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. )

 

Filed by the Registrant þ

 Filed by a Party other than the Registrant  o

Check the appropriate box:

o  Preliminary Proxy Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to §240.14a-12

 

DRESSER-RAND GROUP INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dresser-Rand Group Inc.

West8 Tower, Suite 1000

10205 Westheimer Road

Houston, Texas 77042

Tel: 713-973-5356

Fax: 713-973-5323

www.dresser-rand.com

March 30, 2011

 

TO THE STOCKHOLDERS OF DRESSER-RAND GROUP INC.:

 

This year’s Annual Meeting of Stockholders of Dresser-Rand Group Inc. (“DRC”) will be held at 9:30 a.m. (Central), Tuesday, May 10, 2011, at the offices of DRC located at West8 Tower, Suite 1000, 10205 Westheimer Road, Houston, Texas, 77042.

 

In addition to acting on the matters outlined in the enclosed Proxy Statement, there will be a brief presentation on DRC’s business.

 

We hope that you attend the Annual Meeting personally and we look forward to seeing you. Whether or not you expect to attend in person, your voting as soon as possible would be greatly appreciated and will ensure that your shares will be represented at the Annual Meeting. If you do attend the Annual Meeting, you may revoke your proxy should you wish to vote in person.

 

On behalf of the Directors and management of Dresser-Rand Group Inc., we would like to thank you for your continued support and confidence in DRC.

 

Sincerely yours,

 

William E. Macaulay

Chairman of the Board

DRESSER-RAND GROUP INC.

West8 Tower, Suite 1000
10205 Westheimer Road
Houston, Texas 77042

 

NOTICE OF 2011 ANNUAL MEETING OF STOCKHOLDERS

AND PROXY STATEMENT

To Be Held

May 10, 2011

 

To the Stockholders of Dresser-Rand Group Inc.:

 

NOTICE IS HEREBY GIVEN that the 2011 Annual Meeting of Stockholders of Dresser-Rand Group Inc. (“DRC,” the “Company,” “Dresser-Rand,” “we” or “our”) will be held at 9:30 a.m. (Central) on Tuesday, May 10, 2011, at the offices of the Company located at West8 Tower, Suite 1000, 10205 Westheimer Road, Houston, Texas, 77042 (the “Annual Meeting”).

 

At the Annual Meeting, we will ask stockholders to:

 

1. Elect the eight Directors named in this proxy statement to serve until the next annual meeting of stockholders and until their successors have been duly elected and qualified; and

 

2. Ratify the appointment of PricewaterhouseCoopers LLP as DRC’s Independent Registered Public Accountants;

 

3. Hold an advisory vote on executive compensation;

 

4. Hold an advisory vote on the frequency of future advisory votes on executive compensation; and

 

5. Consider any other matters that properly come before the Annual Meeting or any adjournment or postponement thereof.

 

We plan to hold a brief business meeting focused on these items and we will attend to any other proper business that may arise. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF PROPOSALS 1, 2, AND 3 AND FOR THE APPROVAL, ON AN ADVISORY BASIS, OF AN ANNUAL VOTE ON EXECUTIVE COMPENSATION. The proposals are further described in the proxy statement.

 

Only DRC Stockholders of record at the close of business on March 16, 2011, are entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement of the Annual Meeting. For ten days prior to the Annual Meeting, a list of stockholders entitled to vote will be available for inspection at DRC’s corporate offices located at West8 Tower, Suite 1000, 10205 Westheimer Road, Houston, Texas, 77042.

 

By order of the Board of Directors,

 

Mark F. Mai

Vice President, General Counsel and Secretary

 

 

 

 

TABLE OF CONTENTS

 

 

PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS OF

DRESSER-RAND GROUP INC. TO BE HELD ON

MAY 10, 2011

 

Dresser-Rand Group Inc. (“DRC,” “Dresser-Rand,” the “Company,” “we” or “our”) is providing this proxy statement to stockholders entitled to vote at the 2011 Annual Meeting (the “Annual Meeting”) of DRC as part of a solicitation by the Board of Directors for use at the Annual Meeting and at any adjournment or postponement that may take place. The Annual Meeting will be held on Tuesday, May 10, 2011, at 9:30 a.m. (Central) at the offices of the Company located at West8 Tower, Suite 1000, 10205 Westheimer Road, Houston, Texas 77042.

 

We are taking advantage of Securities and Exchange Commission (“SEC”) rules that allow us to deliver proxy materials to our stockholders on the Internet. Under these rules, we are sending our stockholders a one-page notice regarding the Internet availability of proxy materials instead of a full printed set of proxy materials. Our stockholders will not receive printed copies of the proxy materials unless specifically requested. Instead, the one-page notice that our stockholders receive will tell them how to access and review on the Internet all of the important information contained in the proxy materials. This notice also tells our stockholders how to submit their proxy card on the Internet and how to request to receive a printed copy of our proxy materials. We expect to provide notice and electronic delivery of this proxy statement to such stockholders on or about March 30, 2011.

