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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.     )

Filed by the Registrant    x

Filed by a Party other than the Registrant    ¨

Check the appropriate box:

BARNES GROUP INC.

(Name of Registrant as Specified In Its Charter)

BARNES GROUP INC.

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

Payment of Filing Fee (Check the appropriate box):

Notes:

Reg. (S) 240.14a-101.

SEC 1913 (3-99)

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Barnes Group Inc.

Executive Office

123 Main Street

Post Office Box 489

Bristol, Connecticut 06011-0489 U.S.A.

Tel. (860) 583-7070

April 10, 2007

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD MAY 9, 2007

You are invited to attend the Annual Meeting of Stockholders of Barnes Group Inc. which will be held at the Sheraton Bradley International Hotel, 1 Bradley International Airport, Windsor Locks, Connecticut 06096, at 11:00 a.m. on Wednesday, May 9, 2007, for the following purposes:

Stockholders of record at the close of business on March 13, 2007 will be entitled to vote at the meeting.

Your vote is important. Please VOTE AS SOON AS POSSIBLE BY PROXY USING THE TELEPHONE OR INTERNET as described in the enclosed proxy card or, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED, whether or not you plan to attend the meeting.

Signe S. Gates

Secretary

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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS

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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS

MAY 9, 2007

This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of Barnes Group Inc., which is referred to in this proxy statement as the “Company”, of proxies to be voted at the Annual Meeting of Stockholders to be held on May 9, 2007 and at any adjournment thereof. A stockholder who votes by proxy using the telephone or the Internet as described in the proxy card, or signs and returns a proxy card in the accompanying form, may revoke it by notifying the Secretary of the meeting in person or in writing (including by delivery of a later dated proxy) at any time before it is voted. This Proxy Statement and the enclosed form of proxy are being sent to stockholders on or about April 10, 2007.

ELECTION OF DIRECTORS (Proxy Proposal 1)

The Board of Directors Recommends a Vote “For” All Nominees.

Four directors are nominated for re-election to the Board of Directors for a three-year term (unless any of them earlier dies, resigns, retires or is removed, as provided in the Company’s By-laws). John W. Alden, George T. Carpenter, Frank E. Grzelecki and William J. Morgan are nominated for re-election to the Board of Directors for terms expiring at the Annual Meeting of Stockholders in 2010. Directors are elected by a plurality of the votes cast. Proxies may be voted only for the number of nominees named by the Board of Directors.

Pertinent information concerning the nominees for re-election as directors and the seven directors whose terms continue after the meeting is set forth below. Each director has been associated with his or her present organization for at least the past five years unless otherwise noted. None of the organizations listed as business affiliates of the directors is a subsidiary or other affiliate of the Company.

Nominees for Re-election

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Continuing Directors

Term expiring in 2008

		William S. Bristow, Jr. Director since 1978 Current term expires 2008   Mr. Bristow, 53, is President of W.S. Bristow & Associates, Inc., which is engaged in small business development. He is Chairperson of the Executive Committee, and a member of the Finance Committee and the Audit Committee of the Company’s Board of Directors.
		William C. Denninger Director since 2006 Current term expires 2008   Mr. Denninger, 56, is Senior Vice President, Finance and Chief Financial Officer of the Company. He joined the Company in March 2000 in that position. Mr. Denninger is a director of Graham Corporation.
		Gregory F. Milzcik Director since 2006 Current term expires 2008   Mr. Milzcik, 47, became President and Chief Executive Officer of the Company in October 2006. He joined the Company in June 1999 as Vice President, Barnes Group Inc. and President, Barnes Aerospace. He was appointed President, Associated Spring in November 2004 and Executive Vice President and Chief Operating Officer of the Company in February 2006.

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Continuing Directors

Term expiring in 2009

		Thomas O. Barnes Director since 1978 Current term expires 2009   Mr. Barnes, 58, is Chairman of the Board of Directors and an employee of the Company. He is an ex officio, non-voting member of the Executive Committee of the Company’s Board of Directors. He is a director of Valley Bank.
		Gary G. Benanav Director since 1994 Current term expires 2009   Mr. Benanav, 61, retired in March 2005 from New York Life International, LLC where he was the Chief Executive Officer and the Vice Chairman and a Director of New York Life Insurance Company. He is Chairperson of the Compensation and Management Development Committee, and a member of the Audit Committee and the Corporate Governance Committee of the Company’s Board of Directors. He is a director of Express Scripts, Inc., a full-service pharmacy benefit management company.
		Donald W. Griffin Director since 2001 Current term expires 2009   Mr. Griffin, 70, retired as Chairman of the Board of Directors of Olin Corporation, a position that he held from 1996 until April 2003. He is Chairperson of the Finance Committee, and a member of the Audit Committee and the Compensation and Management Development Committee of the Company’s Board of Directors. He was also President and Chief Executive Officer of Olin from 1996 through 2001. He is a director of Eastman Chemical Company and Olin Corporation.
		Mylle H. Mangum Director since 2002 Current term expires 2009   Ms. Mangum, 58, is the Chief Executive Officer of IBT Enterprises, LLC, a leading provider of branch banking solutions. She was formerly the Chief Executive Officer of True Marketing Services, focusing on consolidating marketing services companies. She is Chairperson of the Audit Committee, and a member of the Corporate Governance Committee and the Finance Committee of the Company’s Board of Directors. From 1999 to 2002, she was the Chief Executive Officer of MMS, a private equity company involved in developing and implementing marketing and loyalty programs in high-tech environments. She is a director of Payless ShoeSource, Inc., Haverty Furniture Companies, Inc., Respironics, Inc., Emageon Inc., and Matria Healthcare, Inc.

