UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant | Filed by a Party other than the Registrant |
Check the appropriate box: | |
Preliminary Proxy Statement | |
Definitive Proxy Statement | |
Definitive Additional Materials | |
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 | |
Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
HUBBELL INCORPORATED
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box): | ||
No fee required. | ||
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. | ||
(1) | Title of each class of securities to which transaction applies: | |
(2) | Aggregate number of securities to which transaction applies: | |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |
(4) | Proposed maximum aggregate value of transaction: | |
(5) | Total fee paid: | |
Fee paid previously with preliminary materials. | ||
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | ||
(1) | Amount Previously Paid: | |
(2) | Form, Schedule or Registration Statement No.: | |
(3) | Filing Party: | |
(4) | Date Filed: |
Hubbell Incorporated
Notice of 2017 Annual Meeting of
Shareholders and Proxy Statement
May 2, 2017
9:00 a.m. local time
Shelton, Connecticut
Notice
A LETTER FROM OUR CHAIRMAN, PRESIDENT AND CEO |
Dear Fellow Shareholder:
I am pleased to invite you to the Hubbell Incorporated Annual Meeting of 2014Shareholders which will be held on Tuesday, May 2, 2017 at 9:00 A.M. local time at our corporate headquarters, 40 Waterview Drive, Shelton, Connecticut 06484.
At this year’s meeting you will be asked to vote on the four proposals listed in the enclosed Notice of Annual Meeting
(1) the election of Shareholdersnine nominees to serve on our Board of Directors for a term of one year, (2) the ratification of the selection of PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm for 2017, (3) the approval, on a non-binding basis, of the compensation of our named executive officers as set forth in the 2017 Proxy Statement, and (4) the approval, on a non-binding basis, of the frequency with which executive compensation will be subject to a shareholder vote. Please take the time to review the information on each of the proposals contained inside the Proxy Statement.
The Board of Directors recommends that you voteFOR proposals 1, 2 and 3, andONE YEAR for proposal 4.
As a shareholder, it is important that your shares are represented at the Annual Meeting in person or by proxy. Last year approximately 92% of all eligible votes were cast by shareholders at the Annual Meeting once again demonstrating the strong engagement and commitment of our shareholders to Hubbell. I encourage you to cast your vote and to continue your support of this great Company and its future prosperity.
On behalf of the Board of Directors, we thank you for your share ownership in Hubbell and look forward to seeing you at the meeting.
Very truly yours,
David G. Nord
Chairman, President and Chief Executive Officer
March 15, 2017
Notice of 2017 Annual Meeting of Shareholders |
Tuesday, May 6, 20142, 2017
9:00 A.M. local time
Hubbell Incorporated, 40 Waterview Drive, Shelton, Connecticut 06484
ITEMS OF BUSINESS
To elect the | |||
To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for | |||
To recommend, by non-binding vote, the frequency with which executive compensation will be subject to a shareholder advisory vote. | |||
5 | To transact any other business that properly comes before the meeting and any continuation,adjournment or |
RECORD DATE
If you were a shareholder of record at the close of business on March 7, 2014,3, 2017, you will be entitled to notice of and to vote at the Annual Meeting.
WEBCAST
A webcast of the Annual Meeting will be available on our website,www.hubbell.com,, on Tuesday, May 6, 2014,2, 2017, starting at 9:00 A.M. local time. An archived copy of the webcast will be available on our website for 12 months following the date of the Annual Meeting. Information on our website, other than our Proxy Statement and form of proxy, is not part of our solicitation materials.
VOTING
It is important that your shares are represented at the Annual Meeting. You can vote your shares using the Internet, by telephone or by requesting a paper proxy card to complete, sign and return by mail. Voting procedures are described in the Proxy Statement on page 6,7, the Notice of Internet Availability of Proxy Materials, and on the proxy card.
By Order of the Board of Directors
Megan C. Preneta
Corporate Secretary and AssistantAssociate General Counsel
March 19, 201415, 2017
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON May 2, 2017: This Notice of Annual Meeting and Proxy Statement and the Company’s Annual Report on Form 10-K for the year ended 2016 are available at www.proxyvote.com. Have your Notice of the Internet Availability of Proxy Materials or proxy card in hand when you go to the website.
Dear Fellow Shareholder:
I am pleased to invite you to the Hubbell Incorporated Annual Meeting of Shareholders which will be held on Tuesday, May 6, 2014 at 9:00 A.M. local time at our corporate headquarters, 40 Waterview Drive, Shelton, Connecticut 06484.
At this year’s meeting you will be asked to vote on the three proposals listed in the enclosed Notice of Annual Meeting – (1) the election of twelve nominees to serve on our Board of Directors for a term of one year, (2) the ratification of the selection of PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm for 2014, and (3) the approval, on an advisory, non-binding basis, of the compensation of our named executive officers as presented in this Proxy Statement. Please take the time to review the information on each of the proposals contained inside the Proxy Statement. The Board of Directors recommends that you voteFOReach of the proposals.
As a shareholder, it is important that your shares are represented at the Annual Meeting in person or by proxy. Last year approximately 93% of all eligible votes were cast by shareholders at the Annual Meeting once again demonstrating the strong engagement and commitment of our shareholders to Hubbell. I encourage you to cast your vote and to continue your support of this great Company and its future prosperity.
On behalf of our Board of Directors, we thank you for your share ownership in Hubbell and look forward to seeing you at the meeting.
Very truly yours,
Timothy H. Powers
Chairman of the Board
March 19, 2014
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 5
Annual Meeting Details
Date, Time and Place
The Annual Meeting of Hubbell Incorporated, which we refer to as Hubbell or the Company is being held on Tuesday, May 6, 20142, 2017 at 9:00 A.M. local time at our corporate headquarters, 40 Waterview Drive, Shelton, Connecticut 06484.
Availability of Proxy Materials
Your proxy is being solicited for the Annual Meeting, or any adjournment, continuation or postponement of the Annual Meeting, on behalf of the Board of Directors of the Company. On March 18, 2014,15, 2017, we mailed a Notice of the Internet Availability of Proxy Materials to all shareholders of record advising that they could view all of the proxy materials (Proxy Statement, proxy card and Annual Report on Form 10-K) online atwww.proxyvote.com, free of charge, or request in writing a paper or email copy of the proxy materials free of charge.charge. We encourage all shareholders to access their proxy materials online to reduce the environmental impact and cost of our proxy solicitation. You may request a paper or email copy of the materials using any of the following methods:
• | By Internet: Go towww.proxyvote.com | |
• | By Phone: 1-800-579-1639 | |
• | By Email:sendmaterial@proxyvote.com |
Eligibility to Vote
You can vote if you held shares of Class A or Class B the Company’s common stock, par value $0.01 per share (“Common StockStock”) as of the close of business on March 7, 2014.3, 2017, which is the record date for the Annual Meeting. Each share of Class A Common Stock is entitled to twenty votes, and each share of Class B Common Stock is entitled to one vote. As of March 7, 2014,3, 2017, there were 7,167,50655,381,614 shares of Class A Common Stock and 51,933,697 shares of Class B Common Stock outstanding and eligible to vote.
How to Vote
You may vote using any of the following methods:
•By Internet: Go towww.proxyvote.com. Have your Notice of the Internet Availability of Proxy Materials or proxy card in hand when you go to the website. | ||
• | By Mail: If you have requested a paper copy of the proxy materials, complete, sign and return your proxy card in the prepaid envelope. | |
• | In Person: Shareholders who attend the Annual Meeting may request a ballot and vote in person. If you are a beneficial owner of shares, you must obtain a legal proxy from your broker, bank or record holder and present it to the inspectors of election with your ballot to be able to vote at the meeting. | |
• | By Phone: 1-800-690-6903. Have your proxy card in hand when you call and then follow the instructions. | |
You may revoke your proxy at any time prior to its use by any of the following methods:
• | Delivering to the Secretary of the Company written instructions revoking your proxy | |
• | Delivering an executed proxy bearing a later date than your prior voted proxy | |
• | If you voted by Internet or telephone, by recording a different vote on the Internet website or by telephone | |
• | Voting in person at the Annual Meeting |
If you hold your shares in street name, you must follow the instructions of your broker, bank or other nominee to revoke your voting instructions.
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 6
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 7 |
Directions to Meeting
Directions to attend the Annual Meeting where you may vote in person can be found on our website,www.hubbell.com,, in the Investor InfoInvestors section. The content of the Company’s website is not incorporated by reference into, or considered to be a part of, this Proxy Statement.
This summary highlights some of the important information contained in this Proxy Statement and does not include all of the information you should consider regarding the proposals being presented at the Annual Meeting. You should read the entire Proxy Statement before casting your vote. Page references are supplied to help you find more detailed information in this Proxy Statement.
Voting ItemsProposals
ItemProposal 1 - Election of Directors (Page 11)10)
The table below presents information on each of the nominees for Director of the Company, including their principal occupation and relevant experience. Each of the nominees is a current Director of the Company and possesses the qualifications and experience recommended by the Nominating and Corporate Governance Committee, and approved by our Board, to serve as a Director.
Committee | ||||||||||
Name | Principal Position | Since | Independent | Membership* | Experience | |||||
Carlos M. Cardoso | Retired Chairman, President and CEO, Kennametal Inc. | 2013 | Yes | A / C | Public company officer/director, operations, international, manufacturing | |||||
Anthony J. Guzzi | President and CEO, EMCOR Group, Inc. | 2006 | Yes | Public company officer/director, operations, distribution, manufacturing | ||||||
Neal J. Keating | Chairman, President and CEO, Kaman Corporation | 2010 | Yes | Public company officer/director, international, operations, distribution | ||||||
John F. Malloy | Chairman, President and CEO, Victaulic Company | 2011 | Yes | A / E / F | Private company officer/director, manufacturing, operations, distribution | |||||
CEO, Siemens USA | 2016 | Yes | N | Public company | ||||||
David G. Nord | Chairman, President and CEO, Hubbell Incorporated | 2013 | No | E | Public company officer/director, finance, operations, strategic planning | |||||
John G. Russell | 2011 | Yes | C / F / N | Public company officer/director, finance, governance, utility industry | ||||||
Steven R. Shawley | Retired Senior Vice President and CFO, Ingersoll-Rand Company | 2014 | Yes | A / E / F | Public company officer/director, finance, | |||||
Richard J. Swift | Retired Chairman, President & CEO, Foster Wheeler Ltd. | 2003 | Yes | C / E / N | Public company officer/director, finance, accounting, auditing, engineering |
* | A – Audit, C – Compensation, E – Executive, F – Finance, N – |
ItemProposal 2 - Ratification of Auditors (Page 51)52)
The Audit Committee of the Board of Directors has selected PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit the annual financial statements for the Company for the year 2014.2017. While shareholder ratification of our independent auditors is not required, we are submitting the item to a vote as a matter of good corporate governance.
ItemProposal 3 (“Say on Pay”) - Advisory Vote on the CompensationApproval, by non-binding vote, of our Named Executive Officers (Page 53)
In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Company is submitting to its shareholders an opportunity to cast an advisory (non-binding) vote on the compensation of the Company’s named executive officers (a “say on pay” vote). As discussedas contained in the Compensation Discussion and Analysis, the Company’s2017 Proxy Statement (Page 54)
Our executive compensation philosophy isprogram has been designed to attract and retain highly-talented executives, deliver compensation
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 7
that is competitive and fair compared to relevant benchmarks, reward strong Company performance, and motivate executives to maximize long-term shareholder returns. To achieve our philosophy, the Compensation Committee has implementedobjectives, we have adopted and maintainsmaintain sound compensation governance practices withand a strong orientation toward pay-for-performance. These practices include, among others:pay for performance philosophy pursuant to which the greatest portion of an executive’s total direct compensation is variable and therefore linked to performance on both a short-term and long-term basis. For these reasons, and as described more fully in our Compensation Discussion and Analysis on page 25, the Company is seeking shareholder approval of the compensation of our named executive officers as set forth in this Proxy Statement.
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 8 |
Proposal 4 (“Say When on Pay”) - Recommendation, by non-binding vote, of the frequency with which executive compensation will be subject to a shareholder advisory vote (Page 55)
The Company is seeking a non-binding recommendation from our shareholders on whether shareholders should have an opportunity to provide an advisory approval of the compensation of our named executive officers every year, every two years or every three years. The Board of Directors believes that its executivean advisory vote on the compensation program is designed both appropriately and effectively to achieve its overall objectives and ensure that the interests of its executives are aligned directly with the interests of its shareholders. At the Company’s 2011 Annual Meeting of Shareholders, 97% of the votes castnamed executive officers should be conducted every year so that shareholders may annually express their views on our say on pay proposal were voted in favor of the Company’s executive compensation program. We believe these strong results indicateThe Board of Directors believes that our shareholders are generally supportive of ourholding this advisory vote annually will provide the Company with timely and appropriate feedback on compensation approach. Accordingly, since 2011, the Compensation Committee has chosen largely to maintain the structure and components of thedecisions for its named executive compensation program, while continuing to evaluate its effectiveness in meeting the Company’s compensation objectives. For example, in 2013 the Committee increased the weighting of the long-term incentive award component of the NEO’s compensation to be 100% performance-based and, therefore, more closely aligned with shareholder interests.officers.
Although the say on pay vote is non-binding, the Compensation Committee values the opinions of shareholders and will consider the outcome of the vote when making future compensation decisions.
Vote Recommendations and Requirements
A quorum is required to transact business at the Annual Meeting. The presence of the holders of Class A and Class B Common Stock, in person or by proxy, representing a majority of the voting power of the Company’s outstanding shares constitutes a quorum for the Annual Meeting. Abstentions and broker non-votes are counted as present for quorum purposes.
The following table summarizes the voting information for the threefour proposals to be considered at the Annual Meeting:
2 RATIFICATION OF AUDITORS | 3 SAY ON PAY | 4 SAY WHEN ON PAY | ||||||||||||||||
Vote Required: Plurality* with Director Resignation Policy | Vote Required: Majority of Votes Cast** Broker discretionary voting allowed | |||||||||||||||||
Vote | Required: Majority of Votes Cast** | Vote Required: Of one year, two years or three years, the option receiving the most votes | ||||||||||||||||
The Boardrecommends thatShareholders voteFOR each Nominee | The Boardrecommends thatShareholders voteFOR this proposal | The Boardrecommends thatShareholders voteFOR this proposal | The Boardrecommends thatShareholders voteONE YEAR forthis proposal | |||||||||||||||
* | Plurality means that the nominees who receive the most votes cast “FOR” their election are elected as directors. Votes withheld and broker non-votes will not affect the election of directors. The terms of the Company’s Director Resignation Policy are discussed below. Broker discretionary voting is not allowed. |
** | |
*** | Abstentions and broker non-votes |
If your shares are held by a broker and you have not instructed the broker how to vote, your shares will not be voted with respect to the election of directors or the say on pay advisory vote,Proposals 1, 3 and 4, but your broker does have the discretion to vote your shares on the ratification of the auditors.
The Company does not intend to present any business at the Annual Meeting other than the items described in the Proxy Statement, and has no information that others will do so. The proxies appointed by our Board of Directors (and named on your proxy card) will vote all shares as the Board recommends above, unless you instruct otherwise when you vote. If a matter not described in this Proxy Statement is properly presented at the Annual Meeting, the named proxies will have the discretion to vote your shares in their judgment.
Director Resignation Policy
In 2016, the Board of Directors adopted a director resignation policy whereby any director in an uncontested election who receives more votes “withheld” from his or her election than votes “for” his or her election will promptly tender his or her resignation to the Board. Following receipt of the tendered resignation and within 60 days of certification of the shareholder vote, the NCGC will consider and recommend to the Board whether to accept or reject the resignation, or whether other action should be taken. The Board will then, within 90 days of certification of the shareholder vote, make a determination taking into consideration the recommendation of the NCGC, the vote results, shareholder input and other relevant factors. The Board’s decision will be disclosed in a Form 8-K furnished by the Company to the SEC within four days after the decision.
Business Highlights
2013 was another yearHubbell is a performance-driven company with an impressive track record of strong performance forconsistently delivering increased value and returning cash to our Company. We achieved record sales and earnings per diluted share.shareholders. Net sales for the year ended 2013in 2016 were $3.184$3.5 billion, an increase of 5%3% compared to 2012;2015; reported operating margin of 15.9%13.6% in 2013 increased2016 decreased 40 basis points compared to 15.5% in 2012;2015; reported earnings per diluted share in 2013 increased 9%2016 was $5.24 compared to 2012;$4.77 in 2015; and free cash flow (defined as cash flow from operations less capital expenditures) was 99%as a percentage of net income attributable to Hubbell was 113% in 2013.2016. Each of these measures is a main driver ofare critical components to our pay for performance compensation structure as they are indicators of strong Company performance and shareholder value. The Company rewards its executives for achievements in these areas as further described in the Compensation Discussion and Analysis beginning on page 26.
25. We also remained committed to deploying our capital in value creating ways. We increased the annual dividend by 11%, spent $125M to $2.80 per share - the 9thconsecutive year of increased dividends. Finally, acquisitions continue to be a core strategic objective and we invested approximately $173 million on three acquisitions and share repurchases, and increased spending on capital expenditures by 20% to help fund productivity programs and new product development. We also introduced four key strategic objectives designed to alignin 2016; one that will join our Electrical segment, the Company aroundother two will be reported in the concept of “One Hubbell”. These key objectives – serving our customers, operating with discipline, growing the enterprise and developing our people – have unified and energized the Company’s focus on delivering reliable, electrical solutions to our customers and attractive returns to our shareholders. In 2013, our shareholders enjoyed a total return of 28%.
Executive Appointments
On January 1, 2013, Mr. David G. Nord was appointed to the position of President and Chief Executive Officer of the Company, succeeding Mr. Timothy H. Powers, who remained our executive Chairman of the Board until his retirement in May 2013. In May 2013 he was re-elected to the Board and appointed non-executive Chairman.Power segment.
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 8
Executive Compensation
The Company’s executive compensation program is focused on providing competitive pay to our executives for their contributions towards the Company’s strategy and goals and for delivering strong Company performance. Our pay for performance philosophy ensures that the interests of our executives are aligned with those of our shareholders by allocating a significant portion of the total compensation payable to our executives to short- and long-term performance-based goals. The balance of executive compensation takes the form of a fixed base salary, retirement and employee benefits generally offered to other employees, and limited perquisites, in each case designed to fulfil the objective of attracting and retaining key executive talent.
Primary Components of 2013 Compensation Program
Pay Mix.As shown in the charts below, the pay mix of our named executive officers and our CEO as reviewed by the Compensation Committee is consistent with external market practices:
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 9
Performance Measures.The short-term incentive award opportunities for our named executive officers are based upon achievements with respect to certain performance metrics approved by our Compensation Committee. For 2013, earnings per share, free cash flow, operating profit and certain strategic objectives were selected as the measures upon which short-term incentive awards could be earned. The performance targets, weightings and payouts for each of these measures are discussed in detail in the “Short-Term Incentive Compensation” section on page 31.
Compensation Awarded in 2013.The table below provides an overview of the compensation paid to or earned by our named executive officers in 2013 (see the complete Summary Compensation Table on page 39 for more detail):
Name and Principal Position | Salary ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Plan Earnings ($) | All Other Compensation ($) | Total ($) | |||||||
D. G. Nord President and CEO | 900,000 | 2,196,158 | 1,500,240 | 918,000 | 1,108,809 | 125,814 | 6,749,021 | |||||||
W. R. Sperry Senior Vice President and CFO | 442,100 | 549,006 | 375,054 | 315,700 | — | 61,867 | 1,743,727 | |||||||
G. N. Amato Group Vice President | 500,200 | 549,006 | 375,054 | 423,700 | 362,168 | 23,362 | 2,233,490 | |||||||
W. T. Tolley Group Vice President | 441,400 | 396,626 | 270,865 | 281,200 | 160,036 | 41,543 | 1,591,670 | |||||||
S. H. Muse Group Vice President | 450,200 | 335,499 | 229,215 | 327,700 | — | 40,655 | 1,383,269 |
Director Compensation
Our compensation program for non-management Directors consists of an annual:
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement10
ELECTION OF DIRECTORS - ITEMPROPOSAL 1
The Company’s By-Laws provide that the Board of Directors shall consist of between three and thirteen Directors who shall be elected annually by the shareholders. The Board has fixed the number of Directors at twelvenine as of the 20142017 Annual Meeting.
Director Qualifications and Experience
The Nominating and Corporate Governance Committee (“NCGC”) works with the Board annually to determine the appropriate characteristics, skills and experience for the Board and its individual members to properly oversee the interests of the Company and its shareholders.
The NCGC recommends candidates for Board membership using the selection criteria outlined in the Corporate Governance Guidelines and other factors it deems necessary to fulfilfulfill its objectives. Candidates are evaluated on the basis of their individual qualifications and experience, and in the context of the Board as a whole. The Board doesNCGC considers diversity when creating the pool of candidates from which it selects potential director nominees. Such diversity includes not have a formal policy ononly gender, race and ethnicity, but also diversity rather itsof experience, professional background, industry exposure and other areas. The objective is to assemble a Board with diverse experience in various areasBoard that can best perpetuate the success of the business and represent shareholder interests through the exercise of sound judgment. Below is a list of some of the qualifications and experience sought by the NCGC in recommending candidates for nomination to the Board:
• | Ability to make independent analytical inquiries | |
• | Marketing, finance, operations or other relevant public company experience | |
• | ||
Gender, race and ethnicity • | Financial literacy | |
• | Professional background | |
• | Corporate governance experience | |
• | ||
• | Experience in the Company’s industry | |
• | Public company board service | |
• | Academic expertise in an area of the • Education | |
In determining whether to recommend a current Director for re-election, the NCGC will also consider:
• | Past attendance at meetings | |
• | Service on other boards | |
• | Participation in and contributions to Board activities |
Each Director nominee possesses the appropriate qualifications and experience for membership to the Board of Directors. As a result, the Board is comprised of individuals with strong and unique backgrounds, giving the Board competence and experience in a wide variety of areas to serve the interests of the Company and its shareholders.
The following nominees are proposed by the Board to stand for election at the 20142017 Annual Meeting of Shareholders and to serve as Directors until the 20152018 Annual Meeting and until their successors have been elected and qualified. All of the nominees are current Directors and were elected by the Company’s shareholders, except for Mr. Shawley who was appointed to the Board in 2014. Mr. Shawley was recommended to the Board by one of our independent directors.shareholders. In the event that any of the nominees for Director should become unavailable, it is intended that the shares represented by the proxies will be voted for any substitutes nominated by the Board of Directors, unless the number of Directors constituting the full Board is reduced. The following biographies provide information on the principal occupation of each of the Director nominees:nominees.
HUBBELL INCORPORATED - NoticeThe Board of 2014 Annual MeetingDirectors Recommends that Shareholders Vote “FOR” all of Shareholders & Proxy Statement11the Nominees.
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 10 |
Carlos M. Cardoso | |
Age: 59 Director Since: 2013 Committees: Audit and Compensation Designation: Independent Directorships: Stanley Black & Decker, Inc., since 2007; (Kennametal Inc. 2006 - 2014) |
Mr. Cardoso has served as Chairman, President and Chief Executive Officer of Kennametal Inc. (publicly traded manufacturer of metalworking tools and wear-resistant products) sincefrom January 2008.2008 to December 2014. Previously, he held the position of President and Chief Executive Officer (2006 – 2008), and also served as Kennametal’s Executive Vice President and Chief Operating Officer from January 2005 to December 2005, and Vice President and President, Metalworking Solutions and Services Group from 2003 to 2004.
Skills and Qualifications
Mr. Cardosobrings to the Board CEO, COO, manufacturing, international business and public company Board experience, including:
Significant manufacturing and operations experience having | ||
Lynn J. Good
Age: 54Director Since: 2009Committees: Audit (Chair), Executive, and Nominating and Corporate GovernanceDesignations: Independent; Audit Committee Financial ExpertDirectorship: Duke Energy Corporation
Ms. Good has served as President Chief Executive Officerof the Pump Division of Flowserve Corporation, a manufacturer/ provider of flow management products and Vice Chair of Duke Energy Corporation (a publicly traded electric power transmission and distribution business) since July 2013. Prior to that, she served as Executiveservices, Vice President and Chief Financial Officer from 2009 to 2013, Group ExecutiveGeneral Manager, Engine Systems and President of Duke Energy’s Commercial Businesses from 2007 to 2009,Accessories, for Honeywell International, Inc., a technology and Treasurer from 2006 to 2007. She also held the position of Executivemanufacturing company, and Vice President Manufacturing Operations for Colt’s Manufacturing Company, LLC, a maker of firearms
Skills and Qualifications
Ms. Goodbrings to the Board CEO, CFO, auditing, public company board, and extensive executive management experience in the utility industry, including:
Age: 53 Director Since: 2006 Committees: Executive, | ||
Designations: Independent; Lead Director Directorship: EMCOR Group, Inc., since 2009 |
Anthony J. Guzzi
Age: 50Director Since: 2006Committees: Nominating and Corporate Governance (Chair), Audit, and ExecutiveDesignations: Independent; Lead DirectorDirectorship: EMCOR Group, Inc., since 2009
Mr. Guzzi has served as President and Chief Executive Officer of EMCOR Group, Inc. (a publicly traded mechanical, electrical construction and facilities services company) since January 2011. Previously, he was President and Chief Operating Officer from 2004 to 2010. He also served as President, North American Distribution and Aftermarket of Carrier Corporation (HVAC and refrigeration systems), a subsidiary of United Technologies Corporation from 2001 to 2004, and President, Commercial Systems and Services in 2001.
Skills and Qualifications
Mr. Guzzibrings to the Board CEO, COO, manufacturing, strategic development, operations, consulting, and public company board experience, including:
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 11 |
Neal J. Keating | ||
Age: 61 Director Since: 2010 Committees: Nominating and Designation: Independent Directorship: Kaman Corporation, | ||
Neal J. Keating
Age: 58Director Since: 2010Committees: Audit, and Nominating and Corporate GovernanceDesignation: IndependentDirectorship: Kaman Corporation, since 2007
Mr. Keating has served as the Chairman of the Board, President and Chief Executive Officer of Kaman Corporation (a publicly traded aerospace and industrial distribution company), since 2008. Prior to that, he held the position of President and Chief Operating Officer of Kaman from 2007 to 2008. From 2004 to 2007, he held the position of Chief Operating Officer of Hughes Supply (a wholesale distributor acquired by Home Depot).
Skills and Qualifications
Mr. Keatingbrings to the Board an extensive history of senior executive leadership and board experience, and a strong background in international operations, distribution, and mergers and acquisitions, including:
• | Serving as Chairman of the Board and CEO of Kaman Corporation, a public manufacturing corporation that serves the aerospace and industrial distribution industries | |
• | Past experience as COO of Hughes Supply and Executive Vice President and COO of Rockwell Collins, Commercial Systems | |
• | Former Managing Director and CEO of GKN Aerospace, and Director of GKN plc, an international aerospace, automotive and land systems business | |
• | Member of Board of Trustees of the Manufacturers Alliance for Productivity and Innovation (MAPI) |
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement12
John F. Malloy | |
Age: 62 Director Since: 2011 Committees: Finance (Chair), Audit and Executive Designation: Independent Directorships: Victaulic Company, since 2006 |
John F. Malloy
Age: 59Director Since: 2011Committees: Audit and FinanceDesignation: IndependentDirectorships: Victaulic Company, since 2006; Lehigh Gas Partners, since 2012
Mr. Malloy has served as the Chairman of the Board, President and Chief Executive Officer of Victaulic Company (a privately held mechanical pipe joining systems company) since 2006. Prior to that, he held the position of President and Chief Executive Officer from 2004 to 2006 at Victaulic, and also President and Chief Operating Officer from 2002 to 2004.
