objectives.

 

Named Executive
Officer

  Target
Incentive Compensation
Opportunity
    Corporate
Objectives
    Business Unit
Strategic
Objectives
        BES      
                                         
           Operating
Income
    (Run Rate)    
   
Net
    Revenue    
             
                                         
                                         

Robert Greifeld

  $ 2,100,000        55%            35%            —               10%       

Lee Shavel

  $ 750,000        40%            15%            35%            10%       

Anna M. Ewing

  $ 750,000        15%            15%            60%            10%       

Hans-Ole Jochumsen

  $ 739,000        10%            10%            70%            10%       

Eric W. Noll

  $ 750,000        10%            10%            70%            10%       

 

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Potential Payouts

Payouts are determined by the management compensation committee and board of directors after the end of the year and are based on the sum of (i) actual performance under each corporate objective, (ii) where applicable, actual performance against an executive’s business unit strategic objectives and (iii) the results of the BES. Each goal applicable to the named executive officers for 2012 had a minimum, target and maximum performance level.

Scoring of each goal is based on actual goal achievement compared to the target. In 2012, as in past years, payouts on most goals could vary between 0% and 200% of the target. However, funding of non-financial business unit strategic objectives was limited to 160% of target in 2012.

Corporate Objectives Performance vs. Goals

With respect to the corporate objectives, the minimum, target and maximum performance levels, NASDAQ OMX’s actual performance for 2012 and the resultant payout percentage of the target incentive award amounts were as follows:

 

  Corporate  Objective

  Minimum     Target   Maximum
(for 200%
payout)
    NASDAQ
OMX’s
Results for 2012
as Measured for
Compensation
Purposes
    Payout
Percentage of
Target
Incentive
Award
Amount
                                 

  Operating Income (Run Rate)(1)

    $696.0 million      $730.2 million -

$750.2 million

    $795.0 million        $757.0 million      115%

  Net Revenue(1)

  $     1,630.2 million      $1,682.7 million -

$1,712.7 million

  $     1,770.2 million      $     1,651.6 million      41%

 

 

(1) For these purposes, operating income (run rate) and net revenue exclude the effects of foreign exchange and extraordinary transactions. Operating income (run rate) also excludes certain non-recurring expense items, such as charges relating to restructuring, special legal expenses, mergers and strategic initiatives, sublease reserves and other expenses, as well as a gain relating to a value-added tax refund. Net revenue also excludes gains from open positions relating to the operations of The NASDAQ Stock Market. As a result, these calculations differ from the GAAP calculations of operating income and revenues less transaction rebates, brokerage, clearance and exchange fees reported in our Form 10-K.

For further information about NASDAQ OMX’s financial results in 2012, see “Compensation Discussion and Analysis – 2012 Business Highlights.”

Business Unit Strategic Objectives Performance vs. Goals

The committee and board assessed each officer’s achievement of the business unit strategic objectives in 2012, as described below.

Mr. Shavel

Mr. Shavel’s business unit strategic objectives were scored as follows:

 

   Goal

   Goal
    Weighting    
   Score as a
Percent of
        Target        
           

  Corporate Strategy initiatives, including transactions

   10%    160%

  Corporate Finance goals relating to expense management, stock price performance, risk management, NASDAQ OMX’s Growth Initiative Fund Team and return on investment capital analysis

   25%    136%

 

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Ms. Ewing

Ms. Ewing’s business unit strategic objectives were scored as follows:

 

   Goal

   Goal
    Weighting    
   Score as a
Percent of
        Target        
           

  Global Technology Services financial results, service delivery and compliance

   45%    132%

  Market Technology financial results and strategic initiatives goals

   15%    111%

Mr. Jochumsen

Mr. Jochumsen’s business unit strategic objectives were scored as follows:

 

   Goal

   Goal
    Weighting    
   Score as a
Percent of
        Target        
           

  Transaction Services Nordic financial results

   40%    74%

  Global Data Products financial results

   30%    200%

Mr. Noll

Mr. Noll’s business unit strategic objectives were scored as follows:

 

   Goal

   Goal
    Weighting    
   Score as a
Percent of
        Target        
           

  Transaction Services U.S. financial results and strategic goals

   60%    65%

  NASDAQ OMX NLX Limited strategic goal

   10%    200%

BES Performance vs. Goals

With respect to the BES goal, the named executive officers received a range of payouts from 125% to 175% of the target incentive award amounts allocated to this goal.

Award Payouts

In early 2013, the committee and board received a final report on the level of achievement on each goal, and on the basis of this report, it approved payouts for 2012.

Under the ECIP, the management compensation committee may, in its sole discretion, reduce some or all of the amount that would otherwise be payable with respect to an award. For 2012, the committee and board reduced Mr. Greifeld’s ECIP payout by $542,100 and Ms. Ewing’s ECIP payout by $263,625. The committee and board explicitly considered the Facebook IPO in connection with their review and determination of these reduced payouts.

 

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The actual annual cash incentive award payouts to the named executive officers for 2012 and 2011 are set forth in the following table.

