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   o

COMMUNICATIONS SYSTEMS, INC.

10900 Red Circle Drive
Minnetonka, Minnesota 55343

NOTICE OF 20162019 ANNUAL MEETING OF SHAREHOLDERS

To Be Held May 19, 201622, 2019

Dear Shareholders:

You are cordially invited to attend the 20162019 Annual Meeting of Shareholders of Communications Systems, Inc. (“CSI” or the “Company”). The meeting will be held at the Company’s offices located at 10900 Red Circle Drive, Minnetonka, Minnesota, on Thursday,Wednesday, May 19, 201622, 2019 beginning at 10:00 a.m., Central Daylight Time, for the following purposes:

The Board of Directors has fixed the close of business on March 24, 201627, 2019 as the record date for determination of shareholders entitled to notice of and to vote at the meeting.

You may attend the meeting and vote in person, or you may vote by proxy. To ensure your representation at the meeting, please complete and submit your proxy, whether or not you expect to attend in person. Shareholders who attend the meeting may revoke their proxies and vote in person if they so desire.

	By Order of the Board of Directors,
		Roger H.D. Lacey, Chairman
	Curtis A. Sampson, Chairman
Minnetonka, Minnesota

COMMUNICATIONS SYSTEMS, INC.
PROXY STATEMENT

QUESTIONS AND ANSWERS ABOUT THE MEETING

Information Regarding the Annual Meeting

This Proxy Statement is furnished to the shareholders of Communications Systems, Inc. (“CSI” or the “Company”) beginning April 8, 201610, 2019 in connection with the solicitation of proxies by the Board of Directors of the Company to be voted at the Annual Meeting of Shareholders that will be held at the Company’s offices at 10900 Red Circle Drive, Minnetonka, Minnesota, on Thursday,Wednesday, May 19, 2016,22, 2019, beginning at 10:00 a.m., Central Daylight Time, or at any adjournment or adjournments thereof.

What is the purpose of the meeting?

At our annual meeting, shareholders will act upon the matters disclosed in the Notice of 2019 Annual Meeting of Shareholders that accompanies this Proxy Statement. These include:

We will also consider any other business that may properly be presented at the meeting, and management will report on CSI’s performance during the last fiscal year and respond to questions from shareholders.

How does the Board recommend that I vote?

The Board of Directors named in this proxy statement recommends a vote:

Who is entitled to vote at the meeting?

If you were a shareholder of record at the close of business on March 24, 201627, 2019 (the “record date”), you are entitled to vote at the meeting. As of the record date, 8,761,001 shares9,308,521 of common stock were outstanding and eligible to vote.

What is the difference between a shareholder of record and a street name holder?

If your shares are registered directly in your name, you are the “shareholder of record” with respect to those shares.record.” If your shares are held in a stock brokerage account or by a bank or other nominee, you are the beneficial owner of those shares, and your shares are held in street name. If you are a “street name holder,” you will receive a voting instruction card that appears very similar to a proxy card. Please complete that card as directed to ensure your shares are voted at the meeting.

What are the voting rights of the shareholders?

Holders of common stock are entitled to one vote per share. Therefore, a total of 8,761,0019,308,521 votes are entitled to be cast at the meeting. There is no cumulative voting for the election of directors.

How many shares must be present to hold the meeting?

A quorum is necessary to hold the meeting and conduct business. The presence of shareholders who can direct the voting of at least a majority of the outstanding shares of common stock as of the record date is considered

a quorum. A shareholder is counted as present at the meeting if the shareholder is present and votes in person at the meeting or the shareholder has properly submitted a proxy by mail, telephone or Internet.

How do I vote my shares?

If you are a shareholder of record, you may give a proxy to be voted at the meeting either:

If you hold shares beneficially in street name, you may also vote by proxy over the Internet by following the instructions provided in the Notice of Internet Availability of Proxy Materials or, if you received printed proxy materials, you may also vote by mail or telephone by following the instructions provided in the voting instruction card provided to you by your broker, bank, trustee or nominee. The telephone and Internet voting procedures have been set up for your convenience. The procedures have been designed to authenticate your identity, to allow you to give voting instructions, and to confirm that those instructions have been recorded properly. YouIf you choose not to vote over the Internet or by completing a Proxy card, you may also vote in person at the meeting as described in “May I vote my shares in person at the meeting?” below.

What does it mean if I receive more than one Notice of Internet Availability of Proxy Materials, proxy card or voting instruction card?

It means you hold shares of CSI stock in more than one account. To ensure that all of your shares are voted, sign and returneach proxy card or voting instruction card or, if you vote by telephone or via the Internet, vote once foreach proxy card, voting instruction card or Notice of Internet Availability of Proxy Materials you receive.

May I vote my shares in person at the meeting?

Yes. If you are a shareholder of record, you may vote your shares at the meeting by completing a ballot at the meeting. Even if you currently plan to attend the meeting, however, we recommend that you submit your proxy ahead of time so that your vote will be counted if, for whatever reason, you later decide to not attend the meeting. If you hold your shares in street name, you may vote your shares in person at the meeting only if you obtain a signed proxy from your broker, bank, trustee or other nominee giving you the right to vote these shares at the meeting.

What vote is required for the proposals to be approved?

How are votes counted?

Shareholders may either vote FOR or WITHHOLD authority to vote on the election of directors. Shareholders may vote FOR, AGAINST or ABSTAIN on proposal No 2.Proposal Nos. 2 and 3.

If you vote ABSTAIN or WITHHOLD, your shares will be counted as present at the meeting for the purposes of determining a quorum. If you ABSTAIN from voting on a proposal, your abstention has the same effect as a vote against that proposal. If you WITHHOLD authority to vote for one or more of the nominees for director, this will have no effect on the election of any director from whom votes are withheld.

If you hold your shares in street name and do not provide voting instructions to your broker or nominee, your shares will be considered to be “broker non-votes” and will not be voted on any proposal on which your broker or nominee does not have discretionary authority to vote under the rules of the New York Stock Exchange. Shares that constitute broker non-votes will be present at the meeting for the purpose of determining a quorum, but are not considered entitled to vote on the proposal in question. Your broker or nominee has discretionary authority to vote your shares on the ratification of DeloitteBaker Tilly as our independent registered public accounting firm even if your broker

or nominee does not receive voting instructions from you, but may not vote your shares on any other matters without instructions from you.

May I change my vote?

Yes. If you are a shareholder of record, you may change your vote and revoke your proxy at any time before it is voted at the meeting in any of the following ways:

If you are a street name holder, please consult your broker, bank, trustee or nominee for instructions on how to change your vote.

Who pays for the cost of proxy preparation and solicitation?

We pay for the cost of proxy preparation and solicitation, including the charges and expenses of brokerage firms or other nominees for forwardingto forward proxy materials to beneficial owners of shares held in street name.

We are soliciting proxies primarily by mail. In addition, proxies Proxies may be solicited by telephone or facsimile, or personally by our directors, officers and regular employees. These individuals will receive no compensation (other than their regular salaries) for these services.

Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of paper copies?

