PC CONNECTION, INC.

730 Milford Road

Merrimack, New Hampshire 03054

(603) 683-2000

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held May 17, 201722, 2019

The 20172019 Annual Meeting of Stockholders of PC Connection, Inc., a Delaware corporation, which we refer to as the Company, will be held at the Crowne Plaza Hotel,Doubletree by Hilton, Nashua, 2 Somerset Parkway, (Exit 8 off the Everett Turnpike), Nashua, New Hampshire 03063 on Wednesday, May 17, 201722, 2019 at 10:00 a.m., Eastern time, to consider and act upon the following matters:

Stockholders of record at the close of business on March 24, 2017April 5, 2019 are entitled to notice of and to vote at the meeting or any adjournments thereof.  Our stock transfer books will remain open.  All stockholders are cordially invited to attend the meeting.

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES AT THE MEETING.  NO POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.

PC CONNECTION, INC.

730 Milford Road

Merrimack, New Hampshire 03054

PROXY STATEMENT FOR THE 20172019 ANNUAL MEETING OF STOCKHOLDERS

To Be Held On May 17, 201722, 2019 

This Proxy Statement is furnished in connection with the solicitation of proxies by PC Connection, Inc., a Delaware corporation, which we refer to as the Company, (or “we,” “us,” or “our”) by our Board of Directors, or the Board, for our 20172019 Annual Meeting of Stockholders, or the Annual Meeting, to be held on Wednesday, May 17, 201722, 2019 at 10:00 a.m., Eastern time, at the Crowne Plaza Hotel,Doubletree by Hilton, Nashua, 2 Somerset Parkway, (Exit 8 off the Everett Turnpike), Nashua, New Hampshire 03063 or any adjournment or adjournments of the Annual Meeting.  You may obtain directions to the location of the meetingAnnual Meeting by contacting Investor Relations at 603‑683‑2262.2505.  All proxies will be voted in accordance with the stockholders’ instructions.  If no choice is specified, the proxies will be voted in favor of the matters set forth in the accompanying Notice of Meeting.  Any proxy may be revoked by a stockholder at any time before its exercise by delivery of a written revocation or a subsequently dated proxy to our secretary or by voting in person at the Annual Meeting.

The Notice of Meeting, this Proxy Statement, the enclosed proxy, our Annual Report on Form 10-K for the year ended December 31, 20162018 as filed with the Securities and Exchange Commission, or the SEC, and our Annual Report to Stockholders for the year ended December 31, 20162018 are being mailed to stockholders on or about April 13, 2017.24, 2019.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 17, 2017:22, 2019:

This proxy statement, form of proxy, and our 20162018 Annual Report to Stockholders for the year ended December 31, 20162018 are available at http://ir.connection.com/annuals.cfm.

Voting Securities and Votes Required

On March 24, 2017,April 5, 2019, the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting, there were outstanding and entitled to vote an aggregate of 26,749,66226,356,146 shares of our common stock, $.01 par value per share, or the Common Stock.  Stockholders are entitled to one vote per share of Common Stock. Our stock record books will remain open for inspection by stockholders of record for ten days prior to the Annual Meeting at our offices at the above address and at the time and place of the Annual Meeting.

The presence, in person or by proxy, of the holders of a majority of the issued and outstanding shares of Common Stock entitled to vote at the Annual Meeting shall be necessary to constitute a quorum for the transaction of business. If a quorum is not present, the meeting will be adjourned until a quorum is obtained.  Abstentions will be considered as present for purposes of determining whether a quorum is present.  Proxies reflecting broker non-votes (where a broker or nominee does not have discretionary authority to vote on a proposal) will be considered as present for purposes of determining whether a quorum is present provided there is at least one routine matter to be voted on.

If a quorum is present at the Annual Meeting, the vote required to adopt each of the scheduled proposals will be as follows:

may vote “for” or “withhold” authority to vote with respect to one or more director nominees; however, where candidates are unopposed, withhold votes will have no effect on the election of such nominees.  In addition, broker non-votes, as described below, will have no effect on the election of such nominees.

