UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT

 

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:

 

 

HUBBELL INCORPORATED

(Name of Registrant as Specified in Its Charter)

 

(Name of Person(s) Filing Proxy Statement)

 

Payment of Filing Fee (Check the appropriate box):

þ  No fee required.

o  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HUBBELL INCORPORATED

40 Waterview Drive, Shelton, Connecticut 06484

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 2, 2011

 

To the Shareholders:

 

Notice is hereby given that the Annual Meeting of Shareholders of Hubbell Incorporated (the “Company”) will be held at the principal executive offices of the Company, 40 Waterview Drive, Shelton, Connecticut 06484 on Monday, May 2, 2011 at 9:00 A.M. local time for the purpose of considering and acting upon the following proposals:

 

1.  Election of the following persons to serve as Directors of the Company for the ensuing year, until the next Annual Meeting of Shareholders of the Company and until their respective successors have been duly elected and qualified.

 

 

2.  The ratification of the selection of the independent registered public accounting firm to audit the annual financial statements for the Company for the year 2011.

 

3.  The reapproval of the Company’s Senior Executive Incentive Compensation Plan, as amended and restated.

 

4.  The approval, by non-binding vote, of the compensation of our named executive officers as presented in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 2, 2011.

 

5.  The recommendation, by non-binding vote, of the frequency with which executive compensation will be subject to a shareholder advisory vote.

 

6.  The transaction of such other business as may properly come before the meeting or any continuations, adjournments or postponements thereof.

 

The Board of Directors has fixed the close of business on March 4, 2011 as the record date for the determination of shareholders entitled to notice of and to vote at such meeting and any continuations, adjournments or postponements thereof. The transfer books will not be closed.

 

By order of the Board of Directors

 

Richard W. Davies

Vice President,

General Counsel and Secretary

 

March 16, 2011

 

 

IMPORTANT:  It is important that your shares be represented at this meeting. Therefore, please vote electronically using the Internet or use the telephone voting procedures as described on the Notice of Internet Availability of Proxy Materials and on the proxy card, or (if you received printed proxy materials) complete, sign and date the enclosed proxy card and return it as soon as possible in the accompanying envelope.

 

HUBBELL INCORPORATED

 

PROXY STATEMENT

for

ANNUAL MEETING OF SHAREHOLDERS

To be held May 2, 2011

 

 

The Board of Directors of Hubbell Incorporated, a Connecticut corporation (the “Company”), is soliciting your proxy to be voted at its Annual Meeting of Shareholders to be held at the principal executive offices of the Company, 40 Waterview Drive, Shelton, Connecticut 06484, on Monday, May 2, 2011 at 9:00 A.M. local time, or any continuations, adjournments or postponements thereof. Commencing on or about March 16, 2011, copies of this Proxy Statement, the proxy card(s), the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 and a Notice of Internet Availability of Proxy Materials will be available to all shareholders.

 

Pursuant to rules adopted by the Securities and Exchange Commission, or SEC, we have elected to provide access to our proxy materials over the Internet. Accordingly, on or about March 16, 2011 we mailed a Notice of Internet Availability of Proxy Materials (a “Notice”) to our shareholders of record on March 4, 2011, which is our record date. All shareholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials.

 

Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found in the Notice, which also contains instructions on how to request proxy materials in the printed form by mail or electronically by email on an ongoing basis. We encourage shareholders to take advantage of the availability of proxy materials on the Internet to help reduce the environmental impact of our Annual Meeting.

 

Any shareholder executing a proxy may revoke it at any time prior to its use. The Company will treat any duly executed proxy as not revoked until it receives a duly executed instrument revoking it, or a duly executed proxy bearing a later date or, in the case of death or incapacity of the person executing the same, written notice thereof. If you vote your shares using the Internet website or the telephone voting procedures, you may revoke your prior Internet or telephone vote by recording a different vote on the Internet website or using the telephone voting procedures, or by signing and returning a duly executed proxy bearing a later date than your last Internet or telephone vote. A proxy also may be revoked by voting by ballot at the Annual Meeting.

 

At the meeting, shareholders will be asked to consider and act upon the following proposals:

 

1. The election of the following persons to serve as Directors of the Company for the ensuing year, until the next Annual Meeting of Shareholders of the Company and until their respective successors have been duly elected and qualified.

 

Timothy H. Powers Lynn J. Good Anthony J. Guzzi		Neal J. Keating Andrew McNally IV G. Jackson Ratcliffe		Carlos A. Rodriguez Richard J. Swift Daniel S. Van Riper

 

2. The ratification of the selection of the independent registered public accounting firm to audit the annual financial statements for the Company for the year 2011.

 

3. The reapproval of the Company’s Senior Executive Incentive Compensation Plan, as amended and restated.

 

4. The approval, by non-binding vote, of the compensation of our named executive officers as presented in this Proxy Statement.

 

5. The recommendation, by non-binding vote, of the frequency with which executive compensation will be subject to a shareholder advisory vote.

 

6. The transaction of such other business as may properly come before the meeting or any continuations, adjournments or postponements thereof.

Unless otherwise directed, the persons named in the form of proxy intend to vote all proxies received by them in favor of (1) the election of the nominees to the Board named herein, (2) the ratification of the selection of the independent registered public accounting firm, (3) the reapproval of the Company’s Senior Executive Incentive Compensation Plan, as amended and restated, (4) the approval of the compensation of our named executive officers as presented in this Proxy Statement, and (5) THREE YEARS for the frequency of shareholder advisory votes on the compensation of our named executive officers. All proxies will be voted as specified by our shareholders. The Board of Directors recommends shareholders to vote FOR proposals 1, 2, 3 and 4 and to vote for THREE YEARS for the frequency of shareholder advisory votes with respect to proposal 5.

 

Management does not intend to present any business at the meeting other than that set forth in the accompanying Notice of Annual Meeting, and it has no information that others will do so. If other matters requiring the vote of the shareholders properly come before the meeting and any continuations, adjournments or postponements thereof, it is the intention of the persons named in the form of proxy to vote the proxies held by them in accordance with their judgment on such matters.

 

Directions to attend the Annual Meeting where you may vote in person can be found on our website, www.hubbell.com, in the Investor Relations section. The content of the Company’s website is not incorporated by reference into, or considered to be a part of, this Proxy Statement.

 

VOTING RIGHTS AND SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The record date for the determination of shareholders entitled to vote at the meeting is the close of business on March 4, 2011. On March 4, 2011, the Company had outstanding 7,167,506 shares of Class A Common Stock, par value $.01 per share, and 53,576,969 shares of Class B Common Stock, par value $.01 per share, and no other voting securities. Each share of Class A Common Stock is entitled to twenty votes, and each share of Class B Common Stock is entitled to one vote. The presence at the Annual Meeting, in person or by proxy, of the holders of Class A Common Stock and Class B Common Stock holding in the aggregate a majority of the voting power of the Company’s outstanding shares shall constitute a quorum for the transaction of business. Once a share of common stock is represented for any purpose at the annual meeting, it will be deemed present for quorum purposes for the remainder of the meeting and for any continuation, adjournment or postponement of the annual meeting. Abstentions and broker non-votes are counted as present for purposes of determining whether there is a quorum. The vote required for each proposal to be acted upon at this meeting is set forth in the description of that proposal.

 

The following table sets forth as of March 4, 2011, or such other date as indicated in the table or the notes thereto, each of the persons known to the Company to own beneficially shares representing more than 5% of any class of the Company’s outstanding voting securities, with the percent of class stated therein being based upon the outstanding shares on March 4, 2011.

 

 

 

(1) The beneficiaries of such trust are the issue of Harvey Hubbell and their spouses.

 

(2) The Trust Indenture requires that, so long as no bank or trust company is acting as a trustee, there shall be three individuals acting as trustees, each of whom, so long as any securities of the Company are held by the trust, must be an officer or Director of the Company. The Trust Indenture provides that successor trustees are to be appointed by the trustees then in office. The trustees have shared voting and investment power with respect to the securities of the Company held in such trust.

 

(3) The beneficiaries of such trust are the issue of Harvey Hubbell.

 

(4) In addition, Messrs. McNally, Ratcliffe, and Richard W. Davies, Vice President, General Counsel and Secretary, beneficially own shares of the Company’s Common Stock as set forth in the table below with respect to Messrs. McNally and Ratcliffe. The shares of the Company’s Common Stock beneficially owned by Mr. Davies are included in the total amount of the Company’s Common Stock beneficially owned by “All Directors and executive officers as a group (19 persons)” in the table below.