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EXECUTIVE AND DIRECTOR COMPENSATION

Compensation Discussion and Analysis

Executive Compensation Objectives

The overarching objective of the Company’s executive compensation philosophy is to support the achievement of Barnes Group’s strategic business objectives of building lasting value through consistent, sustainable and predictable results that increase stockholder wealth. We have structured our executive compensation program to:

This discussion focuses on the compensation paid to the executive officers named in the Summary Compensation Table beginning on page 17. The compensation programs described also apply broadly to other officers and management personnel at the Company, with changes as appropriate at different levels within the organization and different types of positions.

Barnes Group believes that compensation paid to executives should be closely aligned with the Company’s performance on both a short-term and a long-term basis. Accordingly, a significant portion of the compensation opportunity under the Company’s executive compensation program is directly related to stock performance and other factors that directly or indirectly influence stockholder value. If the Company’s results exceed our performance targets, the executives have an opportunity to realize significant additional compensation. If the business results do not meet pre-established threshold performance goals, or if the stock price does not appreciate, the executives have significant downside risk, including the elimination of realized value under certain programs.

The Company aims to provide our executives with the opportunity to earn total direct compensation (total annual salary plus short-term incentives plus the projected value of long-term incentives at date of grant, determined using the binomial valuation method applied consistently with the Company’s practice) that falls between the market median and 75th percentile of the total of such compensation paid to executives holding equivalent positions at a defined compensation peer group of companies, which is referred to in this proxy statement as the “Peer Group”, and for companies with which the Company competes for talent.

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Management initially recommends the Peer Group to the Board’s Compensation and Management Development Committee, which is referred to in this proxy statement as the “Compensation Committee”. Management creates its recommendation by reviewing for consistency with the Company, the financial performance, ownership structure, and overall compensation philosophy of companies that the Company considers to be competitors in one or more of the Company’s businesses. Annually, Frederic W. Cook & Co., Inc., a compensation consulting firm retained by management, reviews the relative size and financial performance of the Peer Group as compared to the Company, and provides its views on the ongoing appropriateness of the group.

As part of making determinations with respect to the Peer Group, the Compensation Committee periodically will request a separate evaluation of the Peer Group by Mercer Human Resource Consulting, a compensation consulting firm retained directly by the Compensation Committee to assist in its oversight of our executive compensation programs, to ensure the Peer Group’s ongoing relevance with respect to compensation decisions being made.

The following companies comprised the Peer Group used in the comparative review of 2006 compensation:

AAR Corp.

Airgas Inc.

Alliant Techsystems Inc.

Ametek Inc.

Applied Industrial Technologies Inc.

BorgWarner Inc.

Carpenter Technology Corp.

Crane Co.

Esterline Technologies Corp.

Hexcel Corp.

Kaman Corp.

Modine Manufacturing Co.

Moog Inc.

Mueller Industries Inc.

Pall Corp.

Stanley Works

Tenneco Inc.

Terex Corp.

Valmont Industries Inc.

Watsco Inc.

WESCO International Inc.

Periodically, management and the Compensation Committee re-examine the Peer Group companies to ensure that the same conditions that resulted in their selection continue to be present and relevant. Management may recommend and the Compensation Committee may supplement the Peer Group with additional peer companies or replace current Peer Group companies with other companies, following significant changes in ownership, size, business structure or strategic business direction of a Peer Group company. Management provides the Compensation Committee and the external compensation consultants with the rationale for potentially altering the composition of the Peer Group, and information to understand the potential impact of the changes. The Compensation Committee must approve any changes to the Peer Group.

Frederic W. Cook & Co., Inc. also annually compiles competitive compensation data regarding each element of compensation provided by our Company, by the Peer Group, and from surveys that include compensation data for other industrial companies of comparable size and complexity, and reviews the

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Company’s compensation practices in terms of competitiveness, appropriateness and alignment with our performance, as well as the proportions the Company allocates to each element. The information provided by Frederick W. Cook & Co., Inc. is reviewed and assessed by the Compensation Committee’s consultants, Mercer Human Resource Consulting. Under separate engagement, actuaries at a different branch of Mercer Human Resource Consulting provide computations for certain of the Company’s employee benefit plans.

Key factors considered in setting an individual executive’s compensation opportunities include:

Our company-wide performance assessment and development program is composed of two components: a self-evaluation and, for each officer, an evaluation by the Chief Executive Officer. The Compensation Committee, in turn, completes an evaluation of the Chief Executive Officer’s performance. These evaluations involve both objective factors (e.g., financial results) and subjective factors (e.g., leadership qualities). The written evaluations are reviewed by the Compensation Committee, along with other factors as it deems appropriate, in making its determinations as to whether an adjustment to the executive’s current grade/position is necessary, and what actions or adjustments are appropriate with respect to the individual’s total compensation opportunity.

An important aspect of the 2006 compensation program involved the anticipated need to provide a smooth transition to a new Chief Executive Officer. Effective October 19, 2006, Edmund M. Carpenter resigned his position as the Company’s President and Chief Executive Officer, remaining with the Company as the Retiring Chief Executive Officer and a Director until his previously-announced retirement on December 31, 2006.