Other Matters.  Under the Company’s by-laws, the affirmative vote of the holders of a majority of the votes cast (meaning the number of shares voted “for” a proposal must exceed the number of shares voted “against” such proposal) will be required for: approval of the advisory vote on the compensation of our executive officers (Proposal 2); approval of one of the three frequency options under the advisory vote on the frequency of future executive compensation advisory votes (Proposal 3); approval of the amendment to the Company’s Amended and Restated 2007 Stock Incentive Plan, as amended (Proposal 4); approval of the amendment to the Company’s Amended and Restated 1997 Employee Stock Purchase Plan, as amended (Proposal 5); and approval of the ratification of the selection of the independent registered public accounting firm (Proposal 2)6). ShareholdersStockholders may vote “for,” “against”“against,” or “abstain” from voting on this proposal.  Abstentions are not considered votes cast for the foregoing purpose, and will have no effect on the vote for this proposal.these proposals.  

Broker Non-Votes.  Persons who hold shares on the record date through a broker, bank, or other nominee are considered beneficial owners.  Brokers holding shares must vote according to specific instructions they receive from the beneficial owners of those shares.  If brokers do not receive specific instructions, brokers may in some cases vote the shares in their discretion.  However, brokers holding shares in “street name” for their beneficial owners are prohibited from voting on behalf of the clients in director elections and certain other non-routine matters unless the brokers have received specific voting instructions from those clients.  Accordingly, a broker cannot vote shares held on behalf of a beneficial owner on ProposalProposals 1, 2, 3, 4, and 5 regarding the election of directors, the advisory vote on the compensation of our executive officers, the advisory vote on the frequency of future executive compensation advisory votes, and the amendments to our stock plans, respectively, unless such broker has received specific voting instructions from the beneficial owner.  However, a broker will have discretion to vote shares held on behalf of a beneficial owner on Proposal 2,6, the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2017,2019, even if such broker has not received specific voting instructions from the beneficial owner.  Shares held in “street name” by brokers or nominees who indicate on their proxies that they do not have discretionary authority to vote such shares as to a particular matter, will not be counted as votes in favor of such matter and will also not be counted as votes cast or shares voting on such matter.    

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Unless otherwise provided below, the following table sets forth, as of March 13, 2017,31, 2019, the beneficial ownership of our Common Stock by: (i) persons known by us to own more than 5% of our outstanding shares; (ii) each of our current and nominated directors; (iii) each of our named executive officers in the Summary Compensation Table under the heading “Executive Compensation” below; and (iv) all our current directors and executive officers as a group. Unless otherwise indicated, each person has sole investment and voting power, or shares such power with his or her spouse, with respect to the shares set forth in the following table. The inclusion in this table of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.

Except as otherwise set forth below, the street address of each beneficial owner is c/o PC Connection, Inc., 730 Milford Road, Merrimack, New Hampshire 03054.

PROPOSAL ONE

ELECTION OF DIRECTORS

Directors are to be elected at the Annual Meeting. The size of our Board of Directors is currentlyhas been fixed at six members.five members following the 2019 annual meeting of Stockholders (the “2019 Annual Meeting”), as Mr. Baute will not stand for re-election. Our Bylaws provide that our directors will be elected at each annual meeting of our stockholders to serve until the next annual meeting of stockholders or until their successors are duly elected and qualified.

The persons named in the enclosed proxy (Patricia Gallup and David Hall) will vote to elect the sixfive nominees named below as our directors unless authority to vote for the election of any or all of the nominees is withheld by marking the proxy to that effect.  Each nominee is presently serving as a director, and each nominee has consented to being named in this Proxy Statement and to serve, if elected.  If for any reason any nominee should be unable to serve, the person acting under the proxy may vote the proxy for the election of a substitute nominee designated by our Board of Directors.  It is not presently expected that any of the nominees will be unavailable to serve.

Our Board of Directors recommends a vote “FOR” the election of the nominees described below.

Set forth below are the name, age, and length of service as a director for each nominee of our Board of Directors and the positions and offices held by him or her, his or her principal occupation and business experience for at least the past five years, and the names of other publicly-held companies of which he or she serves as a director or served as a director during the past five years.  Information with respect to the number of shares of Common Stock beneficially owned by each director or nominee, directly or indirectly, as of March 13, 2017,31, 2019, appears under “Security Ownership of Certain Beneficial Owners and Management.”

