def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment
No. )
Filed by the
Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
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o Preliminary
Proxy Statement
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o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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þ Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to Section 240.14a-12
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Diebold, Incorporated
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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Title of each class of securities to which transaction applies:
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(2) |
Aggregate number of securities to which transaction applies:
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(3) |
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4) |
Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
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(1) |
Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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5995 Mayfair Road
P. O. Box 3077 North Canton, Ohio
44720-8077
March 11, 2011
Dear Shareholder:
The 2011 Annual Meeting of Shareholders of Diebold, Incorporated
will be held at the Sheraton Suites, 1989 Front Street, Cuyahoga
Falls, Ohio 44221, on Thursday, April 28, 2011 at
10:00 a.m. EDT. For your convenience, we are pleased
to offer a live webcast of the Annual Meeting at
http://www.diebold.com.
As described in the accompanying Notice and Proxy Statement, at
the Annual Meeting, you will be asked to (1) elect eleven
directors, (2) ratify the appointment of KPMG LLP as
independent auditors for 2011, (3) cast an advisory vote on
named executive officer compensation, and (4) cast an
advisory vote on the frequency of the shareholder advisory vote
on named executive officer compensation.
Diebold is pleased to continue to take advantage of the
Securities and Exchange Commission rules allowing us to furnish
proxy materials to shareholders on the Internet. We believe that
these rules provide you with proxy materials more quickly and
reduce the environmental impact of our Annual Meeting.
Accordingly, Diebold is mailing to shareholders a Notice of
Internet Availability of Proxy Materials containing instructions
on how to access and review our 2011 Proxy Statement and Annual
Report for the year ended December 31, 2010, and to vote
online or by telephone. If you would like to receive a paper
copy of our proxy materials, please follow the instructions for
requesting these materials on the Notice of Internet
Availability of Proxy Materials.
All holders of record of Diebold common shares as of
February 25, 2011 are entitled to vote at the 2011 Annual
Meeting. You may vote online at www.proxyvote.com. If you
received a paper copy of the proxy card by mail, you may also
vote by signing, dating and mailing the proxy card promptly in
the return envelope or by calling a toll-free number.
If you are planning to attend the meeting, directions to the
meeting location are included on the back page. If you are
unable to attend the meeting, you may listen to a replay that
will be available on Diebolds web site at
http://www.diebold.com.
The replay can also be accessed on the site soon after the
meeting for up to three months.
We look forward to seeing those of you who will be attending the
meeting.
Sincerely,
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JOHN N. LAUER
Chairman of the Board
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THOMAS W. SWIDARSKI
President and Chief Executive Officer
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Important
Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Shareholders to be held on April 28,
2011.
This proxy
statement, along with our Annual Report for the year ended
December 31, 2010, are available free
of charge at www.proxyvote.com (you will need to
reference the
12-digit
control number found on your proxy card
or Notice of Internet Availability of Proxy Materials in order
to vote).
5995 Mayfair Road
P.O. Box 3077 North Canton, Ohio
44720-8077
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 28, 2011
10:00 a.m. EDT
Dear Shareholder,
The Annual Meeting of Shareholders of Diebold, Incorporated will
be held at the Sheraton Suites, 1989 Front Street, Cuyahoga
Falls, Ohio 44221, on April 28, 2011 at
10:00 a.m. EDT, for the following purposes:
1. To elect eleven directors;
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To ratify the appointment of KPMG LLP as independent auditors
for the year 2011;
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3. To hold an advisory vote on named executive officer
compensation; and
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To hold an advisory vote on the frequency of the shareholder
advisory vote on named executive officer compensation.
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Your attention is directed to the attached proxy statement,
which fully describes these items.
Any action on the items of business described above may be
considered at the Annual Meeting at the time and on the date
specified above or at any time and date to which the Annual
Meeting may be properly adjourned or postponed.
Holders of record of Diebold common shares at the close of
business on February 25, 2011 will be entitled to vote at
the Annual Meeting.
The enclosed proxy card is solicited, and the persons named
therein have been designated, by Diebolds Board of
Directors.
By Order of the Board of Directors
CHAD F. HESSE
Vice President, Interim General Counsel
and Secretary
March 11, 2011
(approximate mailing date)
You are
requested to cooperate in assuring a quorum by voting online at
www.proxyvote.com
or, if you received a paper copy of the proxy materials, by
filling in, signing and dating the
enclosed proxy and promptly mailing it in the return
envelope.
TABLE OF
CONTENTS
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DIEBOLD,
INCORPORATED
5995 Mayfair Road
P.O. Box 3077 North Canton, Ohio
44720-8077
PROXY STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS, APRIL 28, 2011
General
Information
This proxy statement is furnished to shareholders of Diebold,
Incorporated in connection with the solicitation by the Board of
Directors of proxies to be used at our 2011 Annual Meeting of
Shareholders, and any postponements or adjournments of the
meeting.
These proxy materials are being sent to our shareholders on or
about March 11, 2011.
Questions
and Answers
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Q: |
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When and where is the Annual Meeting? |
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A: |
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The 2011 Annual Meeting of Shareholders will be held at the
Sheraton Suites, 1989 Front Street, Cuyahoga Falls, Ohio 44221,
on April 28, 2011, at 10:00
a.m. EDT. |
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What items will be voted on at the Annual Meeting? |
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At the Annual Meeting, you are being asked to: |
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Elect eleven directors; |
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Ratify the appointment of KPMG LLP as independent
auditors for the year 2011; |
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Cast an advisory vote on named executive officer
compensation; and |
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Cast an advisory vote on the frequency of the
shareholder advisory vote on named executive officer
compensation. |
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If a permissible proposal other than the listed proposals is
presented at the Annual Meeting, your proxy gives authority to
the individuals named in the proxy to vote on any such proposal
in accordance with their best judgment. We have not received
notice of other matters that may be properly presented at the
Annual Meeting. |
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Who is entitled to vote at the Annual Meeting? |
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Our record date is February 25, 2011. Each shareholder of
record of our common shares as of the close of business on
February 25, 2011 is entitled to one vote for each common
share held. As of the record date, there were 65,765,436 common
shares outstanding and entitled to vote at the Annual Meeting. |
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How do I vote? |
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If you are a shareholder on the record date and you hold shares
on your own name, you have three ways to vote and submit your
proxy before the Annual Meeting: |
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By mail If you received your proxy
materials by mail, you may vote by completing, signing and
returning the enclosed proxy card; |
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By Internet We encourage you to vote and
submit your proxy over the Internet at www.proxyvote.com.
Even if you receive paper materials of the proxy materials, you
may vote by Internet by going to www.proxyvote.com and
entering your control number, which is a 12 digit number located
in a box on your proxy card that is included with your proxy
materials; or |
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By telephone If you received your proxy
materials by mail, you may vote and submit your proxy by calling
1-800-690-6903
and providing your control number, which is a
12-digit
number located in a box on your proxy card. |
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If you complete and submit a proxy card, the persons named as
proxies on your proxy card, which we refer to as the Proxy
Committee, will vote the shares represented by your proxy in
accordance with your instructions. If you submit your proxy card
but do not indicate your voting preferences, the Proxy Committee
will vote according to the recommendation of the Board. |
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How does the Board recommend I vote? |
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The Board recommends a vote: |
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FOR each of eleven nominees for director; |
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FOR the ratification of the appointment of
KPMG LLP as independent auditors for the year 2011; |
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FOR the proposal to approve our named
executive officer compensation; and |
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To hold future shareholder advisory votes on named
executive officer compensation EVERY YEAR. |
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Can I change my vote after I have voted? |
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You may change your vote at any time before your proxy is voted
at the Annual Meeting by: |
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Revoking your proxy by sending written notice or
submitting a later dated, signed proxy before the Annual Meeting
to our Corporate Secretary at the companys address above; |
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Submitting a later dated, signed proxy before the
start of the Annual Meeting; or |
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If you have voted by the Internet or by telephone,
you may vote again over the Internet or by telephone by 11:59
p.m. EST on
April 27, 2011; or |
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Attending the Annual Meeting, withdrawing your
earlier proxy and voting in person. |
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What is cumulative voting and how can I cumulate my votes for
the election of directors? |
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In cumulative voting, each shareholder may cast a number of
votes equal to the number of shares owned multiplied by the
number of directors to be elected, and the votes may be cast for
one director-nominee only or distributed among the
director-nominees. |
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In order to cumulate votes for the election of a director, a
shareholder must give written notice to our President, any Vice
President or our Corporate Secretary no later than 9:59
a.m. on
April 26, 2011 that the shareholder desires that the voting
for the election of directors be cumulative, and if an
announcement of such notice is made upon convening the Annual
Meeting by the Chairman or Secretary of the meeting, or by or on
behalf of the shareholder giving the notice, each shareholder
will have cumulative voting. |
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In the event that voting at the Annual Meeting is to be
cumulative, unless contrary instructions are received on the
enclosed proxy, it is presently intended that all votes
represented by properly executed proxies will be divided evenly
among the director- nominees. However, if voting in such manner
would not be effective to elect all such director-nominees,
votes will be cumulated at the discretion of the Proxy Committee
so as to maximize the number of such director-nominees elected. |
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How many votes are required to adopt each proposal? |
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For Proposal 1, the director-nominees receiving the
greatest number of votes will be elected, subject to our
Majority Voting Policy described below. For each of
Proposals 2 and 3, the affirmative vote of the holders of a
majority of the votes cast, whether in person or by proxy, is
required for approval. For Proposal 4, the frequency of the
shareholder advisory vote on named executive officer
compensation receiving the greatest number of votes (every year,
every two years or every three years) will be considered the
frequency recommended by shareholders. The results of the voting
at the meeting will be tabulated by the inspectors of election
appointed for the Annual Meeting. |
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What is the Majority Voting Policy? |
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Votes withheld with respect to the election of directors will
not be counted in determining the outcome of that vote. However,
our Board of Directors has adopted a policy that any
director-nominee that is elected but receives a greater number
of votes withheld from his or her election than votes in favor
of election is expected to tender his or her resignation
following certification of the shareholder vote, as described in
greater detail below under Majority Voting
Policy. |
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What is a broker non-vote? |
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If your shares are held in the name of a brokerage firm, your
shares may be voted even if you do not provide the brokerage
firm with voting instructions. Brokerage firms have the
authority under the New York Stock Exchange (NYSE) rules to vote
shares for which their customers do not provide voting
instructions on certain |
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routine matters. When a proposal is not a routine
matter under NYSE rules and the brokerage firm has not received
voting instructions from the beneficial owner of the shares with
respect to that proposal, the brokerage firm cannot vote the
shares on that proposal. This is referred to as a broker
non-vote. |
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Proposal 2, the ratification of KPMG LLP as independent
auditors for the year 2011, is the only routine matter for which
the brokerage firm who holds your shares can vote your shares on
these proposals without your instructions. Broker non-votes will
have no effect on the outcome of Proposal 2. |
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How many shares must be present to constitute a quorum and
conduct the Annual Meeting? |
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A quorum is necessary to hold the Annual Meeting. A majority of
the outstanding shares present or represented by proxy
constitutes a quorum for the purpose of adopting a proposal at
the Annual Meeting. If you are present and vote in person at the
Annual Meeting, or vote on the Internet, by telephone or by
submitting a properly executed proxy card, you will be
considered part of the quorum. Broker non-votes will not be part
of the voting power present, but will be counted to determine
whether or not a quorum is present. |
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What happens if I abstain? |
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A share voted abstain with respect to any proposal
is considered as present and entitled to vote with respect to
the proposal, but is not considered a vote cast with respect to
the proposal. Accordingly, for Proposal 1, abstentions will
have no effect on the election of directors, except in regards
to the Majority Voting Policy described above. For
Proposals 2 and 3, abstentions will not be counted for
determining the outcome of these proposals. For Proposal 4,
abstentions will have no effect. |
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Why did I receive a one-page notice in the mail regarding
Internet availability of proxy materials instead of a full set
of proxy materials? |
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Under rules adopted by the Securities and Exchange Commission
(SEC), we have elected to provide access to our proxy materials
on the Internet. Accordingly, we are sending you a Notice of
Internet Availability of Proxy Materials. Pursuant to
instructions found in the notice, all shareholders will have the
ability to access the proxy materials on
www.proxyvote.com or request to receive a printed copy of
the proxy materials. You may also request to receive proxy
materials in printed form by mail or electronically by email on
an ongoing basis. Diebold encourages you to take advantage of
the availability of the proxy materials on the Internet to help
reduce the environmental impact of our Annual Meeting. |
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What shares are included on my proxy card or Notice of
Internet Availability of Proxy Materials? |
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The number of shares printed on your proxy card(s) represents
all your shares under a particular registration. Receipt of more
than one proxy card or Notice of Internet Availability of Proxy
Materials means that certain of your shares are registered
differently and are in more than one account. If you receive
more than one proxy card, sign and return all your proxy cards
to ensure that all your shares are voted. If you receive more
than one Notice, reference the distinct
12-digit
control number on each Notice when voting by Internet. |
CORPORATE
GOVERNANCE
Board
Leadership Structure
We currently separate the roles of our Chief Executive Officer,
or CEO, and our Chairman of the Board; however, in the past, we
have combined these roles. The Board separated the roles upon
the election of our current CEO in late 2005 to allow him to
concentrate on re-aligning our business priorities and running
our business operations as we transitioned to new leadership.
The Board does not have a specific policy with respect to
separating versus combining the CEO and Chairman roles, or
whether the Chairman should be an employee or non-employee
director. Therefore, while the Board currently separates the
roles of CEO and Chairman, the Board reserves the right to
combine those roles in the future if it determines that such a
combination would be in the best interests of the company and
our shareholders. As such, the Board, primarily through the
Board Governance Committee, periodically reviews our leadership
structure to determine if it is still appropriate in light of
current corporate governance standards, market practices, our
specific circumstances and needs, and any other factors that may
be relevant to the discussion.
3
Board
Meetings and Executive Sessions
During 2010, the Board held seven meetings, in person or
telephonically. All of our current directors attended 75% or
more of the aggregate of all meetings of the Board and the Board
committees on which they served during the period. In accordance
with the NYSEs corporate governance standards, our
independent directors regularly meet in executive session
without management present, generally at the conclusion of each
regularly-scheduled Board meeting. In addition, on occasion our
independent directors will meet in executive session prior the
start of a Board meeting as well. Our Chairman of the Board,
John N. Lauer, is an independent director and presides over
these executive sessions.
Board
Risk Oversight
The Board has an active role, as a whole and also at the
committee level, in overseeing management of the companys
risks and in helping to establish the companys risk
appetite and risk tolerance. While the Board and its committees
oversee risk management strategy and effectiveness, management
is responsible for identifying risks inherent in our business,
and implementing and supervising
day-to-day
risk management processes. Accordingly, the Board and the
relevant committees receive regular reports from members of
senior management on areas of material risk to us, including
operational, financial, strategic, competitive, reputational,
legal and regulatory risks. The Board also meets with senior
management, at least annually, for a
two-day
strategic planning session and discussion of the key risks
inherent in our short- and long-term strategies at the
development stage, and also receives periodic updates on our
strategic initiatives throughout the year.
At the committee level, each committee is responsible for
evaluating certain risks within its area of responsibility and
overseeing the management of such risks, and the entire Board of
Directors is informed about such risks and managements
response to such risks through regular committee reports by the
committee chairs.
Audit
Committee Risk Oversight
Our Audit Committee regularly reviews our financial statements,
internal control over financial reporting and other internal
controls, as well as the effectiveness of our internal controls
and the status of any efforts that may be required to remediate
internal control deficiencies identified by management or our
independent auditors. In addition, the Audit Committee has
primary responsibility for overseeing enterprise risk
management. In conducting its oversight, the Audit Committee
relies on the advice and counsel of our independent auditors to
raise awareness of any risk issues that may arise during their
regular reviews of our financial statements.
Under the review and guidance of our Audit Committee, over the
last two years, we successfully remediated a number of material
weaknesses in our internal control over financial reporting that
we had identified primarily in connection with the restatement
of our financial statements in 2008. Together, management and
our Audit Committee worked to re-establish an effective culture
and tone necessary to support our control environment.
Compensation
Committee Risk Oversight
Our Compensation Committee regularly reviews our executive
compensation policies and practices, and employee benefits, and
the risks associated with each. At the request of our
Compensation Committee, management also reviews and evaluates
our compensation policies and practices applicable to all
employees that may create risks for our company. Participating
in this review are members of our human resources, legal,
finance and internal audit departments. In connection with this
review, the Compensation Committee also engages its independent
compensation consultant to conduct a comprehensive risk
assessment of our executive compensation policies and practices,
discussed in detail below under Compensation Discussion
and Analysis, and the results of these reviews and
assessments are presented to the Compensation Committee for its
review and final assessment. Consequently, we have determined
that our compensation policies and practices do not create risk
that is reasonably likely to have a material adverse effect on
the company.
As described in more detail below under Compensation
Discussion and Analysis, our Compensation Committee
has developed an executive compensation philosophy that does not
encourage unnecessary or excessive risk taking. Executives
base salaries are fixed in amount, bonuses are capped and tied
to corporate performance, and a large portion of
executives compensation is provided in the form of
long-term equity awards, the value of which are ultimately tied
to the price of our common shares, and which help to align
executives interests with our shareholders.
4
Other
Risk Oversight
Our Board Governance Committee manages risks associated with the
independence of our Board, corporate governance and potential
conflicts of interest. Our Investment Committee oversees the
management of risks associated with our credit, liquidity,
investments and investment strategy. We also have numerous
management committees that meet regularly to discuss risks and
potential risks as they arise or may arise from
day-to-day
in their various functional areas, and regularly report to the
appropriate Board committees and the entire Board.
We also have robust internal dialog amongst our operations,
finance, treasury, tax, legal and internal audit departments,
among others, whenever a potential risk arises, and any such
discussions are escalated to our CEO, Chief Financial Officer,
or CFO, Vice President and General Counsel, Chief Human
Resources Officer, Vice President and Chief Technology Officer
or Vice President, Internal Audit, as appropriate, with open
lines of communication among them, the various management
committees described above, the various committees of the Board
and the entire Board.
We believe that the Boards approach to risk oversight, as
described above, optimizes its ability to assess the various
risks, make informed cost-benefit decisions, and approach
emerging risks in a proactive manner for Diebold. We also
believe that our board leadership structure complements our risk
management structure, as it allows our independent directors,
through our fully independent committees, to exercise effective
oversight of the actions of management in identifying risks and
implementing effective risk management policies and controls.
In connection with their regular review of the companys
risk oversight, the Board and management conducted a
comprehensive review of our risk identification, communication
and oversight structure, and at the direction of the Board we
will be making improvements to our existing program during 2011.
In particular, we are in the process of creating a
cross-functional Diebold Risk Council, consisting of senior
members of management, which will better align our efforts of
identifying, assessing, managing and monitoring enterprise-wide
risks, and which will better coordinate our risk management
decisions, practices, policies and activities across the
company. The Diebold Risk Council will receive regular reports
from the other management committees noted above, and will
provide regular communications, and a more consistent method of
communication, to our CFO, CEO and the Board.
Board
Committees and Composition
The Boards current standing committees are the Audit
Committee, Board Governance Committee, Compensation Committee
and Investment Committee. In addition, in August 2010, the Board
formed a Special Committee to oversee the Boards legal
representative in connection with our previously disclosed
global Foreign Corrupt Practices Act, or FCPA, review. Below is
a summary of our committee structure and membership information
during 2010:
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1 |
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Mr. Byrnes joined the Board and the
Audit Committee effective as of the Annual Meeting of
Shareholders held April 29, 2010.
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Mr. Cheng joined the Governance
Committee effective April 29, 2010.
|
3 |
|
Mr. Crandall stepped down from the
Audit Committee and joined the Compensation Committee effective
April 29, 2010.
|
4 |
|
Mr. Roorda retired from the Board
effective as of the Annual Meeting of Shareholders held April
29, 2010.
|
Audit
Committee
This committee is a separately-designated standing audit
committee established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934,
or the Exchange Act, and its functions are described below under
Report of Audit Committee. The
committees current charter is available on our web site at
http://www.diebold.com.
The current members of the Audit Committee are Henry D. G.
Wallace, Chair, Bruce L. Byrnes, Mei-Wei Cheng, Phillip B.
Lassiter and Alan J. Weber, all of whom are independent. In
addition, the Board has determined that Messrs. Wallace and
Weber are audit committee financial experts. This committee met
in person or telephonically seven times during 2010, and had
informal communications between themselves and management, as
well as with our independent auditors, at various other times
during the year.
Board
Governance Committee
This committees functions include reviewing the
qualifications of potential director candidates and making
recommendations to the Board to fill vacancies or to expand the
size of the Board, when appropriate. This committee also makes
recommendations as to the composition of the various committees
of the Board, compensation paid to the directors for their
services on the Board and on Board committees, and develops and
recommends corporate governance principles. This committee also
leads the Boards annual self-assessment. The
committees current charter is available on our web site at
http://www.diebold.com.
The current members of the Board Governance Committee are Gale
S. Fitzgerald, Chair, Mei-Wei Cheng, Phillip B. Lassiter, and
John N. Lauer, all of whom are independent. This committee met
in person or telephonically five times during 2010.
Compensation
Committee
This committee administers our executive pay program. The
committee may, in its discretion, delegate all or a portion of
its duties and responsibilities to a subcommittee or, in the
case of non-officers, to the CEO or the Executive Vice
President, Human and Technical Resources. The role of the
committee is to oversee our equity plans (including reviewing
and approving equity grants to executive officers) and to
annually review and approve all pay decisions relating to
executive officers. This committee also assesses achievement of
corporate and individual goals, as applicable, by the executive
officers under our short-(annual) and long-term incentive plans,
and makes recommendations to the Board for approval of such
achievement. This committee reviews the management succession
plan and proposed changes to any of our benefit plans, such as
retirement plans, deferred compensation plans and 401(k) plans.
For a narrative description of the committees processes
and procedures for the consideration of executive officer
compensation, see Compensation Discussion and
Analysis below. The committees current charter
is available on our web site at
http://www.diebold.com.
The current members of the Compensation Committee are Phillip R.
Cox, Chair, Richard L. Crandall, Gale S. Fitzgerald and John N.
Lauer, all of whom are independent. This committee met in person
or telephonically five times during 2010.
Investment
Committee
This committees functions include establishing the
investment policies, including asset allocation, for our cash,
short-term securities and retirement plan assets, overseeing the
management of those assets, ratifying fund managers recommended
by management and reviewing at least annually the investment
performance of our retirement plans and 401(k) plans to assure
adequate and competitive returns. The committees current
charter is available on our web site at
http://www.diebold.com.
The current members of the Investment Committee are Alan J.
Weber, Chair, Phillip R. Cox, Richard L. Crandall and Henry D.
G. Wallace. This committee met once in 2010.
6
Special
Committee
This committees functions are to oversee the Boards
legal representative in connection with our previously disclosed
global FCPA review. The committee has the authority to retain
independent counsel, and may conduct any interviews with
officers, employees
and/or
directors of the company and access all information of the
company or our subsidiaries that it believes will assist in its
activities.
The members of the committee are the chairpersons of the Audit,
Board Governance, Compensation and Investment Committees,
currently Henry D. G. Wallace, Chair, Phillip R. Cox, Gale S.
Fitzgerald and Alan J. Weber, respectively, all of whom are
independent. The Chairman of the Board also has a standing
invitation to attend. The committee was formed on August 5,
2010 and met three times in 2010.
Director
Independence
The Board has determined that each of Bruce L. Byrnes, Mei-Wei
Cheng, Phillip R. Cox, Richard L. Crandall, Gale S. Fitzgerald,
Phillip B. Lassiter, John N. Lauer, Henry D. G. Wallace and Alan
J. Weber, which includes each of the current members of the
Audit Committee, the Board Governance Committee and the
Compensation Committee, has no material relationship with
Diebold (either directly or as a partner, shareholder or officer
of an organization that has a relationship with us) and is
independent within our director independence standards, which
reflect the NYSE director independence standards as currently in
effect.
In making this determination with respect to Mr. Weber, the
Board determined that the provision of our proxy processing,
mailing and tabulation services by Broadridge Financial
Solutions, Inc., the board of directors of which Mr. Weber
is a member, did not create a material relationship or impair
the independence of Mr. Weber because he serves only as a
member of such board, and the nature of the services provided
and the fees paid by Diebold for such services were less than
$100,000 in 2010.
Under our director independence standards, a director will be
determined not to be independent under the following
circumstances:
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The director is, or has been within the last three years, an
employee of ours, or an immediate family member is, or has been
within the last three years, an executive officer, of ours;
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|
The director has received, or has an immediate family member who
has received, during any
12-month
period within the last three years, more than $120,000 in direct
compensation from us, other than director and committee fees and
pension or other forms of deferred compensation for prior
service (provided such compensation is not contingent in any way
on continued service);
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(1) The director is a current partner or employee of a firm
that is our internal or external auditor; (2) the director
has an immediate family member who is a current partner of such
a firm; (3) the director has an immediate family member who
is a current employee of such a firm and personally works on our
audit; or (4) the director has been, or a member of his or
her immediate family has been, a partner or employee of such a
firm and personally worked on our audit during the last three
years;
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The director or an immediate family member is, or has been
within the last three years, employed as an executive officer of
another company where any of our present executive officers at
the same time serves or served on that companys
compensation committee;
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The director is a current employee, or an immediate family
member is a current executive officer, of a company that has
made payments to, or received payments from, us for property or
services in an amount which, in any of the last three fiscal
years, exceeds the greater of $1 million, or two percent of
such other companys consolidated gross revenues;
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The director has engaged in a transaction with us for which we
have been or will be required to make a disclosure under
Item 404(a) of
Regulation S-K
promulgated by the SEC; or
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The director has any other material relationship with us, either
directly or as a partner, shareholder or officer of an
organization that has a relationship with us.
|
Thomas W. Swidarski does not meet the aforementioned
independence standards because he is our President and CEO, and
is our employee.
Our director independence standards are available on our web
site at
http://www.diebold.com.
