SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12

Bell Industries, 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):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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2

BELL INDUSTRIES, INC.
11812 SAN VICENTE BOULEVARD
LOS ANGELES, CALIFORNIA 90049-5069

Dear Shareholder:

This year's Annual Meeting of Shareholders will be held on Tuesday, May 13,
1997, at 10:00 A.M., at the Loews Santa Monica Beach Hotel, 1700 Ocean Avenue,
Santa Monica, California. Management hopes that you will come to the meeting and
give us an opportunity to meet you and discuss any questions you may have.

The formal notice of meeting and the Proxy Statement follow. The only
formal actions to be taken at the meeting are the election of the Board of
Directors for the ensuing year and the voting on an amendment to the Company's
1994 Stock Option Plan to increase the number of shares of the Company's common
stock reserved for issuance thereunder from 500,000 to 1,000,000 shares. I urge
you to review the Proxy Statement carefully and, at your earliest convenience,
sign, date and mail the enclosed proxy card so that your shares will be
represented at the meeting. A prepaid return envelope is provided for this
purpose.

Sincerely yours,

THEODORE WILLIAMS
Chairman
March 20, 1997
3

BELL INDUSTRIES, INC.
11812 SAN VICENTE BOULEVARD
LOS ANGELES, CALIFORNIA 90049-5069

------------------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

MAY 13, 1997

The Annual Meeting of Shareholders of Bell Industries, Inc., a California
corporation, will be held at the Loews Santa Monica Beach Hotel, 1700 Ocean
Avenue, Santa Monica, California, on Tuesday, May 13, 1997 at 10:00 A.M.

The purposes of the meeting are:

(1) to elect seven directors to hold office until the next Annual
Meeting of Shareholders and thereafter until their successors are elected;

(2) to approve an amendment to the 1994 Stock Option Plan to increase
the number of shares of the Company's common stock reserved for issuance
thereunder from 500,000 shares to 1,000,000 shares; and

(3) to transact any other business that may properly come before the
meeting or any adjournments thereof.

The Board of Directors has fixed the close of business on Thursday, March
20, 1997 as the record date for the determination of shareholders entitled to
receive notice of, and to vote at, said meeting and any adjournment or
adjournments thereof.

By Order of the Board of Directors

JOHN J. COST
Secretary

March 20, 1997

YOUR VOTE IS IMPORTANT. IF YOU DO NOT EXPECT TO ATTEND THE ANNUAL MEETING
OF SHAREHOLDERS, OR IF YOU DO PLAN TO ATTEND AND WISH TO VOTE BY PROXY, PLEASE
DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD, FOR WHICH A RETURN,
STAMPED ENVELOPE IS PROVIDED. YOUR PROMPT RETURN OF THE PROXY CARD WILL HELP THE
COMPANY AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION TO ASSURE A QUORUM
AT THE MEETING.
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PROXY STATEMENT

------------------------

ANNUAL MEETING OF SHAREHOLDERS
OF BELL INDUSTRIES, INC.

MAY 13, 1997

------------------------

INTRODUCTION

This Proxy Statement is being mailed on or about March 20, 1997 to
shareholders of Bell Industries, Inc. (the "Company") in connection with the
solicitation of Proxies by the Company's Board of Directors for use at the
Company's Annual Meeting of Shareholders to be held on May 13, 1997, or any
adjournments thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Shareholders. Expenses relating to the proxy
statement, the proxy and the solicitation thereof will be paid by the Company.

The persons named in the accompanying proxy have advised the Company that
they intend to vote the proxies received by them in their discretion for as many
director nominees as the votes represented by such proxies are entitled to elect
(see "Election of Directors") and FOR the proposal to increase the shares
reserved for issuance under the 1994 Stock Option Plan (see "Approval of
Amendment to the 1994 Stock Option Plan"). Any shareholder may revoke his or her
proxy at any time prior to its use by filing with the Secretary of the Company a
written notice of revocation or a duly executed proxy bearing a later date.

Only shareholders of record at the close of business on Thursday March 20,
1997, will be entitled to notice of, and to vote at, the meeting or any
adjournments thereof. At such record date, there were outstanding and entitled
to vote approximately 7,578,000 shares of common stock. Each of the foregoing
shares is entitled to one vote on all matters other than the election of
directors. In connection with the election of directors, each shareholder is
entitled to cumulate votes.

A quorum must be present to take any action on a voting matter at the
meeting. The presence in person or represented by proxy of persons entitled to
vote a majority of the shares constitutes a quorum. For purposes of determining
the number of shares present in person or represented by proxy on voting
matters, all votes cast "for," "against" or "abstain" are included. "Broker
non-votes," which occur when brokers or other nominees are prohibited from
exercising discretionary voting authority for beneficial owners who have not
provided voting instructions, are not counted for the purpose of determining the
number of shares present in person or represented by proxy on a voting matter.

To approve the amendment to the 1994 Stock Option Plan, the affirmative
vote of a majority of shares of common stock present in person or represented by
proxy, and voting at the meeting (which shares voting affirmatively also
constitute at least a majority of the required quorum), is necessary for
approval. In voting for directors, the candidates receiving the highest number
of votes, up to the number of directors to be elected, shall be elected.

