UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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HUBBELL INCORPORATED
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement)
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Tuesday, May 5, 2015
9:00 A.M. local time
Hubbell Incorporated, 40 Waterview Drive, Shelton, Connecticut 06484
ITEMS OF BUSINESS
RECORD DATEHubbell Incorporated
Notice of 2017 Annual Meeting of
Shareholders and Proxy Statement
If you were a shareholder of record at the close of business on March 6, 2015, 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 5, 2015, starting at 2, 2017
9:00 A.M.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.time
Shelton, Connecticut
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, 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 Assistant General Counsel
March 18, 2015
Dear Fellow Shareholder:
I am pleased to invite you to the Hubbell Incorporated Annual Meeting of Shareholders which will be held on Tuesday, May 5, 20152, 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 threefour proposals listed in the enclosed Notice of Annual Meeting:Meeting (1) the election of nine 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 2015, and2017, (3) the approval, on a non-binding basis, of the Company’s Second Amendedcompensation of our named executive officers as set forth in the 2017 Proxy Statement, and Restated 2005 Incentive Award Plan.(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 voteFOReach of the proposals. 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 86%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, of the Board, President and
Chief Executive Officer
March 18, 201515, 2017
Notice of 2017 Annual Meeting of Shareholders |
Tuesday, May 2, 2017
9:00 A.M. local time
Hubbell Incorporated, 40 Waterview Drive, Shelton, Connecticut 06484
ITEMS OF BUSINESS
1 | To elect the nine members of the Board of Directors named in the Proxy Statement. | ||
2 | To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2017. | ||
3 | To approve, by non-binding vote, the compensation of our named executive officers as presented in the 2017 Proxy Statement. | ||
4 | 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 postponement of the meeting. |
RECORD DATE
If you were a shareholder of record at the close of business on March 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,HUBBELL INCORPORATEDwww.hubbell.com, -on Tuesday, May 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 7, the Notice of 2015Internet Availability of Proxy Materials, and on the proxy card.
By Order of the Board of Directors
Megan C. Preneta
Corporate Secretary and Associate General Counsel
March 15, 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 of Shareholders &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.
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 5, 20152, 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, 2015,15, 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 6, 2015,3, 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 6, 2015,3, 2017, there were 7,167,50655,381,614 shares of Class A Common Stock and 50,806,526 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 to | |
• | 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.
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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.
Director | Committee | ||||||||
Name | |||||||||
Principal Position | Since | 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 | ||||
Judith F. Marks | CEO, Siemens USA | 2016 | Yes | A / N | Public company officer, operations, strategy, business development | ||||
David G. Nord | Chairman, President and CEO, Hubbell Incorporated | 2013 | No | E | Public company officer/director, finance, operations, strategic planning | ||||
John G. Russell | Chairman of the Boards of CMS Energy & Consumers Energy | 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 54)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 2015.2017. 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”) - Approval, by non-binding vote, of the compensation of the Company’s Second Amended and Restated 2005 Incentive Award Plannamed executive officers as contained in the 2017 Proxy Statement (Page 56)54)
The BoardOur 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 Directors has approvedan 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 Second Amended and Restated 2005 Incentive Award Plan (whichCompany is referred to herein as the “Restated Plan”), and is submitting the Restated Plan forseeking shareholder approval atof the 2015 Annual Meeting. The Restated Plan increases the numbercompensation of shares of Class B Common Stock available under the Plan by 2.8 million shares and adds certain terms and provisions which the Board believes reflect good corporate governance practices, including additional performance goals which may be usedour named executive officers as set forth in connection with performance-based awards.this Proxy Statement.
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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 an advisory vote on the compensation of the Company’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.
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:
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 approval of the Second AmendedProposals 1, 3 and Restated 2005 Incentive Award Plan,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
Hubbell is a performance-driven company with an impressive track record of consistently delivering increased value and returning cash to our shareholders. We achieved record sales and earnings per diluted share again in 2014. Net sales in 20142016 were $3.4$3.5 billion, an increase of 6%3% compared to 2013;2015; reported operating margin of 15.4%13.6% in 20142016 decreased 5040 basis points compared to 2013;2015; reported earnings per diluted share in 2014 were $5.482016 was $5.24 compared to $5.47$4.77 in 2013;2015; and free cash flow (defined as cash flow from operations less capital expenditures) was 102%as a percentage of net income attributable to Hubbell was 113% in 2014.2016. Each of these measures are 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 quarterlyannual dividend 12%11% to $0.56$2.80 per share - our 7the 9thconsecutive year of increased dividends. The Board of Directors also authorized the repurchase of up to $300 million of the Company’s Class A and Class B common stock. We returned 58% of operating cash flow to shareholders through dividends of $121 million and share repurchases of $105 million. Finally, acquisitions continue to be a core strategic objective and we invested approximately $184$173 million on seventhree acquisitions in 2014; four2016; one that joinedwill join our Electrical segment, the other two will be reported in the Power segment and three that joined the Electrical segment.
Executive Appointments
On February 1, 2014, Mr. Gerben W. Bakker was appointed to the position of Group Vice President, Power Systems, succeeding Mr. William T. Tolley who was appointed to the position of Senior Vice President, Growth and Innovation.
On May 6, 2014, the Board of Directors appointed Mr. David G. Nord to the position of Chairman of the Board, in addition to his existing role as President and Chief Executive Officer. Mr. Nord succeeded Mr. Timothy H. Powers, the former Chairman of the Board, who did not stand for reelection at the 2014 Annual Meeting of Shareholders.
On June 30, 2014, Mr. Gary N. Amato was appointed to the position of Executive Vice President, Hubbell Electrical Segment. In this role, he acquired oversight of the Hubbell Lighting business, in addition to his leadership role over the Electrical Systems business. Mr. Amato assumed responsibility for the Lighting business following the announcement of the retirement of Mr. Scott H. Muse.
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 fulfill the objective of attracting and retaining key executive talent.
HUBBELL INCORPORATED-Notice of 2015 Annual Meeting of Shareholders & Proxy Statement8
Primary Components of 2014 Compensation Program
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | ||||
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:
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 2014, 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 32.
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Compensation Awarded in 2014. The table below provides an overview of the compensation paid to or earned by our named executive officers in 2014 (see the complete Summary Compensation Table on page 41 for more detail):
Change in | ||||||||||||||||||||||||||||
Pension Value and | ||||||||||||||||||||||||||||
Non-Equity | Nonqualified Deferred | |||||||||||||||||||||||||||
Stock | Option | Incentive Plan | Compensation | All Other | ||||||||||||||||||||||||
Salary | Awards | Awards | Compensation | Plan Earnings | Compensation | Total | ||||||||||||||||||||||
Name and Principal Position | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||
D. G. Nord | 940,500 | 2,574,942 | 1,062,572 | 984,000 | 4,501,039 | 137,088 | 10,200,141 | |||||||||||||||||||||
Chairman, President and | ||||||||||||||||||||||||||||
Chief Executive Officer | ||||||||||||||||||||||||||||
W. R. Sperry | 490,000 | 677,691 | 279,630 | 308,700 | — | 66,351 | 1,822,372 | |||||||||||||||||||||
Senior Vice President and | ||||||||||||||||||||||||||||
Chief Financial Officer | ||||||||||||||||||||||||||||
G. N. Amato | 600,000 | 813,190 | 335,541 | 363,100 | 1,227,302 | 25,968 | 3,365,101 | |||||||||||||||||||||
Executive Vice President, | ||||||||||||||||||||||||||||
Hubbell Electrical Segment | ||||||||||||||||||||||||||||
G. W. Bakker | 380,833 | 590,347 | 306,902 | 255,100 | 378,779 | 21,037 | 1,932,998 | |||||||||||||||||||||
Group Vice President, | ||||||||||||||||||||||||||||
Power Systems | ||||||||||||||||||||||||||||
A. Hsieh | 413,000 | 487,862 | 201,332 | 225,500 | — | 65,527 | 1,393,221 | |||||||||||||||||||||
Vice President, | ||||||||||||||||||||||||||||
General Counsel |
Director Compensation
Our compensation program for non-management Directors consists of an annual:
HUBBELL INCORPORATED-Notice of 2015 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 nine as of the 20152017 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 fulfill 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 reelection,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 20152017 Annual Meeting of Shareholders and to serve as Directors until the 20162018 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. Messrs. Ratcliffe, McNally and Ms. Good are not standing for reelection. 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.
The Board of Directors Recommends that Shareholders Vote ‘‘FOR’’“FOR” all of the Nominees.
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Carlos M. Cardoso
Age: 57
Director since: 2013
Committees: Audit and Compensation
Designation: Independent
Directorships: Stanley Black & Decker, Inc., since 2007; Kennametal Inc. (2008
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 served as Chairman, of the Board, President and Chief Executive Officer of Kennametal Inc. (a publicly(publicly traded manufacturer of metalworking tools and wear-resistant products) from January 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. Cardoso brings to the Board CEO, COO, manufacturing, international business and public company Board experience, including:
Anthony J. Guzzi
Age: 51
Director since:
Anthony J. Guzzi | |
Age: 53 Director Since: 2006 Committees: Executive, Finance, and Nominating and Corporate Governance Designations: Independent; Lead Director Directorship: 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. Guzzi brings to the Board CEO, COO, manufacturing, strategic development, operations, consulting, and public company board experience, including:
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Neal J. Keating | ||
Neal J. Keating
Age: 59
Director since:
Age: 61
Director Since: 2010
Committees: Audit, and Nominating and Corporate Governance (Chair), Compensation and Executive
Designation: Independent
Directorship: 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. Keating brings 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) |
John F. Malloy
Age: 60
Director since: 2011
Committees: Audit and Finance
Designation: Independent
Directorships: Victaulic Company, since 2006; Lehigh Gas Partners, since 2012
John F. Malloy | |
Age: 62 Director Since: 2011 Committees: Finance (Chair), Audit and Executive Designation: Independent Directorships: Victaulic Company, since 2006 |
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. Malloy brings 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 |
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Judith F. Marks | |
Age: 53 Director Since: 2016 Committee: Audit, and Nominating and Corporate Governance |
Ms. 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 subsidiary of Siemens Corporation from 2015-2016. Prior to that, she was the President and CEO of Siemens Government Technologies, Inc. from 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 2009-2011.
David G. NordSkills and Qualifications
Age: 57
Director since:Ms. Marks brings to the Board strong multi-disciplinary experience in the areas of corporate strategy, operations, business development, and leadership for emerging geographies, including:
• | Served as President and CEO of Siemens Government Technologies, Inc., a subsidiary of Siemens AG and leading integrator of innovative products, technologies and services for the government | |
• | Led all strategy, planning, customer relations and new business capture across Lockheed Martin Corporation’s (“Lockheed”) $14 billion electronic systems business | |
• | Held the position of President of Lockheed’s Global Business Division, a developer and manufacturer software and hardware solutions for global customers. |
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. Previously, he served as the Company’s President and Chief Operating Officer from June 2012 to January 2013, and Senior Vice President and Chief Financial Officer from September 2005 to June 2012.
Skills and Qualifications
Mr. Nord brings 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 | |
• |
Carlos A. Rodriguez
Age: 50
Director since: 2009
Committees: Compensation and Finance
Designation: Independent
Directorship: 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. Rodriguez brings 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:
John G. Russell
Age: 57
Director since:
HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement | 13 |
John G. Russell | |
Age: 59 Director Since: 2011 Committees: Compensation, Finance, and Nominating and Corporate Governance Designation: Independent Directorships: CMS Energy Corporation and Consumers Energy Company, since 2010 |
Mr. Russell has served as the Chairman of the Board of CMS Energy Corporation (“CMS”) and Consumers Energy Company (“Consumers”) since May 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. Russell brings 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: 62
Director since: 2014
Committees: Audit and Finance
Designations: Independent; Audit Committee Financial Expert
Directorship: GrafTech International (2010 - 2014)
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. Shawley brings 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 | |
• | Served on the board of a public company and as Chair of its Audit Committee |
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Richard J. Swift
Age: 70
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; Kaman Corporation, since 2002; Public Service Enterprise Group Incorporated, since 1994
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. Swift possesses 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, 2014,2016, Mr. Guzzi, Mr. Keating, Mr. Malloy and Mr. Swift have held the principal occupation listed in their biography 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.
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.
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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 (upon election at Annual Meeting) | $ | |
Stock Ownership Guidelines | 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 Fee | 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 |
(1) | |
Directors who are first standing for election are encouraged to own 1,000 shares of | |
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.
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Director Compensation Table for Fiscal Year 20142016
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 2014.2016. Mr. Nord receives no compensation beyond that described in the Executive Compensation section on page 41 for his service as Director.