7
Related
Person Transaction Policy
We do not engage in transactions with non-employee directors or
their affiliates if a transaction would cause an independent
director to no longer be deemed independent, would present the
appearance of a conflict of interest or is otherwise prohibited
by law, rule or regulation. This includes, directly or
indirectly, any extension, maintenance or renewal of an
extension of credit to any of our directors.
This prohibition also includes significant business dealings
with directors or their affiliates, charitable contributions
that would require disclosure in our proxy statement under the
rules of the NYSE, and consulting contracts with, or other
indirect forms of compensation to, a director. Any waiver of
this policy may be made only by the Board and must be promptly
disclosed to our shareholders.
In 2010, we did not engage in any related person transaction(s)
requiring disclosure under Item 404 of
Regulation S-K.
Communications
with Directors
Shareholders and interested parties may communicate with our
committee chairs or with our non-employee directors as a group,
by sending an email to:
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Audit Committee auditchair@diebold.com
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Board Governance Committee
bdgovchair@diebold.com
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Compensation Committee compchair@diebold.com
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Directors nonmanagementdirectors@diebold.com
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Communication may also be directed in writing to such person or
group at Diebold, Incorporated, Attention: Corporate Secretary,
5995 Mayfair Road, P.O. Box 3077, North Canton,
Ohio
44720-8077.
The Board has approved a process for handling communications
received by the company and addressed to non-employee members of
the Board. Under that process, the Corporate Secretary will
review all such communications and determine whether
communications require immediate attention. The Corporate
Secretary will forward communications, or a summary of
communications, to the appropriate director or directors.
A majority of the independent directors of the Board approved
this process for determining which communications are forwarded
to various members of the Board.
Business
Ethics Policy
All of our directors, executive officers and employees are
required to comply with certain policies and protocols
concerning business ethics and conduct, which we refer to as our
Business Ethics Policy.
The Business Ethics Policy applies not only to the company, but
also to all of those domestic and international companies which
we own or in which we control a majority interest. The Business
Ethics Policy describes certain responsibilities that our
directors, executive officers and employees have to Diebold, to
each other and to our global partners and communities including,
but not limited to, compliance with laws, conflicts of interest,
intellectual property and the protection of confidential
information.
The Business Ethics Policy is available on our web site at
http://www.diebold.com.
Compensation
Committee Interlocks and Insider Participation
The members of the Compensation Committee during the year ended
December 31, 2010 were Phillip R. Cox, Chair, Richard L.
Crandall, Gale S. Fitzgerald, and John N. Lauer. No member of
the Compensation Committee is or has been an executive officer
of the company, and no member of the Compensation Committee had
any relationships requiring disclosure by the company under the
SECs rules requiring disclosure of certain relationships
and related person transactions. No officer or employee of the
company served as a director or member of a compensation
committee (or other committee serving an equivalent function) of
any other entity, the executive officers of which served as a
director of the company or member of the Compensation Committee
during 2010.
8
COMPENSATION
OF DIRECTORS
In 2010, our non-employee directors received an annual retainer
of $55,000 for their service as directors and our Chairman of
the Board received an additional retainer of $7,500 per month.
In addition to their annual retainer, our non-employee directors
also received the following annual committee fees for their
participation as members or as Chairs of one or more Board
committees:
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Members
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Chair
|
Audit Committee
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$
|
9,000
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|
$15,000
|
Compensation Committee
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$
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7,000
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$12,000
|
Board Governance Committee
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|
$
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5,000
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$8,000
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Investment Committee
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$
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3,000
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$5,000
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The differences in fees between the committees and between the
committee members and Chairs are intended to reflect differing
levels of responsibility, meeting requirements and fiduciary
duties.
A director may elect to defer receipt of all or a portion of his
or her cash compensation pursuant to the Deferred Compensation
Plan No. 2 for Directors.
In addition to cash compensation, each non-employee director may
also receive equity awards under our Amended and Restated 1991
Equity and Performance Incentive Plan, which we refer to as the
1991 Plan. The aim of the Board is to provide a balanced mix of
cash and equity compensation to our directors, and it targets
directors total pay at the median of a peer group of
companies in similar industries and of comparable size and
revenue. This peer group is the same one used by our
Compensation Committee and which is discussed in more detail
below in Peer Group Comparison under
Compensation Discussion and Analysis.
Prior to 2007, our non-employee directors received stock option
awards under the 1991 Plan. All such stock options that vested
prior to December 31, 2005 are entitled to reload rights,
under which an optionee can elect to pay the exercise price
using previously owned shares and receive a new option at the
then-current market price for a number of shares equal to those
surrendered. The reload feature is only available, however, if
the optionee agrees to defer receipt of the balance of the
option shares for at least two years.
Beginning in 2007, our non-employee directors were awarded
deferred common shares instead of stock options. The deferred
shares vest one year from the date of grant, but receipt is
deferred until the later of (1) three years from the date
of grant, (2) retirement from the Board or
(3) attainment of the age of 65. We believe deferred shares
strengthen the directors ties to shareholder interests by
providing awards that more effectively build stock ownership and
ensure that the directors long-term economic interests are
aligned with those of other shareholders.
In 2010, each non-employee director was awarded 2,800 deferred
common shares.
The following table details the cash retainers and fees received
by our non-employee directors during 2010, as well as the
aggregate grant date fair value of stock grants awarded during
2010 pursuant to our 1991 Plan:
2010 Director
Compensation
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Fees Earned or
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All Other
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Paid in
Cash1
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Stock
Awards2
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Compensation3
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Total
|
Name
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|
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($)
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|
|
($)
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|
|
($)
|
|
|
($)
|
Bruce L. Byrnes
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42,667
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93,184
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2,268
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138,119
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Mei-Wei Cheng
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67,333
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93,184
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6,958
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|
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167,475
|
Phillip R. Cox
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70,000
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93,184
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|
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11,916
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175,100
|
Richard L. Crandall
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65,667
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93,184
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11,916
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|
170,767
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Gale S. Fitzgerald
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70,000
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93,184
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11,916
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175,100
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Phillip B. Lassiter
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67,000
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93,184
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11,916
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172,100
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John N. Lauer
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157,000
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|
|
93,184
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14,730
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264,914
|
Eric J. Roorda
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22,333
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|
|
0
|
|
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9,648
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|
|
31,981
|
Henry D. G. Wallace
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73,000
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|
|
93,184
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|
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14,730
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|
|
180,914
|
Alan J. Weber
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|
69,000
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|
|
93,184
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|
|
11,916
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|
|
174,100
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|
|
|
|
|
|
|
|
|
|
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|
9
|
|
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1 |
|
This column reports the amount of
cash compensation earned in 2010 for Board and committee
service, including Board retainer amounts and the following
committee fees earned in 2010:
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|
|
|
|
|
|
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|
|
|
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|
|
Board
|
|
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|
|
|
|
|
|
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|
Governance
|
|
|
Compensation
|
|
|
Investment
|
|
|
|
Audit Committee
|
|
|
Committee
|
|
|
Committee
|
|
|
Committee
|
Name
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
Bruce L. Byrnes
|
|
|
6,000
|
|
|
-
|
|
|
-
|
|
|
-
|
Mei-Wei Cheng
|
|
|
9,000
|
|
|
3,333
|
|
|
-
|
|
|
-
|
Phillip R. Cox
|
|
|
-
|
|
|
-
|
|
|
12,000
|
|
|
3,000
|
Richard L. Crandall
|
|
|
3,000
|
|
|
-
|
|
|
4,667
|
|
|
3,000
|
Gale S. Fitzgerald
|
|
|
-
|
|
|
8,000
|
|
|
7,000
|
|
|
-
|
Phillip B. Lassiter
|
|
|
-
|
|
|
5,000
|
|
|
7,000
|
|
|
-
|
John N. Lauer
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|
|
-
|
|
|
5,000
|
|
|
7,000
|
|
|
-
|
Eric J. Roorda
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|
|
-
|
|
|
1,667
|
|
|
2,333
|
|
|
-
|
Henry D. G. Wallace
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|
|
15,000
|
|
|
-
|
|
|
-
|
|
|
3,000
|
Alan J. Weber
|
|
|
9,000
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
This column represents the
aggregate grant date fair value computed in accordance with
Financial Accounting Standards Board, or FASB ASC Topic 718 for
deferred shares granted to our non-employee directors in 2010,
as further described above. Each director, except
Mr. Roorda who retired from the Board effective
April 29, 2010, received 2,800 deferred shares as of
April 29, 2010, with a closing price of our common shares
on that date of $33.28. The actual value a director may realize
will depend on the stock price on the date the deferral period
ends. As of December 31, 2010, the aggregate number of
deferred shares held by current directors was: Mr. Byrnes:
2,800; Mr. Cheng, 6,300; Mr. Cox, 10,000;
Mr. Crandall, 10,000; Ms. Fitzgerald, 10,000;
Mr. Lassiter, 10,000; Mr. Lauer, 12,100;
Mr. Wallace, 12,100; and Mr. Weber, 10,000. In
addition, as of December 31, 2010, the aggregate number of
common shares issuable pursuant to options outstanding held by
current directors was: Mr. Cox, 9,000; Mr. Crandall,
21,500; Ms. Fitzgerald, 21,500; Mr. Lassiter, 21,500;
Mr. Lauer, 18,500; Mr. Wallace, 17,500; and
Mr. Weber, 9,000.
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|
3 |
|
This column represents dividend
equivalents on deferred shares.
|
Director
Stock Ownership Guidelines
In 2007, the Board Governance Committee established stock
ownership guidelines for each non-employee director. Under the
ownership guidelines, each non-employee director is expected to
own at least 6,500 common shares. These ownership guidelines are
intended to build stock ownership among non-employee directors
and ensure that their long-term economic interests are aligned
with those of other shareholders. As reflected below under
Security Ownership of Directors and
Management, the majority of our directors have
exceeded the ownership guidelines, while our directors who were
appointed most recently are on track to achieve the ownership
guidelines within the next few years. We do not impose any
penalties on directors who fail to meet the stock ownership
guidelines.
CONSIDERATION
OF DIRECTOR NOMINEES
Shareholder
Nominees
The policy of the Board Governance Committee is to consider
properly submitted shareholder nominations for candidates for
membership on the Board as described below under
Identifying and Evaluating Nominees for
Directors. In evaluating shareholder nominations, the
Board Governance Committee seeks to achieve a balance of
knowledge, experience and capability on the Board and to address
the membership criteria set forth below under Board
Diversity, Director Qualifications and Corporate Governance
Guidelines.
Any shareholder nominations proposed for consideration by the
Board Governance Committee should include:
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complete information as to the identity and qualifications of
the proposed nominee, including name, address, present and prior
business
and/or
professional affiliations, education and experience, and
particular fields of expertise;
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an indication of the nominees consent to serve as a
director of Diebold if elected; and
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why, in the opinion of the recommending shareholder, the
proposed nominee is qualified and suited to be a director of
Diebold.
|
Shareholder nominations should be addressed to Diebold,
Incorporated, 5995 Mayfair Road, P.O. Box 3077,
North Canton, Ohio
44720-8077,
Attention: Corporate Secretary. See also Proposals of
Shareholders below.
10
Identifying
and Evaluating Nominees for Directors
The Board Governance Committee utilizes a variety of methods for
identifying and evaluating nominees for director. The Board
Governance Committee regularly reviews the appropriate size of
the Board and whether any vacancies on the Board are anticipated
due to retirement or otherwise.
In the event that vacancies are anticipated, or otherwise arise,
the Board Governance Committee considers various potential
candidates for director. Candidates may come to the attention of
the Board Governance Committee through current Board members,
professional search firms, shareholders or other persons.
As described above, the Board Governance Committee considers
properly submitted shareholder nominations for candidates for
the Board. Following verification of the recommending
shareholders status, recommendations are considered by the
Board Governance Committee at a regularly scheduled meeting.
Majority
Voting Policy
In 2007, the Board adopted a majority voting policy whereby, in
an uncontested election, any nominee for director who receives a
greater number of votes withheld from his or her
election than votes for election, which we refer to
as a Majority Withheld Vote, is expected to tender his or her
resignation following certification of the shareholder vote. In
such an event, the Board Governance Committee will consider the
tendered resignation and make a recommendation to the Board. The
Board will act on the Board Governance Committees
recommendation within 90 days following certification of
the shareholder vote. Any director who tenders his or her
resignation pursuant to this policy will not participate in the
Board Governance Committee recommendation or Board action
regarding whether to accept or reject the tendered resignation.
However, if each member of the Board Governance Committee
received a Majority Withheld Vote in the same election, then the
Board will appoint a committee comprised solely of independent
directors who did not receive a Majority Withheld Vote at that
election to consider each tendered resignation offer and
recommend to the Board whether to accept or reject each
resignation. Further, if all of the directors received a
Majority Withhold Vote in the same election, then the Board will
appoint a committee comprised solely of independent directors to
consider each tendered resignation offer and recommend to the
Board whether to accept or reject each resignation.
Board
Diversity, Director Qualifications and Corporate Governance
Guidelines
In evaluating director-nominees, the Board Governance Committee
considers such factors as it deems appropriate, consistent with
our Corporate Governance Guidelines and other criteria
established by the Board. While the Board Governance Committee
does not have a formal diversity policy, in general, the Board
Governance Committees goal in selecting directors for
nomination to the Board is to create a well-balanced team that
combines diverse business and industry experience, skill sets
and other leadership aspects, that represents diverse viewpoints
and that enables us to pursue our strategic objectives.
The Board Governance Committee identifies candidates whose
business experience, knowledge, skills, diversity, integrity and
global experiences are considered desirable to strengthen the
talent and capabilities of the Board and any committees of the
Board. Qualifications for service have not been reduced to a
checklist of specific standards or minimum qualifications,
skills or qualities.
The Board Governance Committee makes its determinations as to
director selection based on the facts and circumstances at the
time of the receipt of the director candidate recommendation.
Applicable considerations include:
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whether the Board Governance Committee is currently looking to
fill a new position created by an expansion of the number of
directors, or a vacancy that may exist or is anticipated on the
Board;
|
|
|
|
whether the current composition of the Board is consistent with
the criteria described in our Corporate Governance Guidelines;
|
|
|
|
whether the candidate possesses the qualifications that are
generally the basis for selection of candidates to the
Board; and
|
|
|
|
whether the candidate would be considered independent under the
rules of the NYSE and our standards with respect to director
independence.
|
11
Final approval of any candidate is determined by the full Board.
In addition, the Board Governance Committee annually conducts a
review of incumbent directors using the same criteria as
outlined above, in order to determine whether a director should
be nominated for re-election to the Board.
A copy of our Corporate Governance Guidelines is available on
our web site at
http://www.diebold.com.
The Board Governance Committee has identified the
director-nominees below as fitting the general qualifications
described above, and in particular, due to the specific
experience, skills and qualifications each of them would bring
to the Board as set forth in more detail below.
PROPOSAL 1:
ELECTION OF DIRECTORS
The Board recommends that its eleven nominees for director be
elected at the Annual Meeting, each to hold office for a term of
one year from the date of the Annual Meeting or until the
election and qualification of a successor. In the absence of
contrary instruction, the Proxy Committee will vote the proxies
for the election of the eleven nominees.
With the exception of Mr. Allender, who was identified as a
director-nominee by the Board Governance Committee, all
director-nominees are presently members of the Board. All of the
present members of the Board were previously elected by our
shareholders. A substantial majority of the director-nominees
are independent as required by the corporate governance
standards of the NYSE. While Diebold does not have a formal
policy regarding directors attendance at the Annual
Meeting of Shareholders, it is expected that all directors
attend the Annual Meeting unless there are extenuating
circumstances for nonattendance. All directors standing for
re-election attended the 2010 Annual Meeting.
If for any reason any director-nominees are not available for
election when the election occurs, the Proxy Committee, at its
option, may vote for substitute nominees recommended by the
Board.
Alternatively, the Board may reduce the number of
director-nominees. The Board has no reason to believe that any
director-nominee will be unavailable for election when the
election occurs.
Recommendation
of the Board
The board recommends a vote FOR the election of
our nominees as directors.
The
Director-Nominees are:
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|
|
|
|
Position, Principal Occupation, Business Experience and
Directorships Last
|
Name, Term and Age
|
|
Five Years, and Qualifications
to Serve
|
Patrick W. Allender Director-Nominee Age 64
|
|
February 2007: Retired Executive Vice President, Chief Financial Officer and Secretary, Danaher Corporation, Washington, D.C. (diversified manufacturing); 2005 2007: Executive Vice President, Chief Financial Officer and Secretary, Danaher Corporation.
Currently a director of Colfax Corporation, Richmond, Virginia (flow control products) since 2008, where he serves as Chair of the Governance Committee and a member of the Audit Committee; and Brady Corporation, Milwaukee, Wisconsin (identification solutions) since 2007, where he serves as Chair of the Finance Committee, and a member of the Audit and Compensation Committees.
Mr. Allenders 18 years as Chief Financial Officer of a large publicly traded company with global operations will provide our Board with valuable additional expertise in financial reporting and risk management. In addition, his extensive background in public accounting, including as audit partner of a major accounting firm, will further strengthen our Boards financial acumen.
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12
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Position, Principal Occupation, Business Experience and
Directorships Last
|
Name, Term and Age
|
|
Five Years, and Qualifications
to Serve
|
Bruce L. Byrnes Director since 2010 Age 63
|
|
July 2008: Retired Vice Chairman of the Board, Global Brand Building Training, Procter & Gamble, Inc., Cincinnati, Ohio (consumer goods); 2004 2007: Vice Chairman of the Board, Household Care, Procter & Gamble, Inc.
Currently a director of Cincinnati Bell Inc., Cincinnati, Ohio (telecommunications) since 2003, where he serves as a member of the Governance and Nominating, and Compensation Committees; Boston Scientific Corp., Natick, Massachusetts (medical devices) since 2009, where he serves as a member of the Audit, and Nominating and Governance Committees; and Brown-Forman Corporation, Louisville, Kentucky (wine and spirits) since 2010, where he serves as a member of the Audit Committee. Formerly a director of Procter & Gamble from 2002 2008.
Member of our Audit Committee.
Mr. Byrnes qualifications to sit on our Board include his 38 years in various leadership roles of an $80 billion global business, including his extensive marketing and strategy experience and profit and revenue responsibility at Procter & Gamble. Further, as a result of Procter & Gambles business-to-consumer focus, he brings a different perspective to our Board and our business-to-business focus.
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Mei-Wei Cheng
Director since 2009
Age 61
|
|
May 2010 Present: President and Chief Executive Officer, Siemens Ltd., China, and Chief Executive Officer, Siemens North East Asia, Beijing, China (electrical and electronics); 2008 April 2009: Group Vice President, Ford Motor Company, Dearborn, Michigan, and Executive Chairman, Ford Motor (China) Inc., Shanghai, China (automotive industry); 1998 2009: Chairman and Chief Executive Officer, Ford Motor (China) Inc.
Member of our Audit and Board Governance Committees.
Mr. Chengs executive-level experience with major divisions of four $100+ billion global companies (AT&T, General Electric, Ford and Siemens), including extensive experience in Asia Pacific and China in particular, is a tremendous asset as we continue to focus on growth in that key region. Further, Mr. Chengs experience in Asia Pacific provides an important perspective on potential risk exposure in this region to our Audit Committee.
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13
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Position, Principal Occupation, Business Experience and
Directorships Last
|
Name, Term and Age
|
|
Five Years, and Qualifications
to Serve
|
Phillip R. Cox
Director since 2005
Age 63
|
|
1972 Present: President and Chief Executive Officer, Cox Financial Corporation, Cincinnati, Ohio (financial planning and wealth management services).
Chair of our Compensation Committee and member of our Investment Committee.
Currently a director of Cincinnati Bell Inc., Cincinnati, Ohio (telecommunications) since 1993, where he has served as Chairman of the Board since 2003 and where he serves as a member of the Audit and Finance, Compensation, and Governance and Nominating Committees; The Timken Company, Canton, Ohio (engineered steel products) since 2004, where he serves as Chair of the Finance Committee and as a member of the Audit Committee; and Touchstone Investments, Cincinnati, Ohio (mutual fund company) since 1993, where he has served as Chairman of the Board since 2008. Formerly a director of Duke Energy Corporation/Cinergy Corporation (gas and electric) from 1994 2008.
Mr. Coxs 38 years of experience as a president and Chief Executive Officer in the financial services industry, as well as his experience as a director on the boards of several government-regulated businesses, a global manufacturing company, and the Federal Reserve Bank of Cleveland, provides the Board with experience relevant to many key aspects of our business. Mr. Coxs experience as a Chief Executive Officer also imparts appropriate insight into executive compensation and succession planning issues that are ideal for the Chairman of our Compensation Committee, and his extensive experience in the financial services industry provides the understanding necessary to serve on our Investment Committee.
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Richard L. Crandall
Director since 1996
Age 67
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|
May 2008 Present: Non-executive Chairman of the Board, Novell, Inc., Waltham, Massachusetts (IT management software); 2007 Present: Chairman, Pelstar LLC, Chicago, Illinois (medical equipment manufacturing and sales); 2002 Present: Managing Partner, Aspen Partners LLC, Aspen, Colorado (private equity); 1995 Present: Chairman, Enterprise Software Roundtable, Aspen, Colorado (CEO roundtable for software industry).
Member of our Compensation and Investment Committees.
Currently a director of Novell, Inc. since 2003, where he has served as Chairman of the Board since 2008 and where he serves as a member of the Corporate Governance Committee. Formerly a director of Claymore Dividend & Income Fund, Lisle, Illinois (management investment company) from 2004 2010.
Mr. Crandalls extensive experience as an entrepreneur, leader and Board member with several companies in the information technology and technology fields and in the financial industry, including as chairman of a $900 million global information technology business, brings diversity of thought to our Board. Further, during his 14 years on our Board, Mr. Crandall has provided immeasurable assistance to our technology-driven businesses. Mr. Crandalls background in the financial services industry also provides important financial and investment expertise to our Audit and Investment Committees, and his information technology experience provides perspective on technology risks facing the company.
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14
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Position, Principal Occupation, Business Experience and
Directorships Last
|
Name, Term and Age
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|
Five Years, and Qualifications
to Serve
|
Gale S. Fitzgerald
Director since 1999
Age 60
|
|
December 2008: Retired President and Director, TranSpend, Inc., Bernardsville, New Jersey (total spend optimization).
Chair of our Board Governance Committee and member of our Compensation Committee.
Currently a director of Health Net, Inc., Woodland Hills, California (managed healthcare) since 2001, where she serves as Chair of the Finance Committee and a member of the Audit Committee; and Cross Country Healthcare, Inc. Boca Raton, Florida (healthcare staffing) since 2007 where she serves as a member of the Audit Committee.
Ms. Fitzgeralds international experience as a Chief Executive Officer in the information technology industry, a Chief Executive Officer of a business unit of International Business Machines, and the President and Chief Executive Officer of two privately-held consulting companies bring a well-rounded and diverse perspective to our Board discussions and provide significant insight in critical areas that impact our company, including information technology, supply chain management, procurement solutions, human resources, strategic planning and operations management. Ms. Fitzgeralds service on the Compensation Committee of Health Net also brings valuable experience with compensation and succession planning issues to our Compensation Committee, and her 20 years of multiple board experiences provides a unique point of view to our Board Governance Committee.
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Phillip B. Lassiter
Director since 1995
Age 67
|
|
2004 2006: Non-executive Chairman of the Board, Ambac Financial Group, Inc., New York, New York (financial guarantee insurance holding company); 1991 2004: Chairman of the Board and Chief Executive Officer, Ambac Financial Group, Inc.
Member of our Audit and Board Governance Committees.
Formerly Chairman of the Board of Ambac Financial Group, Inc. from 1991 2006, where he served as Non-executive Chairman of the Board from 2004 2006; and Fidelity National Information Services, Inc./Certegy, Inc. Jacksonville, Florida (financial services and payment systems) from 2002 2006.
Mr. Lassiters 13 years of experience as a Chief Executive Officer in the financial services industry, including 15 years as a board chairman and 22 years as a senior bank executive, bring an important understanding of our industry. Further, during his 15 years on our Board, Mr. Lassiter has provided demonstrated leadership to our Board and a vital perspective from a former customers standpoint. Mr. Lassiters extensive background as a Chief Executive Officer in the financial services industry also provides the necessary financial acumen to serve on our Audit Committee, and his experience as a board chairman is ideal for service on our Board Governance Committee.
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15
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Position, Principal Occupation, Business Experience and
Directorships Last
|
Name, Term and Age
|
|
Five Years, and Qualifications
to Serve
|
John N. Lauer
Director since 1992
Age 72
|
|
2005 Present: Non-executive Chairman of the Board, Diebold, Incorporated; May 2003: Retired Chairman of the Board, Oglebay Norton Co., Cleveland, Ohio (industrial minerals).
Member of our Board Governance and Compensation Committees.
Mr. Lauers experience as a former Chief Executive Officer of a global manufacturing company, with extensive experience in Europe and Asia Pacific, brings directly relatable experience to our Board. Further, during his 18 years on our Board, Mr. Lauer has provided demonstrated leadership to our Board. Mr. Lauers background as a board chairman of two global corporations also provides significant corporate governance experience to our Board Governance Committee, and his experience as a Chief Executive Officer of a global manufacturing company brings an understanding of global compensation issues to our Compensation Committee.
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Thomas W. Swidarski
Director since 2005
Age 52
|
|
2005 Present: President and Chief Executive Officer, Diebold, Incorporated; June 2005 December 2005: President and Chief Operating Officer.
As President and Chief Executive Officer of Diebold, Mr. Swidarskis day-to-day leadership provides him with intimate knowledge of our operations that are a vital component of our Board discussions.
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Henry D. G. Wallace
Director since 2003
Age 65
|
|
December 2001: Former Group Vice President and Chief Financial Officer, Ford Motor Company, Dearborn, Michigan (automotive industry).
Chair of our Audit Committee and member of our Investment Committee.
