Good morning and welcome to The McGraw-Hill Companies 2012 Annual Shareholders Meeting. The meeting is being conducted at The McGraw-Hill Companies' International Headquarters in New York City. At this time, I would like to inform you that the call is being recorded for broadcast and that all participants are on a listen-only mode. If during the call you need assistance, press star and zero. If any listener needs the volume increased or decreased, please press star and zero and I will assist you. This call is also being webcast from The McGraw-Hill Companies' website and will be available for replay about two hours after this meeting ends, both by phone and on the web. To do that, go to the company's homepage at www.mcgraw-hill.com and click on the link for the Annual Shareholders Meeting.
you for being with us today. I would like to introduce you to the gentleman at the table on my right. That's Ken Vittor. He's the Executive Vice President and General Counsel of the corporation. Ken joined McGraw-Hill in 1981 and he has served as our General Counsel for the last 17 years. Now it's my pleasure to introduce our Board of Directors. We have a world-class board whose dedication, expertise, and leadership are a tremendous sense of pride to the corporation. I would kindly ask each of our Directors to stand as I say their names and remain standing. Please, if you would, hold your applause until all have been introduced. First, Pedro Aspe, Co-Chairman of Evercore Partners, Chairman of Protego, and the former Finance Minister of Mexico. Sir Win Bischoff, Chairman of Lloyds Banking Group and the Chairman of the Financial Policy Committee.
Linda Koch Lorimer, Vice President and Secretary, Yale University. Robert P. McGraw, Chairman and Chief Executive Officer, Averdale Holdings, LLC. Hilda Ochoa-Brillembourg, President and Chief Executive Officer, Strategic Investment Group. Sir Michael Rake, Chairman, BT Group and Chairman of the McGraw-Hill Audit Committee. Edward Rust, Chairman, President and Chief Executive Officer, State Farm Insurance Company and Lead Director for The McGraw-Hill Companies. Kurt Schmoke, Dean of the Howard University School of Law and the former Mayor of Baltimore. Sidney Taurel, Chairman Emeritus, Eli Lilly & Co. and Chairman of the Compensation and Leadership Development Committee.Dick Thornburgh, Vice Chairman, Corsair Capital, LLC and former Vice Chairman, Credit Suisse. A remaining director, William Green, who is Executive Chairman of Accenture, due to a pre-scheduled meeting, is at his own meeting in Ireland today. We miss him and he's unable to be with us.
I'm particularly pleased that Bill Green and Dick Thornburgh joined our board last year. They have already added immeasurably to the depth, knowledge, and perspective of this strong board. We couldn't be more pleased to have them. Fin`ally, if I could ask Doug Daft if he could stand. I also want to take this opportunity to thank a director who will be retiring from the board after today's meeting and who has brought such extraordinary judgment and global insight as a member of the board for the past nine years. We had the opportunity to say a very special thank you to Doug last night at a dinner. You just can't thank these people enough for their willingness to serve. Thank you, Doug Daft, former Chairman and CEO of The Coca-Cola Company. Thank you for your incredible service and we wish you and Delphine all the best in your retirement.
Ladies and gentlemen, the Board of Directors. Thank you very much. We also have a number of retired directors and executives that are with us this morning here. I'd like to honor them and say a special thank you. I'd ask them as part of the recognition if they would please stand. Our former Chairman and CEO, Joe Dionne. Joe, there we go. Vern Alden, Lois Reiss, James Ross, Bob Evenson, Henry Hirschberg, Steve Shepard, and Tom Sullivan. I've already introduced Ken Vittor and now I'd like to introduce the other members of the senior management team and I'd ask them to please stand and remain standing. Jack Callahan, Executive Vice President and Chief Financial Officer. John Berisford, Executive Vice President, Global Human Resources. Ted Smyth, Executive Vice President, Corporate Affairs and Executive Assistant to the Chairman, President, and CEO. Charles Teschner, Executive Vice President, Global Strategy.