Skills and Qualifications
Mr. Malloybrings to the Board many years of senior management, operations, economic and strategic planning experience having served as the CEO and COO of a global manufacturing and distribution company, including:
• | ||
• | Over | |
• | Holds a Ph.D. in economics and has taught courses in Economics at Hamilton College |
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 12 |
Judith F. Marks | |
Age: 53 Director Since: 2016 Committee: Audit, and Nominating and Corporate Governance |
Andrew McNally IV
Age: 74Director Since: 1980Committees: Finance (Chair), Compensation, and ExecutiveDesignation: Independent
Mr. McNally hasMs. Marks was appointed CEO of Siemens USA on January 1, 2017. Previously, she served as the Executive Vice President, Global Solutions at Dresser-Rand (a global supplier of custom-engineered rotating equipment for the oil, gas and power industries), a Senior Advisor for Hammond, Kennedy, Whitney & Company (a private merchant banking firm) since 2007 and as Partnersubsidiary of Siemens Corporation from 19982015-2016. Prior to 2006. He has also served as a Member of McNally Investments (a private merchant banking firm) since 2005. Previously, he heldthat, she was the position of Chairman and Chief Executive Officer of Rand McNally (printing, publishing and map-making) from 1993 to 1998, President and Chief Executive officerCEO of Siemens Government Technologies, Inc. from 1978 to 1993,2011-2015, and Vice President, Strategy and Business Development at Lockheed Martin Corporation (a publicly traded global company engaged in aeronautical and space systems, integration and technology services) from 1974 to 1978.2009-2011.
Skills and Qualifications
Mr. McNallyMs. Marksbrings to the Board many years of CEO, management and operationsstrong multi-disciplinary experience in the publishing industryareas of corporate strategy, operations, business development, and public and private company boards, as well as an extensive background in finance and merchant and investment banking,leadership for emerging geographies, including:
• | ||
• | ||
• |
David G. Nord
| |
Age: 59 Director Since: 2013 Committee: Executive (Chair) Designation: Not Independent |
Mr. Nord has served as Chairman of the Board, President and Chief Executive Officer of the Company since May 2014, and President and Chief Executive Officer since January 2013 after having2013. Previously, he served inas the role ofCompany’s President and Chief Operating Officer sincefrom June 2012. Prior2012 to that, he held the position ofJanuary 2013, and Senior Vice President and Chief Financial Officer of the Company from September 2005 to June 2012.
Skills and Qualifications
Mr. Nordbrings to the Board extensive financial, operational, and strategic planning experience, and a strong background in the manufacturing industry having served as a senior executive at 2two global manufacturing companies, including:
• | Serving as the Company’s Senior Vice President and CFO for 7 years and as COO prior to his appointment to CEO in 2013 | |
• | ||
• | Roles of increasing responsibility at The Pittston Company, a publicly held multinational corporation, and Deloitte & Touche |
G. Jackson Ratcliffe
Age: 77Director Since: 1980Committees: Executive (Chair) and Finance Designation: IndependentDirectorship: Sunoco, Inc. (1998 - 2009)
Mr. Ratcliffe has served the Company as Chairman of the Board from 1987 to 2004, and Chairman of the Board, President and Chief Executive Officer from 1987 to 2001. Previously, he held senior executive positions in the Company’s finance and legal departments.
Skills and Qualifications
As the former Chairman, President and CEO of the Company,Mr. Ratcliffebrings to the Board deep knowledge of the Company’s businesses and industry and with that extensive experience in strategic planning, mergers and acquisitions, and public company board service, including:
• | ||
HUBBELL INCORPORATED -Notice of 2014 Annual Meeting of Shareholders & Proxy Statement13
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 13 |
Carlos A. Rodriguez
Age: 49Director Since: 2009Committees: Compensation and FinanceDesignation: IndependentDirectorship: Automatic Data Processing, Inc., since 2011
Mr. Rodriguez has served as President and Chief Executive Officer of Automatic Data Processing, Inc. (“ADP”) (a publicly traded payroll and tax processing, and business services company) since November 2011. Previously, he served as President and Chief Operating Officer of ADP from May to November 2011, as President, National Account Services and Employer Services International from 2010 to 2011, as Division President for ADP’s Small Business Services and the Professional Employer Organization from 2007 to 2010, and as Division President, Professional Employer Organization from 1999 to 2007.
Skills and Qualifications
Mr. Rodriguezbrings to the Board several years of experience as a public company executive officer and a strong background in finance, general management, international business and operations, including:
Age: 59 Director Since: 2011 Committees: Compensation, Finance, and Designation: Independent Directorships: CMS Energy Corporation and Consumers Energy Company, since 2010 |
John G.Mr. Russell
Age: 56Director Since: 2011Committees: Compensation, and Nominating and Corporate GovernanceDesignation: IndependentDirectorships: has served as the Chairman of the Board of CMS Energy Corporation (“CMS”) and Consumers Energy Company (“Consumers”) since 2010
Mr. Russell hasMay 2016. Previously he served as the President and Chief Executive Officer of CMS Energy Corporation (“CMS Energy”) and Consumers Energy Company (“Consumers Energy”) (a publicly traded electric and natural gas utility) since 2010. Previously, hefrom 2010-2016. He also held the position of President and Chief Operating Officer of Consumers Energy from 2004 to 2010.
Skills and Qualifications
Mr. Russellbrings to the Board many years of experience as a public company executive officer and Director in the utility industry, and possesses a strong background in operations, regulated utilities and governance, including:
• | Serving as Chairman of the boards of CMS and Consumers, and as director for over fifteen years | |
• | Serving as the President and CEO of CMS | |
• | Over | |
Steven R. Shawley
| |
Age: 64 Director Since: 2014 Committees: Audit (Chair), Executive, and Finance |
Mr. Shawley served as the Senior Vice President and Chief Financial Officer of Ingersoll-Rand Company (a publicly traded manufacturer of climate solutions, and industrial and security technologies) from 2008 to 2013. Previously, he held the position of Senior Vice President and President of Ingersoll-Rand’s Climate Control Technologies business from 2005 to 2008.
Skills and Qualifications
Mr. Shawleybrings to the Board extensive leadership experience as a public company executive officer and Director, and a strong background in finance, accounting and audit, including:
• | Over | |
• | Holding multiple financial roles of increasing responsibility over the course of 30+ years including audit, accounting, financial planning and as the controller of Westinghouse Electric Corporation’s largest manufacturing division and CFO of its Thermo King subsidiary | |
• |
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 14 |
Richard J. Swift
| |
Age: 72 Director Since: 2003 Committees: Compensation (Chair), Executive, and Nominating and Corporate Governance Designation: Independent Directorships: CVS/Caremark Corporation, since 2006; Ingersoll-Rand Company, PLC, since 1995; |
Mr. Swift served as the Chairman of the Financial Accounting Standards Advisory Council from 2002 to 2006. Previously, he held the position of Chairman, President and Chief Executive Officer of Foster Wheeler Ltd. (design, engineering, construction and other services) from 1994 to 2001.
Skills and Qualifications
Mr. Swiftpossesses CEO experience, extensive public company board experience, and a strong finance, engineering and corporate governance background, including:
• | Former Chairman, President and CEO of Foster Wheeler Ltd. | |
• | Former Chairman of the National Foreign Trade Council and the Financial Accounting Standards Advisory Council, which advises the Financial Accounting Standards Board on accounting standards | |
• | Membership on the boards of 4 public companies | |
• | Former licensed professional engineer |
During the five years ended December 31, 2013,2016, Mr. Cardoso,Guzzi, Mr. Keating, Mr. Malloy Mr. McNally, Mr. Ratcliffe, Mr. Shawley and Mr. Swift have either been retired or held the principal occupation listed in their biography above.above or been retired for that period of time. The employment history of each of the other Director nominees during such time period is reflected in their biographies above.
HUBBELL INCORPORATED -Notice of 2014 Annual Meeting of Shareholders & Proxy Statement14
Directors are elected by plurality vote. Votes withheld and broker non-votes will not affect the election of Directors. Pursuant to the terms of our Director Resignation Policy, any director in an uncontested election who receives more votes “withheld” from his or her election than votes “for” his or her election will promptly tender his or her resignation to the Board. See page 9 for additional details on this Policy.
The Board of Directors Recommends that Shareholders Vote “FOR” all of the Nominees.
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 15 |
The NCGC annually reviews all forms of independent Director compensation in relation to other U.S. companies of comparable size and the Company’s competitors, and recommends changes to the Board, when appropriate. The NCGC is supported in this review by Exequity LLP (“Exequity”), an independent outside compensation consultant engaged by the NCGC, which provides compensation consultation and competitive benchmarking.
As a result, of this review, the Director compensation program reflects a mainstream approach to the structure of the compensation components and the method of delivery.
The In 2016, following the annual review, the Board of Directors, upon the recommendation of the NCGC, determined to maintain the value of total director compensation as reflected in the table describes the components of non-management Director compensation:below.
Compensation Component | ||
Annual Board Retainer | $75,000 | |
$ | ||
Committee Chair Retainer | $20,000 – Audit | |
$15,000 – Compensation | ||
$13,000 – Finance | ||
$13,000 – NCGC | ||
Committee Member Retainer | $10,000 – Audit | |
$7,000 – Compensation | ||
$5,000 – Finance | ||
$5,000 – NCGC | ||
Board / Committee Meeting Fees | None | |
Annual Restricted Share Grant | $ | |
Stock Ownership | Within five years of joining the Board, ownership in Common Stock or deferred stock units valued at 4 times the average annual retainer paid to the Director in the past 5 years | |
Discretionary | Upon NCGC recommendation and consent of the Chairman of the Board, fees commensurate with any activities performed outside the scope of normal Board and Committee service, at the Company’s request |
Directors who are first standing for election are encouraged to own 1,000 shares of | |
(2) | Activities may include customer visits, conference attendance, or training meetings. |
The Company maintains a Deferred Compensation Plan for non-management Directors (“Deferred Plan for Directors”) which enables Directors, at their election, to defer all or a portion of their annual Board and Committee retainers into:
• | A Stock Unit account in which each stock unit consists of one share | |
• | A Cash account which is credited with interest at the prime rate in effect at the Company’s principal commercial bank on the date immediately following each regularly scheduled quarterly Board meeting. |
The Deferred Plan for Directors also enables such Directors, at their election, to defer all or a portion of their annual restricted share grant into:
Generally, all distributions under the Deferred Plan for Directors are paid only after termination of service, and may be paid in a lump sum or in annual installments, at the Director’s election. However, in the event of a change of control, all amounts credited to a Director’s account are paid in a lump sum, with amounts credited as stock units immediately converted into a right to receive cash.
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement15
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 16 |
Director Compensation Table for Fiscal Year 20132016
The following table shows the compensation paid by the Company to non-management Directors for service on the Company’s Board of Directors during fiscal year 2013.2016. Mr. Nord receives no compensation beyond that described in the Executive Compensation section on page 3941 for his service as Director.
Name | Fees Earned or Paid in Cash(1) ($) | Stock Awards(2) ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation(3)(4) ($) | Total ($) | Fees Earned or Paid in Cash(2) ($) | Stock Awards(3) ($) | All Other Compensation(4)(5) ($) | Total ($) | |||||||||
Carlos M. Cardoso | 82,544 | 109,992 | – | 336 | 192,872 | 92,000 | 119,931 | 5,330 | 217,261 | |||||||||
Lynn J. Good | 96,511 | 109,992 | – | 4,336 | 210,839 | |||||||||||||
Anthony J. Guzzi | 98,000 | 109,992 | – | 4,336 | 212,328 | 100,945 | 119,931 | 4,330 | 225,206 | |||||||||
Neal J. Keating | 90,000 | 109,992 | – | 2,336 | 202,328 | 93,310 | 119,931 | 330 | 213,571 | |||||||||
John F. Malloy | 90,000 | 109,992 | – | 336 | 200,328 | 95,297 | 119,931 | 1,580 | 216,808 | |||||||||
Andrew McNally IV | 95,000 | 109,992 | – | 4,336 | 209,328 | |||||||||||||
Judith F. Marks | 82,472 | 119,931 | 330 | 202,733 | ||||||||||||||
David G. Nord | – | – | – | – | – | — | — | — | — | |||||||||
Timothy H. Powers(5) | 533,865 | 109,992 | 425,000 | 89,653 | 1,158,510 | |||||||||||||
G. Jackson Ratcliffe | 80,000 | 109,992 | – | 736 | 190,728 | |||||||||||||
Carlos A. Rodriguez | 87,000 | 109,992 | – | 336 | 197,328 | 32,102 | — | 137 | 32,239 | |||||||||
John G. Russell | 87,000 | 109,992 | – | 336 | 197,328 | 90,310 | 119,931 | 5,050 | 215,291 | |||||||||
Steven R. Shawley(6) | – | – | – | – | – | |||||||||||||
Steven R. Shawley | 100,000 | 119,931 | 330 | 220,261 | ||||||||||||||
Richard J. Swift | 95,000 | 109,992 | – | 4,336 | 209,328 | 95,000 | 119,931 | 330 | 215,261 | |||||||||
Daniel S. Van Riper(7) | 35,588 | – | – | 140 | 35,728 |
(1) | Mr. Rodriguez retired from the Board effective May 3, 2016. The amounts shown in the table reflect compensation paid to him from January 1, 2016 through his retirement date. |
(2) | Includes the following amounts deferred and held under the Company’s Deferred Plan for Directors: Mr. |
Amounts shown represent the grant date fair value of | |
Includes the Company’s payment of | |
Includes a Company matching contribution to an eligible educational institution under The Harvey Hubbell Foundation Educational Matching Gifts Program in the following amounts: | |
As of December 31, 2013,2016, the following table shows the balance in each non-management Directors’ (i) stock unit account (each stock unit consists of one share each of Class A and Class B Common Stock) and (ii) restricted stock unit account (each restricted stock unit consists of one share of Class B Common Stock) under the Deferred Plan for Directors. See the “Deferred Compensation Plan”Plan for Directors” section on page 1516 for additional information:
Name | Aggregate No. of Stock Units Held at Year End (#) | Aggregate No. of Restricted Stock Units Held at Year End (#) | Aggregate No. of Stock Units Held at Year End (#) | Aggregate No. of Restricted Stock Units Held at Year End (#) | ||||
Carlos M. Cardoso | 428 | 1,150 | 1,996 | 4,431 | ||||
Lynn J. Good | 2,229 | 2,595 | ||||||
Anthony J. Guzzi | 7,866 | 2,595 | 22,129 | 5,975 | ||||
Neal J. Keating | 1,119 | 2,595 | 4,135 | 5,975 | ||||
John F. Malloy | 620 | 1,446 | 1,502 | 1,543 | ||||
Andrew McNally IV | — | — | ||||||
Judith F. Marks | — | 1,162 | ||||||
David G. Nord | — | — | — | — | ||||
Timothy H. Powers | 591 | 1,150 | ||||||
G. Jackson Ratcliffe | — | — | ||||||
Carlos A. Rodriguez | 2,292 | 2,595 | ||||||
Carlos A. Rodriguez(1) | 7,824 | 4,812 | ||||||
John G. Russell | 1,054 | 2,595 | 5,304 | 5,975 | ||||
Steven R. Shawley | — | — | 2,867 | 3,204 | ||||
Richard J. Swift | 6,737 | — | 17,123 | — | ||||
Daniel S. Van Riper | 3,592 | — |
(1) | At the time of his retirement, Mr. Rodriguez’s stock unit account balance was 7,683 stock units and his restricted stock unit account balance was 4,725 stock units. The first of multiple tranches of these stock units were paid out in shares of the Company’s Common Stock in January, 2017, pursuant to his election under the Deferred Plan for Directors. |
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement16
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 17 |
The Board of Directors has adopted the Company’s Corporate Governance Guidelines (“Guidelines”) to assist the Board in the exercise of its responsibilities and to best serve the interests of the Company and its shareholders. The Guidelines reflect the Board’s commitment to good governance through the establishment of policies and procedures in areas it believes are critical to the enhancement of shareholder value. It is the Board’s intention that these Guidelines serve as a framework within which the Board can discharge its duties and foster the effective governance of the Company. The Board of Directors met 910 times in 2013.2016.
Governance Snapshot | ||
• Shareholders have identicaleconomic and voting rights – each share of Common Stock is entitled to one vote • Anindependent Lead Director counterbalances a unified Chairman/ CEO and fosters effective collaboration and communication among independent directors • Directors areelected annually by shareholders to serve a one-year term • Directors arerequired to own Company stock equal in value to four times their annual retainer – all directors are in compliance with this policy •All directors attended our Annual Shareholder meeting, and eight directors attended 100% of all Board and committee meetings on which they are a member • Our Board and managementannually certify compliance with our Code of Business Conduct and Ethics • No director serves on more than fiveoutside Boards, or more than two outside Audit Committees • Independent Board members meetregularly in Executive Session, without management present | • The Company’s formershareholder rights plan expired in December 2016 and was not renewed • Ourdirector resignation policy requires any director who fails to receive a majority of the votes cast to tender his or her resignation • Our Board consists of amajority of independent directors and our Audit, Compensation, and Nominating and Corporate Governance Committees are 100% independent • In compiling a diverse Board, director nominees are evaluated on their background and experience, and alsogender, race and ethnicity • Directorcompensation is reviewed annually with advice from our outside compensation consultant, and benchmarked for competitiveness • The Board and each committee annually conduct aperformance evaluation • There areno related party transactions with our directors or officers and significant shareholders • 67% of our Board has atenure of less than six years |
The Guidelines indicate that the Board shall be comprised of a majority of independent Directors. In evaluating the independence of Directors, each year the NCGC reviews all relationships between Directors (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company or any of its subsidiaries) and the Company and its subsidiaries in accordance with the rules of the New York Stock Exchange (“NYSE”) and the Securities and Exchange Commission (“SEC”) and considers whether any relationship is material. The NCGC also reviews responses to annual questionnaires completed by each of the Directors, a report of transactions with Director-affiliated entities, Code of EthicsConduct compliance certifications, case submissions filed with the Company’s confidential communication hotline,resource, and Company donations to charitable organizations with which a Director may be affiliated (noting that The Harvey Hubbell Foundation Educational Matching Gifts Program is available to all Directors, officers and employees and matches eligible gifts up to a maximum of $4,000$5,000 made by an individual in a calendar year). Following reviewyear, and discussion, the NCGC and the Company’s Secretary provide the results of this analysis and supporting informationcontributions to the Board of Directors.qualifying charitable organizations up to $10,000).
In evaluating and determining the independence of the Directors, the NCGC considered that in the ordinary course of business, transactions may occur between the Company and its subsidiaries and entities with which some of the Directors are or have been affiliated. For example:
The NCGC considered the nature and dollar amounts of the above transactions below and determined that none were required to be disclosed as a related party transaction under the federal securities laws or otherwise impaired the applicable Director’s independence as all of these ordinary course transactions were significantly below the NYSE bright-line independence threshold of the greater of $1 million, or 2% of the other company’s sales, and were immaterial to all companies involved. As a result of this review, the Board has determined that each of the current Directors is independent other than Mr. Nord. In addition, the Board determined that Mr. Nord isRodriguez, who served as a director during 2016 but did not stand for re-election at the 2016 Annual Meeting, was independent. In evaluating and determining the independence of the Directors, the NCGC considered an independent Director becausethat in the ordinary course of his employment asbusiness, transactions may occur between the Company’s current PresidentCompany and CEO.its subsidiaries and entities with which some of the Directors are or have been affiliated. For example:
• | Mr. Cardosois a former executive officer of Kennametal, Inc. and as a director of Stanley Black & Decker, Inc., with which the Company engages in ordinary course business transactions. In 2016, the Company purchased tools and component parts from Kennametal and tools and maintenance supplies from Stanley Black & Decker which purchases constituted less than 0.5% of each of Kennametal’s and Stanley Black & Decker’s sales during 2016. | |
• | Mr. Guzziserves as a director and executive officer of EMCOR Group, Inc., with which the Company engages in ordinary course business transactions. In 2016, the Company sold cable glands and enclosure products to EMCOR Group. These transactions constituted less than 0.5% of EMCOR’s sales during 2016. | |
• | Mr. Keatingserves as a director and executive officer of Kaman Corporation, with which the Company engages in ordinary course business transactions. In 2016, the Company sold ethernet and business access equipment to Kaman Corporation and purchased certain component parts from Kaman. These transactions constituted less than 0.5% of Kaman’s sales during 2016. | |
• | Mr. Malloyserves as a director and executive officer of Victaulic Company, with which the Company engages in ordinary course business transactions. In 2016, the Company sold motor control products to Victaulic which transactions constituted less than 0.5% of Victaulic’s sales during 2016. | |
• | Ms. Marksserves as an executive officer of Siemens Corporation, with which the Company engages in ordinary course business transactions. In 2016, the Company sold lighting, connectors and compression products to Siemens which transactions constituted less than 0.5% of Siemen’s sales during 2016. | |
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement17
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 18 |
Waiver to Stand for Re-Election
The Guidelines provide that upon reaching age 72 a director shall not stand for re-election unless the Board, based upon the recommendation of the NCGC, makes an exception to this standard as deemed appropriate in the interests of the Company’s shareholders. Mr. Ratcliffe reached the age of 72 in March 2008 and since then has been granted waivers of this guideline in recognition of his extensive managerial experience and deep knowledge of the Company’s businesses. Mr. McNally reached age 72 in November 2011 and was granted a waiver in 2012 and 2013 for his invaluable Company experience and insights gained from serving the Company’s shareholders as a Director for over thirty years. As a result, the NCGC and Board determined that a waiver of the guideline continued to be appropriate for Mr. Ratcliffe and Mr. McNally in connection with the 2014 election of Directors.
• | Mr. Rodriquezserves as a director and executive officer of ADP, with which the Company engages in ordinary course business transactions. In 2016, the Company purchased payroll processing services from ADP which purchases constituted less than 0.5% of ADP’s sales during 2016. | |
• | Mr. Russellserves as a director of CMS Energy and Consumers Energy, with which the Company engages in ordinary course business transactions. In 2016, the Company sold power transmission and distribution products, and communications equipment to CMS Energy and Consumers Energy. These transactions constituted less than 0.5% of each of CMS Energy’s and Consumers Energy’s respective sales during 2016. | |
• | Mr. Shawleyis a former executive officer Ingersoll-Rand Company with which the Company engages in ordinary course business transactions. During 2016, the Company sold motor controls to Ingersoll-Rand Company and purchased tools and maintenance related items from Ingersoll-Rand. These transactions constituted less than 0.5% of Ingersoll-Rand’s, sales during 2016. | |
• | Mr. Swiftserves as a director of Ingersoll-Rand Company, Kaman Corporation, CVS Caremark and Public Service Enterprise Group Inc. (“PSEG”) with which the Company engages in ordinary course business transactions. During 2016, the Company sold motor controls to Ingersoll-Rand Company, ethernet and business access equipment to Kaman Corporation, and electrical enclosures to PSEG. In addition, during 2016 the Company purchased tools and maintenance related items from Ingersoll-Rand, tools and component parts from Kaman, prescription management services from CVS Caremark and utility power service products from PSEG. These transactions constituted less than 0.5% of each of Ingersoll-Rand’s, Kaman’s, CVS Caremark’s, and PSEG’s respective sales during 2016. |
In searching for qualified Director candidates for election to the Board and to fill vacancies on the Board, the Board may solicit current Directors or members of executive management for the names of potentially qualified candidates, consult with outside advisors, retain a director search firm or consider nominees suggested by shareholders. All nominees for election of Director in 2017 are current Directors of the Company. In 2016, the Company did not utilize the services of any third party firms or advisors to identify or assist in the evaluation of director candidates.
All Director candidates, including any Director candidates recommended by shareholders, are reviewed and evaluated by the NCGC in relation to the specific qualifications and experience sought by the Board for membership (as discussed in the “Election of Directors” section on page 11)10), and the Board’s needs at that time. A candidate whose qualifications and experience align with this criteria is then interviewed by members of the NCGC, other Board members, and executive management to further assess the candidate’s qualifications and experience and determine if the candidate is an appropriate fit. Candidates may be asked to submit additional information to support their potential nomination and references may be requested. Upon reviewing the candidate as a whole, the NCGC considers whether to recommend the candidate’s nomination to the Board. If the Board approves of the NCGC recommendation, the candidate is then nominated for election by the Company’s shareholders or appointed by the Board to fill a vacancy, as applicable.
Any shareholder who intends to recommend a candidate to the NCGC for consideration as a Director nominee should deliver written notice, which must include the same information requested by Article I, Section 11(a)11(A) (2) of our By-Laws, to the Secretary of the Company with the following information about the nominee:candidate:
• | Biographical data (business experience, board service, academic credentials) | |
• | Transactions between the shareholder and the candidate, and the Company or its management | |
• | Relationships or arrangements between the shareholder and the candidate | |
• | Any other transactions or relationships which the Board of Directors should be aware of in order to evaluate the candidate’s independence | |
• | Details of any litigation involving the shareholder and candidate adverse to the Company or associated with an entity engaged in such litigation | |
• | Whether the candidate or any company at which the candidate is a current or former officer or director is, or has been, the subject of any SEC, criminal or other proceedings or investigations related to fraud, accounting or financial misconduct, or any other material civil proceedings or investigations | |
• | Written consent confirming the candidate’s (i) consent to be nominated and named in the Company’s Proxy Statement and, if elected, to serve as a Director of the Company and (ii) agreement to be interviewed by the NCGC and to submit additional information if requested |
Any such notice should be delivered to the Company sufficiently in advance of the Company’s annual meeting to permit the NCGC to complete its review in a timely fashion.
The Company’s By-Laws require the Board to choose the Chairman of the Board from among the Directors and provide the Board with the ability to appoint the CEO of the Company as the Chairman of the Board. This approach gives the Board the necessary flexibility to determine whether these positions should be held by the same person or by separate persons based on the leadership needs of the Company at any particular time. The Board believes that there is no single, generally accepted approach to providing Board leadership, and that each of the possible leadership structures for a board must be considered in the context of the individuals involved and the specific circumstances facing a company at any given time. Accordingly, the optimal board leadership structure for a particular company may vary as circumstances change.
Effective January 1, 2013, the Board appointed Mr. Nord has served as the Company’sChairman, President and CEO succeeding Mr. Powers who will remain Chairman of the Company since May 2014. The Board through the 2014 Annual Meeting. In connection with the succession of Mr. Nord as the Company’s CEO, the Boardhas determined that Mr. Powers should continue to serve ascombining the Chairman during the transitionroles of the CEO role to Mr. Nord. The Board determined that this structureand Chairman is best for the Company and its shareholders at this time because it allowspromotes unified leadership by Mr. Nord asand allows for a new CEO,single, clear focus for management to dedicate himself to operational matters during this transition phase, while providing for Board leadership continuity by allowing Mr. Powers to focus on Board-related matters. The Company adopted a similar board leadership structure during its previous leadership transition when from 2001 to 2004, to assist inexecute the transition of leadership from Mr. Ratcliffe (the Company’s former Chairman, Presidentstrategy and CEO) to Mr. Powers, the Board determined that the Company was best served by having one person serve as the Chairman of the Board and another person serve as President and CEO.business plans.
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement18
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 19 |
In addition, theLead Director
The Board has established the position of an independent Lead Director who is appointed from the full Board membership, upon the recommendation of the NCGC, to serve a one-yearthree-year term commencing immediately following the Company’s Annual Meeting. The Board believes that a three-year term is appropriate for the Lead Director:Director as it affords greater continuity and allows the Lead Director to gain a better understanding of Board and management dynamics and build relationships with the other Directors. The Lead Director is responsible for:
• | Providing leadership to the | ||
Chairman’s role may be perceived to be in conflict | |||
• | Coordinating the agenda | ||
directors regularly throughout the year | |||
• | Regularly meeting with the Chairman and facilitates communications between the | ||
independent directors | |||
• | Spokesperson | Upon request, | |
• | Working with the NCGC and the Chairman to review and maintain the Company’s succession plans |
At such times as the Chairman is an independent director, the Chairman serves as the Lead Director. Currently, Mr. Guzzi is the Lead Director and is expected to hold this position until the 20142019 Annual Meeting. The Board believes that its present leadership structure and composition provides for independent and effective oversight of the Company’s business and affairs as further demonstrated by the fact that its members are current or former CEOs, CFOs or COOs of major companies in similar industries, its Audit, Compensation, and Nominating and Corporate Governance Committees are comprised entirely of Directors who meet the independence requirements of the NYSE, and Mr. Nord is the only Director who is a member of executive management. Given the strong operational leadership of Mr. Nord as Chairman, President and CEO, the continuing oversight by Mr. Powers as Chairmancounterbalancing role of the Board,Lead Director and a Board comprised of effective and independent Directors, the Board believes that its current leadership structure is appropriate at this time.
