SCHEDULE 14A INFORMATION

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

Exchange Act of 1934

Filed by the Registrant ☑

Filed by a Party other than the Registrant ☐

Check the appropriate box:

WOODWARD, 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):

		Woodward, Inc. 1081 Woodward Way Fort Collins, Colorado 80524 Tel:970-482-5811 Fax:970-498-3050

WOODWARD, INC.

NOTICE OF 20162017 ANNUAL MEETING OF STOCKHOLDERS

AND PROXY STATEMENT

December 9, 201612, 2017

Dear Stockholder:

You are cordially invited to join our Board of Directors and senior leadership in attendance at Woodward, Inc.’s Annual Meeting of stockholders at 8:00 a.m., Mountain Standard Time, on Wednesday, January 25, 2017,24, 2018, at Embassy Suites LovelandHilton Fort Collins located at 4705 Clydesdale Parkway, Loveland,425 West Prospect Road, Fort Collins, Colorado. Please follow posted signs directing you to the registration table. We also invite you to join our directors and members of our management team for a continental breakfast at 7:30 a.m. The formal meeting will begin promptly at 8:00 a.m.

Parking is available on site. A map is located on the back of this proxy statement.

Your vote is very important to us and to the continued success of our Company. Please complete and return your proxy card by mail, or vote via telephone or the Internet, as soon as possible regardless of whether you plan to attend in person. Thank you in advance for your continuing commitment to Woodward.

Sincerely yours,

WOODWARD, INC.

Thomas A. Gendron

Chairman, Board of Directors

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Important Notice Regarding the Availability of Proxy Materials for our Annual Meeting to be Held on January 25, 2017:24, 2018:

This Proxy Statement and our Annual Report on Form10-K for the fiscal year ended September 30, 2016,2017, including consolidated financial statements, are available to you atwww.proxydocs.com/wwd.

Date and Time:

Wednesday, January 25, 201724, 2018

8:00 a.m., Mountain Standard Time

Place:

Embassy Suites LovelandHilton Fort Collins

4705 Clydesdale Parkway425 West Prospect Road

Loveland,Fort Collins, Colorado

The purpose of our Annual Meeting is to:

Stockholders who owned Woodward, Inc. common stock at the close of business on the record date, November 28, 2016,27, 2017, are entitled to vote at the meeting, or any postponement or adjournment thereof.

By Order of the Board of Directors,

WOODWARD, INC.

A. Christopher Fawzy

Corporate Secretary

December 9, 201612, 2017

YOUR VOTE IS IMPORTANT

Even if you plan to attend the meeting in person, please date, sign, and return your proxy card in the enclosed envelope, or vote via telephone or the Internet, prior to the meeting and as soon as possible. Your prompt response is helpful and your cooperation will be appreciated.

TABLE OF CONTENTS

ANNUAL REPORT ON FORM10-K

ABOUT THE ANNUAL MEETING AND VOTING

Woodward, Inc. (“Woodward” or the “Company”), on behalf of its Board of Directors (the “Board”), is soliciting your proxy to vote at our Annual Meeting of Stockholders to be held on January 24, 2018 (or at any postponement or adjournment of the meeting) (the “Annual Meeting”). This proxy statement summarizes the information you need to know to vote at the meeting.

We began mailing this proxy statement and the enclosed proxy card on or about December 9, 2016,12, 2017, to all stockholders entitled to vote.vote at the Annual Meeting. The Woodward, Inc. Annual Report, which includes our most recent audited financial statements, is also being distributed with this proxy statement.

Stockholders who owned Woodward common stock at the close of business on the record date, November 28, 2016,27, 2017, are entitled to vote at the meeting. As of the record date, there were 61,724,89361,251,372 shares of Woodward common stock outstanding.

Each share of Woodward common stock that you own entitles you to one vote on each matter to be presented at the Annual Meeting, except for the election of directors, for which you may cumulate your votes. Since three directors are standing for election, you will be entitled to three director votes for each share of stock you own. Of this total, you may choose how many votes you wish to cast for each director. The Board is not soliciting discretionary authority to cumulate votes with respect to the election of directors.

Woodward offers stockholders the opportunity to vote by mail, by telephone, or via the Internet. Instructions to use these methods are set forth on the enclosed proxy card. We urge you to vote promptly, even if you plan to attend the Annual Meeting in person.

If you vote by telephone or via the Internet, please have your proxy or voting instruction card available. A telephone or Internet vote authorizes the named proxies in the same manner as if you marked, signed, and returned the card by mail. Voting by telephone and via the Internet are valid proxy voting methods under the laws of Delaware (our state of incorporation) and our Amended and Restated Bylaws (our “Bylaws”).

If you properly fill in your proxy card and send it to us in time to vote, your shares will be voted as you have directed. If you sign the proxy card but do not make specific choices, your shares will be voted in accordance with the Board’s recommendation as follows:

“FOR” the election of each of the Board’s nominees to the Board;

“FOR” the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm;

“FOR” the advisory resolution regarding the compensation of the Company’s named executive officers;

“EVERY YEAR” for the advisory proposal on the frequency of the advisory vote on executive compensation; and

“FOR” the approval of the amended and restated Woodward, Inc. 2017 Omnibus Incentive Plan.Plan, including an increase in the number of shares reserved for issuance by 800,000.

If any other matter is presented at the meeting, your shares will be voted in accordance with the proxyholder’s best judgment. At the time this proxy statement was printed, we were not aware of any additional matters to be acted on at the meeting.

You may revoke your proxy by:

If you want to give your written proxy to someone other than the individuals named on the proxy card:

ABOUT THE ANNUAL MEETING AND VOTING (continued)

If you hold your shares through a broker, bank or other nominee, please follow the instructions on the Voting Instruction Form you receive from your broker.

SUMMARY OF PROPOSALS SUBMITTED FOR VOTE

Proposal 1: Election of Directors

Director NomineesNominees:: At the Annual Meeting, you will be asked to elect to the Board the three nominees for director identified in this proxy statement. Each director will be elected to serve a three-year term and will hold office until the 20192020 Annual Meeting held in or about January 20202021 and until a successor is elected and qualifies.qualified.

Vote Required: Because this is an uncontested election, directors are elected by a majority vote. A nominee for director in an uncontested election will be elected if the votes cast “for” that nominee’s election exceed the votes cast “against” that nominee’s election. Abstentions and brokernon-votes will not be considered in the calculation. We have adopted a director resignation policy. Accordingly, each director has submitted an irrevocable resignation contingent upon not receiving a majority of votes in an uncontested election and acceptance of the resignation by the Board.

Proposal 2: Ratification of the Appointment of Independent Registered Public Accounting Firm

Independent Registered Public Accounting Firm: At the Annual Meeting, you will be asked to ratify the Audit Committee’s appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2017.2018.

Vote Required: The affirmative vote of the holders of a majority of shares of Woodward common stock present in person or by proxy and entitled to vote at the Annual Meeting will be required to ratify the Audit Committee’s appointment of the independent registered public accounting firm. Abstentions will count as a vote “against” the proposal. Brokernon-votes will have no effect on the outcome of the vote.

Proposal 3: Approval of Advisory Resolution Regarding the Compensation of the Named Executive Officers

Compensation of the Company’s Named Executive Officers: At the Annual Meeting, you will be asked to approve an advisory resolution regarding the compensation of the Company’s named executive officers.

Vote Required: The affirmative vote of the holders of a majority of shares of Woodward common stock present in person or by proxy and entitled to vote at the Annual Meeting will be required for the approval of the advisory resolution regarding the compensation of the Company’s named executive officers. Abstentions will count as a vote “against” the proposal. Brokernon-votes will have no effect on the outcome of the vote.

This proposal 3, commonly referred to as a “say-on-pay”“say-on-pay” proposal, is not binding on the Board or the Compensation Committee. However, the Board and the Compensation Committee will review and consider the voting results when evaluating our executive compensation program.

Proposal 4: Advisory Proposal Regarding the FrequencyApproval of the Stockholder Advisory Vote on Executive CompensationAmended and Restated Woodward, Inc. 2017 Omnibus Incentive Plan

FrequencyApproval of the Advisory Vote onAmended and Restated Woodward, Inc. 2017 Omnibus Incentive Plan, including an increase in the Compensationnumber of Named Executive Officers:shares reserved for issuance thereunder by 800,000: At the 2016 Annual Meeting, stockholders of the Company approved the Woodward, Inc. 2017 Omnibus Incentive Plan (the “2017 Plan”). At the 2017 Annual Meeting, you will be asked to vote “Every Year”approve an amended and restated 2017 Plan (the “Amended 2017 Plan”), “Every Two Years” or “Every Three Years” with respect to how often we hold a say-on-pay vote. This proposal is commonly referred to as a “Say-When-On-Pay” vote.

Vote Required:  The option of one year, two years or three years that receivesincluding an increase in the highest number of votes castshares reserved for issuance thereunder by stockholders will be the frequency for the advisory vote on executive compensation that has been selected by stockholders. Abstentions and broker non-votes will have no effect on the outcome of the vote.800,000.

SUMMARY OF PROPOSALS SUBMITTED FOR VOTE (continued)

Proposal 5:  Approval of the Woodward, Inc. 2017 Omnibus Incentive Plan

Approval of the Woodward, Inc. 2017 Omnibus Incentive Plan, (the “2017 Plan”):  At the Annual Meeting, you will be asked to approve the 2017 Plan.

Vote Required: The affirmative vote of a majority of the votes cast on Proposal 54 at the Annual Meeting will be required for the approval of the Amended 2017 Plan. Under the listing rules of NASDAQ, with respect to Proposal 5,4, abstentions will have the effect of a vote “against” the proposal. Brokernon-votes will have no effect on the outcome of the vote.

Quorum

A quorum of stockholders is necessary to hold a valid meeting. The presence, in person or by proxy, at the Annual Meeting of holders of shares representing a majority of the votes of the common stock entitled to vote constitutes a quorum. Abstentions and brokernon-votes are counted as present for establishing a quorum. A brokernon-vote occurs when a stockholder does not provide voting instructions to his or her broker or nominee and the broker or nominee does not have discretionary authority to vote on the matter, as further described below under “Voting of Shares Held in Street Name by Your Broker.”

Abstentions

Abstentions are counted as present for establishing a quorum. ExceptFor all proposals in this proxy statement, except for the election of directors, and the frequency of “Say-On-Pay” proposal, abstentions have the same effect as votes against the matter.

Voting of Shares Held in Street Name by Your Broker

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name and these proxy materials are being forwarded to you by your broker or nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker how to vote your shares. You are also invited to attend the Annual Meeting and vote your shares in person. In order to vote your shares in person, you must provide us with a legal proxy from your broker.