Robert Bahash, President, McGraw-Hill Education. Louis Eccleston, President, S&P Capital IQ and S&P Indices. Glenn Goldberg, President, Commodities and Commercial Markets. Doug Peterson, President, Standard & Poor’s Ratings. Thank you, gentlemen. We will now proceed to the business of our annual meeting, the purpose of which is, one, to review the 2011 operations and to look at our prospects for 2012 and beyond. Two, to elect 12 directors. Three, to vote on a proposal to approve on an advisory basis the executive compensation program for the company's named executive officers. Four, to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2012. Five, to vote on a shareholder proposal requesting shareholder action by written consent. Six, to take up any other matter that may properly come before this meeting. Ken Vittor will establish that this meeting is duly called. A quorum is present.
That other formalities have been complied with. After he has done so, he will advise us that a quorum is present. We can proceed with the matters listed in item two of the agenda, which was distributed to everyone as you came in. Ken?
Thanks, Terry. Before we begin, let me provide certain cautionary remarks about forward-looking statements that may be made during this annual meeting. Except for historical information, the matters discussed during the meeting may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, including projections, estimates, and descriptions of future events. Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause the actual results to differ materially from the results anticipated in these forward-looking statements. We direct listeners and the audience to the cautionary statement contained in our Form 10-Ks, 10-Qs, and other periodic reports filed with the U.S. Securities and Exchange Commission. The Corporate Secretary, Mr.
Scott Bennett, has advised me that we have certified lists of shareholders of record as of the close of business on March 12th, 2012, who are entitled to vote at this annual shareholders' meeting. Such lists have been opened for inspection by shareholders. We also have copies of the notice of meeting, proxy materials, annual report, and affidavits of mailing relating to this annual meeting. The affidavits will be filed with the records of the annual meeting. The Board of Directors has designated two representatives of Computershare Trust Company to act as inspectors of election for the annual meeting. Representatives of Computershare Trust Company are present and have been duly sworn. Their oaths will be duly filed. In addition, I'm advised by Mr.
Bennett that shares of common stock representing approximately 88% of the outstanding shares ofThe McGraw-Hill Company and representing more than a majority of the votes entitled to be cast at this annual meeting are represented either in person or by proxy. Mr. Chairman, the annual meeting has been duly convened, a quorum is present, and the business of the annual meeting should proceed.
Good. Thank you, Ken. We will now proceed with the election of directors and the other formal business items. Ballots will be distributed to those who want to vote in person on any of the proposals. We will vote on each proposal before taking up the next one. Time will be provided for specific questions relating to each of the proposals as they're introduced. Further time will be provided following the annual report on operations for questions on other matters. I would request that all remarks concerning the formal business items be directed to the Chair in order that remarks from the floor may be heard clearly by everyone. We have placed microphones on each side of the auditorium. I ask that each shareholder who wishes to ask a question or make a statement use one of these microphones. If that's not convenient, we have a handheld microphone available.
If you have a question or remark, please state your name and whether you're a shareholder yourself or that you represent a shareholder. As a matter of courtesy, please limit yourself to one question or remark until everyone who wishes to do so has an opportunity to ask a question or make a statement. The first item to be voted upon is the election of 12 directors. We present as nominees for the election of directors the 12 persons named in the proxy statement dated March 16th, 2012. The names of the 12 directors nominated for election are Pedro Aspe, Sir Win Bischoff, William Green, Linda Koch Lorimer, Harold McGraw III, Robert McGraw, Hilda Ochoa-Brillembourg, Sir Michael Rake, Edward Rust, Kurt Schmoke, Sidney Taurel, and Richard Thornburgh. The floor is now open for questions or comments regarding any of the election of the 12 directors.
By the way, those desiring ballots, please raise your hand. I would remind you that if you've already voted by proxy or by telephone or the internet, it's not necessary to vote again. Any questions on the directors? Okay. Since there's no further discussion on this proposal, I declare the voting closed on this item. The second item to be voted upon is a proposal to approve on an advisory basis the executive compensation program for the company's named executive officers. The floor is now open for questions or comments on that. Good. Since there's no further discussion on this proposal, I declare the voting closed on this item. The third item to be voted upon is the ratification of the selection of Ernst & Young LLP as the company's independent registered public accounting firm for 2012. Ms. Denise Pelley and Mr.