 

(5) The Company has received a copy of Schedule 13G, as amended, as filed with the SEC on February 6, 2010 by Adage Capital Partners, L.P. (“ACP”), Adage Capital Partners GP, L.L.C. (“ACPGP”), a general partner of ACP, Adage Capital Advisors, L.L.C. (“ACA”), as managing member of ACPGP, Phillip Gross, as managing member of ACA, and Robert Atchinson, as managing member of ACA, collectively, the “Reporting Persons”, reporting ownership of these shares as of December 31, 2009. According to the Schedule 13G, the Reporting Persons have shared voting and dispositive power as to these shares. As of the date of this Proxy Statement, the Reporting Persons have not filed an amended Schedule 13G since the amendment filed on February 6, 2010.

 

(6) The Company has received a copy of Schedule 13G, as amended, as filed with the SEC on February 14, 2011 by Mason Capital Management LLC (“Mason Management”), and Kenneth M. Garschina and Matthew E. Martino, as managing principals of Mason Management, reporting ownership of these shares as of December 31, 2010. According to the Schedule 13G, Mason Management is the investment manager of Mason Capital L.P., Mason Capital Master Fund, L.P., and certain other funds and accounts, which directly own the shares. Mason Management has sole voting and dispositive power as to these shares, and Messrs. Garschina and Martino have shared voting and dispositive power as to these shares.

 

(7) The Company has received a copy of Schedule 13G, as amended, as filed with the SEC on February 4, 2011 by BlackRock, Inc. (“BlackRock”) reporting ownership of these shares as of December 31, 2010. According to the Schedule 13G, BlackRock has sole voting and dispositive power as to these shares; and the shares were acquired by the following subsidiaries of BlackRock: BlackRock Japan Co. Ltd., BlackRock Advisors (UK) Limited, BlackRock Asset Management Deutschland AG, BlackRock Institutional Trust Company, N.A., BlackRock Fund Advisors, BlackRock Asset Management Canada Limited, BlackRock Asset Management Australia Limited, BlackRock Advisors, LLC, BlackRock Investment Management, LLC and BlackRock International Ltd.

(8) The Company has received a copy of Schedule 13G, as amended, as filed with the SEC on February 11, 2011 by Artisan Partners Holdings LP (“Artisan Holdings”), Artisan Investment Corporation (“Artisan Corp.”), the general partner of Artisan Holdings, Artisan Partners Limited Partnership (“Artisan Partners”), Artisan Investments GP LLC (“Artisan Investments”), the general partner of Artisan Partners, ZFIC, Inc. (“ZFIC”), the sole shareholder of Artisan Corp., Andrew A. Ziegler, Carlene M. Ziegler, and Artisan Funds, Inc. (“Artisan Funds”) reporting ownership of these shares as of December 31, 2010. Andrew A. Ziegler and Carlene M. Ziegler are the principal shareholders of ZFIC. According to the Schedule 13G, Artisan Holdings, Artisan Corp., Artisan Partners, Artisan Investments, ZFIC, Andrew A. Ziegler and Carlene M. Ziegler have shared voting power with respect to 3,858,551 of such shares and shared dispositive power with respect to all such shares. The shares reported were acquired on behalf of discretionary clients of Artisan Partners, which holds 3,936,851 shares, including 2,635,900 shares on behalf of Artisan Funds.

 

(9) The Company has received a copy of Schedule 13G, as amended, as filed with the SEC on February 14, 2011 by Capital World Investors (“Capital World”) and The Income Fund of America reporting ownership of these shares as of December 31, 2010. According to the Schedule 13G, Capital Research and Management Company (“CRMC”) manages equity assets for various investment companies through two divisions, including Capital World. Capital World is deemed to be the beneficial owner of 3,430,000 shares of Class B Common Stock as a result of CRMC acting as investment advisor to various companies registered under Section 8 of the Investment Company Act of 1940. Capital World has sole voting and dispositive power for all such shares.

 

The following table sets forth as of March 4, 2011, the equity securities of the Company beneficially owned by each of the Directors and the Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and the three other most highly paid executive officers, referred to as the “named executive officers” of the Company, and by all Directors and executive officers of the Company as a group:

 

 

 

 

ITEM 1

 

ELECTION OF DIRECTORS

 

The Company’s By-Laws provide that the Board of Directors shall consist of not less than three nor more than twelve Directors who shall be elected annually by the shareholders. The Board has fixed the number of Directors at nine as of the Annual Meeting of Shareholders, and the following persons are proposed by the Board, upon recommendation of the Nominating and Corporate Governance Committee, as Directors of the Company to hold office until the next Annual Meeting of Shareholders and until their respective successors have been duly elected and qualified. In the event that any of the nominees for Directors should become unavailable, it is intended that the shares represented by the proxies will be voted for such substitute nominees as may be nominated by the Board of Directors, unless the number of Directors constituting a full Board of Directors is reduced. Each of the nominees below was elected as a Director by the shareholders of the Company, except for Mr. Keating who was appointed to the Board of Directors in September 2010. Mr. Keating was recommended to the Board by a non-management director. Messrs. Edwards and Hoffman are retiring as Directors of the Company in accordance with the Company’s Corporate Governance Guidelines (the “Guidelines”) after serving the Company’s shareholders in that capacity since 1990 and 1989, respectively, and therefore are not standing for re-election. Directors are elected by plurality vote. Votes withheld, abstentions and broker non-votes will not affect the election of Directors.

 

 

 

 

During the five years ended December 31, 2010, each of the Directors, other than Messrs. Guzzi, Keating, McNally and Rodriguez, and Ms. Good has either been retired or held the principal occupation set forth above opposite his or her name. The employment history of Messrs. Guzzi, Keating, McNally and Rodriguez, and Ms. Good during the past five years is reflected in the table above.

 

CORPORATE GOVERNANCE

 

The Board of Directors has adopted the Company’s Guidelines with respect to significant corporate governance issues. These Guidelines cover such issues as the composition of the Board and Board Committees, Board and Board Committee meetings, leadership development, including succession planning, new Director orientation, Board responsibilities and compensation, and Director independence. The Guidelines may be viewed on the Company’s website at www.hubbell.com.

 

The Board of Directors of the Company met nine times during the year ended December 31, 2010. During 2010, no Director attended fewer than 75% of the aggregate number of meetings of the Board of Directors and meetings of Committees of which the Director was a member. Board members are expected to attend the Company’s annual meetings of shareholders. All of the Company’s Directors were in attendance at the Company’s May 3, 2010 Annual Meeting of Shareholders, except for Mr. Keating who was appointed to the Board in September 2010.

 

Director Independence

 

The Company’s Guidelines indicate that the Board shall be comprised of a majority of independent Directors. Each year the Nominating and Corporate Governance Committee reviews all relationships between Directors and the Company and its subsidiaries (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company or any of its subsidiaries) in accordance with the objective criteria of independence set forth by the New York Stock Exchange (“NYSE”) and the SEC and considers whether any relationship, individually or in the aggregate, is material and has impaired or may impair a Director’s exercise of independent judgment. The Nominating and Corporate Governance Committee also reviews a summary of the answers to annual questionnaires completed by each of the Directors, a report of transactions with Director-affiliated entities, Code of Ethics certifications (described below), the status of case submissions filed with the Company’s confidential communication hotline, and Company donations to charitable organizations (noting that The Harvey Hubbell Foundation Educational Matching Gifts Program is available to all Directors, officers and employees and matches eligible gifts up to a maximum of $4,000 made by an individual in any single calendar year). Following review and discussion, the Nominating and Corporate Governance Committee and the Company’s Vice President, General Counsel and Secretary, provide the results of this analysis and supporting information to the Board of Directors.

 

In evaluating and determining the independence of the Directors, the Nominating and Corporate Governance Committee considered that in the ordinary course of business, transactions may occur between the Company and its subsidiaries and entities with which some of the Directors are or have been affiliated. Specifically, Messrs. Edwards, Swift and Van Riper serve as directors of other companies with which the Company engages in ordinary course business transactions; Ms. Good and Mr. Rodriguez are officers of other companies with which the Company engages in ordinary course business transactions; and Messrs. Guzzi and Keating serve as both directors and executive officers of other companies with which the Company engages in ordinary course transactions. The Nominating and Corporate Governance Committee considered the dollar amounts of transactions with each of these entities and any related arrangements between the Company and any of the applicable customers or suppliers, and determined that none were required to be disclosed as a related party transaction under the federal securities laws or otherwise impaired the applicable Director’s independence under NYSE guidelines. In addition, the Nominating and Corporate Governance Committee considered Mr. Ratcliffe’s prior service to the Company as President and CEO ending in 2001, as Chairman of the Board and as a consultant each ending in 2004, and the fact that he no longer had any relationship with the Company except as a Director and as a trustee of a significant shareholder, and determined that, in addition to meeting the NYSE “bright line” test for independence with respect to such prior service to the Company, such prior service did not otherwise impair his independence.

