(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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þ | Definitive Proxy Statement |
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ITT Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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2012 | ||
Notice of Annual Meeting |
& Proxy Statement | ||
ITT Corporation |
March 27, 2012
Denise L. Ramos Chief Executive Officer and President | ITT Corporation 1133 Westchester Avenue White Plains, NY 10604-3543 |
Dear Fellow Shareholders:
Enclosed are the Notice of Annual Meeting and Proxy Statement for ITT’s 20102012 Annual Meeting of Shareholders. This year’s meeting is intended to address only the business included on the agenda. Details of the business to be conducted at the Annual Meeting are given in the accompanying Notice of Annual Meeting and Proxy Statement, which provides information required by applicable laws and regulations.
Your vote is important and we encourage you to vote whether you are a registered owner or a beneficial owner.
This year, in accordance with U.S. Securities and Exchange Commission rules, we are again using the Internet as our primary means of furnishing proxy materials to shareholders. Because we are using the Internet, most shareholders will not receive paper copies of our proxy materials. We will instead send these shareholders a notice with instructions for accessing the proxy materials and voting via the Internet. This notice also provides information on how shareholders may obtain paper copies of our proxy materials if they so choose. We believe use of the Internet makes the proxy distribution process more efficient, less costly and helps in conserving natural resources.
If you are the registered owner of ITT common stock, you may vote your shares by making a toll-free telephone call or using the Internet. Details of these voting options are explained in the Proxy Statement. If you choose to receive paper copies of our proxy materials, you can vote by completing and returning the enclosed proxy card by mail as soon as possible.
If you are a beneficial owner and someone else, such as your bank, broker or broker,trustee is the owner of record, the owner of record will communicate with you about how to vote your shares.
Whether or not you plan to attend the Annual Meeting, please vote as soon as possible. If you are a registered owner of ITT common stock and do not plan to vote in person at the Annual Meeting, you may vote via the Internet, by telephone or, if you receive a paper proxy card in the mail, by mailing the completed proxy card. Voting by any of these methods will ensure your representation at the Annual Meeting. Your vote is important.
Sincerely,
March 27, 2012
Time: | 10:30 a.m. Eastern Time, on Tuesday, May | ||
Place: | |||
Items of Business: | 1. Election of | ||
Directors. | |||
2. Ratification of the appointment of Deloitte & Touche LLP as ITT’s Independent Registered Public Accounting Firm for | |||
2012. | |||
3. To approve, in a non-binding vote, the compensation of our named executive officers. | |||
4. To vote on | |||
Company change its state of incorporation from Indiana to Delaware. 5. To vote on a shareholder proposal requesting that the Company adopt a policy that, whenever possible, the Chairman of the Board of Directors be an independent director who has not previously served as an executive officer of the Company. 6. To vote on a shareholder proposal requesting that the Company amend, where applicable, its policies related to human rights. 7. To transact such other business as may properly come before the meeting. | |||
Who May Vote: | You can vote if you were a shareholder at the close of business on March | ||
Annual Report to Shareholders andAnnual Report on Form10-K: | Copies of our | ||
Mailing or Availability Date: | Beginning on or about March | ||
About Proxy Voting: | Your vote is important. Proxy voting permits shareholders unable to attend the Annual Meeting to vote their shares through a proxy. Most shareholders are unable to attend the Annual Meeting. By appointing a proxy, your shares will be represented and voted in accordance with your instructions. If you do not provide instructions on how to vote, the proxies will vote as recommended by the Board of Directors. |
shareholders will not receive paper copies of our proxy materials and can vote their shares by following the Internet voting instructions provided on the Notice of Internet Availability of Proxy Materials. If you are a registered owner and requested a paper copy of the proxy materials, you can vote your shares by proxy by completing and returning your proxy | ||
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on Tuesday, May 8, 2012, at 10:30 a.m. at Doral Arrowwood, 975 Anderson Hill Road, Rye Brook, NY 10573. The Company’s 2012 Proxy Statement, 2011 Annual Report on Form 10-K and Annual Report to Shareholders will be available online at https://www.proxydocs.com/itt. |
Burt M. Fealing | ||||||
Senior Vice President, | ||||||
General Counsel and Secretary |
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Why did I receive these proxy materials? Beginning on or about March 29, 2010,27, 2012, this Proxy Statement is being providedmailed or made available, as the case may be, to shareholders who were shareholders as of the March 17, 201016, 2012, record date, as part of the Board of Directors’ solicitation of proxies for ITT’s 20102012 Annual Meeting and any postponements or adjournments thereof. This Proxy Statement and ITT’s 20092011 Annual Report to Shareholders and Annual Report onForm 10-K (which have been furnished to shareholders eligible to vote at the 20102012 Annual Meeting) contain information that the Board of Directors believes offers an informed view of ITT Corporation (herein referred to as “ITT” or “the Company”the “Company”) and meets the regulations of the Securities and Exchange Commission (the “SEC”) for proxy solicitations.
Who is entitled to vote?vote? You can vote if you owned shares of the Company’s common stock as of the close of business on March 17, 2010,16, 2012, the record date.
What items of business will I be voting on?You are voting on the following items of business, which are described on pages 78 to 19:
1. | Election of |
2. | Ratification of the appointment of Deloitte & Touche LLP (“Deloitte”) as ITT’s Independent Registered Public Accounting Firm for |
3. |
4. | To vote on a shareholder proposal requesting that the Company change its state of incorporation from Indiana to Delaware. |
5. | To vote on a shareholder proposal requesting that the Company adopt a policy that, whenever possible, the Chairman of the Board of Directors be an independent director who has not previously served as an executive officer of the Company. |
6. | To vote on a shareholder proposal requesting that the Company amend, where applicable, its policies related to human rights. |
7. | To transact such other |
How do I vote? What are the proxy voting procedures?If you vote by proxy, you can vote by following the voting procedures on the proxy card. You may vote:You If you are a registered owner, you can either vote in person at the Annual Meeting or by proxy whether or not you attend the Annual Meeting.
Ÿ | |
By the Internet, |
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By Telephone, |
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By Mail. |
Why does the Board solicit proxies from shareholders?Since it is impractical for all shareholders to attend the Annual Meeting and vote in person, the Board of Directors recommends that you appoint the three people named on the accompanying proxy card to act as your proxies at the 20102012 Annual Meeting.
How do the proxies vote?The proxies vote your shares in accordance with your voting instructions. If you appoint the proxies but do not provide voting instructions, they will vote as recommended by the Board of Directors. If any other matters not described in this Proxy Statement are properly brought before the meeting for a vote, the proxies will use their discretion in deciding how to vote on those matters.
How many votes do I have?You have one vote for every share of ITT common stock that you own.
How does the Board of Directors recommend that I vote on the proposals? The Board of Directors recommends a vote FOR the election of each of the nominees of the Board of Directors (Item 1), FOR the ratification of the appointment of Deloitte as ITT’s Independent Registered Public Accounting Firm for 2012 (Item 2), FOR the approval of the compensation of our NEOs (Item 3), AGAINST the shareholder proposal requesting that the Company change its state of incorporation from Indiana to Delaware (Item 4), AGAINST the shareholder proposal requesting that the Company adopt a policy that, whenever possible, the Chairman of the Board of Directors be an independent director who has not previously served as an executive officer of the Company (Item 5) and AGAINST the shareholder proposal requesting that the Company amend, where applicable, its policies related to human rights (Item 6).
What if I change my mind?You can revoke your proxy at any time before it is exercised by mailing a new proxy card with a later date or casting a new vote by the Internet or telephone.telephone, as applicable. You can also send a written revocation to the Secretary at the address listed on the first page of the Proxy Statement. If you come to the Annual Meeting, you can ask that the proxy you submitted earlier not be used.
1
There are foursix formal items, including the shareholder proposals, scheduled to be voted upon at the Annual Meeting as described on page 1. As of the date of this Proxy Statement, the Board of Directors is not aware of any business other than as described in this Proxy Statement that will be presented for a vote at the 20102012 Annual Meeting.
How many votes are required to elect Directors or approve a proposal? How many votes are required for an agenda item to pass?The Restated Articles of Incorporation of ITT Corporation authorize the Company’s By-laws to provide for majority voting for Directors in uncontested elections, and such By-laws further provide that in uncontested elections, anya Director nominee who receives less thanshall be elected by a majority of the votes cast shall not be elected. The Company’s By-laws provide for majority voting in uncontested elections.cast. The By-laws provide that in uncontested elections, any Director nominee who fails to be elected by a majority, but who also is a Director at the time, shall promptly provide a written resignation, as a holdover Director, to the ChairChairman of the Nominating and Governance Committee.Board or the Secretary. The Nominating and Governance Committee (or the equivalent committee then in existence) shall promptly consider the resignation and all relevant facts and circumstances concerning any vote including whether the cause of the vote may be cured, and the best interests of the Company and its shareholders. The independent Directors of the Board will act on the Nominating and Governance Committee’s recommendation atno later than its next regularly
scheduled Board Meetingmeeting or within 90 days after certification of the shareholder vote, whichever is earlier, and the Board will promptly publicly disclose its decision and the reasons for its decision. This means that in an uncontested election, to be elected as a Director of ITT, each of the ten10 director candidates must receive a majority of votes cast.
Item 2, Item 3, Item 4, Item 5 and Item 6 of the proposed agenda items require that the votes cast in favor of the proposal exceed the votes cast against the proposal. Accordingly, neither abstentions nor broker non-votesItem 2, Item 3, Item 4, Item 5 and Item 6 are advisory in nature and are non-binding. Abstentions will have anyno effect on the votes required under Indiana law.
How many shares of ITT stock are outstanding?As of March 17, 2010,16, 2012, the record date, 183,269,32195,462,363 shares of ITT common stock were outstanding.
How many holders of ITT outstanding shares must be present to hold the Annual Meeting?In order to conduct business at the Annual Meeting, it is necessary to have a quorum. To have a quorum, shareholders entitled to cast a majority of outstanding ITT shares of common stock onvotes at the record dateAnnual Meeting must be present in person or by proxy.
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What is the difference between a beneficial owner and a registered owner?If shares you own are held in an ITT savings plan for salaried or hourly employees, a stock brokerage account, bank or by another holder of record, you are considered the “beneficial owner” because someone else holds the shares on your behalf. If the shares you own are held in a Morgan Stanley Smith Barney account for restricted shares or registered in your name directly with The Bank of New York Mellon, our transfer agent, you are the registered owner and the “shareholder of record.”
How do I vote if I am a participant in ITT’s savings plans for salaried or hourly employees? If you participate in any of the ITT savings plans for salaried or hourly employees, your plan trustee will vote the ITT shares credited to your savings plan account in accordance with your voting instructions, except as otherwise provided in accordance with the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended. The trustee votes the shares on your behalf because you are the beneficial owner, not the shareholder of record, of the savings plan shares. The trustee votes the savings plan shares for which no voting instructions are received (“Undirected Shares”) in the same proportion as the shares for which the trustee receives voting instructions, except as otherwise provided in accordance with ERISA. Under the savings plans, participants are “named fiduciaries” to the extent of their authority to direct the voting of ITT shares credited to their savings plan accounts and their proportionate share of Undirected Shares. By submitting voting instructions by telephone, the Internet or by signing and returning the voting instruction card, you direct the trustee of the savings plans to vote these shares, in person or by proxy at the Annual Meeting. ITT Salariedsalaried or Hourly Planhourly plan participants should mail their confidential voting instruction card to Broadridge Financial Solutions, Inc. (“Broadridge”), acting as tabulation agent, or vote by telephone or Internet. Instructions must be received by Broadridge no later than 11:59 p.m. Eastern Time the day before the Annual Meeting.
I participate in the ITT savings plan for salaried employees and am a shareholder of record of shares of ITT common stock. How many proxy cards will I receive?You will receive only one proxy card. Your savings plan shares and any shares you own as the shareholder of record, including ownership through the ITT Direct Purchase, Sale and Dividend Reinvestment Plan, will be set out separately on the proxy card.
How many shares are held by participants in the ITT employee savings plans?As of March 17, 2010, the16, 2012, record date, Wells Fargo Institutional Trust Services,J.P. Morgan Chase, as the trustee for both the employee salaried savings plan and the hourly employee savings plans, held 9,061,732400,507 shares of ITT common stock (approximately 4.9%0.42% of the outstanding shares) and The Northern Trust Company, as the trustee for the hourly employees savings plans, held 543,542salaried plan, and 87,684 shares of ITT common stock (approximately 0.30%0.09% of the outstanding shares).
Who counts the votes? Is my vote confidential?Representatives of Broadridge count the votes. Representatives of IVS Associates, Inc.Broadridge will act as Inspectors of Election for the 20102012 Annual Meeting. The Inspectors of Election monitor the voting and certify whether the votes of shareholders are kept in confidence in compliance with ITT’s confidential voting policy.
Who pays for the proxy solicitation cost?ITT pays the cost of soliciting proxies from registered owners. ITT has appointed Georgeson & CompanyInnisfree M&A Incorporated to help with the solicitation effort. ITT will pay Georgeson & CompanyInnisfree M&A Incorporated a fee of $12,500$25,000 to assist with the solicitation and reimburse brokers, nominees, custodians and other fiduciaries for their costs in sending proxy materials to beneficial owners.
3
How does a shareholder submit a proposal for the 20112013 Annual Meeting?Rule 14a-8 of the Securities Exchange Act of 1934, or the “Exchange Act,” establishes the eligibility requirements and the procedures that must be followed for a shareholder proposal to be included in a public company’s proxy materials. Under the rule, if a shareholder wants to include a proposal in ITT’s proxy materials for its next Annual Meeting, the proposal must be received by ITT at its principal executive offices on or before November 29, 201027, 2012, and comply with eligibility requirements and procedures. An ITT shareholder who wants to present a matter for action at ITT’s next Annual Meeting, but chooses not to do so under Exchange ActRule 14a-8, must deliver to ITT, at its principal executive offices, on or before November 29, 201027, 2012, a written notice to that effect.effect; provided, however, in the event that the date of the 2013 Annual Meeting is changed by more than 30 days from the anniversary date of the 2012 Annual Meeting, such notice must be received not later than 120 days calendar days prior to the 2013 Annual Meeting or 10 calendar days following the date on which public announcement of the date of the annual meeting is first made. In either case, as well as for shareholder nominations for Directors, the shareholder must also comply with the requirements in the Company’s By-laws with respect to a shareholder properly bringing business before the Annual Meeting. (You can request a copy of the By-laws from the Secretary of ITT.)
Can a shareholder nominate Director Candidates?The Company’s By-laws permit shareholders to nominate Directors and present other business for consideration at the Annual Meeting. To make a Director nomination or present other business for consideration at the 20112013 Annual Meeting, you must submit a timely notice in accordance with the nameprocedures described in the Company’s By-laws. To be timely, notice of Director nomination or any other business for consideration at the candidateannual meeting must be received by our Secretary at our principal executive offices no less than 90 days nor more than 120 days prior to the date we released our proxy statement to shareholders in connection with last year’s annual meeting. Therefore, to be presented at our 2013 Annual Meeting, such a proposal must be received on or beforeafter November 29, 2010 to the Secretary of ITT.27, 2012, but not later than December 27, 2012. The nomination and notice must meet all other qualifications and requirements of the Company’s Corporate Governance Principles and Charters (the “Corporate Governance Principles”), By-laws and Regulation 14A of the Exchange Act. The nominee will be evaluated by the Nominating and Governance Committee of the Board using the same standards as it uses for all Director nominees. These standards are discussed in further detail below at pages 23Pages 26 to 2427 under “Information about the Board ofDirectors-Director Selection and Composition.” No one may be nominated for election as a Director after he or she has reached 72 years of age. (You can request a copy of the nomination requirements from the Secretary of ITT.)
Householding of Proxy Materials
SEC rules permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and notices with respect to two or more shareholders sharing the same address by delivering a single proxy statement or a single notice addressed to those shareholders. This process, which is commonly referred to as “householding”, provides cost savings for companies. Some
brokers household proxy materials, delivering a single proxy statement or notice to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker that they will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement or notice, please notify your broker. You can request prompt delivery of a copy of the Proxy Materials by writing to: Elizabeth O’Driscoll, Manager, Stock Administration, ITT Corporation, 1133 Westchester Ave., White Plains, NY 10604, by email at Elizabeth.O’Driscoll@itt.com or by calling 914-641-2000.
We make available, free of charge on our website, all of our filings that are made electronically with the SEC, including Forms 10-K, 10-Q and 8-K. To access these filings, go to our website (www.itt.com) and click on “SEC Filings” under the “Investors” heading. Copies of our Annual Report on Form 10-K for the year ended December 31, 2011, including financial statements and schedules thereto, filed with the SEC, are also available without charge to shareholders upon written request addressed to:
Corporate Secretary
ITT Corporation
1133 Westchester Ave.
White Plains, NY 10604
Internet Availability of Proxy Materials
In accordance with SEC rules, we are using the Internet as our primary means of furnishing proxy materials to shareholders. Because we are using the Internet, most shareholders will not receive paper copies of our proxy materials. We will instead send these shareholders a Notice of Internet Availability of Proxy Materials with instructions for accessing the proxy materials, including our proxy statement and annual report, and voting via the Internet. The Notice of Internet Availability of Proxy Materials also provides information on how shareholders may obtain paper copies of our proxy materials if they so choose.
The Board of Directors’ share ownership guidelines currently provide for share ownership levels at five times the annual cash retainer amount. Non-Management Directors receive a portion of their retainer in restricted stock or restricted stock units (“RSUs”), which are paid in shares when the Share ownership guidelines for corporate officers, first approved by ITT’s Board of Directors during 2001, are regularly reviewed. The guidelines specify the desired levels of Company stock ownership and encourage a set of behaviors for each officer to reach the guideline levels. The approved guidelines require share ownership expressed as a multiple of base salary for all corporate officers. Specifically the guidelines apply as follows: chief executive officer at five times annual base salary; chief financial officer and executive vice president at three times annual base salary; senior vice presidents and group presidents at two times annual base salary; and all other corporate vice presidents at one times annual base salary. In achieving these ownership levels, shares owned outright, Company restricted stock and To attain the ownership levels set forth in the guidelines, it is expected that any restricted shares that become unrestricted restricted stock unitsRSUs vest. Non-Management Directors are encouraged to hold such shares until their total share ownership meets or exceeds the ownership guidelines.restricted stock units,RSUs, shares held in the Company’s dividend reinvestment plan, shares owned in the ITT Salaried Investment and Savings Plan, and “phantom” shares held in a fund that tracks an index of the Company’s stock in the deferred compensation plan are considered.will be held, and that all shares acquired through the exercise of stock options will be held, except, in all cases, to the extent necessary to meet tax obligations.4
Share Ownership Guideline Summary
Non-Management Directors | 5 X Annual Cash Retainer Amount | |
CEO | 5 X Annual Base Salary | |
CFO and EVP | 3 X Annual Base Salary | |
Senior Vice Presidents | 2 X Annual Base Salary | |
Vice Presidents | 1 X Annual Base Salary |
Stock Ownership of Directors and Executive Officers
The following table shows the beneficial ownership, as of January 31, 2010, the beneficial ownership2012, of ITT common stock and options exercisable within 60 days by each Director, by each of the executive officers named in the Summary Compensation Table at page 60,on Page 72, and by all Directors and executive officers as a group. In addition, with respect to Mr. Loranger and Non-Management Directors, we have provided information about ownership of restricted stock units that provides economic linkage to ITT common stock but does not represent actual beneficial ownership of shares.
Amount and Nature of Beneficial Ownership | |||||||||||||||||||||||||||||
Total | ITT Common | ||||||||||||||||||||||||||||
Title of Class | Shares | Stock | |||||||||||||||||||||||||||
Name of Beneficial | ITT Common | Beneficially | Shares | Stock | Percentage | ||||||||||||||||||||||||
Owner | Stock | Owned(1) | Owned | Options(2) | Units | of Class | |||||||||||||||||||||||
Steven R. Loranger(3)(4) | Common Stock | 833,412 | 206,366 | 538,635 | 88,411 | 0.456 | % | ||||||||||||||||||||||
Curtis J. Crawford | Common Stock | 54,844 | 33,011 | 19,638 | 2,195 | 0.030 | % | ||||||||||||||||||||||
Christina A. Gold | Common Stock | 44,345 | 22,512 | 19,638 | 2,195 | 0.024 | % | ||||||||||||||||||||||
Ralph F. Hake | Common Stock | 31,321 | 13,048 | 16,078 | 2,195 | 0.017 | % | ||||||||||||||||||||||
John J. Hamre | Common Stock | 40,480 | 18,647 | 19,638 | 2,195 | 0.022 | % | ||||||||||||||||||||||
Paul J. Kern | Common Stock | 5,275 | 1,016 | 2,064 | 2,195 | 0.003 | % | ||||||||||||||||||||||
Frank T. MacInnis | Common Stock | 37,940 | 16,107 | 19,638 | 2,195 | 0.021 | % | ||||||||||||||||||||||
Surya N. Mohapatra | Common Stock | 9,644 | 3,697 | 3,752 | 2,195 | 0.005 | % | ||||||||||||||||||||||
Linda S. Sanford | Common Stock | 45,300 | 23,467 | 19,638 | 2,195 | 0.025 | % | ||||||||||||||||||||||
Markos I. Tambakeras | Common Stock | 36,954 | 15,121 | 19,638 | 2,195 | 0.020 | % | ||||||||||||||||||||||
Denise L. Ramos | Common Stock | 31,266 | 31,266 | — | — | 0.017 | % | ||||||||||||||||||||||
Gretchen W. McClain | Common Stock | 137,629 | 80,416 | 57,213 | — | 0.075 | % | ||||||||||||||||||||||
David F. Melcher | Common Stock | 17,835 | 7,721 | 10,114 | — | 0.010 | % | ||||||||||||||||||||||
Scott A. Crum | Common Stock | 69,614 | 21,599 | 48,015 | — | 0.038 | % | ||||||||||||||||||||||
All Directors and Executive Officers as a Group | Common Stock | 1,683,582 | 570,753 | 1,004,663 | 108,166 | 0.921 | %(5) | ||||||||||||||||||||||
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Amount and Nature of Beneficial Ownership | ||||||||||||||||||||||
Name of Beneficial Owner | Title of Class ITT Common | Total Shares Beneficially Owned | ITT Common Shares | Options | Stock Units | Percentage of Class | ||||||||||||||||
Denise L. Ramos | Common Stock | 228,633 | 55,359 | 173,274 | — | * | ||||||||||||||||
Aris C. Chicles | Common Stock | | 99,525 | | | 18,504 | | | 81,021 | | — | * | ||||||||||
Thomas M. Scalera | Common Stock | | 36,379 | | 4,921 | 31,458 | — | * | ||||||||||||||
Robert J. Pagano, Jr. | Common Stock | 301,003 | 38,458 | | 262,545 | | — | * | ||||||||||||||
Munish Nanda | Common Stock | | 57,857 | | | 12,627 | | 45,230 | — | * | ||||||||||||
Steven R. Loranger(1) | Common Stock | | 566,432 | | 122,604 | 443,828 | — | * | ||||||||||||||
Gretchen W. McClain | Common Stock | 6,979 | 6,979 | — | — | * | ||||||||||||||||
David F. Melcher | Common Stock | 384 | 384 | — | — | * | ||||||||||||||||
Orlando D. Ashford | Common Stock | — | — | — | — | * | ||||||||||||||||
G. Peter D’Aloia | Common Stock | — | — | — | — | * | ||||||||||||||||
Donald DeFosset, Jr. | Common Stock | — | — | — | — | * | ||||||||||||||||
Christina A. Gold | Common Stock | 26,892 | 10,578 | 12,589 | 3,725 | * | ||||||||||||||||
Paul J. Kern | Common Stock | 7,155 | 508 | 4,049 | 2,598 | * | ||||||||||||||||
Frank T. MacInnis | Common Stock | 20,774 | 5,554 | 12,589 | 2,631 | * | ||||||||||||||||
Linda S. Sanford | Common Stock | 25,992 | 14,506 | 10,809 | 677 | * | ||||||||||||||||
Donald J. Stebbins | Common Stock | — | — | — | — | * |
Title of Class ITT Common ITT Common Shares Markos I. Tambakeras All Directors and Executive Officers as a Group Amount and Nature of Beneficial Ownership Name of Beneficial Owner
Stock Total
Shares
Beneficially
Owned
Stock
Owned Options(1) Stock
Units Percentage
of Class Common Stock 22,715 10,126 12,589 — * Common Stock 1,624,484 330,248 1,284,605 9,631 1.70 %
* | Less than one percent |
(1) | Mr. Loranger’s common stock shares owned exclude 83,709 vested but unsettled RSUs which are anticipated to be settled on May 2, 2012, approximately six months after Mr. Loranger’s termination of employment on October 31, 2011. The vested but unsettled RSUs correspond to the remaining portion of Mr. Loranger’s June 24, 2004 original employment grant of 125,000 RSUs and a portion of a March 3, 2011 grant of 18,221 RSUs. |
Schedule 13G Filings
Set forth below is information reported to the SEC on the most recently filed Schedule 13G by the following persons who owned more than 5% of ITT outstanding common stock. This information does not include holdings by the trustee with respect to individual participants in the ITT Salaried Investment and Savings Plan.
Amount and | ||||||||
nature of | ||||||||
Name and address | beneficial | Percent of | ||||||
of beneficial owner | ownership | Class | ||||||
Barrow, Hanley, Mewhinney & Strauss, LLC(1) | 12,523,837 | 6.85 | % | |||||
2200 Ross Avenue, 31st Floor Dallas, TX75201-2761 | ||||||||
Vanguard Windsor Funds-Vanguard Windsor II Fund(2) | 11,021,220 | 6.03 | % | |||||
100 Vanguard Blvd. Malvern, PA 19355 | ||||||||
BlackRock, Inc.(3) | 9,800,271 | 5.36 | % | |||||
40 East 52nd Street New York, NY 10022 |
Name and address of beneficial owner | Amount and nature of beneficial ownership | Percent of Class | ||||||
Barrow, Hanley, Mewhinney & Strauss, LLC(1) | 6,506,226 | 7.01 | % | |||||
2200 Ross Avenue, 31st Floor Dallas, TX 75201-2761 | ||||||||
BlackRock, Inc.(2) | 5,055,203 | 5.46 | % | |||||
40 East 52nd Street, New York , NY 10022 |
(1) | As reported on Schedule 13G/A | |
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(2) | As reported on Schedule 13G |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires that the Company’s executive officers and directors, and any persons beneficially owning more than 10% of a registered class of the Company’s equity securities, file reports of ownership and changes in ownership with the SEC within specified time periods. To the Company’s knowledge, based upon a review of the copies of the reports furnished to the Company and written representations that no other reports were required, all filing requirements were satisfied in a timely manner for the year ended December 31, 2009.
20102012 Annual Meeting
1. | |
Election of Directors |
The Board of Directors has nominated ten10 individuals for election as Directors at the 20102012 Annual Meeting. Each of the nominees is currently serving as a Director of ITT and has agreed to continue to serve if elected until his or her retirement, resignation or death. If unforeseen circumstances arise before the 20102012 Annual Meeting and a nominee becomes unable to serve, the Board of Directors could reduce the size of the Board or nominate another candidate for election. If the Board nominates another candidate, the proxies could use their discretion to vote for that nominee. Each Director elected at the 20102012 Annual Meeting will be elected to serve as a Director until ITT’s next Annual Meeting.
The Board of Directors recommends that you vote FOR the election of each of the following ten10 nominees:
Denise L. Ramos Chief Executive Officer |
Director Biographical Information: Mr. Loranger, 58,Ms. Ramos, 55, was appointed President and Chief Executive Officer and President and elected a Director of ITT on June 28, 2004. HeOctober 31, 2011. She previously served as Senior Vice President and Chief Financial Officer of ITT. Ms. Ramos has greater than twenty years of business and financial experience acquired at Atlantic Richfield Company (ARCO). During her tenure at ARCO, she served in a number of increasingly responsible finance positions, including Corporate General Auditor and Assistant Treasurer. In addition, Ms. Ramos has five years of experience at Yum! Brands, Inc., where she was electedSenior Vice President and Corporate Treasurer for Yum! and Chief Financial Officer for the U.S. division of KFC Corporation. Prior to joining ITT in 2007, Ms Ramos served as Chief Financial Officer for Furniture Brands International. Ms. Ramos holds a Master of Business Administration in Finance from the University of Chicago and attended Purdue University’s economic honors program.
Director Experience, Qualifications, Attributes or Skills Relevant to Board Membership: Ms. Ramos’s unique background combines more than two decades in the oil and gas industry with significant retail and customer-centric experience. She has extensive operational and manufacturing experience with industrial companies and, in particular, she has intimate knowledge of the Company’s business and operations having served as our Chief Financial Officer since 2007.
Directorships at Public Companies for the Preceding Five Years: Ms. Ramos has been a Director of ITT since October 31, 2011.
Frank T. MacInnis Chairman and former Chief Executive Officer, EMCOR Group, Inc., one of the world’s largest providers of electrical and mechanical construction services, energy infrastructure and facilities services |
Director Biographical Information: Mr. MacInnis, 65, is currently Chairman of the Board and was Chief Executive Officer of Directors on December 7, 2004.EMCOR Group, Inc. from April 1994 to January 2011. He was also President of EMCOR from April 1994 to April 1997. Mr. LorangerMacInnis is Chairman of the Board and a Director of ComNet Communications, LLC, Gilbane, Inc., and The Williams Companies, Inc. Mr. MacInnis received an undergraduate degree from The University of Alberta and is a membergraduate of the Business Roundtable, serves on the boards of the National Air and Space Museum and the Congressional Medal of Honor Foundation and is on the Executive Committee of the Aerospace Industries Association Board of Governors. Mr. Loranger received bachelor’s and master’s degrees in science from theThe University of Colorado.
Director Experience, Qualifications, Attributes or Skills Relevant to Board Membership: Mr. LorangerMacInnis has extensive operational and manufacturinggreater than 25 years of broad-based experience with industrial companies. Mr. Loranger previously served as Executive Vice President and Chief Operating Officer of Textron, Inc. from 2002 to 2004, overseeing Textron’s manufacturing businesses, including aircraft and defense, automotive, industrial products and components. From 1981 to 2002, Mr. Loranger held executive positions at Honeywell International Inc. and its predecessor company, AlliedSignal, Inc., including serving as President anda Chief Executive Officer of its Engines, Systemsa leading, publicly held, international mechanical and Services businesses.electrical construction, energy infrastructure, and facilities services provider. Mr. MacInnis provides knowledgeable leadership and insight into the many commercial and defense markets served by the Company and has a strong corporate and finance background. He is also serves as a Director on the Board of FedEx Corporation,EMCOR Group, Inc., providing additional relevant experience.
Directorships at Public Companies for the Preceding Five Years: Mr. LorangerMacInnis has been a Director of ITT since 20042001. He was elected Chairman of the Board of ITT on October 31, 2011. Mr. MacInnis has been Chairman of the Board and has served as a Director of FedEx CorporationEMCOR Group, Inc. since 2006.
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Orlando D. Ashford Senior Vice President, Chief Human Resources and Communications Officer, Marsh & McLennan Cos. |
Director Biographical Information:Mr. Ashford, 43, is the Senior Vice President, Chief Human Resources and Communications Officer for Marsh & McLennan Companies. Previously, he served as Group Director of Human Resources for Eurasia and Africa for the Coca-Cola Company and Vice President of Global Human Resources Strategy and Organizational Development for Motorola Inc. He has also held leadership positions with Mercer Delta Consulting, Ameritech and Andersen Consulting.
Director Experience, Qualifications, Attributes or Skills Relevant to Board Membership:Mr. Ashford has significant experience in multinational organizations, providing experience and skills relevant to the Company’s international sales infrastructure. Mr. Ashford is also on the Board of Directors for the Executive Leadership Council and serves on advisory boards for Purdue University School of Technology, the NFL Players Association and The Ladders.
Directorships at Public Companies for the Preceding Five Years:Mr. Ashford currently serves on the Board of Directors of Streetwise Partners.
Peter D’Aloia Former Senior Vice President and Chief |
Director Biographical Information: Dr. Crawford, 62, isMr. D’Aloia, 67, served as Senior Vice President and Chief ExecutiveFinancial Officer of XCEO,American Standard Companies Inc., a position he held since 2000, before retiring in 2008. Before joining American Standard, Mr. D’Aloia worked for Honeywell where he most recently served as Vice President—Business Development. He isspent 27 years with Honeywell’s predecessor company, AlliedSignal, in diverse finance management positions. During his career with AlliedSignal, he served as Vice President—Taxes; Vice President and Treasurer; Vice President and Controller; and Vice President and Chief Financial Officer for the Engineered Materials Sector. Early in his career, he worked as a member oftax attorney for the Board of Trustees of DePaul University. He received a B.A. degree in business administrationaccounting firm Arthur Young and computer science and an M.A. degree from Governors State University, an M.B.A. from DePaul University and a Ph.D. from Capella University. Governors State University awarded him an honorary doctorate in 1996 and he received an honorary doctorate degree from DePaul University in 1999.
Director Experience, Qualifications, Attributes or Skills Relevant to Board Membership: Dr. Crawford is an expert on corporate governanceMr. D’Aloia holds a law degree from St. John’s University and the authora Master of three books on leadershipScience in taxation and corporate governance. HeBachelor of Arts degree in accounting from New York University. Mr. D’Aloia has significant executive management experience leading high-technology companies. From April 1, 2002 to March 31, 2003, hegained as an executive officer, strong international experience and financial expertise. Mr. D’Aloia has also served as President and Chief Executive Officer of Onix Microsystems, a private photonics technology company. He was Chairman of the Board of Directors of ON Semiconductor Corporation from September 1999 until April 1, 2002. Previously, he was President and Chief Executive Officer of ZiLOG, Inc. from 1998 to 2001 and its Chairman from 1999 to 2001. Dr. Crawford has extensive executive experience with AT&T Corporation and IBM Corporation. He also serves on the Board of E.I. DuPont de Nemours and Company,Director in other public companies, providing additional relevant experience.
Directorships at Public Companies for the Preceding Five Years: Dr. CrawfordMr. D’Aloia is a board member and managing director of Ascend Performance Materials, Inc. He also currently serves on the boards of FMC Corporation and WABCO Holdings, Inc.
Donald DeFosset, Jr. Former Chairman, James Hardie Industries N.V. |
Director Biographical Information: Donald DeFosset, Jr., 63, retired in 2005 as Chairman, President and Chief Executive Officer of Walter Industries, Inc., a diversified company with principal operating businesses in homebuilding and home financing, water transmission products and energy services. Mr. DeFosset served since November 2000 as President and Chief Executive Officer, and since March 2002 as Chairman, of Walter Industries. Previously, he was Executive Vice President and Chief Operating Officer of Dura Automotive Systems, Inc. (“Dura”), a global supplier of engineered systems, from October 1999 through June 2000. Before joining Dura, Mr. DeFosset served as a Corporate Executive Vice President, President of the Truck Group and a member of the Office of Chief Executive Officer of Navistar International Corporation from October 1996 to August 1999.
Director Experience, Qualifications, Attributes or Skills Relevant to Board Membership: Mr. DeFosset holds a Master of Business Administration from Harvard Business School and a Bachelor of Science degree in industrial engineering from Purdue University. Mr. DeFosset has beensignificant experience as a chief executive of a large diversified industrial company and as a senior executive of an international machinery manufacturer. Mr. DeFosset has also served as a Director in other public companies, providing additional relevant experience.
Directorships at Public Companies for the Preceding Five Years: Mr. DeFosset also serves as a Director of ITT since 1996. He isNational Retail Properties Inc., Regions Financial Corporation and EnPro Industries, Inc. Previously, Mr. DeFosset served as a Director of E.I. DuPont de Nemours and Company and ON Semiconductor Corporation. Dr. Crawford was previously a Director of Agilysys, Inc.James Hardie Industries N.V. from April 2005 to June2006 through 2008.
Christina A. Gold Former President, Chief Executive Officer and Director, |
Director Biographical Information: Mrs. Gold, 62, has been64, was President and Chief Executive Officer of The Western Union Company, a leading company in global money transfer, sincefrom September 2006.2006 to September 2010. From May 2002 to September 2006, Mrs. Gold was President of Western Union Financial Services, Inc. and Senior Executive Vice President of Western Union’s parent company, First Data Corporation. She serves as a Director of New York Life Insurance, a mutual company. Mrs. Gold is a graduate of Carleton University, Ottawa, Canada.
Mrs. Gold was Executive Vice President of Global Development of Avon Products, Inc., and from 1993 to 1997, she was President of Avon North America. Mrs. Gold is a graduate of Carleton University, Ottawa, Canada. She is a board member of the Safe Water Network.
Director Experience, Qualifications, Attributes or Skills Relevant to Board Membership: Mrs. Gold has extensive experience as the Chief Executive Officer of a public company with wide-ranging global leadership, management and marketing experience. She was recognized in 2003, 2006, 2008 and 20082009 byFortune magazine as one of America’s 50 Most Powerful Women in Business and byForbesmagazine on its “100 Most Powerful Women” list as
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Directorships at Public Companies for the Preceding Five Years: Mrs. Gold has been a Director of ITT since 1997. Mrs. Gold has served as Director of The Western Union Company since 2006. Mrs. Gold also serves1997 and as a directorDirector of New York Life Insurance Company, since 2001, a mutual company, andsince 2001. Mrs. Gold previously served as a Director of Torstar Corporation, a broad-based Canadian media company, providing additional relevant experience.
not-for-profit organization chartered to work in the public interest, with expertise in systems engineering, information technology, operational concepts, and enterprise modernization. He received a B.A. degree, with highest distinction, from Augustana College in Sioux Falls, South Dakota, was a Rockefeller Fellow at Harvard Divinity School and was awarded a Ph.D., with distinction, from the School of Advanced International Studies, Johns Hopkins University, in 1978.
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General Paul J. Kern, U.S. Army (Ret.) Senior Counselor, |
Director Biographical Information: General Kern, 64,66, has served as a Senior Counselor to the Cohen Group since January 2005. He served as President and Chief Operating Officer of AM General LLC from August 1, 2008 to January 2010. In November 2004, General Kern retired from the United StatesU.S. Army as Commanding General, Army Materiel Command (AMC). General Kern graduated from the U.S. Military Academy at West Point. He holds masters’masters degrees in both Civilcivil and Mechanical Engineeringmechanical engineering from the University of Michigan, and he was a Senior Security Fellow at the John F. Kennedy School at Harvard University. General Kern serves on the Board of Directors of CoVant Technologies LLC, and AT Solutions, a subsidiary of CoVant Technologies.
Director Experience, Qualifications, Attributes or Skills Relevant to Board Membership: General Kern has extensive international strategic business and defense-related experience. General Kern has demonstrated leadership and management experience during his37-year career with the U.S. Army. He is a leading figure on defense transformation, as well as a highly decorated combat veteran, and achieved recognized prominence as a four-star general with the U.S. Army. General Kern spearheaded Army efforts to direct supply chain improvement efforts, modernize weapons systems and maintain field readiness, while still controlling costs. He is also a Director of iRobot Corporation, providing additional relevant experience, and a member of the Defense Science Board and National Academy of Engineering.