Ken Egan, partners of Ernst & Young and those that are responsible for The McGraw-Hill Companies' account, are present today at our meeting. They're available now if you have any questions about the selection of their firm as an independent registered public accounting firm or if you wish to ask them any questions about the financial statements of The McGraw-Hill Companies. The floor is now open for questions or comments here. Okay. Since there's no further discussion on this proposal, I declare the voting closed on this item. The fourth item to be voted upon is a shareholder proposal requesting shareholder action by written consent. I understand that Mr. Ken Steiner is prepared to present this proposal, which is set forth on page 74 of the proxy statement. I don't know if Mr. Steiner is here and would like to make that statement. Is Mr. Steiner here?
Yes.
Where are you, Mr. Steiner? There you are. Please.
Okay. Thank you. My proposal is on page 74 of the proxy statement. Shareholder action by written consent. Resolved, shareholders request that our Board of Directors undertake such steps as may be necessary to permit written consent by shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting in which all shareholders are entitled to vote for present voting. This includes written consent regarding issues that a board may not be in favor of. Taking action by written consent in place of a meeting is a means shareholders can use to raise important matters outside the normal annual meeting cycle. This would include actions necessary and important to enhancing the value of our investment.
We grant the owners the ability to act within their proper judgment to use their votes if and when appropriate in a more timely fashion than is currently available. I believe that adoption of this proposal would further enhance good governance and is consistent with other changes made in the past in response to proposals that I have made and that others have made at this company and at other corporations across the country. Therefore, I encourage our board to respond positively to this proposal to support improved corporate governance and financial performance. I urge all my fellow shareholders to vote yes on proposal for shareholder action by written consent.
Thank you, Mr. Steiner. The Board of Directors recommends a vote against this proposal. Detailed reasons for this recommendation are also laid out in the proxy statement that you received. The board believes that this proposal is not necessary because the company amended its certificate of incorporation in 2011 to provide that special meetings of shareholders of the company may be called at the request of holders of 25% of the outstanding shares of the company's common stock. This provision then allows such holders to propose actions for shareholder consideration between annual meetings of the company's shareholders. Other comments or questions from the floor on this proposal? There is no further discussion on this proposal. I declare the voting closed on this item. This concludes the voting on the formal business items. The ballots will now be collected. The votes will now be counted on these matters presented.
Thank you and good morning again. While the votes are being counted, we'll move on to the next part of the program. The plans that we've laid out for McGraw Hill's future have all been built on a solid foundation of achievement. Last year was no exception. In fact, 2011 was one of the best years in our 124-year history, including our 39th consecutive annual increase in our quarterly cash dividend for shareholders and continuing our share repurchase program where we repurchased 1.5 billion shares last year. Our revenues, operating profit, earnings per share all posted some very impressive results. While the S&P 500 index barely registered in the black last year, McGraw-Hill earned investors an impressive 27% total shareholder return, far outpacing the index and far outpacing many other companies.
Our share price was higher than an average of our peers in both the education and in the financial information sectors. The same was true with our earnings before interest and taxes. Our earnings per share were also higher compared with our peers in the financial information space. Last year was also significant for a variety of developments positively impacting our top and bottom lines. Let me just list a few of them. Our 2011 revenue was $6.2 billion, up 3% compared with the previous year. Our adjusted EPS was up 9% compared with 2010. We made major progress restructuring and realigning our benefits plans on our way to achieving cost savings of at least $100 million. We purchased again $1.5 billion in shares. We divested our broadcasting group so we could more focus on growth within the core portfolio.
We expanded Platts' capabilities with strategic acquisitions, including Bentek Energy, especially in the natural gas market, and Steel Business Briefing Group. We announced a new partnership with CME Group, that's the Chicago Mercantile Exchange, which we anticipate will close probably by mid-year this year. The deal will help diversify our index business, boosting our revenue stream by adding the Dow Jones indices to our portfolio. It will be a joint venture, which McGraw Hill will own 75% of. By putting the S&P indices with the Dow Jones indices, what you're doing is you're taking institutional investor indices with retail indices and you're getting the complementary nature of it, creating a very, very powerful platform on that. We undertook several initiatives to expand education's digital and global footprint. Overall, 2011 was a banner year on many fronts and the record of achievement continues.
