Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.    )

Filed by the Registrant    x

Filed by a Party other than the Registrant    ¨

Check the appropriate box:

        Rule 14a-6(e)(2))

The McGraw-Hill Companies, Inc.

(Name of Registrant as Specified In Its Certificate)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

x    No fee required.

Notes:

Reg. §240.14a-101.

SEC 1913 (3-99)

Table of Contents

March 16, 2012

Dear Shareholder:

On behalf of our Board of Directors and management, we cordially invite you to attend our Annual Meeting of Shareholders on Wednesday, April 25, 2012. The Meeting will be held at our headquarters at 1221 Avenue of the Americas, New York, New York 10020-1095, at 11:00 a.m. (EDT). If you are unable to attend the Annual Meeting in New York, please join us via live Webcast on the Company’s Web site at www.mcgraw-hill.com.

The Notice of Meeting and Proxy Statement accompanying this letter describe the business we will consider at the Meeting. Your vote is very important. I urge you to vote to be certain your shares are represented at the Meeting even if you plan to attend. Most shareholders have a choice of voting over the Internet, by telephone or by using a traditional proxy card. Please refer to your proxy materials or the information forwarded by your bank, broker or other holder of record to see which methods are available to you.

I look forward to seeing you at the Meeting.

Harold McGraw III

Chairman of the Board, President and Chief Executive Officer

Table of Contents

Notice of Annual Meeting of Shareholders

To Be Held April 25, 2012

The Annual Meeting of Shareholders of The McGraw-Hill Companies, Inc. will be held on Wednesday, April 25, 2012, at 11:00 a.m. (EDT) at the Company’s headquarters at 1221 Avenue of the Americas, New York, New York 10020-1095. At the Meeting, shareholders will be asked to:

You may vote at the Meeting if you were a shareholder of the Company at the close of business on March 12, 2012, the record date for the Meeting.

By Order of the Board of Directors.

Scott L. Bennett

Senior Vice President, Associate General

Counsel and Secretary

New York, New York

March 16, 2012

Please sign and return the enclosed proxy card in the postage-paid envelope provided or, if you prefer, please follow the instructions on the enclosed proxy card for voting by telephone or via the Internet. You may access the Company’s Investor Relations Web site at www.mcgraw-hill.com/investor  relations for further Internet voting instructions as well as to view the Proxy Statement and Annual Report online.

Table of Contents

The McGraw-Hill Companies, Inc.

Proxy Statement

2012 Annual Meeting of Shareholders

i

Table of Contents

ii

Table of Contents

The McGraw-Hill Companies, Inc.

Proxy Statement

2012 Annual Meeting of Shareholders

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDERS MEETING TO BE HELD ON APRIL 25, 2012.

THE COMPANY’S ANNUAL REPORT, LETTER TO SHAREHOLDERS, NOTICE OF ANNUAL MEETING, PROXY STATEMENT AND PROXY CARD ARE AVAILABLE AT www.mcgraw-hill.com/investor_relations.

GENERAL INFORMATION

Why did I receive this Proxy Statement?

The Board of Directors of The McGraw-Hill Companies, Inc. (the “Company”, “we” or “us”) is soliciting proxies for the 2012 Annual Meeting of Shareholders (the “Annual Meeting” or “Meeting”) to be held on Wednesday, April 25, 2012, at 1221 Avenue of the Americas, New York, New York 10020-1095, at 11:00 a.m. (EDT) and at any adjournment of the Meeting. When the Company asks for your proxy, we must provide you with a Proxy Statement that contains certain information specified by law. This Proxy Statement summarizes the information you need in order to vote at the Meeting.

The Company’s Annual Report, Letter to Shareholders, Notice of Annual Meeting, Proxy Statement and proxy card are being mailed to shareholders beginning on or about March 16, 2012.

What will I vote on?

The following items:

Will there be any other items of business on the agenda?

We do not expect any other items of business at the Annual Meeting. Nonetheless, if there is an unforeseen need, your proxy will give discretionary authority to the persons named on the proxy to vote on any other matters that may be properly brought before the Meeting. These persons will use their best judgment in voting your proxy.

Who is entitled to vote?

Shareholders as of the close of business on the record date, which is March 12, 2012, may vote at the Annual Meeting.

How many votes do I have?

You have one vote at the Meeting for each share of common stock you held on the record date.

What constitutes a quorum for the Annual Meeting?

A quorum is necessary to conduct business at the Annual Meeting. A quorum requires the presence at the Meeting of a majority of the outstanding shares entitled to vote, in person or represented by proxy. You are part of the quorum if you have voted by proxy. As of the record date, 278,307,780 shares of Company common stock were issued and outstanding.

1

Table of Contents

How do I vote?

You can vote either in person at the Annual Meeting or by proxy without attending the Meeting. We urge you to vote by proxy even if you plan to attend the Meeting so we will know as soon as possible that enough votes will be present for us to hold the Meeting. If you attend the Meeting in person, you may vote at the Meeting and your earlier proxy will not be counted.

May I vote by telephone or via the Internet?

Yes. Instead of submitting your vote by mail using the enclosed proxy card, you may be able to vote on the Internet or by telephone. Please note that there are separate Internet and telephone voting arrangements depending on whether you hold your shares:

If you are a registered shareholder, you may vote by telephone or via the Internet by following the instructions on your proxy card.

If you are a beneficial owner, please refer to the information forwarded by your bank, broker or other holder of record to see which options are available to you. Most brokers and banks offer voting by telephone and via the Internet as well as by mail.

If you vote via the Internet, you may incur costs, such as usage charges from Internet access providers and telephone companies. You will be responsible for these costs.

What should I do if I want to attend the Annual Meeting?

All shareholders and employees of the Company may attend the Annual Meeting. Please bring your admission ticket or proof of ownership of The McGraw-Hill Companies stock to enter the Annual Meeting. When you arrive at the Annual Meeting, you may be asked to present photo identification, such as a driver’s license, to be admitted. The McGraw-Hill Companies employees wishing to attend the Annual Meeting can present their employee identification card to be admitted.

For safety and security reasons, no cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the Meeting.

How do I vote my shares in the Company’s Dividend Reinvestment Plan?

If you participate in the Company’s Dividend Reinvestment Plan, any proxy you give will also govern the voting of all shares you hold in this Plan, unless you give us other instructions.

How do I vote my shares in the Company’s employee benefit plans?

If you received this Proxy Statement because you are an employee of the Company who participates in these plans and you have shares of common stock of the Company allocated to your account under these plans, you may vote your shares held in these plans as of March 12, 2012 by mail, by telephone or via the Internet. Instructions are provided on the enclosed proxy card from Computershare Trust Company, N.A. (formerly BNY Mellon Shareowner Services), the Company’s transfer agent. Computershare must

2

Table of Contents

receive your instructions by 2:00 p.m. (EDT) on April 23, 2012 in order to communicate your instructions to the plans’ Trustee, who will vote your shares. Any plan shares for which we do not receive instructions from the employee will be voted by the Trustee in the same proportion as the shares for which we have received instructions.

Can I revoke or change my vote?

Yes. If you are a shareholder of record, you have the right to revoke your proxy at any time before the Annual Meeting by sending a signed notice to the Company’s Secretary, The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, New York 10020-1095. If you want to change your vote at any time before the Meeting, you must deliver a later dated proxy by telephone, via the Internet or in writing. You may also change your proxy by voting in person at the Meeting.

If you are a beneficial owner, please refer to the information forwarded by your broker, bank or other holder of record for procedures on revoking or changing your proxy.

What are the costs of soliciting these proxies and who will pay them?

The Company will pay all costs of soliciting these proxies. In addition, some of our officers and employees may solicit proxies by telephone or in person. We will reimburse banks and brokers for the expenses they incur in forwarding the proxy materials to you. Georgeson Inc. is assisting us with the solicitation of proxies for a fee not to exceed $21,500 plus reimbursement for out-of-pocket expenses.

How many votes are required for the approval of each item?

Are abstentions and broker non-votes part of the quorum?

Yes. Abstentions and broker non-votes count as “shares present” at the Annual Meeting for purposes of determining a quorum.

3

Table of Contents

What are broker non-votes?

If your shares are held by a broker, the broker may require your instructions in order to vote your shares. If you give the broker instructions, your shares will be voted as you direct. If you do not give instructions, one of two things can happen depending on the type of proposal. If the proposal is considered “routine” under the rules of the New York Stock Exchange, the broker may vote your shares in its discretion. For other proposals, the broker may not vote your shares without your instructions. When that happens, it is called a “broker non-vote.”

Item 3 in this Proxy Statement (ratification of the appointment of the Company’s independent Registered Public Accounting Firm for 2012) will be considered routine under the rules of the New York Stock Exchange and the broker may vote your shares for this Item in its discretion. The broker is not entitled to vote your shares on the other Items unless the broker has received instructions from you.

Who will count the vote?

Votes at the Annual Meeting will be counted by two independent inspectors of election appointed by the Board.

What if I do not vote for some or all of the matters listed on my proxy card?

If you are a registered shareholder and you return a signed proxy card without indicating your vote for some or all of the matters, your shares will be voted as follows for any matter you did not vote on:

How do I submit a shareholder proposal for the 2013 Annual Meeting?

The Company’s 2013 Annual Meeting is scheduled for May 1, 2013. There are two different deadlines for submitting shareholder proposals. First, if a shareholder wishes to have a proposal considered for inclusion in next year’s Proxy Statement, he or she must submit the proposal in writing so that we receive it by 5:00 p.m. (EDT) on November 16, 2012. Proposals should be addressed to the Company’s Secretary, The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, New York 10020-1095. If you submit a proposal, it must comply with applicable laws, including Rule 14a-8 of the Securities Exchange Act of 1934.

In addition, the Company’s By-Laws provide that any shareholder wishing to nominate a candidate for Director or to propose any other business at the Annual Meeting must give the Company written notice no earlier than December 26, 2012 and no later than January 25, 2013. This notice must comply with applicable laws and the Company’s By-Laws. Copies of the By-Laws are available to shareholders free of charge on request to the Company’s Secretary, The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, New York 10020-1095. You may also download the By-Laws from the Corporate Governance section of the Company’s Investor Relations Web site at www.mcgraw-hill.com/investor_relations.

Can I view future proxy materials online instead of receiving them by mail?

Yes. If you are a shareholder of record or own Company shares through one of the Company’s 401(k) Plans, you may, if you wish, consent to view future Proxy Statements and Annual Reports online. If you elect this feature, you will receive an e-mail notice which will include the Web address for viewing the materials online. The e-mail notice will also include instructions so you can vote your proxy online or by telephone. If you have more than one account, you may receive separate e-mails for each account. Costs normally associated with electronic delivery, such as usage and telephone charges, as well as any costs incurred in printing documents, will be your responsibility.

During the proxy voting period, the Internet voting system will automatically prompt shareholders for their consent. Throughout the year,

4

Table of Contents

registered shareholders can give consent by enrolling in MLink^SM, a secure online mailbox for electronic delivery of the Annual Report and Proxy Statement, as well as account statements. Log on to www.bnymellon.com/shareowner/equityaccess and enter the requested information to enroll in MLink. Owners of shares through one of the Company’s 401(k) Plans may consent at http://www.resources.hewitt.com/mcgraw-hill.

If you are a beneficial owner, please contact your broker, bank or other holder of record for procedures on how to provide your consent.

What are the benefits of electronic delivery?

