NOTICE OF ANNUAL MEETING

 

 

 

 

The Board of Directors of Steelcase Inc. cordially invites all shareholders to attend the Company’s 2011 Annual Meeting of Shareholders as follows:

 

 

The Annual Meeting is being held to allow you to vote on the following proposals and any other matter properly brought before the shareholders:

 

1. Election of two directors nominated to a three-year term on the Board of Directors

 

2. Amendment of the Articles of Incorporation to declassify the Board of Directors

 

 

 

5. Advisory vote on executive compensation

 

6. Advisory vote on the frequency of an advisory vote on executive compensation

 

If you were a shareholder of record as of the close of business on May 16, 2011, you are eligible to vote. You may either vote at the meeting or by proxy, which allows your shares to be voted at the meeting even if you are not able to attend. If you choose to vote by proxy:

 

 

Every vote is important, and you are urged to vote your shares as soon as possible.

 

We look forward to seeing you at the meeting.

 

By Order of the Board of Directors,

 

Lizbeth S. O’Shaughnessy

Senior Vice President, Chief Legal Officer and Secretary

 

Grand Rapids, Michigan

May 31, 2011

 

 W steelcase.com  P 616.247.2710  HQ 901 44th Street S.E. Grand Rapids, MI 49508

 

PROXY STATEMENT

 

TABLE OF CONTENTS

 

 

What am I voting on?

 

You are being asked to vote on the following matters and any other business properly coming before the 2011 Annual Meeting of Shareholders, which we refer to in this proxy statement as the “Meeting”:

 

Proposal 1:  Election of two directors nominated to a three-year term on the Board of Directors

 

Proposal 2:  Amendment of the Articles of Incorporation to declassify the Board of Directors

 

 

 

Proposal 5:  Advisory vote on executive compensation

 

Proposal 6:  Advisory vote on the frequency of an advisory vote on executive compensation

 

How does the Board of Directors recommend I vote?

 

The Board of Directors recommends that you vote FOR each of the nominees for director listed in Proposal 1, FOR Proposals 2, 3, 4 and 5 and for a frequency of ONE YEAR on Proposal 6.

 

Who is entitled to vote?

 

Shareholders of record of Class A Common Stock or Class B Common Stock at the close of business on May 16, 2011 (the “Record Date”) may vote at the Meeting.

 

How many shares were outstanding on the Record Date?

 

At the close of business on May 16, 2011, there were 87,050,666 shares of Class A Common Stock and 44,199,378 shares of Class B Common Stock outstanding.

 

How many votes do I have?

 

Each shareholder has one vote per share of Class A Common Stock and ten votes per share of Class B Common Stock owned of record at the close of business on May 16, 2011.

 

How do I vote?

 

If you are a registered shareholder (that is, you hold your Steelcase stock directly in your name), you may vote by telephone, Internet or mail or by attending the Meeting and voting in person.

 

To vote by telephone or Internet:  Please follow the instructions on the proxy card. The deadline for voting by telephone or Internet is 11:59 p.m. Eastern Daylight Time on July 12, 2011.

 

To vote by mail:  Please complete, sign and date the accompanying proxy card and return it in the enclosed postage-paid envelope. Only cards received and processed before 11:00 a.m. Eastern Daylight Time on July 13, 2011 will be voted.

 

If you hold your stock in “street name” (that is, your shares are registered in the name of a bank, broker or other nominee, which we will collectively refer to as your “broker”), you must vote your shares in the manner required by your broker.

 

Whether you vote by telephone, Internet or mail, you may specify whether your shares should be voted for all, some or none of the nominees for director.

 

If you do not specify a choice and you use the enclosed proxy card, your shares will be voted FOR the election of each of the nominees for director listed under Proposal 1—Election of Directors, FOR Proposals 2, 3, 4 and 5 and for a frequency of ONE YEAR on Proposal 6.

 

If you do not specify a choice and you use a ballot card supplied by your broker, the rules of the New York Stock Exchange, or NYSE, provide that your broker may not vote your shares on Proposals 1, 5 or 6. For more information on the NYSE rules about broker voting, please see “Voting” under Supplemental Information.

 

What should I do if I received more than one proxy card?

 

If you received more than one proxy card, it is likely that your shares are registered differently or are in more than one account. You should sign and return all proxy cards to ensure all of your shares are voted.

 

How will voting on any other business be conducted?

 

For any other matter that properly comes before the Meeting, your shares will be voted in the discretion of the proxy holders. As of May 16, 2011, we do not know of any other matter to be considered at the Meeting.

 

Can I revoke my proxy?

 

If you appoint a proxy, you may revoke it at any time before it is exercised by notifying our corporate secretary in writing, by delivering a later-dated proxy to our corporate secretary or by attending the Meeting and voting in person.

 

Who can attend the Meeting?

 

Shareholders of record of Class A Common Stock or Class B Common Stock can attend the Meeting.

 

May I listen to the Meeting if I cannot attend?

 

You may listen to a live webcast of the Meeting on the Internet. Instructions for listening to the webcast will be available on the “Events & Presentations” page of the Investor Relations section of our website, located under “Company” at www.steelcase.com, approximately one week before the Meeting. An audio replay of the Meeting will be available on our website shortly after the conclusion of the Meeting and for 90 days thereafter.

 

Why didn’t I receive printed copies of this proxy statement and the annual report?

 

To demonstrate our commitment to sustainability by reducing the amount of paper, ink and other resources consumed in printing and mailing our annual report and proxy statement, and to reduce the cost to our company, we follow a process for the distribution of our proxy materials called “notice and access.” Notice and access allows us to send you a brief written notice, called a “Notice of Internet Availability of Proxy Materials,” which lists the address of a website where you can view, print or request printed copies of our proxy materials and an email address and toll-free telephone number that you can use to request printed copies of our proxy materials. If you wish to elect to receive printed copies of our proxy materials each year, you can make a permanent request.

What if I have the same address as another shareholder?

 

We send a single copy of our Notice of Internet Availability of Proxy Materials to any household at which two or more shareholders reside if they appear to be members of the same family. This practice is known as “householding” and helps reduce our printing and postage costs. Any shareholder residing at the same address as another shareholder who wishes to receive a single document or separate documents should call 1-800-542-1061 or write to Broadridge Financial Solutions, Householding Department, 51 Mercedes Way, Edgewood, New York 11717, and we will deliver the requested documents promptly.

 

When and how are shareholder proposals for next year’s Annual Meeting to be submitted?

 

We must receive any shareholder proposals to be included in our proxy statement for the 2012 Annual Meeting of Shareholders by February 1, 2012. Shareholder proposals to be presented from the floor of the 2012 Annual Meeting must be received no earlier than April 14, 2012 and no later than May 4, 2012. All shareholder proposals must be sent in the manner and meet the requirements specified in our by-laws.

