April 4, 2011

 

Dear Fellow Shareholder:

 

I invite you to attend our annual meeting of shareholders on May 18, 2011 in the lobby of the TXCN Building, 570 Young Street, Dallas, Texas. Included is a map for your use. We hope that you will be able to attend.

 

Materials being provided include the Notice of Annual Meeting setting forth the business expected to come before the meeting, the 2011 proxy statement, and A. H. Belo’s 2010 annual report. If you requested printed versions of the materials by mail, these materials also include a proxy/voting instruction card for the annual meeting. The proxy statement tells you more about the agenda and voting procedures for the meeting and provides information about A. H. Belo’s directors, including those nominated for election at this year’s meeting.

 

As permitted by the rules of the Securities and Exchange Commission, most of the Company’s shareholders were mailed a Notice of Internet Availability of Proxy Materials with instructions for electronically accessing these proxy materials and for voting via the Internet. The Notice of Internet Availability of Proxy Materials also provides information on how you may obtain printed copies of our proxy materials free of charge. We believe that this approach allows us to provide our shareholders with the information they need to vote their shares while reducing delivery costs and conserving natural resources.

 

For those A. H. Belo shareholders with access to the Internet, we encourage you to vote your shares on line. Detailed instructions on how to vote over the Internet or by telephone are set forth in the proxy materials and in the Notice of Internet Availability of Proxy Materials. We encourage you to elect to receive future annual reports, proxy statements, and other materials over the Internet by following the instructions in the proxy statement. This electronic means of communication is quick and convenient and reduces the Company’s printing and mailing costs.

 

Whether or not you attend the meeting, it is important that your shares be represented at the annual meeting. I encourage you to vote your shares as soon as possible either by returning your proxy/voting instruction card or by voting using the Internet or telephone voting procedures outlined in the proxy materials or in the Notice of Internet Availability of Proxy Materials. If you are unable to attend the annual meeting in person, you may listen to the meeting by Webcast on our Web site (www.ahbelo.com/invest).

 

I hope to see you on May 18.

 

Sincerely,

 

 

Robert W. Decherd

Chairman of the Board

President and Chief Executive Officer

 

P. O. Box 224866 Dallas, Texas 75222-4866 Tel. 214.977.8200 Fax 214.977.8201

www.ahbelo.com           Deliveries: 508 Young Street           Dallas, Texas 75202

 

P. O. Box 224866

Dallas, Texas 75222-4866

www.ahbelo.com

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 18, 2011

 

 

 

To A. H. Belo Shareholders:

 

Please join us for the 2011 annual meeting of shareholders of A. H. Belo Corporation (“A. H. Belo” or the “Company”). The meeting will be held in the lobby of the TXCN Building at 570 Young Street, Dallas, Texas, on Wednesday, May 18, 2011, at 1:30 p.m., Dallas, Texas time. The annual meeting of shareholders will be simultaneously Webcast on A. H. Belo’s Web site (www.ahbelo.com/invest). Following the conclusion of the meeting, a replay of the Webcast will be archived on A. H. Belo’s Web site.

 

At the meeting, holders of A. H. Belo Series A common stock and A. H. Belo Series B common stock will act on the following matters:

 

 

All record holders of shares of A. H. Belo Series A common stock and A. H. Belo Series B common stock at the close of business on March 22, 2011 are entitled to vote at the meeting or at any postponement or adjournment of the meeting.

 

As permitted by the rules of the Securities and Exchange Commission (the “SEC”), we are furnishing our proxy materials to shareholders via the Internet. Shareholders will receive a Notice of Internet Availability of Proxy Materials with instructions for accessing the proxy materials, including our proxy statement and annual report, and for voting via the Internet. The electronic delivery of our proxy materials will expedite receipt of the materials by our shareholders, reduce any environmental impact, and lessen our printing and mailing costs.

 

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

 

By Order of the Board of Directors

 

DANIEL J. BLIZZARD

Secretary

 

April 4, 2011

 

TABLE OF CONTENTS

 

 

P. O. Box 224866

Dallas, Texas 75222-4866

www.ahbelo.com

 

 

PROXY STATEMENT

 

 

For the Annual Meeting of Shareholders

To Be Held On May 18, 2011

 

This proxy statement contains information related to the annual meeting of shareholders of A. H. Belo Corporation (“A. H. Belo” or the “Company”) to be held on Wednesday, May 18, 2011, beginning at 1:30 p.m., Dallas, Texas time, in the lobby of the TXCN Building at 570 Young Street, Dallas, Texas, and any postponement or adjournment of the meeting.

 

A Notice of Internet Availability of Proxy Materials (the “Notice”) is being mailed or otherwise sent to shareholders of A. H. Belo on or about April 4, 2011. Paper copies of this proxy statement and related proxy/voting instruction card will be distributed to shareholders beginning on or about April 6, 2011.

 

Important Notice Regarding the Availability of Proxy Materials for the 2011 Annual Meeting to Be Held on May 18, 2011. A. H. Belo’s 2011 proxy statement and the 2010 annual report, which includes consolidated financial statements for the year ended December 31, 2010, are available at http://bnymellon.mobular.net/bnymellon/ahc. These documents are also posted on our Web site at www.ahbelo.com.

 

What is the purpose of the annual meeting?

 

At the annual meeting, shareholders will act on matters outlined in the accompanying notice, including the election of directors, the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm, an advisory resolution on executive compensation (say-on-pay), an advisory vote on the frequency of future say-on-pay votes (say-on-frequency), and any other matters properly brought before the meeting. Management will report on A. H. Belo’s performance in 2010 and respond to questions and comments from shareholders.

 

Who can attend the annual meeting?

 

Shareholders and guests of A. H. Belo may attend the annual meeting.

 

Who may vote at the meeting?

 

Only shareholders who owned A. H. Belo shares at the close of business on March 22, 2011, the record date, or their duly appointed proxies, are entitled to vote at the meeting, or at any postponement or adjournment of the meeting. Our common stock is divided into two series: Series A common stock and Series B common stock. Holders of either series of common stock as of the close of business on the record date will be entitled to vote at the meeting. At the close of business on the record date, a total of 19,118,076 shares of Series A common stock and 2,391,535 shares of Series B common stock were outstanding and entitled to vote.

 

What are the voting rights of the holders of Series A common stock and Series B common stock?

 

Holders of A. H. Belo Series A and Series B common stock vote together as a single class on all matters to be acted upon at the annual meeting. Each outstanding share of Series A common stock will be entitled to one vote on each matter. Each outstanding share of Series B common stock will be entitled to 10 votes on each matter.

Why did I receive a one-page Notice of Internet Availability of Proxy Materials this year instead of a full set of proxy materials?

 

Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”), the Company has elected to provide access to its proxy materials via the Internet and has sent a Notice to its shareholders. Shareholders can access the proxy materials on the Web site referred to in the Notice or request to receive free of charge a printed set of the proxy materials, including a proxy/voting instruction card. Instructions on how to access the proxy materials over the Internet or to request a printed copy are set out in the Notice. If you hold A. H. Belo shares in your A. H. Belo Savings Plan account or in your Belo Savings Plan account, the Notice also has instructions on how to provide your voting instructions via the Internet.

 

In addition, all shareholders may request to receive proxy materials electronically by e-mail on an ongoing basis by following the instructions in the paragraph captioned “How to Receive Future Proxy Statements and Annual Reports Online” in the “Annual Report and Additional Materials” section on page 53 of this proxy statement. The Company encourages shareholders to take advantage of the availability of the proxy materials on the Internet in order to help reduce printing and mailing costs and environmental impacts.

 

What constitutes a quorum to conduct business at the meeting?

 

In order to carry on the business of the meeting, we must have a quorum present in person or by proxy. A majority of the voting power of the outstanding shares of common stock eligible to vote and at least one-third of the outstanding shares entitled to vote must be present at the meeting, in person or by proxy, in order to constitute a quorum.

 

Abstentions and broker non-votes are counted as present at the meeting for purposes of determining whether we have a quorum. A broker non-vote occurs when a broker or other nominee returns a proxy but does not vote on a particular proposal because the broker or nominee does not have authority to vote on that particular item and has not received voting instructions from the beneficial owner.

 

How do I cast my vote?

 

You may receive more than one Notice or proxy/voting instruction card depending on how you hold your shares. It is important that you follow the instructions on each card or Notice and vote the shares represented by each card or Notice separately.

 

Shareholders of record.  If you hold shares directly and are listed as a shareholder on A. H. Belo’s stock records, you may vote in person if you attend the meeting or you may vote by proxy, which gives the proxy holder the right to vote your shares on your behalf. You may vote by proxy online via the Internet, by telephone, or, if you request copies of the proxy materials, by completing and returning your proxy card in the envelope provided. Shares represented by proxy cards that are properly completed and submitted will be voted in accordance with the shareholder’s instructions.