 

  Named Executive Officer

 

2012 ECIP
      Award Payout      

    2011 ECIP
    Award Payout
    2012 Payout vs.
2011 Payout
 
                         

  Robert Greifeld

  $       1,350,000      $       3,591,000        (62)%               

  Lee Shavel

  $ 878,625      $ 1,290,000        (32)%               

  Anna M. Ewing

  $ 574,125      $ 1,210,500        (53)%               

  Hans-Ole Jochumsen

  $ 889,387      $ 858,431        4%               

  Eric W. Noll

  $ 688,500      $ 1,300,000        (47)%               

Long-Term Stock-Based Compensation

Long-term incentive compensation consists entirely of equity awards. The management compensation committee and board of directors believe that equity awards align the interests of our employees with those of our stockholders by rewarding outstanding performance and providing incentives to increase the value of our stockholders’ investments.

New Performance-Based Long-Term Incentive Program. On March 16, 2012, the committee and board approved a new performance-based long-term incentive program for our CEO, executive vice presidents and senior vice presidents that focuses on TSR. Consistent with our pay for performance philosophy, this program represents 100% of our CEO and executive vice presidents’ long-term stock-based compensation and 50% of our senior vice presidents’ long-term stock-based compensation. In any event, all of the long-term stock-based compensation awarded to these individuals is performance-based.

The committee and board believe that the new program better aligns the equity structure for the CEO with the executive and senior vice presidents, optimizes the retention value of equity awards and better utilizes the accounting expense associated with equity awards.

Under the program, each individual received a grant of PSUs subject to a three-year cumulative performance period beginning on January 1, 2012 and ending on December 31, 2014. Performance is determined by comparing NASDAQ OMX’s TSR to two groups of companies, each weighted 50%. One group consists of all S&P 500 companies, and the other group consists of the following 13 exchange companies.

 

      ASX Ltd
      Bolsa Mexicana de Valores
      CBOE Holdings, Inc.
      Deutsche Börse AG
      Interactive Brokers Group
      London Stock Exchange Group plc
      TMX Group Inc.
         BGC Partners Inc.
      Bolsas Y Mercados Espanoles
      CME Group Inc.
      ICAP plc
      IntercontinentalExchange, Inc.
      NYSE Euronext

NASDAQ OMX’s relative performance ranking against each of these groups will determine the final number of shares delivered to each individual under the program. The maximum payout will be 200% of the number of PSUs granted if NASDAQ OMX ranks at the 85th percentile or above of both groups. However, if NASDAQ OMX’s TSR is negative for the three-year performance period, regardless of TSR ranking, the payout will not exceed 100% of the number of PSUs granted.

 

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Below is a table showing the amount of shares a grantee may receive based upon different levels of achievement against each of the groups.

 

  Percentile Rank of NASDAQ OMX’s Three-Year TSR Versus
  the Relevant Group

  Resulting
Shares
Earned (% of
Half of Target)
 
         

  ³ 85th Percentile

    200%         

  67.5th Percentile

    150%         

  50th Percentile

    100%         

  25th Percentile

    50%         

  10th Percentile

    30%         

  0 Percentile

    0%         

For levels of achievement between points, the resulting shares earned will be calculated based on straight-line interpolation.

The target amount of PSUs awarded to each of the named executive officers under this program is set forth in the table below. The awards were made on May 7, 2012, which was the date of NASDAQ OMX’s annual all-employee equity grant.

 

  Named Executive Officer

    Target Amount  
of PSUs
Awarded
 
         

  Robert Greifeld

    247,440         

  Lee Shavel

    59,727         

  Anna M. Ewing

    59,727         

  Hans-Ole Jochumsen

    51,195         

  Eric W. Noll

    59,727         

The management compensation committee and board of directors preliminarily determined the target amount of Mr. Greifeld’s award in connection with the negotiation of his new employment agreement in early 2012. The committee and board referenced peer group data to establish a market-competitive award level.

Mr. Greifeld recommended the specific awards for each of the other named executive officers, which varied among executives depending upon responsibilities and retention considerations. The committee and board evaluated these recommendations and determined that the amount of each award reflected the individual’s contributions, was aligned with competitive market levels and was appropriate for retention purposes.

Settlement of March 2010 PSU Grant to CEO. In March 2013, the management compensation committee and board determined the number of shares that Mr. Greifeld was entitled to receive upon vesting in connection with his March 2010 PSU grant, which had a target amount of 80,000 shares. These PSUs had a performance period from January 1, 2010 through December 31, 2012 and a performance target of non-GAAP EPS growth compounded annually over the three-year performance period. Non-GAAP EPS growth was determined based upon the amount by which our adjusted non-GAAP EPS for the fiscal year ended December 31, 2012 exceeded our non-GAAP EPS for the fiscal year ended December 31, 2009, which had been determined to be $1.81.

 

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The following table sets forth the number of shares that Mr. Greifeld was entitled to receive at settlement of the March 2010 PSU grant at varying non-GAAP EPS growth performance levels.

 

     Minimum
Performance
    Target
Performance
    Maximum
Performance
 
                         

Non-GAAP EPS Growth (compounded annual increase over the Performance Period)

    6% growth            12% growth            18% growth       

Adjusted Non-GAAP EPS Level

    $2.16            $2.54            $2.97       

Number of Shares Deliverable

    40,000            80,000            120,000       

The committee and board determined that adjusted non-GAAP EPS growth fell between the minimum and target performance levels, and therefore, Mr. Greifeld was entitled to receive a pro-rated amount of 75,789 shares, which was 95% of target.