Brokerage firms have authority to vote customers’ shares for which they have not received voting instructions on certain “routine” matters, such as ratification of the auditors. If you do not provide voting instructions, your brokerage firm may either vote your shares on routine matters or leave your shares unvoted. On the other hand, absent instructions from customers, a brokerage firm cannot vote customers’ shares onnon-routine matters, such as the election of directors, the advisory resolution regarding the compensation of our named executive officers, the advisory vote on the frequency of the advisory vote on executive compensation, and the approval of the Amended 2017 Plan. The shares for which instructions are not given and therefore, remain unvoted, are referred to as “brokernon-votes.” For the purposes of this Annual Meeting, the only routine matter is the Ratification of the Appointment of our Independent Registered Public Accounting Firm. Consequently, if you do not give your brokerage firm specific instructions, your shares will not be voted on the other,non-routine, matters and will not be counted in determining the number of shares necessary for approval, although they will count for purposes of determining whether a quorum exists. We encourage you to provide instructions to your brokerage firm. This ensures your shares will be voted at the meeting.

BOARD OF DIRECTORS

Woodward’s certificate of incorporation provides for the Board to be divided into three classes, designated Class I, Class II and Class III, with directors in each class serving a three-year term. Woodward’s certificate of incorporation further provides that the Board must consist of no less than six directors. The exact number of directors serving on the Board, and the exact number of directors in each class, is determined from time to time by resolution of the Board. If the number of directors changes, any increase or decrease must be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible. The Company’s Bylaws and Director Guidelines provide that directors are elected by a majority of the votes cast and we have a corresponding resignation policy for uncontested director elections. Contested elections are determined by a plurality vote.

On April 22, 2016,January 25, 2017, the Board increased the approved number of directors from nine to teneleven, and effective on February 15, 2017, the Board appointed Jonathan W. ThayerEileen P. Drake and Daniel G. Korte to serve as a director. Larry E. Rittenberg,directors. John A. Halbrook, age 70,72, will not stand forre-election following the expiration of his term on January 25, 2017,24, 2018, as our Director Guidelines provide that Board members generally will not be nominated forre-election after attaining the age of 70. In light of Dr. Rittenberg’sMr. Halbrook’s retirement from the Board, the Board will reduce the number of directors from teneleven to nine,ten, effective upon the expiration of Dr. Rittenberg’sMr. Halbrook’s term on the date of the Annual Meeting.

The Board’s three classes are currently comprised of threefour Class I directors, threeincluding Mr. Halbrook, four Class II directors, and fourthree Class III directors, including Dr. Rittenberg.directors. Upon Dr. Rittenberg’sMr. Halbrook’s retirement at the end of his current term, each of the Board’s classesClass I will be comprised of three directors. Each of the three directors identified in this proxy statement as standing for election at the 20162017 Annual Meeting of Stockholders has been nominated by the Board at the recommendation of the Nominating and Governance Committee to hold office for a three-year term expiring in January 2020,2021, or when a successor is elected and qualified. Mr. Korte is standing for election by stockholders for the first time. Messrs. Gendron and Sega are incumbents. Directors identified in this proxy statement who are not standing for election at this meeting will continue in office for the remainder of their respective terms.

If a nominee is unavailable for election, proxy holders will vote for another nominee proposed by the Nominating and Governance Committee.

We identify below certain biographical information of each of our directors and the director nominees for election, including his or her principal occupation, public company directorships currently held or held during the past five years and other business affiliations. We also describe the specific experience, qualifications, attributes and skills of each director and director nominee that led the Board to conclude that he or she should serve as a member of the Board.

BOARD OF DIRECTORS (continued)

PROPOSAL 1 — ELECTION OF DIRECTORS

Directors Standing for Election at This Meeting for Terms Expiring in 2020:2021:

BOARD OF DIRECTORS (continued)

BOARD OF DIRECTORS (continued)

Directors Remaining in Office Until 2018:

BOARD OF DIRECTORS (continued)

BOARD OF DIRECTORS (continued)

Directors Remaining in Office Until 2019:

BOARD OF DIRECTORS (continued)

BOARD OF DIRECTORS (continued)

Gregg C. Sengstack                                                                                                                                                                                                                                                                                                                                                                                                                                                       Age: 5859   Director since: 2011		Mr. Gregg C. Sengstack was appointed Chief Executive Officer of Franklin Electric Co., Inc. (“Franklin Electric”), a manufacturer and distributor of water and fuel pumping systems, in May 2014, and Chairman in May 2015. He has been President of the companyFranklin Electric since December 2011. Franklin Electric is a global leader in the production and marketing of systems and components for the movement of water and automotive fuels. Mr. Sengstack was President of Franklin Electric’s International Water Systems and Fueling Group from 2005 to 2011, and was Chief Financial Officer for Franklin Electric from 1999 to 2005. Mr. Sengstack joined Franklin Electric in 1988 and has worked on numerous acquisitions in the U.S. and overseas during his career.   Mr. Sengstack’s combination of P&L, finance, international and general management and top leadership experience, as well as his consensus-driven global leadership style and experience working with boards, allow him to provide the Board with strong insight into the Company’s multi-national markets and operations.   Other public company directorships: Franklin Electric Co., Inc. (since 2014).

BOARD OF DIRECTORS (continued)

Directors Remaining in Office Until 2020:

BOARD OF DIRECTORS (continued)

Director Whose Term Will Not Continue After the Annual Meeting:

GOVERNANCE

Governance Documents

Woodward’s policies and practices reflect corporate governance initiatives that are compliant with the listing requirements of the NASDAQ Global Select Market (“NASDAQ”), SEC rules and regulations, and the applicable corporate governance requirements of the Sarbanes-Oxley Act and the Dodd-Frank Act. Woodward maintainsWe maintain a corporate governance page on itsour website at http://www.woodward.com that can be accessed by clicking on “Investors” and then on “Corporate Governance.” Included on this site are a message from our Chairman and Chief Executive Officer and the following documents adopted by our Board:

Charters for our Audit Committee, Compensation Committee, Executive Committee, and Nominating and Governance Committee can be found by clicking on the “Investors” tab,“Investors,” then selecting “Board of Directors,” and then clicking on the “Board Committees and Charters” link.

Sustainability

Woodward’s mission is to set the global standard in energy control solutions for the aerospace and industrial markets and promote sustainable solutions by optimizing energy use through improved efficiency and lower emissions. Woodward’s commitment to sustainability extends to several aspects of our business, including:

Woodward’s sustainability report outlines our present and future commitment to sustainability. Our sustainability report is available on our website (www.woodward.com)and can be accessed by clicking on our Social Responsibility page under the “Our Company” tab.and then on “Social Responsibility.”

INDEPENDENT DIRECTORS

The Board, during its annual review of the independence of its members, has determined that each member of the Board, other than Mr. Gendron, is independent under the criteria established by current NASDAQ listing requirements for independent directors. In addition, the Board has determined that each member of the Audit Committee and each member of the Compensation Committee meets the additional independence criteria required for audit committee and compensation committee members, as applicable, established by SEC rules and regulations and NASDAQ listing requirements.

BOARD LEADERSHIP STRUCTURE

Mr. Gendron serves as our Chairman of the Board and Chief Executive Officer. Because one individual serves as both Chairman and CEO, the Board appoints an independent director to serve as “Lead Director.” OurThe Board recently adopted a policy providing that the Lead Director iswould serve a maximum term of five years. In November 2017, Mr. Cohn was appointed to Lead Director, replacing Mr. Rulseh who had served in that capacity for more than five years and was, appointedtherefore, rotated out pursuant to that position by the Board in 2011.Company’s newly adopted policy. The independent Lead Director chairs separate executive sessions of the independent directors following regularly scheduled Board meetings. The duties and responsibilities of the Lead Director are set forth under the “Board Meetings and Committees – Lead Director” section below. The Board believes the combined Chairman/CEO position, together with an independent Lead Director, has certain advantages over other board leadership structures and best meets the Company’s current needs. Mr. Gendron’s leadership as Chairman and CEO provides our Board with detailed andin-depth knowledge of the Company’s strategy, markets, operations and financial condition, and enhances our ability to communicate a clear and consistent strategy to our stockholders, employees and business partners. This leadership structure differentiates the oversight role of the Lead Director and other independent directors from the oversight role of the Chairman/CEO and other management, enabling the Board and the Chairman/CEO to have greater clarity and focus on their respective leadership roles.

The Board is responsible for overseeing the management of the business and affairs of the Company; selecting and recommending to stockholders appropriate candidates for election to the Board; reviewing and, where appropriate, approving the business plans, major strategies and financial objectives of the Company; evaluating Board processes and performance and the overall effectiveness of the Board; evaluating the performance of the Company and of senior management; requiring, approving and overseeing the implementation of the Company’s succession plans; reviewing compliance with applicable laws and regulations and adopting policies of corporate conduct to assure compliance with applicable laws and regulations and to assure maintenance of necessary accounting, financial and other controls.

The Board understands there is no single “one-size“one-size fits all” approach to providing Board leadership in the competitive and changing environment in which we operate. The optimal Board leadership structure may vary as circumstances warrant. At present, the Board believes its current structure effectively maintains independent oversight and management. Consistent with our Director Guidelines, the Board reviews and considers whether the positions of Chairman and CEO should be combined or separated as part of a regular review of the effectiveness of the Company’s governance structure.

BOARD MEETINGS AND COMMITTEES

The Board met fiveseven times in fiscal year 2016.2017. All incumbent directors attended at least 80 percent of the aggregate of the total meetings of the Board and all committees on which they served. Directors are encouraged, but are not required, to attend annual meetings of stockholders. All directors attended theThe Company’s last annual meeting of stockholders.

BOARD MEETINGS AND COMMITTEES (continued)

The Board has the following standing committees: Audit Committee; Compensation Committee; Nominating and Governance Committee; and Executive Committee. All actions by committees are reported to the Board at the next regularly scheduled meeting. As part of its ongoing corporate governance review, the Board reviews its assignment of committee memberships annually and made no changes in fiscal year 20162017 to those assignments as reported in last year’s proxy statement except for (i) the removal of Dr. Larry E. Rittenberg from the Audit Committee and the Executive Committee following his retirement on January 25, 2017, (ii) the appointment of Mr. Sengstack as the Audit Committee Chair, replacing Dr. Rittenberg, and (iii) the addition of Ms. Drake and Mr. ThayerKorte to the Audit Committee. Committee following their February 15, 2017 appointments to serve as Directors. At its November 2017 meeting, the Board made the following additional changes of assignments: (i) Mr. Cohn was appointed to the position of Lead Director, replacing Mr. Rulseh, and (ii) Mr. Rulseh was appointed to the position of Nominating and Governance Committee Chairman, replacing Mr. Cohn as Chairman.

