expert”), Dr. Peter B. Lake and W. Wayne Walston; (2) a Compensation Committee, (formerly the Salary Committee), whose present members are W. Wayne Walston (Chairman)(Chair), Thomas E. HoaglinM. Ann Harlan and Christopher H. Lake; (3) a Pension Committee, whose present members are Dr. Peter B. Lake (Chairman)(Chair), Rick R. Taylor and John A. Walter;W. Wayne Walston; and (4) aGovernance and Nominating Committee, which succeeds the previous Nominating Committee, whose present members are John A. Walter (Chairman)M. Ann Harlan (Co-Chair), Christopher H. Lake (Co-Chair), and Rick R. Taylor. All members of each committeeCommittee are independent Directors. Each committee is governed by a written charter adopted by the Board of Directors detailing its authority and responsibilities. These charters are reviewed and updated periodically as legislative and regulatory developments and business circumstances warrant. The Board Committees’ charters are available in their entirety on the Company’s website athttp://www.gormanrupp.com.
Audit Committee
The Audit Review Committee held fivesix meetings in 2007.2010. Its principal functions include reviewing the arrangement and scope of the audit of the Company’s consolidated financial statements, considering comments made by the independent registered public accountants with respect to internal controls and financial reporting, considering corrective actionrelated actions taken by management, reviewing internal accounting systems, procedures and controls with the Company’s internal auditor and financial staff, and reviewing non-audit services provided by the independent accountants. Theregistered public accountants, and organizational oversight of the Company’s enterprise risk management plan.
Compensation Committee is governed by a written charter adopted by the Board of Directors.
7
The Compensation Committee held twoeight meetings during 2007.2010. Its principal functions are, subject to approval by the Board of Directors, to evaluate, develop and monitor compensation policies and programs for the Company’s executive officers and Directors, and to recommend the salaries and profit sharing bonuses for the executive officers. (AA more comprehensive description of the Compensation Committee’s functions areis set forth under the caption “Compensation Discussion and Analysis”.)
Pension Committee
The Pension Committee held four meetings in 2007.2010. Its principal functions are to monitor and assist in the investment of the assets associated with the Company’s defined benefit pension plan.plan and 401(k) defined contribution plan and to assist in evaluating recommended changes in such investments.
TheGovernance and Nominating Committee
To emphasize expanding corporate governance considerations in recent years, the Board of Directors recommended and approved the change of name of the previous Nominating Committee to Governance and Nominating Committee during 2010. The Governance and Nominating Committee
8
held one meetingtwo meetings during 2007.2010. Its principal functions involve the identification, evaluation and recommendation of individuals for nomination as new members of the Board of Directors. MembersDirectors, succession planning for the Company’s Chief Executive Officer and other Executive Officers, succession planning for other corporate officers and key operating executives, and periodic review of the Nominating Committee are “independent” in accordanceBoard Committees’ charters and Corporate Governance Guidelines for compliance with Section 121 of the listing standards of the American Stock Exchange.evolving regulations and Board-desired corporate goals.
The Governance and Nominating Committee does not have a written charter but followsincorporates the Company’s policies and procedures by which to consider recommendations from shareholders for Director nominees. (These written policies and procedures were recommended by the Committee and adopted by the Board of Directors for the Committee in 1991.) Any shareholder wishing to propose a candidate should deliver a typewritten or legible hand-written communication to the Company’s Corporate Secretary. The submission should provide detailed business and personal biographical data about the candidate, and include a brief analysis explaining why the individual is well-qualified to become a Director nominee. All recommendations will be acknowledged by the Corporate Secretary and promptly referred to the Governance and Nominating Committee for evaluation.
The Governance and Nominating Committee does not believe that any particular set of skills, qualities or qualities arediversities is most appropriate for a Director candidate. All Director candidates, including any recommended by shareholders, are first evaluated based upon their (i) integrity, strength of character, practical wisdom and mature judgment; (ii) business and financial expertise and experience; (ii)(iii) intellect to comprehend the issues confronting the Company; (iii) reputation for diligence, and limited time conflicts; and (iv) integrity, strengthavailability of character, practical wisdomadequate time to devote to the affairs of the Company and mature judgment. Anyattend Board and Committee meetings. The Governance and Nominating Committee also focuses on issues of diversity, such as diversity of gender, race and national origin, education, professional experience and differences in viewpoints and skills. New Director candidate will becandidates are subject to a background check performed by the Committee. In addition, the candidate will be personally interviewed by one or more Committee members before he or she is nominated for election to be a new member of the Board of Directors. In considering candidates for the Board, the Governance and Nominating Committee considers the entirety of each candidate’s credentials in the context of their skills, qualities or diversities. With respect to the nomination of continuing Directors for re-election, the individual’s historical contributions to the Board are also considered.
Risk Oversight
The Board of Directors has determinedbelieves that all Non-Employee Directors (Messrs. Hoaglin, C.H. Lake, P. B. Lake, Taylor, Walstoncontrol and Walter)management of risk are “independent” Directors in accordance with Section 121primary responsibilities of senior management of the listing standards ofCompany. As a general matter, the American Stock Exchange. Non-Employee Directors are compensated by the Company for their services as Directors.
Directors who are employees of the Company (Messrs. J. C. Gorman and J. S. Gorman) do not receive any compensation for service as Directors.
8
The table below summarizes the total compensation paid for service of each of the named Non-Employee Directors of the Company for the calendar year ended December 31, 2007.
Director Compensation
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Change in
| | | | | | | |
| | | | | | | | | | | | | | Pension Value
| | | | | | | |
| | | | | | | | | | | | | | and
| | | | | | | |
| | | | | | | | | | | | | | Nonqualified
| | | | | | | |
| | Fees
| | | | | | | | | Non-Equity
| | | Deferred
| | | | | | | |
| | Earned or
| | | | | | Option
| | | Incentive Plan
| | | Compensation
| | | All Other
| | | | |
| | Paid in
| | | Stock
| | | Awards
| | | Compensation
| | | Earnings
| | | Compensation
| | | | |
Name | | Cash(1) | | | Awards(2) | | | ($) | | | ($) | | | ($) | | | ($) | | | Total | |
|
Thomas E. Hoaglin | | $ | 15,300 | | | $ | 16,240 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 31,540 | |
Christopher H. Lake | | | 13,400 | | | | 16,240 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 29,640 | |
Peter B. Lake, Ph.D. | | | 15,600 | | | | 16,240 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 31,840 | |
Rick R. Taylor | | | 14,000 | | | | 16,240 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 30,240 | |
W. Wayne Walston | | | 15,300 | | | | 16,240 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 31,540 | |
John A. Walter | | | 15,000 | | | | 16,240 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 31,240 | |
| | |
(1) | | Each Non-Employee Director receives a fee for each of the Board of Directors meetings attended. Fees were $2,500 for each meeting attended during 2007. Directors serving as members of Board Committees receive an additional fee of $300 for each Committee meeting attended that is held in conjunction with a meeting of the Board of Directors. Each Committee Chairman also receives a retainer of $1,000 per year. |
|
(2) | | Effective May 22, 1997, the Board of Directors adopted a Non-Employee Directors’ Compensation Plan. Under the Plan, as additional compensation for regular services to be performed as a Director, an automatic award of 500 Common Shares (from the Company’s treasury) will be made on each July 1 to each Non-Employee Director then serving on the Board. (On July 27, 2006, the Board of Directors adopted a resolution extending the Non-Employee Directors’ Compensation Plan for an additional term until the earlier of (i) May 21, 2017, (ii) at such time as all of the Company’s Common Shares authorized for award under the Plan and registered underForm S-8 Registration StatementNo. 333-30159 shall have been awarded and issued, (iii) at such time as the Company deregisters any Common Shares not issued under the foregoing Registration Statement, or (iv) at such time as the Plan is terminated by action of the Board of Directors.) The award of 500 Common Shares made on July 1, 2007 had a market value of $16,240. |
Members of theentire Board of Directors are encouragedis responsible for oversight of this important senior management function. The Audit Committee is responsible to attendthe Board for the organizational oversight of the Company’s annual meetingscomprehensive enterprise risk management plan. Additional oversight of shareholders, time permitting. All Directors were in attendance atsome risks is performed by specific Board committees, e.g., financial reporting risks are overseen by the annual meeting in 2007.Audit Committee, benefit plan investment risks are overseen by the
9
Pension Committee, personnel selection, evaluation, retention and compensation risks are overseen by the Compensation Committee, and Chief Executive Officer, Executive Officer, other corporate officer, key operating executive and Director succession planning risks are overseen by the Governance and Nominating Committee; the results of their oversight are reported to the entire Board of Directors.