Currently a director of Hayes Lemmerz International Inc., Northville, Michigan (steel and aluminum wheels) since 2003, where he serves as Chair of the Nominating and Governance Committee and a member of the Compensation Committee; Ambac Financial Group, Inc., New York, New York (financial guarantee insurance holding company) since 2004, where he serves as a member of the Audit and Risk Assessment, Governance and Compensation Committees; and Lear Corporation, Southfield, Michigan (automotive components) since 2005, where he has served as Non-executive Chairman of the Board since August 2010 and where he serves as a member of the Audit Committee.
Mr. Wallaces experience in various senior leadership positions, including Chief Financial Officer of Ford Motor Company and President and Chief Executive Officer of Mazda Motor Corporation, bring a broad understanding of our global business. Further, Mr. Wallaces financial expertise, extensive experience in Europe, Latin America and Asia, and his demonstrated leadership on the boards of several publicly traded companies, is a tremendous asset to our Board. As a result of Mr. Wallaces background as a Chief Financial Officer, he is exceptionally qualified to serve on both our Audit Committee and our Investment Committee.
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16
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Position, Principal Occupation, Business Experience and
Directorships Last
|
Name, Term and Age
|
|
Five Years, and Qualifications
to Serve
|
Alan J. Weber
Director since 2005
Age 62
|
|
2007 Present: Chief Executive Officer, Weber Group LLC, Greenwich, Connecticut (investment advisory); 2009 Present: Operating Partner, Arsenal Capital Partners, LLC, New York, New York (private equity); 2005 2006: Chief Executive Officer, Global Wealth Management Partners, Purchase, New York (investment advisory); May 2005: Retired Chairman and Chief Executive Officer, U.S. Trust Corporation, New York, New York (financial services).
Chair of our Investment Committee and member of our Audit Committee.
Currently a director of Broadridge Financial Solutions, Inc., Lake Success, New York (securities processing, clearing and outsourcing) since 2007, where he serves as a member of the Audit and Compensation Committees.
Mr. Webers experience as a Chief Executive Officer and Chief Financial Officer in the financial industry, as well as 27 years of experience at Citibank, including 10 years as an Executive Vice President, provides a tremendous depth of knowledge of our customers and our industry. Further, Mr. Webers experience as Chief Financial Officer of Aetna, Inc., an insurance services company, brings extensive financial expertise to both our Audit Committee and our Investment Committee.
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|
BENEFICIAL
OWNERSHIP OF SHARES
To our knowledge, no person beneficially owned more than five
percent of our outstanding common shares as of December 31,
2010, except for the shareholders listed below. The information
provided below was derived from reports filed with the SEC by
the beneficial owners on the dates indicated in the footnotes
below.
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|
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|
|
|
|
|
Amount and Nature of
|
|
|
|
Percent of
|
|
Title of Class
|
|
|
Name of Beneficial
Owner
|
|
|
Beneficial Ownership
|
|
|
|
Class
|
|
Common Shares
|
|
|
GGCP, Inc. et al.
One Corporate Center
Rye, New York 10580
|
|
|
|
5,621,965
|
1
|
|
|
|
8.49
|
|
Common Shares
|
|
|
Janus Capital Management LLC
151 Detroit Street
Denver, Colorado 80206
|
|
|
|
4,656,881
|
2
|
|
|
|
7.10
|
|
Common Shares
|
|
|
Perkins Investment Management, LLC 311 S. Wacker
Drive, Suite 6000
Chicago, Illinois 60606
|
|
|
|
4,622,837
|
3
|
|
|
|
7.03
|
|
Common Shares
|
|
|
BlackRock, Inc.
40 East
52nd
Street
New York, New York 10022
|
|
|
|
3,461,810
|
4
|
|
|
|
5.27
|
|
Common Shares
|
|
|
The Bank of New York Mellon Corporation One Wall Street,
31st
Floor
New York, New York 10286
|
|
|
|
3,418,550
|
5
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|
|
|
5.20
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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1 |
|
The Schedule 13D/A filed with
the SEC on November 4, 2009 indicates that, as of
November 3, 2009: (A) Gabelli Funds, LLC had sole
voting and dispositive power with respect to 1,291,000 common
shares; (B) GAMCO Asset Management Inc. had sole voting
power with respect to 3,940,265 common shares and sole
dispositive power with respect to 4,200,065 common shares;
(C) MJG Associates, Inc. had sole voting and dispositive
power with respect to 15,000 common shares; (D) Gabelli
Securities, Inc. had sole voting and dispositive power with
respect to 17,900 common shares; (E) Gabelli Foundation,
Inc. had sole voting and dispositive power with respect to
22,000 common shares; (F) GGCP, Inc. had sole voting and
dispositive power with respect to 10,000 common shares; and
(G) Mario J. Gabelli had sole voting and dispositive power
with respect to 66,000 common shares. Mario Gabelli is deemed to
have beneficial ownership of the securities owned beneficially
by each of the foregoing persons. Gabelli Securities, Inc. is
deemed to have beneficial ownership of the securities owned
beneficially by Gabelli & Company, Inc. GAMCO
Investors, Inc., and GGCP, Inc. are deemed to have beneficial
ownership of the securities owned beneficially by each of the
foregoing persons other than Mario Gabelli and the Gabelli
Foundation, Inc.
|
17
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|
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2 |
|
The Schedule 13G/A filed with
the SEC on February 14, 2011 indicates that, as of
December 31, 2010, Janus Capital Management LLC, an
investment adviser, had shared voting and dispositive power with
respect to 4,656,881 shares through its ownership stake in
INTECH Investment Management and Perkins Investment Management
LLC.
|
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3 |
|
The Schedule 13F-HR filed with
the SEC on February 16, 2011, indicates that, as of
December 31, 2010, Perkins Investment Management, LLC, an
investment manager, had sole voting and dispositive power with
respect to 4,622,837 shares.
|
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4 |
|
The Schedule 13G/A filed with
the SEC on February 4, 2011 indicates that, as of
December 31, 2010, BlackRock, Inc. had sole voting and
dispositive power with respect to 3,461,810 shares.
|
|
5 |
|
The Schedule 13G filed with
the SEC on February 3, 2011 indicates that, as of
December 31, 2010, The Bank of New York Mellon Corporation,
a bank, had sole voting power with respect to
2,913,834 shares, sole dispositive power with respect to
3,291,208 shares, shared voting power with respect to
14,123 shares and shared dispositive power with respect to
26,452 shares through its direct or indirect subsidiaries.
|
SECURITY
OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table shows the beneficial ownership of
Diebolds common shares, including those shares which
individuals have a right to acquire (for example, through
exercise of options under the 1991 Plan) within the meaning of
Rule 13d-3(d)(1)
under the Exchange Act, by (1) each director-nominee,
(2) the CEO, the CFO, and our three other most highly
compensated executive officers, whom we refer to collectively as
the Named Executive Officers, and (3) all
director-nominees, Named Executive Officers and other executive
officers as a group as of February 25, 2011.
Ownership is also reported as of February 22, 2011 for
shares in the 401(k) Savings Plan over which the individual has
voting power, together with shares held in our Employee Stock
Purchase Plan.
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|
|
|
|
|
|
|
|
|
|
|
|
Common Shares
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
Beneficially
|
|
|
|
Exercisable
|
|
|
|
Deferred
|
|
|
Percent of
|
Director-Nominees:
|
|
|
Owned
|
|
|
|
Within 60 Days
|
|
|
|
Shares 1
|
|
|
Class
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick W. Allender
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce L. Byrnes
|
|
|
|
|
|
|
|
|
|
|
|
|
2,800
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mei-Wei Cheng
|
|
|
|
|
|
|
|
|
|
|
|
|
6,300
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillip R. Cox
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
10,000
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard L. Crandall
|
|
|
|
9,089
|
|
|
|
|
21,500
|
|
|
|
10,000
|
|
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gale S. Fitzgerald
|
|
|
|
6,089
|
|
|
|
|
21,500
|
|
|
|
10,000
|
|
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillip B. Lassiter
|
|
|
|
8,771 3
|
|
|
|
|
21,500
|
|
|
|
10,000
|
|
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John N. Lauer
|
|
|
|
19,721
|
|
|
|
|
18,500
|
|
|
|
13,377
|
|
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas W. Swidarski
|
|
|
|
150,927 2, 3
|
|
|
|
|
354,775
|
|
|
|
|
|
|
0.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henry D. G. Wallace
|
|
|
|
1,000
|
|
|
|
|
17,500
|
|
|
|
12,100
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan J. Weber
|
|
|
|
1,500
|
|
|
|
|
9,000
|
|
|
|
10,000
|
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Named Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley C. Richardson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
36,350
|
|
|
|
|
13,750
|
|
|
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James L.M. Chen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President, International Operations
|
|
|
|
67,696
|
|
|
|
|
64,750
|
|
|
|
|
|
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George S. Mayes, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President, Global Operations
|
|
|
|
37,774 2
|
|
|
|
|
39,250
|
|
|
|
|
|
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles E. Ducey, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President, North America Operations
|
|
|
|
33,233 2
|
|
|
|
|
62,250
|
|
|
|
1,180
|
|
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Current Director-Nominees and Executive Officers
as a Group (24)
|
|
|
|
517,955 2, 3
|
|
|
|
|
828,849
|
|
|
|
85,757
|
|
|
2.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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1 |
|
The deferred shares awarded to the
director-nominees, as discussed above under
Compensation of Directors and shares deferred
by Mr. Lauer pursuant to our deferred incentive
compensation plans are not included in the shares reported in
the Common Shares Beneficially Owned column, nor are
they included in the Percent of Class column.
|
|
2 |
|
Includes shares held in his or her
name under the 401(k) Savings Plan over which he or she has
voting power, and/or shares held in the Employee Stock Purchase
Plan.
|
|
3 |
|
Includes shares held in the name of
the spouse of the director-nominee or Named Executive Officer.
|
|
*
|
|
Less than 0.01%.
|
18
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors
and executive officers, and persons who own more than 10% of our
common shares, to file with the SEC reports of ownership of our
securities on Form 3 and changes in reported ownership on
Form 4 or Form 5. Such directors, executive officers
and 10% shareholders are also required by SEC rules to furnish
us with copies of all Section 16(a) forms they file.
Based solely upon a review of the reports furnished to us, or
written representations from reporting persons that all
reportable transactions were reported, we believe that during
the year ended December 31, 2010, our directors, executive
officers and 10% shareholders timely filed all reports they were
required to file under Section 16(a).
COMPENSATION
COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with
management the following Compensation Discussion and
Analysis section of our 2011 proxy statement. Based on
our review and discussions, we recommend to the Board that the
Compensation Discussion and Analysis be included in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2010 and this proxy
statement.
The foregoing report was submitted by the Compensation Committee
of the Board and shall not be deemed to be soliciting
material or to be filed with the SEC or
subject to Regulation 14A promulgated by the SEC or
Section 18 of the Exchange Act.
The Compensation Committee:
Phillip R. Cox, Chair
Richard L. Crandall
Gale S. Fitzgerald
John N. Lauer
COMPENSATION
DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis explains our executive
pay program as it relates to the following Named Executive
Officers, whose compensation information is presented in the
tables following this discussion in accordance with SEC rules,
and whose compensation you are being asked to approve in an
advisory (non-binding) vote discussed in Proposal 3 below:
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Thomas W. Swidarski, our President and Chief Executive Officer
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Bradley C. Richardson, our Executive Vice President and Chief
Financial Officer
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James L.M. Chen, our Executive Vice President, International
Operations
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George S. Mayes, Jr., our Executive Vice President, Global
Operations
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Charles E. Ducey, Jr., our Executive Vice President, North
America Operations
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Our executive pay program is managed by the Compensation
Committee, which we refer to in this Compensation Discussion and
Analysis as the Committee. The role of the Committee is to
oversee our executive pay plans and policies, administer our
stock plans and, with input from our CEO, Chief Human Resources
Officer and independent compensation consultant, annually review
and make recommendations to the Board for all pay decisions
relating to our executives, including our Named Executive
Officers.
Executive
Summary
Our executive pay program is designed primarily to incentivize
and reward the achievement of financial and performance goals
using metrics that we believe are the best indicators of the
success of our business, including some that may be calculated
on a non-GAAP basis.
In order to confirm the continued appropriateness of each
element of our executive pay program, the Committee annually
reviews the pay practices of similarly sized peer companies in
related industries. The Committee believes that the executive
pay program for our Named Executive Officers in 2010 was
designed to incentivize and achieve our
pay-for-performance
goals, and was instrumental in helping us achieve strong
financial
19
performance in 2010 based on the Committees executive pay
philosophy and its subjective evaluations of the following,
among other factors:
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The Named Executive Officers roles in executing our short-
and long-term strategic goals;
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Achievement of the following 2010 financial results:
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Total revenue of $2.8 billion, an increase of 3.9% over
2009;
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Gross profit of $720 million, an increase of 10.7% over
2009, with gross profit margin increasing 1.6 percentage
points over 2009;
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Free cash flow (non-GAAP) of $22.1 million (free cash flow
is net cash provided by operating activities, excluding capital
expenditures);
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Non-GAAP earnings per share, or EPS, of $2.33, an increase of
41% over 2009 (non-GAAP EPS is net income per share,
excluding restructuring charges, non-routine income and
expenses, and a non-cash impairment charge);
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Our SmartBusiness (SB) 200 cost savings initiative led to over
$40 million in
year-over-year
cost savings;
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Total shareholder return (TSR) over the prior three-year period
of 44.3%; and
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The remediation of all material weaknesses in our internal
control over financial reporting.
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The Committee believes that using non-GAAP financial metrics is
a better indication of our base-line performance, and that the
exclusion of restructuring charges, non-routine expenses and
income and impairment charges, permits evaluation and comparison
of results for our core business operations. It is also on a
non-GAAP basis that management internally assesses the
companys performance and provides guidance to our
investors.
Summary
of 2010 Executive Pay Actions and Results
Base
Salary:
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Annual merit increases for all executives averaged 3.4%, and for
the Named Executive Officers (excluding Mr. Chen and
Mr. Ducey), 3.0%.
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Mr. Chen received a promotional increase of 5% due to his
promotion to Executive Vice President, International Operations,
which expanded the scope of his existing responsibilities over
our Asia-Pacific and Europe, Middle East and Africa divisions to
include our Latin America division.
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Mr. Ducey received a promotional increase of 10% due to his
promotion to Executive Vice President, North America Operations,
which expanded the scope of his existing responsibilities over
our global service operations planning and support, global
software development, product management and marketing to
include our North American sales and service organizations, as
well as our security division.
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Annual
Cash Bonus Payout:
Although
our full-year 2010 non-GAAP EPS of $2.33 exceeded the
minimum non-GAAP EPS of $1.05 for funding of Annual Cash
Bonus awards, for purposes of payout, the Committee used its
discretion to adjust the non-GAAP EPS component downward to
$2.15. In particular, the Committee deducted $0.13 attributable
to costs associated with our global FCPA review, as well as
$0.05 attributable to beneficial tax impact.
Achievement
of key initiatives and individual goals for 2010 is discussed in
more detail below under Analysis of 2010 Elements of
Executive Pay; however, consistent with our 2010
performance, payout for such initiatives and goals was
contingent upon achievement of certain free cash flow and SB200
cost savings targets, among others.
2008-2010
Performance Shares Payout:
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Our TSR was 44.3%, which ranked us 12th against our peer group
(discussed below) comprised of 28 companies, and 105th
against the S&P Mid-Cap 400 Index, producing awards equal
to 158% of target.
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Restricted
Stock Units, or RSUs:
Beginning
in 2010, the Committee changed the mix of long-term incentives
to provide for the delivery of total potential value in the form
of 40% performance shares (at target results), 40% stock options
(valued using the Black-Scholes method), and 20% RSUs.
Miscellaneous:
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As a result of our ability to generate significant free cash
flow during 2009 and 2010, the Committee reinstated our 401(k)
match, as discussed in more detail below under Personal
Benefits.
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The executive pay actions in 2010 were successful in driving the
performance of our executives and tying executive pay to the
companys performance, as well as division and business
unit goals which should ultimately lead to increased
value for our shareholders.
20
Executive
Pay Program Overview
Our executive pay program is designed to:
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Provide a total pay opportunity that is commensurate with our
performance and competitive with our peer companies.
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Link the financial interests of executives with those of
shareholders through short- (annual) and long-term incentive
plans that are clearly tied to corporate, business unit and
individual performance.
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Provide a balance of both short- and long-term goals.
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Emphasize performance-based, variable pay.
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Build substantial stock ownership by executives.
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Enable us to attract, retain and motivate high quality
executives.
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Our 2010 executive pay program was consistent with these
objectives. The following table summarizes key elements of our
2010 executive pay program:
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Target Pay Position
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Element
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Primary Purpose
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Factors Increasing or Decreasing Rewards
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Relative to Peer Group
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Base Salary
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Reward individuals skills, competencies, experience and
performance
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Performance against objectives
Individual
responsibilities and experience level
Company
financial performance
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Approximately median of our Peer Group
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Annual Cash Bonuses
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Motivate and reward achievement of annual financial objectives
and individual goals
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Corporate non-GAAP EPS
Achievement
of key initiatives or other corporate goals
Achievement
of individual financial and non-financial goals
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Approximately median of our Peer Group at target performance
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Long-Term Incentives (LTI)
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Performance Shares (PSUs)
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Incentivize performance and achievement of strategic goals over
a three-year period
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TSR relative to peers and S&P 400 Mid-Cap companies
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Total potential value is approximately median of our Peer Group
to provide competitive total pay and build equity ownership.
Value is typically delivered in the form of:
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Stock Options
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Incentivize increase in shareholder value
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Stock price growth
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Approximately 40% performance shares for
target results
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Restricted Stock Units (RSUs)
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Promote executive retention and alignment, and incentivize
increase in shareholder value
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Stock price growth
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Approximately 40% options, valued using the
Black-Scholes method
Approximately 20% RSUs
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Benefits and Perquisites
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Provide for basic life and income security needs, and overall
benefits that are competitive with our peers
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Years of service
Base
salary
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Median levels
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Change-in-Control
Benefits
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Bridge to future employment if employment is terminated
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None; only paid in the event the
executives employment is terminated
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Within the range of competitive practices
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The mix of base salary, annual cash bonuses and LTI noted in the
above table, which we refer to throughout this Compensation
Discussion and Analysis as total pay, generally makes up our
executive pay program. In order to confirm the continued
appropriateness of each element of our executive pay program,
the Committee annually reviews the pay practices of similarly
sized peer companies in related industries.
2010
Total Pay Mix
The Committee varies the mix of total pay to ensure our
compensation program remains competitive with our peers, and to
recognize each executives operating responsibilities and
ability to impact our short- and long-term results. Based on the
fair value of equity awards granted to our CEO and our other
Named Executive Officers in 2010, below is the mix of total pay
for our CEO and our other Named Executive Officers as of
December 31, 2010
21
(excluding pension and non-qualified deferred compensation
earnings, income on dividend equivalents, and perquisites and
other benefits):
CEO:
Other NEOs:
As evidenced by the above charts, the Committee provides a good
mix of base salary, annual cash bonuses and LTI for the Names
Executive Officers to balance the various objectives of the
program, with a significant percentage of the Named Executive
Officers total pay being performance-based including, most
notably, 70% of our CEOs total pay being performance-based.
Market
Benchmarking of Executive Pay
In setting pay for our executives, including the Named Executive
Officers, we target total pay at the median of a peer group of
companies, which we refer to as the peer group. However, actual
pay can vary significantly from
year-to-year
and among individuals within a given year based on corporate and
individual performance and experience.
The Committee reviews peer group practices annually to determine
total pay levels and periodically to identify new pay elements
or emerging trends. In addition to peer group data, the
Committee reviews data obtained from nationally recognized
compensation surveys for a broad range of companies of
comparable size and similar revenue. This additional information
helps confirm peer group results and represents the broader
market in which we compete for senior executives. In 2010, we
used data from both sources to benchmark all elements of total
pay. Each year the Committee also reviews the companies in the
peer group to ensure the group adequately represents our peers
in the market.
The factors used to select peer group companies are:
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Company size: approximately
1/2
to 2 times our revenue, number of employees and/or market
capitalization;
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Products: capital equipment, technologically advanced systems
and repair or maintenance services to such equipment or systems;
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Markets: banking, financial services, health care, education,
government, utilities and retail; and
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Global operations.
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During 2010, the following 44 companies, which remain
unchanged from 2009, made up the peer group and served as the
primary basis for benchmarking our pay levels and practices for
our executives, including our Named Executive Officers:
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Peer Group:
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Products/Markets:
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Actuant Corp.
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Global manufacturing/sales (industrial products)
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Affiliated Computer Services, Inc.
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Business process outsourcing and information technology
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Agilent Technologies Inc.
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Bio-analytical and electronic measurement solutions provider
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Ametek, Inc.
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Global manufacturing/sales (electromechanical devices)
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Benchmark Electronics, Inc.
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Global electronics manufacturing services
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Brady Corp.
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Manufacturing/sales (identification solutions)
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Cooper Industries plc
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Global manufacturing/sales (electrical products and tools)
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Corning Inc.
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Global manufacturing/sales (specialty glass and ceramics)
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Crane Co.
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Global manufacturing/sales (engineered industrial products)
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Curtiss-Wright Corp.
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Global manufacturing/sales (precision components and systems)
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Deluxe Corp.
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Provider of personalized printed products to financial
institutions
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Donaldson Company, Inc.
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Global manufacturing/sales (filtration systems)
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Dover Corp.
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Global manufacturing/sales (industrial products and components)
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Fiserv, Inc.
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Information management and electronic commerce systems/services
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Flowserve Corp.
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Global manufacturing/sales (precision-engineered flow control
equip)
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FMC Technologies, Inc.
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Global technology solutions provider to industrial markets
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Goodrich Corp.
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Global supplier (aerospace components, systems and services)
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Harman International Industries Inc.
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Global manufacturing/sales (audio products and electronic
systems)
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Harris Corp.
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Global communications and information technology provider
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Hubbell Inc.
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Global manufacturing/sales (electrical and electronic products)
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International Game Technology
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Global manufacturing/sales (computerized gaming equipment)
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Itron, Inc.
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Global energy and water products and service provider
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Lennox International Inc.
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Global manufacturing/sales (HVAC and refrigeration)
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ManTech International Corp.
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Global technologies/solutions provider for national security
programs
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Mettler-Toledo International Inc.
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Global manufacturing/sales (precision weighing instruments)
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Moog Inc.
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Global manufacturing/sales (precision motion/fluid
controls/systems)
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NCR Corp.
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Global manufacturing/sales (financial technologies/services)
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Pall Corp.
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Global manufacturing/sales (filtration/purification products and
systems)
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Pentair, Inc.
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Global diversified industrial manufacturing/sales
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PerkinElmer, Inc.
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Global health and safety technology solutions provider
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Pitney Bowes Inc.
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Global mail processing and integrated mail solutions provider
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Rockwell Automation
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Global industrial automation power, control and information
solutions
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Rockwell Collins, Inc.
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Global design and production of communications and aviation
electronics
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Roper Industries, Inc.
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Global manufacturing/sales (energy systems/industrial imaging
products)
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Sauer-Danfoss Inc.
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Global manufacturing/sales (engineered hydraulic and electronic
systems)
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SPX Corp.
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Global flow technology products and industrial services provider
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Teledyne Technologies Inc.
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Global electronic components and communications products provider
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Teleflex Inc.
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Global manufacturing/sales (single-use medical devices)
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The Brinks Company
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Global security and cash management services
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The Timken Company
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Global manufacturing/sales (engineered steel products)
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Thomas & Betts Corp.
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Manufacturing/sales (electrical components for industrial
construction)
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Unisys Corp.
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Global design and management of information technology systems
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Varian Medical Systems, Inc.
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Global manufacturing/sales (cancer therapy systems and x-ray
products)
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Waters Corp.
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Global manufacturing/sales (analytical instruments)
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Pay
Setting Process
Committee
Deliberation and Rationale
The Committee evaluates many factors in determining increases or
decreases in each pay element and in total pay for each
executive, including:
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Peer group and other comparable company practices;
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Company performance as measured by non-GAAP EPS, free cash
flow, TSR and stock price appreciation;
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23
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Division or business unit performance;
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Individual performance;
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Promotions
and/or
changes in the executives responsibilities; and
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Broader market developments or trends.
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Some of these factors are discussed in more detail below in
connection with the analysis of individual pay elements.
The amount of total pay achieved or potentially achievable from
prior awards does not directly impact annual pay decisions or
future pay opportunities. Moreover, the Committee does not have
a specific formula for allocating total pay between short- and
long-term pay elements or between cash and non-cash pay
elements. However, the Committee does vary the mix of these
elements based on competitive practices and management level to
recognize each individuals operating responsibilities and
ability to impact our short- and long-term results. The mix of
these elements is reviewed by the Committee at least annually.
As part of its deliberation process, the Committee annually
reviews a snapshot of total pay for each executive
for purposes of general benchmarking and comparative analysis
with our peer group. In this way, the Committee can validate
target pay positions with respect to total pay elements relative
to our peer group.
The Committee analyzes data from our peer group, to determine
pay positions for each element of compensation. The summary
table above under Executive Pay Program
Overview discloses how individual pay elements are
targeted against the peer group under the column Target
Pay Position Relative to Peer Group.
Historically, the Committee targeted base salary below median
levels, with cash bonuses and long-term incentives slightly
higher than market medians. Beginning in 2010, the Committee
continued to focus on providing competitive total compensation
opportunities, but began shifting to a philosophy of targeting
market medians for each pay element to enhance the balance of
our executive pay program, the retention of our critical
executives, and the attraction of high quality executive talent
to the company.
Consistent with its revised pay philosophy, the Committee
approved pay elements in 2009, 2010 and 2011 for our Named
Executive Officers at target that were, on average, the
following percentages relative to our peer group:
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Percentage of Peer Group Median
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2009
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2010
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2011
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Base salary
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94%
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95.2%
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97.9%
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Base salary plus bonus
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100%
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100.4%
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101.1%
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Total pay
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102%
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89.5%
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99.1%
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Timing
Pay recommendations for our executives, including the Named
Executive Officers, are typically made by the Committee at its
first scheduled meeting of the year, normally held in February.
This is usually five to 15 days after we report our fourth
quarter and year-end financial results for the preceding fiscal
year and provide our financial guidance for the upcoming year.