As a result of this review, the Board has determined that the following Directors are independent in accordance with applicable law and the NYSE rules: Mr. George W. Edwards, Jr., Ms. Lynn J. Good, Mr. Anthony J. Guzzi, Mr. Joel S. Hoffman, Mr. Neal J. Keating, Mr. Andrew McNally IV, Mr. G. Jackson Ratcliffe, Mr. Carlos A. Rodriguez, Mr. Richard J. Swift and Mr. Daniel S. Van Riper; and that Mr. Timothy H. Powers is not independent. Mr. Powers is not considered an independent outside Director because of his employment as Chairman of the Board, President and CEO of the Company. In determining the nominees for election as Directors at the 2011 Annual Meeting of Shareholders, the Nominating and Corporate Governance Committee noted that the Company’s Guidelines provide that upon reaching age 72 a director shall not thereafter stand for re-election unless the Board, based upon the recommendation of the Nominating and Corporate Governance Committee, makes an exception to this standard as deemed appropriate in the interests of the Company’s shareholders. Mr. Ratcliffe had reached the age of 72 in March 2008 and the Committee had determined that a waiver of the guideline was appropriate in Mr. Ratcliffe’s case in light of his extensive managerial experience and deep knowledge of the Company’s businesses. The Committee determined that waiver of the guideline continued to be appropriate for Mr. Ratcliffe in connection with the 2011 election of Directors.

 

Board Leadership Structure

 

The Company’s By-Laws require the Board to choose the Chairman of the Board from among the Directors and provide the Board with the ability to appoint the President of the Company as the Chairman of the Board. This approach gives the Board the necessary flexibility to determine whether these positions should be held by the same person or by separate persons based on the leadership needs of the Company at any particular time.

 

Based on the Company’s present circumstances, the Board has determined that the Company and its shareholders are best served by having Mr. Powers serve as its Chairman of the Board, President and CEO. Mr. Powers’ combined role as Chairman of the Board, President and CEO promotes unified leadership and direction for the Company, which allows for a single, clear focus for management to execute the Company’s strategy and business plans. Mr. Powers has served in this combined role since 2004. However, from 2001 to 2004, to assist in the transition of leadership from Mr. Ratcliffe (the Company’s former Chairman, President and CEO) to Mr. Powers, the Board determined that the Company was best served by having one person serve as the Chairman of the Board and another person serve as President and CEO.

 

The Board’s present composition provides independent and effective oversight of the Company’s business and affairs. The Audit, Compensation, and Nominating and Corporate Governance Committees are comprised entirely of Directors who meet the independence requirements of the NYSE. Mr. Powers is the only member of the executive management who is also a Director. The Board and Nominating and Corporate Governance Committee have assembled a Board that consists of strong and effective Directors who are currently or have been leaders or CFOs of major companies or institutions or advisors thereto, are independent analytical thinkers and have a diverse range of experience and skills.

 

In addition, the Board has established a Lead Director position, which rotates annually among the chairs of the Board Committees, as detailed in the Guidelines, immediately following the Company’s annual meeting. The Lead Director coordinates the activities of the Directors who are not Company officers (including those who are not independent by virtue of a material relationship, former status or family membership, or for any other reason) (collectively, the “Non-Management Directors”), coordinates the agenda for and chairs sessions of the Non-Management Directors, and facilitates communications between the Non-Management Directors and the other members of the Board and the management of the Company. Currently, Mr. Edwards is the Lead Director, and he is expected to hold this position through the Company’s 2011 Annual Meeting of Shareholders.

 

Given the strong leadership of the Company’s Chairman of the Board, President and CEO, the counterbalancing role of the Lead Director, and a Board otherwise comprised of effective and independent directors, the Board believes that, based on the Company’s present circumstances, the Board’s current leadership structure is appropriate.

Board Oversight of Risk

 

The Board of Directors is responsible for overseeing the Company’s risk management practices, and committees of the Board assist it in fulfilling this responsibility.

 

As required by its Charter, the Audit Committee routinely discusses with management the Company’s significant risk exposures and the actions management has taken to limit, monitor or control such exposures, including programs that involve the Company’s assessment of risk and risk management. In this regard, the Board reviews with the Company on an annual basis the implementation of the Company’s Enterprise Risk Management Program (“ERMP”) which identifies and quantifies a broad spectrum of enterprise-wide risks in various categories, such as hazard, financial, operational, strategic, and technical, and related action plans. The ERMP is integrated with the Company’s strategic planning process so that any risk identified as strategic in nature has an action plan in place to mitigate or eliminate it. In addition, the Company’s Internal Audit and Legal Departments report to the appropriate committee on various matters related to the Company’s risk exposures on an regular basis or more frequently, as needed. Such matters may include a review of metrics related to the Company’s confidential communication hotline, Listen Up; reports of audits conducted by the Internal Audit Department; code of ethics or compliance-related matters; major litigation and regulatory exposures; and any other current matters that may present a material risk to the Company’s operations, plans or reputation. At their discretion, members of the Board may directly contact management to review and discuss any risk-related or other concerns that may arise in between regular meetings.

 

In 2010, as part of its risk management activities, the Company reviewed with the Compensation Committee its compensation policies and practices applicable to all employees that could affect the Company’s assessment of risk and risk management and determined that such compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.

 

The Board does not believe that its role in the oversight of the Company’s risks affects the Board’s leadership structure.

 

Code of Ethics

 

The Company has a Conflicts of Interest Policy, Business Ethics Policy and Use of Undisclosed Information Statement (“Code of Ethics”), which is the Company’s “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002. The Code of Ethics can be viewed on the Company’s website at www.hubbell.com. The Company requires all officers and Directors to certify compliance with the Code of Ethics on an annual basis. Waivers to the Code of Ethics as to officers and Directors may be made only by the Company’s Board of Directors or an appropriate committee of the Board of Directors, and will be promptly disclosed to Company shareholders through the Company’s website.

 

Communications with Directors

 

Shareholders and interested parties may communicate with either the Company’s Lead Director or with the Non-Management Directors as a group by using any of the following methods: (a) via Listen Up confidential communication: (i) electronically at http://www.listenupreports.com; (ii) fax to 1-312-635-1501; (iii) toll free to 1-888-789-6627; or (iv) by mail to Listen Up^tm/SAI Global, 101 Morgan Lane #301, Plainsboro, New Jersey 08536; or (b) by writing to: Board of Directors, c/o Richard W. Davies, Vice President, General Counsel and Secretary, Hubbell Incorporated, 40 Waterview Drive, Shelton, Connecticut 06484. Such communications will be distributed to the specific Director(s) requested by the interested party or, if generally to the Board, to other members of the Board as may be appropriate depending on the material outlined in the communication. For example, if a communication relates to accounting, internal accounting controls, or auditing matters, the communication will be forwarded to the Chair of the Audit Committee.

 

Board Committees

 

The Board of Directors has Audit, Compensation, Executive, Finance, and Nominating and Corporate Governance Committees. The principal responsibilities of each of these committees is described generally below,

and in detail in their respective Committee Charters. The Charter for each of the Company’s (i) Audit Committee, (ii) Compensation Committee, (iii) Finance Committee, and (iv) Nominating and Corporate Governance Committee are available on the Company’s website at www.hubbell.com. The Charter for the Executive Committee is incorporated into Article III, Section 1, of the Company’s By-Laws which are also posted on the Company’s website.

 

Audit Committee

 

Messrs. Guzzi, Hoffman, Keating and Van Riper, and Ms. Good serve as members of the Audit Committee, with Mr. Van Riper as Chairman. The Audit Committee consists of members who are “independent” as defined in the current NYSE listing standards and regulations adopted by the SEC under the federal securities laws. The Audit Committee appoints the independent registered public accounting firm to serve as auditors for the following year, subject to ratification by the shareholders at the annual meeting; meets periodically with the independent registered public accounting firm, internal auditors, and appropriate personnel responsible for the management of the Company and subsidiary companies concerning the adequacy of internal controls and the objectivity of the financial reporting of the Company; reviews and oversees the independence of the Company’s independent registered public accounting firm; reviews and discusses the Company’s internal audit function and its personnel; pre-approves the hiring of the independent registered public accounting firm for audit and non-audit services; and reviews and approves the scope of the audit and fees for the audit and non-audit services performed by the independent registered public accounting firm. The independent registered public accounting firm and the Company’s management and internal auditors each meet alone with the Audit Committee several times during the year and have access at any time to the Audit Committee. The Board of Directors has determined, in its business judgment, that each member of the Audit Committee is financially literate, at least one member of the Audit Committee meets the NYSE standard of having accounting or related financial management expertise and that Mr. Van Riper and Ms. Good each meet the SEC criteria of an “audit committee financial expert”. The Audit Committee met nine times in 2010.