We just announced the results of the first quarter for 2012 and it was, I'm delighted to say, the best first quarter in our history in terms of revenue and earnings. Revenue increased 6% to $1.3 billion and adjusted net income from continuing operations was up 19% to $144 million. At McGraw Hill Financial, on a pro forma basis, revenue was up 8% to $1 billion and our operating profit rose 10% to $357 million. For the company overall, our adjusted diluted earnings per share went up 30% to $0.51. The results are particularly gratifying in light of the incredible effort that our employees are putting forward to prepare for the separation of the company by year-end into two highly focused independent companies. We can be proud of what the 24,000 employees of The McGraw-Hill Companies are doing for you.
It was the same kind of hard work and effort we've long known and deeply appreciated from our employees in every business and in every time zone around the world. To all of them who did all of this, I salute them. Thank you. Our ability to adapt to changing market conditions is a key reason why we've been so successful for so many years and why that success will continue in the future. I'd now like to share a video with you about that future.
[uninteligible]. We've always understood the value of growth. S&P Global companies have led industry and revolutionized education throughout the decades. As markets change, so do we. We're taking a fresh approach to these new challenges and offering different perspectives. We're integrating scientific solutions, learning-driven qualities to secure the information you need to make the right moves in today's knowledge economy. The long history fits the future. Growing vertically, growing internationally. Our aim is to provide rock-solid analysis at the moment it's needed with confidence and clarity. We're using new evolutions in digital learning around the world and in your hands. S&P Global, committed to growth today, tomorrow, and beyond. McGraw Hill , one legacy, three powerful companies.
As you just saw, we're marrying our rich history with what I believe will be an even brighter future. That future is bright indeed. I want to share with you some of the incredible opportunities that we see ahead and the tremendous enthusiasm and energy that we're feeling as we create these two new companies, McGraw Hill Financial and McGraw Hill Education. Both companies share a common promise and they both share a common purpose. We're about helping customers find ways to succeed and to prosper in a rapidly changing world where information is often conflicting, confounding, and confusing. The bottom line is that we help make sense of it all. To be clear, our mission is never, nor never will be, about us. It will always be about our customers and their markets.
We're committed to helping our customers with those no borders and where everyone can prosper and reach their fullest potential, not just here, but around the globe. At McGraw Hill Financial, for example, it's not just about our product offerings or the quality or the timeliness of the analytics. It's deeper than that. It's about the profoundly positive impact our products, services, and solutions are having on society in general. That's because behind each bond rating, behind each index, behind each benchmark is a story of growth, promise, and hope. A good example is the whole investment area regarding infrastructure, the overall infrastructure. Depending on which estimates you quote, the demand for infrastructure, now this is the basic building blocks of any modern society: schools, highways, R&D centers, bridges, airports, smart grids, dams, rail lines, seaports, water treatment facilities, all those.
All of this will run in the tens of trillion dollars worldwide over the years ahead. That is how fast the world is growing up and how fast the need is. Having just returned from a trip from India, over the next five years, they're going to need to spend a minimum of $1 trillion on infrastructure in their country to achieve the kind of growth to be able to do it. What's our story there? It's about Standard & Poor’s rating a bond so a school can be built in America or overseas and the next generation of students can be prepared for the future. It's about helping finance a smart grid so energy is saved and the lights never go out.
It's about a bond rating that we're currently doing to help build a seaport in Northern Peru, promote economic growth there, or another bond rating that we're doing for Mexican Highway to help speed that country's supply chain so it becomes more prosperous. It's about an S&P index that helps investors move money to where it's most needed. It's about promoting more transparency in equity markets so Baby Boomers' retirement funds are secure. It's about Platts' iron ore assessments for the spot market, giving the global steelmaking industry greater transparency into the mining markets in Brazil, India, and Australia. That transparency helps make residential and commercial construction doable, streamlining the manufacturing of industrial products and consumer durable. Taken together, it spurs economic growth, creates jobs, it creates prosperity, and it creates a better standard of living. It's our goal.
It's about thousands of stories of hope, progress, and what can be as we see it as a noble purpose. Capital flows are the lifeblood of any modern society. McGraw Hill Financial will help keep it flowing. This is especially true with banks, which are undercapitalized these days, and the world's capital markets are stepping in to fill that breach. By the way, in the U.S. today, about 50% of the capital that's raised for growth comes from banks. The other 50% now comes from capital markets, and it'll only grow. If you compare that to Europe, at this point, of all the capital that's been drawn, 80% is coming from banks, 20% is coming from the capital market. What will that number be five years from now? 40%? 45%? It's only going to get bigger and bigger.
