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 Section14(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

584 Derby Milford Road, Orange, Connecticut 06477

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 4, 2009

 

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, 584 Derby Milford Road, Orange, Connecticut 06477, on Monday, May 4, 2009 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 independent registered public accountants to examine the annual financial statements for the Company for the year 2009.

 

3.  The transaction of such other business as may properly come before the meeting and any adjournments thereof.

 

Accompanying this Notice of Annual Meeting is a form of proxy and a proxy statement. Copies of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 have been mailed under separate cover to all shareholders.

 

 

 

IMPORTANT:  It is important that your shares be represented at this meeting. Therefore, please fill in, date, and sign the enclosed proxy and mail it promptly in the enclosed postage-paid envelope, vote electronically using the Internet or use the telephone voting procedures, as described on the enclosed proxy card.

 

The Board of Directors has fixed the close of business on March 6, 2009 as the record date for the determination of shareholders entitled to notice of and to vote at such meeting and any adjournments thereof. The transfer books will not be closed.

 

By order of the Board of Directors

 

Richard W. Davies

Vice President,

General Counsel and

Secretary

 

Dated: March 16, 2009

HUBBELL INCORPORATED

 

PROXY STATEMENT

for

ANNUAL MEETING OF SHAREHOLDERS

To be held May 4, 2009

 

 

The accompanying proxy is solicited by and on behalf of the Board of Directors of Hubbell Incorporated, a Connecticut corporation (the “Company”), to be voted at its Annual Meeting of Shareholders to be held at the principal executive offices of the Company, 584 Derby Milford Road, Orange, Connecticut 06477, on Monday, May 4, 2009 at 9:00 A.M. local time, and any adjournments thereof. Commencing on or about March 19, 2009, copies of this Proxy Statement and the proxy form are being mailed to all shareholders. Copies of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 have been mailed under separate cover to all shareholders.

 

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.

 

 

 

The following proxy materials are available for you to review at http://bnymellon.mobular.net/bnymellon/HUB:

 

 

If you would like to access your Proxy Statement and Annual Report electronically in the future, in lieu of receiving paper copies, you may do so by signing up for electronic delivery of these documents online at http://www.proxyvoting.com/hub or choosing this option by following the appropriate instructions when you vote by telephone or by marking the appropriate box on your proxy card.

At the meeting, shareholders will be asked to consider and act 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.

 

E. Richard Brooks		Daniel S. Van Riper		Joel S. Hoffman
George W. Edwards, Jr.		Richard J. Swift		G. Jackson Ratcliffe
Andrew McNally IV		Anthony J. Guzzi		Timothy H. Powers

 

2. The ratification of the selection of independent registered public accountants to examine the annual financial statements for the Company for the year 2009.

 

3. The transaction of such other business as may properly come before the meeting and any adjournments thereof.

 

Unless otherwise directed, the persons named in the accompanying 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, and (2) the ratification of the selection of independent registered public accountants. All proxies will be voted as specified. The Board of Directors recommends shareholders to vote FOR proposals 1 and 2.

 

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 adjournments thereof, it is the intention of the persons named in the accompanying 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 6, 2009. On March 6, 2009, the Company had outstanding 7,167,506 shares of Class A Common Stock, par value $.01 per share, and 49,226,614 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 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 6, 2009, 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 6, 2009.

 

 

 

(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 Davies beneficially own shares of the Company’s Common Stock as set forth in the table below. Mr. Davies holds unexercised options for the purchase of the Company’s Class B Common Stock under the Company’s Stock Option Plan for Key Employees (“Option Plan”), and unexercised stock appreciation rights (“SARs”) for the purchase of the Company’s Class B Common Stock under the Company’s 2005 Incentive Award Plan (together with the Option Plan, the “LTI Plans”) (see the table captioned “Outstanding Equity Awards at Fiscal Year End” on page 32).

(5) The Company has received a copy of Schedule 13G, as amended, as filed with the Securities and Exchange Commission (“SEC”) on February 17, 2009 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 and general partner of ACP, Phillip Gross, as managing member of ACA and ACPGP and general partner of ACP, and Robert Atchinson, as managing member of ACA and ACPGP, and general partner of ACP, and collectively, the “Reporting Persons”, reporting ownership of these shares as of February 17, 2009. According to the Schedule 13G, the Reporting Persons have shared voting and dispositive power as to these shares.