If you received your Annual Meeting materials by mail, we strongly encourage you to sign up to receive these materials via e-mail. Electronic delivery benefits the environment and saves the Company money by reducing printing and mailing costs. It will also make it convenient for you to view your proxy materials and vote your shares online. If you have shares in more than one account, it is also an easy way to eliminate receiving duplicate copies of proxy materials.

What are the costs of electronic delivery?

The Company charges nothing for electronic delivery. You may, of course, incur expenses associated with Internet access such as telephone charges or charges from your Internet service provider.

May I change my mind later?

Yes. You may discontinue electronic delivery and resume mail delivery of the Proxy Statement and Annual Report. Registered shareholders should go to www.bnymellon.com/shareowner/equityaccess, log on to their account, and click “decline” in the MLink Profile tab. Owners of shares through one of the Company’s 401(k) Plans can revoke consent at http://www.resources.hewitt.com/mcgraw-hill.

If you are a beneficial owner, please contact your broker, bank or other holder of record for procedures on how to revoke your consent.

Will I receive a copy of the Company’s Annual Report?

Unless you previously elected to view our Annual Report via the Internet, we mailed our 2011 Annual Report to shareholders beginning on or about March 16, 2012.

What is “householding”?

We have adopted “householding”, a procedure under which beneficial owners who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of our Annual Report and Proxy Statement unless one or more of these shareholders notifies us that they wish to continue receiving individual copies. This procedure reduces duplicate mailings and thus reduces our printing costs and postage fees. Shareholders who participate in householding will continue to receive separate proxy cards. Householding does not affect dividend check mailings.

What if I want to receive a separate paper or e-mail copy of the Proxy Statement or Annual Report at no charge?

If you wish to receive a separate paper or e-mail copy of the 2011 Annual Report or this Proxy Statement at no charge, please call us toll-free at (866) 436-8502, or send an e-mail to investor_relations@mcgraw-hill.com, or write to: Investor Relations, The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, New York 10020-1095. We will promptly deliver to you the documents you requested. Please make your request for documents on or before April 16, 2012 to facilitate timely delivery of the documents to you.

Where can I find the voting results?

We will publish voting results in a Form 8-K which we will file with the SEC on or before May 1, 2012. To view this Form 8-K online, log on to the Company’s Investor Relations Web site at www.mcgraw-hill.com/investor_relations, and click on the SEC Filings link located in the Digital Investor Kit.

5

Table of Contents

Can shareholders and other interested parties communicate directly with our Board? If so, how?

Yes. You may communicate directly with one or more members of the Board by writing to the Company’s Secretary, The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, New York 10020-1095, or by sending an e-mail to the Company’s Secretary at corporate_secretary@mcgraw-hill.com. The Company’s Secretary will then forward all questions or comments directly to our Board or a specific Director, as the case may be.

6

Table of Contents

BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

The Company’s business and affairs are overseen by our Board pursuant to the New York Business Corporation Law and our Restated Certificate of Incorporation and By-Laws. We currently have 13 Directors, 12 of whom are being nominated at this Annual Meeting for a one-year term which will expire at the Annual Meeting in 2013. (See Item 1 on page 71.) Mr. Douglas N. Daft, who has served as a Director of the Company since 2003, will be retiring from the Board after the Annual Meeting and will not be standing for re-election.

Director Independence

The Board has determined that all of the Company’s Directors, with the exception of Messrs. Harold McGraw III (the Company’s Chairman, President and Chief Executive Officer) and Robert P. McGraw (the brother of Harold McGraw III), have met the independence requirements of the New York Stock Exchange, based upon the application of objective categorical standards adopted by the Board. To be considered independent, a Director must have no material relationship (other than as a Director) with the Company, or any of its subsidiaries, either directly or as a partner, shareholder or officer of an organization that has a material relationship with the Company or any of its subsidiaries. In making independence determinations, the Board broadly considers all relevant facts and circumstances. In accordance with the Company’s Corporate Governance Guidelines, a Director will not be an independent Director of the Company if:

For purposes of sub-paragraphs (i) through (v) above, an “immediate family member” includes a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law and anyone (other than domestic employees) who shares such person’s home. Individuals who are no longer immediate family members as a result of

7

Table of Contents

legal separation or divorce, or those who have died or become incapacitated are not taken into consideration with respect to the determination of a Director’s independence.

Additional Information Regarding Director Independence

In making its independence determinations with respect to our Directors, the Board considered the following transactions that the Company engages in from time to time with organizations in which our independent Directors serve as executive officers or otherwise have a material interest:

All of these transactions are entered into in the ordinary course of business and on terms that are substantially equivalent to those prevailing at the time for comparable transactions with other similarly situated customers or vendors of the Company.

In making its independence determinations with respect to our Directors, the Board reviews the materiality of these transactions not only from the standpoint of the applicable Director but also from the standpoint of the organizations in which they serve. Based on this review, the Board has concluded that these transactions do not interfere with the ability of each such Director to exercise independent judgment in carrying out his or her Board responsibilities.

Annual Meeting Attendance

It is the Company’s policy that, subject to illness or an unavoidable schedule conflict, all Directors

8

Table of Contents

will attend and be introduced at the Annual Meeting. All of our Directors attended the 2011 Annual Meeting except for one Director who was unable to attend due to a minor accident and a newly elected Director who, at the time he was elected, had a pre-existing commitment on the date of the Annual Meeting.

Leadership Structure of the Board of Directors

The Company’s business and affairs are overseen by its Board of Directors which currently has 13 members. There is one management representative on the Board and, of the 12 remaining Directors, 11 are independent. The Board has standing Nominating and Corporate Governance, Audit and Compensation and Leadership Development Committees composed solely of outside independent Directors. The Chair of each Committee reports to the full Board as appropriate from time to time. In addition to these three standing Committees, the Board has an Executive Committee and a Financial Policy Committee.

The Company’s Corporate Governance Guidelines provide that the Board shall select annually the Chairman of the Board based upon the criteria that the Company’s independent Nominating and Corporate Governance Committee recommends and what the Directors believe to be in the best interests of the Company. This process includes a consideration of whether the roles of Chairman and Chief Executive Officer should be combined or separated based upon the Company’s needs, and the strengths and talents of its executives, at any given time. On April 27, 2011, the Board appointed Harold McGraw III as the Chairman of the Board, President and Chief Executive Officer of the Company for the period April 27, 2011 through April 25, 2012.

The Company’s Corporate Governance Guidelines further provide that, in the event the Chief Executive Officer is also serving as Chairman of the Board, the Board shall designate an independent Director to serve as Presiding Director. The selection of the Presiding Director is made at a meeting at which only independent Directors are present.

The position of Presiding Director is intended to provide a check and balance on the role and responsibilities of the Chief Executive Officer. On April 27, 2011, the Board appointed Mr. Edward B. Rust, Jr., the Chairman of the Nominating and Corporate Governance Committee, as the Presiding Director of the Board for the period April 27, 2011 through April 25, 2012. As Presiding Director, Mr. Rust has the following responsibilities as set forth in the Company’s Corporate Governance Guidelines:

“(i) be readily available to be consulted by any of the senior executives of the Company as to any concerns they may have about the Company; (ii) be readily available to all Directors to communicate their issues and concerns to the Chief Executive Officer; (iii) be readily available to the Chief Executive Officer to offer counsel; (iv) preside at all meetings of the Board at which the Chairman is not present, including all meetings of non-management Directors and all executive sessions of the independent Directors; (v) authority to call meetings of the independent Directors, including in the event of a crisis and/or the incapacitation of the Chief Executive Officer; (vi) communicate Directors’ feedback to the Chief Executive Officer from the meetings of the non-management Directors and from informal conversations with Directors; (vii) review and approve the proposed agenda for each upcoming Board meeting and the annual Board calendar; (viii) review and approve meeting schedules to assure there is sufficient time for discussion of all agenda items; (ix) consult with the other Directors and advise the Chief Executive Officer about the quality and timeliness of the materials distributed to the Board; (x) review and approve the materials and information sent to the Board; (xi) interview, along with the Chief Executive Officer and, as applicable, the Chair of the Nominating and Corporate Governance Committee, candidates for the Board; and (xii) assist the Nominating and Corporate Governance Committee with broad issues of corporate governance.”

9

Table of Contents

The Board believes that its current leadership structure assures the appropriate level of management oversight and independence. This leadership structure provides clarity that Harold McGraw III, the Chief Executive Officer and Chairman, has primary responsibility for managing the Company’s business, implementing the Company’s strategy and directing the work of other officers, under the oversight, and subject to the review, of the Board. This structure results in a single leader being directly accountable to the Board and, through the Board, to shareholders, and enables Mr. McGraw to act as the key link between the Board and other members of management. It also facilitates the Board’s decision-making process because Mr. McGraw, who has first-hand knowledge of our operations and the major issues facing the Company, chairs the Board meetings where the Board discusses strategic and business issues.

Role of Board of Directors in Risk Oversight

The Board of Directors administers its risk oversight role through its Committee structure and the Committees’ regular reports to the Board at each Board meeting. The Board’s Audit Committee meets frequently during the year and discusses with management, the Company’s chief audit executive and the Company’s independent external auditor: (a) current business trends affecting the Company; (b) the major risk exposures facing the Company; (c) the steps management has taken to monitor and control such risk factors; and (d) the adequacy of internal controls that could significantly affect the Company’s financial statements. The Chair of the Audit Committee provides the Board with a report concerning its risk oversight activities at each Board meeting.

In 2009, the Compensation and Leadership Development Committee engaged the compensation consulting firm of Towers Watson to conduct a risk assessment of the Company’s executive compensation program applicable to corporate and business segment employees, including Standard & Poor’s. During this review, Towers Watson studied the Company’s pay philosophy, incentive plan designs, performance metrics and pay plan governance process. Towers Watson also interviewed the Company’s Chief Executive Officer and other key senior executives to inquire about business strategies and areas of risk faced by the Company and its business segments. Towers Watson concluded that the Company’s executive compensation program does not encourage participants to take inappropriate risks, and the Committee concurred in these findings.

In 2011, management conducted a review of all of the Company’s non-executive incentive and sales compensation plans to assess the designs of those plans in order to ensure that they do not encourage inappropriate or excessive risk taking. The findings and conclusions of the review determined that the plan designs do not encourage excessive risk taking. Management reviewed its findings with the Committee, and Frederic W. Cook & Co. concurred in these findings and conclusions.

In both 2010 and 2011, the Committee established performance metrics that focused on revenue, net income, and earnings per share growth, and established goal and payment schedules for each metric that were designed to provide a balance to motivate the achievement of the established goals without the need for inappropriate or excessive risk taking by providing a range of payment opportunities for achievement both below and above the target goals established for the short and long-term incentives. In addition, the Committee reviews and assesses plan design, performance metrics, and goals for the annual incentive plans within the Company’s Standard & Poor’s Ratings Services and S&P Capital IQ/S&P Indices business units to ensure that the designs of those annual incentive plans do not encourage inappropriate or excessive risk taking.

Process for Identifying and Evaluating Directors and Nominees

The Nominating and Corporate Governance Committee reviews with the Board, on an annual basis, the appropriate skills and characteristics required of Board members in the context of the then-current composition of the Board. The Committee also recommends to the Board the general criteria for selection of proposed nominees for election as Directors and the slate of

10

Table of Contents

individuals who will constitute the nominees of the Board for election as Directors at each Annual Meeting. In addition to qualities of intellect, integrity and judgment, this assessment by the Committee takes into consideration diversity, background, senior management experience and an understanding of some combination of marketing, finance, technology, international business matters, government regulation, education and public policy. The Committee makes this determination in the context of an assessment of the perceived needs of the Board at that point in time. The Committee evaluates all nominees for Director based on these criteria, including nominees recommended by shareholders. Although the Committee considers diversity as a factor in assessing the appropriate skills and characteristics required of Board members, the Board does not have a formal policy with regard to diversity in identifying Director nominees. The Committee has sole authority to retain and terminate search firms, to assist the Board in identifying and reviewing prospective Director nominees, and to approve the fees and other retention terms of any search firms.

