UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

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Steelcase Inc.

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NOTICE OF ANNUAL MEETING

 

 

The Board of Directors of Steelcase Inc. cordially invites all shareholders to attend the Company’s 20092011 Annual Meeting of Shareholders as follows:

 

		Date:		June 25, 2009
		Date and Time:		July 13, 2011 at 11:00 a.m. Eastern Daylight TimeEDT
		Location:		Steelcase Global Headquarters 901 44th Street SE Grand Rapids, Michigan 49508

 

The Annual Meeting is being held to allow you to vote on the following proposals and any other matter properly brought before the shareholders, including the following proposal for the electionshareholders:

1. Election of two directors nominated to a three-year term on the Board of Directors:Directors

2. Amendment of the Articles of Incorporation to declassify the Board of Directors

 

3.	Amendment of the Articles of Incorporation to implement majority voting for uncontested director elections

			William P. Crawford
4.				Elizabeth Valk Long
				Robert C. Pew III
				Cathy D. RossAmendment of the Articles of Incorporation to implement majority voting for amendments to Article VII of the Articles

5. Advisory vote on executive compensation

6. Advisory vote on the frequency of an advisory vote on executive compensation

 

If you were a shareholder of record as of the close of business on April 27, 2009,May 16, 2011, you are eligible to vote. You may either vote at the meeting or by proxy, which allows your shares to be voted at the meeting even if you are not able to attend. If you choose to vote by proxy:

 

	•	Please carefully review the enclosed proxy statement and proxy card.
	•	Select your preferred method of voting, including by telephone, Internet or signing and mailing the proxy card.
	•	You can withdraw your proxy and vote your shares at the meeting if you decide to do so.

 

Every vote is important, and you are urged to vote your shares as soon as possible.

 

We look forward to seeing you at the meeting.

 

By Order of the Board of Directors,

 

Lizbeth S. O’Shaughnessy

Senior Vice President,

Chief Legal Officer and Secretary

 

Grand Rapids, Michigan

May 13, 200931, 2011

 

Steelcase Inc., P.O. Box 1967,Wsteelcase.com  P616.247.2710  HQ901 44th Street S.E. Grand Rapids, MI49501-1967 USA www.steelcase.com 49508

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PROPOSAL REQUIRING YOUR VOTE—1—ELECTION OF DIRECTORS

 

Our Board of Directors currently has eleven members and is divided into three classes serving staggered three-year terms. One of our directors, Earl D. Holton, is retiring from the Board of Directors when his term expires at the Meeting. Upon his retirement, the size of the Board of Directors will be reduced to ten members.

There are fourtwo nominees for election this year. Each is currently a member of our Board and is nominated to serve as a Class III director for a term that will expire at the 20122014 Annual Meeting. The Board of Directors recommends that you vote FOR each of the nominees.

 

Nominees for Election as Class III Directors for the Term Expiring in 2012:2014:

 

		William P. Crawford		Director since 1979
		Mr. Crawford held various positions at Steelcase from 1965 until his retirement in 2000, including President and Chief Executive Officer of the Steelcase Design Partnership. Mr. Crawford is also a director of Fifth Third Bank—a Michigan banking corporation. Age 66.
		Elizabeth Valk Long		Director since 2001
		Ms. Long held various management positions, including Executive Vice President, at Time Inc., a magazine publisher, until her retirement in 2001. Ms. Long also serves on the Board of Directors of Belk, Inc. and The J.M. Smucker Company. Age 59.
		Robert C. Pew III		Director since 1987
		Mr. Pew III has been a private investor since 2004. From 1974 to 1984 and from 1988 to 1994, Mr. Pew III held various positions at Steelcase, including President, Steelcase North America and Executive Vice President, Operations. Mr. Pew III has served as Chair of our Board of Directors since June 2003. Age 58.
		Cathy D. Ross		Director since 2006
		Ms. Ross has been Senior Vice President and Chief Financial Officer of Federal Express Corporation, an express transportation company and subsidiary of FedEx Corporation, since 2004. Age 51.

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Class III Directors Continuing in Office for the Term Expiring in 2010:

		James P. Hackett		Director since 1994
		Mr. Hackett has been President and Chief Executive Officer of Steelcase since 1994. Mr. Hackett also serves as a member of the Board of Trustees of The Northwestern Mutual Life Insurance Company and the Board of Directors of Fifth Third Bancorp. Age 54.
		David W. Joos		Director since 2001
		Mr. Joos has been President and Chief Executive Officer of CMS Energy Corporation, an energy company, and Chief Executive Officer of its primary electric utility, Consumers Energy Company, since 2004. Mr. Joos serves on the Board of Directors of CMS Energy Corporation and Consumers Energy Company. Age 56.
		P. Craig Welch, Jr.		Director since 1979
		Mr. Welch, Jr. has been Manager and a member of Honzo Fund LLC, an investment/venture capital firm, since 1999. From 1967 to 1987, Mr. Welch, Jr. held various positions at Steelcase, including Director of Information Services and Director of Production Inventory Control. Age 64.

Class I Directors Continuing in Office for the Term Expiring in 2011:

		Earl D. Holton		Director since 1998
		Mr. Holton held various management positions at Meijer, Inc., a Grand Rapids, Michigan-based operator of retail food and general merchandise stores, including Vice Chairman from 1999, until his retirement in 2004. Age 75.
		Michael J. Jandernoa		Director since 2002
		Mr. Jandernoa has been a general partner of Bridge Street Capital Fund I, L.P., a Grand Rapids, Michigan venture capital fund, since 2004. Mr. Jandernoa is also a director of Perrigo Company and Fifth Third Bank—a Michigan banking corporation. Age 59.

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		Peter M. Wege II		Director since 1979
		Mr. Wege II has been Chairman of the Board of Directors of Contract Pharmaceuticals Ltd., a manufacturer and distributor of prescription and over-the-counter pharmaceuticals, since 2000. From 1981 to 1989, he held various positions at Steelcase, including President of Steelcase Canada Ltd. Age 60.62. Mr. Wege’s experience with our company, having served as a director for more than 30 years and as an employee, and his understanding of the long-term interests of our company and its shareholders, led the Board of Directors to recommend that he should serve as a director.
		Kate Pew Wolters		Director since 2001
		Ms. Wolters has been engaged in philanthropic activities since 1996. She is currently President of the Kate and Richard Wolters Foundation and is a community volunteer and advisor. She also serves as Chair of the Board of Trustees of the Steelcase Foundation. Age 51.53. Ms. Wolters’ experience in philanthropic activities and community involvement, and her understanding of the long-term interests of our company and its shareholders, led the Board of Directors to recommend that she should serve as a director.
Class II Directors Continuing in Office for the Term Expiring in 2012:
		William P. Crawford		Director since 1979
		Mr. Crawford held various positions at Steelcase from 1965 until his retirement in 2000, including President and Chief Executive Officer of the Steelcase Design Partnership. Mr. Crawford is also a director of Fifth Third Bank—a Michigan banking corporation. Age 68. Mr. Crawford’s experience with our company, having served as a director for more than 30 years and as an employee for 35 years, and his understanding of the long-term interests of our company and its shareholders, led the Board of Directors to recommend that he should serve as a director.

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		Elizabeth Valk Long		Director since 2001
		Ms. Long held various management positions, including Executive Vice President, at Time Inc., a magazine publisher, until her retirement in 2001. Ms. Long also serves on the Board of Directors of Belk, Inc. and The J.M. Smucker Company. Age 61. Ms. Long’s marketing expertise and her experience in senior management of a global public company led the Board of Directors to recommend that she should serve as a director.
		Robert C. Pew III		Director since 1987
		Mr. Pew III has been a private investor since 2004. From 1974 to 1984 and from 1988 to 1994, Mr. Pew III held various positions at Steelcase, including President, Steelcase North America and Executive Vice President, Operations. During the period from 1984 to 1988, Mr. Pew III was a majority owner of an independent Steelcase dealership. Mr. Pew III has served as Chair of our Board of Directors since June 2003. Age 60. Mr. Pew’s experience with our company, having served as a director for more than 20 years, as an employee for more than 15 years and as an owner of a Steelcase dealership for four years, and his understanding of the long-term interests of our company and its shareholders, led the Board of Directors to recommend that he should serve as a director.
		Cathy D. Ross		Director since 2006
		Ms. Ross has been Executive Vice President and Chief Financial Officer of Federal Express Corporation, an express transportation company and subsidiary of FedEx Corporation, since September 2010. She served as Senior Vice President and Chief Financial Officer of Federal Express Corporation from 2004 to September 2010. Age 53. Ms. Ross’ financial expertise and her experience in senior management of a global public company led the Board of Directors to recommend that she should serve as a director.