 

Shares held in broker or other nominee name (“street name”).  If you hold shares in street name, you have the right to instruct your broker or other nominee on how to vote those shares on your behalf and you will receive a Notice or, if you request, a copy of the proxy materials, including a voting instruction form, from them. Alternatively, you may vote these shares in person at the meeting, by following the instructions below under “How do I vote in person.”

 

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

 

If you want to vote using the Internet or telephone, please follow the instructions on each proxy/voting instruction card or in the Notice, and have the proxy/voting instruction card or the Notice available when you call in or access the voting site. In order to be included in the final tabulation of proxies, completed proxy/voting instruction cards

must be received, and votes cast using the Internet or telephone must be cast, by the date and time noted on the card or in the Notice.

 

How do I vote in person?

 

For shares held of record in your name, you may vote in person by completing a ballot at the annual meeting. If you plan to vote in person but hold shares through a broker or other nominee, you must provide a “legal proxy” from the broker or nominee evidencing your authority to vote shares the broker held for your account at the close of business on March 22, 2011. You must contact your brokerage firm directly in advance of the annual meeting to obtain a legal proxy. Voting instructions with respect to shares held in the A. H. Belo Savings Plan or the Belo Savings Plan must be submitted by May 16, 2011, and may not be provided at the meeting.

 

Blank ballots will be available at the registration table at the meeting. Completed ballots may be deposited at the registration table and a call for completed ballots will be made during the course of the meeting prior to the close of the polls.

 

Can I change my vote or revoke my proxy prior to the final voting?

 

Yes. For shares held of record in your name, you may revoke your proxy (including an Internet or telephone vote) by:

 

 

If your shares are held through a broker or nominee, contact that broker or nominee if you wish to change your voting instructions.

 

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

 

How do I vote my shares held in the A. H. Belo Savings Plan or in the Belo Savings Plan?

 

Fidelity Management Trust Company is the plan trustee for both the A. H. Belo Savings Plan and the separate Belo Savings Plan maintained by Belo Corp. (together, the “Savings Plans”). Only the plan trustee can vote the shares held by the Savings Plans. If you participate in either of these Savings Plans and had full shares of A. H. Belo common stock credited to your account as of the record date, you received a Notice in lieu of paper copies of our proxy materials. The Notice includes instructions on how to access the proxy materials over the Internet and how to request a printed set of the proxy materials, including a voting instruction card, if you desire to do so. The Notice also has information on how to provide your voting instructions to the plan trustee via the Internet or telephone. You will not be able to vote these shares in person at the annual meeting.

 

Because of the time required to tabulate voting instructions from participants in the Savings Plans before the annual meeting, the trustee must receive your voting instructions by May 16, 2011. If you sign, date, and return a paper voting instruction card but do not check any boxes on the card, the trustee will vote your shares FOR the nominees standing for election as directors named in this proxy statement, FOR ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm, FOR approval of the advisory resolution on executive compensation (say-on-pay), and for every THREE YEARS with respect to the frequency of future say-on-pay advisory votes (say-on-frequency). In addition, at its discretion, the trustee of the Savings Plans will be authorized to vote on any other matter that may properly come before the meeting or any adjournment or postponement of the meeting. If the trustee does not receive instructions from you (by Internet, telephone or voting

instruction card) by May 16, 2011, the trustee will vote your shares in the same proportion as the shares in your particular Savings Plan for which voting instructions have been received from other plan participants. You may revoke or modify previously given voting instructions by May 16, 2011, by submitting a new voting instruction by Internet or telephone, filing with the trustee either a written notice of revocation or submitting a properly completed and signed voting instruction card by that date.

 

What happens if I do not give specific voting instructions?

 

If you indicate when voting on the Internet or by telephone that you wish to vote as recommended by the Board or you sign and return a proxy card or voting instruction card without giving specific voting instructions, then the proxy holders or the trustee of the Savings Plans, as appropriate, will vote your shares in the manner recommended by the Board on all matters presented in this proxy statement as follows: FOR the nominees standing for election as directors named in this proxy statement, FOR ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm, FOR approval of the advisory resolution on executive compensation (say-on-pay), and for every THREE YEARS with respect to the frequency of future say-on-pay advisory votes (say-on-frequency). In addition, the proxy holders or the trustee of the Savings Plans, as appropriate, may vote in their discretion on any other matter that may properly come before the annual meeting or any adjournment or postponement of the annual meeting.

 

If you hold your shares through a broker, and you do not provide any voting instructions on the Internet or by telephone and do not return a voting instruction form, your broker may vote your shares at its discretion only on certain “routine matters.” If the organization that holds your shares does not receive any voting instructions from you, the organization that holds your shares will inform the inspector of election that it does not have the authority to vote your shares with respect to “non-routine” matters. This is generally referred to as a “broker non-vote.”

 

Which proposals are considered “routine” or “non-routine”?

 

The Company believes that Proposal Two, the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm, is a “routine matter” on which brokers will be permitted to vote uninstructed shares. With respect to all other matters, however, your broker may not vote your shares for you without instructions and the aggregate number of unvoted shares is reported as the “broker non-vote.” The Company believes that the election of directors (Proposal One), the advisory resolution on executive compensation (say-on-pay) (Proposal Three), and the advisory vote on the frequency of future say-on-pay votes (say-on-frequency) (Proposal Four) are not “routine matters” and a broker or other nominee will not be permitted to vote any uninstructed shares on Proposals One, Three and Four.

 

How are broker non-votes and abstentions treated?

 

In the election of directors, abstentions and broker non-votes have no effect. For matters requiring majority approval, abstentions have the effect of negative votes, meaning that abstentions will be counted in the denominator, but not the numerator, in determining whether a matter has received sufficient votes to be approved. Broker non-votes are not treated as shares entitled to vote on matters requiring majority approval and are excluded from the calculation.

 

What vote does the Board recommend?

 

The Board recommends a vote:

 

FOR all director nominees named in this proxy statement;

FOR ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm;

FOR approval of the advisory resolution on executive compensation (say-on-pay); and

To conduct future say-on-pay advisory votes every THREE YEARS.

 

With respect to any other matter that properly comes before the meeting, the proxy holders will vote in their own discretion.

What number of votes is required to approve each proposal?

 

4  Election of directors (Proposal One) — The affirmative vote of a plurality of the voting power represented at the annual meeting and entitled to vote is required for the election of directors. This means that the nominees receiving the highest number of votes cast for the number of positions to be filled are elected. You do not have the right to cumulate votes in the election of directors. In other words, you cannot multiply the number of shares you own by the number of directorships being voted on and then cast the total for only one candidate or among several candidates as you see fit. Votes that are instructed to be withheld with respect to the election of one or more directors will not be voted for the director or directors indicated, although they will be counted for purposes of determining whether a quorum is present. Shares held in broker or street name cannot be voted on this proposal without your instruction.

 

Additionally, if an incumbent director does not receive the affirmative vote of at least a majority of the votes cast with respect to that director’s election at the annual meeting (which for this purpose includes votes cast “for” the director’s election and votes to withhold authority with respect to the director’s election), then that director is required to promptly tender his or her resignation and the Board will act on such resignation as provided in the Company’s Corporate Governance Guidelines, the applicable portion of which is attached to this proxy statement as Appendix A. All nominees standing for election at the 2011 annual meeting of shareholders are incumbent directors.

 

4  Ratification of appointment of independent registered public accounting firm (Proposal Two) — The affirmative vote of a majority of the voting power represented at the annual meeting and entitled to vote is required to ratify the appointment of KPMG LLP as the independent registered public accounting firm for the Company for 2011. With respect to shares held in broker or street name, your broker has discretion to vote any uninstructed shares on this matter.

 

4  Advisory resolution regarding executive compensation (say-on-pay) (Proposal Three) — The affirmative vote of a majority of the voting power represented at the annual meeting and entitled to vote is required to approve this advisory resolution. Shares held in broker or street name cannot be voted on this proposal without your instruction.

 

4  Advisory vote regarding the frequency of future say-on-pay votes (say-on-frequency) (Proposal Four) — The affirmative vote of a majority of the voting power represented at the annual meeting and entitled to vote is required to approve this advisory recommendation to the Board. Shares held in broker or street name cannot be voted on this proposal without your instruction.

 

4  Other matters — Unless otherwise required by law or the Company’s Certificate of Incorporation, the affirmative vote of a majority of the voting power represented at the annual meeting and entitled to vote is required for other matters that properly may come before the meeting.

 

Where can I find the voting results of the annual meeting?

 

The preliminary voting results will be announced at the annual meeting. The final voting results will be tallied by the inspector of election and published in the Company’s Current Report on Form 8-K, which the Company is required to file with the SEC within four business days following the annual meeting.

