nabors industries ltd. - glass lewis€¦ · proxy paper nabors industries ltd. nyse: nbr isin:...

PROXY PAPERNABORS INDUSTRIES LTD.

NYSE: NBR ISIN: BMG6359F1032

MEETING DATE: 03 JUNE 2014

RECORD DATE: 04 APRIL 2014

PUBLISH DATE: 18 MAY 2014

COMPANY DESCRIPTION

Nabors Industries Ltd., together with its subsidiaries,provides drilling and rig services; and completion andproduction services.

INDEX MEMBERSHIP: RUSSELL 3000; S&P 500; RUSSELL 1000

SECTOR: ENERGY

INDUSTRY: ENERGY EQUIPMENT AND SERVICES

COUNTRY OF TRADE: UNITED STATES

COUNTRY OF INCORPORATION: BERMUDA

VOTING IMPEDIMENT: NONE

DISCLOSURES: REFER TO APPENDIX REGARDINGCONFLICTS OF INTEREST

OWNERSHIP COMPANY PROFILE COMPENSATION PREVIOUS BOARD PEER COMPARISON VOTE RESULTS APPENDIX

2014 ANNUAL MEETING PROPOSAL ISSUE BOARD GLASS LEWIS CONCERNS

1.00 Election of Directors FOR SPLIT

1.01 Elect James R. Crane FOR FOR

1.02 Elect John P. Kotts FOR FOR

1.03 Elect Michael C. Linn FOR WITHHOLD Ongoing compensation concerns

1.04 Elect John V. Lombardi FOR WITHHOLD Ongoing compensation concerns

1.05 Elect Anthony G. Petrello FOR FOR

1.06 Elect Howard Wolf FOR FOR

1.07 Elect John Yearwood FOR WITHHOLD Excessive against/withhold votesOngoing compensation concerns

2.00 Ratification of Auditor FOR FOR

3.00 Amendment to Shareholder Rights Plan FOR AGAINST Anti-takeover device

4.00 Advisory Vote on Executive Compensation FOR AGAINST Pay and performance disconnectNot in shareholders' interest

5.00 Shareholder Proposal Regarding Shareholder Approval ofSpecific Performance Metrics in Equity CompensationPlans

AGAINST AGAINST

6.00 Shareholder Proposal Regarding Retention of Shares AGAINST AGAINST

7.00 Shareholder Proposal Regarding Sustainability Report AGAINST FOR

The production of a comprehensivesustainability report could provideshareholders with valuable informationregarding the risks and opportunitiesassociated with the Company'soperations

8.00 Shareholder Proposal Regarding Majority Vote forElection of Directors

AGAINST FOR Majority voting increases boardaccountability and performance

9.00 Shareholder Proposal Regarding Proxy Access AGAINST FOR We believe 3% ownership over threeyears is sufficeint for proxy access

10.00 Shareholder Proposal Regarding Counting BrokerNon-Votes

AGAINST FOR Unvoted shares should not be counted

NBR June 03, 2014 Annual Meeting 2 Glass, Lewis & Co., LLC

SHARE OWNERSHIP PROFILE

SHARE BREAKDOWN

1

SHARE CLASS Common Shares

SHARES OUTSTANDING 325.8 M

VOTES PER SHARE 1

INSIDE OWNERSHIP 3.00%

STRATEGIC OWNERS** 10.87%

FREE FLOAT 89.13%

SOURCE CAPITAL IQ AND GLASS LEWIS. AS OF 02-MAY-2014

TOP 20 SHAREHOLDERS HOLDER OWNED* COUNTRY INVESTOR TYPE

1. Pamplona Capital Management, Llc 7.86% United States VC/PE Firm 2. The Vanguard Group, Inc. 5.59% United States Traditional Investment Manager 3. State Street Global Advisors, Inc. 4.24% United States Traditional Investment Manager 4. Sasco Capital Inc. 4.18% United States Traditional Investment Manager 5. Wentworth, Hauser and Violich, Inc. 3.46% United States Traditional Investment Manager 6. Invesco Ltd. 2.95% United States Traditional Investment Manager 7. Petrello, Anthony G. 2.22% N/A Individuals/Insiders 8. BlackRock, Inc. 1.90% United States Traditional Investment Manager 9. Blue Harbour Group, L.P. 1.82% United States Hedge Fund Manager 10. Dimensional Fund Advisors LP 1.67% United States Traditional Investment Manager 11. Sprucegrove Investment Management Ltd 1.41% Canada Traditional Investment Manager 12. The TCW Group, Inc. 1.36% United States Traditional Investment Manager 13. Northern Trust Global Investments 1.26% United States Traditional Investment Manager 14. Teachers Insurance and Annuity Association College Retirement Equities Fund 1.08% United States Traditional Investment Manager 15. EARNEST Partners, LLC 0.99% United States Traditional Investment Manager 16. Overland Advisors, LLC 0.95% United States Hedge Fund Manager 17. Snow Capital Management, LP 0.93% United States Traditional Investment Manager 18. Canada Pension Plan Investment Board 0.92% Canada Government Pension Sponsor 19. Millennium Management, L.L.C. 0.91% United States Hedge Fund Manager 20. LSV Asset Management 0.85% United States Traditional Investment Manager

*COMMON STOCK EQUIVALENTS (AGGREGATE ECONOMIC INTEREST) SOURCE: CAPITAL IQ. AS OF 02-MAY-2014 **CAPITAL IQ DEFINES STRATEGIC SHAREHOLDER AS A PUBLIC OR PRIVATE CORPORATION, INDIVIDUAL/INSIDER, COMPANY CONTROLLED FOUNDATION,ESOP OR STATE OWNED SHARES OR ANY HEDGE FUND MANAGERS, VC/PE FIRMS OR SOVEREIGN WEALTH FUNDS WITH A STAKE GREATER THAN 5%.

SHAREHOLDER RIGHTS MARKET THRESHOLD COMPANY THRESHOLD1

VOTING POWER REQUIRED TO CALL A SPECIAL MEETING N/A 10.0% VOTING POWER REQUIRED TO ADD AGENDA ITEM 1.0%2 1.0%2 VOTING POWER REQUIRED FOR WRITTEN CONSENT N/A 100.0%

1N/A INDICATES THAT THE COMPANY DOES NOT PROVIDE THE CORRESPONDING SHAREHOLDER RIGHT.2SHAREHOLDERS MUST OWN THE CORRESPONDING PERCENTAGE OR SHARES WITH MARKET VALUE OF AT LEAST $2,000 FOR AT LEAST ONE YEAR.


COMPANY PROFILE

FINANCIALS

1 YR TSR 3 YR TSR AVG. 5 YR TSR AVG.

NBR 18.8% -9.9% 7.5%S&P 500 INDEX 32.4% 16.2% 17.9%PEERS* 28.6% 5.5% 20.7%

MARKET CAPITALIZATION (MM USD) 5,015 ENTERPRISE VALUE (MM USD) 8,621 REVENUES (MM USD) 6,152

ANNUALIZED SHAREHOLDER RETURNS. *PEERS ARE BASED ON THE INDUSTRY SEGMENTATION OF THE GLOBAL INDUSTRIAL CLASSIFICATION SYSTEM(GICS). FIGURES AS OF 31-DEC-2013. SOURCE: CAPITAL IQ

EXECUTIVECOMPENSATION

CHANGE IN CEO PAY* 1 YR 3 YR 5 YR

246% 404% 14% *SOURCE: EQUILAR. SIMPLE AVERAGE CALCULATION.

SAY ON PAY FREQUENCY 1 Year P4P 2013 F GLASS LEWIS STRUCTURE RATING Fair GLASS LEWIS DISCLOSURE RATING Poor SINGLE TRIGGER CIC VESTING No EXCISE TAX GROSS-UPS No CLAWBACK PROVISION No OVERHANG OF INCENTIVE PLANS 10.34%

ENVIRONMENTAL& SOCIAL

2012 2011 2010 EEOC FINES N/A N/A N/A EPA FINES 0 0 0 LOBBYING EXPENDITURES 140,000 180,000 140,000 % OF WOMEN IN THE WORKPLACE N/ARESPONDED TO CDP NOT INVITED TO PARTICIPATE OR DID NOT RESPOND

GRI-COMPLIANT SUSTAINABILITY REPORT

UN GLOBAL COMPACT SIGNATORY

HUMAN RIGHTS POLICY CONFORMSWITH ILO OR UN DECLARATION ONHUMAN RIGHTS

NON-DISCRIMINATION POLICY INCLUDESGENDER IDENTITY AND/OR GENDEREXPRESSION

REGULARLY DISCLOSES TOTAL AMOUNTOF CORPORATE POLITICALCONTRIBUTIONS

HAS GHG EMISSIONS TARGET

DISCLOSES TOTAL WATER USE

= Applies. Source: IW Financial

BOARD &MANAGEMENT

ELECTION METHOD Plurality w/ Resignation Policy CEO START DATE 10/29/2011

STAGGERED BOARD No AVERAGE NEDTENURE 3 years

COMBINED CHAIRMAN/CEO Yes

ANTI-TAKEOVERMEASURES

POISON PILL Yes APPROVED BY SHAREHOLDERS/EXPIRATION DATE No; 7/16/16

AUDITORSAUDITOR: PRICEWATERHOUSECOOPERS TENURE: 27 YEARS MATERIAL WEAKNESS(ES) IDENTIFIED IN PAST 12 MONTHS No RESTATEMENT(S) IN PAST 12 MONTHS No

CURRENT AS OF MAY 18, 2014


PAY-FOR-PERFORMANCE

Nabors Industries Ltd.'s executive compensation received an F grade in our proprietary pay-for-performance model. The Company paid more compensation to its namedexecutive officers than the median compensation for a group of companies selected using Equilar's market based peer algorithm.The CEO was paid significantly morethan the median CEO compensation of these peer companies. Overall, the Company paid significantly more than its peers, but performed worse than its peers.

HISTORICAL COMPENSATION GRADE FY 2013: F

FY 2012: F

FY 2011: F

FY 2013 CEO COMPENSATION SALARY: $1,600,000

GDFV EQUITY: $17,925,264

NEIP/OTHER: $47,826,766

TOTAL: $67,352,030

FY 2013 PAY-FOR-PERFORMANCE GRADE 3-YEAR WEIGHTED AVERAGE COMPENSATION

EQUILAR PEERS VS PEERS DISCLOSED BY COMPANY

EQUILAR NBRWeatherford InternationalLtd.* Transocean Ltd.* Helmerich & Payne, Inc.* Noble Corp.* Diamond Offshore Drilling,Inc.* Rowan Companies plc* National Oilwell Varco, Inc.* Schlumberger Limited* Patterson-UTI Energy Inc. Halliburton Company* Baker Hughes Incorporated* Vantage Drilling Company Cameron InternationalCorporation Oceaneering International,Inc. FMC Technologies, Inc.

Freeport-McMoRan Copper &Gold Inc. ConocoPhillips Ensco plc

*ALSO DISCLOSED BY NBR

SHAREHOLDER WEALTH AND BUSINESS PERFORMANCE


Analysis for the year ended 12/31/2013. Performance measures, except ROA and ROE, are based on the weighted average of annualized 1, 2, and 3 year data.Compensation figures are weighted average 3-year data calculated by Glass Lewis based on information disclosed by the Company and its peers in their proxy filings. ForCanadian peers, equity awards are normalized using the grant date exchange rate and cash compensation data is normalized using the fiscal year average exchange rate.

Equilar peers are updated in January and July. Peer data is based on public information, as well as information provided to Equilar during its open submission periods. The“Peers Disclosed by Company” data is based on public information only. Glass Lewis may exclude certain peers from the Pay for Performance analysis based on factors suchas trading status and/or data availability. For details of exclusion criteria, go to: www.glasslewis.com. For more information about Equilar peer groups, go to: www.equilar.com


http://www.glasslewis.com/resources/pay-for-performance/

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1.00: ELECTION OF DIRECTORS

PROPOSAL REQUEST: Election of seven directors RECOMMENDATIONS & CONCERNS:PRIOR YEAR VOTE RESULT: N/A WITHHOLD- Linn M. Ongoing compensation concerns

Lombardi J. Ongoing compensation concerns Yearwood J. Ongoing compensation concerns, Director

received excessive against/withhold votes FOR- Crane J.

Kotts J.Petrello A.Wolf H.

NOT UP- None

ELECTION METHOD: Plurality w/ Resignation Policy

BOARD OF DIRECTORS

NAME UP AGE GLASS LEWISCLASSIFICATION

COMPANYCLASSIFICATION

OWNERSHIP** COMMITTEES TERMSTART

TERMEND

YEARSON

BOARDAUDIT COMP GOV NOM

Anthony G. Petrello*

·CEO·Chairman

59 Insider 1 Not Independent Yes 1991 2014 23

James R. Crane 60 Independent 2 Independent Yes 2012 2014 2

John P. Kotts 63 Independent Independent Yes 2013 2014 1

Michael C. Linn 62 Independent Independent Yes 2012 2014 2

John V. Lombardi 71 Independent Independent Yes C 2009 2014 5

Howard Wolf 79 Independent 3 Independent Yes 2013 2014 1

John Yearwood 54 Independent 4 Independent Yes C C 2010 2014 4

C = Chair, * = Public Company Executive, = Withhold or Against Recommendation

Chairman, president and CEO. 1.Chairman and CEO of Crane Capital Group Inc., which received approximately $39.4 million from the Company for services in fiscal year 2013. 2.Nominated to the board pursuant to an agreement between the Company and an affiliate of Pamplona Capital Management LLP, whichbeneficially owns approximately 8.3% of the Company's common stock.

3.

Lead director. 4.