 

Who is entitled to vote at the Annual Meeting?

 

Anyone who owns of record DRC common stock as of the close of business on March 16, 2011, is entitled to one vote per share owned. We refer to that date as the Record Date. There were 82,732,910 shares outstanding on the Record Date.

 

Who is soliciting my proxy to vote my shares?

 

DRC’s Board of Directors (the “Board”) is soliciting your “proxy,” or your authorization for our representatives to vote your shares. Your proxy will be effective for the Annual Meeting on May 10, 2011, and at any adjournment or continuation of that meeting.

 

Who is paying for and what is the cost of soliciting proxies?

 

DRC is bearing the entire cost of soliciting proxies. We have not hired a solicitation firm to assist us in the solicitation of proxies, but we reserve the right to do so. Proxies will be solicited both through the mail and Internet, but also may be solicited personally or by telephone, facsimile, email or special letter by DRC’s directors, officers, and employees for no additional compensation. DRC will reimburse banks, brokerage firms, and other custodians, nominees, and fiduciaries for reasonable expenses incurred by them in sending our proxy materials to their customers or principals who are the beneficial owners of shares of DRC common stock.

 

What constitutes a quorum?

 

For business to be conducted at the Annual Meeting, a quorum constituting a majority of the shares of DRC common stock issued and outstanding and entitled to vote must be in attendance or represented by proxy.

 

Delaware law and DRC’s Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws govern the vote on each proposal. The Board’s recommendation is set forth together with the description of each item in this proxy statement. In summary, the Board’s recommendations and approval requirements are:

 

PROPOSAL 1. ELECTION OF DIRECTORS.

 

The first proposal to be voted on is the election of the eight Directors named in this proxy statement to hold office until the 2012 Annual Meeting and until their successors have been elected and qualified. The Board has nominated eight people as Directors, each of whom currently is serving as a Director of DRC.

 

You may find information about these nominees beginning on Page 6.

 

You may vote in favor of all the nominees, withhold your votes as to all nominees, or withhold your votes as to specific nominees. Assuming a quorum, each share of common stock is entitled to cast one vote on each of the eight nominees for Director. Directors are elected by a plurality of the votes cast. Stockholders may not cumulate their votes. Withheld votes or broker non-votes (as described below) will have no effect on the outcome of the vote.

 

The Board of Directors unanimously recommends a vote FOR each Director nominee.

 

PROPOSAL 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS, PRICEWATERHOUSECOOPERS LLP, FOR 2011.

 

The second proposal to be voted on is to ratify the appointment of PricewaterhouseCoopers LLP as DRC’s Independent Registered Public Accountants for 2011.

 

You may find information about this proposal beginning on Page 9.

 

You may vote in favor of the proposal, vote against the proposal, or abstain from voting. Assuming a quorum, the proposal will pass if approved by a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the matter. Abstentions will have the same effect as votes against the proposal and broker non-votes will have no effect on the outcome of the vote.

 

The Board of Directors unanimously recommends a vote FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our Independent Registered Public Accountants for 2011.

 

PROPOSAL 3. ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION.

 

The third proposal to be voted on is an advisory vote on executive compensation.

 

You may find information about this proposal beginning on Page 9.

 

You may vote in favor of the proposal, vote against the proposal, or abstain from voting. Assuming a quorum, the proposed advisory resolution will be approved if a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the matter are voted in favor of the proposal. Abstentions will have the same effect as votes against the proposal and broker non-votes will have no effect on the outcome of the vote.

 

The Board of Directors recommends that stockholders vote “for” this advisory resolution on executive compensation.

 

PROPOSAL 4. ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION.

 

The fourth proposal to be voted on is an advisory vote on the frequency of future advisory votes on executive compensation.

 

You may find information about this proposal beginning on Page 11.

 

You will be able to specify one of four choices for this proposal on the proxy card: one year, two years, three years or abstain. Assuming a quorum, the option that receives the highest number of votes cast by stockholders will

be deemed the preferred frequency for the advisory vote on executive compensation that has been selected by stockholders. Abstentions and broker non-votes will have no effect on the outcome of the vote.

 

The Board of Directors recommends that you vote FOR future advisory votes on executive compensation on an annual basis; however, this is not a vote to approve or disapprove the Board’s recommendation.

 

OTHER MATTERS TO COME BEFORE THE ANNUAL MEETING

 

The Board is not aware of any other business to be presented for a vote of the stockholders at the Annual Meeting. If any other matters are properly presented for a vote, the people named as proxies will have discretionary authority, to the extent permitted by law, to vote on such matters according to their best judgment.

 

The chairman of the Annual Meeting may refuse to allow presentation of a proposal or nominee for the Board if the proposal or nominee was not properly submitted. The requirements for submitting proposals and nominations for next year’s meeting are described below under the heading “Stockholder Proposals for the 2012 Annual Meeting.”

 

Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full printed set of proxy materials?