Non-GAAP EPS was calculated by adjusting our reported GAAP EPS for significant non-recurring charges or gains (and their related income tax effects) that were not related to our core business. The non-GAAP EPS for the fiscal year ended December 31, 2012 also was adjusted for certain stock or asset acquisitions that occurred during the performance period. The committee and board relied on the company’s audited financial statements, non-GAAP reconciliations and related information for purposes of determining the amount of non-GAAP EPS growth.

General Equity Award Grant Practices

The reference price for calculating the value of equity awards is the closing market price of NASDAQ OMX’s common stock on the date of grant. The management compensation committee and board of directors consider whether to make equity awards at a regularly scheduled meeting. Regular board and committee meetings are scheduled well in advance without regard to material news announcements by NASDAQ OMX. Existing equity ownership levels are not a factor in award determinations as we do not want to discourage the named executive officers from holding significant amounts of NASDAQ OMX’s common stock.

Throughout the performance period, the management compensation committee receives updates on the executives’ progress in achieving the applicable performance measures and monitors the compensation expense that the company is incurring for outstanding equity awards. The committee believes that the current and expected expense amounts are reasonable and justified in light of the committee’s goals of aligning the long-term interests of officers and employees with those of stockholders and retaining the current management team.

Rule 10b5-1 Plans

NASDAQ OMX permits all employees, including the named executive officers, to enter into plans established under Rule 10b5-1 of the Exchange Act to enable them to trade in our stock, including stock received through equity grants, during periods in which they might not otherwise be able to trade because material nonpublic information about NASDAQ OMX has not been publicly released. These plans include specific instructions to a broker to trade on behalf of the employee if our stock price reaches a specified level or if certain other events occur, and therefore, the employee no longer controls the decision to trade in our stock. As of December 31, 2012, two of our named executive officers had Rule 10b5-1 plans in place.

Stock Ownership Guidelines

We have long recognized the importance of stock ownership as an important means of closely aligning the interests of our executives with the interests of our stockholders. In addition to using equity awards

 

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as a primary long-term incentive compensation tool, we have in place stock ownership guidelines for our CEO, CFO, executive vice presidents and senior vice presidents. Under its charter, the management compensation committee is responsible for reviewing annually the stock ownership guidelines and verifying compliance thereunder.

Under the guidelines, our CEO, CFO, executive vice presidents and senior vice presidents are expected to own specified dollar amounts of NASDAQ OMX common stock based on a multiple of their base salary. The multiple is determined by officer level: our CEO must hold shares valued at a 6X multiple of base salary, our CFO must hold a 4X multiple, other executive vice presidents must hold a 3X multiple and senior vice presidents must hold a 1X multiple. Individual holdings, shares jointly owned with immediate family members or held in trust, shares of restricted stock (including vested and unvested), vested shares underlying PSUs and shares purchased or held through NASDAQ OMX’s plans, such as the NASDAQ OMX Employee Stock Purchase Plan (ESPP), count toward satisfying the guidelines. New executives and executives who incur a material change in their responsibilities are expected to meet the applicable level of ownership within four years of their start date or the date of the change in responsibilities. Senior vice presidents subject to these guidelines when the guidelines were amended in 2009 to cover this level of officer are expected to meet the applicable level of ownership by October 21, 2013. All of the named executive officers were in compliance with the guidelines as of December 31, 2012.

Stock Holding Requirement

We encourage our CEO, CFO, executive vice presidents and senior vice presidents to retain equity grants until the applicable stock ownership level is reached. Under the guidelines, these officers must hold the specified dollar amounts of stock through the end of their employment with NASDAQ OMX. We feel that our stock ownership guidelines provide proper alignment of the interests of our management and our stockholders, and therefore, we do not have additional stock holding requirements beyond the stock ownership guidelines.

Prohibition on Hedging and Pledging

NASDAQ OMX does not allow directors or Section 16 officers to engage in securities transactions that allow them either to insulate themselves, or profit, from a decline in NASDAQ OMX’s stock price (with the exception of selling shares outright). Specifically, these individuals may not enter into hedging transactions with respect to NASDAQ OMX’s common stock, including short sales and transactions in derivative securities. Finally, these individuals may not pledge, hypothecate or otherwise encumber their shares of NASDAQ OMX common stock.

Retirement Savings Plans

NASDAQ OMX’s retirement savings plans are part of our overall compensation and benefits program. The management compensation committee considers appropriate retirement savings options to be a critical component of the package to retain employees at all levels. For more information about NASDAQ OMX’s retirement savings plans, see “Executive Compensation – Retirement Benefits.”

Limited Severance Arrangements

Except as described below in certain circumstances under the employment agreements with Messrs. Greifeld and Jochumsen, under the employment offer letter with Mr. Shavel and in the case of a change in control of the company, we are not obligated to pay general severance or other enhanced benefits to any named executive officer upon termination of his or her employment. However, the management compensation committee has the discretion to pay severance plan benefits. Severance plan decisions do not influence the management compensation committee’s other recommendations regarding compensation as these other decisions are focused on motivating our executives to remain with NASDAQ OMX and contribute to our future success.