 

Your proxy is being solicited on behalf of A. H. Belo’s Board of Directors. In addition to use of the mails, the solicitation may also be made by use of facsimile, the Internet or other electronic means, or by telephone or personal contact by directors, officers, employees, and agents of A. H. Belo. A. H. Belo pays the costs of this proxy solicitation.

 

We have hired Morrow & Co., LLC to assist in soliciting proxies from beneficial owners of shares held in the names of brokers and other nominees, and have agreed to pay Morrow & Co., LLC a fee of $6,000 plus its related costs and expenses. We also supply brokers, nominees, and other custodians with proxy forms, proxy statements, and annual reports for the purpose of sending proxy materials to beneficial owners. We reimburse brokers, nominees, and other custodians for their reasonable expenses.

 

The following tables set forth information as of March 22, 2011, about the beneficial ownership of A. H. Belo common stock by our current directors, nominees for election as director, the executive officers named in the Summary Compensation Table on page 36 of this proxy statement (the “named executive officers” or “NEOs”), all current directors, director nominees and executive officers as a group, and by each person known to A. H. Belo to own more than 5% of the outstanding shares of A. H. Belo Series A or Series B common stock. At the close of business on March 22, 2011, there were 19,118,076 Series A shares, 2,391,535 Series B shares, and 21,509,611 combined Series A and Series B shares issued and outstanding.

 

Under SEC rules, the beneficial ownership of a person or group includes not only shares held directly or indirectly by the person or group but also shares the person or group has the right to acquire within 60 days of the record date (up to and including May 21, 2011) pursuant to exercisable options and convertible securities. The information below, including the percentage calculations, is based on beneficial ownership of shares rather than direct ownership of issued and outstanding shares, except as described in footnote (1) to the table below.

 

Unless otherwise indicated, each person listed below has sole voting power and sole dispositive power with respect to the shares of common stock indicated in the table as beneficially owned by such person. Series A common stock has one vote per share and Series B common stock has 10 votes per share. Consequently, the voting power of Series B holders is greater than the number of shares beneficially owned. For example, the shares of A. H. Belo common stock beneficially owned by all directors and executive officers as a group, representing 15.0% of the outstanding shares of Series A and Series B common stock, have combined voting power of 59.2%.

 

A. H. Belo Corporation Stock Ownership of Current Directors and Executive Officers

 

 

 

 

 

 

A. H. Belo Corporation Stock Ownership of Other Principal Shareholders (greater than 5%)

 

 

 

 

Equity Compensation Plan Information

 

The following table provides information regarding Series A and Series B common stock authorized for issuance under A. H. Belo’s equity compensation plans as of December 31, 2010; the amounts set out in the table do not include any adjustment for risk of forfeiture:

 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Federal securities laws require that A. H. Belo’s executive officers and directors, and persons who own more than ten percent of a registered class of A. H. Belo common stock, file reports with the SEC within specified time periods disclosing their beneficial ownership of A. H. Belo common stock and any subsequent changes in beneficial ownership of A. H. Belo common stock. These reporting persons are also required to furnish us with copies of these reports. Based on information provided to us by these reporting persons or otherwise, we believe that all filings required to be made by the reporting persons during 2010 were timely filed, except that John McKeon did not include a holding of RSUs on a Form 3 that was timely filed in March 2010. The inadvertently omitted award was disclosed on Form 3/A filed on March 1, 2011.

 

A. H. Belo’s bylaws provide that the Board of Directors comprises five to 10 directors, divided into three classes, approximately equal in number, with staggered terms of three years so that the term of one class expires at each annual meeting. The bylaws further provide that a director will retire on the date of the annual meeting of shareholders next following his or her 68th birthday.

 

Citing personal circumstances, directors Dave Morgan and Doug Carlston, both Class I directors, resigned from the Board and each of its standing committees on June 10, 2010 and November 10, 2010, respectively. As announced in March 2011, Larry Hirsch, age 65, a Class II director, will retire from the Board effective with the 2011 annual meeting. The Board elected Ron McCray as a Class I director, effective September 23, 2010, and elected Louis Caldera as a Class II director, effective March 9, 2011. The Company’s CEO and legal counsel recommended Mr. McCray to the Nominating and Corporate Governance Committee. Several non-management directors and the Company’s CEO recommended Mr. Caldera to the Committee. The new directors became members of each of the Board’s standing committees on the date of their election. Messrs. Caldera and McCray have each been nominated by the Board for election by the shareholders at the 2011 annual meeting.

 

Selection, Qualifications and Experience of Directors

 

The Nominating and Corporate Governance Committee of the Board of Directors is responsible for identifying director candidates and making recommendations to the Board. The Board is ultimately responsible for nominating candidates for election to the Board. The Committee employs a variety of methods for identifying and evaluating director nominees. Candidates may come to the Committee’s attention through current Board members, shareholders, or other persons. In evaluating director candidates, the Committee considers a variety of criteria, including an individual’s character and integrity; business, professional and personal background; skills; current employment; community service; and ability to commit sufficient time and attention to activities of the Board. The Committee also may take into account any specific financial, technical, or other expertise and the extent to which such expertise would complement the Board’s existing mix of skills and qualifications. The Committee considers these criteria in the context of the perceived needs of the Board as a whole. (For more information regarding the Nominating and Corporate Governance Committee and the nominee selection and evaluation process, please see “Corporate Governance — Committees of the Board — Nominating and Corporate Governance Committee” on page 23 of this proxy statement.)

 

Based on a review of the background and experiences of the directors, we believe that each of our directors, including those proposed for election to the Board at the 2011 annual meeting, possesses the professional and personal qualifications necessary for service on the A. H. Belo Board of Directors. In the individual biographies below, we have highlighted particularly noteworthy attributes of each Board member that led to the Board’s conclusion that the person should serve as an A. H. Belo director, in light of the Company’s business and structure. In addition, we note that several of our directors based on their length of service to the Company, including prior to the 2008 spin-off of the Company by Belo Corp., have significant exposure to both our business and the communities in which we operate.

 

Nominees for A. H. Belo Directors

 

The following candidates are nominated by the Board and each is an incumbent director: Ron McCray is standing for election as a Class I director and will be eligible to serve a one-year term until the 2012 annual meeting; Louis Caldera is standing for election as a Class II director and will be eligible to serve a two-year term until the 2013 annual meeting; and, Robert Decherd and Ty Miller are standing for election as Class III directors and will be eligible to serve a three-year term until the 2014 annual meeting. The independence of each incumbent director is addressed under “Corporate Governance — Director Independence” on page 22 of this proxy statement.

 

Each independent director serves on each of the three standing committees of the Board (Audit, Compensation, and Nominating and Corporate Governance). Mr. Decherd and Mrs. Herndon do not serve on any standing committee of the Board.

Class I Director (Current term expires at A. H. Belo’s 2011 annual meeting)

 

 

Class II Director (Current term expires at A. H. Belo’s 2011 annual meeting)

 

Class III Directors (Current terms expire at A. H. Belo’s 2011 annual meeting)

 

Vote Required for Approval

 

The affirmative vote of a plurality of the voting power represented at the annual meeting and entitled to vote is required for the election of directors. This means that the nominees receiving the highest number of votes cast for the number of positions to be filled are elected. For additional information, please see “What number of votes is required to approve each proposal” on page 5 of this proxy statement.

 

Recommendation of the Board of Directors

 

The Board of Directors recommends a vote FOR Proposal One, for the election of each of the nominees named in this proxy statement.

Directors Continuing in Office

 

Information regarding our directors continuing in office is provided below.

 

Class I Director (Term expires at A. H. Belo’s 2012 annual meeting)

 

 

 

Class II Director (Term expires at A. H. Belo’s 2013 annual meeting)

 

 

KPMG LLP served as A. H. Belo’s independent auditors for the years ended December 31, 2010 and December 31, 2009. Ernst & Young LLP served as our independent public accounting firm from February 2008 through March 31, 2009, when it was dismissed by the Audit Committee. The Audit Committee has appointed KPMG LLP to serve in such capacity for 2011, and as a matter of good corporate governance has determined to submit the appointment of KPMG LLP for ratification by the shareholders. If the shareholders do not ratify the appointment of KPMG LLP, the Audit Committee will consider the appointment of other independent registered public accounting firms.

 

Representatives of KPMG LLP will be present at the annual meeting. They will have the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions presented at the annual meeting.

