B 2012 Proxy
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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o | Soliciting Material Pursuant to §240.14a-12 |
BARNES GROUP INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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123 Main Street
Bristol, Connecticut 06010
March 23, 2012
NOTICE OF 2012 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 4, 2012
You are invited to attend the 2012 Annual Meeting of Stockholders of Barnes Group Inc. (the “Company”) which will be held at the Hartford Marriott Downtown Hotel, 200 Columbus Boulevard, Hartford, Connecticut 06103, at 11:00 a.m., Eastern Daylight Time, on Friday, May 4, 2012, for the following purposes:
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2. | Ratifying the selection of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for 2012; |
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3. | Voting on an advisory (non-binding) resolution to approve the Company's executive compensation; |
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4. | Voting on a stockholder proposal set forth in the proxy statement, if the proposal is properly presented at the meeting; and |
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5. | Transacting any other business that may properly come before the meeting or any adjournment thereof. |
Stockholders of record at the close of business on March 8, 2012 will be entitled to vote at the meeting. The Board of Directors recommends a vote FOR all director nominees, FOR Items 2 and 3, and AGAINST Item 4.
Your vote is important. Whether or not you plan to attend the meeting, we encourage you to vote as promptly as possible by internet, telephone or mail.
Thomas O. Barnes
Chairman of the Board
2012 Proxy Summary
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.
Annual Meeting of Stockholders
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• Time and Date | 11:00 a.m., Friday, May 4, 2012 |
• Place | Hartford Marriott Downtown Hotel |
| 200 Columbus Boulevard, Hartford, Connecticut 06103 |
• Record Date | March 8, 2012 |
• Voting | Stockholders as of the record date are entitled to vote. Each share of Common Stock is entitled to one vote for each director nominee and one vote for each of the proposals to be voted on. |
Voting Matters
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Proposal No. | | Proposal | | Board Vote Recommendation | | Page Reference (for more detail) |
1 | | Electing Directors | | FOR EACH DIRECTOR NOMINEE | | |
| | Management Proposals | | | | |
2 | | Ratifying the selection of PricewaterhouseCoopers as the Company's independent registered public accounting firm for 2012 | | FOR | | |
3 | | Advisory resolution to approve the Company's executive compensation | | FOR | | |
| | Stockholder Proposal | | | | |
4 | | Establish policy that the Board's chairman be "independent" and not have previously served as an executive officer of the Company | | AGAINST | | |
Board Nominees
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• | The following table provides summary information about each director nominee. Each director nominee is elected for a three-year term, expiring at the Annual Meeting of Stockholders in 2015. Each director is elected by a plurality of the votes cast. |
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Name | | Age | | Director Since | | Independent | | Committee Memberships |
| Audit | | Compensation and Management Development | | Corporate Governance | | Executive | | Finance |
Thomas J. Albani | | 69 | | 2008 | | X | | | | X | | X | | | | X |
Thomas O. Barnes | | 63 | | 1978 | | | | | | | | | | X | | |
| | | | | | | | | | | | | | (ex-officio, non-voting) | | |
Gary G. Benanav | | 66 | | 1994 | | X | | X | | X | | Chair | | | | |
Mylle H. Mangum | | 63 | | 2002 | | X | | X | | Chair | | | | | | X |
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• | No director nominee, each of whom is a current director, attended fewer than 90% of the Board meetings and committee meetings on which he or she sits. |
Auditors
As a matter of good corporate governance, we are asking our stockholders to ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2012. Below is summary
information with respect to PricewaterhouseCoopers LLP's fees for services provided in 2011 and 2010.
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Type of Fees | | | 2011 | | 2010 |
Audit Fees | | | $ | 2,112,675 |
| | $ | 2,327,691 |
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Audit-Related Fees | | | $ | 607,265 |
| | $ | 266,538 |
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Tax Fees | | | $ | 1,543,357 |
| | $ | 1,127,395 |
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All Other Fees | | | $ | 3,636 |
| | $ | 3,030 |
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Total Fees | | | $ | 4,266,933 |
| | $ | 3,724,654 |
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Executive Compensation Advisory Vote
We are asking our stockholders to approve on an advisory basis our named executive officer ("NEO")compensation. The Board recommends a FOR vote because it believes that our compensation policies and practices are effective in achieving the Company's goals of rewarding for financial and operating performance, and aligning our NEOs’ interests with those of our stockholders.
Consistent with stockholders' vote on "say on frequency" last year, the Board approved that stockholders vote on the compensation of our NEOs every year so that stockholders may annually express their views on our executive compensation program.
Executive Compensation - Key Elements
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Type | | | Form | | | Terms |
Equity | | • | Stock options | | • | Time-based vesting; 18, 30, and 42 months from the grant date in equal installments |
| • | Restricted stock units ("RSUs") | | • | Time-based vesting; 30, 42, and 54 months from the grant date in equal installments |
| • | Relative measure performance share awards ("Relative Measure PSAs") | | • | Performance-based vesting at the end of a 3-year cycle; based on three equally weighted measures separately evaluated based on a comparison of the Company's relative performance against the performance of Russell 2000 Index companies |
Cash | | • | Salary | | • | Generally eligible for annual salary increase consideration |
| • | Annual incentive compensation | | • | Stockholder-approved program with payouts based on accomplishment of targeted financial performance measures |
Retirement | | • | Defined benefit plans | | • | Defined benefit plans (qualified and non-qualified above the IRS limit) with terms the same as other eligible U.S. based employees; vesting upon attaining 5 years of service |
| | | | • | Non-qualified defined benefit plan that provides supplemental benefits if executive attains both 10 or more years of service and age 55 while an active employee; benefits are in lieu of benefits under the defined benefit plan above the IRS limit that applies to other U.S. based employees; applies only to Messrs. Milzcik, Dempsey and Burris; plan was closed to new participants in December 2008 |
| | • | Deferred compensation plan | | • | Mr. Stephens and Mses. Toussaint and Edwards participate in a non-qualified deferred compensation program that provides for a deferred employer contribution as a % of base salary and annual incentive amounts earned in excess of the IRS limit for qualified plans |
Change in control and severance | | • | Severance benefits | | • | Severance payable and benefit continuation upon termination of employment in certain specified circumstances or upon a change in control |
| | | | • | Severance ranges from a multiple of one times base salary plus pro rata bonus for certain non-change in control events under certain circumstances, to two times base salary plus additional benefits for certain change in control events |
| | | | | • | “Double trigger” for accelerated vesting of all equity awards made after 2010 upon a change in control (except for CEO based on the terms of his employment agreement) |
| | | | | • | No 280G gross-ups for a “golden parachute payment” |
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Type | | | | | | Terms |
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Perquisites | | | | | • | Financial planning and tax preparation services, annual physicals (for amounts not otherwise covered by health insurance), executive life insurance with tax gross-up benefit (for current participants only), limited personal use of Company-leased aircraft (CEO only) |
Other | | | | | • | Policy that prohibits hedging transactions involving the Company's securities for any of our directors or executive officers |
| | | | | • | Executive stock ownership requirements |
| | | | | • | Clawback of incentive compensation under certain circumstances |
Summary of Key Executive Compensation Changes for 2011
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Program Component | | Summary of Changes in 2011 |
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Base salary | • | $15,000 salary increase for each NEO effective April 1, 2011, approved in connection with the elimination of the cash perquisite allowances (described below) |
| • | No separate merit increases were approved |
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Annual incentive awards | • | Modified performance measures and weighting for 2011 to better align Company focus on profitable sales growth and productivity improvements |
| • | Modified 2011 performance measures (and weighting): basic EPS (70%), Revenue (15%) and Operating Margin (15%) |
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Long-term incentive awards | • | Includes three key components: stock options, restricted stock units ("RSUs") and relative measure performance share awards ("Relative Measure PSAs"); Relative Measure PSAs a new component for 2011 |
| • | The relative measure program compares the Company's performance over a 3-year period against the performance of Russell 2000 Index companies, based on three, equally weighted and independently measured performance measures: total shareholder return, basic EPS growth and operating income before depreciation and amortization growth |
| • | Added a “double trigger” for accelerated vesting of all equity awards made after 2010 upon a change in control - that is, accelerated vesting for such awards occurs only if an NEO's employment is terminated by the Company without cause, or if the NEO resigns for good reason (as defined in the severance agreements) on or within two years following a change in control (except for CEO based on the terms of his employment agreement)
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Retirement programs | • | None (but note changes made in 2012 described on page 35) |
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Executive life insurance programs | • | Eliminated participation in the Senior Enhanced Executive Life Insurance Program ("SEELIP") for any employee hired or promoted into an eligible position after April 1, 2011 |
| • | Eliminated for all NEOs Company-paid premium and related tax gross-up payments following retirement after April 1, 2011 under the SEELIP |
Perquisites | • | Eliminated annual cash perquisite allowances of either $20,000 or $25,000 |
| • | Eliminated tax gross-ups on Company-paid annual physicals (for amounts not otherwise covered by health insurance) and annual financial planning and tax preparation services effective April 1, 2011 |
| • | Established an annual cap of $100,000 for the CEO's personal use of the Company-leased aircraft, the value of which is subject to personal income tax and does not include gross-up |
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Program Component | | Summary of Changes in 2011 |
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Other | • | Determined that stockholder advisory votes on executive compensation will be held annually, in accordance with our stockholders' preference |
| • | Implemented hedging policy, where the Company prohibits hedging transactions involving the Company's securities for any of the Company's directors or Section 16 officers (which includes our NEOs) |
2011 Compensation Summary
Below is the 2011 compensation for each NEO:
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Name and Principal Position | | Year | | Salary | | Bonus | | Stock Awards | | Option Awards | | Non-Equity Incentive Plan Compensation | | Change in Pension Value and Nonqualified Deferred Compensation Earnings | | All Other Compensation | | Total |
Gregory F. Milzcik | | 2011 | | $ | 886,250 |
| | $ | — |
| | $ | 2,040,788 |
| | $ | 904,792 |
| | $ | 2,002,500 |
| | $ | 1,802,030 |
| | $ | 204,408 |
| | $ | 7,840,768 |
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President and Chief Executive Officer | | 2010 | | 856,250 |
| | — |
| | 2,376,761 |
| | 929,770 |
| | 1,619,723 |
| | 1,185,353 |
| | 335,628 |
| | 7,303,485 |
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| 2009 | | 800,000 |
| | — |
| | 1,305,300 |
| | 837,207 |
| | 151,200 |
| | 444,824 |
| | 272,080 |
| | 3,810,611 |
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Christopher J. Stephens, Jr. | | 2011 | | 427,250 |
| | — |
| | 340,131 |
| | 150,549 |
| | 646,500 |
| | 36,337 |
| | 218,575 |
| | 1,819,342 |
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Senior Vice President, Finance and Chief Financial Officer | | 2010 | | 413,250 |
| | 124,000 |
| | 370,940 |
| | 122,080 |
| | 513,375 |
| | 27,478 |
| | 135,112 |
| | 1,706,235 |
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| 2009 | | 394,096 |
| | 50,000 |
| | 155,720 |
| | 91,839 |
| | 51,030 |
| | 18,008 |
| | 98,573 |
| | 859,266 |
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Patrick J. Dempsey | | 2011 | | 427,250 |
| | — |
| | 274,901 |
| | 122,836 |
| | 646,500 |
| | 378,554 |
| | 74,451 |
| | 1,924,492 |
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Vice President, Barnes Group Inc. and President, Logistics and Manufacturing Services | | 2010 | | 413,250 |
| | — |
| | 407,576 |
| | 134,070 |
| | 213,668 |
| | 225,597 |
| | 98,904 |
| | 1,493,065 |
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| 2009 | | 405,000 |
| | — |
| | 744,250 |
| | 156,861 |
| | 50,625 |
| | 135,070 |
| | 76,504 |
| | 1,568,310 |
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Claudia S. Toussaint | | 2011 | | 356,250 |
| | — |
| | 270,241 |
| | 119,840 |
| | 486,000 |
| | 33,721 |
| | 158,106 |
| | 1,424,158 |
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Senior Vice President, General Counsel and Secretary | | 2010 | | 236,635 |
| | — |
| | 407,355 |
| | 284,906 |
| | 262,823 |
| | 17,273 |
| | 199,363 |
| | 1,408,355 |
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Dawn N. Edwards | | 2011 | | 292,250 |
| | — |
| | 223,648 |
| | 101,115 |
| | 399,600 |
| | 73,928 |
| | 117,334 |
| | 1,207,875 |
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Senior Vice President, Human Resources | | | | | | | | | | | | | | | | | | |
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Jerry W. Burris | | 2011 | | 164,782 |
| | — |
| | 386,627 |
| 1 | 382,093 |
| 2 | — |
| | — |
| | 403,446 |
| | 1,336,948 |
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Former Vice President, Barnes Group Inc. and Former President, Precision Components | | 2010 | | 413,250 |
| | — |
| | 407,576 |
| | 134,070 |
| | 579,738 |
| | 209,553 |
| | 89,201 |
| | 1,833,388 |
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| 2009 | | 405,000 |
| | 50,000 |
| | 744,250 |
| | 156,861 |
| | 35,964 |
| | 91,300 |
| | 76,901 |
| | 1,560,276 |
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1 | This amount includes the incremental increase of $125,704 in fair value of prior year grants resulting from a change in service condition that was treated as a modification under ASC 718. |
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2 | This amount includes the incremental increase of $267,496 in fair value of prior year grants resulting from a change in service condition that was treated as a modification under ASC 718. |
2013 Annual Meeting
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• | Deadline for stockholder proposals for inclusion in the proxy statement for the 2013 Annual Meeting: November 23, 2012 |
PROXY STATEMENT FOR 2012 ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT FOR 2012 ANNUAL MEETING OF STOCKHOLDERS
MAY 4, 2012
This proxy statement is being used in connection with the solicitation of proxies by Barnes Group Inc., which is referred to in this proxy statement as the “Company”, on behalf of the Board of Directors for the 2012 Annual Meeting of Stockholders (“2012 Annual Meeting”) to be held on May 4, 2012 and at any adjournment thereof. Availability of this proxy statement and accompanying materials to stockholders is scheduled to begin on or about March 23, 2012.
INTERNET AVAILABILITY OF PROXY MATERIALS
In accordance with the rules of the Securities and Exchange Commission (the "SEC"), instead of mailing a printed copy of its proxy materials to each stockholder of record or beneficial owner, the Company is furnishing its proxy materials (proxy statement for the 2012 Annual Meeting, the proxy card and the 2011 Annual Report to Stockholders) by providing access to these materials on the internet. Stockholders will not receive printed copies of the proxy materials unless they request this form of delivery. Printed copies will be provided upon request at no charge.
A Notice of Meeting and Internet Availability of Proxy Materials (the “Notice of Internet Availability”) will be mailed to stockholders on or about March 23, 2012. The Company is providing the Notice of Internet Availability in lieu of mailing the printed proxy materials and is instructing stockholders as to how they may: (1) access and review the Company's proxy materials on the internet; (2) submit their proxy; and (3) receive printed proxy materials. Stockholders may request to receive printed proxy materials by mail or electronically by e-mail on an ongoing basis by following the instructions in the Notice of Internet Availability. A request to receive proxy materials in printed form by mail or by e-mail will remain in effect until such time as the submitting stockholder elects to terminate it.
INFORMATION ABOUT VOTING
Who Can Vote
Only stockholders of record at the close of business on March 8, 2012 (the “Record Date”) will be entitled to vote at the 2012 Annual Meeting. As of March 8, 2012, the Company had 54,214,129 outstanding shares of common stock, par value $.01 per share (the “Common Stock”), each of which is entitled to one vote.
Voting Your Shares
You can vote your shares either by proxy or in person at the 2012 Annual Meeting. If you choose to vote by proxy,
you can do so in one of three ways:
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• | By internet. To vote using the internet, go to the website listed on your Notice of Internet Availability or proxy card. You will need to follow these instructions and the website. |
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• | By telephone. To vote by telephone, call the toll free number listed on your Notice of Internet Availability or proxy card. You will need to follow these instructions and the prompts from the telephone voting system. |
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• | By mail. If you requested printed proxy materials and wish to vote by mail, simply mark, sign and date the proxy card and return it in the postage-paid envelope provided. |
If you vote by internet or telephone, you should not return your proxy card.
If you hold your shares through a broker, bank or other nominee, you will receive separate instructions from the nominee describing how to vote your shares.
Revocation of Proxy
A stockholder who executes and delivers a proxy may revoke it at any time before it is exercised by voting in person at the 2012 Annual Meeting, by delivering a subsequent proxy, by notifying the inspectors of the election in person or in writing or, if previous instructions were given through the internet or by telephone, by providing new instructions by the same means.
Quorum
For the business of the 2012 Annual Meeting to be conducted, a minimum number of shares constituting a quorum must be present. The holders of a majority of the outstanding shares of Common Stock entitled to vote at the 2012 Annual Meeting must be present in person or represented by proxy at the 2012 Annual Meeting to have a quorum. Shares represented at the meeting by proxies including abstentions and broker non-votes are treated as present at the meeting for purposes of determining a quorum.
Broker Non-Votes
A broker non-vote occurs when a stockholder who holds his or her shares through a bank or brokerage firm does not instruct that bank or brokerage firm how to vote the shares and, as a result, the broker is prevented from voting the shares held in the stockholder's account on certain proposals. Under applicable New York Stock Exchange Rules, if you hold your shares through a bank or brokerage firm and your broker delivers the Notice of Internet Availability or the printed proxy materials to you, the broker has discretion to vote on “routine” matters only. The ratification of the selection of the Company's independent registered public accounting firm is considered "routine" and therefore may be voted on by your bank or brokerage firm without instructions from you.
The Effect of Broker Non-Votes and Abstentions
Abstentions and broker non-votes will not have an effect on the outcome of Proposal 1 (the election of directors). In voting on Proposal 2 (ratification of auditor selection), Proposal 3 (approval of executive compensation) and Proposal 4 (the stockholder proposal regarding establishing a policy requiring that the Board's chairman be an "independent director" and a person who has not previously served as an executive officer of the Company), abstentions will have the effect of votes against the proposals and broker non-votes will not have an effect on the outcome of the vote.
Vote Required and Recommendations of the Board of Directors for each Proposal
Proposal 1, Election of directors.
Vote Required: Directors are elected by a plurality of the votes cast. Proxies may not be voted for more than the number of nominees named by the Board of Directors.
Recommendation of the Board of Directors: The Board of Directors recommends a vote “FOR” all nominees.
Proposal 2, Ratifying the selection of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for 2012.
Vote Required: Affirmative vote of a majority of shares of Common Stock represented in person or by proxy and entitled to vote on the matter.
Recommendation of the Board of Directors: The Board of Directors recommends a vote “FOR” this proposal.
Proposal 3, Advisory (non-binding) resolution to approve the Company's executive compensation.
Vote Required: Affirmative vote of a majority of shares of Common Stock represented in person or by proxy and entitled to vote on the matter. As noted in the discussion of this proposal, the choice receiving a majority of votes will not be binding on the Board of Directors or its Compensation and Management Development Committee (the “Compensation Committee”) and may neither be construed as overruling a decision by the Board of Directors or the Compensation Committee nor creating or implying any additional fiduciary duty on the Board of Directors. Further, it will not affect any compensation paid or awarded to any named executive officer.
Recommendation of the Board of Directors: The Board of Directors recommends a vote “FOR” this proposal.
Proposal 4, Stockholder proposal.
Vote Required: Affirmative vote of a majority of shares of Common Stock represented in person or by proxy and entitled to vote on the matter.
Recommendation of the Board of Directors: The Board of Directors recommends a vote “AGAINST” this proposal.
PROXY PROPOSALS
Stockholders who are entitled to vote at the 2012 Annual Meeting are requested to vote on the proposals listed below.
Election of Directors (Proxy Proposal 1)
Four directors who have previously served on the Board of Directors are nominated for re-election to the Board of Directors for a three-year term (unless any of them earlier dies, resigns, retires or is removed, as provided in the Company's Restated By-Laws). Thomas J. Albani, Thomas O. Barnes, Gary G. Benanav, and Mylle H. Mangum are nominated for re-election to the Board of Directors for terms expiring at the Annual Meeting of Stockholders in 2015.
Below is pertinent information concerning the nominees for re-election as directors and the six directors whose terms continue after the meeting. Each director has been associated with his or her present organization for at least the past five years unless otherwise noted. None of the organizations listed as business affiliates of the directors is a subsidiary or other affiliate of the Company.
The Board of Directors recommends a vote “FOR” all nominees.
Nominees for Re-election
Three-Year Term - Term to expire in 2015
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| Thomas J. Albani |
Age: 69 | Committees: |
Director since: 2008 | Compensation and Management Development |
Current term expires: 2012 | Corporate Governance |
| Finance |
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Mr. Albani retired in May 1998 from Electrolux Corporation where he served as the Chief Executive Officer for seven years and as a member of the Board of Directors. From 1994 to 2010, Mr. Albani was a director of Select Comfort Corporation. Mr. Albani's qualifications to be a member of our Board of Directors include his experience as the Chief Executive Officer of Electrolux Corporation, as well as his service as the Chief Operating Officer of Allegheny International, a multibillion dollar industrial conglomerate. He also has, through his experience in management consulting and participation in various industrial and consumer associations, strong strategic planning and problem solving skills and knowledge of the financial, environmental, legal and structural issues facing industrial companies. |
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| Thomas O. Barnes |
Age: 63 | Committees: |
Director since: 1978 | Executive Committee (ex officio, non-voting member) |
Current term expires: 2012 | |
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Mr. Barnes is Chairman of the Board of Directors and an employee of the Company. His role is described on page 10. He is currently a director of New England Bank Shares, Inc. He served as a director of Valley Bank from 2005 to 2007 when it was merged into New England Bank Shares, Inc. Mr. Barnes' qualifications to be a member of our Board of Directors include his experience in the fields of distribution, manufacturing, finance and governance with numerous organizations throughout his career, including the Company's distribution business. In addition, Mr. Barnes has owned and managed several businesses and has experience in the commercial lending field. He has served on the Board of Directors of the Company for over 30 years and has served as chairman, trustee or director for over 20 non-profit organizations. |
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| Gary G. Benanav |
Age: 66 | Committees: |
Director since: 1994 | Audit |
Current term expires: 2012 | Compensation and Management Development |
| Corporate Governance (Chair) |
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Mr. Benanav retired in March 2005 from New York Life International, LLC where he was the Chief Executive Officer, and the Vice Chairman and a director of New York Life Insurance Company. He is a director of Express Scripts, Inc., a full-service pharmacy benefit management company. Mr. Benanav's qualifications to be a member of our Board of Directors include having served as the executive officer of two U.S. corporations with assets in excess of $100 billion, extensive international business experience, extensive management responsibility for U.S. and international insurance and financial services companies, experience in dealing with regulators and legislators, extensive knowledge of finance and accounting matters including complex financial statement and accounting issues across various types of businesses, and practice as a business attorney for 15 years including serving as a legal advisor to Boards of Directors for over five years. In addition, Mr. Benanav received a Presidential appointment as U.S. representative to APEC Business Advisory Council (2002 to 2005). |
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| Mylle H. Mangum |
Age: 63 | Committees: |
Director since: 2002 | Audit |
Current term expires: 2012 | Compensation and Management Development (Chair) |
| Finance |
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Ms. Mangum is the Chief Executive Officer of IBT Enterprises, LLC, a leading provider of branch banking solutions. She was formerly the Chief Executive Officer of True Marketing Services, focusing on consolidating marketing services companies. From 1999 to 2002, she was the Chief Executive Officer of MMS, a private equity company involved in developing and implementing marketing and loyalty programs in high-tech environments. She is currently a director of Collective Brands, Inc., Haverty Furniture Companies, Inc., and Express, Inc. Over the past five years she has also served as a director of Scientific-Atlanta, Inc., Respironics, Inc., Matria Healthcare, Inc., Emageon Inc., and Payless ShoeSource, Inc., the predecessor to Collective Brands. Ms. Mangum's qualifications to be a member of our Board of Directors include her current service as a chief executive officer, and extensive business and management experience including, in addition to that mentioned above, serving as an executive with General Electric, BellSouth and Holiday Inn Worldwide. She has extensive knowledge of marketing, accounting and finance, as well as compliance and internal controls.
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Continuing Directors | | |
Term expiring in 2013 | | |
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| John W. Alden | |
Age: 70 | Committees: |
Director since: 2000 | Compensation and Management Development |
Current term expires: 2013 | Corporate Governance |
| Finance (Chair) |
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Mr. Alden retired in 2000 as Vice Chairman, United Parcel Service of America, Inc. From 1988 until his retirement, he served as a director of United Parcel Service. He is currently, and has been during the past five years, a director of Silgan Holdings Inc., The Dun & Bradstreet Corporation and Arkansas Best Corporation. In addition to his service with United Parcel Service of America, Inc. and on other boards of directors, Mr. Alden's qualifications to be a member of our Board of Directors include his extensive experience as senior manager and vice chairman of a $50 billion company with responsibility for corporate strategic planning, worldwide marketing, sales, communications, public relations and logistics, and a life-long career in industry. |
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| George T. Carpenter | |
Age: 71 | Committees: |
Director since: 1985 | Compensation and Management Development |
Current term expires: 2013 | Corporate Governance |
| Executive (Chair) |
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Mr. Carpenter is President and a director of The S. Carpenter Construction Company, which is involved in general contracting, and The Carpenter Realty Company, which is involved in real estate management. For over nine years until mid-2008, Mr. Carpenter served as a director of Webster Financial Corporation. Mr. Carpenter's qualifications to be a member of our Board of Directors include his direct ownership and hands-on management of two Bristol, Connecticut-based businesses and his knowledge of the banking and financial industries and financing arrangements. Mr. Carpenter has served on our Board of Directors for 26 years. |
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| William J. Morgan | |
Age: 65 | Committees: |
Director since: 2006 | Audit (Chair) |
Current term expires: 2013 | Corporate Governance |
| Executive |
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Mr. Morgan is a retired partner of the accounting firm KPMG LLP where he served clients in the industrial and consumer market practices. After his retirement in 2006, and until 2010, he was a consultant to KPMG LLP's Leadership Development Group and Dean of KPMG's Chairman's 25 Leadership Development Program. He is the Audit Committee financial expert. From 2004 until 2006, Mr. Morgan was the Chairman of KPMG LLP's Audit Quality Council and, from 2002 until 2006, he was a member of its Independence Disciplinary Committee. He previously served as the Managing Partner of the Stamford, Connecticut office. Mr. Morgan is currently a director of PGT, Inc. He previously served as a member of the Boards of Directors for KPMG LLP and KPMG Americas. In addition to his service with KPMG LLP and on other boards of directors, Mr. Morgan's qualifications to be a member of our Board of Directors include his 39 year career and expertise in the accounting and auditing fields as well as his extensive practice as a certified public accountant and experience working with global industrial companies relative to accounting, finance, auditing, controls, risk management, compliance and corporate governance. |
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Term expiring in 2014 | | |
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| William S. Bristow, Jr. | |
Age: 58 | Committees: |
Director since: 1978 | Executive |
Current term expires: 2014 | Finance |
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Mr. Bristow is President of W.S. Bristow & Associates, Inc., which is engaged in small business development. Mr. Bristow's qualifications to be a member of our Board of Directors include his extensive knowledge of our Company with over 30 years of service as a member of our Board of Directors, ownership and direct management of W.S. Bristow & Associates and his expertise in the area of sales. |
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| Hassell H. McClellan | |
Age: 66 | Committees: |
Director since: 2010 | Audit |
Current term expires: 2014 | Finance |
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Dr. McClellan is an Associate Professor of Finance and Policy at Boston College's Wallace E. Carroll School of Management. Dr. McClellan has been a member of the faculty of Boston College since 1984. He specializes in strategic management, global competitiveness and strategic management for boards of directors and financial services. He served as the Associate Dean of Boston College's Wallace E. Carroll School of Management from 1996 to 2000. Dr. McClellan has both an MBA and a Doctor of Business Administration degree. Dr. McClellan is currently a trustee of the Virtus Variable Insurance Trust (formerly Phoenix Edge Series Fund) where he has served since 2008, the John Hancock Variable Insurance Trust (formerly John Hancock Trust) where he has served since 2005, and John Hancock Funds II where he has served since 2005. Dr. McClellan's qualifications to be a member of our Board of Directors include his extensive experience and expertise in global competitiveness, strategic planning and finance. In addition to his academic achievements in these areas, he has served as a board member or trustee of more than ten not-for-profit and private organizations. |
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| Gregory F. Milzcik | |
Age: 52 | Committees: |
Director since: 2006 | Executive (ex officio, non-voting member) |
Current term expires: 2014 | |
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Mr. Milzcik became President and Chief Executive Officer of the Company in October 2006. He joined the Company in June 1999 as Vice President, Barnes Group Inc. and President, Barnes Aerospace. He was appointed President, Barnes Industrial (formerly Associated Spring) in November 2004 and Executive Vice President and Chief Operating Officer of the Company in February 2006. He is currently, and has been since 2008, a director of IDEX Corporation. Mr. Milzcik's qualifications to be a member of our Board of Directors include his life-long career and expertise in the aerospace industry as well as his extensive knowledge in the fields of domestic and international operations, engineering, lean management, marketing, and enterprise management systems. |
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Ratifying the Selection of PricewaterhouseCoopers LLP as the Company's Independent Registered Public Accounting Firm (Proxy Proposal 2)
The Audit Committee of the Board of Directors has selected PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the fiscal year ended December 31, 2012. Although not required by the Charter or Restated By-Laws of the Company, the Company has determined to ask the stockholders to ratify this selection. A representative of PricewaterhouseCoopers LLP is expected to be present at the meeting and will have the opportunity to make a statement, if desired, and to be available to respond to appropriate questions.
The Board of Directors recommends a vote “FOR” this Proposal.
Advisory (Non-Binding) Resolution to Approve the Company's Executive Compensation (Proxy Proposal 3)
Under SEC rules, we are providing stockholders with an advisory (non-binding) vote to approve the compensation
of our named executive officers, which is described in the Compensation Discussion and Analysis ("CD&A"), the compensation tables, and the accompanying required narrative disclosure regarding named executive compensation included in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives stockholders the opportunity to vote whether or not to approve the compensation of our named executive officers as described in this proxy statement. At the 2011 Annual Meeting, stockholders voted in favor of holding the advisory vote on an annual basis and, in accordance with stockholder preference, the Board of Directors determined that advisory votes will be held on an annual basis. Stockholders that do not wish to vote may abstain from voting.
The Company's executive compensation programs are designed to attract, engage and retain highly qualified executive officers. The Company has a strong pay-for-performance philosophy and, as a result, the compensation paid to our named executive officers is closely aligned with the Company's performance on both a short-term and a long-term basis. For 2011, our executive compensation program for our named executive officers was designed to reward positive performance with respect to the following financial performance measures: basic earnings per share (EPS), consolidated revenue, and consolidated operating margin, as well as the Company's performance over a three-year period ending December 31, 2013 relative to the performance of companies included in the Russell 2000 Index. These 2011 performance measures were designed to align our program with our two key strategic goals for 2011: profitable sales growth and productivity improvements.
Our compensation mix for 2011 continued to provide total target direct compensation for our named executive officers that generally falls at the 50th percentile of the total direct compensation paid to executives holding equivalent positions in a defined peer group of companies and other external sources used to inform the Compensation and Management Development Committee of the Company's Board of Directors (the “Compensation Committee”) generally about the external market value of our executive roles. We believe our compensation mix provides sufficient incentives in the form of annual cash incentive awards and long-term incentive awards to drive the Company's performance and enhance stockholder value. Specifically, if the Company's performance meets or exceeds pre-established performance targets, including achieving performance levels at or above the 50th percentile on a relative basis compared to the performance of Russell 2000 Index companies, and/or our stock price increases, the named executive officers have an opportunity to realize significant additional compensation in the form of annual cash incentive awards and long-term equity and cash incentive awards. If the Company's performance does not meet pre-established performance targets, including reaching performance levels below the 50th percentile on a relative basis compared to the performance of Russell 2000 Index companies, and/or our stock price declines, the named executive officers have significant downside financial risk.
We have also implemented certain policies and guidelines regarding our executive compensation program designed to mitigate risk as set forth in our CD&A, including the following: (1) stock ownership requirements; (2) clawback agreements; and (3) capped annual and long-term incentive programs. We encourage stockholders to review the CD&A starting on page 11 which provides a detailed discussion of the executive compensation program in place for our named executive officers.
Accordingly, stockholders are being asked to approve the following resolution:
“RESOLVED, that the stockholders of the Company approve the compensation paid to the named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis and the tabular disclosures regarding named executive officer compensation, together with the accompanying narrative disclosure, in this proxy statement for its 2012 Annual Meeting.”
This vote will not be binding on the Board of Directors or the Compensation Committee and may not be construed as overruling a decision by the Board of Directors or the Compensation Committee nor create or imply any additional fiduciary duty on the Board of Directors. Further, it will not affect any compensation paid or awarded to any named executive officer. However, the Compensation Committee and the Board of Directors recognize the importance of receiving input from our stockholders on important issues such as executive compensation and expect to continue to take into account the outcome of the “say-on-pay” vote when considering future executive compensation arrangements.
The Board of Directors recommends a vote “FOR” the approval of the advisory resolution to approve the compensation paid to the named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis and the tabular disclosures regarding named executive officer compensation, together with the accompanying narrative disclosure, in this proxy statement for its 2012 Annual Meeting.
Stockholder Proposal (Proxy Proposal 4)
We have received the following proposal from Gerald R. Armstrong, a registered holder as of the Record Date of 960 shares of Common Stock. He has requested that the following resolution and supporting statement be included in our proxy statement for the 2012 Annual Meeting. If properly presented, this proposal will be voted upon at the 2012 Annual Meeting. We are not responsible for the content of the proponent's resolution or supporting statement, which are printed below in italics exactly as submitted.
Mr. Armstrong's address is as follows: 910 Sixteenth Street, No. 412, Denver, Colorado 80202-2917.
RESOLUTION
That the shareholders of BARNES GROUP INC. request its Board of Directors to establish a policy requiring that the Board's chairman be an "independent director," as defined by the rules of the New York Stock Exchange, and who has not previously served as an executive officer of BARNES GROUP, INC.
This policy should not be implemented to violate and contractual obligation and should specify: (a) how to select a new "independent" chairman if the current chairman ceases to be independent during the time between annual meetings of shareholders; and, (b) that compliance is excused if no independent director is available and willing to serve as chairman.
STATEMENT
The proponent believes that the Board of Directors will provide greater oversight of management with an "independent chairman." The absence of an "independent chairman" could be part of the past problems and the inability of Barnes Group to regain significant profits to restore reasonable dividends to shareholders.
Thomas O. Barnes is an employee, a Director since 1978, and serves as chairman. After the earnings decline and the board's inability to restore earnings and reasonable dividends to shareholders, he remains an "employee" Chairman.
In the meeting held May 6, 2011, the proponent's proposal to eliminate "super-majority" voting requirements received approval with votes of 26,537,505 shares (65.03% of shares voted) worth $663,172,249.95 on the meeting date. In the 2010 meeting, his proposal to declassify terms of directors from three years to one year received approval with votes of 27,977,170 shares (67.44% of shares voted) worth $511,702,439.90 on that meeting date. The Board has not supported the shareholder votes on these issues by introducing appropriate amendments and the proponent believes that an "independent chairman" is needed to correct these failures.
Norges Bank Investment Management has stated in support of a similar proposal:
"The roles of Chairman of the Board and CEO are fundamentally different and should not be held by the same person. There should be a clear division of responsibilities between these positions to insure a balance of power and authority on the Board. Approximately, 43% of S&P 1500 companies have separate CEO and Chairman positions.
"The Board should be led by an independent Chairman. Such a structure will put the Board in a better position to make independent evaluations and decisions, hire management, decide a remuneration policy that encourages performance, provide strategic direction and support management in taking a long-term view in development of business strategies. An independently led Board is better able to oversee and give guidance to corporation executives, help prevent conflict or the perception of conflict, and effectively strengthen the system of checks-and-balances within corporate structure and thus protect shareholder value."
If you agree, please vote "FOR" this proposal.
Company Response to Stockholder Proposal
The Board of Directors unanimously recommends a vote AGAINST adoption of the above proposal because
the Board believes:
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• | The Company's corporate governance structure already provides effective independent oversight of management; and |
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• | If adopted, the proposal would unnecessarily restrict the Board's ability to select the director best suited to serve as Chair of the Board based on criteria the Board deems to be in the best interests of the Company and its stockholders. |
The decision of who should serve as Chair is the responsibility of the Board and the Board believes this should not be constrained by a requirement that the position of Chair be limited to a member who is an independent director and who has not previously served as an executive officer. The Board believes that the Company is best served by the Board retaining the flexibility to determine the most effective leadership structure for the Company, based upon its evaluation of what is best for the Company and the stockholders at the time it is making its determination. This includes having the flexibility to appoint an employee to serve as Chair if it is in the best interests of the Company and its stockholders. The Board believes it would be unwise to adopt a policy that would inhibit its future ability to satisfy this duty.
As described under “Board Leadership Structure” and other portions of the “Corporate Governance” section below, the Board believes that effective independence and oversight are currently being maintained, as indicated by several factors including:
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• | The independence of the Board as a whole satisfies both Company and New York Stock Exchange guidelines and independence standards. Only one member of management, our Chief Executive Officer, is a member of the Board. While our Chairman is a Company employee, he is not a member of management. In fact, his services as an executive officer ended in 1997. |
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• | Various committees of the Board perform oversight functions that are independent of management. The Audit Committee, the Compensation and Management Development Committee and the Corporate Governance Committee are each composed entirely of independent directors. This means that oversight of critical matters such as the integrity of the Company's financial statements, executive compensation and the process for the nomination of directors and evaluation of the Board and key committees is entrusted to independent directors. |
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• | While the Chair of the Board presides at executive sessions of the non-management directors, the Chair of the Audit Committee (or his or her delegatee director) presides at executive sessions of the independent directors. |
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• | As required by our Corporate Governance Guidelines, the non-management directors meet in regularly scheduled executive sessions without the presence of management, and the independent directors meet in executive session at least once each year without the employee Chairman. |
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• | The independent members of the Board and each of its key committees, which are composed entirely of independent directors, have unrestricted access to management and the authority to retain independent financial, compensation, legal and other advisors as they may deem appropriate. |
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• | Stockholders may communicate directly with the Company's independent or non-management directors as described below in the “Stockholder and Interested Parties Communications” section. |
In summary, the Board believes it should maintain its ability to establish and maintain leadership structures that reflect the Board's judgment of the best interests of the Company and its stockholders under then prevailing circumstances, and because it believes the Company already receives substantial and effective oversight from our independent directors and our strong corporate governance practices.
Recommendation of the Board of Directors
For these reasons, the Board believes that this proposal is not in the best interests of the Company or its stockholders. Therefore, the Board recommends a vote “AGAINST” this proposal.
EXECUTIVE AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
The following is a discussion and analysis of our compensation programs as they apply to our Chief Executive Officer, Chief Financial Officer and the next most highly compensated executive officers who were serving as executive officers of the Company during 2011 (our “NEOs”). Our NEOs for 2011 were Gregory Milzcik, Christopher Stephens, Jr., Patrick Dempsey, Claudia Toussaint, and Dawn Edwards, and Jerry Burris whose employment with the Company ended on August 20, 2011.
In this Compensation Discussion and Analysis, we discuss our compensation policies and practices as they relate to our NEOs and explain recent changes we have made to our executive compensation program. We also provide details regarding the individual components of our NEO executive compensation program and explain how and why we make decisions to establish executive compensation at particular levels.
Executive Summary
During 2011, the Company focused its efforts on achieving two key strategic objectives - profitable sales growth and productivity improvements. We made significant investments in our worldwide application of Lean principles, the key to increasing efficiency and responding more adeptly to our customers' needs. During 2011, we continued to strengthen our balance sheet and cash flow, re-focused our portfolio of businesses with the divestiture of Barnes Distribution Europe, which was part of our Logistics and Manufacturing Services segment, and reinvigorated our focus on acquisition opportunities.
To drive our two key strategic objectives, profitable sales growth and productivity improvements, the Company built on executive compensation program changes made in 2010 and took a number of additional actions during 2011 to improve alignment. For our annual incentive compensation, the Company continued the use of basic Earnings Per Share ("EPS") and Company-wide consolidated revenue ("Revenue") as performance measures and added a performance measure based on Company-wide consolidated operating margin ("Operating Margin"). This combination of measures was designed to emphasize profitability and productivity, and to drive organic sales growth. To emphasize the new Operating Margin performance measure, the weighting for basic EPS was reduced from 85% to 70%, with the reduction shifted to Operating Margin.
The Company's success in achieving these three performance measures resulted in above-target payouts under our annual incentive compensation program, as detailed in the below table.
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Performance Measure | Weighting (%) | 2011 Results1 | Comparison to Target |
As Certified Basic EPS2 | 70% | $1.69 | $0.48 above target |
As Certified Revenue3 | 15% | $1,280 million | $68.0 million above target |
As Certified Operating Margin4 | 15% | 11.1% | 280 basis points above target |
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1 | Results are adjusted in accordance with the Barnes Group Inc. Performance-Linked Bonus Plan for Selected Executive Officers ("Annual Incentive Plan" or "Performance-Linked Bonus Plan") and certified by the Compensation Committee, as described below in the "Annual Cash Incentive Awards" section. |
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2 | "As Certified Basic EPS" is based on Basic EPS, excluding costs related to discontinued operations, strategic initiatives for restructuring activities and acquisition due diligence, as directed under the Annual Incentive Plan. |
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3 | "As Certified Revenue" is based on Revenue, adding back net sales of discontinued operations, as directed under the Annual Incentive Plan. |
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4 | "As Certified Operating Margin" is based on Operating Margin, excluding costs related to strategic initiatives for restructuring activities and acquisition due diligence, as directed under the Annual Incentive Plan. |
Long-term incentive award opportunities are potentially the largest component of our NEOs' annual compensation depending upon our long-term performance. In 2011, we made significant changes to our long-term incentive compensation program by replacing the portion of the program that was based on annual EPS-driven performance awards with a relative measure program. The program now consists of stock options, restricted stock units ("RSUs"), and relative measure performance share awards ("Relative Measure PSAs"). The relative measure program compares the Company's relative performance over a three-year period against the performance of Russell 2000 Index companies, based on three equally-weighted and independently measured performance measures: total shareholder return, basic EPS growth and operating income before depreciation and amortization
growth. The grants made in 2011 cover the 2011 - 2013 performance period. Payouts, if any, under this program will be made in 2014. The Company's success in achieving predetermined EPS goals under the EPS-based Performance Unit Awards ("EPS PUPs") and EPS-based Performance Share Awards ("EPS PSAs") made in 2009 and 2010 resulted in payouts for the 2011 portion of these grants at the maximum 125% of target level.
Say on Pay Vote
The Compensation Committee believes that our executive compensation programs are effective in driving our pay-for-performance philosophy. As part of our corporate governance system, we evaluate our programs in light of market conditions, stockholder views, and governance considerations, and make changes as appropriate for our business. In May 2011, we held a stockholder advisory vote on the compensation of our NEOs, commonly referred to as a say-on-pay vote. We had strong support from our stockholders with respect to the compensation of our NEOs, with over 74% of stockholder votes cast in favor of our say-on-pay resolution. As we evaluated our compensation programs in 2011 we took into account the stockholder vote and made certain changes to our executive compensation program as described below. We also determined that stockholder advisory votes on executive compensation would be held annually. Under Proposal 3 in this proxy statement, we are recommending that stockholders cast their advisory vote in favor of approving the compensation for our NEOs as disclosed in this proxy statement.
Summary of Key Executive Compensation Changes for 2011
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Program Component | | Summary of Changes in 2011 |
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Base salary | • | $15,000 salary increase for each NEO effective April 1, 2011, approved in connection with the cash perquisite allowances elimination (described below) |
| • | No separate merit increases were approved |
Annual incentive awards | • | Modified performance measures and weighting for 2011 to better align Company focus on profitable sales growth and productivity improvements |
| • | Modified 2011 performance measures (and weighting): basic EPS (70%), Revenue (15%) and Operating Margin (15%) |
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Long-term incentive awards | • | Includes three key components: stock options, restricted stock units ("RSUs") and relative measure performance share awards ("Relative Measure PSAs"); Relative Measure PSAs a new component for 2011 |
| • | The relative measure program compares the Company's performance over a 3-year period against the performance of Russell 2000 Index companies, based on three, equally weighted and independently measured performance measures: total shareholder return, basic EPS growth and operating income before depreciation and amortization growth |
| • | Added a “double trigger” for accelerated vesting of all equity awards made after 2010 upon a change in control - that is, accelerated vesting for such awards occurs only if an NEO's employment is terminated by the Company without cause, or if the NEO resigns for good reason (as defined in the severance agreements) on or within two years following a change in control (except for CEO based on the terms of his employment agreement)
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Retirement programs | • | None (but note changes made in 2012 described on page 35) |
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Executive life insurance programs | • | Eliminated participation in the Senior Enhanced Executive Life Insurance Program ("SEELIP") for any employee hired or promoted into an eligible position after April 1, 2011 |
| • | Eliminated for all NEOs Company-paid premium and related tax gross-up payments following retirement after April 1, 2011 under the SEELIP |
Perquisites | • | Eliminated annual cash perquisite allowances of either $20,000 or $25,000 |
| • | Eliminated tax gross-ups on Company-paid annual physicals (for amounts not otherwise covered by health insurance) and annual financial planning and tax preparation services effective April 1, 2011 |
| • | Established an annual cap of $100,000 for the CEO's personal use of the Company-leased aircraft, the value of which is subject to personal income tax and does not include gross-up |
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Program Component | | Summary of Changes in 2011 |
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Other | • | Determined that stockholder advisory votes on executive compensation will be held annually, in accordance with our stockholders' preference |
| • | Implemented hedging policy, where the Company prohibits hedging transactions involving the Company's securities for any of the Company's directors or Section 16 officers (which includes our NEOs) |
Executive Compensation Philosophy
We believe that executive compensation should support and reinforce a pay-for-performance philosophy. Consequently, our NEO compensation is closely aligned with the Company's performance on both a short-term and a long-term basis by tying a significant portion of the compensation opportunity for our NEOs directly to the Company's stock performance and other objectives that we believe affect stockholder value. As a result, if the Company's performance meets or exceeds pre-established performance targets, including achieving performance levels at or above the 50th percentile on a relative basis compared to the performance of Russell 2000 Index companies, and/or our stock price increases, the NEOs have an opportunity to realize significant additional compensation in the form of annual cash incentive payouts and long-term equity and cash incentive payouts. If the Company's performance does not meet pre-established performance targets, including reaching performance levels below the 50th percentile on a relative basis compared to the performance of Russell 2000 Index companies, and/or our stock price declines, the NEOs have significant downside financial risk.
Further in line with our pay-for-performance philosophy, the Company aims to provide our NEOs with the opportunity to earn total direct compensation that generally falls at the 50th percentile of the total direct compensation paid to executives holding equivalent positions in a defined peer group of companies. This is referred to in this proxy statement as the “Peer Group.” Individual executive compensation may be above or below the target range based on the individual's performance, experience, skillset and range of responsibilities. Other external sources such as survey data are used to inform the Compensation Committee generally about the external market value of our executive roles. We believe that targeting the median range provides an opportunity for appropriate compensation levels that will attract high quality executives, provide the proper incentives to our NEOs for achievement of our strategic objectives and retain our NEOs over the long-term.
Total Direct Compensation in 2011
Total direct compensation includes the following three elements: annual base salary; annual cash incentive awards; and long-term incentive awards. These elements provide the Compensation Committee with a platform to reinforce our pay-for-performance philosophy to address our business needs and goals with appropriate flexibility. The Compensation Committee can vary the performance measures from year to year, consistent with the applicable plans described below. As part of our pay-for-performance philosophy, we have taken steps to reduce certain non-performance based compensation. These changes are noted in the “Summary of Key Executive Compensation Changes for 2011” section in this Compensation Discussion and Analysis. In addition, our NEOs are eligible for change in control and severance benefits; pension, retirement and executive life insurance programs; and certain perquisites.
Performance-based compensation in the form of annual and long-term incentives constituted over 70% of 2011 total direct compensation for our CEO and other NEOs.
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1 | "All Other NEOs" chart above does not include information for Mr. Burris, whose employment with the Company terminated on August 20, 2011. |
The Summary Compensation Table on page 26 provides details regarding the compensation for each NEO.
Executive Compensation General Objectives and Process
Objectives
The overarching objective of the Company's executive compensation philosophy is to support the achievement of our long-term strategic business goals of building lasting stockholder value and achieving profitable sales growth and productivity improvements. To support these goals, our compensation program for our NEOs is designed to:
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• | Provide appropriate incentives by linking and balancing significant short- and long-term compensation opportunities to Company performance and total shareholder return; |
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• | Reward NEOs who contribute meaningfully to achieving our strategic objectives; |
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• | Require NEOs to hold a significant equity investment in our Company so that they manage the business from the perspective of stockholders; |
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• | Align our compensation polices with stockholders' long-term interests by assigning a significant portion of potential compensation to performance-based pay elements that are dependent upon achieving the Company's goals, but that do not encourage excessive risk-taking; |
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• | Attract, retain and engage highly qualified individuals by offering competitive, balanced compensation arrangements based upon clear goals that vest on continued employment; and |
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• | Maximize the tax effectiveness of the total compensation and benefits package, and minimize potentially adverse tax and accounting consequences, in each case to the extent practicable. |
Process of Determining Named Executive Officer Compensation
The Compensation Committee is responsible for determining the types and amounts of compensation paid to our NEOs. The Compensation Committee uses several tools to make these determinations, including external consultants and peer group analysis.
External Consultants
Company management engages Frederic W. Cook & Co. Inc. (“Cook”) to advise management on executive compensation matters. Cook annually compiles competitive compensation data regarding each element of compensation provided by our Company and other companies, and reviews the Company's compensation practices in terms of competitiveness, appropriateness and alignment with our performance, as well as the proportions the Company allocates to each element.
The Compensation Committee directly retains a consulting firm, Meridian Compensation Partners, LLC ("Meridian"), to assist in the Compensation Committee's oversight of the executive compensation program, which includes reviewing and assessing information provided by Cook. The Compensation Committee has engaged Meridian since November 2010. Before November 2010, the Compensation Committee had engaged another consultant. The fees for Meridian are negotiated directly by the Compensation Committee and paid by the Company at the
Compensation Committee's request. Neither Cook nor Meridian provided any services for the Company in 2011 other than advice on executive and director compensation.
Meridian regularly participates in Compensation Committee meetings, both with and without Company management, and advises the Compensation Committee on compensation trends and best practices, plan design, pay and performance alignment and the process used to determine the reasonableness of individual compensation awards. The Compensation Committee believes that the use of a separate consultant reporting directly to it supports the objective that the Company's executive compensation programs are reasonable and consistent with Company goals and evolving governance considerations. In addition, the Compensation Committee from time to time directly retains its own outside legal counsel.
Peer Group Analysis
A primary data source used in setting the NEO compensation is the information publicly disclosed by our Peer Group. The Peer Group is reviewed periodically by Cook and updated as appropriate to take into account changes in the size, scope, financial performance, ownership structure and business focus of the Company and the peer institutions. With the assistance of Cook, management recommends to the Compensation Committee a preliminary Peer Group. At the last review, the factors considered by Cook in making its recommendations included: revenue levels within an approximate range of one-half to two times the Company's annual revenue; companies that operated in one of the same industries as the Company; and companies that used the same distribution channels as the Company. We removed from consideration all companies with a significant concentration of ownership by one party. The analysis also included a review of statistical data to support comparability with the prior Peer Group. After considering these recommendations, the Compensation Committee approves the Peer Group, including any changes to the Peer Group as a result of its analysis. In addition, the Compensation Committee periodically requests a separate evaluation of the Peer Group by its own consultant. The Compensation Committee last requested such a separate evaluation in 2009 for the 2010 compensation cycle.
The Peer Group used for 2011 was the same as the one established in late 2009 in accordance with the above described process because none of the Peer Group companies had sufficient changes in their businesses and the Company's operations also remained essentially the same.
For 2011, our Peer Group was comprised of the following 17 companies:
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Ametek Inc. | Graco Inc. |
Applied Industrial Technologies Inc. | Hexcel Corp. |
BE Aerospace Inc. | Kaman Corp. |
Carpenter Technology Corp. | Kaydon Corp. |
Circor International Inc. | Moog Inc. |
Crane Co. | Triumph Group Inc. |
Curtiss-Wright Inc. | Valmont Industries Inc. |
Enpro Industries Inc. | Watsco Inc. |
Esterline Technologies Corp. | |
In addition, in connection with our annual compensation review process, the Compensation Committee reviewed tally sheets for each NEO.
The Role of Executive Officers
Mr. Gregory Milzcik, the President and Chief Executive Officer, gives the Compensation Committee a performance assessment for each of the other NEOs. The Compensation Committee utilizes these assessments, along with other information, to determine NEO compensation. Mr. Milzcik and Ms. Dawn Edwards, Senior Vice President, Human Resources, regularly attend Compensation Committee meetings at the request of the Compensation Committee but are generally not present for the executive sessions or for any discussion of the individual components of their own compensation. In addition, Mr. Christopher J. Stephens, Jr., Senior Vice President, Finance, and Chief Financial Officer, provides financial information used by the Compensation Committee to make decisions regarding incentive compensation targets and related payouts.
Components of Our Executive Compensation Program
For 2011, the compensation for our NEOs consists of the following elements:
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• | Annual cash incentive awards; |
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• | Long-term incentive awards; |
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• | Change in control and severance benefits; |
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• | Pension, retirement and executive life insurance programs; and |
Only base salary, annual cash incentive awards and long-term incentive awards are taken into account to set the target total direct compensation mix for each NEO. Based on competitive compensation data presented by Cook in December 2010, the 2011 target total direct compensation for all NEOs was at the market median, or approximately the 50th percentile of comparative executives, including those within our Peer Group and/or based on survey data. For Mr. Milzcik, the 2011 target total direct compensation was also at the market median, or approximately the 50th percentile of compensation of CEOs within our Peer Group. The Company defines "median" as within ten percent of the benchmark. In setting the target total direct compensation mix for our NEOs, the Compensation Committee may make decisions that vary from the Peer Group data based on NEO experience, retention considerations, range of responsibilities, and the nature and complexity of each NEO's role. The Compensation Committee also uses individual performance as it considers appropriate to determine whether any adjustments should be made to an NEO's total direct compensation, including the targeted long-term incentive grants.
Base Salary
Base salary increases usually take effect on April 1st of each year, but may be made at interim dates within the annual cycle if the Compensation Committee deems it appropriate and necessary based on internal and external considerations. In determining whether to award merit-based salary increases to our NEOs, the Compensation Committee considered a number of factors, including the following:
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• | Peer Group data and external market information; |
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• | The level of responsibility assumed and the nature and complexity of each NEO's role (including the number of years in the position, any recent promotion or change in responsibility or “impact” as a member of management, and the amount, timing and percentage of the last base salary increase); |
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• | The leadership demonstrated to create and promote a day-to-day working environment of unwavering integrity, compliance with applicable laws and the Company's ethics policies, and global responsibility; and |
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• | The desire to retain NEOs capable of driving achievement of the Company's strategic objectives and the marketability and criticality of retention of NEOs. |
The chart below details annual base salary levels for each NEO as of April 1, 2010 and 2011, respectively, with the corresponding percentage changes reflecting the increase in 2011 base salary for all NEOs. |
| | | | | | | |
NEO | Base Salary Effective April 1, 2010 | | Base Salary Effective April 1, 2011 | | Change in Annual Base Salary ($) | | Change in Annual Base Salary (%) |
G. Milzcik | $875,000 | | $890,000 | | $15,000 | | 1.7% |
C. Stephens, Jr. | $416,000 | | $431,000 | | $15,000 | | 3.6% |
P. Dempsey | $416,000 | | $431,000 | | $15,000 | | 3.6% |
C. Toussaint | $345,000 | | $360,000 | | $15,000 | | 4.3% |
D. Edwards | $281,000 | | $296,000 | | $15,000 | | 5.3% |
J. Burris | $416,000 | | $431,000 | | $15,000 | | 3.6% |
The $15,000 salary increase provided to each of the NEOs in 2011 was designed to offset the discontinuance of the
annual cash perquisite allowance of either $20,000 or $25,000. No other salary increases were provided to NEOs in 2011.
Annual Cash Incentive Awards
We pay annual cash incentive awards to reward the performance achievements of our NEOs. Except in circumstances of retirement, death, or disability, or certain instances of involuntary termination by the Company on or after November 1st of an award period, an NEO generally must be employed by us on the payment date to receive an annual cash incentive award. For 2011, the NEOs participated in the Barnes Group Inc. Performance-Linked Bonus Plan for Selected Executive Officers. We refer to this plan as our “Annual Incentive Plan.” The Annual Incentive Plan is structured to pay amounts that meet the qualified performance-based compensation exception for purposes of Section 162(m) of the Internal Revenue Code.
Under the Annual Incentive Plan, each NEO is assigned an award opportunity expressed as a percentage of his or her base salary, which varies by the NEO's role. Each NEO's annual cash incentive payout is generally determined based on our achievement of Company performance objectives.
The chart below details the cash incentive award opportunities available to each NEO for 2011 under the Annual Incentive Plan expressed as a percentage of base salary. Where performance falls between the threshold, target or maximum performance levels, the cash incentive award opportunity is calculated using straight-line interpolation.
|
| | | | | |
| % of Salary |
NEO | Threshold Level | | Target Level | | Maximum Level |
G. Milzcik | 18.75% | | 75% | | 225% |
C. Stephens, Jr. | 12.5% | | 50% | | 150% |
P. Dempsey | 12.5% | | 50% | | 150% |
C. Toussaint | 11.3% | | 45% | | 135% |
D. Edwards | 11.3% | | 45% | | 135% |
J. Burris | 12.5% | | 50% | | 150% |
The targets for the Annual Incentive Plan are intended to be challenging but attainable. The Compensation Committee generally establishes the target for each financial performance measure in December of each year based on review and approval of the Company's annual business plan and budget. We use financial performance objectives as performance measures under the Annual Incentive Plan because they are consistent with our focus of driving strong business performance and increasing long-term stockholder value. For fiscal year 2011, the performance measures for the Annual Incentive Plan were basic EPS, Revenue and Operating Margin. Basic EPS is used as a measure because we believe it is a principal driver of our stock price. Basic EPS is used rather than diluted EPS to overcome a potentially adverse impact from stock price appreciation that could increase the earned award if the stock price were to decline. Revenue is used as a measure to drive growth in the size of our business. Operating Margin is used as a measure to drive our sales to meet expected levels of profitability.
For fiscal year 2011, all NEOs were evaluated on corporate measures. In fiscal year 2010, NEOs with business segment responsibilities were evaluated on a combination of business segment and corporate measures. The change to 100% corporate measures occurred in recognition of the key role that each NEO plays in the overall management of the Company and in recognition of the impact of overall corporate strategies on segment results.
The chart below sets forth the Annual Incentive Plan performance measures and the weighting of each measure for the NEOs for 2011:
Achievement of the financial performance measures under the Annual Incentive Plan are first determined according to GAAP, but then adjusted pursuant to the terms of the Annual Incentive Plan to include or exclude certain extraordinary, unusual or non-recurring items, discontinued operations and other items, all in accordance with Section 162(m) of the Internal Revenue Code. The Compensation Committee also retains negative discretion in accordance with Section 162(m) of the Internal Revenue Code to further reduce, but not increase, actual awards paid to the NEOs under the Annual Incentive Plan. The adjusted financial performance results certified by the Compensation Committee under the Annual Incentive Plan are non-GAAP financial measures.
The chart below details results certified by the Compensation Committee compared to the goals:
|
| | | | | | | |
Corporate Goal | Threshold | | Target | | Maximum | | 2011 Results |
As Certified Basic EPS1 | $1.03 | | $1.21 | | $1.39 | | $1.69 |
As Certified Revenue (in millions)2 | $1,128 | | $1,212 | | $1,267 | | $1,280 |
As Certified Operating Margin3 | 7.7% | | 8.3% | | 8.9% | | 11.1% |
| |
1 | "As Certified Basic EPS" is based on Basic EPS, excluding costs related to discontinued operations, strategic initiatives for restructuring activities and acquisition due diligence, as directed under the Annual Incentive Plan. |
| |
2 | "As Certified Revenue" is based on Revenue, adding back net sales of discontinued operations, as directed under the Annual Incentive Plan. |
| |
3 | "As Certified Operating Margin" is based on Operating Margin, excluding costs related to strategic initiatives for restructuring activities and acquisition due diligence, as directed under the Annual Incentive Plan. |
Once the results are certified by the Compensation Committee, the annual cash incentive awards are generally paid in February of the following calendar year. The following cash incentive awards were paid to NEOs for 2011 performance based on the performance results certified by the Compensation Committee:
|
| | | | | |
NEO | Annual Incentive Earned ($) | | Annual Incentive Earned as % of Base Salary |
G. Milzcik | $ | 2,002,500 |
| | 225% |
C. Stephens, Jr. | $ | 646,500 |
| | 150% |
P. Dempsey | $ | 646,500 |
| | 150% |
C. Toussaint | $ | 486,000 |
| | 135% |
D. Edwards | $ | 399,600 |
| | 135% |
J. Burris1 | $ | — |
| | 0% |
| |
1 | Mr. Burris, whose employment with the Company terminated on August 20, 2011, was not eligible for a cash incentive award for 2011 under the terms of the Annual Incentive Plan. |
Long-Term Incentive Compensation
Long-term incentive award opportunities are potentially the largest component of our NEOs' annual compensation depending upon our long-term performance. We believe that long-term performance is enhanced through the use of awards denominated in share value that reward our NEOs for maximizing stockholder value over time, thereby aligning the interests of our employees and management with those of our stockholders. When coupled with the ownership requirements described below, our long-term incentive awards help to encourage our NEOs to maintain a continuing stake in our long-term success and provide an effective way to tie a substantial percentage of total direct compensation to any increase or decrease in stockholder value.
In 2011, the Company used a combination of time-based equity awards and performance-based equity awards. The following types of long-term incentive awards are currently used under the terms of the Barnes Group Inc. Amended Stock and Incentive Award Plan (the “Barnes Group Inc. Stock and Incentive Award Plan”), which was approved by stockholders in 2010:
|
| | | | | |
Vehicle | Target Portion of Total Long-Term Incentive Compensation | | Vesting1 | | Comments |
Stock options | 1/3 | • | Time-based vesting; 18, 30, and 42 months from the grant date in equal installments | • | Grants are priced at the fair market value on the grant date |
RSUs | 1/3 | • | Time-based vesting; 30, 42, and 54 months from the grant date in equal installments | • | Settled in shares of Common Stock |
| • | Pays out dividend equivalents in cash during vesting periods |
Relative Measure PSAs | 1/3 | • | Performance-based vesting at the end of a 3-year cycle | • | Settled in shares of Common Stock |
| • | Accrued dividends are paid out in cash |
| • | Based on three equally weighted performance measures - total shareholder return, basic EPS growth, and operating income before depreciation and amortization growth - with each measure separately evaluated based on a comparison of the Company's performance against that of Russell 2000 Index companies |
___________
| |
1 | Assumes continued employment by the NEOs. |
Stock options and RSUs are subject to time-based vesting with staggered vesting dates to encourage NEO retention. In addition to the time-vesting requirements, stock options only have value if the Common Stock price at the time of exercise exceeds the fair market value on the grant date.
For 2011, the Compensation Committee established a relative measure program to replace the prior EPS PUP and EPS PSA programs. The relative measure program is designed to increase long-term focus, but also to provide a better link to shareholder returns and reward NEOs based on performance compared to alternative investment opportunities. The program has three equally weighted and independently measured performance measures: total shareholder return, basic EPS growth, and operating income before depreciation and amortization growth. Each measure is compared separately to the Company's relative performance against that of the Russell 2000 Index over the three-year term of the program ending December 31, 2013. Based on the relative performance, following the end of the three-year cycle, a payout, if any, in the form of shares of Common Stock and accrued dividends will be made. A payout may range between zero for performance below the threshold level, to 250% of target for exceptional relative performance at the maximum level or above. The chart below illustrates potential payouts at various levels of performance. The first payout, if any, under this program, for the 2011 grant of Relative Measure PSAs, is scheduled to occur in 2014.
2011 Relative Measure Program Payout Levels1
|
| | | |
Performance Level2 | Payout Level | | Category |
Performance below 33rd percentile | 0% | | Below Threshold |
Performance at 33rd percentile | 33% | | Threshold |
Performance at 50th percentile | 100% | | Target |
Performance at 60th percentile | 150% | | Above Target - 60th |
Performance at 75th percentile | 200% | | Above Target - 75th |
Performance at or above 85th percentile | 250% | | Maximum |
______________
| |
1 | Each of the three performance measures, total shareholder return, basic EPS growth, and operating income before depreciation and amortization growth, is evaluated separately as compared to performance of companies in the Russell 2000 Index. |
| |
2 | Results between Performance Levels will result in interpolated payouts. |
In addition, the 2011 long-term incentive awards require a “double trigger” for accelerated vesting in the event of a change in control of the Company. Except for Mr. Milzcik who is covered by the terms of his employment agreement (see below section titled "Employment Agreement with Mr. Milzcik" for details), in the event of a change in control as defined in the Stock and Incentive Award Plan, stock options, RSUs and performance vesting stock units under the relative measure program will vest and accelerate only if an NEO's employment is terminated by the Company without cause, or if the NEO resigns for good reason (as defined in the severance agreements) on or within two years following a change in control.
As noted above, for 2011, the Company did not make any new EPS PSAs or EPS PUPs. However, EPS PSAs and EPS PUPs made in 2009 and 2010 will continue vesting through 2013. EPS PSAs and EPS PUPs are subject to performance-based vesting. EPS PSAs pay out in shares of Common Stock and accrued dividends which are paid at the same time and rate as the underlying shares that are issued based on actual performance. EPS PUPs pay out in cash and do not accrue dividend equivalents. Both EPS PSAs and EPS PUPs vest ratably over a three-year time period based on attainment of three annual basic EPS targets. For example, a 2010 EPS PUP award vests in three equal increments in 2011, 2012 and 2013 based on the achievement of an annual basic EPS target that is set annually for each of the 2010, 2011 and 2012 performance periods and that is certified by the Compensation Committee after the end of each annual performance period.
The basic EPS target used for our EPS PSAs and EPS PUPs is identical to the basic EPS target used under our Annual Incentive Plan. The performance result also is determined according to our Annual Incentive Plan and certified by the Compensation Committee. The threshold, below target and maximum levels are derived from the basic EPS target. The 2011 basic EPS target applies to the last tranche of the 2009 EPS PSA awards, and the second tranche of the 2010 EPS PUP and EPS PSA awards made to our NEOs. The basic EPS target is designed to be challenging but attainable.
Below are the 2011 target performance levels for EPS PSAs and EPS PUPs. The Compensation Committee certified 2011 basic EPS of $1.69, which resulted in a payout under the applicable EPS PUP and EPS PSA awards at the 125% payout level. "As Certified Basic EPS" is a non-GAAP financial measure because it excludes certain items from net income, including discontinued operations, strategic initiatives for restructuring activities and acquisition due diligence in 2011. Basic EPS from continuing operations as reported in 2011 in accordance with GAAP was $1.66.
|
| | |
Basic EPS | Payout Level | Category |
Less than $1.03 | 0% | Below Target |
$1.03 to $1.09 | 50% | Threshold |
$1.10 to $1.20 | 75% | Below Target, but Above Threshold |
$1.21 to $1.38 | 100% | Target |
$1.39 or higher | 125% | Maximum |
Long-term incentive award opportunities are established by the Compensation Committee according to the NEO's position and responsibilities, and based on a comparison to our Peer Group and competitive compensation data. In 2011, the Compensation Committee differentiated target awards based on individual NEO performance,experience
and market positioning.
Except with respect to the timeline for vesting, the Compensation Committee does not take into account existing NEO Common Stock holdings because it believes that doing so would have the effect of penalizing success (to the extent that compensation might be reduced based on the appreciation of past awards) or rewarding underperformance (to the extent that compensation might be awarded to make up for lack of appreciation in stock price).
The Company's practice is to make all equity awards at the first regularly scheduled meeting of the Compensation Committee, which is scheduled well in advance, and typically occurs early in February. The Company makes "off-cycle" equity grants to NEOs in limited circumstances, generally for newly hired executives or promotions. During 2011, no “off-cycle” equity grants were made.
In determining the mix of equity grants (e.g., stock options, RSUs, or Relative Measure PSAs), the Compensation Committee receives and reviews recommendations from management, based on analysis prepared by Cook. Generally, the factors considered support the pay-for-performance philosophy at the Company, aligning the interests of stockholders and NEOs, past practice, changes in business strategy, competitive practice (both generally and within the Peer Group), and the strategic impact of equity-based compensation (i.e., cost effectiveness, stockholder dilution, executive retention, a link to Company performance and total stockholder return). All of management's recommendations are reviewed by Cook and Meridian.
As reflected in the above table on page 18, in 2011 the Compensation Committee established a target mix for all NEOs weighing each component of long-term incentive compensation equally, or approximately 331/3% each. The target mix does not take into potential account "off-cycle" grants or supplemental awards, if any. This mix is intended to provide our NEOs with a strong incentive to continue their successful tenures with the Company and to focus on long-term stockholder value.
|
| | | | | | | |
| Target Values | | Annual Stock Option Grants | | Annual RSU Grants | | Relative Measure PSAs |
G. Milzcik | $2,720,000 | | 120,800 | | 43,800 | | 43,800 |
C. Stephens, Jr. | $400,000 | | 20,100 | | 7,300 | | 7,300 |
P. Dempsey | $367,200 | | 16,400 | | 5,900 | | 5,900 |
C. Toussaint | $360,000 | | 16,000 | | 5,800 | | 5,800 |
D. Edwards | $300,000 | | 13,500 | | 4,800 | | 4,800 |
J. Burris1 | $346,800 | | 15,300 | | 5,600 | | 5,600 |
_____________
| |
1 | Grants made to Mr. Burris were forfeited at the time of termination of his employment with the Company on August 20, 2011 or canceled following the applicable post-termination exercise period, other than the Relative Measure PSAs which will be prorated for the portion of the performance period when he was an active employee. The prorated payout on the Relative Measure PSAs, if any, will be at the same time as payouts to the other NEOs. |
NEO Stock Ownership Requirements
Our NEOs are subject to the following stock ownership requirements:
|
| |
Position
| Multiple of Annual Salary
|
Chief Executive Officer | 5x |
All Other NEOs | 3x |
NEOs who became subject to the stock ownership requirements due to their current role before January 1, 2010 are given up to six years to achieve the applicable stock ownership requirements. NEOs who become subject to the stock ownership requirements through hire or promotion on or after January 1, 2010 are given up to five years to achieve the applicable stock ownership requirements. As of December 31, 2011, all NEOs with six or more years under the program comply with the stock ownership requirements.
Clawback Agreements and Hedging
Beginning in late 2008, we implemented a practice whereby executives hired or promoted into corporate officer positions are required to enter into clawback agreements that permit the Company to recoup or “clawback” certain
annual incentive compensation and performance based vesting equity awards paid to those officers in situations where the awards earned by these NEOs are based on the achievement of certain financial performance targets that are later restated and would therefore result in lower awards paid. With respect to NEOs, to date, the Company has entered into agreements with our President and Chief Executive Officer, Senior Vice President, Finance, and Chief Financial Officer, Senior Vice President, General Counsel and Secretary, and Senior Vice President, Human Resources. In addition, all of the Company's equity award agreements provide that awards may be forfeited if an employee engages in activity that is detrimental to the Company, including performing services for a competitor, disclosing confidential information, or otherwise violating the Company's Code of Business Ethics and Conduct. With respect to the four NEOs with whom the Company has entered into clawback agreements, the Compensation Committee has the discretion to make certain exceptions to the clawback requirements and ultimately determine whether any adjustment will be made.
The Company prohibits hedging transactions involving the Company's securities for any of the Company's directors or Section 16 officers (which includes our NEOs).
Risk
We believe our executive compensation program is designed to motivate and reward our NEOs for their performance during the fiscal year and over the long-term and for taking appropriate business risks consistent with our strategic objectives. The following characteristics of our executive compensation program are designed to mitigate the likelihood that our NEOs would make business decisions that present undue risk:
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• | The stock options and RSU components of our long-term incentive award program vest ratably over three or more years. Our Relative Measure PSAs vest based on performance at the end of the three-year performance period. |
| |
• | Performance targets are tied to several financial metrics, including basic EPS, Revenue and Operating Margin, that are quantitative and measurable. |
| |
• | The performance periods and vesting schedules for long-term incentives overlap and, therefore, reduce the motivation to maximize performance in any one period. |
| |
• | Our stock ownership requirements require our NEOs to own equity representing a significant multiple of their base salary, and to retain this equity throughout their tenures. |
| |
• | We have a practice of entering into clawback agreements with executives hired or promoted after late 2008 that allow us to recoup incentive compensation in situations where the awards earned by these NEOs is based on the achievement of certain financial performance targets that are later restated and would therefore result in lower awards paid. |
| |
• | Payouts under our annual and long-term incentive programs are subject to a cap. Specifically, under our current practices for NEOs, our annual cash incentive award payments are capped (at not greater than 2.25 times base salary for the Chief Executive Officer and less for other NEOs). Performance based payouts under the relative measure program are capped at 2.5 times the target level Relative Measure PSA grant. |
Pension and Other Retirement Programs
In addition to our 401(k) plan, our NEOs have the opportunity to participate in one or more of the following additional retirement plans:
|
| | |
Plan | | Summary of Features |
| | |
Salaried Retirement Income Plan ("Qualified Plan") | • | A broad-based tax-qualified defined benefit pension plan; vesting upon attaining 5 years of service |
| | |
Retirement Benefit Equalization Plan ("RBEP") | • | Provides benefits on base salary earnings in excess of Internal Revenue Service limit on qualified plans to eligible salaried employees, officers and NEOs who do not meet MSSORP/DC Plan vesting requirements; vesting upon attaining 5 years of service |
| | |
Supplemental Executive Retirement Plan ("SERP") | • | Provides a supplemental life annuity equal to the reduction that NEOs and other officers receive for 50% joint and survivor benefits; vesting upon attaining age 55 and 10 years of service |
| | |
Modified Supplemental Senior Officer Retirement Plan ("MSSORP") | • | Provides a 55% average final pay benefit (base salary and annual incentive); benefit is reduced for offsets from prior employer retirement benefits and other Company retirement benefits; vesting upon attaining age 55 and 10 years of service |
| | |
Nonqualified Deferred Compensation Plan ("DC Plan") | • | Provides an annual Company contribution based on % of base salary and annual incentive in excess of Internal Revenue Service limit on qualified plans; for 2011, the contribution was based on 20% of base salary; vesting upon attaining 10 years of service
|
| | |
The Qualified Plan is a broad-based tax-qualified defined benefit pension plan. The SERP, the RBEP, the MSSORP and the DC Plan are non-tax-qualified supplemental executive retirement plans that provide a higher level of benefits than are available under the Qualified Plan to certain designated employees and senior level officers, including all NEOs. We believe these more generous benefits are an important part of the overall compensation provided to our NEOs and serve as a strong retention incentive.
The chart below summarizes which NEOs participate in each of the qualified and non-qualified pension and retirement plans. A more detailed discussion of the pension benefits payable to our NEOs is described in the “Pension Benefits Table” and the narrative following the table.
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| | | | | | | | | |
NEO | Qualified Plan | | SERP | | RBEP | | MSSORP | | DC Plan |
G. Milzcik | X | | X | | X | | X | | |
C. Stephens, Jr. | X | | X | | X | | | | X |
P. Dempsey | X | | X | | X | | X | | |
C. Toussaint | X | | X | | X | | | | X |
D. Edwards | X | | X | | X | | | | X |
J. Burris | X | | X | | X | | X | | |
Change in Control and Employment Termination Benefits
The Company provides change in control benefits specifically to retain key executives, including NEOs, during a potential change in control, to provide continuity of management and to provide income continuation for NEOs who are particularly at risk of involuntary termination in the event of a restructuring in connection with a change in control. These benefits were designed to be part of a competitive compensation package and keep our executive officers focused on our business goals and objectives and we believe that these benefits are a necessary part of any total compensation package to attract and retain key executives. In some instances these agreements provide for payments and other benefits if we terminate an NEO's employment without “cause,” or if an NEO terminates employment for “good reason,” either before or after a change in control.
None of the agreements for our NEOs include a gross-up for any taxes as a result of golden parachute payments
under Section 280G of the Internal Revenue Code. For more detail on Section 280G of the Internal Revenue Code see the discussion below under “Tax and Accounting Considerations.” In addition, we generally do not provide change in control cash compensation benefits in excess of severance compensation equal to two times the executive's base salary plus payments under the annual cash incentive program. Our agreements with our NEOs also provide for continuation of group health, life insurance and other benefits for twenty-four months following the executive's termination and for certain other benefits. The terms of the change in control and incremental termination benefits payable to our NEOs are described in more detail below under “Potential Payments Upon Termination or Change in Control.”
Perquisites
In 2011, the Company provided certain perquisites to our NEOs. The perquisites are fully described in the footnotes to the Summary Compensation Table and generally fall into the following categories: financial planning assistance, annual physical examination, and personal use of the company aircraft (for the Chief Executive Officer only).
We made significant changes to our executive perquisites which became effective April 1, 2011 and are described below:
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• | The annual cash perquisite allowances of $20,000 or $25,000 were eliminated; |
| |
• | The tax gross-ups on Company-paid annual physicals (for amounts not otherwise covered by health insurance) and annual financial planning and tax preparation services were eliminated; and |
| |
• | We established an annual cap of $100,000 for the CEO's personal use of the Company-leased aircraft, the value of which is subject to personal income tax and does not include gross-up. |
Additional Benefits
All current NEOs are eligible to participate in the Company's Senior Executive Enhanced Life Insurance Program, under which the Company pays the premiums for a life insurance policy owned by each NEO and pays the NEO's income tax liability arising from its payment of the premiums and taxes. As previously disclosed, the Company closed participation to any employee hired or promoted into an eligible position after April 1, 2011 and eliminated the Company-paid premium and related tax gross-up payments following retirement after April 1, 2011, except that the current program would be maintained during retirement for current employees who have attained or will attain age 62 with 10 years of service on or before December 31, 2011. None of our NEOs meet that criteria. Each of our NEOs participates in other employee benefit plans generally available to all U.S. based employees (e.g., health insurance, 401(k) Plan) on the same terms as all other employees.
Summary of Key Executive Compensation Changes for 2012
In addition to the changes made to the executive compensation program for 2011, as described above, effective April 1, 2012, we made changes to certain retirement programs. The Company has modified the DC Plan to close participation to any employee hired, rehired or promoted into an eligible position on or after April 1, 2012. Existing participants, which includes Mr. Stephens and Mses. Toussaint and Edwards, are grandfathered under the DC Plan. The Company has also modified the SERP to terminate participation for all individuals who are not receiving benefits under the SERP or who are not vested as of April 1, 2012. None of our NEOs are vested in the SERP.
The Company also amended the form of performance share award agreement for grants under the Barnes Group Inc. Stock and Incentive Award Plan to provide for a complete forfeiture of Relative Measure PSAs if the participant's employment is involuntarily terminated by the Company without cause before the first anniversary of the Relative Measure PSA grant date. This changes applies to Relative Measure PSA grants made in 2012 and later years. Before this amendment, if a participant's employment was involuntarily terminated by the Company without cause before the first anniversary of the grant date, then a pro-rata portion of the award based on the number of days the participant was employed during the applicable performance period would have been paid based on the Company's actual performance for that performance period.
Tax and Accounting Considerations
Internal Revenue Code Section 162(m)
As discussed above, our Compensation Committee considers the tax and accounting treatment associated with cash and equity awards it makes, although these considerations are not the overriding factor that the Compensation
Committee uses in making its decisions. Section 162(m) of the Internal Revenue Code places a limit of $1 million on the compensation that the Company may deduct in any one year with respect to each of its most highly compensated executive officers, unless certain conditions are met. There is an exception to the $1 million limitation for performance-based compensation meeting certain requirements. The Company currently grants awards intended to meet this exception including annual cash incentive awards, stock option awards, PSAs and PUPs. Grants of restricted stock or stock units that vest solely on the basis of service do not qualify for the exception. To maintain flexibility in compensating NEOs in a manner designed to promote varying Company goals, our Compensation Committee has not adopted a policy requiring all compensation to be deductible. Our Compensation Committee may approve compensation or changes to plans, programs or awards that may cause the compensation or awards to exceed the limitation under Section 162(m) if it determines that action is appropriate and in our best interests.
Internal Revenue Code Section 280G
The Company also periodically reviews the severance agreements entered into between the Company and the NEOs to assess the impact of Section 280G of the Internal Revenue Code. Currently, the severance agreements do not provide for any gross-up to compensate our NEOs for taxes incurred under Section 4999 of the Internal Revenue Code as a consequence of “golden parachute” payments upon a change-in-control, nor do they preclude the possibility that, in certain circumstances, the compensation payable in the event of a change in control under the agreements or other plans and arrangements may be non-deductible by the Company under Section 280G of the Internal Revenue Code.
Accounting for Equity Compensation
The Company accounts for its stock-based employee compensation plans at fair value on the grant date and recognizes the related cost in its consolidated statement of income in accordance with accounting standards related to share-based payments. The fair values of stock options are estimated using the Black-Scholes option-pricing model based on certain assumptions. The fair values of RSU awards, EPS PSA awards and Relative Measure PSA awards with a performance condition are estimated based on the fair market value of the Company's stock price on the grant date. The fair values of Relative Measure PSA awards with a market condition are estimated using a Monte Carlo valuation model based on certain assumptions.
Compensation Committee Report
To Our Fellow Stockholders at Barnes Group Inc.
We, the Compensation and Management Development Committee of the Board of Directors of Barnes Group Inc., have reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement and, based on such review and discussion, have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
|
|
The Compensation Committee |
|
Mylle H. Mangum, Chair |
Thomas J. Albani |
John W. Alden |
Gary G. Benanav |
George T. Carpenter |
Risk Oversight and Assessment Policies and Practices
Our Audit Committee is ultimately responsible for overall risk oversight for the Company generally. See “Board Role in Risk Oversight” on page 53. The Compensation Committee evaluates and reviews our incentive compensation arrangements annually based on an inventory of all relevant compensation programs prepared by the Human Resources department which includes details of the principal features of the programs, including any key risk mitigation factors such as (i) the mix of equity award instruments used under our long-term incentive program; (ii) the multi-year vesting of our equity awards; (iii) our stock ownership requirements; and (iv) the clawback agreements in place for certain executives. These findings are discussed with the Company's Enterprise Risk Management steering committee. The Compensation Committee also consults with, and makes certain recommendations to, the Board of Directors regarding the Company's compensation programs as necessary. Based on its evaluation, the Compensation Committee has concluded that the overall structure of the
compensation programs for NEOs and company-wide employees are designed with the appropriate balance of risk and reward in relation to the Company's overall business strategy and are not reasonably likely to have a material adverse effect on the Company.
Summary Compensation Table for 2011, 2010 and 2009
The following table sets forth the compensation earned by our NEOs for the fiscal years ended December 31, 2011, 2010 and 2009:
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary | | Bonus1 | | Stock Awards2 | | Option Awards3 | | Non-Equity Incentive Plan Compensation4 | | Change in Pension Value and Nonqualified Deferred Compensation Earnings5,6 | | All Other Compensation7 | | Total |
Gregory F. Milzcik | | 2011 | | $ | 886,250 |
| | $ | — |
| | $ | 2,040,788 |
| | $ | 904,792 |
| | $ | 2,002,500 |
| | $ | 1,802,030 |
| | $ | 204,408 |
| | $ | 7,840,768 |
|
President and Chief Executive Officer | | 2010 | | 856,250 |
| | — |
| | 2,376,761 |
| | 929,770 |
| | 1,619,723 |
| | 1,185,353 |
| | 335,628 |
| | 7,303,485 |
|
| 2009 | | 800,000 |
| | — |
| | 1,305,300 |
| | 837,207 |
| | 151,200 |
| | 444,824 |
| | 272,080 |
| | 3,810,611 |
|
Christopher J. Stephens, Jr. | | 2011 | | 427,250 |
| | — |
| | 340,131 |
| | 150,549 |
| | 646,500 |
| | 36,337 |
| | 218,575 |
| | 1,819,342 |
|
| 2010 | | 413,250 |
| | 124,000 |
| | 370,940 |
| | 122,080 |
| | 513,375 |
| | 27,478 |
| | 135,112 |
| | 1,706,235 |
|
Senior Vice President, Finance and Chief Financial Officer | | 2009 | | 394,096 |
| | 50,000 |
| | 155,720 |
| | 91,839 |
| | 51,030 |
| | 18,008 |
| | 98,573 |
| | 859,266 |
|
| | | | | | | | | | | | | | | | | |
Patrick J. Dempsey* | | 2011 | | 427,250 |
| | — |
| | 274,901 |
| | 122,836 |
| | 646,500 |
| | 378,554 |
| | 74,451 |
| | 1,924,492 |
|
Vice President, Barnes Group Inc. and President, Logistics and Manufacturing Services | | 2010 | | 413,250 |
| | — |
| | 407,576 |
| | 134,070 |
| | 213,668 |
| | 225,597 |
| | 98,904 |
| | 1,493,065 |
|
| 2009 | | 405,000 |
| | — |
| | 744,250 |
| | 156,861 |
| | 50,625 |
| | 135,070 |
| | 76,504 |
| | 1,568,310 |
|
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Claudia S. Toussaint** | | 2011 | | 356,250 |
| | — |
| | 270,241 |
| | 119,840 |
| | 486,000 |
| | 33,721 |
| | 158,106 |
| | 1,424,158 |
|
Senior Vice President, General Counsel and Secretary | | 2010 | | 236,635 |
| | — |
| | 407,355 |
| | 284,906 |
| | 262,823 |
| | 17,273 |
| | 199,363 |
| | 1,408,355 |
|
| | | | | | | | | | | | | | | | | |
Dawn N. Edwards | | 2011 | | 292,250 |
| | — |
| | 223,648 |
| | 101,115 |
| | 399,600 |
| | 73,928 |
| | 117,334 |
| | 1,207,875 |
|
Senior Vice President, Human Resources | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Jerry W. Burris | | 2011 | | 164,782 |
| | — |
| | 386,627 |
| | 382,093 |
| | — |
| | — |
| | 403,446 |
| | 1,336,948 |
|
Former Vice President, Barnes Group Inc. and Former President, Precision Components | | 2010 | | 413,250 |
| | — |
| | 407,576 |
| | 134,070 |
| | 579,738 |
| | 209,553 |
| | 89,201 |
| | 1,833,388 |
|
| 2009 | | 405,000 |
| | 50,000 |
| | 744,250 |
| | 156,861 |
| | 35,964 |
| | 91,300 |
| | 76,901 |
| | 1,560,276 |
|
| | | | | | | | | | | | | | | | | |
| |
* | Mr. Dempsey was promoted to Senior Vice President and Chief Operating Officer effective February 13, 2012. |
| |
** | Ms. Toussaint gave notice of her resignation of employment with the Company, which became effective on March 16, 2012. |
| |
1 | In connection with his offer of employment, the Company agreed to pay Mr. Stephens a $50,000 at-hire bonus in 2009 and a $124,000 bonus in 2010. The $124,000 Bonus was to be paid upon Mr. Stephens' completion of one year of satisfactory service with the Company in lieu of an at-hire long-term incentive award. The amount listed in Bonus for Mr. Burris for 2009 represents a one-time discretionary retention bonus. |
| |
2 | Stock Awards represent the aggregate grant date fair value of RSUs, Relative Measure PSAs, EPS PSAs, and EPS PUPs granted to NEOs under the Barnes Group Inc. Stock and Incentive Award Plan. EPS PUP awards are denominated in units with each unit being equivalent in value to one share of Common Stock and are payable in cash. Both EPS PUP awards and EPS PSA awards vest upon satisfying established performance goals. Relative Measure PSA awards vest upon satisfying established performance goals. In addition to the RSU value, the value disclosed in this column for the Relative Measure PSA awards for Messrs. Milzcik, Stephens, Dempsey and Burris and for Mses. Toussaint and Edwards represents the amount of compensation if target goals are met. The maximum grant date fair value of the Relative Measure PSA awards granted in 2011 was $2,040,788 for Mr. Milzcik, $340,131 for Mr. Stephens, $274,901 for Mr. Dempsey, $270,241 for Ms. Toussaint, $223,648 for Ms. Edwards, and $386,627 for Mr. Burris. All three measures of the Relative Measure PSA awards allow an NEO to receive up to 250% of the target amount, however, only the basic EPS growth and operating income before depreciation and amortization growth measures would increase the compensation awarded under ASC 718 if the award paid out at maximum. The fair value of the performance based portion of the awards was determined based on the market value of Common Stock on the date of grant and the fair value of the market based portion of awards was determined based on a Monte Carlo valuation method, as described in the note on Stock-Based Compensation in the notes to the Company's consolidated financial statements filed with the Annual Report on Form 10-K for the respective year-end. Also included in this column for Mr. Burris is the incremental increase of $125,704 in fair value of prior year grants resulting from a change in service condition that was treated as a modification under ASC 718. |
| |
3 | Option Awards represent the aggregate grant date fair value of stock options granted to NEOs under the Barnes Group Inc. Stock and Incentive Award Plan. The fair value was determined by using the Black-Scholes option pricing model applied consistently with the Company's practice, as described in the note on Stock-Based Compensation in the notes to the Company's consolidated financial statements filed with the Annual Report on Form 10-K for the respective year-end. Also included in this column for Mr. Burris is the incremental increase of $267,496 in fair value of prior year grants resulting from a change in service condition that was treated as a |
modification under ASC 718.
| |
4 | Non-Equity Incentive Plan Compensation includes amounts earned under the Company's Performance-Linked Bonus Plan for Messrs. Milzcik, Stephens, Dempsey and Burris, and Mses. Toussaint and Edwards, and the amounts earned in 2010 under the Management Incentive Compensation Plan for Ms. Toussaint. |
| |
5 | The amount listed in Change in Pension Value and Nonqualified Deferred Compensation Earnings for all NEOs other than Mr. Burris represents the annual increase in pension value for the NEOs under all of Barnes Group Inc.'s defined benefit retirement programs. All assumptions are as detailed in the notes to the Company's consolidated financial statements filed with the Annual Report on Form 10-K for the respective year-end, with the exception of the following: retirement age for all plans is assumed to be the older of the unreduced retirement age, as defined by each plan, or age as of December 31, 2011, December 31, 2010 or December 31, 2009, as applicable, and no pre-retirement mortality, disability, or termination is assumed. The U.S. discount rates of 5.05%, 5.65% and 6.20%, respectively, are detailed in the Management Discussion and Analysis filed with the Annual Report on Form 10-K for the respective year-end. |
| |
6 | At December 31, 2011, the Change in Pension Value and Nonqualified Deferred Compensation Earnings for Mr. Burris relates to the Company's Salaried Retirement Income Plan (the “Pension Plan”), the Retirement Benefit Equalization Plan (“RBEP”), the Supplemental Executive Retirement Plan (“SERP”) and the Modified Supplemental Senior Officer Retirement Plan (“MSSORP”). The change in the pension value for the Pension Plan, RBEP, SERP and MSSORP plans was $11,498, $76,940, $(271,929), and $(44,992), respectively. Pursuant to SEC regulations, the aggregate, negative change in pension value of $(228,483) is not reflected in the amount shown in the column. |
| |
| The Change in Pension Value and Nonqualified Deferred Compensation Earnings is segregated by plan in the following table: |
|
| | | | | | | | | |
Name and Principal Position | | | Plan Name | | Year | | Amounts |
Gregory F. Milzcik | | | Qualified | | 2011 | | $ | 113,672 |
|
President and Chief Executive Officer | | | RBEP | | 2011 | | N/A |
|
| | | MSSORP | | 2011 | | 1,692,920 |
|
| | | SERP | | 2011 | | (4,562 | ) |
| | | TOTAL | | 2011 | | 1,802,030 |
|
| | | | | | | |
| | | Qualified | | 2010 | | $ | 85,922 |
|
| | RBEP | | 2010 | | N/A |
|
| | MSSORP | | 2010 | | 982,928 |
|
| | SERP | | 2010 | | 116,503 |
|
| | TOTAL | | 2010 | | 1,185,353 |
|
| | | | | | |
| | Qualified | | 2009 | | $ | 60,560 |
|
| | RBEP | | 2009 | | N/A |
|
| | MSSORP | | 2009 | | 340,546 |
|
| | SERP | | 2009 | | 43,718 |
|
| | TOTAL | | 2009 | | 444,824 |
|
| | | | | | | |
Christopher J. Stephens, Jr. | | | Qualified | | 2011 | | $ | 36,069 |
|
Senior Vice President, Finance and | | | RBEP | | 2011 | | N/A |
|
Chief Financial Officer | | | MSSORP | | 2011 | | N/A |
|
| | | SERP | | 2011 | | 268 |
|
| | | TOTAL | | 2011 | | 36,337 |
|
| | | | | | | |
| | | Qualified | | 2010 | | $ | 24,883 |
|
| | RBEP | | 2010 | | N/A |
|
| | MSSORP | | 2010 | | N/A |
|
| | SERP | | 2010 | | 2,595 |
|
| | TOTAL | | 2010 | | 27,478 |
|
| | | | | | |
| | Qualified | | 2009 | | $ | 16,313 |
|
| | RBEP | | 2009 | | N/A |
|
| | MSSORP | | 2009 | | N/A |
|
| | SERP | | 2009 | | 1,695 |
|
| | TOTAL | | 2009 | | 18,008 |
|
| | | | | | | |
|
| | | | | | | | | |
Name and Principal Position | | | Plan Name | | Year | | Amounts |
Patrick J. Dempsey | | | Qualified | | 2011 | | $ | 79,898 |
|
Vice President, Barnes Group Inc. | | | RBEP | | 2011 | | N/A |
|
and President, Logistics | | | MSSORP | | 2011 | | 306,626 |
|
and Manufacturing Services | | | SERP | | 2011 | | (7,970 | ) |
| | | TOTAL | | 2011 | | 378,554 |
|
| | | | | | | |
| | | Qualified | | 2010 | | $ | 58,092 |
|
| | RBEP | | 2010 | | N/A |
|
| | MSSORP | | 2010 | | 146,244 |
|
| | SERP | | 2010 | | 21,261 |
|
| | TOTAL | | 2010 | | 225,597 |
|
| | | | | | |
| | Qualified | | 2009 | | $ | 41,093 |
|
| | RBEP | | 2009 | | N/A |
|
| | MSSORP | | 2009 | | 81,262 |
|
| | SERP | | 2009 | | 12,715 |
|
| | TOTAL | | 2009 | | 135,070 |
|
| | | | | | |
Claudia S. Toussaint | | | Qualified | | 2011 | | $ | 33,243 |
|
Senior Vice President, General | | | RBEP | | 2011 | | N/A |
|
Counsel and Secretary | | | MSSORP | | 2011 | | N/A |
|
| | | SERP | | 2011 | | 478 |
|
| | | TOTAL | | 2011 | | 33,721 |
|
| | | | | | | |
| | | Qualified | | 2010 | | $ | 16,359 |
|
| | RBEP | | 2010 | | N/A |
|
| | MSSORP | | 2010 | | N/A |
|
| | SERP | | 2010 | | 914 |
|
| | TOTAL | | 2010 | | 17,273 |
|
| | | | | | | |
Dawn N. Edwards | | | Qualified | | 2011 | | $ | 77,050 |
|
Senior Vice President, | | | RBEP | | 2011 | | N/A |
|
Human Resources | | | MSSORP | | 2011 | | N/A |
|
| | | SERP | | 2011 | | (3,122 | ) |
| | | TOTAL | | 2011 | | 73,928 |
|
| | | | | | | |
Jerry W. Burris | | | Qualified | | 2011 | | $ | 11,498 |
|
Former Vice President, Barnes Group Inc. | | | RBEP | | 2011 | | 76,940 |
|
and Former President, | | | MSSORP | | 2011 | | (271,929 | ) |
Precision Components | | | SERP | | 2011 | | (44,992 | ) |
| | | TOTAL | | 2011 | | (228,483 | ) |
| | | | | | | |
| | | Qualified | | 2010 | | $ | 36,631 |
|
| | RBEP | | 2010 | | N/A |
|
| | MSSORP | | 2010 | | 150,463 |
|
| | SERP | | 2010 | | 22,459 |
|
| | TOTAL | | 2010 | | 209,553 |
|
| | | | | | |
| | Qualified | | 2009 | | $ | 25,572 |
|
| | RBEP | | 2009 | | N/A |
|
| | MSSORP | | 2009 | | 55,949 |
|
| | SERP | | 2009 | | 9,779 |
|
| | TOTAL | | 2009 | | 91,300 |
|
| | | | | | | |
Consistent with financial calculations in the notes to the Company's consolidated financial statements filed with the Annual Report on Form 10-K for the respective year-end, it is assumed that the form of payment is a life annuity for the Salaried Retirement Income Plan ("Qualified"), the Retirement Benefit Equalization Plan (“RBEP”), and the Supplemental Executive Retirement Plan (“SERP”). It is assumed
that the form of payment as of December 31, 2011 is 5 year installments (which are actuarially equivalent to the life annuity) for the NEO MSSORP participants. The 2011, 2010 and 2009 qualified plan limits of $245,000, $245,000 and $245,000, respectively, have been incorporated.
| |
a | The amount listed in this column for Mr. Stephens and Mses. Toussaint and Edwards assumes that they will vest under the Barnes Group 2009 Deferred Compensation Plan and therefore would not be eligible to receive benefits under the RBEP. The amount listed in this column for Messrs. Milzcik and Dempsey assumes that they will vest under the MSSORP and therefore would not be eligible to receive benefits under the RBEP. |
| |
b | The net reduction in value for the SERP plan benefits in 2011 is a result of changes in qualified plan provisions that updated adjustment factors used to determine optional forms of payment. The optional form factors used now provide a lesser reduction. The overall value to the participant remains unchanged should the participant elect the 50% joint and survivor optional form of payment. The decrease in SERP is directly offset by the increase in the qualified plan. |
| |
7 | The compensation represented by the amounts for 2011 set forth in the All Other Compensation column for the NEOs is detailed in the following table: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | Year | | Taxes Paid on All Other Compensa-tiona | | Personal Usage of Company Aircraftb | | Life Insurance Premiumsc | | Perqui-site Allow-anced | | Deferred Compensa- tion Plane | | Reloca- tionf | | Separa-tion Agree-mentg | | Otherh | | All Other Perqui-sitesi | | Total |
| | | | | | | | | | | | | | | | | | | | | |
Gregory F. Milzcik President and Chief Executive Officer | 2011 | | $ | 63,553 |
| | $ | 43,010 |
| | $ | 83,045 |
| | $ | 6,250 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 7,350 |
| | $ | 1,200 |
| | $ | 204,408 |
|
Christopher J. Stephens, Jr. Senior Vice President, Finance and Chief Financial Officer | 2011 | | 28,774 |
| | — |
| | 33,504 |
| | 5,000 |
| | 139,124 |
| | — |
| | — |
| | 7,350 |
| | $ | 4,823 |
| | 218,575 |
|
Patrick J. Dempsey Vice President, Barnes Group Inc. and President, Logistics and Manufacturing Services | 2011 | | 26,008 |
| | — |
| | 28,314 |
| | 6,250 |
| | — |
| | — |
| | — |
| | 7,350 |
| | 6,529 |
| | 74,451 |
|
Claudia S. Toussaint Senior Vice President, General Counsel and Secretary | 2011 | | 29,429 |
| | — |
| | 33,822 |
| | 5,000 |
| | |