Nominees for Election to our Board of Directors

Patricia Gallup, age 63,65, is our Chair and Chief Administrative Officer.  Ms. Gallup served as Chief Executive Officer from September 2002 until August 2012 and from 1990 to 2001.  Ms. Gallup is a co-founder of our Company, and has served on our Board of Directors since its inception and as an executive officer since 1982.

David Hall, age 67,69, is a co‑founder of our Company and has served on our Board of Directors since its inception.  Mr. Hall served as Vice Chair of our Board of Directors from March 1998 to December 2004.  Mr. Hall was an executive officer from 1982 to 1997, and since then has served as an analyst for our Company.

February 2007.  Mr. Beffa‑Negrini served in a variety of senior management capacities in the areas of merchandising, marketing, and communications during his 25 years of employment with the Company.

Barbara Duckett, age 72,74, has served on our Board of Directors since June 2009.  From 2000 to 2013, Ms. Duckett served as the President, Chief Executive Officer, and as a member of the board of directors of Home Healthcare, Hospice and Community Services.  Since April 2011, Ms. Duckett has served as a member of the board of directors of Monadnock Community Hospital.  She also has served as a director or officer of several other non-profit and privately-held healthcare organizations, at the local, state, and national level.

Jack Ferguson, age 78,80, has served on our Board of Directors since May 2016.  Mr. Ferguson served as our Executive Vice President from May 2007 to March 2012, Chief Financial Officer from December 2005 to March 2012, and Treasurer from November 1997 to March 2012.  From December 1992 to May 2007, Mr. Ferguson served in various financial executive roles at the Company.  He retired from the Company in March 2012.

We believe that each of our nominees is qualified to serve as a director of the Company as a result of his or her level of business experience described in the individual biographies above.  Each nominee has served in a broad range of senior management roles, and some have served on other boards of directors.  The Board concluded that the depth of experience and the combination of the different backgrounds of each of our nominees facilitate the Company’s goal of having a diversity of viewpoints and backgrounds on the Board, and gives the Company a broad range of experience on which to draw.  Accordingly, the Board concluded that each of these individuals should serve as a director of the Company, in light of its business and structure, at the time of filing this proxy.  In particular:

Board Committees

Our Board of Directors has established two standing committees–Audit and Compensation. The Audit and Compensation Committees each operate under written charters that have been approved by our Board of Directors. We have included the charters of the Audit Committee and the Compensation Committee as Appendixes A and B, respectively,appendices to thisour 2017 Proxy Statement. They can also be obtained by accessing the website maintained by the SEC at www.sec.gov or by contacting our investor relations department at PC Connection, Inc., 730 Milford Road, Merrimack, New Hampshire 03054.

Our Board of Directors has determined that all of the members of our two standing committees are independent as defined under the rules of the Nasdaq Stock Market including, in the case of all members of the Audit Committee, the independence requirements set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act.  

Audit Committee

The Audit Committee’s responsibilities include:

Compensation Committee and Subcommittee

The Compensation Committee’s responsibilities include:

The processes and procedures followed by our Compensation Committee in considering and determining executive and director compensation are described below under the heading “Executive and Director Compensation Processes.”

The Compensation Committee met threefive times in 2016.2018. The members of the Compensation Committee are Ms. Duckett and Messrs. Baute and Ferguson. Mr. Weatherson served on the Compensation Committee until his resignation from the Board of Directors in January 2017.  TheThe Compensation Committee has established a subcommittee (which we refer to as the 162(m) Subcommittee) and delegated to that subcommittee authority to issue equity awards and to determine othercertain qualified performance‑based compensation for our CEO and three other most highly compensated employees (other than the CEO and CFO) whose compensation is required to be reported to our stockholders pursuant to the Exchange Act in accordance with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as

interview selected candidates. Our Board of Directors does not currently have a charter or written policy with regard to the nomination process.  We do not have a written policy due to the generally extended terms served by our directors.