Under rules of the Securities and Exchange Commission (the “SEC”), we may furnish proxy materials to our shareholders by providing access to these documents on the Internet instead of mailing printed copies. In general, you will not receive printed copies of the materials unless you request them. Instead, we mailed you the Notice of Internet Availability of Proxy Materials (unless you have previously consented to electronic delivery or already requested to receive paper copies), which instructs you as to how you may access and review all of the proxy materials on the Internet. The Notice of Internet Availability of Proxy Materials explains how to submit your proxy over the Internet. If you would like to receive a paper copy or e-mail copy of the proxy materials, please follow the instructions provided in the Notice of Internet Availability of Proxy Materials.

Why do some shareholders receive a notice in the mail regarding the Internet Availability of Proxy Materials instead of a full set of paper copies and some shareholders receive both a Notice of Internet Availability and a full set of paper copies?

In accordance with rules adopted by the Securities and Exchange Commission (the “SEC”), we may furnish proxy materials to our shareholders by providing access to these documents on the Internet instead of mailing printed copies. This year, we have mailed the Notice of Internet Availability of Proxy Materials to all shareholders (unless a shareholder has previously consented to electronic delivery). The Notice of Internet Availability of Proxy Materials explains how to obtain proxy materials and to submit your proxy over the Internet.

If you have not received a paper copy or e-mail copy of the proxy materials, and would like to receive one, please follow the instructions provided in the Notice of Internet Availability of Proxy Materials.

How can a shareholder present a proposal at the 20172020 Annual Meeting?

In order forFor a shareholder proposal to be considered for inclusion in our Proxy Statement for the 20172020 Annual Meeting, the written proposal must be received at our principal executive offices by the close of business on December 9, 2016.12, 2019. The proposal must comply with SEC regulations regarding the inclusion of shareholder proposals in company-sponsored proxy materials.

If a shareholder wishes to present a proposal at the 20172020 Annual Meeting that would not be included in our Proxy Statement for that meeting, the shareholder must provide notice to us no later than April 4, 2017.February 25, 2020. Please contact the Corporate Secretary for a description of the steps to be taken to present a proposal.

How can a shareholder get a copy of the Company’s 20152018 Report on Form 10-K?

Our 20152018 Annual Report, including our Annual Report on Form 10-K for the year ended December 31, 2015,2018, is available electronically with this Proxy Statement, or if have beenStatement. If you were mailed a paper copy of this Proxy Statement, has beenthe 2018 Annual Report was included. The 20152018 Annual Report, including our Form 10-K, is also available in the Investor Relations page of our website http://commsystems.com. Upon request, we will provide you copies of any exhibits to the Form 10-K upon payment of a fee covering our reasonable expenses in furnishing these exhibits. You

can request exhibits to the Form 10-K by writing to the Corporate Secretary, Communications Systems, Inc., 10900 Red Circle Drive, Minnetonka, Minnesota 55343.

What if I do not specify a choice for a matter when returning a proxy?

Unless you indicate otherwise, the persons named as proxies on the proxy card will vote your shares

If any other matters come up for a vote at the meeting, the proxy holders will vote the shares they are entitled to vote, according to the recommendations of the boardBoard of directorsDirectors or, if there is no recommendation, at their own discretion.

PROPOSAL NO. 1 – ELECTION OF DIRECTORS

PROPOSAL NO. 1

Our Board of Directors presently consists of six director positions,five directors, each serving a one-year term. The Board of Directors has nominated and recommends that the Company’s shareholders elect Luella G. Goldberg, Roger H.D. Lacey, Gerald D. Pint, Richard A. Primuth, Curtis A. Sampson, and Randall D. Sampson each of whomand Steven C. Webster. All currently servesserve as a director.directors. The Board of Directors believes that each nominee will be able to serve as a director. The Board has determined that each nominee, with the exception of Roger H.D. Lacey, is independent.

Each nominee has indicated his or her willingness to serve if elected, but if any should benominee is unable or unwilling to serve, proxies may be voted for a substitute nominee designated by the Board. The Company did not receive any shareholder nominations for director. Proxies cannot be voted for more than the number of nominees named in this Proxy Statement.

BOARD OF DIRECTORS

The following table sets forth information regarding the director and nominees named above, including information regarding their principal occupations currently and for the preceding five years.

Vote Required

Directors are elected by a plurality of the votes cast. Therefore, the sixfive nominees who receive the highest number of votes will be elected as directors.

Board Voting Recommendation of the Board

The Board of Directors unanimously recommends that youshareholders vote “FOR”
the election of each of the nominees named above as a director.

PROPOSAL NO. 2 – RATIFICATION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

DeloitteThe Audit & Touche LLP (“Deloitte”), the member firms of Deloitte Touche Tohmatsu, and their respective affiliates have been the Company’s independent registered public accounting firm since 1982. The Board of Directors, upon recommendation of the Audit and Finance Committee is requesting shareholder ratification of the appointment of Deloitte & Touchehas selected Baker Tilly Virchow Krause, LLP to serve as theour independent registered public accounting firm for the Company for the current fiscal year ending December 31, 2016. A representative2019. While the Audit & Finance Committee retains the sole authority to retain, compensate, oversee and terminate the independent registered public accounting firm, the Audit & Finance Committee is submitting the appointment of DeloitteBaker Tilly Virchow Krause, LLP as our independent registered public accountants for ratification. In the event the shareholders do not ratify the appointment of Baker Tilly Virchow Krause, LLP, the Audit & Touche LLP is expected to be present atFinance Committee will reconsider the Annual Meeting of Shareholders and will have an opportunity to make a statement and will be available to respond to appropriate questions.selection.

Vote Required

TheApproval of this Proposal 2 requires the affirmative vote of the holders of a majority of the outstanding shares of the Company’s Common Stock voting at the meetingpresent, in person or by proxy, is required for approval.and entitled to vote on Proposal 2.

Board Voting Recommendation of the Board

The Board of Directors unanimously recommends shareholders Vote “FOR”
Proposal 2: Ratification of the Appointment of Baker Tilly Virchow Krause, LLP

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES

The following is a summary of the fees billed to the Company by Baker Tilly Virchow Krause, LLP for professional service for the year ended December 31, 2018 and 2017.

Audit Fees. This category consists of fees billed for professional services rendered for the audit of the Company’s annual financial statements and review of financial statements included in our quarterly reports.

Audit-Related Fees. This category consists of fees billed for assurance and related services, such as the Company’s employee benefit plan audits that are reasonably related to the shareholders vote “FOR”performance of the proposalaudit or review of the Company’s financial statements and are not otherwise reported under “Audit Fees.”

Tax Fees. This category consists of fees billed for professional services for tax compliance, tax advice and tax planning. Assistance regarding federal and state tax compliance and acquisitions are provided to ratify the appointmentCompany by RSM US LLP.

All Other Fees. All other fees are fees for products and services other than those listed above.

Audit & Finance Committee Pre-approval Policies and Procedures

In addition to approving the engagement of Deloittethe independent registered public accounting firm to audit the Company’s consolidated financial statements, the policy of the Audit & Touche LLP asFinance Committee is to approve all use of the Company’s independent registered public accounting firm for our 2016 fiscal year.non-audit services prior to any such engagement. To minimize relationships that could appear to impair the objectivity of the independent registered public accounting firm, the policy of the Committee is to restrict the non-audit services that may be provided to the Company by the Company’s independent registered public accounting firm primarily to tax services, merger and acquisition due diligence and integration services, and any other services that can clearly be designated as “non-audit” services.