After conducting a review of both internal and potential external candidates, the Board of Directors appointed Gregory F. Milzcik, 47, to the position of President and Chief Executive Officer of the Company, effective October 19, 2006. Mr. Milzcik has been an executive officer of the Company since 1999 and was promoted to Executive Vice President and Chief Operating Officer earlier in 2006. The Board appointed Mr. Milzcik based upon his record of superior performance in leading two of our three business units, Barnes Aerospace and Associated Spring. Mr. Milzcik’s extensive experience with, and support of, the Company’s culture and ethics added to his credentials as a candidate for the Chief Executive Officer position. As described below, the Compensation Committee adjusted elements of Mr. Milzcik’s compensation package to reflect his promotion to President and Chief Executive Officer.

Based on the 2006 compilation of competitive compensation data by Frederic W. Cook & Co., Inc., the projected total direct compensation (total annual salary plus short-term incentives plus the projected value of long-term incentives at grant using the binomial valuation method) for all executives fell, in the aggregate, between the market median and 75th percentile of the total of such compensation provided in 2005 to executives holding equivalent positions at Peer Group companies and industrial companies

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of comparable size and complexity. Frederic W. Cook & Company, Inc. found that, consistent with the Company’s targeted competitive positioning (i.e., median to 75^th percentile of competitive practice), projected total direct compensation for our executives, excluding the Chief Executive Officer, approximated the 75^th percentile in the aggregate. This positioning was influenced in part by the Company’s strong financial performance in 2005, which resulted in annual incentive payments, in accordance with the governing plans, in excess of targeted amounts for the named executive officers.

Frederic W. Cook & Co., Inc., found that Mr. Milzcik’s total direct compensation (after annualizing his non-recurring stock options and restricted stock units awarded on October 19, 2006 in connection with his promotion, which are described on pages 21 and 22, over the applicable vesting periods, consistent with the methodology employed) was below the 25th percentile for Peer Group chief executive officers in 2005, which the Compensation Committee found to be appropriate based on (1) Mr. Milzcik’s lack of prior experience as the chief executive officer of a company and (2) Mr. Milzcik’s serving as Executive Vice President and Chief Operating Officer for most of 2006 and as President and Chief Executive Officer for less than three months.

Elements Of Executive Compensation

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

Annual Cash Salary

We believe that any compensation program must have a fixed cash component which supports a reasonable standard of living so that executive officers are prepared to have their incentive compensation at risk. Base salary typically constitutes less than half of total potential executive compensation.

Salaries are reviewed on at least an annual basis, as well as at the time of a promotion or other change in responsibility. In determining the annual salaries of our executive officers, the Compensation Committee looks at a number of factors such as the number of years in the position, the amount, timing and percentage of the last increase, the level of responsibility assumed, past and current performance, the annual salaries of executive officers of the Peer Group and of industrial companies of comparable size and complexity, pay equity within the Company, and an assessment of the marketability and criticality of retention of key executives. Increases usually take effect on April 1st of each year, but will be made at interim dates within the annual cycle if the Compensation Committee deems it appropriate and necessary based on internal and external considerations, or other factors.

Effective as of October 19, 2006, the date of his promotion to President and Chief Executive Officer, Mr. Milzcik’s annual salary was increased from $465,000 to $600,000 per year, after a review of the Peer Group salaries for the position of chief executive officer from the prior year’s analysis prepared by Frederic W. Cook & Co., Inc., the salary history of the retiring Chief Executive Officer during his tenure, and the Compensation Committee’s overall understanding of the dynamics of the marketplace for talent.

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Although the Compensation Committee retains the discretion to increase Mr. Milzcik’s base salary at any time, under the terms of his employment agreement with the Company, the Compensation Committee has no obligation to review Mr. Milzcik’s salary for increase until March 1, 2008.

Annual Incentives Payable in Cash

A significant percentage of the annual cash compensation paid to the named executive officers is at risk under the Barnes Group Inc. Performance-Linked Bonus Plan For Selected Executive Officers. Award opportunities, determined as a percentage of each executive officer’s base salary, are based on the performance against predetermined objective measures of the Company as a whole or the business unit over which the executive has a direct influence, rather than subjective or individual measures.

For 2006, 85% of each executive’s annual incentive award was based on earnings per share in the case of corporate executives, and performance profit after tax in the case of executives of our business units (Barnes Aerospace, Barnes Distribution, and Associated Spring).

The balance of 15% of each participant’s award was based on corporate or business unit revenues.

We have chosen to base annual incentive targets on financial measures because they are easily understood and not subjective. We believe that the measures used for annual cash incentives are consistent with our goal of increasing stockholder value. We believe that the potential amounts of the annual incentives act as a significant incentive to reach our performance targets. Further, we believe that blending our annual incentives with our long-term equity awards and stock ownership requirements (described below) helps ensure that executives do not simply cut costs to increase short-term profits.

The Performance-Linked Bonus Plan for Selected Executive Officers has been approved by the stockholders of the Company and is specifically designed and administered to qualify the annual cash incentive amounts as performance-based compensation and therefore deductible in accordance with the provisions of Internal Revenue Code Section 162(m). Under this plan, award amounts are based on a pre-established percentage of the base salary of the performance year, according to position and Company results. The award opportunities for 2006 as a percentage of base salary are summarized below.

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In 2006, the Company’s revenues were between the target and maximum performance goals while its earnings per share (adjusted for the effects of non-operating or out-of-period items as discussed below) were above the maximum performance goal. Business unit performance relative to the preset revenue and performance profit after tax measures varied by business. Associated Spring Group’s revenues were slightly less than the target amount, and profitability (again, with a charge for capital employed being subtracted from operating profit) was between the threshold and target goals. The revenue and profitability of Barnes Distribution Group were between the target and maximum performance goals. Barnes Aerospace Group exceeded the preset maximum goals for both revenue and profitability. As a result, the amounts shown in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 17 were paid, consistent with the performance requirements of the Company’s Performance-Linked Bonus Plan For Selected Executive Officers.