The following table reflects the committeethecommittee memberships as of the filing date of this proxy statement:

NOMINATING &

NAME

AUDIT

COMPENSATION

NOMINATING & GOVERNANCE

EXECUTIVE

John D. Cohn

Paul Donovan

Eileen P. Drake

Thomas A. Gendron

John A. Halbrook

Mary L. PetrovichDaniel G. Korte

Larry E. Rittenberg(1)

James R. Rulseh

Ronald M. Sega

Gregg C. SengstackMary L. Petrovich

James R. Rulseh

Ronald M. Sega

Gregg C. Sengstack

Jonathan W. Thayer

= Committee Member; = Chair

Audit Committee

The Audit Committee oversees and monitors the Company’s accounting and financial reporting processes, including the quality of internal controls over those processes and audits of the Company’s financial statements and internal controls over financial reporting. The Audit Committee also assists the Board with overseeing the Company’s processes for risk mitigation and with monitoring compliance with laws, regulations and the Company’s Code of Business Conduct and Ethics. The Audit Committee is also responsible for reviewing the Company’s financial reporting risk exposure and the Company’s risk assessment and risk management processes. In addition, the Audit Committee oversees compliance of the Company’s financial statements with applicable rules and regulations and recommends to the Board, based on reviews and discussion with management and the Company’s independent registered public accounting firm, that the audited financial statements of the Company be included in the Company’s Annual Report on Form10-K. The Audit Committee also retains, oversees, and evaluates the Company’s independent registered public accounting firm, and is involved in the selection of the lead audit partner. The Audit Committee also reviews and approves the selection and tenure of the Company’s internal audit lead, and periodically assesses the quality of internal audit

BOARD MEETINGS AND COMMITTEES (continued)

activity. The Audit Committee operates under a charter that more fully describes the responsibilities of the Audit Committee. The Audit Committee reviews its charter at least annually and recommends to the Board such revisions as it deems necessary or appropriate. The Audit Committee charter is available for review on the Company’s website at http://www.woodward.com/Charter-Audit-Committee.

Consistent with SEC rules and regulations and NASDAQ’s independent director and audit committee listing standards, and in accordance with the Audit Committee charter, all members of the Audit Committee are independent directors, and meet all enhanced independence requirements for Audit Committee members. The Board of Directors determined that Messrs. Rittenberg, Sengstack and Thayer are Audit Committee Financial

BOARD MEETINGS AND COMMITTEES (continued)

Experts, within the meaning of Item 407(d) of RegulationS-K under the Securities Act of 1933, as the SEC defines that term,amended, and have experience resulting in “financial sophistication” as defined under NASDAQ listing requirements.

The Audit Committee meets as often as necessary to perform its duties and responsibilities.

The Audit Committee held five meetings in fiscal year 2016.2017.

Compensation Committee

The principal responsibilities of the Compensation Committee are to, among other things, dischargedischarges the responsibilities of the Board relating to compensation of the Company’s Chief Executive Officer and other executive officers, conductconducts an annual performance review of the Chief Executive Officer with input from the independent members of the Board, produceproduces the annual report required by SEC rules, and recommendrecommends to the Board the inclusion of the Compensation Discussion and Analysis (“CD&A”) in the Company’s Annual Report on Form10-K and its proxy statement. The Compensation Committee reviews and approves the compensation of all of our executive officers. The Compensation Committee has oversight responsibility for the Company’s annual and long-term incentive plans, which includes theWoodward’s Cash Long-Term Management Incentive Compensation Plan and(the “Cash LTI”), the 2006 Omnibus Incentive Plan (the “2006 Plan”), which has now expired, and is intended to be replaced by the 2017 Plan subject(as may be amended from time to stockholder approval. The Compensation Committee will also have oversight responsibility over the 2017 Plan, if it is approved by stockholders.time). The Compensation Committee determines and takes all action, including granting of all incentives and/or stock options to eligible Company employees, in accordance with the terms of the plans. The Compensation Committee reviews performance against targets for both the annual incentive compensation plan and the long-term incentive compensation plan. The Compensation Committee’s written charter, which describes the specific duties of the Compensation Committee, is available on the Company’s corporate website at http://www.woodward.com/Charter-Compensation-Committee.

Consistent with NASDAQ’s independent director listing requirements, and in accordance with the Compensation Committee charter, all members of the Compensation Committee are independent directors and meet the heightened standards for independence of Compensation Committee members under the NASDAQ listing rules. The Compensation Committee Chartercharter provides that the Compensation Committee may, after reviewing certain specified independence criteria, retain or obtain the advice of compensation advisers. The Compensation Committee Chartercharter also provides that the Compensation Committee is responsible for the appointment, compensation and oversight of the work of any such compensation advisers, and that the Company will provide for appropriate funding for payment of reasonable compensation to any compensation advisers retained by the Compensation Committee.

The Compensation Committee meets as often as necessary to perform its duties and responsibilities. The Compensation Committee held fivesix meetings in fiscal year 2016. These meetings were held to review company and executive performance in fiscal year 2016, and to receive and review information regarding compensation trends and competitive compensation information.2017.

In making its decisions and completing its annual review of our Executive Compensation Program, the Compensation Committee routinely examines the following important factors:

BOARD MEETINGS AND COMMITTEES (continued)

BOARD MEETINGS AND COMMITTEES (continued)

Delegation of Authority

The Compensation Committee Chartercharter provides authority to the Compensation Committee to delegate its role and responsibilities to subcommittees entirely made up of Compensation Committee members. The Compensation Committee delegated to the Chairman of the Compensation Committee the authority to approve any and all option exercises when the optionee seeks to pay for the cost of the option and/or the taxes associated with the transaction with stock previously owned and held by the optionee for at least six months. The Chairman of the Compensation Committee is authorized to further delegate these responsibilities to any other member of the Compensation Committee. The Compensation Committee also delegated, to a subcommittee of not less than two independent Compensation Committee directors, the authority to issue interim stock option grants for new hires, subject to the stock option pool for grants as identified and approved by the Compensation Committee in advance on an annual basis.

Risk Assessment

The Compensation Committee regularly reviews the Company’s compensation policies and practices, and believes they are robust and effective. The Company also conducted a review of its compensation plans and related risk to the Company. The Company and the Compensation Committee, with the input of Aon Hewitt, the Company’s compensation consultant, have concluded that any risks arising from its employee compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

Nominating and Governance Committee

The Nominating and Governance Committee recommends qualified individuals to fill any vacancies on the Board, develops and administers the Director Guidelines and the Company’s corporate governance guidelines, establishes other guidelines, such as stock holding requirements for officers and directors, reviews and reassesses the Company’s programs and policies related to its codes of conduct, and addresses other governance related matters. In addition, the Nominating and Governance Committee periodically evaluates the compensation and benefits of the Company’snon-employee members of the Board and recommends any changes to the Board for approval.

In accordance with SEC rules and regulations, NASDAQ listing requirements, and the Nominating and Governance Committee’s charter, all members of the Nominating and Governance Committee are independent directors. The Nominating and Governance Committee meets as often as necessary to perform its duties and responsibilities. The Nominating and Governance Committee held fourthree meetings in fiscal year 2016.2017. The Nominating and Governance Committee charter is available for review on the Company’s website athttp://www.woodward.com/Charter-Nominating-and-Governance-Committee.

BOARD MEETINGS AND COMMITTEES (continued)

Executive Committee

The Executive Committee exercises all the powers and authority of the Board in the management of the business when the Board is not in session, and when, in the opinion of the Chairman of the Board, a particular

BOARD MEETINGS AND COMMITTEES (continued)

matter should not be postponed until the next regularly scheduled Board meeting. The Executive Committee may declare cash dividends. The Executive Committee may not authorize certain major corporate actions such as amending the certificate of incorporation, amending the bylaws, adopting an agreement of merger or consolidation, or recommending the sale, lease, or exchange of substantially all of the assets of the Company. The Executive Committee meets as often as necessary to perform its duties and responsibilities. The Executive Committee held no meetings in fiscal year 2016.2017. The Executive Committee charter is available for review on the Company’s website at http://www.woodward.com/Charter-Executive-Committee.

Director Nomination Process

The Nominating and Governance Committee considers candidates for Board membership as recommended by directors, management, or stockholders. The Nominating and Governance Committee uses the same criteria to evaluate all candidates for Board membership, whether recommended by directors, management, or stockholders. As it deems necessary, the Nominating and Governance Committee may engage consultants or third-party search firms to assist in identifying and evaluating potential nominees. The Nominating and Governance Committee engaged a third-party consultant in fiscal year 20162017 to assist in identifying and evaluating director candidates.

The Nominating and Governance Committee recommends qualified director candidates for nomination by the Board based on the skills and characteristics that the Board seeks in its members as well as consideration of the diversity of the Board as a whole. This review includes an assessment of, among other things, a candidate’s knowledge, education, experience, cultural background, including race, gender and age, and skills in areas critical to understanding the Company and its business, with a commitment to enhancing shareholder value. The Nominating and Governance Committee seeks candidates with the highest professional and personal ethics and values, guided by the philosophy and concepts as expressed in the Company’s Constitution, and who will operate in accordance with the Company’s Code of Business Conduct and Ethics. The Nominating and Governance Committee also assesses a candidate’s ability to make independent analytical inquiries, and willingness to devote adequate time to Board duties.

Director nominees should possess the following experience, qualifications, attributes and skills:

Prospective directors should be committed to representing the long-term interests of the stockholders. A potential director must exhibit an inquisitive and objective perspective, an ability to think strategically, an ability to identify practical problems, and an ability to assess alternative courses of action that contribute to the long-term success of the business. Director candidates must have industry expertise and/or commit to understanding the Company’s industry as a basis to address strategic and operational issues of importance to the Company. Directors are also expected to commit substantial time and energy to the Board and should ensure that other existing and future time commitments do not materially interfere with their service as a director. Directors shall limit their service to a maximum of four other public companies, and in the case of employee directors, to one other public company.