 

(6) The Company has received a copy of Schedule 13G as filed with the SEC on February 5, 2009 by Barclays Global Investors, NA, Barclays Global Fund Advisors, Barclays Global Investors, LTD, Barclays Global Investors Japan Limited, Barclays Global Investors Canada Limited, Barclays Global Investors Australia Limited, and Barclays Global Investors (Deutschland) AG reporting ownership of these shares as of December 31, 2008. As reported in said Schedule 13G, Barclays Global Investors, NA has sole voting power for 1,219,634 and sole dispositive power for 1,498,085 of such shares; Barclays Global Fund Advisors has sole voting power for 1,966,353 and sole dispositive power for 2,283,248 of such shares; Barclays Global Investors, LTD has sole voting power for 1,686 and sole dispositive power for 39,971 of such shares; Barclays Global Investors Japan Limited has sole voting power and sole dispositive power for 10,358 of such shares; Barclays Global Investors Canada Limited has sole voting power and sole dispositive power for 1,773 of such shares; and Barclays Global Investors Australia Limited has sole voting power and sole dispositive power for 5,763 of such shares. According to the Schedule 13G, the shares reported are held in trust accounts for the economic benefit of the beneficiaries of those accounts.

 

(7) The Company has received a copy of Schedule 13G, as amended, as filed with the SEC on February 13, 2009 by Capital World Investors (“Capital World”) and The Income Fund of America, Inc. (“Income Fund”) reporting ownership of these shares as of December 31, 2008. As reported in said 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 3,422,100 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 dispositive power for all of such shares and sole voting power for 250,000 of such shares, and Income Fund, which is advised by CRMC, has sole voting power for 3,272,100 of such shares.

          

 

The following table sets forth as of March 6, 2009, the equity securities of the Company beneficially owned by each of the Directors and the Chief Executive Officer, Chief Financial Officer and 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:

 

 

 

 

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, on 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. Mr. Meyer is retiring as a Director of the Company in accordance with the Company’s Corporate Governance Guidelines (the “Guidelines”) after serving the Company’s shareholders in that capacity since 1989, and therefore is not standing for re-election. Directors are elected by plurality vote. Abstentions and broker non-votes will not be counted for the purposes of the election of Directors.

 

 

 

(1) As of March 6, 2009.

 

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, Board responsibilities and compensation, and Director independence. The Guidelines may be viewed on the Company’s website at www.hubbell.com and are available free of charge to any shareholder who submits a written request to the Secretary of the Company.

 

The Board of Directors of the Company met eleven times during the year ended December 31, 2008. During 2008, 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 5, 2008 Annual Meeting of Shareholders.

 

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 complaints filed with the Company’s confidential communication hotline, and a review of 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 gifts up to a maximum of $4,000 of eligible gifts 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 Messrs. Brooks, Edwards, Meyer, Swift and Van Riper serve as directors of other companies, and that Mr. Guzzi is president and chief operating officer of a company, that in the ordinary course of business, directly or through a subsidiary, purchases goods from or supplies goods to the Company, one of its subsidiaries, or an authorized Company distributor. The Nominating and Corporate Governance Committee considered the dollar amounts of transactions and any related arrangements between the Company and any of the applicable customers or suppliers under NYSE guidelines, and determined that all were below the amount required for disclosure of related party transactions under the federal securities laws, and none otherwise impaired the applicable Director’s independence. In addition, the Nominating and Corporate Governance Committee considered Mr. Ratcliffe’s prior service to the Company as President and Chief Executive Officer 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 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. E. Richard Brooks, Mr. George W. Edwards, Jr., Mr. Anthony J. Guzzi, Mr. Joel S. Hoffman, Mr. Andrew McNally IV, Mr. Daniel J. Meyer, Mr. G. Jackson Ratcliffe, Mr. Daniel S. Van Riper, and Mr. Richard J. Swift; 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 Chief Executive Officer of the Company. In determining the nominees for election as Directors at the 2009 Annual Meeting of Shareholders, the Nominating and Corporate Governance Committee noted that the Company’s Corporate Governance 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 2009 election of Directors.

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 and the rules promulgated thereunder. The Code of Ethics can be viewed on the Company’s website at www.hubbell.com and is available free of charge to any shareholder who submits a written request to the Secretary of the Company. The Company requires all officers and Directors to certify compliance with the Code of Ethics and complete a Code of Ethics training course 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.