However, Mr. Powers is not standing for re-election to the Board at the 2014 Annual Meeting. In light of Mr. Powers’ retirement after the 2014 Annual Meeting, the Board is evaluating its leadership needs based on the Company’s circumstances after his retirement, as discussed above, and expects to appoint a new Chairman of the Board after the Annual Meeting based on the results of this evaluation.
The Board of Directors is responsible for overseeing the Company’s risk management practices, and Committees of the Board assist it in fulfilling this responsibility.
The Audit Committee routinely discusses with management the Company’s policies and processes with respect to risk assessment and risk management, the Company’s major financial risk exposures, and the actions management has taken to limit, monitor or control such exposures. Annually, the full Board reviews with management the implementation and results of the Company’s Enterprise Risk Management Program (“ERMP”). The ERMPenterprise risk management program which identifies and quantifies a broad spectrum of enterprise-wide risks in various categories, such as hazards,strategic, operational, compliance, financial operational, strategic and technical,information technology, and related action plans.
The ERMP is integratedBoard’s other committees - Compensation, Nominating and Corporate Governance, and Finance – oversee risks associated with their respective areas of responsibility as set forth in their charters. For example, the Finance Committee considers risks associated with the Company’s capital structure or acquisition strategy, and the Compensation Committee considers risks associated with its compensation plans and policies. The committees provide detailed reports to the full Board of Directors on risks and other matters that may have been considered and evaluated during its meetings.
Members of senior management assist the Board and committees with their risk oversight responsibilities through routine discussions of risks involved in their specific areas of responsibility. For example, our principal business leaders will report to the Board at regular intervals during the year on the Company’s strategic planning process so that any risk identified as strategic in nature has an action plan in placeactivities and risks relevant to mitigate or eliminate it.
The Company’s Internal Audit and Legal Departments also reportexecution of the strategy. In addition, from time to the appropriate Board Committee on any significant risk exposures they have encountered in the course of their work that may impact the Company. Such risk exposures may arise from reviews of cases submitted to the Company’s confidential communication hotline, Listen Up; reports of audits conducted by the Internal Audit Department; Code of Ethics or compliance-related matters; major litigation and regulatory issues; and any other matters brought to its attention from other functionaltime, independent consultants with specific areas of expertise are engaged to discuss topics that the Company thatBoard and management have determined may present a material risk to the Company’s operations, plans or reputation. Management reports provided to a Board Committee on risk exposures may include detailed risk descriptions, analyses, investigations, action plans and timelines, as appropriate. Progress reports are routinely provided until the risk is satisfactorily mitigated or eliminated. Each Board Committee, as part of its reporting responsibilities under its Charter, discusses the nature and status of these risk reports with the full Board and with Company management in attendance, if appropriate. In between regular meetings, Board members may directly contact management at their discretion to review and discuss any risk-related or other concerns that may have arisen.
In 2013,2016, as part of its risk management activities, the Company reviewed with the Compensation Committee its compensation policies and practices applicable to all employees that could affect the Company’s assessment of risk and risk management and determined that such compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. The Board does not believe that its role in the oversight of the Company’s risks affects the Board’s leadership structure.
Code of Business Conduct and Ethics
The Company requires its Directors and officers to act in accordance with the highest standards of ethical conduct and has adopted a Code of Business Conduct and Ethics Policy(“Code of Conduct”) that supports the Company’s commitment to the people we serve, the communities we work in, the Company and each other. Underlying this commitment is a strong set of core values of– integrity, responsibility, respect for the individual,discipline, collaboration, and a commitment to excellence.excellence – that guide our actions and decisions. Our Code of Ethics PolicyConduct covers many areas of professional conduct ranging from conflicts of interest, ethical business conduct, employment policies,practices, compliance with applicable laws and regulations, protection of Company assets and confidential information, and reporting obligations. Each year, to strengthen the Company’s commitment to ethical conduct, we provide training on various aspects of the Code of Ethics PolicyConduct and require all Directors and officers to certify compliance with the Code of EthicsConduct Policy. Waivers to the Code of EthicsConduct for Directors and executive officers may be granted only by the Board of Directors or an appropriate Board Committee and, along with any amendments, will be promptly disclosed to Company shareholders on the Company’s website. The Code of Ethics PolicyConduct can be viewed on the Company’s website atwww.hubbell.com.
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement19
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 20 |
Shareholders and interested parties may communicate with the full Board, the Lead Director, the non-management Directors as a group, or with individual Directors by using either of the following methods:
By Writing: | Board of Directors | |
Hubbell Incorporated | ||
c/o Megan C. Preneta, Corporate Secretary | ||
40 Waterview Drive | ||
Shelton, Connecticut 06484 | ||
By Email: | Secretary@hubbell.com |
Communications will be forwarded to the specific Director(s) requested by the interested party. General communications will be distributed to the full Board, or to a specific member of the Board depending on the material outlined in the communication. Certain items unrelated to the duties and responsibilities of the Board will not be forwarded including job inquiries and resumes, business opportunities, junk or mass mailings, spam, or any hostile, improper, threatening or illegal communication.
The Board of Directors has established the following standing Committees to assist it in fulfilling its responsibilities: Audit, Compensation, Executive, Finance, and Nominating and Corporate Governance. The principal responsibilities of each of these Committees are described generally below, and in detail in their respective Committee Charters. The Charters for each of the Board Committees, except the Executive Committee,which are available on the Company’s website atwww.hubbell.com.www.hubbell.comThe Charter for, or in the case of the Executive Committee is incorporated intoCharter, in Article III, Section 1, of the Company’s By-Laws which is also available on the website.By-Laws. The Board has determined that each member of the Audit, Compensation and Nominating and Corporate Governance Committees is independent for purposes of the NYSE listing standards and SEC regulations.
Audit Committee | 8 meetings in 2016 |
Members: Steven R. Shawley (Chair) Carlos M. Cardoso John F. Malloy Judith F. Marks | Key Oversight Responsibilities • Oversees the Company’s accounting and financial reporting and disclosure processes • Appoints the independent auditors and evaluates their independence and performance annually • Reviews the audit plans and results of the independent auditors • Approves all audit and non-audit fees for services performed by the independent auditors • Reviews and discusses with management and the independent auditors matters relating to the quality and integrity of the Company’s financial statements, the adequacy of its internal controls processes, and compliance with legal and regulatory requirements |
The Audit Committee is responsible for oversight of the Company’s accounting and financial reporting and disclosure processes. Among its responsibilities, the Audit Committee appoints the independent auditors and evaluates their independence and performance annually, reviews the audit plans and results of the independent auditors and internal auditors, and approves all audit and non-audit fees for services performed by the independent auditors. The Audit Committee also reviews and discusses with management and the independent auditors matters relating to the quality and integrity of the Company’s financial statements, the adequacy of its internal controls processes, and compliance with legal and regulatory requirements. The Audit Committee routinely meets in private sessions with the independent auditors, management and the internal auditors to facilitate the free and open communication of matters relating to Company’s financial statements and disclosures. The Board of Directors has determined that each member of the Audit Committee is financially literate, at least one member of the Audit Committee meets the NYSE standard of having accounting or related financial management expertise, and that Ms. Good and Mr. Shawley areis an “audit committee financial experts”expert” as defined by the SEC. The Audit Committee met 8 times in 2013.
Compensation Committee | 5 meetings in 2016 |
Members: Richard J. Swift (Chair) Carlos M. Cardoso Neal J. Keating John G. Russell | Key Oversight Responsibilities • Determines and oversees the Company’s execution of its compensation philosophy • Approves all compensation of the CEO and other members of senior management • Oversees the development and administration of the Company’s compensation and benefit plans |
The Compensation Committee determines and oversees the Company’s execution of its compensation philosophy, approves all compensation of the CEO and other members of senior management, and oversees the development and administration of the Company’s compensation and benefit plans. For more information on the responsibilities of and actions taken by the Compensation Committee, see the “Compensation Discussion and Analysis” section beginning on page 26. The Compensation Committee met 5 times in 2013.
Executive Committee | Did not meet in 2016 |
Members: David G. Nord, (Chair) Anthony J. Guzzi Neal J. Keating John F. Malloy Richard J. Swift Steven R. Shawley | Key Oversight Responsibilities The Executive Committee may meet during intervals between meetings of the Board of Directors and may exercise all the powers of the Board of Directors in the management of the business and affairs of the Company, except certain powers set forth in the By-Laws of the Company. |
Executive Committee
The Executive Committee meets during intervals between meetings of the Board of Directors and may exercise all the powers of the Board of Directors in the management of the business and affairs of the Company, except certain powers set forth in the By-Laws of the Company.
Finance Committee
The Finance Committee oversees the Company’s financial and fiscal affairs and reviews proposals regarding long- and short-term financing, material acquisitions, dividend policies, stock repurchase programs, and changes in the Company’s capital structure. The Finance Committee also reviews the Company’s major capital expenditure plans, monitors tax rates and the Company’s insurance programs, and reviews the administration and management of the Company’s pension plans and investment portfolios.
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement20
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 21 |
Finance Committee | 6 meetings in 2016 |
Members: John F. Malloy (Chair) Anthony J. Guzzi John G. Russell Steven R. Shawley | Key Oversight Responsibilities • Oversees the Company’s financial and fiscal affairs and reviews proposals regarding long- and short-term financing, material acquisitions, dividend policies, stock repurchase programs, and changes in the Company’s capital structure • Reviews the Company’s major capital expenditure plans, monitors the Company’s insurance programs • Reviews the administration and management of the Company’s pension plans and investment portfolios |
Nominating and Corporate Governance Committee
Nominating and Corporate Governance Committee | 4 meetings in 2016 |
Members: Neal J. Keating (Chair) Anthony J. Guzzi Judith F. Marks John G. Russell Richard J. Swift | Key Oversight Responsibilities • Develops the Company’s corporate governance guidelines and monitors adherence to its principles • Approves related person transactions • Evaluates director independence and compensation • Reviews matters relating to the Code of Business Conduct and Ethics • Identifies qualified individuals to become Board members, recommends nominees for election or appointment to the Board, and oversees the Board’s and management’s performance evaluation and succession planning process |
The Nominating and Corporate Governance Committee is responsible for the development of the Company’s corporate governance guidelines and the adherence to its principles. The Committee approves related person transactions, evaluates director independence and compensation, and reviews matters relating to the Code of Ethics Policy. The Committee’s duties also include identifying qualified individuals to become Board members, recommending nominees for election or appointment to the Board, and overseeing the Board’s and management’s performance evaluation and succession planning process. See the “Director Independence” and “Director Nomination Process” sections on pages 18 and 55page 19 for more information on the actions taken by the Committee in these areas. The Nominating and Corporate Governance Committee met 4 times in 2013.
Board and Committee Membership
During 2013, seven Directors then in office2016, no Director attended 100%fewer than 75% of the aggregate of the total number of meetings of the Board of Directors and the total number of meetings and Committee meetingsheld by all Committees of which they were a member, and five Directors attended 75% or more of the aggregate number of Board meetings and Committee meetings of which they weresuch Director served as a member. Board members are expected to attend the Annual Meeting of Shareholders. At the 20132016 Annual Meeting, all Directors then in office were in attendance.
The Corporate Governance Guidelines and the following additional materials relating to corporate governance are published on our website atwww.hubbell.com.
• | Board of Directors - Current Members and Experience | |
• | Code of Business Conduct and Ethics | |
• | Amended and Restated By-Laws | |
• | Compensation Recovery Policy | |
• | Board Committees - Members and Charters | |
• | Restated Certificate of Incorporation | |
• | Stock Ownership Guidelines | |
• | Contacting our Board of Directors |
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement21
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 22 |
VOTING RIGHTS AND SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company has two classesa single class of stock: Class A Common Stock and Class B Common Stock. Each share of Class A Common Stock is entitled to twenty votes, and each share of Class B Common Stock is entitled to one vote. On March 7, 2014,3, 2017, the Company had outstanding 7,167,50655,381,614 shares of Class A Common Stock and 51,933,697 shares of Class B Common Stock. The following table sets forth as of March 7, 20143, 2017 the beneficial owners known to us of more than 5% of the Company’s Class A and Class B Common Stocks:Stock:
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||||
The Vanguard Group 100 Vanguard Blvd. Malvern, Pennsylvania 19355 | |||||||
| 3,959,337(2) | 7.2% | |||||
| |||||||
| |||||||
Capital World Investors 333 South Hope Street Los Angeles, California 90071 | 3,430,000(3) | ||||||
6.2% |
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 22
(1) | |
The Company has received a copy of Schedule 13G, as amended, as filed with the SEC on February 13, | |
The Company has received a copy of Schedule 13G, as amended, as filed with the SEC on January | |
The Company has received a copy of Schedule 13G, as amended, as filed with the SEC on February |
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement23
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 23 |
The following table sets forth as of March 7, 20143, 2017 information regarding the beneficial ownership of the Company’s Class A and Class B Common Stocks by each Director, the Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and the three other most highly paid executive officers of the Company (collectively, the “named executive officers” or “NEOs”), and by all Directors and executive officers of the Company as a group.
Name | Common Stock | Shares Obtainable Upon Exercise of Options/SARs(1) | Total Beneficial Ownership | Percent of Class | ||||||||||||
Cardoso | ||||||||||||||||
Class B Common | 1,000 | — | 1,000 | (2)(3) | * | |||||||||||
Good | ||||||||||||||||
Class B Common | 4,321 | — | 4,321 | (2)(3) | * | |||||||||||
Guzzi | ||||||||||||||||
Class B Common | 6,480 | — | 6,480 | (2)(3) | * | |||||||||||
Keating | ||||||||||||||||
Class B Common | 5,571 | — | 5,571 | (2)(3) | * | |||||||||||
Malloy | ||||||||||||||||
Class B Common | 6,713 | — | 6,713 | (2)(4) | * | |||||||||||
McNally | ||||||||||||||||
Class A Common | 3,490,891 | — | 3,490,891 | (6) | 48.70% | |||||||||||
Class B Common | 35,026 | 35,026 | (4) | * | ||||||||||||
Powers | ||||||||||||||||
Class B Common | 263,315 | 149,348 | 412,663 | (2)(3)(7) | * | |||||||||||
Ratcliffe | — | |||||||||||||||
Class A Common | 3,571,682 | 3,571,682 | (6) | 49.83% | ||||||||||||
Class B Common | 171,301 | — | 171,301 | (4) | * | |||||||||||
Rodriguez | ||||||||||||||||
Class B Common | 3,121 | — | 3,121 | (2)(3) | * | |||||||||||
Russell | ||||||||||||||||
Class B Common | 1,100 | — | 1,100 | (2)(3) | * | |||||||||||
Shawley | ||||||||||||||||
Class B Common | 1,000 | — | 1,000 | (2)(3) | * | |||||||||||
Swift | ||||||||||||||||
Class B Common | 8,303 | — | 8,303 | (2)(4) | * | |||||||||||
Nord | ||||||||||||||||
Class B Common | 78,424 | 102,931 | 181,355 | (5) | * | |||||||||||
Sperry | ||||||||||||||||
Class B Common | 24,216 | 25,210 | 49,426 | (5) | * | |||||||||||
Amato | ||||||||||||||||
Class B Common | 24,362 | 0 | 24,362 | (5) | * | |||||||||||
Tolley | ||||||||||||||||
Class B Common | 20,059 | 43,553 | 63,612 | (5) | * | |||||||||||
Muse | ||||||||||||||||
Class B Common | 36,110 | 65,243 | 101,353 | (5) | * | |||||||||||
All Directors and executive officers as a group (22 persons) | ||||||||||||||||
Class A Common | 3,897,384 | 3,897,384 | (2)(6)(8)(10) | 54.38% | ||||||||||||
Class B Common | 904,243 | 448,442 | 1,352,685 | (2)(3)(4)(5)(7)(9)(11) | 2.60% |
In addition to the shares of Common Stock reflected below, our Directors hold stock units and restricted stock units, as applicable, under the Deferred Plan for Directors. These deferred stock units are reflected in footnotes (2) and (3) in the table below, and in the Director Compensation section on page 16.
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 24
Name and Title of Class | Common Stock | Shares Obtainable Upon Exercise of Options/SARs(1) | Total Beneficial Ownership | Percent of Class | ||||||||||||
Cardoso | 1,000 | — | 1,000 | (2)(3) | * | |||||||||||
Guzzi | 6,480 | — | 6,480 | (2)(3) | * | |||||||||||
Keating | 5,571 | — | 5,571 | (2)(3) | * | |||||||||||
Malloy | 9,794 | — | 9,794 | (2)(3)(4) | * | |||||||||||
Marks | 1,000 | — | 1,000 | (3) | * | |||||||||||
Russell | 1,100 | — | 1,100 | (2)(3) | * | |||||||||||
Shawley | 1,000 | — | 1,000 | (2)(3) | * | |||||||||||
Swift | 5,081 | — | 5,081 | (2)(4) | * | |||||||||||
Nord | 103,643 | 245,685 | 349,328 | (5) | * | |||||||||||
Sperry | 36,999 | 32,518 | 69,517 | (5) | * | |||||||||||
Ruland | 7,153 | 17,214 | 24,367 | (5) | * | |||||||||||
Hsieh | 10,905 | 35,423 | 46,328 | (5) | * | |||||||||||
Bakker | 9,763 | 27,561 | 37,324 | (5) | * | |||||||||||
All Directors and executive officers as a group (19 persons) | ||||||||||||||||
Common Stock | 707,515 | 434,080 | 1,141,595 | (2)(6)(7) | 1.28% |
* | Less than 1%. |
(1) | Represents shares of |
43. | |
(2) | Does not include stock units (each stock unit consisting of one share |
—17,123. | |
(3) | Does not include vested and unvested restricted stock units (“RSU’s”) (each RSU consisting of the right to receive one share of |
5,975 and Mr. Shawley — 3,204. | |
(4) | Includes |
(5) | Includes the following shares of |
See the section “Outstanding Equity Awards at Fiscal Year End” on page 43. | |
(6) | Includes |
Includes | |
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 25
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 24 |
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) section of the Proxy Statement describes the material elements of the 20132016 compensation program for the following named executive officers:
• | Mr. David G. Nord, Chairman, President and Chief Executive Officer | |
• | Mr. William R. Sperry, Senior Vice President and Chief Financial Officer | |
• | Mr. | |
• | Mr. | |
• | Mr. |
On January 1, 2013, the Board of Directors appointed Mr. David G. Nord President and Chief Executive Officer of the Company. Mr. Nord succeeded Mr. Timothy H. Powers, the Company’s former President and Chief Executive Officer, who remained an executive officer of the Company in the role of executive Chairman of the Board from January 1, 2013 until May 2013. In May 2013, Mr. Powers retired from the Company, was re-elected to the Board of Directors and appointed non-executive Chairman. In connection with this leadership transition, Mr. Powers’ compensation for his service as executive Chairman is reflected in the Director Compensation table on page 16.
Our Business
We are an international manufacturer of quality electrical and electronic products for a broad range of non-residential and residential construction, industrial and utility applications. Our operations are organized into two business segments —- the Electrical segment and the Power segment. The Electrical and Power segments represent approximately 71%70% and 29%30%, respectively, of our total revenue for 2013.2016. For more information about our business, please see our Annual Report on Form 10-K for the year ended December 31, 20132016 filed with the SEC on February 18, 2014.16, 2017.
Our Business Highlights
Our Company delivered another yearIn the face of strongchoppy end markets in 2016, we continued to focus on providing our customers with superior products and solutions while improving the competitiveness of our cost structure. Highlights of our financial performance in 2013 achieving record sales and earnings per diluted share. During 2013, we accomplished the following:are discussed below.
Year Ended December 31, | 2014 | 2015 | 2016 | |||||||||
Net Sales ($ Millions) | $ | 3,359 | $ | 3,390 | $ | 3,505 | ||||||
Adjusted Operating Income(1)($ Millions) | $ | 522.5 | $ | 513.5 | $ | 512.8 | ||||||
Adjusted Operating Margin (% of Net Sales)(1) | 15.6 | % | 15.1 | % | 14.6 | % | ||||||
Adjusted Diluted EPS(1) | $ | 5.54 | $ | 5.52 | $ | 5.66 | ||||||
Free Cash Flow (% of Net Income Attributable to Hubbell)(1) | 102 | % | 92 | % | 113 | % |
(1) | Adjusted operating income, adjusted operating margin, adjusted diluted earnings per share, and free cash flow are non-GAAP financial measures. A reconciliation to the comparable GAAP financial measures can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on February 16, 2017. |
Net Sales
Net Sales.Net sales for the year ended 20132016 were $3.184$3.5 billion, an increase of 5%three percent over the comparable period of 2015. Acquisitions added three percentage points to net sales in 2016 compared to 2012 with acquisitions contributing 3%2015, offset by the impact of the growth. The organicforeign currency translation which reduced net sales by one percentage point. Organic volume, including pricing headwinds, added one percentage point to net sales in 2016 as we saw growth was due to strength in thenon-residential and residential markets, continued declines in core industrial and higher demand for renovationoil markets and relight projects partially offset by weaker demandflat growth in the utility market.transmission and distribution markets. Net sales for the year ended 20122015 were $3.044$3.4 billion, an increase of 6%one percent over the year ended 2014. Acquisitions added three percentage points to net sales in 2015 compared to 2011 with acquisitions contributing 2%2014 offset by the impact of the growth. The organic growth of 4%foreign currency translation which reduced net sales by two percentage points. Organic volume was due to strengthflat in the energy markets, increased utility volume due to transmission projects and significant residential market growth.2015.
Operating Income
Operating Margin.Operatingincome of $477.8 million in 2016 increased 1% from the comparable period in 2015, while operating margin of 15.9% in 2013 increaseddeclined by 40 basis points to 13.6% when compared to 15.5% reported2015. Excluding restructuring and related costs, adjusted operating income of $512.8 million was in 2012. The increaseline with the comparable period in 2015, and the adjusted operating margin was due14.6% in 2016 compared to productivity15.1% in 2015. Savings from cost actions helped support operating margins and lower material costs.partially offset unfavorable price, foreign exchange, and mix impact of industrial and oil market declines. Operating income decreased eight percent in 2015 to $474.6 million, while operating margin of 15.5% in 2012 increased 70declined by 140 basis points to 13.4% when compared to 14.8% reported in 2011. The increase in2014. Excluding restructuring and related costs, adjusted operating income decreased two percent and the adjusted operating margin was 15.1% in 2015 compared to 15.6% in 2014.The decrease in operating income is primarily due to productivity, price realizationunfavorable product and lower material costsbusiness mix, and the unfavorable impact of foreign exchange, partially offset by otherthe favorable net impact of price and material costs as well as productivity in excess of cost increases, including pension and benefit related expenses.inflation.
Earnings Per Diluted Share
HUBBELL INCORPORATED - NoticeEarnings per diluted share in 2016 increased 10% compared to 2015. Excluding restructuring and related costs, and costs associated with the reclassification of 2014 Annual Meeting of Shareholders & Proxy Statement 26Common Stock, adjusted earnings per diluted share increased 3% in 2016 as compared to 2015 driven primarily by a lower
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 25 |
Earnings Per Diluted Share.average number of diluted shares outstanding for the year, which declined by approximately 2.3 million, more than offset tax headwinds. Earnings per diluted share in 2013 increased by 9%2015 decreased 13% compared to 2012 due to higher net sales and operating income. Earnings2014. Adjusted earnings per diluted share declined slightly in 2012 increased by 13%2015 as compared to 20112014 due to higher net sales andlower adjusted operating income, lower other expense partially offset by the impact of a higher effective tax rate. In addition, thelower average number of diluted shares outstanding decreased in 2012for the year, which declined by approximately 1.2 million as compared to 2011.2014.
Free Cash Flow as a % of Net Income.Income
Free cash flow (defined as cash flow from operations less capital expenditures) as a %percentage of Net Incomenet income attributable to Hubbell was 99%113% in 20132016 compared to 100%92% in 20122015, and 104%102% in 2011.2014.
In addition to the performance achievements noted above, during 20132016 the Company also:
Increased the quarterly 11% to | ||
– the 9th consecutive year of increase | ||
$173M on three acquisitions | ||
across both reporting segments | ||
$247M of shares and invested $67M in capital expenditures |
Additionally, the Company also reached the following milestones as part of its restructuring program. Since 2014:
Realized approximately $0.45 of cumulative savings per diluted EPS | ||
20 facilities representing almost 10% of |
We believe that our collective focus on furthering the vision of One Hubbell – serving our customers, operating with discipline, growing the enterprise and developing our people – provides the means for the Company to continue to grow profits and deliver attractive returns to our shareholders.
Our Compensation DecisionsPractices and PracticesDecisions
Our compensation decisions for 20132016 were directly influenced by the operating results for the year described above and reflect the strong relationship between pay and performance. To provide context to the decisions we made regarding our executive compensation, weWe use the following objectives to guide our decisions:
Attract, retainand high-quality executive talent essential to our immediate and long-term success | ||
Align the interests of executives with our shareholders with a compensation structure that reflects strongpay for performance orientation | ||
Deliver compensation to our executives that iscompetitive and fair as compared to relevant external benchmarks |
Our Compensation Committee has designed our compensation program to fulfill these objectives. The following page contains highlights of our compensation practices and decisions which exemplify our commitment to sound compensation governance and shareholder interests.
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 26 |
Compensation Governance Snapshot
WHAT WE DO | |||
Align CEO and NEO Pay with Shareholder Interests | |||
The Committee regularly reviews best practices in governance and executive compensation. In following with our compensation objectives and to demonstrate our commitment to best practice, in recent years we have implemented and maintain the following sound compensation governance practices:
Designate | |||
Limits on Executive Compensation | |||
Cap our | |||
Risk Mitigation | |||
We annually assess our compensation programs and policies to ensure that the features of our program do not encourage excessively risky business decisions | |||
Robust Stock Ownership: | |||
We require senior executives, including our named executive officers, to acquire and maintain ownership in Company stock equal to 3 and 5 times their base salary for the duration of their employment | |||
Strong Governance Practices: | |||
• | We ensure the independence of the Compensation Committee’s outside consultant each year by validating that the consultant perform no work other than as prescribed by the Compensation Committee and NCGC | ||
• |
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 27
• | ||
• | ||
WHAT WE DON’T DO | ||
No Above-Median Targeting of Executive Compensation: | ||
We target the total direct compensation, and each compensation element, of our executive officers at the median of our Peer Group | ||
No Hedging or Pledging | ||
We prohibit our executives, including our named executive officers, from hedging or engaging in derivatives trading with respect to Company stock | ||
No Repricing or Cash Buyouts | ||
We prohibit the repricing or buyout of options and SARs without shareholder approval | ||
No Tax Gross Ups | ||
We do not provide tax “gross ups” for perquisites, severance, or any other benefits provided to our executives, including the named executive officers | ||
Don’t Maintain Excessive Supplemental Retirement Plans | ||
2016 Key Compensation Decisions
Froze | Eliminated | Adopted | Recommended | |||
Froze the Company’s Supplemental Executive Retirement Plan which had been closed to new participants since 2007 Effective: 12/31/16 | Eliminated the single trigger vesting of equity awards on a change in control | |||||
as amended and restated Effective: 12/06/16 | ||||||
Adopted asafe harbor 401(k) plan with an automatic, non-discretionary participant contribution of 4% of eligible earnings Effective: 01/01/17 | ||||||
Effective: 05/02/17 |
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 27 |
Our Shareholders’ Feedback – “Say on Pay”
The Company is submitting to shareholders an opportunity to cast an advisory voteSay on the compensation of the named executive officers. Pay / Say When on Pay
As described in this CD&A, we believe that our executive compensation program is designed both appropriately and effectively to achieve its overall objectives. At the Company’s 2011 and 2014 Annual Meeting of Shareholders, 97% and 98%, respectively, of the votes cast on our say on pay proposal were voted in favor of the Company’s executive compensation program. We believe these strong results indicate that our shareholders are generally supportive of our compensation approach. Accordingly, since 2011 the Compensation Committee has chosen largely to maintain the structure and components of the executive compensation program, while continuing to evaluatecontinually evaluating its effectiveness in meeting the Company’s compensation objectives. Notably, in 2013 the Compensation Committee made the decision to replace the former time-based restricted stock awards with performance-based restricted stock awards in an effort to further strengthen the performance orientation of the long-term incentive award program. In doing so, 72% of the target total compensation awarded to the named executive officers is now subject to performance-based conditions – an increase of 12% compared to 2012’s. At the same time, the conversion to performance-based restricted stock may permit the Company to deduct such awards that qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code, which would create an added benefit to the Company and its shareholders.