Company Leadership Organization
Upon election of Mr. J.S. Gorman as Chief Executive Officer of the Company May 1, 1998, the Company separated the offices of Board Chairman and Chief Executive Officer because it believed this division more clearly delineated their respective responsibilities. This currently provides for the Chairman to focus on Board of Director responsibilities and for the Chief Executive Officer to focus on the Company’s executive, administrative and operating responsibilities. Given their respective service years with the Company, the Company believes this structure is most appropriate currently for conducting its business and its responsibilities to its employees, customers and suppliers, to its shareholders and Directors, and to its community and regulatory agencies.
10
AUDIT REVIEW COMMITTEE REPORT
The Audit Review Committee has submitted the following report to the Board of Directors:
(i) The Audit Review Committee has reviewed and discussed the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2007 with the Company’s management and the Company’s independent public accountants;
(ii) The Audit Review Committee has discussed with the Company’s independent public accountants the matters required to be discussed by Statement on Auditing Standards No. 61 (Codification of Statements on Auditing Standards, AU§380);
(iii) The Audit Review Committee has received the written disclosures and the letter from the Company’s independent public accountants required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and has discussed the issue of independence, including the provision of non-audit services to the Company, with the independent public accountants;
(iv) With respect to the provision of non-audit services to the Company, the Audit Review Committee has obtained a written statement from the Company’s independent public accountants that they have not rendered any non-audit services prohibited by the Securities and Exchange Commission rules relating to auditor independence, and that the delivery of any permitted non-audit services has not and will not impair their independence;
(v) Based upon the review and discussions referred to above, the Audit Review Committee has recommended to the Board of Directors that the Company’s audited consolidated financial statements be included in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2007, to be filed with the Securities and Exchange Commission; and
(vi) In general, the Audit Review Committee has fulfilled its commitments in accordance with its Charter.
| | |
| (i) | The Audit Committee has reviewed and discussed the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2010 and the assessment of the Company’s internal control over financial reporting with the Company’s management and the Company’s independent registered public accountants; |
|
| (ii) | The Audit Committee has discussed with the Company’s independent registered public accountants the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; |
|
| (iii) | The Audit Committee has received the written disclosures and the letter from the Company’s independent registered public accountants required by the Public Company Accounting Oversight Board Rule 3526 (Communication with Audit Committees Concerning Independence), and has discussed the issue of independence, including the provision of non-audit services to the Company, with the independent registered public accountants; |
|
| (iv) | With respect to the provision of non-audit services to the Company, the Audit Committee has obtained a written statement from the Company’s independent registered public accountants that they have not rendered any non-audit services prohibited by the Securities and Exchange Commission rules relating to auditor independence, and that the delivery of any permitted non-audit services has not and will not impair their independence; |
|
| (v) | Based upon the review and discussions referred to above, the Audit Committee has recommended to the Board of Directors that the Company’s audited consolidated financial statements be included in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2010, to be filed with the Securities and Exchange Commission; and |
|
| (vi) | In general, the Audit Committee has fulfilled its commitments in accordance with its Charter. |
Members of the Audit Review Committee are also “independent” in accordance with Section 121 of the additional listing standards of the American Stock Exchange. TheNYSE Amex Exchange, and the Chairman is also an “independent audit committee financial expert” in accordance with Securities and Exchange Commission rules.
10
Based upon a recommendation of the Audit Review Committee, the Board of Directors adopted a written Charter for the Audit Review Committee on October 23, 2003 (replacing the previous Charter adopted on June 8, 2000). The Committee reviews and reassesses the adequacy of the Charter on an annual basis. A proposal to amend the Charter was adopted by the Committee on October 27, 2005, and approved by the Board of Directors on January 26, 2006. The Charter (as amended) was set forth as an appendix to the Proxy Statement in 2006, and will again be set forth as an appendix to the Proxy Statement in 2009.
The foregoing report has been furnished by members of the Audit Review Committee.
| | | | |
/s/ W. Wayne Walston
| | /s/ Thomas E. Hoaglin
| | /s/ Peter B. Lake
| | /s/ W. Wayne Walston
|
Thomas E. Hoaglin, Chair | | Dr. Peter B. Lake | | W. Wayne Walston | | Thomas E. Hoaglin | | Peter B. Lake |
| | Chairman | | |
11
SHAREHOLDINGS BY NAMED EXECUTIVE OFFICERS*COMPENSATION
| | | | | | | | |
| | | | | Shared Voting
| |
| | Shares Owned
| | | and
| |
Name and Principal Position | | Beneficially | | | Investment Power | |
|
Robert E. Kirkendall | | | 30,092 | | | | -0- | |
Senior Vice President and Chief Financial Officer | | | | | | | | |
Judith L. Sovine | | | 8,162 | | | | 6,973 | |
Treasurer | | | | | | | | |
William D. Danuloff | | | 9,687 | | | | 1,792 | |
Vice President and Chief Information Officer | | | | | | | | |
David P. Emmens | | | 7,335 | | | | -0- | |
Corporate Counsel and Secretary | | | | | | | | |
Compensation Discussion and Analysis
Overview
The Compensation Committee (the “Committee”) of the Board of Directors is authorized (i) to review and evaluate the compensation policies and programs for the Company’s Chief Executive Officer and its other officers (collectively, the “Officers”); (ii) to review, at least annually, the Chief Executive Officer’s progress assessments of the other Officers and to evaluate the Chief Executive Officer’s progress assessment; and (iii) to review and recommend the annual salaries and profit sharing determinations for the Officers to the Board of Directors.
Three independent Directors comprise the Committee. Their responsibilities are carried out pursuant to authority delegated by the Board of Directors and in accordance with the federal securities laws and other applicable laws and regulations.