 

Executive Committee

 

Messrs. Edwards, Hoffman, McNally, Powers, and Ratcliffe serve as members of the Executive Committee, with Mr. Ratcliffe as Chairman. The Executive Committee meets during intervals between meetings of the Board of Directors and may exercise all the powers of the Board of Directors in the management of the business, and properties and affairs of the Company, except certain powers set forth in the By-Laws of the Company. The Executive Committee did not meet in 2010.

 

Compensation Committee

 

Messrs. Edwards, McNally, Rodriguez, Swift, and Van Riper serve as members of the Compensation Committee, with Mr. Edwards as Chairman. The Compensation Committee consists of Directors who are “independent” as defined in the current NYSE listing standards and regulations adopted by the SEC under the federal securities laws. The Compensation Committee conducts an annual appraisal of the performance of the CEO and determines the compensation (base salary plus additional compensation and benefits) of the CEO. After consultation with the CEO (and the Chairman of the Board of Directors if a person other than the CEO is serving as Chairman), the Compensation Committee also determines the compensation of other members of the Company’s senior management group. The Compensation Committee evaluates the performance of the Chairman of the Board of Directors; determines equity grants under the Company’s 2005 Incentive Award Plan, as amended and restated; recommends (for approval) to the Board of Directors pension changes, and other significant benefits or perquisites; evaluates the Company’s compensation policies from a risk taking perspective; and reviews the members of the Company’s senior management group and plans for the development of qualified candidates, and reports to the Board of Directors annually. The Compensation Committee met five times in 2010.

 

Finance Committee

 

Messrs. Edwards, McNally, Powers, Ratcliffe and Rodriguez serve as members of the Finance Committee, with Mr. McNally as Chairman. The Finance Committee recommends to the Board of Directors of the Company

proposals concerning long- and short-term financing, material divestments and acquisitions, cash and stock dividend policies, programs to repurchase the Company’s stock, stock splits, and other proposed changes in the Company’s capital structure; periodically reviews the Company’s capital expenditure policy and recommends changes to the Board of Directors, where appropriate, and, when requested by the Board of Directors, reviews and makes recommendations to the Board of Directors with respect to proposals concerning major capital expenditures and leasing arrangements; monitors the Company’s effective tax rate and related tax matters; reviews annually the Company’s insurance programs and their adequacy to protect against major losses and liabilities; reviews and monitors the administration and asset management of the Company’s employee benefit plans, including the selection of investment and other advisors, the allocation of assets between fixed income and equity, the performance of plan investment managers and pension plan contributions; and reviews and monitors the administration of the Company’s cash and investment portfolios, including the Company’s investment guideline policies. The Finance Committee met five times in 2010.

 

Nominating and Corporate Governance Committee

 

Messrs. Guzzi, Hoffman, Keating and Swift, and Ms. Good serve as members of the Nominating and Corporate Governance Committee, with Mr. Swift as Chairman. The Nominating and Corporate Governance Committee consists of Directors who are “independent” as defined in the current NYSE listing standards and regulations adopted by the SEC under the federal securities laws. The Nominating and Corporate Governance Committee assists the Board of Directors in fulfilling its responsibilities by identifying individuals qualified to become Board members; recommending Director nominees to be elected at the next annual meeting of shareholders or appointed by the Board of Directors to fill vacancies on the Board; reviewing and recommending (for approval) to the Board of Directors compensation for service on the Board of Directors and its various committees, policies governing retirement from the Board of Directors, and individuals to serve as the Company’s officers and members of the various committees of the Board of Directors; reviewing and recommending to the Board (for approval) changes proposed by the Chairman of the Board and the CEO pertaining to the structure and appointment of the Company’s officers; and developing and recommending to the Board of Directors the adoption, or amendment, of the Guidelines and principles applicable to the Company. The Nominating and Corporate Governance Committee met seven times in 2010.

 

Director Nominations

 

Qualifications of Director Nominees

 

As set forth in the Guidelines, the Nominating and Corporate Governance Committee works with the Board on an annual basis to determine the size of the Board and the appropriate characteristics, skills and experience for the Board and its individual members. The Committee recommends to the Board candidates for Board membership in accordance with the Guidelines and the selection criteria outlined in its Charter. In evaluating suitability to the Board, the Committee considers candidates on the basis of their ability to make independent analytical inquiries; general understanding of marketing, finance and other elements relevant to the success of a publicly traded company in today’s business environment; educational and professional background; experience in corporate governance (such as an officer or a former officer of a publicly held corporation); experience in the Company’s industry; experience as a board member of another publicly held corporation; and academic expertise in an area of the Company’s operations. Candidates are assessed on the basis of their qualifications, experience, skills and ability to enhance shareholder value. The Nominating and Corporate Governance Committee and the Board evaluate each candidate in the context of the Board as a whole. The Board does not have a policy with regard to the consideration of diversity in identifying director nominees; rather the objective is to assemble a Board with diverse experience in these various areas that can best perpetuate the success of the business and represent shareholder interests through the exercise of sound judgment.

 

Each Director nominee possesses the appropriate characteristics, skills and experience specified in the Company’s Guidelines and the Nominating and Corporate Governance Committee Charter for membership to the Board of Directors. As a result, the Board is comprised of individuals with strong and unique backgrounds, giving the Board, as a whole, competence and experience in a wide variety of areas such as finance and accounting, operations, legal, investing, risk management, mergers and acquisitions, auditing, engineering, corporate governance and public company board service. Several nominees have served or are currently serving as CEO or CFO of reputable public companies in industries, like manufacturing and power, that share common characteristics with the

Company’s industry. Set forth below are summaries of the experience of the nominees considered by the Nominating and Corporate Governance Committee in assembling a Board best suited to represent the interests of the Company and its shareholders:

 

Mr. Powers brings to the Board many years of CFO, CEO and management, strategic development, and mergers and acquisitions experience in manufacturing industries, including:

 

 

Mr. Ratcliffe brings to the Board extensive legal, CFO and CEO and management, strategic development, and mergers and acquisitions experience, public corporation board experience and numerous years with the Company in a variety of capacities, including:

 

 

Ms. Good brings to the Board CFO and finance, auditing, and general management experience in the utility industry, including:

 

 

Mr. Guzzi brings to the Board CEO, COO, manufacturing, strategic development, operations and management consultant experience, including:

 

 

Mr. Keating brings to the Board an extensive history of senior executive leadership and board experience, with an emphasis on international operations, and mergers and acquisitions, including:

 

 

 

Mr. McNally brings to the Board many years of CEO, management and operations experience in the publishing industry and public and private corporation boards, mergers and acquisitions, finance, and analyzing risk experience, as well as service in merchant and investment banking, including:

 

 

Mr. Rodriguez brings to the Board many years of CFO, finance, operations, merger and acquisition, and banking and general management experience, including:

 

 

Mr. Swift possesses CEO experience, public corporation board experience, and a strong finance, engineering and corporate governance background, including:

 

 

Mr. Van Riper brings to the Board, CFO, public accounting, finance, audit, corporate governance, strategic planning, mergers and acquisitions, risk analysis, and public board experience, including:

 

 

Director Nomination Process

 

In searching for qualified Director candidates for election to the Board and to fill vacancies on the Board, the Board solicits current Directors for the names of potentially qualified candidates and may ask Directors to pursue

their own business contacts for the names of potentially qualified candidates. The Nominating and Corporate Governance Committee may also consult with outside advisors or retain search firms to assist in the search for qualified candidates and will consider suggestions from shareholders for nominees for election as Directors and evaluate such suggested nominees on the same terms as candidates identified by Directors, outside advisors or search firms selected by the Nominating and Corporate Governance Committee.

 

Once potential candidates are identified, the Nominating and Corporate Governance Committee reviews the backgrounds of those candidates. Candidates who appear to be suitable based upon their qualifications and the Board’s needs are then interviewed by the independent Directors and executive management. Candidates may be asked to submit additional information to the Company, after which the Nominating and Corporate Governance Committee makes its recommendation to the Board. If the Board approves the recommendation, the recommended candidate is nominated for election by the Company’s shareholders or the candidate is appointed by the Board to fill a vacancy on the Board.