 

Lead Director

 

The Board of Directors 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 of Directors and the management of the Company. Currently, Mr. Meyer is the Lead Director and he is expected to hold this position through the Company’s 2009 Annual Meeting of Shareholders.

 

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 Reports, P.O. Box 274, Highland Park, Illinois 60035; or (b) by writing to: Board of Directors, c/o Richard W. Davies, Vice President, General Counsel and Secretary, Hubbell Incorporated, 584 Derby Milford Road, Orange, Connecticut 06477. Such communications will be distributed to the specific Director(s) requested by the shareholder or, if generally to the Board, to other members of the Board as may be appropriate depending on the material outlined in the shareholder communication. For example, if a communication relates to accounting, internal accounting controls, or auditing matters, the communication will be forwarded to the Chairman 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. Copies of the Charters and By-Laws are also available free of charge to any shareholder who submits a written request to the Secretary of the Company.

 

Messrs. Brooks, Guzzi, Hoffman, Meyer, Swift and Van Riper serve as members of the Audit Committee, with Mr. Meyer 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 independent registered public accountants 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 accountants, 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 accountants; reviews and discusses the Company’s internal audit function and its personnel; pre-approves the hiring of the independent registered public accountants 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 accountants. The independent registered public accountants 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 Messrs. Meyer, Swift and Van Riper each meet the SEC criteria of an “audit committee financial expert”. The Audit Committee met nine times in 2008.

 

 

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 met one time in 2008.

 

 

Messrs. Edwards, McNally, 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 Chief Executive Officer and determines the compensation (base salary plus additional compensation and benefits) of the Chief Executive Officer. After consultation with the Chief Executive Officer and the Chairman of the Board of Directors, the Compensation Committee also determines the compensation of other members of the Company’s key 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; recommends (for approval) to the Board of Directors pension changes, and other significant benefits or perquisites; and reviews the members of the Company’s key management group and plans for the development of qualified candidates, and reports to the Board of Directors annually. The Compensation Committee met four times in 2008.

 

Messrs. Edwards, McNally, Powers, and Ratcliffe 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 four times in 2008.

 

 

Messrs. Brooks, Guzzi, Hoffman, and Meyer serve as members of the Nominating and Corporate Governance Committee, with Mr. Brooks 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 Chief Executive Officer 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 three times in 2008.

 

Director Nominations

 

As set forth in the Guidelines, the Board’s 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, without regard to gender, race, color, national origin, or other protected status. The Nominating and Corporate Governance Committee and the Board evaluate each candidate in the context of the Board as a whole. 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.

 

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.

 

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) detailing 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.

 

Once potential candidates are identified, the Nominating and Corporate Governance Committee reviews the backgrounds of those candidates. Candidate(s) 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.

 

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 2010 Annual Meeting of Shareholders is more than twenty days before or more than seventy days after May 4, 2010, 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 2010 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 4, 2010, 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

 

Overview/Philosophy

 

The total direct compensation package for the Company’s executives is made up of three elements:

 

 

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

 

Accordingly, the total compensation set forth in the Summary Compensation Table, consists of both variable (annual short-term and long-term incentive award grants valued as if paid currently) as well as non-variable compensation (base salary, benefit plans, and perquisites).

 

Variable compensation provides Company executives with additional compensation based on both Company and individual performance. The performance goals assigned to variable compensation opportunities are designed to promote the Company’s strategic interests, thereby aligning executives’ financial concerns with those of the Company’s shareholders. 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 Company has adopted an incentive-pay-for-performance philosophy pursuant to which the greatest portion of an executive’s total direct compensation is variable and therefore is linked to performance on both a short-term and long-term basis.

 

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 has sought the advice of and reviewed data provided by Exequity, LLP (“Exequity”), an independent outside compensation consultant. 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 2008, 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 Chief Executive Officer and to all senior executive compensation recommendations submitted by management.

 

The Compensation Committee considers recommendations made by the Chief Executive Officer with respect to compensation for executives that report directly to him. However, the Compensation Committee is the sole determinant of all final executive compensation decisions.

 

Benchmarking

 

Exequity supplied the Compensation Committee with compensation data for each element of the total direct 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 200 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 does not know the names of the companies whose pay practices are reflected in the statistical summary, nor does it receive information with respect to pay practices at any individual company included in the database. Throughout this Compensation Discussion and Analysis (“CD&A”) references to “benchmarking”, “competitive data” or “market” refer to this statistical summarized data.