 

Our Board of Directors currently has eleven members and is divided into three classes serving staggered three-year terms. One of our directors, Earl D. Holton, is retiring from the Board of Directors when his term expires at the Meeting. Upon his retirement, the size of the Board of Directors will be reduced to ten members.

 

There are two nominees for election this year. Each is currently a member of our Board and is nominated to serve as a Class I director for a term that will expire at the 2014 Annual Meeting. The Board of Directors recommends that you vote FOR each of the nominees.

 

Nominees for Election as Class I Directors for the Term Expiring in 2014:

 

 

Class III Directors Continuing in office for the Term Expiring in 2013:

 

 

Related Directors

 

Robert C. Pew III and Kate Pew Wolters are brother and sister and are first cousins to William P. Crawford and P. Craig Welch, Jr., and Mr. Crawford and Mr. Welch, Jr. are first cousins to each other.

 

Chairman Emeritus

 

Our Board has designated our former director Robert C. Pew II as Chairman Emeritus. As Chairman Emeritus, Mr. Pew II receives Board meeting materials and is invited to attend Board and committee meetings, but he does not have any right to vote as a director and does not receive any retainer or other meeting fees.

 

Fiscal Year 2011 Transactions

 

The following transactions occurred during fiscal year 2011 between our company and our directors, executive officers or owners of more than 5% of our voting securities:

 

 

Related Person Transactions Policy

 

We have a written Related Person Transactions Policy under which the Nominating and Corporate Governance Committee is responsible for reviewing and approving transactions with us in which certain “related persons,” as defined in the policy, have a direct or indirect material interest. Related persons include our directors and executive officers, members of their immediate family and persons who beneficially own more than 5% of our stock. A copy of our Related Person Transactions Policy is posted in the Corporate Governance section of our website, located at www.steelcase.com, and found under “Company,” “Investor Relations.”

 

Under the policy, our Chief Legal Officer determines whether any identified potential related person transaction requires review and approval by the Committee, in which case the transaction is referred to the Committee for approval, ratification or other action. If management becomes aware of an existing related person transaction which has not been approved by the Committee, the transaction is referred to the Committee for appropriate action. In those instances where it is not practicable or desirable to wait until the next Committee meeting to consider the transaction, the Committee has delegated authority to the Committee Chair to consider the transaction in accordance with the policy.

 

The Committee is authorized to approve those related person transactions which are in, or are not inconsistent with, the best interests of our company and our shareholders. Certain categories of transactions have been identified as permissible without approval by the Committee, as the transactions involve no meaningful potential to cause disadvantage to us or to give advantage to the related person. These categories of permissible transactions include, for example, the sale or purchase of products or services at prevailing prices in the ordinary course of business if (1) the amount involved did not exceed

5% of our gross revenues or the gross revenues of the related person, (2) our sale or purchase decision was not influenced by the related person while acting in any capacity for us and (3) the transaction did not result in a commission, enhancement or bonus or other direct benefit to an individual related person.

 

In considering any transaction, the Committee considers all relevant factors, including, as applicable:

 

 

The Committee reviewed each of the transactions described above under “Fiscal Year 2011 Transactions,” and following such review, the Committee approved the purchase of products or services from A&K Finishing, Inc., the employment of Ms. Niemann and the payment of related compensation to her. Approval of the transactions with Fifth Third was not required pursuant to our Related Person Transactions Policy, because Fifth Third is an institutional shareholder holding Steelcase stock with no apparent purpose or effect of changing or influencing control of our company. In each case, the director related to the person or entity involved in the transaction did not participate in the review and approval of the transaction by the Committee or the Board of Directors.

 

 

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our directors, executive officers and those who beneficially own more than 10% of our Class A Common Stock to file reports of initial ownership and changes in their beneficial ownership of shares of Class A Common Stock with the Securities and Exchange Commission, or SEC. Based on our review of the reports filed with the SEC, and written representations that no Form 5 reports were required, we believe that during fiscal year 2011, all Section 16(a) reports were filed on a timely basis, except P. Craig Welch, Jr. filed an amendment, reporting one transaction late, to a timely filed Form 4.

 

 

Our Board of Directors has determined that William P. Crawford, Connie K. Duckworth, Earl D. Holton, David W. Joos, Elizabeth Valk Long, Robert C. Pew III, Cathy D. Ross, Peter M. Wege II, P. Craig Welch, Jr. and Kate Pew Wolters are independent. James P. Hackett is not considered independent because of his executive management position. All of the members of our Audit, Compensation and Nominating and Corporate Governance Committees are independent.

 

The independence of our directors is assessed using the listing standards of the NYSE, and our Board adopted categorical standards to guide the determination of each director’s independence. Under these standards, none of the following is considered a material relationship impairing a director’s independence:

 

 

 

 

As used in the above categorical standards, “business with us” includes us selling products or services to the other company, either directly or through our dealers, and us buying products or services from the other company during the last three years. Unless the context otherwise requires, “director” includes the director and his or her immediate family members as defined in the NYSE listing standards. A copy of these categorical standards for director independence is also available in the Corporate Governance section of our website, located at www.steelcase.com, and found under “Company,” “Investor Relations.”

 

On an annual basis, the Nominating and Corporate Governance Committee assesses the independence of our directors by reviewing and considering all relevant facts and circumstances and presents its findings and recommendations to our Board of Directors. For fiscal year 2011, the following relationships were considered by the Committee in assessing the independence of our directors:

 

 

In addition, the Committee considered that immediate family members of directors Holton, Joos and Long are employees of companies which purchased products and/or services from us or our dealers and/or from which we purchased services in the ordinary course of business. In each case, the purchases involved less than the greater of $1 million or 1% of the other company’s annual gross revenues and the applicable family member did not have any role in, or receive any benefit from, the transactions.

 

The Committee determined that, with the exception of the relationship between us and Mr. Wege II’s daughter, each of the relationships it considered fell within the categorical standards adopted by the Board and, as a result, the relationships were not material. Following a review of the relevant facts and circumstances relating to the transaction involving Mr. Wege II’s daughter and assessing the materiality of the relationship from the standpoint of Mr. Wege II and Mr. Wege II’s daughter, the Committee determined that the relationship is not material and does not impair Mr. Wege II’s independence.

 

The Steelcase Foundation

 

The Steelcase Foundation is included in the categorical standards for director independence described above. The Foundation was established in 1951 by our company to give back to the communities that have been instrumental to our operations and growth by making grants to non-profit organizations, projects and programs in those communities. From time to time, we donate a portion of our earnings to the Foundation, as determined by our Board of Directors. The following of our directors

also serve as Foundation trustees: James P. Hackett, Earl D. Holton, Robert C. Pew III and Kate Pew Wolters, who serves as Chair of the Board of Trustees of the Foundation. The other trustees of the Foundation are Mary Anne Hunting, Mary Goodwillie Nelson (sister of director Peter M. Wege II) and Elizabeth Welch Lykins.

