UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.      )

Filed by the Registrantx                            Filed by a Party other than the Registrant¨

Check the appropriate box:

LINCOLN ELECTRIC HOLDINGS, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders of Lincoln Electric Holdings, Inc. (the “Company”)(Lincoln), which will be held at 11:30 a.m., local time, on Thursday, April 29, 201025, 2013 at the Marriott Cleveland East, 26300 Harvard Road, Warrensville Heights, Ohio. A map showing the location of the Annual Meeting is printed on the outside back cover of the proxy statement.

Enclosed with this letter are the Annual Meeting Notice, Proxy Statement, Proxy and Voting Instruction Formnotice, proxy statement, proxy card and an envelope in which to return the Proxy and Voting Instruction Form.proxy card. Also enclosed is a copy of the Annual Report. The Annual Report and proxy statement contain important information about the Company, itsLincoln, as well as our Board of Directors and its executive officers. Please read these documents carefully.

If you are a registered holder of shares of Lincoln common stock of the Company or a participant in The Lincoln Electric Company Employee Savings Plan (401(k) plan), as a convenience to you and as a means of reducing costs, you may choose to vote your proxy electronically using the Internet or a touch-tone telephone instead of using the conventional method of completing and mailing the enclosed Proxy and Voting Instruction Form.proxy card. Electronic proxy voting is permitted under Ohio law and the Company’sour Amended and Restated Code of Regulations. You will find instructions on how to vote electronically in the proxy statement and on the Proxy and Voting Instruction Form.proxy card. Having the freedom to vote by means of the Internet, telephone or mail does not limit your right to attend or vote in person at the Annual Meeting, if you prefer. If you plan to attend the Annual Meeting, please check the attendance box on the enclosed Proxy and Voting Instruction Form,proxy card, or when prompted if you cast your vote over the Internet or by telephone.

We look forward to seeing you at the Annual Meeting.

Sincerely,

Sincerely, John M. Stropki, Jr.

John M. Stropki, Jr.

Executive Chairman President and Chief Executive Officer

Lincoln Electric Holdings, Inc.

March 19, 201022, 2013

TABLE OF CONTENTS

Lincoln Electric Holdings, Inc.

22801 Saint Clair Avenue

Cleveland, Ohio 44117-1199

The Annual Meeting of Shareholders of Lincoln Electric Holdings, Inc. (the “Company”) will be held at 11:30 a.m., local time, on Thursday, April 29, 2010,25, 2013, at the Marriott Cleveland East, 26300 Harvard Road, Warrensville Heights, Ohio.

Shareholders will be asked to vote on the following proposals:

Shareholders of record as of the close of business on March 3, 2010,4, 2013, the record date, are entitled to vote at the Annual Meeting.

Frederick G. Stueber

Senior Vice President,

General Counsel andand Secretary

March 19, 201022, 2013

Lincoln Electric Holdings, Inc.

22801 Saint Clair Avenue

Cleveland, Ohio 44117-1199

PROXY STATEMENT FOR

ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON APRIL 29, 201025, 2013

GENERAL INFORMATION

Who is soliciting proxies and why? Who is paying for the cost of this proxy solicitation?

The enclosed Proxyproxy is being solicited by theour Board of Directors of Lincoln Electric Holdings, Inc. (the “Company”), and the Companywe will pay the cost of the solicitation. Certain of our officers and other employees of the Company may also solicit proxies by telephone, letter or personal interview, but will not receive any additional compensation for these activities. The CompanyIn addition, we reimburse banks, brokers and other custodians, nominees and fiduciaries for reasonable expenses incurred in forwarding proxy materials to beneficial owners of our common stock and obtaining their proxies. We will begin mailing this proxy statement on or about March 19, 2010.22, 2013.

If your shares are held in your name, in order to vote your shares you must either attend the Annual Meeting and vote in person or appoint a proxy to vote on your behalf. Because it would be highly unlikely that all shareholders would be able to attend the Annual Meeting, the Board recommends that you appoint a proxy to vote on your behalf, as indicated on the accompanying Proxy and Voting Instruction Form,proxy card, or appoint your proxy electronically via telephone or the Internet.

What is Householding?How do we distribute materials to shareholders sharing the same address?

To reduce the expense of delivering duplicate voting materials to shareholders who share the same address, we have taken advantage of the “householding” rules enacted by the Securities and Exchange Commission (“SEC”)(SEC). As long as we provide proper notice to such shareholders, these rules permit us to deliver only one set of voting materials to shareholders who share the same address, meaning only one copy of the Annual Report, proxy statement and any other shareholder communication will be sent to those households. Each shareholder will, however, receive a separate Proxy and Voting Instruction Form.proxy card.

How do I obtain a separate set of communications to shareholders?

If you share an address with another shareholder and have received only one copy of the Annual Report, proxy statement or any other shareholder communication, you may request that the Companywe send a separate copy of these materials to you at no cost to you. The Company will promptly send a copy of these materials to you upon your written or oral request. For this meeting and for future Annual Meetings, you may request separate copies of these materials, ormaterials. You may also request that the Companywe send only one set of these materials to you if you are receiving multiple copies,copies. You may make these requests by sending a written notice to the Corporate Secretary at Lincoln Electric Holdings, Inc., 22801 St. Clair Avenue, Cleveland, Ohio 44117. You may also request separate copies of these materials for this meeting and for future Annual Meetings by calling Roy Morrow, the Company’s Director,Frederick G. Stueber, our Corporate Relations,Secretary, at 216-383-4893.216-481-8100.

Who may vote?

Record holders of shares of common stock of the CompanyLincoln Electric Holdings, Inc. as of the close of business on March 3, 2010,4, 2013, the record date, are entitled to vote at the Annual Meeting. On that date, 42,583,73383,027,257 shares of our common stock of the Company were outstanding. Each share is entitled to one vote on each proposal brought before the meeting.

What is required for there to be a quorum at the Annual Meeting?

Holders of at least a majority of the shares of our common stock issued and outstanding on the record date (March 4, 2013) must be present, in person or by proxy, for there to be a quorum in order to conduct business at the meeting. Abstentions and broker non-votes (described below) will count for purposes of determining if there is a quorum.

What is the difference between holding shares as a shareholder of record and as a beneficial holder?

What shares are included on the proxy card?

If you are both a registered shareholder of the Companyour common stock and a participant in The Lincoln Electric Company Employee Savings Plan (401(k) plan), you may have received one Proxy and Voting Instruction Formproxy card that shows all shares of our common stock of the Company registered in your name, including any dividend reinvestment plan shares, and all shares you have (based on the units credited to your account) under the 401(k) plan. Accordingly, your Proxy and Voting Instruction Formproxy card also serves as your voting directions to the 401(k) plan Trustee.

Please note, however, that unless the identical name or namesname(s) appeared on all your accounts, we were not able to consolidate your share information. If that was the case, you received more than one Proxy and Voting Instruction Formproxy card and must vote each one separately. If your shares are held through a bank, broker, trustee or some other nominee, you will receive either a voting form or a proxy card from the nominee,them, instructing you on how to vote your shares, whichshares. This may also include instructions on telephone and electronic voting. If you are both a record holder of shares and a beneficial holder of additional shares, you will receive a proxy card(s) directly from us as well as a voting instruction card from your bank, broker or other nominee.

What areis a broker non-vote and what effect does it have?

Brokers or other nominees who hold our common stock for a beneficial owner have the discretion to vote on routine proposals when they have not received voting instructions from the beneficial owner. However, your broker or other nominee is not permitted to vote on which Iyour behalf on the election of directors (Proposal 1) and other non-routine matters (including Proposals 3) unless you provide specific voting instructions to them by completing and returning the voting instruction card sent to you or by following the instructions provided to you by your broker, trustee or nominee to vote your shares via telephone or the Internet.

A broker non-vote occurs when a broker or other nominee does not receive voting instructions from the beneficial owner and does not have the discretion to direct the voting of the shares.Therefore, if you hold your shares beneficially through a broker, trustee or other nominee, you must communicate your voting instructions to them to have your shares voted.

Broker non-votes will be voting?counted for purposes of calculating whether a quorum is present at the Annual Meeting, but will not be counted for purposes of determining the number of votes present in person or represented by proxy and entitled to vote (i.e., it will not be considered a vote “cast”) with respect to a particular proposal.

What proposals am I being asked to vote on and what vote is required to approve each proposal?

You are being asked to vote on two proposals:three proposals on the proxy card:

The Board is asking for your vote on Proposal 3 pursuant to requirements under Section 14A of the Securities Exchange Act of 1934. Currently, advisory “Say on Pay” votes are scheduled to be held once every year, with the 2014 vote expected to occur at our 2014 Annual Meeting. The Directors do not know of any other matters that are to be presented at the meeting. If any other matters come before the meeting of which we failed to receive notice within the 30-day period from December 31, 200926, 2012 through January 30, 201025, 2013 (or that applicable laws otherwise would permit proxies to vote on a discretionary basis), it is intended that the persons authorized under solicited proxies will vote on the matters in accordance with their best judgment.

How do I vote?

Registered Holders.Holders

If your shares are registered in your name, you may vote in person or by proxy. If you decide to vote by proxy, you may do so in anyONEof the following three ways.

The Internet and telephone voting procedures have been set up for your convenience and have been designed to authenticate your identity, allow you to give voting instructions and confirm that those instructions have been recorded properly.

Whether you choose to vote by telephone, over the Internet or by mail, you can specify whether your shares should be voted for all, some or none of the nominees for Director (Proposal 1 on the Proxy and Voting Instruction Form). You can also specify whether you want to vote for or against, or abstain from voting for, the ratification of the appointment of the independent auditors (Proposal 2 on the Proxy and Voting Instruction Form). If you make such specifications, your shares will be voted in accordance therewith. If you sign, date and return your Proxy and Voting Instruction Form but do not specify how you want to vote your shares, your shares will be votedFORthe election of all the Director nominees andFORthe ratification of the appointment of the independent auditors.

Participants in the 401(k) Plan.Plan

If you participate in the 401(k) plan, the plan’s independent Trustee, Fidelity Management Trust Company, will vote your 401(k) plan shares according to your voting directions. You may give your voting directions to the plan Trustee in anyONEof the three ways set forth above under “Registered Holders.” If you do not return your Proxy and Voting Instruction Formproxy card or do not vote over the Internet or by telephone, the Trustee will not vote your plan shares. Each participant who gives the Trustee voting directions acts as a named fiduciary for the 401(k) plan under the provisions of the Employee Retirement Income Security Act of 1974, as amended.

Beneficial holders of shares held in “street-name”

Nominee shares.If your shares are held by a bank, broker, trustee or some other nominee (in street-name), that entity will give you separate voting instructions. Brokers and other nominees are not entitled to vote on the election of Directors or the advisory vote on executive compensation unless they receive voting instructions from the beneficial owner. Therefore, it is important that you instruct your bank, broker or other nominee on how you want your shares voted.

What happens if I sign, date and return my proxy but do not specify how I want my shares voted on the proposals?

Registered Shareholders

If you sign, date and return your proxy card but do not specify how you want to vote your shares, your shares will be votedFORthe election of all the Director nominees,FORthe ratification of the appointment of our independent auditors andFORthe approval of the compensation of our named executive officers.

“Street-Name” Shareholders

Your broker or nominee may vote your uninstructed shares only on those proposals on which it has discretion to vote. Your broker or nominee does not have discretion to vote your uninstructed shares on non-routine matters such as Proposal 1 (election of Directors) and Proposal 3 (advisory vote on executive compensation). However, your broker or nominee does have discretion to vote your uninstructed shares on routine matters such as Proposal 2 (ratification of independent auditors).

May I revoke my proxy or change my vote?

Yes. You may change or revoke your proxy prior to the closing of the polls in any one of the following fourFOUR ways:

If your shares are held by a bank, broker, trustee or some other nominee, you will have to check with your bank, broker, trustee or other nominee to determine how to change your vote. Also note that if you plan to attend the Annual Meeting, you will not be able to vote in person at the meeting any of your shares held by a nominee unless you have a valid proxy from the nominee. If you plan to attend the Annual Meeting, please check the attendance box on the enclosed Proxy and Voting Instruction Formproxy card or indicate so when prompted if you are voting by telephone or over the Internet.

How areWho counts the votes counted?votes?

Shareholder

We have engaged Broadridge Financial Solutions, Inc. as our independent agent to receive and tabulate the votes. Broadridge will separately tabulate “for”, “against” and “withhold” votes, abstentions and broker non-votes. Broadridge will be tabulated by an independentalso act as our inspector of elections forat the Annual Meeting. All properly signed Proxy and Voting Instruction Formsproxy cards and all properly recorded Internet and telephone votes (including votes marked “abstain” and broker non-votes) will be counted to determine whether or not a quorum is present at the meeting.

A broker non-vote occurs when a nominee holding shares for the beneficial owner does not vote those shares on a particular proposal because the nominee does not have discretionary authority to do so, and has not received voting instructions with respect to the proposal from the beneficial owner.

May I receive future shareholder communications over the Internet?