Class III Directors Continuing in office for the Term Expiring in 2013:

		Connie K. Duckworth		Director since 2010
		Ms. Duckworth has been President and Chief Executive Officer of ARZU, Inc., a non-profit organization that helps Afgan women weavers by sourcing and selling the rugs they weave, since 2003. Ms. Duckworth also serves as a member of the Board of Trustees of The Northwestern Mutual Life Insurance Company and the Board of Directors of Russell Investment Group. Age 56. Ms. Duckworth’s experience as a former managing director of Goldman Sachs, serving on other public company boards of directors and as a non-profit entrepreneur led the Board of Directors to recommend that she should serve as a director.

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		James P. Hackett		Director since 1994
		Mr. Hackett has been President and Chief Executive Officer of Steelcase since 1994. Mr. Hackett also serves as a member of the Board of Trustees of The Northwestern Mutual Life Insurance Company and as the Lead Director of Fifth Third Bancorp. Age 56. Mr. Hackett’s role as our CEO and his experience as an employee of our company for 30 years led the Board of Directors to recommend that he should serve as a director.
		David W. Joos		Director since 2001
		Mr. Joos has been Chairman of the Board of CMS Energy Corporation, an energy company, and its primary electric utility, Consumers Energy Company, since May 2010. He served as President and Chief Executive Officer of CMS Energy Corporation and Chief Executive Officer of Consumers Energy Company from 2004 to May 2010. Age 58. Mr. Joos’ experience as CEO of a public company and his leadership and analytical skills led the Board of Directors to recommend that he should serve as a director.
		P. Craig Welch, Jr.		Director since 1979
		Mr. Welch, Jr. has been Manager and a member of Honzo Fund LLC, an investment/venture capital firm, since 1999. From 1967 to 1987, Mr. Welch, Jr. held various positions at Steelcase, including Director of Information Services and Director of Production Inventory Control. Age 66. Mr. Welch’s experience with our company, having served as a director for more than 30 years and as an employee for 20 years, and his understanding of the long-term interests of our company and its shareholders, led the Board of Directors to recommend that he should serve as a director.

 

Related Directors

 

Robert C. Pew III and Kate Pew Wolters are brother and sister and are first cousins to William P. Crawford and P. Craig Welch, Jr., and Mr. Crawford and Mr. Welch, Jr. are first cousins to each other.

 

Chairman Emeritus

 

Our Board has designated our former director Robert C. Pew II as Chairman Emeritus. As Chairman Emeritus, Mr. Pew II receives Board meeting materials and is invited to attend Board and committee meetings, but he does not have any right to vote as a director and does not receive any retainer or other meeting fees.

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Audit Committee Financial ExpertsExpert

 

The Board of Directors has designated Michael J. Jandernoa and Cathy D. Ross as an “audit committee financial experts,expert,” as defined by the SEC’s rules and regulations, based on their respectiveher financial and accounting education and experience. Mr. Jandernoa and Ms. Ross areis independent, as independence of audit committee members is defined by the listing standards of the NYSE.

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Compensation Committee

 

Responsibilities

 

The principal responsibilities of the Compensation Committee are:

 

	•	establishing our compensation philosophy;
	•	reviewing and approving the compensation of our executive officers, and submitting the compensation of our CEO to the Board of Directors for ratification;
	•	reviewing executive and non-executive compensation programs and benefit plans to assess their competitiveness, reasonableness and alignment with our compensation philosophy;
	•	making awards, approving performance targets, certifying performance against targets and taking other actions under our incentive compensation and equity-based compensation plans;plan; and
	•	reviewing the Compensation Discussion and Analysis and other executive compensation disclosures contained in our annual proxy statements.

 

Authority of the Compensation Committee

 

Pursuant to its charter, the Compensation Committee is authorized by our Board of Directors to oversee our compensation and employee benefit practices and plans generally, including our executive compensation, incentive compensation and equity-based plans. The Committee may delegate its authority to subcommittees, provided that any such subcommittee must consist of at least two members, and the Committee may also delegate appropriate responsibilities associated with our benefit and compensation plans to members of management. The Compensation Committee must submit any changes to our CEO’s compensation to our Board of Directors for ratification.

 

Delegation of Authority

 

The Compensation Committee has delegated to our CEO the authority to grant stock options, restricted stock and restricted stock units to employees. Under this delegated authority, our CEO cannot grant options to acquire more than 5,000 shares, more than 2,000 shares of restricted stock or more than 2,000 restricted stock units in any year to any one individual, and he cannot grant, in the aggregate, options to acquire more than 100,000 shares, more than 40,000 shares of restricted stock and more than 40,000 restricted stock units in any year. Also, our CEO cannot grant any stock options, restricted stock or restricted stock units to any executive officer. The Compensation Committee also

Our CEO has delegatedthe authority to our CEO to designate those employees who will participate in our Management Incentive Plan; however, the Committee is required to approve participation in such plan by any executive officer or anyone else who directly reports to our CEO.

 

The Committee also has delegated certain responsibilities with regard to our Retirement Plan to an investment committee consisting of directors and members of management and to an administrative committee consisting of members of management.

 

Role of Executive Officers in Determining or Recommending Compensation

 

Our CEO develops and submits to the Compensation Committee his recommendation for the compensation of each of the named executive officers, other than himself, in connection with annual

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merit reviews of their performance. The Compensation Committee reviews and discusses the recommendations made by our CEO, approves the compensation for each named executive officer for the coming year and submits the compensation for our CEO to the Board of Directors for ratification. In addition, our Chief Financial Officer and other members of our finance staff assist the Committee with establishing performance target levels for performance-based compensation, as well as with the calculation of actual financial performance and comparison to the performance targets, each of which requires the Committee’s approval. SeeCompensation Discussion and Analysisfor more discussion regarding the role of executive officers in determining or recommending the amount or form of executive compensation.

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Role of Compensation ConsultantConsultants

 

Pursuant to its charter, the Compensation Committee has the sole authority to retain orand terminate an independent compensation consultantconsultants of its choosing to assist the Committee in carrying out its responsibilities. During

The Committee engaged Towers Watson & Co. (“Towers Watson”) during fiscal year 2009,2011 to provide the Committee engaged Pearl Meyer & Partners, or Pearl Meyer, to advise the Committee on various matters related to the compensationwith a study of the namedcompetitiveness of our executive compensation relative to market data and to provide information regarding total shareholder return performance under equity awards granted to our executive officers. SeeCompensation Discussion and Analysisfor more detail regarding the nature and scope of Pearl Meyer’sTowers Watson’s assignment and the material elements of the instructions or directions given to them with respect to the performance of their duties. The Committee also engaged Towers Perrin to provide the Committee with a study of the competitiveness of our executive compensation relative to market data. Both Pearl Meyer and Towers Perrin wereWatson was engaged directly by the Compensation Committee.

In addition to the services performed for the Committee, and do not perform any other consulting services for our company, but we purchasehave purchased compensation survey data from Towers PerrinWatson from time to time.time and engaged Towers Watson to provide pension plan and compensation consulting services. The decision to purchase the compensation survey data and these services from Towers Watson was made by management and was approved by the Committee. The aggregate amount of fees paid to Towers Watson with regard to executive compensation services in fiscal year 2011 was $24,634, and the amount paid to Towers Watson for compensation survey data and other services in fiscal year 2011 was $110,770.

Compensation Risk Assessment

As of the end of fiscal year 2011, our management conducted an assessment of our employee compensation policies and practices and concluded that any risks arising from such policies and practices are not reasonably likely to have a material adverse effect on our company. The assessment was reviewed and discussed with the Compensation Committee, which concurred with management’s conclusions.

 

Compensation Committee Interlocks and Insider Participation

 

None of the members of our Compensation Committee was an officer or employee of our company during the fiscal year or was formerly an officer of our company, and none of our executive officers served on the compensation committee (or its equivalent) or board of directors of another entity whose executive officer served on our Board of Directors or our Compensation Committee. SeeRelated Person Transactionsfor a discussion of a transaction between our company and a relative of director P. Craig Welch, Jr., who serves on our Compensation Committee.

 

OTHER CORPORATE GOVERNANCE MATTERS

 

Corporate Governance Principles

 

Our Board of Directors is committed to monitoring the effectiveness of policy and decision making at the Board and management levels. Fundamental to its corporate governance philosophy is the

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Board’s commitment to upholding our reputation for honesty and integrity. Equally fundamental is its commitment to serving as an independent overseer of our management and operations. Our Board adopted a set of Corporate Governance Principles, a copy of which can be found in the Corporate Governance section of our website atwww.steelcase.comunder “our“Company,” “Investor Relations.”

Board of Directors Leadership Structure

The leadership structure of our Board of Directors involves a Board Chair who is not our principal executive officer. Robert C. Pew III currently serves as Chair of the Board, and James P. Hackett currently serves as our President and CEO. Our Board of Directors has chosen to keep the roles of Chair of the Board and CEO separate as a matter of sound corporate governance practices and a balance of responsibilities, with an independent director serving as Chair of the Board. This structure allows Mr. Hackett to focus on theday-to-day leadership of our business, while Mr. Pew is able to focus on the leadership of the Board of Directors and its oversight of our company.