Board Leadership Structure

Ms. Gallup is the Chair of our Board of Directors and Chief Administrative Officer of our Company. While the roles of Chief Executive Officer and Chair are separate, our leadership structure does not include a lead independent director. In light of our controlled company status discussed above, we believe that the creation of a lead independent director position is not necessary at this time. Our Board of Directors has determined that having Ms. Gallup act as Chair and as Chief Administrative Officer of our Company is in the best interests of the Company and our stockholders and is consistent with good corporate governance for the following reasons:

Our Board decided to separate the roles of Chair and Chief Executive Officer because it believes that this leadership structure offers the following benefits:

Director Independence

Under applicable NASDAQ rules, a director will only qualify as an “independent director” if, in the opinion of our Board of Directors, that person does not have a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our Board of Directors has determined that none of Ms. Duckett or Messrs. Baute or Ferguson, who comprise our Audit and Compensation Committees, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Each of Messrs. Baute, Ferguson and FergusonBeffa-Negrini and Ms. Duckett is an “independent director” as defined under Nasdaq Stock Market Inc.

with respect to, other executive officer compensation, and our Chief Executive Officer may make recommendations relating to the salaries of our other executive officers.

In 2008, our stockholdersshareholders approved for our executive officers the original Executive Bonus Plan. In 2011, our shareholders approved the Amended and Restated Executive Bonus Plan, which was amended in 2013.Annual cash bonuses under our Amended and Restated Executive Bonus Plan are based on the achievement of company-wide net income and expense leverage goals. Cash bonuses are set as a percentage of the executive officer's base salary.

Our Compensation Committee administers our Amended and Restated 2007 Stock Incentive Plan, as amended, and our Amended and Restated 1997 Employee Stock Purchase Plan, as amended. To the extent permitted by applicable law, our Board of Directors or the Compensation Committee may delegate its authority to grant options and other awards that constitute rights under Delaware law to employees and non-executive officers under our Amended and Restated 2007 Stock Incentive Plan, as amended, to either a committee of our Board or to our Chief Executive Officer, provided that it will fix the terms of such awards to be granted (including the exercise price of such awards, which may include a formula by which the exercise price will be determined) and the maximum number of shares subject to awards that may be granted. The Board of Directors has delegated authority to a committee of the Board of Directors comprised of Ms. Gallup, to issue (i) stock options and (ii) certain other stock-based awards payable only in cash and without any rights to acquire common stock, which we refer to as stock equivalent units, or SEUs, to any employee who is not an executive officer or an “officer,” as defined by Rule 16a-1 of the Securities Exchange Act of 1934, as amended. This committee may grant up to an aggregate maximum of 350,000 shares of common stock subject to options, with no more than 20,000 shares of common stock subject to options permitted to be granted per individual per calendar year. It may also grant up to an aggregate maximum of 500,000 shares of600,000 SEUs.

The Compensation Committee has the authority to retain compensation consultants and other outside advisors to assist in the evaluation of executive officer compensation. In 2015, our Compensation Committee retained Pearl Meyer & Partners, a national consulting firm, as its independent compensation consultant to conduct a competitive assessment of our executive compensation and general compensation programs. Pearl Meyer & Partners provided comparative market data on compensation practices and programs based on an analysis of ten peer companies deemed comparable in terms of product and service offerings and revenue levels. The Compensation Committee used the 2015 report to assist in the review of executive compensation.

Oversight of Risk

Our Board of Directors oversees our risk management processes directly and through its committees. Our management is responsible for risk management on a day-to-day basis. The role of our Board of Directors and its committees is to oversee the risk management activities of management. They fulfill this duty by discussing with management the policies and practices utilized by management in assessing and managing risks and providing input on those policies and practices. In general, our Board of Directors oversees risk management activities relating to business strategy, capital allocation, organizational structure, and certain operational risks;risks, including those arising from cybersecurity threats; our Audit Committee oversees risk

Director Candidates

All of the current members of our Board of Directors have served as directors since 2001, except Ms. Duckett and Mr. Ferguson, who became directors in June 2009 and May 2016, respectively. Where called for, qualifications for consideration as a director nominee may vary according to the particular areas of expertise being sought as a complement to the existing board composition. Minimum qualifications include high-level leadership experience in business activities, breadth of knowledge about issues affecting us, experience on other boards of directors, preferably public company boards, and time available for meetings and consultation on Company matters. While we do not have a formal policy with regard to the consideration of diversity in identifying director nominees, our Board of Directors desires a group of candidates who represent a diversity of viewpoints, backgrounds, skills, and expertise that enable them to make a significant contribution to our Board of Directors, our Company, and stockholders. In the event of a need for a new or additional director, our Board of Directors would evaluate potential nominees by reviewing their qualifications, results of personal and reference interviews, and such other information as the Board may deem relevant.