 

The table below sets forth the KPMG LLP and Ernst & Young LLP fees related to the audit of our financial statements for the years ended December 31, 2010 and December 31, 2009 and the reviews of our financial statements for the quarterly periods within those years:

 

 

 

 

The Audit Committee has adopted a policy and procedures that set forth the manner in which the Audit Committee will review and approve all services to be provided by KPMG LLP before the firm is retained to provide such services. The policy requires Audit Committee pre-approval of the terms and fees of the annual audit services engagement, as well as any changes in terms and fees resulting from changes in audit scope or other items. The Audit Committee also pre-approves, on an annual basis, other audit services, and audit-related and tax services set forth in the policy, subject to estimated fee levels pre-approved by the Committee. Any other services to be provided by the independent auditors must be separately pre-approved by the Audit Committee. In addition, if the fees for any pre-approved services are expected to exceed by 5% or more the estimated fee levels previously approved by the Audit Committee, the services must be separately pre-approved by the Committee. As a general guideline, annual fees paid to the independent auditors for services other than audit, audit-related, and tax services should not exceed one-half the dollar amount of fees to be paid for these three categories of services collectively. The Audit Committee has delegated to the Committee chairman and other Committee members the authority to pre-approve services up to certain limits. Services pre-approved pursuant to delegated authority must be reported to the full Committee at its next scheduled meeting. The Company’s Chief Financial Officer reports periodically to the Audit Committee on the status of pre-approved services, including projected fees. All of the services and fees reflected in the above table were approved by the Audit Committee in accordance with our pre-approval policy.

The report of Ernst & Young on the Company’s consolidated financial statements as of and for the year ended December 31, 2008, did not contain an adverse opinion or a disclaimer of an opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. During the term of Ernst & Young LLP’s engagement, there were no disagreements or any reportable events. Prior to KPMG LLP’s engagement, neither the Company nor anyone on its behalf consulted KPMG LLP respect to any accounting matter.

 

Vote Required for Approval

 

The affirmative vote of a majority of the voting power represented at the annual meeting and entitled to vote on this proposal is required for approval.

 

Recommendation of the Board of Directors

 

The Board of Directors recommends a vote FOR Proposal Two, for the ratification of the appointment of KPMG LLP as A. H. Belo’s independent registered public accounting firm.

 

The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) provides A. H. Belo shareholders with a vote to approve, on an advisory, non-binding basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with SEC rules.

 

The Company and the A. H. Belo Board of Directors recognize that executive compensation is an important matter for our shareholders. This proposal, commonly known as a “say-on-pay” proposal, gives you, as a shareholder, the opportunity to endorse or not endorse on an advisory basis our 2010 executive compensation programs and policies and the compensation paid to the named executive officers. The “Compensation Discussion and Analysis” (“CD&A”) section starting on page 28 of this proxy statement, together with the executive compensation tables starting on page 36 of this proxy statement, and related disclosures set forth the compensation paid to our named executive officers for 2010.

 

As described in more detail in the CD&A section, the Compensation Committee of the Board oversees the Company’s overall executive compensation structure, policies and programs, and has responsibility for establishing, implementing and monitoring adherence to the Company’s compensation philosophy. The Compensation Committee strives to set the compensation of the Company’s executive officers to be competitive and to be consistent with the Company’s strategy, sound corporate governance principles, and shareholder interests and concerns. In particular, the Compensation Committee strives to make cash and equity awards based on performance metrics that are directly linked to financial performance and retention.

 

As described in the CD&A, we believe our compensation program is strongly aligned with the long-term interests of our shareholders. As you consider this proposal, we urge you to read the CD&A section and the tabular and narrative disclosures on executive compensation for additional details on executive compensation, including the more detailed information about the Company’s compensation philosophy and objectives and the past compensation of our named executive officers.

 

In accordance with recently adopted Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as a matter of good corporate governance, we are asking our shareholders to approve the following advisory resolution at the 2011 annual meeting of shareholders:

 

“RESOLVED, that the shareholders of A. H. Belo Corporation (“A. H. Belo” or the “Company”) approve, on an advisory basis, the compensation of A. H. Belo’s named executive officers as disclosed in the “Compensation Discussion and Analysis” section, the Summary Compensation Table and the related compensation tables, notes and narrative contained in the 2011 proxy statement.”

 

Vote Required for Approval

 

The affirmative vote of a majority of the voting power represented at the annual meeting and entitled to vote on this proposal is required for advisory approval of this proposal.

 

The advisory vote under this Proposal Three is non-binding on the Company and its Board of Directors. The vote will not overrule any decisions by the Company or the Board, will not create or imply any change to the fiduciary duties on the part of the Company or the Board, and will not create or imply any additional fiduciary duty on the part of the Company or the Board. Although the vote is non-binding, the Board of Directors and the Compensation Committee value the opinions of our shareholders, and will carefully consider the outcome of the vote when making future compensation decisions for our named executive officers.

 

Recommendation of the Board of Directors

 

The Board of Directors recommends a vote FOR Proposal Three, approval of the advisory resolution on executive compensation.

 

Related to the advisory “say-on-pay” vote addressed in Proposal Three above, and in accordance with the recently adopted Section 14A of the Exchange Act, we are asking our shareholders to vote, on an advisory or non-binding basis, on how frequently future advisory votes on executive compensation should occur. By voting on this Proposal Four, shareholders may indicate whether they would prefer an advisory vote on executive compensation once every one, two, or three years. Shareholders may also abstain from voting on this proposal.

 

After careful consideration, the Board of Directors has determined that holding an advisory vote on executive compensation every three years is the most appropriate policy for the Company, and recommends that shareholders vote for future say-on-pay advisory votes to occur every three years (a triennial vote). We believe that this frequency is appropriate for a number of reasons. Most significantly, our compensation programs are designed to reward long-term performance and to take into account the cyclical nature of the Company’s businesses, which fluctuates with advertising demand. Thus, we encourage our shareholders to evaluate our executive compensation programs over a multi-year horizon and to review the compensation of our named executive officers over the past three years, as reported in the Summary Compensation Table on page 36 of this proxy statement. In addition, we believe that a triennial advisory vote on executive compensation reflects the appropriate time frame to enable the Compensation Committee and the Board to evaluate the results of the most recent advisory vote on executive compensation, to discuss the implications of that vote, to develop and implement any adjustments to our executive compensation programs that may be appropriate in light of a past advisory vote on executive compensation, and for shareholders to see and evaluate any such adjustments to our executive compensation programs.

 

The Board of Directors is aware of and took into account views in support of conducting an annual advisory vote on executive compensation. We are aware that some shareholders believe that annual advisory votes will enhance or reinforce accountability. We have been in the past and will in the future continue to be open in our communications with our shareholders on a number of topics and various forums. Thus, we view the advisory vote on executive compensation as an additional, but not exclusive, means for our shareholders to communicate with us regarding their views on the Company’s executive compensation programs. In addition, because our executive compensation programs are designed to operate over the long-term and to enhance long-term performance, we are concerned that an annual advisory vote on executive compensation could lead to a near-term perspective inappropriately bearing on our executive compensation programs. Finally, although we currently believe that holding an advisory vote on executive compensation every three years will reflect the right balance of considerations in the normal course, we will periodically reassess that view and can provide for an advisory vote on executive compensation on a more frequent basis if changes in our compensation programs or other circumstances suggest that such a vote would be appropriate.

 

Vote Required for Approval

 

The affirmative vote of a majority of the voting power represented at the annual meeting and entitled to vote on this proposal is required for advisory approval of this proposal. Shareholders are not voting to approve or disapprove the Board’s recommendation. The advisory vote under Proposal Four is non-binding on the Company and its Board of Directors. The vote will not overrule any decisions by the Company or the Board, will not create or imply any change to the fiduciary duties on the part of the Company or the Board, and will not create or imply any additional fiduciary duty on the part of the Company or the Board. Although the vote is non-binding, the Board and the Compensation Committee value the opinions of our shareholders, and will carefully consider the outcome of the vote when making future decisions regarding the frequency of advisory votes on executive compensation for our named executive officers.

 

Recommendation of the Board of Directors

 

With respect to Proposal Four, the Board of Directors recommends that shareholders vote to conduct future advisory say-on-pay votes every THREE YEARS.

 

Introduction

 

Our Board periodically reviews and evaluates A. H. Belo’s corporate governance policies and practices in light of the Sarbanes-Oxley Act of 2002 and subsequent legislation, SEC regulations, corporate governance listing standards adopted by the New York Stock Exchange (“NYSE”), and evolving best practices. The Board has formalized its corporate governance guidelines, approved a code of business conduct and ethics applicable to A. H. Belo’s directors, management and other A. H. Belo employees, and adopted a charter for each Board committee. The Nominating and Corporate Governance Committee reviews A. H. Belo’s corporate governance guidelines and Board committee charters annually and recommends changes to the Board as appropriate. Our corporate governance documents are posted on our Web site at www.ahbelo.com under “About A. H. Belo — Corporate Governance,” and are available in print, without charge, upon written or oral request to A. H. Belo Corporation, Attention: Secretary, P. O. Box 224866, Dallas, Texas 75222-4866, (214) 977-8200.