 

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Mr. Greifeld’s employment agreement contains provisions for the payment of severance benefits if the company terminates his employment without “cause” or Mr. Greifeld terminates his employment “for good reason.” There are separate provisions for severance benefits if such termination occurs (i) without regard to a change in control or (ii) within two years of a change in control. “Good reason” includes a reduction in Mr. Greifeld’s position, duties or authority, the company’s failure to secure agreement of any successor entity that he will continue in his position, relocation of Mr. Greifeld’s principal work location beyond a 50 mile radius of the current location or any other material breach of the employment agreement.

Mr. Jochumsens’s employment agreement contains a provision for the payment of severance benefits if his employment is terminated by the company on grounds other than Mr. Jochumsen’s substantial breach of the agreement. Under this provision, the company must give Mr. Jochumsen twelve months’ notice of termination, and Mr. Jochumsen will be entitled to severance pay equal to six months’ salary payable in a lump sum on his last day of employment.

Mr. Shavel’s employment offer letter contains a provision for the payment of severance benefits in the event of a reduction-in-force or other involuntary termination of employment (other than a termination for “cause” as defined in the Equity Plan or a change in control of the company) during the first three years of employment through May 2014. Under this provision, Mr. Shavel will be eligible for 15 months of severance pay at his then current base salary and any additional severance benefits (excluding severance pay) provided under the company’s then current in-practice severance policy.

When the company completed its transition to a public company and adopted an acquisition strategy, the management compensation committee and the board of directors approved change in control agreements in 2005 for each executive not previously covered by such an agreement (letter agreements). In structuring these letter agreements, the management compensation committee evaluated comparable change in control severance arrangements offered by other peer companies in the financial services industry and considered the size of the severance package the committee might approve in other contexts. These letter agreements are intended to provide management stability and to reduce any reluctance on the part of executives to pursue potential transactions that may enhance the value of our stockholders’ investments. The management compensation committee reviews these letter agreements on a regular basis to ensure that they remain appropriate for NASDAQ OMX’s executive compensation program. Of the named executive officers, Messrs. Shavel and Noll and Ms. Ewing are currently party to these letter agreements.

The management compensation committee believes that the terms for triggering payment under each of the agreements described above are reasonable and that some of the terms are more restrictive in several important ways than change in control agreements at many other companies. For example, under the letter agreements, a severance payment is available only if termination of employment (“other than for cause” if by NASDAQ OMX or for “good reason” if by the executive) occurs within one year following a “change in control” of the company or in certain situations within 180 days prior to a change in control. For Mr. Greifeld, a severance payment as a result of a change in control is available only if termination of employment occurs within two years following the change in control. The letter agreements, Mr. Greifeld’s employment agreement and Mr. Jochumsen’s employment agreement use what is known as a “double trigger,” meaning that a severance payment as a result of a change in control is activated only upon the occurrence of both a change in control of the company and a loss of employment. Benefits under these agreements will be provided only if NASDAQ OMX is the target organization. In addition, a change in control under these agreements is limited to situations where the acquirer obtains a majority of NASDAQ OMX’s voting securities or the current members of our board of directors (or their approved successors) cease to constitute a majority of the board. Finally, the agreements do not modify or otherwise change the treatment of the executive’s outstanding equity awards upon a “double trigger” termination in connection with a change in control without cause or for good reason.

 

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For further information on NASDAQ OMX’s limited severance arrangements, see “Executive Compensation – Potential Payments upon Termination or Change in Control.”

Health and Welfare Benefits

We provide a voluntary comprehensive health and welfare benefits program to our executives, including the named executive officers that mirrors the program offered to our other employees. Named executive officers also are allowed to participate in our ESPP on the same terms as other employees.

Limited Perquisites

Because our executive compensation program emphasizes pay for performance, it includes very few perquisites for our executives. In view of the demands of his position, we provide Mr. Greifeld with a company car and driver for use when conducting company business. Mr. Greifeld reports his use of the company car and driver for personal reasons in the Summary Compensation Table included below under “Executive Compensation.” In 2012, this amount was $27,742, which was the incremental cost of Mr. Greifeld’s personal use of the car (including commutation) based on an allocation of the cost of the driver, tolls, fuel and maintenance.

Officers at the level of senior vice president and above are eligible to receive basic financial planning services and executive health exams. Participation in each of these programs is voluntary. We also provide extended sickness insurance to certain non-U.S. executives. We do not provide tax gross-up payments on perquisites.

GLOBAL ETHICS AND COMPLIANCE PROGRAM

The NASDAQ OMX board annually reviews the company’s global ethics and compliance program, including the code of ethics and supporting policies. NASDAQ OMX will take action to remedy any fraudulent or intentional misconduct by an employee. Discipline would vary depending on the facts and circumstances, and may include termination of employment or initiation of an action for breach of fiduciary duty under the company’s code of ethics. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities.

INCENTIVE RECOUPMENT POLICY

The board and committee have adopted an incentive recoupment or “clawback” policy that is applicable to the named executive officers and other executive vice presidents. The policy provides that the company may recoup any cash or equity incentive payments predicated upon the achievement of financial results or operating metrics that were subsequently determined to be incorrect on account of material errors, material omissions, fraud or misconduct.

TAX IMPLICATIONS OF EXECUTIVE COMPENSATION

The management compensation committee considers the income tax consequences of individual compensation elements when it is analyzing the overall level of compensation and the mix of compensation among individual elements.