 

We are taking advantage of SEC rules that allow us to deliver our proxy materials on the Internet to our stockholders. Accordingly, we are sending a Notice Regarding the Availability of Proxy Materials to our stockholders. This notice includes instructions on how to access the proxy materials on the Internet and how to request to receive a printed set of our proxy materials. In addition, our stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.

 

How do I obtain electronic access to the proxy materials?

 

The Notice Regarding the Availability of Proxy Materials you received includes instructions on how to:

 

 

In addition to the website referenced in the one-page Notice Regarding the Availability of Proxy Materials, our proxy materials are also available on the Internet at www.dresser-rand.com using the Investors link.

 

What are the voting rights of holders of DRC common stock?

 

Each outstanding share of DRC common stock on the Record Date will be entitled to one vote on each matter considered at the meeting.

 

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

Most of our stockholders hold their shares through a broker, bank or other nominee rather than directly in their own name. There are some important distinctions between shares held of record and those owned beneficially.

 

Stockholder of Record

 

If your shares are registered in your name with our transfer agent, BNY Mellon Shareowner Services, you are the stockholder of record for those shares. As the stockholder of record, you have the right to grant your voting proxy directly to us or to vote in person at the meeting.

Beneficial Owner

 

If your shares are held in a brokerage account, by a bank or other nominee (commonly referred to as being held in “street name”), you are the beneficial owner of those shares. Your broker, bank or nominee is the stockholder of record and therefore has forwarded proxy-related materials to you as the beneficial owner. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your shares and also are invited to attend the meeting. However, since beneficial owners are not the stockholder of record, you may not vote your shares in person at the meeting unless you obtain a signed proxy from your broker, bank or nominee giving you the right to vote the shares. If your shares were issued pursuant to the Company’s 2005 Stock Incentive Plan, 2005 Directors Stock Incentive Plan, or 2008 Stock Incentive Plan and remain subject to a risk of forfeiture, you may grant your voting proxy directly to us.

 

What does it mean if I receive more than one Notice Regarding the Availability of Proxy Materials?

 

It means that you have multiple accounts at the transfer agent or with brokers or other nominees. Follow the instructions on each notice to ensure that all of your shares are voted.

 

How do I vote?

 

You may vote by Internet, mail, telephone or in person.

 

1. BY INTERNET.  You can vote on the Internet by following the instructions provided in the one-page Notice Regarding the Availability of Proxy Materials. Your vote by Internet must be properly transmitted not later than 11:59 p.m. (Eastern) on May 9, 2011, to be effective.

 

2. BY MAIL.  If you request to receive a printed set of our proxy materials by mail, you can vote by mail. The Board recommends that you vote by proxy even if you plan on attending the meeting. Mark your voting instructions on, and sign and date, the proxy card delivered to you by mail and then return it in the postage-paid envelope provided with your printed set of materials. If you mail your proxy card, we must receive it in accordance with the instructions that will be included in the proxy materials delivered to you by mail.

 

3. BY TELEPHONE.  You can vote by telephone using the phone number obtained by accessing the website set forth in the instructions provided in the one-page Notice Regarding the Availability of Proxy Materials. Your telephonic vote must be completed not later than 11:59 p.m. (Eastern) on May 9, 2011, to be effective.

 

4. IN PERSON.  If you are a stockholder of record, you may vote in person at the meeting. “Street name” or nominee account stockholders who wish to vote at the meeting will need to obtain a signed proxy form from the institution that holds their shares of record giving such owners the right to vote the shares at the meeting. Any stockholder wishing to attend the meeting will need to present valid photo identification to the building receptionist and to the Company receptionist on the 10th floor.

 

How do I revoke my proxy or change my voting instructions?

 

You can change your vote or revoke your proxy at any time before the final vote at the meeting. You can do this by casting a later proxy through any of the available methods described in the question and answer immediately above. If you are a stockholder of record, you also can revoke your proxy by delivering a written notice of your revocation to our Corporate Secretary, Mark F. Mai, at our executive office at West8 Tower, Suite 1000, 10205 Westheimer Road, Houston, Texas, 77042. If you are a beneficial owner, you can revoke your proxy by following the instructions sent to you by your broker, bank or other nominee.

 

How will proxies be voted if I give my authorization?

 

The Board has selected Vincent R. Volpe Jr., Mark E. Baldwin and Mark F. Mai, and each of them, to act as proxies with full power of substitution. All properly submitted proxies will be voted in accordance with the directions given. If you properly submit a proxy with no further instructions, your shares will be voted in accordance with the recommendations of the Board (FOR all Director nominees named in this proxy statement, FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting

firm for 2011, FOR the adoption of the advisory resolution on executive compensation, and FOR the recommended frequency of future advisory votes on executive compensation which is on an annual basis). Management knows of no other matters that may come before the Annual Meeting for consideration by the stockholders. However, if any other matter properly comes before the Annual Meeting, the persons named as proxy holders, or their nominees or substitutes, will vote upon such matters in accordance with the recommendation of the Board, or in the absence of such a recommendation, in accordance with the judgment of the proxy holders, in either case to the extent permitted by law.

 

What is the voting requirement to approve each of the matters?