 

Our Board of Directors met five times during fiscal year 2011. Each of our current directors attended at least 75% of the total number of meetings of the Board and the committees on which they served during the year. Our Board’s policy is that each director is expected to attend our annual meeting of shareholders, and each of our directors attended our 2010 Annual Meeting.

 

Four standing committees assist our Board of Directors in fulfilling its responsibilities: the Nominating and Corporate Governance Committee, the Audit Committee, the Compensation Committee and the Executive Committee. The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Executive Committee, which was established to exercise the powers of the Board of Directors when necessary between regular Board meetings, did not meet during fiscal year 2011. Each committee has the power to conduct or authorize investigations or studies of matters within the scope of its responsibilities and may, at our expense, retain independent counsel or other consultants or advisors as deemed necessary. Each committee also has the sole authority to retain or terminate its consultants and approve the payment of fees.

 

Committee Membership and Meetings

 

The table below indicates the current membership of each of the Board of Directors’ committees and the number of times the committees met during fiscal year 2011. All of the members of the Nominating and Corporate Governance Committee, the Audit Committee and the Compensation Committee are independent.

 

Committee Charters

 

Each of these committees operates under a written charter adopted by the Board of Directors that is reviewed and assessed at least annually. The current charters of our Nominating and Corporate Governance, Audit and Compensation Committees, and our Corporate Governance Principles are available in the Corporate Governance section of our website, located at www.steelcase.com, and found under “Company,” “Investor Relations.” The principal responsibilities of each committee are listed below.

 

Nominating and Corporate Governance Committee

 

Responsibilities

 

The principal responsibilities of the Nominating and Corporate Governance Committee are:

 

 

Qualifications for Nominees

 

Nominees for director are selected on the basis of several criteria, the most fundamental of which is integrity. Directors are expected to be curious and demanding independent thinkers who possess appropriate business judgment and are committed to representing the long-term interests of shareholders. Directors must possess knowledge, experience, skills or expertise that will enhance our Board’s ability to direct our business. Our Board is committed to diversity, and a candidate’s ability to add to the diversity of our Board is also considered. Directors must be willing and able to spend the time and effort necessary to effectively perform their responsibilities, and they must be prepared to resign from our Board in the event that they have a significant change in responsibilities, including a change in employment, as required by our Corporate Governance Principles.

Consideration of Candidates for Director

 

The Nominating and Corporate Governance Committee considers candidates suggested by its members, other directors and senior management in anticipation of potential or expected Board vacancies. After identifying a potential candidate, the Committee collects and reviews publicly-available information to assess whether he or she should be considered further. If the candidate warrants further consideration, the Chair or another member of the Committee will initiate a contact. Generally, if the person expresses a willingness to be considered, the Committee requests information from the candidate, reviews his or her qualifications and accomplishments and conducts one or more interviews with the candidate. Committee members may also contact references or others who have personal knowledge of the candidate’s accomplishments.

 

The Committee will also consider candidates recommended by shareholders for nomination by the Board, taking into consideration the needs of the Board and the qualifications of the candidate. Shareholders must submit recommendations to our corporate secretary in writing and include the following information:

 

 

Shareholders may also make their own nominations for director by following the process specified in our by-laws.

 

Audit Committee

 

Responsibilities

 

The principal responsibilities of the Audit Committee are:

 

 

Audit Committee Financial Expert

 

The Board of Directors has designated Cathy D. Ross as an “audit committee financial expert,” as defined by the SEC’s rules and regulations, based on her financial and accounting education and experience. Ms. Ross is independent, as independence of audit committee members is defined by the listing standards of the NYSE.

 

Compensation Committee

 

Responsibilities

 

The principal responsibilities of the Compensation Committee are:

 

 

Authority of the Compensation Committee

 

Pursuant to its charter, the Compensation Committee is authorized by our Board of Directors to oversee our compensation and employee benefit practices and plans generally, including our executive compensation, incentive compensation and equity-based plans. The Committee may delegate its authority to subcommittees, provided that any such subcommittee must consist of at least two members, and the Committee may also delegate appropriate responsibilities associated with our benefit and compensation plans to members of management. The Compensation Committee must submit any changes to our CEO’s compensation to our Board of Directors for ratification.

 

Delegation of Authority

 

The Compensation Committee has delegated to our CEO the authority to grant stock options, restricted stock and restricted units to employees. Under this delegated authority, our CEO cannot grant options to acquire more than 5,000 shares, more than 2,000 shares of restricted stock or more than 2,000 restricted units in any year to any one individual, and he cannot grant, in the aggregate, options to acquire more than 100,000 shares, more than 40,000 shares of restricted stock and more than 40,000 restricted units in any year. Also, our CEO cannot grant any stock options, restricted stock or restricted units to any executive officer.

 

Our CEO has the authority to designate those employees who will participate in our Management Incentive Plan; however, the Committee is required to approve participation in such plan by any executive officer or anyone else who directly reports to our CEO.

 

The Committee has delegated certain responsibilities with regard to our Retirement Plan to an investment committee consisting of directors and members of management and to an administrative committee consisting of members of management.

 

Role of Executive Officers in Determining or Recommending Compensation

 

Our CEO develops and submits to the Compensation Committee his recommendation for the compensation of each of the named executive officers, other than himself, in connection with annual

merit reviews of their performance. The Compensation Committee reviews and discusses the recommendations made by our CEO, approves the compensation for each named executive officer for the coming year and submits the compensation for our CEO to the Board of Directors for ratification. In addition, our Chief Financial Officer and other members of our finance staff assist the Committee with establishing performance target levels for performance-based compensation, as well as with the calculation of actual financial performance and comparison to the performance targets, each of which requires the Committee’s approval. See Compensation Discussion and Analysis for more discussion regarding the role of executive officers in determining or recommending the amount or form of executive compensation.

 

Role of Compensation Consultants

 

Pursuant to its charter, the Compensation Committee has the sole authority to retain and terminate independent compensation consultants of its choosing to assist the Committee in carrying out its responsibilities.

 

The Committee engaged Towers Watson & Co. (“Towers Watson”) during fiscal year 2011 to provide the Committee with a study of the competitiveness of our executive compensation relative to market data and to provide information regarding total shareholder return performance under equity awards granted to our executive officers. See Compensation Discussion and Analysis for more detail regarding the nature and scope of Towers Watson’s assignment and the material elements of the instructions or directions given to them with respect to the performance of their duties. Towers Watson was engaged directly by the Compensation Committee.