ELECTION OF DIRECTORS

In voting for directors of the Company, each shareholder has the right to
cumulate votes and give one candidate a number of votes equal to the number of
directors to be elected, multiplied by the number of votes
5

to which the shares are entitled, or to distribute the votes on the same
principle among as many candidates as the shareholder chooses. The candidates
receiving the highest number of votes, up to the number of directors to be
elected, shall be elected. For a shareholder to exercise cumulative voting
rights, such shareholder must give notice of intent to cumulate votes prior to
the vote at the meeting.

The Company's Board of Directors presently consists of seven directors. The
persons who are elected directors will hold office until the next Annual Meeting
of Shareholders and thereafter until their successors are elected. All of the
seven director nominees are currently directors of the Company. The names and
principal occupations of the nominees for election as directors, and the
respective numbers of shares of voting stock of the Company beneficially owned,
directly or indirectly, by each nominee are set forth below.

YEAR SHARES BENEFICIALLY PERCENT
FIRST OWNED AS OF OF
NAME AND PRINCIPAL OCCUPATION AGE ELECTED MARCH 1, 1997 CLASS
----------------------------------------- ---- ------- ------------------- --------

John J. Cost(1)(2) 62 1971 12,755(3)(5) (4)
Of Counsel
Irell & Manella LLP, Attorneys
Anthony L. Craig(2) 51 1993 3,615(5) (4)
President, Global Knowledge Network
Herbert S. Davidson 75 1997 -- (4)
Vice Chairman
Gordon M. Graham 62 1994 18,988(6) (4)
President and Chief Operating Officer
Charles S. Troy(1)(2) 53 1993 3,847(5) (4)
President, E&S Ring Management
Corporation
Milton Rosenberg(1)(2) 74 1975 14,833(5) (4)
Private investor and consultant to high
technology companies
Theodore Williams 76 1969 290,944(3) 3.8%
Chairman and Chief Executive Officer

- ---------------

(1) Member of Audit and Nominating Committees.

(2) Member of Compensation Committee.

(3) Includes 28 shares and 1,731 shares held by Messrs. Cost and Williams,
respectively, as custodians for their children.

(4) Less 1% of total outstanding shares.

(5) Includes 10,500 shares with respect to Messrs. Cost and Rosenberg and 3,500
shares with respect to Messrs. Craig and Troy issuable pursuant to currently
exercisable stock options issued under Bell's Nonemployees Directors' Stock
Option Plan.

(6) Includes 3,550 shares issuable pursuant to currently exercisable stock
options.

Mr. Williams has been President and Chief Executive Officer of the Company
since 1970. In January 1995, he relinquished the office of President but
remained Chairman and Chief Executive Officer. In November 1996, Mr. Graham was
elected President. For more than the past five years prior to his election as
President, Mr. Graham was employed by the Company in other executive capacities.
Mr. Cost was a partner in the law firm of Irell & Manella LLP, Los Angeles,
California, from 1969 through December 1994. Effective January 1, 1995, Mr. Cost
retired as a partner of that firm and now acts "of counsel" to it. He was
elected Secretary in 1987. Irell & Manella LLP acts as general counsel to the
Company. For more than the past five years, Mr. Rosenberg has been self-employed
as an investor in, and consultant to, high technology companies.

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Mr. Rosenberg also serves as a director of M.R.V. Communications, a laser
communications firm, based in Woodland Hills, California.

In February 1996, Mr. Craig became the President and Chief Executive
Officer of Global Knowledge Network, a privately held company engaged in
providing learning services for information technology in over 40 countries.
From November 1993 through January 1996, he was a Vice President of Digital
Equipment Corporation, a New York Stock Exchange company, located in Mayward,
Massachusetts. From June 1992 until July 1993, Mr. Craig was a Senior Vice
President of Oracle Systems Corp., a publicly traded data base and consulting
company with annual revenues over $1 billion. Mr. Craig is also a director of
Iomega Corporation, a computer disc storage firm located in Roy, Utah. For more
than the last five years, Mr. Troy has been President and Chief Executive
Officer of E&S Ring Management Corporation, Culver City, California. E&S Ring
Management is a regional property management firm, specializing in multi-family
and commercial properties.

Mr. Davidson became Vice Chairman of the Board upon the consummation of the
acquisition of Milgray Electronics in January 1997. For more than five years
prior to that time, Mr. Davidson was the President and Chief Executive Officer
of Milgray Electronics. In connection with the acquisition, Mr. Davidson
received approximately $55 million for his equity interest in Milgray on the
same basis per share as all other Milgray shareholders. Also, in connection with
that acquisition, the Company entered into an employment agreement with Mr.
Davidson pursuant to which he is employed as Vice Chairman of the Board and an
Assistant Secretary at a salary of $100,000 per year.

If for any reason one or more of the nominees named above should not be
available as a candidate for director, an event that the Board of Directors does
not anticipate, the persons named in the enclosed proxy will vote for such other
candidate or candidates as may be nominated by the Board and discretionary
authority to do so is included in the Proxy.