**Percentages displayed for ownership above 5%, when available

NAME ATTENDED AT

LEAST 75%OF

MEETINGS ADDITIONAL PUBLIC COMPANY DIRECTORSHIPS

Anthony G. Petrello Yes None

James R. Crane Yes None

John P. Kotts Yes None

Michael C. Linn Yes (2) Linn Energy, LLC; Centrica plc

John V. Lombardi Yes None

Howard Wolf Yes None

John Yearwood Yes None


http://www.glasslewis.net?company_Id=6866

http://www.glasslewis.net?company_Id=5956

MARKET PRACTICE

INDEPENDENCE AND COMPOSITION NBR* REQUIREMENT BEST PRACTICE

Independent Chairman No No1 Yes5

Board Independence 86% Majority2 66.7%5

Audit Committee Independence 100% 100%3 100%5

Compensation Committee Independence 100%; Independent Chair 100%2 100%5

Nominating Committee Independence 100%; Independent Chair 100%2 100%5

Percentage of women on board 0% N/A4 N/A

Directors' biographies DEF14A; Page 10

* Based on Glass Lewis Classification

NYSE Listed Company Manual 1.Independence as defined by NYSE listing rules 2.

Securities Exchange Act Rule 10A-3 and NYSElisting rules

3.

No current marketplace listing requirement 4.CII 5.

Glass Lewis believes that boards should: (i) be at least two-thirds independent; (ii) have standing compensation andnomination committees comprised solely of independent directors; and (iii) designate an independent chairman, or failingthat, a lead independent director.

GLASS LEWIS ANALYSIS

We believe it is important for shareholders to be mindful of the following:

OVERVIEW

The Company has consistently been targeted by shareholders in recent years for a number of perceived governancefailures. It remains part of an ignominious club of companies to have had each of its first three say-on-pay proposalsrejected by shareholders; in addition, at least one director has received over a 50% withhold vote at each of the past threeannual meetings. These withhold votes were driven by a multitude of concerns, including a lack of tangible response tomajority-supported shareholder proposals and egregious compensation practices. The 2013 vote result was still arguablya better outcome compared to the Company's contentious 2012 annual meeting, where shareholders, in addition torejecting board nominees and supporting shareholder proposals, voted down the Company's compensation plans.

In fairness, the Company has made a number of positive, substantive changes to its governance practices since 2011.Most notably, the Company has adopted a declassified board structure, adopted proxy access, adopted a directorresignation policy, renegotiated employment agreements and placed its shareholder rights plan up for shareholderratification. Nonetheless, as discussed in further detail below, while the Company has made some positive steps in theseareas, we believe based on consistent shareholder dissatisfaction, more progress is warranted.

Overall, it appears to us that the Company has not been fully responsive to shareholder concerns, particularly in the areaof executive compensation. As such, we recommend that shareholders withhold votes from the members of theCompany's compensation committee.

ONGOING COMPENSATION CONCERNS

At last year's annual meeting, more than 50% of shareholders withheld votes from directors Lombardi and Yearwood andnearly 38% withheld votes from director Linn, likely due to concern with the Company's compensation practices sinceeach of these directors serve as members of the compensation committee. As noted above, the Company's say-on-payproposal has failed to gain majority shareholder approval in each of the past three years.

Shareholder uproar regarding the Company's pay practices previously was focused around the Company's egregiousseverance packages for its top executives, including former CEO Eugene Isenberg (who at one point had an employmentcontract promising him $263 million in severance payments) and his successor Mr. Petrello. Since then, focus has shiftedto the Company's underperformance and questionable bonus payments.

In a seemingly major shift, prior to the Company's 2013 annual meeting, the Company announced a new employmentagreement with Mr. Petrello. While the Company's itemized list of the positive changes made in this new compensation


program looks impressive, it misses a key factor: in exchange for tearing up his previous contract, the compensationcommittee granted Mr. Petrello a total of over $60 million in cash and equity awards. We view these awards as egregiousand, as discussed in last year's Proxy Paper, we believe that the potential benefits of the restructuring of Mr. Petrello'sfuture compensation are significantly tempered by the enormity of these one-time awards.

Moreover, as discussed in our analysis of Proposal 4, the Company has more or less re-packaged its 2013 compensationimprovements in this year's proxy statement. We have been unable to identify any tangible improvements to theCompany's compensation program since the failed say-on-pay vote in 2013 and continue to view the Company'scompensation-related disclosure as inadequate.

RESPONSE TO SHAREHOLDER PROPOSALS

At the 2013 annual meeting, a majority of shares cast were voted in favor of shareholder proposals regarding proxyaccess (for the second consecutive year), the approval of severance agreements, and the appointment of an independentchairman. However, the Company noted its incorporation in Bermuda and its bylaws when it counted broker non-votes(i.e. unvoted shares) as votes cast against each of these proposals. As such, while each proposal garnered more votes"For" than "Against" and "Abstain", the Company determined that these shareholder proposals had in fact not beenapproved.

In response to the Company's uncommon and burdensome vote-counting rules, a shareholder proposal is beingpresented this year requesting the Company amend its bylaws to state that for all matters other than the election ofdirectors, a majority of votes cast-- calculated using only votes cast for, against, and abstentions-- shall be the votingstandard. In our view, the Company's inclusion of broker non-votes in voting calculations dilutes the clear will of itsshareholders; for more information on the proposal and Glass Lewis' view on the use of broker non-votes, please refer toour analysis of Proposal 10.

Despite announcing that the shareholder proposals had not been approved, the Company has taken measures to at leastpartially address the vote results. For example, the Company unilaterally adopted a proxy access provision in its bylawsthat will allow shareholders owning 5% or more of the Company’s shares for at least three years to nominate candidates.However, the requested ownership threshold in the shareholder proposal was 3%; an identical proposal to last year'sproxy access request has been put forward in Proposal 9. While we believe the board's action is commendable,shareholders have twice approved a lower and still reasonable 3% threshold and we see no reason why the board shouldnot have adopted a 3% threshold. The board has also failed to provide any justification for why the higher 5% threshold ismore beneficial for shareholders than the 3% threshold they approved. Consequently, we recommend that shareholderssupport the proxy access proposal seeking to adopt a 3% threshold again this year.

The Company has also stated that it will separate the roles of Chairman and CEO following the end of Mr. Petrello'stenure and it has amended its governance guidelines to allow the lead director to add agenda items for board meetings.While this action is not as far-reaching as the requested appointment of an independent chairman, it at least appears tobe an improvement to be made in the future. That said, the Company's Board Guidelines on Significant CorporateGovernance Issues leave open the door to Mr. Petrello staying on as chairman following his tenure as CEO. As such, wedo not believe these changes will necessarily improve the independent leadership of the board in the medium-term.

One area in which the Company appears to have responded to shareholders without qualification regards severancepayments. According to the Company's proxy statement, it has implemented a policy requiring shareholder approval ofarrangements that would provide severance payments greater than 2.99x the then-current or three-year average sum ofsalary and bonus.

In Proposal 8, shareholders will vote on a shareholder proposal to introduce "true majority" voting. Following the passageof a majority voting proposal in 2012, the Company announced that it had adopted a resignation policy for directors in theevent that a director failed to garner more votes "For" than "Withhold." While technically an improvement on the previousplurality standard, as noted above, directors Lombardi and Yearwood, who each received a majority withhold vote in 2013,remain on the board. In disclosing its vote results, the Company stated:

"The Governance and Nominating Committee of the Board considered the current structure of the Board,the Company’s current strategic needs, shareholders’ expressed reasons for withholding votes, and thecontributions and anticipated roles of each of Messrs. Lombardi and Yearwood, and recommended that theBoard not accept the resignations. The Board determined that acceptance of their resignations would not bein the Company’s best interests and voted unanimously to reject the resignations."

In light of the lack of major changes since last year's annual meeting, we believe that the shareholder proposal's requestfor true accountability through majority voting would be in shareholders' interests.


http://nabors.blob.core.windows.net/library-container/corporate_governance/board-guidelines-on-significant-corp-governance-issues-april-25-2014.pdf

http://nabors.blob.core.windows.net/library-container/corporate_governance/board-guidelines-on-significant-corp-governance-issues-april-25-2014.pdf

SHAREHOLDER RIGHTS PLAN

In conjunction with the declassification of the Company's board in 2012, the Company proposed an amendment to itsbylaws that would require a supermajority vote to approve certain business transactions; the amendment was intended topreserve an anti-takeover mechanism in return for annual elections. After shareholders rejected the amendment at the2012 annual meeting, the Company immediately adopted a shareholder rights plan without shareholder approval. Whilethe rights plan originally was meant to expire in 2013, the Company again extended the plan for a further three years in2013. While we would ordinarily recommend withholding votes from all nominees who served on the board at the time ofthe extension, we note that the Company has placed an advisory ratification of the rights plan on the ballot at this year'sannual meeting in Proposal 3. Given the board's poor track record in responding to shareholder concerns, shareholdersshould closely monitor how the Company responds to the vote, particularly if the Company includes or excludes brokernon-votes when determining whether the proposal passed.

RECOMMENDATIONS

We recommend withholding votes from the following nominees up for election this year based on the following issues:

Nominees LINN, LOMBARDI, and YEARWOOD serve as members of the compensation committee. As discussed above,while the Company made some positive changes during the past year, overall we do not believe that the Company hason the whole been responsive enough to the nearly unprecedented amount of shareholder opposition expressed in recentyears. Given the continued failure of certain board nominees to receive majority support and three failed say-on-payproposals in a row, it appears to us that the Company's piecemeal approach to compensation reform has been inadequate.

With regard to the members of the compensation committee, in our view, since shareholders rely on directors to be theirrepresentatives in the boardroom, they necessarily place a great deal of faith in a company's independent directors toprotect their interests. Additionally, we believe executive compensation can be a illuminating barometer in determining theextent of the board's independence. Given the committee's continued failure to assuage shareholder concerns in thisarea, highlighted in particular by the $60 million in one-time awards granted during fiscal year 2013 and the board'sreticence to implement a transparent compensation program, it appears to us that the board has not properly servedshareholders in this regard.

We believe shareholders would benefit from continuing to apply pressure to the board of directors through votes againstcertain board members, a fourth consecutive rejection of the Company's advisory vote on compensation, and support ofseveral shareholder proposals.

Accordingly, we recommend that shareholders vote:

FOR: Crane; Kotts; Petrello; Wolf

WITHHOLD: Linn; Lombardi; Yearwood

The Company discloses the following biographical information for director John P. Kotts, who joined the board during the past year:John P. Kotts Mr. Kotts is a private investor and entrepreneur. Through his management company, J.P. Kotts & Co., Inc., Mr. Kotts also operates aprivate investment fund focused on the trading of U.S. and international securities and other financial instruments. He also invests in real estate andprivate equities. Mr. Kotts is currently the owner and CEO of Vesco/Cardinal, an oil tool rental and service company, as well as several manufacturingcompanies. Mr. Kotts previously held various financial, banking and investment banking positions in companies specializing in leveraged buyouts,venture capital and turnaround transactions. From 1990 to 1998, he owned and operated Cardinal Services, Inc., a leading supplier of liftboat rentalsand other production-related services, including mechanical wireline services and plug and abandonment services, to oil companies operating in theGulf of Mexico. After selling the company to a group led by First Reserve Corporation in 1998, Mr. Kotts retained a significant partnership interest andcontinued to be involved as a member of that company's Board of Directors until the time of its merger with Superior Energy Services. He holds a B.A. inPhilosophy and an MBA in Finance from Hofstra University and completed additional post-graduate work at McGill University in Montréal, New YorkUniversity and Harvard Business School.


2.00: RATIFICATION OF AUDITOR

PROPOSAL REQUEST: Ratification of PricewaterhouseCoopers RECOMMENDATIONS & CONCERNS:PRIOR YEAR VOTE RESULT: 97.5%; Approved FOR- NO CONCERNS

BINDING/ADVISORY: Advisory

REQUIRED TO APPROVE: Majority of votes cast

AUDITOR OPINION: Unqualified

AUDITOR FEES 2013 2012 2011

Audit Fees: $6,029,813 $4,728,621 $5,259,503 Audit-RelatedFees:

$1,800 $3,385 $13,810

Tax Fees: $403,952 $159,966 $107,840 All Other Fees: $3,000 $468,758 $ 0 Total Fees: $6,438,565 $5,360,730 $5,381,153

Auditor: PricewaterhouseCoopers

PricewaterhouseCoopers

PricewaterhouseCoopers

Years Serving Company: 27 Restatement in Past 12 Months: No Alternate Dispute Resolution: No Auditor Liability Caps: No


The fees paid for non-audit-related services are reasonable and the Company discloses appropriate information aboutthese services in its filings.

Accordingly, we recommend that shareholders vote FOR the ratification of the appointment of PricewaterhouseCoopersas the Company's auditor for fiscal year 2014.


3.00: AMENDMENT TO SHAREHOLDER RIGHTS PLAN

PROPOSAL REQUEST: Approval of the amended Shareholder Rights Plan. RECOMMENDATIONS & CONCERNS:PRIOR YEAR VOTE RESULT: N/A AGAINST- Anti-takeover device

BINDING/ADVISORY: Advisory

REQUIRED TO APPROVE: Majority of votes cast

PROPOSAL SUMMARY

On July 16, 2012, the Company adopted a shareholder rights plan that was subsequently amended on April 4, 2013 andJuly 14, 2013. In this proposal, the Company is requesting shareholder ratification of an extension of the rights planthrough 2016.

The key features of the plan are as follows:

RIGHTS PLANFEATURES

PURPOSETo ensure the fair and equal treatment ofshareholders and to reduce the likelihood of aperson or group to gain control of the Companywithout paying control premium

NOL PILL No

DESCRIPTION OF RIGHTS

Each Right entitles the registered holder topurchase from the Company a unit consisting ofone one-thousandth of a share of a newlyauthorized series of Junior ParticipatingPreferred Share, Series A, par value $0.001 pershare, at a purchase price of $80.00 per unit.

TRIGGERING THRESHOLD 10%

EXEMPTIONS 14.99% for the Company's largest shareholder

SUNSET PROVISION Yes

TERM 4 Years

EARLY TERMINATION Redemption by the board.