 

Director Independence

 

To assist it in making determinations of a director’s independence, the Board has adopted independence standards, which are set forth in A. H. Belo’s corporate governance guidelines, the applicable portion of which is attached to this proxy statement as Appendix B. These standards incorporate the director independence criteria included in the NYSE listing standards, as well as additional, more stringent criteria established by the Board. The Board determined that the following directors are, or with respect to former directors Carlston, Morgan, and Williams, were during their tenure as A. H. Belo directors, independent under these standards: Louis Caldera, Doug Carlston, Larry Hirsch, Ron McCray, Ty Miller, Dave Morgan, John Puerner and Don Williams. Each of the Audit, Compensation, and Nominating and Corporate Governance Committees is composed entirely of independent directors. In accordance with SEC requirements, NYSE listing standards and the independence standards set forth in A. H. Belo’s corporate governance guidelines, all members of the Audit Committee meet additional independence standards applicable to audit committee members.

 

Meetings of the Board

 

The Board held eight meetings in 2010. Each incumbent director attended at least 75% of the aggregate of (1) the total number of meetings held by the Board and (2) the total number of meetings held by all committees on which he or she served. Directors are expected to attend annual meetings of shareholders and all incumbent directors then serving attended the 2010 annual meeting either in person or by telephone.

 

Committees of the Board

 

Each of the Board’s standing committees consists of independent directors Louis Caldera, Larry Hirsch, Ron McCray, Ty Miller, and John Puerner. The A. H. Belo Board has the following committees:

 

Audit Committee.  Ty Miller chairs the Audit Committee. The Audit Committee is responsible for the appointment, compensation and oversight of the independent auditors. The Audit Committee also represents the Board in overseeing A. H. Belo’s financial reporting processes, and, as part of this responsibility, consults with our independent auditors and with personnel from A. H. Belo’s internal audit and financial staffs with respect to corporate accounting, reporting, and internal control practices. The Audit Committee met nine times during 2010.

 

The Board has determined that at least one member of the Audit Committee meets the NYSE standard of having accounting or related financial management expertise. The Board has also determined that at least one member of the Audit Committee, Ty Miller meets the SEC criteria of an “audit committee financial expert.”

 

Compensation Committee.  Doug Carlston chaired the Compensation Committee until his resignation on November 10, 2010. Ron McCray succeeded Doug in that role. The Compensation Committee evaluates the performance of the Chief Executive Officer and sets his compensation level based on this evaluation. The Compensation Committee also approves the compensation of the other executive officers and recommends compensation for non-management directors, and administers, among other plans, the Company’s 2008

Incentive Compensation Plan, the A. H. Belo Savings Plan, the A. H. Belo Change in Control Severance Plan, the A. H. Belo Pension Plan I, the A. H. Belo Pension Plan II, the A. H. Belo Pension Transition Supplement Plan, and the A. H. Belo Pension Transition Supplement Restoration Plan. It also shares responsibility for senior executive succession planning with the Nominating and Corporate Governance Committee. The Compensation Committee met nine times during 2010.

 

To assist the Committee and management in assessing and determining appropriate, competitive compensation for our executive officers and directors, the Committee annually engages an outside compensation consultant. Beginning in February 2008, the Compensation Committee has annually engaged Mercer Human Resource Consulting (“Mercer”), a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. (“Marsh”), as its compensation consultant. The scope of Mercer’s engagement is to assist the Committee with its responsibilities related to the Company’s executive and Board-level compensation programs. For additional information regarding the operation of the Compensation Committee, including the role of consultants and management in the process of determining the amount and form of executive compensation, see the Company’s CD&A below.

 

Mercer’s fees for executive compensation consulting to the Committee in 2010 were $34,092. These fees and the engagement of Mercer for executive compensation consulting services were approved by the Committee. The Company has also retained Mercer and/or its Marsh affiliates to provide other services, unrelated to executive compensation. These services include actuarial services, consulting, and data management for the Company’s retirement plans, and health and welfare plans, as well as services related to the Company’s property, casualty, and general liability risk analysis and insurance programs. The aggregate expense for these other services in 2010 was $606,720, exclusive of insurance premiums. The decision to engage Mercer or its Marsh affiliates for these other services unrelated to executive compensation consulting was made by Company management, and these services and related fees were not separately approved by the Compensation Committee or the Board.

 

Nominating and Corporate Governance Committee.  The Nominating and Corporate Governance Committee is chaired by John Puerner, who also serves as the Board’s Lead Director. The responsibilities of the Nominating and Corporate Governance Committee include the identification and recommendation of director candidates and the review of qualifications of directors for continued service on the Board. The Nominating and Corporate Governance Committee also has responsibility for shaping A. H. Belo’s corporate governance practices, including the development and periodic review of the corporate governance guidelines and the Board committee charters and shares responsibility for senior executive succession planning. The Nominating and Corporate Governance Committee met five times in 2010.

 

In evaluating director nominees, the Nominating and Corporate Governance Committee considers a variety of criteria, including an individual’s character and integrity; business, professional, and personal background; skills; current employment; community service; and ability to commit sufficient time and attention to the activities of the Board. It may also take into account any specific financial, technical or other expertise and the extent to which such expertise would complement the Board’s existing mix of skills and qualifications. The Committee considers these criteria in the context of the perceived needs of the Board as a whole and seeks to achieve a diversity of backgrounds and perspectives on the Board. The Board does not have a formal diversity policy, but does endeavor to have members with a broad mix of professional and personal backgrounds. The Committee assesses the effectiveness of its criteria and its efforts at achieving a diversity of backgrounds and perspectives on the Board when evaluating and recommending new director candidates.

 

The Nominating and Corporate Governance Committee employs a variety of methods for identifying and evaluating director nominees. The Committee reviews the size and composition of the Board as part of the annual Board evaluation process and makes recommendations to the Board as appropriate. If vacancies on the Board are anticipated, or otherwise arise, the Nominating and Governance Committee considers various potential candidates for director. Candidates may come to the Committee’s attention through current Board members, shareholders or other persons.

 

The policy of the Nominating and Corporate Governance Committee, as set forth in A. H. Belo’s corporate governance guidelines, is to consider a shareholder’s recommendation for nominee(s) when the shareholder

supplies the information required for director nominations under the advance notice provisions set forth in Article II of A. H. Belo’s bylaws within the time periods set forth in such Article of the bylaws. Shareholders desiring to submit a nomination for director should consult A. H. Belo’s bylaws, which are available upon request. The Committee evaluates shareholder-recommended nominees based on the same criteria it uses to evaluate nominees from other sources.

 

After the Nominating and Corporate Governance Committee identifies a potential candidate, there is generally a mutual exploration process, during which A. H. Belo seeks to learn more about a candidate’s qualifications, background, and level of interest in A. H. Belo, and the candidate has the opportunity to learn more about A. H. Belo. A candidate may meet with members of the Nominating and Corporate Governance Committee, other directors, and senior management. Based on information gathered during the course of this process, the Nominating and Corporate Governance Committee makes its recommendation to the Board. If the Board approves the recommendation, the candidate is nominated for election by A. H. Belo’s shareholders. The Board may also elect a director between annual meetings of shareholders. In those instances, the new director is nominated for re-election by A. H. Belo’s shareholders at the first annual meeting after his or her election to the Board.

 

The Board convenes executive sessions of non-management directors without Company management present at each regularly-scheduled meeting. The Lead Director presides at the executive sessions of the non-management directors. In addition, the independent directors meet in executive session at least annually, without Robert Decherd or Dealey Herndon present. Board committee chairs preside at executive sessions of their respective committees.

 

Board Leadership Structure

 

Currently, Robert Decherd serves as Chairman of the Board and Chief Executive Officer (“CEO”). The Board believes that the Company and its shareholders are best served by a leadership structure in which Mr. Decherd serves as Chairman and CEO and the Board has an independent Lead Director. Combining the roles of Chairman and CEO makes clear that the person serving in these roles has primary responsibility for managing the Company’s business, under the oversight and review of the Board. Under this structure, the Chairman and CEO chairs Board meetings, where the Board discusses strategic and business issues. The Board believes that this approach makes sense because the CEO is the individual with primary responsibility for implementing the Company’s strategy and managing its day-to-day operations. This structure also enables the CEO to act as a bridge between management and the Board, helping both to act with a common purpose.

 

At the same time, the Board believes that strong, independent Board leadership is a critical aspect of effective corporate governance. Accordingly, to provide independent leadership, the Board has established the position of Lead Director. The Lead Director is an independent director elected annually by the independent directors. John Puerner currently serves as the Lead Director. The Lead Director’s responsibilities and authority include:

 

 

The Board believes that a combined Chairman/CEO, together with a Lead Director, is the most appropriate leadership structure for the Board at this time. The Board also believes that it is in the best interests of the Company for the Board to make a determination about whether to separate or combine the roles of Chairman and CEO based upon the Company’s circumstances at a particular time. The Company’s bylaws permit the roles of Chairman and CEO to be filled by the same or different individuals, thereby providing the Board flexibility to determine whether the roles should be combined or separated based upon the Company’s needs from time to time.