Audit & Finance Committee Report

The Audit & Finance Committee is responsible for independent, objective oversight of the Company’s financial accounting and reporting by overseeing the system of internal controls established by management and monitoring the participation of management and the independent registered public accounting firm in the financial reporting process.

The Audit & Finance Committee held six meetings in 2018. The meetings were designed to facilitate and encourage private communication between the Committee and Baker Tilly Virchow Krause, LLP.

During the meetings, the Committee reviewed and discussed the Company’s financial statements with management and Baker Tilly Virchow Krause, LLP. Management represented to the Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Audit & Finance Committee has reviewed and discussed the consolidated financial statements with management and the independent accountants. The discussions with Baker Tilly Virchow Krause, LLP also included the matters required by Statement on Auditing Standards (“SAS”) No. 61 (Communication with Audit Committees), as amended by SAS 89 and 90 (Audit Committee Communications).

Baker Tilly Virchow Krause, LLP provided to the Committee the written disclosures and the letter regarding its independence as required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and this information was discussed with Baker Tilly Virchow Krause, LLP.

Based on the discussions with management and Baker Tilly Virchow Krause, LLP, the Committee’s review of the representations of management and the report of the Baker Tilly Virchow Krause, LLP, the Audit & Finance Committee recommended to the Board that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission.

Submitted by the Audit & Finance Committee of the Company’s Board of Directors

Randall D. Sampson (Chair)     Steven C. Webster     Richard A. Primuth

CORPORATE GOVERNANCE AND BOARD MATTERS

General Information

Our Board is committed to sound and effective corporate governance practices. Our governance policies are consistent with applicable provisions of the rules of the Securities and Exchange Commission (the “SEC”)SEC and the listing standards of the NASDAQ StockNasdaq Capital Market (“NASDAQ”Nasdaq”). We also periodically review our governance policies and practices in comparison to those suggested by authorities in corporate governance and the practices of other public companies.

You can access our corporate governance charters and other related materials by following links on the “Corporate Governance” page of our websitehttp://commsystems.com.

The Board, Board Committees and Meetings

Meeting Attendance. Our Board meets regularly during the year to review matters affecting our Company and to act on matters requiring Board approval. Each of our directors is expected to make a reasonable effort to attend all meetings of the Board, applicable committee meetings and our annual meeting of shareholders. During 2015,2018, the Board met six times. Each of our directorsdirector attended at least 75%80% of the meetings of the Board and committees on which he or she served, and all directors attended the 20152018 Annual Meeting of Shareholders.

Board Committees. Our Board has established two standing committees: Audit & Finance and Compensation. Only members of the Board serve on these committees. Following is information about each committee:

Audit & Finance Committee. The Audit & Finance Committee is responsible for the engagement, retention and replacement of the independent registered public accounting firm, approval of transactions between the Company and a director or executive officer unrelated to service as a director or officer, approval of non-audit services provided by the Company’s independent registered public accounting firm, oversight of the Company’s internal controls and the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters. Deloitte & Touche LLP, theThe Company’s independent registered public accounting firm, reports directly to the Audit & Finance Committee. The Audit & Finance Committee operates under a formal charter that is reviewed annually and was most recently revised amended on November 13, 2014.The3, 2016. The current members of the Audit & Finance Committee are Luella G. Goldberg, Richard A. Primuth, and Randall D. Sampson (Chair). Ms. Goldberg, and Steven C. Webster. Mr. Primuth, Mr. Sampson and Mr. SampsonWebster are each independent under SEC Rules and NASDAQ listing standards. In addition, the Board of Directors has determined that Randall D. Sampson qualifies as the Committee’s financial expert. The Audit & Finance Committee met six times during 2015.2018.

Compensation Committee. The Compensation Committee is responsible for the overall compensation strategy and policies of the Company; reviews and approves the compensation and other terms of employment of the Company’s chief executive officer and other executive officers, subject to final Board approval; oversees the establishment of performance goals and objectives for the Company’s executive officers; administers the Company’s incentive compensation plans;plans, including the Company Employee Stock Purchase Plan; considers the adoption of other or additional compensation plans; and provides oversight and final determinations with respect to the Company’s 401(k) plan, employee stock ownership plan and other similar employee benefit plans. The Committee operates under a Board-approved charter approved by the Board that is reviewed annually and was most recently amended on March 7, 2014. The current members of the Compensation Committee are Gerald D. Pint, Richard A. Primuth (Chair) and, Randall D. Sampson.Sampson, and Steven C. Webster. Each member of the Compensation Committee member is independent under NASDAQNasdaq standards. The Committee met fourthree times in 2015.2018.

Director Independence

The Board of Directors has adopted director independence guidelines that conform to the definitions of “independence” set forth in Section 301 of the Sarbanes-Oxley Act of 2002, Rule 10A-3 under the Securities Exchange Act of 1934 and listing standards of NASDAQ.Nasdaq. In accordance with these guidelines, the Board of Directors has reviewed and considered facts and circumstances relevant to the independence of each of our directors and director nominees and has determined that each of the following incumbent directors qualifies as “independent” under NASDAQNasdaq listing standards: Luella G. Goldberg, Gerald D. Pint, Richard A. Primuth, Curtis A. Sampson, and Randall D. Sampson.Sampson and Steven C. Webster.

Selecting Nominees for Election to the Board

In selecting nominees for election to the Board at the 20162019 Annual Shareholders Meeting, Lead Governance Director Luella Goldberg (anthe independent director) in consultation with the Board Chairdirectors (Messrs. Primuth, C.A. Sampson, R.D. Sampson and the Compensation Committee Chair (both independent directors)Webster) assessed the existing composition of the Board, in part to ensure the Board reflects an appropriate balance of knowledge, experience, skills, expertise,

diversity, and independence to enable the Board to meet the challenges it may confront. These directors also reviewed the Board composition to determine the qualifications and areas of expertise needed to further enhance the Board’s ability to fulfill its responsibilities. After this consultation, Ms. Goldberg, on behalf of herself and the Board Chair and Compensation Committee Chair,independent directors recommended to the full Board that the sixfive existing directors be nominated for electionreelection at the 20162019 Annual Meeting of Shareholders. Roger Lacey, the sole non-independent member of the Board of Directors, did not participate in selecting the persons recommended for nomination by the full Board of Directors.

Although the Board does not have a formal policy regarding diversity, in addition to minimum requirements of integrity, ability to make independent analytical inquiries, personal health and a willingness to devote adequate time and effort to Board responsibilities, the Board seeks individuals who reflect diversity in background, education, business experience, skills, business relationships and associations and other factors that will contribute to the Board’s governance of the Company.

In making recommendations regarding nominees for election as directors, the Board will consider qualified candidates thatwho are proposed by our shareholders. Shareholders can submit qualified candidates, together with appropriate biographical information, to the Corporate Secretary at: Communications Systems, Inc., 10900 Red Circle Drive, Minnetonka, Minnesota 55343. Any shareholder desiring to submit a director candidate for consideration at our 20172020 Annual Meeting of Shareholders must ensure that the submission is received by the Company no later than December 8, 201612, 2019 to provide adequate time for the Board to properly consider the candidate.

Shareholders may directly nominate an individual for election to the Board at our shareholders meeting by following procedures in our Bylaws. A shareholder wishing to formally nominate an individual to election to the Board at future shareholder meetings should follow the procedure set forth below under the caption “Other Information – Shareholder Proposals for 20172020 Annual Meeting -- Shareholder Nominations.”