Fees Earned | All Other | ||||||||||||||||
or Paid in Cash(1) | Stock Awards(2) | Compensation(3)(4) | Total | ||||||||||||||
Name | ($) | ($) | ($) | ($) | |||||||||||||
Name(1) | Fees Earned or Paid in Cash(2) ($) | Stock Awards(3) ($) | All Other Compensation(4)(5) ($) | Total ($) | |||||||||||||
Carlos M. Cardoso | 92,000 | 109,929 | 4,336 | 206,265 | 92,000 | 119,931 | 5,330 | 217,261 | |||||||||
Lynn J. Good | 100,000 | 109,929 | 336 | 210,265 | |||||||||||||
Anthony J. Guzzi | 98,000 | 109,929 | 4,336 | 212,265 | 100,945 | 119,931 | 4,330 | 225,206 | |||||||||
Neal J. Keating | 90,000 | 109,929 | 336 | 200,265 | 93,310 | 119,931 | 330 | 213,571 | |||||||||
John F. Malloy | 90,000 | 109,929 | 336 | 200,265 | 95,297 | 119,931 | 1,580 | 216,808 | |||||||||
Andrew McNally IV | 95,000 | 109,929 | 4,336 | 209,265 | |||||||||||||
Judith F. Marks | 82,472 | 119,931 | 330 | 202,733 | |||||||||||||
David G. Nord | — | — | — | — | — | — | — | — | |||||||||
Timothy H. Powers | 392,419 | — | 336 | 392,755 | |||||||||||||
G. Jackson Ratcliffe | 80,000 | 109,929 | 518 | 190,447 | |||||||||||||
Carlos A. Rodriguez | 87,000 | 109,929 | 336 | 197,265 | 32,102 | — | 137 | 32,239 | |||||||||
John G. Russell | 87,000 | 109,929 | 336 | 197,265 | 90,310 | 119,931 | 5,050 | 215,291 | |||||||||
Steven R. Shawley | 79,250 | 109,929 | 4,018 | 193,197 | 100,000 | 119,931 | 330 | 220,261 | |||||||||
Richard J. Swift | 95,000 | 109,929 | 4,336 | 209,265 | 95,000 | 119,931 | 330 | 215,261 |
(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: Mr. Cardoso — |
As of December 31, 2014,2016, 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:
Aggregate No. of Stock Units | Aggregate No. of Restricted | ||||||||
Name | Held at Year End (#) | 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 | 838 | 2,122 | 1,996 | 4,431 | |||||
Lynn J. Good | 2,598 | 3,594 | |||||||
Anthony J. Guzzi | 8,438 | 3,594 | 22,129 | 5,975 | |||||
Neal J. Keating | 1,336 | 3,594 | 4,135 | 5,975 | |||||
John F. Malloy | 631 | 1,472 | 1,502 | 1,543 | |||||
Andrew McNally IV | — | — | |||||||
Judith F. Marks | — | 1,162 | |||||||
David G. Nord | — | — | — | — | |||||
Timothy H. Powers | — | — | |||||||
G. Jackson Ratcliffe | — | — | |||||||
Carlos A. Rodriguez | 2,714 | 3,594 | |||||||
Carlos A. Rodriguez(1) | 7,824 | 4,812 | |||||||
John G. Russell | 1,454 | 3,594 | 5,304 | 5,975 | |||||
Steven R. Shawley | 346 | 952 | 2,867 | 3,204 | |||||
Richard J. Swift | 7,187 | — | 17,123 | — |
(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. |
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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 2014.2016.
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)year, and contributions to qualifying charitable organizations up to $10,000).
The NCGC considered the nature and dollar amounts of the transactions below and determined that none were required to be disclosed 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. Rodriguez, 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 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:
• | Mr. Cardoso | |
• | ||
Mr. Guzziserves as a director and executive officer of EMCOR Group, Inc., with which the Company engages in ordinary course business transactions. In | ||
• | Mr. Keatingserves as a director and executive officer of Kaman Corporation, with which the Company engages in ordinary course business transactions. In | |
• | Mr. Malloyserves as a director and executive officer of Victaulic Company, with which the Company engages in ordinary course business transactions. In | |
• | 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. | |
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• | Mr. Rodriquezserves as a director and executive officer of ADP, with which the Company engages in ordinary course business transactions. In | |
• | Mr. Russellserves as a director | |
• | 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 |
HUBBELL INCORPORATED- Notice of 2015 Annual Meeting of Shareholders & Proxy Statement17
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. 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 retained the role of Chairman of the Board through the 2014 Annual Meeting of Shareholders. In connection with the succession of Mr. Nord as the Company’s CEO, the Board determined that Mr. Powers should continue to serve as the Chairman during Mr. Nord’s transition into the CEO role. The Board determined that this structure was best for the Company and its shareholders at the time, because it allowed Mr. Nord, as a new CEO, 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. Mr. Powers did not stand for reelection to the Board at the 2014 Annual Meeting of Shareholders. Onsince May 6, 2014, the Board appointed Mr. Nord as Chairman.2014. The Board has determined that combining the roles of CEO and Chairman is best for the Company and its shareholders at this time because it promotes unified leadership by Mr. Nord and allows for a single, clear focus for management to execute the Company’s strategy and business plans.
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In addition, theLead Director
The Board has established the position of an independent Lead Director 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 |
Currently, Mr. Guzzi is the Lead Director and is expected to hold this position until the 20152019 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 leadership of Mr. Nord as Chairman, President and CEO, the counterbalancing role of the Lead Director and a Board comprised of effective and independent Directors, the Board believes that its current leadership structure is appropriate at this time.
HUBBELL INCORPORATED- Notice of 2015 Annual Meeting of Shareholders & Proxy Statement18
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 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 Board’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 Internal Auditcapital structure or acquisition strategy, and Legal Departments alsothe 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 appropriate Board Committeeat regular intervals during the year 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; reportsstrategic planning activities and risks relevant to execution of audits conducted by the Internal Audit Department; Code of Ethics or compliance-related matters; major litigation and regulatory issues; and any other matters broughtstrategy. In addition, from time 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. 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 2015,2016, 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 - 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.
HUBBELL INCORPORATED- Notice of 2015 Annual Meeting of Shareholders & Proxy Statement19
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 which are available on the Company’s website atwww.hubbell.com, or in the case of the Executive Committee Charter, in Article III, Section 1, of the Company’s 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 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 Mr. Shawley is an “audit committee financial expert” as defined by the SEC. The Audit Committee met 9 times in 2014.
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 2014.
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.
Nominating and Corporate Governance Committee
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 17 and 18 for more information on the actions taken by the Committee in these areas. The Nominating and Corporate Governance Committee met 4 times in 2014.
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Board and Committee Membership
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 • 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 | 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 |
See the “Director Independence” and “Director Nomination Process” sections on page 19 for more information on the actions taken by the Committee in these areas.
During 2014, nine 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 four 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 20142016 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 |
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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 6, 2015,3, 2017, the Company had outstanding 7,167,50655,381,614 shares of Class A Common Stock and 50,806,526 shares of Class B Common Stock. The following table sets forth as of March 6, 20153, 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 | 7.7% | ||||||
Common Stock | |||||||
BlackRock, Inc. 55 East 52ndStreet New York, New York | |||||||
7.2% | |||||||
Capital World Investors | |||||||
333 South Hope Street | |||||||
Los Angeles, California 90071 | |||||||
6.2% |
HUBBELL INCORPORATED - Notice of 2015 Annual Meeting of Shareholders & Proxy Statement22
(1) | |
The Company has received a copy of Schedule 13G, as amended, as filed with the SEC on February 13, | |
The | |
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 |
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The following table sets forth as of March 6, 20153, 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.
Common | Shares Obtainable Upon | Total Beneficial | Percent of | |||||||||||||
Name and Title of Class | Stock | Exercise of Options/SARs(1) | Ownership | 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 | 7,652 | — | 7,652 | (2)(3)(4) | * | |||||||||||
McNally | ||||||||||||||||
Class A Common | 2,431 | — | 2,431 | * | ||||||||||||
Class B Common | 33,965 | 33,965 | (4) | * | ||||||||||||
Ratcliffe | — | |||||||||||||||
Class A Common | 83,222 | 83,222 | * | |||||||||||||
Class B Common | 172,240 | — | 172,240 | (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 | 9,242 | — | 9,242 | (2)(4) | * | |||||||||||
Nord | ||||||||||||||||
Class B Common | 85,157 | 155,918 | 241,075 | (5) | * | |||||||||||
Sperry | ||||||||||||||||
Class B Common | 26,957 | 41,656 | 68,613 | (5) | * | |||||||||||
Amato | ||||||||||||||||
Class B Common | 23,819 | 5,069 | 28,888 | (5) | * | |||||||||||
Bakker | ||||||||||||||||
Class B Common | 7,253 | 11,241 | 18,494 | (5) | * | |||||||||||
Hsieh | ||||||||||||||||
Class B Common | 6,159 | 9,889 | 16,048 | (5) | * | |||||||||||
All Directors and executive officers as a group (21 persons) | ||||||||||||||||
Class A Common | 408,894 | 408,894 | (2)(6)(8) | 5.7% | ||||||||||||
Class B Common | 607,975 | 335,119 | 943,094 | (2)(3)(4)(5)(7)(9) | 1.2% |
HUBBELL INCORPORATED - NoticeIn addition to the shares of 2015 Annual Meeting of Shareholders & Proxy Statement24Common 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.
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 |
(2) | Does not include stock units (each stock unit consisting of one share |
(3) | Does not include vested and unvested restricted stock units (“RSU’s”) (each RSU consisting of the right to receive one share of |
(4) | Includes |
(5) | Includes the following shares of |
(6) | Includes |
(7) | Includes |
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COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) section of the Proxy Statement describes the material elements of the 20142016 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. An-Ping Hsieh, Senior Vice President, | |
• | Mr. Gerben W. Bakker, Group | |
On February 1, 2014, Mr. Gerben W. Bakker was appointed to the position of Group Vice President, Power Systems succeeding Mr. William T. Tolley who was appointed to the position of Senior Vice President, Growth and Innovation.
On May 6, 2014, the Board of Directors appointed Mr. David G. Nord to the position of Chairman of the Board, in addition to his existing role as President and Chief Executive Officer. Mr. Nord succeeded Mr. Timothy H. Powers, the former non-executive Chairman of the Board, who did not stand for reelection at the 2014 Annual Meeting of Shareholders. Mr. Powers’ compensation for his services as non-executive Chairman is reflected in the Director Compensation table on page 15.
On June 30, 2014, Mr. Gary N. Amato was appointed to the position of Executive Vice President, Hubbell Electrical Segment. In this role, he acquired oversight of the Hubbell Lighting business, in addition to his leadership role over the Electrical Systems business. Mr. Amato assumed responsibility for the Lighting business following the announcement of the retirement of Mr. Scott H. Muse.
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 2014.2016. For more information about our business, please see our Annual Report on Form 10-K for the year ended December 31, 20142016 filed with the SEC on February 19,16, 2017.
Our Business Highlights
In the face of choppy 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 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 for the year ended 2016 were $3.5 billion, an increase of three percent over the comparable period of 2015. Acquisitions added three percentage points to net sales in 2016 compared to 2015, offset by the impact of foreign 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 in non-residential and residential markets, continued declines in core industrial and oil markets and flat growth in transmission and distribution markets. Net sales for the year ended 2015 were $3.4 billion, an increase of one percent over the year ended 2014. Acquisitions added three percentage points to net sales in 2015 compared to 2014 offset by the impact of foreign currency translation which reduced net sales by two percentage points. Organic volume was flat in 2015.
HUBBELL INCORPORATED - NoticeOperating Income
Operating income of $477.8 million in 2016 increased 1% from the comparable period in 2015, Annual Meetingwhile operating margin declined by 40 basis points to 13.6% when compared to 2015. Excluding restructuring and related costs, adjusted operating income of Shareholders & Proxy Statement26$512.8 million was in line with the comparable period in 2015, and the adjusted operating margin was 14.6% in 2016 compared to 15.1% in 2015. Savings from cost actions helped support operating margins and 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 declined by 140 basis points to 13.4% when compared to 2014. 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 unfavorable product and business mix, and the unfavorable impact of foreign exchange, partially offset by the favorable net impact of price and material costs as well as productivity in excess of cost inflation.
Earnings Per Diluted Share
Earnings per diluted share in 2016 increased 10% compared to 2015. Excluding restructuring and related costs, and costs associated with the reclassification of Common Stock, adjusted earnings per diluted share increased 3% in 2016 as compared to 2015 driven primarily by a lower
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Our Business Highlights
Our Company delivered another yearaverage number of strong performance in 2014, achieving record sales and earnings per diluted share. During 2014, we accomplished the following:
Net Sales. Net salesshares outstanding for the year, ended 2014 were $3.4 billion, an increase of 6% compared to 2013 with acquisitions contributing 4 points of the growth. The organic growth was primarily due to higher demand in the non-residential markets with modest growth in the residential and utility markets. Net sales for the year ended 2013 were $3,184 billion, an increase of 5% compared to 2012 with acquisitions contributing 3 points of the growth. The organic growth was due to strength in residential markets, and higher demand for renovation and relight projects partiallywhich declined by approximately 2.3 million, more than offset by weaker demand in the utility market.
Earnings Per Diluted Share.tax headwinds. Earnings per diluted share in 2014 were $5.482015 decreased 13% compared to $5.47 reported2014. Adjusted earnings per diluted share declined slightly in 2013. The increase was2015 as compared to 2014 due to higherlower adjusted operating income, andpartially offset by the impact of a lower average number of diluted shares outstanding partially offsetfor the year, which declined by a higher effective tax rate. In 2013, earnings per diluted share increased by 9%approximately 1.2 million as compared to 2012 due to higher net sales and operating income. Earnings per diluted share in 2012 increased by 13% compared to 2011 due to higher net sales and operating income, lower other expense partially offset by a higher effective tax rate.2014.
Operating Margin. Operating margin in 2014 was 15.4% compared to 15.9% reported in 2013. The decrease was due to an unfavorable business and product mix and increased material costs partially offset by the benefit of higher volume. Operating margin of 15.9% in 2013 increased 40 basis points compared to 15.5% reported in 2012 as a result of productivity and lower material costs.
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 113% in 2016 compared to 92% in 2015, and 102% in 2014 compared to 99% in 2013, and 100% in 2012.2014.
In addition to the performance achievements noted above, during 20142016 the Company also:
Increased the quarterly 11% to | ||
– the 9th consecutive year of increase | ||
$173M on three acquisitions | ||
across both reporting segments | Repurchased $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 our total square footage |
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.
HUBBELL INCORPORATED- Notice of 2015 Annual Meeting of Shareholders & Proxy Statement27
Our Compensation DecisionsPractices and PracticesDecisions
Our compensation decisions for 20142016 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 | ||
In 2014, theOur Compensation Committee made several enhancementshas designed our compensation program to the long-term incentive award program demonstrating itsfulfill these objectives. The following page contains highlights of our compensation practices and decisions which exemplify our commitment to driving strong long-term Company performance by challenging executives to outperform their peerssound compensation governance and financial targets to deliver exceptional shareholder value. The table below summarizes the Committee’s key decisions:interests.