Directors who are employees receive no additional compensation for serving
on the Board of Directors. Nonemployee directors receive an annual retainer of
$30,000, plus $1,000 for each attendance at a meeting of the Board or a
committee thereof which does not immediately precede or follow a meeting of the
Board. The Company had a directors' retirement plan for non-employee directors.
Under the plan, directors having served at least ten years as a director after
reaching the age of 65 are entitled to receive an annual retirement benefit
equal to 50% of the annual retainer fee in effect at the time of retirement,
increasing 10% for each year of service after the tenth year. Such payments will
be made for the number of years equal to the number of years served as a
director or until his or her death; provided, that a surviving spouse is
entitled for a period of five years after death to continue to receive the same
benefits that such director would have been so entitled to receive. If a
director has reached age 60 and ceases to serve as a director at the request of
the Company, he will be entitled to the same retirement benefits as if he
retired at age 65. In the event of a change in control, a director leaving the
Board would be entitled to receive an immediate lump sum payment of the present
value of his accrued retirement benefit. In January 1996, the Company terminated
the directors' retirement plan except to the extent rights thereunder were
vested. Messrs. Cost and Rosenberg rights were fully vested under the plan.
Non-employee directors (currently Messrs. Cost, Craig, Troy and Rosenberg) are
also entitled to receive stock options under the Company's Non-employee
Directors' Stock Option Plan. Under the Plan, each non-employee director
receives options for 10,000 shares upon his election as a director and an option
for 1,000 shares for each year thereafter in which he is reelected. Pursuant to
the Plan, Messrs. Cost, Craig, Troy and Rosenberg each received options covering
10,000 shares in May 1996 when the Plan was first adopted.

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INFORMATION REGARDING SHAREHOLDERS

PRINCIPAL SECURITY HOLDERS

To the Company's knowledge, except as hereinafter described, no single
shareholder owned of record or beneficially as of March 3, 1997 more than 5% of
the Company's common stock. As of that date, Cede & Co., a nominee of securities
depositories for various segments of the financial industry, held approximately
6,450,000 shares representing 85% of the Company's outstanding common stock,
none of which was owned beneficially by such organization. Based upon reports
filed through December 31, 1996 with the Securities and Exchange Commission, the
Company believes that each of the companies named below beneficially owns five
percent (5.0%) or more of the Company's common stock:

NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
------------------------------------------------ ----------------------- --------

Newsouth Capital Management..................... 480,988 6.3%
1000 Ridgeway Loop Road, Suite 233 (Direct)
Memphis, Tennessee 38120
Dimensional Fund Advisors....................... 375,261 5.0%
1299 Ocean Avenue, 11th Floor (Direct)
Santa Monica, California 90401

SECURITY OWNERSHIP OF MANAGEMENT

The following table shows the beneficial ownership of the Company's common
stock of those executive officers of the Company listed in the "Summary
Compensation Table" under EXECUTIVE COMPENSATION, who are not directors, as well
as the beneficial ownership of common stock of all nominees for directors and
executive officers of the Company as a group as of March 3, 1997. Information
regarding the stock ownership of director nominees is contained in the prior
table under ELECTION OF DIRECTORS.

NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------------------------------------- -------------------- --------

Paul F. Doucette................................. 71,435(2) (1)
Senior Vice President (Direct)
D.J. Hough....................................... 52,703(3) (1)
Vice President (Direct)
Tracy A. Edwards................................. 20,394(4) (1)
Vice President (Direct)
All directors and executive officers............. 487,463(5) 6.4%
as a group (11)

- ---------------

(1) Less than 1% of the outstanding.

(2) Includes 26,266 shares issuable pursuant to currently exercisable stock
options.

(3) Includes 16,679 shares issuable pursuant to currently exercisable stock
options.

(4) Includes 15,363 shares issuable pursuant to currently exercisable stock
options.

(5) Includes 93,287 shares issuable pursuant to currently exercisable stock
options.

4
8

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN (A):
BELL INDUSTRIES, INC., NYSE MARKET INDEX AND PEER GROUP INDEX

MEASUREMENT PERIOD
(FISCAL YEAR COVERED) BELL IND. INC. PEER GROUP BROAD MARKET

1991 100 100 100
1992 109 146 105
1993 172 180 119
1994 210 179 117
1995 243 238 151
1996 243 276 182

(A) Assumes $100 invested on December 31, 1991 and dividends reinvested.

(B) The Peer Group consists of the following electronic and industrial
distribution companies:

Arrow Electronics, Inc. Marshall Industries
Avnet, Inc. Pioneer Standard Electronics
Jaco Electronics Inc. Sterling Electronics Corp.
Kent Electronics Corp. Wyle Electronics, Inc.

5
9

EXECUTIVE COMPENSATION

The following table shows all cash compensation and certain other
compensation paid to (i) the chief executive officer and (ii) the other four
most highly compensated executive officers (other than Mr. Jaffe, "the Named
Officers") for the three years in the period ending December 31, 1996 for
services rendered in all capacities to the Company and its subsidiaries:

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION OPTIONS
---------------------------------- (NUMBER OF
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OTHER(2) SHARES)
- ------------------------------------- ---- -------- -------- -------- ------------

Theodore Williams 1996 $400,000 $101,878 $ 41,957 -0-
Chairman and Chief 1995 400,000 246,089 41,602 -0-
Executive Officer 1994 400,000 228,271 40,900 -0-

Gordon Graham 1996 $176,000 $ 44,829 $ 19,047 4,200
President and Chief 1995 120,000 70,227 13,602 -0-
Operating Officer, 1994 120,000 46,000 12,439 -0-
effective November 19, 1996;
formerly Senior Vice President