The performance targets incorporate objective operational goals that are intended to be challenging but attainable with successful deployment of the strategic objectives of the business. The goals are generally (but not universally) established prior to the start of, or early in the performance year and are set so that:

To the extent earned, the awards are generally paid in February based on the audited financial results of the prior year’s performance.

Once targets are established and year-end results are determined, under the administrative provisions of our Performance-Linked Bonus Plan For Selected Executive Officers, and in accordance with the provisions of Internal Revenue Code Section 162(m), the Compensation Committee retains the discretion to reduce but not increase the amount of the calculated awards that would otherwise be produced under the formula to adjust for the effects of, for example, non-operating or out-of-period items, accounting changes, and operating income or loss from acquisitions. In 2006, this discretion was utilized to adjust reported results for several items, including to adjust for the impact on profitability, and therefore on calculated awards, of acquisitions, out-of-period accounting adjustments made in accordance with Generally Accepted Accounting Principles, certain specific unplanned costs, and a material gain on the sale of a Company asset, as the Compensation Committee deemed appropriate.

In connection with Mr. Milzcik’s promotion from Chief Operating Officer to President and Chief Executive Officer on October 19, 2006, his annual incentive threshold/target/maximum percentages of salary were increased effective November 1, 2006 from 15%/60%/180% of his December 1 salary to 18.75%/75%/225% of salary. These percentages are the same as the applicable percentages of salary of the retiring Chief Executive Officer, which have been in place since 2000 and have historically been based on overall market trends and analyses of Peer Group practices in prior years. The Compensation Committee recognized that the total compensation package offered to Mr. Milzcik was below the 25^th percentile for

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the Peer Group but determined that this level was an appropriate starting point for a newly appointed Chief Executive Officer and expects to increase the total compensation in the future to reach the targeted positioning of median to the 75 percentile ranking, contingent upon superior performance by Mr. Milzcik. The Compensation Committee determined the award payable to him for the 2006 Award Period such that the target award was prorated, based on his individual target of 60% of the $465,000 salary in effect on October 18, 2006, for the period January 1 through October 31, 2006 and 75% of the $600,000 salary in effect on October 19, 2006, for the period from November 1 through December 31, 2006. The calculated award is included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 17.

Long-Term Equity Incentive Compensation

The long-term incentives payable in the form of stock options, restricted stock units and performance share awards granted to an executive are potentially the largest component of annual compensation. The projected values of these awards are determined using the binomial valuation method applied consistently with the Company’s practice.

Performance-based equity compensation that is tied to the market price of the stock and/or that is based on our achieving targeted increases in basic earnings per share results in greater gains to the executive when the stock appreciates for all stockholders, and thus rewards performance. Service-based awards provide a strong incentive for recipients to remain with the Company through the vesting periods associated with the awards and to focus on long-term results. Accordingly, we believe that long-term incentives in the form of equity inherently incorporate a higher level of risk than other forms of executive compensation, because they are dependent on stock price, or stock price appreciation. When coupled with the ownership guidelines described below, equity incentives help to encourage our executive officers to maintain a continuing stake in our long-term success and provide an effective way to tie a substantial percentage of total compensation directly to any increase or decrease in stockholder value.

Generally, unearned equity grants are forfeited immediately in the event of an executive’s termination of employment; the primary exceptions, which can vary across different types of awards, are for (1) terminations of employment due to death, disability or retirement, in which case the awards vest or are forfeited as applicable in accordance with the specific agreements underlying the individual grants, and (2) with respect to Mr. Milzcik, his termination without Cause or for Good Reason (each as defined in his employment agreement), in which case the awards continue to vest during the severance period, and in the case of stock options they remain exercisable for one year thereafter. The Company also incorporates age and minimum Company service requirements as well as minimum periods of service — typically, two years from the date of grant for restricted stock units and one year for stock options — in the event of an executive’s termination of employment by reason of retirement.

Beginning in 2000, we instituted stock ownership guidelines under which our executives are expected to acquire and hold a substantial ownership of our common stock for the duration of the executive’s tenure with us. This program extends to executives and key managers who are expected to accumulate an ownership position in Barnes Group common stock in a minimum amount equal in value to a specified multiple of their annual salary. Ownership for this purpose is defined to include common stock owned directly and stock held on their behalf within the trust under the Barnes Group Inc. Retirement Savings Plan. Unexercised stock options, and unearned restricted stock unit awards and performance share awards are not counted until the related stock is directly owned.

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The current stock ownership guidelines that apply to our executives and key managers (48 persons in 2006) are as follows:

We have established interim ownership targets that are used to monitor progress toward the five-year targets. We monitor ownership levels, reporting the levels to the Compensation Committee and sending update letters to participants at least annually. Executives and key managers subject to the ownership guidelines are expected to make substantial progress toward the applicable guideline within five years. As of the end of 2006, 100% of the executives and key managers with five or more years under the program had complied with the guidelines. In addition, Mr. Milzcik had attained the higher 5X multiple associated with his role as President and Chief Executive Officer as of December 31, 2006.

The Compensation Committee has discretion to vary the manner of payment of annual incentive awards, for example, to pay an individual’s annual incentive in stock instead of cash, or to take other actions as it deems appropriate at that time to encourage compliance with the guidelines; however, the Compensation Committee has not had to utilize that discretion in the six years the program has been in place.