Although the say on pay vote is non-binding, the Compensation Committee values the opinions of shareholders and will consider the outcome of the vote when making future compensation decisions. At the 2011 Annual Meeting, 76% of our shareholders also voted in favor of the proposal to hold say on pay votes every three years. Accordingly,Since then, the Compensation Committee considered the evolution of the advisory vote on compensation, the prevalence of annual say on pay votes within our next advisorypeer group and general industry, and the level of shareholder support garnered for the triennial say on pay vote (followingback in 2011. In keeping with its objective to continually monitor the non-bindingeffectiveness of the Company’s compensation program, and the voice of our shareholders, the Board of Directors is proposing to move to an annual say on pay advisory vote at this Annual Meeting) is expected to occur at our 2017commencing with the 2018 Annual Meeting of Shareholders. In
Although both the future, wesay on pay and say when on pay votes are non-binding, the Compensation Committee values the opinions of shareholders and will continue to consider the outcome of our triennialthe vote when making future compensation decisions.
The Board of Directors recommends that shareholders vote for a say on pay votes when making compensation decisions regarding the named executive officers.advisory vote every year.
HUBBELL INCORPORATED - Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 28
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 28 |
The Company’s pay for performance compensation philosophy is intended to reward our executives for their contributions toward achievement of the Company’s business strategy and goals. To achieve our compensation objectives, the Company provides its executives with a total direct compensation package consisting of the following fixed and variable compensation elements that provide executives with income that is reflective of competitive benchmarks and enhances the Company’s ability to attract and retain high quality management talent:talent.
Type | ||||
Cash | ||||
Short-Term Incentive | Cash | |||
Long-Term Incentive Compensation | Performance Shares (PS) | Vest at the end of a three year performance period based 50% on Hubbell’s TSR performance and 50% on net sales growth (with a margin modifier) as compared to the companies in the S&P Capital Goods 900. The range of payout for TSR and net sales performance is between 0% and 200%. The net sales payout is further modified based on Hubbell’s cumulative net income margin performance in the range of 0% to 125%. Dividends do not accrue with respect to PS. PS are settled in shares of Common Stock. | ||
Stock Appreciation Rights (SARs) | Vests generally in three equal annual installments on each anniversary of the grant date. Represents right to receive, in Common Stock, the appreciation in value between the stock price on the date of grant and the date of exercise. | |||
Performance-Based Restricted Stock (PBRS) | Vests at the end of a three year performance period if Hubbell’s TSR is greater than the 20thpercentile of the comparator group. Dividends are received during the vesting period. | |||
Retirement | Pension Plans* | Defined Benefit Plan (DB Plan). A qualified plan providing retirement income for eligible participants based on years of service and average earnings up to tax code limitations. Closed to new participants in 2004. | ||
* In 2016, the Committee approved a “soft freeze” of the DB Plan and DB Restoration Plan. Service credit under these plans would freeze February 28, 2017 but compensation credit would continue to accrue through December 31, 2020, at which time both plans would be fully frozen. The Executive Plan was also frozen effective December 31, 2016. | ||||
Restoration Plans* | DB Restoration Plan. Provides retirement income relating to | |||
401(k) | A qualified 401(k) plan that provides participants with the opportunity to defer a portion of their eligible compensation, up to tax code limitations, and receive a Company matching contribution (up to 6% of salary). | |
Executive Deferred Compensation Plan (EDCP) | Enables participants to defer up to 100% of their annual short-term incentive award and 50% of their salary into investments selected by the participant. | |
Other | Perquisites | Limited benefits provided by the Company to executives |
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 29 |
The Role of the Compensation Committee and Compensation Consultant
The Compensation Committee determines the Company’s compensation philosophy and approves each element of executive compensation. The Compensation Committee relies on advice and data provided by Exequity LLP, an independent outside compensation consultant engaged by the Committee to assist in its determination of the appropriate amount of total direct compensation for the named executive officers. Exequity does not advise the management of the Company, and receives no compensation from the Company for services other than as directed by the Compensation Committee and the NCGC for which it provides guidance on independent Director compensation. See the “Compensation of Directors” section on page 15.16.
The Compensation Committee discusses its compensation philosophy with Exequity, but otherwise does not impose any specific limitations or constraints on or direct the manner in which Exequity performs its advisory services. As advisor to the Compensation Committee, Exequity reviews the total compensation strategy and pay levels for the Company’s named executive officers, examines all aspects of the Company’s executive compensation programs to ensure their ongoing support of the Company’s business strategy, informs the Compensation Committee of developing legal and regulatory considerations affecting executive compensation and benefit programs, and provides general advice to the Compensation Committee with respect to all compensation decisions pertaining to the CEO and to all senior executive compensation recommendations submitted by management.
Although the Compensation Committee considers recommendations made by the CEO with respect to executive compensation, the Compensation Committee is solely responsible for determining all executive compensation decisions.
The Committee has assessed the independence of Exequity and concluded that no conflict of interest currently exists or existed in 20132016 that would prevent Exequity from providing independent advice to the Committee regarding executive compensation matters. In making this determination, the Committee considered, among other things, the following factors: (1) Exequity did not provide any non-compensation-related services (and did not receive any fees for any non-compensation-related services); (2) Exequity’s conflict of interest policies; (3) there are no other business or personal relationships between Company management or members of the Committee and any representatives of Exequity who provide services to the Company; and (4) neither Exequity nor any representatives of Exequity who provide services to the Company own any common stockCommon Stock or other securities of the Company.
HUBBELL INCORPORATED -BenchmarkingNotice
The Compensation Committee benchmarks each element of 2014 Annual Meetingexecutive total compensation to the median compensation levels paid to executives in comparable positions in similar industries. In 2016, the Compensation Committee reviewed benchmark data from two sources – the Peer Group and the general industry as described below.
Peer Group Data
The Compensation Committee benchmarks Hubbell’s executive pay practices to a group of Shareholders & Proxy Statement29organizations (the “Peer Group”) that are similar to the Company in size, industry affiliation and performance compatibility, and that are representative of the types of companies with which Hubbell competes for executive talent. When setting 2016 pay for Hubbell’s executives, the Compensation Committee considered the remuneration practices within the community of 19 Peer Group companies listed below.
Acuity Brands, Inc. | Pall Corporation |
AMETEK, Inc. | Pentair Ltd. |
Babcock & Wilcox Co. | Regal-Beloit Corp. |
Belden Inc. | Rockwell Automation, Inc. |
Crane Co. | Roper Industries, Inc. |
Donaldson Company, Inc. | Sensata Technologies Holding NV |
Eaton Corporation | Terex Corporation |
EnerSys, Inc. | Valmont Industries, Inc. |
General Cable Corp. | Woodward, Inc. |
Lincoln Electric Holdings Inc. |
In the third quarter of 2016, management reviewed the peer group composition to assess its continued relevance in terms of operational comparability and organization size. Based on this review, the Compensation Committee approved a new Peer Group of 25 companies for use in benchmarking 2017 compensation. The new Peer Group consists of 12 new companies (bolded in the table below) and 13 existing peers that collectively fit the Compensation Committee’s stipulated benchmarking criteria. Six companies were removed from the former Peer Group due to their impending or completed acquisition by another company or their low performance compatibility. Peer Group data is sourced from a mix of proxy statements, Forms-4 filings, and the Aon Hewitt 2016 Total Compensation Database™. The new Peer Group companies are as follows:
Acuity Brands, Inc. | Parker-Hannifin Corporation |
AMETEK, Inc. | Pentair Ltd. |
Carlisle Companies Incorporated | Regal-Beloit Corp. |
Crane Co. | Rockwell Automation, Inc. |
Curtiss-Wright Corporation | Rockwell Collins, Inc. |
Donaldson Company, Inc. | Roper Technologies, Inc. |
Dover Corporation | Sensata Technologies Holding NV |
EnerSys Inc. | Snap-on Incorporated |
Fastenal Company | Valmont Industries, Inc. |
Flowserve Corporation | W.W. Grainger, Inc. |
IDEX Corporation | Woodward, Inc. |
Lincoln Electric Holdings Inc. | Xylem Inc. |
MSC Industrial Direct Co., Inc. |
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 30 |
BenchmarkingGeneral Industry Data
The Compensation Committee seeksalso benchmarked pay for Hubbell executives to target each elementgeneral industry practices as a secondary reference for most positions, and a primary benchmark for those jobs with an insufficient number of executive total compensation at or nearmatches in the median compensation levels paid to executivesPeer Group. The general industry data reflects the norms among all the companies that participate in comparable positions in similar industries. Accordingly, in setting 2013 annual compensation,Aon Hewitt’s 2016 Total Compensation Database, excluding companies that operate within the Compensation Committee relied on two sources of benchmark data provided by Exequity as described below.financial services, retail, utility, hospital, and hospitality sectors.
SurveyPeer Group Data.The Committee referenced the Aon Hewitt Associates Total Compensation DataBase™ (“Survey Group”) as its benchmark when setting executive cash compensation in 2013. The Survey Group consists of a community of over 300 companies in the U.S.and general manufacturing sector. However, due to a significant level of turnover in the Survey Group, the Compensation Committee determined to focus on only those companies in the Survey Group that were consistent database participants year over year (more than 100 companies). This decision was made in order to establish consistency in theindustry data and ensure that the results were reflective of pay rates for specific jobs across the general industry. The Survey Group data relied upon by the Compensation Committee is a statistical summary of the pay practices for the manufacturing industry as a groupare size-adjusted to reflect pay practices at companies of Hubbell’s size. In its review of the Company’s revenue size.
Peer Group Data.As a supplement to the Survey Group data, in 2013 the Compensation Committee also reviewed the compensation of similarly situated executives from a custom Peer Group (“Peer Group”) recommended by the Company and approved bybenchmark communities, the Committee focuses on 50thpercentile practices and, in consultation with Exequity. The Peer Group is comprised of 20 companies deemed to be representative of the types of companies with which Hubbell competes for executive talent and are similar in terms of industry, revenue and market capitalization. Accordingly,2016, the Committee determined that aggregate target total compensation expenditures for the Company’s executives trailed behind the 50thpercentile of the Peer Group, data was both reasonable and appropriate for purposes forwhich is the Company’s stated compensation benchmarking. The Peer Group companies are as follows:principle.
General.In 2013, theThe Compensation Committee used the Peer Group data to determine the valuereviews a number of long-term incentive awards granted to the named executive officers, and the Survey Group data to determine the named executive officer’s target total cash compensation (base salary and short-term incentive opportunity). Going forward, the Compensation Committee has determined to use the Peer Group data as its primary source of comparison for all forms of compensation and the Survey Group data as a secondary reference, thereby providing a more robust review and greater validation of market pay levels. The Compensation Committee’s review of the Survey Group and Peer Group data in 2013 showed the Company’sfactors when establishing target total compensation for its executives including, but not limited to, be competitive with 50thpercentile practicesmarket data, tenure in those external markets, the position, to which the Committee aims to manage executive compensation opportunities.
experience, performance, and internal pay equity. In addition to reviewing the compensation levels of the Survey Group and Peer Group,benchmark groups, the Compensation Committee also reviews tally sheets totaling 20132016 compensation for each of the named executive officers. These tally sheets identify and value each element of the named executive officer’s compensation, including base salary, short-term and long-term incentive awards, pension benefits, deferred compensation, perquisites, and potential change in control and severance benefits, and provide an aggregate sum for each executive. This analysis aids in the Compensation Committee’s assessment and administration of the Company’s compensation program.
Consistent with our philosophy of linking pay to performance, a significant portion of the total compensation paid to our named executive officers is performance-based, taking the form of short- and long-term incentive award opportunities. As shown in the charts below, the Company’s compensation mix as reviewed by the Compensation Committee is consistent with our Peer Group’s practices:
HUBBELL INCORPORATED -Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 30
Base salary is the principal fixed component of total direct compensation paid to our named executive officers. Salaries are determined and adjusted by reference to competitive Survey Group data, individual levelsprevailing market pay rates, scope of job responsibility and successionincumbent performance considerations. The Company definesintends its market competitive position forbase salary expenditures to be consistent with those incurred by similarly positioned companies elsewhere, so the Compensation Committee expects base salaries asto approximate the 50thpercentile of the Survey Group data. This benchmark representscommunity practices. In December 2015, the Compensation Committee’s belief that base compensation, which is not tied to performance, should be no greater than necessary to be competitive in order to attract and retain qualified individuals, with incentive compensation representing the greatest percentage of total compensation (79% for the CEO and 68% for all other NEOs). In December 2012, the Compensation Committee also approved of increases for the named executive officers that ensured their base salaries remain close to market-representative pay levels effective in 2013.2016.
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 31 |
Short-Term Incentive Compensation
Annual short-term incentive award expendituresawards are also targeted at the 50thpercentile of the Survey Group data.benchmark community practices. Short-term incentive awards for the named executive officers are paid pursuant to the Company’s Incentive Compensation Plan (“Incentive Plan”) and for our CEO, the Company’s Senior Executive Incentive Compensation Plan (“Senior Plan”) (collectively, “STI Plans”). Short-term incentive award target levels (“STI Targets”) for the NEO’s are determined by reference to competitiveNEOs reflect consideration of the market data provided by Exequity. The actual amount ofExequity provides while short-term incentive awards payable toactually paid for the NEO’s reflectsyear reflect achievement of financial and strategic plan goals approved by the Compensation Committee, which includeincluding factors such aslike free and operating cash flow, earnings per diluted share (“EPS”), and operating profit performance. Short-term incentive award target levels (“STI Target”)Targets are based on a percentage of 20132016 base salaries and payable from the compensation plans noted in the table and discussed below:
Name | STI Target Percentage | Base Salary | STI Target | Compensation Plan | STI Target Percentage(1) | Base Salary | STI Target | Compensation Plan | ||||||||||||||||||||
D. G. Nord | 100 | % | $ | 900,000 | $ | 900,000 | Senior Plan | 115 | % | $ | 1,000,000 | $ | 1,150,000 | Senior Plan | ||||||||||||||
W. R. Sperry | 70 | % | $ | 442,100 | $ | 309,470 | Incentive Plan | 80 | % | $ | 525,000 | $ | 420,000 | Senior Plan | ||||||||||||||
G. N. Amato | 70 | % | $ | 500,200 | $ | 350,140 | Incentive Plan | |||||||||||||||||||||
W. T. Tolley | 70 | % | $ | 441,400 | $ | 308,980 | Incentive Plan | |||||||||||||||||||||
S. H. Muse | 70 | % | $ | 450,200 | $ | 315,140 | Incentive Plan | |||||||||||||||||||||
R. R. Ruland | 70 | % | $ | 430,000 | $ | 301,000 | Incentive Plan | |||||||||||||||||||||
A. Hsieh | 70 | % | $ | 440,000 | $ | 308,000 | Senior Plan | |||||||||||||||||||||
G. W. Bakker | 70 | % | $ | 450,000 | $ | 315,000 | Senior Plan |
HUBBELL INCORPORATED -Notice of 2014 Annual Meeting of Shareholders & Proxy Statement31
(1) | For 2016, the Compensation Committee adjusted Mr. Sperry’s STI Target from 70% to 80% in order to ensure competitive positioning as compared to external benchmarks. |
Incentive Compensation Plan
The Incentive Compensation Plan is similar to the design of executive short-term incentive award plans that are common at other companies in the general manufacturing environment. Maintaining a short-term incentive award plan that typifies those used elsewhere enhances the appeal of the Company’s compensation program generally and strengthens the Company’s ability to attract and retain high quality executive talent.
The Incentive Compensation Plan authorizes the creation of an incentive compensation pool each year equal to 15% of the excess of the Company’s consolidated earnings over 10% of the invested capital and long-term debt as of the beginning of the year. Actual short-term incentive awards are paid from the authorized pool based on the extent to which the Company achieves certain performance goals established by the Compensation Committee at the beginning of each year. Depending on performance in relation to the goals, earned awards can range in size from 50%0% to 200% of the named executive officer’s STI Target. IfHowever, if performance falls below a minimally acceptable threshold, as described below, then no short-term incentive award is payable at all. The 20132016 performance goals and thresholds are described below under section entitled “2013“2016 Performance Measures”.
Senior Plan
Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), imposes a $1 million limit on the amount that a public company may deduct for compensation paid to its CEO and its three other most highly paid executives, other than the CFO, who are employed as of the end of the fiscal year. This limitation does not apply to compensation that meets the requirements under Section 162(m) for “qualifying performance-based”performance based” compensation. Short-term incentive awards paid under the Company’s Senior Plan are intended to be exempt from the deduction limit of Code Section 162(m). Like many other public companies that utilize similar plans, the Senior Plan (unlike the Incentive Plan) is intended to provide the Company with the ability to pay performance-basedperformance based compensation to senior executives that may beare deductible by the Company for federal income tax purposes to the extent permitted by Code Section 162(m).the Code.
SimilarThe maximum amounts that may be paid to the Incentive Compensation Plan, short-term incentive awards underparticipants pursuant to the Senior Plan are earned based on the achievement of Compensation Committee approved performance goals, and payable fromdetermined by reference to the incentive compensation pool describedfund established under the Company’s Incentive Compensation Plan described in the prior section above. The 2013 performance goals are described below under the section entitled “2013 Performance Measures.”
Under the Senior Plan, for example, the maximum amounts that may be earned are as follows:
Mr. Nord was eligible to earn a maximum amount for 20132016 equal to the lesser of:
Mr. Sperry, Mr. Hsieh and Mr. Bakker were each eligible to earn a maximum amount for 2016 equal to the lesser of:
After the maximum possible payout under the Senior Plan is determined, the Compensation Committee may use its discretion to decrease (but not increase) the actual amount of the short-term incentive award paid under the Senior Plan. In exercising itsthis discretion, with respect to the 2013 awards, the Compensation Committee considereddecided to apply the same EPS and free cash flow performance goals, weightings and formulation that it applied tomethodology used in determining payments under the Incentive Compensation Plan described in the prior section above to the participants andin the Senior Plan.
The amounts actually awarded to Mr. Nord the amountsNEOS are displayed in the Summary Compensation Table on page 3941 based upon the performance results shown in the “Corporate Officers” tabletables on page 33. Thus, although Mr. Nord’s 201334.
2016 Performance Measures
This section reflects the applicable short-term incentive award was paid under the Senior Plan, he received the same short-term incentive award he would have received for 2013 had he participatedmeasures, weighting and thresholds applied to participants in the Incentive Compensation Plan.Plan and the Senior Plan:
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 32 |
2013 PerformanceEnterprise Level Measures
Corporate Officers
For 2013,2016, the Compensation Committee identified EPS and free cash flow (defined as cash flow from operations less capital expenditures) at the Company level as the two primary performance measures it would use to determine short-term incentive award eligibility.eligibility for Mr. Nord, Mr. Sperry and Mr. Hsieh. EPS was selected because it was deemed by the Committee to affect shareholder value most directly and to be an important variable in determining share price. Free cash flow was selected because it is an important determinant in Company performance. The 20132016 short-term incentive awardsaward for Mr. Nord and Mr. Sperry werewas based solely on these two measures.measures while the award measures for Mr. Sperry and Mr. Hsieh also included a strategic objective component as discussed below.
Enterprise Level Measures | |||||
Mr. Sperry and | Mr. Nord | ||||
Measures | Threshold | Mr. Hsieh Weighting | Weighting | ||
EPS (75% weight) | Minimum | $4.77 = | 50% | ||
Target | $5.30 = | 100% | |||
Maximum | $5.83 = | 200% | |||
Free Cash Flow (25% weight) | Minimum | 214 = | 50% | 85% | 100% |
Target | 268 = | 100% | |||
Maximum | 322 = | 200% | |||
Strategic Objectives | As described below | 15% | – |
Business Level Measures
Group Vice Presidents
In addition toHubbell’s businesses are divided among two operating segments: The Electrical Segment (which is comprised of the EPSCommercial & Industrial, Construction & Energy, and free cash flow measures described above,Lighting business groups) and the short-term incentive awards for Mr. Amato, Mr. Tolley and Mr. Muse (“Group Vice Presidents”) include three additional performance measures at thePower Segment (which is comprised of our Power Systems business unit level: operating profit, free cash flow and strategic objectives specific to each of their businesses.group). The Compensation Committee focused a significant portion ofselected operating profit and operating cash flow as the Group Vice Presidents’two primary performance measures it would use to determine short-term incentive award on operating profiteligibility for Mr. Bakker and free cash flow resultsMr. Ruland to promote decision making that would best increase the value of the business unit withbusinesses over which the Group Vice President hasthey have direct oversight and control. In addition to these measures, a portion of Mr. Bakker’s and Mr. Ruland’s award also included a strategic objective component as discussed below.
Business Level Measures | ||||
Mr. Bakker and | ||||
Measures | Threshold | Mr. Ruland Weighting | ||
Business Level Operating Profit (75% weight) Group Business Level Operating Cash Flow (25% weight) | Minimum | < 80% = | 0% | |
Target | 100% = | 100% | 60% | |
Maximum | ≥ 120% = | 200% | ||
EPS and Free Cash Flow (Enterprise level) | See table above | 25% | ||
Strategic Objectives | As described below | 15% |
Strategic Objective Measures
The EPS, cash flow and operating profit and free cash flow targets were the only targets material to the consideration of the Group Vice Presidents’NEO’s annual short-term incentive award.awards. The strategic objectives for Mr. Amato, Mr. Tolley and Mr. Muse were selected by the Compensation Committee, after consultingupon consultation with management, and identifyingalso identified certain objectives that were central to the strategic planCompany’s strategy upon which it based a component of each of their businesses.Mr. Sperry’s, Mr. Hsieh’s, Mr. Bakker’s and Mr. Ruland’s short-term incentive award. No single strategic objective was a material consideration in the Committee’s determination of an annual short-term incentive award. TheSpecific targets within each strategic objective are set each year. At the end of the annual performance period, the Compensation Committee determinedevaluates each NEO based on their contributions to the specific targets, as well as the strategic objectives as a whole. The specific targets for 2016 are outlined in the table below.
Strategic Objective | Description and Measure | |
Serving Our Customers | Use all means to drive positive customer experience and sales growth | |
Operating with Discipline | Commitment to productivity / restructuring savings | |
Growing the Enterprise | Make growth happen – regardless of market conditions | |
Developing Our People | Accelerate performance culture across enterprise |
For Mr. Nord, the Compensation Committee continued to base his short-term incentive award eligibility entirely on EPS and free cash flow performance measures at the Company level ofas the Committee considered such measures to better reflect his responsibility to the Company as a whole. Further, the Committee recognized that achievement of certainthe strategic objectives by formulathe other NEOs would directly and others using its qualitative judgment. Examples ofindirectly impact the Company wide performance measures used to determine Mr. Nord’s short-term incentive award.
Mr. Sperry’s, Mr. Ruland’s, Mr. Hsieh’s and Mr. Bakker’s individual performance with respect to these strategic objectives foris set forth in the Group Vice Presidents include measured improvements in serving our customers (line fill), operating with discipline (productivity), growing the enterprise (new product development and acquisitions) and developing our people (expanding depth of talent).Short-Term Incentive Payout table on page 34.
HUBBELL INCORPORATED -Notice of 2014 Annual Meeting of Shareholders & Proxy Statement32
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 33 |
The tables below reflect the applicable short-term incentive award measures, weighting and thresholds for Corporate Officers (Mr. Nord and Mr. Sperry) and Group Vice Presidents (Mr. Amato, Mr. Tolley and Mr. Muse):
Corporate Officers | ||||||||
Measures | Threshold | Weight | ||||||
Minimum: | $4.36 | = 50% | ||||||
EPS | Target: | $5.45 | = 100% | 80 | % | |||
Maximum: | ≥ $6.54 | = 200% | ||||||
Minimum: | $262M | = 50% | ||||||
Free cash flow | Target: | $327M | = 100% | 20 | % | |||
Maximum: | $392M | = 200% |
Group Vice Presidents | ||||||||
Measures | Threshold | Weight | ||||||
Operating profit | Minimum: | < 80% | = 0% | |||||
and Free cash flow | Target: | 100% | = 100% | 70 | % | |||
(Business unit level) | Maximum: | ≥ 120% | = 200% | |||||
EPS and Free cash flow (Company level) | See table at left | 15 | % | |||||
Strategic objectives | Comp. Committee Discretion | 15 | % |
Performance Results and Payout
Enterprise Level Measures
For 2013,2016, actual EPS was $5.47$5.24 and free cash flow was $323M$331 million which the Compensation Committee then adjusted for predetermined discrete items not considered in determining the threshold including foreign currency translation and acquisitionunplanned restructuring and related costs,activities, resulting in EPS and free cash flow performance of $5.4699% and $330M,182%, respectively. Applying
Enterprise | EPS 75% weight | Free Cash Flow 25% weight | Composite Payout | |||
Actual Performance | 99% | 182% | 120% | |||
Weighted Performance | 74% | 45% |
Business Level Measures
Construction and Energy
Mr. Ruland leads the weightingsConstruction and Energy (“C & E”) business group, and therefore is measured on the performance of this business group. This business group had an operating profit performance target of 5% less than prior year and an operating cash flow target equivalent to 108% of operating profit. The C & E business group achieved operating profit performance that was 14% above target which translated to a performance result of 171% on the operating profit measure. The C & E business group also achieved operating cash flow performance of 130% of target. This performance translated to a performance result of 200% on the operating cash flow measure. When blended together, the composite measure resulted in a payout of 178% as shown below,below.
Construction and Energy | Operating Profit 75% weight | Operating Cash Flow 25% weight | Composite Payout | |||
Actual Performance | 171% | 200% | 178% | |||
Weighted Performance | 128% | 50% |
Power Systems
Mr. Bakker leads the Power Systems business group, and therefore is measured on the performance of this business group. The Power Systems business group had an operating profit performance target of 6% above prior year and an operating cash flow target equivalent to 109% of operating profit. The Power Systems business group achieved operating profit performance that was 1% lower than target which translated to a performance result of 98% on the operating profit measure. The Power Systems business group achieved operating cash flow performance of 100% of target. This performance translated to a performance result of 99% on the operating cash flow measure. When blended together, the composite measure resulted in a payout of 98% as shown below.
Power Systems | Operating Profit 75% weight | Operating Cash Flow 25% weight | Composite Payout |
Actual Performance | 98% | 99% | 98% |
Weighted Performance | 73% | 25% |
Short-Term Incentive Payout
The following table shows the short-term incentive awards for Mr. Nord and Mr. Sperry resulted in a composite payoutaward earned by each of 102%the named executive officers applying the Composite Payout percentages achieved on their individual performance measures to each of their respective STI Targets, which amounts are reflectedTargets. The resulting amount reflects their 2016 STI Award as shown below and in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table on page 39.41.