BOARD MEETINGS AND COMMITTEES (continued)

The Nominating and Governance Committee considers relevant factors, as it deems appropriate, including the current composition of the Board and the need for expertise on various Board committees. Every effort is made to complement and supplement skills within the Board and strengthen identified areas of need. The Nominating and Governance Committee considers the ability of candidates to meet independence and other requirements of the SEC, NASDAQ, or other regulatory bodies exercising authority over the Company. Under the Director

BOARD MEETINGS AND COMMITTEES (continued)

Guidelines, no individual will be nominated by the Board forre-election if such individual will achieve the age of 70 as of the annual stockholder meeting date of suchre-election, unless the Board determines in its sole discretion that extraordinary circumstances exist that would support any such nomination. Additionally, directors whose professional responsibilities change significantly from those they had when they were elected to the Board or who are involved in other circumstances that may negatively impact the Board or the Company should volunteer to resign from the Board. Such persons should not necessarily leave the Board. There should, however, be an opportunity for the Board through the Nominating and Governance Committee to review the continued appropriateness of Board membership under the circumstances.

The Nominating and Governance Committee evaluation normally requires one or more members of the Nominating and Governance Committee, and others as appropriate, to interview prospective nominees in person or by telephone. Upon identification of a qualified candidate, the Nominating and Governance Committee will recommend a candidate for consideration by the full Board.

Stockholders wishing to suggest a candidate for Board membership should write our Corporate Secretary at 1081 Woodward Way, Fort Collins, Colorado 80524, and provide certain information to the Company as follows:

In connection with its evaluation, the Nominating and Governance Committee may request additional information from the candidate or the recommending stockholder. The Nominating and Governance Committee has discretion to decide which individuals to recommend for nomination as directors. In order to give the Nominating and Governance Committee sufficient time to evaluate a recommended candidate, the recommendation must be received by our Corporate Secretary not later than the 120th calendar day before the one year anniversary of the date our proxy statement was mailed to stockholders in connection with the previous year’s Annual Meeting of stockholders. No candidates for director nominations were submitted to the Nominating and Governance Committee by any stockholder in connection with the election of directors at this Annual Meeting.

BOARD MEETINGS AND COMMITTEES (continued)

Board Composition and Diversity

The Board does not maintain a formal diversity policy for its members. However, the Board meets periodically with the Nominating and Governance Committee to review Board composition for diversity of knowledge, experience, cultural background, race, gender, and age which, when taken together, enables the Board to ensure that board members possess the skills, perspectives and expertise necessary to effectively oversee the Company’s business. In this regard, the Nominating and Governance Committee considers, for each incumbent director and potential nominee, the various factors described in the below table. The Nominating and Governance Committee reviews the assessment and its recommendations with the Board.

Woodward Board Tenure*
Other Public Company Boards w/in 5 years
Independence
Senior Executive of Public Company
Financial Expertise
Technical Expertise
Risk Management
Government Contracting/Regulatory
Lean Manufacturing/ Process Automation
Supply Chain Management
Age
Gender/ Ethnic Diversity
M&A & Business Integration
Licensing/ JVs
Aerospace
Energy
International
John D. Cohn
1562Paul Donovan
17
169Thomas A. Gendron
12
155John A. Halbrook
2671Mary L. Petrovich
15
353Larry E. Rittenberg
1370James R. Rulseh
15
161Ronald M. Sega
9
164Gregg C. Sengstack
6
158Jonathan W. Thayer
145 *Including year appointed

BOARD MEETINGS AND COMMITTEES (continued)

The Nominating and Governance Committee is committed to exercising best practices of corporate governance and recognizes the importance of a Board that contains diverse experience at policy-making levels in business, public service, education, and technology, as well as other relevant knowledge that contributes to the Company’s global activities. The Board believes that diversity is an important component of Board membership, and is guided by the Company’s Bylaws, Director Guidelines, and Constitution, which requires the Board to adhere to the philosophy and concepts, including respect for the dignity, value and equality of all members.

Board diversity, leadership and experience qualifications for our independent directors are summarized in the table below:

BOARD MEMBER		CORPORATE GOVERNANCE						LEADERSHIP EXPERIENCE / COMPLIANCE																INDIVIDUAL DIVERSITY ATTRIBUTES				STRATEGY				INDUSTRY KNOWLEDGE
John D. Cohn		16																						63
Paul Donovan		18		1																				70
Eileen P. Drake		1		1																				51
Thomas A. Gendron		13		1																				56
John A. Halbrook		27																						72
Daniel G. Korte		1		1																				58
Mary L. Petrovich		16		3																				54
James R. Rulseh		16		1																				62
Ronald M. Sega		10		1																				65
Gregg C. Sengstack		7		1																				59
Jonathan W. Thayer		2																						46

* Including year appointed

Lead Director

The Board recently adopted a policy providing that the Lead Director would serve a maximum term of five years. In November 2017, Mr. Cohn was appointed to Lead Director, replacing Mr. Rulseh serves as “Lead Director.”who had served in that capacity for more than five years and was, therefore, rotated out pursuant to the Company’s newly adopted policy. The Lead

Woodward Board Tenure* Other Public Company Boards w/in 5 years Independence Senior Executive of Public Company Financial Expertise Technical Expertise Risk Management Government Contracting/ Regulatory Lean Manufacturing/ Process Automation Supply Chain Management Cybersecurity Age Gender/ Ethnic Diversity M&A & Business Integration Licensing/ JVs Aerospace Industrial International

BOARD MEETINGS AND COMMITTEES (continued)

Director chairs separate meetings of the independent directors, generally following each regularly scheduled Board meeting. Topics discussed are at the discretion of the independent directors, and generally include among other things, a review of our Chief Executive Officer’s performance. The Lead Director then meets with the Chief Executive Officer to review items discussed at the meeting and to provide an update with regard to overall CEO performance. The Lead Director then provides an update to the independent directors regarding each such feedback meeting with the Chief Executive Officer. Additionally, the Lead Director (together with the Chairman of the Compensation Committee) presents to the Chief Executive Officer his annual performance review as conducted by the Compensation Committee with input from the independent members of the Board of Directors. The Lead Director also communicates with the Chief Executive Officer on a regular basis to discuss any other Board matters or concerns, and acts as a liaison in that regard between the independent members of the Board and the Chief Executive Officer.

Stockholder Communications With the Board of Directors

Stockholders may send communications to the Board by submitting a letter addressed to: Woodward, Inc., Attn: Corporate Secretary, 1081 Woodward Way, Fort Collins, Colorado 80524. The Board has instructed the Corporate Secretary to forward such communications to the Lead Director. The Board has also instructed the Corporate Secretary to review such correspondence and, at the Corporate Secretary’s discretion, not to forward correspondence which is deemed of a commercial or frivolous nature or inappropriate for Board consideration. The Corporate Secretary may also forward the stockholder communication within the Company to the Chief Executive Officer and President or to another executive officer to facilitate an appropriate response.

BOARD MEETINGS AND COMMITTEES (continued)

The Corporate Secretary maintains a log of all communications from stockholders and the disposition of such communications, which the directors review at least annually.

Risk Oversight

The Board is responsible for overseeing management’s identification and mitigation of Company risks, including but not limited to risks associated with our strategic plan, capital structure, development activities and compliance with government regulations. While theThe Board has the ultimate oversight responsibility for risk management processes, and various committees of the Board composed entirely of independent directors also have responsibility for some aspects of risk management oversight. While the Board and its various committees have oversight responsibilities for risk management processes, management has responsibility for theday-to-day aspects of risk management. The Board and its committees receive regular reports on risk management from Company management and independent auditors.

The Audit Committee is responsible for risks relating to the Company’s financial statements, financial reporting processes, the evaluation of the effectiveness of internal control over financial reporting, and the Company’s compliance with its financial and ethics policies.

The Compensation Committee is responsible for monitoring risks associated with the design and administration of the Company’s compensation programs and equity compensation plans, and performs the annual performance review of the CEO and ensures the independence of the compensation consultants.

The Nominating and Governance Committee oversees risks relating to the Company’s corporate governance processes, compliance with the Sarbanes-Oxley Act, SEC and NASDAQ rules and regulations, and other state and federal laws and regulations relating to corporate governance, and reviews and reassesses the adequacy of the Company’s Code of Business Conduct and Ethics.

The Board and its committees have direct and independent access to management. We believe this division of risk management responsibilities is the most effective approach for addressing the risks that Woodward faces. The existing Board leadership structure encourages communication between the independent directors and management, including those as a result of discussions between the Lead Director and the Chairman of the

BOARD MEETINGS AND COMMITTEES (continued)

Board and Chief Executive Officer. By fostering increased communication, we believe that the current Board leadership structure leads to the identification and implementation of effective risk management strategies.

Related Person Transaction Policies and Procedures

The Board adopted the Company’s Related Person Transaction Policies and Procedures (our “RPT Policy”), which provides that the Audit Committee will review and approve Interested Transactions (as described below). Our RPT Policy delegates the authority to act with respect to Interested Transactions that are valued below a stated threshold to the Chair of the Audit Committee.

Our RPT Policy defines an “Interested Transaction” with reference to transactions described in Item 404 of RegulationS-K promulgated by the SEC, which generally means a transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships or any material amendments or modifications thereto in which the Company (including any of its subsidiaries) was, is, or will be a participant and the amount involved exceeds $120,000, and in which any Related Person had, has, or will have a direct or indirect interest.

“Related Person” also is defined in our RPT Policy with respect to the definitions contained in Item 404 of RegulationS-K. Generally, “Related Persons” consist of any director or executive officer of the Company, any nominee for director, any holder of five percent or more of the Company’s common stock, or any immediate family member of any such persons. “Immediate family member” means any child, stepchild, parent, stepparent, spouse, sibling,mother-in-law,father-in-law,son-in-law,daughter-in-law,brother-in-law, orsister-in-law of any such person, and any person (other than a tenant or employee) sharing the household of such person. It may also include entities with which any of such persons have a relationship.

The approval procedures in our RPT Policy state that the Audit Committee will take into account, among other factors it deems appropriate, whether the Interested Transaction is on terms no less favorable than terms

BOARD MEETINGS AND COMMITTEES (continued)

generally available to an unaffiliated third-party under the same or similar circumstances. In addition, our RPT Policy states that, in connection with the approval or ratification of an Interested Transaction involving an outside director or nominee for director, the Audit Committee should consider whether such transaction would compromise such director’s status as: (1) an independent director under NASDAQ’s independence standards, (2) an “outside director” under Section 162(m) of the Internal Revenue Code, or a “non-employee“non-employee director” under Rule16b-3 under the Exchange Act, if suchnon-employee director serves on the Compensation Committee of the Board, or (3) an independent director under Rule10A-3 of the Exchange Act, if suchnon-employee director serves on the Audit Committee of the Board. Our RPT Policy also identifies certain transactions that are deemed to bepre-approved, including transactions involving competitive bids, regulated transactions, and employee transactions. No director participates in any discussion for approval of a related party transaction for which he or she is an interested party other than is necessary to provide relevant information to the Audit Committee. Our RPT Policy is available for review on the Company’s website at http://www.woodward.com/Related-Person-Transaction-Policy.