Bruce M. Jaffe 1996 $312,500 $ 65,000 $ 33,507 5,250
Former President and Chief 1995 305,000 187,043 31,948 -0-
Operating Officer 1994 285,000 162,643 29,400 68,250

Paul F. Doucette(3) 1996 $250,000 $ 63,673 $ 27,123 5,250
Senior Vice President 1995 240,000 147,353 25,525 -0-
1994 230,000 131,255 23,900 47,250

D.J. Hough 1996 $202,800 $ 51,652 $ 22,322 -0-
Vice President and Chief 1995 202,800 124,767 21,882 -0-
Information Officer 1994 202,800 115,733 21,180 31,500

Tracy A. Edwards 1996 $173,750 $ 44,253 $ 19,251 4,200
Vice President and Chief 1995 145,520 89,527 16,122 -0-
Financial Officer 1994 145,520 83,045 15,420 26,250

- ---------------

Certain columns have not been included in this table because the
information called for therein is not applicable to the Company or the
individuals named above for the periods indicated.

(1) Includes bonuses accrued and earned for the period although paid in a later
period. For example, executive bonuses earned in 1996 were not paid until
February 1997. For 1995, the named individuals received, pro-rata, an
aggregate of 6,638 shares of common stock as part of their bonuses in
accordance with the policy established by the Compensation Committee of
paying bonuses earned by reason of achieving a return on equity in excess of
a predetermined amount in shares of common stock rather than cash. The
shares were valued at the average of the closing prices on the NYSE for the
ten days preceding February 1, 1996.

(2) Consists of amounts contributed by the Company on behalf of the named
individual under the Company's Savings and Profit Sharing Plan and Executive
Deferred Income and Pension Plan.

(3) Mr. Doucette is married to a niece of Mr. Williams.

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10

Mr. Jaffe resigned as President and a director of the Company in November
1996 and Mr. Graham was elected President shortly thereafter. Mr. Graham is to
receive an annual salary of $500,000 for calendar 1997.

STOCK OPTIONS

The following table shows information on grants of stock options during the
twelve month period ended December 31, 1996 to the chief executive officer and
the Named Officers (including Mr. Jaffe) reflected in the Summary Compensation
Table.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

POTENTIAL
REALIZABLE VALUE
AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE
PERCENTAGE OF APPRECIATION FOR
TOTAL OPTIONS EXERCISE OPTION
GRANTED TO PRICE TERM(4)
OPTIONS EMPLOYEES IN PER EXPIRATION -----------------
NAME GRANTS(1)(2) CALENDAR 1996 SHARE(2)(3) DATE 5% 10%
- --------------------------------- ------------ ------------- ----------- ---------- ------- -------

Theodore Williams................ -0- -- -- -- -- --
Chairman and Chief
Executive Officer
Gordon Graham.................... 4,200 3.4% $ 21.43 2/4/2001 $24,867 $54,950
President and Chief
Operating Officer,
effective November 19, 1996;
formerly Senior Vice President
Bruce M. Jaffe................... 5,250 4.2% $ 21.43 2/4/2001 $31,084 $68,687
Former President and Chief
Operating Officer
Paul F. Doucette................. 5,250 4.2% $ 21.43 2/4/2001 $31,084 $68,687
Senior Vice President
D.J. Hough....................... -0- -- -- -- -- --
Vice President and Chief
Information Officer
Tracy A. Edwards................. 4,200 3.4% $ 21.43 2/4/2001 $24,867 $54,950
Vice President and Chief
Financial Officer
Other employees.................. 105,175 84.8%

- ---------------

(1) All options granted are exercisable in cumulative installments commencing
one year from date of grant, with full vesting on the fourth anniversary
date. Vesting may be accelerated in certain events relating to the change of
the Company's ownership or certain corporate transactions.

(2) All stock option and per share data have been adjusted to reflect stock
dividends.

(3) All stock options were granted at market value (closing price on the New
York Stock Exchange -- Composite Transactions of the Company's common stock)
on the date of grant.

(4) Reported net of the option exercise price. These amounts represent certain
assumed rates of appreciation only. Actual gains, if any, on stock option
exercises are dependent on the future performance of the common stock,
overall stock conditions, as well as the option holders' continued
employment through the vesting period. The amounts reflected in this table
may not be indicative of the value that will actually be achieved or
realized.

In January 1997, grants of 75,000 and 50,000 options, respectively, were
made to Messrs. Williams and Graham under the Company's 1994 Stock Option Plan.

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11

OPTION EXERCISES AND HOLDINGS

The following table sets forth information with respect to the chief
executive officer and the Named Officers, concerning the exercise of options
during the twelve month period ended December 31, 1996 and unexercised options
held as of December 31, 1996:

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES

VALUE NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES REALIZED OPTIONS AT OPTIONS AT
ACQUIRED (MARKET PRICE DECEMBER 31, 1996 DECEMBER 31, 1996(1)
ON AT EXERCISE LESS --------------------------- ---------------------------
NAME EXERCISE EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- -------- ---------------- ----------- ------------- ----------- -------------

Theodore Williams.......... 0 0 0 0 0 0
Chairman and Chief
Executive Officer

Gordon Graham.............. 0 0 3,500 4,262 $ 38,136 $ 4,592
President and Chief
Operating Officer,
effective November 19,
1996; formerly Senior
Vice President

Paul F. Doucette........... 0 0 26,266 43,116 $ 200,877 $ 203,812
Senior Vice President

D.J. Hough................. 0 0 16,679 25,273 $ 129,142 $ 132,847
Vice President and Chief
Information Officer

Tracy A. Edwards........... 0 0 15,363 25,002 $ 120,315 $ 112,102
Vice President and Chief
Financial Officer

- ---------------

(1) Based upon the closing price on the New York Stock Exchange on that date
($21.38).