QUALIFYING OFFER CLAUSE None

REDEMPTION FEATURES None

BOARD'S PERSPECTIVE

The Company notes that it has historically had several governance features, including allowing shareholders to callspecial meetings and not requiring a supermajority vote of shareholders to amend the Company's bylaws, which arebeneficial to shareholders but which also decrease the Company's protection against attempts to gain control of theCompany. Additionally, the board states that it has responded to shareholder requests by declassifying the board andadopting a director resignation policy for directors failing to obtain a majority of votes cast, which both "further limit theboard's defenses" against takeover attempts. Finally, the board states that while many companies incorporated inDelaware have rights plans "on the shelf" and adopt them only when circumstances warrant, Bermuda case law in thisarea is not clear cut. As such, the board believes that in order to bring "clarity and certainty" to the rights plan, it is moreappropriate to adopt and extend the plan as necessary.


Glass Lewis believes that, in general, poison pills are not conducive to good corporate governance. Specifically, they canreduce management accountability by substantially limiting opportunities for corporate takeovers. Studies have shown thatan increase in protection through anti-takeover statutes is associated with a decrease in management accountability(Marianne Bertrand and Sendhil Mullinathan, Is there Discretion in Wage Setting? A Test Using Takeover Legislation,Rand Journal of Economics (1999), page 535; Gerald T. Garvey and Gordon Hanka, Capital Structure and CorporateControl: The Effect of Antitakeover Statutes on Firm Leverage, Journal of Finance (1999), pages 519, 520). Other studies


Control: The Effect of Antitakeover Statutes on Firm Leverage, Journal of Finance (1999), pages 519, 520). Other studieshave found that companies with greater protection from takeovers are associated with poorer operating performance(Paul A. Gompers, Joy L. Ishii and Andrew Metrick, Corporate Governance and Equity Prices, NBER Working Paper No.8449 (2001)).

While the board should be given wide latitude in directing the activities of the Company and charting the Company'scourse, we believe that shareholders should have a say in a matter as important as a poison pill. This issue is differentfrom other matters that are typically left to the board's discretion because there is a greater likelihood of a divergence ofviews between managers and shareholders in this context (Bebchuk, 2002). Managers are often motivated to preservetheir own jobs or to arrange for substantial payouts and, as a result, may not act in the best interests of shareholderswhen it comes to potential takeovers.

In light of the above, we do not believe that the Company has made a particularly convincing case for the extension of therights plan. In previous years, the Company has slowly acquiesced to shareholder action in the area of anti-takeoverdefences, as evidenced by its decisions to declassify its board and present its poison pill for ratification at this year'sannual meeting. We also note that at the 2012 annual meeting, the Company's shareholders rejected a proposed bylawamendment that would have made certain business combinations subject to a supermajority voting requirement; the boardresponded to this vote by implementing this rights plan, without shareholder approval, directly following the meeting. Inlight of the raft of governance failures at the Company and its general reticence to truly respond to the will of itsshareholders, we do not believe the board is entitled to the benefit of the doubt in this instance.

Finally, while we note that the Company in previous years has been touted as a potential takeover target due to itsrelatively cheap valuation, we do not believe shareholders should support this plan in the absence of a specific threat ortakeover offer that treats shareholders unfairly.

Accordingly, we recommend that shareholders vote AGAINST this proposal.


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4.00: ADVISORY VOTE ON EXECUTIVE COMPENSATION

PROPOSAL REQUEST: Approval of Executive Pay Package PAY FOR PERFORMANCEGRADES:

FY 2013 FFY 2012 FFY 2011 F

PRIOR YEAR VOTE RESULT: 36.2%; Failed RECOMMENDATION: AGAINST

STRUCTURE: Fair

DISCLOSURE: Poor

PROGRAM FEATURES 1

POSITIVE

LTIP performance-basedSTIP performance-basedSTI-LTI payout balanceNo single-trigger CIC benefitsExecutive stock ownership guidelines for CEO andincoming CFO

NEGATIVE

Significant disconnect between pay andperformanceInternal pay inequityInsufficient disclosure with respect to incentive plangoalsShort performance period under LTIPNo clawback policy

1 Both positive and negative compensation features are ranked according to Glass Lewis' view of their importance or severity

SUMMARY COMPENSATION TABLENAMED EXECUTIVE OFFICERS BASE SALARY BONUS & NEIP EQUITY AWARDS TOTAL COMP

Anthony G. Petrello Chairman of the Board, President and Chief Executive Officer $1,700,000 $1,479,000 $18,686,961 $68,246,187

R. Clark Wood Principal Accounting and Financial Officer $329,310 $190,000 $200,000 $884,235

Mark D. Andrews Corporate Secretary $200,000 $60,000 $65,000 $409,182

CEO SUMMARY 2013

ANTHONY G. PETRELLO2012

ANTHONY G. PETRELLO2011

ANTHONY G. PETRELLO

Total CEO Compensation $68,246,187 $19,734,569 $15,996,4771-year TSR 18.8% -16.7% N/A

CEO to Avg NEO Pay 105.5:1 33.7:1 2.3:1CEO to Peer Median * 5.9:1 N/A N/A

Fixed/Perf.-Based/Discretionary ** 64.3% / 15.6% / 20.1% N/A N/A

* Calculated using Company-disclosed peers. ** Percentages based on the CEO Compensation Breakdown values.

CEO to Avg NEO Pay: 105.53: 1


CEO COMPENSATION BREAKDOWN ^

FIXEDCash $48.0M

Salary $1.7MBenefits / Other $46.3M

Total Fixed $48.0M

PERFORMANCE- BASED

Cash $1.5MShort-term Incentive Plan $1.5M

Target/Maximum $1.7M / $3.4M Metrics EBITDA Performance Period 1 yearAdditional Vesting / Deferral Period -

Performance Shares $6.5MLong-term Incentive Plan $6.5M

Target/Maximum 200% of base salary / 400% of base salary

Metrics

Further Technological Innovations, Delivery ofContracted PAC-X Rigs, Development ofOperational Performance Measuring Tools,Divestiture of Non-Core Assets andBusinesses

Performance Period 1 yearAdditional Vesting / Deferral Period 3 years

TSR Shares $3.7MLong-term Incentive Plan $3.7M

Target/Maximum 176,967 shares / 353,933 shares Metrics TSR Performance Period 3 yearsAdditional Vesting / Deferral Period -

Total Performance-Based $11.6M

TIME-VESTING/ DISCRETIONARY

Restricted Stock $15.0MPayment Pursuant to Restructuring of Employment Agreement (one-off) $15.0M

Vesting / Deferral Period 3 years (ratable)

Total Time-Vesting/Discretionary $15.0M

Awarded Incentive Pay $26.6M Total Pay Excluding change in pension value and NQDCE $74.7M^ Reflects compensation intended for, but not necessarily granted during fiscal 2013. Benefits/Other includes consideration paid in connection with Mr.Petrello's new employment agreement.


PEER GROUP REVIEW 1 2 3 4

The Company benchmarks NEO compensation to a peer group consisting of 13 companies. Total NEO compensation is targeted at the 75thpercentile of the peer group.

MARKET CAP REVENUE CEO COMP 1-YEAR TSR 3-YEAR TSR 5-YEAR TSR

75th PERCENTILE OF PEER GROUP $41.1B $26.1B $21.9M 37.7% 7.6% 21.1%

MEDIAN OF PEER GROUP $21.2B $18.1B $11.5M 22.9% 2.2% 17.1%

25th PERCENTILE OF PEER GROUP $9.9B $4.2B $7.4M 13.7% -4.1% 9.0%

COMPANY$5.0B $6.2B $68.2M 18.8% -9.9% 7.5%

(5th %ile) (31st %ile) (Highest) (39th %ile) (17th %ile) (18th %ile)

1 Market capitalization figures are as of fiscal year end dates. Source: Capital IQ

2 Annual revenue figures are as of fiscal year end dates. Source: Capital IQ

3 Annualized TSR figures are as of fiscal year end dates. Source: Capital IQ

4 Annual CEO compensation data based on the most recent proxy statement for each company.


COST OF MANAGEMENT 123

1 Compensation data provided by Equilar, Inc. All rights reserved. For additional information, please contact [email protected].

2 Operating cash flow figures provided by Thomson One Banker and Google Finance.

3 Peer median calculated using Equilar peers, weighted based on strength of connection.

EXECUTIVE COMPENSATION STRUCTURE - SYNOPSIS

FIXED Mr. Petrello's base salary increased by more than 20% in connection with the renegotiation of hisemployment agreement and in light of the significant reduction of his incentive opportunity.

SHORT-TERMINCENTIVES

STI PLAN

AWARDS GRANTED (PAST FY) Cash

TARGET PAYOUTS $1,700,000 for the CEO, not disclosed for the other NEOs

MAXIMUM PAYOUTS $3,400,000 for the CEO, not disclosed for the other NEOs

ACTUAL PAYOUTS $1,479,000 for the CEO and between $60,000 and $190,000 foreach other NEO

Performance is measured over one year.

2013 awards for Mr. Petrello were based on the metric below. For other NEOs, the committeedetermines the amount available for bonuses based upon achievement of financial and operationalobjectives for the Company as a whole and the individual business unit or corporate department;bonuses are then allocated based upon individual performance. Specific metrics for other NEOs werenot disclosed, but were generally listed as operating income, cash flow, days sales outstanding,attainment of safety goals, employee turnover and other undisclosed strategic or operation targets.


INCENTIVES

METRICS

EBITDA

Absolute

Weighting 100%

ThresholdPerformance N/D

TargetPerformance N/D

MaximumPerformance N/D

ActualPerformance N/D

LONG-TERMINCENTIVES

LTI PLAN

AWARDS GRANTED (PAST FY) Restricted stock, TSR shares and performance shares

TARGET PAYOUTS Performance Shares: 200% of base salary for the CEO TSR shares: 176,967 shares for the CEO

MAXIMUM PAYOUTS Performance Shares: 400% of base salary for the CEO TSR shares: 353,933 shares for the CEO

ACTUAL PAYOUTS Performance Shares: 380% of base salary for the CEO

TIME-VESTING PAYOUTS Restricted Stock: Between 3,973 and 12,225 shares for each NEOother than the CEO

Performance share performance is measured over one year and awards subsequently time-vest over threeyears.

TSR share performance is measured over three years.

Restricted stock awards vest over four years.

The below metrics outlined below govern the CEO's equity awards.

Restricted stock awards for NEOs other than the CEO are determined as follows: NEOs receive equity as amultiple of one or two of their respective annual cash bonuses, based on a subjective evaluation ofeach NEO's performance.

METRICS FORPERFORMANCE

SHARES

FURTHER

TECHNOLOGICALINNOVATIONS

DIVESTITUREOF

NON-COREASSETS ANDBUSINESSES

DEVELOPMENTOF

OPERATIONALPERFORMANCE

MEASURINGTOOLS

DELIVERY OFCONTRACTED

PAC-X RIGS

Absolute Absolute Absolute Absolute

Weighting N/D N/D N/D N/D

ThresholdPerformance N/D N/D N/D N/D

TargetPerformance N/D N/D N/D N/D

MaximumPerformance N/D N/D N/D N/D

ActualPerformance N/D N/D N/D N/D

METRICS FORTSR SHARES

TSR

Relative to Performance Peer Group

Weighting 100%

ThresholdPerformance 13 of 16

Target Performance 9 of 16

MaximumPerformance 3 of 16



This proposal seeks shareholder approval of a non-binding, advisory vote on the Company's executive compensation.Glass Lewis believes firms should fully disclose and explain all aspects of their executives' compensation in such a waythat shareholders can comprehend and analyze the company's policies and procedures. In completing our assessment,we consider, among other factors, the appropriateness of performance targets and metrics, how such goals and metricsare used to improve Company performance, the peer group against which the Company believes it is competing, whetherincentive schemes encourage prudent risk management and the board's adherence to market best practices.Furthermore, we also emphasize and evaluate the extent to which the Company links executive pay with performance.

OVERALL STRUCTURE : FAIR

We note the following concerns with the structure of the Company's compensation programs:

Vesting Below Median Under the LTI plan, executives become eligible to receive awards if the Company's relative performance is below the 50thpercentile of the designated peer group over the performance period. As such, NEOs are rewarded even if the Companyunderperforms the market. We believe incentive plans should at the very least require performance at the benchmarkmedian before rewarding NEOs.

Performance Period of Long-Term Awards Some of the performance-based awards granted under the Company's long-term incentive plan have a performanceperiod of less than three years. Although earned awards are subject to additional vesting periods, given the shortperformance period, these awards may fail to fully reflect the long-term performance of the Company.

No Clawback Provision To the best of our knowledge, the Company's incentive plans currently lack a clawback provision, whereby any bonusawarded may be recouped by the Company in the event of material fraud or misconduct by the recipient of a bonusaward. We believe emerging best practice has come to promote the use of clawback provisions to safeguard against thereceipt of unwarranted bonuses and to similarly encourage executives and senior management to take a morecomprehensive view of risk when making business decisions. We recognize that the 2010 Dodd-Frank Act requires theSEC to direct securities exchanges and associations to prohibit the listing of any issuer that does not adopt a policy torecover erroneously awarded incentive-based compensation (H.R. 4173, Sec. 954). While we generally believecompanies should consider the pending nature of SEC rulemaking in deciding whether to adopt provisions in advance ofthe rulemaking, it has been several years since the passage of Dodd-Frank and it is still unclear when the SEC mayadopt clawback rules. As such, we do not believe companies should continue to wait to adopt more robust clawbackpolicies.

Internal Pay Inequity Even after excluding the one-time payments received by Mr. Petrello during 2013, we note that his compensation duringthe past fiscal year was more than four times the average compensation received by the other NEOs. In Glass Lewis'view, maintaining an equitable distribution of pay among executives supports succession plans by preventingdemoralization of the larger executive team and promoting retention among potential CEO replacements. Furthermore,since oversized CEO pay is usually the sign of an all-powerful CEO, internal pay equity can also serve as a check on aCEO's authority, increasing the involvement of other executives in the management of the company and preparing themfor future transition into the role of the CEO. Accordingly, a high level of executive pay inequity, as in this case, canindicate serious long-term problems with a company's compensation practices and more broadly, its board-levelmanagement and oversight.