Given the increasing demand for capital, the question over the next few years will be how much further will all of that go? When we think of the capital markets today, you have to expand the globe. Yes, it's New York and London and Tokyo and Frankfurt. Today, it's also Jakarta, Shanghai, Seoul, Tel Aviv, Mumbai, Kuala Lumpur, São Paulo, Istanbul, and other financial centers in many different time zones. With many developing countries and emerging markets growing so rapidly, the role of the capital markets is obviously essential. What we're seeing and what we're seeing taking place at a rapid pace is the development of new global local bond markets literally around the world. It's what's happening in Tel Aviv. It's why India is expanding so rapidly. It's what's happening in Johannesburg. It's what's happening in Jakarta.
As all these local bond markets start cropping up, trying to emulate exactly what's been taking place here and taking place in Europe, it means that we're sitting right in the middle of one of the biggest opportunities on the globe.McGraw Hill Financial will be uniquely qualified to help each of the world's capital and commodities markets meet their needs. We're bringing a new level of judgment, objectivity, and analytical rigor that our customers need to make the right decision in today's complex and rapidly changing marketplace. We're there for them and we're off to a great start, but that's not the whole story. While we're helping our clients make the right kinds of decisions in the world's financial markets, McGraw Hill Education is helping teachers, students, professionals make the right kind of decisions when it comes to preparing for the future, which is our future workforce.
The story here goes all about digital. I believe that the digitization of education represents the opportunity of the century. You wouldn't know it talking to most people. More often than not, all we hear about are the stories of how the sad state of education and funding and curriculum and intense worry for the future. There's enough there in all that, but digitization makes it much more. While the current conditions steer us in a more negative way, I couldn't disagree more with the promise of the opportunity. I'm extremely optimistic for the future of our education. Why? Because at McGraw Hill Education, we're seeing this digitization promise being fulfilled.
Imagine a world in which information comes alive on a laptop, a tablet, an iPad with rich content, including 3D images, video, and content that instructors and students can manipulate and personalize to make learning more engaging and relevant and more importantly, more impactful and more fun. Our products and solutions are already showing improving outcomes for students and instructors. One product, McGraw Hill Connect, has been shown to increase students' information retention rate by more than 20%, as well as improving students' exam scores by a full letter grade. In addition to the iPad announcement with Apple earlier this year, which made headlines and was very, very exciting in terms of how we're expanding that.
By the way, you know we now have 70 titles in the professional area in terms of science, medical, engineering, all on iPad, all of this configuration with video and 3D and all of that. We have 50 at higher ed. Last June, I had the opportunity to be with Steve Jobs and we talked about the whole secondary school area that nobody's doing anything for it. We decided that we would do it together. What we launched in November last year were five titles for the iPad for high school, titles like Algebra, Chemistry, Biology, and so forth. To show you them and to get to them, they are just absolutely unbelievable programs. One slight digression. I took Chemistry when I was in school. I couldn't understand anything about it. I never knew why I took it. What am I ever going to do with this information?
When I went on the board of ConocoPhillips and visited my first refinery, you know I went, "Oh, there it is." If I'd stayed, maybe I'd have been there. Now, you know when I took a look at the chemistry application for the iPad that we did for high school, right there, right in the front, as you come in and all the design, there is a refinery. You tap on it and it walks through the entire refinery, pointing out all the things that you need to know and why you need to know them on that one. I'm just about 30 years too late or something on that one. We also announced through the University of Nebraska-Lincoln that we're developing the first ever full digital curriculum for their economics courses. It will use adaptive learning tools that determine a student's subject area strengths and weaknesses.
It includes, again, video for each of the learning objectives, online assessments, interactive digital workbooks, a revolutionary smart device app to deliver a course on mobile devices. I know some would call the whole economics the dismal science. Forget that. We're bringing the study of economics to life in ways that make it fresh, creative, and very, very relevant. We see tremendous growth potential in India, Brazil, China, and in other countries around the globe. We're growing middle classes to see education as their only means to give the next generation a chance to a better life. We'll be there. Only a week ago, we announced that CTB, McGraw Hill, our educational testing business, was selected by the Smarter Balanced Assessments Consortium, which is funded by the U.S.