Directorships at Public Companies for the Preceding Five Years: General Kern has been a Director of ITT Corporation since August 2008. He has served as a Director of iRobot Corporation since 2006. General Kern was a Director of EDO Corporation from 2005 through 2007. The Company acquired EDO Corporation on December 20, 2007. He was a directorDirector of Anteon Corporation from 2005 until 2006 when it was sold to General Dynamics.
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18-year tenure. Dr. Mohapatra is also a Director at Quest Diagnostics Incorporated, providing additional relevant experience.
Linda S. Sanford Senior Vice President, Enterprise Transformation, |
Director Biographical Information: Ms. Sanford, 57,59, was named Senior Vice President, Enterprise Transformation, IBM in January 2003. Previously, she was Senior Vice President and Group Executive, IBM Storage Systems Group, responsible for development of IBM’s Enterprise Storage Server and other storage-related hardware and software. She also has held positions as General Manager, IBM Global Industries, and General Manager of IBM’s S/390 Division. Ms. Sanford is a member of the Women in Technology International Hall of Fame and the National Academy of
Engineers. She is on the Board of Trustees of St. John’s University, and Rensselaer Polytechnic Institute and the State University of New York, serves on the Board of Directors of Partnership for New York City and is a member of the Board of Directors for the Business Council of New York State, Inc. Ms. Sanford is a graduate of St. John’s University and earned an M.S.a Master of Science degree in operations research from Rensselaer Polytechnic Institute.
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Directorships at Public Companies for the Preceding Five Years: Ms. Sanford has been a Director of ITT since 1998.
Donald J. Stebbins Chairman, Chief Executive Officer and President, Visteon Corporation, a leading global supplier of innovative climate, interior, electronic and lighting products for vehicle manufacturers |
Director Biographical Information: Mr. Stebbins, 54, joined Visteon in June 2005 as President and Chief Operating Officer, was named Chief Executive Officer on June 1, 2008 and elected Chairman effective December 1, 2008. Prior to joining Visteon, he was President and Chief Operating Officer of Lear Corporation’s operations in Europe, Asia and Africa. Before that, he was President and Chief Operating Officer of Lear Corporation’s operations in the Americas. Before joining Lear in 1992, Mr. Stebbins held positions at Bankers Trust Co. and Citibank.
Director Experience, Qualifications, Attributes or Skills Relevant to Board Membership: Mr. Stebbins has more than 20 years of leadership experience in global operations and finance, including 13 years in senior leadership positions with Lear before joining Visteon.
Directorships at Public Companies for the Preceding Five Years: Mr. Stebbins has served on Visteon’s Board of Directors since December 2006. He also currently serves on the board of WABCO Holdings, Inc.
Markos I. Tambakeras Former Chairman, President and Chief Executive Officer, |
Director Biographical Information: Mr. Tambakeras, 59,61, served as Chairman of the Board of Directors, Kennametal, Inc. from July 1, 2002, until December 31, 2006. He was also President and Chief Executive Officer of Kennametal from July 1999 through December 31, 2005. From 1997 to June 1999, Mr. Tambakeras served as President, Industrial Controls Business, for Honeywell Incorporated. HeMr. Tambakeras serves on the Board of Trustees of Loyola Marymount University and he is also a trustee of Arizona State University and has served for two years on the President’s Council on Manufacturing. Mr. Tambakeras received a B.Sc.Bachelor of Science degree from the University of Witwatersrand, Johannesburg, South Africa, and an M.B.A.a Master of Business Administration degree from Loyola Marymount University, Los Angeles, CA.
Director Experience, Qualifications, Attributes or Skills Relevant to Board Membership: Mr. Tambakeras has strong strategic and global operational industrial experience, having worked in increasingly responsible positions in several manufacturing companies, including leadership positions in South Africa and the Asia-Pacific area. Mr. Tambakeras has an extensive background in international operations, providing experience and skills relevant to the Company’s global sales and manufacturing infrastructure. He was previously the Chairman of the Board of Trustees of the Manufacturers Alliance/MAPI, which is the manufacturing industry’s leading executive development and business research organization. Mr. Tambakeras is alsowas a Director of Parker Hannifin Corporation, providing additional relevant experience.
Directorships at Public Companies for the Preceding Five Years: Mr. Tambakeras has been a Director of ITT since 2001. Previously, Mr. Tambakeras was a Director of Kennametal, Inc. from July 1999 through December 2006. Mr. Tambakeras has served on the Board of Parker Hannifin Corporation sincefrom 2005 through 2011 and has served as a Director of the Board of Newport Corporation from May 2008 through December 2009. Mr. Tambakeras was elected the non-Executive Chairman of Xylem Inc. on October 31, 2009.
2. | |
Ratification of Appointment of the Independent Registered Public Accounting Firm |
The Board of Directors has appointed Deloitte & Touche LLP (“Deloitte”) as ITT’s independent registered public accounting firm for 2010.2012. Shareholder ratification is not required for making such appointment for the fiscal year ending December 31, 2012, because the Audit Committee has responsibility for the appointment of our independent registered public accounting firm. The appointment is being submitted for ratification with a view toward soliciting the opinion of shareholders, which opinion will be taken into consideration in future deliberations. No determination has been made as to what action the Board of Directors or the Audit Committee would take if shareholders do not ratify the appointment. Deloitte is a registered public accounting firm by the Public Company Accounting Oversight Board (“PCAOB”). Representatives of Deloitte attended all regularly scheduled meetings of the Audit Committee during 2009.2011. The Audit Committee annually reviews and considers Deloitte’s performance of the Company’s Audit.audit. Performance factors reviewed include Deloitte’s:
Ÿ | |
Independence |
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Ÿ | Experience |
Technical capabilities |
Ÿ | Client service assessment |
Ÿ | Responsiveness |
Ÿ | Financial strength |
Ÿ | Industry insight |
Leadership |
Non-audit services |
Management structure |
Peer review program |
Commitment to quality report |
Appropriateness of fees charged |
Compliance and ethics |
The Audit Committee also reviewed the terms and conditions of Deloitte’s engagement letter including an agreement bybetween the Company and Deloitte to submit disputes between Deloitte and the Company to a dispute resolution process and to limit awards based on punitive or exemplary damages under the dispute resolution procedures.
The Audit Committee discussed these considerations as well as Deloitte’s fees and services with Deloitte and Company management. The Audit Committee also determined that any non-audit services (services other than those described in the annual audit services engagement letter) provided by Deloitte were permitted under the rules and regulations concerning auditor independence promulgated by the SEC and rules promulgated by the PCAOB in Rule 3526T.3526. Representatives of Deloitte will be present at the 20102012 Annual Meeting to answer questions. Representatives of Deloitte also will have the opportunity to make a statement if they desire to do so.
Independent Registered Public Accounting Firm Fees
Aggregate fees billed to the Company for the fiscal years ended December 31, 20092011 and 20082010 represent fees billed by the member firms of Deloitte Touche Tohmatsu, and their respective affiliates.
Fiscal Year Ended | ||||||||
2009 | 2008 | |||||||
(In thousands) | ||||||||
Audit Fees(1) | $ | 8,319 | $ | 10,835 | ||||
Audit-Related Fees(2) | 1,015 | 1,034 | ||||||
Tax Fees(3) | ||||||||
Tax Compliance Services | 1,163 | 506 | ||||||
Tax Planning Services | 209 | 505 | ||||||
Total Tax Services | 1,372 | 1,011 | ||||||
Total | $ | 10,706 | $ | 12,880 | ||||
Fiscal Year Ended | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Audit Fees(1) | $ | 4,347 | $ | 8,423 | ||||
Audit-Related Fees(2) | 14,714 | 2,745 | ||||||
Tax Fees(3) | ||||||||
Tax Compliance Services | 2,470 | 1,448 | ||||||
Tax Planning Services | 4,888 | 501 | ||||||
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Total Tax Services | 7,358 | 1,949 | ||||||
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All Other Fees(4) | 11,508 | 1,500 | ||||||
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Total | $ | 37,927 | $ | 14,617 | ||||
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(1) | Fees for audit services billed in |
Audit of the Company’s annual financial statements and internal control over financial reporting; | |||
Reviews of the Company’s quarterly financial statements; | |||
Statutory and regulatory audits, consents and other services related to SEC matters; and | |||
Financial accounting and reporting consultations. |
(2) | Fees for audit-related services billed in |
Employee benefit plan audits; | |||
Audits and other attest work related to | |||
Internal control advisory services; and | |||
Other miscellaneous attest services. |
(3) | Fees for tax services billed in |
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Tax compliance services are services rendered, based upon facts already in existence or transactions that have already occurred, to document, compute and obtain government approval for amounts to be included in tax filings consisting primarily of: |
Federal, foreign, state and local income tax return assistance; |
ii. | Internal Revenue Code and foreign tax code technical consultations; and |
iii. | Transfer pricing analyses. |
Ÿ | Tax planning services are services and advice rendered with respect to proposed transactions or services that alter the structure of a transaction to obtain an anticipated tax result. Such services consisted primarily of: |
2009 | 2008 | |||||||
Ratio of Tax Planning and Advice to Total Fees | 2.0 | % | 3.9 | % |
i. | Tax advice related to the tax-free nature of the Separation; and |
ii. | Tax advice related to intra-group restructuring. |
(4) | Fees for other services consisted of consulting services in connection with the Company’s value-based commercial excellence programs and advice related to a financial information technology separation. |
Pre-Approval of Audit and Non-Audit Services
The Audit Committee pre-approves audit services provided by Deloitte. The Audit Committee has also adopted a policy on pre-approval of permitted non-audit services provided by Deloitte and certain permitted non-audit services provided by outside internal audit service providers. The purpose of the policy is to identify thresholds for services, project amounts and circumstances where Deloitte and any outside internal audit service providers may perform permitted non-audit services. A second level of review and approval by the Audit Committee is required when such permitted non-audit services, project amounts or circumstances exceed the specified amounts.
The Audit Committee has determined that, where practical, all permitted non-audit services shall first be placed for competitive bid prior to selection of a service provider. Management may select the party deemed best suited for the particular engagement, which may or may not be Deloitte. Providers other than Deloitte shall be preferred in the selection process for permitted non-audit service-related work. The policy and its implementation are reviewed and reaffirmed on a regular basis to assure conformance with applicable rules.
The Audit Committee has approved specific categories of audit, audit-related and tax services incremental to the normal auditing function, which Deloitte may provide without further Audit Committee pre-approval. These categories include among others, the following:
1. | Due diligence, closing balance sheet audit services, purchase price dispute support and other services related to mergers, acquisitions and |
2. | Employee benefit advisory services, independent audits and preparation of tax returns for the Company’s defined contribution, defined benefit, and health and welfare benefit plans, preparation of the associated tax returns or other employee benefit advisory |
3. | Tax compliance and certain tax planning and advice |
4. | Accounting consultations and support related to generally accepted accounting principles (“GAAP”) or government contract compliance. |
The Audit Committee has also approved specific categories of audit-related services, including the assessment and review of internal controls and the effectiveness of those controls, which outside internal audit service providers may provide without further approval.
If fees for any pre-approved non-audit services provided by either Deloitte or any outside internal audit service provider exceed a pre-determined threshold during any calendar year, any additional proposed non-audit services provided by that service provider must be submitted for second-level approval by the Audit Committee. Other audit, audit-related and tax services which have not been
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The Company may not engage Deloitte to provide the services described below:
1. | Bookkeeping or other services related to the accounting records or financial statements of the |
2. | Financial information systems design and |
3. | Appraisal or valuation services, fairness opinions orcontribution-in-kind |
4. | Actuarial |
5. | Internal |
6. | Management functions or human resources |
7. | Broker-dealer, investment adviser or investment banking |
8. | Legal services and other expert services unrelated to the audit. |
Employees of Deloitte who are senior manager level or above, including lead or concurring partners and who have been involved with the Company in the independent audit, shall not be employed by the Company in any capacity for a period of five years after the termination of their activities on the Company account.
The Board of Directors recommends you vote FOR the ratification of appointment of the Company’s Independent Registered Public Accounting Firm.
3. | |
In accordance with the requirements of Section 14A of the Exchange Act (which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”)) and the related rules of the SEC, we are including in these proxy materials a separate resolution subject to shareholder vote to approve, in a non-binding vote, the compensation of our NEOs as disclosed on Pages 42 to 102. The current frequency of non-binding advisory votes on executive compensation is an annual vote and we anticipate that the next vote will be at next year’s annual meeting. The text of the resolution in respect of Proposal No. 3 is as follows:
“RESOLVED, that the compensation paid to the Company’s NEOs as disclosed in this Proxy Statement pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and any related narrative discussion, is hereby APPROVED.”
In considering their vote, shareholders have advisedmay wish to review with care the Companyinformation on the Company’s compensation policies and decisions regarding the NEOs presented in Compensation Discussion and Analysis on pages 43 to 102.
In particular, shareholders should note that they intendthe Company’s Compensation and Personnel Committee (the “Compensation Committee”) bases its executive compensation decisions on the following:
Ÿ | Alignment of executive and shareholder interests by providing incentives linked to operating income, operating margin, revenue and operating cash flow performance |
Ÿ | The ability for executives to achieve long-term shareholder value creation without undue business risk |
Ÿ | Creating a clear link between an executive’s compensation and his or her individual contribution and performance |
Ÿ | The extremely competitive nature of the industries in which we operate and our need to attract and retain the most creative and talented industry leaders |
Ÿ | Comparability to the practices of peers in the industries that we operate in and other comparable companies generally. |
While the results of the vote are advisory in nature, the Board of Directors intends to carefully consider the results of the vote.
The Board of Directors recommends that you vote FOR the approval of the compensation of our named executive officers.
4. | Shareholder proposal requesting that the Company change its state of incorporation from Indiana to Delaware |
John Chevedden, 2215 Nelson Ave., No. 205, Redondo Beach, CA 90278 has notified us that he intends to present the following resolutionproposal at this year’s meeting:
4 — Reincorporate In Delaware
Resolved, shareholders urge our board of directors to take the Annual Meeting.necessary steps (excluding those that may be taken only by shareholders) to change our company’s jurisdiction of incorporation from Indiana to Delaware.
Our company is currently incorporated in Indiana. The Indiana Business Corporation Law is less shareholder-friendly than Delaware’s corporation code — especially following recent Indiana amendments — and Delaware incorporation would benefit shareholders. Recent legislation moves Indiana corporate law in the wrong direction, toward greater director entrenchment and away from giving shareholders power over corporate ground rules.
One example of the advantage of reincorporation in Delaware is that shareholders would have the potential to act by written consent by less than a unanimous vote.
The merit of this reincorporation proposal should also be considered in the context of the opportunity for additional improvement in our company’s 2011 reported corporate governance in order to more fully realize our company’s potential:
The Corporate Library, an independent investment research firm downgraded our company to “D” with “High Governance Risk” and “Very High Concern” in executive pay — $12 million for our CEO Steven Loranger.
Mr. Loranger’s 2010 pension increase came to more than $2.6 million. Two-thirds of long-term executive pay consisted of stock options and restricted stock, both of which simply vest after time. To be effective, equity given to executives for long-term incentive pay should include performance-vesting features. The remaining one-third of long-term executive pay consisted of a target cash
award. Not only did these awards pay out for sub-median performance, but long-term cash awards did nothing to tie executive performance with long-term shareholder value.
Each member (except one) on our Audit and Executive Pay Committees received our highest negative votes of 7% or 8%. Three directors had 13 to 15- years long-tenure-Independence declines as tenure increases.
Please encourage our board to respond positively to this proposal to help initiate improved corporate governance and financial performance:Reincorporate In accordance with applicable proxy regulations,Delaware — Yes on 4.
The Board of Directors recommends a vote AGAINST this proposal for the proposed resolutionfollowing reasons:
ITT’s Board of Directors believes that it is not in the best interest of the Company or its shareholders to change the Company’s jurisdiction of incorporation from Indiana to Delaware.
The Company is committed to maintaining the highest standards of corporate governance, regardless of the Company’s state of incorporation, and supporting statement, for whichthe Board of Directors believes that the Company’s practices reflect this commitment.
Ÿ | We do not have a classified board—all of our directors are elected each year, despite the fact that recent changes to Indiana law would have allowed us to implement a mandatory classified board. |
Ÿ | We elect our directors by majority voting in uncontested elections. |
Ÿ | We do not have “supermajority” voting for actions requiring shareholder approval. |
Ÿ | Our chairman is independent. |
Ÿ | We do not have a “poison pill.” |
Reincorporation in Delaware is not necessary at this time to implement corporate governance ideals. Consequently, the Board of Directors and its Nominating and Governance Committee have concluded that the perceived benefits that could be obtained from reincorporation in Delaware can also be obtained, without the costs and risks associated with reincorporation, by the Company acceptremaining an Indiana corporation.
The proposal cites as an advantage of reincorporation to Delaware that shareholders would have the potential to act by a less-than-unanimous written consent. ITT’s Board of Directors believes that such a provision permitting shareholder action by less than unanimous written consent is unnecessary in light of the existing ability of 35% of ITT’s shareholders to call special meetings. Furthermore, almost 75% of S&P 500 companies prohibit shareholder action by written consent.
Unlike meetings of shareholders, action by written consent can deny shareholders the ability to vote or otherwise provide any input on proposed shareholder actions. Action by written consent would enable shareholders owning a majority or other percentage of our shares to take action on a proposal without the benefit of the opinions or views of other shareholders. In addition, action by written consent would eliminate the need for notice to be given to shareholders in advance of a proposed action, and therefore, certain shareholders may not be informed about the proposed action until after the action has already been taken. The Board of Directors, therefore, believes that reincorporating to Delaware as a means to obtain the right for shareholders to act by less than unanimous written consent is both unnecessary and contrary to the interests of most shareholders.
We have been an Indiana corporation since our formation in 1995. Reincorporating in Delaware, a state with which ITT Corporation has no responsibility,substantive historical or existing connection, would be a costly process and would have other adverse consequences to us. Reincorporation may require us to obtain consents from, or provide notices to, third parties under certain of our agreements as well as obtain approvals and consents not only from shareholders but also from governmental and regulatory agencies and lenders. In addition, reincorporation would require us to pay significantly greater state franchise taxes. Reincorporation to Delaware would subject us to an annual franchise tax under
Delaware corporate law; there is no such tax under Indiana law. It would also require us to incur substantial expense conducting a corporate review that would be duplicative of much of the work performed in connection with executing our recently completed Separation of Exelis, its Defense and Information Solutions business, and Xylem, its water-related business. Reincorporation would divert the time and attention of management from normal business operations without any commensurate benefit. The Board believes that ITT’s time and resources should remain focused on assisting the Corporation’s management in its efforts to continue to create value for all shareholders.
Finally, we note that a significant portion of the proponent’s proposal focuses on the compensation we paid to Steven Loranger, our former Chief Executive Officer, and the tenure of members who were previously on our Audit Committee. On October 31, 2011, ITT completed its previously announced Separation. Effective immediately prior to the occurrence of the Separation, Steven R. Loranger resigned as Chairman, President and Chief Executive Officer of ITT and a new Chief Executive Officer, Chief Financial Officer and management team was put in place at the Company. In addition, Mr. Loranger, Curtis J. Crawford, Director and member of the Audit Committee and Nominating and Governance Committee, John J. Hamre, Director and Chairman of the Nominating and Governance Committee, and Surya N. Mohapatra, Director and member of the Audit Committee, resigned from the Board. The Separation transaction was completed two weeks before the proponent sent the Company his proposal and significant changes to management and the Board of Directors had already taken place. The concerns that the proponent presented in his proposal were no longer relevant to the Company.
For the reasons cited above, we believe that there are set forth below. Approvalsignificant advantages for us and our shareholders to remain incorporated in Indiana and that the advantages outweigh any perceived enhancement of shareholder rights that could result from reincorporation in Delaware.
Accordingly, the Board of Directors recommends that you vote AGAINST this proposal.
William Steiner, 112 Abbottsford Gate, Piermont, NY 10968, has notified us that he intends to present the following proposal at this year’s meeting:
5 — Independent Board Chairman
RESOLVED: Shareholders request that our board of directors adopt a policy that, whenever possible, the chairman of our board of directors shall be an independent director (by the standard of the New York Stock Exchange), who has not previously served as an executive officer of our Company. This policy should be implemented so as not to violate any contractual obligations in effect when this resolution is adopted. The policy should also specify how to select a new independent chairman if a current chairman ceases to be independent between annual shareholder meetings.
To foster flexibility, this proposal gives the option of being phased in and implemented when our next CEO is chosen.
When a CEO serves as our board chairman, this arrangement can hinder our board’s ability to monitor our CEO’s performance. Many companies already have an independent Chairman. An independent Chairman is the prevailing practice in the United Kingdom and many international markets. This proposal topic won 50%-plus support at four major U.S. companies in 2011. James McRitchie and Kenneth Steiner have sponsored proposals on this topic which received significant votes.
The merit of this Independent Board Chairman proposal should also be considered in the context of the opportunity for additional improvement in our company’s 2011 reported corporate governance in order to more fully realize our company’s potential:
In response to our majority vote in favor of 10% of shareholders to be able to call a special meeting, our company adopted a hamstrung shareholder ability to call a special meeting. This hamstrung shareholder ability required more than 3-times as many shareholders to call a special meeting. The new rule further hamstrung shareholders because it was limited to shareholders who had owned their shares for one-year.
And the new rule made it easy for shareholders to withdraw their request to call a special meeting. Plus the new rule said our “. Board may, in its discretion, cancel the special meeting.”
An independent Chairman policy can improve investor confidence in our Company and strengthen the integrity of our Board. Please encourage our board to respond positively to this proposal for an Independent Board Chairman — Yes on 5.
The Board of Directors recommends a vote AGAINST this proposal for the following reasons:
ITT’s Board of Directors believes that it is not in the best interest of the Company or its shareholders to adopt a policy that, whenever possible, the Chairman of the Board shall be an independent director (by the standard of the NYSE), who has not previously served as an executive officer of ITT.
ITT’s Corporate Governance Principles provide that the Chairman of the Board and the Chief Executive Officer may be the same person; however, the two positions may be separated if the Board deems it to be in the best interests of the Company and the shareholders. Under the current governance structure of ITT, the positions of Chairman of the Board and Chief Executive Officer are not combined. The shareholder proposal would unnecessarily eliminate the flexibility of the Board of Directors to consider whether a current or former member of management is the best suited to serve as Chairman of the Board at a given time. The Board of Directors believes that ITT and its shareholders benefit from the Board’s current ability to freely select the Chairman of the Board based on criteria that it believes to be in the best interests of ITT and its shareholders. If adopted, this proposal would requireunnecessarily reduce the affirmative voteBoard of aDirectors’ flexibility in corporate governance matters.
The Board of Directors also disagrees with the proposal because it believes that its existing corporate governance practices already provide for strong independent leadership on the Board, as well as direct accountability to shareholders. As provided in ITT’s Corporate Governance Principles and Charters, the Board believes that the majority of the outstanding sharesBoard should consist of independent directors. As determined by the Board, in accordance with NYSE rules, all of our directors except for Denise L. Ramos, our Chief Executive Officer and President (10.0% of our directors) are currently independent directors. Each of the members of the Board of Director’s Nominating and Governance Committee, Audit Committee and Compensation Committee is an independent director.
In the past, when the Chairman of the Board and the Chief Executive Officer were the same person, the Board’s independent leadership was further enhanced by the existence of an independent presiding director whose duties were clearly delineated in ITT’s Corporate Governance Principles and Charters. The independent presiding director, among other things, presided at all meetings of the Board at which the Chairman was not present, was available to address concerns raised by other directors, senior executives or major shareholders, communicated any issues or concerns to the full Board and the Chief Executive Officer, assisted the Chairman of the Board in setting the agenda for Board meetings, approved information sent to Board members and acted as a liaison between the Chairman and the Board. The Board believes that having an independent presiding director is an effective corporate governance structure that is widely accepted by corporate governance experts and provides substantially similar benefits as having an independent director, who has not previously served as an executive officer of ITT, stock present in person or by proxy and entitled to vote at the Annual Meeting. Identical shareholder proposals were received from eachserve as Chairman of the Mercy Investment ProgramBoard.
The Board believes that a majority independent Board and, when necessary, the Dominican Sistersexistence of Hope, Corporate Social Responsibility, each located at 205 Avenue C, Apt. 10E New York, NY 10009; the Presbyterian Church (USA), 100 Witherspoon Street Louisville, KY40202-1396;independent presiding director ensures the independent exchange of information among ITT’s independent directors and provides ITT and its shareholders with substantially the same benefits that the proposal suggests. In the Board’s view, ITT’s shareholders have benefited from the Board of Directors’ current sound corporate governance practices and strong independent Board leadership, and there is no need to require that the Chairman of the Board be an independent director, who has not previously served as an executive officer of ITT.
Accordingly, the Board of Directors recommends that you vote AGAINST this proposal.
6. | Shareholder proposal requesting that the Company amend, where applicable, its policies related to human rights. |
The Domestic and Foreign Missionary Society of the Protestant Episcopal Church in the United States of America, 815 Second Avenue, New York, NY10017-4503, (collectively, has notified us that it intends to present the “Proponents”), which shareholders hold 50, 1,900, 54, and 8,100 shares respectively.
20102012 ITT IndustriesShareholder Resolution on Foreign Military SalesHuman Rights Policy
Whereas
Companies confront ethical and legal challenges arising from diverse cultures and political and economic contexts or operating in regions of conflict. Today, management must address issues that include human rights, workers’ right to foreign buyers), equipment leases, transfers of excess defense articlesorganize and emergency drawdowns of weaponry.
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Several international conventions, declarations and treaties contain internationally recognized standards designed to protect human rights — civil, political, social, environmental, cultural and economic — that should be reflected in ITT’s policies. These include the United States government’s Fiscal Year 2008, ITT Industries was rankedUniversal Declaration of Human Rights, the 11th largest Department of Defense contractor with $4.4 billion in contracts.(Government Executive, August 15, 2009)
As companies formulate comprehensive policies, we believe significant commercial advantages may accrue through enhanced corporate reputation, improved employee recruitment and retention, improved community and stakeholder relations and reduced risk of adverse publicity, consumer boycotts, divestment campaigns and lawsuits.
Resolved, one for improper handling of sensitive documents, and one for making misleading statements to the State Department’s Directorate of Defense Trade Controls (DDTC).
Supporting Statement
We believe that this report will assist shareholdersITT’s current human rights policies are limited in assessingscope, and provide little or no guidance for determining business relationships where our products or services could entangle the effectivenesscompany in human rights violations. Although we do not recommend inclusion of newly instituted company procedures to prevent further violationsany specific provision of ITAR. The ability of our company to grow its military-related business depends upon the highest of ethical standards.
ITT should be able to assure shareholders that employees are treated fairly and with dignity wherever they work in the global economy. Going beyond internal practices, however, ITT should also provide similar assurance that its products and services are not used in human rights violations. One element of ensuring compliance is reasonableutilization of independent monitors composed of respected local human rights, religious and non-governmental organizations that know local culture and conditions. We believe the report include:
The Board of Directors unanimously recommends a vote “AGAINST”AGAINST this shareholder proposal.
The proposal requests that, the Company provide, within six10 months of the 20102012 annual meeting a comprehensive report, at reasonable cost and omitting proprietary and classified information, of the foreign sales of military and weapons-related products and services byshareholders, the Company (identified byrevise its former name). policies related to human rights that guide its international and U.S. operations in order to have them conform more fully with international human rights and humanitarian standards.
ITT has long supported human rights through its business practices and directly through a specific provision in its Code of Conduct. ITT has also included such rights in its ITT Management System, which incorporates ITT’s values. Over the past several years, ITT has continued to demonstrate progress in benchmarking and communicating its commitment to human rights. This commitment was further evidenced with our adoption of our Policy on Human Rights.
Beginning in 2008, ITT’s Vision and Values instituted a systematic company-wide commitment to respect, responsibility and integrity:
Ÿ | Our values are our compass — we strive to do the right thing always |
Ÿ | Treat others fairly and courteously |
Ÿ | Sustain a culture of diversity and inclusion |
The Company believes that producing the report requested by the proposal is unnecessary because sufficient information is publicly available. The Company’s foreign military salesVision and Values are a matterfundamental to our culture and they are codified in ITT’s Code of public record through U.S. government-provided information or the news media. The Department of Defense (foreign military sales) and Department of State (direct commercial sales) provide notification of such sales to Congress and the media. Furthermore, pursuant to 15 C.F.R. Part 701, Offsets in Military Exports, under the Defense Production Act of 1950, as amended, the Company already provides offset agreement data to the Department of Commerce Bureau of Industry and Security data for itsOffsets in Defense Trade Report(see, for
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In 2009, salesITT modified its Code of Conduct to add specific language regarding its commitment to human rights:
Code of Conduct:
We are committed to conducting our business in a manner that respects and revenue. Note 21advances human rights based on our values and operating principles. We uphold human rights at all times and in all locations, regardless of local business customs.
In particular, we are committed to:
Ÿ | Providing safe and secure conditions for those working on our Company’s behalf |
Ÿ | Protecting the environment |
Ÿ | Following all applicable wage and hour laws |
Ÿ | Strictly prohibiting human trafficking and the use of child or forced labor, including prison or bonded labor |
Ÿ | Treating each other fairly and equitably |
To ensure that every facet of our business upholds these standards, we seek business partners who share these commitments.
Then, in 2010, ITT conducted further research and benchmarked corporate best practices on human rights. Based on the results from that external benchmarking effort, and with a desire to continuously improve ITT’s ethical culture, in 2011, ITT implemented a specific Policy on Human Rights. The policy, which operates in conjunction with ITT’s Vision and Values and Code of Conduct, applies to all ITT employees worldwide and to ITT’s global supply chain partners within ITT’s sphere of influence.
ITT’s Policy on Human Rights states that ITT fully supports and adheres to the Company’s consolidated financial statements on pages 85-87principles of both the 2009Form 10-K breaks down sales to Western Europe, Asia PacificUniversal Declaration of Human Rights and the United States.
For the foregoing reasons, the Board of Directors believes that ITT has substantially fulfilled the request of this shareholder proposal is not inwith the best interestsadoption of the Company or in the best interests of our shareholders.Therefore,its Policy on Human Rights.
Accordingly, the Board of Directors unanimously recommends athat you vote “AGAINST” this shareholder proposal.
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Responsibilities of the Board of Directors. The Board of Directors sets policy for ITT and advises and counsels the chief executive officer and the executive officers who manage the Company’s business and affairs. The Board of Directors is responsible for assuring that:
Ÿ | |
The Company’s businesses are conducted in conformity with applicable laws and |
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The Company’s systems of financial reporting and internal controls are adequate and properly implemented and the Company has appropriate risk management structures in |
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There is continuity in the leadership of the |
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Management develops sound business |
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Adequate capital and managerial resources are available to implement the business |
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The Company’s long-term strategies, significant investments in new businesses, joint ventures and partnerships and significant business acquisitions, including assessment of balance sheet impacts and other financial matters, are reviewed and |
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The Company’s operating plans and capital, research and development and engineering budgets are reviewed and |
Governance Principles. The Board of Directors has adopted principles for governance of the Board (the “CorporateCorporate Governance Principles”)Principles and charters for each of its standing committees. The Corporate Governance Principles provide, among other things, that an Independent Presiding Director shall be appointed on an annual basis (but no Non-Management Director shall serve more than three consecutive annual terms) to preside at meetings of the Board of Directors at which the Chairman is not present, including regularly scheduled private sessions of the Non-Management Directors.
Leadership Structure. The Board believes that the decision as to whether to combine or separate the Chief Executive Officer and Chairman of the Board of Directors positions will depend on the facts and circumstances facing the Company at a given time and could change over time. In today’s challenging economic and regulatory environment, Directors, more than ever, are required to spend a substantial amount of time and energy in successfully navigating a wide variety of issues and guiding the policies and practices of the companies they oversee. To that end, we believe that, although we do not have a formal policy with respect to separation of the Chairman and Chief Executive Officer positions, that having a separate Chairman, whose sole job is to lead the Board, allows our Chief Executive Officer, Ms. Ramos, to completely focus her time and energy on running the day-to-day operations of our Company. The Board believes that the Company’s current leadership structure does not affect the Board’s role in risk oversight of the Company.
Communication with the Board of Directors. Interested parties may contact the Independent Presiding Director, all outside Directors as a group, the entire Board of Directors, a committee of the Board of Directors or an individual Director by submitting a letter to the desired recipient in a sealed envelope labeled “Independent Presiding Director,“Outside Directors,” “Outside“Board of Directors”, or with the name of the Board committee or a specific director.Director. This sealed envelope should be placed in a larger envelope and mailed to the Secretary, ITT Corporation, 1133 Westchester Avenue, White Plains, NY 10604, USA. The Secretary will forward the sealed envelope to the designated recipient.
Policies for Approving Related Person Transactions. The Company and the Board have adopted formal written policies for evaluation of potential related person transactions, as those
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In reviewing related person transactions that are not deemed pre-approved for approval or ratification, the Nominating and Governance Committee will consider the relevant facts and circumstances, including:
Ÿ | Whether terms or conditions of the transaction are generally available to third-parties under similar terms or conditions |
Ÿ | Level of interest or benefit to the related person |
Ÿ | Availability of alternative suppliers or customers |
Ÿ | Benefit to the Company |
The Nominating and Governance Committee is deemed to have pre-approved certain transactions identified in Item 404(a) of Regulation S-K that are not required to be disclosed even if the amount involved exceeds $120,000. In addition, any transaction with another company at which a related person’s only relationship is as an employee (other than an executive officer), Director and/or beneficial owner of less than 10% of that company’s shares is deemed pre-approved; provided, however, that with respect to Directors, if a Director is a current employee, or if an immediate family member of the Director is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues, such transaction shall be reviewed by the Nominating and Governance Committee and not considered appropriate for automatic pre-approval. Regardless of whether a transaction is deemed pre-approved, all transactions in any amount are required to be reported to the Nominating and Governance Committee. Subsequent to the adoption of the written procedures above, the Company has followed these procedures regarding all reportable related
person transactions. The Company’s Related Person Transaction Policy is posted on the Company’s website at:http://www.itt.com/responsibility/investors/governance/related-party-transactions/transactions/.
Code of Conduct.The Company has also adopted the ITT Code of Corporate Conduct which applies to all employees, including the Company’s Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer and, where applicable, to its Non-Management Directors. The Code of Corporate Conduct is also posted on the Company’s website athttp://www.itt.com/responsibility/conduct/citizenship/code-of-conduct/. The Company discloses any changes or waivers from its codethe Code of ethicsConduct on its website for the Company’s Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, its Non-Management Directors and other executive officers. In addition, the Company will disclose within four business days any substantive changes in or waivers of the Code of Conduct granted to our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer, or persons performing similar functions, by posting such information on our website as set forth above rather than by filing a Form 8-K. A copy of the Code of Corporate Conduct will be provided, free of charge, to any shareholder upon request to the Secretary of ITT Corporation.
Independent Directors. The Company’s By-laws require that a majority of the Directors must be independent directors. Additionally, the Company’s Non-Management Directors must meet the New York Stock Exchange (“NYSE”) and the Company’s Corporate Governance PrinciplesNYSE independence standards. The Company’s Corporate Governance Principles define independence.independence in accordance with the independence definition in the current NYSE corporate governance rules for listed companies. The Charters of the Audit, Compensation and Personnel and Nominating and Governance and Strategy and Finance Committees as well as the resolution establishing the Special Litigation Committee also require all members to be independent directors.
Based on its review, the Board of Directors affirmatively determined, after considering all relevant facts and circumstances, that no Non-Management Director has a material relationship with the Company and that all Non-Management Directors, including all members of the Audit, Compensation and Personnel Corporate Responsibility,and Nominating and Governance and Strategy and Finance Committees, meet the independence standards of the Company’s Corporate Governance Principles and By-laws as well as the independence definition in the current NYSE corporate governance rules for listed companies.
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The Nominating and Governance Committee reviews and considers all relevant facts and circumstances with respect to independence for each Director standing for election prior to recommending selection as part of the slate of Directors presented to the shareholders for election at the Company’s Annual Meeting. The Nominating and Governance Committee reviews its recommendations with the full Board, which separately considers and evaluates the independence of Directors standing for re-election using the categorical standards described above.
In February 2010,2012, the Board considered regular commercial sales and payments in the ordinary course of business as well as charitable contributions with respect to each of the Non-Management Directors standing for re-election at the Company’s 20102012 Annual Meeting. In particular, the Board evaluated the amount of sales to ITT or purchases by ITT with respect to companies where any of the Directors serve or served as an executive officer or director.
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Ms. Ramos is not independent because of hisher position as Chairman, President and Chief Executive Officer and President of the Company.
On October 31, 2011, we completed the Separation of our Defense and Information Solutions business and our water related business. In connection with the Separation, the Board of Directors
determined to decrease the size of the Board of the Company from 10 Directors to eight Directors and Steven R. Loranger, Curtis Crawford, John J. Hamre, Surya N. Mohapatra and Ralph Hake tendered their resignations from the Board of Directors and the resignations were accepted. On December 14, 2011, the Board determined to increase the size of the Board of the Company from eight Directors to nine Directors and, in connection therewith, the Board elected Orlando Ashford to the Board. On February 23, 2012, the Board determined to increase the size of the Board of the Company from nine Directors to 10 Directors and, in connection therewith, the Board elected Donald J. Stebbins to the Board. The following are the independent directorsDirectors standing for election: Drs. Crawford, Hamre, and Mohapatra; General Kern; Messrs. Hake,Ashford, D’Aloia, DeFosset, MacInnis, Stebbins and Tambakeras; and Mrs. Gold and Ms. Sanford.
Board and Committee Roles in Oversight of Risk:Risk. The Board of Directors has primary responsibility for overall risk oversight, including the Company’s risk profile and management controls. The Audit Committee of the Board monitorsoversees the Company’s operational and regulatory risk management and risk assessment program, including all risk mitigation processes. The General Internal Auditor, whoNominating and Governance Committee has responsibility for assessing monitoring and auditingmonitoring the Company’s global risk profile, and provide regular reports directly to the AuditBoard with respect to their findings. In addition, the Company has established a cross-functional team of management referred to as the Risk Center of Excellence (the “RCOE”), to internally monitor various risks. The Nominating and Governance Committee andreceives regular reports on a functional basis to the Chief Financial Officer.from RCOE as well. The Strategy and Finance Committee of the Board monitors financial liquidity and financing risk. The Compensation and Personnel Committee reviews and assesses compensation and incentive program risks to ensure that the Company’s compensation programs encourage innovation and balance appropriate business risk and rewards without encouraging risk-taking behaviors which may have a material adverse impacteffect on the Company. The Compensation and Personnel Committee structures compensation so that unnecessary or excessiverisk-taking behavior is discouraged and behaviors correlated withlong-term value creation are encouraged. The Board, Audit, CompensationNominating and PersonnelGovernance and Strategy and FinanceCompensation Committees receive regular reports with respect to the Company’s risk profile and risk management controls.