The types of long-term equity incentive awards currently being used under the terms of the Amended Barnes Group Inc. Stock and Incentive Award Plan, which is referred to in the proxy statement as the “Barnes Group Inc. Stock and Incentive Award Plan”, approved by stockholders in 2004, are summarized below.

The restriction periods on grants of Barnes Group restricted stock units had historically been up to five years in length. However, in 2003 and 2004, we increased the restriction period for officers to seven years and six and one half years, respectively, and added a performance-accelerated receipt feature. Under this feature, the right to obtain the shares under the awards would accelerate if the market value of our common stock appreciated substantially to a predetermined level and remained at or above that level for 30 consecutive trading days. We

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added this acceleration feature in conjunction with the longer vesting periods to tie that incentive component directly to our ability to generate superior total stockholder returns.

The stock price appreciation goal for the 2003 performance-accelerated awards was attained in May 2006, resulting in the vesting and distribution to the executive of 50% of the shares at that time and the right to receive the remaining 50% of the shares in May 2007, provided the executive remains employed by the Company through that date; executives are prohibited from selling vested and distributed shares (net of any shares withheld to satisfy applicable federal, state or local tax withholding requirements) for two years following the applicable distribution date.

The stock price appreciation goal for the 2004 performance-accelerated awards (70% stock price appreciation) has not yet been attained.

In 2005 and 2006, the restricted stock unit grants did not contain the performance-accelerated feature, and the restriction period was adjusted accordingly (so that 1/3 of the units vest after 2-1/2, 3-1/2 and 4-1/2 years, respectively). We continue to stagger the dates upon which restrictions lapse in comparison to performance share measurement dates and annual incentive payouts to facilitate executive retention.

Restricted stock unit recipients also receive dividend equivalent payments on the same basis as, and in amounts equal to, the quarterly dividend paid on our common stock. We believe that the dividend equivalents help reinforce the retentive nature of the restricted stock units by reminding holders that these outstanding grants carry the potential to increase their stock ownership.

We use restricted stock units rather than traditional restricted stock because restricted stock units can be more effectively administered by the Company as they are not subject to the provisions of Internal Revenue Code Section 83 until the restrictions have been met.

Long-term awards are determined according to the individual executive’s position and responsibilities, and based on Peer Group and competitive survey data. Generally, the amounts and types of awards to officers have not been differentiated for individual performance, as the nature of their positions with the Company requires that they be performing and achieving results at a very high level within their positions and in connection with the Company’s strong bias for pay for performance. This also aids in the cultivation of teamwork across the officer team, and devalues competitiveness among the officers. Awards are structured to encourage both long-term performance of the Company as well as individual retention.

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Within the categories of long- term compensation, the “mix” during recent years has progressively moved from 100% stock options to one-third stock options, one-third performance shares and one-third restricted stock units in 2007 (based on a predetermined, calculated value of the underlying shares that the executive will realize if fully earned) for named executive officers other than Mr. Milzcik and Mr. Dempsey. This change in “mix” has been implemented in order to provide our officers with a strong incentive to continue their successful tenures with the Company and to focus on long-term share price growth. The “mix” for Mr. Milzcik for 2007 is approximately one-fourth stock options, one-half performance shares and one-fourth restricted stock units, in accordance with his employment agreement with the Company. For Mr. Dempsey, the “mix” is approximately two-thirds stock options, one-sixth performance shares and one-sixth restricted stock units, which differs from the “mix” of equity awards for other named executive officers because of the nature of Mr. Dempsey’s role as an operating executive. In 2001, we began to reduce our reliance on stock options in order to minimize concerns about the “overhang” (i.e., dilution) created by our existing number of stock options. Frederic W. Cook & Co., Inc. annually measures and reports the Company’s overhang and burn rate, which they noted have been reduced each year.

The determination as to the vesting of long-term awards is based on the Company’s goal of spreading out vesting to maximize the retention value of awards. The vesting dates of the various long-term equity awards are staggered over a “retention timeline” calculated for each executive. Thus, in a year when options and restricted stock are granted, the vesting dates generally are structured to occur in alternate years.

Except with respect to the timeline for vesting, the Compensation Committee does not take into account the amounts or terms of existing stock holdings of executive officers in making decisions to award equity compensation because it believes that doing so would have the effect of penalizing success, to the extent that compensation might be reduced based on the appreciation of past awards, or rewarding underperformance, to the extent that compensation might be awarded to make up for lack of appreciation in stock price.

Except under extraordinary circumstances, all equity grants to executive officers have for a number of years been consistently made by the Compensation Committee at its February meeting, the date for which is set during the prior year. In recent years, the only “off-cycle” equity grants made to executive officers have been in the cases of newly hired executives or promotions, such as Mr. Milzcik’s promotion to President and Chief Executive Officer in October 2006, and in all cases such grants have been approved by the Compensation Committee.

Specifically, on October 19, 2006, Mr. Milzcik was granted (a) stock options with an aggregate calculated value of $1 million determined using the binomial valuation method applied consistently with the Company’s practice, that will vest ratably on April 19 of 2008, 2009 and 2010 and that have an exercise price equal to the mean of the high and low sales prices of the Company’s common stock on the date of grant, and (b) restricted stock units with a value of $500,000 based on the mean of the high and low sales prices of the Company’s common stock on the date of grant and vesting on October 19, 2010. This commencement grant was determined after considering Peer Group practices and past Company practice, to provide a strong incentive to drive future stock price appreciation, and to provide a strong incentive to continue to serve the stockholders. The components of the Commencement Grant were also designed with the knowledge that future long-term incentive grants would be very closely tied to Company performance, most specifically total stockholder return.