Board Leadership

Our Governance Guidelines separateOn December 12, 2018, Communications Systems, Inc. (“CSI’’ or the roles“Company”) announced that Curtis A. Sampson had retired as Chairman of the Board of Directors, but would continue to serve as a Board member with the title Chairman Emeritus.

CSI’s Chief Executive Officer and Vice Chairman Roger H.D. Lacey has been named as the new Executive Chairman of the CSI Board of Directors. Mr. Lacey will continue to serve as Chief Executive Officer of CSI, but the Company anticipates that it will appoint a new Chief Executive Officer in 2019 to lead CSI.

In connection with these changes, CSI Board member Randall D. Sampson, Curt Sampson’s son and Chief Executive Officer of Canterbury Park Holding Corporation, has been named as the Company’s new Lead Independent Director. Randall Sampson has served as a CSI director since 1999, and currently serves as Chair of the Board and Chief Executive Officer. These positions are respectively held by Curtis A. Sampson and Roger H.D. Lacey. This structure enables the Chair, in collaboration with other non-employee Directors, to have an active role in setting agendas and establishing Board priorities and procedures.

Ms. Luella Goldberg serves as Lead Governance Director and, in this capacity, provides leadership in determining the size and composition of the Board, finding individuals qualified to serve as Board members, and reviewing the size and composition of the Board committees, facilitating Board self-assessment and advising the Board on other governance topics.Board’s Audit & Finance Committee.

Mr. Richard Primuth, in addition to his other Directordirector responsibilities, has been designated as Board Secretary. In this capacity, he is responsible for keeping minutes of the boardBoard and committee meetings, developing and maintaining an annual calendar of boardBoard and committeeCommittee meetings and responsibilities, facilitating the flow of information regarding business operations and results to the board,Board, assisting the chairmanExecutive Chairman and CEO to develop agendas for boardBoard meetings, and providing company officers with boardBoard level input on pending legal matters, material contracts, corporate developments and other developments in the Company’s business.

Board’s Role in Managing Risk

In general, management is responsible for the day-to-day management of the risks the Company faces, while the Board, acting as a whole and through the Audit & Finance Committee, has oversight responsibility for risk management. In its risk oversight role, the Board has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. Members of senior management attend the regular meetings of the Board and are available to address questions and concerns raised by the Board related to risk management. In addition, the Board regularly discusses with management, the Company’s independent registered public accounting firm and the internal auditor, identified major risk exposures, their potential financial impact on the Company, and steps that could be taken to manage these risks.

The Audit & Finance Committee assists the Board in fulfilling its risk management oversight responsibilities in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements. The Audit & Finance Committee reviews the Company’s financial statements and meets with the Company’s independent registered public accounting firm and internal auditor at least four times each year to review their respective reports on the adequacy and effectiveness of our internal audit and internal control systems, and to discuss policies with respect to risk assessment and risk management.

Director Compensation

Compensation information paid to non-employee directors of the Company in 20152018 is set forth under the caption “Director Compensation.”

Code of Ethics and Business Conduct

We have adopted a Code of Ethics and Business Conduct (the “Code”) applicable to all of the Company’s officers, directors, employees, and consultants that establish guidelines for professional and ethical conduct in the workplace. The Code also contains a special set of guidelines applicable to the Company’s senior financial officers, including the chief executive officer, principal financial officer, principal accounting officer, and others involved in the preparation of the Company’s financial reports.

These guidelines are intended to promote the ethical handling of conflicts of interest, full and fair disclosure in periodic reports filed by the Company, and compliance with laws, rules and regulations concerning this periodic reporting. A copy of the Code is available by following links on the “Corporate Governance” page of our website athttp://commsystems.com, and is also available, without charge, by writing to the Company’s Corporate Secretary at: Communications Systems, Inc., 10900 Red Circle Drive, Minnetonka, Minnesota 55343.

Contacting the Board of Directors

Any shareholder who desires to contact our Board of Directors may do so by writing to the Board of Directors, generally, or to an individual director at Communications Systems, Inc., 10900 Red Circle Drive, Minnetonka, Minnesota 55343. Communications received electronically or in writing are distributed to the full Board of Directors, a committee or an individual director, as appropriate, depending on the facts and circumstances described in the communication received. By way of example, a complaint regarding accounting, internal accounting controls or auditing matters would be forwarded to the Chair of the Audit & Finance Committee for review. Complaints and other communications may be submitted on a confidential or anonymous basis.

PROPOSAL 3 –APPROVAL Of a 100,000 SHARE INCREASE IN THE COMMUNICATIONS SYSTEMS, INC. Employee Stock Purchase Plan

At our 2019 Annual Meeting, shareholders will be asked to approve amendments to the Company’s Employee Stock Purchase Plan (the “Purchase Plan”) to increase the number of shares issuable under the Purchase Plan by 100,000 shares to 700,000 shares.

Proposed Amendment to Purchase Plan to Increase Authorized Shares

The Purchase Plan originally authorized the issuance of 100,000 shares of common stock pursuant to options granted pursuant to its terms. The number of shares authorized for issuance was increased to 600,000 shares pursuant to amendments approved at annual shareholder meetings in 1995, 1998, 2002, 2009, and 2015 that provided for successive 100,000 share increases in the number of authorized shares. At December 31, 2018, pursuant to options granted under the Purchase Plan, the Company had issued 576,409 of the 600,000 shares authorized and 23,591 were available for future issuers.

On February 19, 2019, the Board of Directors approved an amendment of the Purchase Plan, subject to the ratification and approval by the shareholders, to increase the total number of shares available under the Purchase Plan by 100,000 shares to a total of 700,000 shares. If shareholder approval to increase the number of shares authorized for issuance under the Purchase Plan is not obtained, it is likely it would be necessary to suspend operation of the Purchase Plan in fiscal 2019.

The Board of Directors believes that the Purchase Plan has provided material benefits to the Company and its employees and deems it prudent to increase the shares available for grant under the Purchase Plan by 100,000 shares to enable the continued grant of options and exercise of options pursuant to the terms and conditions of the Plan for the next several years.

Summary of Terms of the Purchase Plan

The following is a brief summary of the Purchase Plan and the principal changes made by amendments approved by the Board as currently in affect.

The Purchase Plan is administered by a Committee consisting of not less than three members who are appointed by the Board of Directors. Each member of such Committee must be a director, officer or an employee of the Company. Currently, the Purchase Plan is administered by the Compensation Committee.

The Purchase Plan is intended to be a “qualified” plan under Section 423 of the Internal Revenue Code. Under the Internal Revenue Code, as amended to date, no income will result to a grantee of an option upon the granting or exercise of an option, and no deduction will be allowed to the Company. The gain, if any, resulting from a disposition of the shares received by a Participant, will be reported according to the provisions of Section 423, Internal Revenue Code of 1954, as amended, and will be taxed in part as ordinary income and in part as capital gain. Eligible employees may voluntarily elect to participate in the Purchase Plan by completing a payroll deduction authorization form provided by the Company and delivering it to the Company or its designated representative prior to the commencement date of any Phase of the Purchase Plan. Payroll deductions are limited to 15% of a Participant’s base pay for the term of that Phase of the Purchase Plan.