Section 162(m) of the Code provides a limit of $1 million on the remuneration that may be deducted by a public company in any year in respect of the CEO and the three other most highly compensated executive officers (other than the principal financial officer), with an exception to this limitation for certain “performance-based compensation.” NASDAQ OMX attempts to structure our compensation arrangements so that amounts paid are tax deductible to the extent feasible and consistent with our overall compensation objectives. Depending upon the relevant circumstances at the time, the committee may determine to award compensation that may not be deductible. In making this determination, the committee balances the purposes and needs of our executive compensation program against potential tax cost.

 

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Elimination of Tax Gross-Up Provision

Mr. Greifeld’s 2012 employment agreement eliminated a prior provision that entitled Mr. Greifeld to a limited gross-up payment in the event of termination after a change in control to reimburse him for any excise tax imposed under Section 4999 of the Code, as well as any additional income and employment taxes resulting from such reimbursement.

Mr. Greifeld’s 2012 employment agreement includes a “best net provision” for any amounts payable to Mr. Greifeld upon a “double trigger” termination in connection with a change in control without cause or for good reason. Under this provision, if any amounts payable to Mr. Greifeld would be characterized as excess parachute payments and due to that characterization, Mr. Greifeld would be subject to an excise tax under Section 4999 of the Code, the amounts will be reduced. The reduction will be to an amount so that none of the amounts payable constitute excess parachute payments if this would result, after taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, in Mr. Greifeld’s receipt on an after-tax basis of the greatest amount of termination and other benefits.

Neither Mr. Jochumsen’s employment agreement nor the change in control letter agreements with our other named executive officers provide for tax gross-ups or reimbursements of any excise or other taxes that may be payable by the executive under Section 4999 of the Code in connection with the change in control of the company. The change in control letter agreements provide that, if any payments or benefits to an executive would be subject to an excise tax under Section 4999, payments and/or benefits to the executive will be reduced to an amount that does not trigger an excise tax.

2012 EMPLOYMENT AGREEMENT WITH CEO

On February 22, 2012, NASDAQ OMX entered into a new employment agreement with Robert Greifeld, NASDAQ OMX’s CEO. The new employment agreement replaces NASDAQ OMX’s prior employment agreement with Mr. Greifeld, which was entered into effective January 1, 2007.

The management compensation committee and board of directors considered the following factors important in negotiating the new employment agreement:

 

   

during Mr. Greifeld’s tenure, NASDAQ OMX has transformed from a single U.S.-based cash equities exchange to a global company that operates multiple exchanges, clearing organizations and central securities depositories across multiple asset classes. In addition, our technology powers more than 70 exchanges, clearing organizations and central securities depositories in over 50 countries;

 

   

continuity of leadership at the CEO level is important to continue building stockholder value, and it is therefore important to retain Mr. Greifeld for a fixed period of time;

 

   

consistent with the prior employment agreement, the new employment agreement emphasizes long-term pay for performance incentives; and

 

   

to the extent possible, the new employment agreement reflects best practices in executive compensation and corporate governance.

The management compensation committee and Mr. Greifeld agreed that the terms of the prior employment agreement were sufficient in most respects (e.g., base salary, benefits and short-term incentives). Therefore, the terms of the new employment agreement with Mr. Greifeld are similar in most respects to the terms of his prior agreement.

Significantly, the new employment agreement has a term of five years, with no automatic renewals thereafter. The agreement guarantees the same base salary and target annual incentive compensation award as under the prior agreement. The agreement does not guarantee the grant of any equity awards, although Mr. Greifeld may be granted equity awards under the Equity Plan, based on the management compensation committee’s evaluation of the performance of NASDAQ OMX and

 

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Mr. Greifeld, peer group market data and internal equity, and consistent with past practices with respect to the combined aggregate value of prior grants. Finally, the agreement sets forth the payments that Mr. Greifeld will receive under various termination scenarios and eliminates a provision from Mr. Greifeld’s prior employment agreement that provided for a modified excise tax reimbursement with a gross-up payment in limited circumstances.

In negotiating the new agreement, the committee utilized Cook & Co., its former outside, independent compensation consultant, to advise on executive compensation and corporate governance matters. When requested by the committee, Cook & Co. provided independent advice, analyzed current market conditions and helped design the compensation package to be both competitive and effective at driving long-term performance and increasing stockholder value.

For a further description of the key terms of Mr. Greifeld’s employment agreement, see “Executive Compensation – Employment Agreements” and “Executive Compensation – Potential Payments upon Termination or Change in Control.”

 

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MANAGEMENT COMPENSATION COMMITTEE REPORT

The management compensation committee reviewed and discussed the Compensation Discussion and Analysis with our management. After such discussions, the committee recommended to NASDAQ OMX’s board of directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into NASDAQ OMX’s Form 10-K.