 

Any shareholder who intends to propose a candidate to the Nominating and Corporate Governance Committee for nomination as a Director should deliver written notice to the Secretary of the Company with the following information: (a) the nominee’s biographical data (including business experience, service on other boards, and academic credentials), (b) all transactions and relationships, if any, between the nominating shareholder or such nominee, on the one hand, and the Company or its management, on the other hand, as well as any relationships or arrangements, if any, between the nominating shareholder and the nominee and any other transactions or relationships of which the Board of Directors should be aware in order to evaluate such nominee’s potential independence as a Director, (c) details of whether the nominee or the nominating shareholder is involved in any on-going litigation adverse to the Company or is associated with an entity which is engaged in such litigation and (d) whether the nominee or any company for which the nominee serves or has served as an officer or director is, or has been, the subject of any bankruptcy, SEC or criminal proceedings or investigations, any civil proceedings or investigations related to fraud, accounting or financial misconduct, or any other material civil proceedings or investigations. The notice must also contain a written consent confirming the nominee’s (a) consent to be nominated and named in the Company’s proxy statement and, if elected, to serve as a Director of the Company and (b) agreement to be interviewed by the Nominating and Corporate Governance Committee and submit additional information if requested to do so. Any such notice should be delivered to the Company sufficiently in advance of the Company’s annual meeting to permit the Nominating and Corporate Governance Committee to complete its review in a timely fashion.

 

Shareholder Nominations for Director

 

The Company’s By-Laws contain time limitations, procedures and requirements relating to direct nominations of Directors by shareholders of record. Any such shareholder who intends to bring before an annual meeting of shareholders any nomination for Director must deliver written notice to the Secretary of the Company. This notice must make certain representations, provide specified consents, and set forth specified information with respect to the shareholder and the nominee, including, without limitation, information as would be required under applicable securities law and SEC regulations in a proxy statement used to solicit proxies for the nominee. In general, the notice must be delivered not less than seventy days nor more than ninety days prior to the first anniversary of the preceding year’s annual meeting (or, if the date of the 2012 Annual Meeting of Shareholders is more than twenty days before or more than seventy days after May 7, 2012, notice by the shareholder must be so delivered not earlier than ninety days prior to the meeting and not later than seventy days prior to the meeting or the tenth day following the date on which public disclosure of the date of the meeting is first made by the Company). If, however, the number of Directors to be elected at the 2012 Annual Meeting of Shareholders is increased and there is no public announcement by the Company naming all of the nominees for Director or specifying the size of the increased Board of Directors at least eighty days prior to May 7, 2012, notice will also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is delivered to the Secretary of the Company not later than the close of business on the tenth day following the day on which such public announcement is first made by the Company. The Company’s By-Laws can be viewed on its website at www.hubbell.com.

COMPENSATION DISCUSSION AND ANALYSIS

 

This section of the proxy statement describes the material elements of the 2010 compensation program for the named executive officers in the Summary Compensation Table. In an attempt to make the materials easier to read and comprehend, we have added an Executive Summary providing an overview of our business and our compensation philosophy. Also, included in this section is a listing of material changes made to our compensation plans to ensure our plans are both competitive in design and aligned with the interests of our shareholders. Following the summary, we will provide a traditional review of each element of executive compensation.

 

Executive Summary

 

We are an international manufacturer of quality electrical and electronic products for a broad range of non-residential and residential construction, industrial and utility applications. Our operations are organized into two business segments, the Electrical segment and the Power segment. The Electrical and Power segments represent approximately 71% and 29%, respectively, of our total revenue for 2010.

 

Our compensation decisions for 2010 were directly influenced by the operating results for the year, reflecting the strong relationship between pay and performance. 2010 was a strong performance year for the Company. Sales grew to $2.5 billion or 8% and operating margin of 14.5% was up 200 basis points compared to 2009. In addition, the strong results were reflected in a total return to shareholders of approximately 30%.

 

To provide context to the decisions made regarding our executive compensation, it is helpful to understand the objectives that guide our decisions. Our compensation objectives are as follows:

 

 

Given these objectives, numerous actions and decisions have been made to our executive compensation programs in recent years as approved by our Compensation Committee with counsel from its independent consultant, ExeQuity, LLP (“ExeQuity”). Some noteworthy examples are included below:

 

 

 

 

 

 

Overview

 

The Company has adopted an incentive pay-for-performance philosophy which is intended to reward our executives for their contributions towards the Company’s business strategy and goals. In order to achieve our compensation objectives, the Company provides its executives with a total direct compensation package consisting of three elements:

 

 

Executives also receive indirect compensation through employee benefit plans, limited perquisites and severance protection.

 

The total direct compensation described above consists of both variable (annual short-term and long-term incentive opportunities) as well as non-variable compensation (base salary, benefit plans and perquisites). Variable compensation is linked to performance on a short- and long-term basis and represents the greatest portion of an executive’s total direct compensation. Non-variable compensation offers a stable source of income and is based on the executive’s functional role and responsibilities, competitive position and the ability of the executive to influence the Company’s performance. The combination of variable and non-variable compensation provides Company executives with income that is reflective of competitive benchmarks which enhances the Company’s ability to attract and retain key management.

The Role of the Compensation Committee and Compensation Consultant

 

The Compensation Committee determines the Company’s compensation philosophy and approves each element of the Company’s executive officers’ compensation. In determining the amount of total direct compensation for the named executive officers, the Compensation Committee relies on the advice of and data provided by ExeQuity, an independent outside compensation consultant engaged by the Committee. ExeQuity advises the Compensation Committee with respect to named executive officer compensation. ExeQuity does not advise the management of the Company, and receives no compensation from the Company for services other than as directed by the Compensation Committee and the Nominating and Corporate Governance Committee (for which ExeQuity provides guidance with respect to independent Director compensation).

 

In 2010, the Compensation Committee discussed its compensation philosophy with ExeQuity, but otherwise did not impose any specific limitations or constraints on, or otherwise direct, the manner in which ExeQuity performed its advisory services. As advisor to the Compensation Committee, ExeQuity reviewed the total compensation strategy and pay levels for the Company’s named executive officers, examined all aspects of the Company’s executive compensation programs to ensure their ongoing support of the Company’s business strategy, informed the Compensation Committee of developing legal and regulatory considerations affecting executive compensation and benefit programs, and provided general advice to the Compensation Committee with respect to all compensation decisions pertaining to the CEO and to all senior executive compensation recommendations submitted by management.

 

The Compensation Committee considers recommendations made by the CEO with respect to executive compensation. However, the Compensation Committee is the sole determiner of all final executive compensation decisions.

 

Benchmarking

 

ExeQuity supplied the Compensation Committee with compensation data for each element of the total compensation package (base salary, and short-term and long-term incentive awards). The Compensation Committee benchmarked to the median pay levels for specific positions at manufacturing companies represented in the Hewitt Associates Total Compensation DataBase^tm which equates to a community of over 300 companies in the U.S. general manufacturing sector. The data relied upon by the Compensation Committee was a statistical summary of the pay practices for the manufacturing companies in that database and was not representative of any individual companies. In fact, the Compensation Committee did not examine the pay practices in effect at any individual company whose pay practices are reflected in the statistical summary. Throughout this Compensation Discussion and Analysis (“CD&A”) references to “benchmarking”, “competitive data” or “market” refer to this statistical summarized data.

 

The Compensation Committee benchmarks the Company’s executive compensation levels to the practices of such general manufacturing companies because it believes that the source and the destination of the Company’s senior executive talent extends beyond the limited community of electrical manufacturers and includes a wide range of other organizations in the manufacturing sectors outside the Company’s traditional competitors for products and services. Benchmarking pay practices to a broad representation of general industry ensures that the Company sets its pay at such levels as will position it to attract and retain qualified senior executives in the face of competing pressures in the Company’s relevant labor markets.

 

The Compensation Committee’s review of the data in 2010 showed the Company’s total pay structure for its executives to be competitive with 50th percentile practices in that external market, the position to which the Committee aims to manage executive compensation opportunities. The actual base salary and target total cash (base salary plus short-term incentive award targets) for the named executive officers as a group were positioned close to the 50th percentile, with total target compensation (total target cash plus the grant date value of long-term incentive opportunities) below the median at approximately the 41st percentile.

 

In addition to reviewing the compensation levels of the benchmark group, to aid in its administration of the Company’s compensation program, the Compensation Committee also reviews tally sheets totaling 2010 compensation for each of the named executive officers. These tally sheets identify and value each component

of the named executive officer’s compensation, including base salary, short-term and long-term incentive awards, pension benefits, deferred compensation, perquisites, and potential change in control and severance benefits, and provide an aggregate sum for each executive.

 

Elements of Compensation

 

Because of the ability of executive officers to directly influence the overall performance of the Company, and consistent with our philosophy of linking pay to performance, our goal is to allocate a significant portion of compensation paid to our executive officers to performance-based, short- and long-term incentive programs. We strive to allocate total compensation in a manner that is market competitive with our peer groups. The table below illustrates the mix of target total compensation for the named executive officers based on compensation in 2010 (excluding any discretionary bonuses):

 

 

Base Salary

 

Base salaries are determined by reference to competitive data and individual levels of responsibility. As noted previously, the Company defines its market competitive position for base salaries as the 50th percentile of the market data. This benchmark represents the Compensation Committee’s belief that base compensation, which is not performance-based, should be competitive in order to attract and retain qualified individuals. In December 2009, management requested, and the Committee approved, that the named executive officers receive no base salary increase for 2010 in light of the challenging economic environment. In 2010, after considering the Company’s year over year performance and the improved economic environment, and to better reflect market rates, the Committee considered and approved base salary increases for the named executive officers for 2011.