Specific Experience, Qualifications, Attributes and Skills of Directors

The Nominating and Corporate Governance Committee has reviewed with the Board the specific experience, qualifications, attributes and skills of each Director nominee standing for re-election as a Director at the Annual Meeting. The Committee has concluded that each Director nominee has the appropriate skills and characteristics required of Board membership, and each possesses an in-depth knowledge of the Company’s complex global businesses and strategy. The Committee further believes that our Board is composed of well-qualified and well-respected Directors who are prominent in business, finance and academia. The experience and key competencies of each Director nominee, as reviewed and considered by the Committee, are set forth below.

Pedro Aspe: As Co-Chairman of Evercore Partners, Inc., a leading investment bank in the United States, and Chairman of Protego Casa de Bolsa, a broker dealer, and Managing Director of Protego Asesores, an investment banking company, both of which are headquartered in Mexico, Dr. Aspe has substantial financial services, capital markets, finance and accounting experience, and broad international business exposure. This experience enables Dr. Aspe to provide the Company with effective leadership in the conduct of its business as a global information services provider serving the financial services and business information markets. As a Professor of Economics at ITAM (Instituto Tecnológico Autónomo de México), Dr. Aspe has broad insight into the operation of educational institutions and is able to provide the Company with valuable guidance in its business as a global provider of instructional, assessment and reference products and solutions for the education market. The positions Dr. Aspe has held with the Mexican government have given him extensive government regulation and public policy experience which is extremely important to the Company in the conduct of its complex global business.

Sir Winfried Bischoff: As Chairman of Lloyds Banking Group plc and former Chairman of Citigroup, Inc. and Schroders plc, Sir Win has substantial financial services, capital markets, finance and accounting experience, broad international business exposure, and extensive experience involving government regulation and public policy. This experience enables Sir Win to provide the Company with effective leadership in the conduct of its business as a global information services provider serving the financial services, education and business information markets.

William D. Green: As current Chairman and former Chief Executive Officer of Accenture plc, a global management consulting, technology services and outsourcing company, Mr. Green has substantial sales, marketing, finance, manufacturing, technology and accounting experience, broad international business exposure and an extensive knowledge of government regulation and public policy. This experience enables Mr. Green to provide the Company with effective leadership in the conduct of its business as a global information services provider serving the financial services and business information markets, including in connection with the numerous

11

Table of Contents

technology issues that the Company faces. As a former member of Business Roundtable, where he served as chairman of its Education, Innovation and Workforce Initiative and previously served as Chairman of The Springboard Project, as Co-Chair of the Business Coalition for Student Achievement, as a member of the National Governors Association’s Complete to Compete National Advisory Group, the Business Higher Education Forum and as an advisory Board member of Skills For America’s Future and a Board member of Change the Equation, Mr. Green has broad insight into the operation of educational institutions and is able to provide the Company with valuable guidance in its business as a global provider of instructional, assessment and reference products and solutions for the education market.

Linda Koch Lorimer: As Vice President and Secretary of Yale University, former President of Randolph-Macon Woman’s College, former Associate Provost of Yale University, former Chairman of the Board of the Association of American Colleges and Universities and the Women’s College Coalition, and a Trustee of Hollins University, Ms. Lorimer has broad insight into the operation of educational institutions and extensive experience involving government regulation and public policy. As a result of this experience, Ms. Lorimer is able to provide the Company with valuable guidance in its business as a global provider of instructional, assessment and reference products and solutions for the education market. In addition, Ms. Lorimer has been responsible during the past seven years for Yale University’s Office of International Affairs, which gives her insight into the global developments affecting the Company. Ms. Lorimer has also been a director of three other publicly traded companies, including service on audit and compensation committees where she contributed valuable guidance in corporate strategic and financial policy matters.

Harold McGraw III: As President and Chief Executive Officer of the Company, and through the many positions Mr. McGraw has held with the Company since joining the Company in 1980, Mr. McGraw has substantial financial services, capital markets, finance, accounting, education, sales and marketing experience, and broad international business exposure. This experience enables Mr. McGraw to provide the Company with effective leadership in the conduct of its business as a global information services provider serving the financial services, education and business information markets. As former Chairman and a member of Business Roundtable, Chairman of the Emergency Committee for American Trade (ECAT), US-India Business Council and US Council for International Business, Vice Chairman of the International Chamber of Commerce, Chairman of The U.S. Trade Representative’s Advisory Committee for Trade Policy and Negotiations (ACTPN) and as a member of The Business Council, Mr. McGraw has extensive government regulation and public policy experience which is extremely valuable to the Company in the conduct of its complex global business.

Robert P. McGraw: As Chairman and Chief Executive Officer of Averdale Holdings, LLC, an international investment company, and through the many positions Mr. McGraw has previously held with the Company, Mr. McGraw has broad insight into the operation of educational institutions, substantial sales and marketing experience, and extensive international business exposure, particularly in China, which is a growth market for the Company. This experience enables Mr. McGraw to provide the Company with valuable guidance in its business as a global provider of instructional, assessment and reference products and solutions for the education market, and effective leadership in the conduct of its business as a global information services provider serving the financial services and business information markets.

Hilda Ochoa-Brillembourg: As President and Chief Executive Officer of Strategic Investment Group, a group of affiliated investment management firms, and as former Chief Investment Officer of the Pension Investment Division at the World Bank, Ms. Ochoa-Brillembourg has substantial finance, accounting, financial services and capital markets experience, and broad international business exposure. As a former lecturer at the Universidad Catolica Andres Bello in Venezuela, Vice Chairman, Dean’s Alumni Leadership Council, Harvard Kennedy School of Government, Advisory Board member of the Rockefeller Center for Latin American Studies at

12

Table of Contents

Harvard University and board member of The Atlantic Council of the United States and The Council on Foreign Relations, Ms. Ochoa-Brillembourg has broad insight into the operation of educational institutions and extensive government regulation and public policy experience. This experience is extremely valuable to the Company in the conduct of its complex global business.

Sir Michael Rake: As Chairman of BT Group plc, one of the largest communications companies in the world, and former Chairman of KPMG International, one of the world’s leading accounting organizations, Sir Michael has substantial finance, accounting, financial services, capital markets, technology and digital products experience, and broad international business exposure. This experience enables Sir Michael to provide the Company with effective leadership in the conduct of its business as a global information services provider serving the financial services, education and business information markets. The positions that Sir Michael has held as Chair of the Commission for Employment and Skills in the UK, as a member of the DTI UK/US Taskforce on Regulation, on the Board of the TransAtlantic Business Dialogue and as a member of the CBI International Advisory Board have given him extensive government regulation and public policy experience which is extremely valuable to the Company in the conduct of its complex global business. As Chairman of the Governors of Wellington College and a William Pitt Fellow at Pembroke College, Cambridge, Sir Michael has broad insight into the operation of educational institutions and is able to provide the Company with valuable guidance in its business as a global provider of instructional, assessment and reference products and solutions for the education market.

Edward B. Rust, Jr.: As Chairman of the Board, President and Chief Executive Officer of State Farm Mutual Automobile Insurance Company, as Co-Chair of Business Roundtable, and as former Chairman of the American Enterprise Institute and Financial Services Roundtable, Mr. Rust has substantial financial services, capital markets, finance, accounting, sales and marketing experience, and extensive government regulation and public policy experience which is extremely valuable to the Company in the conduct of its complex global business. This experience enables Mr. Rust to provide the Company with effective leadership as a global information services provider serving the financial services, education and business information markets. As a Trustee for Illinois Wesleyan University, as a member of the Board of Directors of America’s Promise Alliance and the James B. Hunt, Jr. Institute for Educational Leadership, as the Co-Chairman of the Business Coalition for Student Achievement, and as a former member of President George W. Bush’s Transition Advisory Team Committee on Education, Mr. Rust has broad insight into the operation of educational institutions and is able to provide the Company with valuable guidance in its business as a global provider of instructional, assessment and reference products and solutions for the education market.

Kurt L. Schmoke: As Dean of the Howard University School of Law and a former partner at the law firm of Wilmer Cutler & Pickering, Mr. Schmoke has substantial education and legal experience. This experience enables Mr. Schmoke to provide the Company with effective leadership as a global information services provider serving the financial services and business information markets, and as a global provider of instructional, assessment and reference products and solutions for the education market. As a former Mayor of Baltimore, a former State’s Attorney for Baltimore, a member of the Council on Foreign Relations, and a former member of President Jimmy Carter’s domestic policy staff, Mr. Schmoke has extensive government regulation and public policy experience which is extremely valuable to the Company in the conduct of its complex global business.

Sidney Taurel: As former Chairman and Chief Executive Officer of Eli Lilly and Company, a global pharmaceutical company, Mr. Taurel has substantial sales and marketing, financial services, capital markets, finance and accounting experience, and broad international business exposure. This experience enables Mr. Taurel to provide the Company with effective leadership as

13

Table of Contents

a global information services provider serving the financial services, education and business information markets. As a former CEO of a global company and as a member of the Board of Overseers of the Columbia Business School, and as a founder of the International School of Indiana, an international school located in Indianapolis, Mr. Taurel provides effective leadership relating to global expansion and innovation and has broad insight into the operation of educational institutions and is able to provide the Company with valuable guidance in its business as a global provider of instructional, assessment and reference products and solutions for the education market. The positions Mr. Taurel has held as a member of The Business Council, the Homeland Security Advisory Council, President George W. Bush’s Export Council, and the Advisory Committee for Trade Policy and Negotiations have given him extensive government regulation and public policy experience which is extremely valuable to the Company in the conduct of its complex global business.

Richard E. Thornburgh: As Vice Chairman of Corsair Capital LLC, a private equity firm focused on investing in the global financial services industry, and as a former executive holding key financial and other positions at Credit Suisse and Credit Suisse First Boston, the investment banking arm of Credit Suisse, Mr. Thornburgh has substantial financial services, capital markets, finance and accounting experience, and broad international business exposure. This experience enables Mr. Thornburgh to provide the Company with effective leadership as a global information services provider serving the financial services and business information markets. The positions Mr. Thornburgh has held with the Securities Industry Association have further enhanced Mr. Thornburgh’s experience in these areas. As a member of the Executive Committee of the University of Cincinnati Foundation and a member of the University of Cincinnati Investment Committee, Mr. Thornburgh has broad insight into the operation of educational institutions and is able to provide the Company with valuable guidance in its business as a global provider of instructional, assessment and reference products and solutions for the education market.

14

Table of Contents

Directors’ Biographies

The following 12 Director nominees are currently serving as Directors of the Company and have been nominated to stand for re-election at the Annual Meeting to serve one-year terms that will expire at the 2013 Annual Meeting. Please see pages 1 through 4 and page 71 of this Proxy Statement for voting information.