Risk Oversight

Our Board of Directors administers its oversight of risk assessment and management practices in several ways. Once a quarter, the Audit Committee reviews a business risk profile prepared by management which summarizes the key risks faced by the company” “investor relations.” and the likelihood and anticipated financial impact of each risk materializing, as well as any significant changes in the risk profile from the previous quarter. In addition, risk identification and risk management are discussed by the Board of Directors on a regular basis as part of its review of our financial performance and business and strategic planning. We believe our Board of Directors’ oversight of our risk management is strengthened by having an independent director serve as Chair of the Board.

 

Executive Sessions of Non-Management Directors

 

The only member of our Board who is also a member of management is James P. Hackett, our President and CEO. Our Board meets quarterly in executive session without Mr. Hackett present. During these sessions, Robert C. Pew III, as Chair of the Board, presides. Our Corporate Governance Principles provide that if the Chair of the Board is a member of management, the outside directors will designate a member to preside at executive sessions.

 

You may contact the Chair of the Board (or the lead non-management director, if one is subsequently appointed) by sending a certified letter to:

 

Chair of the Board/Lead Non-Management Director

c/o Steelcase Inc.

P.O. Box 1967

Grand Rapids, MI49501-1967

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Shareholder Communications

 

Our Board has adopted a process for interested parties to send communications to the Board. To contact the Board, any of its committees or any of our directors, please send a certified letter addressed to:

 

Board of Directors

c/o Lizbeth S. O’Shaughnessy, Secretary

Steelcase Inc.

P.O. Box 1967

Grand Rapids, MI49501-1967

 

All such letters will be opened by the Company’s Secretary.corporate secretary. Any contents that are not in the nature of advertising, promotions of a product or service or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the Board or any committee or group of directors,

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the Secretarycorporate secretary will make sufficient copies of the contents and send them to each director who is a member of the committee or group to which the envelope is addressed.

 

Code of Ethics and Code of Business Conduct

 

Our Board adopted a Code of Ethics applicable to our chief executive and senior financial officers, as well as a Code of Business Conduct that applies to all of our employees and directors. Only our Nominating and Corporate Governance Committee may grant any waivers of either code for a director or executive officer. Each of these codes is available in the Corporate Governance section of our website, located atwww.steelcase.com, and found under “our company,“Company,” “investor relations.“Investor Relations.” If any amendment to, or waiver from, a provision of our Code of Ethics is made for our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, we will also post such information in the Corporate Governance section of our website. To date, no such waivers have been issued.

 

Materials Available upon Request

 

We will provide a printed copy of any of the following materials (each of which is also available on our website atwww.steelcase.com) to you upon request and without charge:

 

	•	Code of Ethics,
	•	Code of Business Conduct,
	•	Corporate Governance Principles,
	•	Audit Committee Charter,
	•	Compensation Committee Charter and
	•	Nominating and Corporate Governance Committee Charter.

 

Please send any such requests to us by email atir@steelcase.comor by mail at:

 

Steelcase Inc.

Investor Relations, GH-3C

P.O. Box 1967

Grand Rapids, MI49501-1967

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AUDIT COMMITTEE REPORT

 

Management is responsible for the Company’s financial reporting process and its internal controls regarding financial reporting, accounting, legal compliance and ethics. BDO Seidman,Deloitte & Touche LLP, the Company’s independent registered public accounting firm for the fiscal year ended February 27, 200925, 2011 (the “independent auditor”), is responsible for performing independent audits of the Company’s consolidated financial statements and its internal control over financial reporting and issuing opinions on:

 

	•	the conformity of those audited financial statements with accounting principles generally accepted in the United States of America and
	•	the effectiveness of the Company’s internal control over financial reporting.

 

Our Committee’s role is to serve as an independent and objective party to monitor these processes on behalf of the Board of Directors and to review the audit efforts of the Company’s internal and independent auditors.

 

In this context, we discussed with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 114,The Auditor’s Communication with Those Charged with Governance(which superseded Statement on Auditing Standards No. 61,Communication With Audit Committee, as amended). In addition, we received the written disclosures and letter from the independent auditor required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Committee concerning independence and reviewed, evaluated and discussed the written report and letter with that firm and its independence with respect to the Company.

 

We discussed with the Company’s internal and independent auditors the overall scope and plans for their respective audits. We also reviewed and discussed with management the Company’s audited financial statements. We met with the internal and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal control and the overall quality of the Company’s financial reporting.

 

Based on the review and discussions referred to above, and relying on the representations of the Company’s management and the independent auditor’s report, our Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report onForm 10-K for the fiscal year ended February 27, 200925, 2011 for filing with the Securities and Exchange Commission.

 

Audit Committee

 

Cathy D. Ross (Chair)

Michael J. JandernoaEarl D. Holton

Robert C. Pew III

Peter M. Wege II

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FEES PAID TO PRINCIPAL INDEPENDENT AUDITOR

 

BDO Seidman, LLP’sThe fees billed by Deloitte & Touche LLP for fiscal year 20092011 (estimated) and fiscal year 20082010 (actual) for work performed for us are as follows:

 

			Fiscal Year					Fiscal Year					Fiscal Year					Fiscal Year
Type of Fees			2009					2008					2011					2010
Audit Fees (1)			$	1,612,000				$	1,792,000				$	1,797,000				$	1,878,000
Audit-Related Fees (2)				181,000					206,000					102,000					—
Tax Fees (3)				153,000					213,000					559,000					552,000
All Other Fees				—					—					—					—
Total			$	1,946,000				$	2,211,000
Total Total													$	2,458,000				$	2,430,000

 

 

(1)		Audit fees consisted of fees related to the annual audit of our consolidated financial statements, the annual audit of our internal control over financial reporting, reviews of the financial statements included in quarterly reports onForm 10-Q, other services related to SEC reporting matters and audits of separate financial statements of subsidiaries and other consolidated entities.
(2)		Audit-related fees consisted of employee benefit plan auditsfees for services related to the issuance of a comfort letter for an underwritten public debt offering and related services.accounting training.
(3)		Tax fees consisted primarily of assistance withfees related to corporate tax compliance preparation of certain subsidiary tax returns, tax consultation, planning and implementation services and assistance in connection with tax audits.consultation services for expatriate employees.

 

Our Audit Committee determined that providing the services reflected in the above table was compatible with the maintenance of BDO Seidman, LLP’s independence.the independence of Deloitte & Touche LLP.

 

In addition, ourOur Audit Committee has a policy under which it approves in advance recurring audit, audit-related and tax services rendered by the principal independent auditor, subject to specific fee limits. If circumstances require hiring the independent auditor for services not previously pre-approved or that would exceed the fee limits previously set, the Audit Committee must pre-approve the new services or fee limits. The Audit Committee Chair may approve specified services between regularly scheduled meetings of the Audit Committee, subject to review by the full Audit Committee at its next scheduled meeting. The fiscal year 20092011 services and fees reflected in the above table were pre-approved by the Audit Committee.

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COMPENSATION COMMITTEE REPORT

 

We reviewed and discussed with management theCompensation Discussion and Analysiswhich follows this report. Based on such review and discussions, we recommended to the Board of Directors that theCompensation Discussion and Analysisbe included in this proxy statement for filing with the Securities and Exchange Commission and distribution to the Company’s shareholders.

 

Compensation Committee

 

David W. Joos (Chair)
Earl D. Holton

Connie K. Duckworth

Elizabeth Valk Long
Cathy D. Ross

P. Craig Welch, Jr.

Kate Pew Wolters

 

COMPENSATION DISCUSSION AND ANALYSIS

Overview

 

This section discusses our policies and practices relating to executive compensation and presents a review and analysis of the compensation earned in fiscal year 20092011 by our CEO, our Chief Financial Officer and our three other most-highly compensatedmost highly-paid executive officers,officers. We refer to whom we refer collectivelythese five individuals as the “named executive officers.” The amounts of compensation earned by these executives during the past three fiscal years 2009 and 2008 are detailed in the Summary Compensation Table inExecutive Compensation, Retirement Programs and Other Arrangementsand the other tables which follow it. This section also discusses

Executive Summary

Our financial performance improved significantly in fiscal year 2011 as we began experiencing organic revenue growth as a result of the broader global economic recovery. We recorded revenue of $2.4 billion and net income of $20.4 million in fiscal year 2011, compared to revenue of $2.3 billion and a net loss of $(13.6) million in fiscal year 2010.

We strive to provide competitive pay opportunities and link pay to performance. Amounts realized from short-term and long-term incentive compensation for performance periods ending in fiscal year 2011 were below target. Executive compensation highlights for fiscal year 2011 are:

	•	Awards earned under Management Incentive Plan—The named executive officers earned short-term awards under our Management Incentive Plan at 48% of target based on our economic value added performance.
	•	No long-term performance shares earned—Although our financial performance improved in fiscal year 2011, our three-year absolute and relative total shareholder return, or TSR, were below threshold performance levels; as a result, no shares were earned under the performance share awards for the fiscal year 2009 to 2011 performance period.
	•	Base salary and retirement matching contributions reinstated—After having been temporarily reduced in fiscal year 2010, base salaries were reinstated to prior levels at the beginning of fiscal year 2011. No merit increases were made. Company matching of 401(k) plan contributions was also reinstated in the third quarter of fiscal year 2011.