Corporate Officers
Performance Measures / Results | ||||||||||||||||
EPS and Free | Operating Profit and | Strategic | Total | |||||||||||||
Cash Flow | Operating Cash Flow | Objectives | Composite | x | STI Target | = | STI Award | |||||||||
(Enterprise Level) | (Business Level) | (Individual) | Payout | ($) | ($) | |||||||||||
Mr. Nord | 120% | — | — | 120% | 1,150,000 | 1,380,000 | ||||||||||
Mr. Sperry | 120% | — | 95 | % | 116% | 420,000 | 487,200 | |||||||||
Mr. Ruland | 120% | 178 | % | 113 | % | 154% | 301,000 | 463,500 | ||||||||
Mr. Hsieh | 120% | — | 95 | % | 116% | 308,000 | 357,300 | |||||||||
Mr. Bakker | 120% | 98 | % | 107 | % | 105% | 315,000 | 330,800 |
Performance | |||||||||||
Measures | Threshold | Weight | Result | Weighted | |||||||
Minimum: | $4.36 | = 50% | |||||||||
EPS | Target: | $5.45 | = 100% | 80% | $5.46 | 81% | |||||
Maximum: | ≥ $6.54 | = 200% | |||||||||
Minimum: | $262M | = 50% | |||||||||
Free cash flow | Target: | $327M | = 100% | 20% | $330M | 21% | |||||
Maximum: | $392M | = 200% | |||||||||
COMPOSITE PAYOUT: | 102% |
Group Vice Presidents
Mr. Amato.The Electrical Systems business achieved operating profit performance that was 3% better than target which translated to a performance result for Mr. Amato of 113% on the operating profit measure. The Electrical Systems business achieved free cash flow performance of 102% of target. This performance translated to a performance result of 111% on the free cash flow measure. When blended together to form the composite measure (75% weight operating profit plus 25% weight free cash flow within the Electrical Systems business), Mr. Amato earned a 113% payout on this measure or 80% when the relative weighting was applied. The Compensation Committee assessed Mr. Amato’s performance on the strategic objectives and determined that such results corresponded to a performance level of 175%. As a result, Mr. Amato’s actual short-term incentive award for 2013 is indicated in the following table:
Performance | ||||||||
Measures | Performance Target | Weight | Result | Weighted | ||||
Operating profit | 107% of prior year | 70% | 113% | 80% | ||||
Free cash flow | 69% of Operating profit | 111% | ||||||
EPS and Free cash flow (Company level) | See Corporate Officers table above | 15% | 102% | 15% | ||||
Strategic objectives | Comp. Committee discretion | 15% | 175% | 26% | ||||
COMPOSITE PAYOUT: | 121% |
Mr. Tolley.The Power business achieved operating profit performance that was 7% below target which translated to a performance result for Mr. Tolley of 82% on the operating profit measure. The Power business achieved free cash flow performance of 92% of target. This performance translated to a performance result of 81% on the free cash flow measure. When blended together to form the composite measure (75% weight operating profit plus 25% weight free cash flow within the Power business), Mr. Tolley earned a 81% payout on this measure or 57% when the relative weighting was applied. The Compensation Committee assessed Mr. Tolley’s performance on the strategic objectives and determined that such results corresponded to a performance level of 125%. As a result, Mr. Tolley’s actual short-term incentive award for 2013 is shown in the following table:
Performance | ||||||||
Measures | Performance Target | Weight | Result | Weighted | ||||
Operating profit | 103% of prior year | 70% | 82% | 57% | ||||
Free cash flow | 67% of Operating profit | 81% | ||||||
EPS and Free cash flow (Company level) | See Corporate Officers table above | 15% | 102% | 15% | ||||
Strategic objectives | Comp. Committee discretion | 15% | 125% | 19% | ||||
COMPOSITE PAYOUT: | 91% |
HUBBELL INCORPORATED -Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 33
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 34 |
Mr. Muse.The Lighting business achieved operating profit performance 2% below target which translated to a performance result for Mr. Muse of 96% on the operating profit measure. The Lighting business achieved free cash flow performance of 97% of target. This performance translated to a performance result of 92% on the free cash flow measure. When blended together to form the composite measure (75% weight operating profit plus 25% weight free cash flow within the Lighting business), Mr. Muse earned a 95% on the composite measure or 66% payout when the relative weighting was applied. The Compensation Committee assessed Mr. Muse’s performance on the strategic objectives and determined that such results corresponded to a performance level of 150%. As a result, Mr. Muse’s actual short-term incentive award for 2013 is shown in the following table:
Performance | ||||||||
Measures | Performance Target | Weight | Result | Weighted | ||||
Operating profit | 107% of prior year | 70% | 96% | 66% | ||||
Free cash flow | 69% of Operating profit | 92% | ||||||
EPS and Free cash flow (Company level) | See Corporate Officers table on page 33 | 15% | 102% | 15% | ||||
Strategic objectives | Comp. Committee discretion | 15% | 150% | 23% | ||||
COMPOSITE PAYOUT: | 104% |
Long-Term Incentive Compensation
The Company matches long-term incentive compensation practices in the general manufacturing sector by extending to its executives the opportunity to earn rewards in the form of Company shares under its long-term incentive compensation program. Long-term incentive awards for the named executives are paid in Class B Common Stock pursuant to the Company’s amendedAmended and restatedRestated 2005 Incentive Award Plan (“Equity Plan”). The objectives of the long-term incentive compensation program are to:
• | Generate growth in the Company’s share price by rewarding activity that enhances enterprise value | |
• | Ensure long-term rewards are commensurate with performance | |
• | Facilitate the accumulation of shares by executives, thereby enhancing ownership levels and promoting value-added decision making | |
• | Ensure greater alignment with shareholders |
The value of long-term incentive awards granted to executives each year is based on several factors, including a review of external practices, as provided by Exequity, the Compensation Committee’s assessment of the Company’s financial performance in the short- and long-term, the value of awards granted in prior years, succession considerations and succession considerations. This year, the Committee focused on the Peer Group in reviewing external market pay practices to determine competitive award levels, and the Survey Group secondarily.
individual performance. The Compensation Committee believes that it achieves the best balance of the Company’s interests in motivating, retaining and rewarding the named executive officers by granting 50% of each executive’s long-term incentive award value in the form of SARs, 25% in performance-based restricted stock (“PBRS”), and 25% percent in performance shares. In 2013 PBRS replaced the former time-based restricted stock awards as the Committee sought to further strengthen the performance-based orientationdesign of the long-term incentive award program. This particular blend of award formats was viewedprogram reflects a strong performance-based orientation as demonstrated by the Compensation Committee as being representative of the prevailing mix of long-term equity awards in the general manufacturing sectorwhile also fulfilling its broader objective of tying 100% of the executive’s long-term incentive award opportunity to performance-based conditions.
In December 2013, the Compensation Committee granted the named executive officers long-term incentive awards in the form of SARS, PBRS and performance shares. The Committee further believes that granting awards in these formats uses shares efficiently while increasing executive stock ownership as the Company’s performance increases. Specifically, the Compensation Committee deems the issuance of these particular award types to satisfy the Company’s compensation objectives by:following:
• | ||
• | ||
• | The performance period for all of our performance based awards is three years further promoting attention to long-term Company performance while strengthening the program’s retention character |
As a result of these decisions, the mix of long-term incentive awards the NEOs are eligible to earn is 40% performance shares, 20% PBRS and 40% stock appreciation rights (“SARs”). The Compensation Committee deems this blend of awards to:
• | Strengthen the performance character of the award program | |
• | Optimize the program’s ability to motivate, retain and reward the NEOs | |
• | Build equity ownership | |
• | Efficiently | |
• | ||
• | Reward performance that executives can directly influence |
Long-term incentive grants are usually made once a year, after the Compensation Committee has assessed the Company’s performance for such year. Historically, such grants have been made at the Compensation Committee’s regularly scheduled meeting held in early December, with limited exceptions related to newly appointed or promoted executives.
SARsPerformance Share Awards
A SAR gives2014, 2015 and 2016 Grants
Performance share awards were granted to the holderNEOs in 2014, 2015 and 2016 providing the rightability to receive, once vested, the value inearn shares of the Company’s Class B Common Stock equal to the positive difference between the base price and the market value of a share of Class B Common Stock upon exercise. Generally, SARs vest in three equal installments on eachsatisfaction of pre-established performance measures within a stated period of time. The table below summarizes the key terms of the first three anniversaries of the grant date. The base price pursuant to which the value of a SAR is measured is the mean between the high and low trading prices of Class B Common Stock as reported on the NYSE on the trading day immediately preceding the date of grant (i.e. December 10, 2013— $107.865). The Company uses the mean between the high and low trading prices on the date immediately before the date of grant and not the closing price of its stock on the date of grant for two reasons: First, using the trading prices from the day before the grant enables the Compensation Committee to know the exact grant price and therefore the exact value of each grant before it is made. Second,performance share award:
Performance Measures | Weight | Index | Performance Range | Payout | ||||
Total Shareholder Return | 50% | S&P Capital Goods 900 | > 80thpercentile of Index | 200% | ||||
At 50thpercentile of Index | 100% | |||||||
Net Sales Growth(1) | 50% | At 35thpercentile of Index | 50% | |||||
< 35thpercentile of Index | 0% |
HUBBELL INCORPORATED -Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 34
(1) | Net Sales Growth is measured using the Company’s Compounded Annual Growth Rate (CAGR). The CAGR is then modified by the Company’s cumulative net income margin performance over the three year performance period, as compared to the net income target set by the Company at the beginning of the period, utilizing the following schedule: |
Margin Target | Payout | |||
10.0% | 125% | |||
Net Income Margin Modifier | 9.0% | 100% | ||
8.0% | 75% | |||
<8.0% | 0% |
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 35 |
becauseThe number of performance shares eligible to be earned under this grant is based equally on the Company’s relative TSR and CAGR performance compared to other companies in the S&P Capital Goods 900 Index (“S&P 900 Index”) measured over a three year period. After a detailed review, the Company determined that the S&P 900 Index provides a higher level of comparability to Hubbell than any other index. Specifically, the S&P 900 Index performs most similarly to Hubbell in terms of stock price movement and volatility thereby dampening the effect of macroeconomic factors that play a lesser role in determining relative performance.
The level of TSR and CAGR performance within the ranges set forth above corresponds with the payout percentages noted and are rounded to the nearest percentage. The final award earned reflects a percentage of the relatively low volume at whichtarget award granted. Each performance measure is subject to a minimum vesting threshold such that no shares will be paid on a given measure if the Company’s stock trades it suggests thatTSR and/or CAGR over the mean represents a more accurate picturethree-year performance period falls below the 35thpercentile of the fair market valueapplicable index. The performance shares therefore provide pay only in the event of performance thereby linking the named executive officer’s incentives to shareholder interests and returns.
2013 Grant
The 2013 performance shares granted for the 2014 - 2016 performance period is earned based on the Company’s total shareholder return (“TSR”) over a three-year performance period compared to the TSR of other companies in the S&P Mid-Cap 400 Index (“Index”). The number of performance shares to be paid under this grant is determined based on the Company’s relative performance per the following schedule which shows the potential payout as a percent of the stock than doestarget award. The performance and payouts will be rounded to the closing price. For purposesnearest percentage.
Performance Measure | Performance | Payout | ||
≥ 80thpercentile of Index | 200% | |||
Relative Total Shareholder Return | At 50thpercentile of Index | 100% | ||
At 35thpercentile of Index | 50% | |||
Below 35thpercentile of Index | 0% |
All performance share awards are subject to a minimum vesting threshold such that no shares will be paid in the event the Company’s TSR over the three-year performance period falls below the 35th percentile of determining individual award levels, the valueIndex. The performance shares therefore provide pay only in the event of each SAR is formulated onperformance thereby linking the basis of a modified Black-Scholes calculation.named executive officer’s incentives to shareholder interests and returns. See the section entitled “Equity Award Plan Vesting Provisions” on page 4144 for additional information on the terms of this award.performance share awards.
Performance shares were granted on December 10, 2013, having a performance period of January 1, 2014 to December 31, 2016 were paid out in February 2017 based upon the Company’s TSR achievements as shown in the following table:
At the end of the performance period, the Company achieved TSR performance at the 20% percentile of the Index resulting in a 64% payout thereby earning the named executive officers the following shares of Common Stock: Mr. Nord – 6,364, Mr. Sperry – 1,591, Mr. Ruland – 415, Mr. Hsieh – 1,237 and Mr. Bakker – 415.
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 36 |
Performance-Based Restricted Stock Awards
PBRSPerformance-Based Restricted Stock (“PBRS”) provides executives with the opportunity to earn shares of the Company’s Class B Common Stock upon satisfaction of certain pre-established performance measures within stated periods of time. In 2013, measures. PBRS awards replaced the time-based vested restricted stock awards that had been granted to the NEOs in prior years.
2014, 2015 and 2016 Grants
PBRS were granted to the NEOs in 2014, 2015 and 2016 and will be earned if the Company’s relative TSR performance over a three year period ending December 31, 2017, December 31, 2018 and December 31, 2019, respectively, exceeds the 20th percentile as compared to the TSR of other companies in the S&P Capital Goods 900 Index. In the event the Company fails to meet the performance threshold the executive will forfeit the entire PBRS award. As such, PBRS awards link the NEO’s andincentives to long-term shareholder interests. See the section entitled “Equity Award Plan Vesting Provisions” on page 44 for further information on the terms of these awards.
2013 Grant
The PBRS grant made in 2013 could be earned in three equal annual installments based on the Company’s EBITDA performance as a percentage of net sales for the 12 months preceding the applicable measurement date being greater than 10%, as measured on December 31, 2014, December 31, 2015 and December 31, 2016. In the event the Company fails to meet the performance threshold in any given year, the executive would forfeit one-third of the PBRS award. As such,At the end of December 31, 2016, the Company’s EBITDA performance was 16% of net sales thereby earning the named executive officers the following shares of Common Stock representing one-third of their 2013 PBRS awards are earned onlygrant: Mr. Nord – 2,781, Mr. Sperry – 695, Mr. Ruland – 182, Mr. Hsieh – 541 and Mr. Bakker – 182.
SARS
A SAR gives the holder the right to receive, once vested, the value in shares of the event of performance thereby linking the NEO’s incentives to shareholder interests and returns. PBRS awards replaced the time-based vested restricted stock awards that had been grantedCompany’s Common Stock equal to the NEO’spositive difference between the base price and the market value of a share of Common Stock upon exercise. Generally, SARs vest in prior years.three equal installments on each of the first three anniversaries of the grant date. The base price pursuant to which the value of the SARs granted in 2016 is measured is the mean between the high and low trading prices of Common Stock as reported on the NYSE on the trading day immediately preceding the date of grant (i.e. December 6, 2016 — $113.69). For future grants, the base price will equal the mean between the high and low trading prices of our Common Stock as reported on the NYSE on the trading day immediately preceding the date of grant. The Company uses the mean between the high and low trading prices on the date immediately before the date of grant and not the closing price of its stock on the date of grant for two reasons: First, using the trading prices from the day before the grant enables the Compensation Committee to know the exact grant price and therefore the exact value of each grant before it is made. Second, because of the relatively low volume at which the Company’s stock trades it suggests that the mean represents a more accurate picture of the fair market value of the stock than does the closing price. For purposes of determining individual award levels, the number of shares subject to each SAR is formulated on the basis of a modified Black-Scholes calculation. See the section entitled “Equity Award Plan Vesting Provisions” on page 41 for further information on the terms of these awards.
Performance Share Awards
Performance share awards give the holder the ability to earn shares of the Company’s Class B Common Stock upon satisfaction of certain pre-established performance measures within a stated period of time. In 2013, performance shares were granted and could be earned based on the Company’s total shareholder return (“TSR”) over a three-year performance period compared to the TSR of other companies in the S&P Mid-Cap 400 Index (“Index”). The number of performance shares to be paid under this grant is determined based on the Company’s relative performance per the following schedule which shows the potential payout as a percent of the target award. The performance and payouts will be rounded to the nearest percentage.
All performance share awards are subject to a shareholder protection mechanism such that no shares will be paid in the event the Company’s TSR over the three-year performance period falls below the 35thpercentile of the Index. The performance shares therefore provide pay only in the event of performance thereby linking the named executive officer’s incentives to shareholder interests and returns. See the section entitled “Equity Award Plan Vesting Provisions” on page 4144 for additional information on the terms of performance share awards.this award.
The performance shares grantedTime-Based Restricted Stock
Restricted stock provides incentives for executives to remain employed by the Company and to create and maintain value for shareholders since the value of a restricted share depends on December 1, 2010, having a performance periodthe executive’s continued employment and the value of January 1, 2011 to December 31, 2013, were paid out in February 2014 based upon the Company’s TSR achievements as shownstock on the vesting date. Restricted share awards are granted in shares of the table below:Company’s Common Stock and generally vest in three equal installments on the anniversary of the grant date. No time-based restricted stock awards were granted to the NEOs in 2016, but may remain outstanding from prior grants.
At the end of the performance period, the Company achieved TSR performance at the 90thpercentile of the Index resulting in a 200% payout thereby earning the named executive officers the following shares of Class B Common Stock: Mr. Nord – 6,668, Mr. Sperry – 3,334, Mr. Amato – 6,154, Mr. Tolley – 4,872 and Mr. Muse – 4,616.Compensation Policies
HUBBELL INCORPORATED -Notice of 2014 Annual Meeting of Shareholders & Proxy Statement35
Stock Ownership and Retention Policy
The Company has a stock ownership and retention policy which is applicable to the named executive officers as well as other officers and designated employees. The policy requires such covered employees, consistent with their responsibilities to the shareholders of the Company, to hold a significant equity interest in the Company. The terms and conditions of the policy are routinely examined to ensure consistency with current market practices and external benchmarks, and alignment between the interests of the employees covered by the policy and the interests of the Company’s shareholders. The policy provides:
• | Once the minimum share ownership level is satisfied, the employee is expected to continue to satisfy such requirement for so long as he or she is subject to the policy. | |
• | Shares that count toward the minimum share ownership requirement include shares held directly and indirectly by the employee, including restricted stock granted under the Equity Plan. Shares underlying unexercised SARs, and unearned performance shares are not counted. | |
• | Covered employees have approximately five years from the earliest date such employee is granted an option to acquire Company securities to achieve their minimum ownership requirement |
Accordingly, the policy expects employees to attain a minimum share ownership level equal to their base salary times a certain multiplier, as indicated below:
Accordingly, the policy expects employees to attain a minimum share ownership level equal to their base salary times a certain multiplier, as indicated in the following table: |
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 37 |
Executive Level | Multiple of Base Salary | ||
Chief Executive Officer | 5x | ||
Chief Financial Officer, Group and General Counsel | 3x | ||
Other Corporate Officers | 2x | ||
Other Executives (non-Corporate Officers) | 1x |
All NEO’sNEOs are in compliance with the stock ownership and retention policy.
The Company has a Compensation Recovery Policy which provides that an executive, including the named executive officers, who is determined to have engaged in fraud or other gross misconduct which contributed in whole or in part to a restatement of the Company’s financial results, may be subject to any one or more of the following disciplinary actions:
• | Termination of employment | |
• | Recovery of all or any portion of any performance-based cash or equity paid or vested during the previous three years and that would otherwise not have been paid or vested based on the restated financial results | |
All actions taken under this policy will be determined by the Board of Directors in its sole discretion, upon consultation with the Audit Committee and the NCGC.
Named executive officers also receive employee benefits that are generally available to all employees, as well as certain retirement benefits, perquisites, severance and change in control protections. These additional benefits are similar to the types and amounts available to other senior executives of manufacturing companies as demonstrated in the benchmark data. TheAfter considering the declining prevalence of traditional pension plans in the marketplace, and the importance of offering consistent, sustainable retirement benefits to all employees, in 2016 the Compensation Committee believes that itdetermined to freeze the Company’s tax-qualified defined benefit plan (“DB Plan”) and non-qualified defined benefit pension plans and add a safe harbor non-elective contribution to its tax-qualified defined contribution plan (“DC Plan”). The impact of these decisions is necessary to provide these benefits to executives in order to remain market competitive in attracting and retaining qualified executives.discussed below.
HUBBELL INCORPORATED-Notice of 2014 Annual Meeting of Shareholders & Proxy Statement36
Retirement Plans and Nonqualified Deferred Compensation Plans
Qualified Pension Plans
In addition to the retirement plans which are made generally available to employees of the Company, which include a tax-qualified defined benefit plan (“DB Plan”) and a defined contribution plan consisting of a 401(k) plan and a discretionary profit sharing contribution plan (“DC Plan”), that allows for employee and employer contributions, the named executive officers and certain other selected executive officers participate in various supplemental retirement plans and deferred compensation plans, which allow them to earn additional retirement benefits.
The DB Plan and DC Plan provide employees, including named executive officers, with retirement income. The Company contributes to the DB Plan whereas both the Company and the employee contribute to the DC Plan. Employees hired after December 31, 2003 are not eligible to participate in the DB Plan, but may participate in the DC Plan. The Company closed the DB Plan to new employees after 2003, following its determination that it was no longer necessary in order to attract talent in the marketplace. Instead, the Company emphasized participation in the DC Plan with matching contributions and a discretionary profit sharing contribution which are more in line with current competitive retirement compensation practices.
2016 Qualified Plan Changes
In 2016, due to the declining prevalence of defined benefit plans in the marketplace, the Compensation Committee approved a “soft freeze” of the DB Plan, which will be implemented first as a freeze on credited service, effective February 28, 2017 and a subsequent freeze on eligible compensation, effective December 31, 2020. At that time, all benefit accruals under the DB Plan will cease. This “soft freeze” approach was designed to afford all DB Plan participants the opportunity to make any necessary adjustments to their retirement planning and afford immediate participation in a safe harbor DC Plan (discussed below) as a means of transition relief.
In 2016, the Compensation Committee also approved adding a safe harbor non-elective contribution to the DC Plan, effective January 1, 2017, to ensure that the DC Plan will pass its annual discrimination testing and to enhance the DC Plan benefits in connection with the DB Plan freeze. With the new safe harbor contribution, the DC Plan provides that the Company will make a fully vested annual non-elective Company contribution of 4% of eligible earnings on behalf of all eligible participants, including the named executive officers. Additionally, the Company will continue to make a matching contribution equal to 50% of the first 6% of a participant’s eligible earnings that he or she contributes to the DC Plan. The matching contribution will be subject to a vesting schedule.
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 38 |
Non-Qualified Supplemental Retirement Plans
In 2016, the named executive officers also participateparticipated in supplemental retirement plans available to selected senior executives of the Company, which include the Top Hat Restoration Plan (the “DB Restoration Plan”), the Defined Contribution Restoration Plan (the “DC Restoration Plan”), and either the Supplemental Executive Retirement Plan (the “Executive Plan”) or the Supplemental Management Retirement Plan (the “Management Plan”) both of which areis closed to new participants.
The DB Restoration Plan is an “excess benefit plan” pursuant tounder which participants in the DB Plan receive additional retirement benefits, calculated in the same manner as benefits are calculated under the DB Plan but without regard to the applicable limits on compensation or benefit accruals required by the tax-qualified plan rules. The DC Restoration Plan, also an “excess benefit plan,” enables participants in the DC Plan to receive Company contributions equal to the discretionary profit sharingadditional contributions such employee would have received under the DC Plan but for the compensation limits imposed by the tax-qualified plan rules less the amounts of discretionary profit sharing contributions such employee received under the DC Plan. rules.
The DB Restoration Plan, DC Restoration Plan Executive Plan and ManagementExecutive Plan are intended to promote the retention of our eligible senior management employees by providing them with the opportunity to earn pension and retirement benefits which supplement the benefits available under the Company’s tax-qualified retirement plans.
2016 Non-Qualified Plan Changes
Because the DB Restoration Plan provides for accruals in tandem with those under the DB Plan and the DB Plan was the subject of a soft freeze, the Compensation Committee approved an amendment of the DB Restoration Plan to provide that benefits under the DB Restoration Plan would cease accruing on the same schedule as the DB Plan, with a freeze on credited service, effective February 28, 2017, and a subsequent freeze on eligible compensation, effective December 31, 2020.
To reflect the changes to the DC Plan, the Committee approved an amendment to the DC Restoration Plan, effective January 1, 2017, to provide each participant with (i) an annual non-elective contribution equal to the excess of 4% of eligible earnings over the amount credited as a safe harbor non-elective contribution to the DC Plan for that year and (ii) an annual matching contribution equal to 50% of the first 6% of a participant’s eligible earnings that he voluntary contributes to the DC Plan and/or defers to the Executive Deferred Compensation Plan less the maximum amount of matching contributions that could have been credited under the DC Plan if he had contributed the maximum amount permitted under the DC Plan for that year.
In connection with these changes, the Committee also approved a freeze of the Executive Plan effective December 31, 2016 (including the accrual of both service and compensation credit). The Executive Plan had been closed to new participants since 2007.
Executive Deferred Compensation Plan
The Company also has a nonqualifiednon-qualified Executive Deferred Compensation Plan (“EDCP”), which permits selected individuals, including our named executive officers, to defer the receipt of a portionup to 50% of their annualbase salary and 100% of their short-term incentive compensation and also provides for discretionary Company contributions.award. Amounts deferred under the EDCP are credited with earnings on the basis of individual investment directions made by each participant. The purpose of the EDCP is to provide a tax and retirement planning tool to selected individuals and thus assist the Company in attracting and retaining senior management. See also the “Retirement Plans” section on page 4546 and the “Non-Qualified Deferred Compensation” section on page 47.48.
Perquisites
The Company provides the following limited perquisites to its named executive officers: use of a Company car,Company-provided leased vehicle or an annual vehicle allowance, financial planning and tax preparation services, limited personal travel on the Company aircraft and executive physicals. These perquisites provide flexibility to the executives and increase travel efficiencies, thereby allowing more productive use of the executive’sexecutives’ time, and protect the executive’sexecutives’ personal and financial health and thus the Company’s investment in their development. The Company routinely examines the competitiveness of the perquisites offered in light of the evolving competitive landscape and determines whether any modifications are appropriate. See footnote 56 to the “Summary Compensation Table” on page 39.41.
Severance and Change in Control Benefits
The Company has entered into Change in Control Severance Agreements with its named executive officers which provide certain severance benefits in the event the named executive officer’s employment is involuntarily or constructively terminated. Such severance benefits are designed to alleviate the financial impact of termination of employment through base salary and health benefit continuation, and outplacement services, with the intent of providing for a stable work environment. In addition to general severance, the Company provides enhanced benefits to its senior executives in the event of a change in control as a means of reinforcing and encouraging their continued attention and dedication to their duties of employment without the personal distraction or conflict of interest that could arise from the occurrence of a change in control.
The Company extends severance and change in control benefits because they are essential to help the Company fulfilfulfill its objectives of attracting and retaining key managerial talent. The decision to offer these benefits does not influence the Compensation Committee’s determinations concerning other direct compensation or benefit levels. In making the decision to extend the benefits, the Compensation Committee relied on Exequity to ensure that such severance and change in control benefits align with the policy statements put forth by governance rating agencies and market practices in the area of severance and change in control compensation.
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 39 |
Accordingly, the Company’s Change in Control Severance Agreements contain the following provisions and reflect the types and amounts of compensation benefits payable to senior executives upon a change in control:
• | Double trigger (change in control plus termination of employment) required to obtain cash severance benefit | |
• | Lump sum cash payments not to exceed 2.75 times base salary plus short-term incentive award | |
• | Elimination of gross ups to cover excise taxes |
In 2016, the Board of Directors amended the Company’s Equity Plan to remove the single trigger change in control vesting provision. Under the amended Plan, awards granted on and after December 6, 2016 will no longer automatically become vested and payable upon a change in control. Instead, upon a change in control all awards (other than any portion subject to performance-based vesting) will continue in effect or be assumed or substituted by an acquiring company, unless the Compensation Committee elects to terminate the award or cause it to fully vest. The portion of an award that is subject to performance-based vesting will be subject to the terms of the award agreement or the Committee’s discretion, as applicable.
In 2016, the Board of Directors eliminated the single trigger vesting of equity awards upon a change in control.
If an award continues in effect or is assumed or substituted and a grantees’ employment is terminated without cause or within twelve months following a change in control, then the award will fully vest. Similarly, if the acquiring corporation refuses to assume or substitute an award, the Committee may exercise its discretion to terminate the award in exchange for cash, rights or property, or cause the awards to become fully exercisable prior to the change in control.
For additional information relating to the Company’s change in control and severance benefits, see the “Potential Post-Employment Compensation Arrangements” on page 48.49.
HUBBELL INCORPORATED-Notice of 2014 Annual Meeting of Shareholders & Proxy Statement37
Tax Deductibility of Compensation
Section 162(m) of the Code establishes an annual $1 million limit on the amount that the Company can deduct for compensation paid to its Chief Executive Officer and its three other most highly paid executive officers (other than its Chief Financial Officer), unless the compensation in excess of $1 million is performance-based. Payments under the Senior Plan, SARs granted under the Company’s Equity Plan with an exercise price of at least fair market value, and PBRS and performance shares granted under the Equity Plan are intended to qualify as performance-based compensation under Section 162(m) of the Code.