Department of Education, to develop the first set of core assessment states or assessments that states will be able to use in evaluating the progress of K-12 students. It's the largest contract of its kind to date, and it's a huge step toward realizing the next generation of student assessments can become a reality so instructors can tailor their teaching to students' individual needs, and in turn, students can reach their full potential. I thank Ellen Haley over here and her team for the leadership provided in all of that. None of this is going to happen in a vacuum. Our leadership in digital education is being recognized by numerous outside industry experts and independent organizations. This year, four McGraw Hill digital offerings have been selected as finalists for the Software and Information Industry Association's prestigious 2012 CODiE Awards. That's in education technology.
LearnSmart, Blackboard, Integrity Campus, and Practice Marketing are all in the running. We'll know the winner in about two weeks. As far as I'm concerned, and most importantly, the impact that they're making on student professionals and teachers alike, and all of the cutting-edge and dynamic capability, we've already won. As I said before, I believe that this digitization of education represents the opportunity of the century, and we all need to be very hopeful and need to be very focused in terms of being a part of that. As McGraw Hill Education is formally launched later this year as an independent company, it will be one of the market's commanding leaders with a brand name that's already universally recognized and respected for past accomplishments, as well as being already well prepared for future achievements in a changing educational landscape that's limited only by our imagination.
We're going to put every effort into making sure that the promise is there. Finance. This is more difficult news to share with you. Two months ago, we lost a highly valued colleague and friend. He was our ambassador to the financial community. In February, our Senior Vice President for Investor Relations, Don Rubin, passed away after only recently announcing his retirement. His distinguished career here at McGraw Hill was 52 years long. He was a manager, a thought leader, a mentor, and a beloved friend to all. His legacy is here of one of growth, purpose, passion, trust, and relevance. I had the distinct honor of working closely with Don for many, many of those years. I would also like to acknowledge Celeste Hughes, who's the Senior Manager of Communications and Shareholder Relations, who worked by his side for many of those years as well.
Don was extremely fond of her. In no small measure, the market holds our company today in the highest esteem it does, thanks to the integrity and transparency with which Don ran our investor relations program. With Don's passing,McGraw Hill grew up a leader, and personally, we have lost a very close and dear friend. Through Don's life and career McGraw Hill , we have this video.
Don Rubin was a journalist at heart.
He learned his craft in the 1950s at the foot of the legendary sportswriter Stanley Woodward and later at the Newark Star-Ledger. Don joined McGraw Hill's Electrical Merchandising Week as a reporter in 1959 and soon after won the Jesse H. Neal Award, the Pulitzer Prize of Business Media. Demanding high standards from himself and others, he was valued by many for his wit and wisdom. To many, Don Rubin personified the values of McGraw Hill . His passion for the company he called home was always evident. He spoke with authority, reflecting his deep knowledge of the company. As all good reporters do, he developed relationships throughout McGraw Hill to understand and create simple, powerful stories for investors.
Don was devoted to his wife, Nancy, his son and daughter, Alex and Laura, and Alex's wife and children. An avid tennis player, Don played with the same enthusiasm on the court as he showed in his work.
Don's insight and judgment were valued by McGraw Hill CEOs, Board of Directors, and executives. Just after he announced his retirement, the institutional analysis community wished Don well during an earnings call. CEO Terry McGraw didn't miss a beat.
Don Rubin has been at it for 52 years. He is one of our absolute stars, and you are going to miss the heck out of him.
We already do.
Thank you. Thank you very much for that. Don's rich legacy at McGraw Hill, the company has established a scholarship program and a wonderful way to keep Don and the tribute of Don in front of us for a lifetime. The company established this scholarship with the CUNY Graduate School of Journalism. As many of you know, Steve Shepard is the Dean of the CUNY Graduate School of Journalism, our longtime Editor in Chief of Business Week, and we couldn't be more proud of that association with Steve and with Don. The endowment is a memorial to Don and a symbol of his extreme desire to pass the torch to the next generation of journalists after a lifetime of so many achievements his company will never forget.
I can think of no better way to say goodbye to our dear friend than to say hello to future Rubin scholars in the lifetime ahead. Again, Steve Shepard, who I've already introduced, will be monitoring this endowment fund and the students who will be receiving these funds soon. Of course, the Rubin family, Nancy, Alex, Laura, and Carolyn, thank you for coming today. You know that we all join you in honoring Don. He'd be sorely missed at the company lobbies. Okay. Finally, I look forward to each of you, the owners of McGraw Hill , using and joining us as we continue to make this history come alive and to make the rich promise of everything that we're talking about be real. Okay. The meeting is now open for questions or comments concerning any subject generally relating to The McGraw-Hill Company, .