 

Directors will be elected by a plurality of the votes cast. This means that the nominees with the most votes will be elected.

 

For Proposal 2 (to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accountants for 2011) and Proposal 3 (the adoption of the advisory resolution on executive compensation), approval requires the affirmative vote of stockholders holding a majority of those shares present (in person or by proxy) and entitled to vote on the matter.

 

For Proposal 4 (the advisory vote on the frequency of future advisory votes on executive compensation), the option, either 1 year, 2 years or 3 years, that receives the highest number of votes cast by stockholders will be deemed the preferred frequency for the advisory vote on executive compensation that has been selected by stockholders.

 

If you are a beneficial owner and do not provide the stockholder of record with voting instructions, your shares may constitute broker non-votes for certain matters (as described in the question and answer immediately below). In tabulating the voting result for a proposal, shares that constitute broker non-votes are not considered as being entitled to vote on that proposal.

 

How will votes be counted?

 

The inspector of elections for the Annual Meeting will calculate affirmative votes, negative votes, withhold votes, abstentions, and broker non-votes, as applicable. Under Delaware law, shares represented by proxies that reflect abstentions or broker non-votes will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum.

 

You as beneficial owner own your shares in “street name” if your broker or other “street” nominee is actually the record owner. Brokers or other “street” nominees have discretionary authority to vote on routine matters, regardless of whether they have received voting instructions from their clients who are the beneficial owners. Director elections, the advisory vote on executive compensation and the advisory vote on the frequency of future advisory votes on executive compensation are not considered routine matters and brokers or other “street” nominees may not vote on these matters in the absence of receiving voting instructions from their clients. Ratifying the appointment of independent accountants is considered a routine matter and thus brokers and “street” nominees have discretionary authority to vote on this matter. A “broker non-vote” results on a matter when a broker or other “street” nominee record holder returns a duly executed proxy but does not vote on non-routine matters solely because it does not have discretionary authority to vote on non-routine matters and has not received voting instructions from its client (the beneficial holder). Accordingly, no broker non-votes occur when voting on routine matters. Broker non-votes count toward a quorum. The approval of a proposal regarding a non-routine matter, other than the election of directors and the advisory vote on the frequency of future advisory votes on executive compensation, is determined based on the vote of all shares present in person or represented and entitled to vote on the matter. Abstention on such proposals has the same effect as a vote “against” such proposals. Broker non-votes have no effect on the vote of such proposals. Because we have a plurality voting standard for director elections and for the advisory vote on the frequency of future advisory votes on executive compensation, abstentions and broker non-votes have no effect on the outcome of the vote on these matters.

Where do I find voting results of the Annual Meeting?

 

Preliminary voting results will be announced at the Annual Meeting. Final voting results will be published by DRC in a current report on Form 8-K within four business days after the Annual Meeting. The report will be filed with the SEC and you may receive a copy by contacting our Director, Investor Relations, Blaise E. Derrico, at 713-973-5497. You also may access a copy on the Internet at www.dresser-rand.com or through the SEC’s Internet site at www.sec.gov.

 

The first agenda item to be voted on is the election of eight Directors to hold office until the 2012 Annual Meeting and until their successors have been elected and qualified. The Board has nominated eight Directors, all of whom currently are serving as a Director of DRC. The Board unanimously recommends that you vote “FOR” such nominees.

 

The Board of Directors currently consists of eight Directors. Each Director’s term expires at the Annual Meeting and when their successors have been elected and qualified. All nominees have indicated their willingness to serve, if elected, but if any of the nominees should be unable or unwilling to serve, the Board may either reduce its size, or designate or not designate a substitute nominee. If the Board designates a substitute nominee, proxies that would have been cast for the original nominee will be cast for the substitute nominee unless instructions are given to the contrary.

 

The table below sets forth the name, age as of March 16, 2011, and existing positions with DRC of each Director nominee:

 

 

In evaluating director candidates, and considering incumbent directors for re-nomination to the Board, the Board and the Nominating and Governance Committee have considered a variety of factors. These include each nominee’s independence, financial literacy, personal and professional accomplishments, and experience in light of the needs of the Company. For incumbent directors, the factors include past performance on the Board. Each director provides a broad range of complementary skills, expertise, knowledge and a diversity of perspective to build a capable, responsive and effective Board. This section presents biographical and other information about our director nominees, each of whom is currently serving as a director. It also presents for each director the specific experiences, qualifications, attributes and skills considered by the Board in re-nominating each director to serve on the Board.

 

William E. Macaulay has been the Chairman of our Board of Directors since October 2004. Mr. Macaulay is the Chairman, Chief Executive Officer, and a Managing Director of FRC Founders Corporation, formerly named First Reserve Corporation (“FRC”), a private equity firm focusing on the energy industry, which he joined in 1983.