In January 1997, subsequent to his resignation, Mr. Jaffe exercised options
to purchase 40,633 shares of common stock at an average exercise price of
$14.34. The total value realized, net of the exercise price was approximately
$330,000.

EMPLOYMENT AGREEMENTS

In January 1979, the Company entered into an employment agreement with Mr.
Williams, the Company's Chairman and Chief Executive Officer. Mr. Williams'
agreement provides for an annual salary of not less than $179,400. He is to be
employed as Chief Executive Officer until retirement. Upon retirement, Mr.
Williams is entitled to receive for his lifetime an annual amount equal to
one-half of the average of the highest three years of salary plus bonus paid
during his last ten years of employment. Also, the Company is required to
maintain life and medical insurance benefits at least equal to those in effect
at the time of retirement. In August 1994, Mr. Williams' agreement was amended
so as to fix his retirement benefits to those accrued through June 30, 1994. As
amended, Mr. Williams' employment agreement provides that upon his retirement or
death prior to retirement, he or his estate will receive approximately
$2,187,000, which amount represents the present value of the estimated future
payments payable under his employment agreement as at June 30, 1994, as
determined by recognized actuarial standards. In September 1995 and November
1996, the employment agreement was further amended to permit partial withdrawals
prior to retirement of $187,000 (1995) and $988,000 (1996), which withdrawals
were made.

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12

In February 1995, the Company entered into employment and retirement
agreements with Bruce M. Jaffe, its former President and Chief Operating
Officer, and Paul F. Doucette, a Senior Vice President. These agreements provide
for annual salaries of not less than $285,000 and $230,000, respectively. Mr.
Jaffe was to be employed as President and either Chief Operating Officer or
Chief Executive Officer and Mr. Doucette as a Senior Vice President or in a more
senior office. Upon retirement at age 65, Messrs. Jaffe and Doucette are
entitled to annual retirement payments for life equal to one-half of the average
of the highest three years of salary and bonus paid during his last ten years of
employment. Further, each may elect early retirement at age 62, in which event
the retirement payments are equal to one-third of such average amount. Under
most circumstances, a termination by the Company prior to age 62 is deemed a
retirement by the officer at age 62 and from age 62 through 65, the retirement
payments are increased proportionately. If there is a voluntary termination by
either person prior to age 62, he receives no retirement payments until he
reaches age 62, at which time he is deemed to have retired at age 62. If either
is terminated after a change in control, he is entitled to the same benefits as
if he retired at age 65. Also, the Company is required to maintain life and
medical insurance benefits at least equal to those in effect at the time of
retirement. Both Mr. Jaffe and Mr. Doucette had been employed with the Company
in managerial positions for over twenty-five years at the time the employment
agreements were signed. In connection with his resignation as President in
November 1996, Mr. Jaffe's released all of his benefits under his employment
agreement; and, in consideration for such release, he received a lump sum
payment of $1,085,000 and $150,000 payable in twelve monthly installments.

In connection with the acquisition of Milgray Electronics, the Company and
Mr. Richard Hyman (Milgray's Chief Operating Officer) entered into a five year
employment contract under which Mr. Hyman will be employed as President of that
subsidiary and as Executive Vice President of Bell's Electronics Distribution
Group at a base salary of $400,000 plus a minimum incentive bonus of $135,000
per year.

The Company has severance agreements with its executive officers, including
Messrs. Graham, Hough and Edwards but not Messrs. Williams or Doucette. Each of
these agreements provides, in essence, that should there be a "change in
control" (as defined), and the officer's employment is terminated either (i)
involuntarily, without just cause, or (ii) voluntarily, if the officer has
determined in good faith that his duties have been altered in a material respect
or there has been a reduction in his compensation or employee benefits, then
upon termination, the officer would be entitled to receive a payment in the
amount of 295% of the officer's "base amount" (generally equivalent to the
average of his last three years compensation) as determined in accordance with
Section 280G of the Internal Revenue Code. A "change of control" of the Company
is generally defined as (i) any consolidation or merger of the Company, other
than a merger of the Company in which the holders of the Company's common stock
immediately prior to the merger have at least seventy-five percent (75%)
ownership of the voting capital stock of the surviving corporation immediately
after the merger, (ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, (iii) the shareholders of the Company approve any
plan or proposal for the liquidation or dissolution of the Company, (iv) any
person shall become the beneficial owner of thirty percent (30%) or more of the
Company's outstanding common stock, or (v) during any period of two consecutive
years, individuals who at the beginning of such period constitute the entire
Board of Directors shall cease for any reason (except death) to constitute a
majority thereof unless the election, or the nomination for election by the
Company's shareholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period.

The Company has entered into Indemnity Agreements with all directors and
all executive officers of the Company after having received shareholder approval
at the Company's 1986 Annual Meeting. The Indemnity Agreements provide for
indemnification of directors and officers in cases where indemnification might
not otherwise have been available.