 

Short-Term Incentive Compensation (Non-Equity)

 

Like base salaries, annual short-term incentive awards are targeted at 50th percentile levels for similarly-sized companies across general industry. Short-term incentive awards for executives are paid pursuant to the Company’s Incentive Compensation Plan and Senior Executive Incentive Compensation Plan (“Senior Plan”). Individual short-term incentive award target levels for each executive are determined by reference to competitive data provided by ExeQuity, though the actual amount of short-term incentive awards paid to each executive reflect achievement of Company financial and strategic plan goals which include factors such as free cash flow, operating profit and earnings per diluted share (“EPS”). Short-term incentive award target levels (“STI Target”) are measured as a percentage of 2010 base salaries as indicated below:

 

 

Messrs. Muse, Amato and Tolley participated in the Incentive Compensation Plan in 2010. Messrs. Powers and Nord participated in the Senior Plan, a program that is specifically designed so as to protect for the Company the tax deductibility of short-term incentive awards earned by Messrs. Powers and Nord.

 

Incentive Compensation Plan

 

The Incentive Compensation Plan is structured to closely resemble the design of executive short-term incentive award plans that are common at other companies in the general manufacturing environment. Maintaining a short-term incentive award plan that typifies those used elsewhere enhances the appeal of the Company’s

compensation program generally and strengthens the Company’s ability to attract and retain high quality executive talent.

 

The Incentive Compensation Plan authorizes the creation of an incentive compensation fund each year equal in amount to 15% of the excess of the Company’s consolidated earnings over 10% of the beginning year invested capital and long-term debt. Actual short-term incentive awards are paid from the authorized fund based on the extent to which the Company achieves Compensation Committee-approved performance goals with respect to essential operating measures such as EPS, operating profit and free cash flow, as well as other strategic objectives as determined at the discretion of the Compensation Committee.

 

Incentive Compensation Plan participants can earn from 50% to 200% of their STI Target each year based on performance. However, if performance falls below a pre-established minimally acceptable threshold, then no short-term incentive award is payable at all.

 

Senior Plan

 

Section 162(m) of the Internal Revenue Code of 1986, as amended, (the “Code”) imposes a $1 million limit on the amount that a public company may deduct for compensation paid to its Chief Executive Officer or any of the Company’s other named executive officers, other than the Chief Financial Officer, who are employed as of the end of the fiscal year. This limitation does not apply to compensation that meets the requirements under Section 162(m) for “qualifying performance based” compensation (i.e., compensation paid only if the executive’s performance meets certain pre-established goals approved by the Compensation Committee). Short-term incentive awards paid under the Company’s Senior Plan are intended to be exempt from the deduction limit of Code Section 162(m). Like many other public companies that utilize similar plans (including many general manufacturing companies), the Senior Plan is intended to provide the Company with the ability to pay performance-based compensation to senior executives that are deductible by the Company for federal income tax purposes to the maximum extent permitted by the Code.

 

Similar to the Incentive Compensation Plan, short-term incentive awards under the Senior Plan are earned contingent on the achievement of Compensation Committee-approved goals, and payable from the incentive compensation fund described in connection with the Incentive Compensation Plan. Under the Senior Plan, for example:

 

Mr. Powers was eligible to earn a maximum amount for 2010 equal to the lesser of:

 

 

Mr. Nord’s maximum amount for 2010 was the lesser of:

 

 

After the maximum possible payout under the Senior Plan is determined, the Compensation Committee may use its discretion, as permitted under the Senior Plan and Section 162(m) of the Code, to decrease (but not increase) the actual amount of the short-term incentive awards paid under the Senior Plan. In exercising its discretion to reduce the amounts paid to Messrs. Powers and Nord under the Senior Plan, the Compensation Committee considered the same EPS and free cash flow performance goals, weightings and formulation that it applied to the Incentive Compensation Plan participants and awarded for Messrs. Powers and Nord the amounts displayed in the Summary Compensation Table on page 30 based upon the performance results described in the table below. Thus, although 2010 short-term incentive awards were paid to Messrs. Powers and Nord under the Senior Plan, they received the same short-term incentive award they would have received for 2010 had they each participated in the Incentive Compensation Plan.

2010 Performance Measures and Payout

 

Corporate Officers.  For 2010, the Compensation Committee identified two measures of performance that it would use as principal considerations in its assessment of performance for purposes of determining short-term incentive awards: EPS and free cash flow (cash flow from operations less capital expenditures). EPS was identified because it was deemed by the Compensation Committee to affect shareholder value most directly and to be an important variable in determining share price. Free cash flow was identified because it is an important determinant in Company performance. For Corporate Officers, including Messrs. Powers and Nord, short-term incentive awards were paid on achievement of established EPS and free cash flow targets as set forth in the table below:

 

 

If the minimum levels of EPS of $2.60 and free cash flow of $164M were not obtained, then no short-term incentive award was to be paid. For EPS and free cash flow between the minimum and maximum, the amount of short-term incentive awards were to be interpolated on a straight-line basis. For 2010, EPS was $3.74, before the impact of debt extinguishment, and free cash flow was $215 million before the impact of debt extinguishment and the deferral of a significant capital investment. Therefore, the actual amount of short-term incentive awards payable to Messrs. Powers and Nord under the Senior Plan, resulted in a composite payout of 165% of their respective STI Target, the same calculation as other Corporate Officers. Accordingly, the short-term incentive awards earned by Messrs. Powers and Nord as shown in the Summary Compensation Table on page 30 reflect this level of achievement.

 

Group Vice Presidents.  In addition to EPS and free cash flow measured in the same manner as for Messrs. Powers and Nord described above, the group vice presidents’ short-term incentive awards were principally determined using a composite of (i) operating profit and free cash flow objectives specific to the group vice presidents’ business unit (for Mr. Muse, the lighting business (“Lighting”), for Mr. Amato, the electrical systems business (“Electrical Systems”), and for Mr. Tolley, the power systems business (“Power”)), and (ii) strategic objectives that were identified as being important indicia of success for the group vice president’s respective business unit. The weightings of each performance measure and the potential payout for Messrs. Muse, Amato and Tolley were as follows:

 

 

Focusing a significant portion of the group vice presidents’ potential short-term incentive award on operating profit and free cash flow results was deemed by the Compensation Committee to promote decision making that would best increase the value of the business unit with respect to which the officer has direct oversight and control. The operating profit, EPS and free cash flow targets were the only targets material to the consideration of

Messrs. Muse’s, Amato’s and Tolley’s annual short-term incentive award. The strategic objectives for Messrs. Muse, Amato and Tolley were selected by the Compensation Committee after identifying with management certain objectives that relate to central elements for the strategic plan of each business. However, no single strategic objective was a material consideration in the Committee’s determination of an annual short-term incentive award. Some of the strategic objectives were formula driven, others were not, reflecting instead the Compensation Committee’s judgment with respect to achievements in improving the Company’s safety performance and leveraging the Company’s enterprise business system including advancements in standardized reporting and available functionality.

 

The following section discusses the performance results and payout of each of the group vice president’s businesses applying the performance measures discussed above:

 

Mr. Amato.  The Electrical Systems business achieved operating profit performance that was 32% better than target which translated to a performance result for Mr. Amato of 200% on the operating profit measure. The Electrical Systems business achieved free cash flow performance of 122% of target. This performance translated to a performance result of 200% on the free cash flow measure. When blended together to form the composite measure (75% weight operating profit plus 25% weight free cash flow within the Electrical Systems business), Mr. Amato earned a 200% payout on this measure or 140% when the relative weighting was applied. The Compensation Committee assessed Mr. Amato’s performance on the strategic objectives and determined that such results corresponded to a performance level of 200%. As a result, Mr. Amato’s actual short-term incentive award for 2010 is indicated in the following table:

 

 

Mr. Muse.  The Lighting business achieved operating profit performance 7% better than target which translated to a performance result for Mr. Muse of 134% on the operating profit measure. The Lighting business achieved free cash flow performance of 92% of target. This performance translated to a performance result of 80% on the free cash flow measure. When blended together to form the composite measure (75% weight operating profit plus 25% weight free cash flow within the Lighting business), Mr. Muse earned a 120% on the composite measure or 84% payout when the relative weighting was applied. The Compensation Committee assessed Mr. Muse’s performance on the strategic objectives and determined that such results corresponded to a performance level of 160%. As a result, Mr. Muse’s actual short-term incentive award for 2010 is shown in the following table:

 

 

Mr. Tolley.  The Power business achieved operating profit performance that was 4% below target which translated to a performance result for Mr. Tolley of 90% on the operating profit measure. The Power business achieved free cash flow performance of 86% of target. This performance translated to a performance result of 64%

on the free cash flow measure. When blended together to form the composite measure (75% weight operating profit plus 25% weight free cash flow within the Power business), Mr. Tolley earned an 83% payout on this measure or 58% when the relative weighting was applied. The Compensation Committee assessed Mr. Tolley’s performance on the strategic objectives and determined that such results corresponded to a performance level of 160%. As a result, Mr. Tolley’s actual short-term incentive award for 2010 is shown in the following table:

 

 

Bonus

 

In addition to the performance-based short-term incentive awards paid under the Incentive Compensation Plan and the Senior Plan, for 2010 the Compensation Committee awarded a discretionary bonus to Mr. Amato in the amount of $100,000. The Compensation Committee determined that it was appropriate to provide Mr. Amato with this bonus based on Mr. Amato’s strong leadership in delivering superior performance for the Electrical business.