Board Risk Oversight

 

At least annually, Company management provides the Audit Committee with a report regarding its enterprise risk assessment. The report identifies areas of enterprise risk, and aligns managerial and Board-level oversight, including at the Board committee level, and responsibility with the type of risk. In order to prepare the report, the Company’s Internal Audit Department interviews A. H. Belo business leaders at the corporate and operating unit level about the risk factors identified by the Company in its SEC filings, as well as other potential risks, to confirm Internal Audit’s baseline risk assessment. The risk assessment results are reviewed with management to determine if any future adjustments to the audit plan are needed.

 

The Audit Committee discusses the report’s findings with management. The Audit Committee oversees management’s risk assessment, including reviewing the Company’s risk profile and evaluating management’s approach to addressing identified risks. As specified in the Audit Committee charter, one of the specific duties and responsibilities of the Audit Committee is to review and discuss the Company’s policies with respect to risk assessment and risk management. While the Audit Committee has primary oversight responsibility for the risk assessment and management process, other committees of the Board also have responsibility for oversight of risk management. For example, our Human Resources Department and Compensation Committee consider the risks associated with our compensation policies and practices. The Nominating and Corporate Governance Committee oversees risk associated with the Company’s governance structure and processes.

 

The Board is kept informed of its committees’ risk oversight and related activities primarily through attendance at committee meetings and management reports. In addition, the Audit Committee escalates issues related to risk oversight to the full Board as appropriate so that the Board is appropriately informed of developments that could affect the Company’s risk profile and other aspects of its business. The Board also considers specific risk topics in connection with strategic planning and other matters. While the Board’s role in oversight of Company risk is not determinative of its leadership structure, the Board’s leadership structure helps facilitate risk assessment and review by independent directors under the leadership of the Lead Director.

 

Compensation Committee Interlocks and Insider Participation

 

Doug Carlston, Larry Hirsch, Ron McCray, Dave Morgan, Ty Miller, John Puerner, and Don Williams served as members of A. H. Belo’s Compensation Committee during 2010. Immediately following the annual meeting of shareholders in May 2010, Don Williams retired in accordance with the Company’s bylaw provisions governing director retirement and Dave Morgan resigned to pursue personal business endeavors. Ron McCray was elected to the Board of Directors in September 2010 and became a Compensation Committee member at that time. Doug Carlston, who served as the Compensation Committee chairman, resigned from the Board effective as of November 10, 2010, citing personal circumstances. Ron McCray succeeded Doug Carlston as Chairman of the Compensation Committee. No member of the A. H. Belo Compensation Committee during 2010 was a current or former officer or employee of A. H. Belo or had any relationship with A. H. Belo requiring disclosure under the caption “Certain Relationships.” None of A. H. Belo’s executive officers served as a director or as a member of the compensation committee (or other committee serving an equivalent function) of any other entity that had an executive officer serving as a director or as a member of A. H. Belo’s Compensation Committee during 2010.

 

Audit Committee Report

 

As described more fully in our written charter, which is posted on the Company’s Web site at www.ahbelo.com under “About A. H. Belo — Corporate Governance,” the Audit Committee represents the Board in its oversight of A. H. Belo’s financial reporting processes. In this context, the Audit Committee has reviewed and discussed with management and KPMG LLP, the Company’s independent auditors, A. H. Belo’s audited consolidated financial statements and the audit of the effectiveness of A. H. Belo’s internal control over financial reporting. The Audit Committee has discussed with KPMG LLP various matters, including the firm’s judgments as to the quality of A. H. Belo’s accounting principles and other matters required to be discussed under the rules adopted by the Public Company Accounting Oversight Board (“PCAOB”). In addition, the Audit Committee has received from KPMG LLP the written disclosures and the letter required by applicable requirements of the PCAOB regarding

KPMG LLP’s communications with the Audit Committee concerning independence, and has discussed with the firm its independence from A. H. Belo and our management team.

 

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board has approved, that the audited consolidated financial statements be included in A. H. Belo’s Annual Report on Form 10-K for the year ended December 31, 2010, for filing with the SEC.

 

Respectfully submitted,

 

Audit Committee

Tyree B. Miller, Chairman

Louis E. Caldera

Laurence E. Hirsch

Ronald D. McCray

John P. Puerner

 

Communications with the Board

 

The Company has a process for shareholders and other interested parties to communicate with the Board. These parties may communicate with the Board by writing c/o the Secretary, P. O. Box 224866, Dallas, Texas 75222-4866. Communications intended for a specific director or directors (such as the Lead Director or non-management directors) should be addressed to his, her, or their attention c/o the Secretary at this address. Communications received from shareholders are provided directly to Board members at, or as part of the materials mailed in advance of, the next scheduled Board meeting following receipt of the communications. The Board has authorized management, in its discretion, to forward communications on a more expedited basis if circumstances warrant or to exclude a communication if it is illegal, unduly hostile or threatening, or similarly inappropriate. Advertisements, solicitations for periodical or other subscriptions, and other similar communications generally are not forwarded to the directors.

 

A. H. Belo’s executive officers as of December 31, 2010 were as follows:

 

 

 

 

The following overview highlights and summarizes information regarding executive compensation and does not purport to contain all of the information that is necessary to gain an understanding of our executive compensation policies and decisions. Please carefully read the entire Compensation Discussion and Analysis (“CD&A”) section and the compensation tables and related disclosure that follow for a more complete understanding of our executive compensation program.

 

Overview

 

A. H. Belo is one of the leading independent newspaper publishers in the United States, comprising four award-winning daily newspapers and related online businesses. A. H. Belo became a separate public company following its spin-off from Belo Corp. on February 8, 2008.

 

The newspaper industry continues to experience substantial change caused by the effect of the Internet and other transformational technologies on consumers and advertisers and the rapid ascent of new media businesses. These business issues became more pronounced as a result of recent economic conditions throughout the U.S. and stresses these economic conditions place on our advertisers and consumers. From an executive compensation perspective, this business environment underscores the importance of retaining both experienced and high-potential executives, and rewarding superior individual performance that may not presently be reflected in the Company’s stock price, revenues or operating profit.

 

The significant downturn in the U.S. economy that began during 2008 negatively affected the Company’s revenues, profitability and stock price. As a result, the Company’s senior management and the Compensation Committee of the Board of Directors (the “Compensation Committee” or the “Committee”) have made significant changes to the Company’s compensation programs in the past several years that were designed to align expenses with expected lower revenues and preserve cash. These changes include the following actions:

 

 

In 2010, employee salaries remained at the already reduced levels established in 2009. For certain employees with a significant workload increase or changes in responsibility, salary adjustments were made. As A. H. Belo’s overall financial performance improved in the second half of 2009 and into 2010, in part due to the cost reduction efforts taken by the Compensation Committee and senior management, the Compensation Committee approved a special one-time bonus program for all Company employees in 2010 based on the achievement of corporate or business unit EBITDA goals. Executives participated in the bonus program at a reduced cash incentive bonus equal to 50 percent of their usual target bonus opportunity. With a focus on cost and dilution considerations, the Compensation

Committee approved long-term incentive grants to a limited group of senior executives in 2010, providing additional alignment with shareholder interests.

 

The Company’s senior management, with the support of the Compensation Committee, continues to address executive compensation policies and practices proactively, taking into consideration both the interests of shareholders and the need to retain a talented and experienced management team.

 

Overview of Compensation Program

 

The Compensation Committee of the A. H. Belo Board of Directors oversees the Company’s overall compensation structure, policies and programs, and has responsibility for establishing, implementing and monitoring adherence to the Company’s compensation philosophy. For 2010, the primary management liaisons to the Compensation Committee were the Company’s Chief Executive Officer, Robert Decherd, and its senior vice president, Dan Blizzard.

 

Objectives of Our Program

 

Following the spin-off from Belo Corp. in 2008, A. H. Belo adopted compensation policies to achieve the following objectives:

 

 

Due to continuing challenges in the newspaper industry, the Company recognized it was unable to meet some of the objectives. However, decisions made in the past year considered the program’s overall goals for participants.

 

Role of the Compensation Committee

 

The Compensation Committee administers our executive compensation programs. The Compensation Committee establishes and monitors overall compensation strategy to ensure that executive compensation supports our business objectives. In carrying out its responsibilities, the Compensation Committee, with assistance from its executive compensation consultant, reviews and determines the compensation (including salary, annual incentive, long-term incentives and other benefits) of our NEOs. For a more complete description of the responsibilities of the Compensation Committee, see “Corporate Governance — Committees of the Board” beginning on page 22 of this proxy statement.