We do not currently employ an executive search firm, or pay a fee to any other third party, to locate qualified candidates for director positions.

Our Board of Directors has generally nominated the current directors for re-election at each annual meeting of stockholders. Our Board of Directors has therefore not established special procedures for stockholders to submit director recommendations. If we were to receive recommendations of candidates from our stockholders, the Board of Directors would consider such recommendations in the same manner as all other candidates. ShareholdersStockholders who wish to suggest qualified candidates should send relevant information to the attention of the Corporate Secretary, PC Connection, Inc., 730 Milford Road, Merrimack, New Hampshire 03054 (603-683-2262)(603-683-2164).

Communicating with the Board of Directors

We have not implemented a process for our stockholders to send communications to our Board of Directors, other than as set out elsewhere in this proxy. We have not done so primarily due to our status as a controlled company, as discussed earlier.

Code of Business Conduct and Ethics Policy

We have adopted a written Code of Business Conduct and Ethics Policy, which we refer to as the Policy, thatwhich applies to our directors, officers, and employees, including our principal executive officer, principal financial and accounting officer, controller, and persons performing similar functions. We have posted our Policy on our website at http://ir.connection.com. In addition, we intend to post on our website all disclosures that are required by law or Nasdaq Stock Market listing standards concerning any amendments to, or waivers from, any provision of the Policy that occur in the future.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, executive officers, and holders of more than 10% of our Common Stock to file with the SEC initial reports of ownership and reports of changes in beneficial ownership of our Common Stock. Based solely on our review of copies of reports filed by individuals required to make filings, or Reporting Persons, pursuant to Section 16(a) of the Exchange Act or written representations from certain Reporting Persons, we believe that all such reports required to be filed under Section 16(a) of the Exchange Act for 20162018 were timely filed, except:

In August 2018, Joseph Baute sold a total of 23,660 shares of Common Stock over the course of four days. Mr. Baute reported these transactions on a Form 4 filed with the SEC on March 6, 2019.

On August 14, 2018, Jack Ferguson donated 3,000 shares of Common Stock to a charitable organization. Mr. Ferguson reported this transaction on a Form 4 filed with the SEC on April 1, 2019.

On February 16, 2016, David Hall gifted 5,000 shares of Common Stock to an affiliated charity and should have filed a Form 4 on or before February 18, 2016.  Mr. Hall reported this transaction on a Form 4 filed with the SEC on February 19, 2016.

On March  5, 2016,  Joseph Driscoll received 5,000 shares of Common Stock as a result of the vesting of restricted stock units granted in March 2012, and should have filed a Form 4 on or before March 8, 2016.  Mr. Driscoll reported this transaction on a Form 4 filed with the SEC on March 11, 2016.

On May 25, 2016, Jack Ferguson was appointed to the Board of Directors and as a result should have filed a Form 3 on or about June 6, 2016.  Mr. Ferguson filed the Form 3 with the SEC on March 27, 2017.

On December 3, 2016,September 1, 2018, six members of our Board of Directors each received 500 shares of Common Stock as a result of the vesting of restricted stock units granted in December 2013, and should have filed a Form 4 on or about December  6, 2016.February 2018.  Each of the six directors reported this transaction on a Form 4 filed with the SEC on February 1, 2019.

On November 27, 2018, Timothy McGrath received 15,000 shares of Common Stock as a result of the vesting of restricted stock units granted in November 2013. Mr. McGrath reported this transaction on a Form 4 filed with the SEC on December 9, 2016.6, 2018.