It is also more than two months before we report our first
quarter earnings.
Decisions with respect to prior year performance, performance
for other relevant periods and any resulting award payouts, as
well as equity awards, base salary increases and target
performance levels for the current year and beyond, are also
made at this meeting. Generally, any increases in base salary
approved at this meeting are made effective retroactively to the
beginning of the current year. Further, any equity awards
approved by the Committee at this meeting are approved by the
Board and dated as of the date of the Board meeting held the
following day. As such, the Committee does not time the grants
of options or any other equity incentives to the release of
material non-public information.
The exceptions to this timing are awards to executives who are
promoted or hired from outside the company during the year.
These executives may receive salary increases or equity awards
effective or dated, as applicable, as of the date of their
promotion or hire.
24
Determination
of CEO Pay
The Committee reviews and evaluates the CEOs performance
in executive session, without management or the CEO. The
Committees final pay recommendations for the CEO are then
presented to the independent members of the Board. During an
executive session of the Board, the Board conducts its own
review and evaluation of the CEOs performance and, after
considering all input, ultimately approves pay actions for the
CEO that it deems appropriate.
Independent
Compensation Consultant
In evaluating our total pay program for our executives,
conducting benchmarking, assessing our results, designing
appropriate plans and recommending other potential actions, the
Committee uses the services of an independent compensation
consultant in accordance with the Committees charter. In
2010, the Committee directly engaged the services of Towers
Watson, a global professional services consulting firm, in this
capacity. Towers Watson was formed on December 31, 2009
when Towers Perrin, our prior compensation consultant, merged
with Watson Wyatt. The Committee continued to engage Towers
Watson due to its knowledge and understanding of our business,
our industry, our pay philosophies and our historical pay
practices as a result of its many years of providing consulting
services to the Committee as Towers Perrin, and not as the
result of any recommendations made by management.
Towers Watson also continued providing actuarial and other
consulting services to management, and during 2010 the value of
such services totaled approximately $1,720,480. The value of
Towers Watsons services to the Committee during 2010
totaled approximately $70,955. Accordingly, in order to avoid
any potential conflict of interest or perceived conflict of
interest following the merger, during 2010 the Committee
conducted a search for a new independent compensation
consultant, and in October 2010, engaged Aon Hewitt as its new
independent compensation consultant. The Committee and the full
Board approved the continuation of Towers Watsons
consulting services to management during the Committees
search for a new independent consultant.
The Committees consultant serves at the will of the
Committee and reports directly to its Chair. However, from time
to time, the Committees consultant is also engaged by the
Board Governance Committee to review and provide recommendations
on our pay program for non-employee directors.
The Committees consultant was engaged by the Committee for
2010 to develop external pay data primarily consisting of
comparative analyses of our peer group and companies of
comparable size that are outside of our peer group, as well as
Fortune 500 companies. The Committees consultant also
provides advice on current compensation trends such as long-term
incentives, executive retirement,
change-in-control
severance benefits, deferred compensation programs and
governance practices in connection with executive pay.
At the Committees discretion, the consultant is often
asked to attend Committee meetings dealing with executive pay
matters. On such occasions, the consultant generally
participates in the Committees deliberations on executive
pay decisions, answers questions regarding compensation trends
or the market data it developed, and may provide additional
advice or input as requested by the Committee.
Role
of Management
Our Chief Human Resources Officer serves as managements
primary contact with the Committee and attends and actively
participates in all Committee meetings. With respect to
executive pay, our Chief Human Resources Officer typically meets
independently with the Committees consultant in
preparation for upcoming Committee meetings to review the data
prepared by the consultant that will be presented at the
meeting. Our Chief Human Resources Officer then makes pay
recommendations to our CEO based on market pay comparisons and
an analysis of our executives individual performance
goals, as well as other internal factors (such as expanded job
responsibilities during the year or extraordinary performance
during the year that is not tied to any of the executives
stated goals).
At the Committees request, our CEO periodically attends
Committee meetings and provides input on pay decisions affecting
his management team. Our CEO reviews the recommendations of our
Chief Human Resources Officer and, along with our Chief Human
Resources Officer, makes final pay recommendations to the
Committee with respect to the pay actions and target incentive
levels for management.
25
Our CEO may also meet with the consultant, along with our Chief
Human Resources Officer, to review data that will be presented
at a Committee meeting. However, the only input our CEO and
Chief Human Resources Officer have with respect to the
consultants data is to correct factual information about
the company or management.
While our CEO does not make specific recommendations to the
Committee with respect to his own pay, our CEO does provide a
self-evaluation to the Committee that includes his achievement
against the prior years goals established by the Committee
and his proposed goals for the coming year, which goals are
based on the annual strategic, operational and financial plans
for the company that are approved by the full Board prior to any
CEO pay discussions.
Internal
Equity
We provide similar pay ranges for positions with similar
characteristics and scope of responsibility, including Named
Executive Officer positions. Any differences in compensation
among the Named Executive Officers are based on each
individuals experience, operating responsibilities,
ability to impact short- and long-term results, demonstrated
performance and future potential, as determined by the
Committee. Further, in order to attract and retain quality
executive officers, the Committee believes it is necessary and
proper to provide total pay for each executive position that is
commensurate with market practice (determined specifically by
reference to the practices of our peer group).
The Committee makes no other distinctions in its pay policies
and decisions as among the Named Executive Officers or among the
Named Executive Officers and any other executive officer, and
pay policies and decisions are applied consistently among our
executives.
Analysis
of 2010 Elements of Executive Pay
Base
Salaries
We pay base salaries to recognize the skills, competencies,
experience and individual performance an executive brings to his
or her position. As a result, changes in salary result primarily
from changes in the executives responsibilities and an
assessment of annual performance. The companys financial
performance for the year is also taken into consideration.
At the start of each year, each executive, including the Named
Executive Officers, provides personal performance goals that
relate to his or her applicable position, business unit or
department, and responsibilities. Performance by the Named
Executive Officers (excluding the CEO) against these goals is
subjectively assessed annually by the CEO and the Chief Human
Resources Officer, who then make salary recommendations to the
Committee. Our full Board assesses the CEOs performance.
The Committee relied upon several factors when deciding on
increases in salary for 2010:
|
|
|
|
|
The executives performance against his or her personal
goals, which supports the Committees goal of rewarding
performance;
|
|
|
|
Comparisons with base salaries for executives in similar roles
in peer group companies, which supports the Committees
goal of providing competitive pay;
|
|
|
|
The Committees philosophy regarding salaries, which
targets salaries at median of our peer group; and
|
|
|
|
The Committees assessment of our overall performance
versus goals, and our operating plan and forecasts.
|
In assessing the results of an executives individual
performance, the Committee relies on its judgment and not a
specific formula. This evaluation ensures that we have the
financial capability to provide the increases and that they are
reasonable in light of corporate performance.
Salary increases may take the form of merit increases, market
adjustments or promotional increases. Merit increases are
typically annual and are intended to reflect individual
experience level and performance from the prior year and
year-over-year,
to keep our executives competitive against our peer group, and
to provide an adjustment for inflation. Market adjustments are
provided from time to time to adjust an executives salary
to a level that is
26
competitive with our peer group. Finally, promotional increases
may be given to compensate for promotions or for a significant
increase in an executives responsibilities or areas of
influence.
Annual
Cash Bonuses
Our executives, including the Named Executive Officers, also
have the ability to earn annual cash bonuses under our Cash
Bonus Plan that was originally approved by our shareholders in
2005, and re-approved at our 2010 Annual Meeting. Payout under
the Cash Bonus Plan depends upon our performance against
objective performance measures established by the Board at the
beginning of each fiscal year.
Cash bonuses under the plan provide incentives to meet or
surpass specific short-term corporate financial goals. As a
result, the Cash Bonus Plan balances the objectives of our other
pay programs, which concentrate on long-term financial results
(performance shares) and stock price growth (performance shares,
stock options and RSUs). Finally, annual cash bonuses allow us
to maintain relatively low fixed compensation costs and still
provide our executives with competitive cash pay, subject to
performance.
Cash Bonus Opportunity. The potential earnout levels
of our executives, as a percentage of income, are set by the
Committee so as to provide a reasonable opportunity to achieve
total cash pay at target that approximates the median total cash
pay of our peer group. For 2010, the target bonuses were as
follows:
|
|
|
|
|
CEO: 100% of salary; and
|
|
|
|
Other Named Executive Officers: 75% of salary.
|
Actual bonuses can range from 0% to 200% of target depending on
our actual performance. In this manner, we can reward our
executives with high levels of cash bonuses for results that
substantially exceed target performance expectations.
Conversely, we award relatively low levels of cash bonuses for
results that are below target performance expectations, or none
at all for results that fail to meet minimally acceptable
standards.
Performance Measures. The Cash Bonus Plan allows the
Committee to choose levels of, growth in, or relative peer
company performance in any one or more of the following
performance measures: EPS; return on invested capital; return on
total capital; return on assets; return on equity; TSR; net
income, revenue, cash flow or operating profit;
and/or
productivity improvement.
The Committee has historically used non-GAAP EPS as the
performance criteria for annual cash bonuses, viewing EPS as an
important bottom-line financial result that investors use to
evaluate the value of our common shares. As a result, consistent
increases in EPS over time should lead to improvements in
shareholders investment.
Funding of Cash Bonuses. To pay cash bonuses, we
fund a bonus pool based on (1) achievement of a minimum
EPS, and (2) the maximum bonus available to each executive.
This approach helps us preserve the tax deductibility of all
bonuses paid under the Cash Bonus Plan and provides the
Committee the greatest flexibility to assess and reward annual
performance. While this minimum EPS is used to fund potential
cash bonuses, the actual payout of cash bonuses is based on
achievement of certain weighted corporate goals, key
initiatives, and individual goals.
Weighting. The Committee expects each Named
Executive Officer to contribute to our overall success as a
member of the executive team, as well as focusing on individual
division or business unit goals and objectives, all of which are
tied to our short- and long-term strategic plans. Accordingly,
the Committee believes that there should be a strong emphasis on
corporate performance, as well as individual goals, and as such,
sets varying weights on the individual Named Executive
Officers performance measures in order to reflect the
individual executives relative influence on such goals and
objectives. For 2010 cash bonuses, the Committee approved the
following weighting of performance measures for our Named
Executive Officers:
|
|
|
|
|
For Mr. Swidarski and Mr. Richardson, 60% based on
EPS, 20% based on key initiatives, and 20% based on individual
goals;
|
|
|
|
For Mr. Ducey, 50% based on EPS, 30% based on key
initiatives, and 20% based on individual goals; and
|
|
|
|
For Mr. Chen and Mr. Mayes, 40% based on EPS, 40%
based on key initiatives, and 20% based on individual goals.
|
Prior to 2009, payouts under the plan were based entirely on the
achievement of EPS targets, with the potential for the Committee
to use negative discretion based on the level of achievement of
individual performance measures. The Committee believes the
current practice allows for more alignment between cash bonuses
and performance of
27
each individual within the division, business unit or functional
group on which he or she has the most impact, while still
balancing the need for the achievement of acceptable corporate
goals.
Specifically, the weighting of performance measures for
Mr. Swidarski and Mr. Richardson emphasizes
consolidated company financial performance and shareholder value
creation in the form of EPS, reflective of their focus
and/or
influence on overall corporate results. For Mr. Chen,
Mr. Mayes and Mr. Ducey, the weighting drives key
strategic
and/or
operational results in their specific areas of responsibility,
and in turn, contributes to overall corporate results.
Company Goals. For 2010, the Committee again
selected non-GAAP EPS as the appropriate corporate goal.
The EPS level fixed by the Committee for purposes of target
payout of cash bonuses was intended to approximate our annual
non-GAAP EPS guidance to investors. The performance levels
for payout of cash bonuses at threshold and maximum are then
generally set as a percentage of the target EPS level. The
threshold for payout is set at a level that is intended to be
reasonably capable of achievement. Conversely, the EPS level for
maximum payout is set at a level that should require a fairly
significant effort to achieve.
The following levels of EPS were intended to pay out at the
following weighted results, with an interpolation of actual
results falling in between threshold and maximum:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below Threshold
|
|
à
|
|
non-GAAP EPS
|
|
<
|
|
$
|
1.60
|
|
|
à
|
|
No weighted EPS payout
|
|
|
Threshold
|
|
à
|
|
non-GAAP EPS
|
|
=
|
|
$
|
1.60
|
|
|
à
|
|
40% of weighted EPS payout
|
|
|
Target
|
|
à
|
|
non-GAAP EPS
|
|
=
|
|
$
|
2.00
|
|
|
à
|
|
100% of weighted EPS payout
|
|
|
Maximum
|
|
à
|
|
non-GAAP EPS
|
|
=
|
|
$
|
2.30
|
|
|
à
|
|
200% of weighted EPS payout
|
Our 2010 non-GAAP EPS target of $2.00 approximated the
mid-range of our 2010 non-GAAP EPS guidance to investors of
$1.90 to $2.15. The 2010 EPS target was set below the 2009 EPS
target level due to continued economic uncertainty, particularly
in the financial sector, which continued to impact our customers
and therefore our EPS outlook. For 2010, the Committee set
threshold and maximum EPS levels more in line with historic
practices, while still recognizing the continued difficulty of
achieving maximum results. Accordingly, the Committee set
threshold and maximum EPS for 2010 at 80% and 115% of target,
respectively.
As noted above, in establishing these non-GAAP EPS goals
and evaluating results, the Committee generally excludes certain
restructuring, non-recurring income and expense, and other
extraordinary items consistent with our guidance to investors.
Further, under the plan, the Committee is authorized to consider
negative discretion with respect to bonuses.
We reported 2010 non-GAAP EPS of $2.33, which would have
resulted in a maximum payout for the Company Goals performance
measure; however, as noted above, the Committee used its
discretion to adjust the non-GAAP EPS component downward to
$2.15, for a payout midway between target and maximum.
Key Initiatives. Certain key initiatives for our
executives, including the Named Executive Officers, are
developed and proposed by management. These key initiatives are
intended to drive key strategic
and/or
operational results in the division, business unit or functional
group within which the executive has direct control and
influence, and target levels were tied directly to our 2010
financial plan, as well as our guidance to investors. Similar to
our company goals, the Committees assessment of key
initiatives generally excludes certain non-recurring or
extraordinary items. In addition, for executives with multiple
key initiatives, the Committee has no set weighting system for
each key initiative. For 2010, the Committee approved the
following key initiatives for our Named Executive Officers,
which resulted in the achievement set forth below:
|
|
|
|
|
|
|
|
|
|
Named Executive Officer:
|
|
|
Key Initiatives:
|
|
|
Target Levels:
|
|
|
Achievement:
|
Thomas W. Swidarski
|
|
|
Free cash flow: Free cash flow is net cash generated from
our operating activities and available for execution of our
business strategy, excluding capital expenditures.
|
|
|
Threshold = $100 million
Target = $130
million
Maximum = $160 million
|
|
|
Achieved
$222 Million
-Maximum-
|
Bradley C. Richardson
|
|
|
Free cash flow
|
|
|
Threshold = $100 million
Target = $130
million
Maximum = $160 million
|
|
|
Achieved
$222 Million
-Maximum-
|
James L.M. Chen
|
|
|
Asia Pacific, or AP, operating profit: 2010 profit earned
from our core business activities in AP, excluding interest and
taxes.
Europe, the Middle East and Africa, or EMEA, operating
profit: 2010 profit earned from our core business activities
in EMEA, excluding interest and taxes.
Latin America, or LA, operating profit: 2010 profit
earned from our core business activities in LA, excluding
interest and taxes.
|
|
|
*
*
*
|
|
|
Achieved
-Target-
Did Not Achieve
Achieved
-Maximum-
|
George S. Mayes, Jr.
|
|
|
SmartBusiness 200 (Cost Savings): Our second cost
reduction initiative to take an additional $100 million out of
our cost structure by 2011.
Free cash flow
|
|
|
Threshold = $30 million
Target = $40 million
Maximum = $50 million
Threshold = $100 million
Target = $130 million
Maximum = $160 million
|
|
|
Achieved $40 Million -Target-
Achieved $222 Million -Maximum-
|
Charles E. Ducey, Jr.
|
|
|
North America, or DNA, operating profit: 2010 profit
earned from our core business activities in DNA, excluding
interest and taxes.
|
|
|
*
|
|
|
Achieved
-Target-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
These key initiatives are based on
strategic and operational objectives that are tied to our short-
and long-term strategic and financial plans. These key
initiatives have been selected because they ultimately lead to
customer satisfaction and increased shareholder value. We
believe that disclosing certain performance measures relating to
specific division or business unit performance or other
confidential strategic initiatives, which we do not otherwise
disclose publicly, would cause us competitive harm by
potentially disrupting our customer relationships and providing
competitors with, among other things, insight into our business
strategy, pricing margins and capabilities. We typically set
target performance at a level that would provide results that
are in line with our guidance to our investors or that are
otherwise reasonably difficult to achieve relative to historical
trends and future expectations at the time the levels are set.
Threshold and maximum performance levels are then set to have
slightly decreased and increased difficulty, respectively, as
compared to target levels.
|
Individual Goals. In addition to non-GAAP EPS
and the key initiatives outlined above, each executive has
individualized goals that are directly tied to the
individuals operating unit, functional area or department,
and may consist of a mixture of quantitative measures (for
example, revenue growth, cost reduction, cash conversion,
quality improvement and inventory goals) and qualitative
measures (for example, operational and organizational
improvements, product/service development and customer loyalty).
The CEO develops and proposes the individual goals for his
management team, which are approved by the Committee at the
beginning of each fiscal year, and the Board sets the CEOs
individual performance objectives.
To the extent possible, individual quantitative goals are
approved at threshold, target and maximum achievement levels,
similar to the company goals and key initiatives. Further,
similar to our company goals and key initiatives, quantitative
individual goals may exclude certain non-recurring or
extraordinary items. However, apart from the overall weighting
of individual goals relative to company goals and key
initiatives, the Committee has no set criteria, formula or
weighting system for determining overall achievement of
individual goals. Instead, the Committee bases its determination
primarily on a subjective assessment made by the CEO and
reported to the Committee on the overall achievement level of
each executives individual goals. Similarly, the Committee
and the Board make a subjective assessment of the CEOs
achievement of individual goals.
29
For 2010, the Committee approved the following individual goals
for the Named Executive Officers, which resulted in the
achievement set forth below:
|
|
|
|
|
|
|
Named Executive Officer:
|
|
|
Individual Goals*:
|
|
|
Achievement:
|
Thomas W. Swidarski
|
|
|
Achieve SmartBusiness 200 cost reduction target of $40 million
Complete North America reorganization
Drive expansion of Integrated Services® globally target of $110 million in total contract value
Continue realignment of global resources to increase business performance and profitability
|
|
|
Achieved
-98% of Maximum-
|
Bradley C. Richardson
|
|
|
Complete North America reorganization
Remediate remaining 2007 material weakness related to application of accounting policies, and the 2009 material weakness related to controls over income taxes
Review Enterprise Risk Management and develop action plan to enhance overall effectiveness
Complete full risk assessment of excess cash in foreign locations and develop currency risk mitigation policy
|
|
|
Achieved
-98% of Maximum-
|
James L.M. Chen
|
|
|
Drive AP cash conversion cycle improvement
Drive EMEA cash conversion cycle improvement
Drive LA cash conversion cycle improvement
Deliver Integrated Services® revenue growth in EMEA, AP and LA target of 10% growth
Drive emerging markets flow share gain
|
|
|
Achieved
-91% of Maximum-
|
George S. Mayes, Jr.
|
|
|
Quality improvements reduction in defective ppm in manufacturing plants target of 40% reduction
Successfully implement cash dispenser projects (reliability/cost)
Support Oracle® and information technology plan within timing/cost framework
|
|
|
Achieved
-93% of Maximum-
|
Charles E. Ducey, Jr.
|
|
|
Expand Integrated Services® offering globally target of 50% increase in total contract value
Successfully implement Phase I of MarketBridge (cloud-based information technology)
Achieve SmartBusiness 200 cost reduction target of $40 million
Reduce operating expense globally target of 13.75% reduction
Develop and implement leadership development plans for new direct reports
|
|
|
Achieved
-92% of Maximum-
|
|
|
|
|
* |
|
As indicated above, management
develops and proposes the individual goals that are approved by
our Compensation Committee. These individual goals are based on
strategic and operational objectives that are tied to the
companys short- and long-term strategic and financial
plans. These individual goals have been selected because they
ultimately lead to customer satisfaction and increased
shareholder value. Although not all of these individual goals
are quantitative in nature, for those that are, we believe that
disclosing the quantitative performance measures relating to
specific division or business unit performance or other
confidential strategic initiatives, which we do not otherwise
disclose publicly, would cause us competitive harm by
potentially disrupting our customer relationships and providing
competitors with, among other things, insight into our business
strategy, pricing margins and capabilities. We typically set
target performance at a level that would provide results that
are in line with our guidance to our investors or that are
otherwise reasonably difficult to achieve relative to historical
trends and future expectations at the time the levels are set.
Threshold and maximum performance levels are then set to have
slightly decreased and increased difficulty, respectively, as
compared to target levels.
|
2010 Annual Cash Bonus Payout. Based on the
Named Executive Officers cash bonus opportunities
(threshold / target / maximum as a
percentage of base salary), and their weighted achievement of
the foregoing company goals, key initiatives and individual
goals, the Committee recommended, and the Board approved, a
payout of cash bonuses as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Bonus
|
|
Weighting
|
|
|
|
|
|
|
|
|
|
Committee
|
|
|
|
|
|
|
Opportunity
|
|
Achievement of
|
|
|
|
Achievement of
|
|
|
|
Achievement of
|
|
|
|
|
|
|
|
Base
|
|
|
|
Negative
|
|
|
|
|
|
|
(%)
|
|
Company Goals
|
|
|
|
Key Initiatives
|
|
|
|
Individual Goals
|
|
|
|
Total
|
|
|
|
Salary
|
|
|
|
Discretion
|
|
|
|
Payout
|
Named Executive Officer:
|
|
Thresh.
|
|
Target
|
|
Max.
|
|
(60%)
|
|
|
|
(20%)
|
|
|
|
(20%)
|
|
|
|
(%)
|
|
|
|
($)
|
|
|
|
($)
|
|
|
|
($)
|
|
Thomas W. Swidarski
|
|
40
|
|
100
|
|
200
|
|
90.0%
|
|
+
|
|
40.0%
|
|
+
|
|
39.2%
|
|
=
|
|
169.2%
|
|
x
|
|
800,000
|
|
-
|
|
553,600
|
|
=
|
|
|
800,000
|
|
Bradley C. Richardson
|
|
30
|
|
75
|
|
150
|
|
67.5%
|
|
+
|
|
30.0%
|
|
+
|
|
29.4%
|
|
=
|
|
126.9%
|
|
x
|
|
485,000
|
|
-
|
|
0
|
|
=
|
|
|
615,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Bonus
|
|
Weighting
|
|
|
|
|
|
|
|
|
|
Committee
|
|
|
|
|
|
|
Opportunity
|
|
Achievement of
|
|
|
|
Achievement of
|
|
|
|
Achievement of
|
|
|
|
|
|
|
|
Base
|
|
|
|
Negative
|
|
|
|
|
|
|
(%)
|
|
Company Goals
|
|
|
|
Key Initiatives
|
|
|
|
Individual Goals
|
|
|
|
Total
|
|
|
|
Salary
|
|
|
|
Discretion
|
|
|
|
Payout
|
Named Executive Officer:
|
|
Thresh.
|
|
Target
|
|
Max.
|
|
(40%)
|
|
|
|
(40%)
|
|
|
|
(20%)
|
|
|
|
(%)
|
|
|
|
($)
|
|
|
|
($)
|
|
|
|
($)
|
|
James L.M. Chen
|
|
30
|
|
75
|
|
150
|
|
45.0%
|
|
+
|
|
12.0%
|
|
+
|
|
27.3%
|
|
=
|
|
84.3%
|
|
x
|
|
369,342
|
|
-
|
|
155,677
|
|
=
|
|
|
155,678
|
|
George S. Mayes, Jr.
|
|
30
|
|
75
|
|
150
|
|
45.0%
|
|
+
|
|
45.0%
|
|
+
|
|
27.8%
|
|
=
|
|
117.8%
|
|
x
|
|
343,412
|
|
-
|
|
0
|
|
=
|
|
|
404,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Bonus
|
|
Weighting
|
|
|
|
|
|
|
|
|
|
Committee
|
|
|
|
|
|
|
Opportunity
|
|
Achievement of
|
|
|
|
Achievement of
|
|
|
|
Achievement of
|
|
|
|
|
|
|
|
Base
|
|
|
|
Negative
|
|
|
|
|
|
|
(%)
|
|
Company Goals
|
|
|
|
Key Initiatives
|
|
|
|
Individual Goals
|
|
|
|
Total
|
|
|
|
Salary
|
|
|
|
Discretion
|
|
|
|
Payout
|
Named Executive Officer:
|
|
Thresh.
|
|
Target
|
|
Max.
|
|
(50%)
|
|
|
|
(30%)
|
|
|
|
(20%)
|
|
|
|
(%)
|
|
|
|
($)
|
|
|
|
($)
|
|
|
|
($)
|
|
Charles E. Ducey, Jr.
|
|
30
|
|
75
|
|
150
|
|
56.3%
|
|
+
|
|
21.4%
|
|
+
|
|
27.6%
|
|
=
|
|
105.2%
|
|
x
|
|
357,509
|
|
-
|
|
0
|
|
=
|
|
|
376,253
|
|
In addition to the negative discretion the Committee used in
connection with our non-GAAP EPS performance measure, the
Committee also used negative discretion to reduce the payouts to
Mr. Swidarski and Mr. Chen. The Committee and
management worked collaboratively to conclude that, as a result
of the impact to the company of our
30
non-cash goodwill impairment related to our EMEA business and
the impact of our global FCPA review, it was appropriate that
Mr. Swidarskis cash bonus be reduced to target
payout. The Committee also felt that a reduction was appropriate
for Mr. Chen due to his oversight responsibilities in EMEA
and AP, where we previously reported that we have identified
certain transactions that potentially implicate the FCPA.