Philosophy and Objectives
Under the Committee’s supervision, the Company has formulated a compensation philosophy that assures the provision of fair, competitive and performance-based compensation to the Officers. The philosophy reflects the belief that compensation of the Officers should be aligned with the Company’s historical compensation, its culture, and its profitability.
The implementation of the Company’s philosophy seeks (i) to attract and retain a group of talented individuals with the education, experience, skill sets and professional presence deemed best suited for the respective Officer positions; and (ii) to continually motivate those individuals to help the Company achieve its strategic goals and enhance profitability by offering them incentive compensation in the form of profit sharing, in addition to their salaries, driven by their individual progress assessments and the Company’s results of operations.
Periodic Reviews
In devising and maintaining the Company’s Officer compensation program, the Committee from time to time reviews generally available published data relevant to the compensation of officers in competitor companies that manufacture pumps and related fluid control equipment. The Committee also regularly consults with executive management and periodically with outside accounting and legal advisors as appropriate in arriving at compensation recommendations, subject to approval by the Board of Directors.
12
To provide additional perspective on its internal review and feedback from other outside advisors, in 2007, following its review of the qualifications of several compensation consultants, the Committee engaged the services of Watson Wyatt Worldwide, now known as Towers Watson, an independent compensation consulting company, for a formal benchmarking review. This original review was followed by a subsequent benchmarking review in 2010 by Towers Watson (“Watson”).
The Committee’s initial review objectives were to establish an appropriate peer group for evaluating Officer compensation generally; complete a competitive assessment of pay levels for the Chief Executive Officer and Chief Financial Officer; and develop the structure of the compensation for the Chief Executive Officer and Chief Financial Officer positions including annual incentive opportunities and long-term incentive arrangements, if any. During 2010, the Committee expanded its review to include the compensation of other corporate officer positions and the compensation for the Company’s Non-Employee Directors.
The Committee, working with Watson, obtained public data from a peer group of publicly-traded industrial manufacturing companies identified as applicable benchmark companies for comparative compensation analysis, ranked for relevance to the Company based on the following criteria:
| | |
* | 1. | The table sets forth information received fromIndustry/product type — fluid control related companies with the executive officers assame, or similar SIC codes. |
|
| 2. | Organization size — companies comparable in size based on revenue. |
|
| 3. | Location — primarily companies headquartered in the Midwest and outside of February 1, 2008, and all amounts represent less than 1% of the outstanding shares. The shareholdings of Jeffrey S. Gorman are included below and under the caption “Election of Directors.”major metropolitan areas. |
The Committee received a draft report from Watson and made several observations and recommendations regarding the selected peer group data. Watson then completed their report for their 2010 review and the Committee reviewed the compensation details of each of the peer group companies for their respective officer and Board Non-Employee Director positions. The Committee subsequently made and reported its recommendations for near-term and long-term adjustments for compensation of each of the Company’s officer positions to the Board. The Committee also determined that Non-Employee Director compensation would not be changed during 2010.
Annual Reviews
Prior to the Company’s Annual Meeting of Shareholders, the Committee reviews with the Chief Executive Officer the recommended annual base salary for each of the Officers (other than the Chief Executive Officer). The Committee independently reviews the base salary for the Chief Executive Officer and develops a recommendation therefor. These salary reviews include consideration of updated compensation advisor data and other relevant information in arriving at the Committee’s
1113
recommendations. The Committee then reports the results of its compensation reviews and recommendations to the Board of Directors.
Following the end of each year and the conclusion of the Company’s audited financial statements results, management calculates the total amount of profit sharing available for awarding to the Officers based on the Company’s achieved operating income and the award percentage determined at the beginning of the year. The Chief Executive Officer then determines a recommended allocation of the available profit sharing award pool among the Officers based on the respective Officer’s prior profit sharing award history and their current year progress assessment.
The Committee reviews with the Chief Executive Officer the recommended profit sharing award for each of the Officers (other than the Chief Executive Officer). The Committee independently reviews the profit sharing award for the Chief Executive Officer and develops a recommendation therefor. These profit sharing reviews include consideration of the Chief Executive Officer’s progress assessments of the other Officers, and the Committee’s independent progress assessment of the Chief Executive Officer. The Committee then reports the results of its profit sharing reviews and recommendations to the Board of Directors.
PRINCIPAL SHAREHOLDERSElements of Compensation
The following table sets forth information pertainingCompany’s Officer compensation program is designed to reward leadership, initiative, teamwork and top-quality performances among the beneficialOfficers. The program consists of three elements: base salary; profit sharing; and a component of modest miscellaneous benefits. Incentive stock or option awards and non-equity incentive plan compensation have never been a part of the Company’s Officer compensation program. In addition, the Company has not entered into employment contracts with any of the Officers.
Although not an element of Officer compensation, ownership of the Company’s Common Shares by the Officers has continually been considered a worthy goal within the Company. The Company has paid increased dividends on its Common Shares for 38 consecutive years and paid such quarterly dividends regularly for over 60 years. Toward that end, the Company sponsors purchase opportunities, including a partial Company match, aimed at encouraging the Officers, and substantially all other employees, to voluntarily invest in the Common Shares.
Base Salary and Profit Sharing —Base salaries are premised upon the relative responsibilities of the given Officers and industry surveys and related data. Initial salaries generally are set below competitive levels paid to comparable officers at other entities engaged in the same or similar businesses as the Company. Upon hire, actual salaries are adjusted based on performance judgments of February 1, 2008 by James C. Gormaneach person’s qualifications, prior accomplishments and Jeffrey S. Gorman,expected future contributions in his or her Officer role.
14
The Company intentionally relies to a large degree on incentive compensation in the form of profit sharing to attract and retain the Officers. This profit sharing provides motivation for them to perform to the full extent of their individual abilities and as a team to build Company profitability and shareholder value on a continuing, long-term basis.
Other Compensation —The Officers receive a variety of modest miscellaneous benefits, the value of which is represented for the named Executive Officers under the caption “All Other Compensation” in the Summary Compensation Table. These benefits include taxable life insurance, and Company contributions to the Christmas Savings Plan, the 401(k) Plan and the Employee Stock Purchase Plan.
Stock Ownership —The Company has long encouraged the Officers to voluntarily invest in the Company’s Common Shares. As a consequence, the Company makes the purchase of its Common Shares convenient, in some cases with Company cash contributions, and in all cases without brokers’ fees or commissions, under an Employee Stock Purchase Plan, a 401(k) Plan and a Dividend Reinvestment Plan. Although these plans do not constitute elements of Officer compensation, all of the current Officers are shareholders and participate in one or more of the foregoing plans.
Pension Benefits
The pension plan in which three of the Company’s Executive Officers participate is a defined benefit plan covering substantially all U.S. employees of the Company for which new entry terminated as of December 31, 2007 by each other person known2007. Effective January 1, 2008 a new and enhanced 401(k) Plan was adopted for new employees hired thereafter.