OVERALL DISCLOSURE : POOR

We note the following concern with the Company's disclosure with regard to its compensation policies and procedures:

Performance Goals Not Disclosed The Company has failed to provide a clear description of goals under the STI plan and the vesting conditions forperformance-based equity awards granted under the LTI plan. We believe clearly defined performance targets areessential for shareholders to fully understand and evaluate the Company's procedures for quantifying performance intopayouts for its executives.

2013 PAY FOR PERFORMANCE : F


The Company has failed to link executive pay to corporate performance, as indicated by the "F" grade received by theCompany in Glass Lewis' pay-for-performance model. A properly structured pay program should motivate executives todrive corporate performance, thus aligning executive and long-term shareholder interests. In this case, the Company hasnot implemented such a program. Furthermore, we note that the Company received pay-for-performance grades of "F" inboth our 2013 and 2012 Proxy Papers. In our view, shareholders should be deeply concerned with the compensationcommittee's sustained failure in this area.

CONCLUSION

For the third consecutive year, the Company's executive compensation program failed to earn support from the majorityof voting shares. At its 2013 annual meeting, only 36.2% of shareholder votes supported the Company's 2012compensation program (down from 42.5% support in 2011, but up from 25.0% in 2012). The Company states that the"majority of shares represented at [its] annual general meeting of shareholders voted against the CompensationCommittee's recommendation" and that members of the board and management "spoke extensively with several of [theCompany's] significant shareholders regarding the reasons for their vote." The Company lists several compensation- andgovernance-related shareholder concerns and a series of responses. Each of the compensation-related responses werealso disclosed in the Company's 2013 proxy statement and, at that time, billed as responses to the previous failedsay-on-pay proposals. Notably, Mr. Petrello's previous employment agreement was terminated effective December 31,2012. As outlined in our 2013 Proxy Paper, key features of the CEO's new agreement include:

The elimination of a potential $50 million severance payment in the event of death or disabilityThe removal of his uncapped, cash flow hurdle-based annual bonusCompensation benchmarked at the 75th percentile of the Company's peer groupAn annual bonus targeted at 100% of base salary and capped at 200% of base salaryTermination payments limited to 2.99 times base salary and bonusA requirement that he hold five times his annual base salary in Company equityLong-term incentives based on three-year relative TSR and "other financial and operational objectives"The elimination of "certain perquisites"Continued quarterly contributions to a deferred compensation account with contributions set at $300,000 perquarter

These provisions were outlined well before the Company's 2013 annual meeting, but did not take effect until fiscal 2013.While we recognize that many of these features are significant positive steps, we note that the Company has notdisclosed any new actions taken since its 2013 say-on-pay proposal failed to receive majority support. Further, we do notbelieve that the immediately vested stock valued at $27 million, $18 million in cash and $15 million in restricted stock thatMr. Petrello received during fiscal 2013 should be viewed as a constructive response to repeated shareholder rejection ofthe Company's compensation programs.

We believe that shareholders should be pleased that the CEO now receives performance-vesting equity awards, butbelieve that there is some room to question whether the performance aspects of the grants are sufficiently challenging. Asdiscussed above, TSR shares will vest at 25% of maximum (50% of target and 75% of base salary, or approximately $1.3million) for TSR that ranks 13th out of 16 peers. Shareholders be mindful that performance shares are linked to extremelynebulous achievements. The Company simply lists four "initiatives," with no discussion of their relative weightings, thepossible levels of achievement that could occur or the committee's process of evaluating performance. Given theambiguous nature of several of these initiatives and the determination that awards were earned at 190% of target (to bepaid out in fiscal 2014), we believe that shareholders are entitled to a substantially more rigorous discussion of theaward-determination process.

The determination methodology of the payouts for the other NEOs is even less clear. The Company states that annualbonuses are "subject to a minimum threshold, target and maximum payout" based upon certain financial criteria and thatequity awards are determined based on this same evaluation and a subjective evaluation of performance. The evaluation'sspecific objectives and evaluation process, however, could hardly be more opaque and there is little information toconvince shareholders that awards are not in fact discretionary.

Finally, we note that the Company has a consistent poor track record of failing to align executive pay with performance, asindicated by our pay-for-performance analysis. The Company has earned a pay-for-performance grade of "F" since 2006(it received a "D" for 2005 and another "F" for 2004). Additionally, it appears to have taken nearly no action in response tofailing to receive support for its executive compensation program, despite being one of only three companies to receiveless than 50% say-on-pay support for three straight years. In short, we find little reason for shareholders to support thisproposal.


5.00:

SHAREHOLDER PROPOSAL REGARDING SHAREHOLDERAPPROVAL OF SPECIFIC PERFORMANCE METRICS IN EQUITYCOMPENSATION PLANS

PROPOSAL REQUEST: That shareholders approve quantifiable performancemetrics, numerical formulas and payout schedules for atleast a majority of awards to executives

SHAREHOLDER PROPONENT: AFL-CIO Equity Index Fund c/o MarcoConsulting Group

BINDING/ADVISORY: Precatory

PRIOR YEAR VOTE RESULT: 25.3%; In favor REQUIRED TO APPROVE: Majority of votes cast

RECOMMENDATIONS, CONCERNS & SUMMARY OF REASONING: AGAINST - NO CONCERNS

GLASS LEWIS REASONING

Despite serious flaws with the Company's executive compensation practices, we have significant concerns regarding the termsof this proposal; andWhile we believe the Company could reasonably establish and disclose more specific performance metrics used in executivecompensation, we believe that placing these metrics to a shareholder vote could prove overly burdensome and impractical.

PROPOSAL SUMMARY

Text of Resolution- RESOLVED: Shareholders of Nabors Industries Ltd. (the "Company") urge the CompensationCommittee ("Committee") to adopt a policy that all equity compensation plans submitted to shareholders for approvalunder Section 162(m) of the Internal Revenue Code will specify the awards that will result from performance. This policyshall require shareholder approval of quantifiable performance metrics, numerical formulas and payout schedules("performance standards") for at least a majority of awards to the named executive officers. If the Committee wants to useperformance standards containing confidential or proprietary information it believes should not be disclosed in advance,they can be used for the non-majority of awards to the named executive officers. If changing conditions make previouslyapproved performance standards inappropriate, the Committee may adjust the performance standards and resubmit themfor shareholder ratification. This policy should be implemented so as not to violate existing contractual obligations or theterms of any compensation or benefit plan currently in effect.

Proponent's Perspective

The Company's 2013 advisory vote on executive compensationreceived support from only 32% of shareholders, demonstrating adisconnect between executive pay and long-term Companyperformance;A major contributing factor to the Company's pay-for-performancemisalignment is that the recent plans submitted by the Companyfor shareholder approval have only cited general criteria so vagueand multitudinous as to be meaningless, preventing shareholdersfrom knowing what criteria would be used to assess performanceand in what way;The Company's 2013 Stock Plan provides that awards may besubject to nearly 30 metrics, providing the compensationcommittee with such complete discretion that shareholders cannothave confidence executive pay will be properly aligned withCompany performance;Adoption of this proposal would still provide the compensationcommittee with complete discretion in the number and structure ofmetrics as it feels appropriate, however, it would also require theCompany to specify the performance standards establishing a linkbetween performance and specific awards when submitting a planfor shareholder approval; andSpecifying the performance standards establishing a link betweencompany performance and specific awards when submitting aplan for shareholder approval is a common practice in the U.K.

Board's Perspective

Shareholders rejected this same proposal by nearly 80% whilealso approving the very stock plan the proponents mention bynearly 70% at the Company's 2013 annual meeting;The Company has recently made sweeping changes to itsexecutive compensation program that were specifically designedto address the concerns discussed with some majorshareholders that also appear to underlie this proposal;The CEO and CFO's employment agreements specify that theirlong-term equity awards are tied to specific performance metrics,with nearly half of their annual eligibility tied to the specific metricadvanced by the proposal: total shareholder return relative to theCompany's peer group over a three-year period;Some executive equity awards are based on performancecriteria determined from time to time in order to provide flexibilityto the wholly-independent compensation committee to craftperformance metrics that align incentives of executives with thestrategic goals of the Company most relevant at a given time;The Company's equity compensation plans already specify adiscrete set of objective performance metrics that must beachieved for awards, intended to comply with Section 162(m) ofthe Internal Revenue Code to be earned;If shareholders oppose the scope of performance metrics in anyproposed plan, they can vote against the plan rather than


imposing an artificial set of prerequisites in a multi-year planbefore a plan can even be submitted to them;The unconventional requirements contained in this proposalwould place the Company at a competitive disadvantage in hiringand retaining talent, which would potentially slow the processupfront, or cause the Company to offer employment on uncertainterms;This proposal, as written, is impractical, as its exception that itshould be implemented so as to not violate existing contractualobligations virtually negates the entire proposed policy;Setting performance targets too far in advance would remove thecompensation committee's ability to closely tie equity grants tothe Company's strategic goals;Annual approval of performance metrics would require significanttime and expense, and due to the timing of the decisionsregarding equity awards, could prove impossible;Adoption of this proposal would place limitations on thecompensation committee's ability to tie equity grants to metricsthat contain confidential or proprietary information, even if suchmetrics are the most appropriate measures to properlyincentivize employee performance;The language of this proposal is so vague and ambiguous thatits precise application cannot be conceived, and, as a result,neither shareholders nor the Company can fairly determine withany reasonable certainty exactly what actions or measures thisproposal would require;The Company's executive compensation structure has alreadybeen dramatically changed, and last year shareholdersapproved a new equity plan that contains performance metricstypical for the Company's size and scope; andAs the concerns underlying this proposal have already beenaddressed, shareholders would not be well-served by adoptionof this unclear proposal that seeks to address a hypotheticalproblem.


In general, Glass Lewis does not believe shareholders should be directly involved in the design and negotiation ofcompensation packages. Such matters should be left to the board's compensation committee, which can be heldaccountable for its decisions through the election of directors. Since we recognize that shareholders can express theirdisapproval with a company's compensation program through the nonbinding vote on executive compensation and thevote on the compensation committee members, absent specific, egregious compensation practices, we generally do notbelieve shareholders should support the implementation of specific compensation restrictions. This proposal seeks togrant shareholders a role in the setting of executive compensation policy, which we believe is a task more appropriatelyexercised by the board.

In this case, we have very serious concerns regarding the Company's executive compensation practices, as furtherdiscussed throughout this report. For example, prior to 2013, the Company did not grant performance-vesting incentiveawards. We believe shareholders benefit when equity or long-term incentive awards vest on the basis of metrics withpre-established goals and are thus demonstrably linked to the performance of the company, aligning the long-terminterests of management with those of shareholders. The Company has tied all of the CEO's long-term incentive awardsto performance-based metrics, with over 40% of awards based on three-year relative TSR. The remaining long-termincentive grants are based on nebulous "financial or operational performance targets" and are further subject totime-vesting requirements (2014 DEF 14A, p.45).

The Company also repeatedly states in its proxy statement that future pay will be based "upon the achievement of specificfinancial or operational criteria/objectives," but fails to specify what these objectives are or how they will be evaluated.While we believe that shareholders should be pleased that the Company has endeavored to link pay to capped, objectivemeasures, given the Company's historical pay practices, we also believe that shareholders should expect a substantiallymore concrete explanation of future programs and the related goal-setting process. As such, we are sympathetic with theproponent's attempt to categorically ensure that future awards are sufficiently performance-based.

Nonetheless, we have significant concerns regarding the terms of this proposal, despite the Company's shortcomings in


disclosure. Specifically, while we believe the Company should pre-establish specific performance criteria and share thisinformation to the best extent possible without infringing on competitively sensitive information, it is our view thatsubjecting this information to shareholder approval could prove onerous and present significant problems for theCompany. We believe the compensation committee, despite some of its egregious past (and recent) decisions, shouldretain some flexibility in implementing compensation plans that align executives with the long-term interests of theCompany and its shareholders. We realize that business environments can rapidly change, and, as such, the board mayneed to adjust or change performance targets; putting these items to a shareholder vote may serve to be impractical.Moreover, this proposal does not appear to address the steps that should be taken by the Company should the vote onthese performance metrics fail to receive majority support.

While we believe the Company could reasonably establish and disclose more specific performance metrics used in itsexecutive compensation program, we believe the terms of this proposal are overly prescriptive. Moreover, we believe thatthe Company's advisory vote on executive compensation, as well as shareholders' ability to vote on the Company's stockand bonus plans and against the election of compensation committee members, serve to ensure that shareholders areable to voice their opinions on the Company's executive compensation practices. Overall, the terms of this proposalappear unreasonable and could prove problematic upon implementation. As such, we refrain from offering our support forthis proposal at this time.



6.00: SHAREHOLDER PROPOSAL REGARDING RETENTION OF SHARES

PROPOSAL REQUEST: That executives retain 75% of shares until reachingnormal retirement age or terminating employment with theCompany

SHAREHOLDER PROPONENT: The Trowel Trades S&P 500 Index Fund


PRIOR YEAR VOTE RESULT: 28.5%; In favor REQUIRED TO APPROVE: Majority of votes cast

RECOMMENDATIONS, CONCERNS & SUMMARY OF REASONING: AGAINST - NO CONCERNS


Glass Lewis does not believe that shareholders should be directly involved in the design and negotiation of compensationpackages and that such matters should be left to the board, which can be held accountable for decisions through the electionof directors; While we note significant deficiencies in the Company's executive compensation program, as discussed in more detail inProposal 4, we believe the Company's share ownership guidelines sufficiently address the requests of this proposal; andSeverely restricting executives' ability to exercise a significant portion of equity awards until normal retirement age may hinderthe ability of the compensation committee to attract and retain executive talent.

PROPOSAL SUMMARY

Text of Resolution- RESOLVED: Shareholders of Nabors Industries Ltd. (the "Company") urge the CompensationCommittee of the Board of Directors (the "Committee") to adopt a policy requiring that senior executives retain asignificant percentage of shares acquired through equity compensation programs until reaching normal retirement age orterminating employment with the Company. For the purpose of this policy, normal retirement age shall be defined by theCompany's qualified retirement plan that has the largest number of plan participants. The shareholders recommend thatthe Committee adopt a share retention percentage requirement of at least 75 percent of net after-tax shares. The policyshould prohibit hedging transactions for shares subject to this policy which are not sales but reduce the risk of loss to theexecutive. This policy shall supplement any other share ownership requirements that have been established for seniorexecutives, and should be implemented so as not to violate the Company's existing contractual obligations or the terms ofany compensation or benefit plan currently in effect.