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Compensation Governance Snapshot
Align CEO and | |||||
In recent years, the Committee also implemented and maintains the following sound compensation governance practices to support its compensation philosophy:
Designate | |||
Limits on Executive Compensation | |||
Cap our |
Robust Stock Ownership: | |||
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 | ||
• | |||
• | We require a double-trigger (change in control plus termination of employment) to trigger | ||
• | |||
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 | |||
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 | |||||
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 |
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Our Shareholders’ Feedback – “Say
Say on Pay”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, the Compensation Committee has chosen largely to maintain the structure and components of the executive compensation program, while continually evaluating its effectiveness in meeting the Company’s compensation objectives.
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. Since then, the Compensation Committee considered the evolution of the advisory vote on compensation, the prevalence of annual say on pay votes within our peer group and general industry, and the level of shareholder support garnered for the triennial say on pay vote back in 2011. In keeping with its objective to continually monitor the effectiveness 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 commencing with the 2018 Annual Meeting of Shareholders.
Although both the say on pay vote isand say when on pay votes are non-binding, the Compensation Committee values the opinions of shareholders and will continue to consider the outcome of the vote when making future compensation decisions. Our next advisory
The Board of Directors recommends that shareholders vote for a say on pay advisory vote is expected to occur at our 2017 Annual Meeting of Shareholders. At the 2011 Annual Meeting, our shareholders also voted in favor of the proposal to hold say on pay votes every three years. In the future, we will continue to consider the outcome of our triennial say on pay votes when making compensation decisions regarding the named executive officers.year.
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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 compensation in excess of tax code limitations under same formula as the DB Plan above. | |||
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 20142016 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- Notice of 2015 Annual Meeting of Shareholders & Proxy Statement30
The Compensation Committee benchmarks each element of executive total compensation to the median compensation levels paid to executives in comparable positions in similar industries. In 2014 ,2016, the Compensation Committee reviewed benchmark data from two sources — a– the Peer Group and aSurvey Groupthe general industry as described below.
Peer Group Data. In 2013, theData
The Compensation Committee decided on a go-forward basis to benchmarkbenchmarks Hubbell’s executive pay practices primarily to a peer group of companies similar in size and operating character. The custom Peer Grouporganizations (the “Peer Group”) comprises 20 companies deemedthat are similar to bethe Company in size, industry affiliation and performance compatibility, and that are representative of the types of companies with which Hubbell competes for executive talent and are similartalent. 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 industry, revenueoperational comparability and market capitalization. Hubbell approximatesorganization size. Based on this review, the median of the peer group in terms of revenues, market capitalization and employees. TheCompensation Committee approved a new Peer Group was used asof 25 companies for use in benchmarking 2017 compensation. The new Peer Group consists of 12 new companies (bolded in the primary reference for setting 2014 target paytable below) and making 2014 long-term incentive awards.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. | ||
AMETEK, Inc. | ||
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. | ||
W.W. Grainger, Inc. | ||
IDEX Corporation | ||
Lincoln Electric Holdings Inc. | Xylem Inc. | |
MSC Industrial Direct Co., Inc. |
Survey Group Data.HUBBELL INCORPORATED - 2017 Annual Meeting of Shareholders & Proxy Statement 30
General Industry Data
The Compensation Committee determined that thealso benchmarked pay for Hubbell executives to general industry Survey Group would be usedpractices as a secondary reference for most positions, and a primary benchmark for those positionsjobs with not enoughan insufficient number of matches available amongin the Peer Group, thereby providing a more robust review and providing greater validation of market pay levels.Group. The Survey Groupgeneral industry data consists of a community of over 300reflects the norms among all the companies that participate in the U.S. general manufacturing sector (excluding financial, retail, healthcare, and energy companies) from Aon Hewitt’s 20142016 Total Compensation Database, (“Survey Group”). The Surveyexcluding companies that operate within the financial services, retail, utility, hospital, and hospitality sectors.
Peer Group and general industry data relied upon by the Compensation Committee is a statistical summary of the pay practices for the manufacturing industry as a group,are size-adjusted to reflect pay practices at companies of Hubbell’s size. In its review of the Hubbell’s revenue size.
General. The Compensation Committee’s reviewbenchmark communities, the Committee focuses on 50thpercentile practices and, in 2016, the Committee determined that aggregate target total compensation expenditures for the Company’s executives trailed behind the 50thpercentile of the Peer Group, data andwhich is the Survey Group data in 2014 showed the Company’s stated compensation principle.
The Compensation Committee reviews a number of factors when establishing target total compensation for its executives including, but not limited to, be competitive with 50thpercentile practicesmarket data, tenure in those external markets. This is 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 benchmark group,groups, the Compensation Committee also reviews tally sheets totaling 20142016 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 2015 Annual Meeting of Shareholders & Proxy Statement31
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 Peer Group data where available, 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 Peer 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 (83% for the CEO and 76% for all other NEOs). In December 2013, 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 2014.2016.
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 are paid pursuant to the Company’s Incentive Compensation Plan (“Incentive Plan”) and 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 20142016 base salaries and payable from the compensation plans noted in the table and discussed below:
Name | STI Target Percentage(1) | Base Salary | STI Target | Compensation Plan | STI Target Percentage(1) | Base Salary | STI Target | Compensation Plan | ||||||||||||||||||||
D. G. Nord | 115 | % | $ | 940,500 | $ | 1,081,575 | Senior Plan | 115 | % | $ | 1,000,000 | $ | 1,150,000 | Senior Plan | ||||||||||||||
W. R. Sperry | 70 | % | $ | 490,000 | $ | 343,000 | Senior Plan | 80 | % | $ | 525,000 | $ | 420,000 | Senior Plan | ||||||||||||||
G. N. Amato | 70 | % | $ | 600,000 | $ | 420,000 | Senior Plan | |||||||||||||||||||||
R. R. Ruland | 70 | % | $ | 430,000 | $ | 301,000 | Incentive Plan | |||||||||||||||||||||
A. Hsieh | 70 | % | $ | 440,000 | $ | 308,000 | Senior Plan | |||||||||||||||||||||
G. W. Bakker | 60 | % | $ | 390,000 | $ | 234,000 | Incentive Plan | 70 | % | $ | 450,000 | $ | 315,000 | Senior Plan | ||||||||||||||
A. Hsieh | 60 | % | $ | 413,000 | $ | 247,800 | Incentive Plan |
(1) |
HUBBELL INCORPORATED-Notice of 2015 Annual Meeting of Shareholders & Proxy Statement32
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 20142016 performance goals and thresholds are described below under section entitled “2014“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” 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 is intended to provide the Company with the ability to pay performance based compensation to senior executives that are deductible by the Company for federal income tax purposes to the extent permitted by the Code.
The maximum amounts that may be paid to participants pursuant to the Senior Plan are determined by reference to the incentive compensation fund established under the Company’s Incentive Compensation Plan described in the prior section above.
Under the Senior Plan, the maximum amounts that may be earned are as follows:
Mr. Nord was eligible to earn a maximum amount for 20142016 equal to the lesser of:
Mr. Sperry, Mr. Hsieh and Mr. AmatoBakker were each eligible to earn a maximum amount for 20142016 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 this discretion, the Compensation Committee decided to apply the same methodology used in determining payments under the Incentive Compensation Plan described in the prior section above to the participants in the Senior Plan.
The amounts actually awarded to the NEOsNEOS are displayed in the Summary Compensation Table on page 41 based upon the performance results shown in the tables on pages 34 and 35.page 34.
20142016 Performance Measures
The tables below reflectThis section reflects the applicable short-term incentive award measures, weighting and thresholds applied to participants in the Incentive Compensation Plan and the Senior Plan:
32 |
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Business Level Measures | ||||||||
Measures | Threshold | Weight | ||||||
Operating Profit | ||||||||
(75% weight) | Minimum | < 80% | = 0% | |||||
Target | 100% | = 100% | 60 | % | ||||
Free Cash Flow | Maximum | ≥ 120% | = 200% | |||||
(25% weightl) | ||||||||
EPS and Free Cash Flow | See table at left | 25 | % | |||||
(Company level) | ||||||||
Strategic objectives | As described on page 34 | 15 | % | |||||
These measures were used to determine the STI award for Mr. Amato and Mr. Bakker. |
Enterprise Level Measures
For 2014,2016, 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 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 20142016 short-term incentive award for Mr. Nord was based solely on these two measures while the award measures for Mr. Sperry and Mr. Hsieh also included a strategic objective component as discussed on the following page.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% | – |
HUBBELL INCORPORATED-Notice of 2015 Annual Meeting of Shareholders & Proxy Statement33
Business Level Measures
Hubbell’s business isbusinesses are divided among two operating segments: The Electrical Segment (which is comprised of the Electrical SystemsCommercial & Industrial, Construction & Energy, and Lighting businesses)business groups) and the Power Segment (which is comprised of our Power Systems business group). The Compensation Committee selected operating profit and freeoperating cash flow as the two primary performance measures it would use to determine short-term incentive award eligibility for Mr. AmatoBakker and Mr. BakkerRuland to promote decision making that would best increase the value of the segmentsbusinesses over which they have direct oversight and control. In addition to these measures, a portion of Mr. Amato’sBakker’s and Mr. Bakker’sRuland’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% |
Effective June 30, 2014, Mr. Amato assumed oversight of the entire Electrical Segment. Previously, he was responsible for overseeing solely the Electrical Systems portion of the segment. Given that his oversight of the Electrical Segment began in the second half of 2014, Mr. Amato’s short-term incentive award is based on a blended average of the operating profit and free cash flow performance of both the Electrical Systems and Lighting portions of the segment. The blended average is weighted based on the relative size of each of these businesses, and prorated to reflect Mr. Amato’s additional oversight of the Lighting business beginning June 30, 2014.
Strategic Objective Measures
The EPS, free cash flow and operating profit targets were the only targets material to the consideration of the NEO’s annual short-term incentive awards. The Compensation Committee, upon consultation with management, also identified certain objectives central to the Company’s strategy upon which it based a component of Mr. Sperry’s, Mr. Amato’s,Hsieh’s, Mr. Bakker’s and Mr. Hsieh’sRuland’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 level of achievement of certainspecific targets, as well as the strategic objectives using its qualitative judgment. Examples of strategic objectives include measured improvementsas a whole. The specific targets for 2016 are outlined in customer service, operational discipline, enterprise growth and organizational development.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 EnterpriseCompany level as the Committee considered such measures to better reflect his responsibility to the Company as a whole. Further, the Committee recognized that achievement of the strategic objectives by the other NEO’sNEOs would directly and indirectly 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 is set forth in the Short-Term Incentive Payout table on page 34.
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 33 |
Performance Results and Payout
Enterprise Level Measures
For 2015,2016, actual EPS was $5.48$5.24 and free cash flow was $331.2$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 91%99% and 92%182%, respectively.
EPS | Free Cash Flow | Composite Payout | |||||||
(75% weight) | (25% weight) | ||||||||
Enterprise | EPS 75% weight | Free Cash Flow 25% weight | Composite Payout | ||||||
Actual Performance | $5.48 | $331 million | 91% | 99% | 182% | 120% | |||
Weighted Performance | 68% | 23% | 74% | 45% |
Business Level Measures
Electrical SegmentConstruction and Energy
The Electrical SystemsMr. Ruland leads the Construction 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 8% better5% less than prior year and a freean operating cash flow target equivalent to 93%108% of operating profit. The C & E business group achieved operating profit performance that was 5% lower than14% above target which translated to a performance result of 86%171% on the operating profit measure. The Electrical SystemsC & E business group also achieved freeoperating cash flow performance of 94%130% of target. This performance translated to a performance result of 85%200% on the freeoperating cash flow measure. When blended together, the composite measure resulted in a payout of 86%178% as shown below.
Electrical Systems | Operating Profit | Free Cash Flow | Composite Payout | ||||||
(75% weight) | (25% weight) | ||||||||
Construction and Energy | Operating Profit 75% weight | Operating Cash Flow 25% weight | Composite Payout | ||||||
Actual Performance | 86% | 85% | 86% | 171% | 200% | 178% | |||
Weighted Performance | 65% | 21% | 128% | 50% |
HUBBELL INCORPORATEDPower Systems -Notice
Mr. Bakker leads the Power Systems business group, and therefore is measured on the performance of 2015 Annual Meeting of Shareholders & Proxy Statement34
this business group. The LightingPower Systems business group had an operating profit performance target of 14% better than6% above prior year and a freean operating cash flow target equivalent to 100%109% of operating profit. The Power Systems business group achieved operating profit performance that was 18%1% lower than target which translated to a performance result of 55%98% on the operating profit measure. The LightingPower Systems business group achieved freeoperating cash flow performance of 60%100% of target. This performance translated to a performance result of 0%99% on the freeoperating cash flow measure. When blended together, the composite measure resulted in a payout of 41%98% as shown below.
Lighting | Operating Profit | Free Cash Flow | Composite Payout |
(75% weight) | (25% weight) | ||
Actual Performance | 55% | 0% | 41% |
Weighted Performance | 41% | 0% |
Power Segment
The Power segment had an operating profit performance target of 5% better than prior year and a free cash flow target equivalent to 100% of operating profit. The business achieved operating profit performance that was 3% better than target which translated to a performance result of 116% on the operating profit measure. The Power Systems business achieved free cash flow performance of 101% of target. This performance translated to a performance result of 104% on the free cash flow measure. When blended together, the composite measure resulted in a payout of 113% as shown below.
Power | Operating Profit | Free Cash Flow | Composite Payout |
(75% weight) | (25% weight) | ||
Actual Performance | 116% | 104% | 113% |
Weighted Performance | 87% | 26% |
Strategic Objective Measures
The Compensation Committee assessed the individual performance with respect to the strategic objectives and determined that such results corresponded to the performance levels set forth in the following table.
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 award earned by each of the named executive officers applying the Composite Payout percentages achieved on their individual performance measures to each of their STI Targets. The resulting amount reflects their 20142016 STI Award as shown below and in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table on page 41.