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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Cost who is also a member of the Compensation Committee is the
Secretary of the Company. He receives as compensation for his services as
Secretary, in lieu of the annual retainer for being a director, an amount equal
to the annual retainer.

COMPENSATION STRUCTURE AND COMMITTEE RESPONSIBILITIES

The Company compensates its executive officers with two basic forms of
compensation: cash (salary and incentive bonus) and stock options. Bonuses were
granted for the fiscal year ended June 30, 1994, for the six month period ended
December 31, 1994, and the years ended December 31, 1995 and 1996, based upon
the formulas described hereafter. Further, in September 1994, February 1996 and
January 1997, executives were awarded stock options under Bell's stock option
plans at an exercise price equal to the fair market value of the underlying
shares on the date of grant.

The Company Compensation Committee currently consists of Messrs. Cost,
Craig, Troy and Rosenberg. The duties of the Compensation Committee are to
determine the overall compensation policy for the Company's executive officers,
including specifically fixing the compensation of the chief executive officer.

The following report is submitted by the Compensation Committee as it
relates to both cash compensation of, and stock options granted to, executive
officers of the Company. This report is not deemed "filed" with the Securities
and Exchange Commission and is therefore not intended to be incorporated by
reference in any other document filed by the Company with the Commission.

REPORT OF THE COMPENSATION COMMITTEE

The Company's compensation philosophy is based upon the belief that the
Company's success is the result of the coordinated efforts of all employees
working towards common objectives. Its executive officer compensation program is
composed of base salary, annual incentive cash bonuses and long-term incentive
compensation in the form of stock options.

BASE SALARY

The Committee attempts to set the base salary levels competitively with
those paid by others in the electronics and industrial distribution companies
comprising its Peer Group. Based upon its most recent survey (December 1996),
the Committee believes that the compensation levels paid to Company executives
are in the mid-range of compensation paid by its Peer Group. In determining
salaries, the Committee also takes into account individual experience and
performance, past salary history and specific issues particular to the Company.

ANNUAL INCENTIVE BONUS

Prior to fiscal 1994, cash bonuses were considered annually and awarded
generally upon a subjective evaluation of the particular officer's performance
for the year and were dependent upon the overall financial achievement of the
Company during the year. For example, bonuses usually were not given in years
where the Company's growth was nominal. Thus, no incentive cash bonuses were
awarded for fiscal 1992 and 1993. For the fiscal year ended June 30, 1994, for
the six month period ended December 31, 1994, and for the twelve month periods
ended December 31, 1995 and 1996, the Committee established an incentive bonus
program based upon the return on shareholders' equity and awarded incentive
bonuses for those periods in accordance with such programs. For each period, no
incentive bonus would be earned unless the Company's earnings

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exceeded a predetermined percentage minimum return on shareholders' equity as at
the beginning of the period. If that minimum return was achieved, each executive
officer (including the Chief Executive Officer) earned a bonus based upon the
extent to which the Company's actual earnings exceeded the minimum return on
shareholders' equity. For the six-month period ended December 31, 1994 and for
the years ended December 31, 1995 and 1996, the Company's return on
shareholders' equity was approximately 12%, 14% and 12%, respectively, in each
case in excess of the pre-determined minimum. The amount of a particular
officer's bonus was an arithmetic calculation based upon the actual return on
shareholders' equity and that officer's base salary. Since the amount of any
bonus was dependent upon the extent to which the Company's actual return on
shareholders' equity exceeded the pre-determined minimum return, there was no
arithmetic limitation upon the amount of bonuses that could be earned. Although
individual performance may also be taken into consideration in determining
bonuses, it was not for any of those periods except for Mr. Hough in 1996. For
the current fiscal year, the Committee intends to continue an incentive program
upon which bonuses will be awarded.

LONG-TERM INCENTIVE PROGRAM

Currently, the Company's long-term incentive program consists of the award
of stock options to executive officers and other key employees at current market
prices. The grant of options with exercise prices at prevailing market prices is
designed to align executive compensation and shareholder long-term interests by
creating a direct link between long-term executive compensation and shareholder
return as evidenced by increased stock market value.

The Compensation Committee's current policy is to award significant amounts
of stock options to executive officers and other key employees. Exercise prices
are established equal to the fair market value of Bell's common stock on the
date of grant. Options are usually for a term of 5 years and become vested over
a period of four years dependent upon continued employment. The number of stock
options granted to executive officers is based upon an evaluation of the
particular officer's deemed ability to influence the long-term growth and
profitability of the Company. Stock options were granted to the Company's
executive officers in September 1995, February 1996 and January 1997 with
exercise prices equal to fair market value at the time of grant.

CHIEF EXECUTIVE OFFICER'S COMPENSATION

Mr. Williams has been the Company's Chief Executive Officer for over
twenty-five years. His annual base salary was $400,000 for the fiscal year ended
December 31, 1996. Additionally, Mr. Williams was awarded a cash bonus of
$101,878 for fiscal 1996 based upon predetermined achievement of specific goals
for Company. The Committee has fixed Mr. Williams' base salary for the current
fiscal year at an annual rate of $400,000. Although Mr. Williams is a
substantial shareholder, the Committee decided to provide Mr. Williams with
additional long-term incentive through a grant of a stock option for 75,000
shares of common stock which grant was made in January 1997 at an exercise price
equal to the fair market value of the common stock on the date of grant.