Pension and Other Retirement Programs

As described on pages 35 through 36 of this proxy statement, the Company provides retirement benefits under the Salaried Retirement Income Plan, Supplemental Senior Officer Retirement Plan,

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Retirement Benefit Equalization Plan, and Supplemental Executive Retirement Plan. The Company provides these benefits to help recruit and retain executives, with particular emphasis on attracting and retaining mid-career executive talent. Thus, for example, under the Supplemental Senior Officer Retirement Plan, benefit amounts are significantly reduced if an executive leaves the Company before attaining age 62 with less than 15 years of service. Each retirement program is designed to fulfill a specific purpose; for example, to enable the Company to take advantage of tax, accounting, and other efficiencies that are available under each specific type of retirement benefit arrangement.

Retiring officers are eligible for continuing payments of life insurance premiums under the Company’s Senior Executive Enhanced Life Insurance Program (including the payment of income taxes attributable to premiums paid by the Company). In connection with Mr. E.M. Carpenter’s retirement, the Compensation Committee authorized cash payments in lieu of additional coverage to which Mr. E.M. Carpenter was entitled but agreed to waive. The Compensation Committee also authorized an amendment to Mr. E.M. Carpenter’s employment agreement to correct an inadvertent failure to document the unwritten agreement at the time that the employment agreement was entered into, that Mr. E.M. Carpenter was to be credited with two years of service credit for each one year of actual service under the Senior Executive Enhanced Life Insurance Program.

Change-in-Control and Employment Termination Benefits

As described on pages 36 through 44 of this proxy statement, we provide executive officers benefits in the event of a change-in-control or other termination under employment and severance agreements, stock grant agreements accompanying individual grants, the Executive Separation Pay Plan, and benefit plans available to employees generally.

The Company provides change-in-control benefits specifically to retain key executives during potential changes in control, to provide continuity of management and to provide income continuation for employees who are particularly at risk of involuntary termination in the event of a restructuring. We also believe that these benefits are a necessary part of a total compensation package in order to make it competitive in the marketplace so that we can attract and retain key executives.

The amount the Company will pay under these arrangements is determined under the terms of the individual arrangements and varies depending on the executive’s age and amount of service.

Perquisites and Other Benefits

Because of terms of competitive benefits packages available to senior executives in our industry and generally, we believe that certain executive benefits are a necessary element to attracting and retaining key executives. Accordingly, in addition to the benefits that are provided to substantially all of our salaried employees, the Company provided a limited number of personal benefits described in the Summary Compensation Table to our named executive officers in 2006. The Compensation Committee reviews the nature and amounts of perquisites annually to determine appropriateness and to ensure that they continue to be reflective of competitive practice.

Accounting Considerations

Part of the shift in the form of equity from options to restricted stock units and, beginning in 2005, to performance share awards for all executives, has been a response to the requirement that we expense equity awards in accordance with FAS 123R beginning in 2006. This requirement has resulted in significantly higher recognized expenses in the equity component of our long-term incentives. As a result, we have taken measures to ensure our equity granting practices remain competitive but also cost effective (e.g., shifting from stock options to a combination of stock options and other vehicles and adjusting both our grant guidelines and participation rates). In determining how to allocate shares

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available for awards each year, we look at the grant date value of each type of award and the amount that would be expensed in each year over the life of the award.

Tax Considerations

The tax treatment of various forms and amounts of compensation as well as the timing of compensation decisions are affected by the intent to make most compensation deductible. Section 162(m) of the Internal Revenue Code places a limit of $1 million on the compensation that the Company may deduct in any one year with respect to each of its most highly compensated executive officers, unless certain conditions are met. There is an exception to the $1 million limitation for performance-based compensation meeting certain requirements.

The Compensation Committee reserves the right to grant forms of compensation that do not qualify as performance-based compensation. This can occur where a non-performance-based form of compensation would serve a different, equally important, corporate goal. Thus, for retention purposes, the Compensation Committee may decide to grant restricted stock or restricted stock units without performance requirements, rather than limiting itself to awards that would be deductible.

In addition, the Company has determined that Section 409A of the Internal Revenue Code applies to certain of the Company’s compensation arrangements including without limitation the Supplemental Senior Officer Retirement Plan, Retirement Benefit Equalization Plan, and Supplemental Executive Retirement Plan. While final IRS regulations have not yet been released under Section 409A, the Company intends to administer those arrangements in compliance with Section 409A and believes it is operating in good faith compliance with the statutory provisions which first became effective on January 1, 2005. The Company will amend the arrangements as necessary to comply with the final Section 409A regulations when issued.

The Company also periodically reviews the severance agreements entered into between the Company and the named executive officers to assess the impact of Internal Revenue Code Section 280G. The severance agreements do no provide for any “gross up” to compensate our executives for taxes incurred under Section 4999 of the Internal Revenue Code as a consequence of “golden parachute” payments upon a change in control.

Compensation Recapture

The Company’s employment agreement with its Chief Executive Officer, Gregory F. Milzcik, specifically provides, under certain circumstances, for a “claw-back” of any cash or equity awards earned by Mr. Milzcik that are based on achieving specified financial performance targets if, subsequent to the awards, the Company restates financials to comply with GAAP requirements and financial results are lower than those upon which awards were calculated. The amount to be clawed back is the excess of awards received over those which would have been earned based on restated financial results.

In addition, to ensure that stock-based grants reward only those executives who benefit the Company, the Company’s equity plans and agreements provide that awards may be forfeited if an executive violates prohibitions against engaging in activity that is detrimental to the Company including performing services for a competitor, disclosing confidential information or violating the Company’s Code of Business Ethics and Conduct.