Equity-based compensation is an important component of theCompany's senior executive compensation;While the use of equity-based compensation for senior executivesshould be encouraged, executives are generally free to sellshares received from the Company's equity compensation plans;The Company's current share ownership guidelines for its seniorexecutives do not go far enough to ensure that its equitycompensation plans continue to build share ownership by seniorexecutives over the long-term;The Company's current share ownership guidelines require theCEO to hold an amount of shares equal to five times his salary orabout 350,000 shares, but, in comparison, according to theCompany's 2013 proxy statement, the CEO already owned 11million shares and had more than 5 million shares of equityawards outstanding;Adoption of this proposal will better link executive compensationwith long-term performance by requiring a meaningful shareretention ratio for shares received by senior executives from theCompany's equity compensation plans;Requiring senior executives to hold a significant percentage ofshares obtained through equity compensation plans until theyreach retirement age will better align the interests of executives

Board's Perspective

Shareholders rejected a similar proposal at the 2013 annualmeeting, likely because the Company already has a shareretention policy;The Company acknowledges that senior executive ownership ofmeaningful amounts of Company shares creates a beneficialalignment between long-term interests of shareholders andsenior executives;The Company imposes significant share ownership requirementsfor its senior executives and maintains other policies that alignthe interests of shareholders and senior executives;In light of the Company's existing practices, the strong culture ofshare ownership that exists among senior executives and thenumerous deficiencies and potential unintended negativeconsequences of this proposal, adoption of this proposal is notdesirable at this time;As detailed in the Company's proxy statement, its compensationpractices encourage a focus on long-term performance throughincentive awards that either vest or are awarded on the basis ofperformance metrics;In order to further align executives' interests with those of theCompany, the Company established share ownershiprequirements for its senior executives;The CEO is required to maintain equity ownership with aminimum acquisition value of five times his base salary, which


with the interests of shareholders and the Company;A 2009 Conference Board Task Force report on executivecompensation stated that hold-through-retirement requirementsgive executives "an ever growing incentive to focus on long-termstock price performance as the equity subject to the policyincreases;" andRequiring senior executives to only hold shares equal to a settarget loses effectiveness over time, as after satisfying thesetarget holding requirements, senior executives are free to sell alladditional shares they receive in equity compensation.

minimum acquisition value of five times his base salary, whichmust be retained through his service, and is also prohibited fromentering into any hedging transactions with the Company'sshares;The Company has long had a strong culture of executive shareownership and the CEO's ownership far exceeds therequirements in his contract;Senior executives have historically retained a majority of all netafter-tax shares received under the Company's equitycompensation programs throughout their careers;Adoption of this rigid proposal would create undesirableincentives and undermine the Company's ability to hire andretain qualified talent;This proposal could create a strong incentive for successfulexecutives to terminate their employment in order to realize thevalue of their equity compensation at the height of their success,a time when retention is most important;As a substantial portion of executive compensation is paid in theform of equity awards, there may be a legitimate desire forexecutives to diversify their assets; andThe wholly-independent compensation committee is best suitedto formulate executive share retention requirements that strikean appropriate balance between incentivizing managementbehavior and permitting executive officers to manage their ownfinancial affairs.


Glass Lewis recognizes that the dramatic evaporation of shareholder value as a result of the global financial crisis hasprompted many shareholders to seek mechanisms through which executive compensation can be restricted and/or bemore closely tied to long-term sustainable value creation. However, Glass Lewis does not believe shareholders should bedirectly involved in the design and negotiation of compensation packages. Such matters should be left to the board'scompensation committee, which can be held accountable for its decisions through the election of directors. While webelieve shareholders should be afforded the opportunity to cast a nonbinding vote on executive compensation, wegenerally do not believe shareholders should support the implementation of specific compensation restrictions. Thisproposal seeks to grant shareholders a role in the setting of executive compensation policy, which we believe is a taskmore appropriately exercised by the board.

In this case, the Company states that its CEO must own shares with an acquisition-date value of five times base salaryand its CFO was required to own shares with an acquisition-date value of three times his base salary as of thecommencement of his employment in March 2014 (2014 DEF 14A, p.32). However, it does not appear that any of theCompany's other employees or NEOs were subject to such share ownership requirements. Additionally, the Companystates that its officers' employment agreements require that they "not engage in transactions that result in a materialconflict of interest with the Company," which "prevent[s] them from entering into any hedging transactions involving theCompany's shares" (2014 DEF 14A, p.52). While we would prefer that the Company also required share ownership byexecutives other than just the CEO and CFO and that the Company had a more tailored hedging policy, we believe thatthese policies are sufficient at this time.

While we strongly support the linking of executive pay to the creation of long-term sustainable shareholder value, we donot believe that proposals such as this one are the most effective or desirable way to induce change at target companies.Rather, we believe that severely restricting executives' ability to exercise such a significant portion of equity awards untilnormal retirement age may hinder the ability of the compensation committee to attract and retain executive talent.Otherwise qualified and willing candidates may be dissuaded from employment at the Company if they believe that theircompensation could be dramatically affected by financial results completely unrelated to their own personal performanceor tenure at the Company. Further, as contemplated under the terms of this proposal, executives could be forced to waitfor decades to realize the gains from their equity grants depending on the age of the executive and the determination ofwhat constitutes normal retirement age. As such, we do not believe that supporting this proposal serves the best interestsof shareholders at this time.



http://www.conference-board.org/pdf_free/ExecCompensation2009.pdf

7.00:

SHAREHOLDER PROPOSAL REGARDING SUSTAINABILITYREPORT

PROPOSAL REQUEST: That the Company produce a sustainability report SHAREHOLDER PROPONENT: Appleseed Fund


PRIOR YEAR VOTE RESULT: N/A REQUIRED TO APPROVE: Majority of votes cast

RECOMMENDATIONS, CONCERNS & SUMMARY OF REASONING: FOR-

The production of a comprehensive sustainability report could provide shareholders with valuable information regarding the risks and opportunitiesassociated with the Company's operations


Given the potential direct, legal and reputational risks the Company could face as a result of the environmental impact of itsoperations, we believe the production of a comprehensive sustainability report could provide shareholders with valuableinformation regarding the risks and opportunities associated with operating in the natural gas industry; We believe that the Company lags its peers regarding disclosure practices concerning sustainability-related issues; and While we generally give deference to the board on issues related to sustainability, as we believe that a well-functioning boardwill consider the Company's exposure to sustainability-related risks as a part of its overall leadership of a company, we believethat the Company may be an example of an instance where this oversight is potentially lacking.

PROPOSAL SUMMARY

Text of Resolution- RESOLVED: Shareholders request that the Board of Directors prepare a sustainability reportdescribing the company's short- and long-term responses to ESG-related issues, including goals for the reduction ofgreenhouse gas (GHG) emission, water usage, and adverse environmental impacts of operations, and any linkage madeby the company between executive compensation, including departure arrangements, and the company's financial,environmental, and social performance. The report, prepared at reasonable cost and omitting proprietary information,should be published and made available to the public by November 2014.

The proponents recommend that the report include a review of policies, practices, and performance metrics related toESG performance and that the Company commits to continuous improvement in reporting. The proponent encouragesthe use of the Global Reporting Initiative's ("GRI") Sustainability Reporting Guidelines, a globally accepted reportingframework considered the gold standard of reporting.


Tracking and reporting on environmental, social and governance("ESG") business practices makes a company more responsive toa global business environment which is characterized by finitenatural resources, changing legislation and heightened publicexpectations for corporate accountability;ESG reporting helps companies better integrate and gain valuefrom existing sustainability efforts, identify gaps and opportunitiesin products and processes, publicize innovative practices,structure aligned and prudent executive compensation policiesand recruit and retain employees;Corporate reporting on sustainability is quickly becoming commonpractice as greater than 90% of Global Fortune 250 companiesproduce sustainability reports, four out of five of which are basedon the Global Reporting Initiative ("GRI") Guidelines;Of the top 100 U.S. companies by revenue, approximately 85%produce sustainability reports;Increasingly, companies are identifying ESG factors relevant totheir business and addressing them strategically throughsustainability programs and reports;Comprehensive ESG data on individual companies is readilyavailable through services such as Bloomberg and is used bythousands of institutional investors in their investmentdecision-making processes;The Company does not currently issue a comprehensive report onESG factors, giving rise to shareholder concern that the Company

Board's Perspective

Adoption of this proposal would not be a productive use ofcorporate resources or in the best interests of the Company or itsshareholders;The specific requirements of this proposal present a variety ofpractical difficulties;The Company recognizes the importance of addressing theenvironmental and social impact of its business, as evidencedby its website and public filings which already providecomprehensive disclosures on the Company's ESG practices;The Company's current ESG-related disclosures are tailored toits specific business and its environmental and social concerns;The corporate responsibility section of the Company's websiteprovides several sustainability-related disclosures, such as itscommitment to sustainability, emissions reduction andconservation efforts, safety measures and programs andmanagement systems;A report based on GRI reporting guidelines, as is requested bythis proposal, would require extensive and detailed scientific andtechnical analyses, substantial and unreasonable amounts offunds and personnel time and most likely the employment ofconsultants and specialized expertise;Preparation of the report requested by the proponents woulddivert the Company's valuable resources from the actualoversight of ESG issues, impair its long-term success and itcannot reasonably be produced in the time frame provided;The Company's proxy statement, other public filings, news


is falling behind its peers in the disclosure and management ofthese issues; andIn recent years, the Company has become the focus of publiccriticism over what many saw as extremely excessive executivecompensation schemes and questionable governance practices,which have led to shareholder derivative lawsuits and negativepress coverage for the Company.

We note that the proponent has provided additional information regardingits rationale for this proposal.

The Company's proxy statement, other public filings, newsreleases and website already provide a comprehensive,wide-ranging and transparent report on its ESG businesspractices; andAdoption of this proposal will provide no meaningful additionalsafety, health, environmental or social benefits beyond theCompany's current practices and no meaningful additionalbenefit to shareholders;


In general, we believe it is prudent for management to assess its potential exposure to all risks, including environmentaland social concerns and regulations pertaining thereto in order to incorporate this information into its overall business riskprofile. When there is no evidence of egregious or illegal conduct that might suggest poor oversight or management ofenvironmental or social issues that may threaten shareholder value, Glass Lewis believes that management and reportingof environmental and social issues associated with business operations are generally best left to management and thedirectors who can be held accountable for failure to address relevant risks on these issues when they face re-election.

Glass Lewis believes that investors should take a look at proposals requesting that companies produce a sustainabilityreport on a case by case basis in order to determine if the requested report will clearly lead to an increase in shareholdervalue. When evaluating such a request Glass Lewis considers: (i) the direct, legislative, regulatory, legal and reputationalrisks associated with the Company’s operations; (ii) the relevant company’s current level of disclosure and oversight ofsustainability issues; (ii) the level of sustainability disclosure available at the firm’s peers; (iii) the industry in which the firmoperates; (iv) the level and type of sustainability concerns/controversies at the relevant firm, if any; (v) the level offlexibility granted to the board in the implementation of the proposal and the burden on the Company in the production ofthe requested report; and (vi) the time frame within which the relevant report is to be produced.

For more information about current trends and empirical evidence associated with sustainability reporting, please seeGlass Lewis' In-Depth: Sustainability Reporting.

COMPANY OPERATIONS

The Company owns and operates the world’s largest land-based drilling rig fleet and has one of the largest completionservices and workover and well-servicing rig fleets in North America. It is also a leading provider of offshore platformworkover and drilling rigs in the U.S. and multiple international markets. The Company provides innovative drillingtechnology and equipment, directional drilling and comprehensive oilfield services in most of the significant oil and gasmarkets in the world. Given the nature of the Company’s operations, particularly its natural gas operations, it is exposedto a wide range of environmental and social issues that could make the Company vulnerable to operational, legal,regulatory or reputational risks. For example, the shale gas extraction method known as hydraulic fracturing ("fracking")has come under recent scrutiny from investors and regulators. As risks associated with fracking and related natural gasoperations have raised a number of concerns regarding the effect on shareholder value, we encourage disclosure onthese matters so that shareholders may better assess the risks to which companies are exposed. For more informationregarding this issue, including risks and regulations concerning hydraulic fracturing, more generally, please see GlassLewis' In Depth: Hydraulic Fracturing.

According to the Company's most recent 10-K, its operations are subject to numerous international, local, state and federalhuman health, safety and environmental laws and regulations. Specifically, the Company highlights the domesticenvironmental laws and regulations with which it must comply, such as the Clean Water Act and the Clean Air Act. Inaddition, as a company operating in the oil and natural gas industry that provides drilling and well completion services, theCompany is exposed to environmental liabilities should an environmental incident occur. In this case, the Company"employ[s] personnel responsible for monitoring environmental compliance and arranging for remedial actions that may berequired from time to time and also use[s] consultants to advise on and assist with [its] environmental compliance efforts."However, the Company's environmental liabilities are only recorded after an environmental assessment or remedialefforts are known or probable and associated costs are estimated. Since the oil and gas industry is heavily regulated andscrutinized, the Company acknowledges that changes in environmental laws, such as reclassification of waste andemissions reduction rules, may negatively impact its operations. As the operations in its completion services unit includefracking, the Company notes that, should stricter state rules or federal fracking laws be passed, its operating costs willlikely increase or the demand for its services may decrease as companies attempt to comply with the new regulations(pp.14-15). Regarding safety considerations, the Company states that there are inherent risks of loss, accident or damagedue to its operations. These risks include explosions, fire, loss of well control, damage to the wellbore or undergroundreservoir, personal injury or loss of life and equipment damage or loss due to severe weather conditions or natural


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disasters (p.12).