The pension plan offers participants the option to choose between monthly benefits or a single sum payment. The monthly pension benefits are equal to the Companyproduct of 1.1% of final average monthly earnings (based on compensation during the final ten years of service) and the number of years of credited service. A single sum amount is equal to own beneficially at least five percentthe present value of the outstanding Common Shares.final monthly pension benefit multiplied by a single premium immediate annuity rate as defined by the plan. Historically, nearly all participants in the plan elect the single sum amount at retirement. The single sum payment option is used for financial reporting purposes for the fiscal year ended December 31, 2010, computed as the plan measurement date of December 31, 2010. Actuarial assumptions used by the Company in determining the present value of the accumulated benefit amount consist of a 5% interest rate, a 5% discount rate and The IRS 2008+ Applicable Mortality Table. Base compensation in excess of $225,000 is not taken into account under the plan. Vesting occurs after five years of credited service.
15
Pension Benefits Table
| | | | | | | | | | |
| | | | Number
| | | Percent of
| |
| | | | of Shares
| | | Outstanding
| |
Name and Address | | Type of Ownership | | Owned | | | Shares | |
|
James C. Gorman | | Sole voting and investment power | | | 643,679 | | | | 3.86 | % |
305 Bowman Street Mansfield, OH 44903 | | Shared voting and investment power | | | 672,003 | | | | 4.02 | % |
| | | | | | | | | | |
| | Total | | | 1,315,682 | | | | 7.88 | % |
Jeffrey S. Gorman | | Sole voting and investment power | | | 559,879 | | | | 3.35 | % |
305 Bowman Street Mansfield, OH 44903 | | Shared voting and investment power | | | 321,578 | | | | 1.93 | % |
| | | | | | | | | | |
| | Total | | | 881,457 | | | | 5.28 | % |
Unicredito Italiano | | Sole voting power | | | 1,047,609 | | | | 6.30 | % |
S.p.A. | | Sole investment power | | | 1,047,609 | | | | 6.30 | % |
Piazzo Cordusio 2 | | Shared voting power | | | -0- | | | | — | |
20123 Milan, Italy | | Shared investment power | | | -0- | | | | — | |
| | | | | | | | | | |
| | Total | | | 1,047,609 | (1) | | | 6.30 | % |
PowerShares Capital | | Sole voting power | | | 1,248,843 | | | | 7.48 | % |
Management LLC | | Sole investment power | | | 1,248,843 | | | | 7.48 | % |
1360 Peachtree Street NE | | Shared voting power | | | -0- | | | | — | |
Atlanta, GA 30309 | | Shared investment power | | | -0- | | | | — | |
| | | | | | | | | | |
| | Total | | | 1,248,843 | (1) | | | 7.48 | % |
All Directors and | | | | | 2,353,243 | (2) | | | 14.09 | % |
Executive Officers as a group (13 persons) | | | | | | | | | | |
The table below summarizes the number of years of credited service and the present value of accumulated pension benefit for each of the named Executive Officers of the Company at December 31, 2010.
| | | | | | | | | | | | | | | | | | |
| | | | | | | | Present Value
| | |
| | | | | | Number of
| | of
| | Payments
|
| | | | | | Years Credited
| | Accumulated
| | During Last
|
Name and Principal Position | | Plan Name | | Year | | Service(1) | | Benefit(2) | | Fiscal Year |
|
Jeffrey S. Gorman | | The Gorman-Rupp Company | | | 2010 | | | | 32 | | | $ | 689,982 | | | $ | 0 | |
President and Chief | | Retirement Plan | | | 2009 | | | | 31 | | | | 612,785 | | | | 0 | |
Executive Officer | | | | | 2008 | | | | 30 | | | | 505,009 | | | | 0 | |
Wayne L. Knabel(3) | | The Gorman-Rupp Company | | | 2010 | | | | 0 | | | | 0 | | | | 0 | |
Chief Financial Officer and | | Retirement Plan | | | 2009 | | | | 0 | | | | 0 | | | | 0 | |
Treasurer | | | | | | | | | | | | | | | | | | |
David P. Emmens | | The Gorman-Rupp Company | | | 2010 | | | | 13 | | | | 152,694 | | | | 0 | |
Corporate Counsel | | Retirement Plan | | | 2009 | | | | 12 | | | | 124,109 | | | | 0 | |
and Secretary | | | | | 2008 | | | | 11 | | | | 99,518 | | | | 0 | |
James C.Gorman | | The Gorman-Rupp Company | | | 2010 | | | | 61 | | | | 343,115 | | | | 73,224 | |
Chairman | | Retirement Plan | | | 2009 | | | | 60 | | | | 363,733 | | | | 73,224 | |
| | | | | 2008 | | | | 59 | | | | 385,010 | | | | 73,224 | |
| | |
(1) | | This figure represents the aggregate amountThe credited years of Common Shares beneficially owned. Of the aggregate amount, however, some sharesservice are subject to sole voting power but shared or no investment power, and some shares are subject to sole investment power but shared or no voting power. Consequently, the sumdetermined as of this column does not equal the aggregate amount shown.a measurement date of December 31, 2010. |
|
(2) | | Includes 1,036,427 sharesThe amount represents the actuarial present value of accumulated benefit based on a single sum payment computed as of the plan measurement date of December 31, 2010. The retirement age is assumed to which voting and investment power are shared.be the normal retirement age of 65 as defined in the plan. |
|
(3) | | Mr. Knabel was hired March 31, 2008, subsequent to the closing of the defined benefit pension plan to new participants effective December 31, 2007. The plan was replaced for new employees by an enhanced 401(k) plan established to replace the Company’s defined benefit plan for substantially all U.S. employees thereafter (see Note (6) to the Summary Compensation table). |
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EXECUTIVE COMPENSATION
The rules regarding the disclosure of executive compensation were greatly altered by the Securities and Exchange Commission in 2006 for proxy statements. In addition to new and different tables, greater emphasis is placed on providing discussion and analysis of compensation practices. Further, the content of the Compensation Committee (formerly the Salary Committee) Report has been reduced.
The table below contains information pertaining to the annual compensation of the Company’s principal executive officer, its principal financial officer, and its three other most highly compensated executive officers.
Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Non-
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | Equity
| | | Change in
| | | | | | | |
| | | | | | | | | | | | | | | | | Incentive
| | | Pension Value
| | | | | | | |
| | | | | | | | | | | | | | | | | Plan
| | | and Nonqualified
| | | | | | | |
| | | | | | | | | | | Stock
| | | Option
| | | Compen-
| | | Deferred
| | | | | | | |
Name and
| | | | | | | | | | | Awards
| | | Awards
| | | sation
| | | Compensation
| | | All Other
| | | | |
Principal Position | | Year | | | Salary | | | Bonus | | | ($)(1) | | | ($)(1) | | | ($)(1) | | | Earnings(2) | | | Compensation(3) | | | Total | |
|
Jeffrey S. Gorman | | | 2007 | | | $ | 204,000 | | | $ | 190,000 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 55,443 | | | $ | 6,319 | | | $ | 455,762 | |
President and Chief Executive Officer | | | 2006 | | | | 196,667 | | | | 160,000 | | | | 0 | | | | 0 | | | | 0 | | | | 49,443 | | | | 5,767 | | | | 411,877 | |
Robert E. Kirkendall | | | 2007 | | | | 145,333 | | | | 110,000 | | | | 0 | | | | 0 | | | | 0 | | | | 61,715 | | | | 6,971 | | | | 324,019 | |
Senior Vice President and Chief Financial Officer | | | 2006 | | | | 139,667 | | | | 87,500 | | | | 0 | | | | 0 | | | | 0 | | | | 54,541 | | | | 6,221 | | | | 287,929 | |
Judith L. Sovine | | | 2007 | | | | 114,667 | | | | 67,000 | | | | 0 | | | | 0 | | | | 0 | | | | 44,346 | | | | 6,674 | | | | 232,687 | |
Treasurer | | | 2006 | | | | 110,667 | | | | 56,000 | | | | 0 | | | | 0 | | | | 0 | | | | 39,350 | | | | 6,306 | | | | 212,323 | |
William D. Danuloff | | | 2007 | | | | 114,667 | | | | 58,000 | | | | 0 | | | | 0 | | | | 0 | | | | 40,838 | | | | 4,212 | | | | 217,717 | |
Vice President and Chief Information Officer | | | 2006 | | | | 110,667 | | | | 50,000 | | | | 0 | | | | 0 | | | | 0 | | | | 36,822 | | | | 3,328 | | | | 200,817 | |
David P. Emmens | | | 2007 | | | | 93,333 | | | | 45,000 | | | | 0 | | | | 0 | | | | 0 | | | | 15,356 | | | | 4,608 | | | | 158,297 | |
Corporate Counsel and Secretary | | | 2006 | | | | 88,667 | | | | 34,000 | | | | 0 | | | | 0 | | | | 0 | | | | 11,605 | | | | 4,525 | | | | 138,797 | |
The table below contains information pertaining to the annual compensation of the Company’s principal executive officer, its principal financial officer, and its other executive officers.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Change in
| | | | |
| | | | | | | | | | | | Non-
| | Pension
| | | | |
| | | | | | | | | | | | Equity
| | Value and
| | | | |
| | | | | | | | | | | | Incentive
| | Nonqualified
| | | | |
| | | | | | | | Stock
| | Option
| | Plan
| | Deferred
| | All Other
| | |
Name and
| | | | | | Bonus
| | Awards
| | Awards
| | Compensation
| | Compensation
| | Compensation
| | |
Principal Position | | Year | | Salary | | (1) | | (2) | | (2) | | (2) | | Earnings(3) | | (4) | | Total |
|
Jeffrey S. Gorman(5) | | | 2010 | | | $ | 285,417 | | | $ | 174,000 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 77,197 | | | $ | 7,361 | | | $ | 543,975 | |
President and Chief | | | 2009 | | | | 252,053 | | | | 135,000 | | | | 0 | | | | 0 | | | | 0 | | | �� | 107,776 | | | | 7,430 | | | | 502,259 | |
Executive Officer | | | 2008 | | | | 252,000 | | | | 175,000 | | | | 0 | | | | 0 | | | | 0 | | | | 56,794 | | | | 2,815 | | | | 486,609 | |
Wayne L Knabel(6)(7) | | | 2010 | | | | 188,333 | | | | 117,000 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 34,008 | | | | 339,341 | |
Chief Financial Officer | | | 2009 | | | | 170,153 | | | | 85,000 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 17,495 | | | | 272,648 | |
and Treasurer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
David P. Emmens(7) | | | 2010 | | | | 116,250 | | | | 58,000 | | | | 0 | | | | 0 | | | | 0 | | | | 28,585 | | | | 6,772 | | | | 209,607 | |
Corporate Counsel | | | 2009 | | | | 104,981 | | | | 45,000 | | | | 0 | | | | 0 | | | | 0 | | | | 24,591 | | | | 6,063 | | | | 180,635 | |
and Secretary | | | 2008 | | | | 105,000 | | | | 52,000 | | | | 0 | | | | 0 | | | | 0 | | | | 19,487 | | | | 5,873 | | | | 182,360 | |
James C. Gorman(8) | | | 2010 | | | | 100,000 | | | | 15,000 | | | | 0 | | | | 0 | | | | 0 | | | | (20,619 | ) | | | 4,786 | | | | 99,167 | |
Chairman | | | 2009 | | | | 92,538 | | | | 12,000 | | | | 0 | | | | 0 | | | | 0 | | | | (21,277 | ) | | | 4,742 | | | | 88,003 | |
| | | 2008 | | | | 100,000 | | | | 15,000 | | | | 0 | | | | 0 | | | | 0 | | | | (29,121 | ) | | | 4,709 | | | | 90,588 | |
| | |
(1) | | The Company only provides additional profit sharing compensation as potential incentive compensation to substantially all its employees. |
|
(2) | | The Company has never offered incentive stock awards,or option awards or non-equity incentive plan compensation as a part of the Company’s executive compensation program. |
13
| | programs. |
(2) |
(3) | | The amounts reflect the non-cash change in pension value recognized for financial statement reporting purposes for the fiscal year ended December 31, 2007,2010, in accordance with SEC Release Nos.33-8732A;34-54302A. In computing the change in pension value, the Company applies the assumptions used for financial reporting purposes and a measurement date of OctoberDecember 31 for benefit plan determinations. The change in pension value is the aggregate increase in the actuarial present value of the executive officer’sExecutive Officer’s accumulated benefit measured from the plan measurement date in 20062009 to the measurement date in 2007.2010. The Company does not currently offer nonqualified deferred compensation of earnings to the executive officers.any of its employees. |
|
(3)(4) | | Amounts include taxable life insurance, and Company contributions to the Company’s 401(k) Plan, Employee Stock Purchase Plan and Christmas Savings Plan. |
|
(5) | | Mr. J.S. Gorman’s annual salary was increased to $300,000 by the Board of Directors in July 2010. His salary was last adjusted in May 2008 and in 2009 he took a voluntary pay reduction of 15% of his salary for over one-half of the year totaling $22,947. Average pay reductions of other personnel |
1417
| | |
| | during this period were 8%. His non-cash “Change in Pension Value and Nonqualified Deferred Compensation Earnings” increased each year due to replacement of earlier lower compensated years with his most recent salary. |
|
(6) | | Mr. Knabel was elected Chief Financial Officer and Treasurer effective May 1, 2009. Previously he was Vice President Finance following his hire March 31, 2008. His “All Other Compensation” includes $13,900 and $12,587 for calendar years 2010 and 2009, respectively, for the Company’s contributions to his account in the enhanced 401(k) plan established to replace the defined benefit plan for substantially all U.S. employees hired after December 31, 2007. Also in 2010, this amount includes $15,000 of relocation reimbursement. |
|
(7) | | Mr. Knabel and Mr. Emmens took voluntary pay reductions averaging 8% of their salaries for about one-half of 2009. |
|
(8) | | Mr. J.C. Gorman’s annual salary is $100,000 which has not increased since 1998. He took a voluntary pay reduction of 15% of his salary for about one-half of 2009 totaling $7,462. Average pay reductions of other personnel during this period were 8%. |
COMPENSATION DISCUSSION AND ANALYSISDirector Compensation
Overview
TheNon-Employee Directors are compensated by the Company for their services as Directors. As described in the Compensation Discussion and Analysis section above, the Compensation Committee (the “Committee”)is charged with oversight and periodic review of the Board of Directors is authorized (i) to developsuch compensation policiesfor comparative evaluation with comparable companies and programs for the Company’s Chief Executive Officer and its other executive officers (collectively, the “Executives”); (ii) to review and approve, at least annually, the performance goals established by the Chief Executive Officer for the Executives; and (iii) to recommend, after considering the results of the Executives’ performance evaluations and the Company’s profitability computations, the salaries and profit sharing bonuses for the Executives.