Compensation Committee Interlocks and Insider Participation

Ms. Petrovich and Messrs. Rulseh, Cohn, and Donovan served as members of the Compensation Committee during fiscal year 2016.2017. The Compensation Committee members have no interlocking relationships required to be disclosed under SEC rules and regulations.

Director Compensation

We do not pay directors who are also Woodward employees additional compensation for their services as directors.Non-employee directors are paid cash compensation for their membershipsservice on the Board, as well as additional cash compensation for any memberships and/or chair positions on various Board committees or as Lead Director. Additionally,non-employee directors are awarded equity compensation (in the form of stock

BOARD MEETINGS AND COMMITTEES (continued)

options) based on an intended delivered value as recommended by the Nominating and Governance Committee and approved by the Board, following consultation with and recommendations from Aon Hewitt. The number of stock options awarded to each director is based on the intended delivered value, divided by the Black-Scholes value of options as calculated by Aon Hewitt for all stock option participants in a given year.

Non-employee directors received the following cash compensation in fiscal year 2016:2017:

Our directors are eligible to participate in anon-qualified deferred compensation plan, the Woodward Executive Benefit Plan (“EBP”). Under the EBP, our directors are able to defer up to 100% of their cash compensation, including retainer fees, and any fees for participation as a committee member, committee chairman, or lead director.

BOARD MEETINGS AND COMMITTEES (continued)

The following table shows the compensation paid to the earned bynon-employee members of the Board during the fiscal year ended September 30, 2016:2017:

BOARD MEETINGS AND COMMITTEES (continued)

Supplemental Table to footnote 1 above:

BOARD MEETINGS AND COMMITTEES (continued)

Option awards outstanding as of September 30, 20162017 are as follows:

STOCK OWNERSHIP OF MANAGEMENT

Directors and Named Executive Officers

The following table shows how much Woodward common stock was beneficially owned, as of November 21, 2016,22, 2017, by each director, each named executive officer of the Company, and all directors and executive officers as a group:

*Less than one percent

STOCK OWNERSHIP OF MANAGEMENT (continued)

STOCK OWNERSHIP OF MANAGEMENT (continued)

Table to footnote (2) above:

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based upon a review of our records, all reports required to be filed pursuant to Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) were filed on a timely basis, with the exception of (i) a Form 4 filed by the Company on behalf of Mr. Weber related to a single sale of Company stock, and (ii) a Form 3 filed by the Company on behalf of Mr. Thayer. The untimely Form 4 and Form 3 noted above were filed outside Section 16’s filing requirements and were due to administrative errors.basis.

PERSONS OWNING MORE THAN FIVE PERCENT OF WOODWARD STOCK

The following table shows how many shares of Woodward common stock were owned by each person known to us to own more than five percent of our common stock as of November 21, 2016:22, 2017:

COMPENSATION DISCUSSION AND ANALYSIS

2016 Overview

The following Compensation Discussion and Analysis (“CD&A”) provides an overview of our compensation philosophy, strategy, objectives and structure for fiscal year 2017. This section is intended to be read in conjunction with the tables which immediately follow, which provide further historical compensation information for the NEOs.

For fiscal year 2017, our NEOs were:

Executive Summary

Our Executive Compensation Program has been designed to (1) provide a competitive total compensation program that enables us to attract, retain, and motivate a high-performance executive management team, and (2) link the total compensation program payouts to Company and stockholder interests. We believe that proper administration of this program should result in a compensation program that is aligned with, and motivates improvement in, our fundamental financial performance and supports the long-term interests of the Company and its stockholders.

Our Executive Compensation Program is based on the overall financial performance of the Company and is structured as a total compensation package comprised of the following elements:

In addition, the Executive Compensation Program for NEOs includes health and welfare benefits, a deferred compensation program, defined contribution plans, change in control agreements, and other ancillary benefits.

On November 16, 2016,8, 2017, we reported our financial results for fiscal year 2016,2017, which included the following highlights:

The Compensation Committee oversees the administration of the Executive Compensation Program. AllMix

For our NEOs, we believe it is important to provide a significant portion of total compensation decisionstied to incentives that can fluctuate, up or down, based on our financial and operational performance to align with stockholder

COMPENSATION DISCUSSION AND ANALYSIS (continued)

interests. With respect to the NEOs are subject to Compensation Committee review and approval. In making these decisions,variable compensation, the Compensation Committee usesplaces a market-basedbalanced emphasis on both short term (i.e., the WVIP) and long-term Company performance (i.e., Cash LTI, as defined and discussed below, and equity compensation); however, the majority of target variable compensation model whereinfor our NEOs is attributable to long-term objectives.

In analyzing the responsibilitypay mix and accountabilityvarious elements of the NEOs are compared to similar positions at companies in our peer comparator group. In addition, Aon Hewitt, our independent executive compensation consulting firm engaged byfor each NEO, the Compensation Committee provides guidance throughoutannually considers competitive market data; internal equity (the relative compensation among the entire process, including guidance regarding the selection of our peer comparator groupCompany’s NEOs); and the levelother individual factors described below in Compensation Philosophy and Strategy, including the nature and scope of base salary, annual short-term incentivethe individual’s role at Woodward, the individual’s performance, knowledge, skills, abilities, potential, and overall contribution to the Company and impact to shareholder value.

The charts below reflect the target mix pay between fixed and variable compensation and long-term incentive compensation.components based on FY17 target compensation for our NEOs during fiscal year 2017, which reflects ourpay-for-performance philosophy:

Compensation Philosophy and Strategy

Our compensation philosophy and strategy is to establish total compensation (base salary, annual short-term cash incentives, and long-term incentives) for each NEO that is competitive with total compensation for executives in comparable positions at companies in our peer comparator group. Our compensation approach reflects multiple factors such as (i) the individual’s performance, knowledge, skills, abilities, potential, (ii) significant contributions to the Company and impact to shareholder value, and (iii) our ability to achieve our goals to attract and retain industry leading talent.

Our philosophy places a strong focus onpay-for-performance, with an emphasis on variable compensation, and in particular, long-term incentive compensation that directly ties to Company performance. Our variable

COMPENSATION DISCUSSION AND ANALYSIS (continued)

compensation plans (annual short-term incentives and long-term incentives), which for fiscal year 20162017 represented between 66%68% and 84% of our NEOs’ target total compensation opportunities, are designed so that the payout opportunity is directly linked to the achievement ofpre-determined financial performance metrics, with upside opportunity for exceeding thepre-determined goals. We also use long-term incentives, including equity-based compensation, to align NEO and stockholder interests. With the variable incentive components of our Executive Compensation Program, we strive to align the interests of the NEOs with the interests of our stockholders in different ways, by focusing on both short-term and long-term performance goals, by promoting ownership of the Company, and by linking reward outcomes to our financial performance. As a result of Woodward’s total compensation approach, which includes base pay and variable pay (annual incentive

COMPENSATION DISCUSSION AND ANALYSIS (continued)

compensation and long-term incentive compensation), the actual performance of the Company determinessignificantly influences the total compensation received by our NEOs.

Consideration of Stockholder Say on Pay Vote

In January 2016, Woodward’s2017, our stockholders voted on an advisory resolution regarding the compensation of our named executive officers, which was approved by 95%96% of the votes cast on the proposal (the “say on pay proposal”). The Compensation Committee considereddetermined the 95%96% favorable vote approval on an advisory basis ourdemonstrated strong stockholder support for Woodward’s overall executive compensation practices as disclosed,approach and the related actions described in its 2016 proxy statement, and further determined that current practices and processes did not require any significant modifications to achieve the desired results or address any stockholder concerns. These results demonstrated strong stockholder support for Woodward’s overall executive compensation approach and the related actions describedIn addition, in its 2015 proxy statement. In January 2011,2017, our stockholders approvedindicated their preference for an annual say on pay vote in an advisory resolution regarding the frequency of say on pay proposals, of an annual say on pay vote, which the Board adopted. Accordingly, a say on pay proposal is again being submitted to our stockholders for consideration at the 20162017 Annual Meeting, which proposal is included as Proposal 3 in this proxy statement. The Compensation Committee will continue to consider the outcome of these advisory votes when evaluating future executive compensation arrangements. In addition, we are required to hold an advisory vote on the frequency of say on pay votes every six years. Accordingly, a proposal for the frequency of say on pay is presented as Proposal 4 in this proxy statement. We will determine our next say on pay proposal based on the results of Proposal 4.

The Compensation Committee’s Interaction with Management

In order to design compensation programs that are aligned with appropriate Company performance goals and strategic direction, the Compensation Committee works closely with management, including the Chief Executive Officer, the Corporate Vice President, Human Resources, the Corporate Vice President, General Counsel & Chief Compliance Officer, and the Vice President, Global HR Support Services & Risk Management. Specifically, management facilitates the alignment process by:

All decisions regarding executive compensation are ultimately made by the Compensation Committee.

COMPENSATION DISCUSSION AND ANALYSIS (continued)

The Company’s Vice President, Global HR Support Services & Risk Management, works with the Compensation Committee Chair to establish the agenda for Compensation Committee meetings. At the Compensation Committee’s request, the Chief Executive Officer regularly attends the meetings and provides background information regarding the Company’s strategic objectives, evaluation of the performance of the executive officers, and compensation recommendations as to executive officers other than himself. The Compensation Committee may also seek input from the Corporate Vice President, Human Resources, and the Corporate Vice President, General Counsel & Corporate Secretary, as necessary and appropriate, to carry out its duties. The Corporate Vice President, Human Resources, provides input on executive compensation structure, performance assessment process and data, potential promotions, talent management and succession planning, and compensation associated with promotions. No employee is present during the discussion of his or her compensation.

COMPENSATION DISCUSSION AND ANALYSIS (continued)

Interaction with Compensation Consultants

In making its determinations with respect to executive compensation, the Compensation Committee generally engages the services of an independent compensation consultant. In fiscal year 2016,2017, the Compensation Committee retained the services of Aon Hewitt to assist with its review of the total compensation packages of the NEOs.