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COMPENSATION COMMITTEE REPORT

To Our Fellow Stockholders at Barnes Group Inc.

We, the Compensation and Management Development Committee of the Board of Directors of Barnes Group Inc., have reviewed and discussed the Compensation Discussion and Analysis set forth above with management and, based on such review and discussion, have recommended to the Board of Directors inclusion of the Compensation Discussion and Analysis in this Proxy Statement.

Compensation and Management

Development Committee

Gary G. Benanav, Chairman

John W. Alden

George T. Carpenter

Donald W. Griffin

Frank E. Grzelecki

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Summary Compensation Table for 2006

The following table sets forth aggregate amounts of compensation paid or accrued by us for the year ended December 31, 2006 for services rendered in all capacities, by our Chief Executive Officer, our former Chief Executive Officer (who retired in 2006), our Chief Financial Officer and the three other most highly compensated executive officers during the fiscal year ended December 31, 2006 (the “named executive officers”).

Notes to the above table:

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Grants of Plan-Based Awards in 2006

Notes to the above table:

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Discussion Concerning Summary Compensation and Grants of Plan-Based Awards Tables

Employment Agreements

Mr. Milzcik’s Employment Agreement. We have an employment agreement with Mr. Gregory F. Milzcik, our President and Chief Executive Officer. The terms of the agreement that relate to his compensation are described below. The terms that relate to termination and change-in-control are set forth under “Termination Provisions of Employment and Change-in-Control Arrangements.”

Mr. Milzcik became the President and Chief Executive Officer of the Company on October 19, 2006. On December 13, 2006, we entered into an employment agreement with Mr. Milzcik, which was effective as of October 19, 2006, that sets forth the terms of employment for Mr. Milzcik as the Company’s President and Chief Executive Officer. The agreement provides for Mr. Mizcik’s employment through October 19, 2009, and for automatic annual extensions for successive one-year terms unless either party provides 90 days prior written notice that the agreement will not be extended. In no event will his employment term extend beyond October 19 of the calendar year in which he attains age 65.

The agreement provides for the following compensation and benefits for Mr. Milzcik:

After 2007, while the Compensation Committee will have the discretion to change the structure and payment terms of Mr. Milzcik’s awards under the Performance-Linked Bonus Plan for Selected Executive Officers at threshold, target and maximum levels of performance, Mr. Milzcik’s annual bonus opportunity for each calendar year, upon achieving target level performance for such year, shall not be less than 75% of his then current salary.

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Under specified circumstances for up to three years after the end of his employment, Mr. Milzcik is to reimburse us for some or all of any amounts (determined as set forth in his employment agreement) paid or received (or to be paid or received) in respect of any annual incentive compensation or any long-term incentive compensation awarded to Mr. Milzcik after October 19, 2006, if payment of such compensation was contingent, in whole or in part, upon the achievement of one or more specified

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financial targets, and we implement a Mandatory Restatement (as defined in his employment agreement). This provision will not apply to amounts received by Mr. Milzcik with regard to equity-based compensation that has a vesting schedule based on the passage of time and the continued performance of services, and not on the achievement of any performance objectives or to any award granted Mr. Milzcik that has or had alternative vesting criteria unrelated to the performance objectives affected by the Mandatory Restatement that have otherwise been satisfied at the time of the Mandatory Restatement.

If Mr. Milzcik concludes that the amount to be repaid to us in accordance with the provisions of his employment agreement is excessive and inequitable, he may petition the Compensation Committee to review that determination. If the Compensation Committee agrees with Mr. Milzcik’s conclusion, it shall, in its sole discretion, specify an amount to be repaid to the Company that it concludes is equitable and appropriate under the circumstances. If the Compensation Committee does not agree that the formula produces a result that is excessive and inequitable, no adjustment shall be made in the amount to be repaid to us. The determination, conclusions and other actions of the Compensation Committee shall be conclusive.

His employment agreement provides that Mr. Milzcik will be entitled to indemnification for liabilities and expenses to the fullest extent permitted under Delaware law, to the extent consistent with our Certificate of Incorporation and By-laws.

His employment agreement provides that we will reimburse Mr. Milzcik for reasonable legal fees and expenses incurred by him in connection with (a) any good faith action brought by Mr. Milzcik to enforce his rights under the agreement (or to respond to any action commenced by us) but only those fees and expenses attributable to claims with respect to which there was a substantial likelihood that Mr. Milzcik would prevail on the merits, and (b) the negotiation and documentation of the agreement and the other agreements referenced therein.

Mr. E.M. Carpenter’s Employment Agreement. We had an employment agreement with Mr. Edmund M. Carpenter who was our President and Chief Executive prior to Mr. Milzcik. Mr. E.M. Carpenter resigned as President and Chief Executive Officer as of October 19, 2006 when Mr. Milzcik was promoted, and remained with the Company through December 31, 2006 as a non-officer employee. The terms of his agreement that relate to his compensation are described below. The terms of his agreement, including those in amendments to the agreement, that relate to termination and change-in-control are set forth under “Termination Provisions of Employment and Change-in-Control Arrangements.”