FRC was an affiliate of our former indirect parent, Dresser-Rand Holdings LLC. Prior to joining First Reserve, Mr. Macaulay was a co-founder of Meridien Capital Company, a private equity buyout firm. From 1972 to 1982, Mr. Macaulay was with Oppenheimer & Co., Inc., where he served as Director of Corporate Finance, with responsibility for investing Oppenheimer’s capital in private equity transactions, as a General Partner and member of the Management Committee of Oppenheimer & Co., as well as President of Oppenheimer Energy Corporation. Mr. Macaulay serves as a director of Weatherford International Ltd., an oilfield service company, and formerly served as a director of Alpha Natural Resources, Inc., Dresser, Inc., Foundation Coal Holdings, Inc., National Oilwell Varco and Pride International, Inc. Mr. Macaulay holds a B.B.A. degree, Magna Cum Laude in Economics from City College of New York and an M.B.A. from the Wharton School of the University of Pennsylvania.

 

Mr. Macaulay brings to the Company leadership, industry, economics and finance experience resulting from his career spanning more than 35 years in private equity and finance, including over 25 years focusing on the energy industry.

 

Vincent R. Volpe Jr. is our President and Chief Executive Officer and has served as a member of our Board of Directors since October 2004. Mr. Volpe has been with Dresser-Rand Group Inc., its affiliates and predecessor companies to the business since 1981. He has held positions in Engineering, Marketing and Operations residing and working in various countries, including: Applications Engineer in Caracas, Venezuela; Vice President Dresser-Rand Japan in Tokyo, Japan; Vice President Marketing and Engineering Steam and Turbo Products in Olean, New York; Executive Vice President European Operations in Le Havre, France; and President Dresser-Rand Europe in London, U.K. In January 1997, Mr. Volpe became President of Dresser-Rand Company’s Turbo Product Division, a position he held until September 2000. In April 1999, he assumed the additional role of Chief Operating Officer for Dresser-Rand Company, responsible for worldwide manufacturing, technology and supply chain management, serving in that position until September 2000. Mr. Volpe became President and Chief Executive Officer of Dresser-Rand Company in September 2000. Mr. Volpe serves as a director of FMC Corporation. Mr. Volpe earned a B.S. in Mechanical Engineering and a B.A. in German literature, both from Lehigh University.

 

Mr. Volpe has substantial historical knowledge of the Company and its operations with 30 years of employment in various capacities with the Company across its international operations. He brings leadership experience and extensive operations and industry experience to the Company.

 

Rita V. Foley has been a member of our Board of Directors since May 2007. Ms. Foley retired in June 2006 as Senior Vice President of MeadWestvaco Corporation, a leading global provider of packaging to the entertainment, healthcare, cosmetics, and consumer products industries, and President of its Consumer Packaging Group. Prior to that, from 2001 to 2002, she was the Chief Operating Officer of MeadWestvaco’s Consumer Packaging Group. Ms. Foley held various senior positions from 1999 to 2001 within Westvaco, the predecessor to MeadWestvaco, including Senior Vice President and Chief Information Officer. Ms. Foley has also held various executive global sales, marketing, and general management positions at Harris Lanier, Digital Equipment Corporation, and QAD Inc. Ms. Foley serves on the boards of PetSmart Inc. and Pro Mujer International, and she is a former director of the Council of the Americas. Ms. Foley earned a B.S. degree from Smith College and she is a graduate of Stanford University’s Executive Program.

 

Ms. Foley brings leadership, operational, marketing, merger and acquisition and financial experience to the Company. She served as the President of a global packaging business utilizing an engineered to order manufacturing process similar to that of the Company and has director experience from serving on other public company boards, including membership on compensation, audit and executive committees.

 

Louis A. Raspino has been a member of our Board of Directors since December 2005. He has over 30 years of experience in the oil and gas exploration, production and service industry. Mr. Raspino has been the President and Chief Executive Officer of Pride International Inc., an international provider of contract drilling and related services to oil and natural gas companies, since June 2005 and has been on its Board of Directors since July 2005. He was the Executive Vice President and Chief Financial Officer of Pride International Inc. from December 2003 until June 2005. Before joining Pride International in December 2003, he was Senior Vice President and Chief Financial Officer of Grant Prideco, Inc., a manufacturer of drilling and completion products supplying the energy industry, from July 2001 until December 2003. Previously, he was Vice President of Finance for Halliburton Company, Senior Vice President and Chief Financial Officer of The Louisiana Land & Exploration Company and began his

career with Ernst & Young. Mr. Raspino is a CPA and earned a B.S. from Louisiana State University and an M.B.A. from Loyola University.

 

Mr. Raspino has over 30 years of experience in the oil and gas exploration, production and service industry, as well as international and capital markets experience, and brings to the Company leadership and finance experience. He is the President and Chief Executive Officer of Pride International, a publicly traded company. He is also a CPA and has served in various executive finance positions throughout his career, including as the Chief Financial Officer of two public companies.