		Sir Winfried Bischoff, age 70, has been Chairman of Lloyds Banking Group plc since September 15, 2009. Prior to that he was Chairman of Citigroup, Inc. (“Citi”), a global financial services firm, from December 11, 2007 through February 23, 2009. He served as acting Chief Executive Officer of Citi from November 4, 2007 through December 11, 2007 and Chairman of Citi Europe from 2000 until 2009. Sir Win was Chairman of Schroders plc, an international investment banking and asset management firm headquartered in Great Britain, from 1995 to 2000. Prior to that, Sir Win was Chairman of J. Henry Schroder Co. (the London investment bank of Schroders plc) from 1983 to 1995 and Group Chief Executive of Schroders plc from 1984 to 1995. He is a Director of Eli Lilly and Company and Trustee (formerly Chairman) of Career Academies UK and a member of the International Advisory Board of Akbank TAS, Turkey. He was a Director of Land Securities plc and Prudential plc. He was knighted in 2000 for his services to the banking industry. Sir Win has served as a Director of the Company since 1999 and is Chair of the Financial Policy Committee and a member of the Compensation and Leadership Development and Executive Committees.

15

Table of Contents

		William D. Green, age 59, is the Executive Chairman of Accenture, a global management consulting, technology services and outsourcing company. Mr. Green served as Accenture’s Chief Executive Officer from September 2004 through December 2010. He assumed the additional role of Chairman in 2006 and has served on the Board of Directors since its inception in 2001. Prior to serving as CEO, Mr. Green was Accenture’s Chief Operating Officer-Client Services with overall management responsibility for the company’s operating groups. In addition, he served as Group Chief Executive of the Communications & High Tech operating group from 1999 to 2003. He was also Group Chief Executive of the Resources operating group for two years. Earlier in his career, Mr. Green led the Manufacturing industry group and was Managing Director for Accenture’s business in the United States. He joined Accenture in 1977 and became a partner in 1986. Mr. Green is a member of the United Nations’ Secretary-General’s High-Level Group on Sustainable Energy for All, the Initiative for Global Development, the Business Council, the International Business Council of the World Economic Forum and the G100. He is also deeply involved in many business groups supporting education in the United States and around the world, including the Business Coalition for Student Achievement, where he serves as Co-Chair. He is a Board member of Change the Equation, an advisory Board member of Skills for America’s Future and a member of the Business Higher Education Forum. Mr. Green is also a frequent speaker at business, technology and academic forums worldwide. Mr. Green has served as a Director of the Company since 2011 and is a member of the Compensation and Leadership Development and Nominating and Corporate Governance Committees.

		Linda Koch Lorimer, age 60, has been Vice President and Secretary of Yale University since 1995, having returned to Yale as Secretary of the University in 1993. She was President of Randolph-Macon Woman’s College from 1987 to 1993 and was Associate Provost of Yale University from 1983 to 1987. Ms. Lorimer is the former Chairman of the Board of the Association of American Colleges and Universities and also the Women’s College Coalition. She served as Vice Chair of the Center for Creative Leadership. Ms. Lorimer is a Director of Yale-New Haven Hospital and a Trustee of Hollins University. She was a Director of Sprint Nextel, Centel Corporation and First Colony Life Insurance Company. Ms. Lorimer has served as a Director of the Company since 1994 and is a member of the Compensation and Leadership Development and Nominating and Corporate Governance Committees. She was the Presiding Director of the Company’s Board of Directors from 2004 to 2009.

16

Table of Contents

		Robert P. McGraw, age 57, has been since 1999 Chairman and Chief Executive Officer of Averdale Holdings, LLC, an international investment company. Prior to that, Mr. McGraw was Executive Vice President of the Professional Publishing Group of the Company from 1989 to 1998. He was Executive Vice President of the Healthcare Group from 1987 to 1989, and Group Vice President of that same group from 1985 to 1987. Prior to that, he served in several key positions in the Health Professions Division of the Company: General Manager from 1983 to 1985; Editorial Director from 1982 to 1983; and Editor from 1979 to 1982. He joined the Company in 1976 as a sales representative for McGraw-Hill Higher Education. Mr. McGraw has served as a Director of the Company since 1995 and is a member of the Financial Policy Committee. (a)

17

Table of Contents

		Hilda Ochoa-Brillembourg, age 67, is the founder and has been since 1987 the President and Chief Executive Officer of Strategic Investment Group, a group of affiliated investment management firms. From 1976 to 1987, she was Chief Investment Officer of the Pension Investment Division at the World Bank. Prior to joining the World Bank, she served as an independent consultant in the fields of economics and finance, as a lecturer at the Universidad Catolica Andres Bello in Venezuela and as Treasurer of the C.A. Luz Electrica de Venezuela in Caracas. Ms. Ochoa-Brillembourg is a Director of General Mills, Inc. and Cementos Pacasmayo S.A.A. In addition, she is a Director of The Atlantic Council of the United States and a lifetime member of The Council on Foreign Relations. She is also Vice Chairman, Dean’s Alumni Leadership Council, Harvard Kennedy School of Government. Ms. Ochoa-Brillembourg is Founding Chair of the Youth Orchestra of the Americas. She is also an Advisory Board member of the Rockefeller Center for Latin American Studies at Harvard University. She is a former Director of the World Bank/International Monetary Fund Credit Union and the Harvard Management Company. Ms. Ochoa-Brillembourg has served as a Director of the Company since 2004 and is a member of the Audit and Financial Policy Committees.

		Sir Michael Rake, age 64, has been Chairman of BT Group plc (“BT”), one of the largest communications companies in the world, serving customers in more than 170 countries, since 2007. Prior to being named Chairman of BT, he was Chairman of KPMG International, one of the world’s leading accounting organizations, with operations in 148 countries and more than 113,000 professionals working in member firms worldwide. After joining KPMG in 1972, he served the company in various capacities in Belgium, Luxembourg, the Middle East and London, and led a number of major global clients’ services teams. He joined the company’s UK Board in 1991, was elected UK Senior Partner in 1998 and named International Chairman in 2002. Sir Michael is the former Chair of the Commission for Employment and Skills in the UK and has been Chairman of easyJet plc since 2010. Sir Michael is Senior Independent Director at Barclays and was formerly on the Board of the Financial Reporting Council. He is a member of the Board of the TransAtlantic Business Dialogue and is a William Pitt Fellow at Pembroke College, Cambridge. Educated at Wellington College, where he is Chairman of the Governors, Sir Michael is qualified as a UK chartered accountant. He was knighted in 2007 for his services to the accounting profession. Sir Michael has served as a Director of the Company since 2007 and is Chair of the Audit Committee and a member of the Executive and Financial Policy Committees.

18

Table of Contents

		Edward B. Rust, Jr., age 61, has been Chief Executive Officer of State Farm Mutual Automobile Insurance Company, the largest insurer of automobiles and homes in the United States, since 1985. He was elected Chairman of the Board two years later. Mr. Rust was also President of State Farm Mutual Automobile Insurance Company from 1985 to 1998 and was re-elected President in 2007. Mr. Rust is a Director of Helmerich & Payne, an oil and gas drilling company, and Caterpillar Inc., a manufacturer of construction and mining equipment. Mr. Rust is a Trustee for Illinois Wesleyan University. Additionally, Mr. Rust is Vice Chairman of the U.S. Chamber of Commerce and a member of Business Roundtable, where he served as Co-Chair for seven years, and the Financial Services Roundtable. He was also a member of President George W. Bush’s Transition Advisory Team Committee on Education. Mr. Rust has served as a Director of the Company since 2001 and is Chair of the Nominating and Corporate Governance Committee and a member of the Audit, Compensation and Leadership Development and Executive Committees. He has also served as the Presiding Director of the Company’s Board of Directors since 2010.

19

Table of Contents

		Sidney Taurel, age 63, is Chairman Emeritus of Eli Lilly and Company, a global pharmaceutical company. Prior to that he was Chairman of Eli Lilly and Company from 1999 to December 31, 2008 and Chief Executive Officer from 1999 to March 31, 2008. He was also its President from 1996 through 2005. Mr. Taurel joined Eli Lilly and Company in 1971 and held management positions in the company’s operations in Brazil and Europe before becoming President of Eli Lilly International Corporation in 1986. He was elected a Director of Eli Lilly and Company in 1991, became Executive Vice President in 1993, and President and Chief Operating Officer in 1996. Mr. Taurel is Chairman of the Strategic Advisory Committee for Capital Royalty, LLC. He is also a member of the Boards of IBM Corporation and BioCrossroads. In addition, Mr. Taurel is a member of the global advisory Boards for Moelis, Takeda and Almirall. He serves on the Board of Overseers of the Columbia Business School, is a member of The Business Council, and a Trustee of the Indianapolis Museum of Art. Mr. Taurel received three Presidential appointments: to the Homeland Security Advisory Council (2002-2004); the President’s Export Council (2002-2007); and the Advisory Committee for Trade Policy and Negotiations (2007-2009). Mr. Taurel has served as a Director of the Company since 1996 and is Chair of the Compensation and Leadership Development Committee and a member of the Executive and Nominating and Corporate Governance Committees.

		Richard E. Thornburgh, age 59, is Vice Chairman of Corsair Capital LLC, a private equity firm focused on investing in the global financial services industry. Mr. Thornburgh joined Corsair in 2006. Prior to that, Mr. Thornburgh held key positions with Credit Suisse First Boston (CSFB), the investment banking arm of Credit Suisse, including Executive Vice Chairman of CSFB from 2004 through 2005. He has also held key positions with Credit Suisse, including Chief Financial Officer, Chief Risk Officer and member of the Executive Board of Credit Suisse. Mr. Thornburgh is a Director of Credit Suisse Group AG, Reynolds American Inc. and NewStar Financial, Inc. He was a Director of National City Corporation and Dollar General Corporation. Mr. Thornburgh served as Chairman of the Securities Industry Association in 2004 and later joined its International Advisory Council, which provides guidance on World Trade Organization negotiations, United States-European Union market trends and other issues affecting international capital markets. In addition, he serves on the Executive Committee of the University of Cincinnati Foundation and is on the University of Cincinnati Investment Committee. Mr. Thornburgh has served as a Director of the Company since December 7, 2011 and is a member of the Audit Committee.

(a) Messrs. Harold McGraw III and Robert P. McGraw are brothers.

20

Table of Contents

Corporate Governance Materials

The following corporate governance materials are available and can be viewed and downloaded from the Corporate Governance section of the Company’s Investor Relations Web site at www.mcgraw-hill.com/investor_relations: (i) the Company’s Restated Certificate of Incorporation; (ii) the Company’s By-Laws; (iii) the Company’s Corporate Governance Guidelines; (iv) Board Committee Charters for the Company’s Audit, Compensation and Leadership Development, Executive, Financial Policy and Nominating and Corporate Governance Committees; (v) the Code of Business Ethics applicable to all Company employees; (vi) the Code of Ethics applicable to the Company’s Chief Executive Officer and Senior Financial Officers; (vii) the Code of Business Conduct and Ethics for Directors applicable to all the Company’s Directors; and (viii) the Audit Committee’s Policy concerning Employee Complaint Procedures Regarding Accounting and Auditing Matters.

21

Table of Contents

Committees of the Board of Directors

The Company has standing Nominating and Corporate Governance, Audit and Compensation and Leadership Development Committees. The Chair of each Committee reports to the full Board as appropriate from time to time. Each Committee has a Charter that is reviewed by the Nominating and Corporate Governance Committee on a regular basis. In addition to these three standing Committees, the Board has an Executive Committee and a Financial Policy Committee. A brief description of the Nominating and Corporate Governance, Audit and Compensation and Leadership Development Committees follows.

