DFS Proxy Statement

Compensation Discussion and Analysis RRD Pre-Spin Compensation Philosophy The executive compensation program at RRD was designed to align the interests of its stockholders and executive officers while providing a total compensation package that enabled RRD to attract, retain and motivate executives. Overall compensation levels were targeted at market survey data medians and, where available, the peer group target median, with a range of opportunity to reward strong performance or withhold rewards when objectives were not achieved. Historically, RRD’s compensation philosophy was guided by five principles: • establish target compensation levels that are competitive within the industries and the markets in which it competes for executive talent; • structure compensation so that RRD’s executives share in RRD’s short- and long-term successes and challenges by varying compensation from target levels based upon business and individual performance; • link pay to performance by making a substantial percentage of total executive compensation variable, or “at risk,” through annual incentive compensation and the granting of long-term incentive awards; • base a substantial portion of each NEO’s long-term incentive award on performance measures while maintaining a meaningful portion that vests over time and is therefore focused on the retention of its top talent; and • align a significant portion of executive pay with RRD stockholder interests through equity awards and stock ownership requirements. RRD Pre-Spin Compensation Best Practices Consistent with its compensation philosophy, RRD adopted the following compensation best practices: • the RRD HR Committee determined that any future executive officer agreements would not include any gross-up for excise taxes; • equity plans do not permit option repricing or option grants below fair market value; • no tax gross-ups on any supplemental benefits or perquisites; • policy that prohibits employees, directors and certain of their immediate family members from pledging, short sales, trading in publicly traded options, puts or calls, hedging or similar transactions with respect to RRD stock; • no payment or accrual of dividends on performance share units, or PSUs, or restricted stock units, or RSUs; • limited perquisites provided to executive officers; • clawback policy covering all executive officers; • the RRD HR Committee hired Willis Towers Watson Human Resources Consulting or Willis Towers Watson, as its executive compensation consultant because of their expertise and years of experience as well as their previous work with the RRD HR Committee on the full scale evaluation of all the executive compensation programs at RRD; • meaningful stock ownership requirements for senior management including executive officers to further strengthen the alignment of management and stockholder interests; and • annual review of executive compensation program by RRD’s HR Committee to determine how well actual compensation targets and levels met RRD’s overall philosophy and its targeted objectives in comparison to both its market data and, where available, peer group data. 22