 

In addition to the services performed for the Committee, we have purchased compensation survey data from Towers Watson from time to time and engaged Towers Watson to provide pension plan and compensation consulting services. The decision to purchase the compensation survey data and these services from Towers Watson was made by management and was approved by the Committee. The aggregate amount of fees paid to Towers Watson with regard to executive compensation services in fiscal year 2011 was $24,634, and the amount paid to Towers Watson for compensation survey data and other services in fiscal year 2011 was $110,770.

 

Compensation Risk Assessment

 

As of the end of fiscal year 2011, our management conducted an assessment of our employee compensation policies and practices and concluded that any risks arising from such policies and practices are not reasonably likely to have a material adverse effect on our company. The assessment was reviewed and discussed with the Compensation Committee, which concurred with management’s conclusions.

 

Compensation Committee Interlocks and Insider Participation

 

None of the members of our Compensation Committee was an officer or employee of our company during the fiscal year or was formerly an officer of our company, and none of our executive officers served on the compensation committee (or its equivalent) or board of directors of another entity whose executive officer served on our Board of Directors or our Compensation Committee. See Related Person Transactions for a discussion of a transaction between our company and a relative of director P. Craig Welch, Jr., who serves on our Compensation Committee.

 

Corporate Governance Principles

 

Our Board of Directors is committed to monitoring the effectiveness of policy and decision making at the Board and management levels. Fundamental to its corporate governance philosophy is the

Board’s commitment to upholding our reputation for honesty and integrity. Equally fundamental is its commitment to serving as an independent overseer of our management and operations. Our Board adopted a set of Corporate Governance Principles, a copy of which can be found in the Corporate Governance section of our website at www.steelcase.com under “Company,” “Investor Relations.”

 

Board of Directors Leadership Structure

 

The leadership structure of our Board of Directors involves a Board Chair who is not our principal executive officer. Robert C. Pew III currently serves as Chair of the Board, and James P. Hackett currently serves as our President and CEO. Our Board of Directors has chosen to keep the roles of Chair of the Board and CEO separate as a matter of sound corporate governance practices and a balance of responsibilities, with an independent director serving as Chair of the Board. This structure allows Mr. Hackett to focus on the day-to-day leadership of our business, while Mr. Pew is able to focus on the leadership of the Board of Directors and its oversight of our company.

 

Risk Oversight

 

Our Board of Directors administers its oversight of risk assessment and management practices in several ways. Once a quarter, the Audit Committee reviews a business risk profile prepared by management which summarizes the key risks faced by the company and the likelihood and anticipated financial impact of each risk materializing, as well as any significant changes in the risk profile from the previous quarter. In addition, risk identification and risk management are discussed by the Board of Directors on a regular basis as part of its review of our financial performance and business and strategic planning. We believe our Board of Directors’ oversight of our risk management is strengthened by having an independent director serve as Chair of the Board.

 

Executive Sessions of Non-Management Directors

 

The only member of our Board who is also a member of management is James P. Hackett, our President and CEO. Our Board meets quarterly in executive session without Mr. Hackett present. During these sessions, Robert C. Pew III, as Chair of the Board, presides. Our Corporate Governance Principles provide that if the Chair of the Board is a member of management, the outside directors will designate a member to preside at executive sessions.

 

You may contact the Chair of the Board (or the lead non-management director, if one is subsequently appointed) by sending a letter to:

 

Chair of the Board/Lead Non-Management Director
c/o Steelcase Inc.
P.O. Box 1967
Grand Rapids, MI 49501-1967

 

Shareholder Communications

 

Our Board has adopted a process for interested parties to send communications to the Board. To contact the Board, any of its committees or any of our directors, please send a letter addressed to:

 

Board of Directors
c/o Lizbeth S. O’Shaughnessy, Secretary
Steelcase Inc.
P.O. Box 1967
Grand Rapids, MI 49501-1967

 

All such letters will be opened by the corporate secretary. Any contents that are not in the nature of advertising, promotions of a product or service or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the Board or any committee or group of directors,

the corporate secretary will make sufficient copies of the contents and send them to each director who is a member of the committee or group to which the envelope is addressed.

 

Code of Ethics and Code of Business Conduct

 

Our Board adopted a Code of Ethics applicable to our chief executive and senior financial officers, as well as a Code of Business Conduct that applies to all of our employees and directors. Only our Nominating and Corporate Governance Committee may grant any waivers of either code for a director or executive officer. Each of these codes is available in the Corporate Governance section of our website, located at www.steelcase.com, and found under “Company,” “Investor Relations.” If any amendment to, or waiver from, a provision of our Code of Ethics is made for our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, we will also post such information in the Corporate Governance section of our website. To date, no such waivers have been issued.

 

Materials Available upon Request

 

We will provide a printed copy of any of the following materials (each of which is also available on our website at www.steelcase.com) to you upon request and without charge:

 

 

Please send any such requests to us by email at ir@steelcase.com or by mail at:

 

Steelcase Inc.
Investor Relations, GH-3C
P.O. Box 1967
Grand Rapids, MI 49501-1967

 

Management is responsible for the Company’s financial reporting process and its internal controls regarding financial reporting, accounting, legal compliance and ethics. Deloitte & Touche LLP, the Company’s independent registered public accounting firm for the fiscal year ended February 25, 2011 (the “independent auditor”), is responsible for performing independent audits of the Company’s consolidated financial statements and its internal control over financial reporting and issuing opinions on:

 

 

Our Committee’s role is to serve as an independent and objective party to monitor these processes on behalf of the Board of Directors and to review the audit efforts of the Company’s internal and independent auditors.

 

In this context, we discussed with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 114, The Auditor’s Communication with Those Charged with Governance (which superseded Statement on Auditing Standards No. 61, Communication With Audit Committee, as amended). In addition, we received the written disclosures and letter from the independent auditor required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Committee concerning independence and reviewed, evaluated and discussed the written report and letter with that firm and its independence with respect to the Company.

 

We discussed with the Company’s internal and independent auditors the overall scope and plans for their respective audits. We also reviewed and discussed with management the Company’s audited financial statements. We met with the internal and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal control and the overall quality of the Company’s financial reporting.

 

Based on the review and discussions referred to above, and relying on the representations of the Company’s management and the independent auditor’s report, our 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 fiscal year ended February 25, 2011 for filing with the Securities and Exchange Commission.

 

Audit Committee

 

Cathy D. Ross (Chair)

Earl D. Holton

Robert C. Pew III

Peter M. Wege II

 

The fees billed by Deloitte & Touche LLP for fiscal year 2011 (estimated) and fiscal year 2010 (actual) for work performed for us are as follows:

 

 

 

 

Our Audit Committee determined that providing the services reflected in the above table was compatible with the maintenance of the independence of Deloitte & Touche LLP.