If you are a registered shareholder, you may consent to accessingreceiving future shareholder communications (e.g., proxy materials, Annual Reports and interim communications) over the Internet instead of receiving copies in the mail. You may give your consent by marking the appropriate box on your Proxy and Voting Instruction Formproxy card or following the prompts given you when you vote by telephone or over the Internet. If you choose electronic access, to future shareholder communications, once there is sufficient interest in electronic delivery, we will discontinue mailing proxy statements and Annual Reports to you, butyou. However, you will still receive a Proxy and Voting Instruction Form,proxy card, together with a formal notice of the meeting, in the mail with instructions containing the Internet address or addresses to access shareholder communications.mail.

Providing shareholder communications over the Internet will reduce the Company’sour printing and postage costs and the number of paper documents that you would otherwise receive. If you give your consent, there is no cost to you for this service other than charges you may incur from your Internet provider, telephone and/or cable company. Once you give your consent, it will remain in effect until you inform us otherwise.

If your shares are held through a bank, broker, trustee or some other nominee, check the information provided by that entity for instructions on how to choose to access future shareholder communications over the Internet.

In addition, our Annual Report on Form 10-K for the fiscal year ended December 31, 2009,2012, Annual Report and this proxy statement are available free of charge on the following website:www.lincolnelectric.com/proxymaterials.proxymaterials.

When are shareholder proposals due for the 20112014 Annual Meeting?

In order for proposals to be considered for inclusion in next year’s proxy statement for the 2014 Annual Meeting, a shareholder proposal submitted under Rule 14a-8 of the Securities Exchange Act of 1934 must be received in writing by the Corporate Secretary at Lincoln Electric Holdings, Inc., 22801 Saint Clair Avenue, Cleveland, Ohio 44117-1199 on or before November 19, 2010. If a shareholder intends21, 2013 and it must otherwise comply with Rule 14a-8. In addition, if shareholders want to present a proposalproposals at the 2011our 2014 Annual Meeting withoutother than through the inclusionprocess set forth in Rule 14a-8, they must comply with the requirements set forth in our Amended and Restated Code of that proposal in the proxy statement,Regulations, which we refer to as our “Regulations.” Specifically, they must provide written notice of the proposalcontaining certain information as described in our Regulations and such notice must be received no later than January 29, 201125, 2014 and no earlier than December 30, 2010, or26, 2013. If notices delivered pursuant to the Regulations are not timely received, then

we will not be required to present such proposals at the 2014 Annual Meeting. If the Board of Directors chooses to present any information submitted after the deadlines set forth in the Regulations at the 2014 Annual Meeting, then the persons named in proxies solicited by the Board for the 20112014 Annual Meeting will confermay exercise discretionary authorityvoting power with respect to vote on the proposal if presented at the 2011 Annual Meeting.such information.

May I submit a nomination for Director?

The Company’s Amended and Restated

Our Regulations permit shareholders to nominate one or more persons for election as a Director but require that nominations be received in the Corporate Secretary’s Office at least 80 days before the date of the annual meeting at which the nomination is to be made, in those instances when the Companyas long as we publicly announced the date of the annual meeting more than 90 days prior to the annual meeting dateordate. Alternatively, shareholder nominations for Director must be received in the Corporate Secretary’s Office no later than the close of business on the tenth day following the day on which the Companywe publicly

announced the date of the annual meeting in those instances when the Company haswe have not publicly announced the date of the annual meeting more than 90 days prior to the annual meeting date. For complete details on the nomination process, contact our Corporate Secretary at the Company’s Corporate Secretary.address below.

To nominate a candidate for election as Director, you must send a written notice to the Corporate Secretary at Lincoln Electric Holdings, Inc., 22801 Saint Clair Avenue, Cleveland, Ohio 44117-1199. The notice must include certain information about you as a shareholder of the CompanyLincoln and about the person you intend to nominate, including a statement about the person’s willingness to serve, if elected. Specifically, each notice must include: (1) the name and address of the shareholder who intends to make the nomination and of the person(s) to be nominated, (2) a representation that the shareholder is a holder of record of stock of the CompanyLincoln entitled to vote for the election of directors on the date of such notice and intends to appear in person or by proxy at the meeting to nominate the person(s) specified in the notice, (3) a description of all arrangements or understandings between the shareholder and each nominee and any other person(s) (naming such person(s)) pursuant to which the nomination(s) are to be made by the shareholder, (4) such other information regarding each nominee proposed by the shareholder as would be required to be included in the proxy statement filed pursuant to the proxy rules of the SEC, had the nominee been nominated, or intended to be nominated, by theour Board of Directors, of the Company, and (5) the consent of each nominee to serve as a director of the CompanyLincoln if so elected.

For this year’s Annual Meeting, the Companywe had to receive nominations not later than the close of business on February 8, 20104, 2013 as the Companywe publicly announced the date of this year’s Annual Meeting on January 13, 2010,10, 2013, which is more than 90 days prior to this year’s Annual Meeting date. Accordingly, no additional nominations can be made for this year’s Annual Meeting.

How do I contact the Company?Lincoln?

For general information, shareholders may contact the CompanyLincoln at the following address:

Lincoln Electric Holdings, Inc.

22801 Saint Clair Avenue

Cleveland, Ohio 44117-1199

Attention: Roy Morrow,Amanda Butler, Director, CorporateInvestor Relations

Throughout the year, you may visit our website atwww.lincolnelectric.com for information about current developments at the Company.Lincoln.

How do I contact the Directors?

Shareholders may send communications to any or all of theour Directors of the Company through the Corporate Secretary at the following address:

Lincoln Electric Holdings, Inc.

22801 Saint Clair Avenue

Cleveland, Ohio 44117-1199

Attention: Corporate Secretary

The name of any specific intended Board recipient should be noted in the communication. The Corporate Secretary will forward such correspondence only to the intended recipients. Prior to forwarding any correspondence, the Corporate Secretary will review such correspondence and, in his discretion, not forward certain items if they are deemed of a frivolous nature or otherwise inappropriate for the Board’s consideration. In such cases, some of that correspondence may be forwarded elsewhere in the Companywithin Lincoln for review and possible response.

DIRECTORS

ELECTION OF DIRECTORS

Proposal No. 1(PROPOSAL 1)

The Company’sOur Regulations provide for three classes of Directors whose terms expire in different years. While Ohio’s General Corporation Law provides that, unless another voting standard is stipulated in the Articles of Incorporation, if a quorum is present, the Director nominees receiving the greatest number of votes will be elected as Directors of the Company, the Company hasLincoln (plurality standard). In addition, we have adopted a majority voting policy with respect to uncontested elections of Directors. The majority voting policy is described in detail below under “Corporate Governance.” Accordingly, for the 20102013 Annual Meeting, the plurality standard will determine whether a Director nominee is elected but, under our majority voting policy, if any Director fails to receive a majority of the votes cast in his or her favor, the Director will be required to submit his or her resignation to the Board promptly after the certification of the election results. The Nominating and Corporate Governance Committee of the Board would then consider each resignation and recommend to the Board whether to accept or reject it.

During 2009, the Board consistedEach of 10our three classes of Directors withcurrently has four Directors in aDirectors. Of our three Director classes, one class towill hold office until the 20102013 Annual Meeting, of Shareholdersone class will hold office until the 2014 Annual Meeting and one class will hold office until the 2015 Annual Meeting, in each case to serve until their successors are duly elected and qualified, threequalified.

Election of Four Directors in a class to hold office until the 2011 Annual Meeting of Shareholders and until their successors are duly elected and qualified and three Directors in a class to hold office until the 2012 Annual Meeting of Shareholders and until their successors are duly elected and qualified. On February 10, 2010, the Board increased its size from 10 to 11 Directors, and Mr. Christopher L. Mapes was elected by the Directors then in office to fill the vacancy created by the Board expansion. Mr. Mapes, who joined the class of Directors whose term ends in 2011, was recommended as a Director by a search consultant not retained by the Company. Management referred the matter to Mr. Adams, the Company’s Lead Director and Chair of the Nominating and Corporate Governance Committee, who, in conjunction with other members of the Board and the Nominating and Corporate Governance Committee, reviewed Mr. Mapes’ skills and qualifications against the criteria used to assess director candidates as described in the Company’s Guidelines on Significant Corporate Governance Issues. A description of such criteria is set forth below with the general Committee information related to the Nominating and Corporate Governance Committee.Serve Until 2016

At the 20102013 Annual Meeting, four Directors will be elected to serve for a three-year term until the 20132016 Annual Meeting of Shareholders and until their successors are duly elected and qualified. Unless otherwise directed, shares represented by proxy will be votedFORthe following:

Class of 2013.2016. The class of Directors whose term ends in 20132016 has been fixed at four.Stephen G. Hanks, Kathryn Jo Lincoln, William E. MacDonald, III and George H. Walls, Jr. are standing for election. All of the nominees have been elected previously by the shareholders.

Each of the nominees has agreed to stand for election and has agreed, in accordance with the Company’sour majority voting policy, to tender his/herhis resignation in the event that he/he or she fails to receive a majority of the votes cast in his/his or her favor. If any of the nominees is unable to stand for election, the Board may provide for a lesser number of nominees or designate a substitute. In the latter event, shares represented by proxies solicited by the Directors may be voted for the substitute. We have no reason to believe that any of the nominees will be unable to stand for election.

All

Annual Meeting Attendance

Directors are expected to attend the Annual Meeting.each annual meeting. All of the Director nominees, as well as the continuing Directors, plan to attend this year’s Annual Meeting. At the 20092012 Annual Meeting, all of theour Directors of the Company were in attendance.

DIRECTORS’DIRECTOR BIOGRAPHIES

The following table sets forth biographical information about the Director nominees and the Directors whose terms of office will continue after this Annual Meeting. Except as otherwise indicated, each of the Director nominees and continuing Directors has held the occupation listed below for more than five years.

None of the Director nominees or continuing Directors has any special arrangement or understanding with any other person pursuant to which the Director nominee or continuing Director was or is to be selected as a Director or nominee. There are no family relationships, as defined by SEC rules, among any of our Directors or executive officers. SEC rules define the term ��family“family relationship” to mean any relationship by blood, marriage or adoption, not more remote than first cousin.

NOMINEES FOR ELECTION

Stephen G. Hanks

Kathryn Jo Lincoln

NOMINEES FOR ELECTION
Recent Business Experience:		Ms. Lincoln is Chair/Chief Investment Officer of the Lincoln Institute of Land Policy (a non-profit educational institution teaching land economics and taxation), a position she has held since 1996. Ms. Lincoln also served as President of the Lincoln Foundation, Inc. (a non-profit foundation that supported the foregoing Institute until the two entities merged in 2006) from 1999 through October 2006.
Directorships:		Ms. Lincoln is an Advisory Board Member of the Johnson Bank, Arizona Region, a position she has held since 2006, before which she was a Board Member of Johnson Bank Arizona, N.A. beginning in 2001.
Director Qualifications:		Ms. Lincoln’s leadership experience with a non-profit education and research institution where she has played a crucial role in strategic planning and asset allocation, as well as her experience with the Chautauqua Institution and an international non-profit organization related to land use/policy, make Ms. Lincoln a valuable contributor to a well roundedwell-rounded board. In addition, as a Lincoln family member and long-standing Director of the Company,Lincoln Electric, Ms. Lincoln has a keen sense of knowledge about the CompanyLincoln Electric and its founding principles.

William E. MacDonald, III

George H. Walls, Jr.

CONTINUING DIRECTORS

Class of 2014

David H. Gunning

G. Russell Lincoln

Christopher L. Mapes

Hellene S. Runtagh

Class of 2015

Harold L. Adams

Curtis E. Espeland

Robert J. Knoll

John M. Stropki

CONTINUING DIRECTORS Age:
John M. Stropki, Jr.		62
Age: Term Expires/Service:		59 2015 – Director since 1998.
Term Expires/Service: Recent Business Experience:		2012; Director since 1998.
Recent Business Experience:		Mr. Stropki is Executive Chairman of Lincoln, a position he has held since December 31, 2012. Prior to serving in his current position, Mr. Stropki served as President and Chief Executive Officer of the Company. Mr. Stropki was elected President and Chief Executive Officer inbeginning June 2004 and Chairman inbeginning October 2004. From May 2003 to June 2004, Mr. Stropki was Executive Vice President and Chief Operating Officer of the Company.Lincoln. From May 1996 to May 2003, Mr. Stropki was Executive Vice President of the CompanyLincoln and President, North America of The Lincoln Electric Company.America.
Directorships:		Mr. Stropki has been a member of the Board of Directors of The Sherwin-Williams Company since July 2009.
Director Qualifications:		Mr. Stropki has over 3738 years of experience with the Company,Lincoln, starting as a college intern, to later join the Companyjoining Lincoln as a sales representative and then progressprogressing through the ranks to run the North American business and take over as CEOChief Executive Officer during 2004. Mr. Stropki has extensive knowledge of the Company’sLincoln’s business, its longstanding management philosophies (including the incentive management systemssystem) and the demands and expectations of its customers, as appropriate, guaranteed employment), andwell as the welding industry in general. Mr. Stropki is a leader and an active participant in several industry organizations. Mr. Stropki is the only member of management serving on the Board.
David H. Gunning
Age:		67
Term Expires/Service:		2011; Director since 1987.
Recent Business Experience:		Mr. Gunning is the former Vice Chairman of Cliffs Natural Resources, Inc. (an iron ore and coal mining company formerly known as Cleveland-Cliffs Inc), a position he held from April 2001 until his retirement in May 2007. Prior to that Mr. Gunning served as Chairman, President and Chief Executive Officer of Capital American Financial Corp. Mr. Gunning is also a lawyer and practiced law for many years as a corporate partner with Jones Day.
Directorships:		Mr. Gunning has served on the Boards of Directors of Development Alternatives, Inc. since before 1993 and MFS Funds, Inc. since 2004. In addition, Mr. Gunning served on the Boards of Directors of Cliffs Natural Resources, Inc. from 2001 to 2007, Portman Mining Ltd. from 2005 to 2008 and Southwest Gas Corporation from 2000 to 2004.
Director Qualifications:		Mr. Gunning brings to the Board and its Finance and Nominating and Corporate Governance Committees chief executive officer and senior management experience (with public companies), public company board experience and corporate legal skills. Additionally, Mr. Gunning’s relatively long tenure as a Director provides the Board with a valuable perspective on the Company’s challenges within its industry.