Participation:Participation. None of the members of the Compensation and Personnel Committee during fiscal 2009year 2011 or as of the date of this proxy statement has been an officer or employee of the Company and no executive officer of the Company served on the compensation committeeCompensation Committee or board of any company that employed any member of the Company’s Compensation and Personnel Committee or Board of Directors.
To be considered by the Nominating and Governance Committee as a Director candidate, a nominee must meet the requirements of the Company’s By-laws and Corporate Governance Principles.Composition:Composition. Directors of the Company must be persons of integrity, with significant accomplishments and recognized business stature. The Nominating and Governance Committee desires a diverse, robust board and considers experience, qualifications, attributes, and skills. The Nominating and Governance Committee also desires that the Board of Directors reflectsbe diverse in terms of its viewpoints, professional experience, education and skills as well as race, gender and national origin. In addition, ITT’s Corporate Governance Principles state that as part of the membership criteria for new Board members, individuals must possess such attributes and experiences as are necessary to provide a broad range of personal characteristics including diversity, management skills, and technological, business and international experience. On an annual basis, as part of its self-evaluation, the Board of Directors assesses whether the mix of directors is appropriate for the Company. In addition, theNominating and Governance Committee assesses the effectiveness of these criteria by referring to the criteria when it periodically assesses the composition of the Board. The Board of Directors activelyseeks to consider diverse candidates for membership on the Board when it has a vacancy to fill and includes diversity as a specific factor when conducting any search. As part of its process in identifying new candidates to join the Board of Directors, the Nominating and Governance Committee considers whether and to what extent the candidate’s attributes and experiences will individually and collectively complement the existing Board, recognizing that ITT’s businesses and operations are diverse and global in nature. Currently, the Board consists of 10 directors. Out of the 10 Directors, three are female, and one is African American. The Directors come from diverse professional backgrounds, perspectives,including technology, financial and cultures. manufacturing industries as well as governmental and non-governmental agencies. A nominee should also have experience as a board member, chief executive officer or senior officer of a publicly traded or large privately held company, or have achieved recognized prominence in a relevant field as, for example, a distinguished faculty member of a highly regarded educational institution or senior governmental official. In addition to these minimum qualifications, the Nominating and Governance Committee evaluates each nominee’s skills to determine if those skills are complementary to the skills demonstrated by current Board members. The Nominating and Governance Committee also evaluates the Board’s needs for operational, technical, management, financial, international or other expertise.23
The Nominating and Governance Committee identifies Director candidates through a variety of sources including personal references and business contacts. On occasion, the Nominating and Governance Committee utilizes a search firm to identify and screen Director candidates and pays a fee to that firm for each such candidate elected to the Board of the Company. The Nominating and Governance Committee will consider shareholderDirector nominees recommended by shareholders for election to the Company’s Board who meet the qualification standards described above. (See Section II.E.II.F. of the Nominating and Governance Charter athttp://www.itt.com/responsibility/investors/governance/nominating/..) The Nominating and Governance Committee also evaluates and makes recommendations to the Board of Directors concerning appointment of Directors to Board Committees, selection of Board Committee Chairs, Committee member qualifications, Committee member appointment and removal, Committee structure and operations and proposal of the Board slate for election at the Annual Meeting of Shareholders, consistent with criteria approved by the Board of Directors.
Audit CommitteeDirectors:Directors. The standing Committees of the Board described below perform essential corporate governance functions. In October of 2007 the Board also formed a Special Litigation Committee to oversee an independent investigation involving the Company’s Night Vision matter.2009 Audit Committee Members are:
2011 Audit Committee Members are: | ||
Prior to the Separation: | ||
Frank T. MacInnis, Chair | ||
Christina A. Gold | ||
Ralph F. Hake | ||
Surya N. Mohapatra | ||
Linda S. Sanford | ||
After the completion of the Separation: | ||
G. Peter D’Aloia, Chair | ||
Christina A. Gold | ||
Linda S. Sanford | ||
Donald J. Stebbins (appointed on March 1, 2012) | ||
Meetings in | ||
Responsibilities: | Ÿ Subject to any action that may be taken by the full Board, the Audit Committee has the ultimate authority and responsibility to determine | |
Ÿ Review and discuss with management and | ||
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Ÿ Review and consider with the independent auditor matters required to be discussed by Statement on Auditing Standards. No. | ||
the Company in relation to the audit of financial statements), as adopted by the PCAOB in Rule 3200T. | ||
Ÿ Review with management and | ||
Ÿ As a whole, or through the Audit Committee chair, review and discuss with | ||
Ÿ Review and discuss with management the types of information to be disclosed and the types of presentations to be made with respect to the Company’s | ||
agencies. | ||
Ÿ Discuss with management and | ||
head of the internal audit function. | ||
Ÿ Annually request from | ||
| Ÿ Discuss with |
| Ÿ Assess and recommend appropriate action in response to the | ||
Ÿ Pre-approve or delegate to one or more independent members, when appropriate, to pre-approve the retention of the independent auditor for audit-related and permitted non-audit services. Other tax-related consulting and special projects and fees for any other services to be provided by the independent auditor and internal audit service providers must be submitted to the Audit Committee consistent with the Company’s Audit Services, Audit-Related Services and Non-audit Services Policy. | |||
Ÿ Confirm the scope of audits to be performed by | |||
Ÿ Review fees and expenses charged by | |||
Ÿ On an annual basis, discuss with | |||
Ÿ Review significant findings or unsatisfactory internal audit reports or audit problems or difficulties encountered by |
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Ÿ Provide oversight and discuss with management, internal auditors and | ||
Ÿ Review its performance and Charter at least annually and make recommendations to the Board of Directors for approval and adoption of its Charter. | ||
Ÿ Review the Company’s rating agency reviews. | ||
Ÿ Review regularly and consider the Company’s environmental, safety and health reserves. | ||
Ÿ Review expense accounts of senior executives. | ||
Ÿ Update the Board of Directors on a regular basis with respect to matters coming to its attention that may have a significant impact on the Company’s financial condition or affairs, |
Ÿ Review major issues regarding accounting principles and financial statement presentations, significant changes to the Company’s selection or application of accounting principles and major issues relating to the Company’s internal controls including any specifically required steps to correct identified major internal control issues. The Audit Committee also reviews management or | |||
Ÿ In conjunction with the Board of Directors, evaluate the qualifications of its members and its own performance on an annual basis. | |||
Ÿ Meet separately, on a regular basis, with | |||
Ÿ Establish policies regarding the Company’s employment and retention of current or former employees of |
Ÿ With respect to complaints concerning accounting, internal accounting controls or auditing matters: | ||
| Ÿ Review and approve procedures for receipt, retention and treatment of complaints received by the Company; and | |
| Ÿ Establish procedures for the confidential, anonymous submission of complaints by employees of the Company regarding questionable accounting or auditing matters to the Audit Committee. |
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Ÿ Establish levels for payment by the Company of fees to | |||
Ÿ Receive regular reports from the Chief Executive Officer, Chief Financial Officer and from the Company’s disclosure control committee representative on the status of the Company’s disclosure controls and related certifications, including disclosure of any material weaknesses or significant deficiencies in the design or operation of internal controls and any fraud that involves management or other employees with a significant role in internal controls. | |||
Ÿ Prepare the Report of the Audit Committee | |||
Ÿ Meet regularly with the Company’s general counsel or head of ethics and compliance to review the implementation and effectiveness of the Company’s Code of Conduct and ethics and compliance program and any proposed waivers of the Code of Conduct for directors and officers. | |||
Although more than one member of the Board of Directors satisfies the requirements of the audit committee financial expert, the Board of Directors has identified |
Independence
The Board of Directors has determined that each member of the Audit Committee meets the independence standards set out in the Board’s Corporate Governance Principles and its Audit Committee Charter, and the requirements of the New York Stock ExchangeNYSE currently in effect andRule 10A-3 of the Exchange Act. The Board of Directors has evaluated the performance of the Audit Committee consistent with the regulatory requirements.
A copy of the Audit Committee Charter is available on the Company’s website
http://www.itt.com/responsibility/investors/governance/audit/. The Company will provide, free of charge, a copy of the Audit Committee Charter to any shareholder, upon request to the Secretary of ITT.
Compensation and Personnel Committee
2011 Compensation and Personnel Members are: | ||
Prior to the Separation: | ||
Linda S. Sanford, Chair | ||
Curtis J. Crawford | ||
Ralph F. Hake | ||
Frank T. MacInnis | ||
After the completion of the Separation: | ||
Christina A. Gold, Chair | ||
Linda S. Sanford, | ||
Donald DeFosset, Jr. | ||
Paul J. Kern | ||
Orlando D. Ashford (appointed on February 23, 2012) | ||
Meetings in 2011: | 6 | |
The Compensation Committee’s primary objective is to establish a competitive executive compensation program that clearly links executive compensation to business performance and shareholder return, without excessive enterprise risk. | ||
Responsibilities: | Ÿ Approve and oversee administration of the Company’s employee compensation program including incentive plans and equity-based compensation plans. | |
Ÿ Evaluate senior management and Chief Executive Officer performance, evaluate enterprise risk and other risk factors with respect to compensation objectives, set annual performance objectives for the Chief Executive Officer and approve individual compensation actions for the Chief Executive Officer and |
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Ÿ Oversee the establishment and administration of the Company’s benefit programs. |
Ÿ Select, retain and determine the terms of engagement for independent compensation and benefits consultants and other outside counsel, as needed, to provide independent advice to the Committee with respect to the Company’s current and proposed executive compensation and employee benefit programs. In | ||
Ÿ Oversee and approve the continuity planning process and review with the full Board of Directors, which provides final approval. | ||
Ÿ Regularly report to the Board of Directors on compensation, benefits, continuity and related matters. | ||
Ÿ Prepare the Compensation Committee Report for the Company’s Proxy Statement. | ||
Ÿ Review regularly and consider the Company’s Inclusion & Diversity strategy and the effectiveness of related programs and policies. | ||
Ÿ Review its performance and Charter at least annually and make recommendations to the Board of Directors for approval and adoption of its Charter. |
More detail regarding the processes and procedures used to determine executive compensation is found in the Compensation Discussion and Analysis starting on page 39.
Independence
The Board of Directors has determined that each member of the Compensation and Personnel Committee meets the independence standards set out in the Board’s Corporate Governance Principles and its Compensation and Personnel Committee Charter and the requirements of the NYSE currently in effect.
A copy of the Compensation and Personnel Committee Charter is available on the Company’s websitehttp://www.itt.com/responsibility/investors/governance/compensation/. The Company will provide, free of charge, a copy of the Compensation and Personnel Committee Charter to any shareholder, upon request to the Secretary of ITT.
Corporate ResponsibilityNominating and Governance Committee
2011 Nominating and Governance Committee Members are:
Prior to the Separation: | ||
John J. Hamre, Chair | ||
Curtis J. Crawford | ||
Paul J. Kern | ||
Markos I. Tambakeras | ||
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Donald DeFosset, Jr. | |||
Paul J. Kern | |||
Markos I. Tambakeras | |||
Meetings in | 4 | ||
Responsibilities: | Ÿ Develop, annually review, update and recommend to the Board of Directors corporate governance principles for the Company. | ||
Ÿ In the event it is necessary to select a new chief executive officer, lead the process for candidate evaluation, consideration and screening. The full Board of Directors has the final responsibility to select the Company’s chief executive officer. | |||
Ÿ Evaluate and make recommendations to the Board of Directors concerning the composition, governance and structure of the Board. | |||
Ÿ Make recommendations to the Board of Directors concerning the qualifications, compensation and retirement age of Directors. | |||
Ÿ Administer the Board of Directors’ annual evaluation process. | |||
Ÿ Consider questions of independence and possible conflicts of interest of members of the Board of Directors and executive officers and ensure compliance with the rules of the NYSE and the Clayton Antitrust Act. | |||
Ÿ Review and recommend to the full Board matters and agenda items relating to the Company’s Annual Meeting of | |||
Shareholders. | |||
Ÿ Review the form of Annual Report to Shareholders, Proxy Statement and related materials. | |||
Ÿ Review the Company’s business continuity and disaster recovery programs and plans. | |||
Ÿ Review significant risks related to the Company and the mitigation plans monitored by the RCOE. | |||
Ÿ Review the Company’s communication and advertising program and other activities involving community relations, major charitable contributions and promotion of the Company’s public image. |
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Ÿ Determine desired Board and Director skills and attributes and conduct searches for prospective board members whose skills and attributes reflect those desired for the Board of Directors. | |||
Ÿ Identify, evaluate and propose nominees for election to the Board of Directors. | |||
Ÿ Make recommendations to the Board of Directors concerning the appointment of Directors to Board Committees and the selection of Board Committee Chairs. | |||
Ÿ Evaluate and make recommendations regarding senior management requests for approval to accept | |||
Ÿ Review | |||
approval or disapproval. | |||
Ÿ Review its performance and Charter at least annually and make recommendations to the Board of Directors for approval and adoption of its Charter. |
As described on pages 2326 to 2427 the Nominating and Governance Committee will consider shareholderdirector nominees recommended by shareholders for election to the Company’s Board who meet the qualification standards. (See Section II.E of the Nominating and Governance Charter at
http://www.itt.com/responsibility/governance/investors/governance/nominating/).
Independence
The Board of Directors has determined that each member of the Nominating and Governance Committee meets the independence standards set out in the Board’s Corporate Governance Principles and its Nominating and Governance Committee Charter its Corporate Governance Principles and the requirements of the New York Stock ExchangeNYSE currently in effect.
A copy of the Nominating and Governance Committee Charter is available on the Company’s website(http://www.itt.com/responsibility/investors/governance/nominating/).. The Company will provide, free of charge, a copy of the Nominating and Governance Committee Charter to any shareholder, upon request to the Secretary of ITT.
30
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During 2009,2011, there were five regularly scheduled Board meetings one telephonic meeting, and 2225 meetings of standing Committees. In addition, in connection with the Separation, there were an additional six Board meetings. All Directors attended at least 75% of the aggregate of all meetings of the Board and standing Committees on which they served. It is Company practice that all Directors attend the Company’s Annual Meeting. All Directors attended the Company’s 20092011 Annual Meeting. For 2010,2012, the Board has scheduled five regular meetings. In conjunction with the regular meetings, those Directors who are not employees of ITT are scheduled to meet privately (without management) following each Board meeting during the year. The Independent Presiding Director presides over these private meetings.
In 2010, the Nominating and Governance Committee retained Pay Governance LLC, a compensation consulting firm, to assist with a review of compensation for Non-Management Directors. As part of its review, Pay Governance compared Non-Management Director compensation components and total Director compensation paid with Director compensation components and total Director compensation paid for a sample of companies in the S&P Industrials with median revenue comparable to ITT’s revenue. Pre-Separation Non-Management Director Pay: Post-Separation Non-Management Director Pay: In anticipation of the Separation of the Xylem Inc. and Exelis Inc. businesses from ITT, the Board of Directors again reviewed Non-Management Director compensation levels in May 2011 with Pay Governance, in light of the expected reduced revenue size and market capitalization of the post-Separation Company. As a result of that review, the Nominating and Governance Committee and the Compensation and Personnel Committee recommended, and the Board approved, a post-Separation compensation package made effective on the date of the Separation consisting of $100,000 annual cash retainer, and an annual equity retainer solely in the form of RSUs of $90,000. The Non-Executive Chairman receives an additional annual payment in the amount of $125,000 (payable in 50% cash and 50% RSUs), and the Audit Committee Chair receives an additional annual cash payment in the amount of $15,000. The following table represents the 20092011 Non-Management Director Compensation20092011 grant date fair value of Non-Management Director compensation computed in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).GAAP. As discussed in more detail in the narrative following the table, all Non-Management Directors receive the same cash stock, and optionsstock awards for service as a Non-Management Director (except Mr. MacInnis as the Audit Committee Chair from January 1, 2011, to October 31, 2011, and as Non-Executive Chairman from November 1, 2011, to December 31, 2011, received an additional $10,000$38,750 cash payment; and Mr. D’Aloia as Audit Committee Chair from November 1, 2011, to December 31, 2011 received an additional $7,500 cash payment). Mr. Loranger, asAs an employee Director, Ms. Ramos does not receive compensation for Board service. Mr. Loranger, who was an employee Director prior to his resignation pursuant to the Separation, did not receive compensation for Board service. The grant date fair value of stock awards and option awards granted to Non-Management Directors in 20092011 is provided in footnotesfootnote (c) and (d) to the table. Stock awards are composed of restricted stock units.RSUs. Option awards are composed of non-qualified stock options. Fees Earned or Paid in Stock Option All Other Name Cash Awards Awards Compensation Total (b) ($) (c) ($) (d) ($) (g) ($) (h) ($) Curtis J. Crawford 90,000 90,500 35,968 22,171 238,639 Christina A. Gold 90,000 90,500 35,968 17,857 234,325 Ralph F. Hake 90,000 90,500 35,968 7,652 224,120 John J. Hamre 90,000 90,500 35,968 13,748 230,216 Paul J. Kern 90,000 90,500 35,968 1,327 217,795 Frank T. MacInnis 100,000 90,500 35,968 10,219 236,687 Surya N. Mohapatra 90,000 90,500 35,968 2,312 218,780 Linda S. Sanford 90,000 90,500 35,968 7,912 224,380 Markos I. Tambakeras 90,000 90,500 35,968 6,408 222,876 32
Name (1) | Fees Earned or Paid in Cash (2) ($) | Stock Awards (3) ($) | Stock Option Modification (4) ($) | Total ($) | ||||||||||||
Orlando D. Ashford | 41,667 | 37,848 | — | 79,515 | ||||||||||||
Curtis J. Crawford | 50,000 | 75,322 | 47,149 | 172,471 | ||||||||||||
G. Peter D’Aloia | 57,500 | 45,001 | — | 102,501 | ||||||||||||
Donald DeFosset, Jr. | 50,000 | 45,001 | — | 95,001 | ||||||||||||
Christina A. Gold | 100,000 | 120,324 | 47,149 | 267,473 | ||||||||||||
Ralph F. Hake | 50,000 | 75,322 | 43,304 | 168,626 | ||||||||||||
John J. Hamre | 50,000 | 75,322 | 47,149 | 172,471 | ||||||||||||
Paul J. Kern | 100,000 | 120,324 | 21,995 | 242,319 |
Name (1) Frank T. MacInnis Surya N. Mohapatra Linda S. Sanford Markos I. Tambakeras Fees
Earned or
Paid in
Cash
(2) ($) Stock
Awards
(3) ($) Stock
Option
Modification
(4) ($) Total
($) 138,750 151,575 47,149 337,474 50,000 75,322 25,592 150,914 100,000 120,324 43,304 263,628 100,000 120,324 47,149 267,473
(1) | Dr. Crawford, Mr. Hake, Dr. Hamre and Dr. Mohapatra resigned from the Board on October 31, 2011. Messrs. D’Aloia and DeFosset joined the Board on October 31, 2011. Mr. Ashford joined the Board on December 14, 2011. Mr. Stebbins joined the Board on February 23, 2012 and his compensation for his tenure from the time of his appointment to the Board until the day before the Company’s 2012 Annual Meeting consists of $16,667 in cash and $15,021 in RSUs. |
(2) | Fees earned may be paid, at the election of the Director, in cash or deferred cash. Non-Management Directors may irrevocably elect deferral into an interest-bearing cash account or an account that tracks an index of the Company’s stock. |
(3) | Awards reflect the grant date fair value computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB |
(4) | This column represents a one-time accounting expense related to the conversion of | |
granted to any non-management Director in 2011, and no Non-Management |
The following table represents restricted common stock and stock options outstanding as of December 31, 20092011 for non-management directors.Non-Management Directors. Outstanding restricted common stock awards include unvested restricted stock unitsRSUs and vested but deferred restrictedRSUs. The table gives effect to the 1:2 reverse stock units.
Stock Option Awards Outstanding at Non-Management Director Name Orlando D. Ashford G. Peter D’Aloia Donald DeFosset, Jr. Non-Management Director Name Christina A. Gold Paul J. Kern Frank T. MacInnis Linda S. Sanford Donald J. Stebbins Markos I. Tambakeras Beginning in 2008, all restricted share awards granted to 20092011 Fiscal Year-End Outstanding Outstanding Non-Management Restricted Common Stock Option Stock Awards Awards Curtis J. Crawford 26,179 23,270 Christina A. Gold 22,403 23,270 Ralph F. Hake 9,843 19,710 John J. Hamre 17,035 23,270 Paul J. Kern 2,195 6,190 Frank T. MacInnis 12,691 23,270 Surya N. Mohapatra 3,892 7,610 Linda S. Sanford 10,163 23,270 Markos I. Tambakeras 7,666 23,270 On May 12, 2009, the Board of Directors approved compensation for Non-Management Directors consistent with allocation recommendations provided by Towers Perrin (referred Outstanding
Restricted Common
Stock Awards Outstanding
Stock Option
Awards 1,992 0 2,219 0 2,219 0 Outstanding
Restricted Common
Stock Awards Outstanding
Stock Option
Awards 14,030 13,065 4,817 4,525 8,983 13,065 4,862 11,285 0 0 2,904 13,065 herein as “Towers” - on January 3, 2010 Towers Perrin and Watson Wyatt merged to form Towers Watson). In 2010, the Nominating and Governance Committee retained Pay Governance LLC, a compensation consulting firm formed by a former partner of Towers, as its consultant to assist it with a review of compensation for Non-Management Directors. As approved, for 2009, Non-Management Directors received total annual compensation valued at approximately $220,000 when awarded, as follows:• $90,000 payable at the election of each Non-Management Director in cash or deferred cash. Directors choosing deferred cash payment may irrevocably elect to have the deferred cash deposited into an interest-bearing cash account, at an interest rate determined as of the Company’s next Annual Meeting, or deposited into an account that tracks an index of the Company’s common stock. No deferred compensation selections provide for preferential treatment for Directors;• 2/3 of the remainder in restricted stock units (such restricted stock units payable in shares following the Non-Management Director’s termination of service on the Board of Directors or on a date selected by the Director); and33
Ÿ | ||
The fifth anniversary of the grant of the shares unless extended as described |
Ÿ | ||
The Director retires at age |
Ÿ | ||
There is a Change of Control of the |
Ÿ | ||
The Director becomes disabled or |
Ÿ | ||
The Director’s service is terminated in certain specified, limited |
Ÿ | ||
Any other circumstance in which the Compensation and Personnel Committee believes, in its sole discretion, that the purposes for which the grants of restricted stock were made have been fulfilled and, as such, is consistent with the intention of the Plan. |
Under the 2003 Plan and the 1996 Plan, Non-Management Directors may choose to extend the restriction period for not more than two successive five-year periods, or until six months and one
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The 1996 Plan also provided if a Director ceased serving on the Board under any other circumstances, shares with respect to which the 1996 Plan restrictions have not been lifted would be forfeited. Under the 2003 Plan, the period of restriction for restricted stock granted pursuant to that Plan is five years. The Compensation and Personnel Committee may determine that a Director, whose service from the Board is terminated, has fulfilled the purpose for which the grant of restricted stock was made and lift the restriction for all or a portion of restricted stock or unit grants. Time and form of payment for outstanding restricted stock and restricted stock units, and awards received after 2004, as well as elections to have the cash retainer deferred after 2004, have been modified, with the consent of each Director, to comply with Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”). Section 409A is an Internal Revenue Code section that deals specifically with non-qualified deferred compensation plans and provides requirements and rules for timing of deferrals and distributions under those plans.
ITT reimburses Directors for expenses they incur to travel to and from Board, Committee and shareholder meetings and for other Company-business related expenses (including travel expenses of spouses if they are specifically invited to attend an event for appropriate business purposes). SuchPrior to the Separation, such travel may includepreviously included use of the Company aircraft, if available and approved in advance by the Chairman of the Board and Chief Executive Officer. Director airfare iswas reimbursed at no greater than first-class travel rates.
Indemnification and Insurance. As permitted by its By-laws, ITT indemnifies its Directors to the full extent permitted by law and maintains insurance to protect the Directors from liabilities,
including certain instances where it could not otherwise indemnify them. All Directors are covered under a non-contributory group accidental death and dismemberment policy that provides each of them with $750,000$1,000,000 of coverage. They may elect to purchase additional coverage under that policy. Non-Management Directors also may elect to participate in an optional non-contributory group life insurance plan that provides $100,000 of coverage.
The following Report of the Audit Committee does not constitute soliciting material and the Report should not be deemed filed or incorporated by reference into any other previous or future filings by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein. Role of the Audit Committee.Committee. The Audit Committee of the Board of Directors provides oversight on matters relating to the Company’s financial reporting process and ensures that the Company develops and maintains adequate financial controls and procedures, and monitors compliance with these processes. This includes responsibility for, among other things:
Ÿ | |
Determination of qualifications and independence of |
Ÿ | |
The appointment, compensation and oversight of Deloitte in preparing or issuing audit reports and related |
Ÿ | |
Review of financial reports and other financial information provided by the Company, its systems of internal accounting and financial controls, and the annual independent audit of the Company’s financial |
Ÿ | |
Oversight and review of procedures developed for consideration of accounting, internal accounting controls and auditing-related |
Ÿ | |
Review of risk assessment and risk management processes on a company-wide |
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Ÿ | |
Adoption of and monitoring the implementation and compliance with the Company’s Non-Audit Services Policy. |
The Audit Committee also has oversight responsibility for confirming the scope and monitoring the progress and results of internal audits conducted by the Company’s internal auditor. The Audit Committee discussed with the Company’s internal auditors and Deloitte the plans for their respective audits. The Audit Committee met with the internal auditors and Deloitte, with and without management present, and discussed results of their examinations, their evaluation of the Company’s internal controls, and the Company’s financial reporting.
The Company’s management has primary responsibility for the financial statements, including the Company’s system of disclosure and internal controls. The Audit Committee may investigate any matter brought to its attention. In that regard, the Audit Committee has full access to all books, records, facilities and personnel of the Company, and the Audit Committee may retain outside counsel, auditors or other independent experts to assist the Committee in performing its responsibilities. Any individual may also bring matters to the Audit Committee confidentially or on an anonymous basis, by submitting the matter in a sealed envelope addressed to the “Audit Committee” to the Corporate Secretary who then forwards the sealed envelope to the Audit Committee.
Sarbanes-Oxley Act of 2002 (“SOX”) Compliance.Compliance. The Audit Committee has responsibility for monitoring all elements of the Company’s compliance with Sections 302 and 404 of SOX relating to internal control over financial reporting.
Audit Committee Charter.Charter. The Board of Directors has adopted a written charter for the Audit Committee, which the Board of Directors and the Audit Committee review, and at least annually update and reaffirm. The Charter sets out the purpose, membership and organization, and key responsibilities of the Audit Committee.
Composition of the Audit Committee.Committee. The Audit Committee comprises fivethree members of the Company’s Board. The Board of Directors has determined that each Audit Committee member meets the independence standards set out in the Audit Committee Charter and in the Company’s Corporate Governance Principles and the requirements of the New York Stock Exchange currently in effect, including the audit committee independence requirements ofRule 10A-3 of the Exchange Act. No member of the Audit Committee has any relationship with the Company that may interfere with the exercise of independence from management and the Company. All members of the Audit Committee, in the business judgment of the full Board of Directors, are financially literate and several have accounting or related financial management expertise.
2011 Members of the Audit Committee Prior to the Separation. The members of the Audit Committee prior to the Separation were Frank T. MacInnis, Chair, Christina A. Gold, Ralph F. Hake, Surya N. Mohapatra and Linda S. Sanford.
2011 Members of the Audit Committee Following the Completion of the Separation. Following the completion of the Separation, the current members of the Audit Committee are G. Peter D’Aloia, Chair, Christina A. Gold and Linda S. Sanford (the “Current Audit Committee”). Donald J. Stebbins was appointed to the Audit Committee on March 1, 2012.
Regular Review of Financial Statements.Statements. During 2009,2011, the Audit Committee reviewed and discussed the Company’s audited financial statements with management. The Audit Committee, management and Deloitte reviewed and discussed the Company’s unaudited financial statements before the release of each quarter’s earnings report and filing onForm 10-Q, and the Company’s audited financial statements before the annual earnings release and filing onForm 10-K.
Communications with Deloitte.Deloitte. The Audit Committee has discussed with Deloitte the matters required to be discussed by SASthe statement on Auditing Standards No. 114,61, as amended (AICPA,Communication with Audit CommitteesProfessional Standards(“SAS 114”), Vol. 1. AU section 380) as adopted by the PCAOBPublic Company Accounting Oversight Board in Rule 3526T.3200T (“SAS 61”). These discussions included all matters required by SAS 114,61, including Deloitte’s responsibilities under generally accepted auditing standards in the United States, significant accounting policies and management judgments, the quality of the Company’s accounting principles and accounting estimates. The Audit Committee met privately with Deloitte four times during 2009.
Independence of Deloitte.Deloitte. Deloitte is directly accountable to the Audit Committee and the Board of Directors. The Audit Committee has received the written disclosures and the letter from the Deloitte required written disclosures, including a formal written statement, setting out allby applicable requirements of the relationships betweenPublic Company Accounting Oversight Board regarding Deloitte’s communications with the Company and Deloitte, as adopted by the PCAOB Rule 3526T. The Audit Committee concerning independence and has discussed Deloitte’s
36
Recommendation Regarding Annual Report onForm 10-K.10-K. In performing its oversight function with regard to the 20092011 financial statements, the Current Audit Committee relied on financial statements and information prepared by the Company’s management. It also relied on information provided by the internal audit staff as well as Deloitte. The Current Audit Committee reviewed and discussed with management the Company’s audited financial statements as of and for the year ended December 31, 2009.2011. Based on these discussions, and the information received and reviewed, the Current Audit Committee recommended to the Company’s Board of Directors that the financial statements be included in the 20092011 Annual Report onForm 10-K10-K. (or the Annual Report to Shareholders if distributed prior to the filing ofForm 10-K).
This report is furnished by the members of the 2009Current Audit Committee.
G. Peter D’Aloia, Chair
Christina A. Gold
Linda S. Sanford
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The following Report of the Compensation and Personnel Committee does not constitute soliciting material and the Report should not be deemed filed or incorporated by reference into any other previous or future filings by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein.
ITT’s Compensation and Personnel Committee approves and oversees administration of the Company’s executive compensation program and senior leadership development and continuity programs. The Committee’s primary objective is to establish a competitive executive compensation program that clearly links executive compensation to business performance and shareholder return. The Compensation and Personnel Committee considers appropriate risk factors in structuring compensation to discourage unnecessary or excessive risk-taking behaviors and encourage long-term value creation.
2011 Members of the Compensation and Personnel Committee Prior to the Separation. The members of the Compensation and Personnel Committee prior to the Separation were Linda S. Sanford, Chair, Curtis J. Crawford, Ralph F. Hake and Frank T. MacInnis.
2011 Members of the Compensation and Personnel Committee Following the Completion of the Separation. Following the completion of the Separation, the current members of the Compensation and Personnel Committee are Christina A. Gold, Chair, Orlando D. Ashford, Linda S. Sanford, Donald DeFosset, Jr. and Paul J. Kern (the “Current Compensation and Personnel Committee”).
Recommendation Regarding Compensation Discussion and Analysis
In performing its oversight function during 20092011 with regard to the Compensation Discussion and Analysis prepared by management, the Current Compensation and Personnel Committee relied on statements and information prepared by the Company’s management. It also relied on information provided by Towers,Pay Governance, LLC, the compensation consultant to the Committee. The Current Compensation and Personnel Committee reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with management. Based on this review and discussion, the Current Compensation and Personnel Committee recommended to the Company’s Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report onForm 10-K for 20092011 and this Proxy Statement.
This report is furnished by the members of the 2009Current Compensation and Personnel Committee.
Christina A. Gold, Chair
Orlando D. Ashford
Donald DeFosset, Jr.
Paul J. Kern
Linda S. Sanford ChairCurtis J. CrawfordRalph F. HakeFrank T. MacInnis
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COMPENSATION DISCUSSION AND ANALYSIS
EXECUTIVE SUMMARY
(c) | ||||||||||||
Number of Securities | ||||||||||||
Remaining Available | ||||||||||||
(a) | for Future Issuance | |||||||||||
Number of Securities | Under Equity | |||||||||||
to be Issued Upon | (b) | Compensation Plans | ||||||||||
Exercise of | Weighted-Average | (Excluding Securities | ||||||||||
Outstanding Options, | Exercise Price of | Reflected in | ||||||||||
Warrants and Rights | Outstanding Options, | Column (a)) | ||||||||||
Plan Category | (Thousands) | Warrants and Rights | (Thousands) | |||||||||
Equity Compensation Plans Approved by Security Holders(1)(2) | 9,752 | (3) | $ | 40.29 | 3,586 | (4) | ||||||
Equity Compensation Plans Not Approved by Security Holders | — | — | — | |||||||||
Total | 9,752 | $ | 40.29 | 3,586 |
The disclosure of our NEO compensation for 2011 covers the following executive officers:
Ÿ | Denise L. Ramos, Chief Executive Officer and President |
Ÿ | Aris C. Chicles, Executive Vice President – Strategy |
Ÿ | Thomas M. Scalera, Senior Vice President and Chief Financial Officer |
Ÿ | Robert J. Pagano, Jr., Senior Vice President and President – Industrial Process |
Ÿ | Munish Nanda, Senior Vice President and President – Control Technologies |
Ÿ | Steven R. Loranger, Former Chairman, President and Chief Executive Officer |
Ÿ | Gretchen W. McClain, Former Senior Vice President |
Ÿ | David F. Melcher, Former Senior Vice President |
SUMMARY OF 2011 SEPARATION ISSUES
During 2011, ITT Corporation underwent a significant change in its corporate structure. On October 31, 2011, the Company successfully completed the Separation of its defense- and water-related businesses, now called Exelis Inc. (“Exelis”) and Xylem Inc. (“Xylem”), respectively. As a result, a significant number of our executives assumed new positions with Exelis and Xylem while other executives were appointed to new positions within the Company.
NEO Changes:The Board of Directors approved several changes to our NEO population, all effective at the time of the Separation.
NEO | Position Change | |
Denise L. Ramos | Appointed Chief Executive Officer and President of the Company | |
Aris C. Chicles | Appointed Executive Vice President – Strategy of the Company | |
Thomas M. Scalera | Appointed Senior Vice President and Chief Financial Officer of the Company | |
Robert J. Pagano, Jr. | Appointed as an executive officer of the Company | |
Munish Nanda | Appointed as an executive officer of the Company | |
Steven R. Loranger | Resigned with good reason as Chairman, President and Chief Executive Officer from the Company | |
Gretchen W. McClain | Resigned from the Company, and appointed Chief Executive Officer of Xylem | |
David F. Melcher | Resigned from the Company, and appointed Chief Executive Officer of Exelis |
NEO Compensation Actions: In recognition of these personnel changes, as well as the complexity of the Separation and the commitment necessary to complete it, the Committee and the Board took a number of special actions during 2011 related to compensation. These actions and the reasons for taking them are discussed in more detail in the sections that follow, and included:
Ÿ | Salary / Total Compensation Actions: |
Ÿ | Re-evaluated executive positions using the Company’s lower, post-Separation annual revenue as the key variable in external benchmarking. This has the effect of lowering the median external benchmark pay data for most positions. |
Ÿ | Established an initial external pay positioning for Ms. Ramos as our newly-promoted Chief Executive Officer and President that targeted total compensation (base salary plus target annual incentive opportunity plus target long-term incentive opportunity) at the 25th percentile of the post-Separation external benchmark, with the expectation that her market positioning would be aligned closer to the 50th percentile of the new Peer Group in 2012. |
Ÿ | Reviewed the target compensation levels paid to each of the post-Separation NEOs, and made target compensation increases as appropriate to reflect their significant increases in responsibility associated with assuming elevated post-Separation roles. |
Ÿ | Annual Incentive Plan Actions: |
Ÿ | Increased the target annual incentive plan (“AIP”) award percentages for Ms. Ramos and Messrs. Chicles and Scalera to reflect the additional responsibilities assumed at the time of Separation. |
Ÿ | Bifurcated the AIP into two performance periods — one pre-Separation and one post-Separation. |
Ÿ | Awarded Transition Success Incentive (“TSI”) bonus payments to Messrs. Chicles, Scalera, Pagano, and Nanda, who played key roles in effecting the Separation. |
Ÿ | Long-Term Incentive Plan Actions: |
Ÿ | Settled all of the outstanding Total Shareholder Return (“TSR”) Awards on a prorated basis at the time of the Separation for both executive officers and non-executive officers. Those awards maintained the original TSR Award vesting schedule. |
Ÿ | Converted nearly all outstanding pre-Separation stock options, restricted stock, and restricted stock units (“RSUs”) to post-Separation ITT awards, using conversion ratios that provided equivalent value to plan participants. All NEOs except Mr. Loranger were included in this conversion. |
Ÿ | Converted all outstanding pre-Separation stock options and full-share awards for Mr. Loranger to post-Separation stock options and full-share awards distributed between the Company, Xylem and Exelis in the same proportion as shares in such three companies were distributed to shareholders of the Company. |
Ÿ | Granted one-time special awards of stock options and RSUs (“Founders’ Grants”) to all post-Separation NEOs. These special Founders’ Grants were made in order to strengthen the alignment of the new senior management team with the shareholders of the post-Separation Company, to accelerate the growth of stock ownership levels among the new senior management team, and to encourage long-term key employee retention. |
Ÿ | Benefit Plan Actions: |
Ÿ | Amended the ITT Salaried Retirement Plan to freeze all benefits earned as of the Separation date, including the benefits of all NEOs except for Mr. Loranger, who was not eligible to accrue any additional benefits following his resignation as of the Separation date. |
Ÿ | Actions specific to former NEOs: |
o | Mr. Loranger’s resignation agreement included payments by the Company that were guaranteed under the terms of his existing employment agreement, as well as a one-time award that rewarded him for his leadership of the Company through the successful Separation. |
o | Ms. McClain’s and Mr. Melcher’s resignations from the Company resulted in no additional payments by the Company. Their 2011 AIP awards were assumed by Xylem and Exelis, respectively. Their outstanding unvested Company restricted shares and RSUs, and their unexercised Company stock options, were fully converted into restricted shares, RSUs, and stock options in Xylem and Exelis, respectively. |
Post-Separation NEO Compensation. Prior to the Separation, the Committee determined post-Separation annualized target compensation levels for all post-Separation executive officers, including the NEOs. Annual base salary, annual incentives, and long-term incentives provide the foundation for NEO compensation. Additional compensation components, which supplement these foundational components, are also discussed in this Compensation Discussion and Analysis. The annual target compensation for each NEO as of the Separation date, is as follows:
Name | Base Salary as of the Separation Date | Post-Separation Target Bonus as % of Salary | Post-Separation Target Annual Cash Compensation | Post-Separation Annual Target Long-Term Incentive Value | Post-Separation Annual Target Total Direct Compensation | |||||||||||||||
Denise L. Ramos, Chief Executive Officer and President | $850,000 | 100 | % | $1,700,000 | $2,800,000 | $4,500,000 | ||||||||||||||
Aris C. Chicles, Executive Vice President – Strategy | $420,000 | 75 | % | $735,000 | $630,000 | $1,365,000 | ||||||||||||||
Thomas M. Scalera, Senior Vice President and Chief Financial Officer | $308,000 | 75 | % | $539,000 | $461,000 | $1,000,000 | ||||||||||||||
Robert J. Pagano, Jr., Senior Vice President and President – Industrial Process | $400,000 | 50 | % | $600,000 | $400,000 | $1,000,000 | ||||||||||||||
Munish Nanda, Senior Vice President and President – Control Technologies | $330,000 | 50 | % | $495,000 | $330,000 | $825,000 |
2011 Business Summary and Resulting NEO Compensation Actions
ITT’s compensation philosophy ties a substantial percentage of NEO compensation to business performance and share price performanceperformance. Compensation design for the NEOs is structured to achievelong-term shareholder value creation without undue business risk. Three components of executiveIf business performance or share price performance falls below identified thresholds, at-risk compensation — annual base salary, annual incentives and long-term incentives — provide the foundation for this program. Additional compensation components, which supplement the foundational components, are also discussed in this Compensation Disclosure and Analysis.