I would request that all questions and comments be directed to myself. As before, in order that remarks from the floor may be heard clearly by everyone, we have placed microphones on both sides of the auditorium. Again, a handheld will be there if you so need it. I ask that everyone who wishes to ask a question or make a statement also state your name and whether or not you're a shareholder or represent a shareholder. As a matter of courtesy, we will go as rapidly as we can. Please limit yourself to one until we go. We're open for any comments, questions, thoughts, whatever. I've got time.
It's Dick Reef, retiree, former shareholder.
Hi Dick.
First of all, congratulations on a very strong first quarter and also for the very moving tribute to my former boss, Don Rubin. I have two questions for you. The first involves the pension fund for retirees. I know there is a freeze on it for current employees, but for those of us retirees who still receive a pension, can you tell us if the pension fund is underfunded, fully funded, or perhaps even overfunded?
Dick, you know the announcement that we put out when we said that we were going to freeze, and that's sort of a technical human resource term, freeze the defined benefit pension plan. That's putting a mark that all new people will be going into the defined contribution plan. By a matter of law, everybody that is in the defined benefit plan up to that point is in a defined benefit plan. It's fully funded, and there is absolutely no disruption in any of the pension systems. We're making sure that both in terms of new employees going forward as well, that it's clearly understood that it is a fully funded plan and it's a plan that all employees can count on.
The second question involves your partnership with Apple on e-books, textbooks for elementary and high schools on the iPad. As you know, the Justice Department has sued five publishers and Apple for colluding to fix prices on e-books. They came down pretty hard on the so-called agency model for pricing. How will that affect your arrangement with Apple for e-textbooks? Will you use the agency model for pricing?
No. In this situation, we're not a part of any aspect of that. Our relationship with Apple is very straightforward. We're pricing at a very low price, essentially $15 for the curriculum. Because of the fact that you get a lot of scale and volume, the kinds of factors that we're able to benefit from that, students will be able to benefit from the fact that they are able to get this material at a much lower price.
Thank you.
Thanks, Dick.
Yes, sir.
Philip Burner, portfolio manager and shareholder, some brief comments and questions. When you have a company where the company founder was a visionary, the succeeding family eventually must make difficult decisions, which may navigate the company in a different direction in order to adjust and fully compete in an abruptly changing business environment. As a direct result of our Chairman, Terry McGraw , and our Board now focusing on a more specifically strategic restructuring of MHP's eclectic, esoteric brands, MHP is now positioned to extrapolate long-term shareholder growth and value. The stock price will reflect that eventually and recalibrate it to a new higher level. The separation of the company has great potential to most definitively increase the dream of our late founder to make the MHP education spin-off even a more dominant force in the education field.
Each company alone can deploy cash in a more accretive and positive way. The great 2007- 2009 recession has made MHP part of a select group of stocks you can use the old buy and sell and put away value strategy, where you cannot do that with every stock. Now, some questions. You currently serve on two of the most prestigious, admired company boards in the world, namely UTX and COP. In view of the spin-offs, it looks like you're going to have some time on your hands. Are you planning to serve on any other corporate boards?
You want me to take that one, Phil?
Yeah.
In front of my Board of Directors? I plan on not serving on any additional public boards at this time.
Okay. Can you grandfather in Douglas Daft's directorship?
I'm sorry?
Can you grandfather in Douglas Daft's continued directorship?
What was that? I would love to. Doug might have some pushback on that. Doug grew up in Australia during World War II, joined Coca-Cola at 26, and became the only non-American to run as Chairman and CEO of all of Coca-Cola. He has served for nine years with distinction on this board. I think he wants to take a little bit of a pause and enjoy life a little.
Okay. Since you were previously on the Business Roundtable, how do you now rate the recovery level, which I asked you three years ago and you gave me your opinion? Now, how do you rate that level of before versus now?