The Committee believes that Mr. Williams has managed the Company
exceptionally well during the past few years in the face of a very challenging
business environment.

Submitted By:
John J. Cost (Chairman), Anthony Craig,
Charles Troy and Milton Rosenberg

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OTHER COMPENSATION

SAVINGS AND PROFIT SHARING PLAN

The Company established the Bell Industries' Employees' Savings and Profit
Sharing Plan (the "PSP") in 1973 under which both employees and the Company may
make contributions. The PSP will continue until terminated by the Board of
Directors. Employees must contribute at least 1% of their annual compensation to
participate in the PSP. The Company's contribution to the PSP is determined by
the Board of Directors in its discretion. For the fiscal year ended December 31,
1996, the Company contributed $1,100,000 to the PSP.

EXECUTIVE DEFERRED INCOME AND PENSION PLAN

In July 1993, the Company adopted an Executive Deferred Income and Pension
Plan (the "EDP"). Under the EDP, each officer and such other highly compensated
employees as the Board may designate are eligible to participate. Each
participant may elect a percentage (not more than 10%) of his salary that he
wishes to defer. The Company matches the amount of the chosen deferral. Such
deferred sums bear an assumed interest at a rate equal to the Lehman Brothers
Long T-Bond index.

In the event of an unforeseen emergency, a participant may withdraw his
deferred salary plus accrued interest but no portion of the matching funds
contributed by the Company. In such an event, the participant would be
ineligible from participating in the EDP for a period of two years. After
reaching age 62 and retiring, a participant may elect to have his benefit paid
in a lump sum or payable over a period of 5 to 15 years.

If a participant voluntarily resigns before age 62, he will be entitled to
receive at age 62 only a pro-rata portion of Company matching funds through the
date of his termination. That proration is based upon the period of EDP
participation compared with the participant's age at the time of resignation. If
a participant dies while employed, his beneficiary would receive a lump sum
payment equal to all amounts that have accrued for his benefit through date of
death. If a participant's employment is terminated without cause or after a
change in control, he will receive the same benefit as he would have received if
his employment had been terminated due to death. If a participant is terminated
for cause, or if the Board determines within one year after termination that
cause existed at the time of termination, he will be entitled to receive in a
lump sum payment only the amount attributable to his deferred salary plus
accrued interest.

APPROVAL OF AMENDMENT TO THE 1994 STOCK OPTION PLAN

GENERAL

On July 21, 1994, the Board of Directors adopted the 1994 Stock Option Plan
(the "Plan"), which was approved by the Company's shareholders at the 1994
Annual Meeting held on November 1, 1994. The purpose of the Plan is to provide a
means to attract and retain competent personnel and to provide to participating
directors, officers, key employees, and other persons long-term incentives for
high levels of performance and unusual efforts to improve the financial
performance of the Company.

Any director, key employee of the Company or its subsidiaries and other
persons designated by the Compensation Committee (the "Committee") (other than
directors who are members of the Committee) is eligible to receive awards under
the Plan. Restricted stock of the Company may be purchased, or purchases of
common stock may be made pursuant to "nonincentive" or "non-qualified" stock
options and options that qualify as "incentive stock options" under Section 422A
of the Internal Revenue Code, as amended. Any of such persons may receive shares
of the Company common stock pursuant to stock option rights granted in

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tandem with such options. There is no minimum or maximum number of options that
may be granted to a participant.

Subject to adjustment, the aggregate number of shares of common stock that
may be issued pursuant to awards under the Plan may not exceed 500,000 shares of
common stock. As of February 28, 1997, the Company has issued options covering
358,425 of the shares reserved for issuance under the Plan and, consequently, a
total of 141,575 shares remain for future grants.

The amendment proposed hereunder (the "Proposed Amendment") would increase
the number of shares of common stock reserved for issuance upon exercise of
options granted under the Plan by 500,000 (from 500,000 shares to 1,000,000
shares). The Board of Directors believes that the Proposed Amendment is in the
best interests of the Company and shareholders because only 141,575 shares
remain for future grants under the Plan, and option grants provide incentives
for the future growth, development and financial success of the Company.

A copy of the Plan, as currently in effect, may be obtained by a
shareholder, without charge, upon written request to Bell's Corporate Office at
11812 San Vicente Boulevard, Los Angeles, California 90049-5069.

VOTE REQUIRED

The approval of the Proposed Amendment requires the affirmative vote of a
majority of the shares of common stock present in person or represented by
proxy, and voting at the meeting (which shares voting affirmatively also
constitute at least a majority of the required quorum). The Board of Directors
proxy holders will vote all proxies received to approve the Proposed Amendment,
unless otherwise instructed. The Board of Directors recommends that shareholders
vote FOR the approval of the Proposed Amendment.

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS

The Company's Board of Directors held seven meetings during calendar 1996.
Each director attended at least 80% of the meetings of the Board of Directors
and the committees on which he served.