CONTINUING DIRECTORS EXECUTIVE BIOGRAPHIES
G. Russell Lincoln
Age:		63
Term Expires/Service:		2011; Director since 1989.
Recent Business Experience:		Mr. Lincoln is President of N.A.S.T. Inc. (a personal investment firm), a position he has held since 1996. Prior to joining N.A.S.T. Inc., Mr. Lincoln served as the Chairman and Chief Executive Officer of Algan, Inc.
Director Qualifications:		As an entrepreneurial businessman with experience, including 25 years running a $50 million business, Mr. Lincoln understands business risk and the importance of hands-on management. Mr. Lincoln is the grandson of J. F. Lincoln, who pioneered the use of incentive management, and he appreciates the Company’s culture. His leadership role and his investment experience serve the Company well as a member of the Compensation and Executive Development and Finance Committees of the Board.
Hellene S. Runtagh
Age:		61
Term Expires/Service:		2011; Director since 2001.
Recent Business Experience:		Ms. Runtagh was President and Chief Executive Officer of the Berwind Group (a diversified pharmaceutical services, industrial manufacturing and real estate company) in 2001. From 1997 through 2001, Ms. Runtagh was Executive Vice President of Universal Studios (a media and entertainment company). Prior to joining Universal Studios, Ms. Runtagh spent 27 years at General Electric Company (a diversified industrial company) in a variety of leadership positions.
Directorships:		Ms. Runtagh has served as a Director on the Board of Directors of Harman International Industries, Inc. since 2008 and NeuStar, Inc. since 2006. In addition, Ms. Runtagh was a member of the Board of Directors of IKON Office Solutions Inc. from 2007 to 2008, Avaya Inc. from 2003 to 2007 and Covad Communications Group from 1999 to 2006.
Director Qualifications:		Ms. Runtagh has over 30 years of experience in management positions with global companies. Ms. Runtagh’s responsibilities in management have ranged from marketing and sales to finance, as well as engineering and manufacturing. Ms. Runtagh’s diverse management experience, including growing those businesses while maintaining high corporate governance standards, and her extensive experience as a director of public companies, make her well-positioned for her role as a Director, a member of the Audit Committee and Chair of the Compensation and Executive Development Committee of the Board.

CONTINUING DIRECTORS
Christopher L. Mapes
Age:		48
Term Expires/Service:		2011; Director since February 2010.
Recent Business Experience:		Mr. Mapes is Executive Vice President of A. O. Smith Corporation (a global manufacturer with a water heating and water treatment technologies business and an electric motor and motor solutions business, both of which have residential, commercial, industrial and consumer applications) and the President of its Electrical Products unit, a position he has held since 2004. Prior to joining A.O. Smith, he was the President, Motor Sales and Marketing of Regal Beloit Corporation (a manufacturer of electrical and mechanical motion control products) from 2003 to 2004. From 1990 to 2003, Mr. Mapes was the President, Global OEM Business Group at Superior Essex, Inc. (a wire and cable manufacturer).
Director Qualifications:		As an executive officer of a large, global public company engaged in manufacturing operations, Mr. Mapes understands the challenges of global growth. He is also familiar with the welding industry generally, given that one of his former employers (Superior Essex) has been a supplier to the Company. In addition to his business management experience, Mr. Mapes also has a law degree.The biographies of our executive officers are hereby incorporated by reference from our Form 10-K for the fiscal year ended December 31, 2012, filed on February 22, 2013, at page 8.

DIRECTOR COMMITTEES AND MEETINGS

The Company hasWe have a separately-designated standing Audit Committee established in accordance with SEC rules. The CompanyWe also hashave standing Compensation and Executive Development, Nominating and Corporate Governance and Finance Committees. Information on each Committee is set forth below.

Audit Committee

Compensation and Executive Development Committee

Nominating and Corporate Governance Committee

		•   reviews Director compensation, benefits and expense reimbursement programs
		•   reviews periodically the quality, sufficiency and currency of information furnished to the Board by CompanyLincoln management
		•   reviews and recommends, in conjunction with the Compensation and Executive Development Committee, the appointment and removal of our elected officers
		In evaluating Director candidates, including persons nominated by shareholders, the Committee expects that any candidate for election as a Director of the CompanyLincoln must have these minimum qualifications:
		•   demonstrated character, integrity and judgment
		•   high-level managerial experience or experience dealing with complex problems
		•   ability to work effectively with others
		•   sufficient time to devote to the affairs of the CompanyLincoln and these specific qualifications
		•   specialized experience and background that will add to the depth and breadth of the Board
		•   independence as defined by the NASDAQ listing standards
		•   financial literacy
		•   financial literacy
		In evaluating candidates to recommend to the Board of Directors, in addition to the minimum qualifications discussed above and as stated in the Company’sour Guidelines on Significant Corporate Governance Issues, the Committee considers whether the candidate enhances the diversity of the Board. Such diversity includes professional background and capabilities, knowledge of specific industries and geographic experience, as well as the more traditional diversity concepts of race, gender and national origin.
		The Committee’s process for identifying and evaluating nominees for Director includes annually preparing and discussing prospective Director specifications, which serve as the baseline to evaluate candidates. From time-to-time, the Company haswe have retained an outside firm to help identify candidates, but no such firm was retained on that basis in 2009, and no firm is currently being retained.during 2012.

		Shareholders may nominate one or more persons for election as Director of the Company.Lincoln. The process for doing so is set forth above under the caption “May I submit a nomination for Director?”
		See the narrative following the Director compensation table below for specific information on the Committee’s involvement in determining Director compensation.
		A copy of this Committee’s Charter (i) may be found on the Company’sour website at www.lincolnelectric.com/corporate/about/governance.aspwww.lincolnelectric.com and (ii) will be made available upon request to the Company’sour Corporate Secretary.

Finance Committee

YourBoard Meetings

Our Board held eightseven meetings in 2009.2012. Each of the Directors serving in 2012 attended at least 75% of the total number of full Board meetings, as well as meetings of committees on which he or she served, during 2009.2012.

CORPORATE GOVERNANCE

Director Independence

Each of the non-employee Director nominees and continuing non-employee Directors meets the independence standards set forth in the NASDAQ listing standards.standards, which are reflected in our Director Independence Standards (discussed below). The NASDAQ independence standards include a series of objective tests, such as that the Director is not an employee of the CompanyLincoln and has not engaged in various types of business dealings with the Company,Lincoln, to determine whether there are any relationships whichthat would interfere with the exercise of independent judgment in carrying out the responsibilities of the Director. To be considered independent, the Board must affirmatively determine that the director has no material relationship with Lincoln. The Board has adopted Director Independence Standards, which outline the Company. In its assessment for Mr. Gunning, the Board considered the Company’s transactions with Jones Day, a law firm that the Company has retained for specific legal services, on a case-by-case basis, for over ten years and concluded that Mr. Gunning receives no material indirect benefit from such transactions. Mr. Gunning, is the father-in-law of Gina K. Gunning, a partner of Jones Day. The fees paid by the Company to Jones Day during 2009 were less than 1% of Jones Day’s gross revenues for 2009. Ms. Gunning does not personally render legal services to the Company or supervise any attorneyindependence standards set forth in the renderingNASDAQ listing standards and outline specific relationships that are deemed to be categorically immaterial for purposes of legal services to the Company, and Ms. Gunning does not receive any direct compensation from fees paid by the Company to Jones Day.director independence. The Director Independence Standards are available on our website at www.lincolnelectric.com.

During 2009,2012, the independent Directors met in Executive Session, separate from the sole management Director,Directors, in conjunction with each of the eight meetings of the Board. The Lead Director, discussed below, was the presiding Director of these sessions.

Lead Director

The Lead Director is appointed each year by the independent Directors at the organizational meeting of the Board following the Annual Meeting. The Lead Director serves as a liaison between the Chairman of the Board and the independent Directors, and presides over Executive Sessions attended only by independent Directors. The Lead Director consults with the Chairman on the format and adequacy of information the Directors receive and the effectiveness of the Board meeting process and has independent authority to review and approve Board meeting agendas and schedules, as well as the authority to request from theour officers of the Company any Companycompany information deemed desirable by the independent Directors. The Lead Director may also speak on behalf of the CompanyLincoln, from time to time, as the Board may decide.

In April, 2009, Harold L. Adams was re-appointed as the Lead Director for 2009-2010,2012-2013, a position he has held since the position was created in December 2004. Mr. Adams has been a Director of the Company since 2002 and is the former Chairman, President and Chief Executive Officer of RTKL Associates Inc., an architectural and engineering firm.

Board Leadership

Currently, our Chief Executive Officer also serves as

As of December 31, 2012, we separated the Chairmanroles of the Board. The Board has no policy with respect to the separation of these offices. The Board of Directors believes that this matter is part of the succession planning process and that it is in the best interests of the Company for the Board of Directors to consider it each time that it elects the Chief Executive Officer. The Board of Directors recognizes that there may be circumstances in the future that would lead it to separate these offices, but it believes that there is no reason to do so at this time.

The Board believes having one individual serve as both Chief Executive Officer and Chairman of the Board, is beneficialwith the appointment of John M. Stropki as Executive Chairman of the Board. This action was part of our succession planning for senior leadership. Our Executive Chairman acts as a liaison between our Board and management and offers high-level guidance to the Company, as well as consistent with recent developmentsour Chief Executive Officer. As our former Chief Executive Officer, our Executive Chairman continues in corporate governance matters when coupled with a Lead Director. As both a Director and an officer, Mr. Stropki fulfills a valuable leadership role at Lincoln. Our Executive Chairman also:

Our Chief Executive Officer is responsible for planning, formulating and coordinating the development and execution of Corporate Directors) who have found no reasonour corporate strategy, policies, goals and objectives. He is accountable for a split betweenLincoln’s performance and reports directly to our Board. As of December 31, 2012, Christopher L. Mapes assumed the positionsrole of Chief Executive Officer and Chairman when a counterbalance, such as a Lead Director, is present. Officer. Mr. Mapes was formerly our Chief Operating Officer.

As noted above, the Board officially designates a Lead Director. The Company’sOur Lead Director performs several important functions, including the coordination of the activities of the independent directors, providing input on agendas for Board and committee meetings and facilitating communications between the Chairman (now Executive Chairman) and the other members of the Board. The Lead Director works with the Executive Chairman, andthe Chief Executive Officer and the other Board members to provide strong, independent oversight of the Company’sour management and affairs.

Enterprise Risk ManagementOversight and Assessment

In the ordinary course of business, the Company faceswe face various strategic, operating, compliance and financial risks. The Company’s enterpriseOur risk management process seeksprocesses seek to identify and address significant risks. The Board oversees this enterprise-wide approach, to risk management, and the Lead Director promotes the Board’s engagement in enterprise risk management. Additionally, the Audit Committee also reviews major financial risk exposure and the steps management has taken to monitor and control such risk. Board oversight includes both leadership initiatives and structured follow up and review. Several years ago,The Board has integrated its enterprise risk management identified variousprocess with its strategic planning process, refining the distinction between strategic risks and operational risks. The Board reviews both regularly.

Compensation-Related Risks

We regularly assess risks related to our compensation and benefit programs, including our executive programs, and our Compensation and Executive Development Committee is actively involved in those assessments. In addition, Towers Watson & Co., compensation consultants engaged by management, provides a risk areasassessment of our executive programs. As a result of all these efforts, we do not believe the risks arising from our executive compensation policies and practices are reasonably likely to have a material adverse effect on Lincoln.