The following chart highlights the Company’s businessesperformance in determining compensation structurefiscal year 2011 and pay practices. The structure ofover the Board committees facilitates this evaluationmost recent three-year period, and determination. The Chair of the Committee is a member of the Audit Committee and the Audit Committee Chair is a member of the Committee. This membership overlap provides insight and access to the Company’s
39those results’ effect on 2011 compensation.
Business Results versus Targets | |||
2011 Financial Performance | |||
Pre-Separation Results as % of Target (Jan 1 – Oct 31): — Sum of Value Center Revenue = 103% — Sum of Value Center Operating Cash Flow = 94% — Sum of Value Center Operating Income = 107% Post-Separation Results as % of Target (Nov 1 – Dec 31): — Sum of Segment Revenue = 103% — Sum of Segment Operating Income = 98% — Sum of Segment Cash Flow = 76% | |||
2011 Transaction Success | |||
— Successful separation of the Exelis and Xylem businesses from the Company on October 31 — Corporate and Group HQ expenses within budgets; cash expenses within budget — Created and adhered to rigorous process to design post-separation corporate function within cost targets — Above-target retention rates and strong internal staffing of new positions | — TSI Awards paid at target for recipients — Special Founders’ Grants to all post-Separation NEOs. These special Founders’ Grants were made in order to strengthen the alignment of the new senior management team with the shareholders of the post-Separation Company, to accelerate the growth of stock ownership levels among the new senior management team, and to encourage | ||
Long-Term Financial Performance | |||
Relative TSR performance vs. S&P Industrials peer group was below threshold for each of the three overlapping performance periods that concluded with the Separation on October 31 | — No TSR Award payments for | ||
— For the remaining TSR Award performance periods after the | |||
increase employee retention. |
40
Ÿ | |||
Elimination of repricing or | |||
an equity restructuring (p. 57) |
Ÿ | Elimination of all income tax gross-ups on executive perquisites (p. 62) |
Ÿ | Elimination of all excise tax gross-ups from executive change-in-control severance plans (p. 65) |
Ÿ | Elimination of executive perquisites during any severance period in the event of a change-in-control (p. 65) |
Ÿ | Use of an Independent Compensation Consultant to advise the Committee (p. 67-68) |
Ÿ | Development of a Recoupment Policy (p. 68) |
Ÿ | Development of |
COMPENSATION PROCESS
Our Annual Compensation Cycle
The compensation of our executive officers, including our NEOs, is reviewed in detail every year during the first quarter. This review includes:
Ÿ | Annual performance reviews for the |
Ÿ | Base salary merit increases – normally established in March, |
Ÿ | AIP target awards, and |
Ÿ | |||||
Long-term incentive target awards (including stock options, restricted stock or RSUs, and TSR Awards). |
The actual award date of stock options, restricted stock or RSUs and advice relating to employee compensation and programs, health care and benefits were provided totarget TSR Awards is determined on the Company by an affiliate of Towers. The decision to engage Towers for non-executive compensation and benefits consulting services was made by management and was not approved bydate on which the Committee orapproves these awards. In recent years, this has occurred at the Board.
The Committee annually reviewedwill continue to review and assess the Compensation Consultant’s independenceperformance of Ms. Ramos and engaged in such a review in 2009. The Committee has sole authority to retainall senior executives and terminateauthorize compensation actions it believes are appropriate and commensurate with relevant competitive data and the Compensation Consultant. approved compensation program.
Use of External Market Data
In 2010, the Committee retained Pay Governance LLC, a consulting firm formed by a former partner of Towers as its Compensation Consultant. In 2010, the Nominating and Governance Committee also retained Pay Governance LLC as its consultant to assist it with a review of compensation for Non-Management Directors.
41
This same approach was used in determining executive compensation levels post-Separation for these officers using the processes described in this Compensation Discussion and Analysis. All decisions with respect to compensation for Steven R. Loranger, Chairman, President and Chief Executive Officer were made by the Committee.all NEOs, based on their post-Separation roles. The Committee believesreviewed the Company’s compensation programssame list of external companies, but utilized a lower internal revenue reference point in the regression analysis to reflect the Company’s overarching business rationalelower annual revenue post-Separation. The use of this lower internal revenue reference point has the effect of reducing external pay benchmarking levels, which given the same external market positioning strategy would result in lower total target compensation amounts for our
post-Separation NEOs than for our pre-Separation NEOs in similar positions. The results of the post-Separation external market analysis were as follows:
Named Executive Officer and Title | Post-Separation Base Salary Position Versus Market Median | Post-Separation Position Versus Market Median | Post-Separation Position Versus Market Median | Post-Separation Position Versus Market Median | ||||||||||||
Denise L. Ramos, Chief Executive Officer and President | -11 | % | -26 | % | -27 | % | -24 | % | ||||||||
Aris C. Chicles, Executive Vice President – Strategy | +14 | % | +34 | % | +7 | % | +14 | % | ||||||||
Thomas M. Scalera, Senior Vice President and Chief Financial Officer | -35 | % | -31 | % | -51 | % | -43 | % | ||||||||
Robert J. Pagano, Jr., Senior Vice President and President – Industrial Process | +13 | % | -7 | % | -10 | % | -1 | % | ||||||||
Munish Nanda, Senior Vice President and President – Control Technologies | +18 | % | +27 | % | +43 | % | +29 | % |
For 2012 and are designedfuture years, the Committee expects to be reasonable, fair, fully disclosed,target overall total compensation at the median of a newly-created peer group. This new peer group, which consists of mid-cap S&P Industrials companies, was selected to more accurately reflect the size and consistently aligned with long-term value creation. The Committee further believes this compensation philosophy encourages individual and group behaviors that balance risk and reward and assistindustry focus of the Company in achieving steady, continuous growth.
ELEMENTS OF COMPENSATION
NEO compensation at ITT has traditionally consisted of its NEO positions, were compared to positions with similar attributes and responsibilities based on the CDB information. This information was used to provide a dollar value foran annual base salary, an annual incentivescash-based incentive in the form of the AIP, and target long-term incentive awards in the form of RSUs, stock options, and long-term incentives. The Committee used the CDB, along with other qualitative information, in making its determination of target and actual compensation providedcash awards that are tied to each of the Company’s NEOs. The Committee generally targeted total compensation and each compensation component at the competitive median of the CDB peer group, but may consider deviations from the competitive median depending on a position’s strategic value, the Company’s objectives and strategies, and individual experience and performance in the position. The Committee may, but is not required to consider, prior year’s compensation including short-term or long-term incentive payouts, restricted stock vesting or option exercises in compensation decisions for the NEOs.
42
Rationale for Providing | ||||||
Base Salary | The | |||||
Target AIP | The AIP is structured to reward and emphasize overall enterprise performance | |||||
43
44
RSUs
The Committee | |||
Stock Options | The Committee | ||
TSR Awards | The Committee grants TSR Awards to link executive compensation to relative TSR performance versus a select group of industry peers over a three-year performance period. This plan provides a balance to the Company’s annual grants of RSUs and stock options, as it is the sole performance measure whose value is determined by the Company’s relative, and not absolute, stock performance. |
These compensation elements work together to provide a reasonable mix of short-term versus long-term compensation, guaranteed versus at-risk compensation, and absolute versus relative performance measures to fully align NEO interests with those of shareholders.
Pay Mix Comparisons | Post-Separation Target Compensation Pay Mix Summary | |||
CEO | Other Average NEOs | |||
Short-Term (1 year or less) versus Long-Term (greater than 1 year) | ||||
38% Short-Term, 62% Long-Term | 57% Short-Term, 43% Long-Term | |||
Guaranteed versus At-Risk | 19% Guaranteed, 81% At-Risk | 35% Guaranteed, 65% At- Risk | ||
Absolute Performance versus Relative Performance | 79% Absolute, 21% Relative | 86% Absolute, 14% Relative |
45The Company also provides benefits and limited perquisites to its NEOs that it believes are competitive with the external market for talent.
2011 Base Salary Increases
The Committee approves NEO base salaries annually based on external survey data provided by the Compensation Consultant and the NEO’s individual performance. The Company conducted its annual base salary merit increase process in March 2011. In addition, the Company made salary adjustments in October 2011 to those executives who were promoted into new roles at the Separation.
NEO | Previous Annual Base Salary | Post-Merit Annual Base Salary | ||||||
Denise L. Ramos | $ | 590,000 | $ | 606,500 | ||||
Aris C. Chicles | $ | 340,000 | $ | 360,000 | ||||
Thomas M. Scalera | $ | 280,000 | $ | 288,400 | ||||
Steven R. Loranger | $ | 1,160,000 | $ | 1,200,000 | ||||
Gretchen W. McClain | $ | 530,000 | $ | 600,000 | ||||
David F. Melcher | $ | 530,000 | $ | 600,000 |
For Messrs. Pagano and Nanda, since they were not executive officers of the Company pre-Separation, their March 2011 salary increases were reviewed and approved by Mr. Loranger. He considered the evaluation of their individual performance, external market data on competitive pay levels from third-party consulting firms provided by internal human resources, and the overall 2011 salary increase budget for salaried personnel.
April 2011 Promotional Increase for Mr. Nanda: In April 2011, Ms. Ramos approved an annual salary of $330,000 for Mr. Nanda, a 9% increase, that reflected a compensation level that was considered appropriate for his new role as President of the Control Technologies business segment.
October 2011 Separation-Related Promotional Increases: The Committee re-evaluated the compensation of all executive officers of the post-Separation company prior to the Separation, using the same regression analysis methodology as used in the annual market analysis. As a result of their analysis, they approved salary increases to select executive officers, including Ms. Ramos and Messrs. Chicles, Scalera, and Pagano. While some of the increases effective with the Separation are higher than historically provided during the annual cycle, they reflect the additional responsibilities that these NEOs would have in the Company post-Separation.
The Committee approved the following base salaries, effective October 31, 2011:
NEO | Previous Annual Base Salary | Post- Separation Annual Base Salary | ||||||
Denise L. Ramos | $ | 606,500 | $ | 850,000 | ||||
Aris C. Chicles | $ | 360,000 | $ | 420,000 | ||||
Thomas M. Scalera | $ | 288,400 | $ | 308,000 | ||||
Robert J. Pagano, Jr. | $ | 349,000 | $ | 400,000 |
Going forward, we expect to review the salary levels for all of our NEOs and make salary adjustments as appropriate in the first quarter of each year, as has been the historical practice.
2011 Annual Incentive Plan
The AIP AND LONG-TERM INCENTIVE TARGET AWARDS
Establishing AIP Performance
The 20092011 AIP format is designed to consider internal business achievements. For 2009,2011, NEOs includeincluded officers from the Fluid Technology, Motion & Flow Control andpre-Separation corporate segment, as well as business leaders from the business units that remained with the Company post-Separation. The reported 2011 business segments used to evaluate financial performance prior to the Separation (the “Value Centers”) were Defense and Information Solutions, Fluid Technology, and Motion & Flow Control. The post-Separation business segments as well as Corporate headquarters.
AIP Award is calculated as follows:
The Committee studied past and projected earnings per share and other performance measures of comparable multi-industry peers. Six multi-industryBased on its 2011 business needs and an analysis of performance measures used among these peer companies werein their annual incentive plans, the Company identified as “premier” based on their rankings infour performance metrics for the top quartile ofAIP’s 2011 performance year. The 2011 AIP was modified from 2010 to emphasize the majority ofplanned Separation and continued business collaboration across the quantitativeenterprise. The selected performance metrics evaluated. These six companies are as follows:
1. | ||
Organic |
2. | Operating Cash Flow: Operating cash flow reflects the Company’s |
3. | |||
4. | Operating Margin: Operating margin is utilized at the Segment level in order to emphasize the importance of maintaining healthy margins post-Separation. Operating margin is defined as the ratio of Segment operating income over revenue. |
46
Fluid Technology and | Defense and | ||||||||||||||
2009 Metrics | Motion & Flow Control | Information Solutions | Corporate | ||||||||||||
Margin Rate | 18 | % | — | — | |||||||||||
Organic Revenue | 12 | % | 18 | % | — | ||||||||||
Cash Flow (Free Cash Flow for Corporate) | 18 | % | 18 | % | 30 | % | |||||||||
ROIC | 12 | % | 24 | % | 30 | % | |||||||||
EPS Performance | 40% | 40 | % | ||||||||||||
Earnings Per Share Performance | $ | 2.85 | $ | 3.65 | $ | 4.00 | $ | 4.40 | ||||||||||||
Earnings Per Share Payout % | 20 | % | 100 | % | 180 | % | 200 | % | ||||||||||||
2009 Attainment/Payout % | ||||||||||||||||||||||||||||||
Margin Rate | All Other Metrics | |||||||||||||||||||||||||||||
Performance Percentage | 85% | 100% | 110% | 85% | 100% | 120% | ||||||||||||||||||||||||
Payout Percentage | 50% | 100% | 200% | 50% | 100% | 200% | ||||||||||||||||||||||||
The Committee, after considering management and managementCompensation Consultant recommendations, established separate 20092011 AIP performance targets for employees in each business segment and for employees in ITT Corporate headquartersthe NEOs based on the applicable internal premier performance metrics and the Company’s approved annual operating plan, taking into consideration the Company’s aspirational business goals. Successful attainment of both qualitative factors and quantitative factors (on page 42 and pages 47 to 48 of the Proxy Statement) are achievable only if the businessesenterprise and the individual NEO perform at target levels. The Company’s NEOs include executives at the Corporate headquarters and the Fluid Technology, Motion & Flow Control and the Defense and Information Solutions business segments. The 2009 targets for EPS performance, free cash flow performance for the Company, margin rate
47
Internal performance metrics are weighted to represent operational goals. In order to encourage focus on total Company performance during the transformation, the sum of Value Center Operating Income performance represented 50% of the overall performance metrics for the Company’s 2011 AIP for all employees. For employees working in corporate positions, which include Ms. Ramos and Messrs. Chicles, Scalera, and Loranger, participatesthe sum of Value Center Operating Cash Flow was weighted in the Company’s 2011 AIP at 30%, and the sum of Value Center Revenue was weighted at 20%. For employees working within a specific Segment, which includes Messrs. Pagano and Nanda, the remaining 50% of the AIP weight is distributed between three Segment-specific measures: Segment Operating Cash Flow (20%), Segment Revenue (15%), and Segment Operating Margin (15%). Segment Operating Cash Flow was given a larger AIP weight than Segment Revenue or Segment Operating Margin because the Committee considered strong Segment Operating Cash Flow to be a critical financial measure in the months leading up to the Separation.
We pay for AIP performance that clearly demonstrates substantial achievement of plan goals. We established strong incentives for revenue performance and set aggressive goals for other metrics. In order to achieve an AIP payout, each metric must meet a certain threshold for that component to be considered in the calculation. For example, Sum of Segment Operating Income performance below the 50% payout percentage of target would result in that metric being reflected as zero in the AIP described above. In 2009, with respectcalculation.
The formula to Mr. Loranger,determine each NEO’s AIP total potential payment (subject to negative Committee discretion) is as follows:
2011 AIP Potential Payout =
(Base Salary) x (Target Award Percentage) x (AIP Results Percentage)
Both the Committee determinedindividual performance components of the AIP and considered the three quantifiable goals related to free cash flow, ROIC and EPS performance. Free cash flow and EPS performance goalsoverall AIP Award are provided below. ROIC goals were setcapped at challenging levels that were considered difficult to attain.
Metric (all $ amounts in millions other than earnings per share performance) | Goal | 2009 Performance | ||||
Free Cash Flow | $640.0 | $926.1 | ||||
EPS Performance | $3.65 | $3.78 | ||||
Ÿ | Endeavor to retain top talent as part of the future state organization design process, |
Ÿ | Achieve Separation date targets as internally set, |
Ÿ | Build post-Separation Segment operating margin targets, and |
Ÿ | Aggressively manage steady state and separation costs. |
2011 Target AIP Award Percentage of Base Salary and Weighting of AIP Performance Components
Named Executive Officer | 2011 Percentage of Base | Sum of Revenue (a) | Sum of Flow (b) | Sum of (c) | Segment Operating Cash Flow (d) | Segment (e) | Segment (f) | Total Enterprise Performance | ||||||||||||||||||||||
Denise L. Ramos | 87.5 | % | 20 | % | 30 | % | 50 | % | a+b+c | |||||||||||||||||||||
Aris C. Chicles | 66.7 | % | 20 | % | 30 | % | 50 | % | a+b+c | |||||||||||||||||||||
Thomas M. Scalera | 44.2 | % | 20 | % | 30 | % | 50 | % | a+b+c | |||||||||||||||||||||
Robert J. Pagano, Jr. | 50 | % | 50 | % | 20 | % | 15 | % | 15 | % | c+d+e+f | |||||||||||||||||||
Munish Nanda | 50 | % | 50 | % | 20 | % | 15 | % | 15 | % | c+d+e+f | |||||||||||||||||||
Steven R. Loranger | 130 | % | 20 | % | 30 | % | 50 | % | a+b+c | |||||||||||||||||||||
Gretchen W. McClain | 85 | % | 20 | % | 30 | % | 50 | % | a+b+c | |||||||||||||||||||||
David F. Melcher | 85 | % | 20 | % | 30 | % | 50 | % | a+b+c |
For Ms. Ramos and Messrs. Chicles and Scalera, the target award percentages reflect 10 months’ performance in their pre-Separation roles, and two months’ performance in their post-Separation roles, as follows:
Named Executive Officer | Pre-Separation Target Award Percentage of Base Salary (10 months’ | Post-Separation Target Award Percentage of Base Salary (2 months’ performance) | ||
Denise L. Ramos | 85% | 100% | ||
Aris C. Chicles | 65% | 75% | ||
Thomas M. Scalera | 38% | 75% |
Bifurcation of 2011 AIP into Pre-Separation and Post-Separation Goals: In October 2011, the Committee agreed with the Compensation Consultant’s recommendation to bifurcate the 2011 AIP into pre-Separation and post-Separation plans, due to the fact that the financial performance goals approved by the Committee at the beginning of the year would not be measurable on a post-Separation basis. Therefore, the original Corporate financial goals in the 2011 AIP were pro-rated to reflect 10 months’ pre-Separation performance, and then scored based on financial performance against those goals up to the Separation date. Independent post-Separation financial goals for the remaining two months of fiscal year were then approved by the Committee based on the operating budget for the remainder of the fiscal year, and scored at the conclusion of the fiscal year based on actual performance versus those goals.
Calculation of AIP 2011 Performance
Pre-Separation Performance Period: The AIP performance goals set at the beginning of the fiscal year were based on the full-year operating plan that was approved by the Board, and meeting the financial goals set out in that operating plan would result in an AIP payment equal to 100% of target. The Board believed that the operating plan provided a challenging set of goals for management to achieve.
Once the Separation was completed, these full-year financial goals were multiplied by 0.833, the percentage of the year that had elapsed prior to the Separation, to determine appropriate pre-Separation goals. These pre-Separation goals were then compared to actual performance as follows:
2011 Pre-Separation Metrics | Target | |||||||||||
Actual Performance | Actual as Percentage of Target | |||||||||||
Sum of Value Center Operating Income Performance | 1,229 million | $ | 1,317 million | 107 | % | |||||||
Sum of Value Center Revenue | $ | 9,428 million | $ | 9,726 million | 103 | % | ||||||
Sum of Value Center Operating Cash Flow | ||||||||||||
866 million | 94 | % |
48
Target Award | Return on | ||||||||||||||||||||||||
Percentage | Invested | ITT EPS | Free Cash | ||||||||||||||||||||||
of | Capital | Performance | Flow | Total Corporate | |||||||||||||||||||||
Named Executive Officer | Base Salary | (a) | (b) | (c) | Performance | ||||||||||||||||||||
Steven R. Loranger | 130 | %(1) | 30 | % | 40 | % | 30 | % | a+b+c | ||||||||||||||||
Denise L. Ramos | 85 | % | 30 | % | 40 | % | 30 | % | a+b+c | ||||||||||||||||
Scott A. Crum | 70 | % | 30 | % | 40 | % | 30 | % | a+b+c | ||||||||||||||||
Return on | Organic | ||||||||||||||||||||||||||||||||||
Target Award | Invested | Operating | Organic | Operating | EPS | Total | |||||||||||||||||||||||||||||
Percentage of | Capital | Margin | Revenue | Cash Flow | Segment Perf. | Performance | Segment | ||||||||||||||||||||||||||||
Named Executive Officer | Base Salary | (d) | (e) | (f) | (g) | (h) | (i) | Perf. | |||||||||||||||||||||||||||
Gretchen W. McClain(1) | 80 | % | 12 | % | 18 | % | 12 | % | 18 | % | (d+e+f+g) | 40% | h + i | ||||||||||||||||||||||
David F. Melcher | 70 | % | 24 | % | — | 18 | % | 18 | % | (d+f+g) | 40% | h + i | |||||||||||||||||||||||
49
2011 Post-Separation Metrics | Pro-Rated Target | Actual Performance | Actual as Percentage of Target | |||||
Sum of Post-Separation Segment Operating Income Performance | $48 million | $47 million | 98 | % | ||||
Sum of Post-Separation Segment Revenue | $343 million | $353 million | % | |||||
Sum of Post-Separation Segment Operating Cash Flow | $104 million | $79 million | ||||||
76 | ||||||||
% |
Segment Performance Targets: For Messrs. Pagano and Nanda, we set the remaining 2011 performance targets, Segment Operating Cash Flow, Segment Revenue, and Segment Operating Margin, for the full 12-month period at challenging levels that are consistent with our long-term Peer Group targets, our premier financial targets, and are designed to meet shareholder expectations. We consider these targets to be difficult to attain. We do not report on the Segment financial results used for Segment AIP calculations, as we believe that doing so would cause competitive harm to the Company.
2011 AIP Awards Paid in 2012
The pre-Separation and post-Separation calculations were combined to determine full-year AIP awards earned as follows:
Named Executive Officers | Total Target 2011 AIP Awards ($) | Pre- Separation | Post- Separation AIP Awards ($) | Total 2011 AIP Awards ($) | Total AIP 2011 Awards as Percentage of Target (%) | |||||||||||||||
Denise L. Ramos | $ | 571,271 | $ | 587,300 | $ | 100,200 | $ | 687,500 | 120 | % | ||||||||||
Aris C. Chicles | $ | 247,500 | $ | 266,400 | $ | 37,100 | $ | 303,500 | 123 | % | ||||||||||
Thomas M. Scalera | $ | 129,827 | $ | 124,600 | $ | 27,200 | $ | 151,800 | 117 | % | ||||||||||
Robert J. Pagano, Jr. | $ | 178,750 | $ | 163,600 | $ | 37,500 | $ | 201,100 | 113 | % | ||||||||||
Munish Nanda | $ | 165,000 | $ | 178,400 | $ | 35,700 | $ | 214,100 | 130 | % | ||||||||||
Steven R. Loranger | $ | 1,300,000 | $ | 1,300,000 | $ | 0 | $ | 999,452 | (1) | 77 | % |
(1) | Amount paid to Mr. Loranger was determined based on the terms of his employment agreement and as detailed in his separation agreement as an amount equal to 100% of base salary for Mr. Loranger, pro-rated for the percentage of the year that he was employed by the Company. |
For Ms. McClain and Mr. Melcher, the responsibilities for calculation and payment of their 2011 AIP earned amounts were assumed by Xylem and Exelis, respectively, at the Separation date. 2011 AIP Awards for NEOs are also included in the Summary Compensation Table on page 60.
Transition Success Incentive Bonus
Based on external market data provided by the Compensation Consultant on ten other recent, large spin-off transactions, and in order to retain critical key employees through the uncertainty of the Separation, the Committee anticipates structuring the 2010 AIP formulaapproved one-time TSI Bonuses to incorporate recognitionselect executive officers, including some of our NEOs, and other employees of the importanceCompany. These TSI Bonus payments were made in March 2012, four months following the successful Separation, and all plan participants needed to remain employed by the Company through the payment date in order to be eligible to receive a TSI Bonus. In accordance with the plan design to exclude Chief Executive Officer roles, neither Ms. Ramos nor Mr. Loranger received a TSI Bonus. The NEOs who received TSI Bonus payments, and the amounts of collaboration and overall Company performance.
Named Executive Officers | TSI Bonus ($) | |||
Aris C. Chicles | $ | 180,000 | ||
Thomas M. Scalera | $ | 145,000 | ||
Robert J. Pagano, Jr. | $ | 175,000 | ||
Munish Nanda | $ | 150,000 |
2011 Long-Term Incentive Awards ProgramCompensation
The Company’s long-term incentive awards component for senior executives has three subcomponents, each of which directly ties long-term compensation to long-term value creation and shareholder return:
Ÿ | ||
Restricted stock or RSU awards. In 2010, the Committee awarded restricted stock awards. In 2011 the Committee elected to award RSUs, which will be settled in shares upon vesting. The Committee determined to award RSUs rather than restricted stock in 2011 because RSU awards provide consistent tax treatment for domestic and international employees. RSUs provide the same economic risk or reward as restricted stock, but recipients do not have voting rights and do not receive cash dividends during the restriction period. Dividend equivalents are accrued and paid in cash upon vesting of the RSUs. |
Ÿ | ||
Non-qualified stock option awards. These awards have a 10-year term and a strike price equal to the closing price of the Company stock on the grant date. |
Ÿ | ||
TSR |
The 20092011 Long-Term Incentive Program Awards arewere allocated as follows:1/ 1/3 TSR RSUs calculated at target payment amount;1/grant date fair value; 1/3 non-qualified stock options calculated at the grant date fair value of the non-qualified options; and1/ 1/3 restricted stock TSR Awards calculated at fair value.
The following table describes the TSR Awards, non-qualified stock option awards, and RSU awards made to NEOs in March 2011, and does not give effect to the 1:2 reverse stock split. The TSR Award amounts listed reflect the cash target value, and the stock option and RSU awards reflect the number of underlying options or shares granted. Stock options were granted with a pre-Separation strike price of $57.68, which was equal to the closing price of the Company’s common stock on the grant date. For Ms. Ramos and Messrs. Chicles, Scalera, Pagano, and Nanda, these grants were converted to post-Separation ITT option grants in October 2011, using the conversion method described on Page 61. For more details on these grants, please see “Compensation Tables – Grants of Plan-Based Awards in 2011” on Page 75.
Named Executive Officer | TSR (Target Cash ($) | Non-Qualified Stock (# of Options) | RSU Award (# of Units) | |||||||||
Denise L. Ramos | $ | 533,300 | 33,459 | 9,111 | ||||||||
Aris C. Chicles | $ | 191,700 | 12,025 | 3,274 | ||||||||
Thomas M. Scalera | $ | 50,000 | 3,475 | 854 | ||||||||
Robert J. Pagano, Jr. | $ | 133,300 | 9,260 | 2,278 | ||||||||
Munish Nanda | $ | 110,000 | 7,640 | 1,879 | ||||||||
Steven R. Loranger | $ | 2,133,300 | 133,835 | 36,442 | ||||||||
Gretchen W. McClain | $ | 533,300 | 33,459 | 9,111 | ||||||||
David F. Melcher | $ | 533,300 | 33,459 | 9,111 |
Restricted Stock SubcomponentUnits Component
Grants of restricted stockRSUs provide NEOs with stock ownership of unrestricted shares after the restriction lapses.restrictions lapse. NEOs received restricted stockRSU awards because, in the judgment of the Committee and based on management recommendations, these individuals are in positions most likely to assist in the achievement of the Company’s long-term value creation goals and to create shareholder value over time. The Committee reviews all proposed grants of shares of restricted stockRSUs for executive officers prior to the awards,award, including awards based on performance, retention-based awards and awards contemplated for new employees as part of their offer of employment.
Key elements of the restricted stock2011 RSU program are:
RSUs do not grant dividend or voting rights to the |
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RSUs are generally | |||
If an acceleration event occurs (as described on | |||
If an employee dies or becomes disabled, the RSUs vest in full |
Ÿ | If an employee leaves the Company prior to vesting, whether through resignation or termination for cause, the | ||
If an employee retires or is terminated other than for cause, a pro-rata portion of the |
Ÿ | No individual may receive more than 1,875,441 RSUs under the 2011 Omnibus Incentive Plan (the “2011 Omnibus Plan”) in any one Plan Year. |
In certain cases, such as for new hires or to facilitate retention, selected employees may receive restricted stockRSUs subject to different vesting terms as determined by the Committee.
Non-Qualified Stock Options SubcomponentComponent
Non-qualified stock options permit optioneesoption holders to buy Company stock in the future at a price equal to the stock’s value (exercise price) on the date the option was granted.granted, which is the option exercise price. Non-qualified stock option terms were selected after the Committee’s review and assessment of the Compensation Consultant CDB and consideration of terms best suited to the Company.
For each of our NEOs, non-qualified stock options do not vest until three years after the award date. This delayed vesting is referred to as three-year cliff vesting. This vesting schedule prohibits early option exercises, notwithstanding share price appreciation, and focuses senior executives on the Company’s long-term value creation goals.
In 2009,2011, the fair value of stock options granted under the employee stock option program was calculated using a binomial lattice valuation model. The Committee considered this a preferred model since the model can incorporate multiple and variable assumptions over time, including assumptions such as employee exercise patterns, stock price volatility and changes in dividends.
Key elements of the 2011 non-qualified stock option program are:
Maximum Number Granted: |
¡ | No individual may receive more than 9,377,204 options under the 2011 Omnibus Plan in any one year |
Ÿ | Exercise Price: |
¡ | The option exercise price of stock options awarded is the | ||
For options granted to new executives, the option exercise price of approved stock option awards is the closing price on the grant date, generally the day following the first day of | |||
The 2003 Plan and the 2011 Omnibus Plan prohibit the repricing of, or exchange of, stock options and stock appreciation rights that are priced below the prevailing market price with lower-priced stock options or stock appreciation rights without shareholder approval, except in the event of an equity restructuring |
Vesting Schedule: |
¡ | Three-year cliff vesting is required for executives at the level of senior vice president or | ||
Options cannot be exercised prior to vesting |
¡ | If an acceleration event occurs (as described on | ||
Option Term and Exercise Period: |
¡ | Options awarded in 2010 and 2011 and prior to 2005 expire ten years after the grant date. Options awarded between 2005 and 2009 expire seven years after the grant | ||
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There may be adjustments to the |
Ÿ | Termination Provisions: |
¡ | If an employee is terminated for cause, or voluntarily terminates employment without an acceleration event, vested and unvested portions of the options expire on the date of termination |
¡ | If an employee dies or becomes permanently disabled, all unvested options vest in full |
¡ | If the employee is terminated for a reason other than for cause or retires, a pro-rata portion of the stock options continue to vest on the regular vesting schedule |
¡ | If employment is terminated due to an acceleration event or because the option holder believes in good faith that he or she would be unable to discharge his or her duties effectively after the acceleration event, the option expires on the earlier of the date seven months after the acceleration event or the normal expiration |
TSR Awards Component
TSR Awards are variable cash payments, based on the Committee’s review and assessmentCompany’s stock price appreciation relative to that of the Compensation Consultant’s CDB, as well asTSR Performance Index over a three-year performance cycle. The Committee, at its discretion, determines the Committee’s viewsize and frequency of target TSR Awards, performance measures and performance goals, in addition to performance periods. In determining the vesting terms appropriatesize of target TSR Awards for the Company.
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Determining TSR Awards. The Committee considers individual performance and competitive market data in determining target TSR Awards. Key elements of the TSR Awards include:
Ÿ | |||
The Company’s performance |
Ÿ | |||
Payment, if any, of cash awards | |||
Ÿ |
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If a participant’s employment terminates before the end of the three-year performance period, the award is forfeited except in two | |
Ÿ | |
Subject to the provisions of Section 409A of the Internal Revenue Code, in the event of an acceleration event in a change of control (described on |
Ÿ | |
Performance goals for the applicable TSR performance period are established in writing no later than |
Performance Goals and Payments for the TSR:TSR Awards. Individual targets for the NEOs for the 2011-2013 performance period (the “2011-13 TSR Award Period”) used to determine TSR Awards are provided in the 2009 Grants“Grants of Plan Based Awards in 2011” table on page 62Page 75 of this Proxy Statement. Payouts, if any, are based on a non-discretionary formula and interpolated for values between the 35th and 80th percentile of performance. The following performance goals were established for TSR awards for the performance period January 1, 2007 through December 31, 2009:
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If Company’s Total Shareholder Return Rank Against the Companies that Comprise the TSR Performance Index is | Payout Factor (% of Target TSR | |||
less than the 35th percentile | 0 | % | ||
at the 35th percentile | 50 | % | ||
at the | % | |||
at the 80th percentile or more | 200 | % |
The formula used to determine performance for the 2011-13 TSR awardsAward Period was the same as the formulas previously approved by the Committee for the performance period January 1, 20072010 through December 31, 2009, Mr. Loranger, Ms. Ramos, Ms. McClain,2012 (the “2010-12 TSR Award Period”), and Mr. Crum received payments of $2,596,055, $667,211, $545,900, and $409,425, respectively, on January 28, 2010, as described in the 2009 Option Exercises and Stock Vested table on page 70. Mr. Loranger also received a payment of $1,043,275 for his phantom 2007 TSR award. Mr. Melcher did not receive a TSR payment for the performance period January 1, 20072009 through December 31, 2009 as Mr. Melcher2011 (the “2009-11 TSR Award Period”).
Conversion of TSR Awards at Separation. Upon the advice of the Compensation Consultant, the Committee approved amendments to the TSR Awards’ performance goals and payment schedules in order to reflect the changed business nature of each of the Company, Exelis, and Xylem. The amendments stated that the Company’s performance versus the preset goals for each of the three overlapping award cycles would be measured and scored at the time of Separation, and eligible employees would receive a pro-rated payment of awards earned over that period. The pro-rated portion of awards covering the uncompleted period at the Separation date would be converted to a target cash payment or RSUs, depending on the TSR Award Period. In no case would any participant receive an accelerated payment. The conversion of remaining TSR Awards into RSUs with time-based vesting provisions was first employedapproved by the Committee in order to accelerate the growth in stock ownership among the Company’s new management team, and to increase support for retention of key leadership in the post-Separation Company.
The following chart explains how TSR Awards made during each of the three grant periods were converted.
TSR Award Period | Percentage of (10/31/2011) | How the Target TSR Award Was Treated Upon Separation | ||||
Completed Period | Uncompleted Period | |||||
2009-11 TSR Award Period | 94.4% (34 of 36 months) | Cash payment (if any is earned) based upon actual performance through the Separation date (e.g. January 1, 2009 – October 31, 2011). Cash payment made by March 15, 2012. | Cash payment of the remaining uncompleted percentage of the 2009-11 TSR Award Period (2 months divided by 36), paid at target value. Cash payment made on November 30, 2011. | |||
2010-12 TSR Award Period | 61.1% (22 of 36 months) | Cash payment (if any is earned) in January 2013 based upon actual performance through the Separation date (e.g. January 1, 2010 – October 31, 2011) | Award of new RSUs at a value equal to the original TSR value, multiplied by the remaining uncompleted percentage of the 2010-12 TSR Award Period (14 months divided by 36). RSUs will vest December 31, 2012. | |||
2011-13 TSR Award Period | 27.8% (10 of 36 months) | Cash payment (if any is earned) in January 2014 based upon actual performance through the Separation date (e.g. January 1, 2011 – October 31, 2011) | Award of new RSUs at a value equal to the original TSR value, multiplied by the remaining uncompleted percentage of the 2011-13 TSR Award Period (26 months divided by 36). RSUs will vest December 31, 2013. |
Determination of TSR Award Payments. At the conclusion of the Separation, the Committee reviewed the Company’s TSR performance over each of the three TSR Award Periods, and determined that the Company failed to reach the threshold level of relative TSR performance in Augustany of 2008.
The uncompleted portions of each TSR Award Period were converted into cash payments and RSU grants, at target and pro-rated as per the above schedule. The converted amounts provided to each of the NEOs after the Separation, which give effect to the 1:2 reverse stock split, were as follows:
Named Executive Officer | 2009-11 TSR Award ($)(1) | 2010-12 TSR Award (#)(2) | 2011-13 TSR Award (#)(3) | |||||||||
Denise L. Ramos | $ | 20,000 | 7,670 | 18,992 | ||||||||
Aris C. Chicles | $ | 7,500 | 2,589 | 6,827 | ||||||||
Thomas M. Scalera | $ | 1,850 | 704 | 1,781 | ||||||||
Robert J. Pagano, Jr. | $ | 7,072 | 2,525 | 4,747 | ||||||||
Munish Nanda | $ | 5,000 | 2,077 | 3,917 | ||||||||
Steven R. Loranger (4) | $ | 110,000 | - | - |
(1) | Cash granted in recognition of the uncompleted portion of the 2009-11 TSR Award Period was paid on March 15, 2012. |
(2) | RSUs granted in recognition of the uncompleted portion of the 2010-12 TSR Award Period will vest on December 31, 2012. |
(3) | RSUs granted in recognition of the uncompleted portion of the 2011-13 TSR Award Period will vest on December 31, 2013. |
(4) | Mr. Loranger received target cash payments for the discontinued portions of the 2010-12 TSR Award and the 2011-13 TSR Award, as detailed in his Resignation Agreement on Page 89. These cash payments will vest on the original vesting schedule for the TSR Awards. |
2010Conversion of Other Existing Equity Awards
In anticipation of the Separation, the Committee approved a conversion of all unvested restricted stock, unvested RSUs, and unexercised stock option awards upon the Separation into separate restricted stock, RSU, and stock option grants for each of the three post-Separation companies, with each equity holder receiving a modified grant of restricted stock, RSUs, and/or stock options of their post-Separation employer. All converted awards preserved each equityholder’s intrinsic value and had the same terms and conditions as they had prior to the Separation. This conversion was recommended by the Compensation Consultant and approved by the Committee because it is the most common approach used in major spin-off transactions, aligns the interests of management with shareholders of each company, and maximizes the initial ownership stake among the management of each post-Separation company.