We entered into the agreement on December 8, 1998, when Mr. E.M. Carpenter became the President and Chief Executive Officer of the Company. The agreement provided for the following compensation benefits for Mr. E.M. Carpenter: (i) base salary in the first year of the Agreement, of $550,000, and thereafter on an annual basis the base salary was subject to increase at the discretion of the Board of Directors; (ii) an annual bonus pursuant to our Management Incentive Compensation Plan and any successor plan, up to a maximum of 150% of salary; and (iii) other benefits, consisting of the payment of life insurance premiums, a financial planning allowance, an automobile allowance, double service credits under our non-qualified retirement plans, annual vacations, immediate participation in the Company’s welfare benefit plans, and country club membership expense reimbursement. Subsequent to the date of the agreement, we adopted a successor plan to the Management Incentive Compensation Plan for certain executive officers, the Performance-Linked Bonus Plan for Selected Executive Officers.

Plans

Performance-Linked Bonus Plan for Selected Executive Officers. Each of the named executive officers participated in the Performance-Linked Bonus Plan for Selected Executive Officers in 2006.

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Under the Performance-Linked Bonus Plan for Selected Executive Officers, participants receive specified payments after the close of each award period if specified target performance objectives are attained during the award period. For 2006, the award period was the 2006 fiscal year. The Compensation Committee determines the percentage of salary that will be earned at a given level of performance and also determines the level of performance that must be achieved. Performance at less than the target level of performance may result in a lesser percentage of salary than the target being earned, and performance in excess of the target performance objective may result in a higher percentage of salary than the target being earned. Under no circumstances may the award for a participant’s service in any year exceed $7,000,000. Payment of any award is contingent upon the Compensation Committee’s certifying in writing that the performance level applicable to such award was in fact satisfied. Unless and until the Compensation Committee so certifies, no award is paid. The Compensation Committee may not increase the amount of an award upon satisfaction of the performance level. Except for Performance-Linked Bonus Plan for Selected Executive Officers participants who retire, die or become permanently disabled during the year, whose award will be prorated to the date of such retirement, death or permanent disability, a participant must be employed by the Company on the date of payment of an award. Unless the Compensation Committee determines otherwise, all payments pursuant to the Performance-Linked Bonus Plan for Selected Executive Officers are to be made in cash.

Under the Performance-Linked Bonus Plan for Selected Executive Officers, the performance goals for any award period may be based on any of the following criteria, either alone or in any combination, and on either a consolidated Company, consolidated group, business unit or divisional level, as the Compensation Committee may determine: earnings per share, net income, operating income, performance profit (operating income minus an allocated charge approximating the Company’s cost of capital, before or after tax), gross margin, revenue, working capital, total assets, net assets, stockholders’ equity, or cash flow. The foregoing criteria are to be determined in accordance with generally accepted accounting principles, except to the extent the Compensation Committee directs otherwise and may include or exclude any or all of the following items, as the Compensation Committee may specify: extraordinary, unusual or non-recurring items; discontinued operations; effects of accounting changes; effects of currency fluctuations; effects of financing activities (by way of example, without limitation, effect on earnings per share of issuing convertible debt securities); expenses for restructuring or productivity initiatives; non-operating items; effects of acquisitions and acquisition expenses; and effects of divestitures and divestiture expenses (the “Items”). Any such performance criterion or combination of such criteria may apply to the participant’s award opportunity in its entirety or to any designated portion or portions of the award opportunity, as the Compensation Committee may specify. Unless the Compensation Committee determines otherwise at any time prior to payment of a participant’s award for an award period and subject to the Compensation Committee’s right to reduce an award prior to payment, the Items, any of which affect any performance criterion applicable to the award (including but not limited to the criterion of earnings per share), shall be automatically excluded or included in determining the extent to which the performance level has been achieved, whichever will produce the higher award. This provision is included in the Performance-Linked Bonus Plan for Selected Executive Officers because awards may qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code if the Compensation Committee has discretion to reduce an award, but not if the Compensation Committee has discretion to increase an award.

For a discussion regarding 2006 annual incentive performance goals and awards, please see the “Compensation Discussion and Analysis.”

Restricted Stock Units, Performance Share Awards and Option Awards. Restricted stock units and stock options vest if the participant’s employment by us continues until specified vesting dates. Performance share awards vest if specified performance goals are achieved and if the participant’s

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employment by us continues until specified vesting dates. Performance-accelerated restricted stock unit awards were granted in 2003 and 2004 that vest if the participant’s employment by us continues until February 12, 2010 and August 11, 2010, respectively. However, if the performance goal applicable to those awards is attained before such date, 50% of the awards vest at the time when the performance goal is attained and 50% vest one year later, provided the participant is employed by us at those times. The performance goal applicable to the awards granted in 2003 was attained in 2006 and therefore 50% of those awards vested in 2006. The vesting schedule for outstanding awards is set forth in the notes to the table for “Outstanding Equity Awards at the End of 2006”. Treatment upon termination or a change-in-control is set forth in the notes to the table for “Termination Provisions of Employment and Change-in-Control Arrangements.”

Each restricted stock unit award entitles the holder to receive, without payment to the Company, the number of shares of Common Stock equal to the number of restricted stock units that become vested and to receive dividend equivalents on the restricted stock units determined by multiplying the total number of restricted stock units by the dividend per share paid on the Common Stock on each date on which a dividend is paid to the holders of Common Stock during the period from the date of grant of the award to the date on which the award is paid or forfeited.

On or about March 1 of each year following the year in which the performance share awards are earned, the number of shares of Common Stock equal to the number of earned awards is to be delivered to the holders. Dividend equivalents are paid only on performance share unit awards that are earned. Dividend equivalents on all earned performance share unit awards are paid based upon dividends paid on outstanding shares of Common Stock during the period from the date of grant of the award to the date on which the awards are paid.

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Outstanding Equity Awards At End of 2006

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