LINKING EXECUTIVE COMPENSATION TO SUSTAINABILITY

We note that the proponent specially requests that the Company includes within its sustainability report "any linkage madeby the company between executive compensation, including departure agreements, and the Company's financial,environmental, and social performance." The value generated by incentivizing executives to prioritize environmental andsocial issues varies among industries and differs among companies within industries. Companies' involvement incarbon-intensive activities or activities strongly associated with environmental or social degradation strongly influencesthe degree to which a firm's overall strategy must consider environmental and social concerns. In general, we believe it isprudent for management to assess its potential exposure to all risks, including environmental and social concerns andregulations pertaining thereto and incorporate this information into its overall business risk profile. However, when there isno evidence of egregious or illegal conduct that might threaten shareholder value, Glass Lewis typically believes thatmanagement of environmental and social issues associated with business operations are generally best left tomanagement and directors, who can be held accountable for failure to address relevant risks when they face re-election.With respect to executive compensation as it relates to these issues, we typically view the advisory vote on compensationand/or the election of directors, specifically those who sit on the compensation committee, as the appropriate mechanismfor shareholders to express their disapproval of board policy on this issue.

We do believe, however, that as environmental and social issues gain in prominence and are therefore more widely andconsistently examined and managed, it is likely that an increased number of firms will base incentives on environmentaland social performance. As with many performance metrics, tying executive remuneration to environmental and socialmetrics may present challenges to successful implementation including the subjectivity of target selection and completion,the relevance to shareholder value, and weighing the potential fiduciary conflict between the interests of long-termshareholders and stakeholders over short-term shareholders’ interests. We recognize that the practice of tyingcompensation to environmental and social performance is relatively nascent, deserves close scrutiny and will evolvesignificantly over time. At this time, however, we would not suggest that the inclusion of environmental and social metricsin executive compensation plans is appropriate at all firms at all times.

In 2013, Glass Lewis produced its fourth annual Greening the Green: Linking Executive Compensation and Sustainability,in which we reviewed the most recent short- and long-term compensation plans disclosed for the S&P 100, S&P/TSX 60,FTSE 100, CAC 40, DAX 30, SMI 20, OBX 20, AEX 25, IBrX 50, IBEX 35 and the S&P/ASX 50. We included a widevariety of terms as falling under the umbrella term "sustainability," including a variety of environmental, social andgovernance issues. Overall, we found that 39% of firms reviewed disclosed a link between executive compensation andsustainability and that 38% of S&P 100 companies provided this link. Further, we found that 100% of S&P 100 companiesand 74.2% of all companies in the Energy sector in our review provided sustainability metrics for executives whendetermining compensation.

In this case, the Company states that, beginning in 2014, the chairman and CEO's annual bonus is now "based onspecific financial or operational objectives and subject to a minimum threshold before any amount can be earned. Thoseobjectives may include one or more of the following: earnings per share, earnings before interest expense, provision forincome taxes, and deprecation and amortization expense (EBITDA); health, safety and environmental performance; andother identifiable strategic or operational targets" (2014 DEF 14A, p.28). Particularly given the Company's history of poorcompensation practices, as discussed throughout this report, we are not convinced that this disclosure allowsshareholders to meaningfully evaluate how or if the Company is considering environmental or social metrics whenmaking compensation determinations.

COMPANY DISCLOSURE

The Company dedicates a section of its website to corporate responsibility where it addresses sustainability-related topicssuch as ethics and governance, environment, health and safety considerations, competency and reliability, stakeholderengagement and technological advances. The Company also maintains a sustainability statement, which states thatcorporate responsibility "guides every aspect of [its] daily activities and is the key to [its] continued success." Accordingly,the Company states that it uses technological innovation, environmental impact planning, corporate safety initiatives andcommunity relations activities in order to manage its corporate responsibility. Additionally, the Company states that it haspolicies and procedures designed to ensure the competency of its personnel and reliability of its equipment.The Companyalso highlights its stakeholder engagement which includes proactive engagement with its customers, suppliers,shareholders and communities. The Company states that it is also committed to developing and implementing technologythat allows its operations to be safer and more efficient, while also reducing its overall environmental footprint. Its effortsin this regard include enhanced safety measures, use of high-performance equipment and automated drilling processes,fracking disclosures and technological innovation. Further, the Company also provides some information concerning itsenvironmental stewardship efforts, such as emissions reduction and discharge containment initiatives, in addition to its


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http://www.nabors.com/corporate-responsibility/competency-reliability

http://www.nabors.com/corporate-responsibility/stakeholder-engagement

http://www.nabors.com/corporate-responsibility/technology

http://www.nabors.com/corporate-responsibility/environment-health-safety

new safety programs and Company-wide efforts to eliminate injuries and incidents. Specifically, the Company highlightsits Mission Zero safety program and its PACE-X rig, "[a]n intelligent rig design that advocates sustainable and responsibleoperations" in order to produce energy more responsibly and eliminate high-risk activity.

Regarding the Company's oversight of sustainability-related issues, it states that its governance framework was createdto serve its shareholders' and stakeholders' interests and ensure responsibility, integrity and legal compliance, all of whichis codified in its Code of Business Conduct. The Code provides that compliance with the Company's health, safety andenvironmental policies ("HSE") is a responsibility of management and employees. In addition, changes to the establishedHSE programs and policies are not permitted without the approval of the appropriate Company personnel, as eachbusiness unit has its own policies, or governmental regulatory agency (p.5). The board's technical and safety committeeis tasked with reviewing and monitoring the Company's HSE compliance, safety performance and strategic technologyposition. The committee's charter notes that it is management's responsibility to assess and manage the Company'sexposure to HSE risks, but that the committee "will provide oversight by reviewing policies that govern these processes."

PEER COMPARISON

Peer company Baker Hughes Incorporated (NYSE: BHI) dedicates a section of its website to health, safety, environmentand security ("HSE&S"), where it addresses its commitment to being a responsible corporate citizen and operating in asustainable manner. The firm's codifies this in its HSE and Security Policy Statement. The firm further discusses its HSEpolicies and activities by region, as well as its management system, incident performance including reportable data, recognition and awards, environmental protection, audit program and HSE&S culture. Baker Hughes further discusses itsuse of sustainable technology, such as carbon capture and storage, as well as its initiatives with respect to community engagement and human rights and security. Baker Hughes also provides a 73-page, GRI-indicated 2013 HSE Report thatdetails its corporate social responsibility, health and wellness initiatives, safety programs and Baker Hughes' 2014expectations and targets. Regarding Baker Hughes' oversight of sustainability-related issues, it states that it maintains arigorous audit program that includes continuous, internal reviews of firm operations in order to ensure personnel safetyand environmental protection in addition to occasional third-party audits. The audit program is integrated with the firm'sHSE Management System and assesses the firm's legal and regulatory compliance. In addition, Baker Hughes'governance and health, safety and environmental committee is responsible for providing oversight of the firm's health,

safety and environmental risks, policies and management systems.

Further peer company Halliburton Company (NYSE: HAL) provides significant information regarding itssustainability-related efforts on its website, where it notes that, for the fourth consecutive year, it has earned high rankingsin the Dow Jones Sustainability Indices. Halliburton also maintains Sustainability Guiding Principles which include, amongother things, conducting operations that are safe and have a minimum impact on the environment and leading the industryin innovation, technology development and conscientious stewardship of global resources. In addition, Halliburtonprovides a 62-page, GRI-Indicated 2013 Corporate Sustainability Report that provides significant information concerningits environmental and social impacts.

Regarding linking compensation to sustainability-related metrics, Baker Hughes states that its performance scorecardbonus component may include specific business goal targets related to health, safety and the environment ("HSE") andthat its short-term incentive programs allow for reduction or elimination of bonus payouts if the health, safety andenvironmental targets are not upheld (2014 DEF 14A, p.17). Baker Hughes states that its HSE enterprise goals for 2013were to "improve key HSE metrics by 10%" (2014 DEF 14A, p.24). However, the firm states that "[y]ear-on-yearimprovement on key metrics was overshadowed by an increase in fatalities suffered during the year." It is not clear towhat extent the firm's HSE performance impacted its executives' awards. Haliburton states that the CEO had met hispersonal performance objectives through, among other things, his maintaining an "unwavering commitment to[Halliburton's] Health, Safety and Environment program and ensur[ing] that all employees and other key stakeholdersunderstand that an incident-free workplace is achievable and must be driven by leadership and teamwork of [its]employees" (2014 DEF 14A, p.28). However, it is unclear how this performance was determined or to what extent itspecifically affected executives' awards.

To further compare, the Company was invited to respond to the Carbon Disclosure Project (“CDP”) every year since2006, but has yet to respond to the requests. However, Baker Hughes and Halliburton have both regularly submitteddisclosures since 2005 and 2004, respectively, including participation the CDP's supply chain, water and climate changeprograms. The CDP, acting on behalf of 767 institutional investors with $92 trillion in assets under management andapproximately 50 purchasing organizations, advocates improved disclosure of climate change data through responses tocomprehensive annual questionnaires. The CDP issues reports and collects data on carbon emissions, watermanagement, public procurement, and supply chain information, among others. While not all companies are invited todisclose data through the CDP, Glass Lewis generally views a company’s response as indicative of its commitment todisclosure of its environmental impact and responses to that impact.


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http://www.bakerhughes.com/company/health-safety-environment/hs-e-management-systems

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http://www.bakerhughes.com/company/corporate-social-responsibility/sustainable-technology

http://www.bakerhughes.com/company/corporate-social-responsibility/people-and-society

http://www.bakerhughes.com/company/corporate-social-responsibility/people-and-society

http://www.bakerhughes.com/company/corporate-social-responsibility/human-rights-and-security

http://www.bakerhughes.com/company/corporate-social-responsibility/gri-reporting

http://assets.cmp.bh.mxmcloud.com/system/96599d804d94403e9215de5516d322ef/pdfs/pdf/2013-HSE-Annual-Report_web-FINAL.pdf

http://www.bakerhughes.com/company/health-safety-environment/audit-program

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTc1NzMyfENoaWxkSUQ9LTF8VHlwZT0z&t=1

http://www.halliburton.com/en-US/about-us/sustainability/default.page?node-id=hgeyxt7i

http://www.halliburton.com/en-US/about-us/sustainability/sustainability-guiding-principles.page?node-id=hgeyxt7r

http://www.halliburton.com/public/about_us/pubsdata/sd/CSR2013.pdf

https://www.cdp.net/en-US/Pages/HomePage.aspx

Overall, we find the Company's disclosure of environmental and social issues to lag both Bakers Hughes and Halliburtonas these peer companies provide more thorough sustainability-related disclosures. Moreover, both Baker Hughes andHaliburton provide GRI-Indicated sustainability reports. We recognize that all of the companies provide board-leveloversight of their environmental, health and safety policies, practices and that all three companies tie some level ofcompensation to sustainability, broadly. However, we find that Baker Huges provides a more clear picture than Haliburtonor the Company of how this link is established and how the firm's sustainability-related performance affectscompensation.

CONCLUSION

Particularly given the Company's operations, we believe the Company may be exposed to heightened direct, legal andreputational risks as a result of the environmental and social impact of its operations. Accordingly, we believe theproduction of a comprehensive sustainability report could provide shareholders with valuable information regarding therisks and opportunities associated with the Company's operations, particularly as it lags its peers with respect todisclosure of sustainability-related information. Reporting on these issues in an easily accessible report would also assureshareholders that the Company is actively reviewing, and responding to, these evolving risks. Further, we note that theproponent has specifically suggested, but does not require, that the Company prepare a sustainability report using theGlobal Reporting Initiative’s ("GRI") guidelines, one of the world's most widely used standards for sustainability reporting.As worded, the use of GRI guidelines in the context of this proposal is encouraged, but not mandated. Moreover, theproponent requests only the production of a single report, rather than the issuance of a series of ongoing reports by theCompany.

As discussed throughout this report, we have significant concerns regarding the Company's executive compensationpractices and its consistent failure to tie pay with performance. As such, we believe that increasing the disclosureprovided about how sustainability factors are considered when determining executive compensation would benefitshareholders. This is particularly true given that it appears that executive compensation may already have some sort oflink to compensation determinations, thus this proposal is not requesting that the Company adopt certain compensationpractices. Rather, it is requesting that the Company increase disclosure regarding its current practices.

Lastly, we are concerned regarding the board's current ability to provide adequate oversight of these issues. While wegenerally believe that shareholders should defer to the board on issues related to sustainability, as we believe that awell-functioning board will consider the Company's exposure to sustainability-related risks as a part of its overallleadership of a company, we believe that the Company may be an example of an instance where this oversight ispotentially lacking. As such, we believe that it would benefit both the Company and its shareholders if the Companywould produce a sustainability report detailing the Company's risks and opportunities in relation to sustainability and if theCompany expanded its disclosure regarding its environmental and social impacts and exposure in order to provideshareholders with a better picture of how the Company is managing these issues. Moreover, we believe the terms of theproposal are reasonable and provide sufficient flexibility to the Company to provide the requested report without undueburden.

Accordingly, we recommend that shareholders vote FOR this proposal.


8.00:

SHAREHOLDER PROPOSAL REGARDING MAJORITY VOTE FORELECTION OF DIRECTORS

PROPOSAL REQUEST: That the Company adopt a majority voting standard fordirector elections

SHAREHOLDER PROPONENT: The Central Laborers' Pension Fund



RECOMMENDATIONS, CONCERNS & SUMMARY OF REASONING: FOR - Majority voting increases board accountability and performance


Majority voting enhances shareholders' ability to determine who will serve as their representatives in theboardroom;Implementing a majority vote standard increases board accountability and performance; andA growing number of major corporations have adopted a majority voting standard.

PROPOSAL SUMMARY

Text of Resolution- RESOLVED: That the shareholders of Nabors Industries Ltd. ("Company") hereby request that theBoard of Directors take the necessary steps (excluding those steps that must be taken by shareholders) to provide thatdirector nominees shall be elected by the affirmative vote of the majority of votes cast at an annual meeting ofshareholders, with a plurality vote standard retained for contested director elections. For purposes of this proposal, acontested election is defined as an election in which the number of director nominees exceeds the number of availableboard seats.