 

Philip R. Roth has been a member of our Board of Directors since December 2005. He has over 30 years of accounting and finance experience. Mr. Roth formerly was Vice President, Finance and Chief Financial Officer of Gardner Denver, Inc., which designs, manufacturers and markets compressor and vacuum products and fluid transfer products, from May 1996 until August 2004. Prior to joining Gardner Denver, Mr. Roth was with Emerson Electric Co. from 1980 until 1996 where he held positions in accounting, treasury and investor relations at the corporate office. He also held positions in strategic planning and acquisitions, and as a Chief Financial Officer at the division level. Mr. Roth is a CPA and began his career with Price Waterhouse. He earned a B.S. in Accounting and Business Administration from the University of Missouri and an M.B.A. from the Olin School of Business at Washington University.

 

Mr. Roth has spent most of his career in leadership positions with manufacturing companies, including more than eight years as Chief Financial Officer of a publicly-traded company with significant international operations. He also has extensive compressor industry and acquisition-related experience, as well as a wide-ranging background in accounting, treasury and investor relations.

 

Stephen A. Snider has been a member of our Board of Directors since November 2009. Mr. Snider was Chief Executive Officer and director of Exterran Holdings, Inc., a global natural gas compression services company from August 2007 to June 2009, and was Chief Executive Officer and Chairman of the general partner of Exterran Partners, L.P., a domestic natural gas contract compression services business from August 2007 to June 2009. Both companies are publicly traded and headquartered in Houston, Texas. Prior to that, Mr. Snider was President, CEO and Director of Universal Compression Holdings Inc. (“Universal”), a supplier of equipment used to ship natural gas through pipelines, from 1998 until Universal merged with Hanover Compressor Company in 2007 to form Exterran Corporation. Mr. Snider retired from all positions with Exterran on June 30, 2009. Mr. Snider has over 30 years of experience in senior management of operating companies, and also serves as a current director of Energen Corporation, a publicly traded company. Mr. Snider also served as a director of Seahawk Drilling Incorporated from August 2009 to February 2011. On February 11, 2011, Seahawk announced that substantially all of its assets would be sold to Hercules Offshore, Inc., such sale being implemented through a Chapter 11 bankruptcy filing, citing heavy losses due to the slow issuance of shallow water drilling permits in the U.S. Gulf of Mexico following the Macondo well blowout and other factors. Mr. Snider has also served as a director of Exterran Holdings, Exterran Partners and T-3 Energy Services, Inc.

 

Mr. Snider brings to the Company leadership experience, including as a public company Chief Executive Officer, and nearly 40 years of involvement in rotating equipment, with approximately 25 years dedicated to natural gas compression and processing.

 

Michael L. Underwood has been a member of our Board of Directors since August 2005. Prior to his retirement, from June 2002 to June 2003, Mr. Underwood was employed by Deloitte & Touche LLP as a Director. Prior to that, he had over 35 years of public accounting experience including 25 of those years as an audit partner with Arthur Andersen LLP. Mr. Underwood currently serves on the board of directors of Chicago Bridge & Iron Company N.V. He holds a B.A. in Philosophy and Economics and a Masters Degree in Accounting from the University of Illinois.

 

Mr. Underwood brings to the Company leadership experience and over 35 years of public accounting experience, a significant portion of which was with publicly traded companies in the manufacturing industry.

 

Joseph C. Winkler III has been a member of our Board of Directors since May 2007. Mr. Winkler has served as the Chairman and Chief Executive Officer of Complete Production Services, Inc., a provider of specialized oil and gas services and equipment in North America, since March 2007. Between June 2005 and March 2007, Mr. Winkler

served as its President and Chief Executive Officer. Prior to that, from March 2005 until June 2005, Mr. Winkler served as the Executive Vice President and Chief Operating Officer of National Oilwell Varco, Inc., an oilfield capital equipment and services company and from May 2003 until March 2005 as the President and Chief Operating Officer of the company’s predecessor, Varco International, Inc. From April 1996 until May 2003, Mr. Winkler served in various other capacities with Varco and its predecessor, including Executive Vice President and Chief Financial Officer. From 1993 to April 1996, Mr. Winkler served as the Chief Financial Officer of D.O.S., Ltd., a privately held provider of solids control equipment and services and coil tubing equipment to the oil and gas industry, which was acquired by Varco in April 1996. Prior to joining D.O.S., Ltd., he was Chief Financial Officer of Baker Hughes INTEQ, and served in a similar role for various companies owned by Baker Hughes Incorporated including Eastman/Telco and Milpark Drilling Fluids. Mr. Winkler received a B.S. degree in Accounting from Louisiana State University.

 

Mr. Winkler has many years of operational, financial, international and capital markets experience, a significant portion of which was with publicly traded companies in the oil and gas services, manufacturing and exploration and production industries. He is currently Chairman and Chief Executive Officer of a public company, which is a provider of specialized oil and gas services and equipment.

 

The Board of Directors unanimously recommends that you vote “FOR” each of the Director nominees named above.

 

The second agenda item to be voted on to ratify the appointment of PricewaterhouseCoopers LLP as DRC’s independent registered public accountants for the fiscal year ending December 31, 2011. The Board of Directors unanimously recommends that you vote “FOR” this proposal.

