UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.      )

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o		Soliciting Material pursuant to § 240.14a-12

MOLEX INCORPORATED

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MOLEX INCORPORATED

 

2222 Wellington Court

Lisle, Illinois 60532

 

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 29, 2010

 

 

Dear Stockholders:

 

We will hold the annual meeting of Molex Incorporated stockholders on Friday, October 29, 2010 at 10:00 a.m., Central time, at our corporate headquarters at 2222 Wellington Court, Lisle, Illinois 60532.

 

The purpose of the annual meeting is to consider and take action on the following matters:

 

1. The election of four Class II directors nominated by Molex’s Board of Directors for a term of three years;

 

2. The ratification of the selection of Ernst & Young LLP as Molex’s independent auditors for the fiscal year ending June 30, 2011; and

 

3. Any other business that properly comes before the meeting or any adjournments or postponements thereof.

 

The items of business listed above are more fully described in the Proxy Statement accompanying this Notice. Stockholders of record as of the close of business on September 1, 2010 are entitled to vote at the annual meeting or any adjournments or postponements thereof.

 

Your vote is important. Please note that this year, the rules governing how brokers vote your shares have changed. Brokers may no longer vote your shares on the election of directors absent specific voting instructions from you. Whether or not you plan to attend the annual meeting in person, it is important that your shares be represented and voted. You may vote via the Internet, telephone or mail before the annual meeting or in person at the annual meeting.

 

By Order of the Board of Directors

Mark R. Pacioni

Secretary

 

September 3, 2010

Lisle, Illinois

 

TABLE OF CONTENTS

 

MOLEX INCORPORATED

 

2222 Wellington Court
Lisle, Illinois 60532

 

 

PROXY STATEMENT

 

 

 

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Molex Incorporated (“Molex” or the “Company”), a Delaware corporation, for use at the annual meeting of stockholders to be held on Friday, October 29, 2010, at 10:00 a.m., Central time, or at any postponements or adjournments thereof, for the purposes discussed in this Proxy Statement and in the accompanying Notice of Annual Meeting of Stockholders and for any business properly brought before the annual meeting. Proxies are solicited to give all stockholders of record an opportunity to vote on matters properly presented at the annual meeting, which will be held at our corporate headquarters at 2222 Wellington Court, Lisle, Illinois 60532.

 

In accordance with rules adopted by the Securities and Exchange Commission (the “SEC”), we now furnish to our stockholders proxy materials, including our Annual Report to Stockholders, on the Internet. We will begin distributing a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) to our stockholders of record and beneficial owners on or about September 3, 2010. The Notice of Internet Availability contains instructions on how to access this Proxy Statement and our 2010 Annual Report to Stockholders and how to vote. If you receive a Notice of Internet Availability, you will not receive a printed copy of the proxy materials unless you specifically request them, which you may do by following the instructions included in the Notice of Internet Availability.

 

You are entitled to vote at the annual meeting if you were a stockholder of record of Molex voting stock as of the close of business on September 1, 2010. Your shares may be voted at the annual meeting only if you are present in person or represented by a valid proxy.

 

Whether you hold shares directly as a stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the meeting. If you are a stockholder of record, you may vote by submitting a proxy. If you hold shares beneficially in street name, you may vote by submitting voting instructions to your broker, trustee or nominee. For directions on how to vote, please refer to the instructions below and those on the Notice of Internet Availability, proxy card or voting instruction form provided.

 

By Internet.  Stockholders of record may submit proxies over the Internet by following the instructions on the Notice of Internet Availability or, if printed copies of the proxy materials were received, the instructions on the printed proxy card. Most beneficial stockholders may vote by accessing the website specified on the voting instruction forms provided by their brokers, trustees or nominees. Please check your voting instruction form for Internet voting availability. Voting instructions must be received by 11:59 p.m., Eastern time, October 28, 2010.

 

By Telephone.  Stockholders of record may submit proxies using any touch-tone telephone from within the United States by following the instructions regarding accessing a copy of the proxy statement on the Notice of Internet Availability or, if printed copies of the proxy materials were received, the instructions on the printed proxy card. Most beneficial owners may vote using any touch-tone telephone from within the United States by calling the number specified on the voting instruction

forms provided by their brokers, trustees or nominees. Voting instructions must be received by 11:59 p.m., Eastern time, October 28, 2010.

 

By Mail.  Stockholders of record may submit proxies by mail by requesting printed proxy cards and completing, signing and dating the printed proxy cards and mailing them in the accompanying pre-addressed envelopes. Beneficial owners may vote by completing, signing and dating the voting instruction forms provided and mailing them in the accompanying pre-addressed envelopes.

 

In Person.  Stockholders of record may also vote in person at the annual meeting. We will provide a ballot to anyone who requests one at the meeting. Shares held in your name as the stockholder of record may be voted on that ballot. Shares held beneficially in street name may be voted on a ballot only if you bring a legal proxy from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares. Even if you plan to attend the annual meeting, we recommend that you also submit your proxy or voting instruction form as described below so that your vote will be counted if you later decide not to attend the meeting.

 

Molex is incorporated under Delaware law, which specifically permits electronically transmitted proxies, provided that each such proxy contains or is submitted with information from which the inspector of election can determine that such proxy was authorized by the stockholder. (Delaware General Corporation Law, Section 212(c).) The electronic voting procedures provided for the annual meeting are designed to authenticate each stockholder by use of a control number to allow stockholders to vote their shares and confirm that their instructions have been properly recorded.

 

If you submit a proxy and do not specify how you want your shares to be voted, your shares will be voted by the named proxy holders (i) “For” the election of all of the director nominees and (ii) “For” the ratification of the selection of Ernst & Young LLP as our independent auditors for the year ending June 30, 2011.

 

In their discretion, the named proxy holders are authorized to vote on any other matters that may properly come before the annual meeting and at any postponements or adjournments thereof. The Board of Directors knows of no other items of business that will be presented for consideration at the annual meeting other than those described in this Proxy Statement. In addition, no stockholder proposal or nomination was received by the applicable deadlines, so no such matters may be brought to a vote at the annual meeting.

 

If you vote by proxy, you may revoke that proxy at any time before it is voted at the annual meeting. Stockholders of record may revoke a proxy by sending to our Secretary, at 2222 Wellington Court, Lisle, Illinois 60532, a written notice of revocation or a duly executed proxy bearing a later date or by attending the annual meeting in person and voting in person. If your shares are held in the name of a bank, broker or other holder of record, you may change your vote by submitting new voting instructions to your bank, broker or other holder of record.

 

You are entitled to attend the annual meeting only if you were a Molex stockholder as of the close of business on September 1, 2010 or hold a valid proxy for the annual meeting. You should be prepared to present photo identification for admittance. In addition, if you are a stockholder of record, your ownership as of the record date will be verified prior to admittance into the meeting. If you are not a stockholder of record but hold shares through a broker, trustee, or nominee, you must provide proof of beneficial ownership as of the record date, such as an account statement or similar evidence of ownership. If you do not provide photo identification and comply with the other procedures outlined above, you will not be admitted. Cameras, recording equipment, electronic devices, large bags, briefcases or packages will not be permitted in the annual meeting. For directions to the annual meeting, please call 630.527.4447.

 

We have three classes of common stock: Common Stock, par value $.05 per share (“Common Stock”), Class A Common Stock, par value $.05 per share (“Class A Common Stock”), and Class B Common Stock, par value $.05 per share (“Class B Common Stock”).

 

 

The holders of Common Stock and Class B Common Stock are entitled to one vote per share upon each matter submitted to the vote of the stockholders and, subject to the conditions summarized below, vote separately as a class as to all matters except the election of directors. With respect to the election of directors, the holders of Common Stock and Class B Common Stock vote together as a class. As of the record date, Frederick A. Krehbiel, John H. Krehbiel, Jr. and Fred L. Krehbiel control the vote of approximately 96% of Class B Common Stock. As a result, regardless of the vote of any other Molex stockholder, they generally have control over the vote relating to all matters other than the election of directors, including Item 2, the ratification of the selection of Molex’s independent auditors.

 

The right of Class B Common Stock holders to vote separately as a class is subject to applicable law and exists for so long as at least 50% of the authorized shares of the Class B Common Stock are outstanding. As of September 1, 2010, more than 50% of the authorized shares of Class B Common Stock were outstanding.

 

 

The holders of Class A Common Stock have the same liquidation rights and the same rights and preferences regarding dividends as the holders of Common Stock or Class B Common Stock. However, the holders of Class A Common Stock have no voting rights except as otherwise required by law or under certain circumstances. For example, under Delaware law, any amendments to our Certificate of Incorporation changing the number of authorized shares of any class, changing the par value of the shares of any class, or altering or changing the powers, preferences, or special rights of the shares of any class so as to adversely affect them, including Class A Common Stock, would require the separate approval of the class so affected, as well as the approval of all classes entitled to vote thereon, voting together.