The Compensation Committee retains Aon Hewitt primarily to provide guidance for the executive compensation decision makingdecision-making process. Annually, Aon Hewitt provides the Compensation Committee with an analysis comparing the compensation for the NEOs to our compensation philosophy and to the data of our peer comparator group for base salary, target bonus,short-term incentives, target total cash, target long-term incentives (cash and equity), and target total compensation. In carrying out its assignment, the consultant may interact with members of management, including but not limited to the Chief Executive Officer, the Corporate Vice President, Human Resources, the Corporate Vice President, General Counsel & Corporate Secretary, the Vice President & Corporate Controller, and the Vice President, Global HR Support Services & Risk Management.

In addition to their services with respect to compensation for the NEOs, Aon Hewitt acts as a global compensation and benefits consultant for the Company and provides total compensation data for the Company’s key leadership group. Management also utilizes Aon Hewitt’s benefits-relatedbenefits index and related survey data with respect to compensationbenefits benchmarking fornon-NEOs.

During fiscal year 2016,2017, in accordance with SEC rules and regulations and NASDAQ listing requirements, the Compensation Committee considered various factors relating to compensation consultant independence, including the following six factors established by the SEC:

As a result of the interactions with the Compensation Committee and management, the Company believes Aon Hewitt has a well-developed understanding of our business, and is well positioned to provide objective guidance on compensation and benefit plans that are aligned with and reinforce our strategies and goals, and has determined that Aon Hewitt is independent and free from any conflict of interest.

COMPENSATION DISCUSSION AND ANALYSIS (continued)

Compensation Consultant Fees

For fiscal year 2016,2017, the Company paid Aon Hewitt $981,383$1,080,288 for advice and services provided to the Compensation Committee and the Company. Of this amount, $529,372$528,767 was paid as a result of the work Aon Hewitt performed for the Compensation Committee related to executive compensation advice and services, and $452,011$551,521 was paid as a result of the work Aon Hewitt performed for the Company that was not related to executive compensation, including broad compensation benchmarking data applicable tonon-executive employees, including international benchmarking data and services; and other health, welfare and retirement plan consulting services.

The decision to use Aon Hewitt for advice and services not related to executive compensation was made by management. While neither the Compensation Committee, does not pre-approvenor the Boardpre-approves thesenon-executive

COMPENSATION DISCUSSION AND ANALYSIS (continued)

compensation services, it doesthe Compensation Committee annually reviewreviews Aon Hewitt’s internal guidelines and practices designed to guard against conflicts and ensure the objectivity of advice in connection with itsthe Compensation Committee’s review of the six compensation consultant conflicts of interest factors described above under “Interaction with Compensation Consultants.”

The Compensation Committee believes that the advice and services unrelated to executive compensation that Aon Hewitt provided to the Company did not impact advice and services that Aon Hewitt provided to the Compensation Committee on executive compensation matters ornor the independence of Aon Hewitt with respect to management.

Competitive Comparisons

Our Executive Compensation Program is benchmarked to be competitive with our peer comparator group. On an annual basis, companies in our peer comparator group are approved by the Compensation Committee. The companies included in our peer comparator group are selected from the Aon Hewitt Total Compensation Measurement database on the basis of competition for business or talent, global and publicly-traded holding structure, level of operational complexity, similar revenue size, market capitalization, markets and industries served, and manufacturing profile.

Based on its annual review, effective for fiscal year 2016, the Compensation Committee determined it was appropriate to make changes with respect to the peer group. Brady Corp. and IDEX Corporation were removed from the peer group as a result of changes in their business strategy, and markets and industries served that are likely to make them a less relevant peer to Woodward going forward. CLARCOR Inc., The Timken Company, and Triumph Group, Inc. were added to the peer group due to their similarity in size, business complexity, markets and industries served. Based on the changes made effective for fiscal year 2016,2017, the Compensation Committee determined that the number of companies comprising the revised peer group remained appropriate for pay and performance comparisons. Accordingly, no changes were made to the peer group that was appropriate to benchmark competitiveused for fiscal year 2017 compensation levels.

COMPENSATION DISCUSSION AND ANALYSIS (continued)

determinations.

Compensation data from our peer comparator group identified in the table below was reviewed as part of the Compensation Committee’s process of determining target total compensation opportunities for each NEO for fiscal year 2016.2017. We also reference this data across each component of compensation for our NEOs, including base salary, annual short-term incentive compensation, and long-term incentive compensation. At the time the below peer group below was approved by the Compensation Committee, the peer group was comprised of companies that had revenues equal to 0.6x to 2.5x2.6x the Company’s revenues which, based on Aon Hewitt’s recommendation, the Compensation Committee determined to be an appropriate range. Revenues served as a key evaluation criteria because we believe that it is a reasonable reflection of the scope and complexity of an organization, as well as the duties and responsibilities of the NEO positions being compared.

In fiscal year 2016,2017, the Compensation Committee continued to use the same approach to competitive data to assess the NEOs’ compensation levels as that which was used in fiscal year 2015.2016. Accordingly, the Compensation Committee used raw competitive data (as compared to size adjusted data) to establish the competitive market for pay levels due to the increased transparency of raw data for the Compensation Committee and executives, and because it lessens potential volatility in pay levels that can be attributable to small changes in executives’ revenue responsibilities.

COMPENSATION DISCUSSION AND ANALYSIS (continued)

Compensation Decisions Compared to Market Data

When determining total compensation opportunities for our executives, we consider many factors. As described under “Compensation Philosophy and Strategy” above, these factors, include: including:

In making compensation decisions and determinations, the Compensation Committee, in consultation with Aon Hewitt and management, matches the NEOs with similarly positioned executives at companies in the peer comparator group, which we refer to as the benchmark position. These matches facilitate pay comparisons based on functional matches, job duties, responsibilities, level of impact, and organizational level.

When analyzing market data from our peer group, Aon Hewitt presents data to the Compensation Committee at the 25th, 50th and 75th percentiles for reference points. However, we do not target any percentile or percentile range as a specific objective. Rather, our compensation decisions are based on the full consideration of all of the above mentioned elements that provide input into our deliberations and inform our decisions. As a result of evaluating compensation based on the criteria described above, such as performance, knowledge, skills, abilities, and significant contributions to the Company and shareholder value, total target compensation for our NEOs may in certain circumstances be above or below the reference points provided by Aon Hewitt.

Executive Compensation Mix

For our NEOs, we believe it is important to provide a significant portion of total compensation tied to incentives that can fluctuate, up or down, based on our financial and operational performance to align with stockholder

COMPENSATION DISCUSSION AND ANALYSIS (continued)

interests. With respect to variable compensation, the Compensation Committee places a balanced emphasis on both short term (i.e., the WVIP) and long-term Company performance (i.e., Cash LTI, as defined and discussed below, and equity compensation); however, the majority of target compensation for our NEOs is attributable to long-term objectives.

In analyzing the pay mix and various elements of compensation for each NEO, the Compensation Committee annually considers the competitive data as described in “Compensation Decisions Compared to Market Data” above; internal equity (the relative compensation among the Company’s NEOs); and the other individual factors also described above, including the nature and scope of the individual’s role at Woodward, the individual’s performance, knowledge, skills, abilities, potential, and overall contribution to the Company and impact to shareholder value.

The below charts reflect the target mix pay between fixed and variable compensation components for our NEOs during fiscal year 2016, which reflects our pay-for-performance philosophy:

ELEMENTS OF COMPENSATION

Base Salary

Base salary is a standardan important compensation component we must pay to remain competitive in our industry. The Compensation Committee generally sets base salary and annual adjustments at levels considered appropriate for comparable NEO positions at companies in our peer comparator group. Base salaries are reviewed by the Compensation Committee on an annual basis in the fourth quarter of the fiscal year preceding the effective date of the change. Specifically, base salaries are reviewed and approved in September of each year and are effective January 1st of the following year, which is a consistent practice for all employees of the Company as part of our Leading Performance Management Process (“LPMP”). Prior to 2015, base salaries were effective on October 1st, following their approval in September. The cycle was changed to support the implementation of LPMP, which was launched in 2014.

Base salaries for the NEOs are assessed and set using a blend of quantitative and qualitative factors. Quantitative data in our peer comparator group is considered in determining our NEOs’ base salaries, and is presented to the Compensation Committee by Aon Hewitt, as discussed in “Compensation Decisions Compared to Market Data” above.Hewitt. We also consider qualitative performance data and factors to determine an NEO’s base salary, including an individual NEO’s performance, experience, responsibilities, management, leadership skills, and salary increase progression. For additional information, see the market data comparisons under the caption “Compensation Decisions Compared to Market Data.” Base salary is found in the Summary Compensation Table in the Salary column.

COMPENSATION DISCUSSION AND ANALYSIS (continued)

Annual Short-Term Incentive Compensation

Annual short-term incentive compensation is a key component of the total compensation package. The 20062017 Plan, which was approved by stockholders in January 2017 (and for which the material terms of the performance based compensation elements were reapproved by stockholders in January 2012, and which has now expired, permittedapproved), permits the grant of annual bonus and cash based incentive awards to eligible participants. These awards wereare provided pursuant to the WVIP (adopted under the authority provided in the 2006 Plan and which is intended to continue under the 2017 Plan subject to its approval by the stockholders).Plan. Management andnon-management members participate in the WVIP to enhance

COMPENSATION DISCUSSION AND ANALYSIS (continued)

organizational alignment, line of sight, and engagement toward the achievement of Company goals and objectives. The WVIP measures our internal annual financial and operational performance againstpre-determined metrics. The WVIP is designed to beprovide short-term incentive compensation that is competitive with compensation offerings in our peer comparator group and to align compensation with financial performance drivers that are intended to benefit stockholders.

As with other components of variable compensation, quantitative data in our peer comparator group is considered in determining our NEOs’ annual short-term incentive compensation opportunity, and is presented to the Compensation Committee by Aon Hewitt as discussed in “Compensation Decisions Compared to Market Data” above.Hewitt. We also consider other qualitative performance data and factors as described above. Based on these quantitative and qualitative factors, the Compensation Committee determined that the fiscal year 20162017 annual incentive award opportunity for Mr. Fawzy would be increased by 5%, and that the opportunities for the other NEOs would remain unchanged, as their annual incentive award opportunities have reachedwere aligned with competitive levels. For additional information, see the market data comparisons under the caption “Compensation Philosophy and Strategy — Compensation Decisions Compared to Market Data.”