The Compensation Committee believes that it is in the Company’s best interests to maintain flexibility in the administration of the compensation program. In order to retain the flexibility to compensate the Company’s management in the manner best promoting the Compensation Committee’s policy objectives, the Compensation Committee does not require that all compensation be deductible. Accordingly, certain payments, including payments under the Incentive Compensation Plan and grants of restricted stock are not intended to qualify as performance-based compensation and may be subject to the $1 million deductibility limitation of Section 162(m) of the Code.
The Committee has reviewed the Compensation Discussion and Analysis and discussed its contents with members of the Company’s management.management and the independent compensation consultants. Based on this review and discussion, the Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and in this Proxy Statement.
Compensation Committee
Richard J. Swift, Chair
Carlos M. Cardoso
Andrew McNally IV
Carlos A. RodriguezNeal J. Keating
John G. Russell
HUBBELL INCORPORATED -Notice of 2014 Annual Meeting of Shareholders & Proxy Statement38
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 40 |
Summary Compensation Table for Fiscal Year 20132016
The following table sets forth the total compensation of Company’s named executive officers for the years ended December 31, 2013,2016, December 31, 2012,2015, and December 31, 2011.2014.
Name and Principal Position | Year | Salary(1) ($) | Stock Awards(2) ($) | Option Awards(2) ($) | Non-Equity Incentive Plan Compensation(3) ($) | Change in Pension Value and Nonqualified Deferred Compensation Plan Earnings(4) ($) | All Other Compensation(5) ($) | Total ($) | ||||||||
D. G. Nord | 2013 | 900,000 | 2,196,158 | 1,500,240 | 918,000 | 1,108,809 | 125,814 | 6,749,021 | ||||||||
President and CEO | 2012 | 607,474 | 2,200,297 | 1,344,114 | 622,600 | 1,239,765 | 90,993 | 6,105,243 | ||||||||
2011 | 465,300 | 536,880 | 310,264 | 456,000 | 1,459,937 | 186,215 | 3,414,596 | |||||||||
W. R. Sperry | 2013 | 442,100 | 549,006 | 375,054 | 315,700 | – | 61,867 | 1,743,727 | ||||||||
Senior Vice President | 2012 | 401,596 | 630,077 | 388,029 | 327,000 | – | 59,453 | 1,806,155 | ||||||||
and CFO | ||||||||||||||||
G. N. Amato | 2013 | 500,200 | 549,006 | 375,054 | 423,700 | 362,168 | 23,362 | 2,233,490 | ||||||||
Group Vice President | 2012 | 479,100 | 490,035 | 289,689 | 422,600 | 966,186 | 27,536 | 2,675,146 | ||||||||
2011 | 456,300 | 482,252 | 278,685 | 460,000 | 1,318,448 | 24,297 | 3,019,982 | |||||||||
W. T. Tolley | 2013 | 441,400 | 396,626 | 270,865 | 281,200 | 160,036 | 41,543 | 1,591,670 | ||||||||
Group Vice President | 2012 | 430,600 | 385,832 | 228,137 | 409,900 | 419,885 | 39,200 | 1,913,554 | ||||||||
2011 | 410,100 | 385,791 | 222,954 | 390,400 | 355,738 | 39,914 | 1,804,897 | |||||||||
S. H. Muse | 2013 | 450,200 | 335,499 | 229,215 | 327,700 | – | 40,655 | 1,383,269 | ||||||||
Group Vice President | 2012 | 440,900 | 321,636 | 190,118 | 358,000 | 1,256,500 | 40,942 | 2,608,096 | ||||||||
2011 | 430,100 | 321,523 | 185,786 | 394,400 | 1,488,660 | 38,445 | 2,858,914 |
Name and Principal Position | Year | Salary(1) ($) | Stock Awards(2) ($) | Option Awards(2) ($) | Non-Equity Incentive Plan Compensation(3) ($) | Change in Pension Value and Nonqualified Deferred Compensation Plan Earnings(4)(5) ($) | All Other Compensation(6) ($) | Total ($) | |||||||||
D. G. Nord | 2016 | 1,000,000 | 2,809,259 | 1,765,939 | 1,380,000 | 2,598,258 | 159,153 | 9,712,609 | |||||||||
Chairman, President and | 2015 | 968,700 | 2,748,086 | 1,359,166 | 980,300 | 2,714,019 | 135,085 | 8,905,356 | |||||||||
Chief Executive Officer | 2014 | 940,500 | 2,574,942 | 1,062,572 | 984,000 | 4,501,039 | 137,088 | 10,200,141 | |||||||||
W. R. Sperry | 2016 | 525,000 | 784,000 | 492,916 | 487,200 | — | 80,251 | 2,369,367 | |||||||||
Senior Vice President and | 2015 | 505,000 | 686,920 | 339,788 | 328,800 | — | 64,753 | 1,925,261 | |||||||||
Chief Financial Officer | 2014 | 490,000 | 677,691 | 279,630 | 308,700 | — | 66,351 | 1,822,372 | |||||||||
R. R. Ruland | 2016 | 430,000 | 477,318 | 300,038 | 463,500 | — | 48,808 | 1,719,664 | |||||||||
Group President, | |||||||||||||||||
Construction and Energy | |||||||||||||||||
A. Hsieh | 2016 | 440,000 | 501,190 | 315,049 | 357,300 | — | 73,433 | 1,686,972 | |||||||||
Senior Vice President, | 2015 | 425,000 | 619,627 | 350,837 | 256,900 | — | 68,869 | 1,721,233 | |||||||||
General Counsel | 2014 | 413,000 | 487,862 | 201,332 | 225,500 | — | 65,527 | 1,393,221 | |||||||||
G. W. Bakker | 2016 | 450,000 | 511,324 | 321,463 | 330,800 | 588,207 | 22,757 | 2,224,551 | |||||||||
Group President, | 2015 | 425,000 | 446,497 | 220,870 | 345,100 | 174,024 | 22,339 | 1,633,830 | |||||||||
Power Systems | 2014 | 380,833 | 590,347 | 306,902 | 255,100 | 378,779 | 21,037 | 1,932,998 |
(1) | The amounts reported in theSalarycolumn reflect salaries paid in the years indicated. |
(2) | The amounts reported in theStock AwardsandOption Awardscolumns reflect the aggregate grant date fair value of performance-based restricted stock, performance shares and SARs granted in |
(3) | The amounts reported in theNon-Equity Incentive Plan Compensationcolumn reflect short-term incentive awards earned under the Company’s Incentive |
(4) | The amounts reported in theChange in Pension Valuecolumn reflect the change in the actuarial present value of each named executive officer’s accumulated benefit under the retirement plans in which he participates. |
(5) | The increase in the present value of Mr. Nord’s pension benefit in 2014 is due to the fact that the discount rate used to determine the value of his pension benefit decreased by 80 basis point from 5.10% in 2013 to 4.30% in 2014, and the three year average of his highest compensation continued to increase in 2014 as a result of his appointment to the position of President and Chief Executive Officer in 2013. |
(6) | The amounts reported in theAll Other Compensationcolumn for |
Retirement Plan | ||||||
Perquisites(a) | Contributions(b) | Total | ||||
Name | ($) | ($) | ($) | |||
D. G. Nord | 57,126 | 68,688 | 125,814 | |||
W. R. Sperry | 23,453 | 38,414 | 61,867 | |||
G. N. Amato | 15,712 | 7,650 | 23,362 | |||
W. T. Tolley | 33,893 | 7,650 | 41,543 | |||
S. H. Muse | 33,005 | 7,650 | 40,655 |
Name | Perquisites(a) ($) | Retirement Plan Contributions(b) ($) | Total(c) ($) | |||||
D. G. Nord | 71,991 | 87,162 | 159,153 | |||||
W. R. Sperry | 38,149 | 42,102 | 80,251 | |||||
R. R. Ruland | 14,323 | 32,985 | 48,808 | |||||
A. Hsieh | 37,607 | 35,826 | 73,433 | |||||
G. W. Bakker | 14,807 | 7,950 | 22,757 |
(a) | The amounts in thePerquisitescolumn reflect the incremental cost to the Company for providing the use of an automobile to | |
(b) | The amounts in theRetirement Plan Contributionscolumn reflect Company 401(k) matching contributions of | |
(c) | Includes for Mr. Ruland a payment of $1,500 that he received as payment for a patent award pursuant to the Company’s patent award program. |
HUBBELL INCORPORATED-Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 39
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 41 |
Grants of Plan-Based Awards in Fiscal Year 20132016
The following table presents information concerning plan-based awards granted in 20132016 to the named executive officers under the Company’s Incentive Award Plan, Senior Plan and Equity Plan. All stock awards are payable in shares of the Company’s Class B Common Stock.
Est. Future Payouts Under Non-Equity Incentive Plan Awards(1) | Est. Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: | All Other Option Awards: | Exercise | Grant Date Fair | ||||||||||||||||||||||||||||||||||||||||||||
Name | Type of Award | Grant Date | Threshold ($) | Target ($) | Max ($) | Threshold (#) | Target (#) | Max (#) | Number of Shares of Stock or Units(3) (#) | Number of Shares Underlying Options(3) (#) | or Base Price of Option Awards(4) ($/Sh) | Value of Stock and Option Awards(5) ($) | |||||||||||||||||||||||||||||||||||||
D. G. Nord | STI | 02/11/16 | 575,000 | 1,150,000 | 2,300,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Est. Future Payouts Under | Est. Future Payouts Under | All Other | All Other | Grant | PBRS | 12/06/16 | — | — | — | — | — | — | 7,701 | — | — | 808,066 | |||||||||||||||||||||||||||||||||
Non-Equity Incentive Plan | Equity Incentive Plan | Stock | Option | Exercise | Date Fair | SAR | 12/06/16 | — | — | — | — | — | — | — | 93,883 | 113.69 | 1,765,939 | ||||||||||||||||||||||||||||||||
Awards(1) | Awards(2) | Awards: | Awards: | or Base | Value of | PS/TSR | 12/06/16 | — | — | — | 4,311 | 8,621 | 17,242 | — | — | — | 1,091,850 | ||||||||||||||||||||||||||||||||
Number | Number of | Price of | Stock and | PS/NS | 12/06/16 | — | — | — | 3,233 | 8,621 | 19,397 | — | — | — | 909,343 | ||||||||||||||||||||||||||||||||||
W. R. Sperry | STI | 02/11/16 | 210,000 | 420,000 | 840,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Type | of Shares | Securities | Option | Option | PBRS | 12/06/16 | — | — | — | — | — | — | 2,149 | — | — | 225,495 | |||||||||||||||||||||||||||||||||
of | Grant | Threshold | Target | Max | Threshold | Target | Max | of Stock | Underlying | Awards(4) | Awards(5) | SAR | 12/06/16 | — | — | — | — | — | — | — | 26,205 | 113.69 | 492,916 | ||||||||||||||||||||||||||
Name | Award | Date | ($) | ($) | ($) | (#) | (#) | (#) | or Units(3) | Options(3) | ($/Sh) | ($) | |||||||||||||||||||||||||||||||||||||
D. G. Nord | STI | 450,000 | 900,000 | 1,800,000 | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||
LTI | 12/10/13 | – | – | – | 4,973 | 9,945 | 19,890 | 8,344 | 60,837 | 107.865 | 3,696,398 | PS/TSR | 12/06/16 | — | — | — | 1,203 | 2,406 | 4,812 | — | — | — | 304,720 | ||||||||||||||||||||||||||
W. R. Sperry | STI | 154,735 | 309,470 | 618,940 | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||
LTI | 12/10/13 | – | – | – | 1,243 | 2,486 | 4,972 | 2,086 | 15,209 | 107.865 | 924,060 | PS/NS | 12/06/16 | — | — | — | 902 | 2,406 | 5,414 | — | — | — | 253,785 | ||||||||||||||||||||||||||
G. N. Amato | STI | 175,070 | 350,140 | 700,280 | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||
R. R. Ruland | STI | 02/11/16 | 150,500 | 301,000 | 602,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
LTI | 12/10/13 | – | – | – | 1,243 | 2,486 | 4,972 | 2,086 | 15,209 | 107.865 | 924,060 | PBRS | 12/06/16 | — | — | — | — | — | — | 1,308 | — | — | 137,248 | ||||||||||||||||||||||||||
W. T. Tolley | STI | 154,490 | 308,980 | 617,960 | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||
LTI | 12/10/13 | – | – | – | 898 | 1,796 | 3,592 | 1,507 | 10,984 | 107.865 | 667,491 | SAR | 12/06/16 | — | — | — | — | — | — | — | 15,951 | 113.69 | 300,038 | ||||||||||||||||||||||||||
S. H. Muse | STI | 157,570 | 315,140 | 630,280 | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||
LTI | 12/10/13 | – | – | – | 760 | 1,519 | 3,038 | 1,275 | 9,295 | 107.865 | 564,714 | PS/TSR | 12/06/16 | — | — | — | 733 | 1,465 | 2,930 | — | — | — | 185,542 | ||||||||||||||||||||||||||
PS/NS | 12/06/16 | — | — | — | 549 | 1,465 | 3,296 | — | — | — | 154,528 | ||||||||||||||||||||||||||||||||||||||
A. Hsieh | STI | 02/11/16 | 154,000 | 308,000 | 616,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
PBRS | 12/06/16 | — | — | — | — | — | — | 1,374 | — | — | 144,174 | ||||||||||||||||||||||||||||||||||||||
SAR | 12/06/16 | — | — | — | — | — | — | — | 16,749 | 113.69 | 315,049 | ||||||||||||||||||||||||||||||||||||||
PS/TSR | 12/06/16 | — | — | — | 769 | 1,538 | 3,076 | — | — | — | 194,788 | ||||||||||||||||||||||||||||||||||||||
PS/NS | 12/06/16 | — | — | — | 577 | 1,538 | 3,461 | — | — | — | 162,228 | ||||||||||||||||||||||||||||||||||||||
G. W. Bakker | STI | 02/11/16 | 157,500 | 315,000 | 630,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
PBRS | 12/06/16 | — | — | — | — | — | — | 1,402 | — | — | 147,112 | ||||||||||||||||||||||||||||||||||||||
SAR | 12/06/16 | — | — | — | — | — | — | — | 17,090 | 113.69 | 321,463 | ||||||||||||||||||||||||||||||||||||||
PS/TSR | 12/06/16 | — | — | — | 785 | 1,569 | 3,138 | — | — | — | 198,714 | ||||||||||||||||||||||||||||||||||||||
PS/NS | 12/06/16 | — | — | — | 588 | 1,569 | 3,530 | — | — | — | 165,498 |
(1) | The amounts reported in theEstimated Future Payouts Under Non-Equity Incentive Plan Awardscolumns reflect the target, threshold and maximum short-term incentive award opportunity for each of the named executive officers under the Company’s Incentive |
(2) | The amounts reported in theEstimated Future Payouts Under Equity Incentive Plan Awardscolumns reflect the target number of performance shares awarded to the named executive officers under the Equity Plan on December |
(3) | The amounts reported in theAll Other Stock Awards and All Other Option Awardscolumns reflect the number of PBRS and SARs |
(4) | The amount reported in theExercise or Base Price of Option Awardscolumn reflects the mean between the high and low trading prices of the Company’s |
(5) | The amounts reported in theGrant Date Fair Value of Stock and Option Awardscolumn reflect the aggregate fair value of the PBRS, |
Fair Values | ||||||||
PBRS | SARs | Performance Shares | Total | |||||
Name | ($) | ($) | ($) | ($) | ||||
D. G. Nord | 900,026 | 1,500,240 | 1,296,132 | 3,696,398 | ||||
W. R. Sperry | 225,006 | 375,054 | 324,000 | 924,060 | ||||
G. N. Amato | 225,006 | 375,054 | 324,000 | 924,060 | ||||
W. T. Tolley | 162,553 | 270,865 | 234,073 | 667,491 | ||||
S. H. Muse | 137,528 | 229,215 | 197,971 | 564,714 |
HUBBELL INCORPORATED-Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 40
Equity Award Plan Vesting Provisions
The following table describes the vesting provisions and exercise periods of each of the equity incentive awards granted to the named executive officers in 2013 or outstanding from prior grants under the scenarios shown. For each of these awards, “Retirement” shall mean that the named executive officer has terminated employment with the Company, is minimum age 55 and the executive’s age plus years of service with the Company equals or exceeds 70.
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | ||||||||
HUBBELL INCORPORATED-Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 41
Outstanding Equity Awards at Fiscal Year End
The following table provides information on all restricted stock, PBRS, SAR and performance share awards held by the named executive officers of the Company and the value of such holdings measured as of December 31, 2013.2016. All outstanding equity awards are in shares of the Company’s Class B Common Stock.
Option Awards(1) | Stock Awards(2) | ||||||||||||||||||||||||||||||||||||
No. of | Market | Equity Incentive | Equity Incentive | ||||||||||||||||||||||||||||||||||
No. of | No. of | Shares or | Value of | Plan Awards: | Plan Awards: Market | ||||||||||||||||||||||||||||||||
Securities | Securities | Units of | Shares or | No. of Unearned | or Payout Value of | ||||||||||||||||||||||||||||||||
Underlying | Underlying | Stock that | Units that | Shares, Units, or | Unearned Shares | ||||||||||||||||||||||||||||||||
Unexercised | Unexercised | Option | Option | have not | have not | other Rights that | Units or other Rights | ||||||||||||||||||||||||||||||
Grant | Options (#) | Options (#) | Exercise | Expiration | Vested | Vested | have not Vested | that have not Vested | Option Awards(1) | Stock Awards(2) | |||||||||||||||||||||||||||
Name | Date | Exercisable | Unexercisable | Price ($) | Date | (#) | ($)(3) | (#)(4) | ($)(5) | Grant Date | No. of Securities Underlying Unexercised Options Exercisable (#) | No. of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | No. of Shares or Units of Stock that have not Vested (#) | Market Value of Shares or Units that have not Vested(3) ($) | Equity Incentive Plan Awards: No. of Unearned Shares, Units, or other Rights that have not Vested(4) (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares Units or other Rights that have not Vested(5) ($) | |||||||||||||||||||
D. G. Nord | 12/1/08 | 21,210 | – | 29.275 | 12/1/18 | 20,606 | 2,243,993 | 22,527 | 2,453,190 | 12/06/2010 | 19,531 | — | 59.950 | 12/06/2020 | |||||||||||||||||||||||
12/05/2011 | 22,647 | — | 64.480 | 12/05/2021 | |||||||||||||||||||||||||||||||||
12/7/09 | 21,933 | – | 46.96 | 12/7/19 | 06/06/2012 | 27,910 | — | 76.015 | 06/06/2022 | ||||||||||||||||||||||||||||
12/6/10 | 19,531 | – | 59.95 | 12/6/20 | 12/04/2012 | 47,569 | — | 83.725 | 12/04/2022 | ||||||||||||||||||||||||||||
12/5/11 | 15,098 | 7,549 | 64.48 | 12/5/21 | 12/10/2013 | 60,837 | — | 107.865 | 12/10/2023 | 2,782 | 324,659 | 9,945 | 1,160,582 | ||||||||||||||||||||||||
6/6/12 | 9,303 | 18,607 | 76.015 | 6/6/22 | 12/02/2014 | 38,858 | 19,429 | 106.440 | 12/02/2024 | 7,588 | 885,520 | 16,490 | 1,924,383 | ||||||||||||||||||||||||
12/4/12 | 15,856 | 31,713 | 83.725 | 12/4/22 | 12/08/2015 | 28,333 | 56,668 | 97.480 | 12/08/2025 | 8,720 | 1,017,624 | 19,524 | 2,278,451 | ||||||||||||||||||||||||
12/10/13 | – | 60,837 | 107.865 | 12/10/23 | 12/06/2016 | — | 93,883 | 113.690 | 12/06/2026 | 7,701 | 898,707 | 17,242 | 2,012,141 | ||||||||||||||||||||||||
W. R. Sperry | 12/6/10 | 9,766 | – | 59.95 | 12/6/20 | 6,165 | 671,369 | 6,773 | 737,580 | 06/06/2012 | 10,033 | — | 76.015 | 06/06/2022 | |||||||||||||||||||||||
12/5/11 | 8,136 | 4,069 | 64.48 | 12/5/21 | 12/04/2012 | 11,892 | — | 83.725 | 12/04/2022 | ||||||||||||||||||||||||||||
6/6/12 | 3,344 | 6,689 | 76.015 | 6/6/22 | 12/10/2013 | 15,209 | — | 107.865 | 12/10/2023 | 695 | 81,107 | 2,486 | 290,116 | ||||||||||||||||||||||||
12/4/12 | 3,964 | 7,928 | 83.725 | 12/4/22 | 12/02/2014 | 10,226 | 5,113 | 106.440 | 12/02/2024 | 1,997 | 233,050 | 4,340 | 506,478 | ||||||||||||||||||||||||
12/10/13 | – | 15,209 | 107.865 | 12/10/23 | 12/08/2015 | 7,083 | 14,167 | 97.480 | 12/08/2025 | 2,180 | 254,406 | 4,880 | 569,496 | ||||||||||||||||||||||||
G. N. Amato | 12/6/10 | 6,010 | – | 59.95 | 12/6/20 | 4,649 | 506,276 | 8,910 | 970,299 | ||||||||||||||||||||||||||||
12/5/11 | 6,781 | 6,781 | 64.48 | 12/5/21 | 12/06/2016 | — | 26,205 | 113.690 | 12/06/2026 | 2,149 | 250,788 | 4,812 | 561,560 | ||||||||||||||||||||||||
12/4/12 | 5,285 | 10,571 | 83.725 | 12/4/22 | |||||||||||||||||||||||||||||||||
12/10/13 | – | 15,209 | 107.865 | 12/10/23 | |||||||||||||||||||||||||||||||||
W. T. Tolley | 12/7/09 | 14,269 | – | 46.96 | 12/7/19 | 3,537 | 385,179 | 6,899 | 751,301 | ||||||||||||||||||||||||||||
R. R. Ruland | 12/05/2011 | 1,266 | — | 64.480 | 12/05/2021 | ||||||||||||||||||||||||||||||||
12/6/10 | 14,273 | – | 59.95 | 12/6/20 | 12/04/2012 | 4,162 | — | 83.725 | 12/04/2022 | ||||||||||||||||||||||||||||
12/5/11 | 10,849 | 5,425 | 64.48 | 12/5/21 | 12/10/2013 | 3,971 | — | 107.865 | 12/10/2023 | 182 | 21,239 | 649 | 75,738 | ||||||||||||||||||||||||
12/4/12 | 4,162 | 8,325 | 83.725 | 12/4/22 | 12/02/2014 | 2,556 | 1,279 | 106.440 | 12/02/2024 | 499 | 58,233 | 1,084 | 126,503 | ||||||||||||||||||||||||
12/10/13 | – | 10,984 | 107.865 | 12/10/23 | 07/01/2015 | 1,009 | 2,020 | 109.065 | 07/01/2025 | 446 | 52,048 | ||||||||||||||||||||||||||
S. H. Muse | 12/5/05 | 26,400 | – | 49.755 | 12/5/15 | 2,968 | 323,215 | 5,772 | 628,571 | ||||||||||||||||||||||||||||
12/08/2015 | 4,250 | 8,500 | 97.480 | 12/08/2025 | 1,308 | 152,644 | 2,928 | 341,698 | |||||||||||||||||||||||||||||
12/06/2016 | — | 15,951 | 113.690 | 12/06/2026 | 1,308 | 152,644 | 2,930 | 341,931 | |||||||||||||||||||||||||||||
A. Hsieh | 12/04/2012 | 8,919 | — | 83.725 | 12/04/2022 | ||||||||||||||||||||||||||||||||
12/10/2013 | 11,829 | — | 107.865 | 12/10/2023 | 541 | 63,135 | 1,934 | 225,698 | |||||||||||||||||||||||||||||
12/02/2014 | 7,362 | 3,682 | 106.440 | 12/02/2024 | 1,438 | 167,815 | 3,124 | 364,571 | |||||||||||||||||||||||||||||
12/08/2015 | 7,313 | 14,628 | 97.480 | 12/08/2025 | 2,425 | 282,998 | 3,514 | 410,084 | |||||||||||||||||||||||||||||
12/06/2016 | — | 16,749 | 113.690 | 12/06/2026 | 1,374 | 160,346 | 3,076 | 358,969 | |||||||||||||||||||||||||||||
G. W. Bakker | 12/06/2010 | 3,486 | — | 59.950 | 12/06/2020 | ||||||||||||||||||||||||||||||||
12/4/06 | 23,767 | – | 52.85 | 12/4/16 | 12/05/2011 | 3,146 | — | 64.480 | 12/05/2021 | ||||||||||||||||||||||||||||
12/3/07 | 18,677 | – | 54.56 | 12/3/17 | 12/04/2012 | 2,596 | — | 83.725 | 12/04/2022 | ||||||||||||||||||||||||||||
12/1/08 | 23,612 | – | 29.275 | 12/1/18 | 12/10/2013 | 3,971 | — | 107.865 | 12/10/2023 | 182 | 21,239 | 649 | 75,738 | ||||||||||||||||||||||||
12/7/09 | 15,601 | – | 46.96 | 12/7/19 | 02/01/2014 | 3,112 | 1,556 | 117.160 | 02/01/2024 | 427 | 49,831 | ||||||||||||||||||||||||||
12/6/10 | 13,522 | – | 59.95 | 12/6/20 | 12/02/2014 | 6,646 | 3,324 | 106.440 | 12/02/2024 | 1,298 | 151,477 | 2,820 | 329,094 | ||||||||||||||||||||||||
12/5/11 | 9,040 | 4,521 | 64.48 | 12/5/21 | 12/08/2015 | 4,604 | 9,209 | 97.480 | 12/08/2025 | 1,417 | 165,364 | 3,172 | 370,172 | ||||||||||||||||||||||||
12/4/12 | 3,468 | 6,938 | 83.725 | 12/4/22 | 12/06/2016 | — | 17,090 | 113.690 | 12/06/2026 | 1,402 | 163,613 | 3,138 | 366,205 | ||||||||||||||||||||||||
12/10/13 | – | 9,295 | 107.865 | 12/10/23 |
(1) | TheOption Awardscolumn reflects SARs that were granted to each named executive officer on the dates shown. SARs entitle the recipient to receive the value in shares of the Company’s |
(2) | TheNo. of Shares or Units of Stock |
HUBBELL INCORPORATED -Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 42
(3) | TheMarket Value of Shares or Units that have not Vestedis based upon the closing market price of the Company’s |
(4) | TheEquity Incentive Plan Awardscolumn reflects performance shares granted on the following dates and terms for the performance periods |
(5) | TheMarket or Payout Value of Unearned Shares that have not Vestedis based upon the closing market price of the Company’s |
HUBBELL INCORPORATED-Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 43
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 43 |
Equity Award Plan Vesting Provisions
2016 Grant Terms
The following table describes the terms of each of the equity incentive awards granted to the named executive officers in December 2016.
Performance Based Restricted Stock | Performance Shares | Stock Appreciation Rights | ||||||
Description | Award of shares that vest subject to achievements relative to the performance metrics and ranges described below. | A promise to receive a number of shares, the ultimate payout of which can vary based upon achievements relative to the performance metrics and ranges described below. | Right to receive, in stock, the appreciation in value between the stock price on the date of grant and date of exercise. | |||||
Abbreviation | PBRS | PS/TSR | PS/NS | SARs | ||||
Weighting | 20% | 20% | 20% | 40% | ||||
Metric | Total Shareholder Return | Total Shareholder Return | Net Sales Growth (with modifier) | — | ||||
Comparator | S&P Capital Goods 900 | S&P Capital Goods 900 | S&P Capital Goods 900 | — | ||||
Vesting Period | January 1, 2017 to December 31, 2019 | January 1, 2017 to December 31, 2019 | 1/3 on the anniversary of the grant date | |||||
Range/Payout | 100% of shares will vest if, at the end of the performance period, Hubbell’stotal shareholder return is > than the 20thpercentile of the comparator group. Performance below the 20thpercentile results in no payout. | Payout can range from 0 to 200% of the original grant amount based on Hubbell’stotal shareholder return performance relative to the comparator group. | Payout can range from 0 to 200% of the original grant amount based on Hubbell’snet sales performance relative to the comparator group | |||||
Performance Range and Payout | ||||||||
> 80thpercentile of Index | 200% | |||||||
At 50thpercentile of Index | 100% | |||||||
At 35thpercentile of Index | 50% | — | ||||||
Below 35th percentile of Index | 0% | |||||||
Modifier | ||||||||
—
| The payout is further modified based on Hubbell’s cumulativenet income margin performance compared to the following preestablished targets:
| |||||||
10% | growth = 125% payout | |||||||
9% | growth = 100% payout | |||||||
8% | growth = 75% payout | |||||||
<8% | growth = 0% payout |
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 44 |
Post-Termination Vesting Terms
The following table shows the vesting provisions of equity awards post-termination under the scenarios shown. For each of these award types, “Retirement” shall mean that the named executive officer has terminated employment with the Company, is minimum age 55 and the executive’s age plus years of service with the Company equals or exceeds 70.