 

Class A Common Stock would automatically convert into Common Stock on a share-for-share basis any time upon the good faith determination by the Board of Directors that either of the following events has occurred: (i) the aggregate number of outstanding shares of Common Stock and Class B Common Stock together is less than 10% of the aggregate number of outstanding shares of Common Stock, Class B Common Stock and Class A Common Stock together; or (ii) any person or group, other than one or more members of the Krehbiel family, as defined in our Certificate of Incorporation, becomes or is the beneficial owner of a majority of the outstanding shares of Common Stock.

 

 

As of the close of business on September 1, 2010 there were outstanding:

 

95,560,076 shares of Common Stock

 

78,813,186 shares of Class A Common Stock

 

94,255 shares of Class B Common Stock

 

 

A majority of the outstanding shares of each of Common Stock and Class B Common Stock entitled to vote will constitute a quorum at the meeting.

 

All votes will be tabulated by the inspector of election appointed for the annual meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes. Shares held by persons attending the annual meeting but not voting, shares represented by proxies that reflect abstentions as to a particular proposal and broker non-votes will be counted as present for purposes of determining a quorum.

 

Our directors are elected by a plurality of the votes cast by the holders of Common Stock and Class B Common Stock voting together as a class. This means the director nominees who receive the largest number of properly cast “for” votes will be elected as directors. Abstentions and withheld votes will have no effect on the result of the votes on the election of directors.

 

All other proposals must be approved separately by a majority of the shares of Common Stock voting as a class and the majority of the shares of Class B Common Stock voting as a class. Abstentions will have the same effect as votes against the proposal.

 

If you are a stockholder of record and do not submit your vote by proxy or vote in person at the annual meeting, your shares will not be voted. However, if you hold shares beneficially in street name, the result may be different. If you do not return the voting instruction form, your broker, trustee or nominee may vote your shares in certain circumstances and on certain proposals. Brokers cannot vote “uninstructed” shares in the election of directors. Thus, if you hold your shares in street name and you do not instruct your record holder how to vote in the election of directors (Item 1), then no votes will be cast on your behalf. Discretionary voting by brokers is permitted in the ratification of the selection of the independent auditor (Item 2). When a broker votes a client’s shares on some but not all of the proposals at a meeting, the missing votes are referred to as “broker non-votes.” Those shares will be included in determining the presence of a quorum at the meeting, but are not considered “present” for purposes of voting on non-discretionary matters.

 

All expenses for soliciting proxies will be paid by Molex, which has retained Georgeson Inc. (“Georgeson”), 199 Water Street, 26th Floor, New York, New York 10038, to aid in the solicitation of proxies, for fees of approximately $8,500, plus additional expenses of approximately $1,000. Proxies may be solicited by personal interview, mail and telephone. Georgeson has contacted brokerage houses, other custodians and nominees to ask whether other persons are the beneficial owners of the shares they hold in street name and, if that is the case, will supply additional copies of the proxy materials for distribution to such beneficial owners. Molex will reimburse such parties for their reasonable expenses for sending proxy materials to the beneficial owners of the shares. In addition, solicitation of proxies may be supplemented by telephone, facsimile, electronic mail or personal solicitation by our directors, officers or employees. No additional compensation will be paid to directors, officers or employees for such services.

 

We will announce preliminary voting results at the annual meeting and report final voting results within four business days of the annual meeting on Form 8-K which will be available at www.sec.gov and www.molex.com.

 

A list of stockholders entitled to vote at the annual meeting will be available for examination by any stockholder for any purpose relevant to the annual meeting during ordinary business hours at our offices at 2222 Wellington Court, Lisle, Illinois 60532, for ten days prior to the annual meeting, and also at the annual meeting.

 

Our Board of Directors is divided into three classes, each class consisting, as nearly as possible, of one-third of the total number of directors, with members of each class serving for a three-year term. Vacancies on the Board may be filled only by persons elected by the Board to fill a vacancy (including a vacancy created by an increase in the size of the Board). A director elected by the Board to fill a vacancy (including a vacancy created by an increase in the size of the Board) will serve for the remainder of the full term of the class of directors in which the vacancy occurred and until such director’s successor is elected and qualified, or until such director’s earlier death, resignation or removal.

 

Each share of Common Stock and Class B Common Stock is entitled to one vote for each of the four director nominees. It is the intention of the named proxy holders to vote the proxies received by them for the election of the four nominees named below unless authorization to do so is withheld. If any nominee should become unavailable for election prior to the annual meeting, an event that currently is not anticipated by the Board of Directors, the proxies will be voted for the election of a substitute nominee proposed by the Board unless the Board chooses to reduce the number of directors serving on the Board. Each person nominated for election has agreed to serve if elected, and the Board has no reason to believe that any nominee will be unable to serve.

 

The Corporate Governance and Nominating Committee of the Board of Directors is responsible for making recommendations to the Board concerning nominees for election as directors and nominees for Board vacancies. The characteristics sought in director candidates are: well regarded in the community with long-term, good reputation for highest ethical and moral standards; good common sense and judgment; an independent, objective, candid, yet constructive approach; the ability to contribute from a diversity of perspectives including geographical, cultural and professional; a strategic perspective, awareness of the dynamics of change and the ability to anticipate and capitalize on business opportunities; a history of significant business or professional responsibilities leading to a positive record of accomplishment in present and prior positions; business and/or professional knowledge and experience applicable to the Company’s business; and the time, energy, interest, and willingness to assume the full responsibilities of being a member of the Board.

 

In addition, the Committee considers whether the candidate is committed to act in the best interests of all shareholders, satisfies the independence standards, contributes to the overall functioning of the Board and promotes diversity among the directors. The Committee discusses diversity considerations in connection with each candidate, and in connection with the composition of the Board as a whole. The Committee believes that, as a group, the nominees below bring a diverse range of backgrounds, experiences and perspectives to the Board’s deliberations.

 

Based upon the recommendation of the Corporate Governance and Nominating Committee, Michael J. Birck, Anirudh Dhebar, Frederick A. Krehbiel and Martin P. Slark are all nominees for reelection (or election) to the Board. If elected, each nominee would serve until the 2013 annual meeting of stockholders.

 

Set forth below is information with respect to the nominees, including their recent employment or principal occupation, a summary of their specific experience, qualifications, attributes or skills that led to the conclusion that they are qualified to serve as a director, the names of other public companies for which they currently serve as a director or have served as a director within the past five years, their period of service as a director and their age.

 

Frederick A. Krehbiel and John H. Krehbiel, Jr., are brothers and Fred L. Krehbiel is the son of John H. Krehbiel, Jr., (collectively, the “Krehbiel Family”). The Krehbiel Family may be considered “control persons” of Molex. Other than the Krehbiel Family, no director or executive officer has any family relationship with any other director or executive officer.

Class II Nominees Subject to Election This Year

 

MICHAEL J. BIRCK

 

Michael J. Birck, age 72, has served as a director of Molex since 1995. He is the co-founder of Tellabs, Inc., a telecommunications equipment company. He has been Chairman of Tellabs since 2000. He was the Chief Executive Officer of Tellabs from 2002 to 2004, and Chief Executive Officer and President from 1975 to 2000. Mr. Birck’s prior public company director experience includes Illinois Tool Works Inc. (1996-2008).

 

The Board believes Mr. Birck, as the co-founder, Chairman and former CEO of Tellabs, brings to the Board significant senior leadership, industry, technical, sales and marketing and global experience. He is a recognized industry expert with more than 25 years of experience and has received a number of awards for innovation and entrepreneurship. Mr. Birck also brings to the Board other public company directorship experience.

 

Mr. Birck is a member of the Corporate Governance and Nominating Committee, Technology Committee and Executive Committee.

 

ANIRUDH DHEBAR

 

Anirudh Dhebar, age 59, has served as a director of Molex since August 2009. Dr. Dhebar has been a professor of marketing at Babson College since 1997, and prior to joining the faculty at Babson College, he was on the faculty at the Harvard Business School (1983-1995) and the Sloan School of Management at the Massachusetts Institute of Technology (1995-1997).

 

The Board believes that Dr. Dhebar’s experience as a scholar, educator and consultant focusing on the interplay of technology, product policy, pricing and marketing strategy in the industries and markets in which Molex competes provides valuable technical experience to the Board in the areas of marketing, research and development.

 

Dr. Dhebar is a member of the Technology Committee.

 

FREDERICK A. KREHBIEL

 

Frederick A. Krehbiel, age 69, has served as a director of Molex since 1972. Mr. Krehbiel has been Co-Chairman of the Board since 1999. From 1988 to 1999 he served as Vice Chairman and Chief Executive Officer and as Chairman from 1993 to 1999. From 1999 to 2001 he served as Co-Chief Executive Officer and as Chief Executive Officer from 2004 to 2005. Mr. Krehbiel’s prior public company director experience includes W. W. Grainger, Inc. (2001-2005), DeVry Inc. (1996-2008), and Tellabs, Inc. (1984-2009).

 

The Board believes that Mr. Krehbiel’s 45 years of experience with Molex, including as Co-Chairman and former CEO, brings a deep knowledge of Molex’s business to Board deliberations. Mr. Krehbiel was instrumental in the growth of Molex’s international operations, and his life-long affiliation with the Company provides the Board with a unique historical perspective and a focus on the long-term interests of the Company and its shareholders.