 

Our Audit Committee has a policy under which it approves in advance audit, audit-related and tax services rendered by the principal independent auditor, subject to specific fee limits. If circumstances require hiring the independent auditor for services not previously pre-approved or that would exceed the fee limits previously set, the Audit Committee must pre-approve the new services or fee limits. The Audit Committee Chair may approve specified services between regularly scheduled meetings of the Audit Committee, subject to review by the full Audit Committee at its next scheduled meeting. The fiscal year 2011 services and fees reflected in the above table were pre-approved by the Audit Committee.

 

We reviewed and discussed with management the Compensation Discussion and Analysis which follows this report. Based on such review and discussions, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement for filing with the Securities and Exchange Commission and distribution to the Company’s shareholders.

 

Compensation Committee

 

David W. Joos (Chair)

Connie K. Duckworth

Elizabeth Valk Long

P. Craig Welch, Jr.

Kate Pew Wolters

 

This section discusses our policies and practices relating to executive compensation and presents a review and analysis of the compensation earned in fiscal year 2011 by our CEO, our Chief Financial Officer and our three other most highly-paid executive officers. We refer to these five individuals as the “named executive officers.” The amounts of compensation earned by these executives during the past three fiscal years are detailed in the Summary Compensation Table in Executive Compensation, Retirement Programs and Other Arrangements and the other tables which follow it.

 

Executive Summary

 

Our financial performance improved significantly in fiscal year 2011 as we began experiencing organic revenue growth as a result of the broader global economic recovery. We recorded revenue of $2.4 billion and net income of $20.4 million in fiscal year 2011, compared to revenue of $2.3 billion and a net loss of $(13.6) million in fiscal year 2010.

 

We strive to provide competitive pay opportunities and link pay to performance. Amounts realized from short-term and long-term incentive compensation for performance periods ending in fiscal year 2011 were below target. Executive compensation highlights for fiscal year 2011 are:

 

 

At the beginning of fiscal year 2012, we made two changes to the form of long-term equity incentive awards granted to our named executive officers compared to prior years:

 

 

Philosophy and Objectives

 

Our philosophy for the compensation of all of our employees, including the named executive officers, is to value the contribution of our employees and share profits through broad-based incentive arrangements designed to reward performance and motivate collective achievement of strategic objectives that will contribute to our company’s success.

 

The primary objectives of the compensation programs for our named executive officers are to:

 

 

Annual Review

 

Our executive compensation programs fall within three general categories: (1) base salaries, (2) incentive compensation and (3) retirement programs and benefits. The Compensation Committee reviews and approves the base salary and incentive compensation awards for each of our executive officers each year, taking into account the recommendations of our CEO, the individual performance of each officer and our compensation philosophy and objectives described above. Following approval by the Compensation Committee, the compensation of our CEO is submitted to our Board of Directors for ratification. The amount of incentive compensation actually earned by each officer depends on the performance of our company as a whole against the targets established for the particular award. None of the named executive officers has an employment agreement with us.

 

In order to evaluate the reasonableness and competitiveness of our compensation programs and practices, the Compensation Committee engaged Towers Watson to provide the Committee with an annual study which compares our executive compensation to that of a comparison group of companies. The survey presents information regarding base salaries, short-term bonus targets, annualized expected values of long-term incentive compensation and target total direct compensation for the comparison group. The Compensation Committee does not specifically target each element of compensation of the named executive officers against the comparison group. Instead, the Committee reviews the comparison data to assess whether or not the total compensation of the named executive officers is within a competitive range, and in making its assessment, the Committee considers (a) any difference between the role and responsibilities of each officer compared to those of his or her peers in the comparison group, (b) the specific contributions the officer has made to the successful achievement of our company goals and (c) the relative experience level of the officer and his or her tenure with our company.

 

The criteria established by the Compensation Committee for the composition of the comparison group for fiscal year 2011 were (1) furniture companies, including office furniture and residential furniture companies, (2) other global durable goods manufacturing companies and (3) other companies which (a) are based within the same region as our company and (b) operate globally. The comparison group consisted of the following companies:

 

 

As of December 2009 (the timing of the comparison data used for fiscal year 2011), the most recent fiscal year revenues for the comparison group ranged from $1.2 billion to $14.7 billion, with a median of

$3.5 billion, and market capitalization of the group ranged from $112.0 million to $6.9 billion, with a median of $1.8 billion.

 

Base Salary

 

As described above, the base salary of each of our named executive officers is reviewed and approved by the Compensation Committee as part of its overall review of executive compensation, and our Board of Directors ratifies any changes to our CEO’s base salary. As a general rule, base salaries for the named executive officers are set at a level which will allow us to attract and retain highly-qualified executives. In addition to the annual reviews, the base salary of a particular executive may be adjusted during the course of a fiscal year in connection with a promotion or other material change in the executive’s role or responsibilities.

 

Base salaries were reinstated at the beginning of fiscal year 2011, after having been reduced in fiscal year 2010 due to economic and business conditions. None of the named executive officers received a merit increase or other base salary change during fiscal year 2011.

 

In early fiscal year 2012, each of the named executive officers received a merit increase to his or her base salary within a normal range, and two of the named executive officers received additional increases. James P. Keane’s base salary was increased by a total of 10% for merit and in connection with the expansion of his responsibilities from President of the Steelcase Group for North America to President of the Steelcase Group for the Americas, Europe, the Middle East and Africa. David C. Sylvester’s base salary was increased by a total of 9% for merit and in connection with his promotion to Senior Vice President, Chief Financial Officer.

 

Incentive Compensation

 

In the two most recent fiscal years, the incentive compensation awarded to our executive officers has remained consistent and includes two types of awards: (1) annual awards under our Management Incentive Plan, or MIP, which are earned based on our economic value added, or EVA, results for the fiscal year and are paid in cash and (2) performance unit awards which are earned based on our TSR for three fiscal years and are settled in shares. The combination of these two types of awards create overlapping award cycles that are designed to create retention and provide a mix of cash and equity-based incentives.

 

As an illustration, the following chart shows the mix of compensation for James P. Hackett compared to the average of the other named executive officers, or NEOs, as a group as of fiscal year 2011, valuing the MIP awards at the target level of performance and the performance unit awards at the grant date market price per share of the target number of shares of Class A Common Stock, and notes the portion of the total compensation paid in the form of cash or equity and the portion earned based on EVA or TSR performance. The mix of compensation is relatively consistent between the CEO and the other named executive officers and among the other named executive officers.

Elements of Total Compensation at Target Levels

 

 

Management Incentive Plan

 

Philosophy and Practice

 

As described above, each of our named executive officers receives a short-term award under our MIP each fiscal year which is paid in cash shortly after the end of the fiscal year based on the achievement of certain EVA results for the fiscal year. EVA is a profit measure that takes into account the cost of capital and is calculated by taking our net income before interest expense, deducting a capital charge representing the economic cost of an expected return (set by the Compensation Committee at 10% for fiscal year 2011) on average shareholders’ equity and average long-term debt, and adjusting for cash and short-term investments (including variable life company-owned life insurance policies) in excess of $100 million and related interest income, the impact of recent acquisitions and the deferral of a portion of restructuring or other charges to the extent approved by the Compensation Committee. No awards can be earned to the extent that they would result in our company recording a net loss for the fiscal year unless the Committee determines otherwise.