The closing price of the Company’s stock on October 31st, the final trading day pre-Separation, was $45.60. The opening price of the Company’s stock on November 1st, the first trading day post-Separation, was $17.02, which gives effect to the 1:2 reverse stock split. Given these changes, the conversion was conducted as follows:
Ÿ | Every one pre-Separation restricted share, RSU, and stock option was converted into 2.679201 post-Separation restricted shares, RSUs, and stock options, rounded down to the nearest full share. |
Ÿ | The strike price of every pre-Separation stock option was multiplied by 0.373246 to determine that option’s post-Separation strike price, rounded up to the nearest cent. |
Since Mr. Loranger was not an employee of any of the three post-Separation companies, his pre-Separation equity grants that he retained after his termination date were converted using a distributive method, where he received post-Separation equity in all three companies in the same proportion as shares in such three companies were distributed to shareholders of the Company.
No holder of restricted shares, RSUs, or stock options received any incremental economic benefit from the conversion. However, the conversion resulted in a modification to the Company’s expense of stock options previously granted, as required under ASC Topic 718. This one-time modification is included on an individual NEO basis in the “Option Awards” column of the Summary Compensation Table on Page 72. The expense modification by NEO was as follows:
Named Executive Officer | One-Time Stock Option Expense Modification($) | |||
Denise L. Ramos | $ | 334,686 | ||
Aris C. Chicles | $ | 128,555 | ||
Thomas M. Scalera | $ | 36,780 | ||
Robert J. Pagano, Jr. | $ | 164,019 | ||
Munish Nanda | $ | 71,554 | ||
Steven R. Loranger | $ | 2,219,751 | ||
Gretchen W. McClain | $ | 412,556 | ||
David F. Melcher | $ | 47,115 |
Special 2011 Long-Term Incentive Awards
On November 7, 2011, in connection with the Separation, the Committee awarded Founders’ Grants to selected members of the executive team to create significant alignment with the long-term success of the Company. The Committee approved these Founders’ Grants as a one-time event, with multiple-year vesting schedules for each grant, in order to strengthen the alignment of the new senior management team with shareholders of the post-Separation Company, to accelerate the growth of
stock ownership among the Company’s new senior management team, and to enhance employee retention. The Committee does not consider Founders’ Grants as part of annual compensation for the Company’s NEOs, and such awards are not expected to be repeated in future years.
Options, which constituted 50% of the target value of each Founders’ Grant, were granted with a termination date 10 years from the grant date, a strike price equal to the closing price on the date of the grant, and a three-year ratable vesting schedule. Options were converted from target dollar values to a number of options based upon the estimated lattice model value of $6.94 of each stock option on the date of the grant. RSUs, which constituted the remaining 50% of the target value of each Founders’ Grant, were valued using the closing stock price of Company stock on the date of the grant, and were granted with a three-year cliff vesting schedule.
The following table describes the 2010Founders’ Grants made to the NEOs. Stock options were granted with a strike price of $20.28, which was the closing price of the Company’s common stock on the November 7, 2011 grant date. For more details on these grants, please see “Compensation Tables – Grants of Plan-Based Awards in 2011” on Page 75.
Named Executive Officer | Total Founders’ Grants Expected Value ($) | RSU Award # Units | Non-Qualified Stock # Options | |||||||||
Denise L. Ramos | $ | 4,200,000 | 103,550 | 302,594 | ||||||||
Aris C. Chicles | $ | 1,260,000 | 31,065 | 90,778 | ||||||||
Thomas M. Scalera | $ | 693,000 | 17,086 | 49,928 | ||||||||
Robert J. Pagano, Jr. | $ | 600,000 | 14,793 | 43,228 | ||||||||
Munish Nanda | $ | 495,000 | 12,204 | 35,663 |
ITT Retirement Savings Plan for Salaried Employees
Most of the Company’s salaried employees who work in the United States participate in the ITT Retirement Savings Plan for Salaried Employees, a tax-qualified savings plan, which allows employees to contribute to the plan on a before-tax basis and/or on an after-tax basis. The Company makes a core contribution of 3 or 4% of pay to the plan for all eligible employees, and matches 50% of employee contributions, up to 6% of pay. The core contribution is 3% for employees whose age plus service is less than 50, and 4% for employees whose age plus service is at least 50. In addition, employees who were participating in the ITT Salaried Retirement Plan and whose age and service is at least 60 may be eligible for up to five years of transition employer contributions following the Separation. Prior to the Separation, the floor contribution in the ITT Salaried Investment and Savings Plan was 1/2 of 1% and all contributions were based on base salary only.
Employee Benefits and Perquisites
Executives, including the NEOs, are eligible to participate in ITT’s broad-based employee benefits program. The program includes an investment and savings plan that includes before-tax and after-tax savings features, group medical and dental coverage, group life insurance, group accidental death and dismemberment insurance and other benefit plans. These other benefit plans include short- and long-term disability insurance, long-term care insurance and a flexible spending account plan. Prior to the Separation, employees also participated in a pension program.
The Company provides only those perquisites that it considers to be reasonable and consistent with competitive practice. Perquisites available for NEOs include a car allowance up to $1,300 per month and financial and estate planning. In 2011, the Company prohibited any future reimbursements for personal income taxes due on these perquisites.
Relocation Expenses for Mr. Pagano: In order to promote Mr. Pagano to the role of President of the Industrial Processes segment, we agreed to reimburse him for relocation expenses to assist in the costs associated with his move from White Plains, New York to the Industrial Processes headquarters in Seneca Falls, NY, in 2010. Costs associated with this relocation that were incurred in fiscal year 2011 included reimbursement of loss on the sale of his home, closing costs, the movement of physical goods, attorney’s fees and duplicate costs associated with maintaining his home in White Plains prior to its sale. As part of the terms that were agreed as part of his assumption of the new role, and as permitted under the Company’s relocation program, he received reimbursement for taxes associated with certain of these relocation expenses. The relocation was completed in 2011, and thus the amount paid by the Company to Mr. Pagano in connection with this relocation was a non-recurring event.
Salaried Retirement Plan. Up until the Separation date, most of the Company’s salaried employees who work in the United States participated in the ITT Salaried Retirement Plan. Under the plan, participants had the option, on an annual basis, to elect to be covered by either a Traditional Pension Plan or a Pension Equity Plan formula for future pension accruals. The ITT Salaried Retirement Plan was a tax-qualified plan, which provided a base of financial security for employees after they cease working. The ITT Salaried Retirement Plan was transferred to Exelis by the Company, effective on the Separation date, and both service credit and accrued benefits were frozen as of that date, subject to transition employer contributions into the ITT Retirement Savings Plan for Salaried Employees.
Excess Pension Plans. Because federal law limits the amount of benefits that can be paid and the amount of compensation that can be recognized under tax-qualified retirement plans, the Company established and maintained non-qualified, unfunded excess pension plans solely to pay retirement benefits that could not be paid from the ITT Salaried Retirement Plan. Benefits under the excess pension plans were generally paid directly by the Company. Participating officers with excess plan benefits had the opportunity to make a one-time election prior to December 31, 2008 to receive their excess benefit earned under the Traditional Pension Plan formula (described on Page 82) in a single discounted sum payment or as an annuity. An election of a single-sum payment was only effective if the officer met the requirements for early or normal retirement benefits under the plan; otherwise, the excess benefit earned under the Traditional Pension Plan formula would be paid as an annuity. Since the excess pension plans are an unfunded obligation of the Company, in the event of a change of control, any excess plan benefit would become immediately payable, subject to any applicable Section 409A restrictions with respect to form and timing of payments, and would be paid in a single discounted sum. The single-sum payment provision provides executives the earliest possible access to the funds in the event of a change of control, and avoids leaving unfunded pension payments in the hands of the acquirer. The Excess Pension Plan that provided additional benefits than those that could be received under the tax-qualified ITT Salaried Retirement Plan was transferred to Exelis by the Company, effective on the Separation date, and both service credit and accrued benefits were frozen as of that date, subject to transition credits.
Deferred Compensation Plan. Our NEOs are eligible to participate in the ITT Deferred Compensation Plan. This plan provides executives an opportunity to defer receipt of between 2% and 90% of any AIP payments they earn. The amount of deferred compensation ultimately received reflects the performance of benchmark investment funds made available under the Deferred Compensation Plan as selected by the executive. Participants in the Deferred Compensation Plan may elect a fund that tracks the performance of ITT common stock.
Mr. Loranger’s Non-Qualified Pension Arrangement. Mr. Loranger’s employment agreement (the “Steven R. Loranger Employment Agreement”), as described on Pages 66 to 67, provides for a non-qualified pension arrangement. Because Mr. Loranger forfeited certain employment benefits, including pension arrangements, when he left his prior employer, the Steven R. Loranger Employment Agreement provides him with a pension arrangement similar to the arrangement he forfeited.
Pensions and other post-retirement compensation for the NEOs are discussed in more detail in the 2011 Pension Benefits narrative, table and footnotes on Pages 81 to 85, the Potential Post-Employment Compensation tables and footnotes on Pages 93 to 102 and in descriptions of the compensation arrangements for Mr. Loranger and Ms. Ramos on Pages 66 to 67. The Steven R. Loranger Employment Agreement was negotiated when Mr. Loranger joined the Company.
The Company maintains two severance plans for its senior executives — the Senior Executive Severance Pay Plan and the Special Senior Executive Severance Pay Plan. The Company’s Senior Executive Severance Pay Plan and Special Senior Executive Severance Pay Plan were originally established in 1984 and are regularly reviewed by the Committee. These plans are described in more detail on Pages 90 to 91. The severance plans apply to the Company’s key employees as defined by Section 409A. The Company’s severance plan arrangements are not considered in determining other elements of compensation.
Senior Executive Severance Pay Plan. The purpose of this plan is to provide a period of transition for senior executives. Senior executives, other than Mr. Loranger, who are U.S. citizens or who are employed in the United States are covered by this plan. The plan generally provides for severance payments if the Company terminates a senior executive’s employment without cause.
The exceptions to severance payment are:
Ÿ | The executive terminates his or her own employment |
Ÿ | The executive’s employment is terminated for cause |
Ÿ | Termination occurs after the executive’s normal retirement date (defined as the first of the month which coincides with or follows the executive’s 65th birthday) |
Ÿ | Termination occurs in certain divestiture instances if the executive accepts employment or refuses comparable employment. |
No severance is provided for termination for cause, because the Company believes employees terminated for cause should not receive additional compensation. No severance is provided in the case of termination after a normal retirement date because the executive will be eligible for retirement payments. No severance is provided when an executive accepts or refuses comparable employment because the executive has the opportunity to receive employment income from another party under comparable circumstances.
Ms. Ramos and Messrs. Chicles, Scalera, Pagano, and Nanda participate in this plan. Mr. Loranger did not participate in this plan because his severance arrangements, including severance pay and benefits upon termination from the Company, were provided separately under the Steven R. Loranger Employment Agreement described on Pages 66 to 67.
Special Senior Executive Severance Pay Plan. The purpose of this plan is to provide compensation in the case of termination of employment in connection with an acceleration event (defined on Pages 91 to 92 of this Proxy Statement) including a change of control. The provisions of this plan are specifically designed to address the inability of senior executives to influence the Company’s future performance after certain change of control events. The plan is structured to encourage executives to act in the best interests of shareholders by providing for certain compensation and retention benefits and payments, including change of control provisions, in the case of an acceleration event.
The purposes of these provisions are to:
Ÿ | Provide for continuing cohesive operations as executives evaluate a transaction, which, without change of control protection, could be personally adverse to the executive |
Ÿ | Keep executives focused on preserving value for shareholders |
Ÿ | Retain key talent in the face of potential transactions |
Ÿ | Aid in attracting talented employees in the competitive marketplace. |
As discussed above, this plan provides severance benefits for covered executives, including any NEO whose employment is terminated by the Company other than for cause, or where the covered executive terminates his or her employment for good reason within two years after the occurrence of an acceleration event as described below (including a termination due to death or disability) or if during the two-year period following an acceleration event, the covered executive had grounds to resign with good reason or the covered executive’s employment is terminated in contemplation of an acceleration event that ultimately occurs.
The plan is designed to put the executive in the same position, from a compensation and benefits standpoint, as he or she would have been in without the acceleration event, on a pre-tax basis. With respect to incentive plan awards, since the executive will no longer have the ability to influence the corporate objectives upon which the awards are based, the plan provides that any AIP Awards are paid out at target 100%. In the event of a change of control, a pro-rata portion of outstanding TSR Awards will be paid through the date of the change of control based on actual performance and the balance of the award will be paid at target (100%). More information about the Special Senior Executive Severance Pay Plan is provided on Pages 90 to 91 of this Proxy Statement.
In October 2011, effective with the Separation, the Company amended this plan as follows:
Ÿ | Eliminated all executive perquisites that would previously have been provided during the severance period. |
Ÿ | Amended its calculation of severance benefits so that current salary and target bonus are used in the severance formula, replacing the highest salary and highest actual bonus over the previous three years. |
Ÿ | Eliminated the plan provision that provided for reimbursement of excise taxes and subsequent income tax gross-up on that payment, should the termination payments upon the acceleration event result in an excise tax due under Internal Revenue Code (“IRC”) Section 280G. The excise tax gross-up was replaced with a “best net” provision, which provides either an unreduced benefit or a reduction in payments sufficient to avoid triggering an excise tax, whichever is better after-tax. |
The Company made these changes to the plan in order to improve Company alignment with shareholder interests.
Ms. Ramos, and Messrs. Chicles, Scalera, Pagano, and Nanda participate in the Special Senior Executive Severance Pay Plan. Mr. Loranger did not participate in the plan because his severance arrangements, which included severance pay and benefits upon termination from the Company in connection with an acceleration event, were set forth in the Steven R. Loranger Employment Agreement, described on Pages 66 to 67.
CEO COMPENSATION AND EMPLOYMENT AGREEMENTS
Denise L. Ramos Compensation and Employment Agreements: Upon her appointment as Chief Executive Officer and President of the Company, effective October 31, 2011, Ms. Ramos’s compensation in the role was as follows:
Ÿ | Annual base salary of $850,000. |
Ÿ | AIP target incentive payment of 100% of base salary, with a range of possible payment of 0% to 200% of the target. The AIP target incentive percentage is effective with the 2012 fiscal year. |
Ÿ | Long-Term Incentive Award target award expected value of $2,800,000. |
Ms. Ramos’s employment letter also provided that Ms. Ramos would receive a Founders’ Grant in connection with the Separation composed of nonqualified stock options and RSUs with terms set forth in her employment letter and having an aggregate expected value of $4,200,000, based on the closing price of the Company’s common stock on the November 7, 2011 grant date.
If the Company terminates her employment other than for cause (as defined in her employment letter) and other than as a result of her death or disability, in any case prior to her normal retirement date, she will, subject to certain conditions and limitations set forth in her employment letter, be entitled to severance pay in an amount equal to two times the sum of her then-current annual base salary and target annual incentive payable in installments over 24 months and will also be entitled to receive certain benefits during that time. The terms of her employment agreement were described in the amended 8-K filing on October 17, 2011.
Steven R. Loranger Compensation and Employment Agreements: Mr. Loranger’s compensation as Chief Executive Officer in 2011 was as follows:
Ÿ | Annual base salary of $1,200,000, effective March 7, 2011. |
Ÿ | AIP target incentive payment of 130% of base salary, with a range of possible payment of 0% to 200% of the target. |
Ÿ | Long-Term Incentive Award target of $6,400,000, split equally in 2011 between stock option value, restricted stock value, and TSR Award target value. |
On October 14, pursuant to the terms of his Employment Agreement, ITT Corporation entered into an agreement with Mr. Loranger whereby he would resign for “good reason” in connection with the Separation. Mr. Loranger subsequently resigned as Chairman, President and Chief Executive Officer of the Company on October 31, 2011, the date of the Separation. The terms of his resignation agreement were described in the 8-K filing on October 20, 2011. They included the following compensation and benefit payments, all of which were consistent with his existing Employment Agreement and subsequent voluntary termination for “good reason”:
Ÿ | Any earned but unpaid base salary through the date of termination |
Ÿ | A one-time payment of $999,452, which represents a reduced, pro-rated AIP payment of 100% of his annual salary times the percentage of the 2011 calendar year for which Mr. Loranger was employed |
Ÿ | Two years’ worth of base salary plus annual target incentive payments, with payments beginning six months from his resignation date and subsequently paid over 18 months |
Ÿ | Continuation of health and welfare benefits for two years following the resignation date |
Ÿ | Continuation of vesting in previously-granted stock options and restricted shares, based on the terms and conditions in the original grant agreements, subject to the conversion of outstanding equity grants upon Separation |
Ÿ | Calculation of the awards earned to date in outstanding TSR Award plan, and payments in cash at target values for uncompleted portions of outstanding TSR Awards, subject to the original vesting schedules |
Ÿ | Accrued benefits in the Company’s pension, savings, and deferred compensation plans. |
In addition to the payments consistent with his existing Employment Agreement, the Committee also approved a target payment of $600,000, payable at the discretion of the Committee based upon the successful completion of key milestones related to the Separation. The bonus was paid in March 2012.
As part of the resignation agreement, Mr. Loranger agreed that during the employment term and for two years after termination, he would not compete with the Company. He also agreed that he would not solicit or hire any of the Company’s employees or anyone who was an employee in the previous six months before his departure without the Company’s consent, or solicit any of the Company’s customers or business. Mr. Loranger also agreed not to make any false or disparaging statements at any time about the Company. In addition, Mr. Loranger agreed to follow our Code of Conduct, and he agreed not to reveal any confidential Company information or personal information about our officers, directors or employees except as necessary during employment. Mr. Loranger has assigned all rights to any Company discoveries, inventions or ideas to the Company. If Mr. Loranger violates any of these covenants, the Company may stop paying any post-termination benefits.
KEY PARTICIPANTS IN THE COMPENSATION PROCESS
Role of the Committee: The Committee, with input from Management and external data and advice from its Compensation Consultant, reviews and approves each of the compensation targets for all of the Company’s executive officers, including its NEOs. The Committee reviewed each compensation element for the Chief Executive Officer and other NEOs, and made the final determination regarding executive compensation for these officers using the processes described in this Compensation Discussion and Analysis. It also makes determinations with respect to the AIP as it relates to our executive officers, including the approval of annual performance goals and subsequent full-year achievement against those goals. It administers all elements of the Company’s long-term incentive awardsgrant program, and approves the benefits and perquisites offered to executive officers. It evaluates all compensation programs on an annual basis to ensure that no plans induce or encourage excessive risk-taking by its participants.
Role of Management: The Committee has delegated to the Company’s senior human resources executive responsibility for administering the executive compensation program. During 2011, the Company’s Chief Executive Officer, senior human resources executive, as well as other senior executives, made recommendations to the Committee regarding executive compensation actions and incentive awards. They serve as a liaison with the Independent Compensation Consultant, providing internal data on an as-needed basis so that the Independent Compensation Consultant can provide comparative analyses to the Committee. In 2011, the Company’s human resources, finance and legal departments supported the work of the Committee, provided information, answered questions and responded to requests.
Role of the Independent Compensation Consultant: In 2011, the Committee retained Pay Governance, LLC (“Pay Governance” or the “Compensation Consultant”) as its independent compensation consultant. Pay Governance provides independent consulting services to support the Committee in fulfilling its obligations under its charter, the material terms of which are described beginning on Page 33. The Compensation Consultant also provided independent consulting services in support of the Nominating and Governance Committee’s charter, including providing competitive data on director compensation.
The Compensation Consultant’s engagement leader provided objective expert analyses, assessments, research and recommendations for executive and non-executive employee compensation programs, incentives, perquisites, and compensation standards. In this capacity, the Compensation Consultant provided services that related solely to work performed for and at the direction of the Committee including analysis of material prepared by the Management for the NEOs.
TSR | Non-Qualified | ||||||||||||||
(Target Cash | Stock Option | Restricted Stock | |||||||||||||
Named Executive | Award) | Award | Award | ||||||||||||
Officer | $ | # Options | # Shares | ||||||||||||
Steven R. Loranger | 1,980,000 | 132,265 | 41,267 | ||||||||||||
Denise L. Ramos | 400,000 | 26,721 | 8,337 | ||||||||||||
Gretchen W. McClain | 360,000 | 24,049 | 7,503 | ||||||||||||
David F. Melcher | 360,000 | 24,049 | 7,503 | ||||||||||||
Scott A. Crum | 220,000 | 14,697 | 4,585 | ||||||||||||
Fees for the Compensation Consultant:
Ÿ Services performed that related solely to work performed for, and at the direction of, the Committee or the Nominating and Governance Committee, and analyses of documents prepared by Management for the Committee’s review during 2011: | $ | 898,315 | ||
Ÿ Percentage of the above fees related specifically to work required as part of the Separation: | 80% | |||
Ÿ Other services performed for the Company during 2011: | $ | 0 |
The Committee annually reviews the Compensation Consultant’s independence, and determined the Compensation Consultant was independent. The Committee has sole authority to retain and terminate the Compensation Consultant with respect to compensation matters and the Nominating and Governance Committee has sole authority to retain and terminate the Compensation Consultant with respect to nominating and governance matters.
RECOUPMENT POLICY
In 2008, the Company, upon the recommendation of the Compensation and Personnel Committee, adopted a policy that provides for recoupment of performance-based compensation if the Board of Directors determines that a senior executive has engaged in fraud or willful misconduct that caused or otherwise contributed to the need for a material restatement of the Company’s financial results. In such a situation, the Board will review all performance-based compensation awarded to or earned by that senior executive on the basis of the Company’s financial performance during fiscal periods materially affected by the restatement. This would include annual cash incentive/incentive and bonus awards and all forms of equity-based compensation. If, in the Board’s view, the performance-based compensation related to the Company’s financial performance would have been lower if it had been based on the restated results, the Board will, to the extent permitted by applicable law, seek recoupment from that senior executive of any portion of such performance-based compensation as it deems appropriate after a review of all relevant facts and circumstances. The NEOs are covered by this policy.
EXECUTIVE STOCK OWNERSHIP GUIDELINES
The Company maintains stock ownership guidelines for all of Material Non-Public Information:its executives, including the NEOs. The guidelines, which are described in greater detail on Pages 5 to 6 of this Proxy Statement, specify the desired levels of Company stock ownership and encourage a set of behaviors for each officer to reach the guideline levels. The approved guidelines require share ownership expressed as a multiple of base salary for all corporate officers. The guidelines for all Company executives are:
CEO | 5 X Annual Base Salary | |
CFO and EVP | 3 X Annual Base Salary | |
Senior Vice Presidents | 2 X Annual Base Salary | |
Vice Presidents | 1 X Annual Base Salary |
In achieving these ownership levels, shares owned outright, Company restricted stock and RSUs, shares held in the Company’s dividend reinvestment plan, shares owned in the ITT Salaried Investment and Savings Plan, and “phantom” shares held in a fund that tracks an index of the Company’s stock in the deferred compensation plan are considered. As of the writing of this proxy statement, all NEOs either have met the guideline, or are expected to meet the guideline within the next two years.
BUSINESS RISK AND COMPENSATION
In 2011, the Committee evaluated risk factors associated with the Company’s businesses in determining compensation structure and pay practices. The structure of the Board of Director Committees facilitates this evaluation and determination. During 2011, the Chair of the Committee was a member of the Audit Committee and the Audit Committee Chair was a member of the Committee. This membership overlap provides insight into the Company’s business risks and affords the Committee access to the information necessary to consider the impact of business risks on compensation structure and pay practices. Further, overall enterprise risk is considered and discussed at Board meetings, providing additional important information to the Committee. The Chief Executive Officer and President, and the Senior Vice President and Chief Financial Officer, attend those portions of the Committee meetings at which plan features and design configurations of the Company’s annual and long-term incentive plans are considered and approved.
Compensation across the enterprise is structured so that unnecessary or excessive risk-taking behavior is discouraged. Further, total compensation for senior officers is heavily weighted toward long-term compensation consistent with the Company’s compensation philosophy, which is focused on long-term value creation. This long-term weighting discourages behaviors that encourage short-term risks.
Named Executive Officer Compensation. Annual base salary, annual incentives, and long-term incentives provide the foundation for NEO compensation. Additional compensation components, which supplement these foundational components, are also discussed in this Compensation Discussion and Analysis.
The following table summarizes representative compensation components or policies and relevant risk mitigation factors:
Compensation Component or Policy | Risk Mitigation Factor | |
Salary | Calculation is based on market rates. | |
Base amount provides stability and minimizes risk-taking incentives. | ||
Annual Incentive Plan | AIP design emphasizes overall performance and collaboration among business Segments. | |
AIP components focus on metrics that encourage operating performance and earnings per share appreciation. | ||
AIP design tailored to meet unique business considerations for Corporate headquarters and business Segments. | ||
Individual AIP components and total AIP awards are capped. | ||
Long-Term Incentive Awards | The three-year vesting threshold for senior vice presidents and 10-year option terms encourage behaviors focused on long-term value creation. | |
Restricted Stock or Restricted Stock Units | Restricted stock or RSUs generally vest after three years. | |
Stock Options | Stock options vest after three years for the Chief Executive Officer and President, and for senior vice presidents, and in one-third cumulative annual installments after the first, second and third anniversary of the grant date for other optionees. Options awarded in 2010 and 2011 and options awarded prior to 2005 expire 10 years after the grant date. Options awarded between 2005 and 2009 expire seven years after the grant date. | |
Total Shareholder Return Awards | The TSR long-term award is based on three-year share price performance and encourages behaviors focused on long-term goals, while discouraging behaviors focused on short-term risks. | |
Perquisites | Limited perquisites are based on competitive market data. The Committee has determined that tax reimbursements related to financial counseling and tax preparation for senior executives associated with the 2011 tax year will be eliminated. No salary increase will be provided to offset the elimination of tax reimbursement. | |
Severance and Pension benefits | Severance and pension benefits are in line with competitive market data. | |
Recoupment Policy | Policy provides mechanism for senior executive compensation recapture in certain situations involving fraud or willful misconduct. | |
Officer Share Ownership Guidelines | Company officers are required to own Company shares or share equivalents up to 5x base salary, depending on the level of the officer. Share ownership guidelines align executive and shareholder interests. Company policy prohibits speculative trading in and out of ITT securities, including prohibitions on short sales and leverage transactions, such as puts, calls, and listed and unlisted options. |
CONSIDERATION OF MATERIAL NON-PUBLIC INFORMATION
The Company typically closes the window for insiders to trade in the Company’s stock in advance of, and for a period of time immediately following, earnings releases and Board and Committee meetings because the Company and insiders may be in possession of material non-public information. The first quarter Committee meeting at which compensation decisions and awards are typically made for employees usually occurs during a Board meeting period, so stock option awards may occur at a time when the Company is in possession of material non-public information. The Committee does not consider the possible
55
Non-qualified stock option awards and restricted stock awards or RSU Awards granted to NEOs, senior and other executives, and Directors are awarded and priced on the same date as the grantapproval date. The Company may also award non-qualified stock options in the case of the promotion of an existing employee or hiring of a new employee. Again, these non-qualified stock option grants may be made at a time the Company is in possession of material non-public information related to the promotion or the hiring of a new employee or other matters. The Company does not time its release of material non-public information for the purpose of affecting the value of executive compensation.
56
57
58
Section 162(m) of the Internal Revenue Code places a limit of $1,000,000 on the amount of compensation that the Company may deduct in any one year with respect to its Chief Executive Officer and the three other highest-paid NEOs, other than the Chief Financial Officer. There is an exception to the $1,000,000 limitation for performance-based compensation meeting certain requirements. Compensation attributable to awards under the Company’s AIP and long-term incentive program are generally structured to qualify as performance-based compensation under Section 162(m).
However, the Compensation and Personnel Committee realizes that the evaluation of the overall performance of the senior executives cannot be reduced in all cases to a fixed formula. There may be situations in which the prudent use of discretion in determining pay levels is in the best interests of the Company and its shareholders and, therefore, desirable. In those situations where discretion is used, weawards may structure awardsbe structured in ways that will not permit them to qualify as performance-based compensation under Section 162(m). The compensation of Mr. Loranger may not be fully deductible under these criteria. However, the Committee does not believe that such loss of deductibility would have any material impact on the financial condition of the Company.
The Company’s plans are intended to comply with Section 409A, to the extent applicable, and the Company made amendments to the plans during 2008 in this regard. The amendments are described in the sections that follow. While the Company complies with other applicable sections of the Internal Revenue Code with respect to compensation, the Company and the Committee do not consider other tax implications in designing its compensation programs.
59
COMPENSATION TABLES
Change in | |||||||||||||||||||||||||||||||||||||||||||||
Pension | |||||||||||||||||||||||||||||||||||||||||||||
Non- | Value & | ||||||||||||||||||||||||||||||||||||||||||||
Equity | Nonqualified | ||||||||||||||||||||||||||||||||||||||||||||
Incentive | Deferred | ||||||||||||||||||||||||||||||||||||||||||||
Name & Principal | Stock | Option | Plan | Compensation | All Other | ||||||||||||||||||||||||||||||||||||||||
Position | Year | Salary | Bonus | Awards | Awards | Compensation | Earnings | Compensation | Total | ||||||||||||||||||||||||||||||||||||
(a) | (b) | ($)(c) | ($)(d) | ($)(e) | ($)(f) | ($)(g) | ($)(h) | ($)(i) | ($)(j) | ||||||||||||||||||||||||||||||||||||
Steven R. Loranger | 2009 | 1,130,000 | — | 3,713,945 | 1,744,716 | 1,909,700 | 4,940,075 | 406,545 | 13,844,981 | ||||||||||||||||||||||||||||||||||||
Chief Executive Officer | 2008 | 1,119,615 | — | 4,806,163 | 1,499,000 | 2,534,025 | 2,508,911 | 211,125 | 12,678,839 | ||||||||||||||||||||||||||||||||||||
2007 | 1,056,539 | — | 4,419,247 | 1,440,253 | 2,250,000 | 1,220,271 | 211,975 | 10,598,285 | |||||||||||||||||||||||||||||||||||||
Denise L. Ramos | 2009 | 540,000 | — | 675,272 | 317,269 | 596,700 | 135,414 | 63,377 | 2,328,032 | ||||||||||||||||||||||||||||||||||||
Senior Vice President | 2008 | 533,077 | 150,000 | 873,838 | 272,593 | 870,900 | 70,593 | 184,727 | 2,955,728 | ||||||||||||||||||||||||||||||||||||
and Chief Financial Officer | 2007 | 250,000 | 150,000 | 1,856,170 | 348,283 | 525,000 | 17,743 | 358,155 | 3,505,351 | ||||||||||||||||||||||||||||||||||||
Gretchen W. McClain | 2009 | 504,054 | 61,000 | 2,426,708 | 317,269 | 474,600 | 70,753 | 65,453 | 3,919,837 | ||||||||||||||||||||||||||||||||||||
Senior Vice President | 2008 | 426,462 | — | 801,010 | 249,883 | 527,700 | 39,611 | 139,099 | 2,183,765 | ||||||||||||||||||||||||||||||||||||
and President, Fluid and Motion Control | 2007 | 381,250 | 49,920 | 662,881 | 205,047 | 340,080 | 29,647 | 213,189 | 1,882,014 | ||||||||||||||||||||||||||||||||||||
David F. Melcher | 2009 | 425,000 | — | 468,921 | 224,733 | 386,750 | 66,150 | 58,217 | 1,629,771 | ||||||||||||||||||||||||||||||||||||
Senior Vice President and President, Defense and Information Solutions | |||||||||||||||||||||||||||||||||||||||||||||
Scott A. Crum | 2009 | 380,000 | — | 407,611 | 191,540 | 345,800 | 141,882 | 48,911 | 1,515,744 | ||||||||||||||||||||||||||||||||||||
Senior Vice President and Director Human Resources | |||||||||||||||||||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Value and | All Other Compensation ($)(6) | Total ($) | |||||||||||||||||||||||||||
Denise L. Ramos | 2011 | 640,788 | 20,000 | 3,158,816 | 2,965,014 | 687,500 | 265,992 | 51,443 | 7,789,553 | |||||||||||||||||||||||||||
Chief Executive | 2010 | 580,384 | — | 845,946 | 413,641 | 774,300 | 124,047 | 67,981 | 2,806,299 | |||||||||||||||||||||||||||
Officer & President | 2009 | 540,000 | — | 675,272 | 317,269 | 596,700 | 135,414 | 63,377 | 2,328,032 | |||||||||||||||||||||||||||
Aris C. Chicles Executive Vice President, Strategy | 2011 | 365,385 | 7,500 | 1,010,543 | 949,151 | 483,500 | 129,839 | 35,785 | 2,981,703 | |||||||||||||||||||||||||||
Thomas M. Scalera Chief Financial Officer | 2011 | 289,800 | 1,850 | 445,763 | 433,008 | 296,800 | 34,941 | 12,840 | 1,515,002 | |||||||||||||||||||||||||||
Robert J. Pagano, Jr. President, Industrial Process | 2011 | 355,273 | 7,072 | 564,697 | 596,532 | 376,100 | 460,899 | 1,294,205 | 3,654,778 | |||||||||||||||||||||||||||
Munish Nanda President, Control Technologies | 2011 | 319,065 | 5,000 | 465,878 | 428,383 | 364,100 | 27,453 | 79,582 | 1,689,461 | |||||||||||||||||||||||||||
Steven R. Loranger Former Chairman of |
| 2011 2010 2009 |
|
| 1,007,692 1,154,231 1,130,000 |
|
| 710,000 — — |
|
| 4,235,275 4,187,372 3,713,945 |
|
| 4,341,036 2,047,462 1,744,716 |
|
| — 2,328,352 1,909,700 |
|
| 4,431,301 2,602,844 4,940,075 |
|
| 1,332,915 314,791 406,545 |
|
| 16,058,219 13,844,981 |
| |||||||||
the Board, President | ||||||||||||||||||||||||||||||||||||
and Chief Executive Officer | ||||||||||||||||||||||||||||||||||||
Gretchen W. McClain |
| 2011 2010 2009 |
|
| 494,231 527,604 504,054 |
|
| — — 61,000 |
|
| 1,058,822 761,335 2,426,708 |
|
| 942,841 372,279 317,269 |
|
| — 654,700 474,600 |
|
| 250,968 97,308 70,753 |
|
| 48,372 74,141 65,453 |
|
| 2,795,234 3,919,837 |
| |||||||||
Former Senior Vice President and Former | ||||||||||||||||||||||||||||||||||||
President, Fluid and Motion Control | ||||||||||||||||||||||||||||||||||||
David F. Melcher |
| 2011 2010 2009 |
|
| 494,231 509,808 425,000 |
|
| — — — |
|
| 1,058,822 761,335 468,921 |
|
| 577,440 372,279 224,733 |
|
| — 654,700 386,750 |
|
| 200,596 93,107 66,150 |
|
| 47,696 56,959 58,217 |
|
| 2,378,785 1,629,771 |
| |||||||||
Former Senior Vice President and Former | ||||||||||||||||||||||||||||||||||||
President, Defense & Information Solutions |
(1) | Amounts in this column for Ms. Ramos and Messrs. Chicles, Scalera, Pagano, Nanda and Loranger include the |
(2) | Amounts in this column include the aggregate grant date fair value computed in accordance with |
(3) | Amounts in |
(4) | Amounts in this column for Messrs. Chicles, Scalera, Pagano, and Nanda in 2011 include the |
60
(5) | No NEO received preferential or above-market earnings |
(6) | Amounts in this column for 2011 represent items specified in the All Other Compensation |
Name | Executive Perquisites | All Other Compensation | ||||||||||||||||||||||||||||||||||||||
Personal Use of Corporate Aircraft ($)(1) | Financial Counseling ($)(2) | Auto Allowances ($)(3) | Total Perquisites ($) | Supplemental Savings Plan Contributions ($)(4) | Tax Reimbursements | Relocation Expense ($)(6) | 401(k) Employer Contributions ($)(7) | Other ($)(8) | Total All Other | |||||||||||||||||||||||||||||||
Denise L. Ramos | 2,566 | 5,260 | 15,600 | 23,426 | 16,142 | — | — | 8,575 | 3,300 | 51,443 | ||||||||||||||||||||||||||||||
Aris C. Chicles | — | 5,200 | 15,600 | 20,800 | 5,340 | — | — | 8,575 | 1,070 | 35,785 | ||||||||||||||||||||||||||||||
Thomas M. Scalera | — | — | 2,600 | 2,600 | — | — | — | 9,952 | 288 | 12,840 | ||||||||||||||||||||||||||||||
Robert J. Pagano, Jr. | — | — | 14,000 | 14,000 | 4,641 | 523,861 | 742,528 | 8,575 | 600 | 1,294,205 | ||||||||||||||||||||||||||||||
Munish Nanda | — | — | 13,200 | 13,200 | 3,024 | — | 54,391 | 8,510 | 457 | 79,582 | ||||||||||||||||||||||||||||||
Steven R. Loranger | 131,520 | 85,493 | 13,000 | 230,013 | 17,002 | 73,475 | — | 8,575 | 1,003,850 | | 1,332,915 | | ||||||||||||||||||||||||||||
Gretchen W. McClain | 5,010 | 12,195 | 13,000 | 30,205 | 8,728 | — | — | 8,575 | 864 | 48,372 | ||||||||||||||||||||||||||||||
David F. Melcher | — | 13,394 | 13,000 | 26,394 | 7,148 | 2,997 | — | 8,575 | 2,582 | 47,696 |
(1) | Amounts reflect the aggregate incremental cost to ITT for personal use of the corporate aircraft for Ms. Ramos, Mr. Loranger and Ms. McClain. Mr. Loranger’s employment agreement with the Company permitted occasional personal use of the Company aircraft. The aggregate incremental cost to the Company is determined on a per flight basis and includes the costs of fuel, a pro-rata share of repairs and maintenance, landing and storage fees, crew-related expenses and other miscellaneous variable costs. The corporate aircraft was sold in 2011 and NEOs are not eligible for this benefit going forward. |
(2) | Amounts represent financial counseling and tax service fees paid during 2011. Financial counseling and tax service fees reflect fees incurred during the calendar year prior to the Separation. |
(3) | Semi-monthly auto allowances are provided to a range of executives, including the NEOs. |
(4) | Company contributions to the ITT |
Perquisites | Other Compensation | |||||||||||||||||||||||||||||||||||||||||||||||||
Personal | ||||||||||||||||||||||||||||||||||||||||||||||||||
Use of | Excess | Tax | Total | |||||||||||||||||||||||||||||||||||||||||||||||
Corporate | Financial | Auto | Total | Savings Plan | Reimburse- | 401-K | All Other | |||||||||||||||||||||||||||||||||||||||||||
Aircraft | Counseling | Allowances | Other | Perquisites | Contributions | ments | Match | Other | Compensation | |||||||||||||||||||||||||||||||||||||||||
Name | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | ||||||||||||||||||||||||||||||||||||||||
Steven R. Loranger | 200,488 | 90,599 | 15,600 | — | 306,687 | 31,113 | 54,908 | 8,575 | 5,262 | 406,545 | ||||||||||||||||||||||||||||||||||||||||
Denise L. Ramos | — | 16,289 | 15,600 | — | 31,889 | 10,408 | 10,792 | 8,575 | 1,713 | 63,377 | ||||||||||||||||||||||||||||||||||||||||
Gretchen W. McClain | 14,270 | 10,492 | 15,600 | — | 40,362 | 8,853 | 6,477 | 8,575 | 1,186 | 65,453 | ||||||||||||||||||||||||||||||||||||||||
David F. Melcher | — | 18,825 | 13,200 | — | 32,025 | 6,381 | 8,941 | 8,575 | 2,295 | 58,217 | ||||||||||||||||||||||||||||||||||||||||
Scott A. Crum | — | 11,622 | 15,600 | — | 27,222 | 4,781 | 7,062 | 8,575 | 1,271 | 48,911 | ||||||||||||||||||||||||||||||||||||||||
(5) | ||
The amount for Mr. Pagano reflects a tax equalization payment related to his relocation described below, which provided him with the |
Messrs. Loranger and Melcher reflect tax reimbursement for financial counseling services provided in 2011. Tax reimbursement on all executive perquisites was discontinued as of the Separation date. |
(6) | The amount for Mr. |
(7) | Amounts represent the aggregate of the Company’s |
(8) | Amounts include taxable group term-life |
61
The following table provides information about 2011 equity and non-equity awards for the 2009 NEOs. The table includes the grant date for equity-based awards, the estimated future payouts under non-equity incentive plan awards (which consist of potential payouts under the 20092011 AIP) and estimated future payouts under 20092011 equity incentive plan awards, (includingincluding the TSR target award granted in 20092011 for the 2009-20112011-2013 performance period (each unit equals $1)). Also provided is the number of shares underlying all other stock awards, comprisedcomposed of restricted stockRSU and non-qualified stock option awards. The table also provides the exercise price of the non-qualified stock option awards, reflecting the closing price of ITT stock on the grant date and the grant date fair value of each equity award computed under FASB ASC Topic 718. Grants made prior to the Separation date do not give effect to the 1:2 reverse stock split, and grants made subsequent to the Separation date give effect to the 1:2 reverse stock split. The compensation plans, under which the grants in the following table were made are described in the Compensation Discussion and Analysis, beginning on page 39Page 43 of this Proxy Statement, and include the AIP, TSR restricted stockAwards, RSU awards, and non-qualified stock options awards.
All | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock | All Other | Grant | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Awards: | Option | Date | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts Under | Number | Awards: | Exercise | Fair | |||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Equity Incentive Plan | Estimated Future Payouts Under | of | Number | or Base | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||
Awards | Equity Incentive Plan Awards | Shares | of Securities | Price of | of Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||
of Stock | Underlying | Option | and Option | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Grant | Threshold | Target | Maximum | Threshold | Target | Maximum | or Units | Options | Awards | Awards | |||||||||||||||||||||||||||||||||||||||||||||
Name | Date | ($) | ($) | ($) | ($) | ($) | ($) | (#) | (#) | ($/Sh) | ($) | ||||||||||||||||||||||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) | ||||||||||||||||||||||||||||||||||||||||||||
Steven R. Loranger | 734,500 | 1,469,000 | 2,938,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
01-Jan-09 | 990,000 | 1,980,000 | 3,960,000 | 1,980,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||
05-Mar-09 | 52,243 | 1,733,945 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
05-Mar-09 | 165,690 | 33.19 | 1,744,716 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Denise L. Ramos | 229,500 | 459,000 | 918,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
01-Jan-09 | 180,000 | 360,000 | 720,000 | 360,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||
05-Mar-09 | 9,499 | 315,272 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
05-Mar-09 | 30,130 | 33.19 | 317,269 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Gretchen W. McClain | 206,000 | 412,000 | 824,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
01-Jan-09 | 180,000 | 360,000 | 720,000 | 360,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||
05-Mar-09 | 62,269 | 2,066,708 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
05-Mar-09 | 30,130 | 33.19 | 317,269 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
David F. Melcher | 148,750 | 297,500 | 595,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
01-Jan-09 | 125,000 | 250,000 | 500,000 | 250,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||
05-Mar-09 | 6,596 | 218,921 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
05-Mar-09 | 24,805 | 33.19 | 224,733 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Scott A. Crum | 133,000 | 266,000 | 532,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
01-Jan-09 | 108,650 | 217,300 | 434,600 | 217,300 | |||||||||||||||||||||||||||||||||||||||||||||||||||
05-Mar-09 | 5,734 | 190,311 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
05-Mar-09 | 18,190 | 33.19 | 191,540 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Action Date | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | All Other | Exercise or Base Price of Option Awards ($ / Sh)(5) | Grant ($)(6) | ||||||||||||||||||||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold ($) | Target ($) | Maximum ($) | |||||||||||||||||||||||||||||||||||||||||||
Denise L. Ramos | 214,802 | 429,604 | 859,208 | |||||||||||||||||||||||||||||||||||||||||||||
70,833 | 141,667 | 283,334 | ||||||||||||||||||||||||||||||||||||||||||||||
3/3/2011 | 3/3/2011 | 266,650 | 533,300 | 1,066,600 | 533,300 | |||||||||||||||||||||||||||||||||||||||||||
3/3/2011 | 3/3/2011 | (a) | 9,111 | 525,522 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (b) | 103,550 | 2,099,994 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (c) | 7,670 | 155,548 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (d) | 18,992 | 385,158 | ||||||||||||||||||||||||||||||||||||||||||||
3/3/2011 | 3/3/2011 | (e) | 33,459 | 57.68 | 530,325 | |||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (f) | 302,594 | 20.28 | 2,100,002 | |||||||||||||||||||||||||||||||||||||||||||
Aris C. Chicles | 97,500 | 195,000 | 390,000 | |||||||||||||||||||||||||||||||||||||||||||||
26,250 | 52,500 | 105,000 | ||||||||||||||||||||||||||||||||||||||||||||||
0 | 180,000 | 180,000 | ||||||||||||||||||||||||||||||||||||||||||||||
3/3/2011 | 3/3/2011 | 95,850 | 191,700 | 383,400 | 191,700 | |||||||||||||||||||||||||||||||||||||||||||
3/3/2011 | 3/3/2011 | (a) | 3,274 | 188,844 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (b) | 31,065 | 629,998 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (c) | 2,589 | 52,505 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (d) | 6,827 | 138,452 | ||||||||||||||||||||||||||||||||||||||||||||
3/3/2011 | 3/3/2011 | (e) | 12,025 | 57.68 | 190,596 | |||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (f) | 90,778 | 20.28 | 629,999 | |||||||||||||||||||||||||||||||||||||||||||
Thomas M. Scalera | 45,663 | 91,327 | 182,653 | |||||||||||||||||||||||||||||||||||||||||||||
19,250 | 38,500 | 77,000 | ||||||||||||||||||||||||||||||||||||||||||||||
0 | 145,000 | 145,000 | ||||||||||||||||||||||||||||||||||||||||||||||
3/3/2011 | 3/3/2011 | 25,000 | 50,000 | 100,000 | 50,000 | |||||||||||||||||||||||||||||||||||||||||||
3/3/2011 | 3/3/2011 | (a) | 854 | 49,259 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (b) | 17,086 | 346,504 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (c) | 704 | 14,277 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (d) | 1,781 | 36,119 | ||||||||||||||||||||||||||||||||||||||||||||
3/3/2011 | 3/3/2011 | (e) | 3,475 | 57.68 | 49,727 | |||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (f) | 49,928 | 20.28 | 346,500 | |||||||||||||||||||||||||||||||||||||||||||
Robert J. Pagano, Jr. | 72,708 | 145,417 | 290,833 | |||||||||||||||||||||||||||||||||||||||||||||
16,667 | 33,333 | 66,667 | ||||||||||||||||||||||||||||||||||||||||||||||
0 | 175,000 | 175,000 | ||||||||||||||||||||||||||||||||||||||||||||||
3/3/2011 | 3/3/2011 | 66,650 | 133,300 | 266,600 | 133,300 | |||||||||||||||||||||||||||||||||||||||||||
3/3/2011 | 3/3/2011 | (a) | 2,278 | 131,395 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (b) | 14,793 | 300,002 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (c) | 2,525 | 51,207 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (d) | 4,747 | 96,269 | ||||||||||||||||||||||||||||||||||||||||||||
3/3/2011 | 3/3/2011 | (e) | 9,260 | 57.68 | 132,511 | |||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (f) | 43,228 | 20.28 | 300,002 | |||||||||||||||||||||||||||||||||||||||||||
Munish Nanda | 68,750 | 137,500 | 275,000 | |||||||||||||||||||||||||||||||||||||||||||||
13,750 | 27,500 | 55,000 | ||||||||||||||||||||||||||||||||||||||||||||||
0 | 150,000 | 150,000 | ||||||||||||||||||||||||||||||||||||||||||||||
3/3/2011 | 3/3/2011 | 55,000 | 110,000 | 220,000 | 110,000 | |||||||||||||||||||||||||||||||||||||||||||
3/3/2011 | 3/3/2011 | (a) | 1,879 | 108,381 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (b) | 12,204 | 247,497 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (c) | 2,077 | 42,122 | ||||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (d) | 3,917 | 79,437 | ||||||||||||||||||||||||||||||||||||||||||||
3/3/2011 | 3/3/2011 | (e) | 7,640 | 57.68 | 109,328 | |||||||||||||||||||||||||||||||||||||||||||
10/4/2011 | 11/7/2011 | (f) | 35,663 | 20.28 | 247,501 |
Steven R. Loranger Gretchen W. McClain David F. Melcher 650,000 1,300,000 2,600,000 0 600,000 600,000 3/3/2011 3/3/2011 1,066,650 2,133,300 4,266,600 2,133,300 3/3/2011 3/3/2011 (a) 36,442 2,101,975 3/3/2011 3/3/2011 (e) 133,835 57.68 2,121,285 255,000 510,000 1,020,000 3/3/2011 3/3/2011 266,650 533,300 1,066,600 533,300 3/3/2011 3/3/2011 (a) 9,111 525,522 3/3/2011 3/3/2011 (e) 33,459 57.68 530,325 255,000 510,000 1,020,000 3/3/2011 3/3/2011 266,650 533,300 1,066,600 533,300 3/3/2011 3/3/2011 (a) 9,111 525,522 3/3/2011 3/3/2011 (e) 33,459 57.68 530,325
(1) | Amounts reflect the threshold, target and maximum payment levels, respectively, if an award payout is achieved under the Company’s AIP and TSI Bonus plans described on |
62
Name | Pre-Spin (pro-rated for 10 months) | Post-Spin (pro-rated for two months) | ||||||||||||||||||||||
Salary ($) | Target % | Target Amount ($) | Salary ($) | Target % | Target Amount | |||||||||||||||||||
Denise L. Ramos | 606,500 | 85 | % | 429,604 | 850,000 | 100 | % | 141,667 | ||||||||||||||||
Aris C. Chicles | 360,000 | 65 | % | 195,000 | 420,000 | 75 | % | 52,500 | ||||||||||||||||
Thomas M. Scalera | 288,400 | 38 | % | 91,327 | 308,000 | 75 | % | 38,500 | ||||||||||||||||
Robert J. Pagano, Jr. | 349,000 | 50 | % | 145,417 | 400,000 | 50 | % | 33,333 | ||||||||||||||||
Munish Nanda | 330,000 | 50 | % | 137,500 | 330,000 | 50 | % | 27,500 |
The TSI target award, a one-time award related to the successful execution of the Separation, was computed based upon the applicable range of net estimated payments denominated in dollars where the target award was equal to 100% of the award potential, the threshold is equal to 50% of target and the maximum is equal to 100% of target. Zero payment was possible for below threshold performance.
(2) | Amounts reflect the threshold, target and maximum payment levels, respectively, if an award payout is achieved, under the Company’s TSR Plan for the 2011-2013 performance period described on |
(3) | Amounts reflect the number of |
(a) | Reflects the grants of RSUs provided to the NEOs in March 2011. Numbers listed reflect the pre-Separation number of RSUs. For NEOs who continued employment with the Company after the Separation date, every one pre-Separation restricted share, RSU, and stock option was converted into 2.679201 post-Separation restricted shares, |
(b) | Reflects special Founders’ Grants made on November 7, 2011, to select members of the |
(c) | Reflects RSUs granted in |
(d) | Reflects RSUs granted in recognition of the uncompleted portion of the 2011-13 TSR Award Period, which will vest on December 31, 2013. Details of the conversion are provided on Pages 59 to 60. |
(4) | Amounts reflect the number of non-qualified stock options granted in |
(e) | Reflects the |
(f) | Reflects special Founders’ Grants made on November 7, 2011 to select members of the Executive team in connection with the Separation, as detailed on Pages 61 to 62. Ms. McClain and Messrs. Loranger and Melcher did not receive Founders’ Grants. |
(5) | The option exercise price for non-qualified stock options granted in |
(6) | Amounts in this column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for |
(g) | Because RSUs granted in |
63
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65
66
67
Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||||||||||
Equity | |||||||||||||||||||||||||||||||||||||||||||||
Equity | Equity | Incentive | |||||||||||||||||||||||||||||||||||||||||||
Incentive | Incentive | Plan Awards: | |||||||||||||||||||||||||||||||||||||||||||
Plan | Plan Awards: | Market or Payout | |||||||||||||||||||||||||||||||||||||||||||
Awards: | Market | Number of | Value of | ||||||||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Number of | Value | Unearned | Unearned | |||||||||||||||||||||||||||||||||||||||
Securities | Securities | Securities | Shares | of Shares | Shares, | Shares, | |||||||||||||||||||||||||||||||||||||||
Underlying | Underlying | Underlying | or Units | or Units | Units or | Units or | |||||||||||||||||||||||||||||||||||||||
Unexercised | Unexercised | Unexercised | Option | Option | of Stock | of Stock | Other Rights | Other Rights | |||||||||||||||||||||||||||||||||||||
Options (#) | Options (#) | Unearned | Exercise | Expiration | That Have | That Have | That Have | That Have | |||||||||||||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | Options | Price | Date | Not Vested | Not Vested | Not Vested | Not Vested | ||||||||||||||||||||||||||||||||||||
(a) | (b) | (c) | (#) (d) | ($) (e) | (f) | (#) (g) | ($) (h) | (#) (i) | ($) (j) | ||||||||||||||||||||||||||||||||||||
Steven R. Loranger | 166,668 | 83,332 | — | 41.52 | 28-Jun-14 | 193,121 | 9,605,839 | 5,280,000 | 4,290,000 | ||||||||||||||||||||||||||||||||||||
199,120 | — | — | 45.47 | 08-Mar-12 | |||||||||||||||||||||||||||||||||||||||||
83,612 | — | — | 52.68 | 06-Mar-13 | |||||||||||||||||||||||||||||||||||||||||
— | 89,235 | — | 57.99 | 07-Mar-14 | |||||||||||||||||||||||||||||||||||||||||
— | 100,000 | — | 53.09 | 10-Mar-15 | |||||||||||||||||||||||||||||||||||||||||
— | 165,690 | — | 33.19 | 05-Mar-16 | |||||||||||||||||||||||||||||||||||||||||
Denise L. Ramos | — | 16,359 | — | 69.00 | 02-Jul-14 | 27,587 | 1,372,177 | 960,000 | 780,000 | ||||||||||||||||||||||||||||||||||||
— | 18,185 | 53.09 | 10-Mar-15 | ||||||||||||||||||||||||||||||||||||||||||
30,130 | 33.19 | 05-Mar-16 | |||||||||||||||||||||||||||||||||||||||||||
Gretchen W. McClain | 33,333 | — | — | 55.59 | 19-Sep-12 | 70,668 | 3,515,026 | 910,000 | 730,000 | ||||||||||||||||||||||||||||||||||||
8,725 | — | — | 52.68 | 06-Mar-13 | |||||||||||||||||||||||||||||||||||||||||
10,104 | 5,051 | — | 57.99 | 07-Mar-14 | |||||||||||||||||||||||||||||||||||||||||
— | 16,670 | — | 53.09 | 10-Mar-15 | |||||||||||||||||||||||||||||||||||||||||
— | 30,130 | — | 33.19 | 05-Mar-16 | |||||||||||||||||||||||||||||||||||||||||
David F. Melcher | 1,845 | 3,690 | — | 66.45 | 18-Aug-15 | 7,721 | 384,043 | 400,000 | 275,000 | ||||||||||||||||||||||||||||||||||||
— | 24,805 | — | 33.19 | 05-Mar-16 | |||||||||||||||||||||||||||||||||||||||||
Scott A. Crum | 27,440 | — | — | 45.47 | 08-Mar-12 | 11,603 | 577,133 | 579,800 | 471,150 | ||||||||||||||||||||||||||||||||||||
10,535 | — | — | 52.68 | 06-Mar-13 | |||||||||||||||||||||||||||||||||||||||||
— | 10,040 | — | 57.99 | 07-Mar-14 | |||||||||||||||||||||||||||||||||||||||||
— | 10,985 | — | 53.09 | 10-Mar-15 | |||||||||||||||||||||||||||||||||||||||||
— | 18,190 | 33.19 | 05-Mar-16 | ||||||||||||||||||||||||||||||||||||||||||
Name | Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||||
Grant Date (mm/dd/yyyy) | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested ($) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||||||||||||||||||
Denise L. Ramos | 07/02/2007 | 43,829 | — | — | 25.75 | 7/2/2014 | 202,407 | 3,912,527 | — | — | ||||||||||||||||||||||||||||||
03/10/2008 | 48,721 | — | — | 19.82 | 3/10/2015 | |||||||||||||||||||||||||||||||||||
03/05/2009 | — | 80,724 | — | 12.39 | 3/5/2016 | |||||||||||||||||||||||||||||||||||
03/05/2010 | — | 71,590 | — | 19.97 | 3/5/2020 | |||||||||||||||||||||||||||||||||||
03/03/2011 | — | 89,643 | — | 21.53 | 3/3/2021 | |||||||||||||||||||||||||||||||||||
11/07/2011 | — | 302,594 | — | 20.28 | 11/7/2021 | |||||||||||||||||||||||||||||||||||
Aris C. Chicles | 06/02/2006 | 12,704 | — | — | 19.81 | 6/2/2013 | 66,334 | 1,282,236 | — | — | ||||||||||||||||||||||||||||||
03/07/2007 | 15,793 | — | — | 21.64 | 3/7/2014 | |||||||||||||||||||||||||||||||||||
03/10/2008 | 22,250 | — | — | 19.82 | 3/10/2015 | |||||||||||||||||||||||||||||||||||
03/05/2009 | — | 30,274 | — | 12.39 | 3/5/2016 | |||||||||||||||||||||||||||||||||||
03/05/2010 | — | 24,163 | — | 19.97 | 3/5/2020 | |||||||||||||||||||||||||||||||||||
03/03/2011 | — | 32,217 | — | 21.53 | 3/3/2021 | |||||||||||||||||||||||||||||||||||
11/07/2011 | — | 90,778 | — | 20.28 | 11/7/2021 | |||||||||||||||||||||||||||||||||||
Thomas M. Scalera | 03/06/2006 | 5,082 | — | — | 19.66 | 3/6/2013 | 26,262 | 507,644 | — | — | ||||||||||||||||||||||||||||||
03/07/2007 | 4,286 | — | — | 21.64 | 3/7/2014 | |||||||||||||||||||||||||||||||||||
03/10/2008 | 5,438 | — | — | 19.82 | 3/10/2015 | |||||||||||||||||||||||||||||||||||
03/05/2009 | 5,910 | 2,958 | — | 12.39 | 3/5/2016 | |||||||||||||||||||||||||||||||||||
03/05/2010 | 2,338 | 4,681 | — | 19.97 | 3/5/2020 | |||||||||||||||||||||||||||||||||||
03/03/2011 | — | 9,310 | — | 21.53 | 3/3/2021 | |||||||||||||||||||||||||||||||||||
11/07/2011 | — | 49,928 | — | 20.28 | 11/7/2021 | |||||||||||||||||||||||||||||||||||
Robert J. Pagano, Jr. | 01/02/2003 | 26,792 | — | — | 11.54 | 1/2/2013 | 62,948 | 1,216,785 | — | — | ||||||||||||||||||||||||||||||
02/02/2004 | 48,225 | — | — | 13.98 | 2/2/2014 | |||||||||||||||||||||||||||||||||||
08/09/2004 | 10,716 | — | — | 14.29 | 8/9/2014 | |||||||||||||||||||||||||||||||||||
03/08/2005 | 53,584 | — | — | 16.97 | 3/8/2012 | |||||||||||||||||||||||||||||||||||
03/06/2006 | 24,139 | — | — | 19.66 | 3/6/2013 | |||||||||||||||||||||||||||||||||||
03/07/2007 | 19,169 | — | — | 21.64 | 3/7/2014 | |||||||||||||||||||||||||||||||||||
03/10/2008 | 21,018 | — | — | 19.82 | 3/10/2015 | |||||||||||||||||||||||||||||||||||
03/05/2009 | 22,566 | 11,285 | — | 12.39 | 3/5/2016 | |||||||||||||||||||||||||||||||||||
03/05/2010 | 8,388 | 16,783 | — | 19.97 | 3/5/2020 | |||||||||||||||||||||||||||||||||||
03/03/2011 | — | 24,809 | — | 21.53 | 3/3/2021 | |||||||||||||||||||||||||||||||||||
11/07/2011 | — | 43,228 | — | 20.28 | 11/7/2021 | |||||||||||||||||||||||||||||||||||
Munish Nanda | 05/08/2008 | 8,651 | — | — | 24.35 | 5/8/2015 | 35,644 | 688,999 | — | — | ||||||||||||||||||||||||||||||
03/05/2009 | 7,975 | 7,974 | — | 12.39 | 3/5/2016 | |||||||||||||||||||||||||||||||||||
03/05/2010 | 6,901 | 13,809 | — | 19.97 | 3/5/2020 | |||||||||||||||||||||||||||||||||||
03/03/2011 | — | 20,469 | — | 21.53 | 3/3/2021 | |||||||||||||||||||||||||||||||||||
11/07/2011 | — | 35,663 | — | 20.28 | 11/7/2021 | |||||||||||||||||||||||||||||||||||
Steven R. Loranger | 06/28/2004 | 125,000 | — | 15.50 | 10/31/2012 | — | — | — | — | |||||||||||||||||||||||||||||||
03/08/2005 | 99,560 | — | 16.97 | 3/8/2012 | ||||||||||||||||||||||||||||||||||||
03/06/2006 | 41,806 | — | 19.66 | 3/6/2013 | ||||||||||||||||||||||||||||||||||||
03/07/2007 | 44,617 | — | 21.64 | 3/7/2014 | ||||||||||||||||||||||||||||||||||||
03/10/2008 | 50,000 | — | 19.82 | 3/10/2015 | ||||||||||||||||||||||||||||||||||||
03/05/2009 | 82,845 | — | 12.39 | 3/5/2016 | ||||||||||||||||||||||||||||||||||||
03/05/2010 | 66,132 | — | 19.96 | 10/31/2018 | ||||||||||||||||||||||||||||||||||||
03/03/2011 | 57,623 | — | 21.53 | 10/31/2018 |
(1) | Vesting |
Vesting Schedule (#’s) | ||||||||||||||||||||
Name | Grant Date | 2010 | 2011 | 2012 | ||||||||||||||||
Steven R. Loranger | 6/28/2004 | 83,332 | ||||||||||||||||||
3/7/2007 | 89,235 | |||||||||||||||||||
3/10/2008 | 100,000 | |||||||||||||||||||
3/5/2009 | 165,690 | |||||||||||||||||||
Denise L. Ramos | 7/2/2007 | 16,359 | ||||||||||||||||||
3/10/2008 | 18,185 | |||||||||||||||||||
3/5/2009 | 30,130 | |||||||||||||||||||
Gretchen W. McClain | 3/7/2007 | 5,051 | ||||||||||||||||||
3/10/2008 | 16,670 | |||||||||||||||||||
3/5/2009 | 30,130 | |||||||||||||||||||
David F. Melcher | 8/18/2008 | 1,845 | 1,845 | |||||||||||||||||
3/5/2009 | 8,269 | 8,268 | 8,268 | |||||||||||||||||
Scott A. Crum | 3/7/2007 | 10,040 | ||||||||||||||||||
3/10/2008 | 10,985 | |||||||||||||||||||
3/5/2009 | 18,190 | |||||||||||||||||||
Future Vesting Schedule (# of options) | ||||||||||||||||||||
Name | Grant Date | Expiration Date | 2012 | 2013 | 2014 | |||||||||||||||
Denise L. Ramos | 3/5/2009 | 3/5/2016 | 80,724 | |||||||||||||||||
3/5/2010 | 3/5/2020 | 71,590 | ||||||||||||||||||
3/3/2011 | 3/3/2021 | 89,643 | ||||||||||||||||||
11/7/2011 | 11/7/2021 | 100,865 | 100,865 | 100,864 | ||||||||||||||||
Aris C. Chicles | 3/5/2009 | 3/5/2016 | 30,274 | |||||||||||||||||
3/5/2010 | 3/5/2020 | 24,163 | ||||||||||||||||||
3/3/2011 | 3/3/2021 | 32,217 | ||||||||||||||||||
11/7/2011 | 11/7/2021 | 30,260 | 30,259 | 30,259 | ||||||||||||||||
Thomas M. Scalera | 3/5/2009 | 3/5/2016 | 2,958 | |||||||||||||||||
3/5/2010 | 3/5/2020 | 2,341 | 2,340 | |||||||||||||||||
3/3/2011 | 3/3/2021 | 3,104 | 3,103 | 3,103 | ||||||||||||||||
11/7/2011 | 11/7/2021 | 16,643 | 16,643 | 16,642 | ||||||||||||||||
Robert J. Pagano, Jr. | 3/5/2009 | 3/5/2016 | 11,285 | |||||||||||||||||
3/5/2010 | 3/5/2020 | 8,392 | 8,391 | |||||||||||||||||
3/3/2011 | 3/3/2021 | 8,270 | 8,270 | 8,269 | ||||||||||||||||
11/7/2011 | 11/7/2021 | 14,410 | 14,409 | 14,409 | ||||||||||||||||
Munish Nanda | 3/5/2009 | 3/5/2016 | 7,976 | |||||||||||||||||
3/5/2010 | 3/5/2020 | 6,905 | 6,904 | |||||||||||||||||
3/3/2011 | 3/3/2021 | 6,823 | 6,823 | 6,823 | ||||||||||||||||
11/7/2011 | 11/7/2021 | 11,888 | 11,888 | 11,887 | ||||||||||||||||
Steven R. Loranger | 3/5/2009 | 3/5/2016 | 82,845 | |||||||||||||||||
3/5/2010 | 10/31/2018 | 66,132 | ||||||||||||||||||
3/3/2011 | 10/31/2018 | 57,623 |
(2) | ||
68
Vesting Schedule(#) | ||||||||||||||||||||||||||||||
Name | Grant Date | 2010 | 2011 | 2012 | 2013 | 2014 | ||||||||||||||||||||||||
Steven R. Loranger | 3/7/2007 | 24,474 | ||||||||||||||||||||||||||||
3/10/2008 | 28,370 | |||||||||||||||||||||||||||||
3/5/2009 | 52,243 | |||||||||||||||||||||||||||||
Denise L. Ramos | 7/2/2007 | 6,930 | ||||||||||||||||||||||||||||
7/2/2007 | 6,000 | |||||||||||||||||||||||||||||
3/10/2008 | 5,158 | |||||||||||||||||||||||||||||
3/5/2009 | 9,499 | |||||||||||||||||||||||||||||
Gretchen W. McClain | 3/7/2007 | 3,671 | ||||||||||||||||||||||||||||
3/10/2008 | 4,728 | |||||||||||||||||||||||||||||
3/5/2009 | 9,499 | |||||||||||||||||||||||||||||
3/5/2009 | 52,770 | |||||||||||||||||||||||||||||
David F. Melcher | 8/18/2008 | 1,125 | ||||||||||||||||||||||||||||
3/5/2009 | 6,596 | |||||||||||||||||||||||||||||
Scott A. Crum | 3/7/2007 | 2,753 | �� | |||||||||||||||||||||||||||
3/10/2008 | 3,116 | |||||||||||||||||||||||||||||
3/5/2009 | 5,734 | |||||||||||||||||||||||||||||
Future Vesting Schedule (# of shares) | ||||||||||||||||
Name | Grant Date | 2012 | 2013 | 2014 | ||||||||||||
Denise L. Ramos | 3/5/2009 | 25,449 | ||||||||||||||
3/5/2010 | 22,336 | |||||||||||||||
3/3/2011 | 24,410 | |||||||||||||||
11/7/2011 | (a) | 7,670 | ||||||||||||||
11/7/2011 | (b) | 18,992 | ||||||||||||||
11/7/2011 | 103,550 | |||||||||||||||
Aris C. Chicles | 3/5/2009 | 9,543 | ||||||||||||||
3/5/2010 | 7,539 | |||||||||||||||
3/3/2011 | 8,771 | |||||||||||||||
11/7/2011 | (a) | 2,589 | ||||||||||||||
11/7/2011 | (b) | 6,827 | ||||||||||||||
11/7/2011 | 31,065 | |||||||||||||||
Thomas M. Scalera | 3/5/2009 | 2,357 | ||||||||||||||
3/5/2010 | 2,046 | |||||||||||||||
3/3/2011 | 2,288 | |||||||||||||||
11/7/2011 | (a) | 704 | ||||||||||||||
11/7/2011 | (b) | 1,781 | ||||||||||||||
11/7/2011 | 17,086 | |||||||||||||||
Robert J. Pagano, Jr. | 3/10/2008 | 9,211 | 9,216 | |||||||||||||
3/5/2009 | 9,002 | |||||||||||||||
3/5/2010 | 7,351 | |||||||||||||||
3/3/2011 | 6,103 | |||||||||||||||
11/7/2011 | (a) | 2,525 | ||||||||||||||
11/7/2011 | (b) | 4,747 | ||||||||||||||
11/7/2011 | 14,793 | |||||||||||||||
Munish Nanda | 3/5/2009 | 6,363 | ||||||||||||||
3/5/2010 | 6,049 | |||||||||||||||
3/3/2011 | 5,034 | |||||||||||||||
11/7/2011 | (a) | 2,077 | ||||||||||||||
11/7/2011 | (b) | 3,917 | ||||||||||||||
11/7/2011 | 12,204 |
(a) | Reflects RSUs granted in recognition of the uncompleted portion of the 2010-12 TSR Award Period, which will vest on December 31, 2012. |
(b) | Reflects RSUs granted in recognition of the uncompleted portion of the 2011-13 TSR Award Period, which will vest on December 31, 2013. |
(3) | Reflects the Company’s closing stock price of | |
Option Exercises and Stock Vested in 2011
The following table representsprovides information regarding the values realized by our NEOs upon the exercise of stock options, and the vesting schedule of TSR awards with each TSR unit reflecting $1 of value.
Vesting Schedule | ||||||||||||||||||
Equity Incentive Plan Awards | Grant Date(1) | Target Award in units(#) | 2010 | 2011 | ||||||||||||||
Steven R. Loranger | 1/1/2008 | 3,300,000 | 12/31/2010 | |||||||||||||||
(Includes 1,040,000 TSR units as a phantom award) | ||||||||||||||||||
1/1/2009 | 1,980,000 | 12/31/2011 | ||||||||||||||||
Denise L. Ramos | 1/1/2008 | 600,000 | 12/31/2010 | |||||||||||||||
1/1/2009 | 360,000 | 12/31/2011 | ||||||||||||||||
Gretchen W. McClain | 1/1/2008 | 550,000 | 12/31/2010 | |||||||||||||||
1/1/2009 | 360,000 | 12/31/2011 | ||||||||||||||||
David F. Melcher | 1/1/2008 | 150,000 | 12/31/2010 | |||||||||||||||
1/1/2009 | 250,000 | 12/31/2011 | ||||||||||||||||
Scott A. Crum | 1/1/2008 | 362,500 | 12/31/2010 | |||||||||||||||
1/1/2009 | 217,300 | 12/31/2011 | ||||||||||||||||
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting(1)(#) | Value Realized on Vesting(2)($) | ||||||||||||
Denise L. Ramos | — | — | 11,158 | 646,565 | ||||||||||||
Aris C. Chicles | — | — | 1,934 | 109,000 | ||||||||||||
Thomas M. Scalera | — | — | 473 | 26,658 | ||||||||||||
Robert J. Pagano, Jr. | — | — | 1,827 | 102,970 | ||||||||||||
Munish Nanda | — | — | 672 | 38,915 | ||||||||||||
Steven R. Loranger(3) | — | — | 59,751 | 3,039,321 | ||||||||||||
Gretchen W. McClain | — | — | 4,728 | 266,470 | ||||||||||||
David F. Melcher | — | — | 1,125 | 49,883 |
(1) | The number of shares acquired on vesting does not reflect the reverse split of ITT shares that occurred on October 31, 2011. |
(2) | The amounts reflect the value realized upon the vesting of restricted stock based on the closing price of ITT stock on the date of vesting. |
(3) | The number of shares vested for Mr. Loranger includes shares that vested on October 31, 2011, but will not settle until 2012. The future settlement date and number of shares to be released to Mr. Loranger are: |
69
Option Awards | Stock Awards | |||||||||||||||||||
Number of | Value | Number of | Value | |||||||||||||||||
Shares | Realized | Shares | Realized | |||||||||||||||||
Acquired on | on | Acquired on | on | |||||||||||||||||
Exercise | Exercise | Vesting | Vesting | |||||||||||||||||
Name | (#) | ($) | (#) | ($)(1) | ||||||||||||||||
(a) | (b) | (c) | (d) | (e) | ||||||||||||||||
Steven R. Loranger | — | — | 23,706 | 4,430,873 | ||||||||||||||||
Denise L. Ramos | — | — | 6,000 | 930,011 | ||||||||||||||||
Gretchen W. McClain | — | — | 14,181 | 1,237,804 | ||||||||||||||||
David F. Melcher | — | — | — | — | ||||||||||||||||
Scott A. Crum | — | — | 2,987 | 509,161 | ||||||||||||||||
May 2, 2012 | 31,381 |
Effective on the Separation date, all ITT pension benefits described in this section were frozen, and the cumulative liability of these benefits was assumed by Exelis, except for Mr. Loranger’s Special Pension Arrangement, which is retained by the Company. All NEOs participated in the plans described below, and remain eligible for frozen pension benefits under these plans. ITT Salaried Retirement While the Traditional Pension Plan formula Plan:Plan. Under the ITT Salaried Retirement Plan, participants havehad the option, on an annual basis, to elect to be covered under either a Traditional Pension Plan or a Pension Equity Plan formula for future pension accruals. The ITT Salaried Retirement Plan iswas a funded and tax-qualified retirement program. The plan is described in detail below. All of the NEOs participate in the Traditional Pension Plan formula of the ITT Salaried Retirement Plan.payspaid benefits on a monthly basis after retirement, the Pension Equity Plan formula enablesenabled participants to elect to have benefits paid as a single sum payment upon employment termination, regardless of the participant’s age. The Traditional Pension Plan benefit payable to an employee dependsdepended upon the date an employee first became a participant under the plan.70
A participant first employed prior to January 1, 2000, under the Traditional Pension Plan would receive an annual pension that would be the total of:
Ÿ | ||
2% of his or her “average final compensation” (as described below) for each of the first 25 years of benefit service, plus |
Ÿ | ||
1.5% of his or her average final compensation for each of the next 15 years of benefit service, reduced by |
Ÿ | ||
1.25% of his or her primary Social Security benefit for each year of benefit service up to a maximum of 40 years. |
A participant first employed on or after January 1, 2000, under the Traditional Pension Plan would receive an annual pension that would equal:
Ÿ | ||
1.5% of his or her average final compensation (as defined below) for each year of benefit service up to 40 years, reduced by |
Ÿ | ||
1.25% of his or her primary Social Security benefit for each year of benefit service up to a maximum of 40 years. |
For a participant first employed prior to January 1, 2005, average final compensation (including salary and approved bonus or AIP payments) is the total of:
Ÿ | ||
The participant’s average annual base salary for the five calendar years of the last 120 consecutive calendar months of eligibility service that would result in the highest average annual base salary amount, plus |
Ÿ | ||
The participant’s average annual pension eligible compensation, not including base salary, for the five calendar years of the participant’s last 120 consecutive calendar months of eligibility service that would result in the highest average annual compensation amount. |
For a participant first employed on or after January 1, 2005, average final compensation iswas the average of the participant’s total pension eligible compensation (salary, bonus and annual incentive payments for NEOs and other exempt salaried employees) over the highest five consecutive calendar years of the participant’s final 120 months of eligibility service.
As it applies to participants first employed prior to January 1, 2000, under the Traditional Pension Plan, Standard Early Retirement is available to employees at least 55 years of age with 10 years of eligibility service. Special Early Retirement is available to employees at least age 55 with 15 years of eligibility service or at least age 50 whose age plus total eligibility service equals at least 80. For Standard Early Retirement, if payments begin before age 65, payments from anticipated payments at the normal retirement age of 65 (the “Normal Retirement Age”) are reduced by1/ 1/4 of 1% for each month that payments commence prior to the Normal Retirement Age. For Special Early Retirement, if payments begin betweenages 60-64, benefits will be payable at 100%. If payments begin prior to age 60, they are reduced by5/ 5/12 of 1% for each month that payments start before age 60 but not more than 25%.
For participants first employed from January 1, 2000 through December 31, 2004, under the Traditional Pension Plan, Standard Early Retirement iswas available as described above. Special Early Retirement iswas also available to employees who have attained at least age 55 with 15 years of eligibility service (but not earlier than age 55). For Special Early Retirement, the benefit payable at or after age 62 would be at 100%; if payments commencecommenced prior to age 62 they would be reduced by5/ 5/12 of 1% for each of the first 48 months prior to age 62 and by an additional4/ 4/12 of 1% for each of the next 12 months and by an additional3/ 3/12 of 1% for each month prior to age 57. For participants first employed on or after January 1, 2005, and who retire before age 65, benefits may commence at or after age 55 but they would be reduced by5/ 5/9 of 1% for each of the first 60 months prior to age 65 and an additional5/ 5/18 of 1% for each month prior to age 60.
71
Pension Equity Plan
A participant under the Pension Equity Plan would receive a single sum pension that would equal the total accumulated percentage (as described below) times final average compensation (as defined above).
Ÿ | Under age 30: 3% per year of benefit service |
Ÿ | Age 30 to age 39: 4% per year of benefit service |
Ÿ | Age 40 to age 49: 5% per year of benefit service |
Ÿ | Age 50 and over: 6% per year of benefit service |
In December 2007, effective January 1, 2008, the ITT Salaried Retirement Plan and the ITT Excess Pension Plans were amended to provide for a three-year vesting requirement. In addition, for employees who arewere already vested and who arewere involuntarily terminated and entitled to severance payments from the Company, additional months of age and service (not to exceed 24 months) arewere to be imputed based on the employee’s actual service to his or her last day worked, solely for purposes of determining eligibility for early retirement. These amendments were intended in part to permit compliance with Section 409A.