The Management Compensation Committee

Michael R. Splinter, Chair

Steven D. Black

Glenn H. Hutchins

Lars R. Wedenborn

MANAGEMENT COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of the management compensation committee is an executive officer, employee or former officer of NASDAQ OMX. With the exception of Mr. Greifeld, none of NASDAQ OMX’s executive officers serves as a current member of the NASDAQ OMX board of directors. None of NASDAQ OMX’s executive officers serves as a director or a member of the compensation committee of any entity that has one or more executive officers serving on the NASDAQ OMX board or management compensation committee. One of the members of NASDAQ OMX’s management compensation committee, Glenn H. Hutchins, is a Co-Founder of Silver Lake. For information on transactions with Silver Lake, see “Certain Relationships and Related Transactions.”

 

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EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The table below summarizes the total compensation of each of the named executive officers for services rendered during the fiscal years ended December 31, 2012, 2011 and 2010.

2012 Summary Compensation Table

 

Name and

Principal

Position

    Year       Salary
($)(1)
    Bonus
   ($)(2)  
    Stock
Awards
($)(3)
    Option
Awards
    ($)(4)    
    Non-Equity
Incentive
Plan
Compensation
         ($)(5)         
    Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
         ($)(6)         
    All Other
Compensation
($)(7)
    Total
($)
 
                                                                         

Robert Greifeld

    2012      $ 1,000,000        —        $ 5,567,400             $ 1,350,000      $   916,164      $ 77,742      $ 8,911,306   

Chief Executive
Officer

    2011      $ 1,000,000        —        $ 2,528,000             $ 3,591,000      $ 355,729      $ 93,067      $ 7,567,796   
    2010      $ 1,000,000        —        $ 1,580,000             $ 2,627,000      $ 476,207      $   130,427      $ 5,813,634   
                   
                                                                         

Lee Shavel(8)

    2012      $ 500,000        —        $ 1,343,857             $ 878,625             $ 22,450      $ 2,744,932   

Chief Financial
Officer and
Executive Vice President, Corporate Strategy

    2011      $ 300,000        —        $ 6,120,027      $ 280,003      $ 1,290,000             $ 13,839      $ 8,003,869   
                                                                                                  
                   
                                                                         

Anna M. Ewing

    2012      $ 500,000        —        $ 1,343,857             $ 574,125      $ 198,356      $ 57,925      $ 2,674,263   

Executive Vice

President, Global

Technology Solutions

    2011      $ 500,000        —        $ 1,120,005      $ 280,023      $ 1,210,500      $ 71,038      $ 54,725      $ 3,236,291   
    2010      $ 500,000        —        $ 880,001      $ 219,999      $ 1,029,750      $ 96,494      $ 47,115      $ 2,773,359   
                   
                                                                         

Hans-Ole Jochumsen

    2012      $ 496,608        —        $ 1,151,887             $ 889,387             $ 116,638      $ 2,654,520   

Executive Vice
President, Transaction Services Nordic

                                                                       
                   
                                                                         

Eric W. Noll

    2012      $ 500,000        —        $ 1,343,857             $ 688,500             $ 23,000      $ 2,555,357   

Executive Vice

President, Transaction

Services U.S. and U.K.

    2011      $ 500,000        —        $ 960,008      $ 240,018      $ 1,300,000             $ 19,800      $ 3,019,826   
    2010      $ 500,000      $ 178,625      $ 720,006      $ 180,002      $ 771,375             $ 22,125      $ 2,372,133   
                                                                       

 

(1) For Mr. Jochumsen, certain amounts reported in “Compensation Discussion and Analysis” and “Executive Compensation” are paid in Swedish krona. These amounts are converted to U.S. dollars from krona at an exchange rate of $0.1478 per krona, which was the average exchange rate for 2012.

 

(2) The amount reported in this column reflects a cash award made in 2010 to the named executive officer that is in addition to the amount earned under the ECIP or other performance-based incentive compensation programs, which is reported in the column entitled “Non-Equity Incentive Plan Compensation.”

 

(3)

(a)

The amounts reported in this column reflect the grant date fair value of the stock awards, including PSUs and restricted stock, computed in accordance with FASB ASC Topic 718. The assumptions used in the calculation of these amounts are included in footnote 12 to the company’s audited financial statements for the fiscal year ended December 31, 2012 included in our Form 10-K. The grant date fair value of the 2012 PSU awards was calculated using a price of $22.50 derived from a Monte Carlo simulation. The table below presents separately the grant date fair value of the awards of PSUs, assuming that the target performance level will be achieved, and restricted stock for each year.

 

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Name

and Principal Position

     Year        PSUs
($)
    Restricted Stock
($)
    Total Stock Awards
($)
 
                                 

Robert Greifeld

    2012      $ 5,567,400             $         5,567,400   

Chief Executive Officer

    2011      $ 2,528,000             $ 2,528,000   
    2010      $   1,580,000             $ 1,580,000   
         
                                 

Lee Shavel

    2012      $ 1,343,857             $ 1,343,857   

Chief Financial Officer and Executive Vice President, Corporate Strategy

    2011      $ 1,120,006      $     5,000,021      $ 6,120,027   
                               
         
                                 

Anna M. Ewing

    2012      $ 1,343,857             $ 1,343,857   

Executive Vice President, Global

Technology Solutions

    2011      $ 1,120,005             $ 1,120,005   
    2010      $ 880,001             $ 880,001   
         
                                 

Hans-Ole Jochumsen

    2012      $ 1,151,887             $ 1,151,887   

Executive Vice President, Transaction Services Nordic

                               
                               
         
                                 

Eric W. Noll

    2012      $ 1,343,857             $ 1,343,857   

Executive Vice President, Transaction Services U.S. and U.K.