Three independent Directors comprise the Committee. Their responsibilities are carried out pursuant to authority delegated by the Board of Directors and in accordance with the federal securities laws and other applicable laws and regulations. The Committee is not governed by a written charter.
In devising and maintaining the Company’s executive compensation program, the Committee, from time to time, reviews generally available published data relevantrecommending any changes to the compensation of executives in competitor companies that manufacture pumps and related fluid control equipment. These reviews are not, however, subject to any formal benchmarking process. The Committee also consults with management and outside accounting and legal advisors, as appropriate, but it does not utilize the services of any compensation consultant. The Committee’s recommendations are subject to approval by theentire Board of Directors.
Philosophy and Objectives
Under the Committee’s supervision,Directors who are employees of the Company has formulated a(Messrs. J. C. Gorman and J. S. Gorman) do not receive any compensation philosophy that assures the provision of fair, competitive and performance-based compensation to the Executives. The philosophy reflects the belief that compensation of the Executives should be aligned with the Company’s historical compensation, its culture, and its profitability.
The implementation of the Company’s philosophy seeks (i) to attract and retain a group of talented individuals with the education, experience, skill sets and professional presence deemed best suited for the Company’s executive positions; and (ii) to motivate those individuals to help the Company achieve its strategic goals and enhance profitability by offering them a chance to earn incentive compensation, in addition to their salaries, driven by the accomplishment of Company-wide and individual performance goals.service as Directors.
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Elements of Compensation
The Company’s executive compensation program is designed to reward leadership, initiative, teamwork and top-quality performances among the Executives. The program consists of three elements: base salary; profit sharing bonus; and a component of modest miscellaneous benefits. Stock awards, option awards, and non-equity incentive plan compensation have never been a part of the Company’s executive compensation program. In addition, the Company has not entered into employment agreements with any of the Executives.
Although not an element of executive compensation, ownership of the Company’s Common Shares by the Executives has nevertheless long been considered a worthy goal within the Company. (The Company has paid increased dividends on its Common Shares for 35 consecutive years.) Toward that end, the Company sponsors purchase opportunities, with certain incentives, aimed at encouraging the Executives to voluntarily invest in the Common Shares.
Base Salary and Profit Sharing BonusDirector Compensation Table
Base salaries are initially premised upon the responsibilities of the given Executive. They are further adjusted based on industry surveys and related data, and performance judgments as to the past and expected future contributions of the individual. The salaries are then, however, generally set below competitive levels paid to comparable executives at other entities engaged in the same or similar businesses as the Company. As a consequence, the Company relies to a large degree on incentive compensation, in the form of a profit sharing bonus, to attract and retain the Executives, and to motivate them to perform to the full extent of their abilities.
In the early part of each year, the Committee reviews with the Chief Executive Officer and approves, with modifications considered appropriate, an annual base salary for each of the Executives (other than the Chief Executive Officer). The Committee independently reviews and sets the base salary for the Chief Executive Officer.
The profit sharing bonus for an Executive is closely tied to that individual’s annual performance evaluation, as well as to the Company’s success in achieving its targeted financial goals. This approach allows the Company to operate in a manner that encourages a long and continuing focus on building profitability and shareholder value.
At the beginning of each year, performance objectives for the purpose of computing annual profit sharing bonuses are established based upon the Company’s operating earnings. At the end of each year, performance against those objectives is determined by an arithmetic calculation. In determining the profit sharing bonuses for the Executives, the Committee evaluates management’s recommendations with the Chief Executive Officer based on individual performance. The Committee independently evaluates the individual performance of the Chief Executive Officer. The results of those evaluations,
16
together with the profitability calculations, are used by the Committee to award the profit sharing bonuses to the Executives.
Other Compensation
The Executives receive a variety of modest miscellaneous benefits, the value of which is represented for the named executive officers under the caption “All Other Compensation” in the Summary Compensation Table. These benefits include taxable life insurance, and Company contributions to the Christmas Savings Plan, the 401(k) Plan and the Employee Stock Purchase Plan.
Stock Ownership
The Company has long encouraged the Executives to voluntarily invest in the Company’s Common Shares. As a consequence, the Company makes the purchase of its Common Shares convenient (for all employees), in some cases with Company cash contributions, and in all cases without brokers’ fees or commissions, under an Employee Stock Purchase Plan, a 401(k) Plan and a Dividend Reinvestment Plan. Although these plans do not constitute elements of executive compensation, all of the current executive officers are shareholders and participate in one or more of the foregoing plans.
PENSION BENEFITS
The pension plan in which the Company’s executive officers participate is a defined benefit plan covering the executive officers and substantially all employees of the Company.
The plan offers participants the option to choose between monthly benefits or a single sum payment. The monthly pension benefits are equal to the product of 1.1% of final average monthly earnings (based on compensation during the final ten years of service) and the number of years of credited service. A single sum amount is equal to the present value of the final monthly pension benefit multiplied by a single premium immediate annuity rate as defined by the plan. Historically, nearly all participants in the plan elect the single sum amount at retirement. The single sum payment option is used for financial reporting purposes for the fiscal year ended December 31, 2007, computed as the plan measurement date of October 31, 2007. Actuarial assumptions used by the Company in determining the present value of the accumulated benefit amount consists of a 5.0% interest rate, a 6.1% discount rate and The 2008 IRS Funding Mortality Table. Base compensation in excess of $225,000 is not taken into account under the plan. Vesting occurs after five years of credited service.
17
The table below summarizes the numbertotal compensation paid for service of years of credited service and the present value of accumulated pension benefit for each of the named executive officersNon-Employee Directors of the Company atfor the calendar year ended December 31, 2007.2010.