Nominating and Corporate Governance Committee

The functions performed by the Nominating and Corporate Governance Committee include, among other matters:

Additional information about the Nominating and Corporate Governance Committee follows:

22

Table of Contents

Processes and Procedures for Determining Director Compensation

The Nominating and Corporate Governance Committee is comprised of five Directors, all of whom meet the independence requirements of the New York Stock Exchange. The Board of Directors appoints the Committee Chair and determines which Directors serve on the Committee.

The Committee is solely responsible for determining all matters concerning compensation for the independent members of the Board. It is not authorized to delegate its authority to determine Director compensation. All compensation recommendations by the Committee are submitted to the full Board for review and approval. Directors who are employees of the Company do not receive any compensation for their Board services.

The Committee has sole authority to directly retain external consultants and to commission surveys or analyses that it determines necessary to fulfill its responsibilities.

Executive officers play no role in determining the amount or form of Director compensation. The Committee annually reviews the competitiveness of the Company’s Director compensation using survey data covering U.S. public companies in the publishing, information and media, and financial industries as well as data on similarly sized U.S. public companies from general industry. During 2011, the Committee engaged Frederic W. Cook & Co. to review this compensation survey data and advise the Committee on changes to Director compensation.

Audit Committee

The Company has an Audit Committee comprised of five Directors that has been established by the Board of Directors for the purpose of overseeing the accounting and financial reporting processes of the Company and the audits of the Company’s financial statements. The Board of Directors appoints the Committee Chair and determines which Directors serve on the Committee. The Audit Committee’s duties include, among other matters, assisting the Board’s oversight of:

Additional information about the Audit Committee follows:

23

Table of Contents

Compensation and Leadership Development Committee

The Compensation and Leadership Development Committee’s duties include, among other matters:

Additional information about the Compensation and Leadership Development Committee follows:

Processes and Procedures for Determining Executive Compensation

The Compensation and Leadership Development Committee is comprised of six Directors, all of whom meet the independence requirements of the New York Stock Exchange. The Board of Directors appoints the Committee Chair and determines the composition of the Committee members.

The Committee is responsible for approving all matters concerning the Company’s total compensation philosophy, including the conducting of periodic reviews of the philosophy to ensure it supports the Committee’s objectives and shareholder interests. The Committee is responsible for administering and interpreting the Key Executive Short-Term Incentive Compensation Plan, the Employee Stock Incentive Plans and all other compensation and benefits plans in which the Company’s senior management participate.

The Committee has sole authority to retain and terminate all external consultants and to commission surveys or analyses that it determines necessary to fulfill its responsibilities. Additionally, the Committee has sole authority to approve the fees of the external consultants. The Committee utilizes the services of Frederic W. Cook & Co. as its external compensation advisor for all matters concerning the Company’s senior management compensation programs. Frederic W. Cook & Co. provides no other executive compensation consulting or other services to the Company or its management. Frederic W. Cook & Co. works in cooperation with Company management on matters that come before the Committee but always in its capacity as the Committee’s independent advisor and representative. The Committee has

24

Table of Contents

entered into a consulting agreement with Frederic W. Cook & Co. that specifies the nature and scope of its responsibilities, which include: (1) reviewing Committee agendas and supporting materials in advance of each meeting and raising questions or issues with management and the Committee Chair as appropriate; (2) at the Committee’s instigation, working with management on major proposals in advance of finalization by, and presentation to, the Committee; (3) reviewing drafts of the Company’s Compensation Discussion and Analysis and the Compensation Committee Report and related tables for inclusion in the Company’s Proxy Statement each year; (4) evaluating the chosen compensation peer group and survey data for competitive comparisons; (5) reviewing comparative data on the compensation of the Chief Executive Officer and providing independent analyses and recommendations on the Chief Executive Officer’s compensation to the Committee Chair; and (6) proactively advising the Committee on best practices for Board governance of executive compensation.

The Committee annually reviews and approves the corporate goals and objectives for the Chief Executive Officer’s compensation, evaluates the Chief Executive Officer’s performance in light of those goals and objectives, establishes the Chief Executive Officer’s total compensation and refers its recommendations to the independent Directors of the Board of Directors for ratification.

The Committee annually reviews and approves the individual compensation actions for the direct reports to the Chief Executive Officer and for approximately 14 other senior executives. Below this level, the Committee approves the overall design of the total executive compensation program and delegates the discretion to approve individual compensation decisions to the Chief Executive Officer. The other named executive officers recommend compensation actions for the senior executives in their organizations and these compensation actions are then approved by the Chief Executive Officer.

During 2011, Frederic W. Cook & Co. was also engaged by the Nominating and Corporate Governance Committee to advise on compensation paid to the non-employee Directors. In this capacity, Frederic W. Cook & Co. works solely for the Board and provides no services to management.

Compensation Committee Report

The Compensation and Leadership Development Committee has reviewed and discussed with Company management the Compensation Discussion and Analysis found on pages 31 through 45 of this Proxy Statement, and based on this review and discussion, the Compensation and Leadership Development Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K and this Proxy Statement.

The foregoing report has been furnished on behalf of the Board of Directors by the members of its Compensation and Leadership Development Committee.

Sidney Taurel (Chairman)

Sir Winfried Bischoff

Douglas N. Daft

William D. Green

Linda Koch Lorimer

Edward B. Rust, Jr.

25

Table of Contents

Membership and Meetings of the Board and Its Committees

In 2011, no Director attended fewer than 75 percent of the aggregate of the total number of meetings of the Board and the Committees on which he or she served. Current Committee membership and the number of meetings of the full Board and each Committee held during 2011 are shown in the table below.

In 2011, the non-management Directors met in executive sessions twice without any member of management present. Mr. Robert P. McGraw, who is not an independent Director as defined in the rules of the New York Stock Exchange due to his familial relationship with Mr. Harold McGraw III, the Company’s Chairman, President and Chief Executive Officer, was not present at one of these non-management Director executive sessions.

Compensation Committee Interlocks and Insider Participation

No member of the Compensation and Leadership Development Committee has served as one of our officers or employees at any time. None of our executive officers serves as a member of the compensation committee of any other company that has an executive officer serving as a member of our Board of Directors. None of our executive officers serves as a member of the board of directors of any other company that has an executive officer serving as a member of our Board’s Compensation and Leadership Development Committee.

26

Table of Contents

Director and Officer Indemnification and Insurance

Each Director and certain of our executive officers have entered into an indemnification agreement with the Company which provides indemnification for judgments and amounts paid in settlement and related expenses to the fullest extent permitted under the applicable provisions of the New York Business Corporation Law (“NYBCL”). This indemnification will be reduced to the extent that a Director or executive officer is indemnified by the Company’s Directors’ and Officers’ liability insurance.

The Company has for many years had an insurance program in place that provides Directors’ and Officers’ liability insurance coverage. The Company’s current insurance coverage was purchased for the period May 15, 2011 to May 15, 2012 for a premium of approximately $2,850,000. This insurance is provided by a consortium of carriers, which includes: National Union Fire Insurance Company of Pittsburgh, PA; Federal Insurance Co.; Great American Insurance Co.; Scottsdale Indemnity Company; AXIS Insurance Company; St. Paul Mercury Insurance Co.; and Arch Insurance Co. This program also includes additional capacity dedicated to providing excess coverage for Directors and certain of our executive officers when the Company cannot indemnify them. The additional capacity is provided by: RLI Insurance Company; Continental Casualty Company; Carolina Casualty Insurance Company; and XL Specialty Insurance Company.

The Company also maintains a fiduciary liability insurance program that covers Directors and employees who serve as fiduciaries for our employee benefit plans. This coverage, subject to a number of standard exclusions and certain deductibles, indemnifies the Directors and employees from alleged breaches of fiduciary or administrative duties, as defined in the Employee Retirement Income Security Act of 1974 or similar laws or regulations outside the United States. The Company’s current fiduciary liability coverage was purchased for the period May 15, 2011 to May 15, 2012 for a premium of approximately $275,000 and is provided by the following consortium of carriers: National Union Fire Insurance Company of Pittsburgh, PA; Arch Insurance Co.; and XL Specialty Insurance Company.

The Company’s By-Laws provide for indemnification of Directors and officers to the fullest extent permitted by the NYBCL. Consistent with these By-Laws, the Company has advanced counsel fees and other reasonable fees and expenses incurred by the Directors and officers named in a putative derivative action, Teamsters Allied Benefit Funds v. Harold McGraw III, et al, which was described in Footnote 13 - Commitments and Contingencies in the Company’s Form 10-K filed with the SEC on February 23, 2011. The amount of legal expenses advanced by the Company as of January 31, 2012 for the named individuals (Harold McGraw III, James Ross, Linda Koch Lorimer, Sidney Taurel, Edward B. Rust, Jr., Sir Winfried Bischoff, Robert P. McGraw, Douglas N. Daft, Kurt L. Schmoke, Pedro Aspe, Hilda Ochoa-Brillembourg, Sir Michael Rake, Robert J. Bahash, David Stafford, Emmanuel Korakis and Kenneth Vittor) aggregated approximately $449,065. This matter is now closed and no further advances are expected. Each of the individuals is required in accordance with the requirements of the NYBCL to execute an undertaking to repay such expenses if they are finally found not to be entitled to indemnification under the Company’s By-Laws and the NYBCL. The Company has as of January 31, 2012 received reimbursement from its insurance carriers in the amount of $187,467, after allocating a portion of the expenses to the Company’s self-insured retention.

27

Table of Contents

Audit Committee Report

The Audit Committee reviews the Company’s financial reporting process on behalf of the Board. All of the members of the Committee are independent Directors as defined in the rules of the New York Stock Exchange. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal controls. The Board has adopted a written Charter for the Audit Committee.

In this context, the Committee has met and held discussions with management and the Company’s independent Registered Public Accounting Firm. Management represented to the Committee that it is responsible for the financial reporting process, including the system of internal controls, for the preparation of the Company’s consolidated financial statements in accordance with generally accepted accounting principles and for the report on the Company’s internal controls over financial reporting. The Committee has reviewed and discussed the consolidated financial statements with management and the Company’s independent Registered Public Accounting Firm, which review included a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Committee also discussed with management the process used to support the certifications required by the Sarbanes-Oxley Act of 2002 and to support management’s annual report on the Company’s internal controls over financial reporting. The Committee discussed with the independent Registered Public Accounting Firm matters to be discussed as required by the Public Company Accounting Oversight Board (PCAOB), rules of the Securities and Exchange Commission, and other applicable regulations.

In addition, the Committee has reviewed and discussed with the Company’s independent Registered Public Accounting Firm the firm’s independence from the Company and its management. The Audit Committee received from the independent Registered Public Accounting Firm the written disclosures and the letter regarding its independence as required by the PCAOB’s applicable requirements.

The Committee has also considered whether the provision of services by the Company’s independent Registered Public Accounting Firm, Ernst & Young LLP, not related to the audit of the financial statements referred to above, is compatible with maintaining Ernst & Young LLP’s independence.

The Committee discussed with the Company’s internal auditors and independent Registered Public Accounting Firm the overall scope and plans for their respective audits. The Committee met with the internal auditors and independent Registered Public Accounting Firm, with and without management present, to discuss the results of their examinations, the evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting.

In reliance on the reviews and discussions referred to above, the Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the Securities and Exchange Commission. The Committee and the Board also have recommended, subject to shareholder ratification, the selection of Ernst & Young LLP as the Company’s independent Registered Public Accounting Firm for 2012.