Okay. Again, my guess is that we'll probably grow, and somewhere around the United States will grow somewhere around 2%, maybe 2.5% this year. I don't see an awful lot more for 2013. I think that Europe, for example, is definitely in recession. When do they come out of that? That'll take time. It takes a while to get into some of these issues, and it takes a while to get out of them. The thing that I'd focus on is the growth in areas like India, Brazil, and China. I would look at the next 11. I'd look at Poland and Turkey. I'd look at Indonesia. I'd look at Thailand and Malaysia. I would like to think that some of the advancements that we have seen in parts of Africa are also going to be there.
For sure, there's a lot of troubled spots, but those areas are starting to show some enormous economic growth. That's why when we talked about the capital markets, the promise in terms of being able to do this, this is so global. The United States post-World War II was about 45% of world GDP. It controlled everything on that part. Today, or in the next two years, maybe three years, the United States will be 15%,1-5 of world GDP. That's not because of the numerator. That's because of the denominator. That means the world is going up so fast.
Both in terms of McGraw Hill Financial being able to take advantage of those kind of global markets and the capital flows that lead to all of that kind of growth and prosperity and jobs and all those kind of things, McGraw Hill Education through the digital process has the exact same opportunity to be able to reach out on a much more global scale. Again, as I was saying, as you increase middle classes and you have more people that want to prosper and do more, it's going to be the education that's going to be able to get them there. For all of us, whether it's the infrastructure, whether it's education, or whether it's 21st-century skill sets, those are the critical elements in creating growth in a knowledge economy. Phil, those are, from a growth standpoint today and what tomorrow looks like, the future is bright.
We've got to get out of some of our past practices, and we've got to get into some better, more fiscal strain to help.
Thank you. Incidentally, by the way, I took Inorganic and Organic Chemistry in college, and I loved it.
That's why you're more successful making all that money as an investment manager. Okay, all right.
Yes, sir.
I'm Bob Sherman, shareholder.
Hey Bob
Like you with chemistry, I don't understand digitalization at all. I have been very impressed by the corporate governance of The McGraw-Hill Companies. When it moves over into McGraw Hill Education, will those standards be maintained? Is it going to be similar one to the other?
Absolutely, Bob. By the way, Bob is one of the greats in the music world coming out of Carnegie. He runs the Young Artist Showcase that played forever on WQXR and now WNYC, and has helped so many young people in terms of young musicians that come here and have no knowledge and capability of other things, training them and helping them in that way. Bob, to your question, absolutely. When you talk about any individual or any company, it's about who they are, what they are, what they stand for, what they believe in, what the value structure is, and all of that. Good corporate governance in terms of how you go about the process and procedures of governing and making sure you get something done is critical.
That's why having a Board of Directors is so important, because you have independent directors with lots of different expertise that are going to help and guide the management to make sure that we don't have any breakdowns in that kind of area. Good governance is very transparent and very needed. Thank you for that. Anything else? If there are no other further questions, we will now proceed to the next order of business. I understand that the Inspectors of Election have now submitted their report to Secretary. Mr. Vittor, will you read that report?
The preliminary tally of votes by the Inspectors of Election shows that the 12 persons nominated as directors of The McGraw-Hill Companies, Inc. have been elected. The proposal to approve on an advisory basis the executive compensation program for the company's named executive officers has been approved. Ernst & Young LLP has been approved in connection with the ratification of their appointment as the company's independent registered public accounting firm for 2012. The shareholder proposal requesting shareholder action by written consent has not been approved. The certificate of Inspectors of Election will be filed with the records of the meeting, and the final results will be available on or before May 1 in our SEC Form 8-K filing.
Okay. Thanks, Ken. Let me take a moment to thank all of our shareholders for your interest and for your guidance and thoughts in all of this. We clearly, in everything that we do and everything that we embark on, we do it together. Whether it's employees, whether it's boards, whether it's management, whether it's shareholders or other stakeholders, we do it together. The number of shares voted and the support demonstrated for the slate of directors is very much appreciated. There being no other further business for us, I now entertain a motion that the meeting be adjourned.
The meeting be adjourned.
Thank you, John Berisford. You hit that line just perfect. Okay. On that one. Well done, Ted Smyth, on that one. All in favor? Having no objections, I declare the meeting closed. Thank you all very much.
That concludes this morning's call. On behalf of The McGraw-Hill Companies , we thank you for participating and wish you a good day.