 

The Compensation Committee’s decision to benchmark the Company’s executive compensation levels to the practices of such general manufacturing companies reflects the fact that the source and the destination of the Company’s senior executive talent extend 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 an indiscriminate 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 2008 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, target total cash (base salary plus short-term incentive award targets), and total compensation (total target cash plus the grant date value of long-term incentive opportunities) for the named executive officers as a group were positioned close to the 50th percentile, as shown in the following table:

 

 

To ensure a comprehensive evaluation of total remuneration, compensation tally sheets totaling 2008 compensation for each named executive officer were prepared for, and reviewed by, the Compensation Committee. These tally sheets identified and valued 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 provided an aggregate sum for each executive. The Compensation Committee intends to continue the practice of reviewing tally sheets on at least an annual basis to aid it in its administration of the Company’s compensation program.

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 2007, the Compensation Committee increased salaries for the named executive officers to better reflect general market rates in effect in 2008. In December 2008, the Compensation Committee considered and approved base salary adjustments for the named executive officers in 2009. At that time, Mr. Powers requested, and the Committee approved, that he receive no base salary adjustment for 2009 in light of the challenging economic environment.

 

Short-Term Incentive Compensation (Non-Equity)

 

Like base salaries, annual short-term incentive award expenditures 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 cash flow and earnings per diluted share (“EPS”). Short-term incentive award target levels (“STI Target”) are measured as a percentage of base salaries as indicated below:

 

 

Messrs. Davies, Muse and Amato participated in the Incentive Compensation Plan in 2008. Messrs. Powers and Nord participated in the Senior Plan, a program that is specifically constructed so as to protect for the Company the tax deductibility of short-term incentive awards earned by Messrs. Powers and Nord.

 

The following sections provide a general description of how the Incentive Compensation Plan and Senior Plan work:

 

 

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 pool 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 pool 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 trade working capital, as well as other strategic objectives as determined in 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. For 2008, the Compensation Committee established two measures of performance as the criteria on which short-term incentive awards would be paid for some or all named executive officers: EPS and free cash flow (cash flow from operations less capital expenditures). EPS was selected 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 selected because it is an important determinant in Company performance.

 

 

For corporate officers, short-term incentive awards were paid on achievement of established EPS and free cash flow targets according to the following schedule:

 

			Relative																			Performance Result
Measures			Weight					Performance Threshold														Actual			Weighted
									Minimum:					$3.04 =					50	%
EPS				80	%				Target:					$3.80 =					100	%		119%			95%
									Maximum:					³ $4.56 =					200	%
									Minimum:					$178M =					50	%
Free cash flow				20	%				Target:					$223M =					100	%		200%			40%
									Maximum:					$268M =					200	%
																						Composite Payout:			135%

 

If the minimum levels of EPS of $3.04 and free cash flow of $178M 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 2008, actual EPS was $3.94 and free cash flow was $270 million, therefore, the actual amount of short-term incentive awards payable to Mr. Davies under the Incentive Compensation Plan, and Messrs. Powers and Nord under the Senior Plan (discussed on page 21), resulted in a composite payout of 135% of their respective STI Target. The short-term incentive awards earned by Messrs. Powers, Nord and Davies as shown in the Summary Compensation Table on page 28 reflect this level of achievement.

 

 

In addition to EPS and free cash flow measured in the same manner as for corporate officers described above, the group vice presidents’ short-term incentive awards were principally determined using a composite of (i) operating profit and trade working capital objectives specific to the group vice presidents’ business unit (for Mr. Muse,

the lighting business (“Lighting”), and for Mr. Amato, the electrical products business (“Electrical Products”)), 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 and Amato were as follows:

 

 

Focusing a significant portion of the group vice presidents’ short-term incentive award on operating profit and trade working capital 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, trade working capital, EPS and free cash flow goals were the only goals material to the determination of Messrs. Muse’s and Amato’s annual short-term incentive award. The strategic objectives for Messrs. Muse and Amato 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 one strategic objective was material to the determination of his annual short-term incentive. Some of the strategic objectives are formula driven, others are 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.