    2011      $ 960,008             $ 960,008   
    2010      $ 720,006             $ 720,006   

 

  (b) Since the PSUs are subject to performance conditions, the grant date fair value reported for PSUs reflects the value at the grant date using the Monte Carlo simulation model based upon the probable outcome of the performance conditions, excluding the effect of estimated forfeitures. The table below shows the grant date fair value of the PSU awards, assuming that the maximum performance level will be achieved or exceeded.

 

Name and

Principal  Position

   Year      PSUs
($)
 
                   

Robert Greifeld

     2012       $   11,134,800   

Chief Executive Officer

     2011       $ 3,792,000   
     2010       $ 2,370,000   
     
                   

Lee Shavel

     2012       $ 2,687,715   

Chief Financial Officer and Executive Vice President, Corporate Strategy

     2011       $ 1,680,008   
     
                   

Anna M. Ewing

     2012       $ 2,687,715   

Executive Vice President, Global Technology Solutions

     2011       $ 1,680,008   
     2010       $ 1,320,001   
     
                   

Hans-Ole Jochumsen

     2012       $ 2,303,775   

Executive Vice President, Transaction Services Nordic

     2011       $ 1,080,037   
     2010       $ 839,987   
     
                   

Eric W. Noll

     2012       $ 2,687,715   

Executive Vice President, Transaction Services U.S. and U.K.

     2011       $ 1,440,025   
     2010       $ 1,080,009   

 

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(4) The amounts reported in this column reflect the grant date fair value of the option awards computed in accordance with FASB ASC Topic 718. The assumptions used in the calculation of these amounts are included in footnote 12 to the company’s audited financial statements for the fiscal year ended December 31, 2012 included in our Form 10-K.

 

(5) The amounts reported in this column reflect the cash awards made to the named executive officers under the ECIP and other performance-based incentive compensation programs.

 

(6) The amounts reported in this column reflect the actuarial increase in the present value of the named executive officers’ benefits under all pension plans established by NASDAQ OMX. Assumptions used in calculating the amounts include a 4.00% discount rate as of December 31, 2012, a 5.00% discount rate as of December 31, 2011, a 5.25% discount rate as of December 31, 2010, a 5.75% discount rate as of December 31, 2009, retirement at age 62 (which is the earliest age at which a participant may retire and receive unreduced benefits under the plans) and other assumptions used for financial reporting purposes under generally accepted accounting principles as described in footnote 11 to our audited financial statements for the fiscal year ended December 31, 2012 included in our Form 10-K. The named executive officers may not currently be entitled to receive benefits under the pension plans if such amounts are not vested. None of the named executive officers received above-market or preferential earnings on deferred compensation in 2012, 2011 or 2010.

 

(7) (a) The following table sets forth the 2012 amounts reported in the “All Other Compensation” column by type.

 

Name and
Principal

Position

  Incremental
Cost of
Personal
Use of
Company
Car
($)
    Cost of
Executive
Health
Exam or
Extended
Sickness
Insurance
($)
    Cost of
Financial/Tax
Planning
Services
($)
   
Contribution
to the 401(k)
Plan or
Other
Defined
Contribution
Plans
($)
    Contribution
to the Basic
ERC
($)
    Contribution
to the
Supplemental
ERC
($)
    Vacation
Pay

($)
    Total All
Other
Compensation
($)
 
                                                                 

Robert Greifeld

  $ 27,742                    $ 10,000      $ 10,000      $ 30,000             $ 77,742   

Chief Executive Officer

                                                               
                                                                 

Lee Shavel

         $ 2,450             $ 10,000      $ 5,000      $ 5,000             $ 22,450   

Chief Financial Officer and Executive Vice President, Corporate Strategy

                                                               
                                                                 

Anna M. Ewing

         $ 3,000      $ 14,925      $ 10,000      $ 15,000      $ 15,000             $ 57,925   

Executive Vice President, Global Technology Solutions

                                                               
                                                                 

Hans-Ole Jochumsen

         $ 1,552      $ 4,342      $ 99,322                    $ 11,422      $ 116,638   

Executive Vice President, Transaction Services Nordic

                                                               
                                                                 

Eric W. Noll

         $ 3,000             $ 10,000      $ 5,000      $ 5,000             $ 23,000   

Executive Vice President, Transaction Services U.S. and U.K.

                                                               

 

  (b) The incremental cost of personal use of the company car (including commutation) is calculated based on an allocation of the cost of the driver, tolls, fuel and maintenance.

 

(8) Mr. Shavel began employment at NASDAQ OMX effective May 23, 2011.

 

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EMPLOYMENT AGREEMENTS

NASDAQ OMX currently has employment agreements with two of its named executive officers, Messrs. Greifeld and Jochumsen.

Robert Greifeld

On February 22, 2012, NASDAQ OMX entered into a new employment agreement with Robert Greifeld, NASDAQ OMX’s CEO. The new employment agreement replaced NASDAQ OMX’s existing employment agreement with Mr. Greifeld, which was effective January 1, 2007. In addition to the new employment agreement, NASDAQ OMX and Mr. Greifeld entered into a confidentiality, non-solicitation and invention assignment agreement.