Director Compensation

Each director is entitled to receive an annual retainer of $75,000, payable quarterly, for service on the Board. Each independent director also receives an annual retainer of $15,000, payable quarterly, for participation in the Board’s audit and compensation committees. In addition, Board members who act in a Chair capacity receive annual fees as follows:  Board chair, $35,000; Board vice-chair, $10,000; audit committee chair, $10,000; compensation committee and sub-committee chair, $5,000. 

As more fully described below, the following table describes compensation paid to each director for the year ended December 31, 2016,2018, except for compensation paid to Ms. Gallup, which is reflected below in the Summary Compensation Table for Fiscal Years Ended December 31, 2016, 2015,2018, 2017, and 2014.2016. 

Director Compensation for Fiscal Year Ended December 31, 20162018

recommendations in making compensation decisions for our other named executive officers.  The Compensation Committee has established a subcommittee, or the 162(m) Subcommittee, comprised of two of these independent directors, and delegated to the 162(m) Subcommittee authority to issue equity awards andwhich is authorized to determine othercertain qualified performance-based compensation for our Chief Executive Officer and three other most highly compensated employees (other than the Chief Financial Officer) whose compensation is required to be reported to our stockholders pursuant to the Exchange Act in accordance with the requirements of Section 162(m) of the Code.

Our named executive officers consist of our Chief Executive Officer, Interim Chief Financial Officer, Chief Financial Officer, and Chief Administrative Officer.  For 2016,2018, our Named Executive Officers were:

Mr. Sarno resigned as Senior Vice President, Chief Financial Officer and Treasurer in February 2019; Thomas Baker was hired as Senior Vice President, Chief Financial Officer and Treasurer in February 2019.

Compensation Objectives

Our Compensation Committee’s primary objectives with respect to executive compensation are to attract, retain, and motivate our executives and to create long-term stockholder value.  Additionally, the Committee seeks to ensure that executive compensation is aligned with our corporate strategies and business objectives, and that it promotes the achievement of key strategic and financial performance measures by linking short- and long-term cash and equity incentives to the achievement of measurable company performance goals.

To achieve these objectives, the Compensation Committee evaluates our executive compensation program with the goal of setting compensation at levels the Compensation Committee believes are competitive with those of other companies in our industry and our region that compete with us for executive talent.  In addition, our executive compensation program ties a substantial portion of each executive’s overall compensation to managing their respective areas of responsibility and meeting key strategic, financial, and operational goals.  These goals include success in (a) demonstrated leadership ability, (b) management development, (c) compliance with our policies, and (d) anticipation of, and response to, changing market and economic conditions that enhance our ability to operate profitably.  From time to time, we also provide a portion of our executive compensation in the form of stock options, restricted stock units, and other stock-based awards that vest over time, which we believe helps to attract new management talent, as well as retain our existing executives.  We believe such grants align our executives’ interests with those of our stockholders by allowing them to participate in the longer-term success of our Company as reflected in stock price appreciation.

We compete with many other companies for executive personnel.  Accordingly, the Compensation Committee generally targets overall base salary and bonus compensation for executives at or near the midpoint of compensation paid to similarly situated executives of companies analyzed in our survey data, described more fully below.  We may varyadjust this general target in certain situations when necessary, due to the experience level of the individual or other market factors.

Components of our Executive Compensation Program

The primary elements of our executive compensation program are:

Allocations between long-term and short-term compensation, cash and non-cash compensation, or the different forms of non-cash compensation vary, depending on our current initiatives and stated goals. Our goals for 20162018 were focused on continuing the growth trend in consolidated net sales and net income that we established in prior years and, additionally, achieving a better leveraging of our expense structure by attaining our targeted selling, general and administrative, or SG&A, expenses as a percentage of net sales. Accordingly, the 20162018 performance targets for the Executive Bonus Plan were designed to help achieve these two objectives. A total of 60% of the bonus was allocated to the achievement of a net income target of $49.0$64.8 million, and 40% was allocated to achievement of an SG&A expense target of 10.52%10.57% of net sales. Each component was then applied to a multiplier based on the degree to which the respective target was met or exceeded, ranging from 0.5 to 1.7 for each target. No bonuses were to be paid for performance below $44.1$58.3 million of net income or SG&A expenses in excess of 11.57%11.63% of net sales. 