28

Table of Contents

Transactions With Related Persons

Under SEC rules, we are required to disclose material transactions with the Company in which “related persons” have a direct or indirect material interest. Related persons include any Director, nominee for Director, executive officer of the Company, any immediate family members of such persons, and any persons known by the Company to be beneficial owners of more than five percent of the Company’s voting securities. The term “transaction” is broadly defined under SEC rules to include any financial transaction, arrangement or relationship, including any indebtedness transaction or guarantee of indebtedness.

Based on information available to us and provided to us by our Directors and executive officers and other than the Aircraft Time Sharing Agreement referred to below, we do not believe that there were any such material transactions in effect since January 1, 2011, or any such material transactions proposed to be entered into during 2012.

As noted on pages 45 and 49 of this Proxy Statement, for security reasons, Mr. Harold McGraw III is required to use Company provided aircraft for all air travel. When using Company provided aircraft for personal travel, Mr. McGraw is required to reimburse the Company for the equivalent of first class commercial airfare for himself and for each passenger traveling with him. Mr. McGraw and the Company have entered into an Aircraft Time Sharing Agreement, dated as of September 15, 2004, which provides for such reimbursement. The Compensation and Leadership Development Committee and the Nominating and Corporate Governance Committee of the Company’s Board of Directors have approved this arrangement. The Company’s policy limits the cost of personal travel to the Company. Under this policy, if the incremental cost of personal travel to the Company exceeds $200,000 in any calendar year (excluding, for this purpose, the cost of travel to Board meetings of third party companies), in lieu of reimbursement equivalent to first class commercial airfare, Mr. McGraw is required to reimburse the Company for the full incremental cost of such travel. During 2011, Mr. McGraw made payments to the Company of $94,852 under this Agreement.

The Company’s Board of Directors has adopted a written policy that requires the Board’s Nominating and Corporate Governance Committee to review and approve any related party transactions. At each calendar year’s first regularly scheduled meeting of the Nominating and Corporate Governance Committee, management is required to present to the Committee specific information with respect to any such transaction expected to be entered into or continued during that calendar year. After reviewing this information, the Committee will approve such transaction only if the following two conditions are met: (1) the transaction must be in the best interests (or not inconsistent with the best interests) of the Company and its shareholders; and (2) the transaction must be entered into by the Company on terms that are comparable to those that would be obtained in an arm’s-length transaction with an unrelated third party. If any additional related party transactions are proposed to be entered into subsequent to the Committee’s first calendar year meeting, management is required to present such transactions to the Committee for approval or ratification at a subsequent meeting of the Committee.

29

Table of Contents

EXECUTIVE COMPENSATION

This section contains information on various aspects of compensation of the Company’s executives. In particular, it contains information regarding the cash and equity compensation of the “named executive officers”. The named executive officers of the Company include the Chief Executive Officer (“CEO”), Mr. Harold McGraw III, and the Chief Financial Officer (“CFO”), Mr. Jack F. Callahan, Jr. The named executive officers also include the Company’s three most highly compensated executive officers other than the CEO and CFO who were serving as executive officers on December 31, 2011.

30

Table of Contents

Compensation Discussion and Analysis

The Compensation and Leadership Development Committee of our Board of Directors (the “Committee”) oversees and administers our compensation program for senior executives on behalf of our Board and shareholders. Information about the Committee and its members who are Director nominees can be found on pages 15, 16, 19 and 20 of this Proxy Statement.

This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation program, the basis for the compensation paid to our named executive officers for 2011 and approved compensation opportunities for 2012. Please note that our CD&A includes adjusted financial information. Please see our 2011 year-end earnings release filed on Form 8-K dated January 31, 2012 for exhibits that reconcile the differences between the non-GAAP measures and comparable financial measures calculated in accordance with U.S. GAAP. The results also reflect the reclassification of the Broadcasting Group as a discontinued operation following the signing of a definitive agreement in October 2011 to sell this business.

Executive Summary

Philosophy. Our compensation philosophy is to reward our executives for value-creating performance and to link a significant portion of pay to one or more performance metrics that are intended to create value for our shareholders. Within the framework of pay-for-performance, our compensation practices are implemented in a manner that we believe attracts the highest quality talent to our executive ranks and retains these individuals by rewarding excellence in leadership and success in the implementation of our business strategy. In 2011, the three key elements of our pay program continued to be base salary, annual cash bonus and long-term incentive awards linked to our common stock. This summary first discusses compensation highlights from 2011. Additional information on these topics is provided in the remainder of this CD&A and in the tables that follow. The remainder of the summary discusses our Growth & Value Plan and the impact that we expect the plan to have on 2012 compensation.

Highlights of Our Compensation Decisions for 2011. The following are the key aspects of our 2011 compensation program:

Our 2011 reported net income from continuing operations of $834.4 million was adjusted by the Committee to exclude $42.1 million of after-tax restructuring expense and $6.4 million of after-tax Growth & Value Plan expense. The resulting 2011 adjusted non-GAAP net income from continuing operations was $882.9 million. Our 2011 reported revenue of $6.25 billion was not adjusted by the Committee for purposes of determining incentive compensation achievement.

31

Table of Contents

The Growth & Value Plan and Its Impact on 2012 Executive Compensation. In September 2011, the Company announced its comprehensive Growth & Value Plan that includes separating our business into two companies: McGraw-Hill Financial, primarily focused on content and analytics for financial markets; and McGraw-Hill Education, focused on education services and digital learning.

The Growth & Value Plan is composed of three parts designed to accelerate growth and increase shareholder value by:

With regard to the implementation of the Growth & Value Plan, management and the Committee agreed upon the following compensation decisions for 2012:

32

Table of Contents

We believe the highlights above demonstrate our commitment to pay-for-performance, to rewarding excellence by our executives in developing and implementing our business strategy and to adapting our compensation practices to take into account changes in our business goals and market conditions. The remainder of this CD&A provides further information about the highlights in this summary.

Details of Our Executive Compensation Program

This section of our CD&A provides in question and answer format more detailed information about our executive compensation program.

What Are Our Main Compensation Objectives?

The main objectives of our executive compensation program are:

What Are the Core Principles and Practices We Use to Implement Our Executive Compensation Program?

We use the following core principles and practices to set the compensation of our named executive officers:

33

Table of Contents

What Are the Elements of Our Executive Compensation Program?

Our executive compensation program for our named executive officers consists of the following elements:

We also provide retirement and other post-employment benefits under our tax-qualified and non-qualified retirement plans and our Senior Executive Severance Plan, health and welfare benefits under our group benefit plans and supplemental death and disability plans, and limited perquisites and other fringe benefits.

How Do We Use Market Data in Setting Compensation Levels?

For named executive officers other than the CEO, we review the range of market compensation between the 25th and 75th percentiles for the companies in the compensation surveys described below. For the CEO, our Committee reviews a composite of the market data prepared by Frederic W. Cook & Co. In either case, these reviews are conducted to provide information about the general market practice for these positions. In general, we design our executive compensation program to pay median levels of compensation for target levels of achievement, to pay below median for achievement below target, and to pay above median compensation for significantly higher levels of achievement versus target goals.

We review compensation market data in setting base salaries and long-term and short-term incentive opportunities for our named executive officers. However, we do not limit or increase individual incentive payments based solely on these broad compensation market data reference points.

34

Table of Contents

For purposes of setting the compensation of the named executive officers, a review was made of the 2011 Towers Watson Media Industry Executive Survey, in which the Company participates. This survey contains information on base salaries, annual incentives, and equity awards within the publishing, information, and media industries. For 2011, Towers Watson provided compensation information based on data reported by 48 companies participating in the Media Industry Executive Survey, appropriately sized for our revenue, for positions comparable to those of our named executive officers. The survey data provided to us by Towers Watson does not identify the specific companies that reported this compensation information.

Additionally, for purposes of setting the compensation of our CEO, CFO and Chief Legal Officer (CLO), Towers Watson annually provides management and Frederic W. Cook & Co. with compensation data from publicly reported proxy statements for comparable executives in the companies included in the S&P 500 Financial Services Sector. The data is used by the Committee and management to evaluate the competitiveness of the total compensation opportunity for the named executive officers referenced above. With regard to the CEO, Frederic W. Cook & Co. uses the data from the Towers Watson Media Industry Executive Survey and the proxy data for companies in the S&P 500 Financial Services Sector to determine a market composite for developing recommendations for the CEO’s total compensation opportunities for consideration by the Committee. We believe that the addition of compensation information for the S&P 500 Financial Services Sector as a reference point in determining compensation for our CEO, CFO and CLO is appropriate given that the S&P business operations are a part of the financial services industry. While we do not directly compare to all of the companies included in the S&P 500 Financial Services Sector, we believe that the aggregate compensation data for the Sector is appropriate to take into account in determining compensation levels for these positions. For 2011, the S&P 500 Financial Services Sector comprised the following 81 companies:

35

Table of Contents

How Did We Take into Account the Results of Last Year’s Say-on-Pay Vote?

We value the opinions of our shareholders. At the 2011 Annual Meeting of shareholders, approximately 95% of the votes cast on the say-on-pay proposal were in favor of our executive compensation program described in our 2011 Proxy Statement. In light of this strong shareholder support, we concluded that no revisions were necessary to our executive compensation program based solely on the results of the say-on-pay vote.

How Do We Link Our Executives’ Compensation to Our Performance?

A significant portion of the compensation paid to our named executive officers is based on achievement of financial performance goals. Approximately 80% of our CEO’s total 2011 target compensation opportunity was variable with the payment or value of the awards subject to the achievement of revenue and net income goals for the cash bonus opportunity, as well as evaluations of performance on personal goals set for the year; achievement of a three-year earnings per share goal for the performance share unit award; and, in the case of stock option grants, future increases in the Company’s stock price. With regard to the CEO’s variable compensation opportunity referenced above, 21% was cash-based while 79% was equity-based.

The other named executive officers also had a large part of their total 2011 compensation opportunity subject to the achievement of revenue and net income goals, which affect the funding of the annual incentive pool from which their bonuses are allocated, and earnings per share goals for a portion of long-term incentive awards. The remaining portion of the long-term incentive awards consisted of stock option grants, which are aligned with the Company’s stock price performance. We believe that this incentive design provides strong motivation to focus on creating long-term value for our shareholders and reinforces the importance of individual performance and contributions to Company performance. Our decision to grant base salary increases and long-term incentive awards and to determine the amount of annual incentive payouts also are based on subjective evaluation of individual performance.

What Actions Did We Take to Address Risk in Our Executive Compensation Program?

In 2009, the Committee engaged the compensation consulting firm of Towers Watson to conduct a risk assessment of the Company’s executive compensation program applicable to corporate and business segment employees, including Standard & Poor’s. Towers Watson concluded that the Company’s executive compensation program does not encourage participants to take inappropriate risks, and the Committee concurred in these findings.

36

Table of Contents

In 2011, management conducted a review of all of the Company’s non-executive incentive and sales compensation plans to assess the designs of those plans in order to ensure that they do not encourage inappropriate or excessive risk taking. The findings and conclusions of the review determined that the plan designs do not encourage excessive risk taking. Management reviewed its findings with the Committee, and Frederic W. Cook & Co. concurred in these findings and conclusions.

In both 2010 and 2011, the Committee established performance metrics that focused on revenue, net income, and earnings per share growth, and established goal and payment schedules for each metric that were designed to provide a balance to motivate the achievement of the established goals without the need for inappropriate or excessive risk taking by providing a range of payment opportunities for achievement both below and above the target goals established for the short and long-term incentives. In addition, the Committee reviews and assesses plan design, performance metrics, and goals for the annual incentive plans within the Company’s Standard & Poor’s Ratings Services and S&P Capital IQ/S&P Indices business units to ensure that the designs of those annual incentive plans do not encourage inappropriate or excessive risk taking.