 

Mr. Muse.  The Lighting business did not meet the minimum performance threshold in operating profit which resulted in no incentive payout for Mr. Muse on the operating profit measure. However, the Lighting business achieved 1.9 percentage point improvement in trade working capital performance compared to the prior year which resulted in achievement of the maximum performance result on the trade working capital measure. When blended to form the composite measure (75% weight operating profit plus 25% weight trade working capital), Mr. Muse earned a 50% payout on this composite measure. The Compensation Committee assessed Mr. Muse’s performance on the

strategic objectives and determined that such results corresponded to a performance level of 167%. As a result, Mr. Muse’s actual short-term incentive award for 2008 was determined as shown in the following table:

 

 

Mr. Amato.  The Electrical Products business achieved operating profit performance that was 24% better than prior year which translated to a performance result for Mr. Amato of 195% on the operating profit measure. The Electrical Products business achieved trade working capital performance equal to a 3 percentage point improvement as compared to prior year. This performance translated to a performance result of 200% on the trade working capital measure. When blended to form the composite measure (75% weight operating profit plus 25% weight trade working capital), Mr. Amato earned a 169% payout on this composite measure. The Compensation Committee assessed Mr. Amato’s performance on the strategic objectives and determined that such results corresponded to a performance level of 80%. As a result, Mr. Amato’s actual short-term incentive award for 2008 was determined as shown in the following table:

 

 

 

The Senior Plan is the means for paying short-term incentive awards to the limited number of named executive officers whose incentive compensation opportunities might not otherwise be tax deductible due to the application of Section 162(m) of the Internal Revenue Code of 1986 (the “Code”). The Senior Plan is designed to ensure that short-term incentive amounts paid to its participants are performance-based, thereby ensuring that such amounts remain tax deductible under Section 162(m) of the Code. Plans like the Senior Plan are widely used by companies in the general manufacturing sector as they ensure the tax deductibility of the compensation paid. Their prevalence across

general industry helps promote interest in the Company’s compensation programs among the community of high quality senior executives that the Company strives to recruit and retain.

 

Short-term incentive awards under the Senior Plan also are earned contingent on the achievement of Compensation Committee-approved goals. Participants become entitled to a percentage of the short-term incentive award fund described in connection with the Incentive Compensation Plan. Under the terms of the Senior Plan, for example:

 

Mr. Powers was eligible to earn a maximum amount for 2008 equal to the lesser of:

 

 

Mr. Nord’s maximum amount for 2008 was the lesser of:

 

 

The Compensation Committee then uses its discretion to size actual short-term incentive award payments in relation to goal attainment. However, awards approved by the Compensation Committee under the Senior Plan have mirrored those that would have been paid to participants had they been awarded under the Incentive Compensation Plan at a target of 100% of base salary for Mr. Powers, and a target of 70% of base salary for Mr. Nord. It follows, therefore, that in 2008 Messrs. Powers and Nord were eligible to earn a maximum short-term incentive award equal to 200% of their STI Target if EPS exceeded $4.56 and free cash flow exceeded $268 million. The Compensation Committee then was permitted to reduce (but not increase) these short-term incentive award amounts according to its discretionary assessment of performance. This formulation is necessary to ensure that (i) any short-term incentive awards payable are deductible under Section 162(m) of the Code, and (ii) the amount payable remains in line with the total compensation targeted percentiles described on page 17.

 

In exercising its discretion to reduce the maximum earned short-term incentive award to the level reported in the Summary Compensation Table, 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. For 2008, since actual EPS was $3.94 and free cash flow was $270 million, the Compensation Committee approved for Messrs. Powers and Nord the amounts displayed in the Summary Compensation Table on page 28 which mirrored the amounts that they would have received as corporate officers under the Incentive Compensation Plan.

 

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:

 

 

 

In December 2008, 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:

 

 

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 emblematic of 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 (the number of SARs, shares of restricted stock, or performance shares awarded, subject to the achievement of performance targets) is based on several factors, including:

 

 

The Compensation Committee decreased the aggregate value of long-term incentive compensation awarded in 2008 by approximately 10% compared to the 2007 grant value. This reduction reflected the Compensation Committee’s recognition of the decline in the general marketplace and in equity values shared by other investors. 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. However, in 2008, Mr. Davies did not receive any restricted or performance share awards, but was granted only SARs. This was because Mr. Davies is near retirement age and if he chose to retire before the end of the normal vesting period he would forfeit any restricted and performance share grants and would not receive any value for such awards. Accordingly, the Compensation Committee determined that a SAR only award was the most appropriate method of providing Mr. Davies with long-term incentive compensation.