At the beginning of fiscal year 2012, we made two changes to the compensation programs for theform of long-term equity incentive awards granted to our named executive officers which have been made for fiscal year 2010. The purpose of this section iscompared to provide you with more information about the types of compensation earned by the named executive officers and the philosophy and objectives of our executive compensation programs and practices.prior years:

	•	Both restricted units and performance units were granted, replacing our prior practice of granting performance units with a floor of 25% of the target.
	•	Dividend equivalents on the performance units will only be paid on the number of shares actually earned at the end of the performance period. Dividend equivalents on the restricted units will be paid during the vesting period.

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Philosophy and Objectives

 

Our philosophy for the compensation of all of our employees, including the named executive officers, is to value the contribution of our employees and share profits through broad-based incentive arrangements designed to reward performance and motivate collective achievement of strategic objectives that will contribute to our company’s success.

 

The primary objectives of the compensation programs for our named executive officers are to:

 

	•	attract and retain highly-qualified executives,
	•	motivate our executives to achieve our business objectives,
	•	reward our executives appropriately for their individual and collective contributions,
	•	align our executives’ interests with the long-term interests of our shareholders and
	•	ensure that executive compensation is reasonable when compared to compensation at similar companies.

 

Annual Review

 

Our executive compensation programs fall within three general categories: (1) base salaries, (2) incentive compensation and (3) retirement programs and benefits. The Compensation Committee reviews and approves the base salary and incentive compensation awards for each of our executive officers each year, taking into account the recommendations of our CEO, the individual performance of each officer and our compensation philosophy and objectives described above. Following approval by the Compensation Committee, the compensation of our named executive officersCEO is reviewed and approvedsubmitted to our Board of Directors for ratification. The amount of incentive compensation actually earned by each officer depends on an annual basis, and nonethe performance of our company as a whole against the targets established for the particular award. None of the named executive officers has an employment agreement with us.

 

For fiscal year 2009,In order to evaluate the reasonableness and competitiveness of our compensation programs and practices, the Compensation Committee engaged Towers PerrinWatson to provide the Committee with aan annual study of the competitiveness of our executive compensation relative to market data. The Towers Perrin studywhich compares our executive compensation to that of a comparison group of companies. The Committee established the criteria for the composition of the comparison group, and then Towers Perrin presented

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a proposed comparison group to the Committee for its review and approval. The criteria established by the Committee were:

	•	furniture companies, including office furniture and residential furniture companies,
	•	other global manufacturing companies and
	•	other companies which (a) are based within the same region as our company and (b) operate globally.

The comparison group approved by the Committee for fiscal year 2009 consisted of the following companies:

American Axle & Manufacturing, Inc.		Flowserve Corp.		Navistar International Corporation
ArvinMeritor, Inc.		Harsco Corporation		Parker-Hannifin Corporation
Avery Dennison Corporation		Herman Miller, Inc.		Pitney Bowes Inc.
Ball Corporation		HNI Corporation		Rockwell Automation, Inc.
The Black & Decker Corporation		Kennametal Inc.		The Timken Company
Cooper Tire & Rubber Company		La-Z-Boy Inc.		The Toro Company
Donaldson Company, Inc.		Leggett & Platt Inc.

As of December 2006 (the timing of the comparison data), annual revenues for the comparison group ranged from $1.6 billion to $10.7 billion, with a median of $4.2 billion, and market capitalization of the group ranged from $610 million to $10.4 billion, with a median of $2.8 billion.

The comparison study showedsurvey presents information regarding base salaries, of the comparison group at the 25^th percentile, median and 75^th percentile levels and the median levels of target annual incentive compensation, target total cash compensation,short-term bonus targets, annualized expected valuevalues of long-term incentive compensation and target total direct compensation. Using the median salary levels shown incompensation for the comparison study, management prepared salary ranges for the named executive officers in a manner consistent to the preparation of salary ranges for the Company’s salaried employees generally and presented these ranges to thegroup. The Compensation Committee as part of their review.

The Committee diddoes not specifically target each element of compensation of the named executive officers against the comparison group. Instead, the Committee reviewedreviews the comparison data to assess whether or not the total compensation of the named executive officers wasis within a competitive range, and in making its assessment, the Committee consideredconsiders (a) any difference between the role and responsibilities of each officer compared to those of his peeror her peers in the comparison group, (b) the specific contributions the officer has made to the successful achievement of our company goals and (c) the relative experience level of the officer and his or her tenure with our company.

 

The criteria established by the Compensation Committee also reviewed pay illustrations prepared by management for eachthe composition of the named executive officerscomparison group for fiscal year 2011 were (1) furniture companies, including office furniture and residential furniture companies, (2) other global durable goods manufacturing companies and (3) other companies which modeled(a) are based within the officer’s compensationsame region as our company and (b) operate globally. The comparison group consisted of the following companies:

AMETEK, Inc. ArvinMeritor Inc. Avery Dennison Corp. Ball Corporation Cooper Tire & Rubber Company Donaldson Company, Inc. GATX Corporation		Herman Miller, Inc. HNI Corporation IDEX Corporation La-Z-Boy Inc. Leggett & Platt Inc. Navistar International Corporation Oshkosh Corporation		Parker-Hannifin Corporation Pitney Bowes Inc. Rockwell Automation, Inc. SPX Corporation The Toro Company Thomas & Betts Corporation

As of December 2009 (the timing of the comparison data used for fiscal year 2011), the most recent fiscal year revenues for the following five years using assumed base salary changescomparison group ranged from $1.2 billion to $14.7 billion, with a median of

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$3.5 billion, and future incentive compensation and equity awards and showingmarket capitalization of the estimated amounts that would be received by the executive under several different business scenarios. These scenarios were based on different levelsgroup ranged from $112.0 million to $6.9 billion, with a median of business and stock price performance, and the pay illustrations depicted the amounts that would be earned and reported under the SEC’s executive compensation disclosure rules and regulations.$1.8 billion.

 

Elements of Executive Compensation

Base Salary

 

As described above, the base salary of each of our named executive officers is reviewed and approved by the Compensation Committee as part of its overall review of executive compensation, and our Board of Directors ratifies any changes to our CEO’s base salary. As a general rule, base salaries for the named executive officers are set at a level which will allow us to attract and retain highly-qualified executives. In addition to the annual reviews, the base salary of a particular executive may be adjusted during the course of a fiscal year for example, in connection with a promotion or other material change in the

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executive’s role or responsibilities. During

Base salaries were reinstated at the beginning of fiscal year 2009,2011, after having been reduced in fiscal year 2010 due to economic and business conditions. None of the named executive officers received a merit increase or other base salary change during fiscal year 2011.

In early fiscal year 2012, each of the named executive officers other than Frank H. Merlotti, Jr. received a merit increasesincrease to theirhis or her base salaries.salary within a normal range, and two of the named executive officers received additional increases. James P. Keane’s base salary was increased by a total of 10% for merit and in connection with the expansion of his responsibilities from President of the Steelcase Group for North America to President of the Steelcase Group for the Americas, Europe, the Middle East and Africa. David C. Sylvester’s base salary was increased by a total of 9% for merit and in connection with his promotion to Senior Vice President, Chief Financial Officer.

Incentive Compensation

 

In January 2009, the Compensation Committee approved management-recommended decreasestwo most recent fiscal years, the incentive compensation awarded to our executive officers has remained consistent and includes two types of awards: (1) annual awards under our Management Incentive Plan, or MIP, which are earned based on our economic value added, or EVA, results for the fiscal year and are paid in cash and (2) performance unit awards which are earned based on our TSR for three fiscal years and are settled in shares. The combination of these two types of awards create overlapping award cycles that are designed to create retention and provide a mix of cash and equity-based incentives.

As an illustration, the annual base salaryfollowing chart shows the mix of our CEO (which was ratified by our Board of Directors) and eachcompensation for James P. Hackett compared to the average of the other named executive officers, foror NEOs, as a group as of fiscal year 2010. Our CEO’s salary was reduced by 12%2011, valuing the MIP awards at the target level of performance and the salaryperformance unit awards at the grant date market price per share of the target number of shares of Class A Common Stock, and notes the portion of the total compensation paid in the form of cash or equity and the portion earned based on EVA or TSR performance. The mix of compensation is relatively consistent between the CEO and the other named executive officers was reduced by 10%. These reductions were implemented in connection with salary reductions for our salaried workforce in North America generally as partand among the other named executive officers.