Performance Measures / Results | |||||||||||||||||||||||||||||||||||||||
Performance Measures / Results | |||||||||||||||||||||||||||||||||||||||
EPS and Free | Operating Profit | Strategic | Total | EPS and Free | Operating Profit and | Strategic | Total | ||||||||||||||||||||||||||||||||
Cash Flow | and Free Cash | Objectives | Composite | X | STI Target | = | STI Award | Cash Flow | Operating Cash Flow | Objectives | Composite | x | STI Target | = | STI Award | ||||||||||||||||||||||||
(Enterprise Level) | (Business Level) | (Individual) | Payout | ($) | ($) | (Enterprise Level) | (Business Level) | (Individual) | Payout | ($) | ($) | ||||||||||||||||||||||||||||
Mr. Nord | 91 | % | — | — | 91 | % | 1,081,575 | 984,000 | 120% | — | — | 120% | 1,150,000 | 1,380,000 | |||||||||||||||||||||||||
Mr. Sperry | 91 | % | — | 85 | % | 90 | % | 343,000 | 308,700 | 120% | — | 95 | % | 116% | 420,000 | 487,200 | |||||||||||||||||||||||
Mr. Amato | 91 | % | 84 | % | 88 | % | 86 | % | 420,000 | 363,100 | |||||||||||||||||||||||||||||
Mr. Ruland | 120% | 178 | % | 113 | % | 154% | 301,000 | 463,500 | |||||||||||||||||||||||||||||||
Mr. Hsieh | 120% | — | 95 | % | 116% | 308,000 | 357,300 | ||||||||||||||||||||||||||||||||
Mr. Bakker | 91 | % | 113 | % | 125 | % | 109 | % | 234,000 | 255,100 | 120% | 98 | % | 107 | % | 105% | 315,000 | 330,800 | |||||||||||||||||||||
Mr. Hsieh | 91 | % | — | 90 | % | 91 | % | 247,800 | 225,500 |
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 34 |
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 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 external practices, the Company’s financial performance in the short- and long-term, the value of awards granted in prior years, succession considerations and succession considerations. In 2014, the Compensation Committee made three principal changes to theindividual performance. The design of the long-term incentive award program to strengthen itsreflects a strong performance-based orientation.orientation as demonstrated by the following:
• | ||
• |
HUBBELL INCORPORATED -Notice of 2015 Annual Meeting of Shareholders & Proxy Statement35
• | The performance period for all of our performance based awards is three years further promoting attention to |
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 toto:
• | Strengthen the performance character of the award | |
• | Optimize the program’s ability to motivate, retain and reward the | |
• | Build equity ownership and thereby align the interests of our executives with those of our | |
• | Efficiently deliver value to executives while qualifying expenditures as deductible performance-based compensation under Section 162(m) of the Internal Revenue | |
• | Represent the prevailing mix of long-term equity awards in the general manufacturing | |
• | Reward performance that executives can directly |
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.
SARs
A SAR gives the holder the right to receive, once vested, the value in 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 each 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, 2014– $106.44). 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 value of each SAR is formulated on the basis of a modified Black-Scholes calculation. See the section entitled “Equity Award Plan Vesting Provisions” on page 42 for additional information on the terms of this award.
Performance Share Awards
2014, Grant2015 and 2016 Grants
Performance share awards were granted to the NEO’sNEOs in 2014, 2015 and 2016 providing the ability to earn shares of the Company’s Class B Common Stock upon satisfaction of pre-established performance measures within a stated period of time. The table below summarizes the key terms of the performance share award:
Performance Measures | Weight | Index | Performance Range | Payout(2) | Weight | Index | Performance Range | Payout | ||||
Total Shareholder Return | 50% | S&P Capital Goods 900 | > 80th percentile of Index | 200% | 50% | S&P Capital Goods 900 | > 80thpercentile of Index | 200% | ||||
At 50th percentile of Index | 100% | At 50thpercentile of Index | 100% | |||||||||
Net Sales Growth(1) | 50% | At 35th percentile of Index | 50% | 50% | At 35thpercentile of Index | 50% | ||||||
0% | S&P Capital Goods 900 | < 35thpercentile of Index | 0% | S&P Capital Goods 900 |
(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 |
Margin Target | Payout(2) | |
Net Income Margin Modifier | 10.0% | 125% |
9.0% | 100% | |
8.0% | 75% | |
<8.0% | 0% |
Margin Target | Payout | |||
10.0% | 125% | |||
Net Income Margin Modifier | 9.0% | 100% | ||
8.0% | 75% | |||
<8.0% | 0% |
The 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 target 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 TSR and/or CAGR over the three-year performance period falls below the 35thpercentile of the applicable 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.
HUBBELL INCORPORATED -Notice of 2015 Annual Meeting of Shareholders & Proxy Statement36
Prior Grants2013 Grant
The 2013 performance share grants made in 2011, 2012 and 2013 could beshares 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 target award. The performance and payouts will be rounded to the nearest 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 35th35th percentile 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 4244 for additional information on the terms of performance share awards.
The performancePerformance shares were granted on December 5, 2011,10, 2013, having a performance period of January 1, 20122014 to December 31, 2014,2016 were paid out in February 20152017 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 75%20% percentile of the Index resulting in a 128%64% payout thereby earning the named executive officers the following shares of Class B Common Stock: Mr. Nord – 5,053,6,364, Mr. Sperry – 2,723,1,591, Mr. Ruland – 415, Mr. Hsieh – 1,237 and Mr. AmatoBakker – 4,538.415.
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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. PBRS awards replaced the time-based vested restricted stock awards that had been granted to the NEOs in prior years.
2014, Grant2015 and 2016 Grants
PBRS were granted to the NEOs in 2014, 2015 and could2016 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 incentives to long-term shareholder interests. See the section entitled “Equity Award Plan Vesting Provisions” on page 4244 for further information on the terms of these awards.
2013 Grant
The PBRS grant made in 2013 could be earned in three equal 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.
At the end of the December 31, 2014,2016, the Company’s EBITDA performance was 17.7%16% of net sales thereby earning the named executive officers the following shares of Class B Common Stock representing one-third of their 2013 PBRS grant: Mr. Nord – 2,781, Mr. Sperry – 695, Mr. AmatoRuland – 695, Mr. Bakker - 181 and182, Mr. Hsieh – 540.541 and Mr. Bakker – 182.
SARS
A SAR gives the holder the right to receive, once vested, the value in shares of the Company’s Common Stock equal to the positive difference between the base price and the market value of a share of Common Stock upon exercise. Generally, SARs vest in 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 44 for additional information on the terms of this award.
Time-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 the executive’s continued employment and the value of the Company’s stock on the vesting date. Restricted share awards are granted in shares of the 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.
Compensation Policies
HUBBELL INCORPORATED -Notice of 2015 Annual Meeting of Shareholders & Proxy Statement37
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 in the following table: |
Accordingly, the policy expects employees to attain a minimum share ownership level equal to their base salary times a certain multiplier, as indicated below:
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement |
Executive Level | Multiple of Base Salary | |
Chief Executive Officer | 5x | |
Chief Financial Officer, Group | 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 2015 Annual Meeting of Shareholders & Proxy Statement38
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.
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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 4846 and the “Non-Qualified Deferred Compensation” section on page 50.48.
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 6 to the “Summary Compensation Table” on page 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 51.49.
HUBBELL INCORPORATED -Notice of 2015 Annual Meeting of Shareholders & Proxy Statement39
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 $1 million deductibility limitation of Section 162(m) of the Code.
The Committee has reviewed the Compensation Discussion and Analysis and discussed its contents with members of the Company’s management.management and the independent compensation consultants. Based on this review and discussion, the Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and in this Proxy Statement.
Compensation Committee
Richard J. Swift, Chair
Carlos M. Cardoso
Andrew McNally IV
Carlos A. RodriguezNeal J. Keating
John G. Russell
HUBBELL INCORPORATED -Notice of 2015 Annual Meeting of Shareholders & Proxy Statement40
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Summary Compensation Table for Fiscal Year 20142016
The following table sets forth the total compensation of Company’s named executive officers for the years ended December 31, 2014,2016, December 31, 2013,2015, and December 31, 2012.2014.
Name and Principal Position | Year | Salary(1) ($) | Stock Awards(2) ($) | Option Awards(2) ($) | Non-Equity Incentive Plan Compensation(3) ($) | Change in Pension Value and Nonqualified Deferred Compensation Plan Earnings(4) (5) ($) | All Other Compensation(6) ($) | Total ($) | 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 | 2014 | 940,500 | 2,574,942 | 1,062,572 | 984,000 | 4,501,039 | 137,088 | 10,200,141 | 2016 | 1,000,000 | 2,809,259 | 1,765,939 | 1,380,000 | 2,598,258 | 159,153 | 9,712,609 | |||||||||||||||||
Chairman, President and Chief Executive Officer | 2013 | 900,000 | 2,196,158 | 1,500,240 | 918,000 | 1,108,809 | 125,814 | 6,749,021 | |||||||||||||||||||||||||
2012 | 607,474 | 2,200,297 | 1,344,114 | 622,600 | 1,239,765 | 90,993 | 6,105,243 | ||||||||||||||||||||||||||
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 | 2014 | 490,000 | 677,691 | 279,630 | 308,700 | — | 66,351 | 1,822,372 | 2016 | 525,000 | 784,000 | 492,916 | 487,200 | — | 80,251 | 2,369,367 | |||||||||||||||||
Senior Vice President and Chief Financial Officer | 2013 | 442,100 | 549,006 | 375,054 | 315,700 | — | 61,867 | 1,743,727 | |||||||||||||||||||||||||
2012 | 401,596 | 630,077 | 388,029 | 327,000 | — | 59,453 | 1,806,155 | ||||||||||||||||||||||||||
G. N. Amato | 2014 | 600,000 | 813,190 | 335,541 | 363,100 | 1,227,302 | 25,968 | 3,365,101 | |||||||||||||||||||||||||
Executive Vice President, | 2013 | 500,200 | 549,006 | 375,054 | 423,700 | 362,168 | 23,362 | 2,233,490 | |||||||||||||||||||||||||
Hubbell Electrical Segment | 2012 | 479,100 | 490,035 | 289,689 | 422,600 | 966,186 | 27,536 | 2,675,146 | |||||||||||||||||||||||||
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 | 2014 | 380,833 | 590,347 | 306,902 | 255,100 | 378,779 | 21,037 | 1,932,998 | 2016 | 450,000 | 511,324 | 321,463 | 330,800 | 588,207 | 22,757 | 2,224,551 | |||||||||||||||||
Group Vice President, | |||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||
A. Hsieh | 2014 | 413,000 | 487,862 | 201,332 | 225,500 | — | 65,527 | 1,393,221 | |||||||||||||||||||||||||
Vice President, | |||||||||||||||||||||||||||||||||
General Counsel |
(1) | The amounts reported in theSalary column reflect salaries paid in the years indicated. |
(2) | The amounts reported in theStock Awards andOption Awards columns 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 Compensation column reflect short-term incentive awards earned under the Company’s Incentive |
(4) | The amounts reported in theChange in Pension Value column reflect the change in the actuarial present value of each named executive officer’s accumulated benefit under the retirement plans in which he participates. See the “Employee Benefits” section on page 38 and “Retirement Plans” section on page |
(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 |
(6) | The amounts reported in theAll Other Compensation column for |
Retirement Plan | |||||||
Perquisites(a) | Contributions(b) | Total | |||||
Name | ($) | ($) | ($) | ||||
D. G. Nord | 54,768 | 82,320 | 137,088 | ||||
W. R. Sperry | 26,323 | 40,028 | 66,351 | ||||
G. N. Amato | 18,168 | 7,800 | 25,968 | ||||
G. W. Bakker | 13,237 | 7,800 | 21,037 | ||||
A. Hsieh | 32,023 | 33,504 | 65,527 |
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 thePerquisites column reflect the incremental cost to the Company for providing the use of an automobile to | |
(b) | The amounts in theRetirement Plan Contributions column 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. |
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Equity Award Plan Vesting Provisions
2014 Grant Terms
The following table describes the terms of each of the equity incentive awards granted to the named executive officers in December 2014.