Although we have a long history of pay-for-performance and incentive-based compensation, the programs contain many mitigating factors to ensure that our employees are not encouraged to take unnecessary risks. These factors include:

Guidelines on Significant Corporate Governance Issues

The Board has adopted Guidelines on Significant Corporate Governance Issues, which we refer to as our “Governance Guidelines,” to assure good business practices, transparency in financial reporting and the highest level of professional and personal conduct. These guidelines address current developments in the area of

corporate governance, including developments in Federalfederal securities law, developments related to the Sarbanes-Oxley Act of 2002 and changes in the NASDAQ listing standards. The Governance Guidelines also provide for the annual appointment of our Lead Director and contain our majority voting policy with respect to uncontested elections of Directors as discussed below. In addition, the Governance Guidelines specify through an express confidentiality provision that, unless otherwise authorized by the Board, Directors are not to discuss confidential corporate business with third parties, and instead are to refer all such mattersinquiries concerning confidential corporate business to the appropriate company management.Chief Executive Officer or the Chief Financial Officer.

Majority Voting Policy

Consistent with the current trend of companies adopting majority voting standards in connection with uncontested elections of Directors, our Governance Guidelines include a majority voting policy. The Board has the exclusive power and authority to administer the policy, as well as to repeal the policy, in whole or in part, or to adopt a new policy as it deems appropriate.

Under the policy, in uncontested elections of Directors, any Director who failedfails to receive a majority of the votes cast in his or her favor would be required to submit his or her resignation to the Board promptly after the certification of the election results. The Nominating and Corporate Governance Committee would then consider each resignation and recommend to the Board whether to accept or reject it. The Committee, in making its determination, may consider any factors or other information that it deems appropriate, including the reasons (if any) given by shareholders as to why they withheld their votes, the qualifications of the tendering Director and

his or her contributions to the Board and the Company,Lincoln, and the results of the most recent evaluation of the tendering Director’s performance by the Committee and other members of the Board. Any Director who tenders his or her resignation under the policy shall not participate in the Committee’s recommendation or Board action regarding whether to accept or reject the tendered resignation. If a Director’s tendered resignation is rejected by the Board, the Director will continue to serve for the remainder of his or her term and until a successor is duly elected. If a Director’s tendered resignation is accepted by the Board, then the Board, in its sole discretion, may fill any resulting vacancy or may decrease the size of the Board.

You can access theour Governance Guidelines on Significant Corporate Governance Issues on the Company’sour website at www.lincolnelectric.com/corporate/about/governance.asp.www.lincolnelectric.com.

Code of Corporate Conduct and Ethics

The Board also has adopted a Code of Corporate Conduct and Ethics to govern the Company’sour Directors, officers and employees, including the principal executive officers and senior financial officers. The Company hasWe have satisfied, and in the future intendsintend to satisfy, the disclosure requirements of Item 5.05 of Form 8-K regarding an amendment to, or a waiver from, any provision of itsour Code of Corporate Conduct and Ethics that applies to itsour principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and relates to any element of the code of ethics definition as set forth in Item 406(b) of Regulation S-K of the Securities Exchange Act of 1934, by posting such information on itsour website. You can access the Code of Corporate Conduct and Ethics, and any such amendments or waivers thereto (to date, there have been no such amendments or waivers), on the Company’sour website at www.lincolnelectric.com/corporate/about/governance.asp.

RELATED PARTY TRANSACTIONSwww.lincolnelectric.com.

Any related party transactions concerning the Company and any of its directors or officers (or any of their immediate family members as defined as children, stepchildren, parents, stepparents, spouses, siblings, mother-in-laws, father-in-laws, son-in-laws, daughter-in-laws, brother-in-laws, sister-in-laws and any other persons sharing a household (other than a tenant or employee)), including those that are reportable under Item 404(a) of Regulation S-K of the Securities Exchange Act of 1934, are to be disclosed to and approved by the Chief Compliance Officer, Compliance Counsel and the Audit Committee of the Board. The Company defines “related party transactions” generally as transactions in which the self-interest of the employee, officer or director may be at odds or conflict with the interests of the Company, such as doing business with entities that are or may be controlled or significantly influenced by such persons or their immediate family members. It is the Company’s policy to avoid related party transactions; related party transactions involving officers of the Company are generally prohibited. Our related party transaction policies can be found in our Code of Corporate Conduct and Ethics, as well as the Audit Committee Charter, both of which are available on our website.

In February 2010, the Audit Committee considered and approved a related party transaction involving P&R Specialty, Inc., a supplier to the Company. Greg D. Blankenship, the brother of George D. Blankenship, is the sole stockholder and President of P&R Specialty, Inc. During 2009, the Company purchased approximately $2.1 million worth of products from P&R Specialty in ordinary course of business transactions. George D. Blankenship has no ownership interest in or any involvement with P&R Specialty. The Company believes that the transactions with P&R Specialty were, and are, on terms no less favorable to the Company than those that could have been obtained from unaffiliated parties.

In February 2010, the Committee also considered and approved a related party transaction involving A.O. Smith Corporation, both a supplier to and customer of the Company. Mr. Mapes, one of our Directors, is Executive Vice President of A.O. Smith and President of its Electrical Products unit. During 2009, the Company purchased approximately $671,000 worth of products from A.O. Smith and A.O. Smith purchased approximately $2.8 million worth of products from the Company, all in connection with ordinary course of business transactions. The Company believes that the transactions with A.O. Smith were, and are, on terms no less favorable to the Company than those that could have been obtained from unaffiliated parties.

DIRECTOR COMPENSATION

The following table details the cash retainers and fees, as well as stock-based compensation in the form of shares of restricted stock, received by our non-employee Directors or expensed by the Company during 2009. Mr. Mapes was not a Director during 2009.2012.

Director		Fees Earned or Paid in Cash				Stock Awards (10)			Option Awards		Non-Equity Incentive Plan Compensation		Change in Pension Value and Nonqualified Deferred Compensation Earnings		All Other Compensation				Total
Harold L. Adams (1)		$	100,000			$	49,969		—		—		—		$	—			$	149,969
David H. Gunning (2)			83,500				49,969		—		—		—			—				133,469
Stephen G. Hanks (3)			78,500	(3)			49,969		—		—		—			—				128,469
Robert J. Knoll (4)			88,500				49,969		—		—		—			—				138,469
G. Russell Lincoln (5)			80,000				49,969		—		—		—			—				129,969
Kathryn Jo Lincoln (6)			78,500				49,969		—		—		—			—				128,469
William E. MacDonald, III (7)			80,000				49,969		—		—		—			—				129,969
Hellene S. Runtagh (8)			90,000				49,969		—		—		—			—				139,969
George H. Walls, Jr. (9)			78,500	(9)			49,969		—		—		—			792	(9)			129,261

Director		Fees Earned or Paid in Cash				Stock Awards1				All Other Compensation				Total
Harold L. Adams		$	102,500			$	89,975			$	—			$	192,475
Curtis E. Espeland			68,352				151,150				—				219,502
David H. Gunning			87,500				89,975				—				177,475
Stephen G. Hanks			80,000				89,975				—				169,975
Robert J. Knoll			92,500				89,975				—				182,475
G. Russell Lincoln			80,000				89,975				—				169,975
Kathryn Jo Lincoln			80,000				89,975				—				169,975
William E. MacDonald, III			80,000				89,975				—				169,975
Hellene S. Runtagh			90,000				89,975				—				179,975
George H. Walls, Jr.			80,000	2			89,975				—				169,975

 

(1)1	During 2009, Mr. Adams was the Lead Director, a member of the Compensation and Executive Development Committee and Chair of the Nominating and Corporate Governance Committee.

(2)	During 2009, Mr. Gunning was a member of the Nominating and Corporate Governance Committee and Chair of the Finance Committee.

(3)	During 2009, Mr. Hanks was a member of the Audit Committee and the Compensation and Executive Development Committee. All of the Board fees reported in the first column were deferred by Mr. Hanks under our Non-Employee Directors’ Deferred Compensation Plan, which is described in the narrative below.

(4)	During 2009, Mr. Knoll was a member of the Finance Committee and Chair of the Audit Committee.

(5)	During 2009, Mr. Lincoln was a member of the Compensation and Executive Development Committee and the Finance Committee.

(6)	During 2009, Ms. Lincoln was a member of the Audit Committee and the Nominating and Corporate Governance Committee.

(7)	During 2009, Mr. MacDonald was a member of the Compensation and Executive Development Committee and the Finance Committee.

(8)	During 2009, Ms. Runtagh was a member of the Audit Committee and Chair of the Compensation and Executive Development Committee.

(9)

During 2009, General Walls was a member of the Audit Committee and the Nominating and Corporate Governance Committee. All of the Board fees reported in the first column were deferred by General Walls under our Non-Employee Directors’ Deferred Compensation Plan, which is described in the narrative below. The amount shown in “All Other Compensation” represents the difference between $2,775, the actual earnings credited to General Walls’ deferred compensation account under our Non-Employee Directors’ Deferred Compensation Plan, which is based on the rate of return for Moody’s Corporate Bond Average Index in accordance with the plan, and $1,983, the hypothetical market-rate return specified by SEC rules for proxy statement disclosure purposes, which is based on 120% of the applicable federal long-term rate, compounded monthly for 2009.

(10)

On December 1, 2009, 94813, 2012, 1,878 shares of restricted stock were granted to each of the non-employee Directors pursuant toDirector under our 2006 Stock Plan for Non-Employee Directors. Mr. Espeland was granted an additional 1,319 shares of restricted stock upon joining the board effective February 23, 2012. The Stock Awards column represents the grant date fair value under Accounting Standards Codification (ASC) Topic No. 718.718 based on a closing price of $46.38 and $47.91 per share on February 23, 2012 and December 13, 2012, respectively. See the discussion below entitled “2006 Stock Plan for Non-Employee Directors” for additional information regarding the plan. Assumptions used in the calculation of these amounts are included in footnote (7)(9) to the Company’sour audited financial statements for the fiscal year ended December 31, 20092012 included in the Company’sour Annual Report on Form 10-K filed with the SEC on February 22, 2010.2013.

As of December 31, 2009,2012, the aggregate number of shares of restricted stock held by each non-employee DirectorDirectors was 2,8147,251 shares, except for Mr. MacDonald,Espeland who joined our Board during 2012 and holds 3,355 shares. Mr. Mapes was not a Director as3,197 shares of December 31, 2009.restricted stock.

As of December 31, 2009,2012, the aggregate number of unexercised stock options held by each current non-employee Director who has received stock options was as follows: Mr. Adams, 15,500; Mr. Gunning 5,500;(11,000); Mr. Hanks 6,000; Mr. Knoll, 0;(12,000); Mr. Lincoln 13,500; Ms. Lincoln, 3,500; Mr. MacDonald, 0;(15,000); Ms. Runtagh 9,500;(11,000); and General Walls 6,500.(13,000). All of the outstanding stock options were exercisable as of December 31, 2009.2012. Mr. Mapes wasAdams, Mr. Knoll and Ms. Lincoln do not a Directorhold any unexercised stock options. No additional stock options have been granted to the non-employee Directors since 2006. Accordingly, Messrs. MacDonald and Espeland never received stock option awards as of December 31, 2009.they were elected to the Board after 2006.

2	All of General Walls’ board fees were deferred under our Non-Employee Directors’ Deferred Compensation Plan, which is detailed in the narrative below.

 

 

General

Based upon the recommendations of the Nominating and Corporate Governance Committee, the Board determines our non-employee Director compensation. The Committee periodically reviews the status of Board compensation in relation to other comparable companies, trends in Board compensation and other factors it deems appropriate. The Committee receives assistanceobjectives of our non-employee Director compensation programs are to attract highly-qualified and advice from compensation consultants at Towers Watson & Co., an internationally-recognized human resources consulting firm,diverse individuals to serve on our Board and from the managementto align their interests with those of the Company, particularly the Chief Executive Officer, General Counsel and Vice President, Human Resources, regarding the underlying philosophies, components and levels of Director compensation.our shareholders. An employee of Lincoln who also serves as a Director does not receive any additional compensation for serving as a Director, or as a member or chair of a Board committee. Messrs. Stropki and Mapes are employee Directors and, accordingly, do not receive compensation for their services as Directors.

The Committee also administers our Director equity incentive plans, including approval of grants of stock options,equity-based awards (currently, restricted stock and other equity or equity-based awards,stock), and makes recommendations to the Board with respect to equity-based plans for Directors. The Committee does not generally delegate any of its authority to other persons, although it has the power to do so.

2009 Director Compensation Package for 2012

During 2009, the Directors’ compensation package for

All non-employee Directors was based on the following principles:

a significant portion of Director compensation should be aligned with creatingreceive cash retainers and sustaining shareholder value;

Directors should have equity interest in Lincoln; and

total compensation should be structured to attract and retain a diverse and truly superior Board of Directors.

With the above principles in mind, the compensation package for 2009 was comprised of the following components:

Cash Compensation

an annual retainer of $40,000stock-based award for all Directors;

an annual retainer of $15,000 for the Lead Director;

an annual retainer of $10,000 for the Chairs of the Audit and the Compensation and Executive Development Committees and $5,000 for each other Committee Chair;

Board meeting fees of $3,000 for each meeting attended; and

Committee meeting fees of $1,500 for each meeting attended.