A Participant who is employed by the Company as of the commencement date of a Phase of the Purchase Plan will be granted an option as of such date to purchase a number of full shares of Company common stock to be determined by dividing (i) the total amount to be credited to that Participant’s account through payroll contributions by (ii) the option price, subject to certain limitations outlined in the Purchase Plan. Under the proposed amendments to the Purchase Plan, prior to the commencement of a Phase of the Purchase Plan, the Committee will, in its discretion, determine the discount to be applied in establishing the option price for shares of common stock to be purchased at the end of that Phase. The option price will be a percentage of the fair market value of such shares at the end of the Phase, which will not be less than 85% of such fair market value (a 15% discount). The Committee also has the discretion to impose restrictions on the resale of purchased shares if it decides that this better promotes long-term ownership.

A Participant’s option for the purchase of shares is exercised automatically on the last day of the Phase of the Purchase Plan, unless a Participant gives written notice to the Company prior to such date as to an election not to exercise. A Participant may, at any time prior to the Termination Date of a Phase of the Purchase Plan, give written

notice to the Company that he or she does not wish to continue to participate in the Purchase Plan. Upon receipt of this notice, all payroll deductions credited to the Participant’s account will be returned to the participant and no further payroll deductions will be made during that Phase of the Purchase Plan. All payroll deductions credited to the Participant’s account because he or she discontinues participation are refunded without interest.

Any employee, including an officer of the Company, who, at least one day prior to the commencement date of a Phase of the Purchase Plan, is customarily employed by the Company for more than 15 hours per week, will be eligible to participate in the Purchase Plan. For any Phase of the Purchase Plan, the Company may also choose to further exclude one or more of the following categories of employees, so long as the exclusions are applied in an identical manner: employees employed less than two years; employees whose customary employment is 20 hours or less per week; employees whose customary employment is not more than five months a calendar year; highly compensated employees (as defined in Code Reg. § 1.423-2(e)); employees employed by a Subsidiary that does not adopt the Purchase Plan with the consent of the Company; and, employees who are citizens or residents of a foreign jurisdiction if the grant of the option is prohibited under the laws of such foreign jurisdiction, or if the compliance with the laws of the foreign jurisdiction would cause the Purchase Plan to violate Code Section 423 and the regulations promulgated thereunder.

The Committee or the Board may amend the Purchase Price from time to time, except that shareholder approval is required for certain material changes, such as increasing the number of shares available for purchase under the Purchase Plan, and except that no amendment may make changes in options already granted that would adversely affect the rights of any participants. A copy of the Purchase Plan reflecting the amendments adopted by the Board and proposed for adoption by the Shareholders on May 22, 2019 at the Annual Shareholders Meeting has been filed with the Securities and Exchange Commission as Appendix A to this Proxy Statement. In addition, the Company will provide a copy of the Purchase Plan to any shareholder upon written request submitted to: Corporate Secretary, Communications Systems Inc., 10900 Red Circle Drive, Minnetonka, Minnesota 55343.

Registration with SEC

If shareholder approval to increase the number of shares authorized for issuance under the Purchase Plan, as amended, is received, the Company will file a Registration Statement covering the additional shares authorized with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended.

Vote Required

The affirmative vote of a majority of the outstanding shares of the Company’s common stock voting at the meeting in person or by proxy is required for approval of the proposed amendment to the Company’s Purchase Plan.

Board Voting Recommendation

The Board of Directors recommends that shareholders vote “FOR” Proposal 3: Approval of a 100,000 Share Increase in the Communications Systems, Inc. Employee Stock Purchase Plan.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Summary Ownership Table

The following table sets forth sets forth certain information with respect toownership of the Company’s common stock beneficially owned by:by (i) each person known by the Company to own of record or beneficially 5% or more of the Company’s common stock, (ii) each director and nominee for director, (iii) each current Named Executive Officer listed under “Executive(as defined below in the “Summary Compensation and Related Information,”Table”) and (iv) all officers and directors of the Company as a group, in each case based upon information available as of March 24, 201627, 2019 (unless otherwise noted), and all. As indicated by footnote, the table includes (i) shares subject to options reflect options that may be exercised within 60 days of March 24, 2016, and27, 2019; (ii) restricted stock units (“RSUs”) that will be settled in shares within 60 days of March 24, 2016.27, 2019; and (iii) shares allotted to an individual’s account under the Communications Systems, Inc. Employee Stock Ownership Plan (“ESOP shares”) as of December 31, 2018.

Section 16(a) Beneficial Ownership Reporting ComplianceEXECUTIVE COMPENSATION

The Company’s officers, directors and beneficial holders of 10% or more of the Company’s securities are required to file reports of their beneficial ownership with the Securities and Exchange Commission on Forms 3, 4 and 5. To the Company’s knowledge, based solely on a review of the copies of these reports furnished to the Company and written representations that no other reports were required, during the year ended December 31, 2015, all Section 16(a) filing requirements applicable to its officers, directors and 10% beneficial holders of 10% were complied with.

Five-Year Performance Graph

The following graph presents, at the end of each of the Company’s last five fiscal years, the cumulative total return on the common stock of the Company as compared to the cumulative total return reported for the NASDAQ (U.S.), and the NASDAQ Telecommunications Index. Company information and each index assume the investment of $100 on the last business day before January 1, 2010 and the reinvestment of all dividends.

Comparison of Five-Year Cumulative Total Return

EXECUTIVE COMPENSATION AND RELATED INFORMATION

COMPENSATION DISCUSSION AND ANALYSIS

Communication Systems, Inc. (the “Company”) is a global provider of connectivity infrastructure and services for deployments of broadband networks. Our operations are conducted primarily through three primary business units:our Suttle, Inc. (“Suttle”), Transition Networks, Inc. (“TN”) and JDL Technologies, Inc. (“JDL”). business units.

This Compensation Discussion and Analysis (“CD&A”) coverssection discusses our three fiscal years ending December 31, 2015, with primary emphasis on our 2015 fiscal year. It provides information regarding executive compensation objectives and policies, forms of compensation, plans for our Senior Executives (defined below), and compensation related to services in 2018 paid or potentially payable to the Senior Executives under these plans. This CD&A uses the following terms when discussing executive compensation:

This CD&A discusses compensation of our Senior Executives generally and provides more detailed information regarding compensation of our Named Executive Officers.Officers identified below under the Summary Compensation Table (“NEOs”), as well as other senior executives (collectively, with the NEOs, the “Senior Executives”).

Compensation Philosophy and Objectives

The Company’s philosophy with respectapproach to executive compensation of the Company’s Senior Executives is based on the following objectives:

In furtherance of these objectives, the Company’sThe Company has generally structured its annual and long termlong-term incentive compensation is generally structured to be “performance-based.” In addition, when determining how much performance-based compensation should be paid in Company cash versus equitygranting stock options or other awards payable in stock (collectively “Equity Awards”), the Committee has generally used equity awards to payemphasized paying long-term compensation.compensation through Equity Awards.