 

We use EVA as the performance measure for the MIP because we believe it is an effective measure of the performance of our business, it reinforces the efficient use of capital and it fits with our compensation philosophy of sharing profits with our employees. In addition to the named executive officers, over 300 management employees participate in the MIP and a majority of our other employees also receive annual incentive compensation based on EVA results. We use EVA as a measurement tool in other areas of our business, such as evaluating business acquisitions, ventures, product development and other capital expenditures.

 

Fiscal Year 2011 Awards

 

Annually, the Compensation Committee reviews and establishes the amount of EVA required to earn the minimum, target and maximum level of awards under the MIP. The EVA performance levels established by the Compensation Committee for fiscal year 2011 are set forth in the following chart. In setting the EVA target for fiscal year 2011, the Compensation Committee considered the extraordinarily difficult industry and economic environment over the past two years and the need to keep our employees engaged. The amount of EVA performance above or below the target that would have resulted in the awards being earned at the maximum level or at the minimum level was set at 8% of EVA capital for the fiscal year. The “Equivalent Level of Net Income (Loss)” column indicates the approximate amount of net income (loss) for fiscal year 2011 which would have resulted in the minimum, target or

maximum awards being earned, assuming that all other actual financial results and EVA capital for fiscal year 2011 were unchanged.

 

 

 

 

The named executive officers’ target MIP awards for fiscal year 2011 were:

 

 

In determining the size of MIP awards to be granted, our CEO presented to the Compensation Committee his recommendations for the size of award for each named executive officer other than himself, taking into consideration the factors described above under the heading “Annual Review” and the officer’s long-term incentive compensation. The Committee reviewed the value of the target awards as a percentage of the officer’s base salary relative to the median level of short-term incentive compensation shown in the Towers Watson comparison study.

 

Awards Earned and Link to Company Performance

 

Our actual EVA performance for fiscal year 2011 was $(59.2) million, resulting in the MIP awards being earned at 48% of target. The following chart depicts the relationship between our EVA, as calculated under the MIP, and net income (loss), on the left axis, and the percentage of target earned under the MIP, on the right axis, for each of the past five fiscal years.

 

Equity Awards

 

Philosophy and Practice

 

Each of our named executive officers typically receives a long-term equity-based incentive award under our Incentive Compensation Plan each year, in accordance with our philosophies of paying for performance and aligning the interests of our executives with those of our shareholders. The awards are approved by the Compensation Committee, and in the case of our CEO, ratified by our Board of Directors, typically at a regularly scheduled meeting at the beginning of each fiscal year, but awards also may be approved at a special meeting.

 

In addition to granting annual equity-based incentive awards, from time to time at the request of our CEO, the Compensation Committee considers granting special awards of restricted units to named executive officers in connection with promotions or other changes in responsibilities or in recognition of particular contributions to our company’s performance. No such awards were granted to the named executive officers during fiscal year 2011. In early fiscal year 2012, in connection with the expansion of his responsibilities, James P. Keane received an award of 45,000 restricted units which will vest in three equal installments at the end of each of fiscal years 2012, 2013 and 2014.

 

All grants of equity-based incentive awards to named executive officers require the advance approval of the Compensation Committee (and, for equity awards to our CEO, ratification by the Board), and we do not have any program or practice to time the grant of equity-based awards relative to the release of any material non-public information.

 

Fiscal Year 2011 Awards

 

Each of the named executive officers was granted a performance unit award in fiscal year 2011. The number of shares earned will be based on our TSR performance for fiscal years 2011 through 2013 relative to the industrial subset of companies within the S&P MidCap 400 Index. TSR, expressed as a compound annual growth rate, includes the change in trading price and dividends paid during the performance period and is stated as a percentage relative to the trading price just prior to the beginning of the performance period. During the performance period, the named executive officers receive dividend equivalent payments on the target number of units awarded. A number of shares of Class A Common Stock equal to 25% of the target award will be earned if the officer remains employed by us through the end of fiscal year 2013 whether or not the minimum performance level is achieved.

 

The levels of relative TSR performance that would result in the award of the threshold, target or maximum number of shares under the performance units awarded in fiscal year 2011 are as follows:

 

 

The Compensation Committee selected TSR as the performance measure for these awards to better align the compensation of the executive officers with the interests of our shareholders. It chose the industrial subset of the S&P MidCap 400 index for the measurement of relative TSR because the Committee desired a large enough group to mitigate the impact of any one-time events that may be experienced by a company within the group, and the group includes companies with reasonably similar market capitalization to our company.

 

In determining the number of performance units to be granted, our CEO presented to the Compensation Committee his recommendations for the size of award for each named executive officer other than himself, taking into account the factors described above under the heading “Annual Review.” The Committee reviewed the estimated value of the target level of the recommended awards as a percentage of the officer’s base salary relative to the median level of long-term incentive compensation

shown in the Towers Watson comparison study. The final performance unit awards, including the award to our CEO, were approved by the Committee, and the award to our CEO was ratified by the Board of Directors.

 

Awards Earned and Link to Company Performance

 

The performance period for the performance shares granted to the named executive officers in fiscal year 2009 ran from fiscal year 2009 through fiscal year 2011. The awards could be earned based on two performance criteria, each with 50% weighting: absolute TSR expressed as a compound annual growth rate, and relative TSR. Below are the performance levels which would have resulted in the threshold, target and maximum amounts earned.

 

Our actual TSR performance for this award, also set forth below, resulted in no shares being earned. The lack of a payout for our fiscal year 2009 through fiscal year 2011 performance cycle demonstrates alignment with TSR performance and our pay for performance philosophy.

 

 

Retirement Plans and Benefits

 

Each of the named executive officers is eligible to participate in the following retirement benefit plans:

 

 

The Retirement Plan and Deferred Compensation Plan are intended to allow the officers to contribute portions of their current compensation on a tax-deferred basis and to be competitive with benefits that are offered by similar companies. We also make profit-sharing, matching or other contributions to the Retirement Plan from time to time in our discretion. We reinstated matching contributions during the third quarter of fiscal year 2011, but we did not make any other contributions during the year. The Restoration Retirement Plan is intended to provide benefits to participants for whom contributions to the Retirement Plan are limited under the Internal Revenue Code. No contribution was made to the Restoration Retirement Plan in fiscal year 2011. Amounts contributed to or deferred under these plans earn a return based on the elections made by the individual officer from a number of investment options. The Executive Supplemental Retirement Plan, which was originally adopted in 1981, is intended to assist us with attracting and retaining highly-qualified executives and to enable them to devote their full-time best efforts to our company. We do not have a policy or practice of granting our executive officers extra years of service credit under any of these plans.