 

Mr. Krehbiel is the Chairman of the Executive Committee.

 

MARTIN P. SLARK

 

Martin P. Slark, age 55, has served as a director of Molex since 2000. Mr. Slark has been Vice Chairman and Chief Executive Officer since 2005. From 2001 to 2005, he served as President and Chief Operating Officer. From 1999 to 2001, he served as Executive Vice President. Mr. Slark is a director of Hub Group, Inc. and Liberty Mutual.

 

The Board believes that Mr. Slark provides the strategic and management leadership necessary to guide Molex through its global restructuring program and volatile global economic conditions.

Mr. Slark possesses over 30 years of experience at Molex in a broad variety of roles and geographies giving him in-depth knowledge of Molex’s divisions, employees, customers and markets. Mr. Slark also brings to the Board other public company directorship experience.

 

Mr. Slark is a member of the Executive Committee.

 

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH NAMED NOMINEE

 

Class III Directors Continuing in Office Until the 2011 Annual Meeting of Stockholders

 

EDGAR D. JANNOTTA

 

Edgar D. Jannotta, age 79, has served as a director of Molex since 1986. Mr. Jannotta has been Chairman of William Blair & Company LLC, an international investment banking firm, since 2001. He has served in numerous capacities at William Blair since 1965, including Senior Director, Senior Partner and Managing Partner. Mr. Jannotta is a director of Aon Corporation and Laboratorios Grifols, S.A. Mr. Jannotta’s prior public company director experience includes Exelon Corporation (2000-2008) and Bandag, Incorporated (1973-2008).

 

The Board believes that Mr. Jannotta’s nearly 25 years of service as a director and 50 years as a partner and Chairman of an international investment banking firm provides the Board with global financial, marketing, management and corporate governance experience and insight into global economic and financial trends and strategic financial issues. Mr. Jannotta also brings to the Board other public company directorship experience.

 

Mr. Jannotta is the Chairman of the Corporate Governance and Nominating Committee and is a member of the Executive Committee.

 

JOHN H. KREHBIEL, JR.

 

John H. Krehbiel, Jr., age 73, has served as a director of Molex since 1966. Mr. Krehbiel has been Co-Chairman of the Board since 1999. From 1999 to 2001, he served as Co-Chief Executive Officer. From 1996 to 1999, he served as Chief Operating Officer, and from 1975 to 1999, he served as President.

 

The Board believes that Mr. Krehbiel’s 50 years of experience with Molex, including as Co-Chairman and former Co-CEO, provides the Board with a deep understanding of the Company. Mr. Krehbiel was instrumental in the growth of Molex’s domestic operations and that experience assists the Board in overseeing Molex’s long-term strategy and his life-long affiliation with the Company adds significant value to the Company’s relationship with its stakeholders.

 

Mr. Krehbiel is a member of the Executive Committee.

 

DONALD G. LUBIN

 

Donald G. Lubin, age 76, has served as a director of Molex since 1994. Mr. Lubin is a partner of the law firm Sonnenschein Nath & Rosenthal LLP. He has been a partner since 1964 and was Chairman from 1990 to 1996. Mr. Lubin is a director of Shaklee Global Group, Inc.

 

The Board believes that Mr. Lubin’s extensive legal experience in counseling Boards of Directors and senior management of publicly- and privately-owned companies regarding corporate restructurings, takeover defense, corporate governance and mergers and acquisitions provides the Board with unique insight and perspective in matters relating to law, governance and compliance.

 

ROBERT J. POTTER

 

Robert J. Potter, age 77, has served as a director of Molex since 1981. Dr. Potter has been President and Chief Executive Officer of R.J. Potter Company, a business consulting firm, since 1990.

From 1987 to 1990, Dr. Potter was President and Chief Executive Officer of Datapoint Corporation, a leader in network-based data processing. Dr. Potter is a director of Zebra Technologies Corporation. Dr. Potter’s prior public company director experience includes Cree, Inc. (2001-2007).

 

The Board believes Dr. Potter’s nearly 30 years of service as a director of Molex and experience as an officer and consultant to industrial and service businesses along with his Ph.D. in optics contributes a scientific knowledge with practical business sense to the Board in the areas of technology strategies, investments in new products and ventures and emerging technologies. Dr. Potter also brings to the Board other public company directorship experience.

 

Dr. Potter is the Chairman of the Technology Committee and is a member of the Audit Committee.

 

Class I Directors Continuing in Office Until the 2012 Annual Meeting of Stockholders

 

MICHELLE L. COLLINS

 

Michelle L. Collins, age 50, has served as a director of Molex since 2003. Ms. Collins has been President of Cambium LLC, a business and financial advisory firm, and Advisory Board Member of Svoboda Capital Partners LLC since 2007. Ms. Collins was a co-founder of Svoboda Collins LLC, a private equity firm, where she served as Managing Director from 1998 to 2007. From 1992 to 1997, Ms. Collins was a principal at William Blair & Company, LLC. Ms. Collins is a director of Columbia Acorn Fund, Wanger Advisors Trusts, Bucyrus International, Inc. and Health Care Services Corporation. Ms. Collins’ prior public company director experience includes CDW Corporation (1996-2007).

 

The Board believes that Ms. Collins, co-founder and former managing director of a private equity firm, brings broad business, management and financial experience, including financial statement evaluation and analysis, oversight and reporting experience. Ms. Collins also has extensive governance experience from her service as a director of other public and private companies, mutual funds, civic and not-for-profit organizations.

 

Ms. Collins is a member of the Audit Committee and the Corporate Governance and Nominating Committee.

 

FRED L. KREHBIEL

 

Fred L. Krehbiel, age 45, has served as a director of Molex since 1993. Since 1988, he has served in various engineering, marketing and managerial positions with Molex. Mr. Krehbiel is Senior Vice President, Technology Innovation; from July 2007 through August 2009 he was Vice President, Product Development and Commercialization for Molex’s Global Commercial Products Division; from 2003 to 2007, he was President, Connector Products Division (Americas); and from 2002 to 2003, he served as President, Automotive Division (Americas).

 

The Board believes that Mr. Krehbiel’s 20 years of experience with Molex in a variety of roles including current service as Senior Vice President, Technology Innovation, provides the Board with an extensive understanding of Molex’s products, customers and markets. Mr. Krehbiel also brings an understanding of the industry’s trends and opportunities and Molex’s technology competitiveness and strategy.

 

Mr. Krehbiel is a member of the Technology Committee.

 

DAVID L. LANDSITTEL

 

David L. Landsittel, age 70, has served as a director of Molex since 2005. Mr. Landsittel is Chairman of COSO, a private sector organization that provides guidance to business enterprises and others on internal controls, enterprise risk management and fraud deterrence. He previously served as Chairman of the Auditing Standards Board of the American Institute of Certified Public Accountants

(“AICPA”). From 1963 to 1997, Mr. Landsittel served as an auditor in various positions with Arthur Andersen LLP. Mr. Landsittel is a Trustee of Burnham Investors Trust.

 

The Board believes Mr. Landsittel’s experience in accounting, auditing and financial reporting lends financial expertise to oversee Molex’s financial statements, internal controls and risk management. Mr. Landsittel’s involvement in COSO and AICPA brings insight and perspective to our financial reporting and audit processes. Mr. Landsittel also brings to the Board investment management company experience.

 

Mr. Landsittel is the Chairman of the Audit Committee and is a member of the Compensation Committee.

 

JOE W. LAYMON

 

Joe W. Laymon, age 57, has served as a director of Molex since 2002. He resigned from the Board in 2006 and was re-elected in January 2008. Mr. Laymon has been Corporate Vice President of Human Resources at Chevron Corporation since March 2008. Prior to that, Mr. Laymon was Group Vice President of Corporate Human Resources and Labor Affairs of Ford Motor Company from 2004 to 2008. From 2000 to 2004 he was Executive Director of Human Resources of Ford. Mr. Laymon’s prior public company director experience includes DTE Energy Co. (2005-2006).

 

The Board believes that Mr. Laymon’s executive and management experience at two Fortune 100 companies brings knowledge in global human resources and labor affairs, assists the Board in overseeing the development of a pay-for-performance culture at Molex and provides perspective into executive compensation and benefits.

 

Mr. Laymon is the Chairman of the Compensation Committee.

 

JAMES S. METCALF

 

James S. Metcalf, age 52, has served as a director of Molex since September 2007. Since 2006, he has been the President and Chief Operating Officer of USG Corporation, a leading manufacturer and distributor of building materials and products used in certain industrial processes. Mr. Metcalf joined USG in 1980 and has held numerous executive positions including Executive Vice President and President, Building Systems from 2002 to 2006; President and Chief Executive Officer, L&W Supply from 2000 to 2002; and Executive Vice President and Chief Operating Officer, L&W Supply from 1999 to 2000. Mr. Metcalf is a director of USG.