The new employment agreement with Mr. Greifeld has a term of five years, with no automatic renewals thereafter. The agreement provides for:

 

   

annual base salary of not less than $1,000,000; and

 

   

annual incentive compensation that is targeted at not less than 200% of base salary based on the achievement of one or more performance goals established for such year by the management compensation committee of NASDAQ OMX’s board of directors.

The agreement does not guarantee the grant of any equity awards to Mr. Greifeld. Mr. Greifeld may be granted equity awards under the Equity Plan, based on the management compensation committee’s evaluation of the performance of NASDAQ OMX and Mr. Greifeld, peer group market data and internal equity, and consistent with past practices with respect to the combined aggregate value of prior grants.

The agreement prohibits Mr. Greifeld from rendering services to a competing entity for a period of two years following the date of termination of employment. To receive certain termination payments and benefits under the new employment agreement, Mr. Greifeld must execute a general release of claims against NASDAQ OMX. In addition, such termination payments and benefits are generally subject to discontinuation in the event Mr. Greifeld breaches the restrictive covenants in either the employment agreement or the confidentiality, non-solicitation and invention assignment agreement.

On December 11, 2012, NASDAQ OMX entered into a memorandum of understanding with Mr. Greifeld relating to the calculation of certain severance payments under his employment agreement. The memorandum of understanding clarifies the meanings of certain terms relevant to these calculations.

The employment agreement, as clarified by the memorandum of understanding, sets forth the payments that Mr. Greifeld will receive under various termination scenarios. For further information about these payments and benefits, see “Executive Compensation – Potential Payments Upon Termination or Change in Control.”

Hans-Ole Jochumsen

NASDAQ OMX also has an employment agreement with Hans-Ole Jochumsen, our Executive Vice President, Transaction Services Nordic. The employment agreement was entered into on July 1, 2008 and may be terminated by NASDAQ OMX, subject to twelve months’ prior notice, or by Mr. Jochumsen, subject to six months’ prior notice. If not previously terminated, the agreement will automatically terminate at the earlier of the date of Mr. Jochumsen’s retirement or his reaching the age of sixty-five.

The agreement provides for:

 

   

an annual base salary of not less than 3,200,000 Swedish Krona, to be reviewed each year consistent with NASDAQ OMX’s policies; and

 

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a pension contribution totaling 20% of his monthly base salary during the term of the agreement.

The agreement does not guarantee the grant of any equity awards to Mr. Jochumsen. Mr. Jochumsen may be granted equity awards under the Equity Plan, at the discretion of the board of directors. Mr. Jochumsen is entitled to health and long term disability coverage and other benefits consistent with NASDAQ OMX’s policies.

Upon termination of employment by Mr. Jochumsen, the agreement prohibits Mr. Jochumsen from rendering services to a competing entity for a period of six months following the date of termination. During this six month period, Mr. Jochumsen will be entitled to his monthly salary. Upon termination of the employment agreement by Mr. Jochumsen or NASDAQ OMX, Mr. Jochumsen is restricted from soliciting NASDAQ OMX employees for a period of twelve months from the termination date.

The agreement sets forth the payments that Mr. Jochumsen will receive under various termination scenarios. For further information about these payments and benefits, see “Executive Compensation – Potential Payments Upon Termination or Change in Control.”

 

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GRANTS OF PLAN-BASED AWARDS

The following table sets forth certain information with respect to the plan-based awards granted to each of the named executive officers during the fiscal year ended December 31, 2012.

2012 Grants of Plan-Based Awards Table

 

          Estimated Possible Payouts
Under Non-Equity
Incentive Plan Awards(1)
    Estimated Future Payouts
Under Equity
Incentive Plan Awards(2)
                             
                                                                                     

Name

  Grant
Date
  Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
    All
Other
Stock
Awards:
Number
of
Shares
of
Stock or
Units (#)
    All
Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
    Exercise
or Base
Price of
Option
Awards
($/Sh)
    Grant Date
Fair Value of
Stock and
Option
Awards
($)(3)
 
                                                                                     

Robert Greifeld

  2/22/2012     $0      $ 2,100,000      $ 4,200,000(4)                                                    

Chief Executive Officer

  5/7/2012                          0        247,440        494,880                             $5,567,400   
                       
                                                                                     

Lee Shavel

  2/22/2012     $0        $750,000      $ 1,500,000                                                        

Chief Financial

Officer and Executive Vice President, Corporate Strategy

  5/7/2012                          0        59,727        119,454                             $1,343,857   
                                                                                                                  
                       
                                                                                     

Anna M. Ewing

  2/22/2012     $0        $750,000      $ 1,500,000                                                        

Executive Vice

President, Global Technology Solutions

  5/7/2012                          0        59,727        119,454                             $1,343,857   
                                                                                   
                       
                                                                                     

Hans-Ole Jochumsen

  2/22/2012     $0        $739,000      $ 1,478,000                                                        

Executive Vice

President, Transaction Services Nordic

  5/7/2012                          0        51,195        102,390                             $1,151,887   
                                                                                                                  
                       
                                                                                     

Eric W. Noll

  2/22/2012     $0        $750,000      $ 1,500,000                                                        

Executive Vice

President, Transaction Services U.S. and U.K.

  5/7/2012                          0        59,727        119,454