Performance Based Restricted Stock(1) | Performance Shares(2) | 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 the 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, 2015 to December 31, 2017 | January 1, 2015 to December 31, 2017 | 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 20th percentile of the comparator group. Performance below the 20th percentile 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 - 200% of the original grant amount based on Hubbell’snet sales performance relative to the comparator group | ||||
Performance Range and Payout | |||||||
> 80th percentile of Index | 200% | ||||||
At 50th percentile of Index | 100% | ||||||
At 35th percentile of Index | 50% | — | |||||
Below 35th percentile of Index | 0% | ||||||
Modifier | |||||||
— | Thenet sales payout is further modified based on Hubbell’s cumulativenet income margin performance compared to the following preestablished targets: | ||||||
10% = 125% payout | |||||||
9% = 100% payout | |||||||
8% = 75% payout | |||||||
<8% = 0 payout |
HUBBELL INCORPORATED-Notice of 2015 Annual Meeting of Shareholders & Proxy Statement42
Grants of Plan-Based Awards in Fiscal Year 20142016
The following table presents information concerning plan-based awards granted in 20142016 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 | Est. Future Payouts Under | All Other | All Other | ||||||||||||||||||||||||||||||||||||||||||||||||
Non-Equity Incentive Plan | Equity Incentive Plan | Stock | Option | Grant | |||||||||||||||||||||||||||||||||||||||||||||||
Awards(1) | Awards(2) | Awards: | Awards: | Exercise | Date Fair | ||||||||||||||||||||||||||||||||||||||||||||||
Number | Number | or Base | Closing | Value of | |||||||||||||||||||||||||||||||||||||||||||||||
of Shares | of Shares | Price of | Price on | Stock and | |||||||||||||||||||||||||||||||||||||||||||||||
of Stock | Underlying | Option | Grant | Option | |||||||||||||||||||||||||||||||||||||||||||||||
Type of | Grant | Threshold | Target | Max | Threshold | Target | Max | or Units(3) | Options(3) | Awards(4) | Date | Awards(5) | 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 | Award | Date | ($) | ($) | ($) | (#) | (#) | (#) | (#) | (#) | ($/Sh) | ($/Sh) | ($) | Type of Award | Grant Date | Threshold ($) | 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 | 540,788 | 1,081,575 | 2,163,150 | — | — | — | — | — | — | — | — | STI | 02/11/16 | 575,000 | 1,150,000 | 2,300,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
PBRS | 12/02/14 | — | — | — | — | — | — | 7,588 | — | — | — | 728,144 | PBRS | 12/06/16 | — | — | — | — | — | — | 7,701 | — | — | 808,066 | |||||||||||||||||||||||||||
SAR | 12/02/14 | — | — | — | — | — | — | — | 58,287 | 106.44 | 108.40 | 1,062,572 | SAR | 12/06/16 | — | — | — | — | — | — | — | 93,883 | 113.69 | 1,765,939 | |||||||||||||||||||||||||||
PS/TSR | 12/02/14 | — | — | — | 4,123 | 8,245 | 16,490 | — | — | — | — | 969,200 | PS/TSR | 12/06/16 | — | — | — | 4,311 | 8,621 | 17,242 | — | — | — | 1,091,850 | |||||||||||||||||||||||||||
PS/NS | 12/02/14 | — | — | — | 3,092 | 8,245 | 18,551 | — | — | — | — | 877,598 | PS/NS | 12/06/16 | — | — | — | 3,233 | 8,621 | 19,397 | — | — | — | 909,343 | |||||||||||||||||||||||||||
W. R. Sperry | STI | 171,500 | 343,000 | 686,000 | — | — | — | — | — | — | — | — | STI | 02/11/16 | 210,000 | 420,000 | 840,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
PBRS | 12/02/14 | — | — | — | — | — | — | 1,997 | — | — | — | 191,632 | PBRS | 12/06/16 | — | — | — | — | — | — | 2,149 | — | — | 225,495 | |||||||||||||||||||||||||||
SAR | 12/02/14 | — | — | — | — | — | — | — | 15,339 | 106.44 | 108.40 | 279,630 | SAR | 12/06/16 | — | — | — | — | — | — | — | 26,205 | 113.69 | 492,916 | |||||||||||||||||||||||||||
PS/TSR | 12/02/14 | — | — | — | 1,085 | 2,170 | 4,340 | — | — | — | — | 255,084 | PS/TSR | 12/06/16 | — | — | — | 1,203 | 2,406 | 4,812 | — | — | — | 304,720 | |||||||||||||||||||||||||||
PS/NS | 12/02/14 | — | — | — | 814 | 2,170 | 4,883 | — | — | — | — | 230,975 | PS/NS | 12/06/16 | — | — | — | 902 | 2,406 | 5,414 | — | — | — | 253,785 | |||||||||||||||||||||||||||
G. N. Amato | STI | 210,000 | 420,000 | 840,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
R. R. Ruland | STI | 02/11/16 | 150,500 | 301,000 | 602,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
PBRS | 12/06/16 | — | — | — | — | — | — | 1,308 | — | — | 137,248 | ||||||||||||||||||||||||||||||||||||||||
SAR | 12/06/16 | — | — | — | — | — | — | — | 15,951 | 113.69 | 300,038 | ||||||||||||||||||||||||||||||||||||||||
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 | 12/02/14 | — | — | — | — | — | — | 2,396 | — | — | — | 229,920 | PBRS | 12/06/16 | — | — | — | — | — | — | 1,374 | — | — | 144,174 | |||||||||||||||||||||||||||
SAR | 12/02/14 | — | — | — | — | — | — | — | 18,406 | 106.44 | 108.40 | 335,541 | SAR | 12/06/16 | — | — | — | — | — | — | — | 16,749 | 113.69 | 315,049 | |||||||||||||||||||||||||||
PS/TSR | 12/02/14 | — | — | — | 1,302 | 2,604 | 5,208 | — | — | — | — | 306,100 | PS/TSR | 12/06/16 | — | — | — | 769 | 1,538 | 3,076 | — | — | — | 194,788 | |||||||||||||||||||||||||||
PS/NS | 12/02/14 | — | — | — | 977 | 2,604 | 5,859 | — | — | — | — | 277,170 | PS/NS | 12/06/16 | — | — | — | 577 | 1,538 | 3,461 | — | — | — | 162,228 | |||||||||||||||||||||||||||
G. W. Bakker | STI | 117,000 | 234,000 | 468,000 | — | — | — | — | — | — | — | — | STI | 02/11/16 | 157,500 | 315,000 | 630,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
PBRS | 12/02/14 | — | — | — | — | — | — | 1,298 | — | — | — | 124,556 | PBRS | 12/06/16 | — | — | — | — | — | — | 1,402 | — | — | 147,112 | |||||||||||||||||||||||||||
SAR | 12/02/14 | — | — | — | — | — | — | — | 9,970 | 106.44 | 108.40 | 181,753 | SAR | 12/06/16 | — | — | — | — | — | — | — | 17,090 | 113.69 | 321,463 | |||||||||||||||||||||||||||
PS/TSR | 12/02/14 | — | — | — | 705 | 1,410 | 2,820 | — | — | — | — | 165,746 | PS/TSR | 12/06/16 | — | — | — | 785 | 1,569 | 3,138 | — | — | — | 198,714 | |||||||||||||||||||||||||||
PS/NS | 12/02/14 | — | — | — | 529 | 1,410 | 3,173 | — | — | — | — | 150,080 | PS/NS | 12/06/16 | — | — | — | 588 | 1,569 | 3,530 | — | — | — | 165,498 | |||||||||||||||||||||||||||
RS | 02/01/14 | — | — | — | — | — | — | 1,280 | — | — | — | 149,965 | |||||||||||||||||||||||||||||||||||||||
SAR | 02/01/14 | — | — | — | — | — | — | — | 4,668 | 117.16 | — | 125,149 | |||||||||||||||||||||||||||||||||||||||
A. Hsieh | STI | 123,900 | 247,800 | 495,600 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
PBRS | 12/02/14 | — | — | — | — | — | — | 1,438 | — | — | — | 137,990 | |||||||||||||||||||||||||||||||||||||||
SAR | 12/02/14 | — | — | — | — | — | — | — | 11,044 | 106.44 | 108.40 | 201,332 | |||||||||||||||||||||||||||||||||||||||
PS/TSR | 12/02/14 | — | — | — | 781 | 1,562 | 3,124 | — | — | — | — | 183,613 | |||||||||||||||||||||||||||||||||||||||
PS/NS | 12/02/14 | — | — | — | 586 | 1,562 | 3,515 | — | — | — | — | 166,259 |
(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 Awards columns reflect the number of PBRS and SARs |
(4) | The amount reported in theExercise or Base Price of Option Awards column 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 Awards column reflect the aggregate fair value of the PBRS, SARs |
HUBBELL INCORPORATED-Notice of 2015 Annual Meeting of Shareholders & Proxy Statement43
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 42 |
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, 2016. All outstanding equity awards are in shares of the Company’s Common Stock.
Option Awards(1) | Stock Awards(2) | ||||||||||||||||||
Name | 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 | 12/06/2010 | 19,531 | — | 59.950 | 12/06/2020 | ||||||||||||||
12/05/2011 | 22,647 | — | 64.480 | 12/05/2021 | |||||||||||||||
06/06/2012 | 27,910 | — | 76.015 | 06/06/2022 | |||||||||||||||
12/04/2012 | 47,569 | — | 83.725 | 12/04/2022 | |||||||||||||||
12/10/2013 | 60,837 | — | 107.865 | 12/10/2023 | 2,782 | 324,659 | 9,945 | 1,160,582 | |||||||||||
12/02/2014 | 38,858 | 19,429 | 106.440 | 12/02/2024 | 7,588 | 885,520 | 16,490 | 1,924,383 | |||||||||||
12/08/2015 | 28,333 | 56,668 | 97.480 | 12/08/2025 | 8,720 | 1,017,624 | 19,524 | 2,278,451 | |||||||||||
12/06/2016 | — | 93,883 | 113.690 | 12/06/2026 | 7,701 | 898,707 | 17,242 | 2,012,141 | |||||||||||
W. R. Sperry | 06/06/2012 | 10,033 | — | 76.015 | 06/06/2022 | ||||||||||||||
12/04/2012 | 11,892 | — | 83.725 | 12/04/2022 | |||||||||||||||
12/10/2013 | 15,209 | — | 107.865 | 12/10/2023 | 695 | 81,107 | 2,486 | 290,116 | |||||||||||
12/02/2014 | 10,226 | 5,113 | 106.440 | 12/02/2024 | 1,997 | 233,050 | 4,340 | 506,478 | |||||||||||
12/08/2015 | 7,083 | 14,167 | 97.480 | 12/08/2025 | 2,180 | 254,406 | 4,880 | 569,496 | |||||||||||
12/06/2016 | — | 26,205 | 113.690 | 12/06/2026 | 2,149 | 250,788 | 4,812 | 561,560 | |||||||||||
R. R. Ruland | 12/05/2011 | 1,266 | — | 64.480 | 12/05/2021 | ||||||||||||||
12/04/2012 | 4,162 | — | 83.725 | 12/04/2022 | |||||||||||||||
12/10/2013 | 3,971 | — | 107.865 | 12/10/2023 | 182 | 21,239 | 649 | 75,738 | |||||||||||
12/02/2014 | 2,556 | 1,279 | 106.440 | 12/02/2024 | 499 | 58,233 | 1,084 | 126,503 | |||||||||||
07/01/2015 | 1,009 | 2,020 | 109.065 | 07/01/2025 | 446 | 52,048 | |||||||||||||
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 | ||||||||||||||
12/05/2011 | 3,146 | — | 64.480 | 12/05/2021 | |||||||||||||||
12/04/2012 | 2,596 | — | 83.725 | 12/04/2022 | |||||||||||||||
12/10/2013 | 3,971 | — | 107.865 | 12/10/2023 | 182 | 21,239 | 649 | 75,738 | |||||||||||
02/01/2014 | 3,112 | 1,556 | 117.160 | 02/01/2024 | 427 | 49,831 | |||||||||||||
12/02/2014 | 6,646 | 3,324 | 106.440 | 12/02/2024 | 1,298 | 151,477 | 2,820 | 329,094 | |||||||||||
12/08/2015 | 4,604 | 9,209 | 97.480 | 12/08/2025 | 1,417 | 165,364 | 3,172 | 370,172 | |||||||||||
12/06/2016 | — | 17,090 | 113.690 | 12/06/2026 | 1,402 | 163,613 | 3,138 | 366,205 |
(1) | TheOption Awards column 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 Common Stock equal to the positive difference between the base price and the fair market value of a share of Common Stock upon exercise. Generally, SARs vest and become exercisable in three equal installments on each of the first three anniversaries of the grant date. See the “Equity Award Plan Vesting Provisions” section on page 44. |
(2) | TheNo. of Shares or Units of Stock that have not Vested column reflects restricted stock granted on the following dates and terms: (i)12/06/16, 12/08/15 and 12/02/14 PBRS grants - Vest at the end of a three year period provided that the Company’s TSR performance is greater than the 20% percentile of the S&P Capital Goods 900 index; (ii)12/10/13 PBRS grant - Vests in three equal installments subject to the Company’s EBITDA performance as a percentage of net sales for the preceding 12 months being greater than 10% as measured on December 31, 2014, 2015 and 2016; and (iii)12/08/15, 07/01/15 and 02/01/14 RS grants - Vest in three equal installments on the anniversary of the grant date. See the “Equity Award Plan Vesting Provisions” section on page 44. |
(3) | TheMarket Value of Shares or Units that have not Vested is based upon the closing market price of the Company’s Common Stock on December 30, 2016, the last business day of 2016, of $116.70. |
(4) | TheEquity Incentive Plan Awards column reflects performance shares granted on the following dates and terms for the performance periods noted: (i)12/06/16, 12/08/15 and 12/02/14 grants - Vest based on two equally weighted measures: Total shareholder return (“PS / TSR”) and net sales performance (“PS / NS”) at the end of a three-year performance period compared to that of other companies in the Standard & Poor’s Capital Goods 900 Index. The PS / NS measure is then modified by the Company’s cumulative net income margin performance over the same period, as compared to the target set by the Company at the beginning of the period. The performance periods are 01/01/17 - 12/31/19, 01/01/16 - 12/31/18 and 01/01/15 -12/31/17 and 01/01/14 - 12/31/16, respectively; (ii)12/10/13 grant - Vests based upon the satisfaction of performance criteria related to the Company’s total return to shareholders as compared to the total return to shareholders for companies in the Standard & Poor’s Mid-Cap 400 Index. The performance period is 01/01/14 - 12/31/16. See the “Performance Share Awards” section on page 35. |
(5) | TheMarket or Payout Value of Unearned Shares that have not Vested is based upon the closing market price of the Company’s Common Stock on December 30, 2016, the last business day of 2016, of $116.70. |
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 | ||||
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 | |||
(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. VestedSARs are exercisable for the | Unvested SARs continue to vest in the normal course. Vested SARs are exercisable until | 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 |
HUBBELL INCORPORATED -Notice of 2015 Annual Meeting of Shareholders & Proxy Statement44
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, 2014. All outstanding equity awards are in shares of the Company’s Class B Common Stock.