In fiscal year 2015, Company management finalized the Company’s strategic plan for the next five years, which the Company refers to as “Woodward 150”, as 2020 will mark the 150^th anniversary of the Company’s establishment. ToSimilar to prior years, to ensure that the Company’s short-term incentive plan was aligned with the key focus areas that support Woodward 150, Company management worked with Aon Hewitt to assess the performance metrics comprising the WVIP, and where appropriate, to identify other potential performance metrics for consideration that would support Woodward 150. Based on the outcome of that assessment, management of the Company identified and recommended to the Compensation Committee for its consideration certain modifications to the design of the WVIP, including changes in certain performance metrics and the weighting of the performance metrics. At the September and November 20152016 meetings of the Compensation Committee, the Committee determined that it would be appropriate to make the proposed changes to the design of the fiscal year 20162017 WVIP to further align it with remaining objectives and targets under Woodward 150. The changes that were approved by the Compensation Committee are summarized below:

The Compensation Committee believes that the modifications to the fiscal year 20162017 WVIP will continue to drive the successful execution of Woodward 150, align pay and performance, enhance visibility for participants, and appropriately motivate performance in key areas of the business that are tied to stockholder value creation.

COMPENSATION DISCUSSION AND ANALYSIS (continued)

For fiscal year 2016,2017, actual Company achievement of the overarching performance goal of net earnings determined each NEO’s maximum possible WVIP bonus:incentive payout: up to a maximum WVIP bonuspayout of 1.0% of net earnings for the Chairman & CEO, 0.4% of net earnings for the CFO, and 0.33% of net earnings for eachthe Presidents of ATS and AS, and 0.3% for the other NEOs.GC. Setting maximum bonusesWVIP incentive payouts in this manner motivates achievement of net earnings, which strongly ties to stockholder value creation. The Compensation Committee had the discretion to reduce, but not increase, actual WVIP bonusespayouts from the maximum that became available based on the overarching performance goals.

At the time that the overarching and specific performance metrics were set, the Compensation Committee expected that each NEO’s actual fiscal year 20162017 WVIP bonuspayout would be substantially lower than the maximum payment

COMPENSATION DISCUSSION AND ANALYSIS (continued)

permitted upon achievement of the overarching performance goals. In particular, the specific performance metrics were intended to guide the Compensation Committee’s use of negative discretion to determine WVIP bonuspayout amounts that were less than the maximum available based on the overarching performance goals.

For fiscal year 2016,2017, the specific performance metrics are outlined in the table below and were designed using financial metrics as well as other performance metrics by business group.

For fiscal year 2016,2017, the Compensation Committee continued to use the sameused a similar approach to establishing the threshold and maximum Adjusted EPS objective as that which was used in prior years. For fiscal year 2015. Accordingly, for fiscal 2016,2017, the threshold Adjusted EPS performance goal was set at 80%90% of the target goal and the maximum performance goal was set at 120%110% of target. This represented a more narrow range of performance than previous years. The Compensation Committee determined that this approach continues to incentivize stretch levels of performance, balances pay and performance, represents a more reasonable range of financial performance, and is more closely in line with peer group practices.

With respect to the approach used by the Compensation Committee to establish the threshold, target, and maximum performance goals for the other specific performance metrics, the Committee considered multiple factors that included, but were not limited to, historical performance, budgeted performance for fiscal 2016,2017, and targeted levels of performance or improvement over multiple years. All of these metrics are established at a level that focuses on key business success factors that drive performance and challenge our management to achieve higher operational performance. Such targets are considered difficult,challenging, yet attainable, to achieve at the time they are set.

For purposes of WVIP awards grantedmetrics applicable to all employees, including NEOs, for fiscal year 2016,2017, the Compensation Committee established performance targets based on adjusted earnings per share for 2016.2017. “Adjusted EPS”, “Adjusted EBITDA Margin”EBITDA”, and “Adjusted OEAB” mean the Company’s reported diluted earnings per share, the Company’s adjusted earnings before interest, taxes, depreciation, and amortization, as a percentage of total revenue, and a Business Group’s operating earnings after bonus, respectively, in each case calculated without

COMPENSATION DISCUSSION AND ANALYSIS (continued)

consideration to unusualnon-operational income, gains, expenses or losses totaling in excess of 3% of the Company’s net earnings, the Company’s EBITDA, or the Business Group’s OEAB (as applicable) for the fiscal year, including but not limited to any such items that are related to or associated with any:

COMPENSATION DISCUSSION AND ANALYSIS (continued)

Nonetheless, if at the end of the performance period, the Compensation Committee believes that the achievement of the specific performance metrics under the bonusWVIP plan is not reflective of the Company’s expected level of financial, operating or other performance, the Compensation Committee may in its discretion modify the amount of any bonusWVIP payout to be awardedmade under the plan, but not above the maximum bonusesWVIP incentives available based on achievement of the overarching net earnings goal.

For fiscal year 2016,2017, the above factors (specifically, previously reported special charges, partially offset by certain unplanned tax benefits) causedresulted in no adjustments and therefore Adjusted EPS, to be $0.06 higher than reported EPS. This was partially offset by the Compensation Committee exercising negative discretion in the amount of $0.03 in connection with a non-operational gain, resulting in a WVIP payout for this metric based on $2.88 per share. The previously reported special charges also caused Adjusted EBITDA Margin, to be 0.6 percentage points higher than a margin of 16.0% based on reported EBITDA. This was partially offset by the Compensation Committee exercising negative discretion in connection with the above referenced non-operational gain, resulting in a WVIP payout for this metric based on a margin of 16.5%. None of the above factors caused any changes toand Adjusted OEAB Margin.

For fiscal year 2016,Margin were the same as, respectively, the Company’s netreported diluted earnings were approximately $181 million, resulting inper share, the maximum WVIP bonuses available toCompany’s reported earnings before interest, taxes, depreciation & amortization as a percentage of total revenue, and the NEOs of approximately: $1.81 million for the Chairman & CEO, $725,000 for the CFO, and $600,000 for each of the other NEOs. The Compensation Committee then reviewed achievement of the specific performance metrics to lower actual WVIP bonus amounts.Business Groups’ respective operating earnings after bonus. The following table reflects the metrics and performance with respect to Adjusted EPS, Adjusted EBITDA Margin, and Adjusted OEAB Margin components of the WVIP for our NEOs for 2016:2017:

COMPENSATION DISCUSSION AND ANALYSIS (continued)

Adjusted EPS was $2.88,$3.16, and resulted in a payout of 105.3%119.4% of target for the portion of the WVIP that pertains to the Adjusted EPS performance metric. Adjusted EBITDA Margin was equal to 16.5,17.1, and thus resulted in a payout of 88.0%100% of target for the portion of the WVIP that pertains to the Adjusted EBITDA performance metrics. After giving effect to all performance metrics, the 20162017 target and actual payout for each NEO under the WVIP are detailed in the following table:

COMPENSATION DISCUSSION AND ANALYSIS (continued)

Long-Term Incentive Compensation

The LTI Plan is a key component of the total compensation package. The 20062017 Plan, which has now expired and is intended to be replacedapproved by thestockholders in January, 2017, plan, subject to stockholder approval for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), permittedauthorizes the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, and Other Stock-Based Awards. For 2016,2017, these awards were conditioned upon the approval of the 2017 Plan and were granted pursuant to the LTI Plan, which had been adopted under the authority provided in the 20062017 Plan.

We generally issue two forms of awards under the LTI Plan – stock options and cash. These awards are intended to offer competitive incentive opportunities to our executives and to align their interests with increasing shareholder value. The aggregate value of these awards equal the sum of the total value of the options (as determined using the Black-Scholes methodology) plus the target cash payout, and represents the total long-term incentive compensation for each NEO. As with short-term incentive compensation, quantitative data in our peer comparator group is considered in determining our NEOs’ long-term incentive compensation, and is presented to the Compensation Committee by Aon Hewitt as discussed in “Compensation Decisions Compared to Market Data” above. We also consider other qualitative performance data and factors, including an individual NEO’s performance, knowledge, skills, abilities, and significant contributions to the Company and shareholder value when establishing an award opportunity. For additional information, see the market data comparisons under the captioncaptions “Compensation Philosophy and Strategy — CompensationStrategy” and “Compensation Decisions Compared to Market Data.”

At its regularly scheduled September meeting, the Compensation Committee approves a target opportunity for the stock option awards. The target value of each of the stock option awards is approved individually at this meeting. Typically one business day before the effective grant date of the award (such effective grant date being the first business day of the fiscal year), the Compensation Committee meets to establish the specific number of individual and aggregate awards based on the target value and using a Black-Scholes value calculated using the closing price on NASDAQ of the Company’s stock on the day prior to such approval meeting. The exercise price of the stock option awards is also determined on the effective grant date, and is not less than (and is typically equal to) the closing price as quoted on The NASDAQ Global Select Market on that day. For fiscal year 2017, the Compensation Committee approved the grant of stock options on September 30, 2016 at an exercise price of $62.57, which was the closing price of Woodward common stock as quoted on NASDAQ on the first trading day following the Compensation Committee’s approval of the awards (October 3, 2016). The awards were subject to stockholder approval of the 2017 Plan under which the options were granted. The 2017 Plan was approved by stockholders on January 25, 2017; accordingly, the October 3, 2016 grants became effective.

With respect to the Cash LTI, the Compensation Committee generally establishes a three-year performance period and compares the Company’s performance to that of the companies comprising the S&P Mid Cap 400 Index. The Compensation Committee establishes the Cash LTI award metrics for a three-year performance cycle in the fourth quarter of the fiscal year preceding the first year of the performance cycle. For each NEO, the Compensation Committee also establishes a target Cash LTI, which is a percentage of the NEO’s base salary at the beginning of the three-year performance cycle. The 2016-20182017-2019 performance period cycle was established in

COMPENSATION DISCUSSION AND ANALYSIS (continued)

September 2015.2016. The performance metrics for purposes of the Cash LTI for the multi-year planscycles were determined by the Compensation Committee to be:

The performance metrics were selected because they are a key measuremeasures to the success of the Company’s business and aligned with shareholder value creation. Because the metrics are equally important to the Company, the performance metrics are weighted equally.

COMPENSATION DISCUSSION AND ANALYSIS (continued)

For the purposes of measuring relative performance, “return on capital” is defined as net income, adjusted for accounting changes andafter-tax interest expense, divided by the sum of total debt, stockholder’s equity, and anynon-controlling interest. EPS for this purpose is measured as net income, adjusted for accounting changes, if any, divided by fully diluted common shares outstanding. EPS during the performance cycle is compared to a baseline EPS to calculate the growth in diluted EPS during such cycle. There are currently three relevant cycles: 2014-2016 (basis is reported EPS for year ended 2013 of $2.10), 2015-2017 (basis is reported EPS for fiscal year ended 2014 of $2.45), and 2016-2018 (basis is reported EPS for fiscal year ended 2015 of $2.75), and 2017-2019 (basis is reported EPS for fiscal year ended 2016 of $2.85).