In order to provide shareholders with a meaningful role in directorelections, the Company's current vote standard should bechanged to a majority vote standard;The majority vote standard is particularly well-suited for the vastmajority of director elections in which only board nominatedcandidates are on the ballot;A majority vote standard in board elections would establish achallenging vote standard for board nominees and improve theperformance of individual directors and entire boards;Under the Company's current plurality vote standard, a nomineefor the board can be elected with as little as a single affirmativevote, even if a substantial majority of the votes cast are "withheld"from the nominee;In response to strong shareholder support, over 85% ofcompanies in the S&P 500 have adopted a majority vote standardwith a director resignation policy to address post-election issuesrelated to the status of director nominees who fail to win election;The Company has only partially responded to the increasingsupport for majority voting standards by adopting a post-electiondirector resignation policy that sets procedures for addressing thestatus of director nominees who receive more "withhold" votesthan "for" votes, however, the plurality vote standard remains inplace;A post-election director resignation policy without the majorityvote standard in Company bylaws or articles of incorporation is aninadequate reform;The critical first step in establishing a meaningful majority votepolicy is the adoption of a majority vote standard after which theboard can consider action on developing post-election proceduresto address the status of directors who fail to win election; andThe combination of the majority vote standard and a post-electiondirector resignation policy represents a true majority votestandard.

Board's Perspective

The Company had already implemented a policy that addressesthe proponent's concerns;The standard proposed by the proponent could result in a varietyof negative consequences, without providing any benefit toshareholders over the Company's current policy;In response to shareholder concerns similar to those expressedby the proponent, the Company adopted a director resignationpolicy in the event a director fails to receive majority shareholdersupport in connection with his election;Under the terms of the resignation policy, the board will accept adirector's resignation unless it determines that it would not be inthe Company's best interests to do so;The Company's governance standards, including the directorresignation policy, have helped structure and establish a verycapable and experienced board;This proposal does not challenge the capabilities of the board,but rather endeavors to "improve performance" withoutexplaining why such a change is desirable at this Company orarticulating any performance deficiencies of any individualmember of the board or even the board as a whole;Adoption of this proposal could disrupt orderly function of theboard and increase the possibility of failed elections, which couldannually create an additional, and potentially expensive, processof identifying and electing new directors to fill board vacancies;Vacant board positions would increase the workload of theremaining directors and potentially disrupt the normal function ofboard committees;At the Company's 2013 annual general meeting of shareholders,two directors failed to receive majority support and tenderedtheir resignations, but the board decided that, given their roles inCompany matters and the Company's strategic needs, theresignations would not be in the best interests of the Companyand voted unanimously to reject the resignations;The proposed policy has a rigid structure that would not providethe board with the discretion it needs to avoid "failed" elections;A task force of the American Bar Association found that the true


A task force of the American Bar Association found that the truemajority vote standard presents uncertainty due to its relativenovelty when applied to the election of directors andrecommended against changing the default in corporate lawaway from a plurality standard; andAdoption of this proposal is neither necessary nor desirablegiven the Company's current resignation policy and potentialdetriments that may be experienced due to a change.

GLASS LEWIS' ANALYSIS

Over the past several decades, shareholders have sought a mechanism by which they might have a genuine voice in theelection of directors at companies in which they hold an interest. The oft utilized plurality vote standard ensures thatdirectors who receive the highest number of votes are elected to serve on the board of directors. This system, at facevalue, appears to be a fair conduit through which most favored candidates will be selected for service on the board. Thissystem loses its efficacy, however, when the number of director candidates is equal to the number of open seats on theboard, thereby permitting a nominee who receives a minority of shareholder support (as little as one vote) to assume aseat on the board. Majority voting, to the contrary, requires that each nominee receive the affirmative vote of at least amajority of shareholder votes cast in an election. In this manner a majority vote standard enhances shareholders' ability todetermine who will serve as their representatives in the boardroom, resulting in increased board accountability andperformance.

Moreover, while we recognize that in certain jurisdictions, steps must be taken to ensure a smooth transition in the eventof a failed election, we believe boards may adopt bylaws to satisfactorily manage these situations. For example, directorscan be required to submit irrevocable resignations upon initial nomination to the board. In the event the nominee does notreceive a majority of the votes cast, the resignation already submitted to the Company will come into effect. Thisprovision can be accompanied by a truncated holdover period added to a company's bylaws, by which the director willserve for no more than a specified period of time, such as 90 days. In our view, this type of provision, in combination witha truncated holdover period, will serve to alleviate any issues that may arise if an incumbent director is not elected.

According to the 2013 Spencer Stuart Board Index, approximately 84% of companies in the S&P 500 index have adoptedpolicies requiring directors who fail to secure a majority vote to offer their resignation, up from and 56% in 2008, indicatinga broad shift towards the adoption of best practice corporate governance in this matter.

Although we recognize that the board has adopted a resignation policy for directors failing to receive majority shareholdersupport, we believe such a policy does not go far enough to ensure true director accountability in the rare situation wherea majority of shareholders vote against a director, as evidenced by the fact that directors Yearwood and Lombardireceived 53.2% and 55.9% withhold votes at the 2013 annual meeting, yet the board reappointed them, offeringunconvincing rationale, and thus eviscerating the purported effectiveness of the existing resignation policy. Accordingly,we believe adoption of a true majority vote standard would be in shareholders best interests at this time.



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9.00: SHAREHOLDER PROPOSAL REGARDING PROXY ACCESS

PROPOSAL REQUEST: Investors holding 3% of the Company's shares for at least3 years have the ability to nominate director candidates tomanagement's proxy

SHAREHOLDER PROPONENT: Several New York City Public EmployeePension Plans and Retirement Systems


PRIOR YEAR VOTE RESULT: 51%; In favor REQUIRED TO APPROVE: Majority of votes cast

RECOMMENDATIONS, CONCERNS & SUMMARY OF REASONING: FOR - We believe 3% ownership over three years is sufficeint for proxy access


Given our ongoing governance and compensation-related concerns, we believe that shareholders could benefitfrom a more responsive board; andWe believe that a shareholder who holds 3% of the Company stock for three continuous years should be able tonominate a director, particularly as shareholders must subsequently elect that director in order for the proxy accessnominee to control a seat on the board.

PROPOSAL SUMMARY

Text of Resolution- RESOLVED: Shareholders of Nabors Industries Ltd. ask the board of directors (the "Board") to adopt,and present for shareholder approval, a "proxy access" bylaw. Such a bylaw shall require Nabors to include in proxymaterials prepared for a shareholder meeting at which directors are to be elected the name, Disclosure and Statement (asdefined herein) of any person nominated for election to the board by a shareholder or group (the "Nominator") that meetsthe criteria established below. Nabors shall allow shareholders to vote on such nominee on Nabors' proxy card.

The number of shareholder-nominated candidates appearing in proxy materials shall not exceed one quarter of thenumber of directors then serving. This bylaw, which shall supplement existing rights under Nabors' bylaws, should providethat a Nominator must:

a) have beneficially owned 3% or more of Nabors' outstanding common stock continuously for at least three yearsbefore the nomination is submitted;

b) give Nabors written notice within the time period identified in Nabors' bylaws of the information required by thebylaws and any rules of the Securities and Exchange Commission about (i) the nominee, including consent to beingnamed in the proxy materials and to serving as a director if elected; and (ii) the Nominator, including proof it ownsthe required shares (the "Disclosure"); and

c) certify that (i) it will assume liability stemming from any legal or regulatory violation arising out of the Nominator'scommunications with Nabors shareholders, including the Disclosure and Statement; (ii) it will comply with allapplicable laws and regulations if it uses soliciting material other than Nabors' proxy materials; and (c) to the best ofits knowledge, the required shares were acquired in the ordinary course of business and not to change or influencecontrol at Nabors.

The Nominator may submit with the Disclosure a statement not exceeding 500 words in support of the nominee (the"Statement"). The board shall adopt procedures for promptly resolving disputes over whether notice of a nomination wastimely, whether the Disclosure and Statement satisfy the bylaw and any applicable federal regulations, and the priority tobe given to multiple nominations exceeding the one-quarter limit.


Long-term shareholders should have a meaningful voice inelecting directors;This proposal should be evaluated in the context of concernsregarding the Company's repeated excessive executivecompensation awards and perks, failure to link performance andpay, insufficient board independence and unresponsiveness toshareholder concerns;Due to the Company's governance problems, shareholders haverejected management's say-on-pay proposal for the past three

Board's Perspective

At last year's annual general meeting of shareholders, anidentical proposal failed to received the requisite shareholdervote for approval;In response to a similar proposal in 2013 and following extensivedialogue with one of the prior proponents, the board recentlyadopted a revised policy regarding director candidatesrecommended by shareholders that provides for proxy access asthe Company's proxy access policy;The Company's current proxy access policy, which is available


rejected management's say-on-pay proposal for the past threeyears, withheld the majority of votes cast from directors Lombardiand Yearwood in 2013 and director Sheinfeld in 2011 and cast amajority of votes cast in favor of similar resolutions in 2012 and2013; andThis proposal includes safeguards, such as a 25% limit onshareholder nominees to ensure that it will not facilitate adisruptive change of control.

The Company's current proxy access policy, which is availableon its website, provides shareholder director nominees withaccess to the proxy as this proposal requests as long as theshareholder nominator has continuously owned 5% or more ofthe Company's outstanding common shares for at least threeyears commencing on or after June 3, 2014 and meets certainprocedural requirements;With the adoption of its proxy access policy, the Companybecame only the third company in the S&P 500 to provide anytype of proxy access;The Company's current proxy access policy is similar to theproposed policy in all respects except for the threshold of shareownership required to obtain proxy access;A 5% threshold of share ownership is consistent with the SEC'sthreshold for public disclosures of ownership and still provideslong-term shareholders with a meaningful voice in directorelections that the proponent advocates;The California State Teachers' Retirement System, one of the2012 proxy access co-proponents has commented that theCompany's new policy provides "significant benefits to[Company] shareholders;"Shareholders have means other than that requested by thisproposal to influence the director nomination process;The wholly-independent governance and nominating committeehas the responsibility to identify and nominate qualified directorsto serve on the board and has a defined procedure forindividuals to recommend director candidates;Shareholders have the ability to recommend director candidatesto the board and have their qualifications properly reviewed bythe governance and nominating committee without any minimumshare ownership requirement and the proponents do not allegethat any director candidate proposed by any shareholder hasever failed to receive due consideration;In response to shareholder concerns, the board agreed tonominate two new independent directors one in 2013 and theother in 2014, one of which who was nominated at thesuggestion of a shareholder; andThe board has taken a number of actions in direct response toshareholder concerns, including adopting a proxy access policy,implementing a director resignation policy, declassifying theboard, appointing four new directors and significantly reducingexecutive compensation.


Glass Lewis believes that, because shareholders elect directors to serve as their representatives on the boards ofcompanies in which they invest, the election of directors is the most important proposal on which shareholders vote.Through their votes, shareholders can hold directors accountable and remove directors that fail to adequately representshareholders' interests in overseeing management and ultimately working to increase shareholder returns. We believethat shareholders should not only be able to remove poorly performing directors, but should also be able to nominate newdirectors who they believe would better represent their interests and those of other shareholders. We believe that in thoselimited cases where a majority of shareholders reject a director through the vote at a shareholder meeting, the directorshould resign; we similarly believe that where a significant long-term shareholder believes the board's director selectionprocess has not served shareholders well, it is reasonable to allow that shareholder to exercise judgment in nominating anew director. We believe shareholder would exercise the nomination right rarely, and rarer still would be the actualelection of a dissident director, as other shareholders would need to vote in support of the dissident's director nominee atthe company.

However, we recognize that contested director elections are distracting, expensive and time-consuming to a company andits directors. The very low likelihood of an unqualified, agenda-driven dissident candidate does not lessen the concern thatthe nomination of a director not supported by the current board can distract management and the board from focusing onthe strategy of the company as they strive to fend of the dissident director, and, in the case of directors, save theirpositions. Therefore, we believe a careful balance must be struck between allowing significant long-term shareholders tonominate directors against discouraging nominations by small and short-term shareholders with investment or other goalspotentially very different from those of the majority of shareholders. We therefore recognize the need for appropriate


minimum ownership and/or holding-period thresholds to safeguard against abuse of the nomination process afforded byinsufficient thresholds. As such, when reviewing proposals seeking to grant shareholders the right to nominate directorcandidates, we typically consider the following factors:

Company size;The shareholder proponent and their rationale for putting forth the proposal at the target company;The percentage ownership requested and holding period requirement;Shareholder base, in both percentage of ownership and type of shareholder (e.g., hedge fund, activist investor,mutual fund, pension fund, etc.);Responsiveness of board and management to shareholders evidenced by progressive shareholder rights policies(e.g., majority voting, declassified board structure, etc.) and reaction to shareholder proposals;Company performance and steps taken to improve poor performance (e.g., new executives/directors, spin-offs,etc.);Existence of anti-takeover protections or other entrenchment devices; andOpportunities for shareholder action (e.g., ability to act by written consent or right to call a special meeting).

For detailed information on this topic, including a brief history of proxy access in the United States, empirical evidence theimpact of proxy access on shareholder value and corporate governance, please see Glass Lewis' In-Depth: Proxy Access.

COMPANY ANALYSIS

In this case, we believe support for this proposal at the Company is still warranted. While we recognize that the Companyhas unilaterally adopted a proxy access policy that would allow owners of 5% of the Company's securities for 3 years theability to nominate director candidates, we believe that a 3% threshold for proxy access is appropriate and that it providesa sufficient safeguard to protect against multiple, nuisance nominations by agenda-driven shareholders. Moreover, in2012 and 2013, a majority of shareholders (excluding abstentions and broker non-votes) supported resolutions requestingthese terms, but when the Company provided shareholders with this right, it raised the requisite holdings from 3% to 5%.Though we recognize that the Company has made a number of positive changes that have demonstrated responsivenessto shareholders in the last year, our concerns have not been completely diminished. We still maintain significantgovernance concerns, as discussed in Proposal 1 and find that the Company has, yet again, failed to link executive paywith performance.