Role of the Compensation Committee and the Information Used to Determine Compensation

One of the Compensation Committee’s primary responsibilities is to review and approve, or recommend for Board approval, compensation paid to the Company’s Chief Executive Officer, other Named Executive Officers,the NEOs, and other Senior Executives. The Compensation Committee (“Committee”) carries out this responsibility pursuant to a Board-approved written charter approved by the Board and reviewed annually. The Committee currently consists of three independent directors that serve on our Board. See “Corporate Governance and Board Matters –Director Independence” above.charter. The Committee is subject to Board oversight, and other Board members of the Board frequently participate in deliberations related to executive compensation. Additional information regarding the primary responsibilities of the Committee and its current members is provided above under the caption “Corporate Governance and Board Matters – the Board, Board Committees and Meetings.”

2015 Shareholder Advisory Vote on Compensation

In a non-binding, advisory vote at the Company’s 2015 Annual Meeting of Shareholders, the Company’s shareholders approved the Company’s executive compensation program as presented in the Company’s 2015 Proxy Statement. Of shareholders voting on this matter, 90.6% voted to approve the Company’s executive compensation, 8.2% voted against approval and 1.2% abstained.

Compensation Consultant

Under its charter, the Committee has the authority to select, retain, and compensate executive compensation consultants and other experts asthat it deems necessary to carry out its responsibilities. Prior toSince November 2015, the Company,Committee has, from time to time, engaged Pearl Meyer & Partners LLP to provide executive compensation consulting services. In November, 2015, the Committee engaged Total Rewards Group (“TRG”), a compensation consulting firm, to study and make recommendations regarding our compensation program. This included an evaluation of our base compensation for Senior Executives to determine whether we were paying “competitive” compensation and whether our approach to compensation was generally in line with “best practices” for public companies. The Committee selected TRG without a recommendation by management and TRG reported directly to the Committee.

Comparative Data

We useThe Committee also uses industry surveys to evaluate base compensation and total compensation paid to our Senior Executives. In some years, the Committee has relied on studies prepared by Company employees based on surveys of manufacturing companies of similar size. In other years, this information has been supplied by our compensation consultant.

The Compensation In addition, the Committee periodically compares compensation it pays to Senior Executives to compensation paid by a limited number of specific companies in similar industries, and of similar size and scope (“comparator group”) so that it has comparative data for assessing the Company’s market position in compensation levels and practices. This comparator group has been periodically updated. The current comparators are:

Overview of Components of Executive Compensation

Total compensation paid to Senior Executives in 2015, 2014 and 2013 was paid primarily in: base salary, annual bonus compensation, LTI Awards, and Stock Options. The following table summarizes:

Over the next several pages we present further information regarding each of these components, as well as other benefits provided and compensation paid to our Senior Executives.

Base Salaries

Base salaries of the Company’s executive officers are established by reference to average base salaries paid to executives in similar positions with similar responsibilities using information supplied by compensation consultants and other sources. Base salaries are generally reviewed annually in December of each year and adjustments are made effective as of January 1 of the following year. From time to time, however, promotions and other events require adjustments at other points in the year. While emphasis is placed on measurable financial factors, when it determines base salaries, the Committee also considers factors such as development and execution of strategic plans, changes in areas of responsibility, potential for assuming greater responsibility and the development and management of employees,.employees. The Committee does not, however, assign specific weights to these various quantitative and qualitative factors in reaching its decisions.

At the beginning of 2015, the following adjustments were made in base salaries of individuals then serving as our Named Executive Officers: Mr. Freeman, 3% increase; Mr. Blackwood, 5% increase; Mr. Otis, 5% increase; and Mr. Fluegge, 3% increase. Mr. Roger H. D. Lacey became our Interim Chief Executive Officer on June 4, 2014, and at that time his annual rate of base compensation was set at $250,000; no change was made in his base compensation when Mr. Lacey was designated as our CEO in March 2015.

The following table shows the annual rate of the base salary of each individual who served as a NEO during 2015 and the actual amount of base salary paid to each NEO in 2015.2018.

(1) Actual amount paid was slightly greater than annual rate because there were 27 biweekly payrolls in 2015.

Annual Performance-Based Bonus Plan

Bonuses are paid under the Company’s Annual Bonus Plan (“Bonus Plan”) to NEOs and other Senior Executives during the course of and following the end of each fiscal year based in general, on achievement in relation to objective financial goals set at the beginning of the fiscal year. These bonuses are intended to provide Senior Executives with an opportunity to receive additional cash compensation but only if justified by achievement in relation toupon attainment of pre-established performance goals.

At the beginning of each fiscal year, the Committee determines what objective performance measures it will use to assess performance by the Company overall and by each business unit. In addition, the Committee assigns a percentage weight to the various measures that are applied when determining the total bonus to be paid to each executive. The Committee concurrently determines specific goals for each of these performance measures. Most performance measures for business unit performance have three goals to which achievement is compared:compared, defined as “threshold,” “target” and “maximum,” with “target” goals generally being equal to the Company’s budget for that performance measure.

Bonus Compensation of Business Unit LeadersNamed Executive Officers

The potential bonuses for the Chief Executive Officer and Chief Financial Officer were based on overall Company consolidated performance. Each of our Business Unit Leaders areLeader is typically paid a bonus based on the performance of the business unit they manage, and whetherhe manages. Whether and to what extent bonus compensation is paid to themhim is determined following the end of quarterly semi-annual andor annual periods. For certain performance measures, (“Category 1 Performance Measures”), a comparison of achievement to performance goals is made after the end of each of the four quarters or after the first half and second half of the year, as well as after year end. With respect to Category 1 Performance Measures,these measures, we compare quarterly results and annual results to goals, and a bonus is paid if quarterly or annual performance is generally at least 80% of the target goal for that performance measure. For other performance measures, (“Category 2 Performance Measures”), a comparison of achievement to performance goals is made quarterly or after twelve months. With respect to Category 2 Performance Measures,these measures, we compare quarterly or twelve monthtwelve-month results to goals, and a bonus is paid if achievement is at least 80% of the target goal for that performance measure. Finally, for a third set of performance measures (“Category 3 Performance Measures”), a comparison of achievement to performance goals is made after the first and second half of the year, and for the year as a whole. With respect to Category 3 measures, we compare first half, second half and annual results to goals, and a bonus is paid if first half, second half or annual achievement equals or exceeds the goals established for the respective period.

Concurrent with determining and assigning weight to the various performance measures, and the goals against which achievement is measured, the Committee determines a “target” bonus opportunity and a “maximum” bonus opportunity that may be earned by each of the Senior Executivesexecutive as a percentage of theirhis base salary if actual performance exceeds applicable threshold performance goals. In 2015,2018, the “target” annual bonus opportunity assigned tofor the Senior Executives ranged from 30%40% to 60%70% of their respective base salaries, and their respective “maximum” bonus opportunities were approximately 140%60% to 175%105% of their respective target bonus opportunities if actual achievement equaled or exceeded maximum performance goals. The target annual bonus for the CEO and CFO were based on

operating income targets for the three principal business units (weighted 50.3% with respect to Transition Networks’ performance, 41.2% as to Suttle’s performance, and 8.5% as to JDL’s performance).

The following table presents for 2015:2018: (i) the performance measures for eachthe CSI and TN business unit,units; (ii) the “performance measure category” used to determine how often and for what time period performance is measured, (iii) the relative weight assigned to each of the performance measures in determining overall performance of the business unit, (iv) threshold,units; (iii) target and maximum achievement levels for each performance measure selected,selected; and (v)(iv) actual 20152018 achievement under each performance measure.as a percentage of the target goal.