 

Role of the Compensation Consultant

 

The Compensation Committee has retained Mercer as its outside consultant to advise the Compensation Committee on executive compensation matters. A representative from Mercer regularly attends Compensation Committee meetings, and reports directly to the Compensation Committee on matters relating to compensation for our executive officers, including our CEO.

 

During 2010, Mercer, at the Compensation Committee’s request:

 

 

Role of Company Management

 

The Compensation Committee makes the final decisions on CEO compensation, with advice from Mercer, as appropriate. Our senior management, including the CEO, develops preliminary recommendations regarding compensation matters with respect to all executives other than the CEO and provides these recommendations to the Compensation Committee, which makes the final decisions as to the executive officers. The management team is responsible for the administration of the compensation programs once Compensation Committee decisions are finalized.

 

The Compensation Program

 

The key components of our current compensation program for our key executives are:

 

 

Following our spin-off in 2008, the overall compensation program was established in part based on the practices within a group of comparable newspaper publishing companies. Due to significant compensation changes occurring within the newspaper industry, we adjusted our approach from using specific peer companies in 2009 to using survey data in 2010 provided by Towers Watson for general industry (a composite of all types of industries within the survey) and the media industry (for newspaper-specific positions). The Towers Watson survey contains over 450 general industry companies and over 100 media companies. All named executive officers’ positions were compared, at the 50th percentile of the general industry survey, to positions with similar responsibilities at companies with comparable revenues. This compensation survey data was used to review base salaries, annual cash incentive targets and payouts, and long-term incentives.

 

Given the business conditions the Company faced in 2010, management undertook a detailed analysis using the Towers Watson general industry and media industry surveys to calibrate our programs relative to market practices for base salary, annual bonus and long-term incentives. Throughout 2010, the Compensation Committee reviewed and monitored, with the assistance of its compensation consultant, trends in the industry, trends for companies facing similar business challenges as a result of the economy, and trends in the market generally to determine appropriate compensation policies and recommendations to address these market conditions.

 

As a result, the Company-wide salary reductions made in 2009 were not restored in 2010. Only selective salary increases were given to employees with significantly expanded duties or for promotions. After not paying any annual cash incentive bonuses in 2009 due to the extremely difficult economic environment, the Company announced a special, one-time cash bonus opportunity for most Company employees that covered performance for the first nine months of 2010. The bonus opportunities were established in recognition of the progress the Company had made in improving financial results from the prior year. With respect to long-term incentive awards, the Compensation Committee and senior management utilized a “clean sheet” approach — not relying on historical grant levels. The grant methodology utilized by the Committee relied upon general industry and newspaper-specific survey data for position matching. However, as described further below, final decisions and timing regarding any long-term incentive awards were guided primarily by balancing cost, dilution and retention considerations.

 

Base Salary

 

Base salary is designed to compensate our key executives in part for their roles and responsibilities and also to provide a stable level of compensation that serves as a retention tool throughout the executive’s career. Assuming a normal operating environment, salaries are targeted at the median of the market for similar positions in the Towers Watson general industry survey or Towers Watson media industry survey (for newspaper-specific positions).

 

Based on management’s recommendation in 2009, the base salary of our CEO was reduced by 20%, and the salaries for our other NEOs were reduced by 15%. Neither our CEO nor Jim Moroney received any base salary increase in 2010, effectively freezing their base salaries at the reduced 2009 levels. The Compensation Committee approved an increase in Ali Engel’s annual base salary from $267,750 to $300,000 and an increase in Dan Blizzard’s annual base salary from $204,000 to $250,000. These increases were effective March 1, 2010, in connection with the departure

of an executive whose responsibilities were redistributed to Ali and Dan. The increases in base salaries were similar to increases for key employees with similar changes in responsibilities at the operating unit level during 2010. In September 2010, in recognition of the significant contributions and resulting financial impact that John McKeon has made to the Company since joining The Dallas Morning News in 2007, the Compensation Committee ratified a retention and relocation agreement with John that included increasing his base salary to $400,000. The material terms of this agreement can be found on page 41 of this proxy statement.

 

Incentive Programs — Overview

 

The annual cash incentives (annual performance bonuses) and long-term equity-based incentive compensation are provided under the A. H. Belo 2008 Incentive Compensation Plan and administered by the Compensation Committee. This plan was approved by shareholders in 2009. The Company refers to the Incentive Compensation Plan as the ICP. Awards under the ICP are supplemental to an ICP participant’s base salary and are designed to focus participants on achieving key financial goals, encourage retention and motivation of participants, and reward them for market-driven results. Officers of A. H. Belo and its subsidiaries, including A. H. Belo’s CEO and its other NEOs, are eligible to participate in the ICP. Additional ICP participants may be selected by the Compensation Committee based on management’s evaluation of an individual’s ability to significantly affect A. H. Belo’s results.

 

Annual Cash Incentive Program

 

Historically, under the terms of the ICP, each A. H. Belo executive officer has been eligible to receive an annual cash incentive bonus based on financial performance objectives established in the annual financial plan (the “Financial Plan”) approved by the Board of Directors. The financial performance objectives may vary from year to year and reflect the cyclical nature of A. H. Belo’s businesses due to fluctuating advertising demand and changes in media usage habits by consumers and advertisers, and other competitive conditions, including recruiting and retaining talent.

 

Specific Program for 2010.  After 2009, when no annual cash incentive bonuses were paid, the Compensation Committee waited until signs of improvement and stability were evident in 2010 before approving a special, one-time cash bonus opportunity based upon consolidated EBITDA performance for corporate executives or operating unit EBITDA performance for operating unit executives, for the first nine months of 2010. Due to the timing of the Compensation Committee’s decision and the nine-month performance period, the 2010 bonus opportunity was outside the terms of the ICP. The Compensation Committee selected EBITDA as the sole performance metric to ensure alignment with the Board’s focus on EBITDA as an important measure of financial performance in 2010. All NEOs except for John McKeon were evaluated against consolidated EBITDA goals. John’s award was based on EBITDA results at The Dallas Morning News.

 

In setting the target bonus award opportunities for NEOs, the Committee took into account both pay for performance and retention considerations. Due to the ongoing challenges facing our Company and the newspaper industry in general, the Committee set each NEO’s target cash bonus opportunity at 50 percent of the level that has historically been targeted under the ICP. This resulted in target award opportunities being below the median of the industry surveys for each executive officer.

 

When determining threshold, target and maximum levels for 2010’s cash incentive bonuses, the Compensation Committee concentrated on setting appropriate financial performance goals and corresponding award opportunities in order to motivate and reward performance, yet recognize the current economic environment and competitive variables in the newspaper sector. The EBITDA target was based on our Financial Plan for 2010. Threshold and maximum EBITDA levels were set at 85% and 115%, respectively, of the EBITDA target. Corresponding annual bonus funding levels were 10%, 100%, and 200% for threshold, target, and maximum EBITDA performance, respectively. The following chart shows EBITDA goals for the first nine months of 2010 for each of the corresponding performance levels (threshold, target and maximum) and our actual EBITDA results for the first nine months of 2010.

Summary of EBITDA Goals and Results (Q1 - Q3)

 

 

Actual results listed in the chart above include adjustments for items that are excluded for purposes of bonus calculation, as management’s ability to control or influence such expenses is limited (e.g., pension expense).

 

As a result of the Company achieving maximum financial performance relative to the established range for the first nine months of 2010, NEOs received maximum payouts for the special one-time cash bonus. The bonuses were funded at 200% and therefore calculated at two times the reduced targets (50% of ICP levels). These bonuses were awarded outside the terms of the ICP.

 

Summary of NEO Target Bonus Award Opportunities and Actual Payouts

 

 

 

 

Long-Term Equity Incentive Compensation

 

Historically, as a part of Belo Corp. and beginning in 2008 following the spin-off, the Company has awarded long-term equity incentive grants, or LTI compensation, to executive officers as part of its overall compensation program. These awards are designed to offer competitive compensation that encourages the retention and motivation of key executives, and rewards them based upon market-driven results. The ICP provides the Compensation Committee with discretion to require performance-based standards to be met before awards vest. According to the ICP structure, the Compensation Committee determines each executive officer’s intended LTI compensation value, then determines the allocation of the LTI compensation award among three available types of equity instruments: time-based restricted stock units, referred to as TBRSUs, stock options, and performance-related restricted stock units, referred to as PBRSUs. TBRSUs encourage executives to remain with the Company and to focus on its long-term success. Stock options encourage and reward stock price performance, thus aligning the executive’s interests with those of shareholders. PBRSUs reward the achievement of A. H. Belo’s cumulative annual financial performance goals. Since the ultimate value of the LTI compensation awards depends upon the performance of A. H. Belo common stock, the interests of the executive officers are aligned with the financial interests of A. H. Belo’s shareholders.