Option Awards(1) | Stock Awards | |||||||||||||||||
No. of | ||||||||||||||||||
No. of | No. of | Shares | Market | Equity Incentive | Equity Incentive | |||||||||||||
Securities | Securities | or Units | Value of | Plan Awards: | Plan Awards: Market | |||||||||||||
Underlying | Underlying | of Stock | Shares or | No. of Unearned | or Payout Value of | |||||||||||||
Unexercised | Unexercised | Option | that | Units that | Shares, Units, or | Unearned Shares | ||||||||||||
Options | Options | Exercise | Option | have not | have not | other Rights that | Units or other Rights | |||||||||||
Exercisable | Unexercisable | Price | Expiration | Vested(2) | Vested(3) | have not Vested(4) | that have not Vested(5) | |||||||||||
Name | Grant Date | (#) | (#) | ($) | Date | (#) | ($) | (#) | ($) | |||||||||
D. G. Nord | 12/01/08 | 21,210 | — | 29.275 | 12/01/18 | |||||||||||||
12/07/09 | 21,933 | — | 46.96 | 12/07/19 | ||||||||||||||
12/06/10 | 19,531 | — | 59.95 | 12/06/20 | ||||||||||||||
12/05/11 | 22,647 | — | 64.48 | 12/05/21 | ||||||||||||||
06/06/12 | 18,606 | 9,304 | 76.015 | 06/06/22 | 2,389 | 255,217 | ||||||||||||
12/04/12 | 31,712 | 15,857 | 83.73 | 12/04/22 | 3,203 | 342,176 | 8,634 | 922,370 | ||||||||||
12/10/13 | 20,279 | 40,558 | 107.865 | 12/10/23 | 8,344 | 891,390 | 9,945 | 1,062,424 | ||||||||||
12/02/14 | — | 58,287 | 106.44 | 12/02/24 | 7,588 | 810,626 | 16,490 | 1,761,627 | ||||||||||
W. R. Sperry | 12/06/10 | 9,766 | — | 59.95 | 12/06/20 | |||||||||||||
12/05/11 | 12,205 | — | 64.48 | 12/05/21 | ||||||||||||||
06/06/12 | 6,688 | 3,345 | 76.015 | 06/06/22 | 598 | 63,884 | ||||||||||||
12/04/12 | 7,928 | 3,964 | 83.725 | 12/04/22 | 1,151 | 122,961 | 2,159 | 230,646 | ||||||||||
12/10/13 | 5,069 | 10,140 | 107.865 | 12/10/23 | 2,086 | 222,847 | 2,486 | 265,579 | ||||||||||
12/02/14 | — | 15,339 | 106.44 | 12/02/24 | 1,997 | 213,340 | 4,340 | 463,642 | ||||||||||
G. N. Amato | 12/05/11 | 6,781 | — | 64.48 | 12/05/21 | |||||||||||||
12/04/12 | 5,285 | 5,286 | 83.725 | 12/04/22 | 797 | 85,144 | 2,878 | 307,457 | ||||||||||
12/10/13 | 5,069 | 10,140 | 107.865 | 12/10/23 | 2,086 | 222,847 | 2,486 | 265,579 | ||||||||||
12/02/14 | — | 18,406 | 106.44 | 12/02/24 | 2,396 | 255,965 | 5,208 | 556,371 | ||||||||||
G. W. Bakker | 12/06/10 | 3,486 | — | 59.95 | 12/06/20 | |||||||||||||
12/05/11 | 3,146 | — | 64.48 | 12/05/21 | ||||||||||||||
12/04/12 | 1,730 | 866 | 83.725 | 12/04/22 | 261 | 27,883 | ||||||||||||
12/10/13 | 1,323 | 2,648 | 107.865 | 12/10/23 | 545 | 58,222 | 649 | 69,333 | ||||||||||
02/01/14 | — | 4,668 | 117.16 | 02/01/24 | 1,280 | 136,742 | ||||||||||||
12/02/14 | — | 9,970 | 106.44 | 12/02/24 | 1,298 | 138,665 | 2,820 | 301,261 | ||||||||||
A. Hsieh | 09/11/12 | — | — | — | — | 982 | 104,907 | |||||||||||
12/04/12 | 5,946 | 2,973 | 83.725 | 12/04/22 | 448 | 47,860 | 1,619 | 172,958 | ||||||||||
12/10/13 | 3,943 | 7,886 | 107.865 | 12/10/23 | 1,622 | 173,278 | 1,934 | 206,609 | ||||||||||
12/02/14 | — | 11,044 | 106.44 | 12/02/24 | 1,438 | 153,622 | 3,124 | 333,737 |
HUBBELL INCORPORATED-Notice of 2015 Annual Meeting of Shareholders & Proxy Statement45
Option Exercises and Stock Vested During Fiscal Year 20142016
The following table provides information on the number of shares acquired and the value realized by the named executive officers during fiscal year 20142016 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 | — | — | 6,670 | 760,004 | (2) | 43,143 | 2,316,757 | 2,781 | 248,510 | (2) | |||||||||
5,132 | 589,462 | (3) | 6,364 | 781,945 | (3) | ||||||||||||||
W. R. Sperry | — | — | 2,330 | 265,748 | (2) | 21,971 | 860,902 | 695 | 62,105 | (2) | |||||||||
2,766 | 317,703 | (3) | 1,591 | 195,486 | (3) | ||||||||||||||
G. N. Amato | 4,937 | 817,566 | 1,766 | 192,519 | (2) | ||||||||||||||
R. R. Ruland | — | — | 405 | 39,801 | (2) | ||||||||||||||
415 | 50,991 | (3) | |||||||||||||||||
A. Hsieh | — | — | 968 | 97,342 | (2) | ||||||||||||||
4,610 | 529,505 | (3) | 1,237 | 151,990 | (3) | ||||||||||||||
G. W. Bakker | — | — | 561 | 61,160 | (2) | — | — | 609 | 54,736 | (2) | |||||||||
— | — | 415 | 50,991 | (3) | |||||||||||||||
A. Hsieh | — | — | 1,429 | 166,441 | (2) | ||||||||||||||
— | — |
(1) | The amounts reported in theOption Awards - Value Realized Upon Exercise column 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 Vesting column reflect the number of shares of PBRS and time-based restricted stock, as applicable, acquired upon vesting multiplied by the closing market price of the Company’s |
(3) | The amounts reported in theStock Awards - Value Realized Upon Vesting column reflect the number of performance shares earned multiplied by the closing market price of the Company’s |
HUBBELL INCORPORATED-Notice of 2015 Annual Meeting of Shareholders & Proxy Statement46
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 45 |
Pension Benefits in Fiscal Year 20142016
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 38.
No. of Years | Present Value of | Payments During the | |||||||||||||||
Credited Service | Accumulated Benefit | Last Fiscal Year | |||||||||||||||
Name | Plan 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 | 9.25 | 105,509 | — | DC Plan | 11.25 | 130,424 | — | |||||||||
DC Restoration Plan | 9.25 | 301,251 | — | DC Restoration Plan | 11.25 | 448,548 | — | ||||||||||
Executive Plan | 9.25 | 10,170,752 | — | Executive Plan | 10.00 | 15,482,857 | — | ||||||||||
W. R. Sperry | DC Plan | 6.33 | 101,340 | — | DC Plan | 8.33 | 130,131 | — | |||||||||
DC Restoration Plan | 6.33 | 119,141 | — | DC Restoration Plan | 8.33 | 173,668 | — | ||||||||||
G. N. Amato | DB Plan | 26.67 | 1,224,504 | — | |||||||||||||
R. R. Ruland | DC Plan | 7.17 | 69,611 | — | |||||||||||||
DB Restoration Plan | 26.67 | 3,797,697 | — | DC Restoration Plan | 7.17 | 96,648 | — | ||||||||||
A. Hsieh | DC Plan | 4.25 | 50,108 | — | |||||||||||||
Management Plan | 7.25 | 1,412,206 | — | DC Restoration Plan | 4.25 | 64,305 | — | ||||||||||
G. W. Bakker | DB Plan | 23.75 | 547,071 | — | DB Plan | 25.75 | 665,402 | — | |||||||||
DB Restoration Plan | 23.75 | 467,462 | — | DB Restoration Plan | 25.75 | 1,111,362 | — | ||||||||||
A. Hsieh | DC Plan | 2.25 | 26,805 | — | |||||||||||||
DC Restoration Plan | 2.25 | 29,270 | — |
(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:
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.
HUBBELL INCORPORATED-NoticeAs described in the “Employee Benefits” section on page 38, Years of 2015 Annual Meeting of Shareholders & Proxy Statement47Service will be frozen effective February 28, 2017 and Final Average Pay, Social Security Covered Compensation, and Social Security Benefit will be frozen effective December 31, 2020.
Executive Plan and Management 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.
HUBBELL INCORPORATED -NoticeAs described above, effective January 1, 2017, the Company amended the DC Restoration Plan to provide each participant with (i) an annual non-elective contribution equal to the excess of 2015 Annual Meeting4% of Shareholders & Proxy Statement48eligible 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 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 -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 any 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 20142016
The following table provides information on the benefits payable to each NEO under the Company’s EDCP and DC Restoration Plan:
Executive | Registrant | Aggregate | Aggregate | Aggregate | Executive | Registrant | Aggregate | Aggregate | Aggregate | ||||||
Contributions in | Contributions | Earnings in Last | Withdrawals/ | Balance at | Contributions | Earnings in | Withdrawals/ | Balance at | |||||||
2014 | in 2014 | FY | Distributions | 12/31/14 | in 2016(1) | in 2016(2) | Last FY(3) | Distributions | 12/31/16(4) | ||||||
Name | ($)(1) | ($)(2) | ($)(3) | ($) | ($)(4) | ($) | ($) | ||||||||
D. G. Nord | 459,000 | 50,838 | 101,304 | – | 2,040,006 | 323,500 | 67,697 | 222,983 | — | 3,015,936 | |||||
W. R. Sperry | – | 20,564 | 4,991 | – | 97,313 | — | 21,948 | 10,272 | — | 150,116 | |||||
G. N. Amato | – | – | – | – | – | ||||||||||
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 | |||||
A. Hsieh | – | 13,444 | 522 | – | 13,966 |
(1) | The amounts reported in theExecutive Contributions in |
(2) | The amount reported in theRegistrant Contributions in |
(3) | The amounts reported in theAggregate Earnings in Last FY column include aggregate earnings on the EDCP account balances and the DC Restoration Plan balances in |
(4) | The amounts reported in theAggregate Balance at 12/31/ |
HUBBELL INCORPORATED -Notice of 2015 Annual Meeting of Shareholders & Proxy Statement49
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 five termination scenarios:scenarios (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 | ||||||
Involuntary Termination 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 PS are forfeited but eligible for vesting if the 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 PS become fully vested | – | – | ||||||
Disability Benefits paid under the Equity Plan and retirement plans | – | – | – | Unvested PBRS, restricted stock, SARs and PS 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 PS 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 applicable Supplemental Plans | 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 PS 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, 2014. 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 2015 Annual Meeting of Shareholders & Proxy Statement50
Post-Employment and Change in Control Payment Table
Severance(1) | Equity Awards with Accelerated Vesting(2)(3) | Pension Benefits(4) | Welfare Benefits(5) | Total | ||||||
Name | ($) | ($) | ($) | ($) | ($) | |||||
D. G. Nord | ||||||||||
Death | – | 6,721,640 | – | – | 6,721,640 | |||||
Disability | – | 6,721,640 | 4,930,536 | – | 11,652,176 | |||||
Involuntary Termination | 1,866,639 | – | – | 133,932 | 2,000,571 | |||||
Change in Control | 3,631,527 | 6,721,640 | 6,546,205 | 196,430 | 17,095,802 | |||||
W. R. Sperry | ||||||||||
Death | – | 1,783,547 | – | – | 1,783,547 | |||||
Disability | – | 1,783,547 | – | – | 1,783,547 | |||||
Involuntary Termination | 716,370 | – | – | 128,372 | 844,742 | |||||
Change in Control | 1,604,298 | 1,783,547 | – | 115,400 | 3,503,245 | |||||
G. N. Amato | ||||||||||
Death | – | 1,822,674 | – | – | 1,822,674 | |||||
Disability | – | 1,822,674 | – | – | 1,822,674 | |||||
Involuntary Termination | 1,461,960 | – | – | 141,996 | 1,603,956 | |||||
Change in Control | 1,546,623 | 1,822,674 | 889,753 | 126,595 | 4,385,645 | |||||
Retirement | – | 563,956 | – | – | 563,956 | |||||
G. W. Bakker | ||||||||||
Death | – | 756,003 | – | – | 756,003 | |||||
Disability | – | 756,003 | 1,450,920 | – | 2,206,923 | |||||
Involuntary Termination | 960,606 | – | – | 141,606 | 1,102,212 | |||||
Change in Control | 983,712 | 756,003 | 70,514 | 94,540 | 1,904,769 | |||||
A. Hsieh | ||||||||||
Death | – | 1,265,971 | – | – | 1,265,971 | |||||
Disability | – | 1,265,971 | – | – | 1,265,971 | |||||
Involuntary Termination | 582,534 | – | – | 128,242 | 710,776 | |||||
Change in Control | 1,254,766 | 1,265,971 | – | 103,220 | 2,623,957 |
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 53.50.
HUBBELL INCORPORATED -NoticeEquity Plan
All of 2015 Annual Meetingthe named executive officers received grants under the Equity Plan in 2016. The treatment of Shareholders & Proxy Statement51equity 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 2015employment 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 Shareholders & Proxy Statement52death, 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 2015.2017. 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 20152017 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 20152017 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 Boardaffirmative vote of Directors Unanimously Recommends that the Shareholders Vote “FOR” the Ratificationa majority of the Selectionvotes cast by the holders of our Common Stock is required to ratify the selection of PricewaterhouseCoopers LLP.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, 20142016 and December 31, 2013:2015:
2014 | 2013 | 2016 | 2015 | ||||||||||||
Audit Fees(1) | $ | 2,646,490 | $ | 2,479,200 | $ | 2,810,000 | $ | 2,896,500 | |||||||
Audit-Related Fees(2) | 222,000 | 125,335 | 57,000 | 106,000 | |||||||||||
Tax Fees(3) | 171,000 | 634,000 | 15,000 | 140,000 | |||||||||||
All Other Fees(4) | 6,200 | 6,200 | 184,000 | 6,200 | |||||||||||
TOTAL FEES | $ | 3,045,690 | $ | 3,244,735 | $ | 3,066,000 | $ | 3,148,700 |
(1) | The amount included underAudit Fees consist 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 Fees consist 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 Fees include fees for domestic and international income tax planning assistance and foreign entity compliance services. |
(4) | The amount included underAll Other Fees consists 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-auditservicesnon-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 2015 Annual Meeting of Shareholders & Proxy Statement53
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 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 independent registered public accounting firm the matters required to be discussed by statement on Auditing Standards No. 16, as adopted by the Public Company Accounting Oversight Board; and | |
• | 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, 20142016 for filing with the SEC.