Bonus Compensation of CEO and CFO

In 2015 our CEO, Mr. Lacey, and, our CFO, Mr. Freeman, earned 80% of their annual bonus based on a weighting of business unit financial achievement as comparedBonuses Paid Pursuant to the respective goals of the business units under the applicable performance measures described above. In determining the payout to the CEO and CFO, we assigned a 54.5% weight to Suttle’s performance, a 36.8% weight as to Transition Network’s performance, and a 8.7% weight to JDL’s performance. The CEO and CFO earned the remaining 20% of their bonus based on achieving goals under specific parent company performance measures approved by the Committee.

2015 Results2018 Annual Bonus Plan

The table below presents the bonus opportunity under the Annual Bonus Plan for the five Named Executive Officers participating in the 2015 Bonus Planthree NEOs as a percentage of their respective base salaries upon achievement of “target” goals and “maximum” goals for each performance measure (weighted as indicated above), the dollar value of the opportunity at target and maximum achievement, and the actual amount paid in cash to the five NEOs participating in the 2015 Bonus Plan based on actual achievement in relation to goals for performance measures under the Company’s 20152018 Annual Bonus Plan.

Long-Term, Incentive-Based CompensationDiscretionary Bonuses

The Committee and the Board believe the most appropriate approach to paying annual bonus compensation is one in which executives are measured against predetermined objective performance measures and performance goals. However, from time to time, in limited and extraordinary circumstances, the Committee and the Board also believe, it is in the best interest of the Company and its shareholders to pay discretionary bonuses.

Overview of Long-Term Incentive Compensation

It is the Board’s policy to provide opportunities to ourOur Senior Executives to earn long-term, incentive compensation. Generally,have been given, over the last several years, through 2015, we have paid this formthe opportunity to earn long-term, incentive compensation by means of compensation using the following forms of incentive awards:

Long-term incentive compensation opportunities for our NEOs and other Senior Executives are determined under a two-step process. First, the Committee determines the total “target” opportunity (expressed in dollars)as a percentage of base compensation) for each Senior Executive to earn long-term incentive compensation (“Total(the “Total Target LTI Opportunity”). Over the last several years this percentage has ranged from 20% to 100% of the Senior Executive’s base compensation. Second, an allocation of the Total Target LTI Opportunity is then made to LTI Awards and Stock Options. Except in 2014,For 2018, the Committee has, over the last several years, allocated 70%75% of each executive’s Total Target LTI Opportunity to an LTI Award and 30%25% to Stock Options. In 2014, the allocation was 50% to a non-performance based Options

LTI Award and 50% to Stock Options.Awards

LTI Awards may be “Performance Share Units” or “Performance Cash Units.” LTI Awards that are performance-based and payable in stock following the end of the three-year period are defined as “Performance Share Units” or “PSUs” under our incentive compensation plan. The number of PSUs awarded to each NEO is determined by dividing the dollar value of the NEO’s LTI Award by the average price of the Company’s stock over a 20-business-day period beginning on or about March 1 of each year. Each PSU represents the potential issuance of one share of common stock; the number of PSUs actually issued as shares of stock depends on actual

achievement in relation to performance goals for the three yearthree-year period.

LTI Awards that are performance-based and payable in cash following the end of a three-year period are defined as “Performance Cash Units” or “PCUs” under our incentive compensation plan. Each PCU represents the potential to be paid $1.00, and the number of PCUs that are paid in dollars depends on actual achievement in relation to performance goals for the three yearthree-year period.

Stock Options

The number of shares covered by Stock Options granted to each NEO is determined by dividing the dollar value of the Total Target LTI Opportunity allocated to Stock Options by a value for an option to purchase one share of our stock as determined by the Committee. Typically, the Committee has used the Black Scholes methodology to determine the value of one option based on a share price of the Company’s stock as of a specific date during the second half of March in each year; the share exercise price of Stock Options is fair market value on the date of grant.

LTI Awards for 2013 – 2015 Performance Period

In 2013, LTI Awards in the form of PSUs were granted to our senior Executives for long-term performance over the three-year Performance Period ending in 2015. For the 2013 - 2015 Performance Period, the Committee selected (i) consolidated pretax average return on assets over the three-year period (“Three Year Average ROA) and (ii) consolidated cumulative revenue over the three-year period (“Three Year Cumulative Revenue”), and established the following Minimum, Target, and Maximum performance goals:

Also, at the beginning of 2013,Long term Incentive Awards were granted to the then serving Senior Executive for the 2013 –2015 Performance Period. Each LTI Award provided for a target opportunity to earn shares of stock having a value equal to 70% of the executive’s Total LTI Opportunity, if the Target performance goals were achieved, and a Maximum opportunity two times the amount of the Target opportunity, if the performance goals at Maximum were achieved.

In early 2016 the Committee compared actual performance to goals to determine what shares, if any, would be issued under the 2013-2015 LTI Awards. The Committee measured actual consolidated pretax return on assets (“ROA Achievement”) compared to Minimum, Target and Maximum performance goals for the Three Year Average ROA and measured actual revenue (“Revenue Achievement”) compared to Minimum, Target and Maximum performance goals for Three Year Cumulative Revenue. The Company’s actual ROA Achievement was (0.17%) and the Company’s actual Revenue Achievement was $359 million. Because the Company’s ROA Achievement and Revenue Achievement both fell below the Minimum goals, there was no payout to any Senior Executive for LTICompensation Awards for the 2013 - 2015 Performance Period.

2014 LTI Awards

During the second half of 2013 and into 2014 the Board engaged in an examination of challenges, opportunities, strengths and weaknesses of each of our business units, as well as issues affecting the enterprise overall. As a result of this study the Board reorganized the Company’s business from a “top down” structure to a holding company structure more appropriate for the entrepreneurial requirements of each business unit. As a result of this change the management of each business unit (Suttle, Transition, and JDL) was empowered to operate with a high degree of autonomy in most areas of its respective operations. With this in mind and given that the Company’s business units were in different stages in their development, the Board determined it would be necessary to substantially restructure its approach to the LTI Award portion of its long-term executive compensation. Recognizing, however, that the development of a new plan would require a number of months, it was deemed necessary to develop a “bridge plan” for 2014. Having these considerations in mind the Board approved that the allocation of long term incentive compensation opportunities would be assigned 50% to Stock Option grants and 50% to restricted stock units (RSUs) vesting over a three-year period. This assured that one component of our long term compensation program would be performance-based, because Stock Options only deliver value if the price of the common stock increases over the term of the option. Also, while not directly performance-based, RSUs require a sustained commitment to maintain employment and contribute to the success of the Company over the three year

period, and the value of the stock issued at the end of the three year period will be directly related to the performance of the Company at the conclusion of the three years.

The following table presents for each Named Executive Officer to which a Total Target LTI Opportunity was assigned at the beginning of 2014, the percent of base compensation that was used to determine that officer’s respective Total Target LTI Opportunity, the grant date dollar value of the Total Target LTI Opportunity, and the allocation of this total dollar value to LTI Awards in the form of Restricted Stock Units and Stock Option grants.

__________________

Long Term Incentive Awards for the 20152018 – 20172020 Performance Period

On March 1, 2015,February 5, 2018, pursuant to the Company’s Long Term Incentive Compensation Plan (the “LTI Plan”) the Committee determined, and the Company’s Board ratified and approved, the overall design and other features of the Company’s LTI Plan for the 2015 - 20172018 through 2020 performance period (the “2015-2017“2018-2020 Period”) as applied to the NEOs.