 

Performance share awards granted in 2008 are 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 paid will be 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 remain 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 is 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.

 

 

Long-term incentive grants are usually made once a year, after the Compensation Committee has assessed the Company’s performance for such year. Historically, stock option and SAR 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. In 2008, SAR grants were made on December 1, 2008 at the regularly scheduled Compensation Committee meeting. 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 fair market value of a share of Class B Common Stock upon exercise.

 

The base price pursuant to which the value of a SAR is measured is determined under the 2005 Incentive Award Plan which 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. November 28, 2008 — $29.275). 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 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.

     Stock Ownership Guidelines for Executives

 

In 2005, the Company adopted stock ownership guidelines applicable to the named executive officers as well as other officers and designated employees. The Company’s Policy Regarding Stock Ownership and Retention by Officers and Designated Company Personnel requires that officers and certain designated employees (“Senior Employees”), consistent with their responsibilities to the shareholders of the Company, hold a significant equity interest in the Company. The Board expects all Senior Employees to make a good faith effort, depending on the circumstances, to attain a share ownership equal to their base salary multiplied by a certain multiplier, and divided by the fair market value of the Company’s Class B Common Stock on January 1, 2005, or $52.30 (“Minimum Share Requirement”).

 

The share ownership multiples are set forth in the following table:

 

 

Senior Employees have five years from the earliest date on which any option to acquire Company securities owned by such Senior Employee fully vests to meet their minimum share requirements. Until the Minimum Share Requirement is met, and thereafter whenever the Minimum Share Requirement is not met, a Senior Employee must retain fifty percent (50%) of net shares acquired pursuant to the exercise of a stock option or SAR. Once the Minimum Share Requirement is satisfied, the Senior Employee must continue to satisfy such requirement for so long as he or she remains a Senior Employee. Although the Company has not granted stock options since 2004, options granted prior to 2004 are vested and may remain outstanding.

 

Shares that count toward the Minimum Share Requirement include shares held outright by the Senior Employee or by his or her spouse or minor children, shares held in trust for the benefit of the Senior Employee or his or her spouse or minor children, and restricted stock held pursuant to the 2005 Incentive Award Plan, or other long-term incentive compensation plan of the Company, but do not include shares underlying unexercised options or SARs (whether or not vested).

 

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.

 

 

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.

 

Additional information on the Basic Plan, Contribution Plan and supplemental retirement plans can be found under the section entitled “Retirement Plans” and the accompanying narrative to the Pension Benefits in Fiscal Year 2008 table on page 35. Information on deferred compensation plans can be found under the section entitled “Non-Qualified Deferred Compensation” and the accompanying narrative to the “Non-Qualified Deferred Compensation in Fiscal Year 2008” table on page 37.

 

 

The Company provides certain 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 physical and financial health and thus the Company’s investment in their development; and encourage active involvement in Company marketing efforts. More detail on the Company’s perquisites can be found in the narrative following the Summary Compensation Table on page 30.

 

 

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 an involuntary 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 normal 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 key 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, continuity, 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 the assurances of Exequity that the programs are representative of market practice, both in terms of design and cost. For example, the Compensation Committee’s review of prevailing practices elsewhere demonstrated that the magnitude of the lump sum cash benefits payable following certain change-related terminations (3 times base salary plus short-term

incentive award) reflects general industry standards. Similarly, the promise to accelerate vesting in all outstanding long-term incentive awards also is emblematic of external norms. The Compensation Committee determined that extending these competitive benefits is necessary to attract and retain top quality executive talent.

 

Additional information on the Company’s severance, continuity, 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 38.

 

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 any of its top five executives (as indicated in the Summary Compensation Table for that year), 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 are intended to qualify as performance-based compensation exempt from the limitations of Section 162(m) of the Code.

 

The 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

Richard J. Swift

Daniel S. Van Riper

 

Cash and Other Forms of 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, 2008.

 

Summary Compensation Table for Fiscal Year 2008

 

 

 

 

 

 

 

 

Grants of Plan-Based Awards in Fiscal Year 2008

 

 

 

 

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

 

See the CD&A above for a complete description of 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 2008 and not the salary level of the named executive officer at year end.

 

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, 2008.

 

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, 2008. All outstanding equity awards are in shares of the Company’s Class B Common Stock.