 

Long-Term Incentive Compensation (Equity)

 

The Company matches compensation practices in the general manufacturing sector by extending to its executives the opportunity to earn rewards in the form of Company shares. The long-term incentive compensation program is the means by which shares are earned. The objectives of the long-term incentive compensation program are to:

 

 

The Compensation Committee also understands from its review of the benchmark data that delivering long-term incentive award value in a blend of these formats is similar to how other companies in the manufacturing sector are delivering equity awards to executives in senior leadership positions. The value of long-term incentive awards granted to executives each year is based on several factors, including a review of external practices as provided by ExeQuity, the Compensation Committee’s assessment of the Company’s financial performance in the short- and long-term, and the value of awards granted in prior years.

 

The Compensation Committee determined that the best balance of the Company’s interests in motivating, retaining and rewarding the named executive officers, is by having 50% of each executive’s long-term incentive award value in the form of SARs, 25% in restricted stock, and 25% percent in performance shares. This particular blend of award formats was viewed by the Compensation Committee as being representative of the prevailing mix in the external market. This decision to align the Company’s mix of long-term incentive award grants with the benchmark norm was deemed to be consistent with the Company’s broader objective of extending market representative pay opportunities.

 

In December 2010, the Compensation Committee approved for the named executive officers awards of Class B Common Stock in the form of restricted stock, SARs and performance shares. The Committee believes granting awards in these formats uses shares efficiently while increasing executive stock ownership commensurate with the

Company’s performance. More specifically, the Compensation Committee deems the issuance of these particular award types to satisfy the Company’s compensation objectives in the following manner:

 

 

Long-term incentive grants are usually made once a year, after the Compensation Committee has assessed the Company’s performance for such year. Historically, restricted stock, SARs, stock options and performance share grants have been made at the Compensation Committee’s regularly scheduled meeting held in early December, with limited exceptions related to newly appointed or promoted executives, or in connection with an acquisition.

 

Restricted Stock Awards.   Restricted stock provides incentives for executives to remain employed by the Company and to create and maintain value for shareholders since the value of a restricted share depends on the executives continued employment and the value of the Company’s stock on the vesting date. Restricted share awards are granted in shares of the Company’s Class B Common Stock and generally vest in three equal installments on the anniversary of the grant date.

 

SARs and Stock Options.   A SAR gives the right to the holder to receive, once vested, the value in shares of the Company’s Class B Common Stock equal to the positive difference between the base price and the market value of a share of Class B Common Stock upon exercise. Generally, SARs vest in three equal installments on the anniversary of the grant date. The Company has not granted stock options since 2004, however, grants made prior to 2004 are vested and may remain outstanding.

 

The base price pursuant to which the value of a SAR is measured is the mean between the high and low trading prices of Class B Common Stock as reported on the New York Stock Exchange on the trading day immediately preceding the date of grant (i.e. December 3, 2010 — $59.95). The Company uses the mean between the high and low trading prices on the date immediately before the date of grant and not the closing price of its stock on the date of grant for two reasons: First, using trading prices from the day before the grant enables the Compensation Committee to know the exact grant price and therefore determine the exact value of each grant before it is made. Second, because of the relatively low volume at which the Company’s stock trades suggests that the mean represents a more accurate picture of the fair market value of the stock than does the closing price. For purposes of determining individual award levels, the value of each SAR is formulated on the basis of a modified Black-Scholes calculation that is provided to the Compensation Committee by an independent consulting organization.

 

Performance Share Awards.   Performance share awards give the executive the ability to earn shares of the Company’s Class B Common Stock upon satisfaction of certain pre-established performance measures within a stated period of time. In 2010, performance shares were granted and could be earned based on the Company’s total return to shareholders (“TRS”) over a three-year performance period compared to the TRS generated by the other companies that comprise the S&P Mid-Cap 400 Index (“Index”). The number of performance shares to be paid under this grant is determined based on the Company’s relative performance per the following schedule which shows the potential payout as a percent of the target award. The performance and payouts will be rounded to the nearest percentage.

 

 

 

 

Importantly, all performance share awards are subject to a shareholder protection mechanism such that no shares will be paid in the event the Company’s TRS over the three-year performance period falls below the 35th percentile of the Index. The performance shares therefore provide pay only in the event of performance thereby linking the named executive officer’s incentives to shareholder interests and returns.

 

The performance share grant of December 3, 2007, having a performance period of January 1, 2008 to December 31, 2010, will be paid out in 2011 based upon the Company’s achievements with respect to two equally weighted performance measures: TRS and operating margin improvements. At the end of the performance period, the Company achieved TSR performance at the 71st percentile of the Index resulting in a 170% payout, and operating margin improvement of 2.66% basis points resulting in an 66% payout. When blended to form the composite measure (50% weight TRS plus 50% weight operating margin improvements), the resulting payout was 118% thereby earning Messrs. Powers, Nord, Amato, Muse and Tolley 13,322, 3,542, 2,275, 2,924 and 1,949 shares, respectively.

 

Compensation Policies

 

Stock Ownership and Retention Policy

 

The Company has a stock ownership and retention policy which is applicable to the named executive officers as well as other officers and designated employees. The policy requires such employees, consistent with their responsibilities to the shareholders of the Company, to hold a significant equity interest in the Company.

 

In an effort to maintain consistency with current market practice and external benchmarks, the Compensation Committee reviewed the current design of the Stock ownership and retention policy. In February 2011, upon the recommendation of the Compensation Committee, the Board approved of amendments to the policy that would better reflect evolving market practices and ensure that the interests of the employees bound by the policy are properly aligned with the interests of the Company’s shareholders. The amendments to the policy are summarized below:

 

 

Accordingly, under the policy employees are expected to attain share ownership equal to their base salary times a certain multiplier, as indicated below:

 

 

The policy also provides that until the minimum share ownership level is met, an employee is expected to retain fifty percent (50%) of the net shares acquired pursuant to the exercise of a stock option or SAR. Once the minimum share ownership level is satisfied, the employee is expected to continue to satisfy such requirement for so long as he or she is subject to the policy. Shares that count toward the minimum share ownership requirement include shares held directly and indirectly by the employee, including restricted stock held pursuant to the 2005 Incentive Award Plan, as amended and restated. Shares underlying unexercised options or SARs, and unearned performance shares are not counted.

Compensation Recovery Policy

 

The Company has a compensation recovery policy under which, if an executive is determined to have engaged in fraud or other gross misconduct which contributed in whole or in part to a restatement of the Company’s financial results, the Board may take disciplinary action which may include one or more the following:

 

 

All actions taken under this policy will be determined by the Board of Directors in its sole discretion, upon consultation with the Audit Committee and the Nominating and Corporate Governance Committee.

 

Employee Benefits

 

Named executive officers also receive employee benefits that are generally applicable to all employees, as well as certain retirement benefits, perquisites, severance and change in control protections. These additional benefits are of the type and amount available to other senior executives of manufacturing companies as demonstrated in the benchmarked data. The Compensation Committee believes that it is necessary to provide these benefits to executives in order to remain market competitive in attracting and retaining qualified executives.

 

Retirement Plans and Nonqualified Deferred Compensation Plans

 

In addition to the retirement plans which are made generally available to employees of the Company, which include a tax qualified defined benefit plan (“Basic Plan”) and a defined contribution plan consisting of a 401(k) plan and a discretionary profit sharing contribution plan (“Contribution Plan”), the named executive officers and certain other selected executive officers participate in various supplemental retirement plans and deferred compensation plans, which allow them to earn additional retirement benefits.