The 20092011 Pension Benefits table on page 73Page 84 of this Proxy Statement provides information on the pension benefits for the NEOs. AtMr. Pagano participated under the present time, noneterms of the NEOs listedplan in the Summary Compensation Table has electedeffect for employees hired prior to accrue benefits under the Pension Equity Plan formula.January, 1 2000. Mr. Loranger and Mr. Crum participateparticipated under the terms of the plan in effect for employees hired between January 1, 2000 and December 31, 2004 and2004. Ms. Ramos Ms. McClain and Mr. Melcher participateMessrs. Chicles, Scalera, and Nanda participated under the terms of the plan in effect for employees hired after January 1, 2005. The Traditional Pension Plan accumulated benefit an employee earnsearned over his or her career with the Company is payable on a monthly basis starting after retirement. Employees may retire as early as age 5550 under the terms of the plan. Pensions may be reduced if retirement starts before age 65. Possible pension reductions are described on page 71above. The Pension Equity Plan benefit can be received as a lump sum or an annuity following termination. Mr. Nanda has always participated in the Pension Equity Plan formula and Mr. Scalera participated in the Pension Equity Plan formula prior to 2011. All of this Proxy Statement.
Benefits under this plan are subject to the limitations imposed under Sections 415 and 401(a)(17) of the Internal Revenue Code in effect as of December 31, 2009.2011. Section 415 limits the amount of annual pension payable from a qualified plan. For 2009,2011, this limit is $195,000 per year for a single-life annuity payable at an IRS-prescribed retirement age. This ceiling may be actuarially adjusted in accordance with IRS rules for items such as employee contributions, other forms of distribution and different annuity starting dates. Section 401(a)(17) limits the amount of compensation that may be recognized in the determination of a benefit under a qualified plan. For 2009,2011, this limit is $245,000.
ITT Excess Pension Plan:Plan. Since federal law limits the amount of benefits paid under and the amount of compensation recognized under tax-qualified retirement plans, the Company maintainsmaintained the unfunded ITT Excess Pension Plan, which is not qualified for tax purposes.purposes, until the Separation date. The purpose of the ITT Excess Pension Plan iswas to restore benefits calculated under the ITT Salaried Retirement Plan formula that cannot be paid because of the IRS limitations noted above. The Company hasdid not grantedgrant any extra years of benefit service to any employee under either the ITT Salaried Retirement Plan or the Excess Pension Plan.
Special Pension Arrangement. Mr. Loranger’s employment agreement provided for a non-qualified pension arrangement if Mr. Loranger’s employment was terminated on or after June 28, 2009, or under certain circumstances prior to that date. This arrangement provided for an annuity paid
monthly over Mr. Loranger’s life, calculated as a percentage of his average annual compensation for the five years in which his compensation was highest, with percentage ranges from 38%, if Mr. Loranger was age 57 upon the date of his termination, to 50%, if Mr. Loranger was at least age 60 on the date of his termination. Any amount so determined would be reduced by the amount to which Mr. Loranger was entitled to under the pension plans of ITT or the plans of any prior employer. Quantification of Mr. Loranger’s pension arrangements, as of December 31, 2011, is provided in the 2011 Pension Benefits table below and the arrangements are further discussed in Mr. Loranger’s Post-Employment Compensation description on Page 89.
Mr. Loranger resigned with good reason from the Company on October 31, 2011. During 2011, he received two months of benefit payments under the ITT Salaried Retirement Plan. In the event of a change of control, certain extra years of service may be allowed in accordance with Section 409A, Mr. Loranger will not receive any payments from the terms of the Special Senior Executive Severance Pay Plan described on page 78 of this Proxy Statement.
No pension benefits were paid to any of the other named executives in the last fiscal year.
72
Name | Plan Name | Number of Years Credit Service (#) | Present Value of Accumulated Benefit at Earliest Date for Unreduced Benefit | Payments During Last Fiscal Year ($) | ||||||||||
Denise L. Ramos | ITT Salaried Retirement Plan | 4.33 | 113,175 | — | ||||||||||
ITT Excess Pension Plan | 4.33 | 500,614 | — | |||||||||||
Aris C. Chicles | ITT Salaried Retirement Plan | 5.42 | 104,547 | — | ||||||||||
ITT Excess Pension Plan | 5.42 | 193,255 | — | |||||||||||
Thomas M. Scalera | ITT Salaried Retirement Plan | 5.77 | 31,736 | — | ||||||||||
ITT Excess Pension Plan | 5.77 | 25,450 | — | |||||||||||
Robert J. Pagano, Jr.(2) | ITT Salaried Retirement Plan | 22.08 | 740,517 | — | ||||||||||
ITT Excess Pension Plan | 13.25 | 791,352 | — | |||||||||||
Munish Nanda | ITT Salaried Retirement Plan | 3.53 | 24,818 | — | ||||||||||
ITT Excess Pension Plan | 3.53 | 28,276 | — | |||||||||||
Steven R. Loranger(3) | ITT Salaried Retirement Plan | 7.34 | 208,849 | 2,576 | ||||||||||
ITT Excess Pension Plan | 7.34 | 3,010,434 | — | |||||||||||
Special Pension Arrangement | 7.34 | 14,110,630 | — | |||||||||||
Gretchen W. McClain | ITT Salaried Retirement Plan | 6.13 | 119,982 | — | ||||||||||
ITT Excess Pension Plan | 6.13 | 396,636 | — | |||||||||||
David F. Melcher(4) | ITT Salaried Retirement Plan | 3.21 | 89,748 | — | ||||||||||
ITT Excess Pension Plan | 3.21 | 295,097 | — |
Present Value | |||||||||||||||||||||||
of Accumulated | |||||||||||||||||||||||
Present Value | Benefit at | ||||||||||||||||||||||
Number of | of Accumulated | Earliest | Payments | ||||||||||||||||||||
Years | Benefit at | Date for | During | ||||||||||||||||||||
Credited | Normal | Unreduced | Last Fiscal | ||||||||||||||||||||
Service | Retirement Age | Benefits | Year | ||||||||||||||||||||
Name(a) | Plan Name(b) | (#)(c) | ($)(d)(1) | ($)(e) | ($)(f) | ||||||||||||||||||
Steven R. Loranger | ITT Salaried Retirement Plan | 5.51 | 111,775 | 111,775 | — | ||||||||||||||||||
ITT Excess Pension Plan | 5.51 | 1,424,639 | 1,424,639 | — | |||||||||||||||||||
Special Pension Arrangement | 5.51 | 3,501,077 | 8,761,930 | ||||||||||||||||||||
Denise L. Ramos | ITT Salaried Retirement Plan | 2.50 | 44,504 | 44,504 | — | ||||||||||||||||||
ITT Excess Pension Plan | 2.50 | 179,245 | 179,245 | — | |||||||||||||||||||
Gretchen W. McClain | ITT Salaried Retirement Plan | 4.29 | 50,796 | 50,796 | — | ||||||||||||||||||
ITT Excess Pension Plan | 4.29 | 117,546 | 117,546 | — | |||||||||||||||||||
David F. Melcher | ITT Salaried Retirement Plan | 1.38 | 23,409 | 23,409 | — | ||||||||||||||||||
ITT Excess Pension Plan | 1.38 | 67,733 | 67,733 | — | |||||||||||||||||||
Scott A. Crum | ITT Salaried Retirement Plan | 7.31 | 109,048 | 143,382 | — | ||||||||||||||||||
ITT Excess Pension Plan | 7.31 | 282,949 | 372,036 | — | |||||||||||||||||||
Ÿ | Measurement date: December 31, 2011 |
Ÿ | Discount Rate: 4.75% except for Mr. Loranger’s Special Pension Arrangement, which is based on 4.74% |
Ÿ | Mortality (pre-commencement): None |
Ÿ | Mortality (post-commencement): 2011 PPA Annuitant Mortality Table, separate rates for males and females; For Mr. Loranger’s Special Pension Arrangement: UP-94 Mortality Table projected 16 years with Scale AA |
Ÿ | Normal retirement date: age 65 |
Ÿ | Earliest age at which a participant first employed prior to January 1, 2000 may receive unreduced benefits: age 60 |
Ÿ | Assumed benefit commencement date: age 60 for Mr. Pagano and age 65 for all other NEOs except Mr. Loranger for whom the actual commencement date is used |
Ÿ | Accumulated benefit is calculated based on credited service and pay as of October 31, 2011 |
Ÿ | For benefits under the Traditional Pension Plan (TPP) formula, present value is based on the single life annuity payable at assumed benefit commencement date |
Ÿ | For benefits under the Pension Equity Plan (PEP) formula, present value is based on projected lump sum value at assumed benefit commencement date; PEP value is projected from October 31, 2011, to age 65 using an interest crediting rate of 1.55% for the ITT Salaried Retirement Plan and 3.25% for the ITT Excess Pension Plan |
Ÿ | For Mr. Loranger’s special pension arrangement, present value is based on 100% joint & survivor annuity payable on May 1, 2012 |
Ÿ | Except in Mr. Loranger’s case, the six-month delay under the Pension Plan as required under Section 409A of the Internal Revenue Code was disregarded for this purpose |
Ÿ | All results shown are estimates only; actual benefits will be based on precise credited service and compensation history, which will be determined at benefit commencement date. |
The 2011 row of Employment: Age 65 for all participants except Mr. Crum. For Mr. Crum, age 65 for column (d) and age 62 for column (e). Present value is based on the single life annuity payable beginning on the first day of the month at normal retirement age 65 (column d)) or the earliest time at which a participant may retire under the plan without any benefit reduction due to age (column (c)). The six-month delay under the Pension Plan for “specified employees” as required under Section 409A of the Internal Revenue Code was disregarded for this purpose. All results shown are estimates only; actual benefits will be based on precise credited service and compensation history, which will be determined at termination of employment.
Ÿ | Discount rate: 5.75% |
Ÿ | Mortality (post-commencement): UP-94 Mortality Table projected 16 years with Scale AA |
Ÿ | PEP value is |
(1) | Except for Mr. Loranger’s special pension arrangement, all benefit obligations for plans shown in this table were transferred to Exelis as of October 31, 2011. Accordingly, all benefits under |
(2) | Mr. Pagano became a participant in the |
(3) | Mr. |
(4) | While Mr. | |
73
ITT Deferred Compensation Plan:Plan. The ITT Deferred Compensation Plan is a tax deferral plan. The ITT Deferred Compensation Plan permits eligible executives with a base salary of at least $200,000 to defer between 2% and 90% of their AIP payment. The AIP amount deferred is included in the Summary Compensation Table under Non-Equity Incentive Plan Compensation. Withdrawals under the plan are available on payment dates elected by participants at the time of the deferral election. The withdrawal election is irrevocable except in cases of demonstrated hardship.hardship due to an unforeseeable emergency as provided by the ITT Deferred Compensation Plan. Amounts deferred will be unsecured general obligations of the Company to pay the deferred compensation in the future and will rank with other unsecured and unsubordinated indebtedness of the Company.
Participants can elect to have their account balances allocated into one or more of the 25 phantom investment funds (including a phantom Company stock fund) and can change their investment allocations on a daily basis. All plan accounts are maintained on the accounts of the Company and investment earnings are credited to a participant’s account (and charged to corporate earnings) to mirror the investment returns achieved by the investment funds chosen by that participant. Participants in the deferred compensation plan may elect a fund that tracks the performance of ITT common stock.
A participant can establish up to six “accounts” into which AIP payment deferrals are credited and he or she can elect a different form of payment and a different payment commencement date for each “account.” One account may be selected based on a termination date (the “Termination Account”) and five accounts are based on employee-specified dates (each a “Special Purpose Account”). Each Special Purpose and Termination Account may have different investment and payment options. Termination Accounts will be paid in the seventh month following the last day worked. Changes to Special Purpose Account distribution elections must be made at least 12 months before any existing benefit payment date, may not take effect for at least 12 months, and must postpone the existing benefit payment date by at least five years. Additionally, Termination Account distribution elections are irrevocable.
ITT ExcessSupplemental Retirement Savings Plan:Plan for Salaried Employees. Since federal law limits the amount of compensation that can be used to determine employee and employer contribution amounts ($245,000 in 2009)2011) to the tax-qualified plan, the Company has established and maintains a non-qualified unfunded ITT ExcessSupplemental Retirement Savings Plan for Salaried Employees to allow for employee and Company contributions based on base salary in excess of these limits. Employee contributions under this plan arewere limited to 6% of base salary. All balances under this plan are maintained on the books of the Company and earnings are credited to the accumulated savings under the plan based on the earnings in the Stable Value Fund in the tax-qualified plan. Benefits will be paid in a lump sum in the seventh month following the last day worked.
Effective January 1, 2012, the plan was amended to no longer permit employee contributions.
Deferred Compensation:Compensation. Non-qualified savings represent amounts in the ITT ExcessSupplemental Retirement Savings Plan.Plan for Salaried Employees. Deferred Compensation earnings under the ITT Deferred Compensation Plan are calculated by reference to actual earnings of mutual funds or ITT stock as provided in the accompanying chart.
74
20092011 Nonqualified Deferred Compensation Executive Registrant Aggregate Aggregate Contributions in Contributions Aggregate Withdrawals/ Balance at Name Last FY in Last Earnings in Distributions Last FYE (a) ($)(b) FY ($)(c) Last FY ($)(d) ($)(e) ($)(f) Steven R. Loranger Non-qualified savings 53,100 31,113 10,963 — 443,447 Deferred Compensation 1,267,013 — 423,394 — 5,686,005 Total 1,320,113 31,113 434,357 — 6,129,452 Denise L. Ramos Non-qualified savings 17,700 10,408 846 — 50,359 Deferred Compensation — — — — — Total 17,700 10,408 846 — 50,359 Gretchen W. McClain Non-qualified savings 15,338 8,853 1,469 — 70,952 Deferred Compensation 184,695 — 24,090 (85,222 ) 253,984 Total 200,033 8,853 25,559 (85,222 ) 324,936 David F. Melcher Non-qualified savings 10,800 6,381 108 — 17,289 Deferred Compensation — — — — — Total 10,800 6,381 108 — 17,289 Scott A. Crum Non-qualified savings 8,100 4,781 2,423 — 97,648 Deferred Compensation — — — — — Total 8,100 4,781 2,423 — 97,648
Name (a) | Executive ($)(b) | Registrant ($)(c) | Aggregate ($)(d) | Aggregate ($)(e) | Aggregate ($)(f) | |||||||||||||||
Denise L. Ramos | ||||||||||||||||||||
Non-qualified savings | 21,788 | 16,142 | 2,232 | — | 124,283 | |||||||||||||||
Deferred compensation | — | — | 63,405 | — | 1,322,256 | |||||||||||||||
Total | 21,788 | 16,142 | 65,637 | — | 1,446,539 | |||||||||||||||
Aris C. Chicles | ||||||||||||||||||||
Non-qualified savings | 6,248 | 5,340 | 876 | — | 46,925 | |||||||||||||||
Deferred compensation | — | — | — | — | — | |||||||||||||||
Total | 6,248 | 5,340 | 876 | — | 46,925 | |||||||||||||||
Thomas M. Scalera | ||||||||||||||||||||
Non-qualified savings | — | — | — | — | — | |||||||||||||||
Deferred compensation | — | — | 1,202 | 44,457 | — | |||||||||||||||
Total | — | — | 1,202 | 44,457 | — | |||||||||||||||
Robert J. Pagano, Jr. | ||||||||||||||||||||
Non-qualified savings | 5,187 | 4,641 | 1,318 | — | 86,977 | |||||||||||||||
Deferred compensation | 70,385 | — | 16,955 | — | 412,283 | |||||||||||||||
Total | 75,572 | 4,641 | 17,371 | — | 499,260 | |||||||||||||||
Munish Nanda | ||||||||||||||||||||
Non-qualified savings | 3,553 | 3,024 | 70 | — | 10,595 | |||||||||||||||
Deferred compensation | — | — | 7,814 | — | 146,109 | |||||||||||||||
Total | 3,553 | 3,024 | 7,884 | — | 156,704 | |||||||||||||||
Steven R. Loranger | ||||||||||||||||||||
Non-qualified savings | 29,146 | 17,002 | 9,886 | — | 631,637 | |||||||||||||||
Deferred compensation | — | — | 291,461 | — | 8,120,786 | |||||||||||||||
Vested but undelivered shares(1) | — | 139,882 | (754,457 | ) | 4,991,835 | 1,314,788 | ||||||||||||||
Total | 29,146 | 156,884 | (453,110 | ) | 4,991,835 | 10,067,211 | ||||||||||||||
Gretchen W. McClain(2) | ||||||||||||||||||||
Non-qualified savings | 14,963 | 8,728 | 2,590 | — | 126,699 | |||||||||||||||
Deferred compensation | — | — | — | — | — | |||||||||||||||
Total | 14,963 | 8,728 | 2,590 | — | 126,699 | |||||||||||||||
David F. Melcher(2) | ||||||||||||||||||||
Non-qualified savings | 14,703 | 7,148 | 1,587 | — | 68,048 | |||||||||||||||
Deferred compensation | — | — | — | — | — | |||||||||||||||
Total | 14,703 | 7,148 | 1,587 | — | 68,048 |
(1) | Mr. Loranger has RSUs that have vested but have not settled. Amounts in column (d) for vested but unsettled shares include reinvested dividends on vested but unsettled shares, and the unrealized gain (loss) on those unsettled shares as measured from January 1, 2011 to December 30, 2011. Mr. Loranger had an aggregate balance at December 31, 2010 of $6,921,198 representing RSUs and related dividend equivalents which previously vested but did not settle. The distribution of $4,991,835 represents the portion of those vested but unsettled shares that were converted to Xylem and Exelis shares at the time of the Separation. |
(2) | Amounts listed for Ms. McClain and Mr. Melcher reflect contributions and aggregate earnings from January 1, 2011, to October 31, 2011, and aggregate balances as of October 31, 2011. These balances were transferred to Xylem and Exelis, respectively, as part of the Separation. |
(b) | The amount for Executive Contributions in Last Fiscal Year for Mr. Pagano represents the deferred portion of his 2011 AIP payment, the total of which was included in the Summary Compensation Table in the Company’s 2012 Proxy Statement. The Aggregate Balance at Last FYE was adjusted to reflect this deferral, which took place in March 2012. |
(c) | The amounts in column (c) non-qualified savings are also reflected in column | |
(d) | See note | |
(e) |
75
Rate of | Rate of | ||||||||||||
Return | Return | ||||||||||||
1/1/09 – | 1/1/09 – | ||||||||||||
Name of Fund | 12/31/09 | Name of Fund | 12/31/09 | ||||||||||
Fixed Rate Option(1) | 6.15 | % | Vanguard Developed Markets Index (VDMIX) | 28.17% | |||||||||
PIMCO Total Return Institutional (PTTRX) | 13.87 | % | Artio International Equity A (BJBIX) | 23.34% | |||||||||
PIMCO Real Return Institutional (PRRIX) | 18.99 | % | American Fnds EuroPacific Growth (REREX) | 39.13% | |||||||||
T Rowe Price High Yield (PRHYX) | 49.09 | % | First Eagle Overseas A (SGOVX) | 20.64% | |||||||||
Dodge & Cox Stock (DODGX) | 31.27 | % | Lazard Emerging Markets Equity Open (LZOEX) | 69.14% | |||||||||
Vanguard 500 Index (VFINX) | 26.49 | % | AIM Global Real Estate (AGREX) | 30.65% | |||||||||
American Funds Growth Fund of America R4 (RGAEX) | 34.54 | % | Model Portfolio — Conservative* | 16.41% | |||||||||
Perkins Mid Cap Value (JMCVX) | 30.37 | % | Model Portfolio — Moderate Conservative* | 26.27% | |||||||||
Artisan Mid Cap (ARTMX) | 50.26 | % | Model Portfolio — Moderate* | 34.81% | |||||||||
American Century Small Cap Value (ASVIX) | 38.75 | % | Model Portfolio — Moderate Aggressive* | 41.67% | |||||||||
Perimeter Small Cap Growth (PSCGX) | 31.67 | % | Model Portfolio — Aggressive* | 48.99% | |||||||||
Harbor International (HIINX) | 38.04 | % | ITT Corporation Stock Fund (ITT) | 10.29% | |||||||||
Vanguard Total Bond Market Index (VBMFX) | 5.93 | % | |||||||||||
Name of Fund | Rate of Return 1/1/11 to 12/31/11 | Name of Fund | Rate of Return 1/1/11 to 12/31/11 | |||||||
Fixed Rate Option(1) | 5.65% | Vanguard Developed Markets Index (VDMIX) | (12.53%) | |||||||
PIMCO Total Return Institutional (PTTRX) | 4.16% | Artio International Equity A (BJBIX) | (23.50%) | |||||||
PIMCO Real Return Institutional (PRRIX) | 11.57% | American Funds EuroPacific Growth (REREX) | (13.61%) | |||||||
T Rowe Price High Yield (PRHYX) | 3.19% | First Eagle Overseas A (SGOVX) | (5.60%) | |||||||
Dodge & Cox Stock (DODGX) | (4.08%) | Lazard Emerging Markets Equity Open (LZOEX) | (18.02%) | |||||||
Vanguard 500 Index (VFINX) | 1.97% | Invesco Global Real Estate A | (7.09%) | |||||||
American Funds Growth Fund of America R4 (RGAEX) | (4.87%) | Model Portfolio* — Conservative | 3.35% | |||||||
Perkins Mid Cap Value (JMCVX) | (2.55%) | Model Portfolio* — Moderate Conservative | 0.49% | |||||||
Artisan Mid Cap (ARTMX) | (2.08%) | Model Portfolio* — Moderate | (1.77%) | |||||||
American Century Small Cap Value (ASVIX) | (6.73%) | Model Portfolio* — Moderate Aggressive | (3.68%) | |||||||
Perimeter Small Cap Growth (PSCGX) | (6.98%) | Model Portfolio* — Aggressive | (6.36%) | |||||||
Harbor International (HIINX) | (11.44%) | ITT Corporation Stock Fund (ITT) | 14.01% | |||||||
Vanguard Total Bond Market Index (VBMFX) | 7.56% |
(1) | The Fixed Rate Option |
* |
POST-EMPLOYMENT COMPENSATION FOR MR. LORANGER
Mr. Loranger resigned with “good reason” as Chairman of the Board, President and Chief Executive Officer on the date of Separation. This resignation took place on October 31, 2011. Prior to his resignation, Mr. Loranger entered into an agreement with the Company that provides Mr. Loranger with (a) a one-time payment of $999,452, and (b) a cash severance benefit of $5,520,000, payable over a 24-month period and commencing no earlier than six months after the termination date. The Company agreed to provide health and welfare benefits to Mr. Loranger over this 24-month time period, and stock options, restricted stock and RSUs that were granted to Mr. Loranger prior to the termination date would continue to vest and options would continue to be exercisable as under their original terms and conditions over this time period as well. Mr. Loranger shall also be eligible to receive retiree medical coverage pursuant to the terms of his separation agreement. Additionally, Mr. Loranger shall receive all retirement benefits accrued during his employment with the Company, including his special Pension Arrangement and his other retirement benefits accrued and earned in the Company’s qualified and nonqualified retirement plans. These terms are consistent with the terms of his Employment Agreement at the time of resignation.
In addition to those payments, Mr. Loranger received the following:
Ÿ | Payments of a pro-rated amount of TSR Awards such that the completed portion of each performance period was reviewed and scored. All three of the TSR Award cycles in progress at the time of Mr. Loranger’s resignation was determined to earn 0% of the target award amount. |
Ÿ | Payments of a pro-rated amount of TSR Awards such that the uncompleted portion of performance period was paid at target, with payments made based on the original vesting schedule. These target payment amounts and dates are as follows: |
Ÿ | $110,000 for the 2009-11 TSR Award performance period, payable no later than March 15, 2012. |
Ÿ | $770,000 for the 2010-11 TSR Award performance period, payable as soon as practicable after December 31, 2012 and no later than March 15, 2013. |
Ÿ | $1,540,717 for the 2011-13 TSR Award performance period, payable as soon as practicable after December 31, 2013 and no later than March 15, March 2014. |
Ÿ | A TSI target payment of $600,000, payable in March 2012. The Committee affirmed an earned payment of 100% of the target award in March 2012. |
POST-EMPLOYMENT COMPENSATION FOR MS. MCCLAIN AND MR. MELCHER
On the Separation date, Ms. McClain assumed the role of President and Chief Executive Officer of Xylem, and Mr. Melcher assumed the role of President and Chief Executive Officer of Exelis. Both resigned from the Company on this date. Neither Ms. McClain nor Mr. Melcher received any compensation as a result of their resignations from the Company.
The Potential Post-Employment Compensation tables on The amounts shown in the potential post-employment compensation tables are estimates (or the estimated present value of the ITT Excess Pension Plan which may be paid in continuing annuitypages 80Pages 93 to 89102 reflect the amount of compensation payable to each of the NEOs except Mr. Loranger in the event of employment termination under several different circumstances, including voluntary termination, termination for cause, death, disability, termination without cause or termination in connection with a change of control. Ms. Ramos Ms. McClain and Mr. CrumMessrs. Chicles, Scalera, Pagano and Nanda are covered under the Senior Executive Severance Pay Plan or Special Senior Executive Severance Pay Plan (applicable to change of control) and Mr. Melcher was covered under the ITT Severance Policy and the Special Senior Executive Pay Plan described on page 78Pages 90 to 91 of this Proxy Statement.Mr. Loranger is covered under the Steven R. Loranger Employment Agreement, described on pages 63 to 66 of this Proxy Statement and does not participate in any severance plans.76
The actual amounts to be paid out can only be determined at the time of such executive’s separation from ITT. For purposes of calculating the estimated potential payments to our officers under the ITT Excess Pension Plan, as reflected in the tables below, we have used the same actuarial factors and assumptions described in note (1)the notes to the 20092011 Pension Benefits table on page 73 and those used for financial statement reporting purposes as described in Note 16 to the Consolidated Financial Statements in the 2009Form 10-K. The calculations assume a discount rate of 6.00% and take into account the UP 1994 Mortality Table projected to 2010,Page 84, except as noted in the footnotes.
Payments and Benefits Provided Generally to Salaried Employees:Employees. The amounts shown in the tables belowin this section do not include payments and benefits to the extent these payments and benefits are provided on a non-discriminatory basis to salaried employees generally upon termination of employment. These include:
Accrued salary and vacation | |||
Regular pension benefits under the ITT Salaried Retirement | |||
Health care benefits provided to retirees under the ITT Salaried Retirement Plan, including retiree medical and dental | |||
Distributions of plan balances under the ITT |
No perquisites are available to any NEOs in any of the post-employment compensation circumstances. With respect to the ITT Salaried Retirement Plan, frozen benefits under such plan may be deferred to age 65, but may become payable at age 55 or, if the participant is eligible for early retirement immediately followingage or, earlier for benefits under the last day worked without regardPension Equity Plan formula. Note that employees of ITT do not have to terminate employment in order to receive their benefits from the period ofITT Salaried Retirement Plan since the severance payments.plan is now sponsored by Exelis. Benefits under the ITT Excess Pension Plan must commence as soon as possible following termination but generally would be payable seven months following such date, retroactive to the date the ITT Excess Pension Plan benefit became payable.
Senior Executive Severance Pay Plan.The amount of severance pay under this plan depends on the executive’s base pay and years of service. The amount will not exceed 24 months of base pay or be greater than two times the executive’s total annual compensation during the year immediately preceding termination. The Company considers these severance pay provisions appropriate transitional provisions given the job responsibilities and competitive market in which senior executives function. The Company’s obligation to continue severance payments stops if the executive does not comply with the Company’s Code of Corporate Conduct. We consider this cessation provision to be critical to the Company’s emphasis on ethical behavior. The Company’s obligation to continue severance payments also stops if the executive does not comply with non-competition provisions of the ITT Severance Policy or Senior Executive Severance Pay Plan. These provisions protect the integrity of our businesses and are consistent with typical commercial arrangements.
If a covered executive receives or is entitled to receive other compensation from another company, the amount of that other compensation could be used to offset amounts otherwise payable under the ITT Senior Executive Severance Pay Plan. During the severance payment period, the executive will have a limited right to continue to be eligible for participation in certain benefit plans. Severance Paypay will start within sixty60 days following the covered executive’s scheduled termination date.
77
levels of benefits appropriate based on the relative ability of each level of employee to influence future Company performance. (Senior Vice Presidents receive the higher level and Vice Presidents the second level). Under the Special Senior Executive Severance Pay Plan, if a covered executive is terminated within two years of an acceleration eventa change of control or in contemplation of an accelerationa change of control event that ultimately occurs or if the covered executive terminates his or her employment for good reason within two years of an acceleration event in the event of a change of control, he or she would be entitled to:
Any accrued but unpaid base salary, bonus (AIP payment), unreimbursed expenses and employee benefits, including | |||
Two or three times the | |||
Continuation of health and life insurance benefits | |||
A lump-sum payment equal to two or three times the highest annual base salary rate during the three years preceding termination or an acceleration event times the highest percentage rate of the Company’s contributions to the ITT Salaried Investment and Savings Plan and the ITT | ||
One year of outplacement. |
Ms. Ramos Ms. McClain and Mr. CrumMessrs. Chicles, Scalera, Pagano and Nanda are all covered at the highest level of benefits. Mr. Melcher was covered at the lower level of benefits. Mr. Loranger does not participate in this plan. Ms. Ramos is entitled to a cash payment upon severance, as described on page 67,Page 66, which payment may be delayed, if required by Section 409A.
Mr. Loranger:Ms. Ramos. Mr. Loranger’s entitlement to severance pay and benefits upon a termination fromUnder the Ramos Letter agreement, should Ms. Ramos be terminated by the Company duringother than for cause, Ms. Ramos is entitled to a severance benefit equal to twenty-four months of base salary, subject to the two-year period following a change of control was a negotiated provision of the Steven R. Loranger Employment Agreement, which is described on pages 63 to 66.
The Potential Post-Employment Compensation tables on pages 80Pages 93 to 89102 of this Proxy Statement provide additional information.
The payment or vesting of awards or benefits under each of the plans listed below would be accelerated upon the occurrence of a change of control of the Company. The reasons for the change of control provisions in these plans are to put the executive in the same position he or she would have been in had the change of control not occurred. Executives then can focus on preserving value for shareholders when evaluating situations that, without change of control78
1. A report on Schedule 13D was filed with the SEC disclosing that any person, other than the Company or one of its subsidiaries or any employee benefit plan that is sponsored by the Company or a subsidiary, had become the beneficial owner of 20% or more of the Company’s outstanding stock;
2. A person other than the Company or one of its subsidiaries or any employee benefit plan that is sponsored by the Company or a subsidiary purchased the Company’s shares in connection with a tender or exchange offer, if after consummation of the offer the person purchasing the shares is the beneficial owner of 20% or more of the Company’s outstanding stock;
3. The shareholders of the Company approved,
(a) anyAny consolidation, business combination or merger of the Company other than a consolidation, business combination or merger in which the shareholders of the Company
immediately prior to the merger would hold 50% or more of the combined voting power of the Company or the surviving corporation of the merger and would have the same proportionate ownership of common stock of the surviving corporation that they held in the Company immediately prior to the merger; or
(b) anyAny sale, lease, exchange or other transfer of all or substantially all of the assets of the Company;
4. A majority of the members of the Board of Directors of the Company changed within a12-month period, unless the election or nomination for election of each of the new Directors by the Company’s stockholders had been approved by two-thirds of the Directors still in office who had been Directors at the beginning of the12-month period or whose nomination for election or election was recommended or approved by a majority of Directors who were Directors at the beginning of the12-month period; or
5. Any person other than the Company or one of its subsidiaries or any employee benefit plan sponsored by the Company or a subsidiary became the beneficial owner of 20% or more of the Company’s outstanding stock.
Pre-2005 awards and benefits will be paid if the 20% threshold described above is reached. For awards or benefits earned since January 1, 2005, payment of awards or benefits would be made if a person other than the Company, its subsidiaries or any employment benefit plan sponsored by the Company becomes the beneficial owner of 30% or more of the Company’s outstanding stock.
Under the 2011 Omnibus Incentive Plan, a change of control requires consummation of the transactions described in 3(a) and (b) above.
The following Company plans have change of control provisions:
The 2011 Omnibus Incentive Plan |
Ÿ | The 2003 Equity Incentive | ||
The 1994 Incentive Stock | |||
The 1996 Restricted Stock Plan for Non-Employee | |||
The 1997 Annual Incentive Plan for Executive | |||
The 1997 Annual Incentive | |||
The 1997 Long-Term Incentive | |||
The Special Senior Executive Severance Pay | |||
The Enhanced Severance Pay | |||
The Deferred Compensation | |||
The Supplemental Retirement Savings |
79
The Ramos Letter |
Potential post-employment compensation arrangements are more fully described for the NEOs in the tables on pages 80Pages 93 to 89.