Audit Committee
Lynn J. Good,Steven R. Shawley, Chair
Carlos M. Cardoso
Anthony J. Guzzi
Neal J. Keating
John F. Malloy
Steven R. ShawleyJudith F. Marks
HUBBELL INCORPORATED-Notice of 2015 Annual Meeting of Shareholders & Proxy Statement54
HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 53 |
APPROVALADVISORY VOTE ON THE COMPENSATION OF THE COMPANY’S SECOND AMENDED AND RESTATED 2005 INCENTIVE AWARD PLANOUR NAMED EXECUTIVE OFFICERS - ITEMPROPOSAL 3
The Company previously adoptedIn accordance with the Dodd-Frank Wall Street Reform and shareholders previously approvedConsumer Protection Act and Section 14A of the Hubbell Incorporated 2005 Incentive Award Plan,Securities Exchange Act of 1934, as amended, and restated (the “Equity Plan”), in order to promote the success and enhance the value of the Company by linking the personal interest of participants to those of Company’s shareholders, and by providing participants with an incentive for outstanding performance. The Board of Directors has approved the Second Amended and Restated 2005 Incentive Award Plan (which is referred to herein as the “Restated Plan”), and is submitting the Restated Plan forwe are requesting shareholder approval, at the 2015 Annual Meeting. The Restated Plan is a critical parton an advisory (non-binding) basis, of our pay-for-performance compensation program. We grant long-term incentive awards annually to over 250 of our key employees around the globe. Aligning the compensation of these employees toour named executive officers as presented in this Proxy Statement in the same outcomes achieved byCompensation Discussion and Analysis beginning at page 25 and the compensation tables and accompanying narrative disclosure in the Executive Compensation section beginning on page 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 2016 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 shareholdersexecutive compensation program has been a hallmark of our compensation approach, and supports our objectivedesigned to attract and retain the best talent in the electrical manufacturing industry. We believehighly-talented executives, deliver compensation that it is in the best interests of thecompetitive and fair compared to relevant benchmarks, reward strong Company performance, and our shareholdersmotivate executives to approve the Restated Plan so that we can continue tomaximize long-term shareholder returns. To achieve our objectives, we have adopted and maintain sound compensation objectivesgovernance practices and promotea 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 shareholder value. Based on the amountbasis. Highlights of awards granted in the past, as discussed in more detail below, the shares remaining available for awards under the Equity Plan will likely be insufficient to satisfy our equity compensation needs for 2015 and beyond. Accordingly, we believe that 2.8 million additional shares should be authorized for future issuance under the Restated Plan. The approval of the Restated Plan enables us to continue to attract, retain and reward the many employees who contribute to our long-term success.
The Board of Directors Unanimously Recommends that the Shareholders Vote “For” the Approval of the Company’s Second Amended and Restated 2005 Incentive Award Plan.
Approval of this proposal will constitute approval of the Restated Plan. The substantive differences between the Equity Plan and the Restated Plan are:program include:
• | ||
• | ||
• | ||
• | ||
• | ||
• | ||
• | ||
• |
In addition, certain other immaterial administrative changes have been included in the Restated Plan.
In its determination to approve the Restated Plan, the Board reviewed the Company’s annual share usage, dilution, overhang and peer group market practices and trends. The table below and accompanying narrative reflect the information reviewed and considered by the Board:
A | B | C | ||||||||||||
Weighted Average | ||||||||||||||
Options | Full-Value | Common Shares | ||||||||||||
Year | Granted | Shares Granted | Total Granted | Outstanding | Run Rate | Burn Rate | Overhang | |||||||
2014 | 250,598 | 146,176 | 395,762 | 58,834,362 | 0.67% | 1.17% | 5.6% | |||||||
2013 | 246,692 | 151,509 | 398,201 | 59,078,997 | 0.67% | 1.19% | 6.2% | |||||||
2012 | 328,735 | 209,174 | 537,909 | 59,134,082 | 0.91% | 1.62% | 7.1% | |||||||
3 year average | 0.75% | 1.32% |
Column B represents the number of time-vested awards granted plus the number of performance-based awards paid out during the year.
Run rate for each year = (A + B)/C; 3-year average run rate is the sum of the individual run rates divided by 3.
Burn rate for each year = (A x 3) + B)/C; 3-year average burn rate is the sum of the individual burn rates divided by 3.
Overhang = shares available for grant plus equity awards outstanding divided by common shares outstanding.
HUBBELL INCORPORATED-Notice of 2015 Annual Meeting of Shareholders & Proxy Statement55
• |
In lightAs an advisory vote, the outcome of the factors described above, our overall compensation philosophy which seeks to better align our employees’ and shareholders’ interests and the fact that the ability to continue to grant equity compensation is vital to our ability to continue to attract and retain employees in the competitive labor markets in which we compete, the Board has determined that the size of the share reserve under the Restated Plan is reasonable and appropriate at this time. The Board will not create a subcommittee to evaluate the risks and benefits for issuing the additional authorized shares requested.
By seeking shareholder approval of the Restated Plan, the Company is seeking approval of the material terms of performance goals under the Restated Plan for purposes of Section 162(m) of the Internal Revenue Code. Shareholder approval of such terms would preserve the Company’s ability to deduct compensation associated with future performance-based awards made under the Restated Plan under Section 162(m). Section 162(m) limits the deductions a publicly-held company can claim for compensation in excess of $1 million paid in a given year to its chief executive officer and its three other most highly-compensated executive officers (other than its chief financial officer) (these officers are generally referred to as the “Covered Employees”). “Performance-based” compensation that meets certain requirementsproposal is not counted againstbinding upon the $1 million deductibility cap. Stock optionsCompany. However, our Compensation Committee and stock appreciation rights qualify as performance-based compensation if they are granted at an exercise price equal toour Board value the fair market valueopinions of our Class B Common Stock onshareholders and will consider the dateoutcome of grant. Other awards that the Company may grant under the Restated Plan may qualify as performance-basedthis vote when making future compensation if the payment, retention or vesting of the award is subject to the achievement during a performance period of performance goals selected by the Compensation Committee (the “Committee”). Performance shares which the Company currently uses under the Equity Plan are intended to qualify as performance-based compensation exempt from Section 162(m). The Committee retains the discretion to set the level of performancedecisions for a given performance measure under a performance-based award. For such awards to qualify as performance-based compensation, the shareholders must approve the material terms of the performance goals every five years.
For a discussion of the performance criteria for which approval is being sought, please see the discussion under “Performance-Based Awards” below. If the Restated Plan is not approved, its provisions will not become effective. In that case, the Equity Plan as in existence prior to its second amendment and restatement will continue in effect, but performance-based shares granted to Covered Employees in 2015 and thereafter will not be deductible as performance-based compensation under Section 162(m).our named executive officers.
Description of Proposed Restated PlanVote Required
The following summaryaffirmative vote of a majority of the termsvotes cast by the holders of the Restated Planoutstanding shares of Common Stock is qualified in its entirety by referencerequired to approve, on an advisory, non-binding basis, the textcompensation of our named executive officers. Abstentions and broker non-votes will not affect the Restated Plan and the various award agreements used thereunder. The proposed Restated Plan is attached as Exhibit A to this Proxy Statement.voting results.
The Restated Plan provides for the grant of stock options, both incentive stock options and nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights (SARs), dividend equivalents, stock payments, deferred stock, deferred stock units and performance-based awards (collectively “Awards”) to eligible individuals.
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. |
Administration
The Restated Plan is administered by the Committee, which consists of at least two or more members of the Board of Directors who are each “non-employee directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the “Act”) and who are also “outside directors” as defined in Section 162(m). Subject to the express provisions of the Restated Plan, the Committee has the authority to interpret the Restated Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of the respective award agreements and to make all other determinations necessary or advisable for the administration of the Restated Plan. Subject to the terms and conditions of the Restated Plan, the Committee has the authority to select the employees to whom Awards are to be made, to determine the number of shares to be subject thereto and the terms and conditions thereof, and to make all other determinations and to take all other actions necessary or advisable for the administration of the Restated Plan, including the power to determine the types and sizes of awards, the price and timing of awards and the acceleration or waiver of any vesting restriction, provided that the Committee will not have the authority to accelerate vesting or waive the forfeiture provisions applicable to any performance-based awards. The Committee is also authorized to adopt, amend and rescind rules relating to the administration of the Restated Plan. Further, the Committee has the right to provide that any award shall be subject to the provisions of any claw-back policy implemented by the Company and for the forfeiture of proceeds, gains or other economic benefit actually or constructively received upon the receipt or exercise of an award or upon the receipt or resale of shares of stock underlying an award and the termination of an award and any unexercised portion thereof if (x) a termination of employment or service occurs prior to a specified date or within a specified time period following receipt or exercise of an award, (y) the participant engages in any activity that is harmful to the interests of the Company or (z) the participant incurs a termination of employment or service for “cause”.
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HUBBELL INCORPORATED -2017 Annual Meeting of Shareholders & Proxy Statement | 54 |
Eligibility
Persons eligible to participate in the Restated Plan include: (1) employees of the Company and its subsidiaries, and (2) non-employee directors of the Company, as selected by the Committee. However, options which are intended to qualify as ISOs (as defined below) may only be granted to employees.
Limitation on Awards and Shares AvailableADVISORY VOTE ON THE FREQUENCY OF SHAREHOLDER VOTE ON EXECUTIVE COMPENSATION - PROPOSAL 4
The aggregate numberCompany is seeking a non-binding recommendation from our shareholders on whether shareholders should have an opportunity to provide an advisory approval of sharesthe compensation of Class B Common Stock subjectour named executive officers every year, every two years or every three years. Accordingly, we are asking shareholders to awards under the Equity Plan is currently 6,875,000. If the Restated Plan is approved that number will increase to 9,675,000. That number may be adjusted for changes in the Company’s capitalization and certain corporate transactions, as described below under the heading “Changes in Capital Structure and Change in Control.” Currently, no more than 3,437,500 shares of Class B Common Stock may be granted under the Plan in the form of “full value awards” which are Awards pursuant to which the participant is not required to pay the full fair market value of such Awards determinedvote on the date of grant. As of December 31, 2014, 1,475,181 shares remained available for grant as full value awards. If the Restated Plan is approved no more than 4,837,500 shares will be available for future grant in the form of full value awards.following advisory resolution:
As of December 31, 2014, awards covering an aggregate of 1,709,657 shares were outstanding under the Equity Plan, and 1,475,181 shares (plus any shares that might in the future be returned to the Equity Plan as a result of cancellations, forfeitures, repurchases or expiration of awards) remained available for future grants.
The payment of dividend equivalents in cash in conjunction with outstanding awards will not be counted against the shares available for issuance under the Restated Plan. To the extent permitted by applicable law or any exchange rule, shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any of its affiliates will not be counted against the shares available for issuance under the Restated Plan. Shares tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to anyAward will not be added back to the total number of shares available for grants under the Restated Plan.
In addition, each share subject to a SAR which is exercised shall be counted as one share issued under the Restated Plan for purposes of counting the number of shares available for grant under the Restated Plan.
The maximum number of shares that may be granted pursuant to an option to a participant during any calendar year is 500,000 shares. The maximum number of shares that may be granted pursuant to a SAR to a participant during any calendar year is 500,000 shares. The maximum number of shares that may be granted in the form of restricted stock, restricted stock units, stock payments or performance-based awards to a participant pursuant to the Restated Plan during any calendar year is 250,000 shares and the maximum dollar value of any Award intended to be exempt from Section 162(m) as performance-based which is payable in cash may not exceed $2,000,000.
All Awards generally shall become vested over a period of not less than one year following the date the Award is made (or, in the case of vesting based upon the attainment of performance goals or other performance-based objectives, over a period of not less than one year measured from the commencement of the period over which performance is evaluated);provided, however,“RESOLVED, that the Committee may provideshareholders of Hubbell Incorporated (the “Company”) recommend, on an advisory basis, that such vesting restrictions may lapse or be waived upon the Employee’s death, disability, retirement, or upon a change in control of the Company.
Awards
The Restated Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights, dividend equivalents, stock payments, restricted stock units, deferred stock, deferred stock units and performance-based awards. Each grant will be set forth in a separate agreement with the person receiving the grant and will indicate the type, terms and conditions of the grant. No determination has been made as to the types or amounts of awards that will be granted to specific individuals pursuant to the Restated Plan.
The following briefly describes the characteristics of each type of grant that may be made under the Plan:
Options. Stock options, including incentive stock options, as defined under Section 422 of the Internal Revenue Code, and nonqualified stock options may be granted pursuant to the Restated Plan. The option exercise price of all stock options granted pursuant to the Restated Plan will not be less than 100% of the fair market value of the Company’s Class B Common Stock on the date of grant. Stock options may be exercised as determined by the Committee, but in no event more than ten years and one day after their date of grant. The aggregate fair market value of the sharesfrequency with respect to which options intended to be incentive stock optionsthe Company’s shareholders are exercisable forpresented with an advisory vote on the first time by an employee in any calendaryear may not exceed $100,000, or such other amount as the Internal Revenue Code provides.
Restricted Stock. Restricted stock may be granted pursuant to the Restated Plan. A restricted stock award is the grant of sharescompensation of the Company’s Class B Common Stock at a price determined by the Committee (which maynamed executive officers shall be zero), that is nontransferable and may be subject to substantial risk of forfeiture until specific conditions are met. Conditions may be based on continuing employmentevery one (1) year; two (2) years; or achieving performance goals. During the period of restriction, participants holding shares of restricted stock may have full voting and dividend rights with respect to such shares. The restrictions will lapse in accordance with a schedule or other conditions determined by the Committee.three years.”
Stock Appreciation Rights/SARs. Stock appreciation rights or SARs may be granted pursuant toThe Board of Directors believes that an advisory vote on the Restated Plan, either alone or in tandem with other awards. A SAR is the right to receive payment of an amount equal to the excess of the fair market value of a sharecompensation of the Company’s Class B Common Stocknamed executive officers should be conducted every year so that shareholders may annually express their views on the dateCompany’s executive compensation program. The Board of exerciseDirectors 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 SAR over the fair market value of a share of Class B Common StockBoard’s recommendation.