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Elements of cost reduction efforts made to respond to global economic challenges, and the reductions are expected to remain in effect for approximately one year or until economic conditions improve.Total Compensation at Target Levels

 

Management Incentive Plan Awards

 

Philosophy and Description of the PlanPractice

 

EachAs described above, each of theour named executive officers receives a short-term award under our MIP each fiscal year which is a participantpaid in our Management Incentive Plan, or MIP, which can represent a significant portioncash shortly after the end of the officer’s total compensation earned and reported each year. The MIP, which we originally implemented in fiscal year 1995, provides for short-term and long-term awards which are earned each year based on the achievement of certain economic value added, or EVA results for the fiscal year. EVA is a profit measure that takes into account the cost of capital and is calculated by taking our net income before interest expense, deducting a capital charge representing the economic cost of an expected return on average shareholders’ equity (or net assets) of the Company (set by the Compensation Committee at 12%10% for fiscal year 2009),2011) on average shareholders’ equity and thenaverage long-term debt, and adjusting for cash and short-term investments (including variable life company-owned life insurance policies) in excess cashof $100 million and related interest income, the impact of recent acquisitions and the deferral of a portion of restructuring or other charges to the extent approved by the Compensation Committee. No awards can be earned to the extent that they would result in our company recording a net loss for the fiscal year unless the Committee determines otherwise.

 

We use EVA as the performance measure for the MIP because we believe it is an effective measure of the performance of our business, it reinforces the efficient use of capital and it fits appropriately with our compensation philosophy of sharing profits with our employees. In addition to the named executive officers, over 300 management employees participate in the MIP and a majority of our other employees in North America, both salaried and hourly, also receive annual incentive compensation based on EVA results under our EVA Bonus Plan.results. We also use EVA as a measurement tool in other areas of our business, such as evaluating business acquisitions, ventures, product development and other capital expenditures.

 

Fiscal Year 2011 Awards

Annually, the Compensation Committee reviews and establishes the amount of EVA required to earn the minimum, target and maximum level of awards under the MIP. The amounts of the short-term and long-term awards that are payable to the named executive officers upon achievement of the EVA targets areperformance levels established as specific percentages of the officer’s base salary. The target award percentages are reviewed and approved by the Compensation Committee (and submitted to the Board of Directors for ratificationfiscal year 2011 are set forth in the case of our CEO) each year as part of its review offollowing chart. In setting the officers’ total compensation. TheirEVA target award percentages as of the end offor fiscal year 2009 were as follows:

						Other Named
Targets			CEO			Executive Officers
Short-term			70%			55% to 65%
Long-term			115%			90% to 100%

2011, the Compensation Committee considered the extraordinarily difficult industry and economic environment over the past two years and the need to keep our employees engaged. The short-termamount of EVA performance above or below the target that would have resulted in the awards are paid in cash shortly afterbeing earned at the endmaximum level or at the minimum level was set at 8% of eachEVA capital for the fiscal year. ForThe “Equivalent Level of Net Income (Loss)” column indicates the long-term awards, 50%approximate amount of the award is issuednet income (loss) for fiscal year 2011 which would have resulted in the form of restricted stock units that will be issued as shares of our Class A Common Stock in equal thirds shortly after the end of each of the following three fiscal years and receive dividend equivalent payments during the vesting period, and 50% of the awards are paid in cash in equal thirds shortly after the end of each of the following three fiscal years. We maintain the long-term cash amounts in unfunded accounts which are subject to forfeiture upon termination of employment for any reason other than death, total disabilityminimum, target or retirement, except in the circumstances described below under “Severance and Change in Control Benefits.” We credit the long-term MIP account balances each year for interest at a rate which approximates our three-year incremental borrowing rate.

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The MIP limits the amountmaximum awards being earned, assuming that can be earned by any participant in any year to $3 million forshort-term awardsall other actual financial results and $4 million for long-term awards. The Compensation Committee has also limited the maximum percentage of the target award that can be earned to 200% and has provided that no awards can be earned in a particular fiscal year to the extent that the awards would result in our company recording a net loss for that fiscal year unless the Committee determines otherwise.

Fiscal Year 2009 Awards

For fiscal year 2009, the Committee established two performance targets for the MIP; one based on the absolute level of EVA achieved and the other based on the improvement (or growth) in EVA for the year. The absolute EVA target was set at $0, equating to a 12% return on average shareholders’ equity. The EVA growth target, which was intended to drive EVA performance upward each year, was based on the average of (a) the actual EVA for the prior year and (b) the EVA growth target for the prior year and adjusted for the impact of recent acquisitions and an improvement factor equal to 1% of our net assets to the extent that the resulting growth target would be less than or equal to 15% of our net assets. The MIP awards earned were based 50% on actual EVA compared to the absolute EVA target and 50% on actual EVA compared to the EVA growth target. The levels of EVA that would have resulted in threshold (equal to 0% of the target awards), target or maximum (equal to 200% of the target awards) MIP awardscapital for fiscal year 20092011 were as follows:unchanged.

 

EVA Target

Threshold

Target

MaximumEquivalent Level

AbsolutePerformance Level

EVA Performance

Amount Earned

of Net Income (Loss)

Minimum

$

(120.0)(91.2) million

0% of target

$

0.0(10.0) million

*

Target

$

(25.0) million

100% of target

$

55.0 million

Maximum

$

41.2 million

200% of target

$

120.0 million

Growth

$

(59.2) million

$

0.8 million

$

60.8 million

 

Our financial results for fiscal year 2009 included non-cash impairment charges of $44.5 million after taxes related to goodwill and intangible assets recorded in the fourth quarter due to a substantial decline in the market price of our Class A common stock. On management’s recommendation, the Committee approved amortizing the impact of these charges over a five-year period beginning with fiscal year 2009 for the purposes of calculating EVA results under the MIP as well as under our EVA Bonus Plan, for the following reasons:

 

*	•	management andNo awards can be earned to the Committee believedextent that the impairment charges were not reflective of the performance of the Companyawards would result in our company recording a net loss for the year, but rather were driven by general equity market performance;
	•	applying the charges entirely in fiscal year 2009 would have reduced goodwill and intangible assets, and thusunless the capital charge deducted when determining EVA in future years; and
	•	the amortization methodology was consistent with the treatment of other substantial impairments in prior years.Compensation Committee approves otherwise.

 

After applying the adjustment described above, EVA for fiscal year 2009 was $(50.2) million, which resulted in MIP awards at 37% of target. Without the adjustment, EVA would have been $(73.6) million, which would have resulted in MIP awards at 18% of target. For the same reasons described above, the Committee approved payment of the higherThe named executive officers’ target MIP awards for fiscal year 2009 even though it resulted in2011 were:

Name			Target Award
James P. Hackett			100% of base salary
All other named executive officers			80% of base salary

In determining the size of MIP awards to be granted, our company recording a net lossCEO presented to the Compensation Committee his recommendations for the year.size of award for each named executive officer other than himself, taking into consideration the factors described above under the heading “Annual Review” and the officer’s long-term incentive compensation. The Committee reviewed the value of the target awards as a percentage of the officer’s base salary relative to the median level of short-term incentive compensation shown in the Towers Watson comparison study.

 

Awards Earned and Link to Company Performance

Our actual EVA performance for fiscal year 2011 was $(59.2) million, resulting in the MIP awards being earned at 48% of target. The following chart depicts the relationship between our EVA, as calculated under the MIP, and net income (loss), on the left axis, and the percentage of target earned under the MIP, on the right axis, for each of the past five fiscal years.

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Equity-Based IncentiveEquity Awards

 

Philosophy and Practice

 

Each of our named executive officers typically receives a long-term equity-based incentive award under our Incentive Compensation Plan each year, in accordance with our philosophyphilosophies of paying for performance and aligning the interests of our executives with those of our shareholders. The awards typically are approved by the Compensation Committee, and in the case of our CEO, only, ratified by our Board of Directors, typically at a regularly scheduled meeting at the beginning of each fiscal year, but awards also may be approved by the Committee (and ratified by the Board for the CEO) inat a special meeting.

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In addition to granting annual equity-based incentive awards, from time to time at the request of our CEO, the Compensation Committee considers granting special awards of restricted stock or restricted stock units to named executive officers in connection with promotions or other changes in responsibilities or in recognition of particular contributions to our company’s performance. No such awards were granted to the named executive officers during fiscal year 2009.2011. In early fiscal year 2012, in connection with the expansion of his responsibilities, James P. Keane received an award of 45,000 restricted units which will vest in three equal installments at the end of each of fiscal years 2012, 2013 and 2014.

 

All grants of equity-based incentive awards to named executive officers require the advance approval of the Compensation Committee (and, for equity awards to our CEO, ratification by the Board), and we do not have any program or practice to time the grant of equity-based awards relative to the release of any material non-public information. Pursuant to our Incentive Compensation Plan, all stock options are granted with exercise prices equal to the closing market price on the date of the grant, which is the date the Compensation Committee approves or the Board ratifies the grant. We have not granted stock options to any of our named executive officers since September 2002.