For purposes of developing the performance metrics for determining the payout under the Cash LTI, the Compensation Committee has approved a relative measure methodology that compares our performance to the companies in the S&P Mid Cap 400 Index, an external index. We believe that, for the Cash LTI, the S&P Mid Cap 400 Index relative measure methodology is an appropriate comparison of our performance against a larger and broader population of companies, which is representative of investment options available to the market. The Cash LTI performance metrics and corresponding payouts are based on our ranking within the S&P Mid Cap 400 for all performance cycles that are currently outstanding, and are as follows:

The above payout formula applies to each measure weighted equally. If performance is below the 50th percentile, no award will be earned or paid as it relates to that measure. Award amounts are interpolated for performance results between the above percentiles. Performance at the 60th percentile is necessary to earn a payout of 100% of target as it relates to that measure. We believe having a target payout at the 60th percentile sets a higher standard and is consistent with plan designs of other high performing companies in our peer group. The maximum award that can be earned for performance at or above the 75th percentile is 200% of target as it relates to that measure.

The reward targets established for each NEO are articulated as a percentage of base salary. These targets reflect the Compensation Committee’s desire to establish a meaningful incentive linked to longer term financial performance of the Company that fits within our overall compensation philosophy and strategy.

For the 2014-20162015-2017 Cash LTI cycle, targets and actual payouts are detailed in the following table:

COMPENSATION DISCUSSION AND ANALYSIS (continued)

Payouts for the 2014-20162015-2017 cycle were based on the following performance levels:

COMPENSATION DISCUSSION AND ANALYSIS (continued)

These performance levels resulted in awards that aggregate to 183%184.3% of target for each NEO for the 2014-20162015-2017 cycle. The amounts paid under the Cash LTI ending in fiscal year 20162017 can be found above and in the Summary Compensation Table underNon-Equity Incentive Plan Compensation.

Other Compensation Programs

The NEOs are eligible to participate in the same health, welfare, and retirement benefits as all of our U.S. employee membership. These benefits include a group health insurance program; life insurance, inclusive of employee life, additionalbuy-up employee life, optional spouse life, and optional child life; Accidental Death & Dismemberment insurance; Short-Term Disability; Long-Term Disability; Woodward Retirement Savings Plan, inclusive of employee contributions and Company contributions (100% match on the first 3% of employee contributions, 50% on the next 3% of employee contributions, maxing at 4.5%); Woodward Stock Plan (Company contribution of 5% of base wages); Retirement Income Plan (Company contribution of 1.5% of eligible wages, and 0.1% for each year of additional service). The Retirement Income Plan was closed to new participants as of September 30, 2003, with prior participants grandfathered.

All plans are subject to applicable limitations set by the Internal Revenue Service (“IRS”). Supplemental contributions to the Executive Benefit Plan (“EBP”) described below are made for the Retirement Savings Plan, the Woodward Stock Plan, and the grandfathered Retirement Income Plan and are solely to restore for IRS limitations.

Our NEOs are also eligible to participate in a deferred compensation plan, the EBP. This plan is also available to other key members of management and to members of the Board. Employee participants are able to defer up to 50% of base salary, and up to 100% of any incentive (WVIP and/or Cash LTI) payments.

The benefits described in this section are paid to remain competitive in the marketplace. Amounts relating to certain of these benefits may be found in the “All Other Compensation” column of the Summary Compensation Table.

Post-Employment Compensation and Employment Contracts

The Company’s NEOs are not employed under general employment contracts and are employees at will.

We have entered into change in control agreements with each of the NEOs in order to ensure actions and behaviors that are aligned with, and in the best interests of, our stockholders in the event of a change of control transaction, to retain these executives through a change of control transaction and to enable them to remain focused on running the business to ensure a smooth transition. The change in control benefits are designed to preserve productivity, avoid disruption, and prevent attrition in the event we are involved in a change in control transaction.

Severance benefits are intended to ease the consequences of an unexpected termination of employment. These benefits are also designed to prevent our senior executives from seeking employment with our competitors after termination or soliciting our employees or customers during a period after termination of employment. The change in control severance program also motivates executives to pursue transactions that are in our stockholders’ best interests notwithstanding the potential negative impact of the transaction on their future employment. While cognizant of their terms, the Compensation Committee does not view the change in control agreements as an element of current compensation, and such arrangements do not necessarily affect the Compensation Committee’s annual compensation decisions.

COMPENSATION DISCUSSION AND ANALYSIS (continued)

For a further description of the change in control agreements, see the information under the caption “Executive Compensation — Potential Payments Upon Termination or Change in Control — Change in Control and Restrictive Covenant Agreements Post-Employment Provisions.”

COMPENSATION DISCUSSION AND ANALYSIS (continued)

Impact of Accounting and Tax Issues on Executive Compensation

In setting each individual executive’s compensation levels, we do not explicitly consider accounting and tax issues. We do, however, analyze the overall expense arising from aggregate executive compensation levels and awards and the components of our pay programs.

As one of the factors in our evaluation of compensation matters, we consider the anticipated tax treatment to the Company and to the executive officers of various payments and benefits. Section 162(m) of the Code places a limit of $1,000,000 on the amount of compensation that we may deduct in any one year with respect to our CEO and each of the next three most highly compensated executive officers other than the CFO. Certain performance-based compensation approved by stockholders is not subject to the deduction limit. The 20062017 Plan, previouslywhich was approved by stockholders in January, 2017, permits the stockholders and, as a result,payment of compensation, including stock option and cash-based performance awards, under this plan may qualify for performance-based deductions and may not be subject to the deductibility limit imposed by Section 162(m) of the Code. The 2017 Plan alsothat is intended to permit the payment of compensation that qualifiesqualify as performance-based under Section 162(m) and is being submitted. However, to stockholders for approval at the 2017 Annual Meeting. To maintain flexibility in compensating our key executives, it is not a stated policyrequirement under the 2017 Plan that all compensation must be deductible. The Company and the Compensation Committee may consider various alternatives to preservingapproaches regarding the deductibility of compensation payments and benefits (including paying compensation that is not fully tax deductible) to the extent reasonably practicable and to the extent consistent with our other compensation goals.

Stock Ownership Guidelines

The Board has established stock ownership guidelines fornon-employee directors and executives to align their interests and objectives with those of our stockholders.Non-employee directors are committed to minimum ownership of our common stock of a value equal to 5 times the annual base retainer paid at the date of election to the Board. The Chief Executive Officer is committed to minimum ownership value in an amount equal to 5 times his annual base salary, the Chief Financial Officer and Group Presidents are committed to a minimum ownership value equal to 3 times their respective annual base salaries, and Corporate Vice Presidents are committed to a minimum ownership value equal to 2 times their respective annual base salaries. Accumulation of the amount of stock required under the ownership guidelines is expected within 60 months of the date of such person’s appointment or election. Until the ownership target by an Officer or Director is reached, such person is required to retain 50% of net shares acquired upon any future vesting of stock units and/or exercise of stock options, after deducting shares used to pay applicable taxes and/or exercise price. Shares held as owner of record or in brokerage account in the Woodward Retirement Savings Plan and unfunded deferred amounts denominated in Woodward Stock, all qualify towards the ownership guidelines. Unexercised “in-the-money”“in-the-money” stock options will also qualify towards up to a maximum of 50% of the ownership requirements. The Compensation Committee may in its discretion relieve any person of such obligations on acase-by-case basis, taking into consideration special circumstances such as retirement or health of the individual. As of the date of this proxy statement filing, all directors and officers were in compliance with the ownership guidelines.

Hedging and Pledging

Under our written policies, no directors or employees of the Company are permitted to purchase our stock on margin, or to short sell, buy or sell puts or calls.calls, or to engage in any other transaction related to Woodward securities that is designed to hedge or offset any decrease in the market value of Woodward securities. In addition, effective November 2014, the Board of Directors amended our policy to provide that, following the effective date of the amendment, no directors orand employees of the Company are no longer permitted to pledge Woodward stock under any circumstances. Existing pledges previouslyPledges made prior to November 2014 were allowed under our policies in certain circumstances, and existing pledges are disclosed in this proxy statementstatement. Such pledges are permitted to remain in effect until they terminate or expire, but no new pledging arrangements will be permitted.expire.

COMPENSATION DISCUSSION AND ANALYSIS (continued)

Clawback Policy

During 2016, the Compensation Committee proactively considered and approved a Clawback Policy, which the Board believes exceeds or meets the forthcoming requirements pursuant to the Dodd Frank Wall Street Reform and Consumer Protection Act. The Clawback Policy provides for the recovery by the Company, from any current or former executive officer who was employed by the Company during the three-year look back period (“Covered Person”), of any incentive-based compensation that was determined, in whole or in part, on the achievement of any financial or operating result of the Company, that was awarded erroneously to the Covered Person due to material noncompliance with any financial reporting requirement under the securities laws. A copy of the Clawback Policy is available on the Company’s corporate website at http://www.woodward.com/ClawbackPolicy.

COMPENSATION COMMITTEE REPORT

Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings under the Securities Act of 1933, or the Exchange Act, that might incorporate this Proxy Statement, in whole or in part, the following Woodward, Inc. Compensation Committee Report on Compensation Discussion and Analysis shall not be deemed to be “soliciting material” or “filed” with the SEC or incorporated by reference into any such previous or future filings.

The Compensation Committee is charged with certain responsibilities relating to compensation of the Company’s executive officers. The Compensation Committee evaluates and approves all compensation of executive officers, including base salaries, short-term and long-term incentive compensation, and any perquisite programs of the Company. Compensation Committee determinations are presented to the Board.

The Compensation Committee also fulfills its duties with respect to the Compensation Discussion and Analysis and Compensation Committee Report portions of the proxy statement, as described in the Compensation Committee’s charter.

The Compensation Discussion and Analysis was prepared by management of the Company. The Company is responsible for the Compensation Discussion and Analysis and for the disclosure controls relating to executive compensation. The Compensation Discussion and Analysis is not a report or disclosure of the Compensation Committee.

The Compensation Committee met with management of the Company and the Compensation Committee’s outside consultant to review and discuss the Compensation Discussion and Analysis.

The Compensation Committee of the Board of Directors of the Company has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement and the 20162017 Annual Report on Form10-K with the management of the Company. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and the Company’s 20162017 Annual Report on Form10-K, and the Board approved that recommendation.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following tables set forth compensation information for the NEOs for services rendered in all capacities to the Company and its subsidiaries in fiscal year 2016.2017.