Although, the above details the standard fee schedule applicable for 2009, the Directors elected to take a 5% reduction from their 2009 annual retainer in support of the Company’s cost-saving measures, which are described in detail in the Compensation Discussion and Analysis section below underCost-Saving Measures. The Director retainer likely will be reinstated to the full amount during 2010.

Stock-Based Compensation

serving on our Board. Stock-based compensation is provided under theour 2006 Stock Plan for Non-Employee Directors, whichDirectors. Based on the review and recommendation of Hay Group, Inc., we revised our Director compensation package during 2011. Hay Group, Inc. is an independent compensation consultant that provides for various typesno services to Lincoln or its management. As a result of stock awards, including restricted stockthis review, we eliminated separate Committee meeting fees (for a certain number of standard meetings each year) in order to simplify the Board compensation structure and stock options. Beginning in 2005, the Company migrated stock awards from stock options to restricted stock. As it relates to 2009 compensation, the Nominating and Corporate Governance Committee resolved that annual awardsalign with current trends. The details of restricted stock would be made at a value of $50,000 to all non-employee Directors and that initial awards of restricted stock would be made at a value of $35,000 to anyour non-employee Director who becomes eligible by virtue of his or her election to the Board. These award levelscompensation program, which are the same as those applicable for 2008.unchanged from last year, are provided below.

During 2009, each non-employee Director received an annual restricted stock award of 948 shares, or approximately $50,000 worth of restricted stock. Upon his election to the Board in February 2010, Mr. Mapes received a restricted stock award of 726 shares, or approximately $35,000 worth of restricted stock.

1.

We no longer have separate meeting fees, except that if there are more than 8 full Board or Committee meetings in any given year, Directors will receive $1,500 for each full Board meeting in excess of 8 meetings and Committee members will receive $1,000 for each Committee meeting in excess of 8 meetings.

2.

Beginning in 2010, the restricted stock agreements contain pro-rata vesting of the award upon retirement, as opposed to full vesting as was the case for prior awards. Accordingly, if a Director retires before the restricted stock award vests in full (3 years from the date of the grant), the Director will receive unrestricted shares equal to a portion of the original award calculated based on the Director’s length of service during the 3-year term.

3.

The initial award will be pro-rated based on the Director’s length of service during the twelve-month period preceding the next regularly-scheduled annual equity grant (which normally occurs in the fourth quarter each year).

Other Arrangements

We reimburse all Directors for reasonable out-of-pocket expenses incurred in connection with attendance at Board meetings, or when traveling in connection with the performance of their services for Lincoln. With respect to the use of private aircraft, we will reimburse the Director for the cost of a first-class ticket (which amount is increased proportionately should other Directors or executives travel on the same flight).

Continuing Education

Directors are reimbursed a modest amount ($5,000 is used as a guideline) for continuing education expenses (inclusive of travel expenses) for programs each Director may elect. Seventy percentMore than a majority of our Directors are certified by the Corporate Directors Institute of the National Association of Corporate Directors (NACD), which offers continuing education programs for both new and experienced directors.Directors.

Stock Ownership Guidelines

In keeping with the philosophy that Directors’ interests should be aligned with creating and sustaining shareholder value and as part of its continued focus on best practices with respect to corporate governance, we introducedall of our non-employee Directors must adhere to certain stock ownership guidelines, forwhich we have had in place since 2006. Under the non-employee Directors effective January 1, 2006. Guidelines were also introduced for officers, which are described below in the Compensation Discussion and Analysis section. Under thesecurrent guidelines, all non-employee Directors are required to accumulate over time a certain number of our common shares equal in value to at least threefour times the Board’s 2006current annual cash retainer of $40,000$80,000 (or $120,000)$320,000). Non-employee Directors have five years to satisfy the stock ownership guidelines, which can be satisfied by holding either (1) shares aggregating the specified dollar amountor (2) 3,0258,179 shares, which amountas set forth below in the table.

Retainer Multiple		Number of Shares
4 x annual retainer ($320,000)		8,179**
* Directors have five years to satisfy the guidelines ** Represents shares equal to $320,000 based on the closing price of $39.12 per share on December 30, 2011

The Committee will review the guidelines every two and a half years to ensure that the components and values are appropriate. The next review is the equivalent to three times the annual retainer in effect on January 1, 2006 ($120,000) divided by the closing price of a common share on December 30, 2005 ($39.66). scheduled for 2013.

Restricted stock awards count towards the stock ownership guidelines; common shares underlying stock options and shares held in another person’s name (including a relative) do not. As of December 31, 2009,2012, all of our non-employee Directors onhad satisfied the above stock ownership guidelines, except for Mr. Espeland who joined the Board at such time had satisfied their ownership guidelines.during 2012.

2006 Stock Plan for Non-Employee Directors

The 2006 Stock Plan for Non-Employee Directors providesis the vehicle for the annual and initial grants of stock-based awards as outlineddiscussed above. During 2009,2012, non-employee Directors received an annual award of shares of restricted stock valued at approximately $50,000.$90,000. In addition, Mr. Mapes receivedupon initial election to the Board, non-employee Directors receive an award of shares of restricted stock valued at approximately $35,000 upon his election to$90,000, which is pro-rated based on the board on February 10, 2010. length of service during the twelve-month period preceding the next regularly-scheduled annual equity grant (which normally occurs in the fourth quarter each year).

Recipients of shares of restricted stock have all of the rights of a shareholder with respect to the restricted stock, including the right to vote suchthe shares. Under the terms of the award,awards, shares of restricted stock vest in full three years after the date of grant with accelerated vesting upon a change in control of the CompanyLincoln or upon the death disability or retirementdisability of the Director.Director, as well as upon retirement for awards granted prior to December 2010. Starting with the December 2010 award, the restricted stock awards provide for accelerated vesting of a pro-rata portion of the award upon retirement based on the Director’s length of service during the 3-year term. During the period duringin which the shares remain forfeitable, dividends on the restricted stock are paid out to the non-employee Directors in cash.

No stock options have been granted under the plan since 2006 as the Committee has opted to award restricted stock instead of stock options. With respect to prior awards of stock options, an option becomes exercisable after the optionee has continuously served as a Director for one year from the date of grant, with accelerated vesting upon a change in control of the CompanyLincoln or upon the death, disability or retirement of the Director. Once the optioneeDirector has vested in his or her options, the option may be exercised in whole or in part with respect to 100% of the underlying common shares. Options granted under the plan have a 10-year term.

Non-Employee Directors’ Deferred Compensation Plan

Adopted in 1995, this plan allows the non-employee Directors to defer payment of all or a portion of their annual cash compensation. This plan allows each participating non-employee Director to:

 

elect to defer a specified dollar amount or a percentage of his or her cash compensation;

 

have the deferred amount credited to the Director’s account and deemed invested in one or more of the options available under the plan; and

 

elect to begin payment of the deferred amounts as of the earlier of termination of services as a Director, death or a date not less than one full calendar year after the year the fees are initially deferred.

The investment elections available under the plan are the same as those available to officersexecutives under our Top Hat Plan, which is discussed below in the narrative of the Nonqualified Deferred Compensation Table following the Compensation Discussion and Analysis section of this proxy statement. Two Directors, Mr. Hanks andsection. One Director, General Walls, elected to defer Board fees under the plan during 20092012 as detailed above in the Director Compensation Table.

Directors’ Charitable Award Program

This program was terminated in 2003, other than for Directors already vested. Upon the death of a vested non-employee Director, we will donate an aggregate of $500,000 (in 10 annual installments) to one or more charitable organizations recommended by the vested Director and approved by Lincoln. This program is funded through insurance policies on the lives of the vested Directors. No premiums were paid during 20092012 as the policies were fully-funded as of the end of 2005.

All charitable deductions and the cash surrender value of the policies accrue solely to Lincoln; the vested Directors derive no financial benefit. The current non-employee Directors who are vested in the program are David H. Gunning, G. Russell Lincoln and Kathryn Jo Lincoln.

RELATED PARTY TRANSACTIONS

Any related party transactions concerning Lincoln and any of its directors or officers (or any of their immediate family members, defined as children, stepchildren, parents, stepparents, spouses, siblings, mothers-in-law, fathers-in-law, sons-in-law, daughters-in-law, brothers-in-law, sisters-in-law and any other persons sharing a household (other than a tenant or employee)), including those that are reportable under Item 404(a) of Regulation S-K of the Securities Exchange Act of 1934, are to be disclosed to and approved by the Chief Compliance Officer, Director of Compliance and the Audit Committee of the Board. We define “related party transactions” generally as transactions in which the self-interest of the employee, officer or Director may be at odds or conflict with the interests of Lincoln, such as doing business with entities that are or may be controlled or significantly influenced by such persons or their immediate family members. It is our policy to avoid related party transactions; related party transactions involving our officers are generally prohibited. Our related party transaction policies can be found in our Code of Corporate Conduct and Ethics, as well as the Audit Committee Charter, both of which are available on our website.

In February 2013, the Audit Committee considered and approved a related party transaction involving P&R Specialty, Inc., a supplier to Lincoln. Greg D. Blankenship, the brother of George D. Blankenship, is the sole stockholder and President of P&R Specialty, Inc. During 2012, we purchased approximately $3.3 million worth of products from P&R Specialty in ordinary course of business transactions. George D. Blankenship has no ownership interest in or any involvement with P&R Specialty. We believe that the transactions with P&R Specialty were, and are, on terms no less favorable to us than those that could have been obtained from unaffiliated parties.

AUDIT

EXECUTIVE COMPENSATIONAUDIT COMMITTEE REPORT

The Audit Committee consists solely of independent Directors within the meaning of the NASDAQ listing standards. The Audit Committee oversees our financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal control over financial reporting. In fulfilling its oversight responsibilities, the Committee reviewed and discussed with management the audited financial statements in the Annual Report, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.

The Committee discussed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with U.S. generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the Committee under 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 (PCAOB) in Rule 3200T. In addition, the Committee has received from the independent auditors written disclosures regarding the auditors’ independence required by PCAOB Ethics and Independence Rule 3526,Communication with Audit Committees Concerning Independence, and has discussed with the independent auditors, the independent auditors’ independence.

The Committee discussed with our internal and independent auditors the overall scope and plan for their respective audits. The Committee met with the internal and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of our internal controls, and the overall quality of our financial reporting.

In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors (and the Board approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2012 for filing with the SEC. The Committee and the Board have also recommended the selection of our independent auditors for the year ending December 31, 2013 and the ratification thereof by the shareholders.

By the Audit Committee:

Robert J. Knoll, Chair

Curtis E. Espeland

Stephen G. Hanks

G. Russell Lincoln

Hellene S. Runtagh

George H. Walls, Jr.

RATIFICATION OF INDEPENDENT AUDITORS

(PROPOSAL 2)

A proposal will be presented at the Annual Meeting to ratify the appointment of the firm of Ernst & Young LLP as our independent auditors to examine our books of account and other records and our internal control over financial reporting for the fiscal year ending December 31, 2013.

Fees for professional services provided by Ernst & Young LLP as our independent auditors in each of the last two fiscal years, in each of the following categories are:

		2011				2012
Audit Fees		$	3,019,000			$	3,011,000
Audit-Related Fees			427,000				513,000
Tax Fees			175,000				200,000
All Other Fees			-				-
Total Fees		$	3,621,000			$	3,724,000

Audit Fees include fees associated with the annual integrated audit of the financial statements and internal control over financial reporting in 2012 and 2011, the reviews of our quarterly reports on Form 10-Q, statutory audits required for our international subsidiaries and services provided in connection with regulatory filings with the Securities and Exchange Commission. Audit-Related Fees for 2012 and 2011 primarily relate to audit services associated with acquisitions and audits of employee benefit plans. Tax Fees include tax compliance and tax advisory services.

Audit Committee Pre-Approval Policies and Procedures

The Audit Committee has established a policy regarding pre-approval of all audit and non-audit services performed by our independent auditors, including the scope of and fees for such services. Requests for audit services, as defined in the policy, must be approved prior to the performance of such services. Generally, requests for audit-related services, tax services and permitted non-audit services, each as defined in the policy, must be presented for approval prior to the performance of such services, to the extent known at that time. The Committee has resolved that four specific categories of services, namely audit services, tax advisory services, international tax compliance services and audit-related services related to acquisitions and new accounting pronouncements, are permissible without itemized pre-approval in an amount not to exceed $50,000 for each of the foregoing services (other than international tax compliance and international tax advisory for which the amount is $100,000). Itemized detail of all such services performed is subsequently provided to the Committee. In addition, our independent auditors are prohibited from providing certain services described in the policy as prohibited services. All of the fees included in Audit-Related Fees, Tax Fees and All Other Fees shown above were pre-approved by the Audit Committee (or included in the $50,000 limit or $100,000 limit, as applicable, for certain services as detailed above).