 

Fiscal Year 20092011 Awards

 

In fiscal year 2009, eachEach of the named executive officers was granted a performance shares. These performance share awards canunit award in fiscal year 2011. The number of shares earned will be earned based on the achievement of certain total shareholder return (“TSR”) levels for fiscal years 2009 through 2011, with 50% of the award based on our TSR or “absolute” TSR, and 50% of the award based on our TSRperformance for fiscal years 2011 through 2013 relative to the industrial subset of companies within the S&P MidCap 400 index.Index. TSR, expressed as a compound annual growth rate, includes the change in trading price and dividends paid on our Class A Common Stock during the performance period and is stated as a percentage relative to the trading price just prior to the performance period. The change in trading price is calculated using the average closing price for the 20 trading days immediately before the beginning of the performance period and for the last 20 trading days duringperiod. During the performance period. period, the named executive officers receive dividend equivalent payments on the target number of units awarded. A number of shares of Class A Common Stock equal to 25% of the target award will be earned if the officer remains employed by us through the end of fiscal year 2013 whether or not the minimum performance level is achieved.

The absolute and relative levels of relative TSR performance that would result in the award of the threshold, (50% of target for each half of the award), target or maximum (200% of target for each half of the award) number of shares under the performance units awarded in fiscal year 2011 are as follows:

 

Performance Measure

Threshold

Target

Maximum

Absolute TSR

6%

12%

24%

Relative TSR

30th percentile

50th percentile

90th percentile

			Relative TSR			Number of
Performance Level			Performance			Shares Earned
Minimum			30th percentile			50% of target
Target			50th percentile			100% of target
Maximum			90th percentile			200% of target

 

The Compensation Committee selected TSR as the performance measure for these awards to better align the compensation of the executive officers with the interests of our shareholders. It chose the industrial subset of the S&P MidCap 400 index for the measurement of relative TSR because the Committee desired a large enough group to mitigate the impact of any one-time events that may be experienced by a company within the group, and the group is focused on manufacturingincludes companies with reasonably similar market capitalization to our company.

 

In determining the number of performance sharesunits to be granted, our CEO presented to the Compensation Committee his recommendations for the size of award for each named executive officer other than himself.himself, taking into account the factors described above under the heading “Annual Review.” The Compensation Committee reviewed the estimated value of the proposedtarget level of the recommended awards atas a percentage of the target performance level using the stock price at the time of grant and considered the value of each awardofficer’s base salary relative to the median levelslevel of long-term incentive compensation shown in the Towers Perrin comparison study after deducting the participant’s long-term MIP target award. The Compensation Committee approved the size of the award to be granted to our CEO, subject to ratification by our Board of Directors, and approved a total number of performance shares and performance units to be distributed to the other executive officers. The Committee granted our CEO the authority to determine how the total should be distributed among the other executive officers, as well as authority to redistribute some of the performance shares awarded to him among the other executives, subject to review and approval by the Committee Chair.

Fiscal Year 2010 Incentive Compensation Changes

During fiscal year 2009, the Compensation Committee engaged Pearl Meyer to assist with a review of the short-term and long-term incentive compensation programs for our executive officers. The material

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elements ofshown in the instructions or directions givenTowers Watson comparison study. The final performance unit awards, including the award to Pearl Meyerour CEO, were approved by the Committee, with respectand the award to their engagement were to:

	•	interview members of the Committee and management,
	•	analyze our executive incentive compensation programs from a competitive standpoint and against our philosophies and objectives and
	•	provide alternative designs considering the results of its analyses and interviews, best practices and our business strategy.

The Committee directed Pearl Meyer to focus on methods to more closely alignour CEO was ratified by the relationship between pay and our company’s performance and to suggest incremental changes to the Company’s existing short-term and long-term executive compensation programs rather than entirely new programs, in order to maintain continuity. The Committee expressed its preference to continue to use EVA as a performance measure for a significant partBoard of incentive compensation, but it asked Pearl Meyer to assess the effectiveness of EVA as a performance measure.Directors.

 

Representatives of Pearl Meyer worked with the Committee throughout fiscal year 2009Awards Earned and presented its conclusionsLink to the Committee regarding key themes from its interviews and various alternatives for compensation design. Following the presentation of Pearl Meyer’s conclusions and in consultation with Pearl Meyer, in March 2009, the Committee implemented the following changes to incentive compensation for the named executive officers for fiscal year 2010:

	•	the officers were not granted any long-term awards under the MIP and instead were granted performance units which were larger than in prior years, representing a shift in long-term incentive compensation from cash to equity-based awards and from awards based on annual EVA performance to awards based on TSR performance over a three-year period; and
	•	the officers’ short-term award targets under the MIP were generally increased, in recognition of the increased percentage of incentive compensation to be paid in the form of equity.

The Committee also implemented a number of changes to the calculation of EVA under the MIP and eliminated the EVA growth target, in order to provide a stronger correlation between annual business results and annual payouts under the MIP.

The changes to the named executive officers’ MIP target award percentages were as follows:

			Fiscal Year 2009										Fiscal Year 2010
			Target Award Percentages										Target Award Percentages
Name			Short-Term					Long-Term					Short-Term					Long-Term
James P. Hackett				70%					115%					100%					0%
David C. Sylvester				55%					90%					80%					0%
James P. Keane				65%					100%					80%					0%
Frank H. Merlotti, Jr.				60%					90%					60%					0%
Mark A. Baker				60%					100%					80%					0%

Company Performance

 

The performance unitsperiod for the performance shares granted to each of the named executive officers in Marchfiscal year 2009 willran from fiscal year 2009 through fiscal year 2011. The awards could be earned in part based on two performance criteria, each with 50% weighting: absolute TSR expressed as a compound annual growth rate, and relative TSR. Below are the achievementperformance levels which would have resulted in the threshold, target and maximum amounts earned.

Our actual TSR performance for this award, also set forth below, resulted in no shares being earned. The lack of certain TSR levelsa payout for fiscal years 2010 through 2012 relative to the industrial subset of companies within the S&P MidCap 400 Index. A number of shares equal to 25% of the target award will be earned if the officer remains employed by us through the end ofour fiscal year 2012 whether or not the2009 through fiscal year 2011 performance criteria are met,cycle demonstrates alignment with TSR performance and a maximum number of shares equal to 200% of the target award (but not to exceed 250,000 shares) will be earned if theour pay for performance

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criteria are exceeded. The number of performance units awarded to each of the Named Executive Officers is as follows: philosophy.

 

Name			Performance Units Awarded
James P. Hackett				175,000
David C. Sylvester			Absolute TSR						75,000
James P. Keane			Performance —					Relative TSR			Number of
Performance Level			Annualized					Performance			Shares Earned
Threshold				70,000
Frank H. Merlotti, Jr. 6%				55,00030th percentile			50% of target
Mark A. BakerTarget				82,00012%				50th percentile			100% of target
Maximum				24%				90th percentile			200% of target
Actual				(9%)				9th percentile			0% of target

 

Retirement Plans and Benefits

 

Each of the named executive officers is eligible to participate in the following retirement benefit plans:

 

	•	Retirement Plan,
	•	Restoration Retirement Plan,
	•	Executive Supplemental Retirement Plan and
	•	Deferred Compensation Plan.

 

These plans, with the exception of the Executive SupplementalThe Retirement Plan and Deferred Compensation Plan are intended to allow the officers to defercontribute portions of their current compensation on a tax-deferred basis and to be competitive with benefits that are offered by similar companies. We also make profit-sharing, matching or other contributions to participants’ accountsthe Retirement Plan from time to time in our discretion. We reinstated matching contributions during the third quarter of fiscal year 2011, but we did not make any other contributions during the year. The Restoration Retirement Plan is intended to provide benefits to participants for whom contributions to the Retirement Plan are limited under ourthe Internal Revenue Code. No contribution was made to the Restoration Retirement Plan.Plan in fiscal year 2011. Amounts contributed to or deferred under or contributed to these plans earn a return based on the elections made by the individual officer from a number of investment options. The Executive Supplemental Retirement Plan, which was originally adopted in 1981, is intended to assist us with attracting and retaining highly-qualified executives and to enable them to devote their full-time best efforts to our company. We do not have a policy or practice of granting our executive officers extra years of service credit under any of these plans.

 

Each of these plans, other than our Retirement Plan, areis discussed below inExecutive Compensation, Retirement Programs and Other Arrangementsunder the headings “Pension Benefits” and “Deferred Compensation.” Our Retirement Plan is a tax-qualified defined contribution plan which is open to allU.S.-based employees of Steelcase Inc. and certain of its subsidiaries and affiliates. Participants may elect to contribute a portion of their earnings to the 401(k) component of the Retirement Plan each year, and we make a non-discretionary contribution of 5% of each participant’s eligible pay (subject to certain limitations) to the Retirement Plan each fiscal year. We also matched 50% of the first 4% of eligible pay each participant contributed to the 401(k) component of the Retirement Plan during fiscal year 2009. In January 2009, the Compensation Committee approved the suspension of the company matching contributions and an amendment to the Retirement Plan to remove the 5% non-discretionary contribution, which will allow us to reduce our contribution for fiscal year 2010.