Pension Benefits
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Present Value
| | | | |
| | | | | | | Number of
| | | of
| | | Payments
| |
| | | | | | | Years Credited
| | | Accumulated
| | | During Last
| |
Name and Principal Position
| | Plan Name
| | | | | Service(1) | | | Benefit(2) | | | Fiscal Year | |
|
Jeffrey S. Gorman
President and Chief
Executive Officer | | The Gorman-Rupp Company Retirement Plan | | | 2007
2006 | | | | 29
28 | | | $ | 448,215
392,772 | | | $ | 0
0 | |
Robert E. Kirkendall
Senior Vice President and Chief Financial Officer | | The Gorman-Rupp Company Retirement Plan | | | 2007
2006 | | | | 29
28 | | | | 473,269
411,554 | | | | 0
0 | |
Judith L. Sovine
Treasurer | | The Gorman-Rupp Company Retirement Plan | | | 2007
2006 | | | | 28
27 | | | | 352,417
308,071 | | | | 0
0 | |
William D. Danuloff
Vice President and Chief
Information Officer | | The Gorman-Rupp Company Retirement Plan | | | 2007
2006 | | | | 36
35 | | | | 379,731
338,893 | | | | 0
0 | |
David P. Emmens
Corporate Counsel
and Secretary | | The Gorman-Rupp Company Retirement Plan | | | 2007
2006 | | | | 10
9 | | | | 80,031
64,675 | | | | 0
0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Change in
| | | | |
| | | | | | | | | | Pension Value
| | | | |
| | | | | | | | | | and
| | | | |
| | | | | | | | | | Nonqualified
| | | | |
| | Fees
| | | | | | Non-Equity
| | Deferred
| | | | |
| | Earned or
| | Stock
| | Option
| | Incentive Plan
| | Compensation
| | All Other
| | |
| | Paid in
| | Awards
| | Awards
| | Compensation
| | Earnings
| | Compensation
| | |
Name | | Cash(1) | | (2) | | ($) | | ($) | | ($) | | ($) | | Total |
|
M. Ann Harlan | | $ | 15,775 | | | $ | 12,400 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 28,175 | |
Thomas E. Hoaglin | | | 15,850 | | | | 12,400 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 28,250 | |
Christopher H. Lake | | | 15,775 | | | | 12,400 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 28,175 | |
Peter B. Lake, Ph.D. | | | 17,275 | | | | 12,400 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 29,675 | |
Rick R. Taylor | | | 15,275 | | | | 12,400 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 27,675 | |
W. Wayne Walston | | | 19,200 | | | | 12,400 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 31,600 | |
| | |
(1) | | The credited yearsEach Non-Employee Director receives a fee for each of service are determinedthe Board of Directors meetings attended. Fees were $2,750 for each meeting attended during 2010. Directors serving as members of Board Committees receive an additional fee of $500 for each Committee meeting attended that is held in conjunction with a measurement datemeeting of the Board of Directors. Each Committee Chairman also receives a retainer fee of $1,000 per year. In support of the Company’s management and employees, substantially all of whom underwent compensation reductions for more than six months during 2009, the Non-Employee Directors, upon recommendation of the Compensation Committee, voted unanimously on October 31, 2007.22, 2009 to reduce all components of Director fees by 15%. This reduction remained in effect through April 22, 2010. |
|
(2) | | Effective May 22, 1997, the Board of Directors adopted a Non-Employee Directors’ Compensation Plan. Under the Plan, as additional compensation for regular services to be performed as a Director, an automatic award of 500 Common Shares (from the Company’s treasury) will be made on each July 1 to each Non-Employee Director then serving on the Board. (On July 27, 2006, the Board of Directors adopted a resolution extending the Non-Employee Directors’ Compensation Plan for an additional term until the earlier of (i) May 21, 2017, (ii) at such time as all of the Company’s Common Shares authorized for award under the Plan and registered underForm S-8 Registration StatementNo. 333-30159 shall have been awarded and issued, (iii) at such time as the Company deregisters any Common Shares not issued under the foregoing Registration Statement, or (iv) at such time as the Plan is terminated by action of the Board of Directors.) The amount represents the actuarial presentaward of 500 Common Shares made on July 1, 2010 had a market value of accumulated benefit based on a single sum payment computed as of the plan measurement date of October 31, 2007. The retirement age is assumed to be the normal retirement age of 65 as defined in the plan.$12,400. |
Members of the Board of Directors are encouraged to attend the Company’s Annual Meeting of Shareholders. All Directors were in attendance at the Annual Meeting in 2010.
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COMPENSATION COMMITTEE REPORT
The Compensation Committee has submitted the following report to the Board of Directors:
| | |
| (i) | The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with the Company’s management; and |
| | |
| (ii) | Based on the review and discussions referred to in the preceding paragraph, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement in connection with the 20082011 Annual Meeting of the Company’s shareholders.Shareholders. |
The foregoing report has been furnished by members of the Compensation Committee.
| | | | |
/s/ Thomas E. HoaglinM. Ann Harlan
Thomas E. HoaglinM. Ann Harlan | | /s/ Christopher H. Lake Christopher H. Lake | | /s/ W. Wayne Walston W. Wayne Walston,
Chairman | | /s/ Christopher H. Lake
Christopher H. LakeChair |
1820
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth information pertaining to the beneficial ownership of the Company’s Common Shares as of February 1, 2011, except as otherwise noted, by (i) each person nominated for election as a Director, (ii) each Officer named in the summary compensation table, (iii) nominees for Director and Executive Officers of the Company as a group, and (iv) any person who is known to the Company to be a beneficial owner of more than five percent of the outstanding shares of Common Stock.
| | | | | | | | |
| | | | Percent of
|
| | Amount and Nature of
| | Outstanding
|
Name and Address | | Beneficial Ownership(1) | | Shares |
|
Independent Director Nominees: | | | | | | | | |
M. Ann Harlan | | | 1,150 | | | | * | |
Thomas E. Hoaglin | | | 15,893 | (2) | | | * | |
Christopher H. Lake | | | 38,046 | (3) | | | * | |
Dr. Peter B. Lake | | | 22,676 | (4) | | | * | |
Rick R. Taylor | | | 6,616 | | | | * | |
W. Wayne Walston | | | 11,223 | (5) | | | * | |
Named Executive Officers: | | | | | | | | |
James C. Gorman(6) | | | 1,299,949 | (7) | | | 7.74 | % |
Jeffrey S. Gorman(6) | | | 894,800 | (8) | | | 5.33 | % |
David P. Emmens | | | 8,754 | | | | * | |
Wayne L. Knabel | | | 3,095 | | | | * | |
All Directors and Executive Officers as a group (10 persons): | | | 2,302,202 | (9) | | | 13.71 | % |
Other Principal Beneficial Owners: | | | | | | | | |
Pioneer Investment Management, Inc.(10)(12) | | | 1,056,596 | | | | 6.3 | % |
60 State Street | | | | | | | | |
Boston, MA 02109 | | | | | | | | |
Invesco PowerShares Capital Management(11)(12) | | | 1,047,687 | | | | 6.2 | % |
1555 Peachtree Street NE | | | | | | | | |
Atlanta, GA 30309 | | | | | | | | |
| | |
* | | Represents less than 1% of the outstanding shares. |
| | |
(1) | | Reported in accordance with the beneficial ownership rules of the Securities and Exchange Commission under which a person is deemed to be the beneficial owner of a security if he or she |
21
| | |
| | has or shares voting power or investment power in respect of such security. Accordingly, the amounts shown in the table do not purport to represent beneficial ownership for any purpose other than compliance with the Commission’s reporting requirements. Voting power or investment power with respect to shares reflected in the table is not shared with others except as otherwise indicated. |
|
(2) | | Includes 4,393 shares as to which Mr. Hoaglin shares voting and investment power. |
|
(3) | | Includes 29,981 shares owned by Mr. Lake’s minor children as to which Mr. Lake considers that he shares the voting and investment power with respect thereto, but otherwise disclaims any beneficial interest therein. |
|
(4) | | Includes 3,807 shares owned by Mrs. Lake as to which Dr. Lake shares voting and investment power. |
|
(5) | | The amount shown in the table excludes 987 shares held in a trust of which Mr. and Mrs. Walston are co-trustees. Mr. Walston disclaims beneficial ownership of all of the shares referred to in this note (5). |