Long-Term
Incentives
Overview. The 1991 Plan provides us with flexibility
in the types of long-term incentives we can award to our
executives, including the Named Executive Officers, and includes
stock options, performance shares and RSUs. The LTI mix approved
by the Committee is designed to provide for the delivery of
total potential value in the form of approximately 40%
performance shares (at target results), 40% stock options
(valued using the Black-Scholes method), and 20% RSUs. In this
manner, the Committee strikes a balance between awards tied only
to stock price appreciation and those based on the full value of
our common shares, as well as other performance factors. The
Committee believes this mix aligns our LTI pay with market
practice, and provides an LTI mix with a balance between
long-term company performance, shareholder alignment, value
creation and executive retention.
The LTI granted in 2010 supported our pay philosophy:
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Stock options align our executives interests with those of
shareholders because options only produce rewards for executives
if our stock price increases after options are granted.
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Performance shares reward our executives for achieving sustained
financial results as well as for increasing our stock price. As
a result, they tie rewards to performance and provide an
additional means to own stock.
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Grants of RSUs help in attracting and retaining key executives.
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The Committee also takes into account the competitiveness of our
executives target cash pay (salary plus target bonus) and
competitive total pay levels in awarding LTIs. This dollar
difference represents the target value of LTI that the Committee
delivers in the form of options, performance shares and RSUs.
Stock Options. Stock option grant recommendations
are developed by management and then reviewed and approved by
the Committee, and are based on an executives salary grade
or level, organizational level, reporting relationships and job
responsibilities in order to maintain internal equity in the
grants to participants. Actual grants also vary based on an
assessment of several factors, including the market value of our
common shares, our financial performance, shares available under
the 1991 Plan, an individuals target total compensation
and his or her performance against individual performance goals.
LTI delivered in the form of stock options is valued using the
Black-Scholes option valuation method, the same method we use to
determine its accounting fair value.
Our executives, including the Named Executive Officers, received
option grants in 2010 with the following characteristics:
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Non-qualified stock options, which provide us with a tax
deduction at the time of exercise to the degree executives incur
taxable income.
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Exercise price equal to the closing price of our common shares
on the date of grant so that executives do not receive options
that are in the money.
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Vest ratably over a four-year period to support executive
retention.
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Expire ten years after the date of grant to reward for long-term
stock price appreciation.
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Grants of stock options approved by the Committee to the Named
Executive Officers during 2010 were as follows:
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Named Executive Officer:
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Stock Options Granted:
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Swidarski
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127,500
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Richardson
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25,000
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Chen
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15,000
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Mayes
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15,000
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Ducey
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15,000
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31
Performance Shares. Performance shares are earned
over a three-year performance period, determined as of the date
of our fourth quarter and year-end earnings release immediately
following the performance period, with actual awards varying
from target based on the achievement of financial objectives
established by the Committee at the start of the period. No
dividends are paid on performance shares until earned.
The award of performance shares is consistent with the
Committees objective to take a balanced approach to LTI by
rewarding sustained financial performance, as well as stock
price appreciation and executive retention. The expected value
of a performance share at the time of grant (based on our stock
price) is used to determine the number of target performance
shares awarded. The Committee then reviews and approves the
performance share grant recommendations developed by management,
which are based on the same principles used to develop stock
option grant recommendations.
Our executives, including the Named Executive Officers, received
target performance share awards for the 2010 to 2012 period with
the following characteristics:
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Our TSR for the period relative to our peer group and the
S&P MidCap 400 Index determines the actual number of
performance shares earned. Results in each area are weighted
equally. This approach underscores the importance of providing
shareholder returns equal to or greater than those companies
similar to us as well as to the broader market of companies we
compete with for investment. Moreover, it also balances the
focus of stock options, the value of which is tied to the
absolute growth in our stock price.
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The actual number of shares earned will range from 0% to 200% of
an individuals target award:
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○
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If our relative TSR is below both groups 20th percentile,
no performance shares will be earned. As a result, the Committee
requires executives to provide shareholders a minimally
acceptable (threshold) performance relative to our peers before
any rewards can be earned.
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○
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Our executives can earn the maximum number of shares if our TSR
equals or exceeds (1) the 60th percentile of one group and
100th percentile in the other, (2) the 70th percentile in
one group and
90th
percentile in the other, or (3) the 80th percentile of both
groups. In this manner, our executives receive the highest level
of rewards under the plan only when our performance is superior
to that of other similar companies.
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○
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A matrix is used to determine awards for results between
threshold and maximum.
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○
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An executives individual performance is not a factor in
determining actual performance shares awarded.
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Grants of performance shares, at target, approved by the
Committee to the Named Executive Officers during 2010 were as
follows:
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Named Executive Officer:
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Target Performance Shares Granted:
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Swidarski
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42,500
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Richardson
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6,500
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Chen
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5,500
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Mayes
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5,500
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Ducey
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5,500
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Goals for the 2008 to 2010 performance period were identical to
those established for the 2010 to 2012 period. However, unlike
our 2010 grants of performance shares, the calculation of
payouts for the 2008 to 2010 performance period was determined
by our actual rank, as opposed to our percentile ranking,
relative to our peer group and the S&P MidCap 400 Index.
The Committee changed to a percentile ranking methodology
beginning in 2009 for ease of administration. In the past, when
companies have dropped out of our peer group or the S&P
MidCap 400 Index during a performance period, it has not always
been clear how best to adjust for such changes when using actual
rankings. In certain situations, such as with a bankruptcy, it
might be appropriate to assume poor performance and, therefore,
deem the companies to have performed at the bottom of the
rankings. However, in other situations, it may be less clear,
such as in the case of a merger or acquisition. Changing to
percentile rankings removes the ambiguity.
As discussed above, our actual TSR for the 2008 to 2010
performance period of 44.3% was ranked 12th out of an original
peer group comprised of 28 companies, and
105th in
the S&P Mid-Cap 400 Index, which produced a payout equal to
158% of each executives target award. Our executives
received shares equal to this percent of target,
32
as no discretion was used to increase or decrease the results
based on our relative TSR. Accordingly, the performance shares
earned by the Named Executive Officers for the 2008 to 2010
performance period were as follows (Mr. Richardson joined
the company in November 2009, and therefore did not receive a
performance share grant for the 2008 to 2010 performance period):
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2008-2010
Performance Shares
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Named Executive Officer:
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Target Award:
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Payout:
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Swidarski
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30,000
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47,400
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Richardson
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0
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0
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Chen
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6,000
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9,480
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Mayes
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6,000
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9,480
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Ducey
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6,000
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9,480
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RSUs. The award of RSUs is consistent with the
Committees objective to take a balanced approach to LTI by
providing for executive retention and to enhance
executives incentive for building shareholder value, as
well as rewarding sustained financial performance and stock
price appreciation. The expected value of an RSU at the time of
grant (based on our stock price) is used to determine the number
of RSUs awarded. The Committee then reviews and approves the RSU
grant recommendations developed by management, which are based
on the same principles used to develop stock option and
performance share grant recommendations.
From time to time, the Committee also provides special one-time
grants of RSUs to new executives, to current executives that
take on a new role or greatly expanded responsibilities, or to
ensure retention for a specified period of time. RSUs typically
vest three years after the date of grant and may include
performance features for early vesting. During 2010, the
Committee approved special one-time grants of 5,000 RSUs each to
Mr. Richardson, Mr. Chen, Mr. Mayes and
Mr. Ducey.
Grants of RSUs approved by the Committee to the Named Executive
Officers in 2010 were as follows:
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Named Executive Officer:
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RSUs Granted:
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One-Time RSUs Granted:
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Swidarski
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20,500
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0
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Richardson
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3,000
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5,000
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Chen
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2,500
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5,000
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Mayes
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2,500
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5,000
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Ducey
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2,500
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5,000
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2011 Pay
Actions and Grants to Named Executive Officers
Prior to filing this proxy statement for our Annual Meeting, the
Committee made its executive pay decisions for 2011. The actions
taken in 2011 below reflect the Committees continuing
commitment to implement
pay-for-performance
principles, while also recognizing the need to retain and reward
our key executives.
Summary
of 2011 Executive Pay Actions
Base Salary:
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Annual merit increases for all executives averaged 2.8%, and for
the Named Executive Officers (excluding Mr. Swidarski and
Mr. Ducey), 1.8%.
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Mr. Swidarski and Mr. Ducey received market
adjustments of 5% and 7.5%, respectively, to bring their base
salaries closer to median of our peer group.
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Annual
Cash Bonus Targets:
For
2011 cash bonuses payable in 2012, the Committee again set a
minimum non-GAAP EPS to fund awards under our cash bonus
plan, with payout again contingent upon a company goal based
upon non-GAAP EPS, certain key initiatives, and individual
goals.
2011-2013
Performance Shares:
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The performance criteria for the
2011-2013
performance period remain unchanged from the
2008-2010
performance period: our relative TSR against our current peer
group and the S&P MidCap 400 Index, equally weighted.
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The Committee will be making several revisions to the
2011-2013
performance share awards, including having the performance begin
on January 1, 2011 and continuing through December 31,
2013, where previously the performance period began and ended on
our earnings release dates in the relevant years, and also
raising the threshold relative TSR level for payout to the 35th
percentile of both our peer group and the S&P MidCap 400
Index, from the 20th percentile.
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33
The Committee also approved the following 2011 annual cash bonus
(at target) and LTI awards to our Named Executive Officers:
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Target
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2011-2013 Performance Share
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2011 Stock Option
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Payout Under
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Awards
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Grants
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2011 Annual
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Threshold
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Target
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Maximum
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Stock
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Exercise
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Cash Bonus Plan
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Payout
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Payout
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Payout
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Options
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Price
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2011 RSUs
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Name
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($)
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Grant Date
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(#)
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(#)
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(#)
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(#)
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($/Sh)
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(#)
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Thomas W. Swidarski
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840,000
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2/14/11
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10,875
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43,500
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87,000
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135,000
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33.75
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20,000
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Bradley C. Richardson
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374,663
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2/10/11
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2,250
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9,000
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18,000
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30,000
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32.67
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4,500
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James L.M. Chen
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277,007
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2/10/11
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1,375
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5,500
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11,000
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15,000
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32.67
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2,500
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George S. Mayes, Jr.
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263,998
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2/10/11
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1,625
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6,500
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13,000
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20,000
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32.67
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4,500
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Charles E. Ducey, Jr.
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288,242
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2/10/11
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2,250
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9,000
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18,000
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25,000
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32.67
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4,500
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All of these 2011 grants will be discussed in more detail in our
proxy statement of our 2012 annual meeting.
Personal
Benefits
Our executives, including the Named Executive Officers, are also
eligible to participate in the following additional pay elements
as part of their total pay package.
Benefits
We provide our executives with medical, dental, long-term
disability, life insurance and severance benefits under the same
programs used to provide benefits to all U.S. based
associates. Our executives may buy additional life insurance
coverage at their own expense, but not long-term disability. The
maximum life insurance coverage that may be bought by an
executive is $1.5 million. Our executives personal
benefits are not tied to individual or company performance and
changes to these benefits reflect the changes to the benefits of
all U.S. based associates.
Perquisites
We provide our executives with perquisites that are also not
tied to individual or company performance. The Committee
believes that these benefits are set at a reasonable level, are
highly valued by recipients, have limited cost, are part of a
competitive reward program and help in attracting and retaining
high quality executives. Perquisites received by executives
include the following, the values of which differ based on an
executives reporting level:
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Company car or car allowance, including a repair and maintenance
allowance, and insurance allowance. This perquisite is being
phased out except for a limited number of grandfathered
positions, which include each of the Named Executive Officers.
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Country club memberships, which are anticipated to be used for
business as well as personal purposes. As of December 2008, this
perquisite was discontinued for all of our executives, except
our CEO, as it was felt that he, more so than our other
executives, would benefit from the business development and
networking opportunities provided by his club memberships.
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Reimbursement for financial planning services to assist
executives in managing the rewards earned under our programs.
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A complete annual physical exam (assessment of overall health,
screening and risk reviews for chronic diseases, exercise and
dietary analysis, and other specialty consultations), which
helps protect in small measure the investment we make in these
key individuals.
|
The Committee periodically reviews our practices in this area
and makes any necessary adjustments based on competitive
practices, consistency with our total pay philosophy and
objectives, and cost to provide these personal benefits. As a
result of the Committees review, beginning in 2008, we no
longer provide tax
gross-ups in
connection with any executive perquisites. The trend in our peer
group and in the market is to discontinue the practice of
providing tax
gross-ups in
connection with executive perquisites and, further, providing
tax
gross-ups on
perquisites is not consistent with our global cost reduction
efforts.
34
Deferred
Compensation
Our executives, including the Named Executive Officers, may
elect to defer receipt of annual cash bonuses and performance
shares pursuant to our Deferred Incentive Compensation Plan.
Current investment choices under the plan for cash deferrals
(cash bonuses and dividends on deferred performance shares)
mirror those in our 401(k) plan, except it does not include our
common shares. Our deferred compensation plan does not provide
participants with additional pay, but merely provides a tax
deferred investment vehicle. Moreover, we do not guarantee any
specific rate of return and do not contribute to the return that
may be earned.
Retirement
We also maintain qualified and non-qualified retirement
programs. Our executives, including the Named Executive
Officers, participate in our qualified defined benefit (pension)
and defined contribution (401(k)) plans on the same terms as all
U.S. based associates. Under our 401(k) plan, for
executives hired prior to July 1, 2003, we historically
matched 60% of the first 3% of pay that was contributed by the
executive to the plan, and 40% of the next 3% of pay
contributed. For executives hired on or after such date, we
historically matched 100% of the first 3% of pay that was
contributed by the executive to the plan, and 60% of the next 3%
of pay contributed. However, as a result of the global economic
downturn beginning in late 2008, in early 2009 we discontinued
our 401(k) match for all associates hired prior to July 1,
2003, and reduced our 401(k) match for all associates hired
after July 1, 2003 to 60% of the first 3% of pay
contributed by the associate. Beginning in January 2011, we have
enhanced our 401(k) match as follows: for executives hired prior
to July 1, 2003, we will match 25% of the first 6% of pay
contributed, and for executives hired on or after such date, we
will match 55% of the first 6% of pay contributed.
We also have five non-qualified supplemental retirement plans:
the Supplemental Employee Retirement Plan I, or
SERP I, the Pension Supplemental Executive Retirement Plan,
or Pension SERP, the Pension Restoration Supplemental Executive
Retirement Plan, or Pension Restoration SERP, the 401(k)
Restoration Supplemental Executive Retirement Plan, or 401(k)
Restoration SERP, and the 401(k) Supplemental Executive
Retirement Plan, or 401(k) SERP. None of the Named Executive
Officers participate in the SERP I, and the SERP I is now
closed to new participants.
These plans are described in detail below under 2010
Pension Benefits.
Participation in the plans is limited to executive officers in
positions that help develop, implement and modify our long-term
strategic plan, as nominated by the CEO and approved by the
Committee.
Mr. Swidarski and Mr. Ducey participate in the Pension
SERP, Pension Restoration SERP and the 401(k) Restoration SERP;
however, any benefits accrued under the Restoration SERPs offset
benefits accrued under the Pension SERP to avoid duplication of
benefits provided. Mr. Richardson and Mr. Mayes
participate in the 401(k) Restoration SERP and the 401(k) SERP.
Change-in-Control
Benefits
We maintain
change-in-control
agreements for our executive officers, including the Named
Executive Officers, that provide our executives with the
potential for continued employment for three years following a
change-in-control.
As a result, these agreements help retain these executives and
provide for management continuity in the event of an actual or
threatened
change-in-control
of the company. They also help ensure that our executives
interests remain aligned with shareholders interests
during a time when their continued employment may be in
jeopardy. Finally, they provide some level of income continuity
should an executives employment be terminated without
cause.
The agreements provide:
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Severance of three times salary for the CEO and two times salary
for the other Named Executive Officers and other executives.
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One year of continued participation in employee retirement
income, health and welfare benefit plans, including all
executive perquisites.
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One year of additional service for determining the
executives non-qualified retirement benefits.
|
In addition, the agreements provide a tax
gross-up for
any excise tax imposed under Section 280G of the Internal
Revenue Code, covering severance amounts payable under any other
agreement, plan or arrangement. The Committee feels that this
tax gross-up
is reasonable to ensure that our executives are kept
whole in the event of a
change-in-control
so that the individual receives the same after-tax amount as he
or she would have received without the imposition of the excise
tax.
35
Change-in-control
benefits are only paid upon the occurrence of two events. First,
there must be a
change-in-control
of the company, as defined in the agreements. Second, an
executive must be terminated without cause or he or she must
terminate his or her own employment for good cause, as described
in the agreements. In this manner, benefits are only paid to
executives if they are adversely affected by a
change-in-control,
consistent with the agreements objectives.
The terms and conditions of these agreements are identical in
all material respects, except for the multiple of base salary
noted above. The Committee periodically reviews our policy with
respect to these
change-in-control
agreements, and engages its compensation consultant to provide a
competitive analysis of our practices. The Committee has
determined that this type of agreement is still a valued
component of overall compensation for purposes of attracting and
retaining quality executive officers. Based upon these reviews,
the Committee believes its
change-in-control
benefits, providing for payments of two and three times base
salary, as applicable, are below median levels for executives in
similar positions in our peer group and at other comparable
companies and, therefore, remained consistent with the
Committees philosophy relative to these types of awards.
As such, the Committee approved the continued award of these
agreements to new executives. The Committee does not take the
value of these agreements into consideration when making any
other compensation decisions.
Expatriate
Benefits
Executives sent on expatriate assignments receive payments to
cover housing, automobile and other expenses under our standard
expatriate policies. With the exception of Mr. Chen, who
was asked to relocate to China when he was hired by us, none of
the Named Executive Officers received expatriate benefits in
2010. Mr. Chens expatriate benefits are described in
more detail in footnote 5 to the 2010 Summary
Compensation Table below.
Employment
and Separation Agreements
Employment
Agreements
We typically enter into employment agreements only with the CEO,
and also the President when that title is held by someone other
than the CEO. Mr. Swidarskis employment agreement is
described below. Other than Mr. Swidarski, we have not
entered into any employment agreements with any of the other
Named Executive Officers.
When an employment agreement is deemed necessary, the Committee
usually models the agreement after prior employment agreements,
and makes adjustments as necessary given, among other factors, a
competitive analysis of the market for the position, our needs
and the relative experience level of the individual accepting
the position. These employment agreements may then go through a
negotiation process with the individual and his or her legal
counsel.
Mr. Swidarski. In April 2006, we entered into an
employment agreement with Mr. Swidarski, with a term of two
years and with automatic one-year renewals thereafter unless
either party notifies the other at least six months before the
scheduled expiration date that the term is not to renew.
Pursuant to his agreement, Mr. Swidarski was to receive a
base salary of $550,000 for the first year, with a cash bonus
opportunity up to 200% of base salary, as well as other
compensation. Further, Mr. Swidarski is entitled to a
monthly auto allowance up to $3,295, financial planning and tax
preparation services up to $20,000 annually, country club dues
and fees, and an annual physical examination. Mr. Swidarski
had previously been entitled to a tax
gross-up on
his auto allowance, but he agreed to the discontinuance of this
benefit in 2008.
In the event that Mr. Swidarski is terminated without
cause, he is entitled to receive severance payments, including:
a lump sum amount equal to two years base salary; a lump sum
amount equal to twice his target annual cash bonus for the year
in which termination occurs; a pro rata annual cash bonus for
the year in which termination occurs, but only to the extent an
annual cash bonus is paid to others for the year of termination;
and continued participation in our employee benefits plans for a
period of two years (not including any qualified or
non-qualified pension plan or 401(k) plan). Mr. Swidarski
is also subject to non-competition and non-solicitation
obligations for a period of two years following his termination
of employment, regardless of the circumstances surrounding such
termination. A copy of Mr. Swidarskis amended and
restated agreement was filed as Exhibit 10.28 to our Annual
Report on
Form 10-K
for the year ended December 31, 2008.
Separation
Agreements
We typically enter into separation agreements with our executive
officers upon their separation from service in order to
reinforce that individuals confidentiality,
non-competition and non-solicitation obligations. As with
36
employment agreements, the Committee usually models the
agreement after prior separation agreements, and makes
appropriate adjustments, taking into consideration the past
service of the individual, the reason for the separation and any
other factors the Committee deems relevant. These agreements are
only prepared at the time of an executives separation from
the company, and as such, do not affect the Committees
decisions on other compensation elements.
Other
Compensation Policies
Stock
Ownership Guidelines
We established stock ownership guidelines for our executives in
1996. Ownership guidelines reinforce the primary goals of our
LTI: to build stock ownership among our executives and ensure
their long-term economic interests are aligned with those of
other shareholders.
In 2007, we modified our ownership requirements, adopting fixed
share ownership guidelines instead of setting guidelines as a
percentage of salary, in order to:
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Provide shareholders and executives a clearer view on the level
of ownership required;
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Increase the financial flexibility our executives have in
meeting those requirements; and
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Maintain executives commitment to share ownership once
ownership targets are achieved.
|
The new levels of ownership set forth in these guidelines are
approximately the same as our prior ownership guidelines, which
were based on the executives salaries and our stock price
on October 5, 2006, and are as follows:
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Chief Executive Officer: 130,000 shares;
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President and Chief Operating Officer: 100,000 shares;
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Executive and Senior Vice Presidents: 50,000 shares;
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Vice Presidents and Group Vice Presidents:
25,000 shares; and
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Other Senior Management: 15,000 shares.
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In addition, until guidelines are met, our executives must hold
at least 80% of the net shares of stock received from any
equity-based awards, after deductions for taxes and exercise
costs. Once the guidelines are met, our executives are required
to hold at least 40% of the net shares of stock received from
any equity-based awards, after such deductions.
In determining an executives stock holdings, we count the
shares directly owned by the executive, including unvested
restricted shares and shares deferred pursuant to our deferred
compensation program, as well as the following stock
equivalents: deferred shares, RSUs and the potential after-tax
shares owned through the executives 401(k) savings plan
account. Outstanding options and unearned performance shares do
not count toward the executives stock ownership guidelines.
The stock holdings of the Named Executive Officers are set forth
above under Security Ownership of Directors and
Management.
The Committee reviews managements stock holdings annually
to monitor progress toward the stock ownership guidelines.
However, we do not impose any penalties on executives who fail
to meet the stock ownership guidelines. This is because the
guidelines mandate some level of stock ownership whenever an
executive would realize any value from an equity-based award.
Moreover, we do not allow executives to hedge the economic risk
associated with stock ownership.
Clawback
Policy
In addition to any other rights or remedies legally available to
us, all of our equity plans include provisions that allow us to
cancel awards or claw back any shares received
pursuant to awards or the exercise of stock options for certain
specified conduct that is deemed detrimental to the company. To
the extent that an executive has already received value for such
awards, these provisions also allow us to seek reimbursement of
such value directly from the executive or through the
garnishment of salary or cash bonus.
Examples of such detrimental conduct include:
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Engaging, directly or indirectly, in any activity in competition
with us, in any product, service or business activity for which
the executive had any direct responsibility or direct
involvement during the two previous years;
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37
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Soliciting one of our employees to terminate his or her
employment with us;
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Unauthorized disclosure of confidential, proprietary or trade
secret information obtained during employment with us;
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Failure to promptly disclose and assign any interest in any
invention or idea conceived during the executives
employment and related to any of our actual or anticipated
business, research or development work; and
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Any activity that results in a termination for cause, including
gross neglect and any act of dishonesty constituting a felony.
|
In addition, as a result of the passage of the Dodd-Frank Wall
Street Reform and Consumer Protection Act in July 2010, the NYSE
will be amending its listing standards to require listed
companies to implement a mandatory clawback policy for the
recoupment from current or former executives of any financial
performance-based incentive compensation paid during a
three-year look-back period, after a company restates financial
results due to a material error. The effective date of this
mandatory clawback policy requirement has been delayed in order
for the SEC to better articulate the scope and demands of the
clawback policy. Accordingly, the Committee has delayed the
implementation of a mandatory policy until more detailed rules
have been issued by the SEC.
Company-Imposed
Black-Out Periods
Any time one of our executives is in possession of material
non-public information, he or she is prohibited from trading in
our stock. Apart from these trading restrictions, we also impose
routine black-out periods that prohibit executives, including
the Named Executive Officers, from trading during the period
that begins two weeks prior to the end of each quarter and
extends through the first business day following our next
scheduled quarterly earnings release. These self-imposed
black-out periods are an example of good corporate governance
and help to protect both us and the individual from allegations
of insider trading violations.
However, our black-out policy was not intended to penalize
employees for this type of positive corporate behavior, and in
the past the Committee has approved a cash distribution to
employees, including Named Executive Officers, who were barred
from exercising stock options prior to their expiration due to
extended company-imposed black-out periods. In 2010, however,
none of the Named Executive Officers received any such cash
distribution as a result of expiring stock options.
Limitations
on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code generally
limits the tax deductibility of compensation paid by a public
company to its CEO and certain other highly compensated
executive officers to $1 million in the year the
compensation becomes taxable to the executive. There is an
exception to the limit on deductibility for performance-based
compensation that meets certain requirements.
In order to qualify as performance-based compensation, our
compensation plans must meet certain requirements, including
shareholder approval. We have taken steps intended to ensure we
are not adversely affected by Section 162(m). To that end,
our annual bonuses, grants of performance shares and awards of
stock options are designed to meet the sections
deductibility requirements. Nevertheless, the Committee also
believes it must maintain flexibility to take actions it deems
to be in our best interests, but may not qualify for tax
deductibility under Section 162(m).
Base salaries and grants of restricted stock and RSUs do not
qualify as performance-based compensation and would not be
excluded from the limitation on deductibility. As a result, we
have a policy pursuant to which certain executives have entered
into agreements to automatically defer amounts affected by the
$1 million limitation until the time when that limitation
no longer applies.
38
EXECUTIVE
COMPENSATION
The table below summarizes the total compensation earned by each
of our Named Executive Officers for the fiscal years ended
December 31, 2010, 2009 and 2008. The amounts shown include
compensation for services in all capacities that were provided
to us.