 

The Audit Committee has appointed, with approval of the Board of Directors, PricewaterhouseCoopers LLP to act as DRC’s independent registered public accountants for the fiscal year ending December 31, 2011. The Board of Directors has directed that such appointment be submitted to DRC’s stockholders for ratification at the Annual Meeting. PricewaterhouseCoopers LLP was DRC’s independent registered public accounting firm for the fiscal year ended December 31, 2010.

 

Stockholder ratification of the appointment of PricewaterhouseCoopers LLP as DRC’s independent registered public accountants is not required. The Board, however, is submitting the appointment to the stockholders for ratification as a matter of good corporate practice. If the stockholders do not ratify the appointment, the Board of Directors will request that the Audit Committee reconsider its appointment of PricewaterhouseCoopers LLP for the fiscal year ending December 31, 2011, and consider such vote in its review and future appointment of the Company’s independent registered public accounting firm. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different accounting firm at any time during the 2011 fiscal year if the Audit Committee determines that such a change would be in the best interests of DRC and its stockholders.

 

Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting and will have an opportunity to make a statement if they so desire. They will be available to respond to appropriate questions.

 

The Board of Directors unanimously recommends that you vote FOR this proposal.

 

The third agenda item to be voted on is the adoption of an advisory resolution on executive compensation. The Board of Directors unanimously recommends that you vote “FOR” this proposal.

 

The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, enables our stockholders to vote to approve an advisory resolution on executive compensation. This vote,

commonly known as “say on pay”, provides you as a stockholder the opportunity to endorse or not endorse the compensation of our named executive officers as disclosed in this proxy statement in accordance with the SEC’s rules.

 

The Board of Directors believes that the Company’s success as one of the largest global suppliers of custom-engineered rotating equipment solutions to the oil, gas, petrochemical, process, power, military and other industries is led by the collective talent, experience and performance of its executive leadership team. With that in mind, our overall executive compensation program has been designed to attract, retain and motivate leaders who will develop and execute strategies that generate long-term success and growth. The key principles underlying the Company’s executive compensation program are described in detail in the Compensation Discussion & Analysis (CD&A) beginning on page 24 of this proxy statement and are set forth below:

 

 

We believe that our executive compensation policies and practices are effective in supporting these guiding principles, including policies and practices such as:

 

 

We urge stockholders to read the Compensation Discussion and Analysis beginning on page 24 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables, notes and narrative, appearing on pages 41 through 52, which provide detailed information on the compensation of our named executive officers.

 

In accordance with the recently adopted Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking you to approve the following advisory resolution at the 2011 Annual Meeting:

 

“Resolved, that the Company’s stockholders approve, on an advisory basis, the compensation paid to the named executive officers, as disclosed in this proxy statement, including the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative discussion.”

 

Because this vote is advisory, it will not be binding upon the Board of Directors or the Company. Although non-binding, the Compensation Committee values the opinions expressed by stockholders in their vote on this proposal and will review and consider the voting results when making future decisions regarding our executive compensation program.

 

The Board Recommends that Stockholders vote “FOR” Approval of this Advisory Resolution.

 

The fourth agenda item to be voted on is the frequency of future advisory votes on executive compensation. The Board of Directors unanimously recommends that you vote “1 YEAR” on this proposal.

 

The Dodd-Frank Act and recently adopted Section 14A of the Exchange Act also enable our stockholders to vote on whether future advisory votes on executive compensation of the nature reflected in Proposal No. 3 above should occur every 1 year, every 2 years or every 3 years.

 

After careful consideration, the Board of Directors is recommending to conduct an advisory vote on executive compensation every year as an appropriate policy for the Company at this time. While the Company’s executive compensation programs are designed to promote a long-term connection between pay and performance, the Board of Directors recognizes that executive compensation disclosures are made annually. Given that the “say on pay” advisory vote provisions are new, holding an advisory vote every year on executive compensation provides for more immediate feedback from our stockholders, allowing our Compensation Committee to consider stockholder opinions on executive compensation on a more frequent basis. Therefore, the Board of Directors recommends that you vote for the advisory vote on executive compensation to be held every year. However, stockholders should note that because the advisory vote on executive compensation occurs well after the beginning of the compensation year, and because the different elements of our executive compensation programs are designed to operate in an integrated manner and to complement one another, in many cases it may not be appropriate or feasible to change our executive compensation programs in consideration of any one year’s advisory vote on executive compensation by the time of the following year’s annual meeting of stockholders.

 

We understand that our stockholders may have different views as to what is an appropriate frequency for advisory votes on executive compensation, and we will carefully review the voting results on this proposal. Stockholders will be able to specify one of four choices for this proposal on the proxy card: 1 year, 2 years, 3 years, or abstain. Stockholders are not voting to approve or disapprove the Board’s recommendation.

 

The option of 1 year, 2 years or 3 years that receives the highest number of votes cast by stockholders will be deemed the frequency for the advisory vote on executive compensation that has been selected by stockholders. However, while significant consideration will be given to the preference of the stockholders, this vote is advisory and not binding on the Board of Directors or the Company in any way. Notwithstanding the Board’s recommendation and the outcome of the stockholder vote, the Board may in the future decide that it is in the best interests of our stockholders and the Company to hold an advisory vote on executive compensation more or less frequently and may vary its practice based on factors such as discussions with stockholders and the adoption of material changes to compensation programs.