 

The Board believes that Mr. Metcalf’s executive and management experience with respect to business conditions, manufacturing operations, corporate strategy, acquisitions and divestitures and quality management provides the Board with insight and expertise to oversee corporate strategy. Mr. Metcalf also brings to the Board other public company directorship experience.

 

Mr. Metcalf is a member of the Compensation Committee.

 

The Board of Directors has assessed the independence of the directors in light of the published listing standards of NASDAQ and the more stringent Independence Standards established by the Board, which are described below and can also be found on our website, www.molex.com/financial/corporate_governance.html on the Investors page under Corporate Governance.

 

The NASDAQ rules have objective tests and a subjective test for determining who is an “independent director.” Under the objective tests, a director cannot be considered independent if the director (i) is an employee of the Company or (ii) is a partner in, or an executive officer of, an entity to

which the Company made, or from which the Company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year.

 

The subjective test states that an independent director must be a person who lacks a relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

 

In addition to the Board-level standards for director independence, each director who serves on the Audit Committee must satisfy standards established by the SEC providing that to qualify as “independent” for the purposes of membership on that committee, members of audit committees may not accept directly or indirectly any consulting, advisory, or other compensatory fee from the company other than their director compensation and must not be an affiliated person.

 

Under the additional Independence Standards established by the Board, a director cannot be affiliated with a business organization that either paid or received payments to or from Molex during any one of the past three fiscal years that exceed the greater of 2% of the recipient’s gross revenues for that year or $200,000.

 

In assessing independence, the Board reviewed transactions and relationships of the directors based on information provided by each director, our records and publicly available information. Based on the review and recommendation by the Corporate Governance and Nominating Committee, the Board of Directors determined that under these standards, the following directors are independent including that each member is free of any relationship that would interfere with his or her individual exercise of independent judgment: Michael J. Birck, Michelle L. Collins, Anirudh Dhebar, Edgar D. Jannotta, David L. Landsittel, Joe W. Laymon, James S. Metcalf and Robert J. Potter. Donald G. Lubin has determined that he is not independent in light of his longstanding role as a legal advisor to Molex and the Krehbiel Family, and the Board agrees with Mr. Lubin’s determination.

 

From time to time, we make charitable contributions to organizations with which a non-employee director has an affiliation. The Corporate Governance and Nominating Committee reviewed all such charitable contributions and the Board determined that they did not affect the independent status of any non-employee director.

 

As stated in Molex’s Corporate Governance Principles, the Board generally believes that the positions of CEO and Chairman should be held by separate persons and reviews this arrangement when a new CEO or Chairman is being considered. Currently, the positions of CEO and Chairman are held by separate persons, Martin P. Slark is our CEO and Frederick A. Krehbiel and John H. Krehbiel, Jr. serve as Co-Chairmen. We believe this structure is optimal for Molex because it allows Mr. Slark to focus on the day-to-day operation of the business. At the same time, the Co-Chairmen focus on leadership of the Board of Directors, including preparing meeting agendas, calling and presiding over Board meetings and providing Molex with direction on company-wide issues. The Co-Chairmen also work with Mr. Slark to ensure management is adequately addressing the matters identified by the Board. This structure optimizes the roles of CEO and Chairman and provides Molex with sound corporate governance practices in the management of its business.

 

The Board of Directors held seven meetings during FY10, and all of the directors attended at least 75% of the total number of meetings of the Board and committees on which they served. The Board expects all directors to attend the annual meeting of stockholders, barring unforeseen circumstances. All members of the Board were present at the 2009 annual meeting of stockholders except Dr. Dhebar who had just been appointed to the Board. The non-employee directors meet in executive session without management present following each regularly scheduled Board meeting.

The Chairman of the Corporate Governance and Nominating Committee presides at these executive sessions.

 

The Board has a standing Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee, Technology Committee, and Executive Committee. The charters of these committees are posted on our website, www.molex.com/financial/corporate_governance.html. In addition, the Board has established a Stock Option Plan Committee comprised of Frederick A. Krehbiel, John H. Krehbiel, Jr., and Martin P. Slark.

 

The Audit Committee consists of Mr. Landsittel (Chair), Ms. Collins and Dr. Potter. The Board has determined that each of the members of the Audit Committee is independent under the listing standards of NASDAQ, and that each member of the committee is an “audit committee financial expert” as defined by SEC regulations. All members of the Audit Committee meet the NASDAQ composition requirements, including the requirements regarding financial literacy and financial sophistication. The functions of the Audit Committee are described under “Audit Committee Report.” During FY10, the Audit Committee met eleven times.

 

The Compensation Committee consists of Mr. Laymon (Chair) and Messrs. Landsittel and Metcalf. The Board has determined that each of the members of the Compensation Committee is independent under the listing standards of NASDAQ. The Compensation Committee is responsible for establishing executive compensation policies and overseeing executive compensation practices. The roles and responsibilities of the Compensation Committee, management and the compensation consultants are described in greater detail under “Compensation Discussion and Analysis.” The Compensation Committee is authorized to delegate responsibilities to subcommittees when appropriate but has not done so. During FY10, the Compensation Committee met three times.

 

The Corporate Governance and Nominating Committee consists of Mr. Jannotta (Chair), Mr. Birck and Ms. Collins. The Board has determined that each of the members of the Corporate Governance Committee is independent under the listing standards of NASDAQ. The Corporate Governance Committee oversees corporate governance and Board membership matters and monitors the independence of the Board. The Corporate Governance Committee also determines Board membership qualifications, selects, evaluates and recommends to the Board nominees for election to the Board and reviews the performance of the Board. During FY10, the Corporate Governance Committee met twice.

 

The Technology Committee consists of Dr. Potter (Chair), Mr. Birck, Dr. Dhebar and Fred L. Krehbiel. The Technology Committee reviews and monitors the execution of the Company’s technology strategies and its technology competitiveness. In addition, the Technology Committee reviews and discusses significant emerging technology issues, trends and opportunities that may affect the Company, its business and strategy. During FY10, the Technology Committee met four times.

 

The Executive Committee consists of Frederick A. Krehbiel (Co-Chair), John H. Krehbiel, Jr. (Co-Chair), and Messrs. Birck, Jannotta and Slark. The Executive Committee has all the powers and authority of the Board in the management of the business and affairs, except with respect to certain enumerated matters including Board composition and compensation, changes to our charter documents, or any other matter expressly prohibited by law or our charter documents. Pursuant to its charter, the Executive Committee has appointed a subcommittee consisting of Frederick A. Krehbiel, John H. Krehbiel, Jr., and Martin P. Slark to act in certain prescribed and specific areas. During FY10 the Executive Committee did not meet, but its subcommittee acted by unanimous written consent.

 

 

The Board of Directors has adopted policies and procedures to ensure effective governance of the Company. Our corporate governance materials, including our Corporate Governance Principles (which are set forth in Appendix I to this proxy statement), the charters of each of the standing committees of the Board, our Director Independence Standards, our codes of conduct and information

regarding securities transactions by our directors and officers, may be viewed on our website at www.molex.com/financial/corporate_governance.html. We will also provide any of the foregoing information in print without charge upon written request to the Office of the Secretary, Molex Incorporated, 2222 Wellington Court, Lisle, IL 60532.

 

 

The Corporate Governance and Nominating Committee maintains, with the approval of the Board, certain criteria and procedures relating to the identification, evaluation and selection of candidates to serve on the Board. The minimum criteria sought by the Board for candidates as directors are described in the Board’s “Criteria for Membership on the Board of Directors.” In addition, the Corporate Governance and Nominating Committee has established “Procedures for Identifying and Evaluating Candidates for Director.” These documents are included in this Proxy Statement as Appendix II and Appendix III, respectively, and posted on our website, www.molex.com/financial/corporate_governance.html, on the Investors page under Corporate Governance. The Corporate Governance and Nominating Committee will consider candidates recommended by stockholders provided that appropriate notice is given.

 

 

In recognition of the increasing demands of board service, the Board has limited the number of public company boards on which our directors and executive officers may serve as follows: (i) non-employee directors are limited to service on three other public company boards; (ii) the Chief Executive Officer and Chief Operating Officer are limited to service on two other public company boards; and (iii) all other executive officers (other than the Co-Chairmen) are limited to service on one other public company board.

 

 

When a director’s principal occupation or business association changes substantially during his or her tenure as a director, that director is required to tender his or her resignation for consideration by the Board. The Board will determine whether any action should be taken with respect to the resignation.

 

 

Our annual meetings provide an opportunity each year for stockholders to ask questions of, or otherwise communicate directly with, members of the Board on appropriate matters. In addition, stockholders may communicate in writing with any particular director, any committee of the Board, or the directors as a group by following the “Procedures for Stockholder Communications with Directors” included in this Proxy Statement as Appendix IV and posted on our website www.molex.com/financial/corporate_governance.html, on the Investors page under Corporate Governance.