Generally, requests for independent auditor services are submitted to the Audit Committee by our Senior Vice President, Chief Financial Officer and Treasurer (or other member of our senior financial management) and our independent auditors for consideration at the Audit Committee’s regularly scheduled meetings. Requests for additional services in the categories mentioned above may be approved at subsequent Audit Committee meetings to the extent that none of such services is performed prior to its approval (unless such services are included in the categories of services that fall within the dollar limits detailed above). The Chairman of the Audit Committee is also delegated the authority to approve independent auditor services requests under certain dollar thresholds provided that the pre-approval is reported at the next meeting of the Audit Committee. All requests for independent auditor services must include a description of the services to be provided and the fees for such services.

Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they so desire and are expected to be available to respond to appropriate shareholder questions. Although ratification of the appointment of the independent auditors is not required by law, the Audit Committee and the Board of Directors believe that shareholders should be given the opportunity to express their views on the subject. While not binding on the Audit Committee or the Board of Directors, the failure of the shareholders to ratify the appointment of Ernst & Young LLP as our independent auditors would be considered by the Board of Directors in determining whether or not to continue the engagement of Ernst & Young LLP. Ultimately, the Audit Committee retains full discretion and will make all determinations with respect to the appointment of independent auditors, whether or not our shareholders ratify the appointment.

Majority Vote Needed

Ratification requires the affirmative vote of the majority of the shares of Lincoln common stock present or represented and entitled to vote on the matter at the Annual Meeting. Unless otherwise directed, shares represented by proxy will be votedFOR ratification of the appointment of Ernst & Young LLP.

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTEFOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT AUDITORS

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

The following explains the material elements of thedescribes and analyzes our executive compensation objectivesprograms and, policies as it relatesspecifically, how they apply to our “named executive officers”officers.”¹

2012 Named Executive Officers

Name		Title
John M. Stropki		Executive Chairman and Former Chief Executive Officer
Christopher L. Mapes		President and Chief Executive Officer and Former Chief Operating Officer
Vincent K. Petrella		Senior Vice President, Chief Financial Officer and Treasurer
Frederick G. Stueber		Senior Vice President, General Counsel and Secretary
David M. LeBlanc		Senior Vice President; President, Lincoln Electric International
George D. Blankenship		Senior Vice President; President, Lincoln Electric North America

This discussion and analysis contains statements regarding future performance targets and goals. These targets and goals are disclosed in the limited context of our compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. We specifically caution investors not to apply these statements for other contexts.

Introduction

Our approach to executive compensation is generally the same as our approach to employee-wide compensation, with a strong belief in pay-for-performance and a long-standing commitment to incentive-based compensation. For example, virtually all domestic welding business employees participate in a bonus program designed to reward both company financial performance and individual contributions. The bonus has been paid every year since the 1930s. In 2012, this broad-based bonus pool was $99.3million, the average bonus paid was 70.1% of an employee’s base pay and the average total cash compensation received (base and bonus) was $81,819. This was a 10% increase from the bonus multiplier in 2011, after an 11.7% increase in the financial metric used for that program.

To maintain our performance-driven culture, we:
•        Expect our executives to deliver above-market financial results (and assess those results on a current and historical basis);
•        Provide systems that tie executive compensation to superior financial performance (and regularly verify that this pay-for-performance approach is operating as intended);

Take action when needed to address specific business challenges; and

Maintain good governance practices in the design and operation of our executive compensation programs, including consideration of the risks associated with those practices.

1

John M. Stropki served as President, Chief Executive Officer and Chairman of Lincoln until December 31, 2012, at which time he transitioned to Executive Chairman and Christopher L. Mapes, who formerly served as Chief Operating Officer, became President and Chief Executive Officer as of December 31, 2012.

At the 2012 Annual Meeting, shareholders approved the compensation we pay to our named executive officers with over 97% of the shareholders supporting our “say-on-pay” proposal. The Compensation and Executive Development Committee believes that the shareholder vote reinforces the company’s philosophy and objectives relative to our executive compensation program.

Above-Market Financial Results

We have a long track record of delivering increased value to our shareholders and we have typically delivered above-market performance, across various financial metrics over many cycles. Since the global recession in 2009, Lincoln has rebounded across most of the financial components we monitor for purposes of executive compensation.

In assessing our financial results for compensation purposes, we compare our results to a peer group of companies (described below), to the S&P 400 MidCap Index (in which we participate), to a subset that includes the manufacturing companies in the S&P 400 MidCap Index (to obtain a more targeted understanding of performance) and, for certain metrics, to the S&P Composite 500 Stock Index (to obtain a broader understanding of performance). Within these groups, we consider various types of widely-reported financial metrics, each of which is related to our executive compensation programs in some way. These include earnings before interest and taxes (EBIT) growth, adjusted net income growth, return on invested capital (ROIC), and 1-year, 3-year and 5-year total shareholder return (TSR). Some of these financial metrics directly impact our executive compensation programs, while others are the closest approximation to the metrics that we use in our programs. We believe that the recent intense period of global economic pressure impacted different companies in our comparator groups in different ways and at different points in the cycle. Therefore, we have relied both on current and historical financial comparisons to assess our financial results and to determine pay-for-performance during 2012 (as explained below).

The following tables illustrate Lincoln’s financial results for the most recent reporting periods and for the four prior reporting periods. They compare those results to our peer group, S&P 400 Midcap companies, S&P 400 Midcap manufacturing companies and, for TSR, S&P 500 companies. The percentile rankings show the position of Lincoln’s financial results compared to the particular group, with a 50^th percentile ranking indicating median (or market) performance. Percentiles below 50 indicate below-market performance, while percentiles above 50 indicate above-market performance. Information is based on the most recently available public information (as accumulated by an independent third party), as of January 2013 when the analysis was performed.

Trailing 12 months (for Lincoln ending):

September 2008

September 2009

September 2010

September 2011

September 2012

Calendar 2012

Lincoln’s Adjusted EBITGrowth

24%

(59%)

34%

51%

35%

26%

Percentile Rank to the:

Not Available

Peer Group

70th

12th

63rd

75th

83rd

-

S&P Midcap 400

68th

12th

75th

85th

83rd

-

S&P Midcap 400 Manufacturing

67th

14th

71st

79th

86th

-

Trailing 12 months (for Lincoln ending):

September 2008

September 2009

September 2010

September 2011

September 2012

Calendar 2012

Lincoln’s Net Income Growth

18%

(82%)

159%

78%

26%

19%

Percentile Rank to the:

Not Available

Peer Group

58th

4th

96th

68th

72nd

-

S&P Midcap 400

67th

25th

92nd

88th

73rd

-

S&P Midcap 400Manufacturing

63rd

26th

93rd

85th

79th

-

Most recently reported calendar year

2008

2009

2010

2011

TTM (for Lincoln ending Sept. 2012)

Calendar 2012

Lincoln’s ROIC

20%

4%

11%

18%

19%

19%

Percentile Rank to the:

Not Available

Peer Group

68th

16th

51st

71st

78th

-

S&P Midcap 400

93rd

44th

70th

89th

91st

-

S&P Midcap 400Manufacturing

94th

37th

59th

85th

90th

-

Most recently reported calendar year

2008

2009

2010

2011

2012

Trailing 12-months

Lincoln’s 1-Year TSR

(27%)

8%

25%

22%

26%

24%

Percentile Rank to the:

Peer Group

74th

20th

9th

97th

58th

77th

S&P Midcap 400

50th

40th

50th

78th

70th

70th

S&P Midcap 400Manufacturing

57th

41st

37th

78th

62nd

66th

S&P 500

54th

38th

54th

75th

72nd

71st

Most recently reported calendar year

2006-2008

2007-2009

2008-2010

2009-2011

2010-2012

Trailing 36-months

Lincoln’s 3-Year TSR1

10%

(2%)

(1%)

18%

24%

33%

Percentile Rank to the:

Peer Group

82nd

39th

21st

36th

79th

85th

S&P Midcap 400

82nd

56th

42nd

57th

79th

90th

S&P Midcap 400Manufacturing

76th

56th

40th

56th

72nd

85th

S&P 500

85th

52nd

49th

60th

79th

90th

Most recently reported calendar year

2004-2008

2005-2009

2006-2010

2007-2011

2008-2012

Trailing 60-months

Lincoln’s 5-Year TSR1

18%

11%

13%

7%

9%

14%

Percentile Rank to the:

Peer Group

91st

85th

64th

62nd

62nd

74th

S&P Midcap 400

86th

80th

78th

66th

70th

76th

S&P Midcap 400Manufacturing

82nd

74th

67th

58th

67th

69th

S&P 500

86th

80th

80th

70th

73rd

81st

1	Compounded annual growth rate.

Pay-for-Performance

In designing our executive compensation programs, a core philosophy is that our executives should be rewarded when they deliver long-term financial results for the benefit of our shareholders. Therefore, we provide systems that tie executive compensation to superior financial performance. While we have typically delivered above-market financial performance (as described above), our executive compensation has generally been below the competitive market (as described below) – this means we have delivered financial results that are superior to the compensation we have paid to executives.

To assess pay-for-performance, we evaluate the relationship between “total direct realizable pay” for the named executive officers and our financial performance. This allows us to understand the degree of alignment between total compensation delivered for the prior three fiscal years and our financial performance, both relative to peers. Because we believe the global recession impacted different companies in our peer group at different points in the cycle, we have relied both on current and historical comparisons to assess pay-for-performance for 2012. This analysis is performed by management’s compensation consultant, Towers Watson & Co., with review and comment provided to the Compensation and Executive Development Committee (the “Committee”) by its independent consultant, Hay Group, Inc.

“Financial performance” is a composite of reported EBIT growth, adjusted net income growth, ROIC and TSR (the “composite”). To better understand a key financial metric, however, we also consider “financial performance” by exclusively looking at total shareholder return. “Total direct realizable pay” is the sum of the following components (using comparable components from the peer group):

Base pay for the applicable three-year period;

Actual annual bonus paid during the three-year period;

The value of any in-the-money stock options granted over the relevant three-year period (for Lincoln, this is based on the closing price of Lincoln common stock as of the most recent fiscal year-end);

The value of restricted shares and restricted stock units (which were awarded in place of restricted stock beginning in 2011) granted over the three-year period (for Lincoln, this is based on the closing price of Lincoln common stock as of the most recent fiscal year-end); and

The value of long-term performance units/shares over the relevant three-year period (for Lincoln, this includes payments under our cash long-term incentive program (Cash LTIP) during the three-year cycle and pro-rata amounts, at target, for awards that are mid-cycle).

The analysis reveals that financial performance and executive compensation were aligned for 2012 (in reviewing the 2009 to 2011 period, the most recent period available). As the charts below demonstrate, our financial performance results were below market between 2009 and 2011, with our overall financial performance at the 35^th percentile and our total shareholder return at the 43^rd percentile. However, total direct realizable compensation was much further below market at the 25^th percentile for the named executive officers. We believe these charts demonstrate a very appropriate relationship between our compensation programs and company financial performance, with below market financial results directly resulting in well below market executive compensation.

Lincoln Electric Pay for Performance Composite Financial Comparison		Lincoln Electric Pay for Performance 3-Year TSR Comparison
Composite Financial Comparison (Percentile to Peer Group)		3-Year Total Shareholder Return (Percentile to Peer Group)

Information is based on the most recently available data as of November 2012 when the analysis was performed.

2012 Executive Compensation Actions

During 2012, financial results were stronger than those delivered during 2011, which allowed us to revert to our core philosophies on executive compensation. Key 2012 actions and results include:

Base pay increases for executives for 2012 that were modest, with an average increase of 5%;

Annual bonuses for executives that were, on average, 20% above target amounts as result of the strong financial results delivered for 2012;

Cash LTIP payments made to the officers for the 2010 to 2012 cycle that were 68% above target amounts;

Accelerated vesting of restricted stock granted to executives at the end of 2009 (based on achievement of both financial targets under the 2010 to 2012 Cash LTIP);

An award of 33,161 restricted stock units (valued at approximately $1,608,000) as a special retirement replacement and executive retention award for Mr. Mapes, who became our Chief Executive Officer on December 31, 2012; and

Amendments to restricted stock awards for Mr. Stropki, our Executive Chairman, to extend the normal retirement from age 62 to April 25, 2013, which resulted in greater tax deductibility for the Company during 2012 and beyond.