Award Type | Involuntary Termination (without cause) and Voluntary Termination | Retirement | Death/Disability | |||
Restricted Stock | ||||||
PBRS (performance-based) | Unvested PBRS forfeited | Unvested PBRS remain eligible to vest provided that the performance conditions are met during the performance period | Unvested PBRS fully vest | |||
RS (time-based) | Unvested shares forfeited | Unvested shares fully vest | Unvested shares fully vest | |||
Performance Shares | ||||||
Unvested shares forfeited | Eligible for a pro-rata portion of shares based on the number of months the executive served during the performance period | Target number of shares fully vest | ||||
SARs | ||||||
Unvested SARs forfeited. Vested SARs are exercisable for the earlier of 90 days after the termination date or the 10thanniversary of the grant date. | Unvested SARs continue to vest in the normal course. Vested SARs are exercisable until the10th anniversary of the grant date. | Unvested SARs fully vest. Upon death (or if the NEO dies within 90 days of termination of service due to disability) SARs are exercisable for the earlier of 1 year after death or the 10thanniversary of the grant date. | ||||
Option Exercises and Stock Vested During Fiscal Year 20132016
The following table provides information on the number of shares acquired and the value realized by the named executive officers during fiscal year 20132016 on the exercise of SARs, and on the vesting of restricted stock. All SAR exercises are in shares of the Company’s Class B Common Stock.
Option Awards | Stock Awards | |||||||||||||||||
No. of Shares Acquired | Value Realized | No. of Shares | Value Realized | |||||||||||||||
on Exercise | Upon Exercise(1) | Acquired on Vesting | Upon Vesting | Option Awards(1) | Stock Awards | |||||||||||||
Name | (#) | ($) | (#) | ($) | No. of Shares Acquired on Exercise (#) | Value Realized Upon Exercise ($) | No. of Shares Acquired on Vesting (#) | Value Realized Upon Vesting ($) | ||||||||||
D. G. Nord | – | – | 7,573 | 775,749(2) | 43,143 | 2,316,757 | 2,781 | 248,510 | (2) | |||||||||
6,668 | 801,627(3) | 6,364 | 781,945 | (3) | ||||||||||||||
W. R. Sperry | 31,250 | 1,922,170 | 2,782 | 285,403(2) | 21,971 | 860,902 | 695 | 62,105 | (2) | |||||||||
3,334 | 400,813(3) | 1,591 | 195,486 | (3) | ||||||||||||||
G. N. Amato | 18,498 | 616,039 | 2,599 | 277,157(2) | ||||||||||||||
R. R. Ruland | — | — | 405 | 39,801 | (2) | |||||||||||||
6,154 | 739,834(3) | 415 | 50,991 | (3) | ||||||||||||||
W. T. Tolley | 20,021 | 1,061,144 | 2,063 | 219,996(2) | ||||||||||||||
A. Hsieh | — | — | 968 | 97,342 | (2) | |||||||||||||
4,872 | 585,712(3) | 1,237 | 151,990 | (3) | ||||||||||||||
S. H. Muse | – | – | 1,794 | 191,393(2) | ||||||||||||||
G. W. Bakker | — | — | 609 | 54,736 | (2) | |||||||||||||
4,616 | 554,936(3) | 415 | 50,991 | (3) |
(1) | The amounts reported in theOption Awards - Value Realized Upon Exercisecolumn reflect the number of shares acquired upon exercise multiplied by the difference between the base price of the SAR and the market price of the Company’s |
(2) | The amounts reported in theStock Awards - Value Realized Upon Vestingcolumn reflect the number of shares of PBRS and time-based restricted stock, as applicable, acquired upon vesting multiplied by theclosing market price of the Company’s |
(3) | The amounts reported in theStock Awards - Value Realized Upon Vestingcolumn reflect the number of performance shares earned multiplied by the closing market price of theCompany’s |
HUBBELL INCORPORATED -Notice of 2014 Annual Meeting of Shareholders & Proxy Statement 44
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 45 |
Pension Benefits in Fiscal Year 20132016
The following table provides information on the retirement benefits for the named executive officers under the Company’s DB Plan and DC Plan (tax qualified plans) and the DB Restoration Plan, DC Restoration Plan Management Plan and Executive Plan (non-qualified plans, collectively, “Supplemental Plans”) in which they participate. See the “Employee Benefits” section on page 36.38.
No. of Years | Present Value of | Payments During the | ||||||
Credited Service | Accumulated Benefit | Last Fiscal Year | ||||||
Name | Plan Name | (#) | ($) | ($) | ||||
D. G. Nord | DC Plan | 8.25 | 89,746 | – | ||||
DC Restoration Plan | 8.25 | 227,594 | – | |||||
Executive Plan | 8.25 | 5,669,533 | – | |||||
W. R. Sperry | DC Plan | 5.33 | 86,109 | – | ||||
DC Restoration Plan | 5.33 | 92,322 | – | |||||
G. N. Amato | DB Plan | 25.67 | 1,001,648 | – | ||||
DB Restoration Plan | 25.67 | 3,206,259 | – | |||||
Management Plan | 6.25 | 999,198 | – | |||||
W. T. Tolley | DB Plan | 11.83 | 274,667 | – | ||||
DB Restoration Plan | 11.83 | 693,825 | – | |||||
Management Plan | 6.25 | 598,283 | – | |||||
S. H. Muse | DB Plan | 20.25 | 462,592 | – | ||||
DB Restoration Plan | 20.25 | 1,005,026 | – | |||||
Executive Plan | 10 | 3,794,919 | – |
Name | Plan Name | No. of Years Credited Service (#) | Present Value of Accumulated Benefit(1) ($) | Payments During the Last Fiscal Year ($) | |||||
D. G. Nord | DC Plan | 11.25 | 130,424 | — | |||||
DC Restoration Plan | 11.25 | 448,548 | — | ||||||
Executive Plan | 10.00 | 15,482,857 | — | ||||||
W. R. Sperry | DC Plan | 8.33 | 130,131 | — | |||||
DC Restoration Plan | 8.33 | 173,668 | — | ||||||
R. R. Ruland | DC Plan | 7.17 | 69,611 | — | |||||
DC Restoration Plan | 7.17 | 96,648 | — | ||||||
A. Hsieh | DC Plan | 4.25 | 50,108 | — | |||||
DC Restoration Plan | 4.25 | 64,305 | — | ||||||
G. W. Bakker | DB Plan | 25.75 | 665,402 | — | |||||
DB Restoration Plan | 25.75 | 1,111,362 | — |
(1) | For the DB Plan and Supplemental Plans, the present value of accrued benefits at December 31, |
The following paragraphs describe the manner in which benefits are calculated under each of the Company’s retirement plans:
DB Plan and DB Restoration Plan
The DB Plan provides for participation by all regular full-time salaried employees who were employed by covered Company businesses on December December��31, 2003. The annual benefits under the DB Plan upon normal retirement (age 65) are calculated under the following two formulas in which Final Average CompensationPay refers to the average of the executive’s highest three consecutive earnings (base salary and short-term incentives) in the last ten years:
For all other participants hired before January 1, 2004, the formula is as follows:
HUBBELL INCORPORATED -Notice of 2014 Annual Meeting of Shareholders & Proxy Statement45
Grandfathered Participants will have benefits earned after 2003 calculated under whichever of the above two formulas produces a higher benefit. Early retirement (age 55 and at least 10 years of service) benefits are calculated under the same formula as normal retirement benefits, but reduced by 0.6% (0.3% for Grandfathered Participants) for each month by which the executive’s early retirement is after age 60, but before age 65, and 0.3% (0.5% for Grandfathered Participants) for each month by which the executive’s early retirement precedes age 60. Lump sum payments cannot be elected under the Basic Plan.
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 46 |
Benefits under the DB Restoration Plan are calculated in the same manner as benefits under the BasicDB Plan, but without regard to any limits on compensation or benefit accruals that may apply under the BasicDB Plan as required by the tax-qualified plan rules.
Executive PlanAs described in the “Employee Benefits” section on page 38, Years of Service will be frozen effective February 28, 2017 and ManagementFinal Average Pay, Social Security Covered Compensation, and Social Security Benefit will be frozen effective December 31, 2020.
Executive Plan
The Executive Plan provides designated executives the opportunity to earn pension benefits supplementing those earned under the BasicDB Plan. Executive Plan benefits upon normal retirement (age 65) are calculated using the following formula in which Final Total Compensation refers to the average of the executive’s highest three earnings (base salary and short-term incentive) over the last ten years:
Executive Plan benefits upon early retirement (on or after age 55) are calculated under the same formula as normal retirement benefits except that the early retirement benefit is reduced by 0.3% for each month by which the executive’s early retirement precedes age 62, and by an additional 0.2% for each month by which the executive’s early retirement precedes age 60. Executive Plan benefits are payable based on a 50% joint and survivor form of annuity distribution, except that benefits are paid out as a lump sum upon a change in control. Participation in the Executive Plan is at the sole discretion of the Compensation Committee which closed the Plan to new participants in 2007.
Benefits As described under the Management Plan upon normal retirement (age 65) are calculated using the following formula in which Final Total Compensation refers to the average of the executive’s highest three earnings (base salary and short-term incentive) over the last ten years, and benefits may not exceed 60% of Final Total Compensation:
Management Plan benefits upon early retirement (on or after age 55) are calculatedEmployee Benefits section on page 38, all benefit accruals under the same formulaExecutive Plan were frozen effective as normal retirement benefits except that the early retirement benefit is based upon the executive’s years of service up to the executive’s actual early retirement date reduced by 0.3% for each month by which the executive’s early retirement precedes age 65 and by an additional 0.2% for each month by which the participant’s early retirement precedes age 60. Management Plan benefits are payable based on a life annuity distribution except for benefits are paid out as a lump sum upon a change in control. Married participants also have a death benefit equal to 50% of their annuity payable to their spouse for the spouse’s life, in the event that the participant dies. Participation in the Management Plan is at the sole discretion of the Compensation Committee, which closed the Plan to new participants in 2010.December 31, 2016.
Except as otherwise provided, for Executive Plan and Management Plan participants who have entered into Change in Control Severance Agreements with the Company, no benefit is payable under the Executive Plan or Management Plan if a participant terminates employment prior to age 55 with less than 10 years of service under the Executive Plan, (or 5 years of service under the Management Plan), but such participant may be entitled to a benefit under the DB Plan, DC Plan, and DB Restoration and DC Restoration Plans.
DC Plan and DC Restoration Plan
TheUnder the DC Plan as in effect through December 31, 2016, the Company providesprovided a discretionary profit sharing contribution under the DC Plan.contribution. Full-time salaried employees hired on or after January 1, 2004 arewere eligible to receive asuch discretionary contribution. The contribution, iswhich was made after year end at the discretion of the Board of Directors. The amount iswas determined by multiplying the sum of the employee’s base salary and short-term incentive compensation by a certain percentage approved by the Board of Directors, which in recent years has been 4%. There iswas no guarantee, however, that that percentage willwould continue in future years.
As described under the Employee Benefits section on page 38, effective January 1, 2017, the DC Plan provides eligible participants with a fixed non-elective contribution of 4% of eligible earnings and a matching contribution equal to 50% of the first 6% of a participant’s eligible earnings that he or she voluntarily contributes to the DC Plan.
Effective January 1, 2011, the Company adopted the DC Restoration Plan to allow for additional profit sharing and other contributions for those employees whose contributions are limited under the tax-qualified DC Plan due to compensation limits imposed by the IRS. Employees impacted by those limitations receive a contribution under the DC Restoration Plan equal to the same percentage used for the DC Plan multiplied by their compensationeligible earnings in excess of the IRS limits. Since the plan was first adopted on
As described above, effective January 1, 2011,2017, the Company amended the DC Restoration Plan to provide each participant with (i) an annual non-elective contribution equal to the excess of 4% of eligible earnings over the amount credited as a retroactivesafe harbor non-elective contribution was made in early 2011 to cover the period from January 1, 2004 through December 31, 2010DC Plan for employees impacted bythat year and (ii) an annual matching contribution equal to 50% of the IRS compensation limits duringfirst 6% of a participant’s eligible earnings that period.he or she voluntarily contributes to the DC Plan and/or defers to the Executive Deferred Compensation Plan less the maximum amount of matching contributions that could have been credited under the DC Plan if he had contributed the maximum amount permitted under the DC Plan for that year.
HUBBELL INCORPORATED-Notice of 2014 Annual Meeting of Shareholders & Proxy Statement46
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 47 |
Non-Qualified Deferred Compensation
Executive Deferred Compensation Plan
The Executive Deferred Compensation Plan (“EDCP”) enables certain designated executives to defer up to 50% of their annual base salary and 100% of their annual short-term incentive compensation. Amounts deferred into the EDCP are invested at the discretion of the participant in mutual funds selected by the Compensation Committee, and all participants are 100% vested in the amounts they elect to defer. The Company is permitted to make discretionary contributions to EDCP participants, and to make contributions subject to vesting conditions or other restrictions. Since the EDCP’s adoption in 2008, however, no discretionary Company contributions have been made.
Participants are required to make their deferral elections by December 31 of the year prior to the year in which the short-term incentive award is earned. At that time, participants also elect the date on which they want their deferrals for that year and related earnings to be distributed. Distributions can be made at anytimeany time while the participant remains an employee (but no sooner than two years after the year for which the deferral is made) or upon separation from service or a change in control. Distributions upon separation from service may be made in lump sum or installments over 5, 10 or 15 years. In service distributions and distributions upon a change in control are made in a lump sum. Participants may also access their accounts under the EDCP in the event of an unforeseen emergency.
Non-Qualified Deferred Compensation in Fiscal Year 20132016
The following table provides information on the benefits payable to each NEO under the Company’s EDCP and DC Restoration Plan:
Aggregate | Aggregate | Aggregate | ||||||||
Executive | Registrant | Earnings in Last | Withdrawals/ | Balance at | ||||||
Contributions in 2013 | Contributions in 2013 | FY | Distributions | 12/31/13 | ||||||
Name | ($) | ($)(1) | ($)(2) | ($) | ($)(3) | |||||
D. G. Nord | – | 32,590 | 165,577 | – | 1,428,864 | |||||
W. R. Sperry | – | 16,483 | 11,465 | – | 71,758 | |||||
G. N. Amato | – | – | – | – | – | |||||
W. T. Tolley | – | – | 37,972 | – | 385,676 | |||||
S. H. Muse | – | – | – | – | – |
Executive | Registrant | Aggregate | Aggregate | Aggregate | |
Contributions | Contributions | Earnings in | Withdrawals/ | Balance at | |
in 2016(1) | in 2016(2) | Last FY(3) | Distributions | 12/31/16(4) | |
Name | ($) | ($) | ($) | ($) | ($) |
D. G. Nord | 323,500 | 67,697 | 222,983 | — | 3,015,936 |
W. R. Sperry | — | 21,948 | 10,272 | — | 150,116 |
R. R. Ruland | — | 11,224 | 5,459 | — | 83,348 |
A. Hsieh | — | 15,424 | 3,116 | — | 47,029 |
G. W. Bakker | 86,250 | — | 6,323 | — | 92,573 |
(1) | The amounts reported in theExecutive Contributions in 2016 column reflect an elective contribution by Mr. Nord and Mr. Bakker of 50% and 20%, respectively, of their short-term incentive awards into the EDCP. This amount was earned and deferred for services in 2015, but contributed to the EDCP in April 2016, and are included in the Summary Compensation Table for 2016 under the Non-Equity Incentive Compensation Plan column. |
(2) | The amount reported in theRegistrant Contributions in |
The amounts reported in theAggregate Earnings in Last FYcolumn include aggregate earnings on the EDCP account balances and the DC Restoration Plan balances in | |
The amounts reported in theAggregate Balance at 12/31/ |
HUBBELL INCORPORATED -Notice of 2014 Annual Meeting of Shareholders & Proxy Statement47
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 48 |
Potential Post-Employment Compensation Arrangements
The Company offers post-employment compensation and benefits to the named executive officers under its general Severance Policy (which is also available to senior level employees), Equity Plan, STI Plans, benefit plans and retirement plans, and pursuant to individual change in control severance agreements (“CIC Agreements”) that provide compensation and benefits only in the event of a change in control. The tablesection below describes the types of compensation and benefits a named executive officer is eligible for under these plans, policies and agreements based on fourfive termination scenarios –involuntary(i) involuntary termination, (ii) death, (iii) disability, (iv) Retirement, and (v) change in control and Retirement.involuntary termination. No incremental amounts are payable to the named executive officers upon voluntary termination or termination for cause, therefore, these scenarios are not included in the table.cause.
Scenario | Severance | Insurance Benefits | STI Award | LTI Award | Pension Benefits | Outplacement Services | ||||||
InvoluntaryTermination Benefits paid under Severance Policy, Equity Plan, STI Plans and retirement plans | 4 weeks base salary continuation for each year of service, 26 weeks minimum and 78 weeks maximum | Continued medical, dental and life insurance benefits for the salary continuation period | Pro-rated portion of target short-term incentive award earned through date of termination | Unvested PBRS, restricted stock, SARs and performance shares forfeited unless NEO meets definition of Retirement | – | Up to 12 months following termination. Benefit not exchangeable for cash equivalent. | ||||||
Death Benefits paid under the Equity Plan and retirement plans | – | – | – | Unvested PBRS, restricted stock, SARs and performance shares become fully vested | – | – | ||||||
Disability Benefits paid under the Equity Plan and retirement plans | – | – | – | Unvested PBRS, restricted stock, SARs and performance shares become fully vested | Unreduced immediate pension benefit based upon service projected to age 65 | – | ||||||
Change in Control Benefits paid under CIC Agreements, Equity Plan and benefit plans | Lump sum of NEO’s base salary times 2.75 for Mr. Nord and 2.5 for the other NEOs | Continued medical, dental and life insurance benefits under Company benefit plans after termination for 2.75 years for Mr. Nord, and 2.5 years for the other NEOs | Average short-term incentive awards received by the NEO in the three years preceding the change in control and a pro-rated portion of NEO’s annual STI Target for year in which termination occurs | Unvested PBRS, restricted stock, SARs and performance shares become fully vested | A lump-sum cash payment equal to the incremental value of: 2.75 years for Mr. Nord, and 2.5 years for the other NEOs of additional age and service credit under all Supplemental Plans in which the NEO participates | Up to 12 months following termination at a cost not to exceed 15% of the NEO’s annual base salary | ||||||
Retirement Benefits paid under the Equity Plan | – | – | – | Unvested PBRS and performance shares remain eligible to vest subject to satisfaction of performance criteria, restricted stock becomes fully vested, and SARs continue to vest in the normal course | – | – |
The following table reflects the estimated incremental post-termination amounts that would have been payable to a named executive officer in the event of termination of employment in each of the five scenarios described above on December 31, 2013. These amounts are calculated in accordance with the terms of the applicable plans, policies and agreements described in the preceding table and assume that the named executive officer has met the applicable eligibility requirements. The amounts in the table DO NOT include:
HUBBELL INCORPORATED -Notice of 2014 Annual Meeting of Shareholders & Proxy Statement48
Post-Employment and Change in Control Payment Table
Equity Awards with | ||||||||||
Severance(1) | Accelerated Vesting(2)(3) | Pension Benefits(4) | Welfare Benefits(5) | Total | ||||||
Name | ($) | ($) | ($) | ($) | ($) | |||||
D. G. Nord | ||||||||||
Death | — | 6,505,741 | — | — | 6,505,741 | |||||
Disability | — | 6,505,741 | 6,044,423 | — | 12,550,164 | |||||
Involuntary Termination | 1,453,856 | — | — | 130,656 | 1,584,512 | |||||
Change in Control | 3,237,263 | 6,505,741 | 7,498,222 | 182,593 | 17,423,819 | |||||
W. R. Sperry | ||||||||||
Death | — | 2,024,990 | — | — | 2,024,990 | |||||
Disability | — | 2,024,990 | — | — | 2,024,990 | |||||
Involuntary Termination | 530,522 | — | — | 127,514 | 658,036 | |||||
Change in Control | 1,483,017 | 2,024,990 | — | 103,918 | 3,611,925 | |||||
G. N. Amato | ||||||||||
Death | — | 2,059,653 | — | — | 2,059,653 | |||||
Disability | — | 2,059,653 | — | — | 2,059,653 | |||||
Involuntary Termination | 1,100,422 | — | — | 140,046 | 1,240,468 | |||||
Change in Control | 1,539,340 | 2,059,653 | 1,701,091 | 108,415 | 5,408,499 | |||||
Retirement | — | 506,276 | — | — | 506,276 | |||||
W. T. Tolley | ||||||||||
Death | — | 1,598,410 | — | — | 1,598,410 | |||||
Disability | — | 1,598,410 | 1,659,909 | — | 3,258,319 | |||||
Involuntary Termination | 682,452 | — | — | 132,408 | 814,860 | |||||
Change in Control | 1,488,370 | 1,598,410 | 1,624,342 | 102,875 | 4,813,997 | |||||
S. H. Muse | ||||||||||
Death | — | 1,336,894 | — | — | 1,336,894 | |||||
Disability | — | 1,336,894 | 984,114 | — | 2,321,008 | |||||
Involuntary Termination | 990,464 | — | — | 140,592 | 1,131,056 | |||||
Change in Control | 1,262,584 | 1,336,894 | 3,473,325 | 101,895 | 6,174,698 | |||||
Retirement | — | 323,215 | — | — | 323,215 |
Severance Policy
The Company has a severance policySeverance Policy which offers severance benefits to the named executive officers and other members of senior management in the event of involuntary termination or termination for reasons other than cause (“Severance Policy”). The Severance Policy offers the following benefits:
• | 4 weeks base salary continuation for each year of service with a minimum of 26 weeks and a maximum of 78 weeks | |
• | Continued medical, dental and life insurance benefits for the salary continuation | |
• | Pro-rated portion of their target short-term incentive award earned through the date of termination | |
• | Outplacement services for up to 12 months |
In the event of 4 weeks for each year of service with a minimum of 26 weeks and maximum of 78 weeks; continued medical, dental and life insurance benefits for the salary continuation period; a prorated portion of the employee’s target short-term incentive award earned through the date of termination; and outplacement services for up to 12 months. The Severance Policy does not offer benefits if termination of employment isdue to Retirement, death, disability, or a change in control, there are no benefits payable under the resultgeneral Severance Policy. However, in the event of a change in control. In such event,control, the named executive officers would only be eligible for severance benefits pursuant to the terms of their CIC Agreements as described on page 50.
HUBBELL INCORPORATED-NoticeEquity Plan
All of 2014 Annual Meetingthe named executive officers received grants under the Equity Plan in 2016. The treatment of Shareholders & Proxy Statement49equity awards upon involuntary termination, Retirement, and death and disability is set forth in the table below.
Award Type | Involuntary Termination | Retirement(1) | Death / Disability | |||
PBRS | Unvested PBRS forfeited | Unvested PBRS are eligible to vest provided that the performance conditions are met | Unvested PBRS fully vest | |||
Performance Shares | Unvested shares forfeited | Eligible for a pro-rata portion of shares based on the number of months the NEO served during the performance period. | Target number of shares fully vest | |||
RS (time-based) | Unvested shares forfeited | Unvested shares fully vest | Unvested shares fully vest | |||
SARs | Unvested SARs forfeited. May exercise vested SARs for the earlier of 90 days after the termination date or the 10thanniversary of the grant date. | Unvested SARs continue to vest in the normal course. Vested SARs exercisable until the 10th anniversary of the grant date. | Unvested SARs fully vest. Upon death (or if the NEO dies within 90 days of termination due to disability) SARs are exercisable for the earlier of one year after death or the 10thanniversary of the grant date. |
(1) | Retirement means that the named executive officer has terminated employment with the Company, is minimum age 55 and the executive’s age plus years of service with the Company equals or exceeds 70. |
In 2016, the Board of Directors amended the Equity Plan to eliminate the single trigger vesting of equity awards upon a change in control. Under the amended Equity Plan, awards granted on or after December 6, 2016 will no longer automatically become vested and payable upon a change in control, rather the awards will be subject to the discretion the Compensation Committee in the event they are not assumed an the acquiring company. The table below shows the treatment of equity awards upon a change in control:
Change in Control | Change in Control and Involuntary Termination | ||
Pre 12/06/16 Equity Grants | 12/06/16 Equity Grants | Pre 12/06/16 Equity Grants | 12/06/16 Equity Grants |
Unvested awards fully vest | Unless otherwise determined by the Compensation Committee, unvested time-based RS and SARs will be assumed by the acquirer and continue to vest. Treatment of unvested PBRS and PS subject to discretion of the Compensation Committee. | Unvested awards fully vest | Unvested awards fully vest only if the NEO is involuntarily terminated within 12 months following a change in control |
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 49 |
Short-Term Incentive Award Plans
In 2016, the named executive officers participated the Senior Plan or the Incentive Plan, as applicable. In the event of involuntary termination, the named executive officers would be entitled to receive a pro-rated portion of their target short-term incentive award earned through the date of termination pursuant to the Severance Policy (as discussed above). If a named executive officers’ employment is terminated due to Retirement, death or disability, generally the executive would also receive a pro-rated incentive award earned through the date of termination. In the event of a change in control, the named executive officers would only be eligible to receive the short-term incentive award benefits prescribed under their CIC Agreements discussed below.
Change in Control Severance Agreements
The Company is a party to CIC Agreements with the named executive officers which provide severance benefits in the event of a termination of employment by the executive for good reason or by the Company (other than for cause or due to the executive’s death, disability or retirement) within two years after a change in control or, in certain circumstances, in anticipation of a change in control. A “change in control” is generally defined as a change in the majority of the Company’s Board of Directors during any 12 month period, the acquisition by a party directly or indirectly of 30% or more of the voting power of the Company, a sale of substantially all of the Company’s assets, the acquisition by a party of more than 50% of either the voting power of the Company or the fair market value of the Company. CIC Agreements may only be granted with the approval of the Board of Directors, upon the recommendation of the Compensation Committee.
In the event of a change in control, the benefits provided to the named executive officers under their CIC Agreements are as follows:
• | Lump sum payment of the named executive officers’ base salary multiplied by 2.75 for Mr. Nord, and 2.5 for the other named executive officers. | |
• | Continued medical, dental and insurance benefits under the Company’s benefit plans after termination for 2.75 years for Mr. Nord, and 2.5 years for the other named executive officers. | |
• | The average short-term incentive awards received by the named executive officer in the three years preceding the change in control and a pro-rated portion of their annual short-term incentive award target for the year in which the termination occurs. | |
• | The incremental value of additional age and service credit under all applicable Supplemental Plans (subject to the terms of each plan freeze) payable as a lump sum. | |
• | Outplacement services up to 12 months following termination at a cost not to exceed 15% of the named executive officer’s annual base salary. |
The CIC Agreements contain a provision whereby the severance multiple is reduced in monthly increments over the two-year period following the named executive officer’s 63rdbirthday, until it reaches one times the executive’s base salary and average short-term incentive award. Payments under the CIC Agreements are offset by severance or similar payments and/or benefits received by the executive under any other Company plan or policy.