 

Molex’s Corporate Governance Principles provide that the Board is responsible for the consideration and oversight of strategic issues and risks facing the Company. Together with the Board’s standing committees, the Board is responsible for ensuring that material risks are identified and managed appropriately. The Board carries out this responsibility by considering specific risk topics, including risks associated with our strategic plan, capital structure and corporate development activities. At each Board meeting, the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer present detailed reports that include strategic, operational and financial risks. In addition, the executive vice presidents of our global divisions and senior vice presidents of our corporate functions periodically present reports to the Board that include the risks relative to their respective areas. Furthermore, the Board is routinely informed by senior management of developments that could affect our risk profile or other aspects of our business.

The Board also executes its oversight responsibility through its standing committees: Audit, Compensation, Corporate Governance and Nominating and Technology. Each committee chairperson reports on the committee’s activities at regularly scheduled board meetings.

 

 

We believe that our compensation programs are designed with appropriate risk mitigators, including:

 

 

We have begun to assess the potential risks associated with our compensation policies and practices and have reviewed the compensation programs with the Compensation Committee. At this time, we do not believe that our compensation policies and practices are reasonably likely to have a material adverse effect on the Company.

 

We use a combination of cash and stock-based incentives to attract and retain qualified candidates to serve on the Board. In setting director compensation, we consider the significant amount of time that directors expend to fulfill their duties, the skill level required of the members of the Board and competitive practices among peer companies. Employee directors do not receive additional compensation for their service on the Board.

 

Director Fees

 

Each non-employee director receives (i) an annual retainer of $60,000; (ii) $3,000 for each board meeting attended; and (iii) $2,000 for each committee meeting attended. The non-employee director chairs of the committees receive higher meeting fees in view of their increased responsibilities: the chair of each of the Compensation, Corporate Governance and Nominating, and Technology Committees is paid $3,000 for each committee meeting attended, and the chair of the Audit Committee is paid $4,000 for each committee meeting attended. In addition, non-employee directors are reimbursed for all reasonable travel and out-of-pocket expenses associated with attending Board and committee meetings and continuing education seminars. In connection with our restructuring and other compensation program reductions, the directors reduced their annual retainer by 20% to $48,000, effective April 1, 2009. We reinstated the annual retainer effective October 1, 2009.

 

Stock Options

 

Each non-employee director receives an annual automatic non-discretionary stock option grant under the 2008 Molex Stock Incentive Plan. The options are granted on the date of the annual meeting of stockholders with an exercise price equal to the closing price of the Class A Common Stock on the grant date. Each option vests ratably over four years commencing on the first anniversary of the grant date and expires ten years from the grant date. Options granted prior to the 2009 annual meeting expire five years from the grant date. The number of shares underlying the option is 500 multiplied by the number of years of service or fraction thereof. The number of shares underlying a stock option grant cannot exceed 5,000 shares or $150,000 in value, whichever is less.

 

Stock Ownership Guidelines for Directors

 

The stock ownership guidelines for non-employee directors require them to own 500 shares (and/or stock units) of Molex stock within three years of commencement of service and 1,000 shares (and/or stock units) of Molex stock within six years of commencement of service. As of September 1, 2010, each non-employee director had met, or was on track to meet, the stock ownership guidelines.

 

Deferred Compensation Plan

 

Our non-employee directors are eligible to participate in the Molex 2005 Outside Directors’ Deferred Compensation Plan, under which they may elect on a yearly basis to defer all or a portion of the following year’s director’s fees. A non-employee director may elect to have the deferred fees (i) accrue interest during each calendar quarter at a rate equal to the average six-month Treasury Bill rate in effect at the beginning of each calendar quarter (an “interest account”), or (ii) converted to stock units at the closing price of Common Stock on the date the fees would otherwise be paid (a “stock account”). Upon a director’s termination of service as a director (or age 591/2 if later) or the director’s death or disability, the accumulated amount in the director’s interest account is distributed in cash, and the stock units in the director’s stock account are distributed in an equal number of shares of Common Stock. We impute dividends on each stock unit that is credited to a director’s stock account, and the imputed dividends are converted into additional stock units on the basis of the market value of the Common Stock on the dividend payment date. The number of outstanding stock units (including dividend units) is included in the “Security Ownership of Directors and Executive

Officers” table. All distributions will be made in a single lump sum payment, except that a participant may elect to receive amounts distributed in annual installments over a period of up to ten years on account of his or her separation from service after attaining age 591/2.

 

The following table sets forth summary information concerning compensation for each of our non-employee directors for FY10. Information about compensation for employee directors who are not Named Executive Officers can be found under “Transactions with Related Persons.”

 

 

 

The following table sets forth the number of shares of Molex stock beneficially owned by each director, the Named Executive Officers, and all directors and executive officers as a group as of September 1, 2010. The beneficial ownership of the non-voting Class A Common Stock is reported for informational purposes.

 

 

 

 

We have stock ownership guidelines for executive officers to ensure that our officers (including the NEOs) have a meaningful stake in the equity of the Company and to further align the interest of the officers with the long-term interest of our stockholders. The guidelines require the Chief Executive Officer to own Molex stock equal in value to at least three times his annual base salary, and each other executive officer to own Molex stock equal in value to at least two times his or her annual base salary. A new executive officer is given five years to meet these guidelines. We make exceptions to these guidelines for an executive officer expected to retire within three years or for economic hardship. As of September 1, 2010, each executive officer had met, or was on track to meet, the stock ownership guidelines. Restricted stock and stock acquired upon the exercise of options is subject to a six month holding period unless the person is retirement eligible.

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires Molex’s directors and certain of its officers to file reports of their ownership of Molex stock and of changes in such ownership with the SEC. SEC regulations also require us to identify in this Proxy Statement any person subject to this requirement who failed to file any such report on a timely basis. Based on our review of the reports we have received or assisted in preparing, we believe that all of our directors and officers complied with all of the reporting requirements applicable to them with respect to transactions during FY10.

 

The following table sets forth information regarding beneficial ownership of the stockholders of more than 5% (other than directors and executive officers) of the outstanding Molex stock as of September 1, 2010, unless otherwise indicated in the Schedule 13G. The beneficial ownership of the non-voting Class A Common Stock is reported for informational purposes.

 

 

 

The Audit Committee has selected Ernst & Young LLP (“E&Y”) as Molex’s independent auditors for the fiscal year ending June 30, 2011, and has further directed that the Board submit the selection of independent auditors for ratification by the stockholders at the annual meeting. A representative of E&Y is expected to be present at the annual meeting, will have an opportunity to make a statement if he or she so desires, and will be available to respond to questions.

 

Stockholder ratification of the selection of E&Y as Molex’s independent auditors is not required by the Bylaws or otherwise, but the Board believes that as a matter of corporate practice the selection of E&Y should be submitted to Molex’s stockholders for ratification. If the stockholders do not ratify the selection, the Audit Committee will consider whether or not to retain E&Y. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent auditor at any time during the year if the Audit Committee determines that such a change would be in the best interests of Molex and its stockholders.

 

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ITEM 2

 

The Audit Committee assists the Board of Directors by providing oversight on the following matters relating to Molex’s financial reporting:

 

 

Molex’s management is responsible for preparing the financial statements, establishing and maintaining the system of internal controls, and assessing the effectiveness of Molex’s internal control over financial reporting. E&Y is responsible for auditing the annual financial statements and expressing opinions on the conformity of the financial statements with U.S. generally accepted accounting principles and on the effectiveness of Molex’s internal control over financial reporting based on its audit.

 

In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management and E&Y the audited financial statements for the fiscal year ended June 30, 2010 and the reasonableness of significant estimates and judgments made in preparing the financial statements, as well as the clarity of the disclosures in the financial statements. The Audit Committee also discussed, with management and separately with E&Y, in executive sessions, their evaluations of Molex’s internal control over financial reporting and the overall quality of Molex’s financial reporting.

 

The Audit Committee discussed with E&Y those matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. In addition, E&Y has

provided the Audit Committee with the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Audit Committee concerning independence, and the Audit Committee and E&Y have discussed the auditors’ independence from Molex and its management, including the matters in those written disclosures. The Audit Committee also considered the non-audit services provided by E&Y and the fees and costs billed and expected to be billed by E&Y for those services. All of the non-audit services provided by E&Y have been approved by the Audit Committee in accordance with its pre-approval policy. When approving the retention of E&Y for these non-audit services, the Audit Committee has considered whether the retention of E&Y for these non-audit services is compatible with maintaining auditor independence.

 

In reliance on the reviews and discussions with management and E&Y referred to above, the Audit Committee recommended to the Board of Directors, and the Board approved, the inclusion of the audited financial statements in Molex’s Annual Report on Form 10-K for the fiscal year ended June 30, 2010 for filing with the SEC. The Audit Committee also approved the selection of E&Y as Molex’s independent auditors for the fiscal year ending June 30, 2011. Each member of the Audit Committee is an “audit committee financial expert” as defined by the SEC and meets the NASDAQ requirements, including the requirements regarding financial literacy and financial sophistication.