 

Each of these plans, other than our Retirement Plan, is discussed below in Executive Compensation, Retirement Programs and Other Arrangements under the headings “Pension Benefits” and “Deferred Compensation.” Our Retirement Plan is a tax-qualified defined contribution plan which is open to all U.S.-based employees of Steelcase Inc. and certain of its subsidiaries and affiliates. Participants may elect to contribute a portion of their earnings to the 401(k) component of the Retirement Plan each year.

Certain senior management employees, including our CEO, also have individual deferred compensation agreements with us that were entered into more than ten years ago. Under these agreements, the employees deferred a portion of their compensation and are entitled to receive fixed payments beginning at age 70. These agreements were intended to allow participants to build additional retirement income on a tax-deferred basis. At the time we entered into the agreements, we purchased company-owned life insurance policies that, although they were not pledged sources of funding for these agreements, were expected to generate returns that would approximate our obligations under the agreements.

 

In addition to these retirement and deferred compensation plans, upon a qualifying retirement (generally when the age at retirement and number of years of continuous service with our company equals 80 or more), each of the named executive officers is eligible to continue to receive healthcare benefits, including medical, dental and vision insurance programs, in the same manner as all other U.S. employees of Steelcase Inc. hired before July 22, 2002. We currently allow eligible U.S. retirees to continue to receive healthcare benefits for life, but we reserve the right to change or eliminate this benefit at any time. Participating retirees are required to pay a portion of the cost of coverage, and the cost sharing percentage varies depending on the date the participant became eligible to retire, age and years of service with our company.

 

Severance and Change in Control Benefits

 

Each of the named executive officers participates in our Executive Severance Plan, which provides for certain benefits in the event of certain terminations of employment with our company. This plan is intended to provide clarity to shareholders and executive management in the event of a severance and/or change in control, align the interests of executive management with the long-term interests of our shareholders, reinforce behavior that promotes maximum value in the event of any merger or acquisition activity and attract and retain executive management by maintaining competitive compensation programs. The value of the potential benefits under the Executive Severance Plan for each of the named executive officers as of the end of fiscal year 2011 are detailed below in Executive Compensation, Retirement Programs and Other Arrangements under the heading “Termination or Change in Control Payments.”

 

Other Programs and Practices

 

Perquisites and Other Benefits

 

Our company provides very limited perquisites or other personal benefits to our named executive officers. The only perquisite received in fiscal year 2011 by the named executive officers was an optional annual physical examination and, in the case of our CEO only, home security costs. In addition, the family members of some of our named executive officers travelled on our corporate aircraft on occasion during fiscal year 2011, but the incremental cost to our company of such travel was negligible as they were passengers on flights that were otherwise scheduled for business purposes. Use of our corporate aircraft by our CEO for personal travel is governed by written aircraft time-sharing agreements under which he reimburses us for all operating expenses associated with the flight, multiplied by 200%. The aggregate incremental cost to our company of the perquisites or other personal benefits received by the named executive officers in fiscal year 2011 was less than $10,000 per officer.

 

The named executive officers also may elect to participate in other benefit programs on the same terms as other employees of our company. These programs include medical, dental, vision, life and disability insurance, charitable gift matching and discounts on company products. None of the named executive officers has a company car or company-provided housing, and we do not pay any country club memberships or financial planning for any of the named executive officers.

Stock Ownership Guidelines

 

The Compensation Committee established stock ownership guidelines to encourage stock ownership among our executives to further the objective of aligning our executives’ interests with those of our shareholders. Under these guidelines, our CEO is expected to own shares of our common stock having a current market value of not less than five times his base salary, and the other named executive officers are expected to own shares having a current market value of not less than two or three times their respective base salaries, depending on their position. The amount of holdings required by the guidelines was developed based on market comparisons and the premise that an executive should be able to satisfy the guidelines by retaining shares awarded to the executive as compensation and without purchasing additional shares, assuming the applicable performance criteria for the share awards are satisfied. New executive officers are given a period of five fiscal years from their appointment to meet the guidelines in order to allow them an appropriate period of time to build their holdings through annual equity awards.

 

In addition to shares owned by our executives, holdings which count toward satisfaction of stock ownership guidelines include restricted stock, restricted units, performance shares and performance units at target award levels during the vesting period, as well as the value of in-the-money stock options held by the executives. The Compensation Committee reviews compliance with the stock ownership guidelines annually. All of the named executive officers are in compliance with their stock ownership guidelines.

 

Non-compete and Other Forfeiture Provisions

 

One of the basic principles of the various compensation plans and programs which may provide benefits to our named executive officers during or after their employment with us is that certain compensation or benefits will be forfeited or returned if the participant competes with us during a specified period after they leave our employment.

 

In addition, our Executive Severance Plan provides that in the event our financial results are materially restated, the Compensation Committee may review the circumstances surrounding the restatement and determine whether and which participants will forfeit the right to receive any future benefits and/or repay any prior benefits received under the plan. In the event of a material restatement due to fraud, if the Committee determines that a participant was responsible for or participated in the fraud, that participant will be required to forfeit any future benefits and repay any prior benefits paid in excess of the amounts that would have been paid based on our restated financial results. These are called “clawback” provisions, and the MIP and the Incentive Compensation Plan have similar clawback provisions which apply only to those participants who also participate in the Executive Severance Plan.

 

Tax Considerations

 

In making decisions regarding executive compensation, the Compensation Committee considers the tax deductibility of the amounts payable. Section 162(m) of the Internal Revenue Code generally limits the tax deductibility of annual compensation paid to certain officers to $1 million unless certain conditions are satisfied. The Committee’s goal is to structure the compensation paid to these individuals to maximize deductibility for federal income tax purposes; however, when deemed necessary, the Committee may authorize compensation that may not be deductible under Section 162(m) to promote incentive and retention goals.

 

This section and the tables set forth in this section should be read in conjunction with the more detailed description of our executive compensation plans and arrangements included in the Compensation Discussion and Analysis which precedes this section.

 

Summary Compensation Table

 

The following table shows compensation information for fiscal years 2011, 2010 and 2009 for (1) James P. Hackett, our President and CEO, (2) David C. Sylvester, our Chief Financial Officer, and (3) our three other most highly-paid executive officers as of the end of fiscal year 2011. In this proxy statement, we refer to these five executive officers collectively as the “named executive officers.”