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Certain senior management employees, including our CEO, also have individual deferred compensation agreements with us that were entered into more than ten years ago. Under these agreements, the employees deferred a portion of their compensation and are entitled to receive fixed payments beginning at age 70. These agreements were intended to allow participants to build additional retirement income on a tax-deferred basis. At the time we entered into the agreements, we purchased company-owned life insurance policies that, although they were not pledged sources of funding for these agreements, were expected to generate returns that would approximate our obligations under the agreements.

 

In addition to these retirement and deferred compensation plans, upon a qualifying retirement (generally when the age at retirement and number of years of continuous service with our company equals 80 or more), each of the named executive officers (other than Frank H. Merlotti, Jr.) is eligible to

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continue to receive healthcare benefits, including medical, dental and vision insurance programs, in the same manner as all other U.S. employees of Steelcase Inc. hired before July 22, 2002. EligibleWe currently allow eligible U.S. retirees mayto continue to receive healthcare benefits for life, but we reserve the right to change or eliminate this benefit at any time. Participating retirees are required to pay a portion of the cost of coverage;coverage, and the cost sharing percentage varies depending on the date hired,the participant became eligible to retire, age and years of service with our company.

 

Severance and Change in Control Benefits

 

Each of the named executive officers participates in our Executive Severance Plan, which provides for certain benefits in the event of certain terminations of employment with our company. This plan is intended to provide clarity to shareholders and executive management and plan participants in the event of a severanceand/or change in control, align the interests of executive management with the long-term interests of our shareholders, reinforce behavior that promotes maximum value in the event of any merger or acquisition activity and attract and retain executive management by maintaining competitive compensation programs. The value of the potential benefits under the Executive Severance Plan for each of the named executive officers as of the end of fiscal year 2009 is2011 are detailed below inExecutive Compensation, Retirement Programs and Other Arrangementsunder the heading “Termination or Change in Control Payments.”

 

Other Programs and Practices

 

Perquisites and Other Benefits

 

Our company provides very limited perquisites or other personal benefits to our named executive officers. The only perquisite received in fiscal year 20092011 by the named executive officers was an optional annual physical examination.examination and, in the case of our CEO only, home security costs. In addition, the family members of some of our named executive officers travelled on our corporate aircraft on occasion during fiscal year 2009,2011, but the incremental cost to our company of such travel was negligible as they were passengers on flights that were otherwise scheduled for business purposes. Any other useUse of our corporate aircraft by our CEO for personal travel is governed by written aircraft time-sharing agreements under which he reimburses us for all operating expenses associated with the flight, multiplied by 200%. The aggregate incremental cost to our company of the perquisites or other personal benefits received by the named executive officers in fiscal year 20092011 was less than $10,000 for eachper officer.

 

The named executive officers also may elect to participate in other benefit programs on the same terms as other employees of our company. These programs include medical, dental, vision, life and disability insurance, charitable gift matching and discounts on company products. None of the named executive officers has a company car or company-provided housing, and we do not pay any country club memberships or financial planning for any of the named executive officers.

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Stock Ownership Guidelines

 

The Compensation Committee established stock ownership guidelines to encourage stock ownership among our executives to further the objective of aligning our executives’ interests with those of our shareholders. Under these guidelines, our CEO is expected to own shares of our common stock having a current market value of not less than five times his base salary, and the other named executive officers are expected to own shares of our common stock having a current market value of not less than two or three times their respective base salaries, depending on their position. The amount of holdings required by the guidelines was developed based on market comparisons and the premise that an executive should be able to satisfy the guidelines by retaining shares awarded to the executive as compensation and without purchasing additional shares, assuming the applicable performance criteria for the share awards are satisfied. New executive officers are given a period of five fiscal years from their appointment to meet the guidelines in order to allow them an appropriate period of time to build their holdings through annual equity awards.

 

In addition to shares owned by our executives, holdings which count toward satisfaction of stock ownership guidelines include restricted stock, restricted stock units, performance shares and performance units at target award levels during the vesting period, as doeswell as the value ofin-the-money

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stock options held by the executives. The Compensation Committee reviews compliance with the stock ownership guidelines annually. Persons who wereAll of the named executive officers when the guidelines were adoptedare in fiscal year 2007 are expected to meet the guidelines by the end of fiscal year 2011, and persons who become executive officers thereafter have a period of five fiscal years to meet these guidelines to allow them an appropriate period of time to buildcompliance with their holdings through annual equity awards.stock ownership guidelines.

 

Non-compete and Other Forfeiture Provisions

 

One of the basic principles of the various compensation plans and programs which may provide benefits to our named executive officers following termination ofduring or after their employment with us is that certain compensation or benefits will be forfeited or returned if the participant engages in competitioncompetes with us during a specified period after they leave our employment. Our Executive Severance Plan provides for forfeiture of any remaining payments if the participant engages in competition during a period of two years after leaving our employment. Similarly, the MIP, Incentive Compensation Plan, Restoration Retirement Plan and Executive Supplemental Retirement Plan provide that a participant forfeits any benefits (including any equity awards) under those plans if he or she engages in competition while employed by us or during three years after leaving our employment, and the Deferred Compensation Plan provides for forfeiture of all past earnings on deferred amounts in such event. Under the Incentive Compensation Plan, a participant also must return to us:

	•	any gain he or she received from exercising an option,
	•	the fair market value on the grant date of any restricted stock or restricted stock units awarded prior to April 1, 2008,
	•	the number of shares of restricted stock or restricted stock units awarded on or after April 1, 2008 and
	•	any gain resulting from any performance shares or performance units which vested,

in each case to the extent the gain was received or the award vested within twelve months prior to the date when he or she started competing with us.

 

In addition, to non-compete forfeiture provisions, our Executive Severance Plan provides that in the event our financial results are materially restated, the Compensation Committee may review the circumstances surrounding the restatement and determine whether and which participants will forfeit the right to receive any future benefitsand/or repay any prior benefits received under the plan. In the event of a material restatement due to fraud, if the Compensation Committee determines that a participant was responsible for or participated in the fraud, that participant will be required to forfeit any future benefits and repay any prior benefits paid in excess of the amounts that would have been paid based on our restated financial results. These are called “clawback” provisions, and the MIP and the Incentive Compensation Plan have similar clawback provisions which apply only to those participants who also participate in the Executive Severance Plan.

 

Tax Considerations

 

In making decisions regarding executive compensation, the Compensation Committee considers the tax deductibility of the amounts payable. Section 162(m) of the Internal Revenue Code generally limits the tax deductibility of annual compensation paid to certain officers to $1 million.million unless certain conditions are satisfied. The Committee’s goal is to structure the compensation paid to these individuals to maximize deductibility for federal income tax purposes; however, when deemed necessary, the Committee may authorize compensation that may not be deductible under Section 162(m) to promote incentive and retention goals.

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EXECUTIVE COMPENSATION, RETIREMENT PROGRAMS AND OTHER ARRANGEMENTS

 

This section and the tables set forth in this section should be read in conjunction with the more detailed description of our executive compensation plans and arrangements included in theCompensation Discussion and Analysiswhich precedes this section.

 

Summary Compensation Table

 

The following table shows compensation information for fiscal years 2009, 20082011, 2010 and 20072009 for (1) James P. Hackett, our President and CEO, (2) David C. Sylvester, our Chief Financial Officer, and (3) our three nextother most highly-paid executive officers as of the end of fiscal year 2009.2011. In this proxy statement, we refer to these five executive officers collectively as the “named executive officers.”