 

The Audit Committee
David L. Landsittel, Chairman
Michelle L. Collins
Robert J. Potter

 

The following table presents fees for professional audit services rendered by Molex’s independent auditors, E&Y, for the audit of Molex’s annual financial statements for FY10 and FY09, and fees billed for other services rendered by the independent auditors during those periods.

 

 

 

Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation for and overseeing the work of the independent auditors. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditors.

 

Management submits to the Audit Committee a list of services and related fees expected to be rendered during that year within each of four categories of services: audit services, audit-related services, tax services and all other services. Prior to engagement, the Audit Committee pre-approves

services within each category and the fees for each category are budgeted. The Audit Committee requires the independent auditors and management to report actual fees versus the budget periodically throughout the year by category of service. Pursuant to the policy, all services provided by the independent auditors were pre-approved by the Audit Committee.

 

During the year, circumstances may arise when it may become necessary to engage the independent auditors for additional services not contemplated in the original pre-approval categories. In those instances, the Audit Committee requires specific pre-approval before engaging the independent auditors. The Audit Committee may delegate pre-approval authority to the Chairman of the Audit Committee. The Chairman reports any pre-approval decisions to the Audit Committee at its next scheduled meeting.

 

Introduction

 

In FY09, our company, and the connector industry, experienced a significant drop in demand for our products due to the global economic downturn. To mitigate the impact of this downturn in FY10, we took the following cost-saving measures:

 

 

These measures, along with a stabilizing global economy, enabled us to achieve better than expected revenue growth in FY10.

 

Compensation Philosophy and Objectives

 

We believe that the performance and contributions of our executive officers are critical to the overall success of Molex. To attract, retain and motivate our executives to accomplish our business strategies, we have implemented executive compensation programs providing executives with the opportunity to earn compensation comparable to that paid by companies with which we compete for top talent and that reward strong performance and creation of stockholder value.

 

The overall objectives of our executive compensation program are to attract world-class executive talent, retain key leaders, reward short-term and long-term performance, and align executives’ interests with the long-term interests of our stockholders. We focus on the following core principles in structuring an effective compensation program that meets our stated objectives:

 

 

 

Procedures Used to Establish Executive Compensation

 

Compensation Committee

 

The Compensation Committee (“Committee”) is responsible for establishing executive compensation policies and overseeing executive compensation practices. The Committee is composed entirely of outside, non-employee directors within the meanings of Section 162(m) of the Internal Revenue Code and SEC regulations, and each member is independent under the NASDAQ rules. The Committee has the authority to retain a compensation consultant to assist in the evaluation of executive officer compensation and benefits and approve the consultant’s fees and other retention terms. The Committee has engaged The Delves Group to provide advice regarding best practices in executive compensation and compensation trends, and to assist the Committee in its decision-making. The Delves Group’s sole engagement for Molex is as compensation consultant to the Committee. Each year the Committee reviews and considers competitive market data along with the individual responsibilities and performance of each executive and internal pay comparisons when setting annual pay opportunities. Annually, the Committee uses tally sheets for each executive officer to review all elements of total direct compensation (base salary, target cash incentives and long-term stock incentives), as well as outstanding equity awards and projected payments upon termination.

 

Management’s Role in Compensation

 

Recommendations on the CEO’s compensation are made by the Co-Chairmen of the Board and the Committee sets the CEO’s pay based on their assessment of the CEO’s individual performance, the financial and operating performance of Molex, the recommendations of the Co-Chairmen, competitive market data, and the advice of The Delves Group. The CEO presents his assessment of the performance of the other executive officers and makes general recommendations to the Committee concerning the compensation of such officers. The Senior Vice President, Global Human Resources presents specific recommendations to the Committee on the annual incentive plan structure, long-term incentive compensation strategy, the competitive position of compensation for each executive officer, including base salary adjustments, target cash incentives and equity grants. These recommendations are developed in consultation with the CEO and accompanied by competitive market data provided by Towers Watson. The Committee considers management’s recommendations based on each executive’s individual responsibility, performance, overall contribution, competitive market data and the advice of The Delves Group, and then determines the compensation arrangements for these individuals.

 

Executive Compensation Market Data

 

In determining the design and the level of each element of compensation, we undertake a thorough review of competitive market information. Management has retained the compensation consulting firm Towers Watson to provide competitive market information and to assist it in making recommendations to the Committee with respect to the composition of the peer group of companies. The Delves Group reviews the composition of the peer group with the Committee. Towers Watson also assists management in making recommendations to the Committee with respect to total compensation levels for our named executive officers and the mix and design of incentive compensation. The companies in the peer group are representative of the types of companies with which we compete for executive talent and are broadly comparable to us in terms of industry, global operations, revenue, size and market capitalization. The peer group is reviewed regularly and adjustments are made as necessary to ensure that the peer group continues to be relevant.

The peer group used for analysis of executive compensation at the beginning of FY10 in August 2009 was comprised of the following companies:

 

 

In January 2010, management asked Towers Watson to review the peer group. Towers Watson recommended updates to better align the group with best practices for the peer group revenue range. ITT Corporation and Genuine Parts were removed because their revenue fell outside the best practices range; Anixter International, Inc., Trimble Navigation Ltd. and Flir Systems Inc. were added from the performance peer group due to their size and market capitalization; and Corning Inc. was added from a broader search of Molex’s industry codes within the best practices revenue range. In April 2010, the Committee continued their review of the peer group and added Tyco Electronics, Inc, a direct competitor, and Celestica, Inc.

 

The peer group company compensation data that is presented to the Committee is supplemented with compensation data from broader, general industry surveys provided by Towers Watson. The following published compensation sources and industry scope cuts were utilized by Towers Watson: 2008/2009 Watson Wyatt Top Management Survey, 2008 Mercer Executive Compensation Survey and 2008 Radford Executive Compensation Survey. In connection with the equity grants awarded in August 2009, Towers Watson provided general industry trend analysis data from 48 Fortune 500 companies in a broad spectrum of industries, fixed-share methodology analysis, fixed-value methodology analysis, peer group assessment, as well as the following surveys: Watson Wyatt Long Term Incentive Survey, Towers Perrin Long Term Incentive Data and Mercer Long Term Incentive Multiples. The general industry data and survey information are intended to help the Committee gain an understanding of a broad industry perspective on executive pay norms and trends and avoid over reliance on a smaller sampling of companies.

 

The Committee uses the peer group data and broader, general industry surveys as a reference point or market check to assess the competitive positioning of the Company’s executive compensation. Other issues such as executive experience, performance and retention are also considered by the Committee. While we generally seek to provide total direct compensation at or above the median of our peer group, rigid targets are not established for total direct compensation or any element thereof, relative to the peer group.

 

For FY10, the total direct compensation for our named executive officers compared to our peer group was above the 75th percentile largely due to the long-term incentives granted in 2009.

 

Elements of Compensation

 

Our executive compensation program is composed primarily of three elements: base salary, cash incentives and long-term equity incentives. We also provide certain perquisites to our executive officers. Each of these elements plays an important role in balancing executive rewards over short-term and long-term periods, based on our program objectives.

 

Although we have no formal policy for a specific allocation between current and long-term compensation or between cash and non-cash compensation, the Committee has now established a pay mix for executive officers that balances performance-based pay with retention-based equity awards. Executive compensation is divided between current and long-term compensation, and cash and non-cash compensation, to generally reflect market practice and to provide executive officers with attractive levels of pay while encouraging officers to remain with us for the long term.

Base Salary

 

The base salary of an executive officer takes into account the executive’s performance, responsibilities, experience and internal pay equity. In past years we sought to provide base salaries between the median and 75th percentile of our peer group with the expectation that successful performance over time will position pay at or above the 75th percentile. In any given year, actual individual salaries may range above or below the 75th percentile based on a variety of factors, including position level, executive experience relative to industry peers, individual performance, future potential and leadership qualities and tenure. As noted above, salaries were reduced in FY09 and the first quarter of FY10 and after fully reinstating the salaries, no increases were given in FY10. The base salaries for the named executive officers generally were in the 75th percentile, except for Mr. Slark who was at the median.

 

Molex Annual Incentive Plan

 

In August 2009, the Committee approved a redesign of the cash incentive program under the Molex Annual Incentive Plan. For FY10, the Molex Incentive Plan (“MIP”) was designed to better support a pay-for-performance culture by incorporating divisional and business unit components into the plan, and developing an improved methodology to set performance goals. The MIP plan is designed to fund cash incentives every six months based on achievement of period-over-period growth in operating income at the corporate, division and business unit level (funding units). The performance periods are July 1 to December 31 and January 1 to June 30. The purpose of the MIP is to incentivize executives to meet the period-over-period growth goals as well as meet their individual objectives. An incentive will be paid upon the achievement of both the quantitative and individually designed goals. Quantitative performance measures make up 80% of the payment, and performance against individual goals make up the remaining 20% of the payment. Positive operating income at the corporate level must be met in order for any payout to be earned. In other words, no matter how well an executive performed against individual goals, if the quantitative performance goal is not met then no cash incentive will be paid out. In addition, under the MIP, 50% of any incentive earned by an executive officer in the first performance period (July 1- December 31) is withheld until completion of the full fiscal year. Should annual results meet required thresholds the remaining 50% would be paid to the executive officer after the close of the fiscal year.