We recognize that the Company has five large shareholders above the 3% threshold who could take advantage of thisright, one of which, Pamplona Capital Management, is a private equity and investment management firm. However, it isunclear how long this investor has held its shares and, more importantly, as of the writing of this report, it owns over 7% ofshares, well above the threshold necessary to nominate directors under the Company's current policy. Most of theCompany's other large investors and traditional asset managers and have not historically engaged in proxy contests oreven submitted shareholder proposals at their portfolio companies, even at those with a very low threshold of $2,000 instock (or 1% ownership) and one year of ownership for shareholder proposal submissions. Moreover, there is no evidenceof abuse of this right in other markets where shareholders enjoy the ability to nominate directors under lower ownershipthresholds and holding periods.

Given the above, we believe that adoption of a 3% proxy access threshold is appropriate at this time. We note that in anApril 18, 2012 Proxy Talk, Vegard Torsnes from Norges Bank Investment Management stated that proxy access is afundamental right of corporate governance and that any successful board does not have to fear the implementation ofproxy access because candidates nominated through this process at a company with good governance practices andresponsiveness to shareholders will likely not be elected to the board. Moreover, we believe that a shareholder who holds3% of the Company stock for three continuous years should be able to nominate a director, particularly as shareholdersmust subsequently elect that director in order for the proxy access nominee to control a seat on the board.



http://www.glasslewis.com/assets/uploads/2013/02/Glass-Lewis-In-Depth-Proxy-Access.pdf

http://www.glasslewis.com/assets/uploads/2013/02/Glass-Lewis-In-Depth-Proxy-Access.pdf

10.00:

SHAREHOLDER PROPOSAL REGARDING COUNTING BROKERNON-VOTES

PROPOSAL REQUEST: That broker non-votes not be counted as a vote against aproposal for all matters except director elections

SHAREHOLDER PROPONENT: California Public Employees' RetirementSystem



RECOMMENDATIONS, CONCERNS & SUMMARY OF REASONING: FOR - Unvoted shares should not be counted


Given our larger governance concerns and the Company's historical failure to align pay with performance, we believe thatadoption of this proposal may benefit shareholders at this time, as it may require the Company to recognize and respond toshareholder concerns in a quicker and more thorough manner going forward;While we recognize that the Company's current voting tabulation method is within the bounds of the law, the Company is anoutlier with respect to the method it employs.

PROPOSAL SUMMARY

Text of Resolution- RESOLVED: The shareowners of Nabors Industries Ltd. (the "Company") recommend that theCompany amend its bye-laws, in compliance with the law and required processes, to explicitly set out that approval of allmatters other than the election of directors, be calculated by a majority of the votes cast—using consideration of only "for"votes, "against" votes, and abstentions. Broker non-votes should not have the effect as a vote against a proposal underthe proposed voting methodology.


Good corporate governance is underpinned by accountability,therefore, integrity of the vote counting process is critical;CalPERS Global Principles of Accountable CorporateGovernance explicitly state that, "[a] shareowner resolution that isapproved by a majority of proxies cast should be implemented bythe board" and that "[b]roker non-votes should be used forquorum purposes only;"Broker non-votes are uninstructed votes where a broker does nothave instruction to vote shares;Currently, the Company's bylaws require that broker non-voteswill have the same effect as a vote against a proposal, which is anon-transparent method to adopt what is, in effect, asupermajority voting provision;According to research conducted by Governance MetricsInternational, only 36 firms in the Russell 1000 index, including theCompany, include broker non-votes in vote calculations fornon-routine items;At the Company's 2013 annual meeting, the voting results forProposals 7 and 10 were understated due to the Company'sinclusion of broker non-votes and therefore did not pass with lessthan majority support, although if broker non-votes had beenexcluded the proposal would have received 53.99% and 50.90%support, respectively;The Company's vote calculations in 2013 did not properlyrepresent the views of voting shareholders; andThe Company has significantly underperformed its peers andbroader stock market indices during the one-, three- and five-yearperiods ending November 29, 2013.

The proponent has released additional information concerning its rationalefor this proposal.

Board's Perspective

This proposal requests an unnecessary change that provideslittle benefit to shareholders;The proponent does not explain why its standard is preferable tothe Company's existing standard, but rather references theCompany's stock performance without providing a nexusbetween that reference and its argument;The Company's 2014 TSR is higher than any company in its peergroup, but this information is not relevant to this simple point ofgovernance;The Company counts votes at shareholder meetings in theneutral manner required by its bylaws, which have remainedunchanged in that regard since its incorporation and areconsistent with the Bermuda Companies Act;Counting broker non-votes is not a surreptitious, anti-shareholdermeasure, but is a procedure for counting votes that appliesequally to proposals proposed by the Company and is describedin its proxy statement;Counting broker non-votes is simple math and no lesstransparent than any other standard;The board carefully considers all shareholder proposals,regardless of the outcome of the shareholder vote and the voteoutcomes cited by the proponent were non-binding, advisoryproposals;In response to shareholder concerns, the board hasimplemented policies consistent with the two proposals cited bythe proponent that garnered less than the requisite majority vote;The proponent previously sponsored a proposal regardingseverance payments that, even under this proposed votestandard, would have failed, yet the board implemented a policythat affects the intent of that proposal; andThe Company's existing vote standard has not impacted theboard's responsiveness to shareholder concerns, therefore, thereis no utility in replacing one neutral procedure for another.


http://www.sec.gov/Archives/edgar/data/919079/000117152014000359/eps5675.htm


The tabulation of proxy votes for U.S. public companies are determined by several sources: Federal securities regulations;the securities regulations of the state in which a company is legally domiciled; rules established by securities exchanges;and a company's charter and/or bylaws. According to the SEC, matters other than voting on the election of directors aretypically approved by a vote of a majority of the shares voting or present at the meeting. However, beginning January 1,2010, brokers were no longer have the discretion to vote their customers' shares held in companies without receivingvoting instructions on how to vote them from the beneficial owners, though these votes could be cast for the purpose ofestablishing a quorum. As such, these uninstructed votes are commonly excluded from official vote calculations. In thiscase, the Company is incorporated in Bermuda and follows Bermuda Companies Act Section 77 (2) which requires anyquestion proposed for consideration at any general meeting to be "decided on a simple majority of votes or by suchmajority as the bye-laws of the company may prescribe" (p.64). Accordingly, the Company states in its 2014 proxystatement that except for the election of directors, broker non-votes "will be counted for purposes of establishing a quorumand, because of the vote required to approve 'nondiscretionary' items ... will have the same effect as a vote against aproposal" (p.2).

Although the Company provides clear instructions on its vote tabulation process, we are concerned regarding theCompany's history of ignoring shareholder concerns. For example, shareholder proposals requesting proxy access for theowners of 3% of the Company's stock for 3 years and proposals requesting that the Company seek shareholder approvalfor severance payments valued at 2.99 times the sum of salary and bonus both received more "for" than "against" votes(which is how vote results for shareholder resolutions are commonly counted) in both 2012 and 2013. We recognize thatin the last year the Company has, to some extent, responded to these situations, including eliminating severanceagreements over the 2.99 threshold and allowing 5% of shareholders for 3 years the ability to nominate directorcandidates. However, given our larger governance concerns and the Company's historical failure to align pay withperformance, we believe that adoption of this proposal may benefit shareholders at this time, as it may require theCompany to recognize and respond to shareholder concerns in a quicker and more thorough manner going forward.While we recognize that the Company's current voting tabulation method is within the bounds of the law, the Company isan outlier with respect to this method- according to the proponent only 36 companies in the Russell 1000 include brokernon-votes in their voting tabulations. As such, we believe that adoption of this proposal may serve sharheolders' bestinterests at this time.



http://www.sec.gov/spotlight/proxymatters/voting_mechanics.shtml

http://www.bermudalaws.bm/Laws/Consolidated%20Laws/Companies%20Act%201981.pdf

COMPETITORS / PEER COMPARISON

NABORSINDUSTRIES LTD.

WEATHERFORDINTERNATIONAL LTD.

TRANSOCEAN LTD. HELMERICH &PAYNE, INC.

Company Data (MCD)Ticker NBR WFT RIG HPClosing Price $25.29 $20.95 $42.72 $107.04 Shares Outstanding (mm) 325.8 772.6 362.0 107.9 Market Capitalization (mm) $8,314.5 $16,225.3 $15,590.2 $11,720.7 Enterprise Value (mm) $11,920.2 $24,558.3 $23,043.2 $11,334.3 Latest Filing (Fiscal Period End Date) 12/31/13 12/31/13 12/31/13 12/31/13

Financial Strength (LTM) Current Ratio 2.1x 1.5x 1.9x 2.9x Debt-Equity Ratio 0.65x 1.06x 0.64x 0.04x

Profitability & Margin Analysis (LTM) Revenue (mm) $6,152.0 $15,263.0 $9,484.0 $3,432.2 Gross Profit Margin 35.3% 19.4% 40.2% 45.8% Operating Income Margin 9.1% 4.3% 25.5% 28.3% Net Income Margin 2.3% -2.3% 14.8% 21.9% Return on Equity 2.6% -3.7% 8.7% 17.2% Return on Assets 2.8% 1.8% 4.5% 9.8%

Valuation Multiples (LTM) Price/Earnings Ratio 70.9x - 11.1x 15.6x Total Enterprise Value/Revenue 1.9x 1.6x 2.4x 3.3x Total Enterprise Value/EBIT 21.4x 37.7x 9.5x 11.7x

Growth Rate* (LTM) 5 Year Revenue Growth Rate 2.2% 9.7% -5.6% 9.3% 5 Year EPS Growth Rate -22.3% - -20.9% 7.6%

Stock Performance (MCD) 1 Year Stock Performance 73.3% 66.9% -17.3% 84.4% 3 Year Stock Performance -17.2% -2.9% -41.2% 61.4% 5 Year Stock Performance 55.5% 22.7% -39.4% 241.8%

Source: Capital IQ

MCD (Market Close Date): Calculations are based on the period ending on the market close date, 05/01/14. LTM (Last Twelve Months): Calculations are based on the twelve-month period ending with the Latest Filing. *Growth rates are calculated based on a compound annual growth rate method. A dash ("-") indicates a datapoint is either not available or not meaningful.


VOTE RESULTS FROM LAST ANNUAL MEETING JUNE 4, 2013

Source: 8-K dated June 6, 2013

ELECTION OF DIRECTORSNO. PROPOSAL VOTES WITHHELD/AGAINST GLC REC1.1 Elect James R. Crane 29.55% For

1.2 Elect Michael C. Linn 38.27% For

1.3 Elect John V. Lombardi 55.90% Withhold

1.4 Elect Howard Wolf 2.31% For

1.5 Elect John Yearwood 53.24% Withhold

EXECUTIVE COMPENSATION

NO. FOR AGAINST ABSTAIN BROKERNON-VOTES 1 YEAR 2 YEARS 3 YEARS GLC

REC 3.0 2013 Incentive Bonus Plan

242,592,973 14,052,462 643,287 23,133,967 N/A N/A N/A For 4.0 2013 Stock Plan

190,320,173 65,611,460 1,357,089 23,133,967 N/A N/A N/A For 5.0 Advisory Vote on Executive Compensation

93,179,267 162,803,623 1,305,832 23,133,967 N/A N/A N/A Against

OTHER ITEMS

NO. PROPOSAL FOR AGAINST ABSTAIN BROKERNON-VOTES GLC REC

2.0 Ratification of Auditorand Authority to SetFees

273,322,024 6,742,264 358,401 N/A For

6.0 Shareholder ProposalRegarding ShareholderApproval of SpecificPerformance Metrics inEquity CompensationPlans

65,007,275 191,636,335 645,112 23,133,967 Against

7.0 Shareholder ProposalRegardingIndependent BoardChairman

138,901,515 117,887,239 499,968 23,133,967 For

8.0 Shareholder ProposalRegarding Retention ofShares

73,020,817 183,406,592 861,313 23,133,967 Against

9.0 Shareholder ProposalRegarding Approval ofSeveranceAgreements

128,610,631 128,136,375 541,716 23,133,967 For

10.0 Shareholder ProposalRegarding ProxyAccess

130,962,251 125,618,933 707,538 23,133,967 For


APPENDIX

Questions or comments about this report, GL policies, methodologies or data? Contact your client service representative or go towww.glasslewis.com/issuer/ for information and contact directions.

NOTE

The shareholder proponents of Proposals 9 and 10, the New York City Comptroller and the California Public Employees' Retirement System,respectively, are clients of Glass Lewis.

DISCLOSURES

Glass, Lewis & Co., LLC is not a registered investment advisor. As a result, the proxy research and vote recommendations included in this report shouldnot be construed as investment advice or as any solicitation, offer, or recommendation to buy or sell any of the securities referred to herein. Allinformation contained in this report is impersonal and is not tailored to the investment strategy of any specific person. Moreover, the content of this reportis based on publicly available information and on sources believed to be accurate and reliable. However, no representations or warranties, expressed orimplied, are made as to the accuracy, completeness, or usefulness of any such content. Glass Lewis is not responsible for any actions taken or nottaken on the basis of this information.

This report may not be reproduced or distributed in any manner without the written permission of Glass Lewis.

For information on Glass Lewis' policies and procedures regarding conflicts of interests, please visit: http://www.glasslewis.com/

LEAD ANALYSTS Governance: Greg WatersShareholder Proposals: Courteney KeatingeCompensation: Carter Moar


http://www.glasslewis.com/

EQUILAR PEERS VS PEERS DISCLOSED BY COMPANY EQUILAR NBRWeatherford International Ltd.* Transocean Ltd.* Helmerich & Payne, Inc.* Noble Corp.* Diamond Offshore Drilling, Inc.* Rowan Companies plc* National Oilwell Varco, Inc.* Schlumberger Limited* Patterson-UTI Energy Inc. Halliburton Company* Baker Hughes Incorporated* Vantage Drilling Company Cameron International Corporation Oceaneering International, Inc. FMC Technologies, Inc.

Ensco plc ConocoPhillips Freeport-McMoRan Copper & Gold Inc.

*ALSO DISCLOSED BY NBR


nabors industries ltd. - glass lewis€¦ · proxy paper nabors industries ltd. nyse: nbr isin:...

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