How Do We Consider Individual Performance for Our Named Executive Officers?

The Committee and the other independent members of the full Board review the Company performance objectives and personal goals for the CEO at the beginning of the year. At or after year-end, the Committee members evaluate the CEO’s performance, achievements, and contributions and make decisions concerning the CEO’s base salary, target annual incentive and long-term incentive awards for the upcoming year. The Committee Chairman reviews these decisions with the other independent members of the full Board and solicits their input and approval for the CEO’s compensation recommendations. The Committee Chairman then reports these decisions to the CEO along with feedback about the assessments of his performance during the year.

For all employees except the CEO, we use a global Performance Management Program that measures performance against individual qualitative and quantitative goals, behaviors and competencies. The performance evaluations are then used along with other considerations, such as compensation survey data, merit budget increase guidelines, and the consideration of an individual’s potential contributions by the manager, to determine base salary changes, annual incentive payments, and the amount of long-term incentive awards. We do not use specific corporate performance targets in assessing individual performance of the named executive officers. Those employees with lower performance evaluations are not eligible for compensation increases or annual incentive payments unless and until performance improves to meet their manager’s expectations.

For the other named executive officers, the CEO reviews and assesses their accomplishments and achievements, and formulates a performance evaluation. As described below, the CEO makes annual recommendations to the Committee regarding the base salary and the annual and long-term incentives awarded to the other named executive officers and, in connection with his recommendations, he discusses his evaluation of each executive’s individual performance.

What Individual Performance Did We Consider for 2011?

At the beginning of 2011, the independent members of the Board of Directors established goals for the CEO that focused on a strategic plan for McGraw-Hill Education, completing a comprehensive review of the business to determine future investment and divestiture opportunities, reducing general and administrative costs across the Company, implementing digital growth strategies and opportunities, developing and adding to the Company’s executive leadership talent and strengthening the brand in our Financial Services segment. In determining the CEO’s annual incentive payment for 2011, the Committee considered the Company’s 2011

37

Table of Contents

financial performance together with the performance of the CEO against these goals.

With respect to the other named executive officers, the CEO’s assessment of the executives’ performance was taken into account in setting their annual incentive payments for 2011. The CEO determined that each of the named executive officers performed at a high level of achievement during 2011.

How Do We Determine Base Salaries?

We pay a base salary to our named executive officers to provide a fixed amount of cash compensation on which they can rely. Their base salaries are reviewed on an annual basis against compensation market data as described above. For our named executive officers other than the CEO, increases to base salary are based on the CEO’s assessment of the executives’ individual performance evaluated under our Performance Management Program each year and the guidelines established for merit increases for corporate employees for the year. Our Committee independently evaluates the performance of the CEO and establishes the CEO’s base salary so that, together with his target annual incentive opportunity and stock-based long-term incentive awards, his total annual target compensation is competitive against composite median market data for the publishing, information, media and financial services industries.

In light of the adoption of the Growth & Value Plan beginning in 2012 and the plans to separate the Company into two new market-focused operating companies, management and the Committee determined that, for purposes of the 2012 calendar year, no members of the senior management team, including the CEO and the named executive officers, would receive 2012 merit increases.

How Do We Determine Annual Incentive Plan Funding?

For Named Executive Officers Other Than the CEO. As noted above, our annual incentive plan uses an incentive pool design for the named executive officers and other corporate employees, except for the CEO. The amount of our target annual incentive pool is approved at the start of each year by the Committee and is based on the sum of the individual targets for the covered participants. The target incentive pool is adjusted each year for changes in participant headcount. The actual funding of the pool is determined following year-end by the Committee based on the achievement of approved performance goals, which were revenue and net income for 2011. Each named executive officer’s annual incentive payment is recommended to the Committee by the CEO, after review of the individual’s payment history, the funding of the pool, and evaluations of the individual’s performance for the year and contributions to Company performance.

For the CEO. The CEO position is not included in the corporate annual incentive pool. Instead, the Committee establishes a target annual incentive opportunity that, together with his base salary and long-term incentive grants, is set to be generally competitive with composite median market levels reflecting information from media industry and financial services companies and input from Frederic W. Cook & Co. For 2012, the Committee determined that the CEO’s target annual incentive opportunity will continue to be $1,288,980, which was the same amount used for the CEO’s 2011 annual incentive target opportunity.

How Was the Annual Incentive Performance Goal Established for 2011?

For the net income performance goal, the Committee originally established a funding schedule with a 0% funding threshold for 0% growth; 100% funding for 5.1% growth; and 200% funding for 10%. The funding between 0% and 200% was based on a linear goal schedule between 0% and 10% growth. Adjusted non-GAAP net income for 2010 upon which the growth goals were calculated was $840.0 million. The 2010 adjusted non-GAAP net income was subsequently amended in 2011 downwards to $836.5 million to reflect the reclassification of Broadcasting Group’s net income to discontinued

38

Table of Contents

operations. No change was made to the 2011 original goal in terms of absolute dollars, resulting in a slight increase in percentage growth required to achieve the original funding.

Key Executive Short-Term Incentive

Compensation Plan

2011 Net Income Goal & Funding Schedule

For the revenue performance goal, the Committee established a funding schedule with a 0% funding threshold for 0% growth above 2010 revenue; 100% funding for 7.8% growth; and 200% funding for 11.7 %. The funding between 0% and 200% was based on a linear goal schedule between 0% and 11.7% growth. Revenue for 2010 upon which the growth goals were calculated was $6.17 billion. The 2010 revenue was subsequently amended in 2011 downwards to $6.07 billion to reflect the reclassification of Broadcasting Group’s revenue to discontinued operations. 2011 original revenue goal in terms of absolute dollars was adjusted downwards by $0.1 billion to reflect this reclassification. Reclassification resulted in a slight increase in percentage growth required to achieve the original funding.

Key Executive Short-Term Incentive Compensation Plan

2011 Revenue Goal & Funding Schedule

In early 2011, the Committee established definitions of net income and revenue to be used for determining the achievement of the net income and revenue performance goals established for incentive compensation purposes.

The 2011 reported net income from continuing operations of $834.4 million was adjusted by the Committee to exclude $42.1 million of after-tax restructuring expense and $6.4 million of after-tax Growth & Value Plan expense. The resulting 2011 adjusted non-GAAP net income from continuing operations was $882.9 million.

The 2011 reported revenue of $6.25 billion was not adjusted by the Committee for purposes of determining incentive compensation achievement.

The 2011 adjusted non-GAAP net income from continuing operations of $882.9 million resulted in growth of 5.58% over 2010 and funded the 2011 target incentive pool at the 99.6% payout level. The reported 2011 revenue growth of 2.9% over 2010 funded the 2011 target incentive pool at the 36.9% payout level. The resulting blended 2011 incentive pool funded at 83.9% of the target level.

How Were Actual 2011 Annual Incentives Determined?

Individual annual incentive payments for named executive officers, other than the CEO, are recommended to the Committee by the CEO based primarily on his consideration of their individual performance for the year and the funding of the corporate annual incentive pool. As noted above, the corporate annual incentive pool funded at 83.9% of target for 2011.

The Committee determined Mr. McGraw’s 2011 annual incentive payment would be $1,082,000, or 83.9% of his target award. This decision was based on the 2011 incentive achievement level and the Committee’s review and assessment of Mr. McGraw’s demonstrated 2011 performance and leadership, which included, among other things, the development and implementation of the Growth & Value Plan, the related decision to separate McGraw-Hill Education, the divestiture of McGraw-Hill Broadcasting, the addition of new leadership and talent, and the completion of the evaluation of the business portfolio.

The amounts for the other named executive officers are reflected in the Summary Compensation Table on page 46 of this Proxy Statement and were recommended to the Committee by Mr. McGraw based on the size of the incentive pool, historical bonus payments, and his assessment of their individual 2011 performance and contributions.

39

Table of Contents

How was the Long-Term Performance Share Unit Incentive Goal established for 2011?

For the three-year earnings per share cumulative compound growth goal under the 2011 Performance Share Unit (PSU) Award, the Committee originally established a funding schedule with a 0% payment threshold of 0% growth; 100% payment for 7.36% growth; and 200% payment for 11.07% growth. The payment between 0% and 200% was based on a linear goal schedule between 0% and 11.07% growth. The adjusted non-GAAP earnings per share for 2010 upon which the 2011 growth goal was calculated was $2.69.

The 2010 earnings per share was subsequently amended in 2011 downwards to $2.679 to reflect the reclassification of the Broadcasting Group’s net income into discontinued operations. No change was made to the original 2011 PSU Award earnings per share goal in terms of absolute dollars, resulting in a slight increase in the cumulative compound percentage growth required to achieve the original payment targets.

2011 PSU Award Goal & Payment Schedule

What Was the 2011 Earnings Per Share Achievement for Purposes of the 2011 Long-Term Incentive Award?

The reported 2011 diluted earnings per share from continuing operations of $2.75 was adjusted by the Committee to exclude $0.14 of restructuring expense and $0.02 of Growth & Value Plan expense. The resulting 2011 adjusted non-GAAP earnings per share from continuing operations was $2.91. This adjusted earnings per share amount of $2.91 will be used as the 2011 year result under the three-year long-term incentive award covering 2011, 2012 and 2013. Earnings per share growth for 2011 tracked at a rate of 8.5% against the base year.

How Is the Annual Incentive Performance Goal Established for 2012?

For the 2012 performance year, the Committee determined that the performance metrics used under the corporate annual incentive plan will be operating income (weighted 70%) and the successful separation of McGraw-Hill Education (weighted 30%). These performance metrics are focused on the 2012 objective of creating two new operating companies under the Growth & Value Plan.

For the operating income performance goal, the Committee established a funding schedule based on growth over the 2011 adjusted non-GAAP operating income of $1.499 billion.

Key Executive Short-Term Incentive Compensation Plan

2012 Operating Income Goal & Funding Schedule

For the separation of McGraw-Hill Education performance metric, the Committee will determine the achievement in its sole discretion based on timing, execution and successful implementation.

How Do We Determine the Amount and Type of Our Long-Term Stock-Based Incentives?

Long-term equity incentives for our named executive officers typically consist of annual awards of performance share units and stock options. The target award amounts are determined to be competitive with median long-term grant values as reflected in the Tower Watson survey results.

40

Table of Contents

However, for purposes of the 2012 long-term incentive grants, management and the Committee determined that, in light of the focus on the separation of the Company into two operating companies, no stock options will be granted. As a result, the total value of the 2012 long-term incentive target awards will be granted in the form of performance share units.

In addition, to ensure that meaningful progress has been completed on the Growth & Value Plan prior to making the 2012 long-term incentive grants, the grant date for the 2012 Performance Share Unit Awards is being delayed from the normal April 1 grant date until July 2, 2012.

How Will the 2012 Performance Share Unit Award Be Designed?

For purposes of the design of the performance share unit award to be granted in 2012 and covering the years 2012, 2013 and 2014, the Committee considered the current business environment and the impending separation into two operating companies, and determined that it would establish an earnings per share performance metric with a one-year performance goal. Following the end of the 2012 performance goal period, the earned share units will be subject to continued vesting during 2013 and 2014 based on continued service by the named executive officer. The earned share units will then be paid in the form of actual shares to participants in early 2015.

The Committee established a one-year earnings per share goal and payment schedule based on growth over 2011 adjusted non-GAAP earnings per share from continuing operations of $2.91.