 

Summary Compensation Table

 

 

 

 

 

 

 

 

								Earnings payable
			Earnings paid					after end of
			after end of					fiscal year
Name			fiscal year 2011					2012
James P. Hackett			$	13,962				$	2,861
David C. Sylvester			$	4,420				$	942
Mark A. Baker			$	5,317				$	1,180
James P. Keane			$	6,642				$	1,324
Nancy W. Hickey			$	4,649				$	944

 

 

			Company
			Contributions under					Life					All Other
			Retirement or					Insurance					Compensation
Name			Pension Plans					Premiums					–Total
James P. Hackett			$	4,900				$	74				$	4,974
David C. Sylvester			$	2,046				$	74				$	2,210
Mark A. Baker			$	3,892				$	74				$	3,966
James P. Keane			$	2,211				$	74				$	2,285
Nancy W. Hickey			$	2,921				$	74				$	2,995

Incentive Compensation Awards

 

The following table shows the awards granted to the named executive officers during fiscal year 2011 under our incentive compensation plans.

 

Fiscal Year 2011 Grants of Plan-Based Awards

 

 

 

 

MIP awards

 

The short-term MIP awards granted for fiscal year 2011 were based on EVA achievement compared to a target of $(25.0) million. In March 2011, the Compensation Committee confirmed the performance results, and the awards were earned at 48% of target.

 

Performance unit awards

 

The performance unit awards granted in fiscal year 2011 can be earned based on the achievement of certain TSR levels for fiscal years 2011 through 2013 relative to the industrial subset of companies within the S&P MidCap 400 index. TSR includes the change in trading price and dividends paid on our Class A Common Stock during the performance period and is stated as a compound annual growth rate relative to the trading price just prior to the beginning of the performance period.

 

A floor amount equal to 25% of the target number of shares will be earned regardless of the level of relative TSR achieved, and the levels of relative TSR performance that would result in the award of the threshold, target or maximum number of shares are as follows:

 

 

During the performance period, dividend equivalent payments were made based on the target number of shares for each award, and at the end of fiscal year 2013, the number of performance units earned will be issued as Class A Common Stock.

Outstanding Equity Awards

 

The following table shows the equity awards granted to the named executive officers under our Incentive Compensation Plan which remained outstanding at the end of fiscal year 2011, including (1) unexercised stock options, (2) unvested restricted units and (3) unearned or unvested performance units. The market values shown in the table are based on the closing price of our Class A Common Stock at the end of fiscal year 2011 of $9.75 per share.

 

Fiscal Year 2011 Outstanding Equity Awards at Fiscal Year-End

 

 

 

 

 

Option Award Exercises and Stock Award Vesting

 

The following table shows (1) stock options exercised by the named executive officers during fiscal year 2011 and (2) stock awards (including restricted stock and units and performance shares and units) previously granted to the named executive officers which vested during fiscal year 2011.

 

Fiscal Year 2011 Option Exercises and Stock Vested

 

 

 

 

Pension Benefits

 

The following table shows information regarding each plan that provides for payments or other benefits to the named executive officers at, following or in connection with retirement.

 

Fiscal Year 2011 Pension Benefits

 

 

 

 

Executive Supplemental Retirement Plan

 

Our Executive Supplemental Retirement Plan, or SERP, is an unfunded plan that provides certain defined benefits to participants who are approved by the Compensation Committee. Participants do not make contributions to the SERP, which pays the following benefits following a qualifying retirement, death or total disability:

 

 

A participant is eligible for normal retirement under the SERP at age 65. A participant is eligible for early retirement under the SERP when the participant’s age plus years of continuous service with our company equal 80 or more, but if the participant retires before age 65, payments under the SERP for amounts treated as deferred prior to January 1, 2005 will not start until after the participant has reached age 65 and payments for amounts treated as deferred on or after January 1, 2005 will start on the participant’s early retirement date, unless otherwise elected by the participant. None of the named executive officers is age 65 or older, but James P. Hackett and Nancy W. Hickey meet the requirements for early retirement.

 

Participants are fully vested in the SERP after seven years of participation in the plan, with partial vesting beginning at 20% after three years of participation and increasing 20% per year thereafter. For example, after five years of participation in the SERP, a participant is 60% vested and would receive payments equal to 60% of the amounts described above if he or she qualified for retirement and retired at that point.

 

Deferred Compensation Agreement

 

We have an individual deferred compensation agreement with James P. Hackett under which he deferred a portion of his compensation from March 1996 to February 2001. This is an unfunded arrangement and is similar to other arrangements we entered into around the same time with other senior employees.

 

Under his agreement, Mr. Hackett deferred an aggregate of $250,000, and after he reaches age 70 in 2025, he will receive a payment of $300,000 per year for a period of 15 years. This payment stream reflects an implied annual rate of return of approximately 8.55%. If Mr. Hackett dies before age 70, his heirs would be entitled to receive reduced payments under his agreement, and in the event his employment is terminated for cause, we would pay him only the original amount he deferred.

Deferred Compensation

 

The following table shows information for fiscal year 2011 regarding each plan under which compensation may be deferred on a basis that is not tax-qualified.

 

Fiscal Year 2011 Nonqualified Deferred Compensation

 

 

 

 

Deferred Compensation Plan

 

Under our Deferred Compensation Plan, participants may elect to defer up to 25% of their base salary and/or up to 50% of their short-term award under the MIP into an unfunded account with our company on a tax-deferred basis. Our company does not make any contributions to the Deferred Compensation Plan. Funds deferred under the Deferred Compensation Plan are deemed invested in one or more market investment funds selected by the participant and are payable to the participant after termination of employment in either a lump sum or installments, at the election of the participant.

 

Restoration Retirement Plan

 

Our Restoration Retirement Plan is a non-qualified defined contribution plan which is unfunded. Participants in our MIP for whom contributions to our Retirement Plan are limited by Section 401(a)(17) of the Internal Revenue Code may participate in the Restoration Retirement Plan. We make annual additions to a participant’s bookkeeping account under the Restoration Retirement Plan at the same rate of contribution as our Retirement Plan up to a combined maximum of two times the limit under Section 401(a)(17).

 

The vesting period for our contributions to the Restoration Retirement Plan is two years. Participants select from several investment fund options for their accounts under the Retirement Plan, and, prior to January 15, 2011, the rate of return a participant earned on his or her Retirement Plan account was also applied to the participant’s Restoration Retirement Plan account. Effective January 15, 2011, participants make separate elections for the Restoration Retirement Plan, and the rate of return is based on those elections. Following termination of employment, a participant’s account balance in the Restoration

Retirement Plan, to the extent vested, is paid out to the participant either in a lump sum or installments, at the election of the participant.

 

Termination or Change in Control Payments

 

The following table shows the estimated payments that would have been made to the named executive officers if a termination of employment and/or change in control had happened on February 25, 2011, the last day of our fiscal year 2011.

 

The various circumstances under which payments would have been made are categorized as follows:

 

 

Potential Payments upon Termination or Change in Control