Good Governance Practices

In addition to our emphasis on above-market financial performance and pay-for-performance, we design our executive compensation programs to be current with best practices and good corporate governance. We also consider the risks associated with any particular program, design or compensation decision. We believe these assessments result in sustained, long-term shareholder value. Some of those governance practices are described in the Compensation-Related Risks section above. Other such practices include:

Annual reviews of market competitiveness and the relationship of compensation to financial performance;

Independent compensation consultants and legal advisors, retained directly by the Committee, to provide input and recommendations on our executive compensation programs;

No multi-year guarantees for compensation increases, including base pay, and no guaranteed bonuses;

The elimination of full vesting of equity awards upon retirement (vesting was changed to pro-rata) – this change also applied to Board equity awards;

No repricing or replacement of underwater stock options without prior shareholder approval;

No dividend or dividend equivalents paid while executive restricted stock or restricted stock units are unvested;

No equity awards and other long-term incentive compensation included in the Summarypension calculation of our SERP;

No new participants added to our SERP since 2005;

No new grants of prior (or additional) years of service under our SERP (Mr. Stueber is the only current executive who has received a grant of prior service, which was awarded to him over seventeen years ago);

Change in control arrangements that do not provide for tax gross-ups, no longer provide for additional retirement service in the SERP, are limited to three times base pay and bonus (for the Executive Chairman and Chief Executive Officer, with other executives receiving payments of only two or one times base pay and bonus) and mainly provide for payments only upon a double (not single) trigger;

No tax gross-up payments or tax reimbursements on compensation and benefits, other than tax equalization benefits that are available to all employees who are on international assignment and modest gross-up payments on employee relocation benefits (and which are a standard component of a U.S. company’s expatriate program and/or relocation benefits);

Modest perquisites, consisting of financial planning (for which imputed income is charged), an annual physical examination and reimbursement of club dues (for which, if not used exclusively for business purposes, imputed income is charged);

A broad clawback policy that applies to all recent incentive awards for officers;

Stock ownership requirements for our officers and Board of Directors; the requirements will be reviewed mid-cycle to ensure they remain appropriate; and

The prohibition on hedging activities, such as cashless collars, forward sales, equity swaps and other similar arrangements. In addition, during 2012, our insider trading policy was amended to prohibit the pledging of Lincoln stock on a going-forward basis.

Our Compensation Table – Messrs. Stropki, Petrella, Stueber, LeBlanc and Blankenship.Philosophy

Core Principles

Our executive compensation programs consist of four main components: (1) base compensation,pay, (2) annual bonus (MIP), (3) long-term incentives and (4) benefits/perquisites, all of which are discussed in more detail below. Base pay is targeted at the 45^th percentile of the competitive market (slightly below(below market), while target total cash compensation (which includes an annual bonus that incorporates aggressive financial targets) is set at the 65^th percentile of the market (above market). Long-term incentive compensation is set at the 50^th percentile (at market), and is divided equally among three programs: (1) stock options, (2) restricted stock units and (3) a cash long-term incentive program. Benefits are set at the market median or 50^th percentile. Although not targeted to a specific competitive level, we believe our benefits, taken as a whole, are at the market median and our executive perquisites are below the market median.

The following discussion and analysis contains statements regarding future individual and company performance targets and goals. These targets and goals are disclosed in the limited context of our compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. We specifically caution investors not to apply these statements for other contexts.

Executive Summary

The Compensation and Executive Development Committee of the Board, which we refer to in this section as the Committee and which consists solely of non-employee Directors, has responsibility for reviewing, establishing and monitoring all elements of compensation of our executives (seeRole of Committee, Consultants and Managementbelow). To set the levels of compensation for executive management, the Committee conducts an annual review of competitive market compensation, executive compensation trends, business needs, individual performance and our financial performance to peers. Based on these factors and the advice of its outside executive compensation consultant, Towers Watson & Co. (for years prior to 2010), the Committee made certain changes in 2009 and 2010. Most notably, it added a return on invested capital metric to the cash long-term incentive plan for the 2009 to 2011 plan cycle and all future cycles, it revised the annual bonus program matrix to broaden the range on individual performance ratings (but did not increase the maximum payout percentages) and it re-evaluated severance agreements for our officers to ensure continuity and continued dedication of efforts in the event of a change in control.

For each named executive officer, the Committee reviewed the levels and amounts of compensation based on an analysis of pay for performance, a summary of the Company’s overall compensation philosophies, a comparison of current pay to the various competitive targets and individual performance. The Committee did not increase base pay for the named executive officers for 2009 and, in February 2009 and May 2009, all Management Incentive Plan, or MIP (or bonus), participants, including the named executive officers, had their base pay reduced by 5% in each instance, for a total base pay reduction of 10%. During 2009, two named executive officers subsequently did receive base pay increases as a result of promotions, but the 10% reduction was applied to those new base pay amounts. In late 2008, the Committee also set 2009 MIP (bonus) targets and long-term incentives (Cash LTIP and equity awards) for the named executive officers (each of these actions is described in more detail in theExecutive Compensation Components below).

For 2009, financial results for the Company were substantially lower than 2008. Accordingly, actual payouts for the 2009 MIP (annual bonus) for the named executive officers were well below the actual payouts for 2008. In addition, as a result of this weaker 2009 financial performance, there were no payouts under the Cash LTIP for the named executive officers (or for any other participants) for the 2007 to 2009 plan cycle, nor accelerated

vesting of restricted stock granted at the end of 2006. In approving the significantly lower 2009 incentive payouts, the Committee noted that the Company’s financial performance compared to its peer group and companies in the S&P Midcap 400 Index was mixed during this period – in both longer historical periods (the most recent trailing 36-month period) and the last year (the most recent trailing 12-month period), some of the Company’s financial performance (such as net income growth) was well below its peer group and companies in the S&P Midcap 400 Index while other financial performance (such as return on invested capital) was well above those groups. Due to the lower incentive payments, the 2009 compensation for the named executive officers was also significantly below comparable amounts for the peer group companies and companies in the S&P Midcap 400 Index (each of these components is described in more detail inExecutive Compensation Components below).

Recognizing that 2009 financial performance incentive anomalies were expected to impact long-term incentives for the next few years, in late 2009, the Committee approved a special, one-time award of restricted stock for executive management (including the named executive officers) in order to incent and retain key management. Excluding this special award, 2010 compensation for the named executive officers is not significantly higher than 2009 target compensation, with only one named executive officer receiving any increase. Each of these components is described in more detail inExecutive Compensation Components below.

Beginning in 2010, in keeping with good corporate governance practices, the Committee engaged Hay Group, Inc. to act as its independent executive compensation consultant. Towers Watson & Co. will continue to provide both executive compensation consulting and other services to management.

Cost-Saving Measures

In light of the global economic recession, the Company instituted several cost-cutting initiatives during the fourth quarter of 2008 and 2009 to align the Company’s business with the challenging economic environment. At our domestic welding business, these measures included reduced work hours for piecework and hourly employees, cuts in expenses and discretionary spending in all areas, reassignment of employees under the guaranteed employment policy, cancellation of merit raises, elimination of most external hiring, institution of a 5% base salary reduction for salaried, non-executive employees, institution of a 10% base salary reduction for executive management (including the named executive officers), suspension of the Company’s 401(k) match and the offer of a voluntary separation incentive program for our employees. Similar actions were also taken for our global operations, consistent with local rules and policies. In light of slightly improving general economic conditions, the Company has already increased the hours of certain employees and returned many reassigned employees to their original functions. In addition, the 5% base pay reduction for salaried employees and the 10% base pay reduction for executive management (including the named executive officers) was removed effective March 16, 2010 and the 401(k) match will be reinstated effective April 1, 2010, retroactive to January 1, 2010.

Executive Compensation Philosophy

We place the greatest emphasis on programs that reward financial and individual performance while striking a balance between different programs that reward both short-term and long-term financial performance. We believe that this structure is the most effective way to attract, motivate and retain exceptional employees. Our approachWe use a variety of financial metrics in the operation of our programs (namely earnings before interest, taxes and bonus (EBITB), adjusted net income growth, average operating working capital to executive compensation is generally the same as our approach to employee-wide compensation,sales (AOWC/Sales), return on invested capital (ROIC) and share price appreciation) and we use a mixture of consolidated and business-specific financial goals, with a strong belief in pay-for-performance and a long-standing commitment to incentive-based compensation. For example, virtually all domestic welding business full-time employees (including factory and non-factory employees) participate in a bonus program designed to reward both company financial performance and individual contributions. In the 2009 bonus year, our broad-based bonus pool for domestic welding business employees was $42million, the average bonus paid was 37.41% ofno one factor receiving an employee’s base pay and the average total cash compensation received by bonus-eligible employees was $53,227.excessive weighting.

We use base pay and benefits to deliver a level of predictable compensation since our compensation programs are heavily weighted toward variable compensation. Therefore, fixed components, such as base compensation,pay, are generally set below the competitive market for each position, while incentive-based compensation, such as annual bonuses, are set above the competitive market and require above market financial performance for payouts at (or above) target.performance. However, because annual bonuses reward short-term operating performance and are paid in cash, our long-term incentive compensation programs are weighted more heavily toward rewards for share price appreciation.

Employees are rewarded when we achieve superior financial results but their compensation is significantly reduced when we do not achieve the expected level of financial performance. The latter was the case in 2009. In addition, individual performance plays a key role in determining the amount of compensation delivered to an individual in many of our programs, with our philosophy being that the best performers should receive the greatest rewards.

Executive Compensation MethodologiesThe following is a summary of our executive compensation and how each component fits within our core principles:

Role of Committee, Consultants and Management

Committee.    

The Roles of the Committee, External Advisors and Management The Committee, which consists solely of non-employee Directors, has primary responsibility for reviewing, establishing and monitoring all elements of our executive compensation programs. The Committee is advised by independent executive compensation consultants and independent legal counsel. Management provides recommendations and analysis to the Committee, and is supported in those efforts by its own executive compensation consultant. The Committee To set the levels of compensation for executive management, the Committee conducts an annual review of
competitive market compensation, executive compensation trends, business needs, individual performance and our financial performance to peers. Based on these factors and, with input from its independent, executive compensation consultant, Hay Group, the Committee approves the design of our executive compensation programs.

The Committee regularly involves the full Board in its responsibilities. Its primary charge is to determine and report to the Board on the compensation (or method of calculating it) for the Chairman, President and Chief Executive Officer and the other executive officers. It establishes and then conducts a full Board review, in executive session, of the annual performance for the Executive Chairman and the Chief Executive Officer and their goals and objectives for the upcoming year. It relies on the full Board’s input when establishing annual compensation amounts for the Executive Chairman and the Chief Executive Officer. In addition, the Committee, with Board involvement, establishes procedures and conducts succession planning for the Chief Executive Officer and other executive management positions. It also reviews

Chief Executive Officer and makes recommendations toManagement

Our management (particularly the Board concerning our employee stock, incentive compensation and certain employee benefit programs.

CEO and Management.    The management of the Company (particularlyExecutive Chairman, the Chief Executive Officer, the Chief Financial Officer and the Senior Vice President, Human Resources and Compliance) provides recommendations to the Committee relative to the philosophies underlying our compensation programs, components of these programs and levels of compensation. Specifically, the Chief Executive Officer recommends the compensation for the other executive management positions and provides the Committee with assessments of their individual performance, both of which are subject to Committee review. Relative to compensation setting, the Committee reviews the Chief Executive Officer’s recommendations and discusses them with their independent, executive compensation consultant to ensure the compensation recommendations are in line with the executive compensationour program’s stated philosophies and are reasonable when compared to our competitive market. Relative to individual performance assessments, which are based on achievement of various financial and leadership objectives set by the Chief Executive Officer, at the beginning of each year, the Committee reviews specific performance components and makes suggestions for modifications where warranted.

External Advisors

Compensation Consultants.    The Committee receives assistance and advice from its independent executive compensation consultants who, priorat Hay Group. Hay Group has been retained by the Committee since the end of 2009 to 2010, wereserve as its independent compensation consultant. The Chair of the Committee selected Hay Group from a pool of compensation consultants after interviewing the firms. Management and at Towers Watson & Co., an internationally-recognized human resources consulting firm. Compensation consultants adviseleast one other member of the Committee also interviewed the firms. Hay Group advises on matters including competitive compensation surveys,analysis, executive compensation trend data, observations on thetrends and plan design, of our incentive programs, peer company/S&P Midcap 400 Indexgroup company configuration, competitive financial performance and peer company/S&P Midcap 400 Index compensation analysis. The Committee’s consultants report directly to the Chairperson of the Committee and often meet with the Committee in executive session without the participation of Company management, although, prior to 2010, these consultants were also available to, and regularly did, provide advice to management. Changes to the incentive programs in 2008 and 2009 were made in consultation with Towers Watson.financial target setting. The Committee, however, is not bound by the input, advice or recommendations of its consultant. While some of the analysis and data collection may be prepared initially by management (or its consultant), all work is reviewed by Hay Group, who discuss their findings directly with the Committee.

Hay Group reports directly to the Chairperson of the Committee and meets with the Committee in executive session without the participation of management. Considering all relevant factors, as required by the compensation consultant.consultant independence standards set forth in applicable SEC rules, we are not aware of any conflict of interest that has been raised by the work performed by Hay Group.

In addition, since 2010, the Committee has retained the services of independent legal counsel to provide input on various matters. During 2012, this advice included review and drafting of various materials relating to the transition of Mr. Stropki to the position of Executive Chairman and the appointment of Mr. Mapes to the position of President and Chief Executive Officer.