 

The Committee approves the operating income threshold, target and maximum levels at the corporate and division funding unit level at the beginning of each performance period and the incentive pool is funded for the period based on reaching those operating income levels. Operating income is equal to gross profit less selling, general and administrative expense. Depending on Company and individual performance, actual bonuses can vary widely. The process for establishing the operating income levels begins with corporate finance developing the goals, followed by a divisional review that includes a determination of the business unit goals, and concludes with corporate finance reconciling the division and business unit goals with those of corporate.

 

The Committee also approves the individual performance goals of the executives at the beginning of each performance period. These individual performance goals may be based on a variety of factors, including internal budget goals, investor expectations, peer company results, prior year company performance, upcoming fiscal year business plans and strategic initiatives, and may exclude specified items that are not reflective of the performance of the ongoing business. Each named executive officer’s performance against his or her individual goals is assessed at the end of the performance period and the scores can range from 1.0 to 5.0.

The target and maximum award opportunities as a percent of base salary for our NEOs, which is based on published survey data, are as follows:

 

 

The incentive opportunity for the CEO is a higher percentage of salary than the other named executive officers due to the broader scope of his responsibilities, impact on corporate performance and published market and peer group data. Moreover, when the Company achieves maximum overall funding, executive officers may receive an award greater than the maximum opportunity if their performance evaluation generally exceeds expectations.

 

Due to the uncertain global economic conditions that existed at the beginning of FY10, the Committee and management decided to defer implementing the MIP until the second half of the fiscal year, and instead the Committee approved a discretionary incentive for the performance period ending December 31, 2009 of 10% of the variance of operating income to the budget and reserved the right to withhold the executives’ incentive pending full-year results. In January 2010, it was determined that operating income did exceed the budget by 10% and an incentive was paid to eligible employees. The executive officers, however, elected not to participate in the incentive payout based on the size of the available pool in order to provide meaningful cash incentives to employees. The Committee did review what each named executive officer would have earned had they participated in the payout.

 

In August 2009, the Committee selected operating income as the performance measure for the performance period ending June 30, 2010. At the same time, the Committee approved individual performance goals for the CEO, and the Committee and the CEO approved performance goals for the other named executive officers. The CEO’s individual performance goal areas for FY10 included revenue growth, cost structure improvement, operational performance improvement, driving a pay for performance culture and continued development of Molex’s corporate citizenship and responsibility program. The individual performance goal areas for the other named executive officers related to financial, operational and business achievements. In January 2010, the Compensation Committee approved the operating income target and maximum goals for the six-month performance period ending June 30, 2010.

 

Long-Term Incentives

 

Equity Awards

 

The Committee awards a combination of stock options and restricted stock to focus executive officers on long-term value creation through positive business and financial performance. Equity awards help to align the interests of our executive officers with those of our stockholders. Executive officers receive stock options that provide them with the right to buy a fixed number of shares of Class A Common Stock at the closing price of the stock on the grant date. Generally, options vest ratably over four years beginning on the first anniversary of the grant date and expire on the tenth anniversary. Restricted stock awards of Class A Common Stock are granted at no cost to the executive officer. Generally, restricted stock awards vest ratably over four years beginning on the first anniversary of the grant date. The vesting of stock options and restricted stock awards is accelerated upon the death, total disability or qualified retirement of an executive officer. While options only have value to the recipients if the price of the Class A Common Stock appreciates after the options are granted and carry more risk and upside potential, restricted stock provides greater certainty of executive stock ownership.

The Committee determines the aggregate and relative number of stock options and shares of restricted stock granted by an assessment of the overall value of the long-term incentive opportunity and its value relative to peer company comparisons. We believe that equity awards, more than any other element of compensation, provide our executive officers with incentives to improve the performance of Molex over the long term. This performance incentive, combined with the fact that equity awards allow us to retain valuable executive talent and align the interests of our executives with those of stockholders, is why the Committee has historically provided equity awards that are at or above the 75th percentile of our peer group.

 

Equity Grant Practices

 

Pursuant to equity grant procedures, as amended by the Committee and the Board in August 2009, the Committee approves proposed long-term incentive grants for named executive officers at their regularly scheduled July or August meeting with an effective date of October 1 (or the next trading day if the markets are closed). All long-term equity grants to non-executive employees are approved by a Stock Option Plan Committee comprised of Frederick A. Krehbiel, John H. Krehbiel, Jr., and Martin P. Slark, and routine annual grants for these employees also occur on October 1 (or the next trading day if markets are closed on October 1). The timing of the amended equity grant procedures is intended to align the grants with our performance management program which is also determined after the end of the fiscal year.

 

Previously, long-term incentive grants for executive officers occurred on August 15 and on February 1 for non-executive employees. The Committee and the Board approved an exception to those equity grant procedures in FY09 and granted equity to all employees, including executive officers other than the CEO, COO and CFO, in April 2009. This was done for two reasons: (1) our stockholders approved in October 2008 a new omnibus stock plan pursuant to which grants can be made to directors, executive officers and employees, and this plan replaced the separate plans we previously maintained and made it unnecessary for us to use different grant dates for executive officers and employees; and (2) in January 2009, management decided to consolidate five product divisions into three product divisions and these consolidations with the reductions in force that we implemented in response to the downturn in our business required us to defer our February 1 grant. In consultation with the CEO, the Committee deferred consideration of grants to the CEO, COO and CFO until its August 2009 meeting.

 

FY10 Results

 

In response to the business downturn caused by the global economic recession, we reduced salaries and benefits globally in February 2009. Our CEO, COO and Co-Chairmen each took a 20% pay reduction and all other executive officers took a 10% pay reduction. We fully reinstated salaries October 1, 2009, but due to the challenging global economic conditions, there were no increases in salary for FY10. See the “Summary Compensation Table.”

 

Under the cash incentive program, the final award includes a measure of both company and individual performance. In FY10, we reported revenue of $3 billion and for the second half of FY10 corporate operating income was $173.6 million, which exceeded the target ($125 million) and maximum ($173 million) operating income goals for that performance period. In August 2010, the Committee and Co-Chairman, Frederick A. Krehbiel, conducted an evaluation of the FY10 performance of the CEO, and the Committee and the CEO conducted an evaluation of the FY10 performance of the other named executive officers and the individual performance scores ranged from 3.2 to 3.8. As a result of exceeding the maximum operating income goal and the individual performance evaluations for the performance period ending June 30, 2010, our named executive officers earned a cash incentive. The CEO was at 195% of target and the other named executive officers ranged from 133% to 168% of target. As noted above, the named executive officers declined a discretionary bonus for the first half of FY10.

At the Committee’s August 2009 meeting, the Committee reviewed an analysis of long-term incentives prepared by Towers Watson and approved equity grants to the CEO, COO and CFO. In determining the value of the equity grants for FY10, the Committee considered the data provided by Towers Watson, recommendations of the Co-Chairman of the Board, advice from The Delves Group, and other factors such as salary reductions and no salary increases in FY10, the value of prior equity grants and total compensation opportunity. In addition, the Committee considered the retention of the CEO and the other named executive officers as a significant objective for the Company and in the best interests of shareholders and the further alignment of the named executive officers’ interests with those of stockholders through equity ownership. Based on all these factors, the Committee awarded equity grants significantly above the 75th percentile of peer group companies to provide meaningful incentives and satisfy the objectives of our program.

 

Our CEO’s compensation is reviewed in the context of the higher market compensation for CEOs generally. For FY10, the base salary, cash incentive and equity awards for the CEO were higher than those for the other named executive officers because the Committee believes that the CEO position merits a higher level of compensation relative to the other executive officers due to his critical role in the strategy and performance of the business and the need to retain a talented executive to fill this role.

 

Post-Employment Compensation and Benefits

 

In order to provide competitive total compensation, we offer qualified profit sharing and 401(k) defined contribution plans. U.S. executive officers participate in these plans on the same terms as other salaried employees. The ability of executive officers to participate fully in these plans is limited under IRS and ERISA requirements. As is commonly the case among our peer group, we offer to executive officers a nonqualified counterpart to the profit sharing plan that is not subject to these limitations. Additionally, we offer a nonqualified deferred compensation plan, supplemental life insurance, supplemental travel/accident insurance and the opportunity to purchase supplemental life insurance coverage.

 

We do not currently offer special employment agreements, severance agreements, or change-in-control agreements to any executive officer. Our only such arrangement, which applies to all employees with equity compensation awards, is accelerated vesting of equity. As the Committee annually reassesses the effectiveness of the executive compensation program, it also assesses the merits of offering these types of arrangements for executives. The Committee may decide to offer these types of benefits in the future.

 

We do not offer pension benefits to our executive officers. On a case-by-case basis, the Committee has approved individual retirement packages, in addition to the retirement benefits generally available under other employee benefit plans, to retiring executive officers based on years of service and contributions to Molex.