Because this vote is advisory and not binding on the dateBoard of grant of the SAR. The Committee may elect to pay SARs in cash,Directors or in stock, or in any combination of the two, as determined by the Committee.
HUBBELL INCORPORATED-Notice of 2015 Annual Meeting of Shareholders & Proxy Statement57
Restricted Stock Units. Restricted stock units represent the right to receive shares of Class B Common Stock at a specified date in the future, subject to forfeiture of such right. If the restricted stock unit has not been forfeited, then on the date specified in the restricted stock unit award agreement, the Company shall deliver to the holder of the restricted stock unit, unrestricted shares of Class B Common Stock which will be freely transferable. The Committee will specify the purchase price, if any, to be paid by the grantee for the shares.
Dividend Equivalents. Dividend equivalents represent the value of the dividends per share of Class B Common Stock paid by the Company, calculated with reference to the number of shares covered by an Award (other than a dividend equivalent award, option or SAR) held by the participant. Dividend Equivalents will not be granted on options or SARs. In addition, no dividend equivalent with respect to an Award with performance-based vesting will be paid unless and until the Award on which the dividend equivalent is granted vests.
Stock Payments. Payments to participants of short-term incentive awards or other compensation may be made under the Restated Plan in the form of Class B Common Stock. The number of shares will be determined by the Committee, and may be based upon performance criteria.
Deferred Stock. Shares of stock that underly a deferred stock award subject to a vesting schedule shall be issued on the vesting date when performance conditions and criteria have been satisfied. A participant granted deferred stock shall only have rights as a shareholder when the conditions have been met, the award has vested and the stock underlying the award has been issued.
Deferred Stock Units. A deferred stock unit entitles the participant to receive one share of stock on the date the deferred stock unit becomes vested or upon a specified settlement date thereafter. A participant granted deferred stock shall only have rights as a shareholder when the conditions have been met, the award has vested and the stock underlying the award has been issued.
Performance-Based Award. Performance-based awards are payable in cash, shares of Class B Common Stock or units of value including the dollar value of the shares of Class B Common Stock, as determined by the Committee, and are linked to satisfaction of performance criteria; provided, that no performance award which is intended to be exempt from the limits of Section 162(m) may be payable in cash in excess of $2,000,000 for any calendar year.
Payment for Awards
Upon the exercise of a stock option or with respect to other Awards which the Committee requires a purchase price, the purchase price must be paid in full in either cash or its equivalent or by tendering previously acquired shares with a fair market value at the time of exercise equal to the purchase price (provided such shares have been held for such period of time as may be required by the Committee in order to avoid adverse accounting consequences and have a fair market value on the date of delivery equal to the aggregate purchase price of the exercised portionof the Award) or other property acceptable to the Committee (including through the delivery of a notice that the participant has placed a market sell order with a broker with respect to shares then issuable upon exercise of the Award, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the purchase price, provided that payment of such proceeds is then made to the Company upon settlement of such sale).
Performance-Based Awards
The Restated Plan has been designed to permit the Committee to grant equity and cash awards that will qualify as “performance-based compensation” within the meaning of Section 162(m). The Committee may grant performance-based compensation awards to Covered Employees whose compensation for a given fiscal year may be subject to the limit on deductible compensation imposed by Section 162(m), to preserve the deductibility of these awards for federal income tax purposes (see additional discussion of deductibility requirements under “Federal Income Tax Consequences” below). Performance-based compensation awards vest or become exercisable upon the attainment of specific performance targets that are pre-established by the Committee and are related to one or more of the performance goals (described below) set forth in the Restated Plan. Participants are only entitled to receive payment for a performance-based compensation award for any given performance period to the extent that such pre-established performance goals for the period are satisfied.
The pre-established performance goals must be based on one or more of the following performance criteria:
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The foregoing criteria may relate to the Company, one or more of its divisions, business units, platforms or an individual, or any combination of the foregoing, and may be applied on an absolute basis or as compared to any incremental increases or as compared to results of one or more peer group companies or market performance indicators or indices, or any combination thereof, all as the Committee shall determine.
The Committee may provide that one or more objectively determinable adjustments will be made to one or more of the performance goals established for any performance period. Such adjustments may include one or more of the following:
In determining the actual size of an individual performance-based award for a performance period, the Committee may reduce or eliminate (but not increase) the award. Generally, a participant will have to be employed on the date the performance-based award is paid to be eligible for a performance-based award for any period (limited exceptions are made in the case of death, disability or retirement of a participant).
Changes in Capital Structure and Change in Control
In the event of a stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off, recapitalization, distribution of assets or any other corporate event affecting the Class B Common Stock or the share price of the Class B Common Stock in a manner that causes dilution or enlargement of benefits or potential benefits under the Restated Plan (other than an “equity restructuring”, as defined in the Restated Plan), the Committee may make equitable adjustments, in its discretion, to: (i) the aggregate number and types of shares of stock that may be issued under the Restated Plan; (ii) the number and type of shares subject to outstanding awards; (iii) the terms and conditions of any outstanding awards (including any applicable performance targets); and (iv) the grant or exercise price for any outstanding awards.
In addition, in such a case or in the event of any unusual or nonrecurring transactions or events affecting the Company or the financial statements of the Company, or of changes in applicable laws, the Committee may, in its discretion, subject to the terms of the Restated Plan, take any of the following actions if it determines that such action is appropriate in order to prevent the dilution or enlargement of benefits or potential benefits intended to be made available under the Restated Plan or with respect to any award: (i) provide for either the payment and termination of the award or the replacement of the award; (ii) provide that the awards shall be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; (iii) make adjustments in the number and type of shares of stock (or other securities or property) subject to outstanding awards, and in the number and kind of outstanding restricted stock and/or in the terms and conditions of (including the grant or exercise price) and the criteria included in, outstanding awards and awards which may be granted in the future; (iv) provide that any such award shall be exercisable or payable or fully vested with respect to all shares of stock covered thereby, notwithstanding anything to the contrary in the plan or the applicable award agreement; or (v) provide that any such award cannot vest, be exercised or become payable after such event. In connection with the occurrence of any equity restructuring, (x) the number and type of securities subject to each outstanding award and the exercise price or grant price thereof, if applicable, shall be equitably adjusted; and/or (y) the Committee shall make such equitable adjustments, if any, as the Committee, in its sole discretion, may deem appropriate to reflect such equity restructuring with respect to the aggregate number and kind of shares of stock that may be issued under the Restated Plan.
In the event of a “change in control” (as defined in the Restated Plan), subject to the sole and absolute discretion of the Committee and pursuant to an award agreement or otherwise, Awards may be fully exercisable and all forfeiture restrictions on such Awards may lapse. In connection with a change in control, the Committee, in its sole discretion, may (i) provide for the termination of any Award, by surrender of such Award for an amount of cash and/or other property, if any, equal to the amount by which the fair market value of the Class B Common Stock which the Award represents exceeds the Award exercise price for all or part of the shares which are related to such Award; or (ii) determine that the Awards may be assumed by a successor or survivor.
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Amendment and Termination
The Committee, subject to approval ofway, the Board may terminate, amend, or modifydecide that it is in the Restated Plan at any time;provided, however, that shareholder approval will be obtained for any amendment:
In no event may an Award be granted pursuant to the Restated Plan on or after May 5, 2025, the tenth anniversarybest interests of the dateour shareholders approve the Restated Plan.
Federal Income Tax Consequences
With respect to nonqualified stock options, the Company is generally entitled to deduct and the optionee recognizes taxable income in an amount equal to the difference between the option exercise price and the fair market value of the shares at the time of exercise. A participant receiving incentive stock options will not recognize taxable income upon grant. Additionally, if applicable holding period requirements are met, the participant will not recognize taxable income at the time of exercise. However, the excess of the fair market value of the Class B Common Stock received over the option price is an item of tax preference income potentially subject to the alternative minimum tax. If stock acquired upon exercise of an incentive stock option is held for a minimum of two years from the date of grant and one year from the date of exercise, the gain or loss (in an amount equal to the difference between the fair market value on the date of sale and the exercise price) upon disposition of the stock will be treated as a long-term capital gain or loss, 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 not be entitled to any deduction. Ifconsider the holding period requirements are not met, the incentive stock option will be treated as one which does not meet the requirementsoutcome of the Internal Revenue Code for incentive stock options andvote when determining the tax consequences described for nonqualified stock options will apply.
The current federal income tax consequences of other awards authorized under the Restated Plan generally follow certain basic patterns: SARs are taxed and deductible in substantially the same manner as nonqualified stock options; nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excessfrequency of the fair market value over the price paid, if any, only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); stock-based performance awards, dividend equivalents and other types of awards are generally subject to tax at the time of payment. Compensation otherwise effectively deferred is taxed when paid. In each of the foregoing cases, the Company will generally have a corresponding deduction at the time the participant recognizes income.
Certain Awards under the Plan, depending in partshareholder vote on particular Award terms and conditions, may be considered non-qualified deferred compensation subject to the requirements of Internal Revenue Code Section 409A. If the terms of such Awards do not meet the requirements of Section 409A, then the violation may result in an additional 20% tax obligation, plus penalties and interest for such participant.executive compensation.
As of March 6, 2015, the closing market price of a share of Class B Common Stock authorized for issuance under the Restated Plan was $109.88 and the approximate number of employees and non-employee directors eligible to participate in the Restated Plan was 250.
New Plan Benefits
The number of Awards that an employee or director may receive under the Restated Plan is in the discretion of the Committee and cannot be determined at this time. However, for the sake of illustration, the following sets forth the grants that such individuals received under the Equity Plan in 2014:
Name and Position | Number of Stock Appreciation Rights | Number of Restricted Shares | Number of Performance Shares | |||
David G. Nord | ||||||
Chairman, President and Chief Executive Officer | 58,287 | 7,588 | 16,490 | |||
William R. Sperry | ||||||
Senior Vice President and Chief Financial Officer | 15,339 | 1,997 | 4,340 | |||
Gary N. Amato | ||||||
Executive Vice President, Hubbell Electrical Segment | 18,406 | 2,396 | 5,208 | |||
Gerben W. Bakker | ||||||
Group Vice President, Power Systems | 14,638 | 2,578 | 2,820 | |||
An-Ping Hsieh | ||||||
Vice President, General Counsel | 11,044 | 1,438 | 3,124 | |||
Executive Group | 145,630 | 18,351 | 39,880 | |||
Non-Executive Director Group | — | 10,329 | — | |||
Non-Executive Officer Employee Group | 17,333 | 1,986 | 4,610 |
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Equity Compensation Plans
The following table provides certain information as of December 31, 2014 about Class B Common Stock that may be issued under the Company’s existing equity compensation plans (in thousands, except per share amounts):
Equity Compensation Plan Information | A | B | C | ||||||
Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column A) | ||||||
Equity compensation plans approved byshareholders(a) | 1,710 | (c)(e) | $78.69 | (f) | 1,475(c) | ||||
Equity compensation plans not requiringshareholder approval(b) | 61 | (c)(d) | — | 35(c) | |||||
Total | 1,771 | $78.69 | 1,510 |
Under NYSE rules,The option of one year, two years or three years that receives the affirmative votehighest number of a majority of the votes cast by shareholders will be considered the holders of the Class A Common Stockfrequency recommended by shareholders. Abstentions and Class B Common Stock, all voting as a single class, is required to approve the Restated Plan. Abstentions will count as votes cast and will have the same effect as votes cast against the proposal. Brokerbroker non-votes will not count as votes cast because brokers do nottherefore have the authority to vote sharesno effect on this proposal without direction from the beneficial owner.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. |
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The Company will pay the cost of soliciting proxies for the 20152017 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 $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 20142016 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.met, except that due to an administrative oversight a Form 3 for Ms. Judith F. Marks was not timely filed.
Information Regarding Executive OfficersCompensation Committee Interlocks and Insider Participation
In 2005, Mr. William T. Tolley, Senior Vice President, Growth and Innovation 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.
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Shareholder Proposals and Nominations for Director
Proposals Intended for Inclusion in the 20162018 Proxy Materials
Shareholder proposals to be considered for inclusion in the Company’s proxy materials related to the 20162018 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, 2015.15, 2017.
Proposals Not Intended for Inclusion in the 20162018 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 20162018 Annual Meeting of Shareholders. These procedures require that any nominations or proposals must be received by the Company no earlier than February 5, 20161, 2018 and no later than February 25, 201621, 2018 in order to be considered.
If, however, the date of the 20162018 Annual Meeting is more than 20 days before or more than 70 days after May 5, 2016,2, 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 20162018 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 5, 2016,2, 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 20162018 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 18, 2015
HUBBELL INCORPORATED -Notice of 2015 Annual Meeting of Shareholders & Proxy Statement63
2005 INCENTIVE AWARD PLAN
(As Amended and Restated Effective May 5, 2015)
Article 1
Purpose
The purpose of the Hubbell Incorporated 2005 Incentive Award Plan (as it may be amended and restated from time to time, the “Plan”) is to promote the success and enhance the value of Hubbell Incorporated (the “Company”) by linking the personal interests of the members of the Board and Employees to those of Company shareholders and by providing such individuals with an incentive for outstanding performance to generatesuperior returns to Company shareholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of members of the Board and Employees upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent.
Article 2
Definitions and Construction
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.15, 2017
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Article 3
Shares Subject to The Plan
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Article 4
Eligibility and Participation
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Article 5
Stock Options
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Article 6
Restricted Stock Awards
Article 7
Stock Appreciation Rights
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Article 8
Performance-Based Awards, Dividend Equivalents, Stock Payments, Restricted Stock Units
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Article 9
Provisions Applicable to Awards
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Article 10
Changes in Capital Structure
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Article 11
Administration
Serving Our Customers | Discipline | ||
Enterprise | |||
Our People |
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Article 12
Effective and Expiration Date
Article 13
Amendment, Modification, and Termination
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Article 14
General Provisions
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