|
(6) | | The address of these individuals is The Gorman-Rupp Company, 600 South Airport Road, Mansfield, Ohio 44903. |
|
(7) | | Includes 565,613 shares owned by Mr. Gorman’s wife and 106,390 shares held in a trust of which Mr. Gorman is a co-trustee. Mr. Gorman has a beneficial interest in 106,390 of the shares held in the trust, considers that he shares the voting and investment power with respect to all of the foregoing shares, but otherwise disclaims any beneficial interest therein. The amount shown in the table excludes 1,783,596 shares beneficially owned by members of Mr. Gorman’s immediate family and 450,956 shares held in trusts of which he and members of his family have beneficial interests. (106,390 of the shares held in trust are the same shares described above.) Mr. Gorman disclaims beneficial ownership of all of the shares referred to in this note (7). |
|
(8) | | Includes 75,668 shares owned by Mr. Gorman’s wife and 234,586 shares owned by his adult children. Mr. Gorman considers that he shares the voting and investment power with respect to all of the foregoing shares, but otherwise disclaims any beneficial interest therein. The amount shown in the table excludes 74,766 shares held in a trust in which Mr. Gorman has a beneficial interest. Mr. Gorman disclaims beneficial ownership of all of the shares referred to in this note (8). |
|
(9) | | Includes 1,043,515 shares as to which voting and investment power are shared. |
|
(10) | | Pioneer Investment Management, Inc., an investment advisory business, is an indirect subsidiary of UniCredit S.p.A. |
|
(11) | | Invesco PowerShares Capital Management LLC is a subsidiary of Invesco Ltd. |
|
(12) | | Information pertaining to the beneficial ownership of the Company’s Common Shares is as of December 31, 2010. |
22
ADVISORY VOTE ON THE COMPENSATION OF THE COMPANY’S
NAMED EXECUTIVE OFFICERS
(Proposal No. 2)
This newly required proposal is for a non-binding, advisory vote to approve the compensation of the Company’s named Executive Officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of the named Executive Officers and the compensation philosophy, policies and practices as described in the Executive Compensation — Compensation Discussion and Analysis narrative discussion and Summary Compensation Table of this proxy statement. As detailed therein, the directors are focused on compensating the Executive Officers fairly and in a manner that promotes the Company’s compensation philosophy that compensation of the Executive Officers should be aligned with the Company’s historical compensation, its culture, and its profitability for the continued achievement of long-term shareholder value. Accordingly, the Company is asking shareholders to vote “FOR” the adoption of the following resolution:
“RESOLVED, that the shareholders of The Gorman-Rupp Company approve, on an advisory basis, the compensation of the Company’s named Executive Officers, as disclosed in the Executive Compensation -Compensation Discussion and Analysis narrative discussion and Summary Compensation Table of this 2011 Proxy Statement.”
While not binding on the Company, the Board of Directors or the Compensation Committee, the failure of the shareholders to approve the compensation of the Company’s named Executive Officers would be considered by the Board and Compensation Committee when making future compensation decisions for the Company’s named Executive Officers.
The Directors recommend a vote FOR Proposal No. 2 to approve the advisory resolution on the compensation of the Company’s named Executive Officers.
ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON THE
COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS
(Proposal No. 3)
This newly required proposal is for a non-binding, advisory vote on the frequency with which the Company will seek the non-binding advisory vote to approve the compensation of the named Executive Officers, similar and related to Proposal No. 2 above. The shareholders may vote for this advisory vote on executive compensation to be held in the future (i) every year, (ii) every two years, or (iii) every three years. Shareholders may also abstain from voting on this proposal. The Company is required to hold this advisory vote at least once every six years.
23
The Company and the Board of Directors have determined that the newly-required advisory vote on executive compensation that occurs annually is the most appropriate alternative for The Gorman-Rupp Company and therefore recommends a vote for an annual advisory vote. Although the Company’s executive compensation practices have changed very little from year to year, the Board believes it is valuable for the Company’s shareholders to have an opportunity to express their opinion on a regular basis and for the Board to receive feedback.
While not binding on the Company, the Board of Directors or the Compensation Committee, the outcome of this vote will be considered by the Board and Compensation Committee when making future decisions on the frequency with which to hold an advisory vote on executive compensation.
The Directors recommend a vote FOR Proposal No. 3 to conduct future advisory votes on compensation of the named Executive Officers every year.
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal No. 2)4)
AThis proposal will be presented at the Meetingis for a vote to ratify the appointment by the Audit Review Committee of the Board of Directors of Ernst & Young LLP as independent registered public accountants for the Company during the year ending December 31, 2008.2011. Representatives of Ernst & Young LLP are expected to be present at the Meeting, will have an opportunity to make a statement if they so desire, and are expected to be available to respond to appropriate questions.
The Company paid Ernst & Young LLP the following fees in connection with the Company’s fiscal years ending December 31, 20072010 and 2006:2009:
Audit Fees — $799,500 (2007)$727,500 (2010); $766,000 (2006)$686,500 (2009). Audit fees consist of the aggregate fees billed for professional services rendered for the audit of the Company’s annual financial statements and the reviews of the Company’s interim financial statements included in its quarterly reports onForm 10-Q, or services that are normally provided by the accounting firm in connection with statutory and regulatory filings or engagements for those fiscal years. The fees paid in 20062009 and 20072010 also cover services performed in connection with the Sarbanes-Oxley Section 404 attestation and other Sarbanes-Oxley requirements.
Audit-Related Fees — $70,500 (2007)$47,000 (2010); $56,500 (2006)$47,000 (2009). Audit-related fees consist of the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under the caption “Audit Fees.” The audit-related fees were paid for the following services: benefit plan audits.
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Tax Fees— $17,300 (2007)$30,500 (2010); $15,900 (2006)$36,700 (2009). Tax fees consist of the aggregate fees billed for professional services rendered for tax compliance, tax advice and tax planning. The tax fees were paid for the following services: federal and international tax planning and advice; federal, state, local and international tax compliance; state and local tax consulting; form 5500 compliance issues; Canadian compliance issues; and other tax advice and assistance regarding statutory and regulatory matters.
All Other Fees — $0 (2007)(2010); $0 (2006)(2009). The “all other fees” category consists of the aggregate fees billed for products and services provided, other than the services reported in the foregoing three paragraphs.
Under its Charter, the Audit Review Committee is directly responsible for the oversight of the work of Ernst & Young LLP and has the sole authority to (i) appoint, retain and terminate Ernst & Young LLP, (ii) pre-approve all audit engagement fees, terms and services, and (iii) pre-approve scope and fees for any non-audit engagements with Ernst & Young LLP. The Committee exercises this authority in a manner consistent with applicable law and the rules of the Securities and Exchange Commission and the American StockNYSE Amex Exchange, and Ernst & Young LLP reports directly to the
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