Towers Watson also& Co. provides other human resources consulting to the Company, such as accounting and actuarial services for its global retirement programs, broad-based compensation surveys and consulting on Director compensation. In order to ensure the independence of its consultants, prior to 2010, the Committee

required that, with respect to non-executive compensation work, the Committee review and approve the work to be performed, the amount of non-executive compensation work could not exceed a certain level and Towers Watson had to ensure that the specific executive compensation consultants did not perform such non-executive compensation work. For 2009, the aggregate fees paid to Towers Watson for these additional services were $481,344 and the aggregate fees paid to Towers Watson for executive compensation services were $239,910. Towers Watson did not provide services related to director compensation during 2009.

Beginning in 2010, the Committee retained Hay Group, Inc. to act as its compensation consultant to ensure even greater independence. For 2010, Hay Group will serve as the sole compensation consultant to the Committee and Towers Watson will continue to provide both executive compensation and other services directly to management. For executive compensation, Towers Watson performs the data analysis on competitive compensation, competitive financial performance and financial target setting. That analysis is provided to the Committee’s consultant to allow them to comment upon the findings and any recommendations being made by management.

Our Methodologies

Selection of Compensation Elements

As part of its annual review, the Committee first evaluates whether changes in the philosophy or structure are warranted in light of emerging trends, business needs and/or our financial performance. Absent changes, theThe Committee then uses competitive market data, performance assessments and management recommendations to set the pay components along the targets described above (e.g.,(for example, 45^th percentile for base pay). Actual pay for the executive management will generally fall within a range of these targets (plus or minus 20%).

Consistent with our pay-for-performance and incentive-based philosophies is our belief that compensation for executives new Absent significant increases due to their positions should be brought to the levels described above over time, not all at once. Therefore, for a period of time, new executives may experience incrementally larger pay increases but their compensation will be set below the targets described above during a transition period. Transition periods can last from three to five years after taking on new, larger assignments. Absent these types of significant increases,promotion, increases for break-through individual performance or significant changes in the competitive market data, pay increases are generally expected to be in line with national trends.

Market Comparison Data

CompetitiveWe collect competitive market compensation data is collected from multiple, nationally-published surveys, from proxy data for a peer group of companies and from proxy data for companies in the S&P Midcap 400 Index (in which the Company participates). The S&P Midcap 400 Index data is collected for all companies in that index as well as for the manufacturing companies only in that index.Index. All competitive market compensation data is statistically determined (through regression analysis) to approximate the Company’sour revenue size. Survey data is also aged to approximate more current data.

ComparisonPeer Group

TheWe use a peer group of companies that consists of 2529 publicly-traded industrial corporations that are headquartered in the United States, that serve a number of different market segments and that have significant foreign operations. These are companies for which Lincoln competes for talent and for shareholder investment.

In addition, we only select companies with solid historical financial results and we remove companies from the peer group when their financial performance falls below an acceptable level. The Committee conducts an annual review of our peer group. During 2009,2012, the Committee removed one company (Thomas & Betts) from our peer group after it was acquired by a foreign company.

For 2012, our peer group was comprised of the following companies:

 

AGCO Corp		DonaldsonDeere & Co		Illinois Tool WorksGraco Inc		Parker-HannifinPall Corp
Ametek Inc		Donaldson Co		IDEX Corp.		Parker-Hannifin Corp
Carlisle Companies Inc.		Dover Corp		ITT CorpIllinois Tool Works		Regal Beloit Corporation
Caterpillar Inc		Dresser-Rand Group Inc.		ITT Corp		Rockwell Automation
CLARCOR Inc		Eaton Corp		Kennametal Inc		Rockwell AutomationRoper Industries
Cooper Industries		Emerson Electric		Nordson Corporation		Roper IndustriesSPX Corp
Crane Company		Flowserve Corporation		Paccar Inc		SPX CorpThe Toro Company
Cummins Inc		Graco Inc		Pall Corp		Thomas & Betts
Deere & Co

Compensation Structure

Business NeedsNeeds..    Compensation    The Committee’s independent, compensation consultants assist in presenting information about emerging trends in executive compensation, along with Committee members’ own reading and study on these matters.study. These trends are considered by the Committee in light of our compensation philosophies and looking at various business needs. Business needs that are evaluated can include: talent attraction andor retention strategies, growth expectations, strategic programs, cost-containment initiatives, management development needs administrative complexity and our company culture. In evaluating the impact of these business needs, noNo single factor guides whether changes will be made. Instead, the Committee adoptsuses a holistic approach, considering variousa variety of factors.

Individual PerformancePerformance..    Individual past performance is a significant factor in determining annual changes (up or down) to pay components (base pay, annual bonus targets and long-term incentive awards) as the Company views past performance as a strong indicator of future performance.components. In addition, as described in more detail below, the annual bonus includes an individual performance component in determining the percentage of target actually paid.to be paid (described below). Individual performance is measured against how well an executive achieves objectives established for him or her at the beginning of the year. Other than objectives tied to specific business needs (such as those described above), objectives could include: leadership of specific initiatives, participation in or support of strategic programs and individual development actions. Historically, a performance rating has generally ranged from .80 to 1.15, with allFor the past three years, performance ratings capped at 1.15. For 2009, the Committee approved modifications tofor the annual bonus matrixhave ranged from 80 to provide for a broader range of performance ratings, up to a maximum of 130 and a different scale. However, it maintained the top payout percentages (that previously applied to the 1.15 performance rating cap). This will allow the Company to reflect a broader range of performance but is not intended to increase the amount actually paid.130.

Pay and Performance ReviewPay-for-Performance Review..    In determining whether changes will be made to the existing philosophy or structure and before setting compensation levels for the upcoming year, the Committee conducts anits annual reviewassessment of payLincoln’s financial performance and performance. This review ispay-for-performance (both of which are described above). These reviews are used to evaluate whether executive pay levels are properly aligned with our financial performance.

In setting 2012 compensation (which was done in the fourth quarter of 2011), the Committee reviewed the composite financial performance when compared to pay levels offor Lincoln (which included EBIT growth, adjusted net income growth and 3-year TSR) versus those same metrics for the peer group companies, and financial performanceit compared the level of total direct realizable pay for our named executive officers versus similar individuals in the peer group companiescompanies. The period used for this analysis was 2008 to 2010, the most recent full fiscal years available. The Committee also reviewed reported EBIT growth, adjusted net income growth and 1-year, 3-year and 5-year TSR for Lincoln, the peer group and companies in the S&P Midcap 400 Index. The review looks at variousThese metrics are similar to the financial components used by the Committee in determining our incentive compensation, but they are not all identical. Given the unavailability of certain metrics that we use in our programs, we have selected publicly-available financial metrics and compensation data forthat are a close approximation to the most recent fiscal year and for a multi-year historical period. It then considers whether our financial performance is at, below or above that of the peer group companies/companies in the S&P Midcap 400 Index and whether our executive compensation is at, below or above the peer group companies.ones we use.

In setting 2009 compensation (which was done in the fourth quarter of 2008), the Committee reviewed revenue growth, earnings before interest and taxes (EBIT) growth, net income growth, earnings per share (EPS) growth, return on invested capital and 1-year and 3-year total shareholder return for Lincoln versus the peer group and versus companies in the S&P Midcap 400 Index (those components were also reviewed in setting 2010 compensation, which was done in the fourth quarter of 2009). Overall, the Committee noted that in both longer historical periods and the most recentrecently completed fiscal year, pay levels were generally at or lower than the financial performance delivered, particularly as it relates to long-term incentives. In evaluating 2009 pay levels, the Committee reviewed 2007 and 2008 pay levels versus the competitive targets, noting that some differences existed in the data obtained from the broad-based surveys versus the peer group companies and the S&P Midcap 400 companies’ proxy statement data. Overall, the Committee concluded that base pay for the named executive officers was generally in line with the Company’s 45^th percentile target when comparing it to both survey and proxy statement data, total cash compensation for the named executive officers (base pay and annual bonus (MIP)) was generally in line with the Company’s 65^th percentile target when comparing it to both survey data and proxy statement data, and long-term incentives for the named executive officers were generally in line with the Company’s 50^th percentile target when comparing them to survey data, but was substantially below that threshold when comparing them to proxy statement data.

In evaluating Lincoln’s financial performance relative to the peer group companies and companies in the S&P Midcap 400, Lincoln’s historical financial performance was at or above the peer group’s/S&P Midcap 400’s

financial performance for the most recent fiscal year and the most recent three-year period. Specifically, revenue growth and EBIT growth for 2007 were above the 75^th percentile of the peer group (and above the median, or 50^th percentile, of the S&P Midcap 400 Index), return on invested capital and 3-year total shareholder return for the Company for 2007 were above the 75^th percentile of both peer group and S&P Midcap 400 performance and net income growth, EPS growth and 1-year total shareholder return for the Company for 2007 were above the 50^th percentile of both peer group and S&P Midcap 400 performance, while compensation was at or below the median (50^thpercentile) of the peer group and companies in the S&P Midcap 400 Index.delivered. Taken as a whole, the Committee used this information to conclude that while no significant changes were needed to our overall executive compensation philosophies for 2009, certain adjustments in the incentive programs were appropriate to allow for larger payouts at higher levels of financial performance.2012.

Timing of Compensation Determinations and Payouts

Base pay levels, annual bonus targets and long-term incentive awards (which include all equity-based awards, such as stock options, and restricted stock units and a cash long-term incentive plan target)plan) are set at the end of the prior year at a regularly-scheduled Committee meeting. The date is fixed by the Committee well in advance and generally occurs at the same time each year (in the fourth quarter) in connection with regularly-scheduled Board and Committee meetings. Payout amounts for the annual bonus and the cash long-term incentive plan are determined after year-end, at the first regularly-scheduledavailable Committee meeting of the following year (normally in February) or a subsequent special meeting (normally in March), once completefinal financial results are available.

Elements of Executive Compensation Components

Base Compensation

BaseEach compensation component for our named executive officers is provideddescribed below, with specific actions noted that were taken during 2012. For 2012 compensation amounts, please refer to the Company’s executives to compensate them for their time and proficiency in their positions, as well as the value of their job relative to other positions in the Company. Base salaries are set based on the executive’s experience, expertise, level of responsibility, seniority, leadership qualities, individual accomplishmentsSummary Compensation Table and other accompanying tables below.

2012 and 2013 Base Pay

Base salary increases have been moderate for the Company aims to set base salaries at approximately the 45^th percentile of the market (slightly below market) in keeping with our philosophy that greater emphasis should be placed upon variable compensation. In late 2008, in recognition of the poor economic conditions, the Committee did not increase the base pay for any named executive officer for 2009. All of the executive management (including the named executive officers) received 5% decreases to their base pay effective as of February 1, 2009, as well as another 5% decrease to base pay effective as of May 1, 2009, as part of the Company’s cost-saving measures during the economic recession. During 2009, Messrs. LeBlanc and Blankenship did receive base pay increases as part of their promotions to President, International and President, North America, respectively. However, the 10% reduction was applied to these new amounts. As a result of these reductions and even incorporating the increases for Messrs. LeBlanc and Blankenship,past several years. For 2012, base salaries for the named executive officers were allremained below the 45th percentile, with an average increase of 4%.

For 2013, the average base pay increase for the named executive officers was 6%, with the exception of Mr. Mapes whose base pay for 2013 was increased by 57% to reflect his transition to Chief Executive Officer. On average, named executive officers base salaries placed the group slightly above the 45^th percentile; however, Mr. Mapes was still below the 45^th percentile ofwith the market after an average decrease in2013 base pay of 6.9%. For 2010, of the named executive officers, onlyadjustment. Base pay for Mr. LeBlanc received an increase (of 3%),Stropki, as part of ongoing pay movement to reflect his new role. During the first quarter of 2010, the Company removed the 10% base pay reductionExecutive Chairman for executive management.2013, was unchanged.

Annual Bonus

Overview.    The Management Incentive Plan, or MIP, provides the named executive officers an opportunity to receive an annual cash bonus. We believe that, given base pay is set below market, annual cash bonus opportunities should be above average to balance some of the risk associated with greater variable compensation. Therefore, we target total cash compensation (base and bonus target) at the 65^th percentile of the market. We believe, however, that payments of above-average bonuses should only be made where the individual’s performance, that of the entire Company and that of his or her particular business unit warrant it. As a result, financial goals are set above market. Actual bonus payments may be substantially above the market median

(approaching total cash compensation in the upper quartile, or 75^th percentile, of the market) if Lincoln delivers outstanding financial results that are well above competitive market. Conversely, actual bonus payments, and therefore total cash compensation, may be substantially below market if either individual performance or Company performance does not reach budgeted levels. For 2009, 362012, 31 individuals participated in the MIP worldwide. One additional individual was recommended for participation inTwo new individuals were added to the MIP for 2010.2013.

Annual Bonus (MIP) Matrix

Funding Formula—MIP Matrix.The percentage of target bonus actually paid is based upon a matrix that takes into account the level of achievement of financial performance and thean executive’s individual performance. If either of these factors is not met, the percentage of target bonus paid is reduced, with the potential that no bonus will be paid. If either of these factors exceeds expectations, the percentage paid iscan be above the target amount, but only up to a maximum of 160%. For 2009, the of target. The 2012 MIP matrix wasis as follows:

2009 MIP Matrixfollows (which is unchanged from last year):