The Board of Directors also has standing committees: an Audit Committee, a
Compensation Committee, and a Nominating Committee. The Company does not
currently have an acting Executive Committee. The Audit Committee consists of
Messrs. Cost, Troy and Rosenberg and held one meeting during calendar 1996. The
Audit Committee reviews periodic financial statements of the Company, reviews
the independent accountants' scope of engagement, performance and fees, and
reviews the adequacy of the Company's financial control procedures. The
Compensation Committee is composed of Messrs. Cost, Craig, Troy and Rosenberg
and during calendar 1996 held five meetings. Its function is to fix compensation
of the chief executive officer and other key executives and to administer
various benefit plans, including the stock option plans, in which officers and
employees may participate. Messrs. Cost, Troy and Rosenberg are members of the
Nominating Committee which was established in March 1993. The Nominating
Committee held no meetings during calendar 1996. Its function is to recommend
individuals to be members of the Board of Directors.

ANNUAL REPORT ON FORM 10-K

The Company will provide, without charge, a copy of the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission for the
year ended December 31, 1996 upon the written request of any shareholder. This
request should be directed to Mr. Tracy A. Edwards, Vice President and Chief
Financial Officer, Bell Industries, Inc., 11812 San Vicente Boulevard, Los
Angeles, California 90049-5069.

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SHAREHOLDER PROPOSALS

If a shareholder wishes to have a proposal printed in the Proxy Statement
to be used in connection with the Company's next Annual Meeting of Shareholders,
tentatively scheduled for May 12, 1998, such a proposal must be received by the
Company at its Corporate Office prior to December 22, 1997.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under Section 16(a) of the Securities Exchange Act of 1934, the officers
and directors of the Company and certain shareholders beneficially owning more
than 10% of the Company's common stock ("Ten Percent Shareholders") are required
to file with the Securities and Exchange Commission and the Company reports of
ownership, and changes in ownership, of Company common stock. The non-employee
directors of the Company (i.e., Messrs. Cost, Craig, Troy and Rosenberg) did not
file, as of the required date (February 15, 1997), reports on Form 5 regarding
the issuance of 10,000 stock options to each of them in May 1996 under the
Company's Non-employee Directors' Stock Option Plan. All such reports were
subsequently filed in compliance with Section 16(a). Except for the foregoing,
based solely on a review of the reports received by it, the Company believes
that, during the year ended December 31, 1996, all of its officers and directors
and Ten Percent Shareholders complied with all applicable filing requirements
under Section 16(a).

MISCELLANEOUS

Price Waterhouse has been the Company's independent accountants for a
number of years and has been selected to continue in such capacity for the
current fiscal year. It is anticipated that a representative from Price
Waterhouse will attend the Annual Meeting of Shareholders, will be available to
answer questions, and will be afforded the opportunity to make any statements
the representative desires to make.

The Board of Directors knows of no other matters that are likely to come
before the meeting. If any such matters should properly come before the meeting,
however, it is intended that the persons named in the accompanying form of proxy
will vote such proxy in accordance with their best judgment on such matters. The
Company's Bylaws require that, for other business to be properly brought before
an annual meeting by a shareholder, the Company must have received written
notice thereof not less than 60 nor more than 90 days prior to the annual
meeting (or, if less than 70 days notice or other public disclosure of the date
of the annual meeting is given, not later than 10 days after the earlier of the
date notice was mailed or public disclosure of the date was made). The notice
must set forth (a) a brief description of the business proposed to be brought
before the annual meeting, (b) the shareholder's name and address, (c) the
number of shares beneficially owned by such shareholder as of the date of the
shareholder's Notice, and (d) any financial interest of such shareholder in the
proposal. Similar information is required with respect to any other shareholder,
known by the shareholder giving notice, supporting the proposal. Further, if the
proposal includes the nomination of a person to become a director which person
was not set forth in a proxy statement submitted to all shareholders pursuant to
the federal proxy rules, such proposal shall contain all the information
specified by such rules.

By Order of the Board of Directors

John J. Cost
Secretary
March 20, 1997

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PROXY PROXY

BELL INDUSTRIES, INC.

11812 SAN VICENTE BOULEVARD, LOS ANGELES, CALIFORNIA 90049

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

The undersigned hereby appoints Theodore Williams and John J. Cost and
each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and to vote as designated below, all
the shares of common stock of Bell Industries, Inc. held of record by the
undersigned on March 20, 1997, at the Annual Meeting of Shareholders to be held
on May 13, 1997 or any adjournment or postponement thereof.

This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, the proxy will
be voted for the election of all nominees as directors and for the amendment to
the 1994 Stock Option Plan.

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.

(Continued and to be signed on reverse side.)
19
BELL INDUSTRIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]

[ ]

The Board of Directors recommends a vote FOR Item 1 and Item 2.

1. ELECTION OF DIRECTORS. For All
J. Cost, A. Craig, H. Davidson, G. Graham, For Withheld Except
C. Troy, M. Rosenberg, T. Williams [ ] [ ] [ ]

For ALL except nominees written on the space provided below.

____________________________________________________________

2. AMENDMENT TO 1994 STOCK OPTION PLAN.
Proposal to amend the 1994 Stock Option Plan For Against Abstain
to increase the shares of the Company's [ ] [ ] [ ]
common stock reserved for issuance thereunder
from 500,000 to 1,000,000 shares.

3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.

Please sign exactly as name appears on the left.

Dated: __________________________________, 1997.

________________________________________________
Signature

________________________________________________
Signature if held jointly

When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.