 

Summary Compensation Table

 

																							Change in Pension																																			Change in Pension
																							Value and																																			Value and
																							Nonqualified																																			Nonqualified
																		Non-Equity					Deferred																														Non-Equity					Deferred
Name and			Fiscal										Stock					Incentive Plan					Compensation					All Other										Fiscal										Stock					Incentive Plan					Compensation					All Other
Principal Position			Year					Salary (1)					Awards (2)					Compensation (3)					Earnings (4)					Compensation (5)					Total					Year					Salary					Awards (1)					Compensation (2)					Earnings (3)					Compensation (4)					Total
James P. Hackett				2009					$896,538					$253,006					$512,568					—					$94,481					$1,756,593					2011				$	900,000				$	2,056,500				$	448,823				$	124,024				$	4,974				$	3,534,321
President and Chief				2008					$869,885					$2,161,104					$1,856,451					$28,898					$264,864					$5,181,202					2010				$	792,000				$	1,069,250				$	101,988				$	225,305				$	74				$	2,188,617
Executive Officer				2007					$832,308					$1,453,935					$2,598,022					$101,044					$27,499					$5,012,808					2009				$	896,538				$	365,016				$	512,568				$	247,212				$	29,928				$	2,051,262
David C. Sylvester				2009					$377,115					$228,719					$157,434					—					$43,869					$807,137					2011				$	380,000				$	822,600				$	151,282				$	145,298				$	2,120				$	1,501,300
Vice President, Chief				2008					$354,711					$224,095					$532,293					$320,098					$60,676					$1,491,873
Financial Officer				2007					$227,308					$60,118					$409,791					—					$22,690					$719,907
Senior Vice President,																																							2010				$	342,000				$	576,000				$	24,687				$	391,463				$	99				$	1,334,249
Chief Financial Officer																																							2009				$	377,115				$	125,021				$	157,434				$	914				$	28,788				$	689,272
Mark A. Baker																																							2011				$	460,000				$	914,000				$	183,138				$	167,296				$	3,966				$	1,728,400
Senior Vice President,																																							2010				$	403,570				$	629,760				$	37,938				$	385,616				$	99				$	1,456,984
Global Operations Officer																																							2009				$	433,731				$	155,458				$	207,206					—				$	27,600				$	823,995
James P. Keane				2009					$477,269					$252,581					$245,370					—					$53,991					$1,029,211					2011				$	479,000				$	914,000				$	191,902				$	139,428				$	2,285				$	1,726,615
President,				2008					$479,038					$412,483					$914,059					—					$56,852					$1,862,432					2010				$	431,100				$	537,600				$	48,213				$	396,959				$	74				$	1,413,946
Steelcase Group				2007					$450,385					$257,961					$1,251,846					$48,736					$26,904					$2,035,832					2009				$	477,269				$	165,057				$	245,370					—				$	29,292				$	916,988
Frank H. Merlotti, Jr.				2009					$465,000					$171,760					$223,865					—					$58,354					$918,979
President, Coalesse				2008					$473,942					$348,863					$911,146					$2,947					$59,838					$1,796,736
				2007					$462,977					$253,427					$1,288,434					$55,955					$27,843					$2,088,636
Mark A. Baker				2009					$433,731					$225,820					$207,206					—					$49,521					$916,278
Nancy W. Hickey																																							2011				$	380,000				$	667,220				$	151,513				$	38,351				$	2,995				$	1,240,079
Senior Vice President,				2008					$414,231					$410,939					$716,496					$504					$65,557					$1,607,727					2010				$	342,000				$	499,200				$	34,134				$	119,727				$	74				$	995,135
Global Operations Officer				2007					$381,154					$298,479					$956,020					$41,169					$27,448					$1,704,270
Chief Administrative Officer																																							2009				$	378,077				$	100,290				$	170,006				$	75,717				$	27,600				$	751,690

 

 

(1)		Fiscal years 2009 and 2007 included 52 weeks, and fiscal year 2008 included 53 weeks.
(2)		The amounts shown in this column are the dollar amounts recognized during the applicable fiscal year for financial reporting purposesaggregate grant date fair values computed in accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (Revised 2004) Share-Based Payment(“FAS 123R”Codification Topic 718 (“FASB ASC Topic 718”) for performance units and restricted stock and performance share awardsunits granted during the applicable and prior fiscal years and, for fiscal years 2009 and 2008, restricted stock unit awards granted shortly after the end of the fiscal year as a portion of the long-term MIP awards earned for the year. The assumptions made in the valuation of such awards are disclosed in Note 1316 to the consolidated financial statements included in our annual report onForm 10-K for fiscal year 20092011 filed with the SEC on April 24, 2009.25, 2011. For the performance units, the grant date fair value is based upon the probable outcome of the performance conditions, including the floor amount. Assuming that the highest level of performance conditions will be achieved, the value of the performance units granted in fiscal year 2011, based on the grant date market price per share of the maximum number of shares of our Class A Common Stock that can be earned, including the floor amount, would be $2,947,500 for James P. Hackett, $1,177,200 for David C. Sylvester, $1,308,000 for Mark A. Baker, $1,308,000 for James P. Keane, and $954,840 for Nancy W. Hickey.
(3)(2)		The amounts shown in this column represent the sum of:

		(a) short-term MIP awards earned for the applicablein fiscal years 2011 and 2009 (no such awards were earned in fiscal year 2010),

		(b) the cash portion of long-term MIP awards earned for the applicablein fiscal year 2009 and

		(c) earnings for the applicable fiscal year on long-term MIP awards earned in prior fiscal years.

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		The short-term awards were paid in cash shortly after the end of the applicable fiscal year. The cash portion of the long-term awards are payable in three equal annual installments after the end of the three following fiscal years. No long-term awards were made to the named executive officers in fiscal year 2011 or 2010 as a result of a change in the mix of incentive compensation awarded to the officers.
		The long-term awards are credited with an annual rate of return which is

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		paid at the time the related portion of the award is paid. For fiscal yearyears 2011, 2010 and 2009, the raterates of return waswere 4.17%, 7.92% and 4.02%, respectively, and waswere based on an estimate of our three-year incremental borrowing rate at the beginning of the fiscal year. For fiscal years 2008 and 2007, the rate of return was equal to the percentage change in our shareholders’ equity for the year (before the payment of dividends and the impact of share issuances and repurchases). The amounts included in this column for fiscal year 20092011 for earnings on long-term MIP awards made in prior years are as follows:

 

								Earnings payable										Earnings payable
			Earnings paid					after end of					Earnings paid					after end of
			after end of					fiscal years					after end of					fiscal year
Name			fiscal year 2009					2010 and 2011					fiscal year 2011					2012
James P. Hackett			$	42,275				$	42,396				$	13,962				$	2,861
David C. Sylvester			$	8,306				$	9,620				$	4,420				$	942
Mark A. Baker													$	5,317				$	1,180
James P. Keane			$	22,196				$	20,114				$	6,642				$	1,324
Frank H. Merlotti, Jr.			$	22,891				$	20,318
Mark A. Baker			$	16,778				$	15,471
Nancy W. Hickey													$	4,649				$	944

 

		The amounts shown for David C. Sylvester for fiscal years 2008 and 2007 include earnings on long-term awards made in prior fiscal years under our International Management Incentive Plan, which operated similarly to the MIP.
(4)(3)		The amounts shown in this column represent the net increase in actuarial present value of the applicable officer’s accumulated benefit under (a) our Executive Supplemental Retirement Plan and (b) in the case of James P. Hackett, only, a deferred compensation agreement. The changes in the actuarial present value of the accumulated benefit under the Executive Supplemental Retirement Plan for each participant are affected by changes in compensation and the discount rate. For fiscal year 2011, the change in the actuarial present value of the accumulated benefit for each participant was primarily attributable to a decrease in the discount rate from 5.3% to 4.8% and the impact of the restoration of the officers’ base salaries to prior year levels. For fiscal year 2010, the increase in the present value of accumulated benefits from the prior year was primarily attributable to a significant decrease in the discount rate from 8.0% to 5.3%, which had a greater impact on those who had not met retirement eligibility. For fiscal year 2009, the change in the actuarial present value of each named executive officer’sthe accumulated benefit under the Executive Supplemental Retirement Plan was a reduction,for Mark A. Baker and James P. Keane were reductions of $42,019 and $79,796, respectively, so the amounts are reflected as zero in accordance with the SEC’s rules and regulations. The reductions were as follows: James P. Hackett, $98,442 (net of an increase in the present value of his accumulated benefit under his deferred compensation agreement); David C. Sylvester, $29,739; James P. Keane, $95,725; Frank H. Merlotti, Jr., $64,606; and Mark A. Baker, $80,244. For David C. Sylvester, the change in fiscal year 2008 reflects the fact that he became a participant in the plan during fiscal year 2008. Earnings under our Deferred Compensation Plan are not included because they are not earned at a preferential rate.
(5)(4)		The amounts shown in this column for fiscal year 20092011 include the following:

 

													Company
			Dividends/					Company					Contributions
			Dividend					Contributions					under															Company
			Equivalents					under					Restoration										All Other					Contributions under					Life					All Other
			on Unvested					Retirement					Retirement					Life Insurance					Compensation					Retirement or					Insurance					Compensation
Name			Stock Awards					Plan					Plan					Premiums					—Total					Pension Plans					Premiums					–Total
James P. Hackett			$	64,553				$	16,100				$	11,500				$	2,328				$	94,481				$	4,900				$	74				$	4,974
David C. Sylvester			$	15,081				$	16,100				$	11,500				$	1,188				$	43,869				$	2,046				$	74				$	2,210
Mark A. Baker																												$	3,892				$	74				$	3,966
James P. Keane			$	24,699				$	16,100				$	11,500				$	1,692				$	53,991				$	2,211				$	74				$	2,285
Frank H. Merlotti, Jr.			$	26,290				$	16,100				$	11,500				$	4,464				$	58,354
Mark A. Baker			$	21,921				$	16,100				$	11,500					—				$	49,521
Nancy W. Hickey																												$	2,921				$	74				$	2,995

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