2010
Summary Compensation Table
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Change in
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Pension Value
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and Non-
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qualified
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Non-Equity
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Deferred
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Name and Principal
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Salary
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Bonus
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Awards 1
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Awards 2
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Compensation
3
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Earnings
4
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Compensation
5
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Total
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Position
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Year
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($)
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($)
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($)
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($)
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($)
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($)
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($)
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($)
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Thomas W. Swidarski
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2010
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800,000
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0
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1,756,440
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1,222,725
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800,000
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787,477
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164,603
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5,531,245
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President and Chief
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2009
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750,000
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0
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1,158,000
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1,177,440
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921,000
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474,000
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114,410
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4,594,850
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Executive Officer
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2008
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750,000
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0
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765,900
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860,700
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1,500,000
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658,000
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172,587
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4,707,187
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Bradley C. Richardson
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2010
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485,000
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0
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404,260
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239,750
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615,465
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0
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|
226,242
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1,970,717
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Executive Vice President and
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2009
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51,609
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60,625
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773,518
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269,397
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0
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0
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20,856
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1,176,005
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Chief Financial Officer
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2008
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-
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-
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-
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-
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-
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-
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|
-
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|
-
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James L.M. Chen
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2010
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369,342
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0
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362,440
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143,850
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155,678
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0
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284,852
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1,316,162
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Executive Vice President,
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2009
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340,248
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0
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173,700
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117,744
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244,821
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0
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724,820
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1,601,333
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International Operations
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2008
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328,742
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0
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|
344,655
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71,725
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486,538
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0
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203,869
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1,435,529
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George S. Mayes, Jr.
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2010
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343,412
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0
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362,440
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143,850
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404,368
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0
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120,631
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1,374,701
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Executive Vice President,
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2009
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329,277
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0
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173,700
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117,744
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270,776
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0
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188,333
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1,079,830
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Global Operations
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2008
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300,481
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0
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153,180
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71,725
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444,712
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0
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|
103,489
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1,073,587
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Charles E. Ducey, Jr.
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2010
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357,509
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0
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362,440
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143,850
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376,253
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|
493,583
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54,958
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1,788,593
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Executive Vice President,
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2009
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308,706
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0
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173,700
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117,744
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233,421
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229,000
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40,011
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1,102,582
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North America Operations
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2008
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-
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-
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-
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-
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-
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-
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-
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-
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1 |
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For 2010, this column represents
the aggregate grant date fair value, computed in accordance with
FASB ASC Topic 718, for performance shares and RSUs awarded to
the Named Executive Officers in 2010. For more information
regarding 2010 awards, see the 2010 Grants of
Plan-Based Awards Table below. Pursuant to SEC rules,
the amounts shown exclude the impact of estimated forfeitures
related to service-based vesting conditions. For the performance
shares, such amounts are based on the probable outcome of the
relevant performance conditions as of the grant date. The
maximum number of performance shares that may be earned is also
reflected below under the 2010 Grants of Plan-Based
Awards Table, the grant date fair value of which would
be: for Mr. Swidarski, $2,369,800; for Mr. Richardson,
$362,440; for Mr. Chen, $306,680; for Mr. Mayes,
$306,680; and for Mr. Ducey, $306,680. The specific terms
of the performance shares and RSUs are discussed in more detail
in Compensation Discussion and Analysis.
These amounts reflect the grant date fair value for these
awards, and do not necessarily correspond to the actual value
that will be realized by the Named Executive Officers.
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2 |
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For 2010, this column represents
the aggregate grant date fair value, computed in accordance with
FASB ASC Topic 718, for options awarded to the Named Executive
Officers in 2010. For more information regarding 2010 grants,
see the 2010 Grants of Plan-Based Awards
Table below. Pursuant to SEC rules, the amounts shown
exclude the impact of estimated forfeitures related to
service-based vesting conditions. The assumptions used in
calculating the fair value of these stock options can be found
under Note 3 to the Consolidated Financial Statements in
our Annual Report on
Form 10-K
for the year ended December 31, 2010. The specific terms of
the stock options are discussed in more detail above under
Compensation Discussion and Analysis. These
amounts reflect the grant date fair value for these awards, and
do not necessarily correspond to the actual value that will be
realized by the Named Executive Officers.
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3 |
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For 2010, this column reflects
amounts earned by the Named Executive Officers under our Cash
Bonus Plan for the 2010 fiscal year, but that were not actually
paid out until February 2011. For a more detailed description of
the related performance measures for the Cash Bonus Plan, see
above under Compensation Discussion and
Analysis.
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4 |
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For 2010, these amounts shown are
the difference between the value of pension benefits earned as
of December 31, 2010 based on a 5.83% discount rate and the
RP-2000 Combined Healthy Mortality Table with mortality
improvement to December 31, 2010 based on Scale AA and the
value of pension benefits earned as of December 31, 2009
based on a 6.33% discount rate and the RP-2000 Mortality Table
with no mortality improvement. Further, the values were
determined assuming the probability is nil that the Named
Executive Officer will terminate, retire, die or become disabled
before normal retirement date. There was no above-market or
preferential interest earned by any Named Executive Officer in
2010 on non-qualified deferred compensation. The benefit values
for Mr. Swidarski and Mr. Ducey reflect their
participation in the Qualified Retirement Plan, Pension SERP and
Pension Restoration SERP based upon 14 and 32 years of
service, respectively. See the 2010 Pension Benefits
Table below.
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5 |
|
For 2010, the amounts reported for
All Other Compensation consist of amounts
provided to the Named Executive Officers as outlined in the
table below, with respect to (a) the use of an automobile
or cash in lieu thereof (for Mr. Chen, this amount includes
the cost of a driver), (b) club memberships for
Mr. Swidarski, (c) the dollar value of insurance
premiums paid by us for the benefit of the executive,
(d) amounts
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39
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contributed for the executive by us
under our 401(k) plan and any non-qualified defined contribution
plan, including taxes attributable to such non-qualified defined
contribution plan, for which the executive is a participant,
(e) financial planning services/tax assistance,
(f) dividend equivalents paid on unvested RSUs, and
(g) other. For the Named Executive Officers, excluding
Mr. Chen, the amount in column (g) reflects the
approximate value of an annual physical exam provided to our
executives and other miscellaneous expenses. For
Mr. Richardson, the amount in column (g) also reflects
relocation expenses totaling $48,258 for his move from Wisconsin
to Northeast Ohio following his appointment. For Mr. Chen,
the amount in column (g) includes the following expatriate
cost of living allowances for the location of his residence in
Shanghai, China: a housing allowance in the amount of $111,000;
a goods and services allowance in the amount of $37,000; pension
payments in the amount of $55,401; and miscellaneous other
benefits totaling $45,746.
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All Other Compensation
|
|
|
|
($)
|
Names
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(a)
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|
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(b)
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(c)
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(d)
|
|
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(e)
|
|
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(f)
|
|
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(g)
|
|
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|
|
|
|
|
|
|
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Thomas W. Swidarski
|
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23,400
|
|
|
26,435
|
|
|
2,346
|
|
|
16,462
|
|
|
18,750
|
|
|
65,340
|
|
|
11,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Bradley C. Richardson
|
|
|
15,042
|
|
|
0
|
|
|
1,870
|
|
|
114,166
|
|
|
10,008
|
|
|
34,398
|
|
|
50,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James L.M. Chen
|
|
|
18,492
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
17,213
|
|
|
249,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George S. Mayes, Jr.
|
|
|
14,256
|
|
|
0
|
|
|
1,253
|
|
|
79,662
|
|
|
10,000
|
|
|
12,960
|
|
|
2,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles E. Ducey, Jr.
|
|
|
14,256
|
|
|
0
|
|
|
1,212
|
|
|
5,854
|
|
|
10,000
|
|
|
12,960
|
|
|
10,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
Grants of Plan-Based Awards Table
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Option
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
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|
|
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All Other Stock
|
|
|
Awards: Number
|
|
|
Exercise or
|
|
|
Fair Value of
|
|
|
|
|
|
|
Estimated Possible Payouts Under
|
|
|
Estimated Future Payouts Under
|
|
|
Awards: Number
|
|
|
of Securities
|
|
|
Base Price of
|
|
|
Stock and
|
|
|
|
|
|
|
Non-Equity Incentive Plan
Awards 1
|
|
|
Equity Incentive Plan
Awards 2
|
|
|
of Shares of Stock
|
|
|
Underlying
|
|
|
Option
|
|
|
Option
|
|
|
|
|
|
|
Thresh.
|
|
|
Target
|
|
|
Max.
|
|
|
Thresh.
|
|
|
Target
|
|
|
Max.
|
|
|
or
Units 3
|
|
|
Options 4
|
|
|
Awards
|
|
|
Awards 5
|
Name
|
|
|
Grant Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/Sh)
|
|
|
($)
|
Thomas W. Swidarski
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
127,500
|
|
|
27.88
|
|
|
1,222,725
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
20,500
|
|
|
-
|
|
|
-
|
|
|
571,540
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
10,625
|
|
|
42,500
|
|
|
85,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,184,900
|
|
|
|
2/11/2010
|
|
|
320,000
|
|
|
800,000
|
|
|
1,600,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley C. Richardson
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
|
27.88
|
|
|
239,750
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8,000
|
|
|
-
|
|
|
-
|
|
|
223,040
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,625
|
|
|
6,500
|
|
|
13,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
181,220
|
|
|
|
2/11/2010
|
|
|
145,500
|
|
|
363,750
|
|
|
727,500
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James L.M. Chen
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
15,000
|
|
|
27.88
|
|
|
143,850
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,500
|
|
|
-
|
|
|
-
|
|
|
209,100
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,375
|
|
|
5,500
|
|
|
11,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
153,340
|
|
|
|
2/11/2010
|
|
|
110,803
|
|
|
277,007
|
|
|
554,013
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George S. Mayes, Jr.
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
15,000
|
|
|
27.88
|
|
|
143,850
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,500
|
|
|
-
|
|
|
-
|
|
|
209,100
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,375
|
|
|
5,500
|
|
|
11,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
153,340
|
|
|
|
2/11/2010
|
|
|
103,024
|
|
|
257,559
|
|
|
515,118
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles E. Ducey, Jr.
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
15,000
|
|
|
27.88
|
|
|
143,850
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,500
|
|
|
-
|
|
|
-
|
|
|
209,100
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,375
|
|
|
5,500
|
|
|
11,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
153,340
|
|
|
|
2/11/2010
|
|
|
107,253
|
|
|
268,132
|
|
|
536,264
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
These columns present information
about the potential payout under our Cash Bonus Plan for fiscal
year 2010. The actual amount paid in February 2011 is reflected
above in the 2010 Summary Compensation Table
under the column Non-Equity Incentive Plan
Compensation. For a more detailed description of the
related performance measures for our Cash Bonus Plan, see above
under Compensation Discussion and Analysis.
|
|
2 |
|
These columns present information
about performance shares awarded during 2010 pursuant to the
1991 Plan. The performance measures will be calculated over the
three-year period beginning on February 3, 2010 through the
day of our year-end earnings release in January 2013. No amount
is payable unless the threshold performance is exceeded. The
maximum award amount, which can be up to 200% of the target
amount, will be earned only if we achieve maximum performance.
For a more detailed description of the performance shares and
the related performance measures, see above under
Compensation Discussion and Analysis.
|
|
3 |
|
This column presents information
about RSUs awarded during 2010 pursuant to the 1991 Plan. For a
more detailed description of the RSUs, see above under
Compensation Discussion and Analysis.
|
|
4 |
|
All stock option grants were new
and not granted in connection with an option re-pricing
transaction, and the terms of the stock options were not
materially modified in 2010. For a more detailed description of
the stock options, see above under Compensation
Discussion and Analysis.
|
|
5 |
|
The value of performance shares and
RSUs was calculated using the closing market price of the shares
on the grant date of $27.88, and reflects the total amount that
we would expect to expense in our financial statements over the
awards three-year performance period, based on the
probable outcome of the performance conditions, excluding the
effect of estimated forfeitures, in accordance with FASB ASC
Topic 718. For stock options, the fair value is calculated using
the Black-Scholes value on the grant date of $9.59, calculated
in accordance with FASB ASC Topic 718. The assumptions used in
calculating the fair value of these stock options can be found
under Note 3 to the Consolidated Financial Statements in
our Annual Report on
Form 10-K
for the year ended December 31, 2010.
|
40
Outstanding
Equity Awards at 2010 Fiscal Year-End
The following table provides information relating to exercisable
and unexercisable stock options as of December 31, 2010 for
the Named Executive Officers. In addition, the following table
provides information relating to grants of RSUs and performance
shares to the Named Executive Officers that have not yet vested
as of December 31, 2010. No stock appreciation rights were
outstanding as of December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
Awards1
|
|
|
Stock Awards
|
|
|
|
|
|
|
Number of Securities Underlying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unexercised Options
|
|
|
Equity Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: Number of
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
Market Value of
|
|
|
Number of Unearned
|
|
|
Market or Payout Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Underlying
|
|
|
|
|
|
|
|
|
or Units of Stock
|
|
|
Shares or Units of
|
|
|
Shares, Units or Other
|
|
|
of Unearned Shares,
|
|
|
|
|
|
|
|
|
|
|
|
|
Unexercised Unearned
|
|
|
Option Exercise
|
|
|
|
|
|
That Have Not
|
|
|
Stock That Have
|
|
|
Rights That Have Not
|
|
|
Units or Other Rights
|
|
|
|
Grant Date of
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Options
|
|
|
Price
|
|
|
Option Expiration
|
|
|
Vested2
|
|
|
Not
Vested3
|
|
|
Vested4
|
|
|
That Have Not
Vested3
|
Name
|
|
|
Award
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
Thomas W. Swidarski
|
|
|
2/7/2001
|
|
|
8,000
|
|
|
0
|
|
|
-
|
|
|
28.69
|
|
|
2/6/2011
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/6/2002
|
|
|
15,000
|
|
|
0
|
|
|
-
|
|
|
36.59
|
|
|
2/5/2012
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/5/2003
|
|
|
20,000
|
|
|
0
|
|
|
-
|
|
|
36.31
|
|
|
2/4/2013
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2004
|
|
|
25,000
|
|
|
0
|
|
|
-
|
|
|
53.10
|
|
|
2/10/2014
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/10/2005
|
|
|
22,900
|
|
|
0
|
|
|
-
|
|
|
55.23
|
|
|
2/9/2015
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
12/12/2005
|
|
|
75,000
|
|
|
75,000
|
|
|
-
|
|
|
37.87
|
|
|
12/11/2012
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/13/2008
|
|
|
60,000
|
|
|
60,000
|
|
|
-
|
|
|
25.53
|
|
|
2/12/2018
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2009
|
|
|
37,500
|
|
|
112,500
|
|
|
-
|
|
|
24.79
|
|
|
2/10/2019
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2010
|
|
|
0
|
|
|
127,500
|
|
|
-
|
|
|
27.88
|
|
|
2/10/2020
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/14/2007
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
40,000
|
|
|
1,282,000
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
20,500
|
|
|
657,025
|
|
|
-
|
|
|
-
|
|
|
|
2/13/2008
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
60,000
|
|
|
1,923,000
|
|
|
|
3/26/2009
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
50,000
|
|
|
1,602,500
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
42,500
|
|
|
1,362,125
|
Bradley C. Richardson
|
|
|
11/23/2009
|
|
|
7,500
|
|
|
22,500
|
|
|
-
|
|
|
26.43
|
|
|
11/22/2019
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2010
|
|
|
0
|
|
|
25,000
|
|
|
-
|
|
|
27.88
|
|
|
2/10/2020
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
11/23/2009
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
23,850
|
|
|
764,393
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8,000
|
|
|
256,400
|
|
|
-
|
|
|
-
|
|
|
|
11/23/2009
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,625
|
|
|
180,281
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
6,500
|
|
|
208,325
|
James L.M. Chen
|
|
|
2/6/2002
|
|
|
5,000
|
|
|
0
|
|
|
-
|
|
|
36.59
|
|
|
2/5/2012
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/5/2003
|
|
|
7,500
|
|
|
0
|
|
|
-
|
|
|
36.31
|
|
|
2/4/2013
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2004
|
|
|
8,000
|
|
|
0
|
|
|
-
|
|
|
53.10
|
|
|
2/10/2014
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/10/2005
|
|
|
8,000
|
|
|
0
|
|
|
-
|
|
|
55.23
|
|
|
2/9/2015
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/20/2006
|
|
|
8,000
|
|
|
0
|
|
|
-
|
|
|
39.43
|
|
|
2/19/2016
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/14/2007
|
|
|
7,125
|
|
|
2,375
|
|
|
-
|
|
|
47.27
|
|
|
2/13/2017
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/13/2008
|
|
|
5,000
|
|
|
5,000
|
|
|
-
|
|
|
25.53
|
|
|
2/12/2018
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2009
|
|
|
3,750
|
|
|
11,250
|
|
|
-
|
|
|
24.79
|
|
|
2/10/2019
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2010
|
|
|
0
|
|
|
15,000
|
|
|
-
|
|
|
27.88
|
|
|
2/10/2020
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/20/2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
750
|
|
|
24,038
|
|
|
-
|
|
|
-
|
|
|
|
2/13/2008
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,500
|
|
|
240,375
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,500
|
|
|
240,375
|
|
|
-
|
|
|
-
|
|
|
|
2/13/2008
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12,000
|
|
|
384,600
|
|
|
|
3/26/2009
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,500
|
|
|
240,375
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,500
|
|
|
176,275
|
George S. Mayes,
Jr.
|
|
|
2/10/2005
|
|
|
3,000
|
|
|
0
|
|
|
-
|
|
|
55.23
|
|
|
2/9/2015
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/20/2006
|
|
|
8,000
|
|
|
0
|
|
|
-
|
|
|
39.43
|
|
|
2/19/2016
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/14/2007
|
|
|
7,125
|
|
|
2,375
|
|
|
-
|
|
|
47.27
|
|
|
2/13/2017
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/13/2008
|
|
|
5,000
|
|
|
5,000
|
|
|
-
|
|
|
25.53
|
|
|
2/12/2018
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2009
|
|
|
3,750
|
|
|
11,250
|
|
|
-
|
|
|
24.79
|
|
|
2/10/2019
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2010
|
|
|
0
|
|
|
15,000
|
|
|
-
|
|
|
27.88
|
|
|
2/10/2020
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/20/2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,500
|
|
|
144,225
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,500
|
|
|
240,375
|
|
|
-
|
|
|
-
|
|
|
|
2/13/2008
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12,000
|
|
|
384,600
|
|
|
|
3/26/2009
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,500
|
|
|
240,375
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,500
|
|
|
176,275
|
Charles E. Ducey,
Jr.
|
|
|
2/6/2002
|
|
|
6,400
|
|
|
0
|
|
|
-
|
|
|
36.59
|
|
|
2/5/2012
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/5/2003
|
|
|
8,000
|
|
|
0
|
|
|
-
|
|
|
36.31
|
|
|
2/4/2013
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2004
|
|
|
5,000
|
|
|
0
|
|
|
-
|
|
|
53.10
|
|
|
2/10/2014
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/10/2005
|
|
|
4,600
|
|
|
0
|
|
|
-
|
|
|
55.23
|
|
|
2/9/2015
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/20/2006
|
|
|
10,000
|
|
|
0
|
|
|
-
|
|
|
39.43
|
|
|
2/19/2016
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/14/2007
|
|
|
7,125
|
|
|
2,375
|
|
|
-
|
|
|
47.27
|
|
|
2/13/2017
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/13/2008
|
|
|
5,000
|
|
|
5,000
|
|
|
-
|
|
|
25.53
|
|
|
2/12/2018
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2009
|
|
|
3,750
|
|
|
11,250
|
|
|
-
|
|
|
24.79
|
|
|
2/10/2019
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2010
|
|
|
0
|
|
|
15,000
|
|
|
-
|
|
|
27.88
|
|
|
2/10/2020
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2/20/2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,500
|
|
|
144,225
|
|
|
-
|
|
|
-
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,500
|
|
|
240,375
|
|
|
-
|
|
|
-
|
|
|
|
2/13/2008
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12,000
|
|
|
384,600
|
|
|
|
3/26/2009
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,500
|
|
|
240,375
|
|
|
|
2/11/2010
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,500
|
|
|
176,275
|
|
41
|
|
|
1 |
|
With the exception of
Mr. Swidarskis December 12, 2005 award of
150,000 stock options, all of the stock options outstanding at
2010 fiscal year-end vest ratably over a four-year period
beginning on the first anniversary of the date of grant.
Mr. Swidarskis award of 150,000 stock options has a
seven-year cliff vest; however, pursuant to the terms of the
option grants, one-half of this award vested on August 7,
2007, when our stock price reached $50 per share for 20
consecutive trading days. The remainder of this award may vest
early if our stock price reaches $60 per share for 20
consecutive trading days.
|
|
2 |
|
This column reflects unvested RSUs
and restricted shares granted to the Named Executive Officers
that had not yet vested as of December 31, 2010. Included
in this column are special grants of RSUs awarded to
Messrs. Chen, Mayes, and Ducey on February 20, 2006 of
1,500 RSUs, 9,000 RSUs, and 9,000 RSUs, respectively, with a
seven-year cliff vest; however, pursuant to the terms of the RSU
grants, one-half of these awards vested on August 7, 2007,
when our stock price reached $50 per share for 20 consecutive
trading days. The remainder of these special grants may vest
early if our stock price reaches $60 per share for 20
consecutive trading days. The remaining RSUs and restricted
shares included in this column have a three-year cliff vest.
|
|
3 |
|
The market value was calculated
using the closing price of our common shares of $32.05 as of
December 31, 2010.
|
|
4 |
|
This column reflects the probable
outcome, as of December 31, 2010, of performance shares
granted to the Named Executive Officer for the performance
periods 2008 to 2010, 2009 to 2011 and 2010 to 2012. For the
2008 to 2010 performance period, the current performance, as of
December 31, 2010, was between target and maximum and, as
such, pursuant to SEC rules, this column reflects the maximum
payout. For the 2009 to 2011 performance period, the current
performance, as of December 31, 2010, was between threshold
and target and, as such, pursuant to SEC rules, this column
reflects the target payout. For the 2010 to 2012 performance
period, the current performance, as of December 31, 2010,
was between threshold and target and, as such, pursuant to SEC
rules, this column reflects the target payout.
|
2010
Option Exercises and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value
|
|
|
Number of Shares
|
|
|
Value
|
|
|
|
Acquired on
|
|
|
Realized on
|
|
|
Acquired
|
|
|
Realized on
|
|
|
|
Exercise
|
|
|
Exercise
1
|
|
|
on Vesting
|
|
|
Vesting 2
|
Name
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
Thomas W. Swidarski
|
|
|
0
|
|
|
0
|
|
|
11,000
|
|
|
306,680
|
Bradley C. Richardson
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
James L.M. Chen
|
|
|
0
|
|
|
0
|
|
|
2,750
|
|
|
76,670
|
George S. Mayes, Jr.
|
|
|
0
|
|
|
0
|
|
|
2,750
|
|
|
76,670
|
Charles E. Ducey, Jr.
|
|
|
5,000
|
|
|
20,300
|
|
|
2,750
|
|
|
76,670
|
|
|
|
|
1 |
|
The value realized is calculated by
multiplying the number of stock options by the difference
between the market value of the underlying securities on the
date of exercise and the exercise price of the stock option. In
2010, Mr. Ducey exercised 5,000 stock options on
November 9, 2010, with a closing price of our common shares
on that date of $32.75 and an exercise price of $28.69.
|
|
2 |
|
The value realized is calculated
for RSUs, restricted shares and performance shares by
multiplying the number of shares of stock or units, as
applicable, by the market value of the underlying securities on
the vesting date. In 2010, Mr. Swidarski, Mr. Chen,
Mr. Mayes and Mr. Ducey received a payout of
performance shares on February 11, 2010, for the
2007 2009 performance period, with a closing price
of our common shares on that date of $27.88. The number of
shares actually received upon vesting may be less than the
number shown, due to shares being withheld for the payment of
applicable taxes.
|
2010
Pension Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years of
|
|
|
Present Value of
|
|
|
Payment During
|
|
|
|
|
|
|
Credited Service
|
|
|
Accumulated
Benefit1
|
|
|
Last Fiscal Year
|
Name
|
|
|
Plan Name
|
|
|
(#)
|
|
|
($)
|
|
|
($)
|
Thomas W. Swidarski
|
|
|
Qualified Plan
|
|
|
14.3333
|
|
|
214,656
|
|
|
-
|
|
|
|
Pension SERP
|
|
|
14.3333
|
|
|
960,956
|
|
|
-
|
|
|
|
Pension Restoration SERP
|
|
|
14.3333
|
|
|
1,033,865
|
|
|
-
|
Bradley C. Richardson
|
|
|
n/a
|
|
|
-
|
|
|
-
|
|
|
-
|
James L.M. Chen
|
|
|
n/a
|
|
|
-
|
|
|
-
|
|
|
-
|
George S. Mayes, Jr.
|
|
|
n/a
|
|
|
-
|
|
|
-
|
|
|
-
|
Charles E. Ducey, Jr.
|
|
|
Qualified Plan
|
|
|
32.1667
|
|
|
474,269
|
|
|
-
|
|
|
|
Pension SERP
|
|
|
32.1667
|
|
|
522,737
|
|
|
-
|
|
|
|
Pension Restoration SERP
|
|
|
32.1667
|
|
|
564,577
|
|
|
-
|
|
|
|
|
1 |
|
The values are determined based on
a 5.83% discount rate and the RP-2000 Combined Healthy Mortality
Table with projected mortality improvement to December 31,
2010 based on Scale AA and are calculated assuming that the
probability is nil that a Named Executive Officer terminates,
dies, retires or becomes disabled before normal retirement date.
|
42
Mr. Swidarski and Mr. Ducey participate in the
Diebold, Incorporated Retirement Plan for Salaried Employees, or
Qualified Retirement Plan, which provides funded, tax-qualified
benefits under the Internal Revenue Code to all salaried and
non-union hourly U.S. based employees who were hired before
July 1, 2003. This plan provides benefits that are limited
by Internal Revenue Code requirements applicable to all
tax-qualified pension plans. We also maintain three defined
benefit Supplemental Executive Retirement Plans, which provide
unfunded, non-qualified benefits to select executives. The
purpose of the SERPs is to provide additional benefits above
those provided under the Qualified Retirement Plan.