The CIC Agreements also provide that if an executive would have otherwise incurred excise taxes under Section 4999 of the Code, such payments may be reduced to the “safe harbor amount” so that no excise taxes would be due, if such reduction would result in the executive being in a better net after tax position. The CIC Agreements do not provide for any tax-gross up in the event the payments are not reduced, and thus the executive would be required to pay any excise taxes under Section 4999 of the Code. No benefits are payable under the CIC Agreements if a named executive officer is terminated for “cause” or if the named executive officer terminates employment other than for “good reason” as defined in the CIC Agreements.
The Company has established a grantor trust to secure the benefits to be provided under the CIC Agreements, the Executive Plan, Management Plan, DB Restoration Plan, and DC Restoration Plan and other plans maintained by the Company for the benefit of members of the Company’s senior management.
Supplemental Plan BenefitsPlans
Under the terms of the Supplemental Plans, upon a termination of employment due to disability, a participant is entitled to an unreduced immediate pension benefit, based upon such participant’s service projected to age 65 (subject to the terms of each plan freeze).
Certain provisions of the Executive Plan and Management Plan do not take effect until the occurrence of certain change of control events. Among others, provisions in the Executive Plan and Management Plan provide for the (i) suspension, reduction or termination of benefits in cases of gross misconduct by a participant; (ii) forfeiture of benefits if a retired participant engages in certain competitive activities; (iii) reduction in benefits upon early retirement; and (iv) offset of amounts which a participant may then owe the Company against amounts then owing the participant under the Executive Plan and Management Plan are automatically deleted upon the occurrence of a change of control event. In addition, a participant’s years of service with the Company (as calculated for the purpose of determining eligibility for Supplemental Plan benefits) and Supplemental Plan benefits accrued prior to the change of control event, may not be reduced after the occurrence of a change of control. If a participant’s employment is terminated after a change of control, unless the participant elects to receive a distribution of Supplemental Plan benefits in installment payments, the participant will receive payment of benefits in one lump sum within 10 days after termination.
HUBBELL INCORPORATED-NoticeAs described above, the CIC Agreements also provide for additional incremental benefits under the Supplemental Plans upon qualifying terminations of 2014 Annual Meeting of Shareholders & Proxy Statement50employment in connection with a change in control.
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 50 |
The following table reflects the estimated incremental post-termination amounts that would have been payable to a named executive officer on December 31, 2016 in the event of death, disability, involuntary termination, Retirement, or a change in control and involuntary termination. There is no incremental benefit to a named executive officer solely upon a change in control unless such officer experiences a qualifying termination following a change in control. The amounts in the table are calculated in accordance with the terms of the applicable plans, policies and agreements described in the preceding table and assume that the named executive officer has met the applicable eligibility requirements. The amounts in the table DO NOT include (i) any value that would be realized upon the exercise of vested SARs, and (ii) the estimated value of vested and accrued pension benefits that would be received upon any termination of employment under the Company’s retirement plans.
Post-Employment and Change in Control Payment Table
Equity Awards with | ||||||||||
Severance(1) | Accelerated Vesting(2)(3) | Pension Benefits(4) | Welfare Benefits(5) | Total | ||||||
Name | ($) | ($) | ($) | ($) | ($) | |||||
D. G. Nord | ||||||||||
Death | — | 10,587,913 | — | — | 10,587,913 | |||||
Disability | — | 10,587,913 | — | — | 10,587,913 | |||||
Involuntary Termination | 1,996,164 | 2,801,850 | — | 136,368 | 4,934,382 | |||||
Retirement | — | 2,801,850 | — | — | 2,801,850 | |||||
Change in Control and | ||||||||||
Involuntary Termination(6) | 4,409,577 | 10,587,913 | 5,048,324 | 203,235 | 20,249,049 | |||||
W. R. Sperry | ||||||||||
Death | — | 2,779,405 | — | — | 2,779,405 | |||||
Disability | — | 2,779,405 | — | — | 2,779,405 | |||||
Involuntary Termination | 743,072 | — | — | 131,168 | 874,240 | |||||
Change in Control and | ||||||||||
Involuntary Termination(6) | 1,652,593 | 2,779,405 | — | 124,145 | 4,556,143 | |||||
R. R. Ruland | ||||||||||
Death | — | 1,465,628 | — | — | 1,465,628 | |||||
Disability | — | 1,465,628 | — | — | 1,465,628 | |||||
Involuntary Termination | 797,140 | 415,569 | — | 133,080 | 1,345,789 | |||||
Retirement | — | 415,569 | — | — | 415,569 | |||||
Change in Control and | ||||||||||
Involuntary Termination(6) | 994,678 | 1,465,628 | — | 92,848 | 2,553,154 | |||||
A. Hsieh | ||||||||||
Death | — | 2,114,124 | — | — | 2,114,124 | |||||
Disability | — | 2,114,124 | — | — | 2,114,124 | |||||
Involuntary Termination | 528,012 | — | — | 129,464 | 657,476 | |||||
Change in Control and | ||||||||||
Involuntary Termination(6) | 1,343,857 | 2,114,124 | — | 113,275 | 3,571,256 | |||||
G. W. Bakker | ||||||||||
Death | — | 1,858,298 | — | — | 1,858,298 | |||||
Disability | — | 1,858,298 | 831,490 | — | 2,689,788 | |||||
Involuntary Termination | 990,012 | — | — | 142,698 | 1,132,710 | |||||
Change in Control and | ||||||||||
Involuntary Termination(6) | 915,773 | 1,858,298 | — | 105,393 | 2,879,464 |
(1) | The amounts reported in theSeverancecolumn are equal to the product of (a) a multiple specified in each NEO’s CIC Agreement and (b) the sum of (x) the NEO’s base salary and (y) the average of the actual bonuses payable to executive over the most recent three years. The specified multiple may be reduced pursuant to the CIC Agreements, as discussed further in the “Change in Control Severance Agreements” section below. In addition, Severance includes a prorata portion of the NEO’s target bonus through the date of termination. |
(2) | The amounts reported in theEquity Awards with Accelerated Vesting column reflect the value realized by the NEO upon the exercise of all unvested SARs, and the vesting of all unvested PBRS, time-based restricted stock and performance shares upon death, disability, or a qualifying change in control. Upon a change in control, if the unvested time-based restricted stock and SARs are assumed by the acquiror and an NEO is terminated without cause within one year of such change in control, such awards will become fully vested prior to the date of termination. If the NEO is not terminated without cause within one year of the change in control, such equity awards will not accelerate. Treatment of unvested PBRS and PS upon a change in control shall be subject to the discretion of the Compensation Committee. |
(3) | For Mr. Nord and Mr. Ruland, both of whom meet the definition of Retirement, the amounts shown reflect the value realized upon the vesting of all unvested restricted shares upon Retirement. The value realized is calculated using the closing market price of the Company’s Common Stock on December 30, 2016, the last business day of 2016, of $116.70. The amounts shown do not include the value of (i) SARs that are unvested at Retirement but become exercisable post-Retirement, or (ii) outstanding performance shares at Retirement which may vest on a pro-rated basis at the end of the applicable performance period. |
(4) | The amounts reported in theDisability rows are calculated based on a 4.30% discount rate and using the disability mortality table published in Internal Revenue Ruling 96-7. This table assumes a different life expectancy than the tables used to calculate the present value of accumulated benefits under the Company’s retirement plans. In the event of disability, the incremental retirement plan benefit was calculated by comparing the disability benefit to the vested accrued benefit under the qualified and non-qualified plans as of December 31, 2016. |
(5) | The amounts reported in theWelfare column include the payment of outplacement services for the NEOs for up to twelve months and insurance benefit continuation calculated in accordance with the terms of the Severance Policy and CIC Agreements, as applicable. |
(6) | No benefits shall become payable to the NEOs upon a change in control due to their unvested time-based restricted stock and SARs until and unless the NEO experiences a qualifying termination related to such change in control. Treatment of unvested PBRS and PS upon a change in control shall be subject to the discretion of the Compensation Committee. |
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 51 |
RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - ITEMPROPOSAL 2
The Audit Committee of the Board of Directors has appointed PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm (independent auditor) for 2014.2017. Although ratification of our selection of independent auditors is not required, we value the opinions of our shareholders and wish to submit the matter to a vote at the 20142017 Annual Meeting as a matter of sound corporate governance.
PricewaterhouseCoopers LLP has served as the Company’s independent auditors for many years. We have been advised that a representative of PricewaterhouseCoopers LLP will attend the 20142017 Annual Meeting of Shareholders to respond to appropriate questions and will be afforded the opportunity to make a statement if desired.
In the event the selection of PricewaterhouseCoopers LLP is not ratified by the shareholders, the Audit Committee would reconsider the selection of PricewaterhouseCoopers LLP as the Company’s independent auditor. Even if the selection of independent auditors is ratified, the Audit Committee still retains the discretion to select a different independent auditor at any time if it determines that such a change would be in the best interests of the Company and our shareholders.
The affirmative vote of a majority of the votes cast by the holders of our Common Stock is required to ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company. Abstentions will not affect the voting results. Because brokers have the discretionary authority to vote on the ratification of auditors, we do not expect any broker non-votes in connection with the ratification.
The Board of Directors Unanimously Recommends that the Shareholders Vote “FOR” the Ratification of the Selection of PricewaterhouseCoopers LLP. |
The following table shows the aggregate fees for professional services provided by PricewaterhouseCoopers LLP to the Company and its subsidiaries for the years ended December 31, 20132016 and December 31, 2012:2015:
2013 | 2012 | |||
Audit Fees(1) | $2,479,200 | $ | 2,502,000 | |
Audit-Related Fees(2) | 125,335 | 484,000 | ||
Tax Fees(3) | 634,000 | 448,000 | ||
All Other Fees(4) | 6,200 | 6,000 | ||
TOTAL FEES | $3,244,735 | $ | 3,440,000 |
2016 | 2015 | |||||||
Audit Fees(1) | $ | 2,810,000 | $ | 2,896,500 | ||||
Audit-Related Fees(2) | 57,000 | 106,000 | ||||||
Tax Fees(3) | 15,000 | 140,000 | ||||||
All Other Fees(4) | 184,000 | 6,200 | ||||||
TOTAL FEES | $ | 3,066,000 | $ | 3,148,700 |
(1) | The amount included underAudit Feesconsist of fees for professional services rendered for the audits of the Company’s consolidated annual financial statements and the effectiveness of internal control over financial reporting. Audit Fees also include review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by PricewaterhouseCoopers LLP in connection with statutory and regulatory filings or engagements. |
(2) | The amount included underAudit-Related Feesconsist of fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under Audit Fees. This category includes fees principally related to |
(3) | The amount included underTax Feesinclude fees for domestic and international income tax planning assistance and foreign entity compliance services. |
(4) | The amount included underAll Other Feesconsists of fees for products and services other than the services reported above. These services include fees related to information technology assessments as well as technical publications purchased from the independent registered public accounting firm. |
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 52 |
Audit and Non-Audit Services Pre-Approval Policy
The Company’s Audit and Non-Audit Services Pre-Approval Policy (“Services Policy”) sets forth the policies and procedures by which the Audit Committee reviews and approves all services to be provided by the independent auditors prior to their engagement. The Services Policy underscores the need to ensure the independence of the independent auditor while recognizing that the independent auditor may possess the expertise on certain matters that best position it to provide the most effective and efficient services on certain matters unrelated to accounting and auditing.
The Audit Committee will only pre-approve the services that it believes enhance the Company’s ability to manage or control risk. The Audit Committee is also mindful of the relationship between fees for audit and non-audit services in deciding whether to pre-approve any such services. The Services Policy provides the Audit Committee with a description of services that can be performed such as audit, audit-related, tax and other permissible non-audit services. The Audit Committee periodically monitors the services rendered and actual fees paid to the independent auditors. Any proposed services exceeding pre-approved amounts also requires pre-approval by the Audit Committee. In the interim periods during which the Audit Committee is not scheduled to meet, the Chairman of the Audit Committee can authorize spending which exceeds pre-approved levels. As part of the process, the Audit Committee shall consider whether such services are consistent with SEC rules and regulations on auditor independence.
HUBBELL INCORPORATED-Notice of 2014 Annual Meeting of Shareholders & Proxy Statement51
The affirmative vote of a majority of the votes cast by the holders of the outstanding shares of the Class A Common Stock and Class B Common Stock, all voting as a single class is required to ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company. Abstentions and broker non-votes will not affect the voting results. Because brokers have the discretionary authority to vote on the ratification of auditors, we do not expect any broker non-votes in connection with the ratification.
The Board of Directors Unanimously Recommends that the Shareholders Vote “FOR” the Ratification of the Selection of PricewaterhouseCoopers LLP.
The Audit Committee of the Board of Directors is comprised of independent Directors functioning in accordance with a written charter adopted and approved by the Board of Directors effective December 6, 2011,2016, which Charter is reviewed annually by the Audit Committee. As provided in the Charter, the Audit Committee assists the Company’s Directors in fulfilling their responsibilities relating to corporate accounting, the quality and integrity of the Company’s financial reports, and the Company’s reporting practices. The functions of the Audit Committee are further described in the “Corporate Governance” section on page 17.18.
In connection with the discharge of its responsibilities, the Audit Committee has taken a number of actions, including, but not limited to, the following:
• | The Audit Committee reviewed and discussed with management and the independent registered public accounting firm the Company’s audited financial statements; | |
• | The Audit Committee has discussed with | |
• | The Audit Committee received from the independent registered public accounting firm the written disclosures and letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, discussed their independence with them and satisfied itself as to the independence of the independent registered public accounting firm. |
Based on the foregoing reviews and discussions, the Audit Committee recommended to the Company’s Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20132016 for filing with the SEC.
Audit Committee
Lynn J. Good,Steven R. Shawley, Chair
Carlos M. CardosoAnthony J. GuzziNeal J. Keating
John F. MalloySteven R. Shawley
HUBBELL INCORPORATED-Notice of 2014 Annual Meeting of Shareholders & Proxy Statement52Judith F. Marks
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 53 |
ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS - ITEMPROPOSAL 3
In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Securities Exchange Act of 1934, as amended, we are requesting shareholder approval, on an advisory (non-binding) basis, of the compensation of our named executive officers as presented in this Proxy Statement in the Compensation Discussion and Analysis beginning at page 2625 and the compensation tables and accompanying narrative disclosure in the Executive Compensation section beginning on page 39.41.
Accordingly, we will present the following resolution for vote at the Annual Meeting:
“RESOLVED, that the shareholders of Hubbell Incorporated (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers as described in the Compensation Discussion and Analysis and disclosed in the 20132016 Summary Compensation Table and related compensation tables and narrative disclosure as set forth in this Proxy Statement.”
As described more fully in the Compensation Discussion and Analysis section of this Proxy Statement, our executive compensation program has been designed to attract and retain highly-talented executives, deliver compensation that is competitive and fair compared to relevant benchmarks, reward strong Company performance, and motivate executives to maximize long-term shareholder returns. To achieve our objectives, we have adopted and maintain sound compensation governance practices and a strong pay for performance philosophy pursuant to which the greatest portion of an executive’s total direct compensation is variable and therefore linked to performance on both a short-term and long-term basis. Highlights of our program include:
• | Base salaries and annual short-term incentive awards targeted at the | |
• | A mixture of salary and incentive compensation that provides for an average of 70% of the named executive officers’ compensation to be “at-risk” and dependent on individual and company | |
• | Caps on incentive award payouts and the elimination payouts for performance below a minimum | |
• | Performance goals designed to challenge executives to high levels of performance and offer incentive compensation only upon achievement of such | |
• | Requirement for senior executives, including the | |
• | A Compensation Recovery Policy to recover performance-based compensation under certain prescribed acts of misconduct and/or terminate the | |
• | Limited perquisites and no tax gross ups of any | |
• | Closed participation in all Company supplemental retirement | |
• | Annual risk assessment to determine whether the Company’s compensation policies encourage risk |
As an advisory vote, the outcome of this proposal is not binding upon the Company. However, our Compensation Committee and our Board value the opinions of our shareholders and will consider the outcome of this vote when making future compensation decisions for our named executive officers. At the 2011 Annual Meeting, our shareholders also voted in favor of the proposal to hold say on pay votes every three years. Accordingly, our next advisory say on pay vote (following the non-binding advisory vote at this Annual Meeting) is expected to occur at our 2017 Annual Meeting of Shareholders.
The affirmative vote of a majority of the votes cast by the holders of the outstanding shares of the Class A Common Stock and Class B Common Stock, all voting as a single class is required to approve, on an advisory, non-binding basis, the compensation of our named executive officers. Abstentions and broker non-votes will not affect the voting results.
The Board Of Directors Unanimously Recommends that the Shareholders Vote “FOR” the Approval by Non-Binding Vote of the Compensation of our Named Executive Officers. |
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 54 |
ADVISORY VOTE ON THE FREQUENCY OF SHAREHOLDER VOTE ON EXECUTIVE COMPENSATION - PROPOSAL 4
The Company is seeking a non-binding recommendation from our shareholders on whether shareholders should have an opportunity to provide an advisory approval of the compensation of our named executive officers every year, every two years or every three years. Accordingly, we are asking shareholders to vote on the following advisory resolution:
“RESOLVED, that the shareholders of Hubbell Incorporated (the “Company”) recommend, on an advisory basis, that the frequency with respect to which the Company’s shareholders are presented with an advisory vote on the compensation of the Company’s named executive officers shall be every one (1) year; two (2) years; or three years.”
The Board Ofof Directors Unanimously Recommendsbelieves that an advisory vote on the Shareholders Vote “FOR” the Approval by Non-Binding Votecompensation of the CompensationCompany’s named executive officers should be conducted every year so that shareholders may annually express their views on the Company’s executive compensation program. The Board of Directors believes that holding this advisory vote annually will provide the Company with timely and appropriate feedback on compensation decisions for its named executive officers.
Although the Board of Directors recommends a vote every year, shareholders will be able to specify one of four choices for this proposal on the proxy card: one year, two years, three years or abstain. Shareholders are not voting to approve or disapprove of the Board’s recommendation.
Because this vote is advisory and not binding on the Board of Directors or the Company in any way, the Board may decide that it is in the best interests of our Named Executive Officers.shareholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option approved by our shareholders. However, we value the opinions of our shareholders, and we will consider the outcome of the vote when determining the frequency of the shareholder vote on executive compensation.
HUBBELL INCORPORATEDVote Required-Notice
The option of 2014 Annual Meetingone year, two years or three years that receives the highest number of Shareholders & Proxy Statement53votes cast by shareholders will be considered the frequency recommended by shareholders. Abstentions and broker non-votes will therefore have no effect on this vote.
The Board of Directors Unanimously Recommends that the Shareholders Select “ONE (1) YEAR” for the Advisory Vote on the Frequency of Shareholder Vote on Executive Compensation. |
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 55 |
The Company will pay the cost of soliciting proxies for the 20142017 Annual Meeting. Original solicitation of proxies may be supplemented by telephone, facsimile, electronic mail or personal solicitation by the Company’s directors, officers or employees. No additional compensation will be paid to the Company’s directors, officers or employees for such services. The Company has retained D. F. King & Co.,MacKenzie Partners, Inc. to assist in the solicitation of proxies at an estimated cost of $10,000,$15,000, plus reasonable expenses.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s officers, Directors and persons owning more than ten percent of a registered class of the Company’s equity securities to file reports of ownership and changes in ownership of all equity and derivative securities of the Company with the SEC and the NYSE. SEC regulations also require that a copy of all Section 16(a) forms filed be furnished to the Company by its officers, Directors and greater than ten-percent shareholders.
Based solely on a review of the copies of such forms and related amendments received by the Company and, where applicable, written representations from the Company’s officers and Directors that no Form 5s were required to be filed, the Company believes that during and with respect to fiscal year 20132016 all Section 16(a) filing requirements applicable to its officers, Directors and beneficial owners of more than ten percent of any class of its equity securities were met, except that due to an administrative oversight onea Form 43 for Mr. Powers reporting three transactions, and one Form 4 for Mr. Malloy reporting one share acquisition wereMs. Judith F. Marks was not timely filed.
Information Regarding Executive OfficersCompensation Committee Interlocks and Insider Participation
In 2005, Mr. Tolley entered into an agreement with the SEC to settle charges that he had allegedly violated certain provisionsDuring our last completed fiscal year, no member of the federal securities laws at his prior employer, which resulted in material misstatements of certain of such employer’s quarterly earnings in 2000. Pursuant to the agreement, Mr. Tolley, without admittingCompensation Committee was an employee, officer or denying the allegationsformer officer of the SEC’s complaint, consented toCompany. None of our executive officers served on the entryboard or compensation committee of any entity in 2016 that had an executive officer serving as a final judgment permanently enjoining him from further violationsmember of the federal securities laws, and to pay a civil penalty in the amountour Board of $50,000. The charges were not related to the CompanyDirectors or to Mr. Tolley’s service with the Company. The Board considered this matter in connection with Mr. Tolley’s return to the Company on May 2, 2005, following a period of paid administrative leave.Compensation Committee.
Review and Approval of Related Person Transactions
The Company reviewsBoard of Directors has adopted a written related person transaction policy. The NCGC administers the policy, which applies to all relationships and transactions in which the Company is or will be a participant and the amount exceeds $100,000 and in which any related persons participate to determine whether related personsperson was or will be a participant or had, has or will be a participant or have a direct or indirect material interest in any such transactions. Under SEC rules, ainterest. A related person isincludes any person who is or was since the beginning of the last fiscal year a director, executive officer, nominee for director, or beneficial owner of more than 5% of the Company’s Class A or Class B Common Stock, or any of his or her immediate family members. The Company’s legal staff is primarily responsible for the development and implementation of processes and controls to obtain information from the Directors and executive officers with respect to related person transactions and for then determining,NCGC will determine, based on the facts and circumstances it deems appropriate, whether the Company or asuch related person has a direct or indirect material interest in the transaction.transaction should be approved. As required under SEC rules, transactions that are determined to be directly or indirectly material to the Company or a related person are disclosed in the Company’s Proxy Statement. In addition,For fiscal year 2016, the NCGC reviews and approves or ratifies anyCompany had no related person transactiontransactions that iswere required to be disclosed.disclosed in the Company’s Proxy Statement. See the discussion under “Director Independence” above on page 17.18.
HUBBELL INCORPORATED-Notice of 2014 Annual Meeting of Shareholders & Proxy Statement54
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 56 |
Certain Relationships and Related Transactions
Mr. John F. Mulvihill serves as a trustee of the Roche Trust and the Hubbell Trust, which collectively own approximately 48.67% of the Company’s Class A Common Stock. Mr. Mulvihill, as a result of his position as trustee, is deemed a beneficial owner of the shares owned by the Roche Trust and Hubbell Trust. Mr. Mulvihill serves as Assistant Secretary and Assistant General Counsel of the Company. In connection with his employment during the fiscal year ended December 31, 2013, he received an annual base salary of $208,200, a short-term incentive award of $82,683 (earned in 2012 and paid in 2013) and $74,300 (earned in 2013 and paid in 2014), grants of restricted stock and SARs with an aggregate grant date fair value of $105,406, and a contribution by the Company on his behalf of $7,650 to his 401(k) plan account.
Shareholder Proposals and Nominations for Director
Proposals Intended for Inclusion in the 20152018 Proxy Materials
Shareholder proposals to be considered for inclusion in the Company’s proxy materials related to the 20152018 Annual Meeting of Shareholders pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended, must be received by the Company no later than November 19, 2014.15, 2017.
Proposals Not Intended for Inclusion in the 20152018 Proxy Materials
The Company’s By-Laws set forth specific procedures and requirements in order to nominate a director or submit a proposal to be considered at the 20152018 Annual Meeting of Shareholders. These procedures require that any nominations or proposals must be received by the Company no earlier than February 5, 20151, 2018 and no later than February 25, 201521, 2018 in order to be considered.
If, however, the date of the 20152018 Annual Meeting is more than 20 days before or more than 70 days after May 6, 2015,2, 2018, shareholders must submit such nominations or proposals not earlier than the 90thday prior to the meeting and not later than the close of business on the later of the 70thday prior to the meeting or the 10thday following the day on which public announcement of the date of the meeting is first made by us. In addition, with respect to nominations for directors, if the number of directors to be elected at the 20152018 Annual Meeting is increased and there is no public announcement by us naming all of the nominees for director or specifying the size of the increased Board at least 80 days prior to May 6, 2015,2, 2018, notice will also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is delivered to the Secretary at our principal executive offices not later than the close of business on the 10thday following the day on which such public announcement is first made by us.
A shareholder’s notice to nominate a director or bring any other business before the 20152018 Annual Meeting must set forth certain information specified in our By-Laws. For additional information on the time limitations and requirements related to director nominations or other shareholder proposals, see the Company’s By-Laws atwww.hubbell.com in the Investor InfoInvestors section.
By Order of the Board of Directors
Hubbell Incorporated
Shelton, Connecticut
March 19, 201415, 2017
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 57 |
reliable | electrical | solutions |
HUBBELL INCORPORATED-Notice of 2014 Annual Meeting of Shareholders & Proxy Statement55
Serving Our Customers | Operating with Discipline | Growing the Enterprise | Developing Our People |
reliable | electrical | solutions
| ||||||||||||||||||||
Nominees: | |||||||||||||||
01 | Carlos M. Cardoso | 02 | Lynn J. Good | 03 | Anthony J. Guzzi | 04 | Neal J. Keating | 05 | John F. Malloy | ||||||
06 | Andrew McNally IV | 07 | David G. Nord | 08 | G. Jackson Ratcliffe | 09 | Carlos A. Rodriguez | 10 | John G. Russell | ||||||
11 | Steven R. Shawley | 12 | Richard J. Swift |
| ||||||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary,please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation orpartnership, please sign in full corporate or partnership name, by authorized officer.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, and Annual Report on Form 10K is/are available atwww.proxyvote.com.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS HUBBELLINCORPORATEDFor Annual Meeting of Shareholders, May 6, 2014 9:00 AM
The undersigned hereby appoints each of AN-PING HSIEH and MEGAN C. PRENETA as proxies of the undersigned, with full power of substitution, to vote the shares of the undersigned in Hubbell IncorporatedClass A Common Stockat the annual meeting of its shareholders and at any postponement, continuation or adjournment thereof upon the matters set forth in the notice of meeting and proxy statement for the 2014 annual meeting of shareholders and upon all other matters properly coming before said meeting or any postponement, continuation or adjournment thereof.This proxy will be voted FOR the election of each nominee for director, and FOR Proposals 2 and 3, unless a contrary specification is made, in which case it will be voted in accordance with such specification. The proxies are authorized to vote upon such other business as may properly come before the annual meeting or at any postponement, continuation or adjournment thereof in their discretion.
Address change/comments:
Continued and to be signed on reverse side
| ||||||||||||||||||||
Nominees: | |||||||||||||||
01 | Carlos M. Cardoso | 02 | Lynn J. Good | 03 | Anthony J. Guzzi | 04 | Neal J. Keating | 05 | John F. Malloy | ||||||
06 | Andrew McNally IV | 07 | David G. Nord | 08 | G. Jackson Ratcliffe | 09 | Carlos A. Rodriguez | 10 | John G. Russell | ||||||
11 | Steven R. Shawley | 12 | Richard J. Swift |
| ||||||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary,please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation orpartnership, please sign in full corporate or partnership name, by authorized officer.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, and Annual Report on Form 10K is/are available atwww.proxyvote.com.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS HUBBELLINCORPORATEDFor Annual Meeting of Shareholders, May 6, 2014 9:00 AM
The undersigned hereby appoints each of AN-PING HSIEH and MEGAN C. PRENETA as proxies of the undersigned, with full power of substitution, to vote the shares of the undersigned in Hubbell IncorporatedClass B Common Stockat the annual meeting of its shareholders and at any postponement, continuation or adjournment thereof upon the matters set forth in the notice of meeting and proxy statement for the 2014 annual meeting of shareholders and upon all other matters properly coming before said meeting or any postponement, continuation or adjournment thereof.This proxy will be voted FOR the election of each nominee for director, and FOR Proposals 2 and 3, unless a contrary specification is made, in which case it will be voted in accordance with such specification. The proxies are authorized to vote upon such other business as may properly come before the annual meeting or at any postponement, continuation or adjournment thereof in their discretion.
Address change/comments:
Continued and to be signed on reverse side