Potential Post-Employment CompensationPOTENTIAL POST-EMPLOYMENT COMPENSATION Steven R. Loranger Termination Not For Cause or With Good Reason Termination Termination After Change Resignation For Cause Death Disability Not For Cause Of Control ($)(a) ($)(b) ($)(c) ($)(d) ($)(e) ($)(f)
Salary — — — — 2,260,000 3,390,000 AIP — — — — 2,938,000 7,602,075 — — — — 5,198,000 10,992,075
2008 — 10 TSR Award — — 3,300,000 3,300,000 3,300,000 6,600,000 2009 — 11 TSR Award — — 1,980,000 1,980,000 1,980,000 1,320,000 — — 5,280,000 5,280,000 5,280,000 7,920,000 6/28/04 Stock Option — — 684,989 684,989 684,989 684,989 6/28/04 RSUs — — 4,378,811 4,378,811 4,378,811 4,378,811 3/7/07 Stock Option — — — — — — 3/7/07 Restricted Stock — — 1,217,337 1,217,337 1,217,337 1,217,337 3/10/08 Stock Option — — — — — — 3/10/08 Restricted Stock — — 1,411,124 1,411,124 1,411,124 1,411,124 3/5/09 Stock Option — — 2,742,170 2,742,170 — 2,742,170 3/5/09 Restricted Stock — — 2,598,567 2,598,567 2,454,202 2,598,567 — — 13,032,998 13,032,998 10,146,463 13,032,998 ITT Excess Pension Plan(4) 1,424,639 1,424,639 781,142 — 1,424,639 2,372,479 Special Pension Arrangement(5) 8,761,930 8,761,930 8,761,930 8,761,930 8,761,930 12,912,169 ITT Excess Savings Plan(6) — — — — — 118,650 10,186,569 10,186,569 9,543,072 8,761,930 10,186,569 15,403,298 Outplacement — — — — — — Health & Welfare(7) — — — 4,416 4,416 6,624 — — — — — 9,833,316 — — — 4,416 4,416 9,839,940 10,186,569 10,186,569 27,856,070 27,079,344 30,815,448 57,188,311
Denise L. Ramos | ||||||||||||||||||||||||
Resignation ($) | Termination For Cause ($) | Death ($) | Disability ($) | Termination Not For Cause ($) | Termination After Change ($) | |||||||||||||||||||
Cash Severance(1) | ||||||||||||||||||||||||
Salary | — | — | — | — | 1,700,000 | 2,550,000 | ||||||||||||||||||
AIP | — | — | — | — | 1,700,000 | 2,550,000 | ||||||||||||||||||
Total | — | — | — | — | 3,400,000 | 5,100,000 | ||||||||||||||||||
Unvested Equity | ||||||||||||||||||||||||
3/5/2009 Option Award | — | — | 560,378 | 560,378 | 560,378 | 560,378 | ||||||||||||||||||
3/5/2009 Restricted Stock | — | — | 491,929 | 491,929 | 491,929 | 491,929 | ||||||||||||||||||
3/5/2010 Option Award | — | — | — | — | — | — | ||||||||||||||||||
3/5/2010 Restricted Stock | — | — | 431,755 | 431,755 | 431,755 | 431,755 | ||||||||||||||||||
3/3/2011 Option Award | — | — | — | — | — | — | ||||||||||||||||||
3/3/2011 Restricted Stock | — | — | 471,845 | 471,845 | 445,631 | 471,845 | ||||||||||||||||||
11/7/2011 Option Award | — | — | — | — | — | — | ||||||||||||||||||
11/7/2011 Restricted Stock(3) | — | — | 2,001,622 | 2,001,622 | 1,445,616 | 2,001,622 | ||||||||||||||||||
11/7/2011 Restricted Stock(4) | — | — | 148,261 | 148,261 | 148,261 | 148,261 | ||||||||||||||||||
11/7/2011 Restricted Stock(5) | — | — | 367,115 | 367,115 | 367,115 | 367,115 | ||||||||||||||||||
Total | — | — | 4,472,895 | 4,472,895 | 3,890,685 | 4,472,895 | ||||||||||||||||||
Non-Qualified Retirement Benefits | ||||||||||||||||||||||||
ITT Excess Pension Plan(6) | 484,705 | 484,705 | 209,598 | 484,705 | 484,705 | 484,705 | ||||||||||||||||||
ITT Supplemental Retirement Savings Plan for Salaried Employees(7) | — | — | — | — | — | 89,250 | ||||||||||||||||||
Total | 484,705 | 484,705 | 209,598 | 484,705 | 484,705 | 573,955 | ||||||||||||||||||
Other Benefits | ||||||||||||||||||||||||
Outplacement(8) | — | — | — | — | 5,000 | 5,000 | ||||||||||||||||||
Health and | — | — | — | — | 19,776 | 29,664 | ||||||||||||||||||
Total | — | — | — | — | 24,776 | 34,664 | ||||||||||||||||||
Total(10) | 484,705 | 484,705 | 4,682,493 | 4,957,600 | 7,800,166 | 10,181,514 |
80
(1) | ||
81
Denise L. Ramos | ||||||||||||||||||||||||||||||
Termination | ||||||||||||||||||||||||||||||
Not For Cause | ||||||||||||||||||||||||||||||
or With Good | ||||||||||||||||||||||||||||||
Reason | ||||||||||||||||||||||||||||||
Termination | Termination | After Change | ||||||||||||||||||||||||||||
Resignation | For Cause | Death | Disability | Not For Cause | of Control | |||||||||||||||||||||||||
$(a) | $(b) | $(c) | $(d) | $(e) | $(f) | |||||||||||||||||||||||||
Cash Severance(1) | ||||||||||||||||||||||||||||||
Salary | — | — | — | — | 1,080,000 | 1,620,000 | ||||||||||||||||||||||||
AIP | — | — | — | — | — | 2,612,700 | ||||||||||||||||||||||||
Total | — | — | — | — | 1,080,000 | 4,232,700 | ||||||||||||||||||||||||
Unvested Non-Equity Awards(2) | ||||||||||||||||||||||||||||||
2008 — 10 TSR Award | — | — | 600,000 | 600,000 | 600,000 | 1,200,000 | ||||||||||||||||||||||||
2009 — 11 TSR Award | — | — | 360,000 | 360,000 | 360,000 | 240,000 | ||||||||||||||||||||||||
Total | — | — | 960,000 | 960,000 | 960,000 | 1,440,000 | ||||||||||||||||||||||||
Unvested Equity Awards(3) | ||||||||||||||||||||||||||||||
7/2/07 Stock Option | — | — | — | — | — | — | ||||||||||||||||||||||||
7/2/07 Restricted Stock | — | — | 643,138 | 643,138 | 643,138 | 643,138 | ||||||||||||||||||||||||
3/10/08 Stock Option | — | — | — | — | — | — | ||||||||||||||||||||||||
3/10/08 Restricted Stock | — | — | 256,559 | 256,559 | 256,559 | 256,559 | ||||||||||||||||||||||||
3/5/09 Stock Option | — | — | 498,652 | 498,652 | — | 498,652 | ||||||||||||||||||||||||
3/5/09 Restricted Stock | — | — | 472,480 | 472,480 | 446,231 | 472,480 | ||||||||||||||||||||||||
Total | — | — | 1,870,829 | 1,870,829 | 1,345,928 | 1,870,829 | ||||||||||||||||||||||||
Non-Qualified Retirement Benefits | ||||||||||||||||||||||||||||||
ITT Excess Pension Plan(4) | — | — | — | — | — | 1,129,291 | ||||||||||||||||||||||||
ITT Excess Savings Plan(5) | — | — | 9,521 | 9,521 | — | 56,700 | ||||||||||||||||||||||||
Total | — | — | 9,521 | 9,521 | — | 1,185,991 | �� | |||||||||||||||||||||||
Other Benefits | ||||||||||||||||||||||||||||||
Outplacement(6) | — | — | — | — | 75,000 | 75,000 | ||||||||||||||||||||||||
Health & Welfare(7) | — | — | — | — | 2,385 | 3,577 | ||||||||||||||||||||||||
IRC 280(g) TaxGross-Up(8) | — | — | — | — | — | 3,328,284 | ||||||||||||||||||||||||
Total | — | — | — | — | 77,385 | 3,406,861 | ||||||||||||||||||||||||
Total | — | — | 2,840,350 | 2,840,350 | 3,463,313 | 12,136,381 | ||||||||||||||||||||||||
Under Ms. Ramos’ employment agreement dated October 4, 2011, described on | ||
(2) | ||
Unvested equity awards reflect the market value of stock and in the money value of options based on the Company’s December 31, |
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(3) | Reflects special Founders’ Grants made on November 7, 2011. |
(4) | Reflects RSUs granted in recognition of the uncompleted portion of the 2010-12 TSR Award Period. |
(5) |
(6) | All benefits under the ITT Salaried Retirement Plan and the ITT Excess Pension Plan are payable by Exelis. Values under scenarios other than Death reflect the |
(7) | No additional ITT |
(8) | The Company’s Senior Executive Severance Pay Plan includes one year of outplacement services. |
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Gretchen W. McClain | ||||||||||||||||||||||||||||||
Termination | ||||||||||||||||||||||||||||||
Not For Cause | ||||||||||||||||||||||||||||||
or With Good | ||||||||||||||||||||||||||||||
Reason | ||||||||||||||||||||||||||||||
Termination | Termination | After Change | ||||||||||||||||||||||||||||
Resignation | For Cause | Death | Disability | Not For Cause | of Control | |||||||||||||||||||||||||
$(a) | $(b) | $(c) | $(d) | $(e) | $(f) | |||||||||||||||||||||||||
Cash Severance(1) | ||||||||||||||||||||||||||||||
Salary | — | — | — | — | 557,917 | 1,545,000 | ||||||||||||||||||||||||
AIP | — | — | — | — | — | 1,583,100 | ||||||||||||||||||||||||
Total | — | — | — | — | 557,917 | 3,128,100 | ||||||||||||||||||||||||
Unvested Non-Equity Units(2) | ||||||||||||||||||||||||||||||
2008 — 10 TSR Award | — | — | 550,000 | 550,000 | 550,000 | 1,100,000 | ||||||||||||||||||||||||
2009 — 11 TSR Award | — | — | 360,000 | 360,000 | 250,000 | 240,000 | ||||||||||||||||||||||||
Total | — | — | 910,000 | 910,000 | 800,000 | 1,340,000 | ||||||||||||||||||||||||
Unvested Equity Awards(3) | ||||||||||||||||||||||||||||||
3/7/07 Stock Option | — | — | — | — | — | — | ||||||||||||||||||||||||
3/7/07 Restricted Stock | — | — | 182,596 | 182,596 | 182,596 | 182,596 | ||||||||||||||||||||||||
3/10/08 Stock Option | — | — | — | — | — | — | ||||||||||||||||||||||||
3/10/08 Restricted Stock | — | — | 235,171 | 235,171 | 228,638 | 235,171 | ||||||||||||||||||||||||
3/5/09 Stock Option | — | — | 498,652 | 498,652 | — | 498,652 | ||||||||||||||||||||||||
3/5/09 Restricted Stock | — | — | 3,097,260 | 3,097,260 | 1,308,028 | 3,097,260 | ||||||||||||||||||||||||
Total | — | — | 4,013,679 | 4,013,679 | 1,719,262 | 4,013,679 | ||||||||||||||||||||||||
Non-Qualified Retirement Benefits ITT Excess Pension Plan(4) | 117,546 | 117,546 | 65,155 | — | 117,546 | 773,220 | ||||||||||||||||||||||||
ITT Excess Savings Plan(5) | — | — | 4,481 | 4,481 | — | 54,075 | ||||||||||||||||||||||||
ITT Total | 117,546 | 117,546 | 69,636 | 4,481 | 117,546 | 827,295 | ||||||||||||||||||||||||
Other Benefits | ||||||||||||||||||||||||||||||
Outplacement(6) | — | — | — | — | 75,000 | 75,000 | ||||||||||||||||||||||||
Health & Welfare(7) | — | — | — | — | 1,908 | 2,861 | ||||||||||||||||||||||||
IRC 280(g) TaxGross-Up(8) | — | — | — | — | — | 3,582,072 | ||||||||||||||||||||||||
Total | — | — | — | — | 76,908 | 3,659,933 | ||||||||||||||||||||||||
Total | 117,546 | 117,546 | 4,993,315 | 4,928,160 | 3,271,633 | 12,969,007 | ||||||||||||||||||||||||
(10) | Values in this table show the full payments per the applicable plan documents under the potential termination scenarios. In the event of a change-in-control a “best net” provision would apply, which provides either an unreduced benefit or a reduction in payments sufficient to avoid triggering an excise tax, whichever is better after-tax. |
POTENTIAL POST-EMPLOYMENT COMPENSATION
Aris C. Chicles | ||||||||||||||||||||||||
Resignation ($) | Termination For Cause ($) | Death ($) | Disability ($) | Termination Not For Cause ($) | Termination Not For Cause or With Good Reason After Change of Control ($) | |||||||||||||||||||
Cash Severance(1) | ||||||||||||||||||||||||
Salary | — | — | — | — | 490,000 | 1,260,000 | ||||||||||||||||||
AIP | — | — | — | — | — | 945,000 | ||||||||||||||||||
Total | — | — | — | — | 490,000 | 2,205,000 | ||||||||||||||||||
Unvested Equity Awards(2) | ||||||||||||||||||||||||
3/5/2009 Option Award | — | — | 210,159 | 210,159 | 210,159 | 210,159 | ||||||||||||||||||
3/5/2009 Restricted Stock | — | — | 184,466 | 184,466 | 184,466 | 184,466 | ||||||||||||||||||
3/5/2010 Option Award | — | — | — | — | — | — | ||||||||||||||||||
3/5/2010 Restricted Stock | — | — | 145,729 | 145,729 | 145,729 | 145,729 | ||||||||||||||||||
3/3/2011 Option Award | — | — | — | — | — | — | ||||||||||||||||||
3/3/2011 Restricted Stock | — | — | 169,543 | 169,543 | 113,029 | 169,543 | ||||||||||||||||||
11/7/2011 Option Award | — | — | — | — | — | — | ||||||||||||||||||
11/7/2011 Restricted Stock(3) | — | — | 600,486 | 600,486 | 266,883 | 600,486 | ||||||||||||||||||
11/7/2011 Restricted Stock(4) | — | — | 50,045 | 50,045 | 50,045 | 50,045 | ||||||||||||||||||
11/7/2011 Restricted Stock(5) | — | — | 131,966 | 131,966 | 81,210 | 131,966 | ||||||||||||||||||
Total | — | — | 1,492,394 | 1,492,394 | 1,051,521 | 1,492,394 | ||||||||||||||||||
Non-Qualified Retirement Benefits | ||||||||||||||||||||||||
ITT Excess Pension Plan(6) | 191,171 | 191,171 | 98,395 | 191,171 | 191,171 | 191,171 | ||||||||||||||||||
ITT Supplemental Retirement Savings Plan for Salaried Employees(7) | — | — | — | — | — | 44,100 | ||||||||||||||||||
Total | 191,171 | 191,171 | 98,395 | 191,171 | 191,171 | 235,271 | ||||||||||||||||||
Other Benefits | ||||||||||||||||||||||||
Outplacement(8) | — | — | — | — | 5,000 | 5,000 | ||||||||||||||||||
Health and Welfare(9) | — | — | — | — | 10,909 | 28,051 | ||||||||||||||||||
Total | — | — | — | — | 15,909 | 33,051 | ||||||||||||||||||
Total(10) | 191,171 | 191,171 | 1,590,789 | 1,683,565 | 1,748,601 | 3,965,716 |
(1) | Under the Senior Executive Severance Pay Plan, Mr. Chicles will receive 14 months of base salary after termination without cause, as described on Page 90 of this Proxy Statement. In the event of a change in control, Mr. Chicles is covered under the Company’s Special Senior Executive Severance Pay Plan, described on | |
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(2) | Unvested equity awards reflect the market value of stock and |
(3) | Reflects special Founders’ Grants made on November 7, 2011. |
(4) | Reflects RSUs granted in recognition of the uncompleted portion of the 2010-12 TSR Award Period. |
(5) |
(6) | All benefits under the ITT Salaried Retirement Plan and |
(7) | No additional ITT |
(8) | The Company’s Senior Executive Severance Pay Plan includes one year of outplacement services. Amounts shown |
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David F. Melcher | ||||||||||||||||||||||||||||||
Termination | ||||||||||||||||||||||||||||||
Not For Cause | ||||||||||||||||||||||||||||||
or With Good | ||||||||||||||||||||||||||||||
Reason | ||||||||||||||||||||||||||||||
Termination | Termination | After Change | ||||||||||||||||||||||||||||
Resignation | For Cause | Death | Disability | Not For Cause | of Control | |||||||||||||||||||||||||
$(a) | $(b) | $(c) | $(d) | $(e) | $(f) | |||||||||||||||||||||||||
Cash Severance(1) | ||||||||||||||||||||||||||||||
Salary | — | — | — | — | 212,500 | 850,000 | ||||||||||||||||||||||||
AIP | — | — | — | — | — | 973,800 | ||||||||||||||||||||||||
Total | — | — | — | — | 212,500 | 1,823,800 | ||||||||||||||||||||||||
Unvested Non-Equity Awards(2) | ||||||||||||||||||||||||||||||
2008 — 10 TSR Award | — | — | 150,000 | 150,000 | 125,000 | 300,000 | ||||||||||||||||||||||||
2009 — 11 TSR Award | — | — | 250,000 | 250,000 | 125,000 | 166,667 | ||||||||||||||||||||||||
Total | — | — | 400,000 | 400,000 | 250,000 | 466,667 | ||||||||||||||||||||||||
Unvested Equity Awards(3) | ||||||||||||||||||||||||||||||
8/18/08 Stock Option | — | — | — | — | — | — | ||||||||||||||||||||||||
8/18/08 Restricted Stock | — | — | 55,958 | 55,958 | 34,196 | 55,958 | ||||||||||||||||||||||||
3/5/09 Stock Option | — | — | 410,523 | 410,523 | 136,852 | 410,523 | ||||||||||||||||||||||||
3/5/09 Restricted Stock | — | — | 328,085 | 328,085 | 145,816 | 328,085 | ||||||||||||||||||||||||
Total | — | — | 794,566 | 794,566 | 316,864 | 794,566 | ||||||||||||||||||||||||
Non-Qualified Retirement Benefits | ||||||||||||||||||||||||||||||
ITT Excess Pension Plan(4) | — | — | — | — | — | 697,657 | ||||||||||||||||||||||||
ITT Excess Savings Plan(5) | — | — | 4,347 | 4,347 | — | 29,750 | ||||||||||||||||||||||||
Total | — | — | 4,347 | 4,347 | — | 727,407 | ||||||||||||||||||||||||
Other Benefits | ||||||||||||||||||||||||||||||
Outplacement(6) | — | — | — | — | 75,000 | 75,000 | ||||||||||||||||||||||||
Health & Welfare(7) | — | — | — | — | 1,530 | 2,295 | ||||||||||||||||||||||||
IRC 280(g) TaxGross-Up(8) | — | — | — | — | — | 1,468,812 | ||||||||||||||||||||||||
Total | — | — | — | — | 76,530 | 1,546,107 | ||||||||||||||||||||||||
Total | — | — | 1,198,913 | 1,198,913 | 855,894 | 5,358,547 | ||||||||||||||||||||||||
(10) | Values in this table show the full payments per the applicable plan documents under the potential termination scenarios. In the event of a change-in-control a “best net” provision would apply, which provides either an unreduced benefit or a reduction in payments sufficient to avoid triggering an excise tax, whichever is better after-tax. |
POTENTIAL POST-EMPLOYMENT COMPENSATION
Thomas M. Scalera | ||||||||||||||||||||||||
Resignation ($) | Termination For Cause ($) | Death ($) | Disability ($) | Termination Not For Cause ($) | Termination Not For Cause or With Good Reason After Change of Control ($) | |||||||||||||||||||
Cash Severance(1) | ||||||||||||||||||||||||
Salary | — | — | — | — | 359,333 | 924,000 | ||||||||||||||||||
AIP | — | — | — | — | — | 693,000 | ||||||||||||||||||
Total | — | — | — | — | 359,333 | 1,617,000 | ||||||||||||||||||
Unvested Equity Awards(2) | ||||||||||||||||||||||||
3/5/2009 Option Award | — | — | 20,534 | 20,534 | 20,534 | 20,534 | ||||||||||||||||||
3/5/2009 Restricted Stock | — | — | 45,561 | 45,561 | 45,561 | 45,561 | ||||||||||||||||||
3/5/2010 Option Award | — | — | — | — | — | — | ||||||||||||||||||
3/5/2010 Restricted Stock | — | — | 39,549 | 39,549 | 39,549 | 39,549 | ||||||||||||||||||
3/3/2011 Option Award | — | — | — | — | — | — | ||||||||||||||||||
3/3/2011 Restricted Stock | — | — | 44,227 | 44,227 | 29,485 | 44,227 | ||||||||||||||||||
11/7/2011 Option Award | — | — | — | — | — | — | ||||||||||||||||||
11/7/2011 Restricted | — | — | 330,272 | 330,272 | 146,788 | 330,272 | ||||||||||||||||||
11/7/2011 Restricted | — | — | 13,608 | 13,608 | 13,608 | 13,608 | ||||||||||||||||||
11/7/2011 Restricted | — | — | 34,427 | 34,427 | 21,186 | 34,427 | ||||||||||||||||||
Total | — | — | 528,178 | 528,178 | 316,711 | 528,178 | ||||||||||||||||||
Non-Qualified Retirement Benefits | ||||||||||||||||||||||||
ITT Excess Pension Plan(6) | 33,562 | 33,562 | 30,320 | 33,562 | 33,562 | 33,562 | �� | |||||||||||||||||
ITT Supplemental Retirement Savings Plan for Salaried Employees(7) | — | — | — | — | — | 32,340 | ||||||||||||||||||
Total | 33,562 | 33,562 | 30,320 | 33,562 | 33,562 | 65,902 | ||||||||||||||||||
Other Benefits | ||||||||||||||||||||||||
Outplacement (8) | — | — | — | — | 5,000 | 5,000 | ||||||||||||||||||
Health and Welfare(9) | — | — | — | — | 10,738 | 27,611 | ||||||||||||||||||
Total | — | — | — | — | 15,738 | 32,611 | ||||||||||||||||||
Total (10) | 33,562 | 33,562 | 558,498 | 561,740 | 725,344 | 2,243,691 |
(1) | Under the Senior Executive Severance Pay Plan, Mr. Scalera will receive 14 months of base salary after termination without cause, as described on Page 90 of this Proxy Statement. In the event of a change in control, Mr. Scalera is covered under the Company’s Special Senior Executive Severance Pay Plan, described on |
(2) | |
Unvested equity awards reflect the market value of stock and |
86
(3) | Reflects special Founders’ Grants made on November 7, 2011. |
(4) |
(5) | Reflects RSUs granted in recognition of the uncompleted portion of the 2011-13 TSR Award Period. |
(6) | All benefits under the ITT Salaried Retirement Plan and the ITT Excess Pension Plan are payable by Exelis. Values under scenarios other than Death reflect the sum of (i) Pension Equity formula lump sum |
2011 of the Traditional Pension Plan formula annual vested benefit payable at age 55 under the ITT Excess Pension Plan. The value under Death reflects the value of the benefit payable to Mr. Scalera’s beneficiary upon death. |
No additional ITT |
(9) | ||
87
Scott A. Crum | ||||||||||||||||||||||||||||||
Termination | ||||||||||||||||||||||||||||||
Not For Cause | ||||||||||||||||||||||||||||||
or With Good | ||||||||||||||||||||||||||||||
Reason | ||||||||||||||||||||||||||||||
Termination | Termination | After Change | ||||||||||||||||||||||||||||
Resignation | For Cause | Death | Disability | Not For Cause | of Control | |||||||||||||||||||||||||
$(a) | $(b) | $(c) | $(d) | $(e) | $(f) | |||||||||||||||||||||||||
Cash Severance(1) | ||||||||||||||||||||||||||||||
Salary | — | — | — | — | 506,667 | 1,140,000 | ||||||||||||||||||||||||
AIP | — | — | — | — | — | 1,440,000 | ||||||||||||||||||||||||
Total | — | — | — | — | 506,667 | 2,580,000 | ||||||||||||||||||||||||
Unvested TSR Non-Equity Awards(2) | ||||||||||||||||||||||||||||||
2008 — 10 TSR Award | — | — | 362,500 | 362,500 | 362,500 | 725,000 | ||||||||||||||||||||||||
2009 — 11 TSR Award | — | — | 217,300 | 217,300 | 169,011 | 144,867 | ||||||||||||||||||||||||
Total | — | — | 579,800 | 579,800 | 531,511 | 869,867 | ||||||||||||||||||||||||
Unvested Equity Awards(3) | ||||||||||||||||||||||||||||||
3/7/07 Stock Option | — | — | — | — | — | — | ||||||||||||||||||||||||
3/7/07 Restricted Stock | — | — | 136,934 | 136,934 | 136,934 | 136,934 | ||||||||||||||||||||||||
3/10/08 Stock Option | — | — | — | — | — | — | ||||||||||||||||||||||||
3/10/08 Restricted Stock | — | — | 154,990 | 154,990 | 154,990 | 154,990 | ||||||||||||||||||||||||
3/5/09 Stock Options | — | — | 301,045 | 301,045 | — | 301,045 | ||||||||||||||||||||||||
3/5/09 Restricted Stock | — | — | 285,209 | 285,209 | 205,984 | 285,209 | ||||||||||||||||||||||||
Total | — | — | 878,178 | 878,178 | 497,908 | 878,178 | ||||||||||||||||||||||||
Non-Qualified Retirement Benefits | ||||||||||||||||||||||||||||||
ITT Excess Pension Plan(4) | 282,949 | 282,949 | 165,538 | — | 282,949 | 1,602,393 | ||||||||||||||||||||||||
ITT Excess Savings Plan(5) | — | — | — | — | — | 39,900 | ||||||||||||||||||||||||
Total | 282,949 | 282,949 | 165,538 | — | 282,949 | 1,642,293 | ||||||||||||||||||||||||
Other Benefits | ||||||||||||||||||||||||||||||
Outplacement(6) | — | — | — | — | 75,000 | 75,000 | ||||||||||||||||||||||||
Health & Welfare(7) | — | — | — | — | 1,368 | 2,052 | ||||||||||||||||||||||||
IRC 280(g) TaxGross-Up(8) | — | — | — | — | — | 1,766,293 | ||||||||||||||||||||||||
Total | — | — | — | — | 76,368 | 1,843,345 | ||||||||||||||||||||||||
Total | 282,949 | 282,949 | 1,623,516 | 1,457,978 | 1,895,403 | 7,813,683 | ||||||||||||||||||||||||
(10) | Values in this table show the full payments per the applicable plan documents under the potential termination scenarios. In the event of a change-in-control a “best net” provision would apply, which provides either an unreduced benefit or a reduction in payments sufficient to avoid triggering an excise tax, whichever is better after-tax. |
POTENTIAL POST-EMPLOYMENT COMPENSATION
Robert J. Pagano, Jr. | ||||||||||||||||||||||||
Resignation ($) | Termination For Cause ($) | Death ($) | Disability ($) | Termination Not For Cause ($) | Termination Not For Cause or With Good Reason After Change of Control ($) | |||||||||||||||||||
Cash Severance(1) | ||||||||||||||||||||||||
Salary | — | — | — | — | 800,000 | 1,200,000 | ||||||||||||||||||
AIP | — | — | — | — | — | 600,000 | ||||||||||||||||||
Total | — | — | — | — | 800,000 | 1,800,000 | ||||||||||||||||||
Unvested Equity Awards(2) | ||||||||||||||||||||||||
3/10/2008 Restricted Stock | 356,194 | 356,194 | — | 356,194 | ||||||||||||||||||||
3/5/2009 Option Award | — | — | 78,339 | 78,339 | 78,339 | 78,339 | ||||||||||||||||||
3/5/2009 Restricted Stock | — | — | 174,009 | 174,009 | 174,009 | 174,009 | ||||||||||||||||||
3/5/2010 Option Award | — | — | — | — | — | — | ||||||||||||||||||
3/5/2010 Restricted Stock | — | — | 142,095 | 142,095 | 142,095 | 142,095 | ||||||||||||||||||
3/3/2011 Option Award | — | — | — | — | — | — | ||||||||||||||||||
3/3/2011 Restricted Stock | — | — | 117,971 | 117,971 | 111,417 | 117,971 | ||||||||||||||||||
11/7/2011 Option Award | — | — | — | — | — | — | ||||||||||||||||||
11/7/2011 Restricted Stock(3) | — | — | 285,949 | 285,949 | 206,519 | 285,949 | ||||||||||||||||||
11/7/2011 Restricted Stock(4) | — | — | 48,808 | 48,808 | 48,808 | 48,808 | ||||||||||||||||||
11/7/2011 Restricted Stock(5) | — | — | 91,760 | 91,760 | 91,760 | 91,760 | ||||||||||||||||||
Total | — | — | 1,295,125 | 1,295,125 | 852,947 | 1,295,125 | ||||||||||||||||||
Non-Qualified Retirement Benefits | ||||||||||||||||||||||||
ITT Excess Pension Plan(6) | 551,473 | 551,473 | 267,535 | 551,473 | 551,473 | 551,473 | ||||||||||||||||||
ITT Supplemental Retirement Savings Plan for Salaried Employees(7) | — | — | — | — | — | 42,000 | ||||||||||||||||||
Total | 551,473 | 551,473 | 267,535 | 551,473 | 551,473 | 593,473 | ||||||||||||||||||
Other Benefits | ||||||||||||||||||||||||
Outplacement(8) | — | — | — | — | 5,000 | 5,000 | ||||||||||||||||||
Health and Welfare(9) | — | — | — | — | 9,974 | 14,960 | ||||||||||||||||||
Total | — | — | — | — | 14,974 | 19,960 | ||||||||||||||||||
Total (10) | 551,473 | 551,473 | 1,562,660 | 1,846,598 | 2,219,394 | 3,708,558 |
(1) | Under the Senior Executive Severance Pay Plan, Mr. Pagano will receive 24 months of base salary after termination without cause, as described on Page 90 of this Proxy Statement. In the event of a change in control, Mr. Pagano is covered under the Company’s Special Senior Executive Severance Pay Plan, described on |
88
Unvested equity awards reflect the market value of stock and |
(3) | Reflects special Founders’ Grants made on November 7, 2011. |
(4) |
(5) | Reflects RSUs granted in recognition of the uncompleted portion of the 2011-13 TSR Award Period. |
(6) | All benefits under the ITT Salaried Retirement Plan and |
No additional ITT |
The Company’s Senior Executive Severance Pay Plan includes one year of outplacement services. Amounts shown |
(10) | Values in this table show the full payments per the applicable plan documents under the potential termination scenarios. In the event of a change-in-control a “best net” provision would apply, which provides either an unreduced benefit or a reduction in payments sufficient to avoid triggering an excise tax, whichever is better after-tax. |
POTENTIAL POST—EMPLOYMENT COMPENSATION
Munish Nanda | ||||||||||||||||||||||||
Resignation ($) | Termination For Cause ($) | Death ($) | Disability ($) | Termination Not For Cause ($) | Termination Not For Cause or With Good Reason After Change of Control ($) | |||||||||||||||||||
Cash Severance(1) | ||||||||||||||||||||||||
Salary | — | — | — | — | 330,000 | 990,000 | ||||||||||||||||||
AIP | — | — | — | — | — | 495,000 | ||||||||||||||||||
Total | — | — | — | — | 330,000 | 1,485,000 | ||||||||||||||||||
Unvested Equity Awards(2) | ||||||||||||||||||||||||
3/5/2009 Option Award | — | — | 55,369 | 55,369 | 55,369 | 55,369 | ||||||||||||||||||
3/5/2009 Restricted Stock | — | — | 122,997 | 122,997 | 122,997 | 122,997 | ||||||||||||||||||
3/5/2010 Option Award | — | — | — | — | — | — | ||||||||||||||||||
3/5/2010 Restricted Stock | — | — | 116,927 | 116,927 | 110,431 | 116,927 | ||||||||||||||||||
3/3/2011 Option Award | — | — | — | — | — | — | ||||||||||||||||||
3/3/2011 Restricted Stock | — | — | 97,307 | 97,307 | 59,465 | 97,307 | ||||||||||||||||||
11/7/2011 Option Award | — | — | — | — | — | — | ||||||||||||||||||
11/7/2011 Restricted Stock(3) | — | — | 235,903 | 235,903 | 91,740 | 235,903 | ||||||||||||||||||
11/7/2011 Restricted Stock(4) | — | — | 40,148 | 40,148 | 40,148 | 40,148 | ||||||||||||||||||
11/7/2011 Restricted Stock(5) | — | — | 75,716 | 75,716 | 40,770 | 75,716 | ||||||||||||||||||
Total | — | — | 744,367 | 744,367 | 520,920 | 744,367 | ||||||||||||||||||
Non-Qualified Retirement Benefits | ||||||||||||||||||||||||
ITT Excess Pension Plan(6) | 36,439 | 36,439 | 36,439 | 36,439 | 36,439 | 36,439 | ||||||||||||||||||
ITT Supplemental Retirement Savings Plan for Salaried Employees(7) | — | — | — | — | — | 34,650 | ||||||||||||||||||
Total | 36,439 | 36,439 | 36,439 | 36,439 | 36,439 | 71,089 | ||||||||||||||||||
Other Benefits | ||||||||||||||||||||||||
Outplacement(8) | — | — | — | — | 5,000 | 5,000 | ||||||||||||||||||
Health and Welfare(9) | — | — | — | — | 9,281 | 27,844 | ||||||||||||||||||
Total | — | — | — | — | 14,281 | 32,844 | ||||||||||||||||||
Total (10) | 36,439 | 36,439 | 780,806 | 780,806 | 901,640 | 2,333,300 |
(1) | ||
(2) | Unvested equity awards reflect the market value of stock and in the money value of options based on the Company’s December 31, |
(3) | Reflects special Founders’ Grants made on November 7, 2011. |
(4) | Reflects RSUs granted in recognition of the uncompleted portion of the 2010-12 TSR Award Period. |
(5) | Reflects RSUs granted in recognition of the uncompleted portion of the 2011-13 TSR Award Period. |
89
(6) | All benefits under the ITT Salaried Retirement Plan and the ITT Excess Pension Plan are payable by Exelis. Values under scenarios other than Death reflect the Pension Equity Plan formula lump sum value as of December 31, 2011. The value under Death reflects the value of the benefit payable to Mr. Nanda’s beneficiary upon death. |
(7) | No additional ITT Supplemental Savings Plan for Salaried Employees payments are made in the event of voluntary or involuntary termination, or termination for cause. Amount reflects the additional cash payment representing Company contributions, which would be made following a change of control as described in the Special Senior Executive Severance Pay Plan on Pages 90 to 91 of this Proxy Statement. |
(8) | The Company’s Senior Executive Severance Pay Plan includes one year of outplacement services. Amounts shown are based on a competitive bid. |
(9) | Under the Senior Executive Severance Plan, Mr. Nanda will continue to receive benefits during the Severance period after termination without cause. In the event of a change in control, Mr. Nanda is covered under the Company’s Special Senior Executive Severance Pay Plan, which provides for three years continued health and life insurance benefits. |
(10) | Values in this table show the full payments per the applicable plan documents under the potential termination scenarios. In the event of a change-in-control a “best net” provision would apply, which provides either an unreduced benefit or a reduction in payments sufficient to avoid triggering an excise tax, whichever is better after-tax. |
Equity Compensation Plan Information
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | |||||||||
Equity Compensation Plans Approved by Security Holders(1)(2) | 9,414,737 | (3) | $ | 16.70 | (4) | 41,118,214 | (5) | |||||
Equity Compensation Plans Not Approved by Security Holders | — | — | — | |||||||||
Total | 9,414,737 | $ | 16.70 | 41,118,214 |
(1) | Equity compensation plans approved by shareholders include the 1994 ITT Incentive Stock Plan, the 1996 Plan, the 2002 ITT Stock Option Plan for Non-Employee Directors, the ITT Amended and Restated 2003 Equity Incentive Plan and the 2011 Omnibus Incentive Plan. |
(2) | Since the approval of the 2011 Omnibus Incentive Plan, no additional awards, including awards of restricted stock, will be granted under the other plans referred to in footnote (1) above. Under the 2011 Omnibus Incentive Plan currently in effect, restricted stock and restricted stock units may be awarded up to a maximum aggregate grant of 1,875,441 shares or units in any one plan year to any one participant. |
(3) | The weighted-average remaining contractual life of the total number of outstanding options was 3.0 years as disclosed in Note 18 to the Consolidated Financial Statements in the Company’s 2011 Annual Report on Form 10-K. |
(4) | The weighted-average exercise price pertains only to 8,030,972 outstanding options and not to outstanding restricted stock shares or units, which by their nature have no exercise price. |
(5) | As of December 31, 2011, the number of shares available for future issuance under the 2011 Omnibus Incentive Plan with respect to restricted stock and restricted stock unit awards was approximately 18,374,470, which is included in the 41,118,214 disclosed above. |
Appendix A
List of Companies from the S&P® Industrials Composite that wereCompanies used in the Compensation Consultants2011 Towers Watson Compensation Data Bank Analyses
Abbott Laboratories | ||||||
Agilent Technologies | ||||||
Air Products and Chemicals | Schlumberger | |||||
Alcoa | Sealed Air | |||||
Allergan | Eastman Kodak | King Pharmaceuticals | Sherwin-Williams | |||
Spectra Energy | ||||||
Sprint Nextel | ||||||
Applied Materials | ||||||
Archer Daniels Midland | ||||||
Starwood Hotels & Resorts | ||||||
Stryker | ||||||
Automatic Data Processing | Express Scripts | L-3 Communications | Sunoco | |||
Target | ||||||
Tellabs | ||||||
Baxter International | First Solar | Masco | Tenet Healthcare | |||
Teradata | ||||||
Big Lots | ||||||
Biogen Idec | ||||||
Boeing | ||||||
Boston Scientific | McKesson | Time Warner Cable | ||||
Bristol-Myers Squibb | Fortune Brands | MeadWestvaco | Tyson Foods | |||
Broadcom | Freeport-McMoRan Copper & Gold | Medtronic | UnitedHealth | |||
CA | Gap | Merck & Co | United States Steel | |||
Cameron International | General Dynamics | Microsoft | United Technologies | |||
Cardinal Health | General Electric | Molson Coors Brewing | ||||
Monsanto | ||||||
Motorola | ||||||
Newmont Mining | Visa | |||||
Century Link | Goodyear Tire & Rubber | New York Times | ||||
NIKE | ||||||
Northrop Grumman | ||||||
Novell | Watson Pharmaceuticals | |||||
C.H. Robinson Worldwide | Hershey | Occidental Petroleum | ||||
CIGNA | Office Depot | Weyerhaeuser | ||||
Cintas | Hewlett-Packard | Owens-Illinois | Whirlpool | |||
Cisco Systems | H.J. Heinz | Parker Hannifin | ||||
PepsiCo | ||||||
PerkinElmer | ||||||
Pfizer | ||||||
Pitney Bowes | ||||||
ConAgra Foods | Humana | PPG Industries | ||||
ConocoPhillips | IBM | Praxair | ||||
Corning | Intel | Pulte Homes | ||||
CVS Caremark | International Flavors & Fragrances | |||||
International Paper | ||||||
Iron Mountain | Qwest Communications | |||||
Dell | Jabil Circuit | Rockwell Automation | ||||
Dentsply | Jacobs Engineering | |||||
Rockwell Collins | ||||||
J.M. Smucker | R.R. Donnelley |
90
ITT CORPORATION 1133 WESTCHESTER AVENUE WHITE PLAINS, NY 10604 WWW.ITT.COM | WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE | ||
VOTING, BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK. Internet and telephone voting | |||
VOTE BY INTERNET - Use the Internet to vote your proxy. Have your proxy card in hand when you access the website. VOTE BY TELEPHONE - 1-800-690-6903 Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: M43362-P20924 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY
| ||||
ITT CORPORATION | ||||||||||||||||||||||||||||||||
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS 1, 2 AND 3. | ||||||||||||||||||||||||||||||||
Vote on Directors | ||||||||||||||||||||||||||||||||
1. | Election of ten members of the Board of Directors. | |||||||||||||||||||||||||||||||
For | Against | Abstain | ||||||||||||||||||||||||||||||
Nominees: | ||||||||||||||||||||||||||||||||
1a. Denise L. Ramos | ¨ | ¨ | ¨ | For | Against | Abstain | ||||||||||||||||||||||||||
1b. Frank T. MacInnis | ¨ | ¨ | ¨ | 1i. Donald J. Stebbins | ¨ | ¨ | ¨ | |||||||||||||||||||||||||
1c. Orlando D. Ashford | ¨ | ¨ | ¨ | 1j. Markos I. Tambakeras | ¨ | ¨ | ¨ | |||||||||||||||||||||||||
1d. Peter D’Aloia | ¨ | ¨ | ¨ | Vote on Proposals | ||||||||||||||||||||||||||||
1e. Donald DeFosset, Jr. | ¨ | ¨ | ¨ | 2. | Ratification of the appointment of Deloitte & Touche LLP as ITT’s Independent Registered Public Accounting Firm for 2012. | ¨ | ¨ | ¨ | ||||||||||||||||||||||||
1f. Christina A. Gold | ¨ | ¨ | ¨ | 3. | To approve, in a non-binding vote, the compensation of our named executive officers. | ¨ | ¨ | ¨ | ||||||||||||||||||||||||
1g. General Paul J. Kern | ¨ | ¨ | ¨ | THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE AGAINST PROPOSALS 4, 5 AND 6: | ||||||||||||||||||||||||||||
1h. Linda S. Sanford | ¨ | ¨ | ¨ | 4. | To vote on a shareholder proposal requesting that the Company change its state of incorporation from Indiana to Delaware. | ¨ | ¨ | ¨ | ||||||||||||||||||||||||
For address changes and/or comments, please check this box and write them on the back where indicated. | ¨ | 5. | To vote on a shareholder proposal requesting that the Company adopt a policy that, whenever possible, the Chairman of the Board of Directors be an independent director who has not previously served as an executive officer of the Company. | ¨ | ¨ | ¨ | ||||||||||||||||||||||||||
Please indicate if you plan to attend this meeting. | ¨ Yes | ¨ No | 6. | To vote on a shareholder proposal requesting that the Company amend, where applicable, its policies related to human rights. | ¨ | ¨ | ¨ | |||||||||||||||||||||||||
(When signing as attorney, executor, administrator, trustee or guardian, give full title. If more than one trustee, all should sign.) | ||||||||||||||||||||||||||||||||
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | |||||||||||||||||||||||||||||
10:30 a.m., Tuesday, May 11, 2010
Doral Arrowwood
975 Anderson Hill Road
Rye Brook, New York 10573
PLEASE PRESENT THIS CARD AT THE ENTRANCE TO THE MEETING ROOM
Note:If you plan to attend the Annual Meeting of Shareholders, please so indicate your intention to attend by marking the appropriate box on the attached proxy card. If you plan to attend the Annual Meeting in person, please bring, in addition to this Admission Ticket, a proper form of identification. The use of video, still photography or audio recording at the Annual Meeting is not permitted. For the safety of attendees, all bags, packages and briefcases are subject to inspection. Your compliance is appreciated.
This Admission Ticket should not be returned with your proxy but should be retained and brought with you to the Annual Meeting.
SEC Proxy Access Notice
Important Notice Regarding the Internet Availability of Proxy Materials for the Shareholder Meeting to be held on May 11, 20108, 2012 at 10:30 a.m. EDT at 1133 Westchester Avenue, White Plains, NY 10604-3543:the Doral Arrowwood, 975 Anderson Hill Road, Rye Brook, New York 10573:
The proxy materials for ITT’s 20102012 Annual Meeting of Shareholders, including the 20092011 Annual Report Form 10-Kand Notice and Proxy Statement are available overon the Internet. To view these proxy materials, please visit https://www.proxydocs.com/itt.
M43363-P20924
CORPORATION FOR THE ANNUAL MEETING TO BE HELD MAY 8, 2012: | | |||||||
The shareholder(s) whose signature(s) appear(s) on the reverse side of this proxy form hereby appoint(s) Aris C. Chicles, Burt M. Fealing, and Thomas M. Scalera or any of them, each with full power of substitution as proxies, to vote all shares of ITT Corporation common stock that the shareholder(s) would be entitled to vote on all matters that may properly come before the 2012 Annual Meeting and at any adjournments or postponements. The proxies are authorized to vote in accordance with the For participants in the Under the savings plan, participants are “named fiduciaries” to the extent of their authority to direct the voting of ITT shares credited to their savings plan accounts and their proportionate share of allocated shares for which no direction is received and unallocated shares, if any (together, “Undirected Shares”). ITT Salaried Plan participants should mail their confidential voting instruction card to Broadridge, acting as tabulation agent, or vote by Phone or Internet. Instructions must be received by Broadridge before 11:59 p.m. on May 3, 2012. The trustee of the savings plans will vote Undirected Shares in the same proportion as the shares for which directions are received, except as otherwise provided in accordance with ERISA. By submitting voting instructions by telephone, Internet, or by signing and returning this voting instruction card, you direct the trustee of the savings plans to vote these shares, in person or by proxy, as designated herein, at the 2012 Annual Meeting of stockholders. The Trustee will exercise its discretion in voting on any other matter that may be presented for a vote at the meeting and at adjournments or postponements. |
Address Changes/Comments: | ||||||||
(If you noted any Address Changes/Comments above, please mark corresponding box on the | ||||||||
(Continued, and to be dated and signed on the reverse side.) | ||||||||