Mr. Swidarski and Mr. Ducey also participate in the
Pension Restoration SERP and the Pension SERP.
Qualified
Retirement Plan
The benefit provided under the Qualified Retirement Plan is
payable as a life annuity beginning at normal retirement age
(age 65). The benefit is determined based on the following
formula:
|
|
|
|
|
0.8% of final average compensation up to the Covered
Compensation level, plus
|
|
|
|
1.25% of final average compensation in excess of the Covered
Compensation level,
|
|
|
|
which sum is multiplied by years of service (subject to a
maximum of 30 years).
|
In addition, a benefit equal to $50.40 times the number of years
of service (subject to a maximum of 30 years) is added to
the amount determined above.
Final average compensation is an average of the five highest
consecutive full calendar years of salary and bonus out of the
last ten full calendar years, with each years compensation
held to a maximum of the IRS compensation limit for that year
($245,000 in 2010). The participants individual
Covered Compensation is as defined under the
Internal Revenue Code. The benefit is payable for the lifetime
of the participant, with alternative forms of payment available
to the participant with an actuarial reduction.
Participants may retire early if they are at least age 50
and the sum of their age plus service is at least 70, or at any
age with 30 years of service. Benefits may begin upon
retirement on an actuarially reduced basis. Participants with at
least 15 years of service who become disabled while
employed are eligible for an immediate unreduced benefit.
Participants terminating with at least five years of service are
entitled to a deferred vested benefit at age 65, or may
commence the benefit on an actuarially reduced basis when the
sum of their age plus service is at least 70.
Mr. Swidarski has additional annual benefits payable from
the Qualified Retirement Plan in the amount of $4,668, as a
result of a transfer of a portion of his Pension SERP benefits.
This amount is payable at the same time and in the same form as
those described below under the Pension SERP.
Pension
Restoration SERP
Benefits under the Pension Restoration SERP are determined using
the same formula as stated above for the Qualified Retirement
Plan except the IRS compensation limit is ignored. Net benefits
payable from the Pension Restoration SERP equal the difference
between the benefit determined using total pensionable pay,
ignoring qualified plan compensation limits, and the benefit
payable from the Qualified Retirement Plan. All other provisions
of the Pension Restoration SERP are identical to the Qualified
Retirement Plan. Mr. Swidarski and Mr. Ducey are the
only Named Executive Officers who are participants in the
Pension Restoration SERP.
Pension
SERP
The Pension SERP provides a supplemental monthly retirement
benefit in an amount such that a participants total
retirement benefit from the Qualified Retirement Plan, the
Pension Restoration SERP, the annuity equivalent of the
employer-provided balance in the 401(k) Restoration SERP and the
Pension SERP, plus one-half of the participants
anticipated Social Security benefit payable at age 65,
equals 50% (prorated for less than 25 years of service) of
the participants final average compensation received from
us during the highest five consecutive full calendar years of
the last ten full calendar years of employment. Compensation is
defined for this purpose as salary plus bonus accrued for each
such calendar year. The Pension SERP benefits are payable at
age 65 as a straight life annuity. Joint and survivor
options are available on an actuarially equivalent basis.
Benefits are available to participants retiring or terminating
employment with at least 10 years of service, and are
payable at the later of (1) attaining both the age of 50
and 70 points (determined by age plus years of service), or
(2) separation from
43
service (on a reduced basis if payments begin before
age 65). Participants who become disabled while employed
and have at least 15 years of service are eligible for an
immediate benefit.
Accrued benefits under the Pension SERP are fully vested in the
event of a change in control of the company. Mr. Swidarski
and Mr. Ducey are the only Named Executive Officers who are
participants in the Pension SERP.
Mr. Swidarski receives enhanced benefits such that he
accrues the full 50% target ratably over his entire service at
age 60.
Present
Value of Accumulated Benefits
The Present Value of Accumulated Benefits is the
single-sum value as of December 31, 2010, of the annual
pension benefit that was earned through that date payable under
a plan beginning at the Named Executive Officers normal
retirement age. The normal retirement age is defined as
age 65 for the Qualified Retirement Plan, Pension
Restoration SERP and Pension SERP. For Mr. Swidarski, a
portion of the Qualified Retirement Plan benefit is payable at
the same time and in the same form of payment as benefits in the
Pension SERP. We used certain assumptions to determine the
single-sum value of the annual benefit that is payable beginning
at normal retirement age. The key assumptions are as follows:
|
|
|
|
|
An interest rate of 5.83%, the FASB ASC 715 discount rate
as of December 31, 2010;
|
|
|
|
The RP-2000 Combined Healthy Mortality Tables for males and
females projected with mortality improvement to
December 31, 2010 using Scale AA;
|
|
|
|
A probability of 100% that benefits are paid as
annuities; and
|
|
|
|
No probability of termination, retirement, death, or disability
before normal retirement age.
|
Extra
Credited Service
Mr. Swidarski has been granted the ability to accrue, for
benefit calculation purposes only, 1.124 years of service
for each year of service until the full 50% target benefit in
the Pension SERP is accrued at age 60. We reserve the
discretion to provide such grants of extra service on a
case-by-case
basis. Factors that might warrant such a grant would include,
but not be limited by, the following: the recruitment of an
executive who is foregoing benefits under a prior
employers SERP or other non-qualified deferred
compensation plans or the provision for an executive who would
otherwise not qualify for a full accrual at the SERPs
normal retirement age of 65 because his or her years of service
are less than the required 25 years of service.
2010
Non-Qualified Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1992 Deferred Compensation Plan
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Aggregate Balance
|
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Earnings in
|
|
|
Withdrawals/
|
|
|
as of December 31,
|
|
|
|
in 2010
|
|
|
in 2010
|
|
|
2010 1
|
|
|
Distributions
|
|
|
2010 2
|
Name
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
Thomas W. Swidarski
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Bradley C. Richardson
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
James L.M. Chen
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
George S. Mayes, Jr.
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Charles E. Ducey, Jr.
|
|
|
0
|
|
|
0
|
|
|
2,592
|
|
|
0
|
|
|
43,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
This amount represents aggregate
earnings on cash deferrals, as well as dividends on deferred
common shares. This amount is not reflected above in the
2010 Summary Compensation Table as it is not
considered preferential or above-market earnings on deferred
compensation.
|
|
2 |
|
This column reflects the balance
of all cash deferrals, including dividends on deferred common
shares, and the aggregate earnings in 2010 on such cash
deferrals. As of December 31, 2010, the aggregate balance
of all cash deferrals for Mr. Ducey was $5,990. This column
also reflects the value of common shares deferred by
Mr. Ducey calculated using the closing price of the shares
of $32.05 as of December 31, 2010. The aggregate number of
common shares deferred by Mr. Ducey and reflected in this
column was 1,180 shares, with a value as of
December 31, 2010, of $37,819. No portion of this amount is
reflected in the All Other Compensation column of
the 2010 Summary Compensation Table and no
portion of this amount was previously reported in our Summary
Compensation Tables in prior years proxy statements.
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) Restoration SERP and 401(k) SERP
|
|
|
|
|
|
|
Executive
|
|
|
|
Registrant
|
|
|
|
Aggregate
|
|
|
|
Aggregate
|
|
|
|
Aggregate Balance
|
|
|
|
|
Contributions
|
|
|
|
Contributions
|
|
|
|
Earnings in
|
|
|
|
Withdrawals/
|
|
|
|
as of December 31,
|
|
|
|
|
in 2010
|
|
|
|
in 2010 1
|
|
|
|
2010 2
|
|
|
|
Distributions
|
|
|
|
2010 3
|
|
Name
|
|
|
($)
|
|
|
|
($)
|
|
|
|
($)
|
|
|
|
($)
|
|
|
|
($)
|
|
Thomas W. Swidarski
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
43,033
|
|
|
|
|
0
|
|
|
|
|
344,641
|
|
Bradley C. Richardson
|
|
|
|
0
|
|
|
|
|
109,756
|
|
|
|
|
2,014
|
|
|
|
|
0
|
|
|
|
|
125,915
|
|
James L.M. Chen
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
George S. Mayes, Jr.
|
|
|
|
0
|
|
|
|
|
74,778
|
|
|
|
|
43,037
|
|
|
|
|
0
|
|
|
|
|
409,106
|
|
Charles E. Ducey, Jr.
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
12,678
|
|
|
|
|
0
|
|
|
|
|
88,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
These amounts are included in the
All Other Compensation column of the 2010
Summary Compensation Table and include amounts
contributed in 2010, as well as amounts contributed in 2011 for
the 2010 plan year.
|
|
2 |
|
These amounts represent aggregate
earnings (or losses) on executive and registrant contributions.
These amounts are not reflected in the 2010 Summary
Compensation Table, as they are not considered
preferential or above-market earnings on deferred compensation.
|
|
3 |
|
This column reflects the balance of
all contributions and the aggregate earnings on such
contributions. No portion of this amount is reflected in the
All Other Compensation column or the
Salary column of the 2010 Summary
Compensation Table except current-year Registrant
Contributions and Executive Contributions, respectively.
|
Non-Qualified
Deferred Compensation Plans
Deferred
Incentive Compensation Plan
Pursuant to our 1992 Deferred Incentive Compensation Plan,
certain executives, including the Named Executive Officers, were
able to defer cash bonuses received under our Cash Bonus Plan
and performance share awards earned under the 1991 Plan.
Effective December 31, 2004, as a result of the passage by
Congress of the American Jobs Creation Act of 2004, we elected
to freeze the 1992 Deferred Incentive Compensation Plan and
closed the plan to future deferrals. Effective January 1,
2005, the Board approved the Deferred Incentive Compensation
Plan No. 2, which was substantially similar to the 1992
Deferred Incentive Compensation Plan in all material respects,
but was designed to be administered in accordance with
Section 409A of the Internal Revenue Code.
Under the Deferred Incentive Compensation Plan No. 2, an
executive may defer all or a portion of his or her Annual Cash
Bonus or performance share earnout. Deferral elections for cash
bonuses must be made prior to the end of the year preceding the
year in which such bonuses would be earned (and payable in the
following year). Deferral elections for performance shares must
be made at least six months prior to the end of the three-year
performance period specified in the grant. None of the Named
Executive Officers currently has any incentive compensation
deferred under the Deferred Incentive Compensation Plan
No. 2.
Deferrals of performance shares are treated as a line-item in
the executives deferred account with us; however, the
earnings on the performance shares (dividends and interest) are
invested in the same manner as deferrals of cash compensation.
The Vanguard Group administers our cash deferrals. As such, cash
deferrals are transferred to Vanguard on a quarterly basis, and
the executive may invest such cash deferrals in any funds
available under our 401(k) plan (except that the Vanguard Prime
Money Market Fund is not available in our 401(k) plan). The
table
45
below shows the funds available under the deferred compensation
plans and their annual rate of return for the year ended
December 31, 2010, as reported by Vanguard.
|
|
|
|
|
|
|
|
|
|
Name of Fund
|
|
|
Rate of Return
|
|
|
Name of Fund
|
|
|
Rate of Return
|
Vanguard Total Bond Market Index Fund
|
|
|
6.42%
|
|
|
Vanguard International Value Fund
|
|
|
7.31%
|
Loomis Sayles Bond Fund
|
|
|
13.58%
|
|
|
Vanguard Target Retirement Income
|
|
|
9.39%
|
Vanguard STAR Fund
|
|
|
11.70%
|
|
|
Vanguard Target Retirement 2005
|
|
|
9.71%
|
Vanguard Windsor II Fund
|
|
|
10.62%
|
|
|
Vanguard Target Retirement 2010
|
|
|
11.43%
|
Vanguard 500 Index Fund
|
|
|
14.91%
|
|
|
Vanguard Target Retirement 2015
|
|
|
12.47%
|
Vanguard U.S. Growth Fund
|
|
|
11.53%
|
|
|
Vanguard Target Retirement 2020
|
|
|
13.12%
|
Vanguard Prime Money Market Fund
|
|
|
0.06%
|
|
|
Vanguard Target Retirement 2025
|
|
|
13.84%
|
Vanguard Selected Value Fund
|
|
|
19.44%
|
|
|
Vanguard Target Retirement 2030
|
|
|
14.43%
|
Vanguard Mid-Cap Index Fund
|
|
|
25.46%
|
|
|
Vanguard Target Retirement 2035
|
|
|
15.14%
|
Loomis Sayles Small Cap Value Fund
|
|
|
25.07%
|
|
|
Vanguard Target Retirement 2040
|
|
|
15.17%
|
Vanguard Explorer Fund
|
|
|
27.43%
|
|
|
Vanguard Target Retirement 2045
|
|
|
15.19%
|
Vanguard International Growth Fund
|
|
|
15.66%
|
|
|
Vanguard Target Retirement 2050
|
|
|
15.20%
|
Oppenheimer Developing Markets Fund
|
|
|
26.98%
|
|
|
Diebold Company Stock
|
|
|
16.72%
|
|
|
|
|
|
|
|
|
|
|
Executives deferring under the Deferred Incentive Compensation
Plan No. 2 select their period of deferral and method of
payment at the time of making their deferral elections.
Executives may elect to defer their payments until a specified
date or until the date they cease to be an associate of the
company. Further, the executives may elect to receive their
distribution either as a lump sum or in approximately equal
quarterly installments, not to exceed 40 installments.
401(k)
Restoration SERP
The 401(k) Restoration SERP is designed to replace lost
retirement benefits due solely to IRS compensation limits.
Benefits under this plan are determined exactly as in our 401(k)
Plan except that compensation limits are ignored. Named
Executive Officers are permitted to elect to defer compensation
above the annual IRS limit and we provide a matching
contribution at the same rate as under the 401(k) Plan. Vanguard
administers the 401(k) Restoration SERP. Both the salary
deferrals and our matching contributions are transferred to
Vanguard and the executive may invest in any funds available
under our Deferred Incentive Compensation Plan.
401(k)
SERP
The 401(k) SERP is designed to provide supplemental retirement
benefits to executives hired after July 1, 2003, because
those executives are not eligible to participate in the
Qualified Retirement Plan and Pension SERP. Each year the
executive is provided a contribution based upon a points formula
(age plus service) as follows:
|
|
|
|
|
|
Points
|
|
|
Contribution Credit
|
|
Under 50
|
|
|
|
5%
|
|
50-59
|
|
|
|
10%
|
|
60-69
|
|
|
|
12.5%
|
|
70-79
|
|
|
|
15%
|
|
80 and over
|
|
|
|
20%
|
|
|
|
|
|
|
|
Vanguard administers the 401(k) SERP. Our contributions are
transferred to Vanguard and the executive may invest the
contributions in any investment funds available under our 401(k)
Restoration SERP. The 401(k) SERP includes the Vanguard PRIMECAP
Fund with a 2010 annual rate of return of 12.89%).
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The amount of compensation payable to each Named Executive
Officer upon voluntary or involuntary termination (with and
without cause), retirement, death, disability or in the event of
a
change-in-control
(with termination) is described qualitatively in the following
narrative and is shown quantitatively in the table below. The
amounts shown assume that such termination or
change-in-control
was effective as of December 31, 2010, and include amounts
earned through such time and are estimates of the amounts that
would be paid out to the executives
46
upon his or her termination or
change-in-control.
The actual amounts to be paid out can only be determined at the
time of each Named Executive Officers separation.
Payments
Made Upon Termination
Voluntary
or Involuntary With Cause
Whether a Named Executive Officers employment terminates
voluntarily or involuntarily with cause, he or she is only
entitled to base salary earned through the date of termination,
along with any deferred compensation earnings payable upon
separation from service and any benefits that have accrued under
our Qualified Retirement Plan, and any SERP or 401(k) plan
(except that no SERP benefits are payable in the event of
involuntary termination with cause). The Qualified Retirement
Plan benefit, under both termination scenarios, and the SERP
benefit, if termination is voluntary, is determined as described
in 2010 Pension Benefits above.
Involuntary
Without Cause
If, however, a Named Executive Officer is involuntarily
terminated without cause, in addition to the foregoing, he or
she is entitled to the following:
|
|
|
|
|
Separation payments and continued participation in our employee
health care plans pursuant to our Health Care Plan and
Separation Benefits Plan applicable to all
U.S.-based
employees, with the length of such benefits and payments ranging
from one to six months, depending upon the executives
years of service (and for Mr. Chen, such separation
payments as are required by applicable law);
|
|
|
|
Lapse of the restrictions on outstanding restricted
shares; and
|
|
|
|
A Qualified Retirement Plan benefit determined using the plan
provisions as described in 2010 Pension
Benefits above.
|
The Pension SERP, Pension Restoration SERP, 401(k) SERP and
401(k) Restoration SERP do not provide any additional benefits
upon an involuntary termination. The Named Executive Officer is
only entitled to a SERP benefit if he or she otherwise qualifies
for a normal, early or deferred vested SERP benefit at
termination.
Mr. Swidarski
Pursuant to Mr. Swidarskis employment agreement, in
the event of an involuntary termination without cause, in
addition to the benefits identified above, he is entitled to the
following:
|
|
|
|
|
A lump sum payment equal to 24 months base salary, as
in effect on the date of termination;
|
|
|
|
A pro-rata award under our Cash Bonus Plan, based upon the time
employed in the year of termination, to the extent such awards
are otherwise earned, payable when such awards are generally
paid to others;
|
|
|
|
A lump sum payment equal to twice the target bonus level for the
year in which termination occurs under our Cash Bonus Plan;
|
|
|
|
All outstanding unvested options immediately vest;
|
|
|
|
Pro-rata performance share earnouts, based upon the time
employed in the year of termination relative to the performance
period, to the extent such awards are earned, payable when such
awards are generally paid to others; and
|
|
|
|
Continued participation in all of our employee health and
welfare benefit plans for a period of 24 months (or the
date he receives equivalent coverage from a subsequent
employer), excluding perquisites and any qualified or
non-qualified pension or 401(k) plans.
|
Under his employment agreement, Mr. Swidarski is subject to
certain non-competition, non-solicitation and confidentiality
obligations for a period of two years following termination of
his employment.
Payments
Made Upon Retirement
In the event of the retirement of a Named Executive Officer at
or after the earliest voluntary retirement age, in addition to
the benefits identified above under Voluntary or
Involuntary With Cause and Involuntary
Without Cause, he or she is entitled to the following:
|
|
|
|
|
All outstanding unvested options awarded prior to 2007
immediately vest;
|
47
|
|
|
|
|
All outstanding unvested options awarded after 2006 immediately
vest if the Named Executive Officer had attained the age of 65
and completed five or more years of continuous employment;
|
|
|
|
All outstanding RSUs awarded prior to 2007 immediately vest and
become nonforfeitable;
|
|
|
|
All outstanding RSUs awarded after 2006 immediately vest and
become nonforfeitable if the Named Executive Officer had
attained the age of 65 and completed five or more years of
continuous employment;
|
|
|
|
All outstanding RSUs awarded after 2006 vest pro-rata based upon
the time employed in the year of termination relative to the
deferral period of the RSUs, if the sum of the Named Executive
Officers age and years of continuous employment equals or
exceeds 70; and
|
|
|
|
Pro-rata performance share earnouts, as described above.
|
Payments
Made Upon Death or Disability
In the event of the death or disability of a Named Executive
Officer, the Named Executive Officer or his or her estate or
beneficiaries would receive the same benefits indicated above
under Payments Made Upon Retirement, except
that all outstanding and unvested options and RSUs, regardless
of when awarded, would immediately vest and become
nonforfeitable. In addition, the Named Executive Officer or his
or her estate or beneficiaries would receive benefits under our
disability plan or payments under our group term life insurance
plan or any supplemental life insurance plan, as appropriate.
Named Executive Officers who die while actively employed are
eligible for surviving spouse benefits from the Qualified
Retirement Plan payable at the Named Executive Officers
normal retirement date (or on an actuarially reduced basis at an
early retirement date) if the Named Executive Officer had at
least five years of service. The benefit is equal to 50% of the
benefit payable if the Named Executive Officer terminated
employment on the date of his death, survived to the payment
date as elected by his or her spouse, elected the 50% joint and
survivor form of payment and died the next day. Benefits payable
to the surviving spouse upon death of the Named Executive
Officer from the Pension SERP and the Pension Restoration SERP
are payable at the later of the executives early
retirement date or date of death. For the Pension SERP, the
death benefit is equal to the benefit that would have been
payable to the Named Executive Officer if he or she terminated
employment on the date of death and survived to his or her first
payment date. Named Executive Officers must have ten years of
service at the time of death for death benefits to be payable
under the Pension SERP. For the Pension Restoration SERP, the
death benefit is equal to 50% of the benefit, actuarially
adjusted for the difference in age between the Named Executive
Officer and spouse, that would have been payable to the
executive if he or she terminated employment on the date of
death and survived to his or her first payment date. Named
Executive Officers must have five years of service at the time
of death for death benefits to be payable under the Pension
Restoration SERP. The 401(k) SERP and 401(k) Restoration SERP
pay a death benefit equal to the executives plan account
if the executive had 10 years of service and three years of
service, respectively.
Disability benefits are payable immediately on an unreduced
basis from the Qualified Retirement Plan based on service at the
date of disability if the Named Executive Officer had at least
15 years of service and was determined to be totally and
permanently disabled. Disability benefits under the Pension
SERP, Pension Restoration SERP, 401(k) Restoration SERP, and
401(k) SERP are payable immediately on an unreduced basis.
Mr. Swidarski
Pursuant to Mr. Swidarskis employment agreement, in
the event of his death, in addition to the benefits identified
above, he is entitled to the following:
|
|
|
|
|
Base salary through the end of the month in which death
occurs; and
|
|
|
|
A pro-rata award under our Annual Cash Bonus Plan, as described
above.
|
In the event of his permanent and total disability, in addition
to the benefits identified above, he would also be entitled to
the following:
|
|
|
|
|
Disability benefits in accordance with the long-term disability
program in effect for our senior executives, which in no event
will provide him with less than 60% of his base salary to
age 65;
|
|
|
|
Base salary through the end of the month in which disability
benefits commence;
|
48
|
|
|
|
|
A pro-rata award under our Annual Cash Bonus Plan, as described
above; and
|
|
|
|
Continued participation in our employee health and welfare
benefit plans for a period of 36 months, excluding
perquisites and any qualified or non-qualified pension or 401(k)
plans.
|
Payments
Made Upon a
Change-in-Control
or Termination Following a
Change-in-Control
In the event of a
change-in-control,
pursuant to the terms of the applicable equity compensation
agreements, each Named Executive Officer is automatically
entitled to the following benefits:
|
|
|
|
|
Lapse of all restrictions on outstanding restricted shares
awarded prior to September 2009;
|
|
|
|
All outstanding unvested options awarded prior to September 2009
immediately vest;
|
|
|
|
All outstanding RSUs awarded prior to September 2009 immediately
vest and become nonforfeitable; and
|
|
|
|
All performance shares awarded prior to September 2009 are
deemed to have been earned in full (at target) and become
immediately due and payable in the form of common shares.
|
For all equity compensation agreements entered into after
September 2009, the foregoing benefits would immediately vest
only in the event the Named Executive Officers employment
is terminated without cause following a
change-in-control
or if the Named Executive Officer terminates his or her own
employment under the circumstances identified below.
In addition to the aforementioned benefits, pursuant to the
change-in-control
agreements described previously, if a Named Executive
Officers employment is terminated without cause within
three years following a
change-in-control
or if the Named Executive Officer terminates his or her
employment within such time under the circumstances identified
below, in addition to the benefits indicated above, the Named
Executive Officer is entitled to the following benefits:
|
|
|
|
|
A lump sum payment equal to two times base salary (for
Mr. Swidarski, three times base salary), as in effect on
the date of termination; and
|
|
|
|
Continued participation in all of our employee retirement
income, health and welfare benefit plans, including executive
perquisites (or substantially similar plans) for a period of
12 months, excluding any equity compensation plans, with
such benefits period being considered service for purposes of
service credits under any of our qualified or non-qualified
retirement plans (except that the continued service credit under
any qualified plan shall be paid for by us).
|
For purposes of both the equity compensation agreements and the
change-in-control
agreements, a
change-in-control
is deemed to occur upon any of the following events:
|
|
|
|
|
We are merged, consolidated or reorganized with another company,
and as a result, less than a majority of the combined voting
power of the then-outstanding securities is held by our
shareholders of record immediately prior to such transaction;
|
|
|
|
We sell or otherwise transfer all or substantially all of our
assets, and as a result, less than a majority of the combined
voting power of the then-outstanding securities is held by our
shareholders of record immediately prior to such transaction;
|
|
|
|
There is a report filed with the SEC disclosing that any person
or entity has become the beneficial owner of 20% or more of the
combined voting power of our then-outstanding securities (except
that for equity compensation agreements entered into after
September 2009, the applicable beneficial ownership threshold is
30%);
|
|
|
|
We file a current report or proxy statement with the SEC
disclosing that a change in control has or may have occurred or
will or may occur in the future pursuant to any then-existing
contract or transaction; or
|
|
|
|
If, during any period of two consecutive years, directors at the
beginning of such period cease to constitute at least a majority
of the board, unless the election or nomination for election of
each director first elected during the period was approved by a
vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period.
|
49
Further, for purposes of the equity compensation agreements
entered into after September 2009 and the
change-in-control
agreements, a voluntary termination by a Named Executive Officer
will be deemed a constructive termination by us upon the
occurrence of any of the following events:
|
|
|
|
|
Failure to elect, re-elect or otherwise maintain the executive
in the offices or positions held prior to the
change-in-control;
|
|
|
|
A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties
attached to the position held by the executive, or a reduction
in his aggregate compensation or employee benefit plans;
|
|
|
|
A good faith determination by the executive that the
change-in-control
has rendered him or her substantially unable to carry out or has
substantially hindered his or her ability to perform any of the
authorities, powers, functions, responsibilities or duties
attached to the position he or she held prior to the
change-in-control;
|
|
|
|
We liquidate, dissolve, merge, consolidate or reorganize or
transfer all or a significant portion of our business or assets,
unless the successor has assumed all duties and obligations of
the
change-in-control
agreements; or
|
|
|
|
We relocate and require the executive to change his or her
principal location of work to any location which is in excess of
25 miles from his or her previous location of work, or
requires the executive to travel significantly more than was
previously required.
|
For purposes of calculating the retirement benefits payable when
a
change-in-control
occurs with termination, the Named Executive Officer is entitled
to the following:
|
|
|
|
|
A Qualified Retirement Plan benefit determined using the plan
provisions as described in 2010 Pension
Benefits above and
|
|
|
|
A SERP benefit based on the formula applicable for normal
retirement.
|
For both the Qualified Retirement Plan and all of the SERPs,
these benefits are determined assuming continuous participation
for an additional 12 months subsequent to termination as
described above (except that the continued service credit under
any qualified plan shall be paid for by us).