 

The Basic Plan and Contribution Plan are intended to provide employees, including named executive officers, with retirement income. Only the Company contributes to the Basic Plan whereas both the Company and the employee contribute to the Contribution Plan. Employees hired after December 31, 2003 are not eligible to participate in the Basic Plan, but participate only in the Contribution Plan. The Company determined to no longer offer the Basic Plan to new employees after 2003, as it was no longer necessary in order to attract talent in the marketplace. Instead, the Company emphasized participation in the Contribution Plan with matching contributions and a discretionary profit sharing contribution which are more in line with current competitive retirement compensation practices.

 

In addition to the Basic Plan and the Contribution Plan, the named executive officers participate in supplemental retirement plans available to selected senior management employees of the Company, which include the Top Hat Restoration Plan (the “Restoration Plan”) and either the Supplemental Executive Retirement Plan (the “Executive Plan”) or the Supplemental Management Retirement Plan (the “Management Plan”) both of which are closed to new participants. The Restoration Plan is an “excess benefit plan” pursuant to which participants in the Basic Plan receive additional retirement benefits, calculated in the same manner as benefits are calculated under the Basic Plan but without regard to the applicable limits on compensation or benefit accruals under the Basic Plan as required by the tax-qualified plan rules.

 

Effective January 1, 2011, the Company adopted the Defined Contribution Restoration Plan (the “DC Plan”), also an “excess benefit plan,” pursuant to which each employee, including each named executive officer, who is eligible to participate in the Contribution Plan will receive Company contributions equal to the discretionary profit-sharing contributions such employee would have received under the Contribution Plan absent the compensation limits under the Contribution Plan as required by the tax-qualified plan rules less the amounts of discretionary profit-sharing contributions such employee received under the Contribution Plan. The Restoration Plan, Executive Plan, Management Plan and DC Plan are intended to promote the retention of our eligible senior management

employees by providing them with the opportunity to earn pension benefits which supplement the benefits available under the Company’s tax-qualified retirement plans.

 

The Company also maintains the Executive Deferred Compensation Plan (“EDCP”), a nonqualified deferred compensation plan which permits selected individuals, including our named executive officers, to defer the receipt of a portion of their annual short-term incentive compensation and provides for discretionary company matching contributions. The purpose of the EDCP is to provide a tax- and retirement-planning tool to selected individuals and thus assist the Company in attracting and retaining senior management.

 

Additional information on the retirements plan discussed in this section can be found under the section entitled “Retirement Plans” and the accompanying narrative to the Pension Benefits in Fiscal Year 2010 table on page 36. Information on the EDCP can be found under the section entitled “Non-Qualified Deferred Compensation” and the accompanying narrative to the “Non-Qualified Deferred Compensation in Fiscal Year 2010” table on page 38.

 

Perquisites

 

The Company provides limited perquisites to its named executive officers. These perquisites provide flexibility to the executives and increase travel efficiencies, thereby allowing more productive use of executive time; protect the executive’s financial health and thus the Company’s investment in their development; and encourage active involvement in Company marketing efforts. The Company examines the competitiveness of the perquisites offered and the evolving competitive landscape and recommended to the Compensation Committee which determined in 2010 to eliminate the perquisite of Company-provided country club memberships. More detail on the Company’s perquisites can be found in the narrative following the Summary Compensation Table on page 32.

 

Severance and Change in Control Benefits

 

In addition to retirement benefits, the Company provides for certain severance benefits in the event a named executive officer’s employment is involuntarily or constructively terminated. Such severance benefits are designed to alleviate the financial impact of a termination through base salary and health benefit continuation, as well as outplacement services, and with the intent of providing for a stable work environment. In addition to general severance, the Company provides enhanced benefits in the event of a change in control as a means of reinforcing and encouraging the continued attention and dedication of senior executives of the Company to their duties of employment without personal distraction or conflict of interest in circumstances which could arise from the occurrence of a change in control.

 

The Company extends severance and change in control benefits because they are essential to help the Company fulfill its objectives of attracting and retaining key managerial talent. The decision to offer these benefits did not influence the Compensation Committee’s determinations concerning other direct compensation or benefit levels. In making the decision to extend the benefits, the Compensation Committee relied on ExeQuity and determined in December 2010, that certain modifications to the Company’s existing severance and change in control benefits were appropriate in order to better align with policy statements put forth by governance rating agencies and emerging market practices in the area of severance and change in control compensation. In particular, the Compensation Committee’s review of such policy statements and market practices elsewhere demonstrated that the magnitude of the lump sum cash benefits payable following certain change in control-related terminations (2.75 or less times base salary plus short-term incentive award) and the elimination of the Company’s payment of gross ups to cover excise taxes more closely reflect emerging industry standards. Accordingly, effective December 31, 2010, the Company replaced all of its existing Continuity Agreements with new Change in Control Severance Agreements containing these and other provisions deemed by ExeQuity to better represent the types and amounts of compensation benefits payable upon a change in control.

 

The Compensation Committee also reviewed the Company’s general severance benefits in light of current market trends and in February 2011 determined to revise the Company’s general Severance Policy to better reflect its understanding of current best practices regarding severance benefits. Additional information on the Company’s severance and change in control benefits can be found under the section entitled “Potential Post-Employment and Change in Control Payments” and the accompanying tables and narrative on page 39.

Tax Deductibility of Compensation

 

Section 162(m) of the Code establishes an annual $1 million limit on the amount that the Company can deduct for compensation paid to its Chief Executive Officer and its three other most highly paid executive officers (other than its Chief Financial Officer), unless the compensation in excess of $1 million is performance-based. Payments under the Senior Plan, stock options and SARs granted under the Company’s LTI Plans with an exercise price of at least fair market value, and performance shares granted under the 2005 Incentive Award Plan, as amended and restated, are intended to qualify as performance-based compensation exempt from the limitations of Section 162(m) of the Code.

 

The Compensation Committee believes that it is in the Company’s best interests to maintain flexibility in the administration of the compensation program. In order to retain the flexibility to compensate the Company’s management in the manner best promoting the Compensation Committee’s policy objectives, the Compensation Committee does not require that all compensation be deductible. Accordingly, payments under the Incentive Compensation Plan and grants of restricted stock are not intended to qualify as performance-based compensation and may be subject to the $1 million deductibility limitation of Section 162(m) of the Code.

 

Compensation Committee Report

 

The Committee has reviewed the Compensation Discussion and Analysis and discussed its contents with members of the Company’s management. Based on this review and discussion, the Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K and in this Proxy Statement.

 

Compensation Committee

 

George W. Edwards, Jr., Chairman

Andrew McNally IV

Carlos A. Rodriguez

Richard J. Swift

Daniel S. Van Riper

EXECUTIVE COMPENSATION

 

The following table sets forth the total cash and other compensation paid or accrued by the Company for services rendered to the Company and its subsidiaries by the Company’s named executive officers for the year ended December 31, 2010.

 

Summary Compensation Table for Fiscal Year 2010

 

 

 

 

 

 

 

Grants of Plan-Based Awards in Fiscal Year 2010

 

 

 

 

 

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table

 

See the CD&A above for a complete description of the compensation plans pursuant to which the amounts listed under the Summary Compensation Table and Grants of Plan-Based Awards Table were paid or awarded and the criteria for such payment.

 

Salary.  The values set forth in the table reflect salary paid in 2010.

 

Short-Term Incentive Compensation (Non-Equity).  The calculation of short-term incentive amounts in the Summary Compensation Table and the target, minimum and maximum amounts set forth in the Grants of Plan-Based Awards Table are based upon the salary of the named executive officers at December 31, 2010.

 

Long-Term Incentive Compensation (Equity).  SARs and restricted stock vest in three equal annual installments on the anniversary of the grant date based on continued service, and fully vest upon death, disability or a change in control. SARs generally have a term of and will expire on the tenth anniversary of their grant date. However, SARs will expire 90 days following termination of employment for reasons other than death or retirement. Upon death, vested SARs remain exercisable for one year. Upon disability, vested SARs are exercisable until the earlier of one year following termination of employment if death occurs within 90 days of termination of employment, or the tenth anniversary of the grant date.

 

Performance shares are payable at target level if the participant dies, becomes disabled or there is a change in control prior to the expiration of the three-year performance period. The following table summarizes the vesting and exercise periods of each unvested equity award in the event of termination due to death or disability:

 

 

The vesting and exercise periods for all restricted stock, SARs, stock options, and performance share awards upon retirement or a change in control, as applicable, are discussed under the section entitled “LTI Plans” on page 42.

Perquisites

 

In addition to participation in other employee benefit plans that are generally applicable to all employees, named executive officers are eligible for the following perquisites:

 

 

Outstanding Equity Awards at Fiscal Year End

 

The following table provides information on all restricted stock, SAR, stock option, and performance share awards held by the named executive officers of the Company and the value of such holdings measured as of December 31, 2010. All outstanding equity awards are in shares of the Company’s Class B Common Stock.