The Committee first determined that the following NEOs and other Senior Executives. To a large degreewould be awarded the Committee resumed the approach tototal opportunities for long term executive compensation followed since 2011, first determining theas a percentage of each NEO’stheir respective base salary that should be the dollar value of the Total LTI Opportunity and then allocating this total opportunity 70%compensation as follows:

With respect to LTI Awards in the form of PSUs and 30% to Stock Options.

In contrast to earlier years, however, for the 2015-20172018-2020 Period, (i) the Committee determined that the relevant performance duringperiod for measuring financial performance would be average results for each year of the three year Performance Period would be evaluated separately and that achievement in relation to target goals in each year would be determined and vested as of the end of the year, but with payment of any such incentive compensation contingent upon continued employment through the end of the 2015-2017 Period. It was also determined thatperiods ending 2020; (ii) performance measures weighting of performance measures, and specificfor this period were determined for the Company on a consolidated basis, as well as “minimum,” “target” and “maximum” goals would be established for each business unit.

For 2015, the first year of the three year period, the Committee determined that theperformance measure; (iii) Company consolidated performance measures (and percentage weight given to each measure) were determined to be three-year separate year adjusted EBITDA (70%) and three-year separate year Revenue (30%); and (iv) to the minimum, target and maximum goals for business unit leaders would be specific to their respective business unit, while the CEO and CFO would (i) earn 80% of their potentialextent earned, long term incentive opportunity based on weighting of the achievement of the three business unitscompensation payable to NEOs and other Senior Executives will be paid 50% in relation to their respective goals, with Suttle’s performance weighted 54.5%, Transition Network’s performance weighted 36.8%,Company stock and JDL’s performance weighted 8.7%; and, (ii) earn 20% of their potential long term incentive opportunity based on parent company level

performance measures approved by the Compensation Committee. For the 2015 phase of the 2015-2017 Period, the Committee determined each Named Executive would be granted an LTI Award50% in the form of PSUs.

Thecash following table shows the dollar value of the total long term incentive opportunity awarded to each of the Named Executives in 2015, the dollar value of PSUs awarded in 2015 that could result in the issuance of shares of Company common stock after the end of the 2015-2017 Period (70% of total opportunity for target performance) based on achievement of applicable target and maximum goals in each year of the three year period, and the number of shares covered by stock options granted in 2015three-year period.

With respect to each NEO, the opportunity to earn long term compensation under an LTI Award is initially determined as a dollar value that is a percentage of which equals 30%the Executive’s base salary. In each case, 50% of each NEOs LTI Opportunity.

The total number of PSUs awarded to each NEO was determined by dividing thethis dollar value of their PSU Award assuming maximum level of performance, which is column (c) above,will be divided by $3.53, the average price of the Company’s stock over the 20 business day20-business-day period beginningended March 1, 2015,23, 2018, with the number so determined becoming an award of the same number of PSUs, with each PSU representing the potential issuance of one share of Company stock. ThisThe other 50% of the LTI Award value will be an award of PCUs that represent the opportunity to receive cash to the extent earned. Prior to March 15, 2021, the Committee will assess actual performance against the performance measures established for each Named Executive and determine the number of shares of Company stock to be issued and cash to be paid to each Named Executive.

The following table shows the dollar value of the total number for PSUsLTI Award opportunity awarded to each of the NEOsNamed Executives that would result in the issuance of shares of Company common stock and other Senior Executives was then allocated one-thirdpayment of cash after the end of the 2018-2020 Period based on achievement in relation to their incentive opportunitiestarget and maximum goals. Achievement below the target goal for each performance measure will result in eacha reduced number of 2015, 2016,shares being issued and 2017. cash paid, and if achievement fails to meet any of the applicable minimum performance goals, the Named Executive will not be paid any cash or issued any shares under the PSUs awarded.

The following table showspresents the opportunity for eachdollar value of stock options awarded to the three NEOs eligible to be issued shares under their respective PSU Award assuming target or maximum levels of performance were achievedparticipate in 2015the long term incentive compensation plan and the number of shares which were actually earned for 2015 performance comparedpotentially issuable pursuant to performance goals. The issuancethese options at an assumed value per option of shares earned for 2015 performance is contingent upon continued employment through the end of the 2015-2017 Period.$1.00 per share:

Other Compensation

In addition to participating in Company-wide plans providing health, dental and life insurance on the same basis as all of our other U.S. basedU.S.-based employees, our Senior Executives receive other compensation in various forms, primarily the following:

The amount of suchthis other compensation for our Named Executive Officers is presented in the column titled “All Other Compensation” under the “Summary of Executive Compensation Table,”Table” and the “Other Compensation Table.”

Employment Agreements

None of our NEOs have a written employment agreement.

Stock Ownership Guidelines

The Company has adopted guidelines for stock ownership by our Senior Executives. For our Chief Executive Officer, the guideline is beneficial ownership of shares valued at three times base salary; for our Chief Financial Officer the guideline is beneficial ownership of shares valued at two times base salary; and, for all other Senior Executives, guideline is being a beneficial ownerownership of shares having a value equal to one times base salary. Stock ownership includes shares held directly and shares beneficially held in the Company’s ESOP, but does not include unexercised stock options or shares potentially payable under Incentive Awards. The Company annually reviews each executive’s progress towards achieving ownership equal to the ownership guidelines.

Consideration of Risk in Compensation

The Company believes placing substantial emphasis on long-term incentive compensation encourages executives to direct their efforts to promote the creation of long-term shareholder value and that promoting the creation of long-term value discourages behavior that leads to excessive risk. The Committee believes that the following features of our compensation programs provide incentives for the creation of long-term shareholder value and encourage high achievement by our executive officers without encouraging inappropriate or unnecessary risk taking:

Compensation Committee Report

The Committee has reviewed the Compensation Discussion and Analysis set forth above. Based upon this review,financial metrics used in our incentive compensation programs are measures the Committee recommendedbelieves drive long-term shareholder value. Moreover, the Committee attempts to set ranges for these measures that encourage success without encouraging excessive risk taking to achieve short term results. In addition, all forms of incentive compensation specify a maximum amount that cannot exceed two times the Board thattarget amount, no matter how much financial performance exceeds the Compensation Discussion and Analysis be included in this Proxy Statement.

Submitted byranges established at the Compensation Committeebeginning of CSI’s Board of Directors

Richard A. Primuth (Chair) Gerald D. Pint Randall D. Sampson

the year.

SUMMARY COMPENSATION TABLE

The following table presents information regarding compensation earned in 2015, 2014,2018 and 20132017 for services in all capacities by the Company’s Chief Executive Officer Roger H.D. Lacey, the Company’s Chief Executive Officer, Edwin C. Freeman, the Company’s Chief Financial Officer Mark Fandrich, and the three other most highly compensated executive officers of the Company in 20152018 (together referred to as the “Named Executive Officers,”Officers” or “NEOs”).

Non-Equity Incentive Plan Compensation Table

The following table provides a breakdown of information under the column “Non-Equity Incentive Plan Compensation” in the preceding Summary Compensation Table.

Other Compensation Table

The following table provides a breakdown of information under the column “Other Compensation” above.