Each of the
change-in-control
agreements with the Named Executive Officers is substantially
similar. A form of these amended and restated agreements was
filed as Exhibit 10.1 to our Annual Report on
Form 10-K
for the year ended December 31, 2008.
Effect of
Certain Tax Regulations on Payments
Effect
of Excise Tax on Parachute Payments
Under our
change-in-control
agreements, if any amount or benefit paid under the agreement,
taken together with any amounts or benefits otherwise paid to
the executives under any other agreement, are deemed to be
excess parachute payments subject to excise tax
under Sections 280G and 4999 of the Internal Revenue Code,
we will reimburse the executive for the excise tax and any
additional income, employment and excise taxes incurred on the
gross-up
payment.
Effect
of Section 409A on Timing of Payments
With respect to any severance amounts payable to our executives,
any amounts that are not exempt from Section 409A of the
Internal Revenue Code will be subject to the required six-month
delay in payment after termination of service, provided that the
executive is deemed a specified employee for
purposes of Section 409A at the time of termination of
service.
50
Post-Termination
Payments Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
Control w/
|
|
|
|
|
|
|
Voluntary
|
|
|
with Cause
|
|
|
w/o Cause
|
|
|
Retirement
|
|
|
Death
|
|
|
Disability
|
|
|
Control
|
|
|
Termination
|
Name
|
|
|
Compensation Components
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
Thomas W. Swidarski
|
|
|
Salary/Bonus
|
|
|
-
|
|
|
-
|
|
|
4,000,000
|
|
|
-
|
|
|
800,000
|
|
|
800,000
|
|
|
-
|
|
|
2,400,000
|
|
|
|
Accelerated Long-Term Incentives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
-
|
|
|
-
|
|
|
1,739,625
|
|
|
-
|
|
|
1,739,625
|
|
|
1,739,625
|
|
|
1,207,950
|
|
|
1,739,625
|
|
|
|
Performance shares
1
|
|
|
-
|
|
|
-
|
|
|
2,374,816
|
|
|
2,374,816
|
|
|
2,374,816
|
|
|
2,374,816
|
|
|
2,564,000
|
|
|
3,926,125
|
|
|
|
RSUs
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,939,025
|
|
|
1,939,025
|
|
|
1,282,000
|
|
|
1,939,025
|
|
|
|
Retirement Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualified Retirement Plan/SERP
2
|
|
|
2,554,118
|
|
|
491,822
|
|
|
2,554,118
|
|
|
344,641
|
|
|
1,963,991
|
|
|
2,554,118
|
|
|
-
|
|
|
2,701,536
|
|
|
|
Other Benefits
3
|
|
|
-
|
|
|
-
|
|
|
23,158
|
|
|
-
|
|
|
-
|
|
|
1,647,737
|
|
|
-
|
|
|
72,537
|
|
|
|
280G Excise Tax and Gross-up
4
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
6,364,039
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
2,554,118
|
|
|
491,822
|
|
|
10,691,717
|
|
|
2,719,457
|
|
|
8,817,457
|
|
|
11,055,321
|
|
|
5,053,950
|
|
|
19,142,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley C. Richardson
|
|
|
Salary/Bonus
|
|
|
-
|
|
|
-
|
|
|
80,833
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
970,000
|
|
|
|
Accelerated Long-Term Incentives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
230,700
|
|
|
230,700
|
|
|
-
|
|
|
230,700
|
|
|
|
Performance shares
1
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
178,835
|
|
|
178,835
|
|
|
178,835
|
|
|
-
|
|
|
388,606
|
|
|
|
RSUs
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,020,793
|
|
|
1,020,793
|
|
|
-
|
|
|
1,020,793
|
|
|
|
Retirement Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualified Retirement Plan/SERP
2
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
210,634
|
|
|
|
Other Benefits
3
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
152,189
|
|
|
|
280G Excise Tax and Gross-up
4
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,594,973
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
0
|
|
|
0
|
|
|
80,833
|
|
|
178,835
|
|
|
1,430,327
|
|
|
1,430,327
|
|
|
0
|
|
|
4,567,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James L.M. Chen
|
|
|
Salary/Bonus
|
|
|
-
|
|
|
-
|
|
|
369,342
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
738,684
|
|
|
|
Accelerated Long-Term Incentives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
176,825
|
|
|
176,825
|
|
|
114,275
|
|
|
176,825
|
|
|
|
Performance shares
1
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
394,393
|
|
|
394,393
|
|
|
394,393
|
|
|
432,675
|
|
|
608,950
|
|
|
|
RSUs
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
504,788
|
|
|
504,788
|
|
|
264,413
|
|
|
504,788
|
|
|
|
Other Benefits
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
249,147
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
0
|
|
|
0
|
|
|
369,342
|
|
|
394,393
|
|
|
1,076,006
|
|
|
1,076,006
|
|
|
811,363
|
|
|
2,278,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George S. Mayes, Jr.
|
|
|
Salary/Bonus
|
|
|
-
|
|
|
-
|
|
|
85,853
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
686,824
|
|
|
|
Accelerated Long-Term Incentives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
176,825
|
|
|
176,825
|
|
|
114,275
|
|
|
176,825
|
|
|
|
Performance shares
1
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
394,393
|
|
|
394,393
|
|
|
394,393
|
|
|
432,675
|
|
|
608,950
|
|
|
|
RSUs
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
384,600
|
|
|
384,600
|
|
|
144,225
|
|
|
384,600
|
|
|
|
Retirement Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualified Retirement Plan/SERP
2
|
|
|
92,636
|
|
|
71,517
|
|
|
92,636
|
|
|
92,636
|
|
|
92,636
|
|
|
92,636
|
|
|
-
|
|
|
468,124
|
|
|
|
Other Benefits
3
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
115,582
|
|
|
|
280G Excise Tax and Gross-up
4
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,048,258
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
92,636
|
|
|
71,517
|
|
|
178,489
|
|
|
487,029
|
|
|
1,048,454
|
|
|
1,048,454
|
|
|
691,175
|
|
|
3,489,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles E. Ducey, Jr.
|
|
|
Salary/Bonus
|
|
|
-
|
|
|
-
|
|
|
178,755
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
715,018
|
|
|
|
Accelerated Long-Term Incentives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
176,825
|
|
|
176,825
|
|
|
114,275
|
|
|
176,825
|
|
|
|
Performance shares
1
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
394,393
|
|
|
394,393
|
|
|
394,393
|
|
|
432,675
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|
|
608,950
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|
|
|
RSUs
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
384,600
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|
|
384,600
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|
|
144,225
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|
|
384,600
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|
|
|
Retirement Benefits:
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|
|
|
|
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|
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|
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|
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|
|
|
|
Qualified Retirement Plan/SERP
2
|
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1,649,939
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549,227
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|
|
1,649,939
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1,441,496
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|
1,155,307
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|
|
3,514,126
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|
|
-
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|
|
1,660,945
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|
|
|
Deferred Compensation Plan
5
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|
|
43,809
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|
|
43,809
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|
|
43,809
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|
|
43,809
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|
|
43,809
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|
|
43,809
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|
|
-
|
|
|
43,809
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|
|
|
Other Benefits
3
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
41,692
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|
|
|
280G Excise Tax and Gross-up
4
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,712,504
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|
|
|
|
|
|
|
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|
Total:
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|
|
1,693,748
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|
|
593,036
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|
|
1,872,503
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|
|
1,879,698
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|
|
2,154,934
|
|
|
4,513,753
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|
|
691,175
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|
|
5,344,343
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|
|
|
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1
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Assuming actual payout of
performance shares at target.
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2 |
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The assumptions used to calculate
the value of the Qualified Retirement Plan, Pension SERP and
Pension Restoration SERP benefits are consistent with those used
to calculate the values above under 2010 Pension
Benefits. Further, the Named Executive Officers are
assumed to have terminated employment on December 31, 2010
and received the value of their benefits assuming payment begins
at normal retirement or immediately, if eligible, at
December 31, 2010. The values were determined as of
December 31, 2010 based on compensation and service as of
that date. In addition, these values represent total values to
the Named Executive Officer under the given termination scenario.
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3 |
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Other Benefits
includes, as applicable, the total value of any other
contributions by us on behalf of the Named Executive Officer for
retirement income, health and welfare benefit plans, including
executive perquisites, which the Named Executive Officer was
eligible to receive as of December 31, 2010. In addition,
for Mr. Swidarski, the amount in the Disability
column includes the value of Mr. Swidarskis long-term
disability benefits, determined as of December 31, 2010, in
excess of the benefits payable in our Long-
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51
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Term Disability Plan. The amount of
Mr. Swidarskis long-term disability benefits of
$1,613,000 is determined as the present value of a fixed-term
annuity, payable from Mr. Swidarskis current age to
age 65, based on a discount rate of 5.83%.
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4 |
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Upon a change in control of the
company, the executive may be subject to certain excise taxes
pursuant to Section 280G of the Internal Revenue Code. We
have agreed to reimburse the executive for all excise taxes that
are imposed on the executive under Section 280G and any income
or other taxes that are payable by the executive as a result of
any reimbursements for Section 280G taxes. The calculation
of the 280G
gross-up
amount is based upon a 280G excise tax rate of 20%. For purposes
of the 280G calculation, it is assumed that no amounts will be
discounted as attributable to reasonable compensation and no
value will be attributed to the executive executing a
non-competition agreement.
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5 |
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Distribution of the amounts
reflected for deferred compensation remains subject to the
deferral elections made by the executive, as discussed above
under Non-Qualified Deferred Compensation
Plans.
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REPORT OF
AUDIT COMMITTEE
The Audit Committee is comprised of Henry D. G. Wallace, Chair,
Bruce L. Byrnes, Mei-Wei Cheng, Philip B. Lassiter and Alan J.
Weber. Each member of the committee is independent as defined in
Section 303A.02 of the NYSE corporate governance standards.
The primary duties and responsibilities of the committee are
(1) to monitor the adequacy of our financial reporting
process and systems of internal controls regarding finance,
accounting and legal compliance, (2) to monitor the
independence and performance of our outside auditors and
internal audit department, and (3) to provide an avenue of
communication among the outside auditors, management, the
internal audit department and the Board. The Board has adopted
an Audit Committee Charter, which is available on our web site
at
http://www.diebold.com.
The Audit Committee has reviewed and discussed with our
management and KPMG LLP, our independent auditors, our audited
financial statements contained in our Annual Report to
Shareholders for the year ended December 31, 2010. The
Audit Committee has also discussed with our independent auditors
the matters required to be discussed pursuant to SAS
No. 61, as amended (AICPA, Professional Standards,
Vol. 1. AU Section 380), as adopted by the Public Company
Accounting Oversight Board in Rule 3200T.
The Audit Committee has received and reviewed the written
disclosures and the letter from KPMG LLP required by applicable
requirements of the Public Company Accounting Oversight Board
regarding KPMG LLPs communications with the Audit
Committee concerning independence, and has discussed with KPMG
LLP its independence. The Audit Committee has also considered
whether the provision of non-audit services to us by KPMG LLP is
compatible with maintaining its independence.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited
financial statements be included in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010 filed with the
SEC.
The foregoing report was submitted by the Audit Committee of the
Board and shall not be deemed to be soliciting
material or to be filed with the SEC or
subject to Regulation 14A promulgated by the SEC or
Section 18 of the Exchange Act.
The Audit Committee:
Henry D. G. Wallace, Chair
Bruce L. Byrnes
Mei-Wei Cheng
Philip B. Lassiter
Alan J. Weber
52
PROPOSAL 2: RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has again appointed KPMG LLP, our
independent auditors since 1965, to examine our accounts and
other records for the fiscal year ending December 31, 2011.
This appointment is being presented to you for ratification at
the Annual Meeting. If the shareholders fail to ratify the
appointment, the Audit Committee will reconsider its selection.
KPMG LLP has no financial interest, direct or indirect, in us or
any of our subsidiaries.
A representative of KPMG LLP is expected to be present at the
Annual Meeting, to make a statement if he or she desires and to
respond to appropriate questions.
Audit and
Non-Audit Fees
The following table shows the aggregate fees billed to us for
the annual audit and review of the interim financial statements
and other services provided by KPMG LLP for fiscal 2010 and 2009.
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2010
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2009
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Audit
Fees1
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$
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4,007,031
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$
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3,742,100
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Audit-Related
Fees2
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622,213
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0
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Tax Fees3
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900,540
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1,086,398
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All Other
Fees4
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20,000
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0
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Total
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$
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5,549,784
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$
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4,828,498
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1 |
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Audit Fees consist of
fees billed for professional services rendered for the audit of
our annual financial statements and the review of the interim
financial statements included in quarterly reports and services
that are normally provided by KPMG LLP in connection with
statutory and regulatory filings.
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2 |
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Audit-Related Fees
consist of fees billed related to the remediation of our
internal financial controls and our global FCPA review.
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3 |
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Tax Fees consist of
fees billed for professional services rendered for tax
compliance, tax advice and tax planning, both domestic and
international. These services include assistance regarding
federal, state and international tax compliance, acquisitions
and international tax planning.
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4 |
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All Other Fees consist
of fees billed for those services not captured in the audit,
audit-related and tax categories. We generally do not request
such services from the independent auditors; however, for 2010
these fees consist of a contract compliance review for our
subsidiary in Canada.
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Policy on
Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors
Consistent with SEC policies regarding auditor independence, the
Audit Committee has responsibility for appointing, setting
compensation and overseeing the work of our independent
auditors. In recognition of this responsibility, the Audit
Committee has established a policy to pre-approve all audit and
non-audit services provided by the independent auditors.
These services may include audit services, audit-related
services, tax services and other services. Pre-approval is
generally provided for and any pre-approval is detailed as to
the particular service or category of services and is generally
subject to a specific budget. The Audit Committee has delegated
pre-approval authority to Henry D. G. Wallace, Chair of the
Audit Committee, when expedition of services is necessary,
provided that Mr. Wallace must report any decisions to
pre-approve to the full Audit Committee at its next scheduled
meeting. All of the fees included under the categories
Audit-Related Fees, Tax Fees and
All Other Fees above were pre-approved by the Audit
Committee. None of these fees were approved by the Audit
Committee after services were rendered pursuant to the de
minimis exception established by the SEC.
Recommendation
of the Board
The board recommends a vote FOR ratification of the
appointment of our independent auditors.
53
PROPOSAL 3: ADVISORY
VOTE ON NAMED EXECUTIVE OFFICER
COMPENSATION
In this Proposal 3, pursuant to
Rule 14a-21(a)
under the Exchange Act, we are providing our shareholders the
opportunity to cast an advisory (non-binding) vote on the
compensation paid to the companys named executive
officers, as disclosed in Compensation Discussion and
Analysis and Executive Compensation
above, pursuant to the compensation rules of the SEC. While this
vote is advisory, and not binding on the company, the Board
values the opinions of our shareholders and the Compensation
Committee will review the results of the vote and take it into
consideration when making future decisions regarding executive
compensation.
Compensation Discussion and Analysis and
Executive Compensation describe our executive
compensation program and the decisions and rationale of our
Compensation Committee. Our executive pay program is designed to
enable us to attract, retain and motivate high quality
executives who will provide dynamic leadership to the company
and are instrumental to the success of the company. We emphasize
performance-based variable pay through a mix of base salary,
annual cash bonuses and long-term incentives and seek to provide
total pay that is commensurate with our performance and
competitive with our peer group. Accordingly, we are asking our
shareholders to vote FOR the following resolution:
RESOLVED, that the compensation of the named executive
officers of the company as disclosed pursuant to the
compensation rules of the SEC, including the Compensation
Discussion and Analysis, the compensation tables and any related
material disclosed in this proxy statement, is hereby
APPROVED.
Recommendation
of the Board
The Board recommends that you indicate your support for the
companys named executive officer compensation philosophy
by voting FOR Proposal 3.
PROPOSAL 4: ADVISORY
VOTE ON THE FREQUENCY OF
THE SHAREHOLDER ADVISORY VOTE ON NAMED EXECUTIVE OFFICER
COMPENSATION
As described in Proposal 3 above, pursuant to
Rule 14a-21(b)
under the Exchange Act, we are providing our shareholders the
opportunity to cast an advisory vote on our named executive
officer compensation. This advisory vote is referred to as a
say-on-pay
vote.
This Proposal 4 affords shareholders the opportunity to
cast an advisory (non-binding) vote on how often we should
include a
say-on-pay
vote in our proxy materials for future annual meeting of
shareholders. Under this Proposal 4, shareholders may vote
to have the
say-on-pay
vote every year, every two years, or every three years or
abstain.
We believe that
say-on-pay
votes should be conducted every year so that our shareholders
are provided with the opportunity to frequently express their
views on our executive compensation programs and practices. The
Compensation Committee values the opinions expressed by
shareholders in
say-on-pay
votes and will consider the outcome of these votes in making
decisions on named executive officer compensation.
The frequency of the shareholder advisory vote on named
executive officer compensation receiving the greatest number of
votes (every year, every two years or every three years) will be
considered the frequency recommended by shareholders.
Recommendation
of the Board
The Board recommends that shareholders vote to hold future
shareholder advisory votes on
say-on-pay
EVERY YEAR. Shareholders are not voting to approve or
disapprove the Boards recommendation. Shareholders may
choose among the four choices (every year, every two years,
every three years or abstain) set forth above.
54
SHAREHOLDERS
SHARING THE SAME ADDRESS
Some banks, brokers and other intermediaries engage in the
practice of householding our proxy statements and
annual reports. This means that only one copy of our proxy
statement and annual report to shareholders may be sent to
multiple shareholders in your household unless you request
otherwise. We will promptly deliver a separate copy of our
Annual Report on
Form 10-K
for the year ended December 31, 2010 or this proxy
statement to you if you share an address subject to
householding. Please contact our Corporate Secretary at
5995 Mayfair Road, P.O. Box 3077, North Canton,
Ohio
44720-8077
or
(330) 490-4000.
Please contact your bank, broker or other intermediary if you
wish to receive individual copies of our proxy materials in the
future. Please contact your bank, broker or other intermediary,
or our Corporate Secretary as provided above if members of your
household are currently receiving individual copies and you
would like to receive a single household copy for future
meetings.
EXPENSES
OF SOLICITATION
The cost of soliciting the proxies will be paid by us. In
addition to solicitation by mail, some of our directors,
officers and employees, without extra compensation, may conduct
additional solicitations by telephone, facsimile and personal
interviews. We may also enlist, at our own cost, the assistance
of banks, bankers and brokerage houses in additional
solicitations of proxies and proxy authorizations, particularly
from those of their clients or customers whose shares are not
registered in the clients or customers own names.
Brokers, bankers, etc., will be reimbursed for
out-of-pocket
and reasonable clerical expenses incurred in obtaining
instructions from beneficial owners of the common shares. It is
estimated that the expense of such special solicitation will be
nominal. In addition, Laurel Hill Advisory Group, LLC, New York,
New York, has been retained to assist in the solicitation of
proxies for an estimated fee of $7,000.
SHAREHOLDER
PROPOSALS
We must receive by November 12, 2011 any proposal of a
shareholder intended to be presented at our 2012 Annual Meeting
of Shareholders and to be included in our proxy, notice of
meeting and proxy statement related to the 2012 meeting pursuant
to
Rule 14a-8
under the Exchange Act. Such proposals should be submitted to
our Corporate Secretary at our principal executive office by
certified mail, return receipt requested.
Notice of proposals of shareholders submitted outside the
processes of
Rule 14a-8
under the Exchange Act, including nominations of directors,
which a shareholder intends to present at our 2012 meeting, but
which will not be included in our proxy, notice of meeting and
proxy statement related to the 2012 Meeting, or
non-Rule 14a-8
proposals, must be received by us at our principal executive
office on or between December 12, 2012 and January 11,
2012 (or, if the 2012 meeting is held more than 30 days
prior to or after April 28, 2012, not later than the close
of business on the later of the 90th day prior to the 2012
meeting or the 10th day following the day on which public
announcement of the date of the 2012 meeting is first made), or
such proposals will be considered untimely under the advance
notice provisions of our code of regulations.
Non-Rule 14a-8
proposals must comply with certain provisions of our code of
regulations. Our proxy related to the 2012 meeting will give
discretionary authority to the Proxy Committee to vote with
respect to all
non-Rule 14a-8
proposals properly brought before the 2012 meeting.
OTHER
MATTERS
We are not aware of any matters to be presented at the Annual
Meeting other than the matters set forth herein. Should any
other matters be presented for a vote of the shareholders, the
proxy in the enclosed form confers discretionary voting
authority upon the Proxy Committee. In accordance with the
provisions of Ohio Revised Code, the Board has appointed
inspectors of elections to act at the Annual Meeting.
55
For information on how to obtain directions to be able to attend
the Annual Meeting and vote in person, please see the directions
at the end of this proxy statement or contact our Corporate
Secretary at 5995 Mayfair Road, P.O. Box 3077,
North Canton, Ohio
44720-8077
or
(330) 490-4000.
By Order of
the Board of Directors
Chad F. Hesse
Vice President, Interim General Counsel
and Secretary
Canton, Ohio
March 11, 2011
56
Directions
to Sheraton Suites
1989 Front Street, Cuyahoga Falls, Ohio 44221
From Akron-Canton Regional Airport
Take Interstate 77 North to Route 8 North. Proceed on Route 8
North and take the Broad Boulevard Exit. Turn left onto Broad
Boulevard. The hotel is located on the left, at the corner of
Front Street and Broad Boulevard.
From Youngstown (East)
Take Interstate 76 West to Route 8 North. Proceed on Route
8 North and take the Broad Boulevard Exit. Turn left onto Broad
Boulevard and turn left again onto Front Street. The hotel is
located on the left.
From Cleveland Hopkins International Airport
Take Route 71 South to the Ohio Turnpike (80 East). Proceed on
the Ohio Turnpike to Exit 180 (Route 8 South). Continue on Route
8 South to the Broad Boulevard Exit. Turn right on Broad
Boulevard and then turn left on Front Street. The hotel is on
the left.
From Columbus (West)
Take Interstate 71 North to Interstate 76/224 East. Continue for
approximately 20 miles to the 277/224 East/Canton Exit.
Follow Route 77 to Exit 4B, Akron Exit Only. Within
one mile follow Exit 125A, Route 8 North. Exit at Broad
Boulevard and turn left to the hotel.
DIEBOLD, INCORPORATED
5995 MAYFAIR ROAD
PO. BOX 3077
NORTH CANTON, OH 44720-8077
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting
instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time the day
before the cut-off date or meeting date. Have your
proxy card in hand when you access the web site and
follow the instructions to obtain your records and
to create an electronic voting instruction form.
Electronic Delivery of Future PROXY MATERIALS
If you would like to reduce the costs incurred by our
company in mailing proxy materials, you can consent
to receiving all future proxy statements, proxy cards
and annual reports electronically via e-mail or the
Internet. To sign up for electronic delivery, please
follow the instructions above to vote using the
Internet and, when prompted, indicate that you agree
to receive or access proxy materials electronically
in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your
voting instructions up until 11:59 P.M. Eastern
Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you call
and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in
the postage-paid envelope we have provided or return
it to Vote Processing, c/o Broadridge, 51 Mercedes
Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
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KEEP THIS PORTION FOR YOUR RECORDS |
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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DETACH AND RETURN THIS PORTION ONLY |
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For
All |
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Withhold
All |
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For All
Except |
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To withhold authority to vote for any
individual nominee(s), mark For All
Except and write the number(s) of the nominee(s) on the line below. |
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The Board of Directors recommends you vote
FOR the following:
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1. Election of Directors |
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Nominees |
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01 Patrick W. Allender |
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02 Bruce L. Byrnes |
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03 Mei-Wei Cheng |
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04 Phillip R. Cox |
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05 Richard L. Crandall |
06 Gale S. Fitzgerald |
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07 Phillip B. Lassiter |
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08 John N. Lauer |
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09 Thomas W. Swidarski |
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10 Henry D.G. Wallace |
11 Alan J. Weber |
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The Board of Directors recommends you vote FOR proposals 2. and 3. |
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For |
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Abstain |
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2. To ratify the appointment of KPMG LLP as independent auditors for the year 2011; |
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3. To hold an advisory vote on named executive officer compensation; |
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The Board of Directors recommends you vote 1 YEAR on the following proposal: |
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1 year
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2 years |
3 years |
Abstain |
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4. To hold an advisory vote on the frequency for future advisory votes on named executive officer compensation. |
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NOTE: The Common Shares represented by this proxy will be voted by the Proxy Committee, as recommended by the Board of Directors,
unless otherwise specified. The Board of Directors recommends a vote FOR these items. |
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Please sign exactly as your name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give
your full title as such.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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PLEASE VOTE TODAY
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The
Annual Report, Notice & Proxy Statement is/are available at www.proxyvote.com.
DIEBOLD, INCORPORATED
This Proxy is Solicted on Behalf of the Board of Directors
The undersigned hereby appoints Thomas W. Swidarski and Bradley C. Richardson, and each of
them, as the Proxy Committee, with full power of substitution, to represent and to vote all the
Common Shares of Diebold, Incorporated held of record by the undersigned on February 25, 2011, at
the annual meeting of shareholders whi