In 2015Peer Group

Prior to 2016, our Compensation Committee retained Pearl Meyer & Partners, a national consulting firm, as its independent compensation consultant to conduct a competitive assessment of our executive compensation and general compensation programs. Pearl Meyer & Partners provided comparative market data on compensation practices and programs based on an analysis of tena group of peer companies deemed comparable in terms of product and service offerings and revenue levels. Individual compensation ranges for each executive position were provided that compared the compensation ranges to actual salary levels.

TheIn both 2016 and 2017, we updated the peer group updated fordata that was used by our Compensation Committee in 2015 was used to benchmark our executive compensation levels against companies that have executive positions with responsibilities similar in breadth and scope to ours, and that compete with us for executive talent.

In 2018 our Compensation Committee requested Pearl Meyer & Partners to conduct a competitive assessment of our executive compensation and general compensation programs. Pearl Meyer & Partners provided comparative market data on compensation practices and programs based on an in-depth analysis of peer companies deemed comparable in terms of product and service offerings and/or revenue levels. Also considered in the analysis was broader market survey data reflecting industry- and size-appropriate comparators. Individual compensation ranges for each executive position were provided that compared the compensation ranges to actual salary levels.

The following companies, whose executive positions’ responsibilities were most similar to ours, were included in the peer group:group for 2018:

The Compensation Committee used the updated survey data to assist it in the review and comparison of each element of executive compensation, including base salary, and bonus compensation, and other long-term incentive vehicles for our executives. With this information, the Compensation Committee analyzed compensation for each executive. The Compensation Committee targeted different compensation levels for each element of compensation as described below.

Base Salary

Base salaries are reviewed at least annually by the Compensation Committee, and in the case of named executive officers other than our Chief Executive Officer, are based on recommendations of the Chief Executive Officer. These salaries are adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance, experience, and the peer group data.

The Compensation Committee reviews the base salaries of our executives initially by reference to the median base salary level of the updated survey data. The Compensation Committee then makes adjustments to these reference levels for each executive’s base salary based on comparisons to the survey data and evaluation of the executive’s level of

Executive Bonus Plan

In 2008, our shareholdersstockholders approved the original Executive Bonus Plan for our executive officers. In 2011, our shareholders approved the Amended and Restated Executive Bonus Plan, and in 2013, our shareholdersstockholders approved an amendment to the Amended and Restated Executive Bonus Plan.Annual cash bonuses are intended to compensate our executives for the achievement of company-wide net income and expense leverage goals. Cash bonuses are set as a percentage of the executive officer's base salary, with higher-ranked executives typically being compensated at a higher percentage of base salary. However, our success is dependent on the ability of our management group to integrate and work together to meet common company‑wide goals. Accordingly, executives are not assigned specific individual goals but instead are collectively responsible for meeting company‑wide goals. Our Compensation Committee develops corporate goals that, if achieved, will result in improved operating performance. In 2016,2018, our target bonus percentages were 100% of base salary for our Chief Executive Officer and Chief Financial Officer and 75% for our Chief Administrative Officer, and 25% for our Interim Chief Financial Officer. In addition, our compensation program also provides incentives for our executives to reach beyond our target corporate goals. If our executives perform above expectations, they may be entitled to receive additional bonus amounts that can result in a total annual bonus of up to 170% of base salary for our Chief Executive Officer and Chief Financial Officer and up to 127.5% of base salary for the Chief Administrative Officer, and up to 42.5% for our Interim Chief Financial Officer. Proportionally lower bonuses are provided for achievement levels between 90% and 100% of respective company-wide targets, and no bonuses are earned by any executive where less than 90% of the respective company-wide target factor is achieved. Our Compensation Committee approved a consolidated net income goal of $49.0$64.8 million for 2016,2018, reflecting our growth target for the year and an expense leverage goal to limit 20162018 consolidated SG&A expenses as a percentage of net sales at 10.52%10.57%. The Amended and Restated Executive Bonus Plan provides that the two targets be increased or decreased to reflect material changes in revenue growth rates for the IT markets in which the Company competes. This potential adjustment is based on the belief that management should neither receive a windfall from higher-than-expected IT industry growth nor be penalized for lower-than-expected growth. The Company employs an assessment of IT industry revenue growth prepared quarterly by International Data Corporation, or IDC, a global provider of market intelligence for technology markets. In 2016,markets to determine the IDC assessment found thatappropriate amount of these adjustments, if any. No adjustments to the IT industry grew at higher-than-expected growth.  In addition, the twoperformance targets were increased to account for our 2016 acquisitions.  Accordinglymade in 2018 based on the net income target was increased by $1.5 million to $50.5 million andresults of the SG&A target was increased from 10.52% to 10.69%.assessments.

Our executive officers work together as a team, and all executives are assigned the same company‑wide net income and expense leverage goals. In 2016,2018, our net income, adjusted to exclude special charges, was $50.2 million and$65.3 million. SG&A expense as a percentage of net sales, which would have been reported under the previous year’s revenue recognition standard (ASC 605), was 10.67%10.46%. Performance by theThe Company againstexceeded its adjusted net income target fell short by 1%, and performance

The table below describes the bonus payments and the percentage of base salary for 20162018 for the named executive officers:

We believe providing these benefits help us compete for executive talent. After reviewing the practices of companies represented in our 2015 peer group, we believe that our severance and change of control benefits are generally in line with severance packages offered to executives at such companies.

Tax and Accounting Considerations

Section 162(m) of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, generally disallows a tax deduction for compensation in excess of $1.0 million paid to our Chief Executive Officer and the threeChief Financial Officer and to each other officersofficer (other than theour Chief Executive Officer and our Chief Financial Officer) whose compensation is required to be disclosedreported to our stockholders underpursuant to the Exchange Act by reason of being among ourthe three other most highly compensatedpaid executive officers. QualifyingPursuant to tax legislation signed into law on December 22, 2017 commonly known as the Tax Cuts and Jobs Act, or the Tax Act, for taxable years beginning after December 31, 2017, the Section 162(m) deduction limitation is expanded so that it also applies to compensation in excess of $1 million paid to a public company’s chief financial officer. Historically, compensation that qualified under Section 162(m) as performance-based compensation iswas exempt from the deduction limitation. However, subject to certain transition rules, the Tax Act eliminated the qualified performance-based compensation exception. As a result, for taxable years beginning after December 31, 2017, all compensation in excess of $1 million paid to each of the executives described above will not be deductible by us, subject to the deduction limitation if specified requirements are met.  We periodically review the potential consequences of Section 162(m), and we intend to structure the performance-based portion of our executive compensation, where feasible, to comply with exemptions in Section 162(m) so that the compensation remains tax deductible to us.   However, the Compensation Committee may, in its judgment, authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes that such payments are appropriate to attract and retain executive talent.transition relief.

We account for equity compensation awarded to our employees per the methods prescribed by ASC 718, which require us to recognize compensation expense in our financial statements for all share-based payments based upon an estimate of their fair value over the service period of the award. We record cash compensation as an expense at the time the obligation is accrued. Given our adoption of ASC 718, we believe that the accounting impact of the different forms of equity compensation awards generally reflects their economic impact. Accordingly, the underlying accounting treatment is not a material consideration in determining the specific nature or size of equity awards granted. The tax impact of the awards on the recipient and the effectiveness of the award in retaining executives are more relevant considerations.

Executive Compensation

The following table sets forth information for our Chief Executive Officer, two individuals who served as Chief Financial Officer during 2018, and our other most highly compensated executive officer who were servingserved as executive officers as of December 31, 2016, and one otheran executive officer of the Company who ceased serving as Chief Financial Officer during 2016,2018, collectively, the named executive officers for the fiscal years indicated.

Summary Compensation Table for Fiscal Years Ended December 31, 2016, 20152018, 2017 and 20142016

Grants of Plan-Based Awards for Fiscal Year Ended December 31, 20162018

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth certain information regarding outstanding equity awards held by our named executive officers as of December 31, 2016.2018.

Outstanding Equity Awards at Fiscal Year Ended December 31, 20162018