 

Defined Contribution Plans

 

The Molex Incorporated Profit Sharing and Retirement Plan (the “Profit Sharing Plan”) is a defined contribution plan under which we make discretionary annual contributions of a fixed percentage of eligible compensation to a participant’s account. We make contributions to the Profit Sharing Plan for executive officers on the same terms as applicable to all participating employees. During FY10, we did not make a contribution to the Profit Sharing Plan.

 

U.S. executive officers may also participate in the Molex Incorporated Employees 401(k) Plan, a defined contribution plan. Under this plan, each executive officer may contribute a maximum of 25% of eligible pay on a pre-tax basis up to the IRS limit. We match the contributions of executive officers on the same terms as are applicable to all participating employees – up to 1% of an employee’s contributions.

Mr. Hirokawa participates in the Japanese national retirement plan and the Molex-Japan Directors Retirement Trust, a defined contribution plan under which we make discretionary annual contributions to eligible executive directors of Molex Japan. See “Company Contributions.”

 

Supplemental Executive Retirement Plan

 

The Molex Supplemental Executive Retirement Plan (the “SERP”) is a nonqualified defined contribution plan available to all participants in the Profit Sharing Plan who are affected by the IRS contribution limits. Molex did not make any contributions to the SERP in FY10. Additional information about the Profit Sharing Plan and the SERP can be found under “Nonqualified Deferred Compensation.”

 

Executive Deferred Compensation Plan

 

The Molex Executive Deferred Compensation Plan permits participants to defer all or a portion of their base salary and bonus during the plan year. Additional information about this plan can be found under “Nonqualified Deferred Compensation.”

 

Executive Perquisites

 

We provide certain perquisites to our executive officers. We are selective in our use of perquisites, utilizing perquisites that are generally modest in value; these perquisites may include car allowances or leased cars, financial planning and counseling, executive physical medical examinations and other customary executive perquisites. The Committee has adopted a perquisite pre-approval policy under which certain perquisites and maximum amounts for such perquisites have been pre-approved by the Committee. The Committee has delegated authority to the CEO to approve such perquisites for other executive officers. The Committee must separately approve perquisites not included in the policy or amounts that exceed the specified amounts.

 

Recoupment and Forfeiture Policies

 

Under the Molex Annual Incentive Plan, the Board may require reimbursement of incentive awards paid to a named executive officer where (i) the payment was predicated in whole or in part upon the achievement of certain financial results that were subsequently the subject of a material restatement; (ii) in the Board’s view the named executive officer engaged in fraud or misconduct that caused the need for the restatement; and (iii) a lower incentive award would have been made to the named executive officer based upon the restated financial results. The Board may also seek reimbursement of incentive awards paid to any named executive officer in other circumstances involving fraud or misconduct if such fraud or misconduct caused substantial harm to Molex even in the absence of a restatement of Molex’s financial statements.

 

Under the 2008 Molex Stock Incentive Plan, awards will be forfeited if (i) the participant engages in competitive activities during employment or within one year after termination of employment; (ii) the participant solicits employees to work for another organization during employment or within two years after termination of employment; or (iii) the participant’s employment is terminated for cause, as defined for purposes of the equity plans. Participants must also reimburse the Company for amounts paid in settlement of awards earned or accrued within 24 months of a restatement of Molex’s financial statements in certain circumstances.

 

Limitations on Deductibility of Compensation

 

Section 162(m) of the Internal Revenue Code generally limits the tax deductibility of compensation paid by a public company to its CEO and certain other highly compensated executive officers who are in office at the end of the fiscal year to $1 million per officer in the year the compensation becomes taxable to the executive. There is an exception to the limit on deductibility for performance-based compensation that meets certain requirements. It is the Committee’s intention to provide annual incentive awards and stock options that are qualified and fully deductible by the Company under

Section 162(m). However, when warranted due to competitive or other factors, the Committee may decide in certain circumstances to provide incentive and other compensation that exceeds the $1 million limitation set forth in Section 162(m). The time-vested restricted stock units granted by the Committee in FY10 and prior years will not be treated as performance-based compensation under Section 162(m).

 

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee has recommended to the full Board of Directors that the Compensation Discussion and Analysis be included in the 2010 Proxy Statement for filing with the SEC.

 

Compensation Committee

Joe W. Laymon, Chairman

David L. Landsittel

James S. Metcalf

 

The following table sets forth information regarding the FY10 compensation for each FY10 Named Executive Officer (“NEO”). In accordance with SEC rules, FY08 compensation is not presented for Mr. Hirokawa because he was not a NEO in FY08.

 

 

 

All Other Compensation

 

The following table sets forth amounts for other compensation provided to the NEOs in FY10 included in the “All Other Compensation” column of the “Summary Compensation Table.”

 

 

 

Perquisites

 

The following table sets forth amounts for perquisites provided to the NEOs in FY10 included in the “Perquisites” column of the “All Other Compensation” table. The amounts included in the table reflect the actual cost to Molex for providing these perquisites.

 

 

 

Company Contributions

 

The following table sets forth amounts included in the “Company Contributions to Defined Contribution Plans” column of the “All Other Compensation” table for FY10 as follows: (i) Molex matching contributions to the Molex Incorporated 401(k) Savings Plan; (ii) Molex contributions to the Profit Sharing Plan; (iii) Molex contributions to the SERP; and (iv) Molex contributions to non-U.S. retirement plans. This table does not include contributions made by each of the NEOs to these plans.

 

 

 

The following table provides information on the estimated possible payouts for awards granted under the Molex Annual Incentive Plan for the second half of FY10, based on certain assumptions about the achievement of performance objectives for Molex and the individual NEOs at various levels. No incentive awards were granted to the NEOs under the MIP for the first half of FY10. Since Molex’s maximum operating income goals were exceeded in the second half of FY10, the NEOs received a payout, which is set forth in the “Summary Compensation Table” under “Non-Equity Incentive Plan Compensation.” The table also provides information on the grant date fair value of stock awards and stock options to acquire shares of Class A Common Stock granted in FY10 to each of the NEOs. Only Messrs. Slark, Johnson and McCarthy received equity grants in FY10. See “Compensation Discussion and Analysis.” There can be no assurance that the amounts in the “Grant Date Fair Value of Stock and Option Award” column will ever be realized.

 

 

 

 

Molex Annual Incentive Plan Awards.  The Molex Annual Incentive Plan awards are further described under “Compensation Discussion and Analysis.” These awards are granted under the Molex Incorporated Annual Incentive Plan (the “AIP”), which was approved by stockholders at the 2008 annual meeting. The purpose of the AIP is to enhance stockholder value and promote the attainment of our significant business objectives by basing a portion of an employee’s annual cash compensation on the achievement of specific performance goals. All of our executive officers and other key employees are eligible to participate in the AIP. The AIP is administered by the Compensation Committee with respect to executive officers and by the CEO with respect to other key employees. The CEO determines the other key employees who are eligible to participate in the AIP. The Compensation Committee determines which participants will be treated as “covered employees” for purposes of Section 162(m) of the Internal Revenue Code.

 

As it relates to awards for executive officers, each year the Compensation Committee (i) establishes one or more performance measures; (ii) sets the semi-annual performance goal with respect to such performance measure for the Company, divisions, business units or an individual; (iii) establishes the weighting to be given to the performance measures and performance goals; and (iv) designates whether an award will be a Section 162(m) Award. As it relates to awards for other key employees, the CEO makes the same determinations as described above, except he will not be designating Section 162(m) Awards.

 

The Compensation Committee and/or the CEO determine the amount available for payment of annual incentives in any year or any other measurement period. The aggregate maximum amount that may be paid to any one participant during any fiscal year with respect to all awards under the AIP is $10,000,000.

 

Restricted Stock and Stock Options.  The restricted stock and stock option programs are further described under “Compensation Discussion and Analysis.” The restricted stock and stock option awards are granted under the 2008 Molex Stock Incentive Plan (the “SIP”), which was approved by stockholders at the 2008 annual meeting. The purpose of the SIP is to optimize our profitability and growth through stock incentives that are consistent with our goals and that link and align the personal interests of directors, officers and employees to those of our stockholders. The SIP also enables us to attract, motivate, and retain directors, officers and employees who make significant contributions to our success and to allow such individuals to share in our success. The plan is intended to meet the requirements of Section 162(m) of the Internal Revenue Code by qualifying certain awards as performance-based compensation. The SIP is administered by the Compensation Committee and the Stock Option Plan Committee. The Compensation Committee is responsible for administering awards to executive officers.

 

The following table sets forth summary information regarding the outstanding stock options and restricted stock awards at June 30, 2010 held by each of our NEOs. Market values are presented as of the end of FY10 (the $15.45 per share closing price of Molex Class A Common Stock on June 30, 2010) for outstanding stock awards. Market values are not present for stock options. Unless otherwise noted, option awards and stock awards are for the acquisition of shares of Class A Common Stock and vest ratably over four years commencing on the first anniversary of the grant date.

 

 

 

This table summarizes the option exercises and vesting of stock awards for each of the NEOs in FY10.