2012 PSU Award Goal & Payment Schedule

How Will the Number of Share Units to be Granted as Stock-Based Incentive Awards be Determined in July 2012?

The 2012 long-term incentive target award opportunity will be expressed as a dollar value. The number of target share units will be determined by dividing the target dollar opportunity by the closing stock price on July 2, 2012.

The resulting target share units then will be subject to the achievement of the 2012 earnings per share performance goals established by the Committee for the Award.

As described above, the grant date for the 2012 Performance Share Unit Awards is being delayed from the normal April 1 grant date until July 2, 2012, in connection with the implementation of the Growth & Value Plan.

What Other Actions Did We Take to Make Compensation More Performance-Based?

In December 2011, the Committee substituted, with the consent of the executives, the cash long-term bridge payments originally contemplated by the employment offer letters for Messrs. Berisford and Callahan with grants of cash-based restricted stock units (“RSUs”). The purpose of this change was to align the amount of payments with changes in the Company’s stock price and, therefore, make the payments performance-based. Each stock unit entitles the executive at settlement to a cash payment equal to the value of one share of our common stock. We have reported the grant of these stock units in the Summary Compensation Table on page 46 of this Proxy Statement. The vesting and payment terms of the cash-based RSUs follow those that applied to the cash long-term bridge payments that were eliminated.

What Impact Do the Accounting Rules Have on the Type of Equity Awards We Make?

We consider the impact of FASB ASC Topic 718 on the type and mix of our equity awards. Under

41

Table of Contents

this accounting standard, performance share unit awards are recorded using fixed award date accounting, and the expense associated with the awards varies with the number of performance share units earned, but not with changes in stock price.

How Does Our Senior Executive Pay Recovery Policy Work?

In the event of a material recalculation or determination of the performance criteria used to determine the annual and long-term incentive payments to our senior executives, our Senior Executive Pay Recovery Policy provides for the recovery of all or a portion of any overpayment. The Policy applies to any payments made within two years following the expiration of the relevant performance period.

In 2011, we were required to recalculate one or more of the performance criteria used to determine the incentive compensation paid to certain of our senior executives. The reason for the recalculation and its effects on covered compensation were reviewed with the Committee and with the independent members of our Board of Directors. After review, the independent Directors exercised the discretion afforded to them under the Senior Executive Pay Recovery Policy and applied the Policy to reduce a portion of the 2010 non-equity incentive plan compensation paid to Mr. McGraw, Mr. Bahash (our former CFO) and one other senior executive, although none of these individuals was responsible for the activity that resulted in the need to recalculate the performance criteria. For each of the executives, the amount of the recovery was equal to the difference between the non-equity incentive plan compensation that was paid to them for 2010 and the amount of the non-equity incentive plan compensation that should have been paid to them for 2010 using the recalculated performance criteria. As required by the terms of the Senior Executive Pay Recovery Policy, we provided each executive with written notice within 90 days of the determination by the independent Directors that a repayment was required. The excess cash amounts for each executive have been returned to the Company, and the resulting adjustment to Mr. McGraw’s 2010 non-equity incentive plan compensation is noted in the Summary Compensation Table on page 46 of this Proxy Statement.

We will review the design of our Senior Executive Pay Recovery Policy in light of the requirements under the Dodd-Frank Act and will make any necessary changes to be in compliance with those requirements once final regulations have been issued.

How Does IRC Section 162(m) Affect Our Executives’ Compensation and Why?

Section 162(m) of the Internal Revenue Code limits the amount of compensation paid to each named executive officer that may be deducted by the Company to $1 million in any year, unless the compensation qualifies as “performance-based.” Our annual cash bonuses and long-term incentive compensation are intended to meet the requirements for performance-based compensation and be fully deductible. However, we do not have a policy requiring that all compensation be deductible. In 2011, approximately $440,000 of the compensation paid to the CEO was not deductible by the Company. It was composed primarily of the portion of the CEO’s base salary above $1 million, the value of dividend equivalents and imputed income on Company-

provided perquisites.

How Do We Encourage a Significant Ownership Stake in the Company?

We are committed to ensuring that our executive officers have a significant ownership stake to strengthen the alignment of our executives’ interests with those of our shareholders.

The Company has formal stock ownership guidelines for senior executives that range from an ownership guideline of five times base salary for the CEO to three times base salary for the other named executive officers. These guideline ownership levels were selected to be aligned with competitive information on executive stock ownership guidelines. Further, the ownership guidelines will be reduced by one-half for executives covered by these guidelines beginning at

42

Table of Contents

age 62. This reduction is intended to permit individuals to begin an orderly process of stock sales to provide for diversification as the executives covered by these guidelines get closer to the Company’s normal retirement age of 65. Until the guideline ownership levels are attained, senior executives must retain 100% of net profit shares realized from the exercise of stock options, the payment of performance share unit awards, and the vesting of any restricted stock awards. Upon attainment of the guideline ownership levels, senior executives must continue to retain 50% of any future net profit shares acquired from stock option exercises for six months. Further, the CEO and his direct reports who are under the purview of the Committee are subject to this six-month holding period following voluntary termination of employment, including retirement.

Under the Company’s Policy for Insider Trading Restrictions and Reporting Requirements, no shares of Company stock owned by officers may be pledged as security for a loan unless approved by the Compensation and Leadership Development Committee of the Board of Directors. In addition, officers are prohibited from engaging in transactions in derivative securities based on Company stock such as puts, calls and collar arrangements, nor may any shares of Company stock be held in a margin account or any other account that could cause Company stock to be subject to a margin call or otherwise be available as collateral for a margin loan.

At the close of 2011, our named executive officers owned shares of our common stock valued at the following multiples of the named executive officer’s base salary:

Stock Ownership for Named Executive Officers

What Retirement and Other Benefits Do We Pay to Our Executives Following Their Termination of Employment and Why?

In connection with their retirement or other termination of employment, the named executive officers will generally be eligible to receive benefits under our savings and retirement plans and, depending on the circumstances of an executive’s termination, severance benefits. These post-termination benefits are described beginning on page 54 of this Proxy Statement. We have previously frozen our legacy supplemental retirement program covering our present CEO and our former CFO and now President of McGraw-Hill Education. In addition, as part of our Growth & Value Plan, we are freezing for all employees our defined U.S. benefit pension plans. Our remaining defined contribution plans are provided to executives to allow them to accumulate assets for retirement through a combination of individual and company contributions and to allow participants in these plans the opportunity to direct the investments of these retirement assets.

As discussed below, annual incentives under our Key Executive Short-Term Incentive Compensation Plan and stock options awarded under our 2002 Stock Incentive Plan have a “single trigger” that accelerates vesting and/or payment on the occurrence of a defined change-in-control, without requiring the executive’s employment to be terminated. In the case of the short-term

43

Table of Contents

incentive awards, the payment will be based on the average of the three prior year’s payments. In the case of performance share unit awards, the earnings per share goals will be deemed to be fully achieved at target upon a change-in-control that occurs during a performance period under the award. The outstanding long-term incentive awards would then be paid pro rata, with the balance of the award remaining subject to the original schedule for vesting and payment.

In the case of annual incentive payments and performance share unit awards, we have adopted this approach because it would be impractical, and potentially unfair, following a change-in-control, to continue to measure Company performance based on performance goals that were initially set for a separate, independent enterprise. In the case of stock options, the purpose of accelerated vesting on a change-in-control is to put employee option holders in the same position as our shareholders in enabling them to capture market value appreciation through the date of the change-in-control on unvested equity awards.

As indicated above, none of our named executive officers is a party to an employment agreement, although each of Messrs. Berisford and Callahan are parties to offer letters signed in connection with their initial employment with us. Our severance arrangements with the named executive officers are governed by our Senior Executive Severance Plan, which was originally adopted by our Board of Directors in the late 1980s and is part of a human resources program that has been in place for many years. Our Senior Executive Severance Plan is designed to promote employee loyalty, to provide employees with security and reasonable compensation upon an involuntary termination of employment, and to ensure the continued commitment of employees in the event of a potential or actual change-in-control. The Committee does not take into account the benefits offered under our Senior Executive Severance Plan in setting compensation for our named executive officers.

Generally, the Senior Executive Severance Plan provides for base salary and benefits continuation in the event of a Company-initiated termination (including a “constructive” termination). In general, the severance benefit is service-based, in that longer tenured executives receive larger payment amounts in the event of termination. The maximum benefit is payable under the Senior Executive Severance Plan for all participants, regardless of their years of service, if they terminate employment under specified circumstances following a change-in-control. In addition, following a change-in-control, severance amounts are increased to include the executive’s annual target bonus. The Committee, with the advice of Frederic W. Cook & Co., determined it was necessary to increase the minimum and maximum level of severance benefits payable under the Senior Executive Severance Plan for 2012 in order to foster retention during the implementation of the Growth & Value Plan. The increase in severance is set to expire at the end of 2012 and revert to previous levels.

Certain payments that would be provided to our named executive officers in connection with a change-in-control may be classified as “excess parachute payments” under Section 280G of the Internal Revenue Code and may not be deductible as compensation by the Company. In addition, Section 4999 of the Internal Revenue Code imposes an excise tax on executives that receive an excess parachute payment equal to 20% of such amount. The excise tax is not reimbursed or “grossed up” by the Company. Instead, as discussed on page 61 of this Proxy Statement, in certain circumstances, we may “cut back” the amount of severance benefits payable under our Senior Executive Severance Plan if they would not be deductible by the Company under Section 280G.

What Health and Welfare Benefits Do We Provide to Our Executives and Why?

The Company provides a uniform healthcare benefits program for all domestic U.S. employees, including the named executive officers, to provide financial security for employees and their families. The employee healthcare contributions are differentiated by salary levels, with the higher-paid employees required to make larger contributions for their healthcare

44

Table of Contents

coverage. We provide no supplemental executive healthcare benefits other than a Company-paid annual physical examination for the named executive officers and 50 other senior executives. Additionally, 130 executives participate in the Management Supplemental Death and Disability Benefits Plan, which provides a death benefit equal to two times base salary and a supplemental long-term disability benefit equal to 50% of the executive’s monthly earnings, as defined in the Plan, less other Company paid benefits and Social Security benefit payments.

What Perquisites and Other Fringe Benefits Do We Provide to Our Executives and Why?

We provide the following perquisites, which we believe are reasonable and competitive, to the named executive officers to enable them to conduct Company business more effectively and to allow greater focus on the demands of their positions:

We do not gross-up income recognized by the named executive officers as a result of receiving the above perquisites.

Additionally, pursuant to a third-party security study undertaken for the Company, the CEO is required by the Company to use Company- provided aircraft for all air travel. When using Company provided aircraft for personal travel, the CEO and any passengers traveling with him are required to reimburse the Company for the equivalent of first class commercial airfare. Furthermore, as described on pages 29 and 49 of this Proxy Statement, the Company’s policy limits the cost of personal travel to the Company by requiring reimbursement of the incremental cost to the Company in excess of $200,000 in any year. The CEO is also provided a Company car and security personnel. We believe these security costs are legitimate business expenses, but we recognize that they convey a personal benefit. As such, the incremental cost to the Company for providing them is reported in the Summary Compensation Table on page 46 of this Proxy Statement.

45

Table of Contents

2011 Summary Compensation Table

The following table contains information concerning compensation paid or accrued to the named executive officers for services rendered in all capacities to the Company in 2011, 2010 and 2009:

46

Table of Contents

2011 Grants of Plan-Based Awards Table

The following table includes each grant of an award made to the named executive officers in 2011 under any equity-based and non-equity incentive plan of the Company: