UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by Registrantþ | |||
Filed by Party other than Registranto | |||
Check the appropriate box: | |||
o | Preliminary Proxy Statement | o | Confidential, for Use of the Commission |
Only (as permitted by Rule 14a-6(e)(2)) | |||
þ | Definitive Proxy Statement | o | Definitive Additional Materials |
o | Soliciting Materials Pursuant to §240.14a-12 |
Pitney Bowes Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box): | |||
þ | No fee required. | ||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | ||
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(Set forth the amount on which the filing fee is calculated and state how it was determined): | |||
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NOTICE OF THE 20132014
ANNUAL MEETING
AND
PROXY STATEMENT
PITNEY BOWES INC.
WORLD HEADQUARTERS
1 ELMCROFT ROAD
STAMFORD, CONNECTICUT 06926-0700
(203) 356-5000
To the Stockholders:
We will hold our 2014 annual meeting of stockholders at 9:00 a.m. on Monday, May 12, 2014 at our World Headquarters in Stamford, Connecticut. The Notice of Meeting and Proxy Statement and accompanying proxy card describe in detail the matters to be acted upon at the meeting.
It is important that your shares be represented at the meeting. Whether or not you plan to attend, please submit a proxy through one of the three convenient methods described in this proxy statement in order for your shares to be voted at the meeting. Your vote is important so please act at your first opportunity.
We have elected to furnish proxy materials and the Annual Report to Stockholders, including the Report on Form 10-K for the year ended December 31, 2013 to many of our stockholders via the Internet pursuant to Securities and Exchange Commission rules. We urge you to review those materials as well as our proxy statement for information on our financial results and business operations over the past year. The Internet availability of our proxy materials affords us an opportunity to reduce costs while providing stockholders the information they need. On or about March 27, 2014, we started mailing to many of our stockholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy statement and annual report and how to submit a proxy online along with instructions on how to receive a printed copy of the proxy statement and annual report. We provided a copy of the annual meeting materials to all other stockholders by mail or through electronic delivery.
If you receive your annual meeting materials by mail, the Notice of Meeting and Proxy Statement, Annual Report to Stockholders, including the Report on Form 10-K for the year ended December 31, 2013 and proxy card are enclosed. Whether or not you plan to attend the annual meeting in person, please mark, sign, date and return your proxy card in the enclosed prepaid envelope, or submit your proxy via telephone or the Internet, as soon as possible in order for your shares to be voted at the meeting. If you decide to attend the annual meeting and wish to change your vote, you may do so by submitting a later dated proxy or by voting in person at the annual meeting. If you received your annual meeting materials via e-mail, the e-mail contains voting instructions and links to the proxy statement and annual report on the Internet, which are also available atwww.proxyvote.com.
We look forward to seeing you at the meeting.
Michael I. Roth
Non-Executive Chairman of the Board
Stamford, Connecticut
March 27, 2014
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Notice of Meeting:
The annual meeting of stockholders of Pitney Bowes Inc. will be held on Monday, May 12, 2014, at 9:00 a.m. at the company’s World Headquarters, 1 Elmcroft Road, Stamford, Connecticut 06926-0700. Directions to Pitney Bowes’ World Headquarters appear on the back cover page of the proxy statement.
Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be held on May 12, 2014:
Pitney Bowes’ 2014 Proxy Statement and Annual Report to Stockholders, including the Report on Form 10-K for the year ended December 31, 2013, are available atwww.proxyvote.com.
The items of business at the annual meeting are:
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2. | Ratification of the Audit Committee’s Appointment of the Independent Accountants for | 2014. | ||
3. | Advisory Vote to Approve Executive Compensation. | |||
4. | Approval of the |
Stockholders also will act on such other matters as may properly come before the meeting, including any continuation of the meeting caused by any adjournment or postponement of the meeting.
March 14, 2014 is the record date for the meeting.
This proxy statement and accompanying proxy card are first being distributed or made available via the Internet beginning on or about March 27, 2014.
Amy C. Corn
Corporate Secretary
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NOTICE: Your vote is important. Brokers arenot permitted to vote on our proposals regarding the election of directors, executive compensation and | |||
TABLE OF CONTENTS
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Stockholder Proposals and Other Business for the |
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Role of the Board of Directors in Risk Oversight |
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In this summary we highlight certain information contained elsewhere in this proxy statement. This is only a summary and does not contain all the information you should consider before you submit your proxy or vote. Please read the complete proxy statement and Annual Report on Form 10-K before you submit your proxy or vote.
Annual Meeting Information
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Time and Date: | Monday, May | ||
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| Pitney Bowes World Headquarters | |
Requirements for | Admission | ||
Record Date: | March | 14, 2014 | |
Voting: |
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Governance Structure and Leadership Roles
The board reappointed Michael Roth, an independent member of the board of directors, to serve as Non-Executive Chairman of the Board in May 2013. A description of the Independent Chairman role appears in the Board of Directors Governance Principles, which can be found on the company’s website atwww.pb.com under the caption “Our Company—Leadership & Governance.” In December 2012, Marc Lautenbach became the company’s President and Chief Executive Officer. In his first year as President and CEO, Mr. Lautenbach focused on resetting the strategic direction of the company, assembling the right team to lead the company’s critical areas of development over the next several years and beginning to execute on initiatives consistent with the new strategies.
2013 Performance and Payout
SUMMARY OF 2013 BUSINESS RESULTS
In 2013, the company achieved significant success in executing on its strategy to transform the company for the future. This success was evidenced through our financial results and attainment of certain objectives targeted at longer-term success, including solidifying our balance sheet and divesting businesses no longer in line with the company’s long-term strategy. Our total shareholder return for the year was an extraordinary 132%, which placed us fifth in year-over-year total stockholder return among all S&P 500 companies for 2013. We believe the stock price increase reflected stockholder recognition that our first steps in executing on our new strategy to unlock the value embedded in our company were successful and position us well for the future.
We identified three major objectives for the company that would determine our progress towards transforming our businesses and made significant progress on each. These objectives were as follows: (1) stabilize the mailing business; (2) achieve operational excellence and (3) invest in growth initiatives.
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• | Achieve Operational Excellence.Our efforts in reducing expenses in 2013 resulted in a $71 million decline in selling, general and |
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PROXY SUMMARY
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| operating expenses going forward. In addition, in 2013, we sold three businesses, Pitney Bowes Management Services (PBMS), International Mailing Services (IMS) and the Nordic furniture business. We sold these businesses because they did not fit within our future strategic intent for the company. We used the net proceeds from the sale of the North American portion of the PBMS sale to strengthen our balance sheet by redeeming $300 million in bonds originally scheduled to mature in 2014. Also in 2013, our clear focus on initiatives surrounding inventory and accounts receivables, two key components of working capital, generated over $100 million of cash improvements. | |
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• | Invest in Growth Initiatives.In 2013, we continued to invest in our e-commerce business which grew revenue sequentially at a high double digit rate. In our software business, we brought in new leadership with skill sets to support our new go-to-market strategy, which we expect will bring revenue growth in the software business. Effective in 2014, we also increased our investment to 100%, in our high growth potential Brazilian joint venture by purchasing our joint venture partner’s interest in the business. |
We urge stockholders to read our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission (SEC) on February 21, 2014, which describes our business and 2013 financial results in more detail.
SUMMARY OF 2013 COMPENSATION PAYOUTS
Based on the 2013 financial results summarized above when compared against the pre-determined financial goals, the annual incentive payout multiplier for the named executive officers (NEOs) was 109.5% and the long-term 2011-2013 cash incentive award payout was $1.50.
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| the 2013 Annual Incentive Pool and Payout Multiplier | |||
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| The sum of the metrics may not exactly equal the total due to rounding. | ||||
For additional detail on the calculation of the financial metrics shown in this chart please refer to the table on page 55 “Accounting Items and Reconciliation of GAAP to non-GAAP Measures.” |
2013 Funding of the Cash Incentive Unit Pool and Payout Value | |||
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PROXY SUMMARY
Summary of 2013 Executive Compensation Changes
At the annual meeting in 2013, stockholders overwhelmingly approved our executive compensation (Say-on-Pay) with nearly 93% of votes cast in favor. The vote reflected stockholder approval for the compensation changes the Executive Compensation Committee adopted in late 2012 and early 2013 in connection with executive compensation. These actions included:
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• | Enhancing the rigor and transparency of our annual incentive | ||
• | Changing the | ||
• | Enhancing the disclosure of performance targets; and | ||
• | Eliminating excise tax gross-ups; |
Continuing to make improvements in the executive compensation structure in 2013, the Executive Compensation Committee adopted the following changes to further strengthen the alignment of executive compensation incentives with stockholder interests:
• | Changing the LTI mix beginning with 2014 grants to 100% equity, firmly placing the executive in the shoes of the | LTI payouts; | |
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| weighting of financial metrics to 100% for the annual incentive program; |
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• | Utilizing as part of the LTI program a three-year cumulative TSR metric; | ||
• | Expanding the executive stock ownership policy to include more senior executives, while at the same time, restricting shares that count toward the stockholding requirement; | ||
• | Reducing severance benefits payable upon a change of control | levels; and | |
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| Introducing premium-priced stock options as a manner of | making special compensatory awards. |
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We have a “pay-for-performance” philosophy that is the foundation of all decisions regarding compensation of our NEOs. With the changes approved by the Executive Compensation Committee and the independent board members, we have enhanced the link between pay and performance in the design of our executive compensation program. Please see “Compensation Discussion and Analysis” beginning on page 35 of this proxy statement for a more detailed discussion of the 2013 executive compensation awards and payouts.
Direct Compensation Components and Mix
For each NEO, the Executive Compensation Committee sets target total direct compensation levels (base salary plus annual and long-term incentives) so that the base salary, total cash compensation, and total direct compensation is at +/– 20% of the median for each position of the competitive data based on the Towers Watson Regressed Compensation Report, as regressed for companies approximately our size, and the Radford High-Tech Industry Survey focusing on companies with revenue scopes similar to ours (Survey Reports). NEO direct compensation is weighted toward variable compensation, where the actual amount earned may vary from the targeted amounts due to company performance.
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PROXY SUMMARY
Meeting Agenda Items
Proposal 1: Election of Directors
You are being asked to elect 10 directors. Two of our current directors, James H. Keyes and Robert E. Weissman, will retire from the board, as required by our Governance Principles, when their current terms end as of the 2013 annual meeting of stockholders. One of our current directors, Rodney Adkins, expressed a preference not to be re-nominated. Effective as of May 13, 2013, the board of directors reduced the size of the board from thirteen to ten members. Each of the other directors is standing for election to a one-year term ending as of the next annual meeting of stockholders in 20142015 and until his or her successor has been duly elected and qualified.
All directors attended over 75% of the meetings of the board and board committees on which they served in 2012.2013.
PROXY SUMMARY
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| Summary Information about our Director Nominees | ||||||||||
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| Director | Age | Director | Occupation | Independent** |
| Committees |
| Other Public |
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| Linda G. Alvarado | 61 | 1992 | President and | X | ● | Finance |
| 3M Company |
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| CEO, Alvarado |
| ● | Governance |
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| Construction, Inc. |
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| Anne M. Busquet | 63 | 2007 | Principal, AMB | X | ● | Finance |
| Meetic S.A. |
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| Advisors, LLC |
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| Roger Fradin | 59 | 2012 | President and | X | ● | Audit |
| MSC Industrial |
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| CEO, Honeywell |
| ● | Finance |
| Direct Co., Inc. |
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| Automation and |
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| Control Solutions, |
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| Honeywell |
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| International, Inc. |
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| Anne Sutherland | 65 | 2005 | Consultant to | X | ● | Audit |
| Gartner, Inc. |
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| S. Douglas | 57 | 2012 | CEO, Leap Wireless | X | ● | Audit |
| Leap Wireless |
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| International, Inc. |
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| Marc B. Lautenbach | 51 | 2012 | President and CEO, |
| ● | Executive |
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| Eduardo R. Menascé | 67 | 2001 | Retired President, | X | ● | Executive |
| John Wiley & Sons |
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| Enterprise Solutions |
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| Inc., Hill-Rom |
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| Group, Verizon |
| ● | Compensation*** |
| Holdings, Inc., |
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| Communications Inc. |
| ● | Governance |
| Hillenbrand, Inc. |
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| Michael I. Roth* | 67 | 1995 | Chairman and CEO, | X | ● | Audit |
| Ryman Hospitality |
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| The Interpublic |
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| Properties Inc., The |
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| Group of |
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| Interpublic Group of |
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| Companies, Inc. |
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| Companies, Inc. |
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| David L. Shedlarz | 64 | 2001 | Retired Vice | X | ● | Audit*** |
| Teachers Insurance |
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| Chairman, Pfizer Inc. |
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| and Annuity |
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| Association, The |
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| Hershey Company |
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| David B. Snow, Jr. | 58 | 2006 | Former Chairman | X | ● | Executive |
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| and CEO, Medco |
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| Health Solutions, Inc. |
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| ● | Governance*** |
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| * | Non-Executive Chairman, Pitney Bowes Inc. |
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| ** | In accordance with the New York Stock Exchange listing standards and the standards of independence, which are set forth in the Governance Principles of the Board of Directors available on our website atwww.pb.com under the caption “Our Company – Leadership & Governance.” | |||||||||
| *** | Committee Chair |
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| Vote Required (Majority Vote) |
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| In accordance with our By-laws, in an uncontested election, a majority of the votes cast is required for the election of directors. Abstentions and broker non-votes will not be votes cast and therefore will have no effect on the outcome of the vote. The board of directors’ Governance Principles provide that any nominee for director in this election who fails to receive a majority of votes cast in the affirmative must tender his or her resignation for consideration by the Governance Committee. The Governance Committee will recommend to the board of directors the action to be taken with respect to any offer of resignation. The board of directors will act on the Governance Committee’s recommendation and publicly disclose its decision within 90 days from the date of the certification of the election results. |
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| The board of directors recommends a vote FOR the election of the director candidates nominated by theboard. |
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PROXY SUMMARYSummary Information about our Director Nominees
Director Nominee | Age | Director Since | Occupation | Independent | Committees | Other Public Boards | |||||||
Linda G. Alvarado | 62 | 1992 | President and CEO, Alvarado Construction, Inc. | X | • Finance •Governance | 3M Company | |||||||
Anne M. Busquet | 64 | 2007 | Principal, AMB Advisors, LLC | X | • Executive Compensation •Governance | — | |||||||
Roger Fradin | 60 | 2012 | President and CEO, Honeywell Automation and Control Solutions, Honeywell International, Inc. | X | • Audit •Finance | MSC Industrial Direct Co., Inc. | |||||||
Anne Sutherland Fuchs | 66 | 2005 | Consultant to private equity firms | X | • Audit • Executive Compensation | Gartner, Inc. | |||||||
S. Douglas Hutcheson | 58 | 2012 | Former CEO, Leap Wireless International, Inc. | X | • Audit •Finance | — | |||||||
Marc B. Lautenbach | 52 | 2012 | President and CEO, Pitney Bowes Inc. | • Executive | — | ||||||||
Eduardo R. Menascé | 68 | 2001 | Retired President, Enterprise Solutions Group, Verizon Communications Inc. | X | • Executive •Executive Compensation** • Governance | John Wiley & Sons Inc., Hill-Rom Holdings, Inc., Hillenbrand, Inc. | |||||||
Michael I. Roth* | 68 | 1995 | Chairman and CEO, The Interpublic Group of Companies, Inc. | X | • Audit • Executive** • Finance** | Ryman Hospitality Properties Inc., The Interpublic Group of Companies, Inc. | |||||||
David L. Shedlarz | 65 | 2001 | Retired Vice Chairman, Pfizer Inc. | X | • Audit** •Executive • Finance | Teachers Insurance and Annuity Association, The Hershey Company | |||||||
David B. Snow, Jr. | 59 | 2006 | Managing Partner and CEO, Cedar Gate Partners LLC | X | • Executive •Executive Compensation • Governance** | — |
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Committee Chair |
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PROXY SUMMARY
Proposal 2: Ratification of the Audit Committee’s Appointment of the IndependentAccountants for 2014
The board is asking stockholders to ratify the selection of PricewaterhouseCoopers LLP as our independent accountants for 2014.
Proposal 3: Advisory Vote to Approve Executive Compensation
The board is asking stockholders to approve, on an advisory basis, the compensation of the named executive officers as disclosed in this proxy statement. The board has determined to hold this advisory vote on an annual basis. The next advisory vote will be at the 2015 annual meeting of stockholders.
The vote on executive compensation is an advisory vote and the results will not be binding on the board or Pitney Bowes Inc. The affirmative vote of the majority of the votes cast will constitute the stockholders’ non-binding approval with respect to our executive compensation programs. Abstentions and broker non-votes will not be votes cast and therefore will have no effect on the outcome of the vote.
Proposal 4: Approval of the Pitney Bowes Directors’ Stock Plan
The board is asking stockholders to approve the Directors’ Stock Plan. The plan will govern grants of stock-based awards to non-employee directors. The plan does not require the authorization of additional shares. All awards under the Directors’ Stock Plan will be satisfied from the shares approved in 2013 in connection with the 2013 Employee Stock Plan.
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Our board of directors is soliciting proxies to be used at the annual meeting of stockholders to be held on May 13, 2013,12, 2014, at 9:00 a.m. at the company’s World Headquarters, 1 Elmcroft Road, Stamford, Connecticut, and at any adjournment or postponement of the meeting. This proxy statement contains information about the items being voted on at the annual meeting.
An admission ticket, which is required for entry into the annual meeting, is attached to your proxy card if you hold shares directly in your name as a stockholder of record.registered stockholder. If you plan to attend the annual meeting, please submit your proxy but keep the admission ticket and bring it to the annual meeting.
If your shares are held in the name of a bank, broker or nominee and you plan to attend the meeting, you must present proof of your ownership of Pitney Bowes stock as of the record date (such as a bank or brokerage account statement) to be admitted to the meeting.
If you have received a Notice of Internet Availability of Proxy Materials (a “Notice”), your Notice is your admission ticket. If you plan to attend the annual meeting, please submit your proxy, but keep the Notice and bring it to the annual meeting.
Stockholders also must present a form of photo identification, such as a driver’s license, in order to be admitted to the annual meeting.No cameras, recording equipment, large bags, or packages will be permitted in the annual meeting. Many cellular phones have built-in cameras, and, while these phones may be brought into the annual meeting, the camera function may not be used at any time.
Record stockholders of Pitney Bowes common stock and $2.12 convertible preference stock at the close of business on March 15, 201314, 2014 (the record date) can vote at the meeting. As of the record date, 201,463,161202,609,582 shares of Pitney Bowes common stock and 23,92820,853 shares of $2.12 convertible preference stock were issued and outstanding. Each stockholder has one vote for each share of common stock owned as of the record date, and 16.53 votes for each share of $2.12 convertible preference stock owned as of the record date.
If you are a registered stockholder (whichwhich means you hold shares in your name),name, you may choose one of three methods to grant your proxy to have your shares voted:
• | you may grant your proxy on-line via the Internet by accessing the following website and following the instructions provided:www.proxyvote.com; | ||
• | you may grant your proxy by telephone (1-800-690-6903); or | ||
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Alternatively, you may attend the meeting and vote in person.
If you hold your shares through a broker, bank, trustee or other nominee, you are a beneficial owner and should refer to instructions provided by that entity on voting methods.
May I revoke my proxy or change my vote?
If you are a registered stockholder, you may revoke your proxy or change your vote at any time before your proxy is voted at the meeting by any of the following methods:
• | you may send in a revised proxy dated later than the first proxy; | ||
• | you may vote in person at the meeting; or | ||
• | you may notify the corporate secretary in writing prior to the meeting that you have revoked your proxy. |
Attendance at the meeting alone will not revoke your proxy.
If you hold your shares through a broker, bank, trustee or other nominee, you are a beneficial owner and should refer to instructions provided by that entity on how to revoke your proxy or change your vote.
The holders of shares representing a majority of the sharesvotes entitled to votebe cast at the annual meeting constitutes a quorum. If you submit your proxy by Internet, telephone or proxy card, you will be considered part of the quorum. Abstentions and broker non-votes are included in the count to determine a quorum. If a quorum is present, director candidates receiving the affirmative vote of a majority of votes cast will be elected. Proposals 2, 3 and 4 will be approved if a quorum is present and a majority of the votes cast by the stockholders are voted for the proposal. In addition, under New York Stock Exchange rules, the total number of votes cast must represent a majority of the shares entitled to vote on the proposal.
Your broker is not permitted to vote on your behalf on the election of directors, executive compensation and other matters to be considered at the stockholders meeting (except on ratification of the selection of PricewaterhouseCoopers LLP as auditors for 2013)2014), unless you provide specific instructions by completing and returning the voting instruction form or following the instructions provided to you to vote your stock via telephone or the Internet. If you do not own your shares of record, for your vote to be counted with respect to proposals 1, 3 or 4, you will need to communicate your voting decisions to your broker, bank, financial institution or other nominee before the date of the stockholders meeting.nominee.
Under New York Stock Exchange rules, if your broker holds your shares in its “street” name, the broker may vote your shares in its discretion on proposal 2 if it does not receive instructions from you.
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10 |
GENERAL INFORMATION
If your brokerdoes nothave discretionary voting authority and you do not provide voting instructions, or if you abstain on one or more agenda items, the effect would be as follows:
Proposal 1: Election of Directors
Broker non-votes and abstentions would not be votes cast and therefore would not be counted either for or against. As a result, broker non-votes and abstentions will have no effect in the election of directors.
Proposal 2: Ratification of Audit Committee’s Appointment of the Independent Accountants for 20132014
If you choose to abstain in the ratification of the Audit Committee’s selection of the independent accountants for 2013,2014, the abstention will have no effect.
Proposal 3: Advisory Vote to Approve Executive Compensation
The vote to approve executive compensation is an advisory vote and the results will not be binding on the board of directors or the company. The board of directors will review the results and take them into consideration when making future decisions regarding executive compensation. Broker non-votes and abstentions would not be votes cast and therefore would not be counted either for or against. As a result, broker non-votes and abstentions will have no effect on the advisory vote on executive compensation.
Proposal 4: Approval of the Pitney Bowes Inc. 2013Directors’ Stock Plan
For purposes of approval under
Under our By-laws, broker non-votes and absentionsabstentions would not be votes cast and therefore would not be counted either for or against. As a result, broker non-votes and abstentions will have no effect on the vote on the 2013Directors’ Stock Plan. However, for purposes of approval under New York Stock Exchange rules, abstentions are treated as votes cast, and, therefore, will have the same effect as an “against” vote. In addition,vote, and broker non-votes are not considered entitled to vote, havingvotes cast, and, therefore, will have no effect on the practical effect of increasing the number of affirmative votes required to achieve a majorityoutcome of the shares entitled to vote.
How do Dividend Reinvestment Plan participants or employees with shares in the 401(k) plans vote by proxy?
If you are a registered stockholder of record and participate in our Dividend Reinvestment Plan, or our employee 401(k) plans, your proxy includes the number of shares acquired through the Dividend Reinvestment Plan and/or credited to your 401(k) plan account.
Shares held in our 401(k) plans are voted by the plan trustee in accordance with voting instructions received from plan participants. The plans direct the trustee to vote shares for which no instructions are received in the same proportion (for, against or abstain) indicated by the voting instructions given by participants in the plans.
Broadridge Financial Solutions, Inc. (“Broadridge”)(Broadridge) will tabulate the votes and act as Inspector of Election.
Only one Notice or, if paper copies are requested, only one proxy statement and annual report to stockholders including the report on Form 10-K are delivered to
multiple stockholders sharing an address unless one or
more of the stockholders give us contrary instructions. You may request to receive a separate copy of these materials, either now or in the future.future, and we will promptly deliver the requested materials.
Similarly, any stockholder currently sharing an address with another stockholder but nonetheless receiving separate copies of the materials may request delivery of a single copy in the future.
Requests can be made to:
Broadridge Householding Department by phone at 1-800-579-1639 or by mail to:
Broadridge Householding Department
51 Mercedes Way
Edgewood, New York 11717.
If you own shares of stock through a bank, broker, trustee or other nominee and receive more than one copy of the materials, please contact that entity to eliminate duplicate mailings.
Additional copies of our annual report to stockholders, including the report on Form 10-K or the proxy statement will be sent to stockholders free of charge upon written request to:
Investor Relations, Pitney Bowes Inc.
1 Elmcroft Road, MSC 63-02
Stamford, CT 06926-0700.
We want to communicate with you in the way you prefer. You may choose to receive:
• | ||
| a full set of printed materials, including the proxy statement, annual report and proxy card; or | |
| ||
• | an email with instructions for how to view the annual meeting materials and vote online. |
During the voting season, you can select the method of delivery for the future by following the instructions when you vote online or by telephone. If you choose to receive the annual meeting materials electronically, you will receive an e-mail for future meetings listing the website locations of these documents and your choice will remain in effect until you notify us that you wish to resume mail delivery of these documents. If you hold your Pitney Bowes stock through a bank, broker, trustee or other nominee, you should refer to the information provided by that entity for instructions on how to elect this option. This proxy statement and our 20122013 annual report may be viewed online atwww.proxyvote.com.
If a stockholder wants to submit a proposal for inclusion in our proxy material for the 20142015 annual meeting, which is scheduled to be held on Monday, May 12, 2014,11, 2015, it must be received by the corporate secretary by the close of business on November 25, 2013.27, 2014. Also, under our By-laws, a stockholder can present other business at an annual meeting, including the nomination of candidates for director, only if written notice of the business or candidates is received by the corporate secretary byno earlier than the close of business on January 12, 2015 and no later than the close of business on February 11, 2014.2015. However, in the event that the date of the 2015 annual
11 |
GENERAL INFORMATION
meeting is more than 30 days before or more than 60 days after the anniversary of our 2014 annual meeting, then the stockholder’s notice must be delivered no earlier than the close of business on the 120th day prior to the meeting and no later than the close of business on the later of the 90th day prior to the meeting or, if the first public announcement of the date of the annual meeting is less than 100 days prior to the date of such meeting, the 10th day after the first public announcement of the meeting date. There are other procedural requirements in the By-laws pertaining to stockholder proposals and director
nominations. The By-laws are posted on theour Corporate Governance website atwww.pb.com under the caption “Our Company – Company—Leadership & Governance.” If notice of a matter is not received within the applicable deadlines or does not comply with the By-laws, the chairman of the meeting may refuse to introduce such matter. If a stockholder does not meet these deadlines, or does not satisfy the requirements of Rule 14a-4 of the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the annual meeting.
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Stockholders are encouragedCorporate Governance
We encourage stockholders to visit our Corporate Governance website atwww.pb.com under the caption “Leadership“Our Company—Leadership & Governance” for information concerning governance practices, including the Governance Principles of the Board of Directors, charters of the committees of the board, and the directors’ Code of Business Conduct and Ethics. Our Business Practices Guidelines, which is the Code of Ethics for employees, including our chief executive officerChief Executive Officer and chief financial officer,Chief Financial Officer, is also available on our Leadership & Governance website. We intend to disclose any future amendments or waivers to certain provisions of the directors’ Code of Business Conduct and Ethics or the Business Practices Guidelines on our website within four business days following the date of such amendment or waiver.
Key Corporate Governance Practices Enhancing the Board’s Independent Leadership, Accountability and Oversight | ||||
• | Separate Chairman and CEO.Our Governance Principles include well-defined responsibilities, qualifications and selection criteria with respect to the Chairman role. | |||
| ||||
• | Independent Committees.The board of directors determined that all board committees, other than the Executive Committee, should consist entirely of independent directors. | |||
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• | Executive Sessions.At each regular board meeting, our independent directors meet without the CEO or other members of management present to discuss issues, including matters concerning management. | |||
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• | Majority Voting in Director Elections.Our By-Laws provide that in uncontested elections, director nominees must be elected by a majority of the votes cast. | |||
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• | Annual Election of Directors.Our By-Laws provide that our stockholders elect all directors annually. | |||
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• | Stock Holding Requirements.Under the current Directors’ Stock plan, restricted stock awards may not be transferred or | |||
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• | No Hedging or Pledging.Directors may not pledge or transfer for value Pitney Bowes securities, engage in short-term speculative (“in and out”) trading in Pitney Bowes securities, or participate in hedging and other derivative transactions, including short sales, “put” or “call” options, swaps, collars or similar derivative transactions, with respect to Pitney Bowes securities. | |||
12 |
Effective December 3, 2012, the board of directors separated the roles of Chairman and CEO. The board appointed Michael I. Roth, an independent director, as Non-Executive Chairman of the board of directors. Priordirectors and reappointed him to this appointment, Mr. Roth served as Lead Directorrole in May 2013 for the board.a term of one year. The board of directors believes it should have the flexibility to establish a leadership structure that works best for the company at a particular time, and it reviews that structure from time to time, including in the context of a change in leadership. The board decided that, with the election of Mr. Lautenbach as CEO, and due to the fact that the responsibilities of the Lead Direc-Director, which
torwas Mr. Roth’s role prior to his appointment as Non-Executive Chairman, were similar in most respects to those of a Non-Executive Chairman, this was an appropriate time to separate the roles of CEO and Chairman.
The board of directors has established well-defined responsibilities, qualifications and selection criteria with respect to the Chairman role. This information is set forth in detail in the Governance Principles of the Board of Directors, which can be found on our website atwww.pb.com under the caption “Our Company—Leadership & Governance.”
Among the board’s most important responsibilities is to oversee succession planning and leadership development. As part of this process, the Governance Committee oversees long-term and short-term plans for CEO succession. The board of directors is responsible for evaluating the performance of the CEO and for selection of successors to that position. The criteria used when assessing the qualifications of potential CEO successors include, among others, strategic vision and leadership, operational excellence, financial management, executive officer leadership development, ability to motivate employees, and an ability to develop an effective working relationship with the board. The Governance Principles of the Board of Directors, which are posted on the company’s website atwww.pb.com under the caption “Our Company—Leadership & Governance,” include additional information about succession planning.
In late 2012, the board used the succession planning process described above to plan for the succession from our former CEO to the hiring of our new President and CEO, Mr. Lautenbach, and to the appointment of a new Non-Executive Chairman of the board, Michael I. Roth.
Periodically, but not less than annually, the board of directors considers management’s recommendations concerning succession planning for senior management roles other than the role of CEO. As part of this process, the board reviews development plans to strengthen and supplement the skills and qualifications of internal succession candidates.
Role of the Board of Directors in Risk Oversight
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The board of directors is responsible for oversight of the risk assessment and risk management process. Management is responsible for risk management, including identification and mitigation planning. The company established the enterprise risk management process was established to identify, assess, monitor and address risks across the entire company and its business operations. The description, assessments, mitigation plan and status for each enter-
priseenterprise risk are developed and monitored by management, including management “risk owners” and an oversight management risk committee.
Oversight
Upon the recommendation of the Governance Committee, the board of directors assigns oversight responsibility for each of the identified enterprise-wide risks is assigned, upon the recommendation of the Governance Committee and approval by the board of directors, to either a specific committee of the board, or to the full board. In addition to the board, each
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committee, with the exception of the Executive Committee, is responsible for oversight of one or more risks. Where possible, theThe assignments are generally made based upon the type of enterprise risk and the linkage of the subject matter to the responsibilities of the
committee as described in its charter or the nature of the enterprise risk warranting review by the full board. For example, the Finance Committee oversees risks relating to liquidity the Executive Compensation Committee oversees risks relating to compensation and the Audit Committee oversees risks relating to internal controls. Each enterprise risk and its related mitigation plan is reviewed by either the board of directors or the designated board committee on an annual basis. The Audit Commit-
teeCommittee is responsible for overseeing and reviewing on an ongoing basis the overall process by which management identifies and manages risks. On an annual basis the board of directors receives a report on the status of all enterprise risks and their related mitigation plans.
Management monitors the risks and determines, from time to time, whether new risks should be considered either due to changes in the external environment, changes in the company’s business, or for other reasons. Management also determines whether previously identified risks should be combined with new or emerging risks.
CORPORATE GOVERNANCE
The board of directors conducts an annual review of the independence of each director under the New York Stock Exchange listing standards and our standards of independence, which are set forth in the Governance Principles of the Board of Directors available on our website atwww.pb.com under the caption “Our Company – Company—Leadership & Governance.” In making these determinations, the board of directors considers, among other things, whether any director has had any direct or indirect material relationship with Pitney Bowes or its management, including current or past employment with
Pitney Bowes or its independent accountants by the director or the director’s immediate family.family members.
Based upon its review, the board of directors has concluded in its business judgment that the following directors are independent: Rodney C. Adkins, Linda G. Alvarado, Anne M. Busquet, Roger Fradin, Anne Sutherland Fuchs, S. Douglas Hutcheson, James H. Keyes, Eduardo R. Menascé, Michael I. Roth, David L. Shedlarz, and David B. Snow, Jr. In addition, the board of directors previously determined that Rodney C. Adkins, James H. Keyes and Robert E. Weissman.Weissman, who served on the board until May 2013, were independent. Marc B. Lautenbach is not independent because he is a Pitney Bowes executive officer.
Communications with the Board of Directors
|
Stockholders and other interested parties may communicate with the Non-Executive Chairman of the board via e-mail atboardchairman@pb.com,, the Audit Committee chair via e-mail ataudit.chair@pb.com or they may write to one or more directors, care of the Corporate Secretary, Pitney Bowes Inc., 1 Elmcroft Road, MSC 65-19, Stamford, CT 06926-0700.
The board of directors has instructed the corporate secretary to assist the Non-Executive Chairman, Audit Committee chair and the board in reviewing all electronic and written communications, as described above, as follows:
(i) | ||
| Customer, vendor or employee complaints or concerns are investigated by management and copies are forwarded to the Chairman; | |
(ii) | If any complaints or similar communications regarding accounting, internal accounting controls or auditing matters are received, they will be forwarded by the corporate secretary to the General Auditor and |
to the Audit Committee chair for review and copies will be forwarded to the Chairman. Any such matter will be investigated in accordance with the procedures established by the Audit Committee; and
(iii) | |
| |
| Other communications raising matters that require investigation will be shared with appropriate members of management in order to permit the gathering of information relevant to the directors’ review, and will be forwarded to the director or directors to whom the communication was addressed. |
Except as provided above, the corporate secretary will forward written communications to the full board of directors or to any individual director or directors to whom the communication is directed unless the communication is threatening, illegal or similarly inappropriate. Advertisements, solicitations for periodical or other subscriptions, and other similar communications generally will not be forwarded to the directors.
Board Committees and Meeting Attendance
|
During 2012,2013, each director attended at least 75% of the total number of board meetings and meetings held by the board committees on which he or she served. The board of directors met eleventen times in 2012,2013, and the independent directors met in executive session, without any member of management in attendance, tenseven times. Members of the board of directors serve on one or more of the five standing committees described below. As the need arises, the board may establish ad hoc committees of the board to consider specific issues. Mr. Lautenbach
is a member of the Executive Committee.
The members of all other board committees are independent directors pursuant to New York Stock Exchange independence standards. Each committee of the board operates in accordance with a charter. The members of each of the board committees are set forth in the following chart.
It is the longstanding practice and the policy of the board of directors that the directors attend the annual meeting of stockholders. All directors attended the May 20122013 annual meeting.
14 |
CORPORATE GOVERNANCE
Name | Audit | Executive | Executive Compensation(1) | Finance | Governance | ||||||
Linda G. Alvarado | X | X | |||||||||
Anne M. Busquet | X | X | |||||||||
Roger Fradin | X | X | |||||||||
Anne Sutherland Fuchs | X | X | |||||||||
S. Douglas Hutcheson | X | X | |||||||||
Marc B. Lautenbach | X | ||||||||||
Eduardo R. Menascé | X | Chair | X | ||||||||
Michael I. Roth | X | Chair | Chair | ||||||||
David L. Shedlarz | Chair | X | X | ||||||||
David B. Snow, Jr. | X | X | Chair | ||||||||
Number of meetings in 2013 | 6 | 0 | 11 | 4 | 6 |
| |
Rodney C. Adkins, James H. Keyes and Robert E. Weissman served on the Executive Compensation Committee until May 2013. |
|
|
|
|
|
|
|
Name | Audit | Executive | Executive | Finance | Governance | |
| ||||||
| Rodney C. Adkins | X |
| X |
|
|
| Linda G. Alvarado |
|
|
| X | X |
| Anne M. Busquet |
|
|
| X | X |
| Roger Fradin | X |
|
| X |
|
| Anne Sutherland Fuchs | X |
| X |
|
|
| S. Douglas Hutcheson | X |
|
| X |
|
| James H. Keyes |
|
| X |
| X |
| Marc B. Lautenbach |
| X |
|
|
|
| Eduardo R. Menascé |
| X | Chair |
| X |
| Michael I. Roth | X | Chair |
| Chair |
|
| David L. Shedlarz | Chair | X |
| X |
|
| David B. Snow, Jr. |
| X | X |
| Chair |
| Robert E. Weissman |
|
| X |
| X |
| ||||||
| Number of meetings in 2012 | 6 | 0 | 9 | 4 | 5 |
|
The Audit Committee monitors our financial reporting standards and practices and our internal financial controls to confirm compliance with the policies and objectives established by the board of directors and oversees our ethics and compliance programs. The committee appoints independent accountants to conduct the annual audits, and discusses with our independent accountants the scope of their examinations, with particular attention to areas where either the committee or the independent accountants believe special emphasis should be directed. The committee reviews the annual financial statements and independent accountant’s report, invites the independent accountant’s recommendations on internal controls and on other matters, and reviews the evaluation given and corrective action taken by management. It reviews the independence of the independent accountants and approves their fees. It also reviews our
reviews our internal accounting controls and the scope and results of our internal auditing activities, and submits reports and proposals on these matters to the board. The committee is also responsible for overseeing the process by which management identifies and manages the company’s risks. The committee meets in executive session with the independent accountants and internal auditor at each committee meeting.
The board of directors has determined that the following members of the Audit Committee, S. Douglas Hutcheson, Michael I. Roth and David L. Shedlarz are “audit committee financial experts,” as that term is defined by the SEC. All Audit Committee members are independent as independence for audit committee members is defined in the New York Stock Exchange standards.
The Executive Committee can act, to the extent permitted by applicable law and the company’s Restated Certificate of Incorporation and its Bylaws,By-laws, on matters concerning management of the business which may arise between scheduled board of directors meetings and as described in the committee’s charter.
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The Executive Compensation Committee is responsible for our executive compensation policies and programs. The committee chair frequently consults with, and the committee meets in executive session with, Pay Governance LLC, its independent compensation consultant. The committee recommends to all of the independent directors for final approval policies, programs and specific actions regarding the compensation of the chief
executive officer, or CEO, and approves the same for all of our other executive officers.of-
ficers. The committee also recommends the “Compensation Discussion and Analysis” for inclusion in our proxy statement, in accordance with the rules and regulations of the SEC, and reviews and approves stock grants and other stock-based compensation awards. All Executive Compensation Committee members are independent as independence for compensation committee members is defined in the New York Stock Exchange standards.
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CORPORATE GOVERNANCE
The Finance Committee reviews our financial condition and capital structure, and evaluates significant financial policies and activities, oversees our major retirement programs, advises management and recommends financial action to the board of directors. The committee’s duties include monitoring our current and projected financial condition, reviewing and recommending for board
board approval major investment decisions including financing, mergers and acquisitions, divestitures and overseeing the financial operations of our retirement plans. The committee recommends for approval by the board of directors the establishment of new plans and any amendments that materially affect cost, benefit coverages, or liabilities of the plans.
The Governance Committee recommends nominees for election to the board of directors, determines the duties of, and recommends membership in, and functions of, the board committees, reviews executives’ potential for growth, reviews and recommends to the board of directors the amount and form of compensation to non-employee members of the board, and, with the Non-Executive Chairman and the CEO, is responsible for CEO succession planning and ensuring management continuity. The Governance Principles of the Board of Directors, which are posted on our website atwww.pb.com under the caption “Our Company—Leadership & Governance,” include additional information about succession planning. The committee reviews and evaluates the effectiveness of board administration and its governing documents, and reviews and monitors company programs and policies relating to directors. The committee reviews related-person transactions in accordance with company policy.
The Governance Committee generally identifies qualified candidates for nomination for election to the board of directors from a variety of sources, including other board members, management and stockholders. The committee also may retain a third-party search firm to assist the committee members in identifying and evaluating potential nominees to the board of directors.
Stockholders wishing to recommend a candidate for consideration by the Governance Committee may do so by writing to: c/o Corporate Secretary, Pitney Bowes Inc., 1 Elmcroft Road, MSC 65-19, Stamford, CT 06926-0700. Recommendations submitted for consideration by the committee in preparation for the 20142015 annual meeting of stockholders must be received by January 2, 2014,5, 2015, and must contain the following information: (i) the name and address of the stockholder; (ii) the name and address of the person to be nominated; (iii) a representation that the stockholder is a holder of our stock entitled
to vote at the
meeting; (iv) a statement in support of the stockholder’s recommendation, including a description of the candidate’s qualifications; (v) information regarding the candidate as would be required to be included in a proxy statement filed in accordance with the rules of the SEC; and (vi) the candidate’s written, signed consent to serve if elected.
The Governance Committee evaluates candidates recommended by stockholders recommend based on the same criteria it uses to evaluate candidates from other sources. The Governance Principles of the Board of Directors, which are posted on our Corporate Governance website atwww.pb.com under the caption “Our Company—Leadership & Governance,” include a description of director qualifications. A discussion of the specific experience and qualifications identified by the committee identified for directors and nominees may be found under “Director Qualifications” on page 23 of this proxy statement.
If the Governance Committee believes that a potential candidate may be appropriate for recommendation to the board of directors, there is generally a mutual exploration process, during which the committee seeks to learn more about the candidate’s qualifications, background and interest in serving on the board of directors, and the candidate has the opportunity to learn more about the company, the board, and its governance practices. The final selection of the board’s nominees is within the sole discretion of the board of directors.
Alternatively, as referenced on page 1311 of this proxy statement, stockholders intending to nominate a candidate for election by the stockholders at the meeting must comply with the procedures in Article II,I, Section 65 of the company’s By-laws. The By-laws are posted on our Corporate Governance website atwww.pb.com under the caption “Our Company—Leadership & Governance.”
Directors’ Fees |
During 2012,2013, each director who was not an employee received an annual retainer of $65,000 and a meeting fee of $1,500 for each board and committee meeting attended. Committee chairs (except for the Audit Committee chair) receive an additional $1,500 for each committee meeting that they chair, and the Audit Committee chair receives an additional $2,000 for each Audit Committee meeting chaired. The Lead Director received an additional annual retainer of $10,000. Effective January
1, 2013, theThe Non-Executive Chairman receives an additional annual retainer of $50,000. The Non-Executive Chairman role replaced the Lead Director position. All directors are reimbursed for their out-of-pocket expenses incurred in attending board and committee meetings.
The board of directors maintains directors’ stock ownership guidelines, requiring, among other things, that each director accumulate and retain a minimum of 7,500
16 |
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
shares of our common stock within five years of becoming a director of Pitney Bowes. The stock ownership guidelines provide limited exceptions for the transfer of these shares while the director continues to serve on our board, as discussed in more detail under “Directors’
Stock Plan” below. All members of the board of directors
are in compliance with these guidelines. The directors’ stock ownership guidelines are available on our Corporate Governance website atwww.pb.com under the caption “Our Company—Leadership & Governance.”
Directors’ Stock Plan |
|
In accordance with the Governance Principles of the Board, the Governance Committee reviews and recommends to the board of directors the amount and form of compensation to non-employee members of the board of directors. The Governance Committee reviews the
director compensation policy periodically and may consult from time to time with a compensation consultant, to be selected and retained by the committee, as to the competitiveness of the program. The following is a summary of the director compensation program.
Under the Directors’ Stock Plan, in 20122013 each director who was not an employee of the company received an award of 2,200 shares of restricted stock which are fully vested after six months from the date of grant. (Directors appointed by the board to fill a vacancy during the year receive a prorated grant of shares as described in the Directors’ Stock Plan.) The shares carry full voting and dividend rights upon grant but, unless certain conditions are met, may not be transferred or alienatedsold until the later of (i) termination of service as a director, or, if earlier, the date of a change of control (as defined in the Directors’ Stock Plan), and (ii) the expiration of the six-month period following the grant of such shares. The Directors’ Stock Plan permits certain dispositions of stock granted under the restricted stock program pro-provided that the di-
vided that the directorrector effecting the disposition had accumulated and will retain 7,500 shares of common stock. Permitted dispositions are limited to: (i) transfer to a family member or family trust or partnership; and (ii) donations to charity after the expiration of six months from date of grant. The original restrictions would continue to apply to the donee except that a charitable donee would not be bound by the restriction relating to termination of service from the board of directors.
Ownership of shares granted under the Directors’ Stock Plan is reflected
Shares shown in the table on page 21 of this proxy statement showingdisclosing security ownership of directors and executive officers.officers include shares granted to the directors under the Directors’ Stock Plan.
Directors’ Deferred Incentive Savings Plan |
We maintain a Directors’ Deferred Incentive Savings Plan under which directors may defer all or part of the cash portion of their compensation. Deferred amounts will be notionally “invested” in any combination of severalsev-
eral institutional investment funds. The investment choices available to directors under this plan are the same as those offered to employees under the company’s 401(k) plan. Deferral elections made with respect to plan years prior to 2004 also included as an investment choice
Directors’ Retirement Plan
The board discontinued the ability to invest in options to purchase common stock of the company.
Stock options selected by directors as an investment vehicle for deferred compensation were granted through
the Directors’ Stock Plan. The Directors’ Stock Plan permits the exercise of stock options granted after October 11, 1999 during the full remaining term of the stock option by directors who have terminated service on the board of directors, provided that service on the board is terminated: (i) after ten years of service on the board; (ii) due to director’s death or disability; or (iii) due to the director having attained mandatory directors’ retirement age. The stock options may be exercised for three months following termination for any other reason. The Directors’ Stock Plan also permits the donation of vested stock options, regardless of the date of grant, to family members and family trusts or partnerships. All outstanding stock options are fully vested.
Our Directors’ Retirement Plan, was discontinued, and thewith all benefits previously earned by directors were frozen as of May 12, 1997.
Linda G. Alvarado is the only current director who is eligible to receive a retirement benefit under the plan after
termination of service on the board of directors. As of
the date the plan was frozen, she had completed five years of service as a director, the minimum years of service required to receive an annual retirement benefit of 50% of her retainer as of May 12, 1997. Therefore she will receive an annual benefit of $15,000.
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CORPORATE GOVERNANCE
DIRECTOR COMPENSATION FOR 20122013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
| Fees Earned or |
| Stock |
| Change in |
| All Other |
|
| Total ($) |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney C. Adkins |
| 101,000 |
|
| 31,933 |
| 0 |
|
| 0 |
|
|
| 132,933 |
|
Linda G. Alvarado |
| 92,000 |
|
| 31,933 |
| 26,678 |
|
| 0 |
|
|
| 150,611 |
|
Anne M. Busquet |
| 95,000 |
|
| 31,933 |
| 0 |
|
| 5,000 |
|
|
| 131,933 |
|
Roger Fradin |
| 88,083 |
|
| 43,360 |
| 0 |
|
| 5,000 |
|
|
| 136,443 |
|
Anne Sutherland Fuchs |
| 105,500 |
|
| 31,933 |
| 0 |
|
| 5,000 |
|
|
| 142,433 |
|
S. Douglas Hutcheson |
| 49,000 |
|
| 26,355 |
| 0 |
|
| 0 |
|
|
| 75,355 |
|
James H. Keyes |
| 104,833 |
|
| 31,933 |
| 0 |
|
| 5,000 |
|
|
| 141,766 |
|
Eduardo R. Menascé |
| 113,000 |
|
| 31,933 |
| 0 |
|
| 0 |
|
|
| 144,933 |
|
Michael I. Roth |
| 122,167 |
|
| 31,933 |
| 0 |
|
| 5,000 |
|
|
| 159,100 |
|
David L. Shedlarz |
| 102,500 |
|
| 31,933 |
| 0 |
|
| 5,000 |
|
|
| 139,433 |
|
David B. Snow, Jr. |
| 105,500 |
|
| 31,933 |
| 0 |
|
| 0 |
|
|
| 137,433 |
|
Robert E. Weissman |
| 102,500 |
|
| 31,933 |
| 0 |
|
| 0 |
|
|
| 134,433 |
|
Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3) | All Other Compensation ($)(4) | Total ($) | |||||||||||||||||
Rodney C. Adkins(5) | 34,875 | 0 | 0 | 0 | 34,875 | |||||||||||||||||
Linda G. Alvarado | 96,500 | 33,363 | 0 | 0 | 129,863 | |||||||||||||||||
Anne M. Busquet | 98,000 | 33,363 | 0 | 0 | 131,363 | |||||||||||||||||
Roger Fradin | 93,500 | 33,363 | 0 | 5,000 | 131,863 | |||||||||||||||||
Anne Sutherland Fuchs | 105,500 | 33,363 | 0 | 5,000 | 143,863 | |||||||||||||||||
S. Douglas Hutcheson | 95,000 | 33,363 | 0 | 5,000 | 133,363 | |||||||||||||||||
James H. Keyes(5) | 40,875 | 0 | 0 | 0 | 40,875 | |||||||||||||||||
Eduardo R. Menascé | 119,000 | 33,363 | 0 | 0 | 152,363 | |||||||||||||||||
Michael I. Roth | 160,000 | 33,363 | 0 | 5,000 | 198,363 | |||||||||||||||||
David L. Shedlarz | 107,000 | 33,363 | 0 | 0 | 140,363 | |||||||||||||||||
David B. Snow, Jr. | 108,500 | 33,363 | 0 | 0 | 141,863 | |||||||||||||||||
Robert E. Weissman(5) | 40,875 | 0 | 0 | 0 | 40,875 |
(1) | Each non-employee director receives an annual retainer of $65,000 ($16,250 per quarter) and a meeting fee of $1,500 for each board and committee meeting attended. Committee chairs (except for the Audit Committee chair) receive an additional $1,500 for each committee meeting that they chair, and the Audit Committee chair receives an additional $2,000 for each Audit Committee meeting chaired. In 2012, the Lead Director received an additional annual retainer of $10,000. Effective January 1, 2013, the Non-Executive Chairman receives an additional annual retainer of $50,000. | ||
(2) | On May | ||
(3) | Ms. Alvarado is the only non-employee director who served on the board of directors during | ||
(4) |
| ||
(5) | Mr. Adkins completed his term as a director in May 2013, having expressed his preference not to be re-nominated. Messrs. Keyes and Weissman retired in May 2013. |
Role of Governance Committee in Determining Director Compensation
In accordance with the Governance Principles of the Board, the Governance Committee reviews and recommends to the board of directors the amount and form of compensation to non-employee members of the board of directors. The Governance Committee reviews the di-
rector compensation policy periodically and may consult from time to time with a compensation consultant, to be selected and retained by the committee, as to the competitiveness of the program.
Revised Director Compensation Program
The Governance Committee undertook a review of director compensation in 2013. The compensation for the board of directors was last modified in 2007. The Governance Committee retained an independent compensation consultant, Farient Advisors, to assist in its review. Farient provides no other consulting services to the company.
Farient presented a recommendation to the Governance Committee for changes to the board of directors compensation program, based upon an extensive analysis of comparative data, including director compensation at companies in the peer group used for executive com-
pensation purposes. Farient concluded that the company’s director compensation was below market, particularly in the equity component of the program, when compared with the peer group and the broader benchmark of comparably sized companies.
Based upon its review, including the information Farient provided, the Governance Committee recommended that the board of directors approve changes to the director compensation program. The Governance Committee recommended that the compensation level be set at about the 50th percentile of the total compensation in the peer and broader benchmark groups. The board of
18 |
CORPORATE GOVERNANCE
directors approved the changes to the compensation program, subject to the approval by our stockholders of an amended and restated Directors’ Stock Plan. No new
shares need to be authorized to satisfy awards under the amended and restated Directors’ Stock Plan.
A comparison of the current directors’ compensation program and the new program is shown in the table below.
COMPARISON OF CURRENT AND NEW DIRECTOR COMPENSATION PROGRAMS
Incremental Leadership | ||||||||||||||||||
Board Member | Premiums | |||||||||||||||||
Compensation Element | Current | New | Current | New | ||||||||||||||
Board service | (Board Chairman) | |||||||||||||||||
Cash retainer | $65,000 | $75,000 | $50,000 | $100,000 | ||||||||||||||
Meeting fee | $1,500 | $0 | $0 | $0 | ||||||||||||||
Equity Award | 2,200 shares | $100,000 | ||||||||||||||||
Annual Equity Grant | value-based grant | |||||||||||||||||
Committee service | Committee | |||||||||||||||||
Cash retainer | Chairmen | |||||||||||||||||
• Audit | $0 | $12,000 | $0 | $12,000 | ||||||||||||||
• Executive Compensation | $0 | $10,500 | $0 | $10,500 | ||||||||||||||
• Governance | $0 | $9,000 | $0 | $9,000 | ||||||||||||||
• Finance | $0 | $9,000 | $0 | $9,000 | ||||||||||||||
Meeting Fee | ||||||||||||||||||
• Audit | $1,500 | $0 | $2,000 | $0 | ||||||||||||||
• Executive Compensation | $1,500 | $0 | $1,500 | $0 | ||||||||||||||
• All Other Committees | $1,500 | $0 | $1,500 | $0 | ||||||||||||||
Total Compensation | @$125,000 | @$195,000 | ||||||||||||||||
Ownership Guidelines | 7,500 shares; | 5 times cash retainer; | ||||||||||||||||
5 years to reach | 5 years to reach | |||||||||||||||||
compliance | compliance |
Highlights of the Revised Directors’ Compensation Program are:
• | Cash component will be paid as annual retainers rather than as a combination of a retainer and meeting attendance fees | |
| ||
• | Leadership premiums will be paid to Committee Chairmen rather than as a higher meeting attendance fee | |
• | Increase in leadership premium for Chairman of the Board | |
• | Annual equity grant will be in the form of restricted stock units, the number of which is to be calculated by dividing $100,000 by the fair market value of share of the company’s common stock as of the award date | |
• | The changes to the Directors’ Stock Plan further our goal of providing market-based equity compensation to board members to both attract and | |
• | The stock ownership requirement, to be attained over a five-year period, will be shares having a market value of five times the annual cash retainer, or $375,000 |
A meeting attendance fee of $2,000 will be paid with respect to meetings of the Executive Committee. The Executive Committee did not meet in 2013.
19 |
CORPORATE GOVERNANCE
Relationships and Related-Person Transactions
The board of directors has a written “Policy on Approval and Ratification of Related-Person Transactions” which states that the Governance Committee is responsible for reviewing and approving any related person transactions between Pitney Bowes and its directors, nominees for director, executive officers, beneficial owners of more than five percent of any class of Pitney Bowes voting stock and their “immediate family members” as defined by the rules and regulations of the SEC (“related persons”)(related persons).
Under the related-person transaction approval policy, any newly proposed transaction between Pitney Bowes and a related person must be submitted to the Governance Committee for approval if the amount involved in the transaction or series of transactions is greater than $120,000. Any related-person transactions that have not been pre-approved by the Governance Committee must be submitted for ratification as soon as they are identified. Ongoing related-person transactions are reviewed on an annual basis. The material facts of the transaction and the related person’s interest in the transaction must be disclosed to the Governance Committee. It is the expectation and policy of the board of directors that any related-person transactions will be at arms’ length and on terms that are fair to the company.
If the proposed transaction involves a related person who is a Pitney Bowes director or an immediate family member of a director, that director may not participate in the deliberations or vote regarding approval or ratification of the transaction but may be counted for the purposes of determining a quorum.
The following related-person transactions do not require approval by the Governance Committee:
1. | Any transaction with another company with which a related person’s only relationship is as an employee or beneficial owner of less than ten percent of that company’s shares, if the aggregate amount invested does not exceed the greater of $1 million or two percent of that company’s consolidated gross revenues; |
2. | A relationship with a firm, corporation or other entity that engages in a transaction with Pitney Bowes where the related person’s interest in the transaction arises only from his or her position as a director or limited partner of the other entity that is party to the transaction; |
| 3. | Any charitable contribution by Pitney Bowes to a charitable organization where a related person is an officer, director or trustee, if the aggregate amount involved does not exceed the greater of $1 million or two percent of the charitable organization’s consolidated gross revenues; |
| 4. | Any transaction involving a related person where the rates or charges involved are determined by competitive bids; and |
| 5. | Any transaction with a related person involving services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture, or similar services. |
The Governance Committee may delegate authority to approve related-person transactions to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any approval or ratification decisions to the Governance Committee at its next scheduled meeting.
No transactions were
During 2013, the company submitted one transaction to the Governance Committee for review and ratification. Abby F. Kohnstamm was appointed Executive Vice President and Chief Marketing Officer, effective as of June 17, 2013. Prior to the effective date of her appointment as Chief Marketing Officer, on February 1, 2013, Pitney Bowes had entered into a consulting agreement for a period of four months with Abby F. Kohnstamm & Associates, Inc., a marketing consulting firm which Ms. Kohnstamm founded and served as President and Chief Executive Officer. Pitney Bowes paid Abby F. Kohnstamm & Associates, Inc. $200,000 during 2012.2013 under the consulting agreement. The term of the consulting agreement, and all services performed thereunder, ended prior to the effective date of Ms. Kohnstamm’s appointment as Chief Marketing Officer.
Compensation Committee Interlocks and Insider Participation
|
During 2012,2013, there were no compensation committee interlocks and no insider participation in Executive Compensation Committee decisions that were required to be reported under the rules and regulations of the Securities Exchange Act of 1934, as amended.
20 |
CORPORATE GOVERNANCE
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Title of Class of Stock | Name of Beneficial Owner | Shares Deemed to be Beneficially Owned(1)(2)(3)(4) | Options Exercisable Within 60 Days(4) | % of Class | |||||||||
Common | Linda G. Alvarado | 37,428 | 0 | * | |||||||||
Common | Anne M. Busquet | 15,882 | 0 | * | |||||||||
Common | Roger Fradin | 9,997 | 0 | * | |||||||||
Common | Anne Sutherland Fuchs | 18,763 | 0 | * | |||||||||
Common | S. Douglas Hutcheson | 9,256 | 0 | * | |||||||||
Common | Eduardo R. Menascé | 24,092 | 0 | * | |||||||||
Common | Michael I. Roth | 39,085 | 0 | * | |||||||||
Common | David L. Shedlarz | 25,892 | 0 | * | |||||||||
Common | David B. Snow, Jr. | 17,800 | 0 | * | |||||||||
Common | Marc B. Lautenbach | 334,981 | 250,000 | * | |||||||||
Common | Michael Monahan | 600,282 | 527,720 | * | |||||||||
Common | Mark F. Wright | 18,672 | 0 | * | |||||||||
Common | Daniel J. Goldstein | 59,109 | 39,855 | * | |||||||||
Common | Abby F. Kohnstamm | 0 | 0 | * | |||||||||
Common | Leslie Abi-Karam(5) | 526,720 | 526,720 | * | |||||||||
Common | Vicki A. O’Meara(5) | 276,136 | 226,295 | * | |||||||||
Common | All executive officers and directors as a group (19) | 2,400,222 | 1,894,798 | 1.17 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Title of |
| Name of Beneficial Owner |
| Shares |
| Options |
| % of Class |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common |
| Rodney C. Adkins |
| 12,768 |
|
| 0 |
|
| * |
|
|
| Common |
| Linda G. Alvarado |
| 35,228 |
|
| 0 |
|
| * |
|
|
| Common |
| Anne M. Busquet |
| 13,682 |
|
| 0 |
|
| * |
|
|
| Common |
| Roger Fradin |
| 7,797 |
|
| 0 |
|
| * |
|
|
| Common |
| Anne Sutherland Fuchs |
| 16,563 |
|
| 0 |
|
| * |
|
|
| Common |
| S. Douglas Hutcheson |
| 2,056 |
|
| 0 |
|
| * |
|
|
| Common |
| James H. Keyes |
| 28,302 |
|
| 0 |
|
| * |
|
|
| Common |
| Eduardo R. Menascé |
| 21,892 |
|
| 0 |
|
| * |
|
|
| Common |
| Michael I. Roth |
| 36,723 |
|
| 0 |
|
| * |
|
|
| Common |
| David L. Shedlarz |
| 23,692 |
|
| 0 |
|
| * |
|
|
| Common |
| David B. Snow, Jr. |
| 15,600 |
|
| 0 |
|
| * |
|
|
| Common |
| Robert E. Weissman |
| 33,429 |
|
| 1,789 |
|
| * |
|
|
| Common |
| Marc B. Lautenbach |
| 0 |
|
| 0 |
|
| * |
|
|
| Common |
| Murray D. Martin |
| 2,708,973 |
|
| 2,447,574 |
|
| 1.33 | % |
|
| Common |
| Michael Monahan |
| 575,847 |
|
| 519,319 |
|
| * |
|
|
| Common |
| Leslie Abi-Karam |
| 547,351 |
|
| 513,319 |
|
| * |
|
|
| Common |
| Vicki A. O’Meara |
| 227,448 |
|
| 204,556 |
|
| * |
|
|
| Common |
| John E. O’Hara |
| 394,865 |
|
| 354,621 |
|
| * |
|
|
| Common |
| All executive officers and directors as a group (22) |
| 5,227,026 |
|
| 4,507,505 |
|
| 2.54 | % |
|
| Less than 1% of Pitney Bowes Inc. common stock. |
(1) | These shares represent common stock beneficially owned as of March 1, |
(2) | Other than with respect to ownership by family members, the reporting persons have sole voting and investment power with respect to the shares listed. |
(3) | Includes shares that are held indirectly through the Pitney Bowes 401(k) Plan and its related excess plan. |
(4) |
|
| The director or executive officer has the right to acquire beneficial ownership of this number of shares within 60 days of March 1, |
(5) | Ms. Abi-Karam and Ms. O’Meara terminated their employment with the Company in September, 2013. See page 68 for further details. |
21 |
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
The only persons or groups known to the company to be the beneficial owners of more than five percent of any class of the company’s voting securities are reflected in the chart below. The following information is based solely upon Schedules 13G and amendments thereto filed by the entities shown with the SEC as of the date appearing below.
|
|
|
|
|
|
|
|
Name and Address of Beneficial Owner |
| Amount and Nature of |
| Percent of |
| ||
State Street Corporation |
| 27,405,915 | (2) |
| 13.7 | % |
|
|
|
|
|
|
|
|
|
BlackRock, Inc. |
|
|
|
|
|
|
|
40 East 52nd Street |
| 21,084,229 | (3) |
| 10.5 | % |
|
New York, NY 10022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Vanguard Group, Inc. |
|
|
|
|
|
|
|
100 Vanguard Blvd. |
| 11,694,440 | (4) |
| 5.8 | % |
|
Malvern, PA 19355 |
|
|
|
|
|
|
|
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership of Common Stock | Percent of Common Stock(1) | ||
BlackRock, Inc. 40 East 52nd Street New York, NY 10022 | 14,279,704(2) | 7.1% | ||
The Vanguard Group, Inc. 100 Vanguard Blvd Malvern, PA 19355 | 14,216,972(3) | 7.0% | ||
Iridian Asset Management LLC David L. Cohen, Harold J. Levy 276 Post Road West Westport, CT 06880-4704 | 12,913,791(4) | 6.4% |
(1) | There were |
(2) | As of December 31, |
|
|
As of December 31, |
Section 16(a) Beneficial Ownership Reporting Compliance
Directors and persons who are considered “officers” of the company for purposes of Section 16(a) of the Securities Exchange Act of 1934 and greater than ten percent stockholders (“Reporting Persons”) are required to file reports with the SEC showing their holdings of and transactions in the company’s securities. It is generally the practice of the company to file the forms on behalf of its Reporting Persons who are directors or officers. WeBased solely on a review of such forms and amendments furnished to us and written representations that no other reports were required, we believe that all such forms have been timely filed for 2012.2013.
22 |
Proposal 1: Election of Directors
The board of directors believes that, as a whole, the board should include individuals with a diverse range of experience to give the board depth and breadth in the mix of skills represented for the board to oversee management on behalf of our stockholders. In addition, the board of directors believes that there are certain attributes that each director should possess, as described below. Therefore, the board of directors and the Governance Committee consider the qualifications of directors and nominees both individually and in the context of the overall composition of the board of directors.
The board of directors, with the assistance of the Governance Committee, is responsible for assembling appropriate experience and capabilities within its membership as a whole, including financial literacy and expertise needed for the Audit Committee as required by applicable law and New York Stock Exchange listing standards. The Governance Committee is responsible for reviewing and revising, as needed, criteria for the selection of directors. It also reviews and updates, from time to time, the board candidate profile used in the context of a director search, in light of the current and anticipated needs of the company and the experience and talent then represented on the board of directors. The Governance Committee reviews the qualifications of director candidates in light of the criteria approved by the board of directors and recommends candidates to the board for election by the stockholders at the annual stockholders meeting.
The Governance Committee seeks to include individuals with a variety of occupational and personal backgrounds on the board of directors in order to obtain a range of viewpoints and perspectives and to enhance the diversity of the board of directors in such areas as experience and geography, as well as race, gender, ethnicity and age.
Among other things, the board of directors has determined that it is important that the board should include members with the following skills and experiences:
• | ||
| Financial acumenfor evaluation of financial statements and capital structure. |
• | ||
|
| |
| Software and technology acumen,coupled with in-depth understanding of our business and markets, to provide counsel and oversight with regard to our strategy. | |
|
| |
| Human resources experience, including executive compensation experienceto help us attract, motivate and retain world-class talent. | |
| Corporate governance experienceat publicly traded companies to support the goals of greater transparency, accountability for management and the board, and protection of stockholder interests. | |
| Understanding of customer communications and marketing channelsto support our client focus and customer communications and marketing strategy. | |
| Turnaround experienceto help us assess opportunities to reposition certain of our businesses. | |
| Leadershipto motivate others and identify and develop leadership qualities in others. |
Additionally, the board believes all directors should demonstrate integrity and ethics, business acumen, sound judgment, and the ability to commit sufficient time and attention to the activities of the board of directors, as well as the absence of any conflicts with our interests.
The Governance Committee assesses the effectiveness of its criteria when evaluating and recommending new candidates.
Each director brings experience and skills that complement those of the other directors. The board of directors believes that all the directors nominated for election are highly qualified, and have the attributes, skills and experience required for service on the board of directors. Additional information about each director is included with biographical information for each appearing below.
23 |
PROPOSAL 1: ELECTION OF DIRECTORS
PROPOSAL 1: ELECTION OF DIRECTORS
Directors are elected to terms of one year. The board of directors presently has thirteenten members whose terms expire in 2013.2014. Each of the nominees for election at the 20132014 annual meeting of stockholders is a current board member and was selected by the board of directors as a nominee in accordance with the recommendation of the Governance Committee. If elected at the 20132014 annual meeting of stockholders, each of the nominees would serve until the 20142015 annual meeting of stockholders and until his or her successor is elected and has qualified, or until such director’s death, resignation or removal.
Effective as of July 9, 2012, the board of directors increased the size of the board from twelve to thirteen members, and elected Mr. Hutcheson to fill the resulting vacancy for a term expiring on May 13, 2013. Mr. Hutcheson was brought to the Governance Committee’s attention by an independent director search firm retained by the committee to identify candidates fitting the profile and meeting the criteria established by the committee, with the concurrence of the board of directors.
As of December 3, 2012, Mr. Martin resigned from the board of directors, and the board elected Mr. Lautenbach to fill the resulting vacancy for a term expiring on May 13, 2013. Mr. Adkins expressed a preference not to be renominated. Mr. Keyes and Mr. Weissman will retire from the board as of May 13, 2013 as required by our Gover-
nance Principles. Effective as of May 13, 2013, the board of directors reduced the size of the board from thirteen to ten members.
For the 2013 annual meeting, the Governance Committee recommended to the board of directors, and the board approved, the nominations of Ms. Alvarado, Ms. Busquet, Mr. Fradin, Ms. Fuchs, Mr. Hutcheson, Mr. Lautenbach, Mr. Menascé, Mr. Roth, Mr. Shedlarz, and Mr. Snow to one-year terms expiring at the 2014 annual meeting. Information about each nominee for director, including the nominee’s age, as of March 1, 2013,2014, is set forth beginning on page 25 of this proxy statement. Unless otherwise indicated, each nominee or incumbent has held his or her present position for at least five years.below.
Should you choose not to vote for a nominee, you may list on the proxy the name of the nominee for whom you choose not to vote and mark your proxy under proposal 1 for all other nominees, or grant your proxy by telephone or the Internet as described in the proxy voting instructions.
Should any nominee become unable to accept nomination or election as a director (which is not now anticipated), the persons named in the enclosed proxy will vote for such substitute nominee as may be selected by the board of directors, unless the size of the board is reduced. At the annual meeting, proxies cannot be voted for more than the ten director nominees.
Vote Required; Recommendation of the Board of Directors
|
In accordance with our By-laws, in an uncontested election, a majority of the votes cast is required for the election of directors. Abstentions and broker non-votes will not be votes cast and therefore will have no effect on the outcome of the vote. OurThe Board of Directors Governance Principles provide that any nominee for director in this election who fails to receive a majority of votes cast in the affirmative must tender his or her resignation for consideration by the Governance Committee. The Governance Committee will recommend to the board of directors the action to be taken with respect to such offer of resignation. The board of directors will act on the Governance Committee’s recommendation and publicly disclose its decision within 90 days from the date of the certification of the election results.
The board of directors recommends that stockholders vote FOR the election of all the director nominees.
|
![]() | Linda G. Alvarado, | |
| ||
![]() | Anne M. Busquet, |
24 |
PROPOSAL 1: ELECTION OF DIRECTORS
![]() | Roger Fradin, As the chief executive officer of a |
| |
| |
![]() | Anne Sutherland Fuchs, Ms. Fuchs has experience as a senior executive with operational responsibility within the media and marketing industries, as well as experience as global chief executive officer of a unit of LMVH Moet Hennessy Louis Vuitton. Her experience in the publishing industry includes senior level operational roles at Hearst, Conde Nast, Hachette and CBS. She possesses experience in product development, marketing and branding, international operations, as well as in human resources and executive compensation. Her experience in managing a number of well-known magazines contributes to her knowledge and understanding of businesses closely tied to the mailing industry. Her work for the City of New York has further informed her understanding of government operations and government partnerships with the private sector. | |
| ||
![]() | S. Douglas Hutcheson, Mr. Hutcheson brings to the board of directors significant operational and financial expertise as | |
| ||
![]() | Marc B. Lautenbach, As a former senior operating executive at a global technology services company, Mr. Lautenbach possesses substantial operational experience, including in technology services, software solutions, application development, and infrastructure management, as well as marketing, sales and product development. Mr. Lautenbach has extensive experience working with a breadth of client segments, including in the small and medium sized business segment and public and enterprise markets. He also has significant international experience. |
25 |
PROPOSAL 1: ELECTION OF DIRECTORS
![]() | ||
Eduardo R. Menascé, Mr. Menascé has broad experience as a former senior executive responsible for a significant international operation of a public company, as well as experience in senior leadership positions with a number of European and Latin American businesses, including business operations, finance and capital markets, international and emerging markets, technology, customer communications and marketing channels, and executive compensation. His experience on other public company boards and as a director of the New York chapter of the National Association of Corporate Directors contributes to his knowledge of public company matters. |
|
![]() | Michael I. Roth, Mr. Roth has broad experience as the chief executive officer of a public company and as a member of other public company boards of directors, as well as previous experience as a certified public accountant and attorney. In addition to his experience as chief executive officer of The Interpublic Group of Companies, his experience includes service as the chief executive officer of The MONY Group Inc. prior to its acquisition by AXA Financial, Inc. He brings to the board of directors his deep financial expertise, and experience in business operations, capital markets, international markets, emerging technologies and services, marketing channels, corporate governance, and executive compensation. | |
![]() | David L. Shedlarz, Mr. Shedlarz has broad experience as a former senior executive of a public company, experience as a former chief financial officer and as a member of other public company boards of directors. He possesses financial expertise, knowledge of business operations and capital markets, international markets, emerging technologies and services, customer communications and marketing channels, human resources and executive compensation, regulatory and government affairs, product development, and corporate governance. | |
![]() | David B. Snow, Jr., In addition to his experience as the chief executive officer of a public company, Mr. Snow has a strong background in operations, having served in senior leadership positions at several companies including WellChoice (Empire Blue Cross Blue Shield) and Oxford Health Plans. Mr. Snow also brings to the board of directors a broad range of experience, including finance and capital markets, emerging technologies, customer communications and marketing channels, human resources and executive compensation, regulatory and government affairs, corporate governance, and product development. |
| ||
| ||
| ||
| ||
| ||
| ||
26 |
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The Audit Committee functions pursuant to a charter that is reviewed annually and was last amended in September 2013. The committee represents and assists the board of directors in overseeing the financial reporting process and the integrity of the company’s financial statements. The committee is responsible for retaining the independent accountants and pre-approving the services they will perform, and for reviewing the performance of the independent accountants and the company’s internal audit function. The board of directors, in its business judgment, has determined that all five of the members of the committee are “independent,” as required by applicable listing standards of the New York Stock Exchange.
In the performance of its responsibilities, the committee has reviewed and discussed the audited financial statements with management and the independent accountants. The committee has also discussed with the independent accountants the matters required to be discussed under the rules adopted by the Public Company Accounting Oversight Board (“PCAOB”). Finally, the committee has received the written disclosures and the letter from the independent accountants required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with the independent accountants their independence.
In determining whether to recommend that the stockholders ratify the selection of PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) as Pitney Bowes’ independent auditor for 2014, management and the committee, as they have done in prior years, engaged in a review of PricewaterhouseCoopers. In that review, the committee considers the continued independence of PricewaterhouseCoopers, its geographic presence compared to that of Pitney Bowes, its industry knowledge, the quality of the audit and its services, the audit approach and supporting technology, any Securities and Exchange Commission actions and other legal issues as well as PCAOB inspection reports. Pitney Bowes management prepares an annual assessment that includes an analysis of (1) the above criteria for PricewaterhouseCoopers and the other “Big Four” accounting firms; (2) an assessment of whether firms outside of the “Big Four” should be considered; and (3) a detailed analysis of the PricewaterhouseCoopers’ fees. In addition, PricewaterhouseCoopers reviews with the committee its analysis of its independence. Based on the results of this review this year, the committee concluded that PricewaterhouseCoopers is independent and that it is in the best interests of Pitney Bowes and its investors to appoint PricewaterhouseCoopers to serve as Pitney Bowes’ independent registered accounting firm for 2014.
Based upon the review of information received and discussions as described in this report, the committee recommended to the board of directors that the audited financial statements be included in the company’s Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on February 21, 2014.
By the Audit Committee of the board of directors,
David L. Shedlarz, Chair
Roger Fradin
Anne Sutherland Fuchs
S. Douglas Hutcheson
Michael I. Roth
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Proposal 2: Ratification of the Audit Committee’s Appointment of the Independent Accountants for 2014
The Audit Committee has appointed PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) as the independent accountants for Pitney Bowes for 2013.2014. Although not required by law, this matter is being submitted to the stockholders for ratification, as a matter of good corporate governance. If this proposal is not ratified at the annual meeting by the affirmative vote of a majority of the votes cast, the Audit Committee intends
to reconsider its appointment of PricewaterhouseCoopers as its independent accountants. PricewaterhouseCoopers has no direct or indirect financial interest in Pitney Bowes or any of its subsidiaries. A representative from PricewaterhouseCoopers willis expected to attend the annual meeting and willto be available to respond to appropriate questions and will have the opportunity to make a statement if he or she desires to do so.
Principal Accountant Fees and Services
Aggregate fees billed for professional services rendered for the company by PricewaterhouseCoopers for the years ended December 31, 20122013 and 2011,2012, were (in millions):
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Audit | $ | 8.8 | $ | 7.0 | |||||||
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Total | $ | 9.7 | $ | 8.5 |
Audit Fees:fees:The Audit fees for the years ended December 31, 20122013 and 20112012 were for services rendered for the audits of the consolidated financial statements and internal control over financial reporting of the company and selected subsidiaries, statutory audits, issuance of comfort letters, consents, income tax provision procedures, and assistance with review of documents filed with the SEC. The Audit fees were higher in 2013 compared with 2012 due to the additional audit services required in connection with the divestiture of Pitney Bowes Management Services in 2013.
Audit-Related Fees:The Audit-Related fees for the years ended December 31, 20122013 and 20112012 were for assurance and related services related to employee benefit plan audits, procedures performed for SSAE 16 reports, attestation services pertaining to financial reporting that are not required by statute or regulation
and consultations concerning financial accounting and reporting standards.
Tax Fees:The Tax fees for the years ended December 31, 20122013 and 20112012 were for services related to tax compliance, including the preparation and/or review of tax returns and claims for refunds.
All Other Fees:The All Other fees for the year ended December 31, 2011 related to services provided by a consulting firm that was acquired by PricewaterhouseCoopers during the course of its engagement with the company.
The Audit Committee has adopted policies and procedures to pre-approve all services to be performed by PricewaterhouseCoopers. Specifically the committee’s policy requires pre-approval of the use of PricewaterhouseCoopers for audit services as well as detailed, specific types of services within the following categories of audit-related and non-audit services: merger and acquisition due diligence and audit services; employee benefit plan audits; tax services; and procedures required to meet certain regulatory requirements.requirements; and selected consulting services. The committee will not approve any service prohibited by regulation and does not anticipate approving any service in addition to the categories described above.regulation. In each case, the committee’s policy is to pre-approve a specific annual budget by category for such audit, audit-related and tax services which the company anticipates obtaining from PricewaterhouseCoopers, and has required management to report the actual fees (versus budgeted fees) to the committee on a periodic basis throughout the year. In addition, any new, unbudgeted engagement for audit services or within one of the other pre-approved categories described above must be pre-approved by the committee or its chair.
Vote Required; Recommendation of the Board of Directors
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Ratification of the appointment of Pitney Bowes’ independent accountants requires the affirmative vote of a majority of votes cast. Abstentions and broker non-votes will not be votes cast and therefore will have no effect on the outcome of the vote.
The board of directors recommends that stockholders vote FOR the ratification of PricewaterhouseCoopers LLP as our independent accountants for 2013.2014.
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Proposal 3: Advisory Vote to Approve Executive Compensation
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In accordance with SEC rules, stockholders are being asked to approve, on an advisory or non-binding basis, the compensation of our named executive officers as disclosed in this proxy statement.
Over
This proposal, commonly known as a “Say-On-Pay” proposal and required by the courseDodd-Frank Wall Street Reform and Consumer Protection Act of 2010 provides our stockholders with the last year, the Executive Compensation Committee engaged inopportunity to express their views, on an extensive re-examination ofadvisory (non-binding) basis, on our executive compensation program followingfor our named executive officers (“NEOs”) for fiscal year 2013 as described in “Compensation Discussion and Analysis” or (CD&A) beginning on page 35 of this proxy statement, as well as the vote cast against our“Summary Compensation Table” and other related compensation tables and narratives, on pages 57 through 73 of this proxy statement.
The stockholders have approved the board of directors’ recommendation to hold advisory resolutionvotes on executive compensation or Say-on-Payannually. At the company’s annual meeting of stockholders in 2013, stockholders overwhelmingly approved the company’s executive compensation by a vote at our 2012 annual meeting. of approximately 93% of the votes cast in favor.
The Executive Compensation Committee and the independent board members received direct feedback from stockholders through two outreach campaigns spearheaded byof directors believe that the Executive Compensation Committee’s newly appointed chairman. The Executive Compensation Committee also engaged a new independent compensation consultant, Pay Governance LLC, to assist them in assessing the stockholder feedback and in conducting their own analysis in deciding which changes to implement. The committee chairman launched his first stockholder outreach campaignprogram described in the spring, beforeCD&A establishes effective incentives for the 2012 annual meeting. During that campaign,sustainable achievement of positive results without encouraging unnecessary or excessive risk-taking. Our compensation program appropriately aligns pay and performance incentives with stockholder interests and enables the committee’s chairmancompany to attract and members of senior managementretain talented executives. The company and the committee have reached out to stockholders holding over 60% of our outstanding shares to elicitsolicit their feedback regardingviews on the company’s executive compensation structure.
The following are the most critical factors driving the board and the committee’s conclusion in establishing the incentive compensation payouts:
best performing stock on the basis of total shareholder return in the entire S&P 500; | ||
• | the financial results in 2013 were within the guidance provided by the company to its stockholders; and | |
• | the rate of decrease in revenue was the lowest in recent years, and earnings per diluted share and adjusted earnings before interest and taxes both showed an improvement in the company’s performance as compared to prior years. |
Based on these financial results when compared against the pre-determined financial goals established by the committee for 20131, the annual incentive payout multiplier for the NEOs was 109.5% and the 2011-2013 long-term cash incentive units award payout was $1.50.
As discussed in the CD&A, the committee has structured our executive compensation policies and programs. Inprogram based on the fall, after the Executive Compensation Committee and the board had approved and announced the changesfollowing central principles:
(1) | Compensation should be tied to performance and long-term stockholder return and performance based compensation should be a greater part of total compensation for more senior positions; | |
(2) | Compensation should reflect leadership position and responsibility; | |
(3) | Incentive compensation should reward both short-term and long-term performance; | |
(4) | Compensation levels should be sufficiently competitive to attract and retain talent; and | |
(5) | Executives should own meaningful amounts of Pitney Bowes stock to align their interests with Pitney Bowes stockholders. |
We believe our executive compensation program
the committee’s chairman again launched demonstrates a stockholder outreach campaign initiating contact with holders of approximately 64% of our outstanding shares to explain the announced changes to our program and to elicit their feedback. Both in the spring and the fall outreach campaigns, the committee chairman, together with members of senior management held meetings with more than a majority of the stockholders with whom they initiated contact. Stockholders responded favorably at the meetings held in the fall to the announced changes.
The committee chairman and members of management also met with the two prominent stockholder proxy advisory firms to obtain feedback. The committee chairman is committed to continuing his dialogue with our stockholders on executive compensation on a regular basis.
Because the committee adopted its 2012 executive compensation program before the 2012 advisory vote on executive compensation, some of the recent changes will not be reflected in named executive officer compensation tables until our 2013 executive compensation is reported in the 2014 proxy statement. Where possible, however, the committee retroactively adjusted elements of long term compensation and also exercised negative discretion on the final payout of the annual incentive and CIUs to align with our performance and total stockholder return compared to our new peer group.
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Please see “Compensation Discussion and Analysis – Discussion of Compensation Actions – Response to the 2012 Say-on-Pay Vote” beginning on page 49 of this proxy statement for a more complete summary of these changes.
We have a “pay-for-performance” philosophy that forms the foundation of all decisions regarding compensation of our named executive officers. We believe we have strengthened thestrong link between pay and performance in theits design of our executive compensation program. The pay-for-performance link is evidenced as follows:and exhibits strong pay governance practices.
1 | See detailed discussion of the 2013 pre-determined financial goals beginning on page 44. |
PROPOSAL 3: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
Existing Pay for Performance | and Strong Pay Governance Practices | |||
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Please see “Compensation Discussion and Analysis – Compensation Payout Overview” beginning on page 53 of this proxy statement for a more detailed discussion of the 2012 executive compensation awards and payouts.
In addition to the changes summarized above, we are maintaining the existing compensation practices that represent strong corporate governance policies.
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| An independent compensation consultant who reports directly to the committee and performs no other services for the company; | ||
| A direct line of communication between our stockholders and the board of directors; | ||
| No employment agreements with our executive officers; | ||
| No special arrangements whereby extra years of prior service are credited under our pension plans; | ||
| No perquisites other than limited financial counseling and an executive physical benefit; | ||
| “Double-trigger” vesting provisions in our | ||
| A “clawback” policy that permits the company to recover bonuses from senior executives whose fraud or misconduct resulted in a significant restatement of financial results; | ||
| Prohibitions against pledging and hedging our stock; | ||
| An annual risk assessment of our pay practices; | ||
| Significant stock ownership guidelines that align executives’ and directors’ interests with those of stockholders; and | ||
| An annual stockholder advisory vote on executive compensation. |
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PROPOSAL 3: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
The committee has also acted to make changes in 2013 in accordance with good pay governance, changing market practices and stockholder feedback by eliminating tax gross-ups, reducing severance benefits, providing onlyde minimisfringe benefits and reducing duplicative financial metrics between the annual and long-term incentive plans.
Finally, the committee and the company have made continual efforts to contact stockholders with respect to their thoughts on our compensation structure. Over the past years, the committee has adopted changes in executive compensation that directly relate to comments received from the stockholders.
Key Changes Made to our Executive Compensation Program in 2013
• | Increased the weighting of financial objectives to 100% for the annual incentive program; | ||
• | Utilizing as part of the LTI program a three-year cumulative TSR metric; | ||
• | Reduced duplicative metrics across award types by replacing the Adjusted earnings per share financial objective with an Adjusted earnings before interest and taxes objective in annual incentive; | ||
• | Enhanced disclosure of performance targets in the 2013 and 2014 proxy; | ||
• | Revised our peer group in light of the evolving strategic direction of the company with increasing emphasis in the software and technology arena and to reflect the divestiture of PBMS; | ||
• | Restructured the LTI design to be implemented in 2014 awards, making all long-term awards stock based; | ||
• | Expanded the executive stock ownership policy to: (i) include more senior executives, and (ii) restrict the shares that will count toward stock holding requirement; | ||
• | Introduced the Radford Survey High-Tech Industry in addition to the Towers Watson Regressed Compensation Report in determining the competitiveness of executive compensation; and | ||
• | Reduced severance benefits payable on account of a Change of Control from three to two times participant’s annual salary and average annual incentive award and eliminated the excise tax gross-up. |
We believe thatIn addition to the changes summarized above, together with our otherwe are maintaining the existing strong compensation practices have addressedthat represent strong corporate governance policies.
We urge stockholders to read the concernsCD&A beginning on page 35 of manythis proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the “Summary Compensation Table” and other related compensation tables and narratives on pages 57 through 73, which provide detailed information on the compensation of our NEOs.
We also invite stockholders to read our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and have resultedExchange Commission on February 21, 2014, which describes our business and 2013 financial results in a compensation program deserving of stockholder support. more detail.
In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we are
asking stockholders to indicate their support for our named executive officerNEO compensation by voting FOR this resolution. This vote is not intended to address any specific item of compensation, but rather the overall compensation for our named executive officers. Accordingly, we are asking our stockholders to vote FOR the following advisory resolution at the 2013 annual meeting:2014 Annual Meeting:
RESOLVED, that the stockholders of Pitney Bowes Inc. approve on an advisory basis the compensation of the company’s named executive officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrativenarratives in this proxy statement for the company’s 2013 annual meeting2014 Annual Meeting of stockholders.Stockholders.
This advisory resolution, commonly referred to as a “Say-on-Pay”“Say-On-Pay” resolution, is non-binding on the board of directors. Although non-binding, our board of directors and the committee will carefully review and consider the voting results when making future decisions regarding our executive compensation program. The next “Say-on-Pay” advisory vote will occur at the 2015 annual meeting.
Vote Required; Recommendation of the Board of Directors
The vote on executive compensation is an advisory vote. The affirmative vote of the majority of the votes cast will constitute the stockholders’ non-binding approval with respect to our executive compensation programs. Abstentions and broker non-votes will not be votes cast and therefore will have no effect on the outcome of the vote.
The board of directors recommends that stockholders vote FOR the approval of the advisory resolution on executive compensation.
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Proposal 4: Approval of the Pitney Bowes Inc. Directors’ Stock Plan
Proposal 4: Approval of the Pitney Bowes Inc.
Directors’ Stock Plan, as Amended and Restated
The board of directors recommends that stockholders approve the Pitney Bowes Inc. Directors’ Stock Plan, as amended and restated (Plan). The board of directors unanimously approved the Plan in February 2014. The Plan will become effective May 12, 2014, upon stockholder approval at our annual meeting. The Plan governs grants of stock-based awards to non-employee directors, which is an important component of our non-
employee director compensation program, enabling us to attract and retain persons of outstanding competence to serve as non-employee directors and encouraging the alignment of non-employee director compensation with stockholder interests.
The complete text of the Plan approved by the board of directors is attached as Annex A to this Proxy Statement. The following discussion is qualified in all respects by reference to Annex A.
Why We Believe You Should Approve the Plan
Equity compensation is an essential part of our non-employee director compensation program and enables us to attract and retain persons of outstanding ability. We believe our future success depends on our ability to attract, motivate and retain high quality non-employee directors and approval of the Plan is critical to achieving this success. The potential change in value of the equity compensation to the board members over time directly aligns their interests with the long-term interests of our stockholders.
We believe that we have demonstrated our commitment to sound equity compensation practices. We recognize that equity compensation awards dilute stockholder equity and, therefore, we have carefully managed our equity incentive compensation. In fact, the equity to be utilized under the new Directors’ Stock Plan will be drawn from the Pitney Bowes Stock Plan equity reserve which the stockholders previously approved in 2013. The board targeted its compensation, including the equity component, to be consistent with the market median, and we believe our historical share usage has been responsible and mindful of stockholder interests, as described further below.
Plan Highlights
PROPOSAL 3: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
The vote on executive compensation is an advisory vote. The affirmative vote of the majority of the votes cast will constitute the stockholders’ non-binding approval with respect to our executive compensation programs. Abstentions and broker non-votes will not be votes cast and therefore will have no effect on the outcome of the vote.
The board of directors recommends that stockholders vote FOR the approval of the advisory resolution on executive compensation.
Proposal 4: Approval of the Pitney Bowes Inc. 2013 Stock Plan
The board of directors recommends that stockholders approve the Pitney Bowes Inc. 2013 Stock Plan (the “Plan”). Based upon the recommendation of the Executive Compensation Committee, the board of directors unanimously approved the Plan in December 2012 and approved the maximum shares to be provided under the Plan in February 2013. The Plan will become effective May 13, 2013 subject to stockholder approval at our
annual meeting. The Plan would govern grants of stock-based awards to employees, which is an important component of our compensation program encouraging the alignment of executive compensation with stockholder interests. The complete text of the Plan approved by the board of directors is attached as Annex A to this Proxy Statement. The following discussion is qualified in all respects by reference to Annex A.
Why we believe you should approve the Plan
Equity compensation is an essential part of our compensation program to help us attract and retain talent in order to deliver our strategy and create stockholder value. We believe our future success depends on our ability to attract, motivate and retain high quality employees and approval of the Plan is critical to achieving this success.The use of our stock as part of our compensation program is also important to our continued success because it fosters a pay-for-performance culture, which is an important element of our overall compensation program. We believe that equity compensation motivates employees to create stockholder value because the
value employees realize from equity compensation is based on our stock performance.Finally, we believe that we have demonstrated our commitment to sound equity compensation practices. We recognize that equity compensation awards dilute stockholder equity and, therefore, we have carefully managed our equity incentive compensation. Our equity compensation practices are targeted to be consistent with the market median, and we believe our historical share usage has been responsible and mindful of stockholder interests, as described further below.
Plan Highlights
The Plan is an “omnibus” stock plan that provides for a variety of equity award vehicles to maintain flexibility. The Plan will permit the grant of stock options, stock appreciation rights (“SARs”), restricted stock awards, stock units, and other stock-based awards. Currently, participant awards largely consistautomatic annual grants of restricted stock units with occasional usefor non-employee directors.
Awards granted under the Plan will be settled by the issuance of shares of common stock, options. Also$1 par value per share, of the company (Common Stock), that are drawn from the shares of Common Stock available for issuance under the Pitney Bowes Inc. 2013 Stock Plan (2013 Stock Plan), previously approved by the company’s stockholders. As has historically been and continues to be the case, however, non-employee directors will not participate in unique circumstances, where neededthe 2013 Stock Plan. Approval of the Plan will not result in an increase in the number of shares that are available for attracting, retainingissuance under our equity compensation plans. As of December 31, 2013, 19,180,600 shares remain available for issuance under the 2013 Stock Plan. Based on our past experience, we believe the previously approved share pool under the 2013 Stock Plan will provide us an opportunity to grant equity awards under the 2013 Stock Plan and motivating executive talent, restricted stock may be awarded. Thethe Plan is flexible and will allow usfor approximately four more years before we would need to change equity grant practices from time to time.seek stockholder approval of more shares.
Provisions Designed to Protect Stockholder
Interests
The Plan has several provisions designed to protect stockholder interests and promote effective corporate governance including:
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Determination of the Shares Available Underthe PROPOSAL 4: APPROVAL OF THE PITNEY BOWES INC. DIRECTORS’ STOCK PLAN
PlanIn order to decide upon a number Terms and Conditions
Purpose of the Plan features,
The purpose of the Plan is to enable the company to attract and retain persons of outstanding competence to serve as non-employee directors of the company by paying such persons a portion of their compensation in stock of the company pursuant to the terms of the Plan.
Plan Administration
This Plan is to be administered by the Governance Committee of the board or any successor committee consulted Pay Governance LLC,having responsibility for the remuneration of the directors (hereinafter in this Proposal referred to as the “Committee”).
Eligibility and Participation
Persons who serve as members of the board of directors of the company and who are not “employees” of the company or its independent compensation advisor. Pay Governance examinedsubsidiaries are eligible to participate in the Plan. Currently, all of the company’s nine (9) non-employee directors are eligible to, and do participate in, the Plan.
Shares Available under the Plan
Awards granted under the Plan will be settled by the issuance of shares of Common Stock that are drawn from the shares of Common Stock available for issuance from time to time under the 2013 Stock Plan, previously approved by the company’s stockholders. Shares of Common Stock issued pursuant to awards of restricted stock units under the Plan shall reduce, on a number of factors, including our burn rate, and performed an overhang analysis. The committee considered Pay Governance’s analysis and advice in reaching its decision onone-for-one basis, both (a) the totaloverall maximum number of shares to include inof Common Stock available for issuance under the Plan. The committee2013 Stock Plan and (b) the board also consideredsub-limit under the need2013 Stock Plan for stockholder approvalthe number of the Plan to maintain the ability to make performance-basedshares that may be issued for awards that are intendednot options or stock appreciation rights.
As of December 31, 2013, 19,180,600 shares remain available for issuance under the 2013 Stock Plan share pool. In addition to comply with Internal Revenue Code Section 162(m).
A maximumthe number of 19 million shares plusdescribed in the preceding sentence, any shares subject toassociated with outstanding awards under the prior plans (as defined in the 2013 Stock Plan) as of April 30, 2013 under any Prior Plans (as defined below) that on or after that
such date cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested and nonforfeitable shares), subject to adjustment as described below, will be available for grants of all equity awards. Any shares authorized but not awarded under the current 2007 Stock Plan will be extinguished under that plan upon approval of the Plan. Prior Plans means the Pitney Bowes Stock Plan, as amended and restated as of January 1, 2002 and the Pitney Bowes Inc. 2007 Stock Plan as amended through February 2010.
The board believes that 19 million shares, 11.5 million of which are reserved for full value share awards, represents a reasonable amount of potential equity dilution and provides a powerful incentive for employees to increase the value of the company for all stockholders. Based on our past experience, we believe the 19 million shares will provide us an opportunity to grant equity awards for approximately five years before we would need to seek stockholder approval of more shares. In order to determine the number of shares to be authorized under the Plan, the committee and the board considered the need for the shares and the potential dilution that awarding the requested shares may have on current stockholders.
Equity OverhangAs of December 31, 2012, there were 16,644,439 sharesbecome available for issuance under the Prior Plans that will be extinguished upon approval2013 Stock Plan share pool. Shares delivered out of the 2013 Plan. If approved,Stock Plan share pool will be authorized but unissued shares of Common Stock, treasury shares or shares purchased in the 19 millionopen market or otherwise. To the extent that any award payable in shares is forfeited, cancelled, returned to the company for failure to satisfy vesting requirements or upon the occurrence of other forfeiture events, or otherwise terminates without payment being made, the shares covered thereby will no longer be charged against the maximum share limitation under the 2013 Stock Plan share pool and may again become available under the 2013 Stock Plan would represent approximately 9%share pool.
Terms and Conditions of 200,884,047 shares of common stock outstandingRestricted Stock Units Awards
Each non-employee director then serving as of December 31, 2012. No further grants would be made under the 2007 Stock Plan; accordingly, the 16,644,439 shares
referred to above would no longer be available for future awards under the Prior Plans. Assuming the approvala director of the Plan andcompany will receive an annual award on the extinguishmentdate of the 16,644,439 shares from Prior Plans, the potential equity overhang from all stock incentives granted and available to employees andfirst meeting of directors would be approximately 15%. The equity overhang under the Prior Plans as of December 31, 2012 was 14%.
An additional metric that the committee and the board used to consider the cumulative dilutive impact of the equity program was overhang. Included in the equity overhang calculation are options with exercise prices greater than the current share price. Overhang is defined as:
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As of December 31, 2012, there were 15,760,550 shares outstanding under the Prior Plans (of which 2,107,305 are stock units and sharesafter each annual stockholders’ meeting of restricted stock and 13,653,245 are stock options). Asunits with respect to a number of December 31, 2012, the weighted average exercise priceshares of outstanding stock options was $35.28 and the weighted average remaining term was 4.2 years.
Burn RateThe committee andCommon Stock having a fair market value equal to $100,000; provided, however, that a non-employee director who joins the board also consideredafter such date will receive a pro-rated award of restricted stock units. Each restricted stock unit granted under the burn ratePlan will represent the right to receive one share of Common Stock on the date that is one year following the date the award is granted; provided, however, that with respect to each annual grant the company may, in its sole discretion, provide non-employee directors with the one-time opportunity to elect to defer the settlement of the restricted stock units until the termination of the non-employee director’s service as a director of the company.
Unless the Committee determines otherwise, non-employee directors will have the right to receive dividend equivalents in connection with the restricted stock units
granted under the Plan pursuant to which the non-employee directors will be entitled to receive payments equivalent to dividends with respect to the equity awards. The burn rate isnumber of shares subject to the total equitycorresponding award of restricted stock units, which payments, unless the Committee determines otherwise, shall be paid to the non-employee directors in cash as and when such dividends are paid to the holders of Common Stock.
Unless the Committee provides otherwise, non-employee directors have no voting or other rights (other than the dividend equivalent rights described above) as a stockholder with respect to the shares of Common Stock subject to and/or issuable pursuant to any awards weof restricted stock units granted in a fiscal year divided by the total common stock outstanding at the beginning of the year. Our three-year average burn rate of 1.09% for the time period from 2010 to 2012 is below the median burn rate of 1.55% for S&P 1500 companies in FY2011 (source: Equilar 2012 Equity Trends Report). We will continue to monitor our equity use in future years to ensure our burn rate is maintained within competitive market norms. The committee and the board were satisfied that the burn rate over the past three years was at an acceptable level and well below the median of S&P 1500 companies.
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The Plan, like our prior equity plans, provides for a variety of equity instruments to preserve flexibility. The types of awards that may be issued under the Plan until such shares are described below.actually issued.
Stock OptionsStock options
The restricted stock units granted under the Plan may not be either non-qualified stock optionssold, assigned, pledged or incentive stock options under Section 422 ofotherwise transferred by the Internal Revenue Code of 1986, as amended (the “Code”). The exercise price of any stock option granted,non-employee director, other than substitute awardsby will or tandem SARs, may not be less than 100%the laws of the fair market value of a share of Pitney Bowes common stock on the date of grant. The Plan defines the fair market value as the closing price of Pitney Bowes common stock on the date of grant as reported by the New York Stock Exchange. The option exercise price is payable in cash, shares of Pitney Bowes common stock, through a broker-assisted cash-less exercise through share withholding or as otherwise permitted by the Committee.
The Committee determines the terms of each stock option grant at the time of the grant. Generally, all options have a ten-year term from the date of the grant. The Committee specifies, at the time each option is granted, the time or times at which,descent and in what proportions, an option becomes vested and exercisable. Vesting may be based on the continued service of the participant for specified time periods or on the attainment of specified business performance goals established by the Committee or both. Under certain circumstances, the Committee may accelerate the vesting of options.
In general, a vested stock option expires three months after termination of employment.
Stock Appreciation RightsA SAR entitles the participant, upon settlement, to receive a payment based on the excess of the fair market value of a share of Pitney Bowes common stock on the date of settlement over the base price of the right, multiplied by the applicable number of SARs of Pitney Bowes common stock. SARs may be granted on a stand-alone basis or in tandem with a related stock option. The base price may not be less than the fair market value of a share of Pitney Bowes common stock on the date of grant. The Committee will determine the vesting requirements, form of payment and other terms of a SAR, including the effect of termination of service of a participant. Vesting may be based on the continued service of the participant for specified time periods or on the attainment of specified business performance goals established by the Committee or both. Under certain circumstances, the Committee may accelerate the vestingdistribution.
of SARs. Generally, all SARs have a ten-year term from the date of the grant. SARs may be payable in cash or in shares of Pitney Bowes common stock or in a combination of both.
The company does not currently have any SARs outstanding.
Restricted StockA restricted stock award represents shares of Pitney Bowes common stock that are issued subject to restrictions on transfer and vesting requirements as determined by the Committee. Generally, time vested restricted stock awards will vest over a period of not less than three years and performance shares will vest over a period of not less than one year. Awards may allow pro-rated vesting during the restriction period. Vesting requirements may be based on the continued service of the participant for specified time periods or on the attainment of specified business performance goals established by the Committee or both.
Stock UnitsAn award of stock units provides the participant the right to receive a payment based on the value of a share of Pitney Bowes common stock. Stock units may be subject to such vesting requirements, restrictions and conditions to payment as the Committee determines are appropriate. Generally, time vested stock unit awards will vest over a period of not less than three years and performance units will vest over a period of not less than one year. Awards may allow pro-rated vesting during the restriction period. Vesting requirements may be based on the continued service of the participant for a specified time period or on the attainment of specified business performance goals established by the Committee or both. Stock unit awards are payable in cash or in shares of Pitney Bowes common stock or in a combination of both. Stock units may also be granted together with related dividend equivalent rights which are payments equivalent to dividends declared on the company’s common stock. The Plan provides that dividend equivalents may not be paid with respect to invested stock.
Other Stock Based AwardsThe Committee may grant participants such other awards denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of Pitney Bowes common stock (including without limitation securities convertible into such shares), as are deemed by the Committee to be consistent with the purposes of the Plan.
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PROPOSAL 4: APPROVAL OF THE PITNEY BOWES INC. DIRECTORS’ STOCK PLAN
Adjustments for Corporate Changes
PROPOSAL 4: APPROVAL OF THE PITNEY BOWES INC. 2013 STOCK PLAN
Qualifying Performance-Based Awards
Subject to the other terms of the Plan, the Committee may condition the grant, retention, issuance, payment, release, vesting or exercisability of any award, in whole or in part, upon the achievement of performance criteria during one or more specified performance periods. The performance criteria for any award that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code will be any one or more of the following performance criteria, either individually, alternatively or in any combination, applied to either the company as a whole or to a business unit, subsidiary, division or department, either individually or alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous year’s results or to a designated comparison group, in each case established by the Committee: (i) achievement of cost control, (ii) adjusted earnings per share, (iii) adjusted free cash flow, (iv) earnings before interest and taxes (“EBIT”), (v) earnings before interest, taxes, depreciation and amortization (“EBITDA”), (vi) earnings per share, (vii) economic value added, (viii) free cash flow, (ix) gross profit, (x) growth of book or market value of capital stock, (xi) income from continuing operations, (xii) net income, (xiii) operating income, (xiv) operating profit, (xv) organic revenue growth, (xvi) return on investment, (xvii) return on operating assets, (xviii) return on stockholder equity, (xix) revenues, (xx) stock price, (xxi) total earnings, or (xxii) total stockholder return.
To the extent consistent with Section 162(m) of the Code, the Committee (A) will appropriately adjust any
evaluation of performance under a performance goal to eliminate the effects of charges for restructurings, discontinued operations, extraordinary items and all items of gain, loss or expense determined to be extraordinary or unusual in nature or related to the disposal of a segment or a business or related to a change in accounting principle all as determined in accordance with standards established by opinion No. 30 of the Accounting Principles Board (APB Opinion No. 30) or other applicable or successor accounting provisions, as well as the cumulative effect of accounting changes, in each case as determined in accordance with generally accepted accounting principles or identified in the company’s financial statements, including the notes thereto, and (B) may appropriately adjust any evaluation of performance under a performance goal to exclude any of the following events that occurs during a performance period: (i) asset write-downs, (ii) litigation, claims, judgments or settlements, (iii) the effect of changes in tax law or other such laws or provisions affecting reported results, (iv) accruals for reorganization and restructuring programs and (v) accruals of any amounts for payment under the Plan or any other compensation arrangement maintained by the company.
The Committee will certify the extent to which any qualifying performance criteria has been satisfied, and the amount payable as a result thereof, prior to payment, settlement or vesting of any award that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code.
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Upon certain terminations of employment on account of a change of control (as defined in the Plan), all options and SARs outstanding will become immediately and fully exercisable, all restrictions applicable to restricted stock or stock units will terminate and be deemed to be fully satisfied and all forfeiture provisions imposed on such awards will lapse, the holders of any outstanding dividend equivalents will be entitled to surrender such award to the company and receive payment of an amount equal to the amount that would have been paid over the remaining term of the dividend equivalent, as determined by the Committee, all outstanding other stock-based awards will become immediately vested and payable, and performance awards for all perform-
ance periods, including those not yet completed, will immediately become fully vested and payable in accordance with the following:
(A) the total amount of performance awards conditioned on nonfinancial performance goals will be immediately payable (or exercisable or released, as the case may be) as if the performance goals had been fully achieved for the entire performance period; and
(B) for performance awards conditioned on financial performance goals and payable in cash, the amount payable under such award will be the higher of (i) target performance and (ii) performance achieved through the end of the last fiscal quarter prior to the triggering event as if satisfied for the entire performance period.
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In the event of recapitalizations, reclassificationsany change in the number or other specified events affecting the company or thekind of outstanding shares of Pitney Bowes commonCommon Stock of the company by reason of a recapitalization, merger, consolidation, dividend, combination of shares or any other change in the corporate structure or shares of stock of the company, the board will make equitable adjustments will be made toand appropriate adjust-
ments in the number and kindof restricted stock units to be awarded to non-employee directors, in the number of shares subject to and any other affected provisions of Pitney Bowes commonoutstanding awards of restricted stock available for
grant, as well asunits to other maximum limitationsprevent enlargement or diminution of the benefits intended to be granted under the Plan,Plan.
Amendment and the number and kind of shares of Pitney Bowes common stock or other rights and prices under outstanding awards.Termination
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The Plan will have a term of ten years expiring on February 10, 2023, unless terminated earlier bycompany reserves the board of directors. Unless prohibited by applicable lawright to amend, modify or otherwise expressly provided in an award agreement or interminate the Plan the board may at any time and from time to time and in any respect amend, alter, suspend, discontinue or terminate the Plan. The board may seek the approval of any amendment or modification by the company’s stockholders to the extent it deems necessary or advisable in its sole discretion for purposes of compliance with Section 162(m)action of the Code,board, provided that such action will not adversely affect any non-employee director’s rights under the listing requirements of the New York Stock Exchange or another exchange or securities market or for any other purpose. No amendment or modificationprovisions of the Plan willwith respect to awards that were made prior to such action.
Plan Benefits
adversely affect any outstanding award without the consentAs described above, each non-employee director then serving as a director of the participant or the permitted transferee of the award. Any amendment to the Plan that would (a) increase the total number of shares available for awards under the Plan; (b) reduce the price at which options or SARs may be granted below the exercise price; (c) reduce the exercise price of outstanding options or SARs; (d) extend the term of the Plan; (e) change the class of persons eligible to be participants; (f) otherwise amend the Plan in any manner requiring stockholder approval by law or under the New York Stock Exchange listing requirements; or (g) increase the individual maximum limits would require stockholder approval.
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Because benefits under the Plan will depend on the Committee’s actions (including a determination of whocompany will receive future awards and the terms of those awards) and the fair market value of common shares at various future dates, it is not possible to determine the benefits that will be received by executive officers and
other employees if the Plan is approved by the stockholders.
On February 11, 2013,an annual award on the date of the 2013first meeting of directors after each annual stockholders’ meeting of restricted stock units with respect to a number of shares of Common Stock having a fair market value equal to $100,000; provided, however, that a non-employee director who
joins the board after such date will receive a pro-rated award grants,of restricted stock units.
On February 28, 2014, the closing price of our common stock traded on the New York Stock Exchange was $13.85$25.45 per share.
U. S. Federal Income Tax Consequences
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The following discussion summarizes the material U.S. federal income tax consequences to the company and the participating employeesnon-employee directors in connection with the Plan under existing applicable provisions of the CodeIRC and the accompanying regulations. The discussion is general in nature and does not address issues relating to the income tax circumstances of any individual employee.non-employee director. The discussion is based on federal income tax laws in effect on the date of this proxy statement and is, therefore, subject to possible future changes in the law. The discussion does not address the consequences of state, local or foreign tax laws.
Nonqualified OptionsAn employee will not recognize any income upon receipt of a nonqualified stock option, and the company will not be entitled to a deduction for federal income tax purposes in the year of grant. Ordinary income will be realized by the holder at the time the nonqualified stock option is exercised and the shares are transferred to the
employee. The amount of such taxable income, in the case of a nonqualified stock option, will be the difference, if any, between the option price and the fair market value of the shares on the date of exercise.
Incentive Stock OptionsAn employee who receives an incentive stock option (“ISO”) will not recognize any income for federal income tax purposes upon receipt of the ISO, and the company will not realize a deduction for federal income tax purposes. However, the difference between the fair market value of the stock on the date of grant and the option exercise price is a tax preference item that may subject the optionee to the alternative minimum tax. If the optionee does not dispose of the ISO shares within two years from the date the option was granted or within one year after the shares were transferred to him on exercise of the option, then that portion of the gain on the sale of the shares that is equal to the difference between the sales price and the option exercise price will be treated
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as a long-term capital gain. The company will not be entitled to a deduction either at the time the employee exercises the ISO or subsequently sells the ISO shares. However, if the employee sells the ISO shares within two years after the date the ISO is granted or within one year after the date the ISO is exercised, then the sale is considered a disqualifying sale, and the difference between the grant price and the exercise price will be taxed as ordinary income. The balance of the gain will be treated as long- or short-term capital gain depending on the length of time the employee held the stock. If the shares decline in value after the date of exercise, the compensation income will be limited to the difference between the sale price and the amount paid for the shares. The tax will be imposed in the year the disqualifying sale is made. The company will be entitled to a deduction equal to the ordinary income recognized by the employee.
With respect to both nonqualified stock options and ISOs, special rules apply if an employee uses shares already held by the employee to pay the exercise price or if the shares received upon exercise of the option are subject to a substantial risk of forfeiture by the employee.
Stock Appreciation RightsUpon exercise of a SAR, an employee will recognize taxable income in the amount of the aggregate cash received. An employee who is granted unrestricted shares will recognize ordinary income in the year of grant equal to the fair market value of the shares received. In either such case, the company will be entitled to an income tax deduction in the amount of such income recognized by the employee.
Restricted StockEmployees receiving restricted stock will not recognize any income upon receipt of the restricted stock. Ordinary income will be realized by the holder at the time that the restrictions on transfer are removed or have expired. The amount of ordinary income will be equal to the fair market value of the shares on the date that the restrictions on transfer are removed or have expired. The company will be entitled to a deduction at the same time and in the same amount as the ordinary income the employee is deemed to have realized. However, no later than 30 days after an employee receives the restricted stock, the employee may elect to recognize taxable ordinary income in an amount equal to the fair market value of the shares at the time of receipt. Provided that the election is made in a timely manner, when the restrictions on the shares lapse, the employee will not recognize any additional income. If the employee forfeits the shares to the company, the employee may not claim a deduction with respect to the income recognized as a result of the election. Units
Generally, when an employee disposes of shares acquired under the Plan, the difference between the sales price and his or her basis in such shares will be treated as long- or short-term capital gain or loss depending upon the holding period for the shares.
Stock UnitsEmployees who are granted restricted stock unitsNon-employee directors do not recognize income at the time of the grant.grant of restricted stock units. When the award vests or is paid, participantsnon-employee directors generally recognize ordinary income in an amount equal to the fair market value of the restricted stock units at such time, and the company will receive a corresponding deduction.
Potential Limitation on DeductionsSpecial rules limit the deductibility of compensation paid to the chief executive officer and to eachVote Required; Recommendation of the next three most highly compensated executive officers, other than the chief financial officer. Under Section 162(m), unless various conditions are met that enable compensation to qualify as “performance-based,” the annual compensation paid to anyBoard of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. However, the rules and regulations promulgated under Section 162(m) are complicated and subject to change. As such, there can be no assurance that any compensation awarded or paid under the Plan will be deductible under all circumstances to these executive officers.Directors
Federal Income Tax Consequences to the CompanyThe board of directors believes that it is in the best interests of the company and its stockholders to provide for a stock plan under which compensation awards made to the company’s executive officers are eligible to qualify for deductibility by the company for federal income tax purposes. To the extent that a recipient recognizes ordinary income in the circumstances described above, the company will be entitled to a corresponding deduction provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Code and is not disallowed by the $1,000,000 limitation on certain executive compensation under Section 162(m) of the Code.
Accordingly, the Plan is designed to permit the grant of awards that are intended to qualify as “performance-based compensation” not subject to the $1,000,000 deductibility cap under Section 162(m), however, there can be no guarantee that amounts payable under the Plan will be treated as qualified “performance-based compensation” under Section 162(m). In general, under Section 162(m), in order for the company to be able to deduct compensation in excess of $1,000,000 paid in any one year to the company’s chief executive officer or any of the Company’s three other most highly compensated executive officers (other than the company’s chief financial officer), such compensation must qualify as “performance-based.” One of the requirements for “performance-based” compensation for purposes of Section 162(m) is that the material terms of the performance goals under which compensation may be paid be disclosed to and approved by the company’s stockholders at least once every five years. For purposes of Section 162(m), the material terms include (i) the employees eligible to receive compensation, (ii) a
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description of the business criteria on which the performance goal is based and (iii) the maximum amount of compensation that can be paid to an employee under the performance goal. With respect to the various types of awards under the Plan, each of these aspects is discussed below, and approval of the Plan itself will constitute approval of each of these aspects of the Plan for purposes of the approval requirements of Section 162(m).
Tax WithholdingTo the extent required by applicable federal, state, local or foreign law, a participant will be required to satisfy, in a manner satisfactory to the company, any withholding tax obligations that arise by reason of the award.
Section 409ASection 409A of the Code applies to any awards under the Plan that are deemed to be deferred compensation. If the requirements of Section 409A of the Code are not met, the recipient may be required to include deferred compensation in taxable income, and additional taxes and interest may be assessed on such amounts. If any awards are subject to Section 409A, we intend to have the awards comply with Section 409A of the Code.
Tax Treatment of Awards to Employees Outside the United StatesThe grant and exercise of options and awards under the Plan to employees outside the United States may be taxed on a different basis.
Approval of the Pitney Bowes Inc. 2013Directors’ Stock Plan as amended and restated, requires the affirmative vote of a majority of votes cast. AbstentionsUnder our By-laws, abstentions and broker non-votes will not be votes cast and therefore will have no effect on the outcome of the vote. In addition, under New York Stock Exchange rules, the total number of votes cast must represent a majority of the outstanding shares entitled to vote on the proposal. However, for purposes of approval under New York Stock Exchange rules, abstentions are treated as votes cast, and, therefore, will have the same effect as an “against” vote. In addition,vote, and broker non-votes are not considered entitled to vote, havingvotes cast, and, therefore, will have no effect on the practical effect of increasing the number of affirmative votes required to achieve a majorityoutcome of the shares entitled to vote.
The board of directors recommends that stockholders vote FOR the proposal to approve the Pitney Bowes Inc. 2013Directors’ Stock Plan.
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| The following table provides information as of December 31, 2012 regarding the number of shares of common stock that may be issued under our equity compensation plans. |
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| Plan Category |
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| Equity compensation plans approved by security holders |
| 15,760,550 |
| $32.93 |
| 16,644,439 |
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| Equity compensation plans not approved by security holders |
| — |
| — |
| — |
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| Total |
| 15,760,550 |
| $32.93 |
| 16,644,439 |
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Equity Compensation Plan Information
The following table provides information as of December 31, 2013 regarding the number of shares of common stock that may be issued under our equity compensation plans.
(c) | |||||||||
Number of securities | |||||||||
(a) | remaining available for | ||||||||
Number of securities to be | (b) | future issuance under equity | |||||||
issued upon exercise of | Weighted-average exercise | compensation plans | |||||||
outstanding options, | price of outstanding options, | excluding securities | |||||||
Plan Category | warrants and rights | warrants and rights | reflected in column (a) | ||||||
Equity compensation plans approved by security holders | 14,526,633 | $31.78 | 19,180,600 | ||||||
Equity compensation plans not approved by security holders | — | — | — | ||||||
Total | 14,526,633 | $31.78 | 19,180,600 |
Report of the Executive Compensation Committee
The Executive Compensation Committee of the board of directors (1) has reviewed and discussed with management the section included below in this proxy statement entitled “Compensation Discussion and Analysis” and (2) based on that review and discussion, the Committee has recommended to the board of directors that the CD&A be included in the company’s Annual Report on Form 10-K for the year ended December 31, 2013 and this proxy statement.
By the Executive Compensation Committee of the board of directors,
Eduardo R. Menascé, Chairman
Anne M. Busquet
Anne Sutherland Fuchs
David B. Snow, Jr.
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Compensation Discussion and Analysis
The following discussion and analysis contains statements regarding company performance targets and goals. These targets and goals are disclosed in the limited context of our compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. Investors should not apply these statements to other contexts.
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Executive Summary Overview This Compensation Discussion and Analysis, or CD&A, section explains our compensation philosophy, summarizes the material components of our compensation programs and reviews compensation decisions made by the Executive Compensation Committee (the Committee) and the independent board members. The Committee, comprised of only independent directors, makes all compensation decisions regarding the seven executives identified as Named Executive Officers (NEOs) in the Summary Compensation Table below. The independent board members, based on recommendations by the Committee, decide compensation actions impacting the Chief Executive Officer (CEO). In 2013, the company’s NEOs included two former executive officers (Leslie Abi-Karam and Vicki A. O’Meara) who would have been in the top five highly paid officers had they still been employed by the company at the end of the year (see page 68 for additional details). As a result, there are seven NEOs for 2013:
Effective December 3, 2012, the board of directors elected Marc B. Lautenbach President and CEO and appointed Michael I. Roth non-executive chairman of the board of directors. In his first year as our new President and CEO, Mr. Lautenbach focused on resetting the strategic direction of the company and beginning to execute on that strategy, assembling the right team to lead the company’s critical areas of development over the next several years and beginning to execute on initiatives consistent with the new strategies outlined below. Considering the future prospects of the company, Mr. Lautenbach invested $1,000,000 of his own financial resources in company stock. In addition, two newly hired executive business unit heads also purchased company stock from their own financial resources. Summary of 2013 Business Results2 In 2013, the company achieved significant success in the early stages of executing on its strategy to transform the company for the future. This success was evidenced through our financial results and attainment of certain objectives targeted at longer-term achievement, including solidifying our balance sheet and divesting businesses no longer in line with the company’s long-term strategy. Our total shareholder return (TSR) for the year was an extraordinary 132%, which placed us fifth in year-over-year TSR among all S&P 500 companies for 2013. We believe the stock price increase reflected stockholder recognition that our first steps in executing on our new strategy to unlock the value embedded in our company were successful and position us well for the future. We identified three major objectives for the company that would determine our progress towards transforming our businesses and made significant progress on each. These objectives were as follows: (1) stabilize the mailing business; (2) achieve operational excellence; and (3) invest in growth initiatives. |
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COMPENSATION DISCUSSION AND ANALYSIS
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COMPENSATION DISCUSSION AND ANALYSIS
• | Achieve Operational Excellence.Our efforts in reducing expenses in 2013 resulted in a $71 million savings in selling, general and administrative expenses compared to the prior year. We are in the early stages of implementing a new enterprise resource planning (ERP) system to streamline and consolidate many of our back-office operations. We signed a contract to sell our World Headquarters building in 2014. This is another example of our commitment to reducing operating expenses going forward. In addition, in 2013, we sold three businesses, Pitney Bowes Management Services (PBMS), International Mailing Services (IMS) and the Nordic furniture business. We sold these businesses because they did not fit within our future strategic intent for the company. We used the net proceeds from the North American portion of the PBMS sale to strengthen our balance sheet by redeeming $300 million in bonds originally scheduled to mature in 2014. Also in 2013, our clear focus on initiatives surrounding inventory and accounts receivables, two key components of working capital, generated over $100 million of cash improvements. | |||||
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Turning to our financial performance in 2013, revenue was $3.869 billion compared to $3.915 billion in 2012; however the 1% decrease was more favorable than the year-over-year trend from prior years. Also, we grew revenue in the fourth quarter of 2013, with total revenue of $1 billion representing an increase of 2% over the prior year’s fourth quarter. Adjusted earnings per diluted share from continuing operations for 2013 were $1.88, compared to $1.96 in 2012. Adjusted earnings before interest and taxes were $711 million compared to $744 million in 2012. Adjusted free cash flow for the year was $635 million, and we generated $625 million in cash from operations. Our digital commerce solutions segment experienced higher growth with revenue increasing 3% year over year, including a 17% growth rate in the fourth quarter. Our digital commerce solutions revenue for the year increased from $578 million to $596 million. Our production mail business had an outstanding year due to the growth in its revenue and gross margin. In 2013, we reduced debt on the balance sheet by $671 million compared to year-end 2013. In aggregate, the 2013 financial results were within the guidance the company provided to the investment community.
In addition, in 2013:
• | We accelerated globalization of | |
• | We created a single global marketing organization, which will enable us to better serve our clients, leverage our size, and create the foundation to enable us to integrate our organization. | |
• | We reorganized our business into three segments: (i) a Digital Commerce solution; (ii) SMB Solution Group; and (iii) an Enterprise Business Solutions Group, which will better align our businesses for which we have a similar strategic intent and will enable us to better serve our clients. | |
• | We took important steps to improve our go-to-market capabilities by deepening our specialization in our software business and creating a more robust go-to-market capability in our SMB business. | |
• | We announced a multi-year licensing agreement with Twitter, the leading global real-time information network, to provide location intelligence solutions for its mobile platform. | |
• | We announced an interactive digital communications exchange with Broadridge Financial Solutions, Inc. utilizing technology developed by VollyTMthat will make it easier for businesses to communicate with consumers about their most important transactions. This new platform, powered by Amazon Web Services (AWS), enables consumers to securely receive and store comments and manage payments on any participating online channel they choose. | |
• | We solidified our financial flexibility by strengthening our balance sheet, reducing our dividend payments and implementing key initiatives to reduce our cost structure, working capital and improve our overall efficiency. | |
• | We enhanced the company’s existing strong business talent with outside recruits of seasoned executives with critical skills and pertinent experience necessary to lead our company’s transformative development over the next several years. |
In summary, in 2013, we saw improving trends in our business and made significant progress to unlocking the long-term value embedded in our company for the benefit of our clients, our shareholders, and our employees.
Some of the amounts in the CD&A portion of this proxy statement are shown on a non-GAAP basis. For additional detail on the calculation of the financials reported, please refer to the table on page 55 “Accounting Items and Reconciliation of GAAP to Non-GAAP Measures”. We urge stockholders to read our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 21, 2014, which describes our business and 2013 financial results in more detail.
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COMPENSATION DISCUSSION AND ANALYSIS
CEO 2013 Compensation
The compensation package of our President and CEO reflects the enhanced performance-linked pay philosophy the board adopted in 2012 and further enhanced in 2013 and is competitive when compared to our peer group and two third-party compensation survey reports. Mr. Lautenbach’s total direct compensation is 91% of the market median of total direct compensation for CEOs in our peer group and 94% of the average of the median CEO total direct compensation using the Towers Watson Regressed Compensation Report and Radford High Tech Industry Survey (Survey Reports). Mr. Lautenbach’s base compensation is 87% of the market median of the peer group and 85% of the average of the median of the Survey Reports. His total cash compensation is 86% of the market median of the peer group and 88% of the average of the median of the Survey Reports.
In the above illustration, because the peer median and Survey Reports average median data is reported at target, Mr. Lautenbach’s compensation elements are also illustrated at target for comparison purposes.
Mr. Lautenbach’s long-term incentive amount includes the value of his one-time sign-on grant of premium-priced stock options.
The following highlights 2013 compensation actions for the President and CEO approved by the board of directors:
• | Base salary remained at $850,000 in 2013 (the board of directors and the Committee approved a freeze of base salaries for the CEO | |||||||
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| Annual incentive target remained at 130%, resulting in a payout of $1,209,975 (after applying the | |||||||
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| Long-term incentive target remained at $4,000,000 with the | |||||||
| • | The second and final tranche of a |
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COMPENSATION DISCUSSION AND ANALYSIS
Summary of 2013 Executive Compensation Changes
At the company’s annual meeting of stockholders in 2013, stockholders overwhelmingly approved the company’s executive compensation by a vote of approximately 93% of the votes cast in favor. During 2013, management and the Committee maintained their commitment to obtaining and considering stockholder feedback on the company’s compensation program by soliciting feedback over the course of the year. The following highlights the changes that we made to the program in 2013. These highlights will be discussed in more detail in “2013 Compensation” beginning on page 43 of this proxy statement.
• | Increased the weighting of financial objectives | |
• | Reduced duplicative metrics across award types by | |
• | Enhanced disclosure of performance targets in the 2013 proxy statement; | |
• | Revised our peer group in light of the evolving strategic direction of the company with increasing emphasis in the software and technology arena and to | |
• | Restructured the LTI design to be implemented in 2014 awards, making all long-term awards stock based; | |
• | Expanded the executive stock ownership policy to: (i) include more senior executives, and (ii) restrict the shares that will count toward stock holding requirement; | |
• | Introduced the Radford High-Tech Industry Survey Report in addition to the Towers Watson Regressed Compensation Report in determining the competitiveness of executive compensation; and | |
• | Reduced severance benefits payable on account of a Change of Control from three to two times the participant’s annual salary and average annual incentive award and eliminated the excise tax gross-up. |
Snapshot of 2013 Compensation Payout Decisions
In making its compensation decisions and recommendation for the 2013 performance year, the Committee considered, among other things, our financial results, the achievement of the compensation objectives (see discussion beginning on page 44), our relative and absolute TSR and the feedback received from stockholders. Our one year TSR placed us at the top of our peer group, while our three year TSR placed us at the 25th percentile, further illustrating the significant improvement that occurred in our businesses in 2013. Based on 2013 financial results, the Committee and independent board members approved an annual incentive payout of 109.5% of target, after application of the Strategic Modifier. For the 2011 – 2013 CIU long-term incentive award, the Committee approved a CIU payout of $1.50 per unit, after application of the TSR Modifier. The following tables compare the actual payouts in 2013 and 2012.
2013 Actual Payout | 2012 Actual Payout | Percentage change | ||||||||||
Annual Incentive | Factor as a % of Target | Factor as a % of Target | 2013 vs. 2012 | |||||||||
Financial Objectives | 100.5 | % | 64.0 | % | ||||||||
Strategic Objectives | n/a | 11.0 | % | |||||||||
Payout Modifier | 9.0 | % | 0.0 | % | ||||||||
Subtotal | 109.5 | % | 75.0 | % | ||||||||
Negative Discretion | 0 | % | (11.0 | %) | ||||||||
Total Payout Factor | 109.5 | % | 64.0 | % | 71.1 | % |
2013 Actual Unit Payout | 2012 Actual Unit Payout | Percentage change | ||||||||||
Long-Term Incentive | Value (2011 – 2013 cycle) | Value (2010 – 2012 cycle) | 2013 vs. 2012 | |||||||||
Adjusted Earnings per Share | $0.83 | $0.62 | ||||||||||
Adjusted Free Cash Flow | $0.77 | $0.80 | ||||||||||
TSR Modifier1 | ($0.10 | ) | ($0.28 | ) | ||||||||
Subtotal | $1.50 | $1.14 | ||||||||||
Negative Discretion | $0.00 | ($0.40 | ) | |||||||||
Total Payout Value | $1.50 | $0.74 | 102.7 | % |
1 | The TSR Modifier for 2011 – 2013 and 2010 – 2012 |
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Annual Incentive |
| 2012 Actual Payout |
| 2011 Actual Payout |
| Percentage change |
Financial Objectives |
| 64% |
| 74% |
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Strategic Objectives |
| 11% |
| 17% |
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Payout Modifier |
| 0% |
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Subtotal |
| 75% |
| 98% |
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Negative Discretion |
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Total Payout Factor |
| 64% |
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Long-Term Incentive |
| 2012 Actual Unit Payout |
| 2011 Actual Unit Payout |
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Adjusted Earnings per Share |
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| $0.42 |
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Adjusted Free Cash Flow |
| $0.80 |
| $0.90 |
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TSR Modifier1 |
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Subtotal |
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| $1.07 |
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Negative Discretion |
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Total Payout Value |
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See “Compensation Payout Overview”“2013 Compensation” beginning on page 5343 of this proxy statement for a discussion of each of the compensation components and the respective payouts.
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COMPENSATION DISCUSSION AND ANALYSIS
Pay For Performance Alignment
We have designed our compensation program to link pay with performance.
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| 2013 Program Design.86% of target total direct compensation for our CEO is variable and | |
| • | 2014 Actual Payout. |
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| Annual incentive.With respect to its annual incentive | |
º | Long-term incentive.With respect to its long-term incentive targets, the company achieved an average of 110% of target for the Adjusted earnings per share metric and an average of 109% of target for the Adjusted free cash flow metric over the three-year award cycle. This level of performance supported a CIU payout of $1.60 per unit. However, in applying the company’s TSR Modifier, which | ||
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COMPENSATION DISCUSSION AND ANALYSIS
Executive Compensation Program Structure
Compensation Philosophy
We link executive compensation to the performance of the company as a whole. We believe executives with higher levels of responsibility and a greater ability to influence enterprise results should have a greater percentage of variable total compensation. Compensation for our NEOs varies from year to year primarily based on achievement of enterprise-wide objectives and individual performance. We emphasize enterprise-wide performance to break down any internal barriers that can arise in organizations that emphasize individual performance.
Our executive compensation program is designed to recognize and reward outstanding achievement and to attract, retain and motivate our leaders. In addition, we directly engaged with many of our stockholders in 2013 to solicit feedback on our executive compensation programs to ensure they are appropriately aligned with stockholder interests.
COMPENSATION DISCUSSION AND ANALYSIS
Executive Compensation Program Structure
Compensation Philosophy
Our executive compensation program is designed to recognize and reward outstanding achievement and to attract, retain and engage our leaders. In addition, we directly engaged with many of our stockholders in 2012. We plan to continue to regularly engage with our stockholders to solicit feedback on our executive compensation programs to ensure it is appropriately aligned with stockholder interests.
Below is an overview of key aspects of our pay philosophy.
Overall Objectives | • |
| Compensation levels should be sufficiently competitive to attract and retain talent; | ||||
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| Compensation should reflect leadership position and responsibility; | ||||||
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| Executive compensation should be linked to the performance of the company as a whole; | ||||||
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| Compensation should motivate our executives to deliver the short and long-term business objectives and | strategy; and | |||||
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| Compensation packages should be designed to preserve tax | ||||||
Pay Mix Principles | • |
| Compensation should be tied to performance and long-term stockholder return; | ||||
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| Performance-based compensation should be a | ||||||
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| Incentive compensation should reward both short-term and long-term performance; and | ||||||
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| Executives should own meaningful amounts of Pitney Bowes stock to align their interests with Pitney Bowes stockholders. | ||||||
Pay for Performance | • |
| A significant | ||||
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| The annual and long-term incentive components should be linked to operational outcomes, financial results or stock price performance: | ||||||
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| Annual incentive compensation is earned only if pre-determined financial | ||||||
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| Performance-based cash incentive units are earned only if certain financial objectives | ||||||
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| Performance-based restricted stock units and cash incentive units are earned only if a threshold financial target is met for IRC 162(m) purposes. |
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COMPENSATION DISCUSSION AND ANALYSIS
This
We Design our Compensation Mix to Focus on Variable Pay
The chart below shows the 2013 targeted compensation mix for the CEO and other NEOs compared with the targeted average compensation of our peer group as reported in their 2013 proxy statements. As illustrated in the chart, our compensation is (i) well aligned to the compensation mix of our peer group and (ii) predominantly variable. The specific proportion of each compensation element below may change with changes in market practice or performance considerations.
We design the mix of short and long-term incentives is designed to reward and motivate near-termshort-term performance, while at the same time providing significant incentives to keep our executives focused on longer-term corporate goals that drive stockholder value. In addition, we believe this balance of short-term and long-term incentive compensation and mix of performance criteria helps mitigate the incentive for executives to take excessive risk that may have the potential to harm the company in the long-term. We monitor on an annual basisthe structure annually to make sure that the structure of our compensation programsit does not incentivize excessive risk and report our findings to the committee.Committee.
At
In determining our executive’s grant levels, we take into consideration the NEO following:
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By theirDue to the qualitative nature of these considerations, we do not establishassign specific weightings or numerical goals to them.
Overview of Compensation Components
The Committee is responsible for determining the compensation for all NEOs, other than the CEO, and for recommending to the board of directors each specific element of compensation for the CEO. The Committee considers recommendations from the CEO regarding the compensation of the other NEOs. The independent board members are responsible for determining the CEO’s compensation. No member of the management team, including the CEO, has a role in determining his or her own compensation. For each NEO, the Committee sets, as a guideline, target total direct compensation levels so the base salary, total cash compensation, and total direct compensation is at +/– 20% of the median of the competitive data based on the Towers Watson Regressed Compensation Report, as regressed for companies approximately our size, and the Radford High-Tech Industry Survey focusing on companies with revenue scopes similar to ours for each position. We describe these considerations.two reports in more detail under “Assessing Competitive Practice” beginning on page 51 of this proxy statement. In order to attract specific talent, the general +/– 20% of the median guideline may be exceeded. For 2013, the total target cash compensation (base salary plus annual incentive) and total target direct compensation (base salary plus annual incentive plus long-term incentive) for Mr. Lautenbach were 88% and 92%, respectively, of the average of the Survey Reports for chief executive officers. For the NEOs, as a group, the average total target cash compensation and total direct compensation were 107% and 108%, respectively, of the average of the Survey Reports.
41 |
COMPENSATION DISCUSSION AND ANALYSIS
Overview of Compensation Components
The committee is responsible for determining the compensation for all NEO’s, other than the CEO, and for recommending to the board of directors each specific element of compensation for the CEO. Recommendations from the CEO are taken into account by the committee. The independent board members are responsible for determining the CEO’s compensation. No member of the management team, including the CEO, has a role in determining his or her own compensation. For each NEO, the committee sets target total direct compensation levels so the base salary, total cash compensation, and total direct compensation is at +/– 20% of the median of the competitive data based on the Towers Watson General Industry Executive Compensation Survey Report, as regressed for companies approximately our size (“Towers Watson Regressed Compensation Report”) and as described in more detail under “Assessing Competitive Practice – Benchmarking” beginning on page 59 of this proxy statement), for each position. For 2012, the total target cash compensation (base salary plus annual incentive) and total target direct compensation (base salary plus annual incentive plus long-term incentive) for Mr. Lautenbach was 82% and 101%, respectively, of the market median for chief executive officers in the Towers Watson Regressed Compensation Report. For the NEOs as a group, excluding our former CEO, the average total target cash compensation and total direct compensation was 93% and 106%, respectively, of the market median in the Towers Watson Regressed Compensation Report.
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The following table outlines the components of direct compensation for our named executive officersNEOs and how it alignsthey align with our compensation principles.
How it Aligns | Fixed or | Cash or | |||||||||||
What it Rewards |
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Highly developed skills and abilities critical to the success of the company | • | • • | Increases influenced by executive’s individual performance rating | • | |||||||||
Annual Incentive | |||||||||||||
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• • • | Payout dependent on achievement of objectives aligning pay to performance Subject to a “clawback” (See “Clawback Policy” on page | • • • | Individual performance Up to a maximum of $4,000,000 per NEO granted under the | • | |||||||||
Long-term Incentives | |||||||||||||
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Cash Incentive Units (CIUs) | |||||||||||||
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Change in company’s stock price versus S&P 500 companies for | • • • | The resulting unit value is modified by up to +/–25% based on TSR. For the CIU award cycle 2011-2013, the company’s TSR 3-year performance period cycle thereby promoting retention | • • | Up to a maximum in any one year of $8,000,000 per NEO granted under the KEIP | • | Cash | |||||||
Performance Stock Units (PSUs) (0% in 2013; 70% in 2014) | |||||||||||||
• • | Achievement of pre-determined long-term objectives and annual objectives established in the first quarter of the first year and the first quarter of each year, respectively, of the three year cycle Change in company’s stock price compared to peer group starting in 2014 | • • | Shares vested dependent on achievement of long-term objectives aligning pay to performance The resulting number of shares vested is modified by up to +/-25% based on 3-year cumulative TSR as compared to 3-year cumulative TSR of our peer group, further linking compensation to stockholder return. TSR Modifier cannot be positive if there is a negative TSR over the three-year cycle | • • | Performance-based compensation measured on enterprise-wide metrics Up to a maximum of 1,200,000 shares including RSUs per NEO in any plan year granted under the 2013 Stock Plan | • | Equity | ||||||
• | 3-year performance period cycle thereby promoting retention |
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COMPENSATION DISCUSSION AND ANALYSIS
How it Aligns | Fixed or | Cash or | |||||
What it Rewards | With Our Principles | Performance-Based | Equity | ||||
Performance-Based Restricted Stock Units (RSUs) 2014) | |||||||
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Company stock value | • • • | 3-year pro-rata vesting beginning 2014 thereby promoting retention for executives; 4-year pro-rata vesting Award value linked to company’s stock price | • • | Up to a maximum of | • |
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Company stock value | • • • | 3-year cliff vesting thereby promoting retention Award value linked to company’s stock price | • • | Up to a maximum number of | • | ||||||||
Periodic Off-cycle Long-term Awards | |||||||||||||
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We also provide certain other benefits for our NEOs, including retirement benefits and deferred compensation plans. For additional information, please see “Other Indirect Compensation” on page 5748 of this proxy statement.
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At the 2012 annual meeting of stockholders, our stockholders did not approve our advisory resolution on executive compensation. Accordingly, the committee, led by its chairman, devoted significant time during 2012 gathering feedback from our stockholders and analyzing the executive compensation program with the assistance of its new independent compensation consultant. This ultimately resulted in the committee adopting significant
changes to the executive compensation program described in detail below. The committee strives to maintain a balanced compensation program that effectively motivates and retains our executives. The compensation decisions made over the past year generally reflected the financial and operational results and objectives for the year, TSR as well as the feedback we received from our stockholders.
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In the spring, before our 2012 annual meeting, the newly appointed committee chairman conducted a stockholder outreach campaign. During that campaign, the committee chairman and members of management contacted stockholders holding approximately 60% of our outstanding shares to seek their views on our executive compensation approach. We met with more than a majority of the stockholders contacted. Those discussions included topics such as CEO compensation, discretionary payments, compensation disclosure, annual and long-term incentive program, our peer group, talent management and succession planning.
Immediately after the 2012 annual meeting the committee began a search for a new independent compensation consultant. After interviewing several candidates, the committee engaged Pay Governance LLC (“Pay Governance”). The committee next conducted an extensive re-examination of our executive compensation program and practices in light of the stockholder feedback and advice from Pay Governance. They conducted this evaluation through frequent meetings over several months with the compensation consultant. The committee chairman also conferred regularly with the Lead Director of the board. Based on this evaluation, the committee and the independent board members made significant changes to our executive compensation program to enhance the alignment of our executive compensation program with stockholder interests.2013 Compensation
In the fall, after the committee and the board announced the changes to our executive compensation program, the committee chairman again conducted a stockholder outreach campaign initiating contact with holders of approximately 64% of our outstanding shares to explain the announced changes to our program and seek their feedback. The committee chairman, together with members of management, met with more than a majority of the stockholders whom they contacted. Stockholders responded favorably to the changes discussed at the meetings held in the fall. The committee chairman and members of management also held meetings with two prominent proxy advisory firms to seek
Overview
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more detailed input. The committee chairman is committed to continuing his dialogue with our stockholders on executive compensation on a regular basis.
The following discussion highlights the actions taken by the committee and the independent board members in 2012 and 2013 to address the various concerns raised by our stockholders.
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Based on our review of market practices and data, we believe that the reduction in the CEO annual incentive target better aligns to current market competitive data while still providing a competitive total cash compensation package. Mr. Lautenbach’s total target cash compensation, including base salary and annual incentive, was 82% of the median of the Towers Watson Regressed Compensation Report.
In our discussions with stockholders, we learned that the weighting and duplication of certain objectives raised concerns regarding the rigor of our incentive targets. We believe that decreasing the weighting of strategic objectives to no more than 20% provides more focus on financial objectives where the rigor can be more easily assessed by stockholders, while maintaining an appropriate weight for strategic objectives aimed at providing management with the right incentives to focus on long term growth.
In addition to reducing duplication of financial metrics across award types by replacing the Adjusted EPS financial objective with Adjusted EBIT, the committee believes that an Adjusted EBIT metric will better link incentive compensation with short-term corporate performance. The committee believes that EBIT is a more appropriate measurement for annual incentive compensation because it measures current profitability and performance. The committee maintained the Adjusted Free Cash Flow objective due to the critical importance of this metric to our short and long-term financial position.
Additionally, because our one year TSR for 2012 was –36%, the committee and the independent board members took further action to reduce the annual incentive enterprise pool by an additional 11%, impacting the NEOs as well as all eligible employees.
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By increasing the CIU component from 50% to 60%, a majority of the long-term incentive is now based on financial performance metrics, in addition to the IRC 162(m) threshold target. The goal of this change is to ensure that a substantial portion of our executive officers’ long-term incentive compensation is more closely linked to the achievement of financial performance objectives than the structure we used in 2012. In 2012, the committee had replaced stock options with market stock units (“MSUs”) in order to introduce an award that was directly tied to TSR and therefore company performance. The introduction of the MSUs met with mixed stockholder acceptance, therefore, the committee eliminated MSUs from the long term incentive mix for 2013. Instead, RSUs will be 40% of the long-term incentive award. Management believes the RSUs are important for retaining the talent necessary to support our activities and strategic realignment.
Before 2012, the committee applied the TSR modifier to adjust the payout in each of the three years of a CIU cycle. Because the MSU award that we introduced in 2012 included an intrinsic TSR feature, we eliminated the TSR feature for the 2012 – 2014 CIU cycle. However, in light of stockholder feedback and the internal review of executive compensation practices, the committee re-introduced a cumulative three-year TSR modifier of +/– 25% into the CIU awards and retroactively reinstituted the cumulative three-year TSR modifier for the 2012 – 2014 CIU cycle. The TSR modifier adjusts the CIU payout by +/– 25% based on relative performance compared with the newly constituted peer group
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over the cumulative three-year period. However, if our TSR is negative for the cumulative three-year period, there can be no positive application of the TSR modifier even if our TSR is less negative as compared to our new peer group. Finally, the committee also approved a maximum CIU payout that is two times target, including any impact from the TSR modifier.
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In addition to the structural changes we made to our executive compensation program after the 2012 Advisory Vote on Executive Compensation, we took the following compensation actions:
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In February 2012, prior to the results of our 2012 Say-on-Pay vote and consistent with our usual time frame for making compensation decisions, the committee approved the executive compensation structure for 2012 and took the following actions:
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Mr. Lautenbach’s total direct compensation package is 95% of the market median of total direct compensation when compared to our new peer group and 101% of the median of the Towers Watson Regressed Compensation Report:
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Annual Base Salary: $850,000
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The option awards will vest in four equal annual installments beginning on the first anniversary of the Start Date and ending on the fourth anniversary of the Start Date.
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As discussed under “Discussion of Compensation Actions” beginning on page 49 of this proxy statement, the committee and the independent board members approved extensive changes to our executive compensation program. We could not reflect all these changes in the 2012 compensation payouts discussed below, because the 2012 compensation program was approved in February 2012, prior to the results of our 2012 Say-on-Pay vote and our subsequent adjustments to the compensation program. Where possible, however, the committee made retroactive adjustments and also exercised negative discretion on the final payment of the annual incentive and cash incentive units to better align with our performance and TSR.
We link executive compensation to the performance of the company as a whole. We believe executives with higher levels of responsibility and a greater ability to influence enterprise results should have a greater percentage of variable total compensation. Compensation for our NEOs varies from year to year based on company stock performance as well as an assessment of the success of the NEO in achieving enterprise-wide objectives. This means that our executives may be paid below or above market rates depending on enterprise-wide performance. We emphasize enterprise-wide performance to break down any internal barriers that can arise in organizations that emphasize individual performance. At the same time, the executive compensation committee does factor in individual performance in determining the executive’s overall compensation.
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In February 2012, we approved merit increases to base salaries for the broad-based employee population. Similarly, the committee and the independent directors approved merit increases for the NEOs and the CEO, respectively, and set 2012 target compensation. The committee and the board approved increases effective March 2012 between 1.75% and 3% for NEOs, except for Mr. O’Hara who received a 22% increase in his base salary to more closely align it to market competitive com-
pensation following his promotion to President, Pitney Bowes Software.
In February 2013, we determined that duethe Committee implemented changes to the 2012compensation program in response to feedback received from the company’s stockholders. These
changes ensured a stronger link between company financial performance and executive compensation and will be reflected beginning with the February 2014 payouts.
Base Salary
In February 2013, based on the business results no merit increases will be applied to base salaries for 2012, the broad-based employee population. Similarly, the committeeCommittee and the independent directors froze the base salaries for the NEOsCEO and the CEO, respectively.NEOs. The
company also imposed a freeze on the base salaries of the broad-based employee population.
43 |
COMPENSATION DISCUSSION AND ANALYSIS
Annual Incentives
Annual Incentives
NEOs are eligible for annual incentives under the KEIP primarily for achieving challenging enterprise-wide financial and strategic objectives established at the beginning of each
each year. Individual performance ratings can, in certain circumstances, modify the final payout forand its impact on financial, strategic, unit or individual objectives may be considered.
2013 Annual Incentive Objectives and Metrics
In 2013, 100% of the annual incentive.
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The 2012incentive was based on financial objectives which were weighted at 70% at target, are shown in the chart below. The chart also shows the threshold, target, and maximum ranges.
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Financial Objectives | Weighting | Threshold | Target | Maximum |
Adjusted Earnings Per Share(1) | 28% | $1.72 | $2.15 | $2.58 |
Revenue Growth(1) | 21% | –3.5% | 0% | 2.0% |
Adjusted Free Cash Flow(1) | 21% | $684 million | $760 million | $836 million |
Financial Objectives | Weighting | Threshold | Target | Maximum |
Adjusted Earnings Before Interest and Taxes(1) | 35% | $673 million | $727 million | $779 million |
Revenue Growth(1) | 25% | –1.2% | 0.6% | 2.8% |
Adjusted Free Cash Flow(1) | 40% | $573 million | $623 million | $673 million |
(1) | Adjusted |
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We believe that each of thetogether these financial objective metricsobjectives effectively measure how well our business is an important measurement of our performanceperforming on a short-term basis and thus particularlyrepresent appropriate metrics upon which to base annual incentive awards. Adjusted EPS is an appropriate measure of our profitability because it excludes the impact of certain special items, both positive and negative. While these special items are actual income or expenses, they could mask the underlying trend or performance within a business. Revenue growth is an appropriate measure because it indicates whether our business is expanding. Adjusted Free Cash Flow is an appropriate measure of the company’s ability to pursue discretionary opportunities that enhance stockholder value.
While we believe theIn 2012 metrics are important measures of our financial health, our stockholders expressed concern regarding duplicative financial metrics in our use of the EPS metric in multiple awards.short and long-term compensation programs. In response to those concerns,that concern, we replaced the EPSearnings per share metric with an EBITAdjusted earnings before interest and taxes metric for the 2013 annual incentive program. We believe that
Each of these metrics exclude the impact of certain special items, both positive and negative, which could mask the underlying trend or performance within a business.
We set the targets for the Adjusted earnings before interest and taxes and Adjusted free cash flow financial objectives at approximately the midpoint of our guidance provided to stockholders and the financial community at the beginning of 2012. Any subsequent revisions to guidance during the year did not affect the targets set. The threshold and maximum ranges are approximately 10% to 20% above and below2013. We set the target based on market best practices. We believefor 2013 revenue at the 2012 financial objectives were set at aggressive yet achievable levelslower end of guidance because we believed achieving that goal would be challenging in light of continuing uncertainties in the prolonged global economic uncertainty, the continued decline in postal volumes,core business environment and the impact both have ontransformational changes being made inside the company. The only revision to targets during the course of the year reflected the revision to guidance announced as a result of the sale of PBMS, IMS and our business andNordic furniture business. We believe that the markets in which we operate.
The 2012 strategic2013 financial objectives were weighted at 30% ofeach level (threshold, target and were:
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The committee designed the 2012level with the related payout. In 2013, we increased the weighting of the financial metrics to be 100%, from 70%, of the annual incentive design. This demonstrates our commit-
ment to place more rigor in the payouts and reflects stockholder feedback. While strategic performance objectivesmetrics did not play a primary role in the annual incentive design, we included these important goals as a zero to encourage management10% modifier to focus on the future development and growthultimate payout. Strategic goals are targets that are important to the successful operation of the enterprise group while sustainingabove and beyond financial goals. The strategic goals for 2013 included improving client satisfaction and implementing a culture change throughout the core mail business. As we repositionorganization. These important strategic goals are the foundation for our future growth, it is importantbusiness success. Depending on the achievement of the strategic goals, the annual incentive multiplier may be increased by 0% to maintain the strength of those parts of our business which contribute significantly to our strong cash flow.10%.
The committee reviewed these strategic objectives to ensure that they had a high degree of difficulty for achievement. The specific targets within these objectives are highly confidential and not reported publicly because such disclosure would provide competitors insight into our internal planning processes and would result in meaningful competitive harm.
Funding of the 2012 Annual Incentive Pool and 2013 Actual Payout
Funding of the annual incentive pool begins with the sum of the annual incentive targets of eligible Pitney Bowes Incentive Plan (PBIP) participants. For more information on setting the target see “Assessing Competitive Practice” on page 51. After the close of the calendar year, the Committee determines the company’s achievement of the overall financial results against each metric (see above) and approves a multiplier to be applied to the sum of the annual incentive targets. For NEOs, executive officers, unit presidents and staff vice presidents the annual incentive is only paid if the company achieves its IRC 162(m) threshold target of an$276,086,000 in income from continuing operations, of $383,665,000, excluding certain special eventsevents. (See “Treatment of Special Events” beginning on page 6555 of this proxy statement.) This IRC 162(m) target is used specifically to meet the IRC 162(m) requirements, and isan additional target intended to ensure tax deductibility of compensation paid. Actual 20122013 Adjusted income from continuing operations, excluding all special events, was $435,277,000.
The chart below shows actual financial results and the payout as compared to target.
Objectives Target Weighting Actual Result Actual Payout as a % of Target Financial Objectives: Adjusted Earnings Per Share(1) 28 % $2.16 30 % Revenue Growth(1) 21 % (3.4% ) 11 % Adjusted Free Cash Flow(1) 21 % $767 23 % Strategic Objectives: Demonstrate progress on growth in the enterprise segment 15 % Did not meet threshold 0 % Improve the core business 15 % Exceeded threshold 11 % Subtotal 100 % n/a 75 % Negative Discretion n/a n/a (11% ) Total 100 % n/a 64 %
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COMPENSATION DISCUSSION AND ANALYSIS
Objectives | Target Weighting | Actual Result | Actual Payout as a % of Target |
Financial Objectives: | |||
Adjusted Earnings Before | 35% | $714 million | 32.4% |
Interest and Taxes(1) | |||
Revenue Growth(1) | 25% | (-0.8%) | 19.0% |
Adjusted Free Cash Flow(1) | 40% | $655 million | 49.0% |
Total | 100% | n/a | 100.5% |
(1) | Adjusted |
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The committeeCommittee compared the 2013 performance against the financial targets and approved a 2013 annual incentive multiplier of 100.5%. Next the Committee assessed the predetermined strategic goals for 2013 which included improving client satisfaction and implementing a culture change throughout the organization.
Noting the significant progress made in addressing client satisfaction across the four key business units and achieving outstanding results in implementing a culture change throughout the organization, the Committee, and independent board members may modify the resulting payout factor by between 0 and 15% based on the achievement of pre-determined customer and employee objectives, TSR and the quality of our earnings. The committee compared the 2012 actual performancewith respect to the pre-determined targets and did not apply any modifier.CEO, added a 9% strategic modifier resulting in a final annual incentive multiplier of 109.5%.
Even though the performance against the financial and strategic objectives would have supported a payout of 75% of target for the incentive pool, the committee approved a 2012 incentive pool of 64%, after utilizing
negative discretion due to our overall performance in 2012. The resulting payout factor was 35% less than the payment factor for 2011 performance.
Based on the above analysis, and taking into account Mr. Martin’s recommendations as CEO for most of 2012, Mr. Lautenbach made specific recommendations to the committeeCommittee for Mr. Lautenbach’shis direct reports. The committeeCommittee considered those recommendations and the actual performance against objectives as shown, and applied negative discretion, resulting in the annual incentive awards to our NEOs as follows:
Executive Target Award Payout Payout Percent to Target Michael Monahan $ 462,720 $296,141 64% Leslie Abi-Karam $ 444,320 $284,365 64% Vicki A. O’Meara $ 419,200 $268,288 64% John E. O’Hara $ 270,000 $172,800 64% Murray D. Martin $ 1,300,000 $832,000 64%
Executive | Target Award | Payout | Payout Percent to Target | |||||||||
Marc B. Lautenbach | $ | 1,105,000 | $ | 1,209,975 | 109.5 | % | ||||||
Michael Monahan | $ | 462,720 | $ | 506,678 | 109.5 | % | ||||||
Abby F. Kohnstamm(1) | $ | 241,797 | $ | 264,768 | 109.5 | % | ||||||
Daniel J. Goldstein | $ | 286,440 | $ | 313,652 | 109.5 | % | ||||||
Mark F. Wright | $ | 300,000 | $ | 328,500 | 109.5 | % | ||||||
Leslie Abi-Karam | $ | 444,320 | N/A | N/A | ||||||||
Vicki A. O’Meara | $ | 419,200 | N/A | N/A |
Mr. Lautenbach did not receive an annual incentive payout for 2012.
(1) | Ms. Kohnstamm’s annual incentive is prorated based on her June 17, 2013 start date. |
45 |
COMPENSATION DISCUSSION AND ANALYSIS
Long-term Incentives
Long-term Incentives
Long-term incentives link the NEOs’ long-term rewards to our long-term financial performance and our stock price performance. We also pay long-term incentives in order to be competitive in the markets in which we operate and in order to attract and retain high-performing executives. In 2013, the long-term incentive mix consisted of 60% CIUs and 40% RSUs.
Cash Incentive Units (CIUs)
CIUs are long-term cash awards granted annually with three year performance and vesting cycles. The vesting of long-term incentive awards are generally subject to achieving an initial financial threshold target underestablished for purposes of IRC 162(m).
time there are three cycles outstanding. NEOs are awarded CIUs with payouts based on achieving challenging enterprise-wide financial objectives established at the beginning of each individual year of the three-year cycle. If the threshold level of performance is not met for a calendar year for both of these goals, one-third of the award value will be forfeited.
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2010 – 2012 LTI Adjusted Earnings Per Share(1) |
| Threshold |
| Target |
| Maximum |
|
2010 |
| $1.92 |
| $2.40 |
| $2.45 |
|
2011 |
| $1.78 |
| $2.23 |
| $2.27 |
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2012 |
| $1.72 |
| $2.15 |
| $2.19 |
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2010 – 2012 LTI Adjusted Free Cash Flow(1) |
| Threshold |
| Target |
| Maximum |
|
2010 |
| $536 |
| $670 |
| $683 |
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2011 |
| $729 |
| $819 |
| $850 |
|
2012 |
| $684 |
| $760 |
| $790 |
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replaced it with Performance Stock Units, discussed below.
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The Committee believes that adjusted EPSAdjusted earnings per share and Adjusted FCFfree cash flow are important indicators of
our long-term viability and performance and thus appropriate metrics upon which to base long-term incentive awards. Adjusted EPSearnings per share is a goodan appropriate measure of long-term profitability;profitability, and a strong
Adjusted FCFfree cash flow provides us with the resources we need to reposition and pursue new growth opportunities.
The committeeCommittee generally sets the financial targets at the midpoint of the guidance we provide to stockholders and
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the financial community at the beginning of each year. Subsequent revisions of guidance during the course of the year do not affect the targets set at the beginning of a year. Before finalizing payouts, the Committee compares the company’s cumulative three-year TSR to a cumulative three-year TSR of the company’s peer group. The committeeCommittee believes it setsets the 20122013 objectives with the appropriate level of difficulty and stretch for each target.
CIU Objectives and Metrics
The 2011 – 2013 financial objectives, each weighted at aggressive yet achievable levels in light of the prolonged global economic uncertainty, the continued decline in postal volumes, and the impact both have on our business and the markets in which we operate.50%, are stated below:
2011 – 2013 LTI Adjusted Earnings Per Share(1) | Threshold | Target | Maximum |
2011 | $1.78 | $2.23 | $2.27 |
2012 | $1.72 | $2.15 | $2.19 |
2013 | $1.53 | $1.71 | $1.88 |
2011 – 2013 LTI Adjusted Free Cash Flow(1) | Threshold | Target | Maximum |
2011 | $729 | $819 | $850 |
2012 | $684 | $760 | $790 |
2013 | $573 | $623 | $673 |
(1) | Adjusted earnings per share and Adjusted free cash flow (in millions) are non-GAAP measures. For a reconciliation and additional information on the adjustments, please see “Accounting Items and Reconciliation of GAAP to non-GAAP Measures” beginning on page 55 of this proxy statement. |
2013 Funding of the Cash Incentive Unit Pool and Actual Payout
For the 20102011 – 20122013 CIU cycle, the unit value at target is $1.00. The CIU value range is between $0 and $1.80 based upon the achievement of the pre-determined financial objectives described above, each weighted at
50%. The committeeCommittee modifies the resulting unit value by up to +/– 25% based on our TSR as compared to the TSR of companies within the S&P 500, (“TSR modifier”), therefore linking payout to our relative TSR.
For NEOs, executive officers, unit presidents and staff vice presidents the 20102011 – 20122013 CIU Cycle,cycle is only paid if the company achieves an IRC 162 (m)162(m) threshold was achieving antarget of average annual income from continuing operations over the cycle of $331,379,000,$298,086,000, excluding certain special events (seeevents. (See “Treatment of Special Events” beginning on page 65).55 of this proxy statement.) Adjusted average annual income from continuing operations for the 20102011 – 20122013 CIU Cyclecycle exceeded the threshold and was $481,418,000.$426,332,000. The IRC 162(m) threshold target for income from continuing operations on the 2011 – 2013 period was restated to exclude PBMS, IMS and Nordic furniture.
46 |
COMPENSATION DISCUSSION AND ANALYSIS
The chart below shows actual results as compared to target before and after applying the TSR modifierModifier for the 20102011 – 20122013 cycle.
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Objectives |
|
| Actual Result | Metric | TSR Modifier | Final |
2010 – 2012 LTI Adjusted |
|
|
|
|
|
|
Earnings Per Share(1) |
|
|
|
|
|
|
2010 |
|
| $2.23 | $0.12 | (10%) | $0.11 |
2011 |
|
| $2.70 | $0.30 | (25%) | $0.23 |
2012 |
|
| $2.16 | $0.20 | (25%) | $0.15 |
2010 – 2012 LTI Adjusted |
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|
Free Cash Flow(1) |
|
|
|
|
|
|
2010 |
|
| $951 | $0.30 | (10%) | $0.27 |
2011 |
|
| $994 | $0.30 | (25%) | $0.23 |
2012 |
|
| $767 | $0.20 | (25%) | $0.15 |
Subtotal |
|
|
| $1.42 |
| $1.14 |
Negative Discretion |
|
|
|
|
| ($0.40) |
Total |
|
|
|
|
| $0.74 |
Metric | Final | |||
Objectives | Actual Result | Payout Value | TSR Modifier | Payout Value |
2011 – 2013 LTI Adjusted | ||||
Earnings Per Share(1) | ||||
2011 | $2.70 | $0.30 | (25%) | $0.23 |
2012 | $2.16 | $0.20 | (25%) | $0.15 |
2013 | $1.88 | $0.33 | 25% | $0.41 |
2011 – 2013 LTI Adjusted | ||||
Free Cash Flow(1) | ||||
2011 | $994 million | $0.30 | (25%) | $0.23 |
2012 | $767 million | $0.20 | (25%) | $0.15 |
2013 | $655 million | $0.27 | 25% | $0.34 |
Total | $1.60 | $1.50 |
1) | |
| Adjusted |
The TSR modifierModifier in aggregate decreased the CIU pay-out level for the 20102011 – 20122013 cycle by –20%6%.
Even though the pre-determined financial objectives would have supported a payout of $1.14 per unit after applying the TSR modifier for the 2010 – 2012 CIU award cycle, the committee approved a final payout of $0.74 per unit, after applying negative discretion based on our overall 2012 performance. This resulted in decreasing the CIU payout for the 2010 – 2012 award cycle by 35%.
The CIU payout in February 20132014, for 2011-2013 cycle, was 31% less than$1.50. This compares to the payout in February 2012.2010-2012 cycle pay-out which was $0.74, after the Committee applied negative discretion.
Performance-Based Restricted Stock Units
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An annual grant of performance-based RSUsrestricted stock units (RSUs) is made during the first quarter of the year, typically after our fourth quarter earnings release has been widely disseminated.year.
For NEOs, executive officers, unit presidents and staff vice presidents, no performance-based restricted stock units (RSUs) will vest unless the 2012 awards, thecompany achieves its IRC 162(m) threshold was 2012target of $276,086,000 income from continuing operations, equaling or exceeding $383,665,000, excluding certain special
events (see events. (See “Treatment of Special Events” beginning on page 65). The actual 201255 of this proxy statement.) Actual 2013 Adjusted income from continuing operations, excluding all special events, was $380,668,000, which exceeded the targettarget. The IRC 162(m) threshold targets for income from continuing operations and was $435,277,000. Therefore, the 2012actual 2013 income from continuing operations were restated to exclude PBMS, IMS and Nordic furniture.
The 2013 award will vestvests in four equal installments commencing on the first anniversary of the grant date if the executive is still employed on the vesting date. If the initial threshold had not been achieved, the performance-based RSUs granted in 20122013 would have been forfeited.
Performance-Based Market Stock Units
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Performance-based MSUsmarket stock units (MSUs) were granted to executive officers, including NEOs, in February 2012 for the first time and given changes made later in 2012, the only time. The number of MSUs that can vest is capped at 200% of the number of MSUs originally granted. A minimum number of shares, comprising 50% of the award, will vest at the end of the three-year performance period.
Because the IRC 162 (m) threshold target was achieved, the 2012 award will vest on the third anniversary of the grant
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date. The number of performance-based MSUs that will vest at that time is contingent on our TSR over the vesting period and the executives’ continued employment until the vesting date. The vesting percentage is determined by multiplying the number of units by a fraction, the numerator of which is the Pitney Bowes ending stock price1plus cumulative dividends paid on outstanding company stock during the vesting period, and the denominator, of which is the Pitney Bowes beginning stock price.2
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In special circumstances,2013, the committee, or in the caseCommittee determined that MSUs would no longer be a part of the CEO, the independent board members, may determine that it is appropriate to make additional long-term award grants to executives during the course of the year. Effective December 3, 2012, the independent board
members awarded a one-time grant of premium-priced stock options in connection with the commencement of Mr. Lautenbach’s employment. Please see “Compensation for the New CEO” beginning on page 52 of this proxy statement.company’s executive compensation structure.
(1) | ||
| Pitney Bowes ending stock price is the average of the closing price of company stock for the 20 trading days ending on the last day of the month prior to the vesting date. | |
(2) | ||
| Pitney Bowes beginning stock price is the average of the closing |
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47 |
COMPENSATION DISCUSSION AND ANALYSIS
Periodic Off-Cycle Long-Term Awards
In special circumstances, the Committee, or in the case of the CEO, the independent board members, may determine that it is appropriate to make additional long-term award grants to executives during the course of the year. In February 2013, the independent board members awarded the second and final tranche of premium-priced stock options promised to Mr. Lautenbach upon commencement of his employment in December 2012. These options were awarded at a 160% premium to the award date stock price. In July 2013, the Committee awarded a one-time grant of 400,000 premium-priced stock options, with a premium ranging from 115% to 160% of the award date stock price, to Mr. Monahan for retention purposes.
See details of the grants for Mr. Lautenbach and Mr. Monahan in the “Grants of Plan-Based Awards in 2013” table on page 59 of this proxy statement.
2014 LTI Design Mix
In November 2013, reflecting the tenor of comments made by stockholders, the Committee changed the design mix for the 2014 LTI awards to 100% equity to further align long-term incentives with long-term stockholder interests. The 2014 LTI design mix will be 70%
performance stock units (PSUs) and 30% performance-based RSUs, both paid in stock. The long-term executive compensation structure will be entirely impacted by changes in company stock price.
PSUs, which the Committee decided will be granted in place of CIUs beginning in 2014, have many of the same features as the previously granted CIUs, except that the PSUs are based on and settled in stock instead of cash. The new LTI mix of 100% equity further aligns the LTI program with market best practices. In addition, the vesting period for the RSUs was changed from four years to three years.
Because PSUs are equity-based and CIUs are cash-based, beginning in 2014, the Summary Compensation Table will reflect for reporting purposes only a “bunching” of award values. The outstanding and previously granted cash-based CIU awards will continue to be reflected as required under SEC rules when paid, but the equity denominated PSUs are required to be reported when granted. The result will look like the total value of LTI has increased when in fact it only reflects the different timing of when cash versus equity is reported. Since outstanding and previously awarded CIU awards will continue to vest through 2016, this “bunching” effect will continue through 2016.
Other Indirect Compensation
Retirement Compensation
In the United States, retirement benefits include:
Retirement Compensation
Retirement Benefits include:
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Nonqualified restoration plans (pension and 401(k)) are based on the same formulas as are used under the qualified plans and make up for benefits that otherwise would be unavailable due to limitations set forth under the Internal Revenue Code of 1986, as amended (the “Code”)(IRC). Restoration plans are available to employees including the NEOs.
Nonqualified plans are unfunded obligations of the company subject to claims by our creditors. The 401(k) restoration plan is:Restoration Plan:
is adjusted on the basis of notional investment returns of publicly-available mutual fund investments; and does not receive any above-market earnings.
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The pension restoration planPension Restoration Plan applies the same standard actuarial rules as are applied under the qualified pension plan.Pension Plan.
In January
Effective April 1, 2013, the board of directors approved effective April 1, 2013, the freezing of all future pension planPension Plan benefit accruals for employees with fewer than 16 years of benefit accrual service as of
March 31, 2013. Employees with 16 or more years of benefit accrual service on March 31, 2013 will continue to accrue pension benefits through December 31, 2014, after which date no further benefits will accrue under the pension plan.Pension Plan. Similar
actions amendments were adopted with respect to the Pension Restoration Plan. At the same time, the board of directors approved,amended the 401(k) Plan, effective April 1, 2013, to provide eligibility to participate in the eligibility of2% employer core contribution to those employees who will no longer accrue benefits under the pension plan to participate in the 2% employer core contribution to the 401(k) plan.Pension Plan. The 2% employer core contribution has been in effect since 2005 when the pension planPension Plan was closed to employees hired after December 31, 2004.
For additional information, please see the narrative accompanying the “Pension Benefits as of December 31, 2012”2013” table on page 7765 and the narrative accompanying the “Nonqualified Deferred Compensation for 2012”2013” table on pages 7866 and 7967 of this proxy statement.
Other Benefits
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Other benefits include:
º | |||
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| Provides a savings vehicle in a tax efficient manner | ||
º |
| Provides certain executives the ability to voluntarily defer payouts of annual cash incentives, CIUs and base pay into a nonqualified deferred compensation plan |
48 |
COMPENSATION DISCUSSION AND ANALYSIS
to provide guidance in managing complex investment, tax, legal and estate matters; up to a maximum of $7,500 per year
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| Executive physical | ||
• | Spousal travel |
Process for Determining Named Executive Officer Compensation Committee
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The committeeCommittee is responsible for reviewing the performance of and approving compensation awarded to our executives,executive officers, other than the CEO. The independent board members, with the input of the committee,Committee, annually set the CEO’s individual target compensation, review his performance and determine his compensation payout in the context of the established objectives, the actual
the actual performance against those objectives and the TSR. In addition, the committeeCommittee may exercise negative discretion in its sole determination. The committeeCommittee works closely with its independent consultant, Pay Governance LLC, and management to examine various pay and performance matters throughout the year.
Independent Compensation Consultant
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From January through May 2012 Frederic W. Cook & Co. (“FWC”) served as the committee’s compensation consultant. In June 2012 the committee terminated the services of FWC and engagedThe Committee hired Pay Governance as its independent compensation consultant.consultant in June, 2012. The committee decided to retain a new consultant after the 2012 Say-on-Pay vote and after listening to stockholders’ feedback on our compensation programs because it believed it needed a fresh look at the entire program. The committee selected Pay Governance after a search process that included interviewing several firms. The committee found Pay Governance’s analysis and presentation during the interview process to be the most forthright and compelling. Additionally Pay Governance had a proven track record of aiding companies to revamp their executive compensation program after a failed Say-on-Pay vote.
The committeeCommittee considers advice and information from its independent compensation consultant in determining the compensation for the CEO and the other NEOs. The consultant advises on a range of matters, including peer
group composition and plan design. The consultant regularly attends the committeeCommittee meetings. NeitherThe consultant performeddoes not perform other services for us or the board of directors.company. We incurred $109,378$145,396 in fees from FWC and $134,411 fromfor Pay Governance for services performed for the committeeCommittee during 2012.2013. The committeeCommittee considered the following six factors and determined there was no conflict in the engagement of Pay Governance:Governance and that Pay Governance is independent: i) the provision
of other services to usthe company by Pay Governance; (ii) the amount of fees received from usthe company by Pay Governance, as a percentage of the total revenue of Pay Governance; (iii) the policies and procedures of Pay Governance that are designed to prevent conflicts of interest; (iv) any business or personal relationship of the Pay Governance consultant with a member of the committee;Committee; (v) any of ourcompany stock owned by the Pay Governance consultants; and (vi) any business or personal relationship of the Pay Governance consultant or Pay Governance with any of ourthe company’s executive officers. The committeeCommittee has the sole authority to hire and terminate its consultant.
49 |
COMPENSATION DISCUSSION AND ANALYSIS
Determining Compensation—The Decision Process
Determining Compensation—The Decision Process
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At the beginning of each year our CEO, on behalf of senior management, recommends to the committeeCommittee financial and strategic objectives for the incentive plans based on ourthe financial and strategic objectives set by the board of directors. The committeeCommittee and the independent directors review the recommendations of management particularly with respect to the appropriateness and rigor of the objectives and approve the final annual and long term objectives.
Our
After reviewing benchmarking data presented by external consultants, our CEO and Executive Vice President and Chief Human Resources Officer recommend compensation target levels for total direct compensation as well as the annual and long-term incentive compensation for executive officers, including the NEOs, other than the CEO. The committeeCommittee reviews management’s recommendations and determines the appropriate financial and strategic objectives, base salary and the target levels of annual and long-term incentive compensation. The committeeCommittee also recommends for approval by the independent board members the CEO’s base salary and annual and long-term incentive target levels. Generally at this time the committeeCommittee also approves any changes to the compensation program for the coming year.
At the end of each year, each NEO completes a written self-assessment of his or her performance against his or her objectives. The CEO evaluates the performance of his executive officer direct reports and recommends individual ratings for each NEO other than himself. These ratings are considered by the committee in determining annual merit base salary increases. Based on these ratings, the CEO also recommends incentive compensation actions other than for himself to the committee.Committee. The committeeCommittee recommends to the independent board members an individual rating for the CEO. The committeeCommittee reviews the financial and strategic accomplishments of the company, taking into account predetermined objectives for the preceding year, as well as the individual ratings and determines actual base salary increases as well as the annual and long-term incentive compensation for the NEOs and recommends for approval by the independent board members the CEO’s compensation. The actual payout levels for annual incentive compensation are based upon the com-
company’spany’s performance against the predetermined financial and strategic objectives and other criteria, as discussed in further detail under “Annual Incentives” beginning on page 53.44. For long-term incentive compensation, the recommendation to the committeeCommittee for payout levels is based on pre-determined financial objectives and a TSR modifier,Modifier, as discussed in further detail under “Long-term Incentives” beginning on page 5546 of this proxy statement.
To assist in this process, the committeeCommittee also reviews tally sheets the Human Resources department prepares to evaluate the individual components and the total mix of compensation. The tally sheets show the dollar amount of each of the components of each executive officer’s compensation, summarizing the total compensation opportunity, including the executive’s fixed and variable compensation, perquisites and potential payments upon termination or changeChange of control.Control. In addition, the tally sheets include a summary of historical compensation. These tally sheets aid the committeeCommittee in analyzing the individual compensation components as well as the compensation mix and weighting of the components within the total compensation package.
To ensure thatevaluate whether each NEO’s compensation package is competitive with the marketplace, the committee,Committee, and with respect to the CEO, the independent board members, also reviews each executive’s total direct compensation against market data during the benchmarking process as more fully described in “Assessing Competitive Practice –Benchmarking”Practice” below. Based on the structure of our current management team, the committeeCommittee and the board strive to ensure that the relationship between the compensation paid to the CEO and the second highest paid NEO are within acceptable market norms, subject to considerations such as performance, the market median compensation of the respective positions, contributions to the company and experience that may lead to deviations from market relationships. However, since we have no Chief Operating Officer, or COO, the difference between the CEO’s compensation and that of our next most highly paid officer, currently our CFO, will likely be a bit larger than for companies that do have a COO.
|
COMPENSATION DISCUSSION AND ANALYSIS
Assessing Competitive Practice
To ensure thatevaluate whether Pitney Bowes’ executive compensation is competitive in the marketplace, the committeeCommittee annually compares each executive’s total direct compensation (base salary, annual incentive and long-term incentives) against two independent reports with a view towards determining the optimal mix and level of compensation. To achieve this, we use two sources of compensation, information. We use the Towers Watson Regressed Compensation Report to determine(Towers Watson Report), and the compensation targets annually andRadford High-Tech Industry Survey Report (Radford Report). We then we review the targets and actual payouts against publicallypublicly available data from our peer group to evaluate ongoing compensation opportunity and competitiveness.
The committee Finally, the Committee’s independent compensation consultant reviews the data presented to the Committee, before the Committee establishes the target total direct compensation structure based on the Towers Watson
Regressed Compensation Report. Compensationstructure. The Committee sets compensation targets are set based on the assumption that specific incentive award performance objectives are achieved at their target level. Beginning this year, the committeeThe Towers Watson data is regressed the data from this report for corporate revenue of approximately $5.3$4.0 billion (instead of following our previous practice of comparing compensation against a group with revenues of $6 – $10 billion) for corporate leaders and actual regressed revenue for business unit leaders. The committeeRadford Report bases its analysis on applicable revenue ranges as they pertain to various roles. The Committee believes that this newusing the Towers Watson Report regressed revenue scope and the revenue ranges in the Radford Report more accurately reflectsreflect market competitiveness against outside companies that are withincompanies. However, the company’s revenue range. The report is comprised of companies in all industry areas other than those in the financial and energy sector. However, the
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exact number of companies included in the data for each executive position may vary depending on the structure of the applicable company and whether the company submitted the relevant data. The reportTowers Watson Report is a sub-section of the 20122013 US CDB General Industry Executive Database reportDatabase. The Radford Report is derived from Towers Watson. The complete report can be purchaseda database of survey results from Towers Watson.high-tech companies.
This market data provides important reference points for the committeeCommittee but is not the sole basis for determining appropriate compensation design, compensation targets, or individual pay levels. Use of comparative industry data and outside surveys only serveserves to indicate to the committeeCommittee whether those decisions are in-linein line with industry in general and our peer group in particular. The committeeCommittee believes that the comparative industry data used from the Towers Watson Report, the Radford Report and the new peer group are consistent with our compensation philosophy. In addition, compensation targets and individual pay levels may vary from the median for various reasons, including:
• | ||
| the value of the total rewards package; | |
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• | program design and strategic considerations; | |
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| affordability; | |
• | changing competitive conditions; | |
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• | program transition considerations; | |
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• | the definition and scope of the executive’s role; | |
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• | the executive’s individual contributions to the company; or | |
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• | succession or retention considerations. |
For
In making its determination that the Pitney Bowes compensation package is appropriate and competitive, the
Committee takes the following actions. The Committee first references for each NEO the committee targets total direct compensation levels that strive to ensure that generallymedian of the data presented in the Towers Watson and Radford Reports in determining target base salary, target total cash compensation and target total direct compensation is at +/– 20% ofcompensation. However, in making its final determination on any one position, the median of the dataCommittee will also take into account unique skill sets presented by the Towers Watson Regressed Compensation Report for each executive’s position. The committee believes thatemployee in high-growth areas targeted by comparing our compensation data against the mid-point or median, we are measuring against the most stable central tendency of the companies included in the survey. Based on this review, the committee determined that the Pitney Bowes’ total direct compensation package approximates the median of the data fromcompany. In addition, as a supplement to the Towers Watson Regressed Compensation Report. In addition, to supplement the Towers Watsonand Radford information, the committee askedCommittee asks Pay Governance to perform its analysis and provide an analysisits opinion on compensation trends along with its views onthe specific compensation program design. The committeeCommittee and the board also consider the burn rate with respect to the equity awards when deciding how much of the total direct compensation package should be composed onof equity-based awards. The burnBurn rate is the total equity awards we grantedawarded in a fiscal year divided by the total common stock outstanding at the beginning of the year. Our three-year average burn rate of 1.09%1.00% for the time period from 20102011 to 20122013 is below the median run-rateburn rate of 1.55%1.72% for S&P 1500 companies in FY2011fiscal year 2012 (source: Equilar 20122013 Equity Trends Report).
We
Next, the Committee annually reviews our relative performance, compensation targets and actual payouts against the relative performance and compensation of the peer group listed below.
Based on this rigorous review, the Committee has determined that the Pitney Bowes total compensation package for 2013 is appropriate and competitive considering all the factors outlined above.
PEER GROUP
Although we do not have a single completely overlapping competitor due to the unique mix of our business. Nevertheless, the committee annually reviews our relative performance, compensation targets and actual payouts
against the relative performance and compensation of thebusiness, we use a peer group listed below.of companies similar in size and complexity to benchmark our executive compensation against. In 2012,2013, the committeeCommittee changed the composition of the peer group.group to reflect the sale of Pitney Bowes Management Services (PBMS) and the company’s enhanced focus on software and technology. Pay Governance and the committeeCommittee designed our peer group so the committeeCommittee could analyze compensation packages, including compensation mix and other benefits, within the competitive market to attract and retain the talent and skill required to lead a business of complexity and size similar to ours.our business. This peer group consists of services, industrial and technology companies. When evaluating the appropriateness of the peer group, the committeeCommittee considered factors such as revenue, net income, market capitalization, number of employees, and complexity of the business to ensure a reasonable balance in terms of company size and an adequate number of peers. The Committee also considered feedback received from stockholders. The new peer group consists of companies with revenues between $2$2.7 billion and $22$22.3 billion, and market capitalization between $1$1.5 billion and $14$16.4 billion.
Previously our peer group was weighted towards companies with higher revenues and larger market capitalization than ours. Stockholders told us that they were concerned that our executive pay may have been compared with
51 |
COMPENSATION DISCUSSION AND ANALYSIS
Based upon these considerations, the wrong benchmark. InCommittee eliminated the previous peer group, we were at the 30thpercentile for revenue and 13thpercentile for market capitalization in 2012. After reevaluating the previous peer group, the committee eliminated six of the sixteenfollowing companies from our previousthe prior peer group and added another four companies. With these changes our company is at the 50thpercentile for revenue and 25thpercentile for market capitalization within the new peer group asgroup:
• | Agilent Technologies | |
• | Avery Dennison |
The Committee eliminated Agilent Technologies because of December 31, 2012. The new peer group also eliminates our previousits primary focus on industrial machinery comparators while increasingbioanalytical solutions, a business that does not closely reflect our portfolio. The Committee removed Avery Dennison to reflect our emphasized focus on technology and software following the weightsale of commercial printingPBMS.
The Committee added the following companies to the peer group:
• | EchoStar Corp. | |
• | Fidelity National Information Services, Inc. | |
• | The Western Union Co. |
The Committee added EchoStar Corp. since it is an appropriately-sized equipment manufacturing business, Fidelity National Information Services, Inc. because of its focus on data processing solutions and computer hardware peers.services, similar to the geocoding and address processing services we provide to our clients and the Western Union Co. because of its focus on financial transactions as well as data processing and outsourcing services, which are similar to our leasing, banking and processing services functions. The committeeCommittee decided to continue to include Xerox in our peer group despite the revenue size difference because the committeeCommittee considers themit our closest direct peer given its business portfolio compared to oursin the office equipment space and it also is undergoing a similar transformation in its core business. The committee eliminated the following companies from the peer group:
Peer Group | ||||||||||||||||||||
Fiscal 2013 | 12/31/2013 | |||||||||||||||||||
Revenue | Market Capitalization | Total Stockholder Return | ||||||||||||||||||
Company Name | ($ millions) | ($ millions) | 1-Year | 3-Year | 5-Year | |||||||||||||||
Alliance Data Systems Corporation | 4,150 | 12,808 | 82 | % | 55 | % | 41 | % | ||||||||||||
Diebold, Incorporated | 2,886 | 2,107 | 12 | % | 5 | % | 7 | % | ||||||||||||
DST Systems Inc. | 2,650 | 3,827 | 52 | % | 29 | % | 20 | % | ||||||||||||
EchoStar Corp. | 3,261 | 4,494 | 45 | % | 26 | % | 27 | % | ||||||||||||
Fidelity National Information Services, Inc. | 5,992 | 15,628 | 57 | % | 27 | % | 29 | % | ||||||||||||
Fiserv, Inc. | 4,742 | 15,231 | 49 | % | 26 | % | 27 | % | ||||||||||||
Harris Corporation | 5,042 | 7,461 | 47 | % | 19 | % | 17 | % | ||||||||||||
Iron Mountain Inc. | 3,016 | 5,803 | 1 | % | 15 | % | 9 | % | ||||||||||||
Lexmark International Inc. | 3,629 | 2,206 | 59 | % | 4 | % | 8 | % | ||||||||||||
NCR Corp. | 6,095 | 5,668 | 34 | % | 30 | % | 19 | % | ||||||||||||
R.R. Donnelley & Sons Company | 10,385 | 3,686 | 144 | % | 13 | % | 16 | % | ||||||||||||
Rockwell Automation Inc. | 6,352 | 16,401 | 44 | % | 21 | % | 33 | % | ||||||||||||
Unisys Corporation | 3,440 | 1,474 | 94 | % | 9 | % | 32 | % | ||||||||||||
The Western Union Company | 5,545 | 9,526 | 31 | % | 0 | % | 6 | % | ||||||||||||
Xerox Corporation | 22,282 | 14,895 | 83 | % | 4 | % | 11 | % | ||||||||||||
25th Percentile | 3,350 | 3,756 | 39 | % | 7 | % | 10 | % | ||||||||||||
Median | 4,742 | 5,803 | 49 | % | 19 | % | 19 | % | ||||||||||||
75th Percentile | 6,044 | 13,852 | 71 | % | 27 | % | 28 | % | ||||||||||||
Pitney Bowes Inc. | 4,843 | 4,706 | 132 | % | 7 | % | 6 | % | ||||||||||||
PBI Percent Rank | 52 | % | 37 | % | 98 | % | 25 | % | Lowest | |||||||||||
Source: Capital I.Q. |
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Cognizant Technology SolutionsCOMPENSATION DISCUSSION AND ANALYSIS
Other Policies and ITT have been eliminated because, due to changes to their businesses and ours, their business operations are no longer a strong fit compared to ours from an industry perspective. ADP, Computer Sciences, Ingersoll Rand and Seagate were all eliminated because their revenue is twice that of ours.Guidelines
Clawback Policy
The committee added the following companies:
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We added Avery Dennison, Diebold, Iron Mountain, and Unisys Corp. to provide greater industry focus and relevant size characteristics to the group. Additionally Avery Dennison represents a close industry match for us with a similar revenue size. Iron Mountain is a good fit from a
business content perspective. The inclusion of Unisys including their trailing twelve month revenues and market capitalization compared to ours recognizes our anticipated growth in the software solutions segment.
New Peer Group
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| Fiscal 2012 |
| 12/31/2012 |
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| Total Stockholder Return |
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Company Name |
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| 1-Year |
| 3-Year |
| 5-Year |
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Agilent Technologies Inc. |
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| 6,858 |
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| 14,244 |
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| 18 | % |
| 10 | % |
| 2 | % |
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Alliance Data Systems Corporation |
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| 3,641 |
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| 7,217 |
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| 39 | % |
| 31 | % |
| 14 | % |
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Avery Dennison Corporation |
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| 6,036 |
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| 3,478 |
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| 26 | % |
| 2 | % |
| -5 | % |
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Diebold, Incorporated |
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| 2,992 |
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| 1,935 |
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| 5 | % |
| 6 | % |
| 5 | % |
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DST Systems Inc. |
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| 2,577 |
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| 2,733 |
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| 35 | % |
| 13 | % |
| -5 | % |
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Fiserv, Inc. |
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| 4,482 |
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| 10,548 |
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| 35 | % |
| 18 | % |
| 7 | % |
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Harris Corporation |
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| 5,451 |
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| 5,560 |
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| 40 | % |
| 4 | % |
| -2 | % |
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Iron Mountain Inc. |
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| 3,005 |
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| 5,886 |
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| 17 | % |
| 18 | % |
| 0 | % |
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Lexmark International Inc. |
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| 3,798 |
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| 1,498 |
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| -27 | % |
| -2 | % |
| -7 | % |
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NCR Corp. |
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| 5,730 |
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| 4,074 |
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| 55 | % |
| 32 | % |
| 0 | % |
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R.R. Donnelley & Sons Company |
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| 10,222 |
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| 1,621 |
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| -32 | % |
| -21 | % |
| -20 | % |
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Rockwell Automation Inc. |
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| 6,259 |
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| 11,731 |
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| 17 | % |
| 24 | % |
| 7 | % |
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Unisys Corporation |
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| 3,706 |
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| 761 |
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| -12 | % |
| -23 | % |
| -18 | % |
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Xerox Corporation |
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| 22,390 |
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| 8,618 |
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| -12 | % |
| -5 | % |
| -14 | % |
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25th Percentile |
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| 3,658 |
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| 2,135 |
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| -8 | % |
| -1 | % |
| -6 | % |
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Median |
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| 4,967 |
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| 4,817 |
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| 18 | % |
| 8 | % |
| -1 | % |
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75th Percentile |
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| 6,203 |
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| 8,268 |
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| 35 | % |
| 18 | % |
| 4 | % |
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Pitney Bowes Inc. |
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| $ 4,904 |
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| $ 2,136 |
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| -36 | % |
| -16 | % |
| -17 | % |
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PBI Percent Rank |
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| 50% |
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| 25% |
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| Lowest |
| 10 | % |
| 10 | % |
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Source: Capital I.Q. |
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Previous Peer Group
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| Fiscal 2012 |
| 12/31/2012 |
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| Total Stockholder Return |
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Company Name |
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| 1-Year |
| 3-Year |
| 5-Year |
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Agilent Technologies Inc. |
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| 6,858 |
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| 14,244 |
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| 18 | % |
| 10 | % |
| 2 | % |
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Alliance Data Systems Corporation |
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| 3,641 |
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| 7,217 |
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| 39 | % |
| 31 | % |
| 14 | % |
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Automatic Data Processing, Inc. |
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| 10,172 |
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| 27,638 |
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| 9 | % |
| 13 | % |
| 8 | % |
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Cognizant Technology Solutions |
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| 7,346 |
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| 22,179 |
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| 15 | % |
| 18 | % |
| 17 | % |
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Computer Sciences Corporation |
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| 15,877 |
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| 6,223 |
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| 73 | % |
| -10 | % |
| -3 | % |
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DST Systems Inc. |
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| 2,577 |
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| 2,733 |
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| 35 | % |
| 13 | % |
| -5 | % |
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Fiserv, Inc. |
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| 4,482 |
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| 10,548 |
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| 35 | % |
| 18 | % |
| 7 | % |
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Harris Corporation |
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| 5,451 |
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| 5,560 |
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| 40 | % |
| 4 | % |
| -2 | % |
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Ingersoll-Rand Plc |
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| 14,035 |
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| 14,436 |
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| 60 | % |
| 12 | % |
| 2 | % |
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ITT Corporation |
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| 2,228 |
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| 2,175 |
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| 23 | % |
| 6 | % |
| -2 | % |
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Lexmark International Inc. |
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| 3,798 |
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| 1,498 |
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| -27 | % |
| -2 | % |
| -7 | % |
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NCR Corp. |
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| 5,730 |
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| 4,074 |
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| 55 | % |
| 32 | % |
| 0 | % |
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R.R. Donnelley & Sons Company |
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| 10,222 |
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| 1,621 |
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| -32 | % |
| -21 | % |
| -20 | % |
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Rockwell Automation Inc. |
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| 6,259 |
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| 11,731 |
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| 17 | % |
| 24 | % |
| 7 | % |
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Seagate Technology Public Limited |
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| 14,939 |
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| 11,483 |
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| 95 | % |
| 22 | % |
| 6 | % |
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Xerox Corporation |
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| 22,390 |
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| 8,618 |
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| -12 | % |
| -5 | % |
| -14 | % |
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25th Percentile |
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| 4,311 |
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| 3,739 |
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| 13 | % |
| 2 | % |
| -4 | % |
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Median |
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| 6,559 |
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| 7,918 |
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| 29 | % |
| 12 | % |
| 1 | % |
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75th Percentile |
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| 11,175 |
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| 12,359 |
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| 44 | % |
| 19 | % |
| 7 | % |
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Pitney Bowes Inc. |
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| $ 4,904 |
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| $ 2,136 |
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| -36 | % |
| -16 | % |
| -17 | % |
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PBI Percent Rank |
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| 30% |
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| 13% |
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| Lowest |
| 3 | % |
| 3 | % |
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Source: Capital I.Q. |
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The board of directors adoptedcompany’s executive compensation programs include a “clawback” policy in 2009. Under this policy,feature, allowing the board of directors mayto adjust, recoup or require the forfeiture of any awards made or paid under any stock plan or the KEIP:KEIP under the following circumstances:
| to any executive officer, including NEOs, in the event of any financial restatement due to a misrepresentation of the financial statements of the company. This applies to vesting or to payments made or paid during the 36-month period prior to the financial restatement; or | |
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• | to any employee, including NEOs, whom the board of directors reasonably believes engaged in gross misconduct or breached any provisions in their Proprietary Interest Protection Agreement, which generally provides for confidentiality, and non-competition and non-solicitation of employees and customers for one year following termination of employment. |
No Agreements with Executives
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We have not entered into fixed term employment agreements with any of our NEOs, and thereforeincluding the CEO. Therefore, such officers are “at will” employees.
No Pledging, Hedging and Other Short-term Speculative Trading
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We have policies prohibiting both the pledging and hedging of our stock. Neither the board of directors nor management-level employees may pledge or transfer for value Pitney Bowes securities, engage in short-term speculative (“in and out”) trading in Pitney Bowes securities, or participate in hedging and other derivative transactions, including short sales, “put” or “call” options, swaps, collars or similar derivative transactions, with respect to Pitney Bowes securities (other than transactions in employee stock options).
Executive Stock Ownership Policy
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Among the board’s responsibilities is to oversee succession planning and leadership development. As part of this process, the Governance Committee oversees long-term and short-term plans for CEO succession. The board of directors is responsible for evaluating the performance of the CEO and for selection of successors to that position. The criteria used when assessing the qualifications of potential CEO successors include, among others, strategic vision and leadership, operational excellence, financial management, executive officer leadership development, ability to motivate employees, and an ability to develop an effective working relationship with the Board. The Governance Principles of the Board of Directors, which are posted on the company’s website at www.pb.com under the caption “Our Company – Leadership & Governance,” include additional information about succession planning.
In 2012, the board used the succession planning process described above to plan for the succession of
Mr. Martin, our former CEO. The Governance Committee interviewed internal and external candidates with the assistance of a nationally recognized executive search firm. After the Governance Committee conducted an in-depth review of all the internal and external candidates, it referred finalist candidates for board interviews. Effective December 3, 2012, the board elected Mr. Lautenbach as our new President and CEO and Michael I. Roth, a director since 1995 and the board’s Lead Director since February 2012, as the new Non-Executive Chairman of the board.
Periodically, but not less than annually, the board of directors considers management’s recommendations concerning succession planning for senior management roles other than the role of CEO. As part of this process, the board reviews development plans to strengthen and supplement the skills and qualifications of internal succession candidates.
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We maintain an executive stock ownership policy that encourages executives to think as owners and to own substantial amounts of company stock to more closely align our key executives’ interests with the long-term interests of our stockholders.
In setting2013, the Committee once again reviewed the executive stock ownership guidelinespolicy using external benchmarks. Although the committee consideredbenchmarks indicated that the prior stock ownership policy was predominantly in line with market best market practices, in determining the methodologyCommittee made changes to the company’s executive stock ownership policy. The Committee adopted the changes to further emphasize its expectation that its executives think like owners, own substantial amounts of company stock and ownership level requirement. All of our NEOs are in compliancemore closely align their interests with the guidelines.long-term stockholders.
The
Although the multiple of base salary requiredownership requirement for the CEO and other executive officers will remain at 5X and 2X, respectively, unvested RSU and option awards will no longer count toward the ownership requirement. Instead, only shares owned outright, shares held in a trust and shares owned in a deferred compensation plan will be counted toward the requirement. In addition, the Committee approved expanding the policy to be held is as follows:include unit presidents and staff vice presidents at a 1X multiple of base salary.
Title | |
| Multiple of Base Salary |
Chief Executive Officer | 5X |
Other Executive Officers | 2X |
Unit Presidents and Staff Vice | |
Presidents | 1X |
We calculate the number of shares targeted for retention by multiplying an executive’s annual base salary times the multiple of salary required and dividing by the average closing price of our common stock on the last trading day of each of the prior two years.
In 2007,
The guidelines provide that the committee approved guidelines providing that executivesCEO and other executive officers have five years to achieve the required ownership levels from the date of the first award following the time they become covered by this policy, or receive a promotion, whichever is later. In Feb-policy.
ruary 2012, the committee revised the guidelines to provide that executives are expected to reach their multiple of salary requirement within the later of five years after (i) the ownership multiple is established or (ii) the first grant following the election of becoming executive officer. The value of 60% of the performance-based RSUs, restricted stock and unexercised vested stock options and 100% of the shares owned outright or held in trust are counted toward the ownership requirement. The value is calculated using the closing price of our common stock on the last trading day of the previous calendar year.
Until anthe CEO and other executive meetsofficers meet the required ownership levels, that executive is required to hold 100%at least 75% of their “net profit shares.”shares” in the first five years, and 100% of the “net profit shares” thereafter. Unit Presidents and Staff Vice Presidents must hold at least 50% of their “net profit shares” until the multiple is met. Net profit shares are, with respect to stock options, the shares remaining after payment of the option exercise price and taxes owed upon exercise and, with respect to vested performance-based RSUs, PSUs and restricted stock, the shares that remain after the payment of applicable taxes. As long as the multiple of salary requirement is met, an executive may sell shares acquired previously in the market as well as shares acquired through the exercise of stock options or the vesting of restricted stockequity awards.
53 |
COMPENSATION DISCUSSION AND ANALYSIS
Change of Control
COMPENSATION DISCUSSION AND ANALYSIS
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We believe that the cash payments and benefit levels provided to our executives following a changeChange of controlControl transaction are consistent with current market practice for companies of our size. Our changeChange of controlControl arrangements are intended to encourage those executives most closely connected to a potential changeChange of controlControl to act more objectively, and therefore, in the best interests of our stockholders, despite the fact that such a transaction could result in the executives’ termination. Our changeChange of controlControl protections also encourage executives to remain with the company until the completion of the transaction to enable a successful transition. Except for equity awards made under our now superseded 2002 Stock Plan, accelerated vesting of equity awards and changeChange of controlControl severance payments occur only when an employee is terminated without cause or when an employee voluntarily terminates for good reason (such as a reduction in position, pay or other constructive termination event) within two years following a changeChange of controlControl (a “double trigger” payment mechanism). The changeChange of control,Control, by itself, does not cause severance payments or accelerated vesting of equity awards except for those under the 2002 Stock Plan.
In 2012, the board eliminated the excise tax gross-up provision of the policy which previously allowed the reimbursement of any excise taxes imposed by Section 4999 of the CodeIRC in the event that 110% of the safe-harbor amount was exceeded. Although many companies still have gross-up policies, the board eliminated this policy in October 2012 with immediate effect.
In February 2013, based on competitive data and stockholder feedback and continuing our practice of exercising good pay governance, the board amended the changeChange of controlControl benefit payable to the executive officers,offi-
cers, including NEOs, under the Senior Executive Severance Policy (“SESP”)(SESP) to two times the sum of the participant’s current annual salary and the participant’s average annual incentive award in the preceding two years.three years from the prior three times of annual salary and incentive award.
During Mr. Lautenbach’s first 18 months of employment, if a changeChange of controlControl were to occur, he would receive severance benefits under the SESP equal to (a) 1.5 times his then current base salary and (b) 1.5 times his then current target bonus, payable in a lump sum. All other severance benefits under the SESP are the same as other senior executives covered by the policy.
The board of directors also approved a change in the definition of Change of Control dealing with the acquisition of company shares. Under the new definition, a Change of Control would occur if there is an acquisition of 30% (previously 20%) or more of our common stock or 30% (previously 20%) or more of the combined voting power of our voting securities by an individual, entity or group.
Our changeChange of controlControl arrangements fit into our overall compensation objectives because they are aligned with our goal of providing a compensation package sufficiently competitive to attract and retain talent and aligned with stockholder interests. With the prior adoption of the double trigger payment mechanism applicable to both equity vesting and cash payouts and the more recent elimination of the gross-up provision, we believe the changeChange of controlControl arrangements may be considered asare market leading from a corporate governance perspective.
Tax and Accounting
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Our compensation programs generally satisfy the requirements for full deductibility under IRC Section 162(m) of the Code. IRC Section 162(m) denies the company a tax deduction for certain compensation in excess of $1 million paid to “covered employees” unless the compensation is qualified performance-based compensation. We generally structure our incentive compensation programs to be IRC 162(m) compliant; however,compliant. However, the committeeCommittee weighs the benefits of compliance with IRC Section 162(m) against the potential limitations of such compliance, and may award compensation that may not be fully deductible if it determines that it is in the company’s best interest to do so. The rules and regulations promulgated under SectionIRC 162(m) are complicated and subject to change from time to time, sometimes with retroactive effect. In addition, a number of requirements must be met in order for particular compensation to so qualify. As such, there can be no assurance that any compensation awarded or paid by the company will be fully deductible under all circumstances.
In determining the number
Stock options are not currently granted as part of stock options in the mix of long-term incentives, however, special awards of stock options may be granted. In those cases we value stock
options based upon the Black-Scholes valuation method, consistent with the provisions of FASB Accounting Standards Codification Topic 718 (“ASC 718”)(ASC 718). Key assumptions used to estimate the fair value of stock options include:
| the volatility of our | |
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• | the risk-free interest rate; | |
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• | expected term; and | |
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• | our dividend yield. |
In determining the number of MSUs in the mix of long-term incentives, we
We value MSUs based upon a Monte-Carlo Simulation which is a generally accepted statistical technique used, in this instance, to simulate a range of possible future stock prices for the company. Key assumptions used to estimate the value of market stockMSUs units include:
| the volatility of our | |
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• | the risk-free interest rate; | |
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• | expected term; and | |
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• | our dividend yield. |
We believe that the valuation techniques and the approaches utilized to develop the underlying assumptions
54 |
COMPENSATION DISCUSSION AND ANALYSIS
are appropriate in estimating the fair value of our stock option and market stock unitMSU grants. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events are not
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indicative of the reasonableness of the original estimates of fair value made by the company under ASC 718.
In determining the number of RSUs to be awarded in the mix of long-term incentives, we value RSUs based
upon the closing price of our common stock on the grant date. In reporting the value of RSUs in the Summary Compensation Table, we discount the value of the RSUs for non-payment of dividends during the vesting period as required by accounting guidance under ASC 718.
For additional information on the accounting treatment for stock-based awards, see note 1112 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.2013.
Treatment of Special Events
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In determining performance goals and evaluating enterprise performance results, the committeeCommittee may use its discretion and judgment to ensure that management’s rewards for business performance are commensurate with their contributions to that performance while still holding management accountable for the overall results of the business. The committeeCommittee believes that the metrics for incentive compensation plans should be specific and objective. However, in exercising its negative discretion, the committeeCommittee recognizes that interpretation of the application of pre-determined metrics to results may be necessary from time to time to better reflect the operating performance of the companycompany’s business segments and take into account certain one-time events. In adopting its philosophy in establishing metrics and compensating the management team for its actual performance, the committeeCommittee believes it to be a fairer measure to remove the impact of certain events that may mask,distort, either positively or negatively, the actual performance of management. The following chart below explains the types of events that the committeeCommittee has taken into consideration in this regard.
ACCOUNTING ITEMS AND RECONCILIATION OF GAAP TO NON-GAAP MEASURES
For 2013, the Committee determined that Adjusted earnings per share, Adjusted free cash flow, Adjusted income from continuing operations, and Adjusted earnings before interest and taxes may exclude the impact of certain special events (both positive and negative) such as restructuring charges, legal settlements and asset impairments, which materially impact the comparability of the company’s results.
The following are non-GAAP measures: Adjusted earnings per share, Adjusted free cash flow, Adjusted income from continuing operations, Adjusted earnings before interest and taxes and revenue growth.
• | ||||
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| Adjusted earnings per share | |||
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• | Adjusted free cash flow is | special events (as discussed above under “Treatment of Special Events”). | ||
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• | Adjusted income from continuing operations excludes special events (as described under “Treatment of Special Events”) including the impact of any accounting changes. | |||
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• | Adjusted earnings before interest and taxes excludes the impact of one-time adjustments, including restructuring charges, strategic actions, capital-related initiatives, and accounting changes. | |||
• | Revenue growth is computed as the year over year change in revenue excluding the impact of foreign currency translation. |
This adjusted financial information should not be construed as an alternative to our reported results determined in accordance with Generally Accepted Accounting Principles, or GAAP. Further, our definition of this adjusted financial information may differ from similarly titled measures used by other companies. We use measures such as Adjusted earnings per share, Adjusted free cash flow, Adjusted income from continuing operations and Adjusted earnings before interest and taxes to exclude the impact of special items like restructuring charges, tax adjustments, and asset impairments, because, while these are actual income or expenses of ours, they can mask underlying trends associated with our business. Such items are often inconsistent in amount and frequency and as such, the adjustments allow a stockholder greater insight into the current underlying operating trends of the business. The use of Adjusted free cash flow provides investors insight into the amount of cash that management could have available for other discretionary uses. It adjusts GAAP cash from operations for capital expenditures, as well as special items like cash used for restructuring charges, unusual tax payments and contributions to its pension funds.
55 |
COMPENSATION DISCUSSION AND ANALYSIS
Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted Measures
(Unaudited)
(Dollars in thousands, except per share data) | 2013 | 2012(1) | 2011(1) | |||||||||
GAAP diluted earnings per share from continuing operations, as reported | $ | 1.49 | $ | 1.96 | $ | 2.16 | ||||||
Restructuring charges and asset impairments | 0.29 | 0.06 | 0.44 | |||||||||
Extinguishment of debt | 0.10 | — | — | |||||||||
Sale of leveraged lease assets | — | (0.06 | ) | (0.13 | ) | |||||||
Tax adjustments | — | — | 0.02 | |||||||||
Diluted earnings per share from continuing operations, as adjusted(2) | $ | 1.88 | $ | 1.96 | $ | 2.49 | ||||||
Adjustment for discontinued operations(3) | — | 0.20 | 0.21 | |||||||||
Adjusted diluted earnings per share(2) | 1.88 | 2.16 | 2.70 | |||||||||
GAAP net cash provided by operating activities, as reported | $ | 624,824 | $ | 660,188 | $ | 948,987 | ||||||
Capital expenditures | (137,512 | ) | (176,586 | ) | (155,980 | ) | ||||||
Restructuring payments | 59,520 | 74,718 | 107,002 | |||||||||
Pension contribution | — | 95,000 | 123,000 | |||||||||
Tax and other payments on sale of businesses and leveraged lease assets | 75,545 | 114,128 | — | |||||||||
Reserve account deposits | (20,104 | ) | 1,636 | 35,354 | ||||||||
Extinguishment of debt | 32,639 | — | — | |||||||||
Free cash flow, as adjusted | 634,912 | 769,084 | 1,058,363 | |||||||||
Reserve account deposits | 20,104 | (1,636 | ) | (35,354 | ) | |||||||
Reclassification(4) | — | — | (28,794 | ) | ||||||||
Adjusted free cash flow | $ | 655,016 | $ | 767,448 | $ | 994,215 | ||||||
GAAP income from continuing operations after income taxes, as reported | $ | 301,733 | $ | 395,684 | $ | 437,593 | ||||||
Restructuring charges and asset impairments, after tax | 59,024 | 11,610 | 89,477 | |||||||||
Extinguishment of debt, after tax | 19,911 | — | — | |||||||||
Sale of leveraged lease assets, after tax | — | (12,886 | ) | (26,689 | ) | |||||||
Tax adjustments | — | — | 3,539 | |||||||||
Adjusted income from continuing operations | $ | 380,668 | $ | 394,408 | $ | 503,920 | ||||||
GAAP income from continuing operations before income taxes, as reported | $ | 403,177 | $ | 534,312 | $ | 491,486 | ||||||
Interest expense, net, before tax | 190,364 | 188,386 | 197,266 | |||||||||
Restructuring charges and asset impairments, before tax | 84,344 | 17,176 | 118,630 | |||||||||
Extinguishment of debt, before tax | 32,639 | — | — | |||||||||
Sale of leveraged lease, before tax | — | 3,817 | 7,283 | |||||||||
Earnings before interest and taxes, as adjusted | $ | 710,524 | $ | 743,691 | $ | 814,665 | ||||||
Impacts of foreign currency compared to budget(5) | 3,210 | — | — | |||||||||
Adjusted earnings before interest and taxes | $ | 713,734 | $ | 743,691 | $ | 814,665 | ||||||
Reported revenue growth | (1.2% | ) | (5.1% | ) | (3.2% | ) | ||||||
Impacts of foreign currency | 0.4% | 1.1% | (1.6% | ) | ||||||||
Revenue growth on a constant currency basis | (0.8% | ) | (4.0% | ) | (4.8% | ) |
(1) | During 2013, we sold our PBMS operations, our Nordic furniture business and our International Mail Services operations. The historical results for 2012 and 2011 have been restated to reflect the divested businesses as discontinued operations. | |
(2) |
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| Pitney Bowes Inc. |
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| Twelve Months Ended December 31, |
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| (Dollars in thousands, except per share data) |
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| 2012 |
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| 2011 |
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| 2010 |
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| GAAP diluted earnings per share from continuing operations, as reported |
| $ | 2.16 |
| $ | 1.98 |
| $ | 1.57 |
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| |
| Restructuring charges and asset impairments |
|
| 0.08 |
|
| 0.48 |
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| 0.59 |
|
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| Goodwill impairment |
|
| — |
|
| 0.41 |
|
| — |
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| |
| Sale of leveraged lease |
|
| (0.06 | ) |
| (0.13 | ) |
| — |
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| |
| Tax adjustments |
|
| — |
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| 0.02 |
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| 0.13 |
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| Diluted earnings per share from continuing operations, as adjusted(1) |
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| 2.18 |
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| 2.75 |
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| 2.29 |
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| Adjustment for IMS (reported as a discontinued operation for GAAP) |
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| (0.02 | ) |
| (0.05 | ) |
| (0.06 | ) |
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| Diluted earnings per share from continuing operations, as adjusted |
| $ | 2.16 |
| $ | 2.70 |
| $ | 2.23 |
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| GAAP net cash provided by operating activities, as reported |
| $ | 660,188 |
| $ | 948,987 |
| $ | 952,111 |
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| Capital expenditures |
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| (176,586 | ) |
| (155,980 | ) |
| (119,768 | ) |
| |
| Restructuring payments and discontinued operations |
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| 74,718 |
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| 107,002 |
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| 119,565 |
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| Pension contribution |
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| 95,000 |
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| 123,000 |
|
| — |
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| Tax payments on sale of leveraged lease assets |
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| 114,128 |
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| — |
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| — |
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| Reserve account deposits |
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| 1,636 |
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| 35,354 |
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| 10,399 |
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| Free cash flow, as adjusted(2) |
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| 769,084 |
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| 1,058,363 |
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| 962,307 |
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| Reserve account deposits |
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| (1,636 | ) |
| (35,354 | ) |
| (10,399 | ) |
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| Adjusted free cash flow |
| $ | 767,448 |
| $ | 1,023,009 |
| $ | 951,908 |
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| GAAP income from continuing operations |
| $ | 435,932 |
| $ | 400,556 |
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| 324,267 |
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| Restructuring charges and asset impairments, after tax |
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| 15,407 |
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| 97,661 |
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| 122,666 |
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| Goodwill impairments, after tax. |
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| — |
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| 82,890 |
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| — |
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| Sales of leveraged lease, after tax |
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| (12,886 | ) |
| (26,689 | ) |
| — |
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| Tax adjustments |
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| — |
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| 3,539 |
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| 27,509 |
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| Income from continuing operations, as adjusted |
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| 438,453 |
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| 557,957 |
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| 474,442 |
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| Adjustment for IMS (reported as a discontinued operation for GAAP) |
|
| (3,176 | ) |
| (9,863 | ) |
| (13,558 | ) |
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| Adjusted income from continuing operations |
| $ | 435,277 |
| $ | 548,094 |
| $ | 460,884 |
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| Reported revenue growth |
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| (4.3% | ) |
| (2.6% | ) |
| (2.1% | ) |
| |
| Impacts of foreign currency |
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| 1.1% |
|
| (1.5% | ) |
| (0.3% | ) |
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| Revenue growth on a constant currency basis |
|
| (3.2% | ) |
| (4.1% | ) |
| (2.4% | ) |
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| Adjustment for IMS (reported as a discontinued operation for GAAP) |
|
| (0.2% | ) |
| (0.1% | ) |
| (0.5% | ) |
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| Revenue growth on a constant currency basis (before discontinued operation) |
|
| (3.4% | ) |
| (4.2% | ) |
| (2.9% | ) |
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| (1) | The sum of the earnings per share amounts may not equal the totals above due to rounding. |
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| (2) | The above table includes an adjustment to GAAP net cash provided by operating activities due to a reclassification between net cash provided by operating activities and net cash used in investing activities. As a result, GAAP net cash provided by operating activities increased by $28.8 million for the year ended December 31, 2011. |
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| Represents amounts reclassified to discontinued operations related to transactions that occurred in 2013 and 2012. |
The table below shows the vested compensation in 2012 and 2011 by the NEOs and supplements the Summary Compensation Table that appears on page 69 of this proxy statement. This supplemental table also illustrates the impact that the company’s below-target financial performance in 2012 and 2011 had on vested compensation in each of those years. Compensation information for Mr. Lautenbach is not included in this table because he did not join the company until December 3, 2012.
The primary difference between this supplemental table and the standard Summary Compensation Table is the method used to value stock options and stock awards. SEC rules require that the grant date fair value of all stock options and restricted stock units be reported in the Summary Compensation Table for the year that they were granted. As a result, a significant portion of the total compensation amounts reported in the Summary Com-
pensation Table relate to stock options and restricted stock units that have not vested and which are subject to substantial uncertainty based on future changes in stock price and financial performance. In contrast, the supplemental table below includes only stock options and restricted stock units that vested during the applicable year and shows the value of those awards as of the applicable vesting date. There is no assurance that the NEOs will actually realize the value attributed to these awards even in this supplemental table, since the ultimate value of the stock options will depend on when the stock options are exercised and the underlying shares are sold and the ultimate value of the restricted stock units will depend on when the released shares are sold. That means that the value of even some of the compensation currently realized depends upon future company performance.
| GAAP net cash provided by operating activities, as reported increased by $28.8 million for the year ended December 31, 2011 due to a reclassification between net cash provided by operating activities and net cash used in investing activities. |
Vested Compensation Compared to Target Compensation
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Name |
| Year |
| Salary |
| Stock |
| Option |
| Annual |
| Cash |
| Other |
| All Other |
| Total |
| Total |
| % |
|
Michael Monahan |
| 2012 |
| 575,600 |
| 180,060 |
| 0 |
| 296,141 |
| 444,000 |
| 1,100,000 |
| 53,310 |
| 2,649,111 |
| 3,388,356 |
| -22% |
|
| 2011 |
| 558,000 |
| 150,313 |
| 0 |
| 440,294 |
| 588,500 |
| 106,500 |
| 28,788 |
| 1,872,395 |
| 2,217,700 |
| -16% |
| |
Leslie Abi-Karam |
| 2012 |
| 553,800 |
| 180,060 |
| 0 |
| 284,365 |
| 444,000 |
| — |
| 21,798 |
| 1,484,023 |
| 2,248,156 |
| -34% |
|
| 2011 |
| 544,016 |
| 150,313 |
| 0 |
| 427,907 |
| 588,500 |
| 106,500 |
| 27,360 |
| 1,844,596 |
| 2,191,076 |
| -16% |
| |
Vicki A. O’Meara |
| 2012 |
| 522,500 |
| 109,264 |
| 0 |
| 268,288 |
| 240,500 |
| — |
| 42,727 |
| 1,183,279 |
| 1,622,530 |
| -27% |
|
| 2011 |
| 512,500 |
| 179,712 |
| 0 |
| 403,760 |
| 347,750 |
| 35,500 |
| 34,587 |
| 1,513,809 |
| 1,693,646 |
| -11% |
| |
John E. O’Hara |
| 2012 |
| 450,000 |
| 30,310 |
| 0 |
| 172,800 |
| 44,733 |
| — |
| 70,680 |
| 768,523 |
| 873,921 |
| -12% |
|
Murray D. Martin |
| 2012 |
| 996,667 |
| 713,630 |
| 0 |
| 832,000 |
| 1,757,500 |
| — |
| 144,284 |
| 4,444,081 |
| 7,237,317 |
| -39% |
|
| 2011 |
| 975,000 |
| 619,318 |
| 0 |
| 1,584,660 |
| 2,541,250 |
| 337,250 |
| 62,758 |
| 6,120,236 |
| 7,814,916 |
| -22% |
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(5) |
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The information in the table below provides additional context to 2012 and 2011 NEO compensation, because it demonstrates that our below-target financial performance in 2012 and 2011 had a negative impact on the actual compensation received as compared to the value accorded these items when initially awarded. The table below also supplements the Summary Compensation Table that appears on page 69 of the proxy statement and compares the following for the NEOs in 2012 and 2011:
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The target value for vested RSU awards is calculated by multiplying the number of RSUs by the closing price of the company’s common stock on the grant date. The target value for vested stock options is calculated by multiplying the number of stock options by the Black-Scholes value on the grant date; and
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| Target Value of Options |
| Value of Options | ||||||||||||
Name |
| Year |
| Stock |
| RSUs ($) |
| Total ($) |
| Stock |
| RSUs ($) |
| Total ($) |
| Difference in |
Michael Monahan |
| 2012 |
| 425,003 |
| 225,033 |
| 650,036 |
| — |
| $180,060 |
| $180,060 |
| -72% |
| 2011 |
| 366,669 |
| 143,751 |
| 510,420 |
| — |
| $150,313 |
| $150,313 |
| -71% | |
Leslie Abi-Karam |
| 2012 |
| 425,003 |
| 225,033 |
| 650,036 |
| — |
| $180,060 |
| $180,060 |
| -72% |
| 2011 |
| 366,669 |
| 143,751 |
| 510,420 |
| — |
| $150,313 |
| $150,313 |
| -71% | |
Vicki A. O’Meara |
| 2012 |
| 218,333 |
| 137,497 |
| 355,830 |
| — |
| $109,264 |
| $109,264 |
| -69% |
| 2011 |
| 143,333 |
| 250,813 |
| 394,146 |
| — |
| $179,712 |
| $179,712 |
| -54% | |
John E. O’Hara |
| 2012 |
| 52,470 |
| 41,001 |
| 93,471 |
| — |
| $ 30,310 |
| $ 30,310 |
| -68% |
Murray D. Martin |
| 2012 |
| 1,675,000 |
| 890,651 |
| 2,565,651 |
| — |
| $713,630 |
| $713,630 |
| -72% |
| 2011 |
| 1,779,172 |
| 593,744 |
| 2,372,916 |
| — |
| $619,318 |
| $619,318 |
| -74% |
The following “Summary Compensation Table” shows all compensation earned by or paid to for Messrs. Lautenbach, Monahan, O’HaraWright, Goldstein, and Martin, andMs. Kohnstamm. Mmes. Abi-Karam and O’Meara terminated employment in 2013 but are included in the table below because they were executive officers during the course of the year with total compensation that would have placed them in the top five highest paid notwithstanding their termination of employment. The compensation shown below was paid for services performed during or with respect to 2013, 2012 2011 and 2010 for services rendered to the company.2011. The “Summary Compensation Table” includes amounts earned and deferred during the periods covered under the Deferred Incentive Savings Plan.
The “Grants of Plan-Based Awards in 2012”2013” table on page 7159 provides additional information regarding grants made during 20122013 to the NEOs.
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SUMMARY COMPENSATION TABLE | ||||||||||||||||||
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Name and Principal Position |
| Year |
| Salary |
| Bonus |
| Stock |
| Option |
| Non-Equity |
| Change in |
| All Other |
| Total ($) |
Marc B. Lautenbach |
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President and Chief |
| 2012 |
| 70,833 |
| 0 |
| 0 |
| 289,300 |
| — |
| — |
| — |
| 360,133 |
Executive Officer |
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Michael Monahan |
| 2012 |
| 575,600 |
| 0 |
| 650,000 |
| 0 |
| 1,840,141 |
| 161,052 |
| 53,310 |
| 3,280,103 |
Executive Vice President |
| 2011 |
| 558,000 |
| 0 |
| 325,000 |
| 325,000 |
| 1,135,294 |
| 264,368 |
| 28,788 |
| 2,636,450 |
and Chief Financial Officer |
| 2010 |
| 540,000 |
| 0 |
| 300,000 |
| 300,000 |
| 1,018,160 |
| 252,487 |
| 24,295 |
| 2,434,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leslie Abi-Karam |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President |
| 2012 |
| 553,800 |
| 0 |
| 650,000 |
| 0 |
| 728,365 |
| 136,738 |
| 21,798 |
| 2,090,701 |
and President, Pitney |
| 2011 |
| 544,016 |
| 0 |
| 325,000 |
| 325,000 |
| 1,122,907 |
| 328,795 |
| 27,360 |
| 2,673,078 |
Bowes Communications |
| 2010 |
| 535,096 |
| 0 |
| 300,000 |
| 300,000 |
| 963,727 |
| 271,468 |
| 29,603 |
| 2,399,894 |
Solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vicki A. O’Meara |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President |
| 2012 |
| 522,500 |
| 0 |
| 450,000 |
| 0 |
| 508,788 |
| — |
| 42,727 |
| 1,524,015 |
and President, Pitney |
| 2011 | (8) | 512,500 |
| 0 |
| 225,000 |
| 225,000 |
| 787,010 |
| — |
| 34,587 |
| 1,784,097 |
Bowes Services |
| 2010 |
| 500,000 |
| 50,000 |
| 262,500 |
| 162,500 |
| 395,500 |
| — |
| 14,775 |
| 1,385,275 |
Solutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John E. O’Hara |
| 2012 |
| 450,000 |
| 0 |
| 750,000 |
| 0 |
| 217,533 |
| — |
| 70,680 |
| 1,488,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Murray D. Martin |
| 2012 |
| 996,667 |
| 0 |
| 2,625,000 |
| 0 |
| 2,589,500 |
| 1,430,430 |
| 144,284 |
| 7,785,881 |
Former Chairman, President |
| 2011 | (9) | 975,000 |
| 0 |
| 1,187,500 |
| 1,187,500 |
| 4,463,160 |
| 1,354,880 |
| 62,758 |
| 9,230,798 |
and Chief Executive Officer |
| 2010 |
| 950,000 |
| 0 |
| 1,187,500 |
| 1,187,500 |
| 4,420,600 |
| 508,288 |
| 80,446 |
| 8,334,334 |
SUMMARY COMPENSATION TABLE
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | All Other Compensation ($)(6), (7) | Total ($) | |||||||||
Marc B. Lautenbach President and Chief Executive Officer | ||||||||||||||||||
2013 | 850,000 | — | 1,172,558 | 148,800 | 1,209,975 | — | 14,704 | 3,396,037 | ||||||||||
2012 | 70,833 | — | — | 289,300 | — | — | — | 360,133 | ||||||||||
Michael Monahan Executive Vice President and Chief Financial Officer | 2013 | 578,400 | — | 381,082 | 554,560 | 1,481,678 | 199,451 | 42,940 | 3,238,111 | |||||||||
2012 | 575,600 | — | 582,644 | — | 1,840,141 | 161,052 | 26,164 | 3,185,601 | ||||||||||
2011 | 558,000 | — | 279,737 | 325,000 | 1,135,294 | 264,368 | 53,534 | 2,615,933 | ||||||||||
Abby F. Kohnstamm Executive Vice President and Chief Marketing Officer | ||||||||||||||||||
2013 | 303,333 | 400,000 | 379,947 | — | 264,768 | — | 200,240 | 1,548,288 | ||||||||||
Mark F. Wright Executive Vice President and President, Pitney Bowes Digital Commerce Solutions | ||||||||||||||||||
2013 | 356,061 | 350,000 | 450,421 | — | 328,500 | — | 4,961 | 1,489,943 | ||||||||||
Daniel J. Goldstein Executive Vice President and Chief Legal & Compliance Officer | ||||||||||||||||||
2013 | 477,400 | — | 190,546 | — | 726,152 | — | 55,282 | 1,449,380 | ||||||||||
Leslie Abi-Karam(8) former Executive Vice President and President, Pitney Bowes Communications Solutions | ||||||||||||||||||
2013 | 407,285 | — | 381,082 | — | 1,966,667 | 789,701 | 610,184 | 4,154,919 | ||||||||||
2012 | 553,800 | — | 582,644 | — | 728,365 | 136,738 | 44,707 | 2,046,254 | ||||||||||
2011 | 544,016 | — | 279,737 | 325,000 | 1,122,907 | 328,795 | 27,360 | 2,627,815 | ||||||||||
Vicki A. O’Meara(9) former Executive Vice President and President, Pitney Bowes Services Solutions | ||||||||||||||||||
2013 | 393,000 | — | 263,829 | — | 1,618,750 | — | 33,597 | 2,309,176 | ||||||||||
2012 | 522,500 | — | 403,367 | — | 508,788 | — | 47,782 | 1,482,437 | ||||||||||
2011 | 512,500 | — | 193,680 | 225,000 | 787,010 | — | 38,444 | 1,756,634 | ||||||||||
(1) | On |
(2) | This column includes the value of stock awarded to NEOs during 2013, 2012 |
57 |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
(3) | This column includes the value of stock options awarded to |
(4) | When considering all elements of the table above, the majority of compensation for the |
|
| |
(5) | This column shows the change in the actuarial present value of the accumulated pension benefit applicable to all eligible employees during 2013, 2012 |
(6) | Amounts shown for |
(7) | For Mr. Monahan, 2012 and 2011 amounts are amended to reflect company match to the 401(k) Restoration Plan during the years earned rather than the year credited. For Ms. |
(8) |
|
(9) |
|
|
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
GRANTS OF PLAN-BASED AWARDS IN All Other All Other Exercise Grant Estimated Future Payouts Under Estimated Future Payouts Under Name Grant Threshold Target Maximum(1) Threshold Target Maximum Marc B. Lautenbach (Premium-priced Stock Options)(2) 12/3/2012 100,000 13.386 63,300 (Premium-priced Stock Options)(3) 12/3/2012 200,000 15.132 101,800 (Premium-priced Stock Options)(4) 12/3/2012 300,000 16.878 124,200 Michael Monahan (Annual Incentive)(5) 34,704 462,720 4,000,000 (CIU)(6) 16,088 650,000 8,000,000 (Performance- based MSUs)(7) 2/13/2012 9,073 18,146 36,292 325,000 (Performance- based RSUs)(8) 2/13/2012 17,587 325,000 Leslie Abi-Karam (Annual Incentive)(5) 33,324 444,320 4,000,000 (CIU)(6) 16,088 650,000 8,000,000 (Performance- based MSUs)(7) 2/13/2012 9,073 18,146 36,292 325,000 (Performance- based RSUs)(8) 2/13/2012 17,587 325,000 Vicki A. O’Meara (Annual Incentive)(5) 31,440 419,200 4,000,000 (CIU)(6) 11,138 450,000 8,000,000 (Performance- based MSUs)(7) 2/13/2012 6,282 12,563 25,126 225,000 (Performance- based RSUs)(8) 2/13/2012 12,175 225,000 John E. O’Hara (Annual Incentive)(5) 20,250 270,000 4,000,000 (CIU)(6) 7,425 300,000 8,000,000 (Performance- based MSUs)(7) 2/13/2012 4,188 8,375 16,750 150,000 (Performance- based RSUs)(8) 2/13/2012 8,117 150,000 (Performance- based RSUs)(9) 4/9/2012 26,148 450,000 Murray D. Martin (Annual Incentive)(5) 97,500 1,300,000 4,000,000 (CIU)(6) 64,969 2,625,000 8,000,000 (Performance- based MSUs)(7) 2/13/2012 36,642 73,283 146,566 1,312,500 (Performance- based RSUs)(8) 2/13/2012 71,023 1,312,500 20122013
Stock
Awards:
Number of
Shares of
Stock or
Units (#)
Option
Awards:
Number of
Securities
Underlying
Options (#)
or Base
Price of
Option
Awards
($/Sh)
Date Fair
Value of
Stock and
Option
Awards
Non-Equity Incentive Plan Awards
Equity Incentive Plan Awards
Date
($)
($)
($)
(#)
(#)
(#)
Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards(2) | ||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum(1) ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||
Marc B. Lautenbach | |||||||||||||||||
(Annual Incentive)(3) | 193,375 | 1,105,000 | 4,000,000 | ||||||||||||||
(CIU)(4) | 59,400 | 2,400,000 | 8,000,000 | ||||||||||||||
(Performance-based RSUs)(5) | 2/11/2013 | 115,523 | 1,172,558 | ||||||||||||||
(Premium-priced Stock Options)(6) | 2/11/2013 | 400,000 | 22.16 | 148,800 | |||||||||||||
Michael Monahan | |||||||||||||||||
(Annual Incentive)(3) | 80,976 | 462,720 | 4,000,000 | ||||||||||||||
(CIU)(4) | 19,305 | 780,000 | 8,000,000 | ||||||||||||||
(Performance-based RSUs)(5) | 2/11/2013 | 37,545 | 381,082 | ||||||||||||||
(Premium-priced Stock Options)(7) | 7/1/2013 | 40,000 | 17.20 | 77,160 | |||||||||||||
(Premium-priced Stock Options)(8) | 7/1/2013 | 80,000 | 19.45 | 129,120 | |||||||||||||
(Premium-priced Stock Options)(9) | 7/1/2013 | 120,000 | 21.69 | 163,320 | |||||||||||||
(Premium-priced Stock Options)(10) | 7/1/2013 | 160,000 | 23.94 | 184,960 | |||||||||||||
Abby F. Kohnstamm | |||||||||||||||||
(Annual Incentive)(3) | 42,315 | 241,797 | 4,000,000 | ||||||||||||||
(Performance-based RSUs)(11) | 7/1/2013 | 26,738 | 379,947 | ||||||||||||||
Mark F. Wright | |||||||||||||||||
(Annual Incentive)(3) | 52,500 | 300,000 | 4,000,000 | ||||||||||||||
(CIU)(4) | 11,138 | 450,000 | 8,000,000 | ||||||||||||||
(Performance-based RSUs)(12) | 5/1/2013 | 21,008 | 260,919 | ||||||||||||||
(Performance-based RSUs)(13) | 5/1/2013 | 14,006 | 189,501 | ||||||||||||||
Daniel J. Goldstein | |||||||||||||||||
(Annual Incentive)(3) | 50,127 | 286,440 | 4,000,000 | ||||||||||||||
(CIU)(4) | 9,653 | 390,000 | 8,000,000 | ||||||||||||||
(Performance-based RSUs)(5) | 2/11/2013 | 18,773 | 190,546 | ||||||||||||||
Leslie Abi-Karam | |||||||||||||||||
(Annual Incentive)(3) | 77,756 | 444,320 | 4,000,000 | ||||||||||||||
(CIU)(4) | 19,305 | 780,000 | 8,000,000 | ||||||||||||||
(Performance-based RSUs)(5) | 2/11/2013 | 37,545 | 381,082 | ||||||||||||||
Vicki A. O’Meara | |||||||||||||||||
(Annual Incentive)(3) | 73,360 | 419,200 | 4,000,000 | ||||||||||||||
(CIU)(4) | 13,365 | 540,000 | 8,000,000 | ||||||||||||||
(Performance-based RSUs)(5) | 2/11/2013 | 25,993 | 263,829 |
The Grants of Plan-Based awards table captures the potential threshold, target and maximum award payouts for annual incentive, CIUs, performance-based RSUs, and premium-priced stock options.
(1) | The values shown in this column represent the maximum annual incentive and CIU payout for IRC 162(m) purposes. The |
(2) |
|
|
|
|
|
| Values in this row represent |
Ms. Kohnstamm’s 2013 annual incentive is prorated based on her June 17, 2013 date of hire. As a result of Mmes. Abi-Karam’s and O’Meara’s termination from employment, the Company is not obligated to make the 2013 annual incentive payment listed on the schedule above. | ||
| ||
| Values in this row represent |
59 |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
Karam and O’Meara terminated employment with the company in 2013, they will receive a pro-rated payout of their 2011-2013, 2012-2014 and 2013-2015 CIU awards at the end of each respective cycle. | |
|
|
| Performance-based RSUs were granted based on the actual closing price on the February |
(6) | These options have an exercise price equal to 160% of the closing price of the company’s common stock on the February 11, 2013 grant date of $13.85. Based on these terms the exercise price is $22.16. The Black-Scholes value for each option granted on February 11, 2013 grant date was $0.372, based on assumptions detailed in note 12 to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the SEC on February 21, 2014. |
(7) | These options have an exercise price equal to 115% of the closing price of the company’s common stock on the July 1, 2013 grant date of $14.96. Based on these terms the exercise price is $17.20. The Black-Scholes value for each option granted on July 1, 2013 grant date was $1.929, based on assumptions detailed in note 12 to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC on February 21, 2014. |
(8) | These options have an exercise price equal to 130% of the closing price of the company’s common stock on the July 1, 2013 grant date of $14.96. Based on these terms the exercise price is $19.45. The Black-Scholes value for each option granted on July 1, 2013 grant date was $1.614, based on assumptions detailed in note 12 to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC on February 21, 2014. |
(9) | These options have an exercise price equal to 145% of the closing price of the company’s common stock on the July 1, 2013 grant date of $14.96. Based on these terms the exercise price is $21.69. The Black-Scholes value for each option granted on July 1, 2013 grant date was $1.361, based on assumptions detailed in note 12 to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC on February 21, 2014. |
(10) | These options have an exercise price equal to 160% of the closing price of the company’s common stock on the July 1, 2013 grant date of $14.96. Based on these terms the exercise price is $23.94. The Black-Scholes value for each option granted on July 1, 2013 grant date was $1.156, based on assumptions detailed in note 12 to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC on February 21, 2014. |
(11) | Performance-based RSUs granted to |
(12) | Performance-based RSUs granted to Mr. Wright were based on the actual closing price on the May 1, 2013 grant date of $14.28. A performance metric tied to income from continuing operations was met as of December 31, 2013, however, the awards remain subject to forfeiture |
| Performance-based RSUs granted to Mr. Wright were based on the actual closing price on the May 1, 2013 grant date of $14.28. A performance metric tied to income from continuing operations was met as of December 31, 2013, however, the awards remain subject to forfeiture over the remaining vesting period. This award has a one-year cliff vesting feature which vests in full on May 1, 2014. |
Stock Awards
| The “Stock Awards” column in the “Summary Compensation Table” represents the value of performance-based RSUs | |
| ||
• | It is our policy that the number of stock awards to be granted is determined based on the market price of the stock on the date of grant. The | |
| ||
• | The “Estimated Future Payouts Under Equity Incentive Plan Awards” column in the “Grants of Plan-Based Awards in | |
Option Awards
• | ||
| ||
| The “Option Awards” column in the “Summary Compensation Table” represents the value of options awarded during 2013, 2012 | |
| ||
• | It is our policy that stock options are granted only at an exercise price equal to or greater than the market price of the stock on the date of grant with a ten-year exercise period. The |
60 |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
Non-Equity Incentive Plan Compensation
• | ||
| ||
| The values shown in the “Non-Equity Incentive Plan Compensation” column in the “Summary Compensation Table” include the annual incentive payments earned for 2013, 2012 | |
| ||
• | The “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” column in the “Grants of Plan-Based Awards in | |
Change in Pension Value and Nonqualified Deferred Compensation Earnings
• | ||
| ||
| The “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column in the “Summary Compensation Table” reflects the change in pension value for each of the years shown. | |
| ||
• | The change in pension value reflects the aggregate change for both the Pension Plan and the Pitney Bowes Pension Restoration Plan. | |
|
| |
• | There were no above-market deferred compensation |
earnings credited to the Pension Restoration Plan. | ||
| ||
• | ||
| ||
| The | |
| ||
|
|
|
All Other Compensation
Equity Awards
The next table is provided to present an overview of Pitney Bowes equity awards held as of December 31, 2013 by each NEO. It discloses compensation in the form of equity that has previously been awarded, remains outstanding, and is unexercised or unvested.
61 |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
OUTSTANDING EQUITY AWARDS AT 2013 FISCAL YEAR-END
The following table provides information on the current holdings of stock option and stock awards by the NEOs. This table includes unexercised or unvested option awards, unvested RSUs and unvested MSUs. Each equity grant is shown separately for each NEO. The vesting schedule for each outstanding award is shown following this table(1). For additional information about the stock option and stock awards, see the description of equity incentive compensation in “Compensation Discussion and Analysis” beginning on page 55.47.
|
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| Option Awards | Stock Awards | |||||||||||||||||||||||||
Name |
| Grant Date |
|
| Number of |
| Number of |
| Option |
| Option |
| Unrealized |
|
| Number |
| Market Value |
| Equity |
| Equity | ||||||||
Marc B. Lautenbach |
| 12/3/2012 |
|
| 0 |
|
| 100,000 |
|
| 13.3860 |
|
| 12/3/2022 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 12/3/2012 |
|
| 0 |
|
| 200,000 |
|
| 15.1320 |
|
| 12/3/2022 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 12/3/2012 |
|
| 0 |
|
| 300,000 |
|
| 16.8780 |
|
| 12/3/2022 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
Michael Monahan |
| 2/10/2003 |
|
| 15,000 |
|
| 0 |
|
| 32.1000 |
|
| 2/9/2013 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/9/2004 |
|
| 23,000 |
|
| 0 |
|
| 40.0800 |
|
| 2/8/2014 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/14/2005 |
|
| 26,000 |
|
| 0 |
|
| 46.9300 |
|
| 2/13/2015 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/13/2006 |
|
| 28,050 |
|
| 0 |
|
| 42.6200 |
|
| 2/12/2016 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/12/2007 |
|
| 28,777 |
|
| 0 |
|
| 48.0300 |
|
| 2/11/2017 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/11/2008 |
|
| 153,846 |
|
| 0 |
|
| 36.9600 |
|
| 2/10/2018 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/9/2009 |
|
| 90,461 |
|
| 0 |
|
| 24.7500 |
|
| 2/8/2019 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/9/2009 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 2,778 |
|
| 29,558 |
|
| — |
|
| — |
|
|
| 2/8/2010 |
|
| 70,922 |
|
| 30,935 |
|
| 22.0900 |
|
| 2/7/2020 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/8/2010 |
|
| 0 |
|
| 4,526 |
|
| 22.0900 |
|
| 2/7/2020 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/8/2010 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 6,790 |
|
| 72,246 |
|
| — |
|
| — |
|
|
| 2/14/2011 |
|
| 31,401 |
|
| 58,967 |
|
| 26.0700 |
|
| 2/13/2021 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/14/2011 |
|
| 0 |
|
| 3,835 |
|
| 26.0700 |
|
| 2/13/2021 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/14/2011 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 9,349 |
|
| 99,473 |
|
| — |
|
| — |
|
|
| 2/13/2012 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 17,587 |
|
| 187,126 |
|
| — |
|
| — |
|
|
| 2/13/2012 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| — |
|
| — |
|
| 18,146 |
|
| 193,073 |
|
Leslie Abi-Karam |
| 2/10/2003 |
|
| 4,418 |
|
| 0 |
|
| 32.1000 |
|
| 2/9/2013 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/9/2004 |
|
| 18,000 |
|
| 0 |
|
| 40.0800 |
|
| 2/8/2014 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/14/2005 |
|
| 25,000 |
|
| 0 |
|
| 46.9300 |
|
| 2/13/2015 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/13/2006 |
|
| 28,050 |
|
| 0 |
|
| 42.6200 |
|
| 2/12/2016 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/12/2007 |
|
| 28,777 |
|
| 0 |
|
| 48.0300 |
|
| 2/11/2017 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/11/2008 |
|
| 153,846 |
|
| 0 |
|
| 36.9600 |
|
| 2/10/2018 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/9/2009 |
|
| 90,461 |
|
| 0 |
|
| 24.7500 |
|
| 2/8/2019 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/9/2009 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 2,778 |
|
| 29,558 |
|
| — |
|
| — |
|
|
| 2/8/2010 |
|
| 70,922 |
|
| 30,935 |
|
| 22.0900 |
|
| 2/7/2020 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/8/2010 |
|
| 0 |
|
| 4,526 |
|
| 22.0900 |
|
| 2/7/2020 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/8/2010 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 6,790 |
|
| 72,246 |
|
| — |
|
| — |
|
|
| 2/14/2011 |
|
| 31,401 |
|
| 58,967 |
|
| 26.0700 |
|
| 2/13/2021 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/14/2011 |
|
| 0 |
|
| 3,835 |
|
| 26.0700 |
|
| 2/13/2021 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/14/2011 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 9,349 |
|
| 99,473 |
|
| — |
|
| — |
|
|
| 2/13/2012 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 17,587 |
|
| 187,126 |
|
| — |
|
| — |
|
|
| 2/13/2012 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| — |
|
| — |
|
| 18,146 |
|
| 193,073 |
|
Vicki A. O’Meara |
| 8/27/2008 |
|
| 50,000 |
|
| 0 |
|
| 33.9100 |
|
| 8/27/2018 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/9/2009 |
|
| 53,454 |
|
| 0 |
|
| 24.7500 |
|
| 2/8/2019 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/9/2009 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 1,642 |
|
| 17,471 |
|
| — |
|
| — |
|
|
| 11/9/2009 |
|
| — |
|
| ��� |
|
| — |
|
| — |
| — |
|
|
| 5,614 |
|
| 59,733 |
|
| — |
|
| — |
|
|
| 2/8/2010 |
|
| 38,416 |
|
| 14,682 |
|
| 22.0900 |
|
| 2/7/2020 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/8/2010 |
|
| 0 |
|
| 4,526 |
|
| 22.0900 |
|
| 2/7/2020 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/8/2010 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 3,678 |
|
| 39,134 |
|
| — |
|
| — |
|
|
| 11/8/2010 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 4,248 |
|
| 45,199 |
|
| — |
|
| — |
|
|
| 2/14/2011 |
|
| 21,739 |
|
| 39,643 |
|
| 26.0700 |
|
| 2/13/2021 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/14/2011 |
|
| 0 |
|
| 3,835 |
|
| 26.0700 |
|
| 2/13/2021 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/14/2011 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 6,473 |
|
| 68,873 |
|
| — |
|
| — |
|
|
| 2/13/2012 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 12,175 |
|
| 129,542 |
|
| — |
|
| — |
|
|
| 2/13/2012 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| — |
|
| — |
|
| 12,563 |
|
| 133,670 |
|
Option Awards | Stock Awards | |||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Unrealized Appreciation ($)(2) | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | ||||||||||||||||||
Marc B. Lautenbach | 12/3/2012 | 25,000 | 75,000 | 13.3860 | 12/3/2022 | 991,400 | — | — | — | — | ||||||||||||||||||
12/3/2012 | 50,000 | 150,000 | 15.1320 | 12/3/2022 | 1,633,600 | — | — | — | — | |||||||||||||||||||
12/3/2012 | 75,000 | 225,000 | 16.8780 | 12/3/2022 | 1,926,600 | — | — | — | — | |||||||||||||||||||
2/11/2013 | 100,000 | 300,000 | 22.1600 | 12/2/2022 | 456,000 | — | — | — | — | |||||||||||||||||||
2/11/2013 | — | — | — | — | 0 | 115,523 | 2,691,686 | — | — | |||||||||||||||||||
Michael Monahan | 2/9/2004 | 23,000 | 0 | 40.0800 | 2/8/2014 | 0 | — | — | — | — | ||||||||||||||||||
2/14/2005 | 26,000 | 0 | 46.9300 | 2/13/2015 | 0 | — | — | — | — | |||||||||||||||||||
2/13/2006 | 28,050 | 0 | 42.6200 | 2/12/2016 | 0 | — | — | — | — | |||||||||||||||||||
2/12/2007 | 28,777 | 0 | 48.0300 | 2/11/2017 | 0 | — | — | — | — | |||||||||||||||||||
2/11/2008 | 153,846 | 0 | 36.9600 | 2/10/2018 | 0 | — | — | — | — | |||||||||||||||||||
2/9/2009 | 90,461 | 0 | 24.7500 | 2/8/2019 | 0 | — | — | — | — | |||||||||||||||||||
2/8/2010 | 106,383 | 0 | 22.0900 | 2/7/2020 | 128,723 | — | — | — | — | |||||||||||||||||||
2/8/2010 | — | — | — | — | — | 3,395 | 79,104 | — | — | |||||||||||||||||||
2/14/2011 | 62,802 | 27,566 | 26.0700 | 2/13/2021 | 0 | — | — | — | — | |||||||||||||||||||
2/14/2011 | 0 | 3,835 | 26.0700 | 2/13/2021 | 0 | — | — | — | — | |||||||||||||||||||
2/14/2011 | — | — | — | — | — | 6,233 | 145,229 | — | — | |||||||||||||||||||
2/13/2012 | — | — | — | — | — | 13,190 | 307,327 | — | — | |||||||||||||||||||
2/13/2012 | — | — | — | — | — | — | — | 18,146 | 422,802 | |||||||||||||||||||
2/11/2013 | — | — | — | — | — | 37,545 | 874,799 | — | — | |||||||||||||||||||
7/1/2013 | — | 40,000 | 17.2000 | 6/30/2023 | 244,000 | — | — | — | — | |||||||||||||||||||
7/1/2013 | — | 80,000 | 19.4500 | 6/30/2023 | 308,000 | — | — | — | — | |||||||||||||||||||
7/1/2013 | — | 120,000 | 21.6900 | 6/30/2023 | 193,200 | — | — | — | — | |||||||||||||||||||
7/1/2013 | — | 160,000 | 23.9400 | 6/30/2023 | — | — | — | — | — | |||||||||||||||||||
Abby F. Kohnstamm | 7/1/2013 | — | — | — | — | — | — | — | 26,738 | 622,995 | ||||||||||||||||||
Mark F. Wright | 5/1/2013 | — | — | — | — | — | 21,008 | 489,486 | — | — | ||||||||||||||||||
5/1/2013 | — | — | — | — | — | 14,006 | 326,340 | — | — | |||||||||||||||||||
Daniel J. Goldstein | 10/18/2010 | — | — | — | — | — | 4,638 | 108,065 | — | — | ||||||||||||||||||
2/14/2011 | 18,900 | 9,450 | 26.0700 | 2/13/2021 | — | — | — | — | — | |||||||||||||||||||
2/14/2011 | 7,670 | 3,835 | 26.0700 | 2/13/2021 | — | — | — | — | — | |||||||||||||||||||
2/14/2011 | — | — | — | — | — | 2,637 | 61,442 | — | — | |||||||||||||||||||
2/13/2012 | — | — | — | — | — | 6,595 | 153,664 | — | — | |||||||||||||||||||
2/13/2012 | — | — | — | — | — | — | — | 9,073 | 211,401 | |||||||||||||||||||
2/11/2013 | — | — | — | — | — | 18,773 | 437,411 | — | — | |||||||||||||||||||
Leslie Abi-Karam | 2/9/2004 | 18,000 | 0 | 40.0800 | 2/8/2014 | 0 | — | — | — | — | ||||||||||||||||||
2/14/2005 | 25,000 | 0 | 46.9300 | 2/13/2015 | 0 | — | — | — | — | |||||||||||||||||||
2/13/2006 | 28,050 | 0 | 42.6200 | 2/12/2016 | 0 | — | — | — | — | |||||||||||||||||||
2/12/2007 | 28,777 | 0 | 48.0300 | 2/11/2017 | 0 | — | — | — | — | |||||||||||||||||||
2/11/2008 | 153,846 | 0 | 36.9600 | 2/10/2018 | 0 | — | — | — | — | |||||||||||||||||||
2/9/2009 | 90,461 | 0 | 24.7500 | 2/8/2019 | 0 | — | — | — | — | |||||||||||||||||||
2/8/2010 | 106,383 | 0 | 22.0900 | 2/7/2020 | 128,723 | — | — | — | — | |||||||||||||||||||
2/14/2011 | 62,802 | 27,566 | 26.0700 | 2/13/2021 | 0 | — | — | — | — | |||||||||||||||||||
2/14/2011 | 0 | 3,835 | 26.0700 | 2/13/2021 | 0 | — | — | — | — | |||||||||||||||||||
2/13/2012 | — | — | — | — | — | — | — | 18,146 | 422,802 |
(Table continued on next page)
62 |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
Option Awards | Stock Awards | |||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Unrealized Appreciation ($)(2) | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | ||||||||||||||||||
Vicki A. O’Meara | 8/27/2008 | 50,000 | 0 | 33.9100 | 8/27/2018 | 0 | — | — | — | — | ||||||||||||||||||
2/9/2009 | 53,454 | 0 | 24.7500 | 2/8/2019 | 0 | — | — | — | — | |||||||||||||||||||
2/8/2010 | 57,624 | 0 | 22.0900 | 2/7/2020 | 69,725 | — | — | — | — | |||||||||||||||||||
2/14/2011 | 43,478 | 17,904 | 26.0700 | 2/13/2021 | 0 | — | — | — | — | |||||||||||||||||||
2/14/2011 | 0 | 3,835 | 26.0700 | 2/13/2021 | 0 | — | — | — | — | |||||||||||||||||||
2/13/2012 | — | — | — | — | — | — | — | 12,563 | 292,718 | |||||||||||||||||||
2/11/2013 | — | — | — | — | — | 25,993 | 605,637 | — | — |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Option Awards | Stock Awards | |||||||||||||||||||||||||
Name |
| Grant Date |
|
| Number of |
| Number of |
| Option |
| Option |
| Unrealized |
|
| Number |
| Market Value |
| Equity |
| Equity | ||||||||
John E. O’Hara |
| 2/11/2008 |
|
| 8,077 |
|
| 0 |
|
| 36.9600 |
|
| 2/10/2018 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/9/2009 |
|
| 8,635 |
|
| 0 |
|
| 24.7500 |
|
| 2/8/2019 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/9/2009 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 266 |
|
| 2,830 |
|
| — |
|
| — |
|
|
| 2/8/2010 |
|
| 7,145 |
|
| 3,573 |
|
| 22.0900 |
|
| 2/7/2020 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/8/2010 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 684 |
|
| 7,278 |
|
| — |
|
| — |
|
|
| 6/23/2010 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 15,645 |
|
| 166,463 |
|
| — |
|
| — |
|
|
| 2/14/2011 |
|
| 3,835 |
|
| 7,670 |
|
| 26.0700 |
|
| 2/13/2021 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/14/2011 |
|
| 4,015 |
|
| 8,031 |
|
| 26.0700 |
|
| 2/13/2021 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/14/2011 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 2,338 |
|
| 24,876 |
|
| — |
|
| — |
|
|
| 2/13/2012 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 8,117 |
|
| 86,365 |
|
| — |
|
| — |
|
|
| 2/13/2012 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| — |
|
| — |
|
| 8,375 |
|
| 89,110 |
|
|
| 4/9/2012 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 26,148 |
|
| 278,215 |
|
| — |
|
| — |
|
Murray D. Martin |
| 2/10/2003 |
|
| 75,000 |
|
| 0 |
|
| 32.1000 |
|
| 2/9/2013 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/9/2004 |
|
| 75,000 |
|
| 0 |
|
| 40.0800 |
|
| 2/8/2014 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/14/2005 |
|
| 100,000 |
|
| 0 |
|
| 46.9300 |
|
| 2/13/2015 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/13/2006 |
|
| 119,215 |
|
| 0 |
|
| 42.6200 |
|
| 2/12/2016 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 3/16/2007 |
|
| 324,149 |
|
| 0 |
|
| 45.4000 |
|
| 3/15/2017 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/11/2008 |
|
| 600,000 |
|
| 0 |
|
| 36.9600 |
|
| 2/10/2018 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/9/2009 |
|
| 390,625 |
|
| 0 |
|
| 24.7500 |
|
| 2/8/2019 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/9/2009 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 11,995 |
|
| 127,627 |
|
| — |
|
| — |
|
|
| 2/8/2010 |
|
| 280,733 |
|
| 135,840 |
|
| 22.0900 |
|
| 2/7/2020 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/8/2010 |
|
| 0 |
|
| 4,526 |
|
| 22.0900 |
|
| 2/7/2020 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/8/2010 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 26,878 |
|
| 285,982 |
|
| — |
|
| — |
|
|
| 2/14/2011 |
|
| 114,734 |
|
| 225,634 |
|
| 26.0700 |
|
| 2/13/2021 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/14/2011 |
|
| 0 |
|
| 3,835 |
|
| 26.0700 |
|
| 2/13/2021 |
| 0 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| 2/14/2011 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 34,162 |
|
| 363,484 |
|
| — |
|
| — |
|
|
| 2/13/2012 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| 71,023 |
|
| 755,685 |
|
| — |
|
| — |
|
|
| 2/13/2012 |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
|
| — |
|
| — |
|
| 73,283 |
|
| 779,731 |
|
(1) | |
| Option and Stock Awards Vesting Schedule |
Grant Date | Award Type | Name of Executive | Vesting Schedule (as of December 31, 2013) | ||||
2/8/2010 |
| RSU |
| Monahan |
| remaining 25% vests on February | |
10/18/2010 |
| RSU |
| Goldstein |
|
| |
|
|
| remaining 33% vests on February | ||||
2/14/2011 |
| NQSO |
| Monahan, Abi-Karam, O’Meara, | remaining 33% vests on February 14, 2014 | ||
2/14/2011 | ISO | Monahan, Abi-Karam, O’Meara, Goldstein | 100% vests on February | ||||
2/14/2011 |
| RSU |
| Monahan, Goldstein |
| Four year vesting; 50% remains unvested; 25% vests on February | |
2/13/2012 |
| RSU |
| Monahan, Goldstein |
|
| |
|
|
|
| ||||
|
|
|
| ||||
|
|
|
| ||||
|
|
| Four year vesting; 75% remains unvested; 25% vests on February | ||||
2/13/2012 |
| Monahan, Abi-Karam, O’Meara, | 100% vests on February 3, 2015 | ||||
12/3/2012 | NQSO | Lautenbach | Four year vesting; 75% remains unvested; 25% vests on December 3, 2014, December 3, 2015 and December 3, 2016 | ||||
2/11/2013 | NQSO | Lautenbach | Four year vesting; 75% remains unvested; 25% vests on December 3, 2014, December 3, 2015 and December 3, 2016 | ||||
2/11/2013 | RSU | Lautenbach, Monahan, O’Meara, Goldstein | Four year vesting; 100% remains unvested; 25% vests on February | ||||
5/1/2013 | RSU | Wright | Four year vesting for 21,008 units; 100% remains unvested; 25% vests on February 4, 2014, February 3, 2015, | ||||
5/1/2013 |
| RSU |
| Wright |
| 100% of 14,006 units vests on May 1, 2014 | |
7/1/2013 | NQSO | Monahan | Three year vesting; 100% remains unvested; 33% vests on February 3, 2015, 33% vests on February 2, 2016 and 33% vests on February 7, 2017 | ||||
7/1/2013 |
| RSU |
| Kohnstamm |
|
| |
12/3/2012
NQSO
Lautenbach
Four year vesting; 100% remains unvested; 25% vests on December 3, 2013, December 3, 2014, December 3, 2015 and December 3, 2016
(2) | This column represents the difference between the exercise price on the date of grant and the closing price of the company stock on December 31, |
(3) | These amounts were calculated based on the closing price of the company’s common stock of |
63 |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
OPTION EXERCISES AND STOCK VESTED DURING 2013 FISCAL YEAR(1)
Option Awards | Stock Awards | |||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#)(2) | Value Realized on Vesting ($) | ||||||||
Marc B. Lautenbach | 0 | 0 | 0 | 0 | ||||||||
Michael Monahan | 0 | 0 | 13,686 | 181,955 | (3) | |||||||
Abby F. Kohnstamm | 0 | 0 | 0 | 0 | ||||||||
Mark F. Wright | 0 | 0 | 0 | 0 | ||||||||
Daniel J. Goldstein | 0 | 0 | 8,155 | 108,421 | (3) | |||||||
Leslie Abi-Karam | 0 | 0 | 36,504 | 696,958 | (4) | |||||||
Vicki A. O’Meara | 0 | 0 | 33,830 | 544,700 | (5) |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
|
|
|
|
|
|
|
OPTION EXERCISES AND STOCK VESTED DURING 2012 FISCAL YEAR(1) | ||||||
| Option Awards | Stock Awards | ||||
Name | Number of | Value Realized | Number of | Value Realized | ||
Michael Monahan | 0 | 0 | 9,291 |
| 180,060 |
|
Leslie Abi-Karam | 0 | 0 | 9,291 |
| 180,060 |
|
Vicki A. O’Meara | 0 | 0 | 5,638 |
| 109,264 |
|
John E. O’Hara | 0 | 0 | 1,564 |
| 30,310 |
|
Murray D. Martin | 0 | 0 | 36,823 |
| 713,630 |
|
(1) | Mr. Lautenbach, Ms. Kohnstamm and Mr. Wright did not have any stock option exercises or stock vest during |
(2) | Performance-based RSUs granted on |
(3) | These values were determined based on the average of the high and low trading price on the February |
| For Ms. Abi-Karam, values for 13,686 RSUs were determined based on the average of the high and low trading price on the February 5, 2013 vesting date of $13.30; values for 22,818 RSUs were determined based on the average of the high and low trading price on the November 14, 2013 vesting date of $22.57, the date she became eligible for early retirement. |
(5) | For Ms. O’Meara, values for 14,297 RSUs were determined based on the average of the high and low trading price on the February 5, 2013 vesting date of $13.30; values for 19,533 RSUs were determined based on the average of the high and low trading price on the September 30, 2013 vesting date of $18.16. |
Pension Benefits
The following table provides information regarding pension payments to the NEOs. It includes data regarding the Pitney Bowes Pension Plan and the Pension Restoration Plan. The Pitney Bowes Pension Plan is a qualified defined benefit pension plan for U.S. employees. U.S. NEOs hired prior to January 1, 2005 are eligible to participate in the Pitney Bowes Pension Plan which is a broad-based tax-qualified plan under which employees generally are eligible to retire with unreduced benefits at age 65. U.S. NEOs who participate in the Pitney Bowes Pension Plan are also eligible to participate in the Pension Restoration Plan, a nonqualified deferred compensation plan, which provides eligible employees with compensation greater than the $250,000 limit for 2012 and those employees who defer portions of their compensation with benefits based on the same formula used under the qualified plan.
The Pension Restoration Plan is offered to approximately 230225 of our current active employees to provide for retirement benefits above amounts availableemployees. Benefits under the tax-qualified Pension Plan. Pitney Bowes does not as a hiring practice grant extra years of credited service under its pension plans. Payments under the nonqualified Pension Restoration Plan are paid from our general assets. These payments are substantially equal to the difference between the amount that would have been payable under our qualified Pension Plan, in the absence ofabsent IRS limits on compensation and benefits, as applied to qualified plans, and the amount actually paid under our qualified Pension Plan. The Pitney BowesPayments under the nonqualified Pension Restoration Plan which is a nonqualified deferred compensation plan,are made out of the company’s general assets. The Pension Restoration Plan does not include special provisions, such asprovide above-market interest rates.rates on deferred compensation.
All of the eligible NEOs are fully vested in their pension benefit.
On January 29, 2013
In 2009, the board of directors approved freezing the qualified and nonqualified Pension Plan for all participants, effective April 1, 2013,December 31, 2014. Mr. Monahan is the freezing of all futureonly active NEO accruing benefits under the pension plan benefit accruals for employees with fewer than sixteen years of benefit accrual service as of March 31, 2013.plans. (See discussion under “Other Indirect Compensation – Retirement Compensation” on page 5748 of this proxy statement).statement.)
The amounts reported in the table below equal the present value of the accumulated benefit on December 31, 2012,2013, for the NEOs under the various Pitney Bowes pension plans determined based on years of service and covered earnings (as described below). The present value has been calculated based on benefits payable that would commence whencommencing upon the executive reachesattaining age 65, and in an amount consistent with the assumptions as described in note 1718 to the financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2012,2013, as filed with the SEC on February 25, 2013.21, 2014.
64 |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
PENSION BENEFITS AS OF DECEMBER 31, 2013(1)
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($)(2) | |||||
Michael Monahan | Pitney Bowes Pension Plan | 25.6 | 336,869 | |||||
Michael Monahan | Pitney Bowes Pension Restoration Plan | 25.6 | 1,301,278 | |||||
Daniel J. Goldstein | Pitney Bowes Pension Plan | 8.9 | 95,000 | |||||
Daniel J. Goldstein | Pitney Bowes Pension Restoration Plan | 8.9 | 56,497 | |||||
Leslie Abi-Karam | Pitney Bowes Pension Plan | 29.9 | 515,844 | |||||
Leslie Abi-Karam | Pitney Bowes Pension Restoration Plan | 29.9 | 2,086,295 |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
PENSION BENEFITS AS OF DECEMBER 31, 2012(1)
|
|
|
|
|
|
|
|
|
|
| Name |
| Plan Name |
| Number of Years |
| Present Value of |
| |
| Michael Monahan |
| Pitney Bowes Pension Plan |
| 24.6 |
| 314,399 |
|
|
| Michael Monahan |
| Pitney Bowes Pension Restoration Plan |
| 24.6 |
| 1,124,297 |
|
|
| Leslie Abi-Karam |
| Pitney Bowes Pension Plan |
| 28.9 |
| 408,802 |
|
|
| Leslie Abi-Karam |
| Pitney Bowes Pension Restoration Plan |
| 28.9 |
| 1,403,636 |
|
|
| Murray D. Martin(3) |
| Pitney Bowes Pension Plan |
| 25.4 |
| 733,093 |
|
|
| Murray D. Martin |
| Pitney Bowes Pension Restoration Plan |
| 25.4 |
| 7,541,414 |
|
|
(1) | Mr. Lautenbach, Ms. |
Material assumptions used to calculate the present value of accumulated benefits under the Pitney Bowes Pension Plan for each | |
|
|
The material terms of the Pitney Bowes Pension Plan and Pension Restoration Plan are as follows:
• | ||
| Only U.S. employees hired prior to January 1, 2005 are eligible to participate. | |
| ||
• | Normal retirement age is 65 with at least three years of service, while early retirement is allowed at age 55 with at least ten years of service. | |
| ||
• | The vesting period is three years. | |
| ||
• | For purposes of determining pension benefits, “earnings” are defined as the average of the five highest consecutive calendar year pay amounts. Earnings include base salary, vacation, severance, before-tax plan contributions, annual incentives (paid and deferred), and certain bonuses. Earnings do not include CIU payments, stock options, restricted stock, RSUs, MSUs, hiring bonuses, company contributions to benefits, and expense reimbursements. | |
| ||
• | The formula to determine benefits is based on age, years of service, and final average of the highest consecutive five-year earnings. Employees receive annual percentages of earnings based on their age plus service. The annual percentages range from 2% to 10% of final average earnings, plus 2% to 6% of such earnings in excess of the Social Security Wage Base. In addition, Pitney Bowes Pension Plan participants whose age plus service totaled more than 50 as of September 1, 1997 receive “transition credits” to make up for some of the differences between old and new retirement plan formulas. | |
| ||
• | The maximum benefit accrual under the Pitney Bowes Pension Restoration Plan is an amount equal to 16.5% multiplied by the participant’s final average earnings and further multiplied by the participant’s credited service. | |
| ||
• | Upon retirement, benefits are payable in a lump-sum or various annuity forms, including life annuity and 50% joint and survivor annuity. | |
| ||
• | The distribution options under the Pitney Bowes Pension Restoration Plan are designed to comply with the requirements of | |
| ||
• | The company has not provided extra years of credited services to any of the NEOs. |
Deferred Compensation
Information included in the table below includes contributions, earnings, withdrawals, and balances with respect to the Pitney Bowes 401(k) Restoration Plan (a nonqualified deferred compensation plan restoring benefits that would have otherwise been made in the qualified 401(k) Plan but for IRC limitations) and the Pitney Bowes Deferred Incentive Savings Plan (a nonqualified deferred compensation plan where certain employees may defer their incentives and base salary). The Pitney Bowes 401(k) Restoration Plan and Deferred Incentive Savings Plan, which we refer to as the DISP, are unfunded plans established for a select group of management or highly compensated employees under ERISA. All payments pursuant to the plans are made from the general assets of the company and are subject to the company’s creditors. Participants do not own any interest in the assets of the company as a result of participating in the plans. The company reserves the right to fund a grantor trust to assist in accumulating funds to pay the company’s obligations under the plans. Any assets of the grantor trusts are subject to the claims of the company’s creditors.
65 |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
NONQUALIFIED DEFERRED COMPENSATION FOR 2013(1)
Executive | Registrant | Aggregate | Aggregate | Aggregate | |||||||||||||
Contributions | Contributions | Earnings/(Loss) | Withdrawals/ | Balance at | |||||||||||||
Name | in Last FY ($)(2) | in Last FY ($)(3) | in Last FY ($)(4) | Distributions ($) | Last FYE ($)(5) | ||||||||||||
Marc B. Lautenbach | |||||||||||||||||
401(k) Restoration Plan | — | — | — | 0 | — | ||||||||||||
Deferred Incentive Savings Plan | — | — | — | 0 | — | ||||||||||||
Michael Monahan | |||||||||||||||||
401(k) Restoration Plan | — | 12,000 | 66,387 | 0 | 193,635 | ||||||||||||
Deferred Incentive Savings Plan | 25,000 | — | 177,142 | 0 | 1,164,647 | ||||||||||||
Abby F. Kohnstamm | |||||||||||||||||
401(k) Restoration Plan | — | — | — | 0 | — | ||||||||||||
Deferred Incentive Savings Plan | — | — | — | 0 | — | ||||||||||||
Mark F. Wright | |||||||||||||||||
401(k) Restoration Plan | — | — | — | 0 | — | ||||||||||||
Deferred Incentive Savings Plan | — | — | — | 0 | — | ||||||||||||
Daniel J. Goldstein | |||||||||||||||||
401(k) Restoration Plan | — | 29,857 | 7,245 | 0 | 51,972 | ||||||||||||
Deferred Incentive Savings Plan | 50,000 | — | 19,118 | 0 | 122,005 | ||||||||||||
Leslie Abi-Karam | |||||||||||||||||
401(k) Restoration Plan | — | 22,000 | 23,142 | 0 | 144,764 | ||||||||||||
Deferred Incentive Savings Plan | 20,000 | — | 1,404 | 0 | 129,820 | ||||||||||||
Vicki A. O’Meara | |||||||||||||||||
401(k) Restoration Plan | — | 20,525 | 1,380 | 0 | 67,759 | ||||||||||||
Deferred Incentive Savings Plan | 0 | — | 0 | 0 | 0 |
Deferred Compensation
Information included in the table below includes contributions, earnings, withdrawals, and balances with respect to the Pitney Bowes 401(k) Restoration Plan (a nonqualified deferred compensation plan) and the Pitney Bowes Deferred Incentive Savings Plan (a nonqualified deferred compensation plan where certain employees may defer their incentives and base salary). Eligibility for both of these plans is limited to U.S. employees. The Pitney Bowes 401(k) Restoration Plan and Deferred Incentive Savings Plan, which we refer to as the DISP, are unfunded plans established for a select group of management or highly compensated employees under ERISA. All payments pursuant to the plans are made from the general assets of the company and no special or separate fund is established, or segregation of assets made, to assure payment. Participants do not own any interest in the assets of the company as a result of participating in the plans. The company reserves the right to fund a grantor trust to assist in accumulating funds to pay the company’s obligations under the plans. Any assets of the grantor trusts are subject to the claims of the company’s creditors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
| Executive |
| Registrant |
| Aggregate |
| Aggregate |
| Aggregate |
| ||||
Michael Monahan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) Restoration Plan |
|
| — |
|
| 36,306 |
|
| (26,434 | ) |
| 0 |
| 115,248 |
|
|
Deferred Incentive Savings Plan |
|
| 0 |
|
| — |
|
| 114,541 |
|
| 0 |
| 960,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leslie Abi-Karam |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) Restoration Plan |
|
| — |
|
| 0 |
|
| 5,071 |
|
| 0 |
| 99,622 |
|
|
Deferred Incentive Savings Plan |
|
| 15,000 |
|
| — |
|
| 4,519 |
|
| 0 |
| 108,416 |
|
|
Vicki A. O’Meara |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) Restoration Plan |
|
| — |
|
| 20,670 |
|
| 992 |
|
| 0 |
| 45,854 |
|
|
Deferred Incentive Savings Plan |
|
| 0 |
|
| — |
|
| 0 |
|
| 0 |
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John E. O’Hara |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) Restoration Plan |
|
| — |
|
| 5,194 |
|
| 381 |
|
| 0 |
| 5,575 |
|
|
Deferred Incentive Savings Plan |
|
| 0 |
|
| — |
|
| 0 |
|
| 0 |
| 0 |
|
|
Murray D. Martin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) Restoration Plan |
|
| — |
|
| 111,394 |
|
| 48,295 |
|
| 0 |
| 662,307 |
|
|
Deferred Incentive Savings Plan |
|
| 125,000 |
|
| — |
|
| 138,334 |
|
| 0 |
| 1,510,501 |
|
|
| Mr. Lautenbach, |
(2) | Amounts in this column represent the portion of the |
(3) | Amounts shown are company contributions to the Pitney Bowes 401(k) Restoration Plan earned in |
Amounts shown are the respective earnings in the Pitney Bowes 401(k) Restoration Plan and the Deferred Incentive Savings Plan. These earnings are not included in the Summary Compensation Table. | |
(5) | Amounts shown are the respective balances in the Pitney Bowes 401(k) Restoration Plan and the Deferred Incentive Savings Plan. For Mr. Monahan, the Deferred Incentive Savings Plan amount reflects an additional $2,297 in dividends relating to 2012 investment activity that were applied to the beginning balance in 2013. The aggregate balance for the 401(k) Restoration Plan includes amounts previously reported as compensation in the Summary Compensation Table, including the amended 2012 and 2011 amounts, as follows: |
The material terms of the Pitney Bowes 401(k) Restoration Plan are as follows:
• | |||
| The goal of this plan is generally to restore benefits that would have been provided under the qualified 401(k) Plan but for certain | ||
| |||
• | For purposes of determining benefits under the 401(k) Restoration Plan, earnings are defined as base salary, vacation, annual incentives (paid and deferred), and certain bonuses. Earnings do not include CIU payments, stock options, restricted stock, performance-based RSUs, severance, hiring bonuses, company contributions to benefits, and expense reimbursements. Participants need to contribute the allowable maximum pre-tax contributions to the 401(k) Plan to be eligible for | ||
• | In addition, employees | ||
| On January 29, 2013, the board of directors approved, effective April 1, 2013 the eligibility of those employees who will no longer accrue benefits under the |
66 |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
| Employees must have one year of service to participate, and the vesting is the same as under the qualified 401(k) Plan. Except for Mr. Lautenbach, Ms. Kohnstamm and Mr. Wright, all NEOs are fully vested in their accounts. | |
| ||
• | Distributions payable in a lump-sum or installments may occur upon termination of employment and will follow guidelines under | |
The material terms of the Deferred Incentive Savings Plan (DISP) are as follows:
• |
| The DISP allows deferral of up to 100% of annual incentives and long-term cash incentives. Base salary deferral is permissible only for certain key employees. | |
| |||
• | Employees must be “highly-compensated employees” as defined in the DISP in order to participate in this plan. | ||
| |||
• | Distributions from the DISP can occur for various reasons and will be in compliance with guidelines established under | ||
• |
| Termination/Death/Disability – a lump sum payment is made one month after termination including termination for disability and within 90 days after death |
|
| Retirement – payment is made in accordance with the payment election in effect for the account beginning after termination | |
| ||
• | Change of Control – payment is made in a lump sum in the event of a termination within two years following a | |
| ||
• | Unforeseeable Emergency – plan permits withdrawals with appropriate verification | |
| ||
• | In-Service Payments – payments are made immediately after the deferral dates selected. |
Investment options for both the Pitney Bowes 401(k) Restoration Plan and the DISP are comparable to those in the Pitney Bowes 401(k) Plan. These investment options provide participants with an opportunity to invest in a variety of publicly available bond funds, money market funds, equity funds and blended funds. Prior to January 1, 2011, participants also had the opportunity to invest infunds, including Pitney Bowes stock. Each employee notionally selects his or her investment options and can change these at any time by accessing his or her account on the internet.web site of the third party administrator. These investments are tracked in “phantom” accounts. All investment gains and losses in a participant’s account under the Pitney Bowes 401(k) Restoration Plan and the DISP are entirely based upon the notional investment selections made by the participant.
Potential Payments upon Termination or Change of Control
Other Post-Termination Payments
The tables below reflect the amount of compensation that would become payable to each of the NEOs under existing arrangements if the hypothetical termination of employment events described had occurred on December 31, 2013, given the NEO’s compensation and service levels as of such date and, if applicable, based on the company’s closing stock price on that date.
For purposes of valuing stock options in the “Post-Termination Payments” tables, we assume that upon a Change of Control, all vested outstanding stock options will be cashed out using the difference between the stock option exercise price and $23.30, the closing price of our common stock on December 31, 2013.
All payments are payable by the company in a lump-sum unless otherwise noted. The actual amounts that would be paid upon a NEO’s termination of employment can be determined only at the time of such executive’s separation from the company. Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be higher or lower than reported in the tables below. Factors that could affect these amounts include the timing during the year of any such event, our company’s stock price and the executive’s age.
In the event of termination of employment, the NEOs are entitled to receive the vested portion of their deferred compensation account. The account balances continue to be credited with increases or decreases reflecting changes in the value of the investment funds that are tracked until the valuation date as provided under the plan, and therefore amounts received by the NEOs will differ from those shown in the “Nonqualified Deferred Compensation for 2013” table on page 66. See the narrative accompanying that table for information on available types of distributions under the plans.
The benefits described in the tables below are in addition to benefits available regardless of the occurrence of such an event, such as currently exercisable stock options, and benefits generally available to salaried employees, such as distributions under the company’s 401(k) Plan, subsidized retiree medical benefits, disability benefits, and accrued vacation pay. In addition, in connection with any actual termination of employment, the company may determine to enter into an agreement or to establish an arrangement providing additional benefits or amounts, or altering the terms of benefits described in the tables below, as the Committee determines appropriate or in the case of Mr. Lautenbach, the independent board members.
67 |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
After continuing employment with the company through an appropriate transition period, Ms. Abi-Karam separated from the company on September 1, 2013 and was eligible for separation benefits under the Pitney Bowes Separation Pay Plan (Separation Plan). In exchange for Ms. Abi-Karam signing a waiver and release, Ms. Abi-Karam will receive separation pay in an aggregate amount of $1,741,605. In addition, Ms. Abi-Karam was eligible to receive (i) a lump sum payment from the qualified Pension Plan valued at $562,555, (ii) a lump sum payment from the nonqualified Pension Plan valued at $2,408,692 payable in 2014, (iii) accelerated vesting of Ms. Abi-Karam’s outstanding stock options, (iv) accelerated vesting of RSUs, representing 43,634 units, (v) continued vesting of MSUs representing 18,146 units payable in 2015 after the end of the three year award cycle, (vi) pro-rated payment of her CIU awards payable at the end of each respective three-year award cycle, (vii) payment of her nonqualified 401(k) Restoration Plan balance in 2014, (viii) payment of her deferrals under the Deferred Incentive Savings Plan in 2014, (ix) COBRA coverage with the first six months at the active employee rate, (x) outplacement services valued at $25,000, (xi) financial counseling valued at $11,250, (xii) continued company-provided life insurance for one year following separation from employment. Ms. Abi-Karam’s severance period and separation payments ($1,741,605) will count as pensionable earnings through December 31, 2014 under the terms of the qualified Pension Plan and the nonqualified Pension Restoration Plan. Ms. Abi-Karam forfeited her 2013 RSU award upon her separation of employment.
Ms. O’Meara’s employment with the company terminated as a result of the sale of PBMS on September 30, 2013. Ms. O’Meara was not entitled to any severance pay under the company’s plans. As a consequence of the sale, Ms. O’Meara’s RSU and MSU awards vested, with the MSU award payable at the end of the three-year award cycle. Ms. O’Meara’s outstanding CIUs will be pro-rated on the basis of active employment during the award cycle and payable at the end of the award cycle. The buyer assumed the liability for Ms. O’Meara’s 2013 annual incentive.
As noted in footnote 4 to the Summary Compensation Table, Mmes. Abi-Karam and O’Meara were granted performance retention awards which were paid on August 31, 2013 in the amounts of $1,100,000 for Ms. Abi-Karam and $1,000,000 for Ms. O’Meara. These awards were based on the achievement of financial objectives and continued employment through August 31, 2013. The 2010 performance retention awards to Mr. Monahan (paid in 2012) and Mmes. Abi-Karam (paid in 2013) and O’Meara (paid in 2013) were made as part of the board’s succession planning process at a time the board was assessing who would succeed our former CEO.
68 |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
Estimated Post-Termination Payments and Benefits(1)
Name | Type of Payment or Benefit | Retirement Eligible ($) | Involuntary Not for Cause Termination ($)(2) | Change of Control with Termination (CIC) ($) | Death ($) | Disability ($) | |||||||
Marc B. Lautenbach | Severance | — | 32,692 - 2,932,500 | (3) | 2,932,500 | (4) | — | — | |||||
Annual Incentive | — | 0 - 1,105,000 | (5) | 1,105,000 | (6) | 1,209,975 | (7) | 1,209,975 | (7) | ||||
CIUs | |||||||||||||
2013 – 2015 cycle | — | 0 | (8) | 2,400,000 | (9) | 800,000 | (8) | 800,000 | (8) | ||||
Stock Options Accelerated(10) | — | 2,275,800 | 3,755,700 | 3,755,700 | 3,755,700 | ||||||||
Performance-based RSUs Accelerated(11) | — | 0 | 2,691,686 | 2,691,686 | 2,691,686 | ||||||||
Financial Counseling(12) | — | 0 - 11,250 | — | — | — | ||||||||
Medical & other benefits(13) | — | — | 85,935 | ||||||||||
Total | 0 | 2,308,492 - 6,324,550 | 12,970,821 | 8,457,361 | 8,457,361 | ||||||||
Michael Monahan | Severance | — | 22,246 - 1,561,680 | (3) | 1,973,197 | (4) | — | — | |||||
Annual Incentive | — | 0 - 462,720 | (5) | 462,720 | (6) | 506,678 | (7) | 506,678 | (7) | ||||
CIUs | — | ||||||||||||
2011 – 2013 cycle | — | 0 - 975,000 | (14) | 975,000 | (9) | 975,000 | (14) | 975,000 | (14) | ||||
2012 – 2014 cycle | — | 0 - 433,333 | (8) | 650,000 | (9) | 433,333 | (8) | 433,333 | (8) | ||||
2013 – 2015 cycle | — | 260,000 | (8) | 780,000 | (9) | 260,000 | (8) | 260,000 | (8) | ||||
Stock Options Accelerated(10) | — | 0 | 745,200 | 745,200 | 745,200 | ||||||||
Performance-based RSUs Accelerated(11) | — | 0 - 1,406,458 | 1,406,458 | 1,406,458 | 1,406,458 | ||||||||
Performance-based MSUs Accelerated(11) | — | 0 - 422,802 | 422,802 | 422,802 | 422,802 | ||||||||
Incremental Pension Benefit | — | 0 - 200,348 | (15) | 118,837 | (15) | — | — | ||||||
Financial Counseling(12) | — | 0 - 11,250 | — | — | — | ||||||||
Medical & other benefits(13) | — | — | 88,606 | — | — | ||||||||
Total | 0 | 282,246 - 5,733,591 | 7,622,820 | 4,749,471 | 4,749,471 | ||||||||
Abby F. Kohnstamm | Severance | — | 21,538 - 1,512,000 | (3) | 2,016,000 | (4) | — | — | |||||
Annual Incentive | — | 0 - 264,768 | (5) | 448,000 | (6) | 264,768 | (7) | 264,768 | (7) | ||||
Performance-based RSUs Accelerated(11) | — | 0 - 0 | 622,995 | 622,995 | 622,995 | ||||||||
Financial Counseling(12) | — | 0 - 11,250 | — | — | — | ||||||||
Medical & other benefits(13) | — | — | 56,524 | — | — | ||||||||
Total | 0 | 21,538 - 1,788,018 | 3,143,519 | 887,763 | 887,763 | ||||||||
Mark F. Wright | Severance | — | 19,231 - 1,200,000 | (3) | 1,600,000 | (4) | — | — | |||||
Annual Incentive | — | 0 - 300,000 | (5) | 300,000 | (6) | 328,500 | (7) | 328,500 | (7) | ||||
CIUs | — | ||||||||||||
2013 – 2015 cycle | — | 0 | (8) | 450,000 | (9) | 150,000 | (8) | 150,000 | (8) | ||||
Performance-based RSUs Accelerated(11) | — | 0 | 815,826 | 815,826 | 815,826 | ||||||||
Financial Counseling(12) | — | 0 - 11,250 | — | — | — | ||||||||
Medical & other benefits(13) | — | — | 73,432 | — | — | ||||||||
Total | 0 | 19,231 - 1,511,250 | 3,239,258 | 1,294,326 | 1,294,326 | ||||||||
Daniel J. Goldstein | Severance | — | 18,362 - 1,145,760 | (3) | 1,156,655 | (4) | — | — | |||||
Annual Incentive | — | 0 - 286,440 | (5) | 286,440 | (6) | 313,652 | (7) | 313,652 | (7) | ||||
CIUs | — | ||||||||||||
2011 – 2013 cycle | — | 0 - 412,500 | (14) | 412,500 | (9) | 412,500 | (14) | 412,500 | (14) | ||||
2012 – 2014 cycle | — | 0 - 216,667 | (8) | 325,000 | (9) | 216,667 | (8) | 216,667 | (8) | ||||
2013 – 2015 cycle | — | 0 | (8) | 390,000 | (9) | 130,000 | (8) | 130,000 | (8) | ||||
Stock Options Accelerated(10) | — | 0 | 0 | 0 | 0 | ||||||||
Performance-based RSUs Accelerated(11) | — | 0 - 271,958 | 760,582 | 760,582 | 760,582 | ||||||||
Performance-based MSUs Accelerated(11) | — | 0 - 211,401 | 211,401 | 211,401 | 211,401 | ||||||||
Incremental Pension Benefit | — | — | (15) | — | (15) | — | — | ||||||
Financial Counseling(12) | — | 0 - 11,250 | — | — | — | ||||||||
Medical & other benefits(13) | — | — | 56,506 | — | — | ||||||||
Total | 0 | 18,362 - 2,555,976 | 3,599,084 | 2,044,802 | 2,044,802 |
Potential Payments upon Termination or Change of Control
Other Post-Termination Payments
The tables below reflect the amount of compensation that would become payable to each of the NEOs under existing arrangements if the hypothetical termination of employment events described had occurred on December 31, 2012, given the NEO’s compensation and service levels as of such date and, if applicable, based on the company’s closing stock price on that date.
For purposes of valuing stock options in the “Post-Termination Payments” tables, we assume that upon a change of control, all vested outstanding stock options will be cashed out using the difference between the stock option exercise price and $10.64, the closing price of our common stock on December 31, 2012.
All payments are payable by the company in a lump-sum unless otherwise noted. The actual amounts that would be paid upon a NEO’s termination of employment can be determined only at the time of such executive’s separation from the company. Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be higher or lower than reported in the tables below. Factors that could affect these amounts include the timing during the year of any such event, our company’s stock price and the executive’s age.
In the event of termination of employment, the NEOs are entitled to receive the vested portion of their deferred compensation account. The account balances continue to be credited with increases or decreases reflecting changes in the value of the investment funds that are tracked until the valuation date as provided under the plan, and therefore amounts received by the NEOs will differ from those shown in the “Nonqualified Deferred Compensation for 2012” table on page 78. See the narrative accompanying that table for information on available types of distributions under the plans.
The benefits described in the tables below are in addition to benefits available regardless of the occurrence of such an event, such as currently exercisable stock options, and benefits generally available to salaried employees, such as distributions under the company’s 401(k) plan, subsidized retiree medical benefits, disability benefits, and accrued vacation pay. In addition, in connection with any actual termination of employment, the company may determine to enter into an agreement or to establish an arrangement providing additional benefits or amounts, or altering the terms of benefits described in the tables below, as the committee determines appropriate or in the case of Messrs. Lautenbach and Martin, the independent board members.
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
| Type of Payment or Benefit |
| Retirement |
|
| Involuntary Not for |
|
| Change of |
| Death ($) |
|
| Disability ($) | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marc B. Lautenbach |
|
| Severance |
| — |
|
| 32,692 - 2,932,500 | (3) |
| 2,461,000 | (4) |
| — |
|
| — |
|
|
|
| Annual Incentive |
| — |
|
| — |
|
| 0 |
|
| — |
|
| — |
|
|
|
| Stock Options Accelerated(5) |
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
|
|
| Financial Counseling(6) |
| — |
|
| 0 - 11,250 |
|
| — |
|
| — |
|
| — |
|
|
|
| Medical & other benefits(7) |
| — |
|
| — |
|
| 89,000 |
|
|
|
|
|
|
|
|
|
| Total |
| 0 |
|
| 32,692 - 2,943,750 |
|
| 2,550,000 |
|
| — |
|
| — |
|
Michael Monahan |
|
| Severance |
| — |
|
| 22,246 - 1,561,680 | (3) |
| 1,590,689 | (4) |
| — |
|
| — |
|
|
|
| Annual Incentive |
| — |
|
| 0 - 462,720 | (8) |
| 462,720 | (9) |
| 296,141 | (10) |
| 296,141 | (10) |
|
|
| CIUs |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2010 – 2012 cycle |
| — |
|
| 0 - 444,000 | (11) |
| 444,000 | (12) |
| 444,000 | (11) |
| 444,000 | (11) |
|
|
| 2011 – 2013 cycle |
| — |
|
| 0 - 433,333 | (13) |
| 650,000 | (12) |
| 433,333 | (13) |
| 433,333 | (13) |
|
|
| 2012 – 2014 cycle |
| — |
|
| 0 | (13) |
| 650,000 | (12) |
| 216,667 | (13) |
| 216,667 | (13) |
|
|
| Stock Options Accelerated(5) |
| — |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
|
|
| Performance-based RSUs Accelerated(14) |
| — |
|
| 0- 168,123 |
|
| 388,403 |
|
| 388,403 |
|
| 388,403 |
|
|
|
| Performance-based MSUs Accelerated(14) |
| — |
|
| 0 |
|
| 193,073 |
|
| 193,073 |
|
| 193,073 |
|
|
|
| Incremental Pension Benefit |
| — |
|
| 0 - 390,958(15) |
|
| 219,009 | (16) |
| — |
|
| — |
|
|
|
| Financial Counseling(6) |
| — |
|
| 0 - 11,250 |
|
| — |
|
| — |
|
| — |
|
|
|
| Medical & other benefits(7) |
| — |
|
| 0 |
|
| 101,501 |
|
| — |
|
| — |
|
|
|
| Total |
| 0 |
|
| 22,246 - 3,472,064 |
|
| 4,699,395 |
|
| 1,971,617 |
|
| 1,971,617 |
|
Leslie Abi-Karam |
|
| Severance |
| — |
|
| 21,362 - 1,499,580 | (3) |
| 1,260,237 | (4) |
| — |
|
| — |
|
|
|
| Annual Incentive |
| — |
|
| 0 - 444,320 | (8) |
| 444,320 | (9) |
| 284,365 | (10) |
| 284,365 | (10) |
|
|
| CIUs |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2010 – 2012 cycle |
| — |
|
| 0 - 444,000 | (11) |
| 444,000 | (12) |
| 444,000 | (11) |
| 444,000 | (11) |
|
|
| 2011 – 2013 cycle |
| — |
|
| 0 - 433,333 | (13) |
| 650,000 | (12) |
| 433,333 | (13) |
| 433,333 | (13) |
|
|
| 2012 – 2014 cycle |
| — |
|
| 0 | (13) |
| 650,000 | (12) |
| 216,667 | (13) |
| 216,667 | (13) |
|
|
| Stock Options Accelerated(5) |
| — |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
|
|
| Performance-based RSUs Accelerated(14) |
| — |
|
| 0 - 168,123 |
|
| 388,403 |
|
| 388,403 |
|
| 388,403 |
|
|
|
| Performance-based MSUs Accelerated(14) |
| — |
|
| 0 |
|
| 193,073 |
|
| 193,073 |
|
| 193,073 |
|
|
|
| Performance Award Accelerated |
| — |
|
| 0 | (17) |
| 1,100,000 | (18) |
| 870,833 | (19) |
| 870,833 | (19) |
|
|
| Incremental Pension Benefit |
| — |
|
| 0 - 805,094 | (15) |
| 570,485 | (16) |
| — |
|
| — |
|
|
|
| Financial Counseling(6) |
| — |
|
| 0 - 11,250 |
|
| — |
|
| — |
|
| — |
|
|
|
| Medical & other benefits(7) |
| — |
|
| 0 |
|
| 100,913 |
|
| — |
|
| — |
|
|
|
| Total |
| 0 |
|
| 21,362 - 3,805,700 |
|
| 5,801,431 |
|
| 2,830,674 |
|
| 2,830,674 |
|
Vicki A. O’Meara |
|
| Severance |
| — |
|
| 20,154 - 1,414,800 | (3) |
| 2,554,260 | (4) |
| — |
|
| — |
|
|
|
| Annual Incentive |
| — |
|
| 0 - 419,200 | (8) |
| 419,200 | (9) |
| 268,288 | (10) |
| 268,288 | (10) |
|
|
| CIUs |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2010 – 2012 cycle |
| — |
|
| 0 - 240,500 | (11) |
| 240,500 | (12) |
| 240,500 | (11) |
| 240,500 | (11) |
|
|
| 2011 – 2013 cycle |
| — |
|
| 0 - 300,000 | (13) |
| 450,000 | (12) |
| 300,000 | (13) |
| 300,000 | (13) |
|
|
| 2012 – 2014 cycle |
| — |
|
| 0 | (13) |
| 450,000 | (12) |
| 150,000 | (13) |
| 150,000 | (13) |
|
|
| Stock Options Accelerated(5) |
| — |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
|
|
| Performance-based RSUs Accelerated(14) |
| — |
|
| 0 - 207,448 |
|
| 359,951 |
|
| 359,951 |
|
| 359,951 |
|
|
|
| Performance-based MSUs Accelerated(14) |
| — |
|
| 0 |
|
| 133,670 |
|
| 133,670 |
|
| 133,670 |
|
|
|
| Performance Award Accelerated |
| — |
|
| 0 | (17) |
| 1,000,000 | (18) |
| 791,667 | (19) |
| 791,667 | (19) |
|
|
| Incremental Pension Benefit |
| — |
|
| — | (15) |
| — | (16) |
| — |
|
| — |
|
|
|
| Financial Counseling(6) |
| — |
|
| 0 - 11,250 |
|
| — |
|
| — |
|
| — |
|
|
|
| Medical & other benefits(7) |
| — |
|
| 0 |
|
| 98,468 |
|
| — |
|
| — |
|
|
|
| Total |
| 0 |
|
| 20,154 - 2,593,198 |
|
| 5,706,049 |
|
| 2,244,076 |
|
| 2,244,076 |
|
John E. O’Hara |
|
| Severance |
| — |
|
| 17,308 - 1,080,000 | (3) |
| 1,463,594 | (4) |
| — |
|
| — |
|
|
|
| Annual Incentive |
| — |
|
| 0 - 270,000 | (8) |
| 270,000 | (9) |
| 172,800 | (10) |
| 172,800 | (10) |
|
|
| CIUs |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2010 – 2012 cycle |
| — |
|
| 44,733 | (11) |
| 44,733 | (12) |
| 44,733 | (11) |
| 44,733 | (11) |
|
|
| 2011 – 2013 cycle |
| — |
|
| 0 - 108,333 | (13) |
| 162,500 | (12) |
| 108,333 | (13) |
| 108,333 | (13) |
|
|
| 2012 – 2014 cycle |
| — |
|
| 0 | (13) |
| 300,000 | (12) |
| 100,000 | (13) |
| 100,000 | (13) |
|
|
| Stock Options Accelerated(5) |
| — |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
|
|
| Performance-based RSUs Accelerated(14) |
| — |
|
| 0 - 193,159 |
|
| 566,027 |
|
| 566,027 |
|
| 566,027 |
|
|
|
| Performance-based MSUs Accelerated(14) |
| — |
|
| 0 |
|
| 89,110 |
|
| 89,110 |
|
| 89,110 |
|
|
|
| Incremental Pension Benefit |
| — |
|
| — | (15) |
| — | (16) |
| — |
|
| — |
|
|
|
| Financial Counseling(6) |
| — |
|
| 0 - 11,250 |
|
| — |
|
| — |
|
| — |
|
|
|
| Medical & other benefits(7) |
| — |
|
| 0 |
|
| 94,367 |
|
| — |
|
| — |
|
|
|
| Total |
| 0 |
|
| 17,308 - 1,707,475 |
|
| 2,990,331 |
|
| 1,081,003 |
|
| 1,081,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
Name |
| Type of Payment or Benefit |
| Retirement |
|
| Involuntary Not for |
|
| Change of |
| Death ($) |
|
| Disability ($) | |||
Murray D. Martin |
|
| Severance |
| — |
|
| 38,462 - 3,450,000 | (3) |
| 5,850,718 | (4) |
| — |
|
| — |
|
|
|
| Annual Incentive |
| 832,000 | (10) |
| 832,000 | (20) |
| 1,300,000 | (9) |
| 832,000 | (10) |
| 832,000 | (10) |
|
|
| CIUs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2010 – 2012 cycle |
| 1,757,500 | (11) |
| 1,757,500 | (11) |
| 1,757,500 | (12) |
| 1,757,500 | (11) |
| 1,757,500 | (11) |
|
|
| 2011 – 2013 cycle |
| 1,583,333 | (13) |
| 1,583,333 | (13) |
| 2,375,000 | (12) |
| 1,583,333 | (13) |
| 1,583,333 | (13) |
|
|
| 2012 – 2014 cycle |
| 875,000 | (13) |
| 875,000 | (13) |
| 2,625,000 | (12) |
| 875,000 | (13) |
| 875,000 | (13) |
|
|
| Stock Options Accelerated(5) |
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
|
|
| Performance-based RSUs Accelerated(14) |
| 777,092 |
|
| 777,092 |
|
| 1,532,777 |
|
| 1,532,777 |
|
| 1,532,777 |
|
|
|
| Performance-based MSUs Accelerated(14) |
| — |
|
| 0 |
|
| 779,731 |
|
| 779,731 |
|
| 779,731 |
|
|
|
| Incremental Pension Benefit |
| — |
|
| 0 - 1,450,105 | (15) |
| 720,770 | (16) |
| — |
|
| — |
|
|
|
| Financial Counseling(6) |
| — |
|
| 0 - 11,250 |
|
| — |
|
| — |
|
| — |
|
|
|
| Medical & other benefits(7) |
| — |
|
| — |
|
| 99,689 |
|
| — |
|
| — |
|
|
|
| Total |
| 5,824,925 |
|
| 5,863,387 - 10,736,280 |
|
| 17,041,185 |
|
| 7,360,341 |
|
| 7,360,341 |
|
(1) | All data is shown assuming termination on December 31, |
(2) | Ranges represent variance between the |
(3) | If termination of employment falls within the terms of the Pitney Bowes Severance Pay Plan, |
(4) | In October 2012, Pitney Bowes’ |
69 |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
(5) | A pro-rated annual incentive is paid at the lower of target or current bonus accrual as additional severance at termination contingent upon signing a waiver and release. If a waiver and release is not signed, no severance is paid in excess of two weeks. For Ms. Kohnstamm, annual incentive is pro-rated based on her start date of June 17, 2013. |
| |
(6) | Annual incentive is valued at the targeted amount and is paid upon termination following a Change of Control. |
(7) | A pro-rated annual incentive is paid at the actual amount earned for 2013 at the time of the normal distribution of annual incentives. For Ms. Kohnstamm, annual incentive is pro-rated based on her start date of June 17, 2013. |
(8) | CIUs for 2012 – 2014 and 2013 – 2015 cycles are estimated at the targeted amount which is $1.00 per unit. Payment is pro-rated based upon time worked through the end of each cycle. However, payment is not made until the end of the performance period and will be paid based on actual results. In the case of involuntary not for cause termination, no payments are made for the 2013 – 2015 CIU cycle since the award has been outstanding for less than one year, except if the executive has attained early retirement eligibility or is bridgeable to early retirement, then payment is pro-rated based upon time worked through the end of the cycle. The 2012 – 2014 cycle payment is subject to signing a waiver and release. |
(9) | CIUs for 2011 – 2013 cycles are valued at $1.50 per unit and paid in February 2014 under the normal distribution of CIUs. CIUs for 2012 – 2014 and 2013 – 2015 cycles are valued at the targeted amount which is $1.00 per unit. |
(10) | In cases of retirement, options outstanding for at least one year will immediately vest and remain exercisable for the balance of the option term. In cases of involuntary not for cause termination, options outstanding for at least one year will continue to vest and remain exercisable for 24 months following termination of employment contingent upon signing a waiver and release. In cases of |
| |
(11) | In the case of involuntary not for cause termination accompanied by a separation agreement including a waiver and release, all performance-based RSUs and MSUs outstanding for one year or more at the date of termination will continue to vest up to 24 months following termination, except if the executive has attained retirement eligibility or is bridgeable to early retirement, then all performance-based RSUs will eventually vest. For Mr. Monahan and Mr. Goldstein, in the case of Change of Control followed by termination of employment, all performance-based MSUs vest immediately with shares issued immediately at target. All restrictions on performance-based RSUs and MSUs lapse immediately upon death, disability, or Change of Control followed by termination of employment. |
(12) | Amount shown is the value of the company’s cost to provide financial counseling through the severance period, which |
| |
(13) | Amount shown is the present value of the company’s cost to continue medical and other health |
|
|
|
|
|
|
| CIUs for |
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| Amount shown is the increase in lump-sum actuarial equivalent of the pension age, service and earnings credits for the associated severance period. Mr. Lautenbach, Mr. Wright, and Ms. |
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EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
Explanation of Benefits Payable upon Various Termination Events
The benefits described below apply to the NEOs.
Resignation
A voluntary termination would not provide any compensation, benefits or special treatment under equity plans for any of the NEOs.
Early and Normal Retirement
The U.S. Pitney Bowes Pension Plan allows for early retirement at age 55 with at least ten years of service, and normal retirement at age 65 with at least three years of service. Early and normal retirement entitles NEOs to the following upon termination:
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| A prorated annual incentive award; | |
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• | Prorated CIU payments paid at the end of each three-year cycle; | |
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• | Stock option awards and RSUs that have been outstanding for at least one year will fully vest and stock options will remain exercisable for the duration of the term; | |
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• | MSUs that have been outstanding for at least one year will fully vest with units converted into stock at the end of the three-year vesting period based on TSR. |
The board of directors has the discretion
Ms. Abi-Karam terminated employment September 1, 2013 and was bridged to accelerate vesting of restricted stock that would otherwise be forfeited.her early retirement date, November 14, 2013.
Normal Retirement
The U.S. Pitney Bowes Pension Plan provides that normal retirement is age 65 with at least 5 years of service. Mr. Martin is eligible for normal retirement at this time. Normal retirement entitles NEOs to the following:
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Involuntary/Not for Cause Termination
We maintain a severance pay plan that provides for the payment of severance to full-time employees based in the United States whose employment is terminated under certain business circumstances (other than a changeChange of control)Control). The Pitney Bowes Severance Pay Plan provides a continuation of compensation upon involuntary termination by the company without cause (defined as willful failure to perform duties or engaging in illegal conduct or gross misconduct harmful to the company) as summarized below. In addition, in order to obtain an appropriate waiver and release from the employee, we may offer enhancedconditional severance payments. Where an employee is involuntarily terminated after becoming eligible for early retirement, the employee is eligible for benefits afforded early retirees or involuntarily terminated employees, whichever is greater.
Severance Pay Plan
The Severance Pay Plan provides for one week of salary continuation benefits per year of service. Salary continuation benefits in excess of two weeks of salary require a signed agreement containing a waiver and release. There is a two week minimum benefit under the severance pay plan.Severance Pay Plan.
Conditional Severance
We may offer additional severance to employees, including NEOs, upon termination of employment, conditioned upon signing a waiver and release. Additional severance could include the following payments:
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| Severance pay is based on years of service and level within the company. All NEOs are eligible for 78 weeks of pay including current base salary plus current target annual | |
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• | A prorated annual incentive award to the date of termination of employment; | |
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• | CIUs outstanding for one year from the date of grant are prorated and payments are calculated and paid at the end of each three-year cycle; | |
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• | For NEOs, stock options, RSUs and MSUs outstanding for one year at the date of termination will continue to vest up to 24 months following termination and will expire at the end of this period; |
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• | Pension benefit calculation includes service credit and earnings during the severance period; | |
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• | Financial counseling through the severance period; and | |
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• | Outplacement services. |
Termination for Cause
Termination for cause would not provide any additional compensation, severance, benefits or special treatment under equity plans to any of the NEOs. “Cause” is defined as willful failure to perform duties or engaging in illegal conduct or gross misconduct harmful to the company.
71 |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
Death
The NEO’s beneficiary would be entitled to the following upon the executive’s death:
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• | CIU payments | |
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• | All stock options will vest upon death. The NEO’s beneficiary can exercise stock options during the remaining term of the grant; | |
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• | Restrictions on outstanding shares of restricted stock and RSUs will be removed; | |
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• | MSUs will fully vest with units converted into stock at the end of the three-year vesting period based on | |
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Disability
Disability vesting occurs after the completion of two years of long-term disability or on the date of termination of employment due to disability, whichever is earlier. The NEOs would be entitled to the following upon termination for disability:
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• | Prorated CIU payments made at the end of each three-year cycle; | |
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• | All stock options and RSUs will vest upon disability vesting date. Stock options can be exercised during the remaining term of the grant; | |
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• | Restrictions on outstanding shares of restricted stock and RSUs will be removed; | |
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• | MSUs will fully vest with units converted into stock at the end of the three-year vesting period based on | |
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Change of Control Arrangements
Set forth below is a summary of our changeChange of controlControl arrangements. Under our changeChange of controlControl arrangements, a “Change of Control” is defined as:
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• | the replacement of a majority of the board of directors other than by approval of the incumbent board; | |
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• | the consummation of a reorganization, merger, or consolidation where greater than 50% of our common stock and voting power changes hands; or | |
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• | the approval by stockholders of the liquidation or dissolution of the company. |
In October 2012, the board of directors amended the Pitney Bowes’ Senior Executive Severance PlanBowes SESP to eliminate excise tax gross-ups. Upon a termination from employment without cause or for good reason (defined as a diminution in position, authority, duties, responsibilities, earnings or benefits, or relocation) within two years of a changeChange of controlControl each of the NEOs receive payments calculated based on a “best net”“best-net” approach as it relates to the following:benefits described below.
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| Either (i) the full value of the payment equal to | ||
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• | During the first 18 months of employment, Mr. Lautenbach is entitled to one and one-half times current base salary and target bonus. Bonus will be payable in a lump sum. After 18 months of employment, upon a |
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| A prorated annual incentive award based on the participant’s current annual incentive target; | ||
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• | CIU payments based on the total of the outstanding grants for each of the open cycles paid at target value at the end of the cycle, or upon termination, if earlier; | ||
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• | All stock options, restricted stock, RSUs and MSUs granted under the 2007 and 2013 Plan will vest upon the employee’s termination and stock options can be exercised during their remaining term; | ||
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| Only age and service credits are included in the pension calculation for the associated severance period; |
72 |
EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE
| Health and welfare benefits for the executive and his or her dependents for a three-year period. Effective February 11, 2013, health and welfare benefits for the executive and his or her dependents will be provided for a two-year period; and | |
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• | Outplacement services. |
Internal Revenue Code Section 409A
Our benefits arrangements are intended to comply with Section 409A of the Code.IRC 409A. In that regard, “Key Employees” as defined in SectionsIRC 409A and IRC 416 of the Code may have certain payments delayed until six months after termination of employment.
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In addition to the use of the mail, proxies may be solicited by the directors, officers, and employees of the company without additional compensation by personal interview, by telephone, or by electronic transmission. Arrangements may also be made with brokerage firms and other custodians, nominees, and fiduciaries for the forwarding of solicitation material to the beneficial owners of Pitney Bowes common stock and $2.12 convertible preference stock held of record, and the company will reimburse such brokers, custodians, nominees, and fiduciaries for reasonable out-of-pocket expenses incurred. The company has retained Morrow & Co., LLC to aid in the solicitation of proxies.
The anticipated fee of such firm is $10,000 plus out-of-pocket costs and expenses. The cost of solicitation will be borne entirely by Pitney Bowes.
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Management knows of no other matters which may be presented for consideration at the meeting. However, if any other matters properly come before the meeting, it is the intention of the individuals named in the enclosed proxy to vote in accordance with their judgment.
By order of the board of directors.
Amy C. Corn
Corporate Secretary
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PITNEY BOWES INC. DIRECTORS’ STOCK PLAN |
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Section 1.Purpose.Purpose and Effective Date of Plan.
This Plan shall be known as the Pitney Bowes Inc. Directors’ Stock Plan. The purposespurpose of the Plan is to enable Pitney Bowes Inc. (the “Company”) to attract and retain persons of outstanding competence to serve as non-employee directors of the Company by paying such persons a portion of their compensation in stock of the Company pursuant to the terms of the Plan. The Plan became effective on the date the Plan was initially approved by the stockholders of the Company. The Plan may be amended from time to time and was amended and restated effective as of May 12, 2014.
Section 2.Stock Available for the Plan.
Awards granted under the Plan will be settled by the issuance of shares of Common Stock, $1 par value per share, of the Company (“Common Stock”), that are drawn from the shares of Common Stock available for issuance from time to time under the Pitney Bowes Inc. 2013 Stock Plan effective(the “2013 Stock Plan”), previously approved by the Company’s stockholders, or a successor stockholder-approved equity compensation plan. Shares of Common Stock issued pursuant to awards of restricted stock units under the Plan shall reduce, on a one-for-one basis, both (a) the overall maximum number of shares of Common Stock available for issuance under the 2013 Stock Plan and (b) the sub-limit under the 2013 Stock Plan for the number of shares that may be issued for awards that are not options or stock appreciation rights.
Section 3.Eligibility for Participation in Plan.
Persons who serve as members of May 1, 2013, (the “Plan”) are to align the interestsboard of key employeesdirectors of the Company (the “Board”) and its Affiliates with the interests of Pitney Bowes shareholders, to make available to key employees, certain compensatory arrangements related to the growth in value of the common stockwho are not “employees” of the Company so as to generate an increased incentive to contribute toor its subsidiaries within the Company’s future financial success and prosperity and to enhance the abilitymeaning of the Company and its Affiliates to attract and retain exceptionally qualified individuals whose efforts can affect the financial growth and profitabilityEmployee Retirement Income Security Act of 1974, as amended (“ERISA”) shall be considered “Eligible Directors” for purposes of the Company.
Section 2.Definitions.
As usedPlan. It is intended that all Eligible Directors participate in the Plan, the following terms shall have the meanings set forth below:Plan.
Section 4.Awards of Restricted Stock Units.
(a) | Each Eligible Director then serving as a director of the Company shall receive an annual award on the date of the first meeting of directors after each annual stockholders’ meeting of restricted stock units with respect to a number of shares of Common Stock having a Fair Market Value (as defined herein) equal to $100,000. For purposes of this Plan, the Fair Market Value of a share of Company Common Stock on the date of grant shall be the closing price of a share of Company Common Stock on the date of grant as reported in the New York Stock Exchange Composite Transactions Table published in the Wall Street Journal. If the New York Stock Exchange (NYSE) is closed on the date of grant, then Fair Market Value shall be the closing price on the first trading day of the NYSE immediately following the grant date. An Eligible Director who joins the Board after such date shall receive a partial award of restricted stock units with respect to a number of shares of Common Stock having a Fair Market Value on the date of grant equal to a prorated amount determined by multiplying $100,000 by a fraction the numerator of which is the number of days remaining in the 12 month period beginning on the date following the annual stockholders’ meeting and the denominator of which is 365. Fractional shares shall not be issued to Eligible Directors. A whole number of shares shall be determined by rounding each fractional share to the next highest whole number. | |
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Section 5.Dividends; Transfer Restrictions; Terms and Conditions of Restricted Stock Units.
(a) | Unless the Administrator (as defined herein) determines otherwise, Eligible Directors shall have the right to receive dividend equivalents in connection with the restricted stock units granted |
A-1 |
paid to the holders of Common Stock. Unless the Administrator determines otherwise, other than the rights to dividend equivalents, Eligible Directors shall have no voting or other rights as a stockholder with respect to the shares of Common Stock subject to and/or issuable pursuant to any awards of restricted stock units granted hereunder until such shares are actually issued to the Eligible Director and are registered in his or her name. | ||
(b) | The restricted stock units granted hereunder may | |
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Section 6.[reserved]
Section 7.Change of Control.
For purposes of this Plan, a “Change of Control” shall be deemed to have occurred if:
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| there is an acquisition, in any one transaction or a series of transactions, other than from Pitney Bowes Inc., by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), of beneficial ownership (within the meaning of Rule 13(d)(3) promulgated under the Exchange Act) of 30% or more of either the then outstanding shares of | |
(ii) |
| individuals who, as of |
(iii) |
| there occurs either (A) the consummation of a reorganization, merger, consolidation, or sale or other disposition of all or substantially all of the assets of the Company, in each case, with respect to which the individuals and entities who were the respective beneficial owners of the common stock and voting securities of Pitney Bowes Inc. immediately prior to such reorganization, merger, consolidation or sale or other disposition do not, following such reorganization, merger, consolidation or sale or other disposition, beneficially own, directly |
or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger, consolidation or sale or other disposition, or (B) an approval by the shareholders of Pitney Bowes Inc. of a complete liquidation or dissolution of Pitney Bowes Inc. or of the sale or other disposition of all or substantially all of the assets of Pitney Bowes Inc. | ||
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Section 8.Amendment or Termination of Plan.
The Company reserves the right to amend, modify or terminate this Plan at any time by action of its Board, provided that such action shall not adversely affect any Eligible Director’s rights under the provisions of this Plan with respect to awards which were made prior to such action.
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Section 9.Administration of Plan.
This Plan shall be administered by the Governance Committee of the Board or any successor committee having responsibility for the remuneration of the directors (hereinafter referred to as the “Administrator”). All decisions which are made by the Administrator with respect to interpretation of the terms of the Plan, or with respect to any questions or disputes arising under this Plan, shall be final and binding on the Company and on the Eligible Directors and their heirs or beneficiaries.
Section 10.Recapitalization.
In the event of any change in the number or kind of outstanding shares of Common Stock of the Company by reason of a recapitalization, merger, consolidation, dividend, combination of shares or any other change in the corporate structure or shares of stock of the Company, the Board will make equitable and appropriate adjustments in the number of shares to be awarded to each Eligible Director under Section 4, in the number of shares subject to and any other affected provisions of outstanding awards of restricted stock units to prevent enlargement or diminution of the benefits intended to be granted under the Plan.
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Northbound on I-95
Please take Exit 7 (Greenwich Avenue) and proceed through the first intersection to next traffic light, where you should turn right onto Washington Boulevard. Continue straight on Washington Boulevard. (Washington Boulevard becomes Dyke Lane.) At the end of Dyke Lane, turn left onto Elmcroft Road. Please park where indicated.
Southbound on I-95
Please take Exit 7 (Atlantic Street) and stay in the middle lane. Turn left onto Washington Boulevard. Continue straight on Washington Boulevard. (Washington Boulevard becomes Dyke Lane.) At the end of Dyke Lane, turn left onto Elmcroft Road. Please park where indicated.
From the Merritt Parkway
Please take Exit 34 (Long Ridge Road). Turn south onto Long Ridge Road. Follow Long Ridge Road for approximately 2 miles to Cold Spring Road and turn right onto Cold Spring Road. Bear left onto Washington Boulevard and follow to the end (approximately 2 miles under railroad and I-95). (Washington Boulevard becomes Dyke Lane.) At the end of Dyke Lane, turn left onto Elmcroft Road. Please park where indicated.
This proxy statement is printed entirely on recycled and recyclable paper. | AD11997 |
PITNEY BOWES INC.
1 ELMCROFT ROAD
STAMFORD, CT 06926-0700
VOTE BY INTERNET -www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TOVOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | |||
M71210-P46056 | KEEP THIS PORTION FOR YOUR RECORDS | ||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY | ||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
PITNEY BOWES INC.
The Board of Directors recommends you vote FOR all of the directors listed below. | ||||||||||||||||||||||||
1. | Election of Directors | |||||||||||||||||||||||
Nominees: | For | Against | Abstain | |||||||||||||||||||||
1a. | Linda G. Alvarado | £ | £ | £ | ||||||||||||||||||||
The Board of Directors recommends you vote FOR proposals 2, 3 and 4. | For | Against | Abstain | |||||||||||||||||||||
1b. | Anne M. Busquet | £ | £ | |||||||||||||||||||||
1c. | Roger Fradin | £ | £ | 2. Ratification of the Audit Committee’s Appointment of the Independent Accountants for 2014. 3. Advisory Vote to Approve Executive Compensation. 4. Approval of the Pitney Bowes Directors’ Stock Plan. | £ | £ | £ | |||||||||||||||||
1d. | Anne Sutherland Fuchs | £ | £ | £ | ||||||||||||||||||||
£ | £ | £ | ||||||||||||||||||||||
£ | £ | £ | ||||||||||||||||||||||
£ | £ | £ | ||||||||||||||||||||||
£ | £ | £ | ||||||||||||||||||||||
1g. | Eduardo R. Menascé | £ | £ | £ | ||||||||||||||||||||
1h. | Michael I. Roth | £ | £ | £ | ||||||||||||||||||||
1i. | David L. Shedlarz | £ | £ | £ | ||||||||||||||||||||
1j. | David B. Snow, Jr. | £ | £ | £ | ||||||||||||||||||||
Please indicate if you plan to attend this meeting. | £ | £ | ||||||||||||||||||||||
Yes | No | |||||||||||||||||||||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | ||||||||||||||||||||||||
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
20132014 Annual Meeting of
Pitney Bowes Stockholders
May 13, 201312,
2014 9:00 a.m. Local Time PitneyPitney Bowes World Headquarters
1 Elmcroft Road, Stamford, CT 06926-0700
Upon arrival, please present this admission ticket and photo identification at
the registration desk.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report to Stockholders, including the Report on Form 10-K
are available atwww.proxyvote.comwww.proxyvote.com..
M71211-P46056
Proxy Solicited on Behalf of Pitney Bowes Board of Directors
Annual Meeting of Stockholders May 13, 201312, 2014
Marc B. Lautenbach, Michael Monahan,I. Roth, Amy C. Corn, or any of them, with power of substitution are hereby appointed proxies of the undersigned to vote all shares of common stock and $2.12 convertible preference stock of Pitney Bowes Inc. owned by the undersigned at the annual meeting of stockholders to be held in Stamford, Connecticut, on May 13, 2013,12, 2014, including any continuation of the meeting caused by any adjournment, or any postponement of the meeting, upon such business as may properly come before the meeting, including items as specified on the reverse side.
The undersigned, if a participant in any of the Pitney Bowes 401(k) Plans (the “Plans”) for which T. Rowe Price Trust Company acts as directed Trustee (“Trustee”), hereby directs the trustee to vote as indicated on the reverse side all Pitney Bowes common stock allocated to his or her account at the annual meeting of stockholders to be held in Stamford, Connecticut, on May 13, 2013.12, 2014.
Shown on this card are all shares of common stock and $2.12 convertible preference stock registered in your name, held for your benefit in the dividend reinvestment plan and/or held for your benefit in the Plans. The shares represented hereby will be voted in accordance with the directions given by the stockholder.If a properly signed proxy is returned without choices marked, the shares represented by this proxy registered in your name and/or held for your benefit in the dividend reinvestment plan will be voted FOR Items 1 through 4 (unless otherwise directed). If no proxy card is received or a properly signed proxy card properly executed is returned without choices marked, the plan shares represented by the proxy card will be voted with respect to Items 1 through 4 in the same proportion indicated by the properly executed voting instructions given by participants in the Plans (unless otherwise directed by the employer).
In their discretion, the proxies are authorized to vote such other business as may properly come before the meeting, including any continuation of the meeting caused by any adjournment, or any postponement of the meeting.
Please mark, date, sign, and promptly return this proxy in the enclosed envelope, which requires no postage if mailed in the U.S., or grant your proxy via telephone or Internet as described on the reverse side.
Continued and to be signed on reverse side