 

Specific Program for 2010.  In developing LTI recommendations for 2010, the Compensation Committee’s primary focus was to balance dilution, cost and retention concerns. The Compensation Committee chose to grant TBRSUs to NEOs in order to accomplish several objectives, including: 1) managing share usage and dilution to acceptable levels; 2) aligning the interests of executives with those of shareholders; 3) providing retention to key executives over a multi-year period; and 4) ensuring that the total expense incurred is consistent with the value delivered to executives.

Each TBRSU represents a contingent right to receive the value of one share of A. H. Belo Series A common stock. TBRSUs are valued as of the date of vesting and are paid 60% in shares of A. H. Belo Series A common stock and 40% in cash. In order to positively impact employee retention, TBRSUs granted in 2010 vest as follows: 40% on the third trading day following the annual earnings release date for the year ending December 31, 2010; 30% on the third trading day following each annual earnings release date for the years ending December 31, 2011 and 2012.

 

A “clean sheet” approach was used in 2010 for setting the award values for each NEO, meaning that no consideration was given to prior grants. Based on recommendations from senior management and assistance from its compensation consultant, the Compensation Committee used median general industry survey data reflecting companies of similar size and scope as A. H. Belo to determine appropriate LTI grant values for the NEOs. A description of the survey data used can be found under “The Compensation Program” on page 30 of this proxy statement. The Committee also considered both executive and corporate performance, total cost, and shareholder dilution, with no specific goals or weightings assigned to such factors, when determining the size of equity grants. The following table displays the grant date fair market value of the long-term equity grants to the NEOs in 2010.

 

Summary of NEO 2010 TBRSU Awards

 

 

Retirement Benefits

 

Prior to the 2008 spin-off, Belo Corp. offered pension benefits to eligible employees through The G. B. Dealey Retirement Pension Plan (the “Pension Plan”). In March 2007, Belo froze the Pension Plan and all affected employees were provided with transition benefits. At the time of the spin-off, Belo Corp. remained the sole sponsor and administrator of the Pension Plan for all of its approximately 9,300 participants, and A. H. Belo agreed to share investment oversight responsibilities with Belo Corp. and to reimburse Belo Corp. for 60 percent of each contribution Belo Corp. made to the Pension Plan.

 

The Company and Belo Corp. split the Pension Plan effective January 1, 2011. Under the agreement, benefit liabilities and assets allocable to the approximately 5,100 current and former employee participants of A. H. Belo and its newspaper businesses were transferred to two new defined benefit pension plans created, sponsored and managed by or on behalf of A. H. Belo. Benefits under the new A. H. Belo plans will continue to be frozen like the Pension Plan and A. H. Belo is now solely responsible for contributions to those plans. The split of the Pension Plan does not change the amount of the benefits any participant has accrued or is currently receiving.

 

In connection with the Pension Plan freeze in 2007, A. H. Belo adopted two separate defined contribution plans at the time of the spin-off which were designed to provide supplemental pension benefits over a five-year period for all A. H. Belo employees who were participants in the Pension Plan, including Robert Decherd and Jim Moroney. The A. H. Belo PTS Plan is an account-balance plan intended to qualify under the provisions of Section 401(a) of the Internal Revenue Code. The A. H. Belo PTS Restoration Plan is a non-qualified plan and is intended to cover any transition supplement payments that exceed Internal Revenue Service (“IRS”) limits to all qualified plan accounts.

 

The Company suspended, with respect to all participants, the 2009 contributions that would have been made to the PTS Plan and PTS Restoration Plan in 2010. Effective January 1, 2010, the PTS Plan and PTS Restoration Plan benefits were reinstated for all participants and accrued benefits for 2010 will be contributed in 2011. For additional discussion of the PTS Plan and the PTS Restoration Plan, see “Post-Employment Benefits” on page 42 of this proxy statement.

Employment Agreements

 

In 2010, the Compensation and Nominating and Corporate Governance Committees ratified a retention and relocation agreement with John McKeon, a named executive officer in this proxy statement. The agreement was in recognition of John’s appointment to the A. H. Belo Management Committee in 2010 and the significant contributions and resulting financial impact that he has made to the Company since joining The Dallas Morning News in 2007. John had been commuting between Southern California and Dallas since the time of his hire, and the Board felt it was imperative that he reside in Dallas, given his responsibilities as President and General Manager of The Dallas Morning News and a member of the Company’s Management Committee. The agreement with John McKeon includes clawbacks in the event he voluntarily leaves the Company prior to September 22, 2013. The material terms of the agreement can be found under “Employment Arrangements” on page 41 of this proxy statement. The Company does not have individual employment agreements with any of its other executive officers.

 

Change in Control and Severance Benefits

 

The Compensation Committee believes that severance and change of control benefits are necessary in order to attract and retain the caliber of executives A. H. Belo needs in its most senior positions. These benefits are particularly important in an industry undergoing significant restructuring, providing for continuity of senior management and helping executives focus on business results, cost management, and strategic initiatives.

 

CIC Plan.  The levels of payments and benefits available upon termination of employment in connection with a change in control were originally set to be comparable to those provided at similar companies. However, as noted earlier, in March 2009 the Company reduced the severance benefits payable as part of its ongoing effort to manage compensation expense and no additional changes were made to the CIC Plan in 2010. Additional information regarding the severance and change in control payments, including a definition of key terms and quantifications of benefits that would have been received by our NEOs had termination occurred on December 31, 2010, is found under “Potential Payments on Change in Control or Upon Termination of Employment at December 31, 2010” table on page 47 of this proxy statement.

 

2009 Severance Plan.  Effective January 1, 2009, the A. H. Belo Management Committee, under the authority of the Board of Directors, adopted the 2009 Severance Plan which provides for severance payments for both officers and non-officer employees of A. H. Belo and its subsidiary companies in the event of termination of employment due to general involuntary terminations including, but not limited to, reduction-in-force and cost reengineering actions. Under the 2009 Severance Plan, any NEO, as well as each vice president and above, who is terminated due to such an action is eligible for a lump sum severance payment plus a certain amount of benefits coverage. No changes were made to this plan in 2010. For additional discussion, see “Potential Payments on Change in Control or Upon Termination of Employment at December 31, 2010” on page 47 of this proxy statement.

 

Tax Treatment

 

Under section 162(m) of the Internal Revenue Code, the Company generally receives an annual federal income tax deduction for compensation paid to the CEO and the other three most highly paid executives (excluding the CFO) only if the compensation is less than $1 million or is performance-based. The applicable awards granted under the ICP qualify as performance-based compensation and typically are fully tax-deductible for the Company, except for TBRSUs. The Company intends to continue seeking a tax deduction to the extent possible for all executive compensation, as long as it is in the best interests of A. H. Belo and its shareholders.

Compensation Committee Report

 

In accordance with its written charter adopted by our Board of Directors, the Compensation Committee has oversight of the Company’s overall compensation structure, policies and programs. In exercising its oversight responsibility, the Committee has retained a compensation consultant to advise the Committee regarding market and general compensation trends.

 

The Committee, after consultation with its compensation consultant, has reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) with management, which has the responsibility for preparing the CD&A. Based upon this review and discussion, the Committee recommended to our Board that the CD&A be included in this proxy statement and incorporated by reference in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2010.

 

COMPENSATION COMMITTEE

 

Ronald D. McCray, Chairman

Louis E. Caldera

Laurence E. Hirsch

Tyree B. Miller

John P. Puerner

 

The following information summarizes annual and long-term compensation awarded to, earned by or paid to A. H. Belo’s principal executive officer, principal financial officer and its three other most highly-paid executive officers for services in all capacities to A. H. Belo for the years ended December 31, 2010 and 2009, respectively, and for the partial year ended December 31, 2008.

 

 

 

 

 

Grants of Plan-Based Awards in 2010

 

The following table summarizes cash-based and equity awards that were granted under the ICP during 2010.

 

 

 

Equity Holdings and Value Realization

 

Effective with the spin-off, equitable adjustments were made with respect to stock options and restricted stock units (“RSUs”) originally relating to Belo Corp. common stock. As a result, securities exercisable for or settled in A. H. Belo’s common stock were issued to each of the NEOs pursuant to the anti-dilution adjustment provisions of their previously outstanding Belo Corp. stock option and RSU awards. Information regarding the A. H. Belo option and RSU awards received by the NEOs as a result of the spin-off was disclosed in the “A. H. Belo Corporation Outstanding Equity Awards at Fiscal Year-End 2008” table of the Company’s 2009 proxy statement. Subsequent to the spin-off, A. H. Belo made awards of stock options to the NEOs in December 2008; no LTI awards were made in 2009; and TBRSU awards were made in January 2010.

 

The following table contains information on all A. H. Belo equity awards that were outstanding as of December 31, 2010.