 

The Board of Directors recommends that you vote “1 YEAR” for the frequency of future advisory votes on executive compensation; however, this is not a vote to approve or disapprove the Board’s recommendation.

 

The Audit Committee of the Company’s Board of Directors consists of Messrs. Underwood, Raspino and Roth and Ms. Foley. The Audit Committee operates under a written charter adopted by the Board of Directors. The committee charter is available on the Company’s web site (www.dresser-rand.com).

 

The Company’s management is responsible for all financial statements and financial reporting processes of the Company and its direct and indirect subsidiaries, including the systems of internal accounting control. The independent registered public accounting firm is responsible for performing audits of the consolidated financial statements and opining as to whether such statements are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America. The Audit Committee monitors the financial reporting processes and systems of internal control on behalf of the Board of Directors.

In this context, the Audit Committee has reviewed the audited financial statements for the fiscal year ended December 31, 2010, and has met and held discussions with management and the independent registered public accounting firm regarding such financial statements. Management represented to the Audit Committee that the consolidated financial statements for the fiscal year ended December 31, 2010, were prepared in accordance with accounting principles generally accepted in the U.S. The Audit Committee discussed with the independent registered public accounting firm matters required to be discussed by Statement on Auditing Standards No. 61, (Communication with Audit Committees) as amended (AICPA, Professional Standards, Vol. 1, AU section 380) and adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee, in consultation with management, the independent registered public accounting firm and DRC’s internal auditor has reviewed management’s report on internal control over financial reporting as of December 31, 2010, and the independent registered public accounting firm’s attestation report (which are required pursuant to Section 404 of the Sarbanes-Oxley Act of 2002), and has considered the effectiveness of the Company’s internal control over financial reporting.

 

In addition, the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and has discussed with the independent registered public accounting firm the firm’s independence from the Company and its management. In concluding that the firm is independent, the Audit Committee considered, among other factors, whether the non-audit services provided by the firm were compatible with its independence.

 

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the audited consolidated financial statements of the Company be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, for filing with the SEC.

 

THE AUDIT COMMITTEE

 

Michael L. Underwood, Chairman

Rita V. Foley

Louis A. Raspino

Philip R. Roth

 

The Audit Committee has reviewed the audit fees of the independent auditors. For work performed in regard to fiscal years 2009 and 2010, DRC paid PricewaterhouseCoopers LLP the following fees for services, as categorized (dollars in thousands):

 

 

 

 

Our Board has a policy to assure the independence of its independent registered public accounting firm. Prior to each fiscal year, the Audit Committee receives a written report from PricewaterhouseCoopers LLP describing the

elements expected to be performed in the course of its audit of the Company’s financial statements for the coming year. All audit related services, tax services and other services were pre-approved for 2009 and 2010 by the Audit Committee, which concluded that the provision of such services by PricewaterhouseCoopers LLP was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. As required by its charter, the Audit Committee pre-approves all auditing services, internal control-related services and permitted non-audit services (including the fees and terms thereof), other than prohibited non-auditing services as set forth in Sarbanes-Oxley Act Section 201, to be performed for DRC by its independent registered public accounting firm, subject to any de minimus exceptions for non-audit services described in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are approved by the Audit Committee prior to the completion of the audit. The Audit Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting.

 

As of the date of this proxy statement, we know of no business that will be presented for consideration at the Annual Meeting other than the items referred to above. If any other matter is properly brought before the meeting for action by stockholders, proxies will be voted in accordance with the recommendation of the Board, or in the absence of such a recommendation, in accordance with the judgment of the proxy holder.

 

In determining director independence, DRC employs the standards set forth in the New York Stock Exchange (“NYSE”) listed company manual. The independence test included in the NYSE listing standard requires that the Board determine that the director have no direct or indirect material relationship with DRC. Additionally, a director is not independent if:

 

 

In addition, members of our Audit Committee must meet the following additional independence requirements under the SEC’s rules:

 

 

Applying the NYSE test, the Board has affirmatively determined that Ms. Foley and Messrs. Macaulay, Raspino, Roth, Underwood, Snider and Winkler are independent, and that all members of the Audit Committee meet the heightened requirements for independence set forth above. In addition, the Board affirmatively determined that Mr. Volpe is not independent because he is the President and Chief Executive Officer of DRC.

 

The Board of Directors held seven meetings in 2010, either in person or by telephone. Each director attended at least 75% of all Board and applicable committee meetings during 2010. Directors are encouraged to attend stockholder meetings. All directors attended the 2010 Annual Meeting. In connection with each of the quarterly Board meetings, the non-management Directors will meet in executive session without any employee directors or members of management present. If the Board convenes a special meeting, the non-management directors may meet in executive session if the circumstances warrant. The independent Chairman of the Board presides at each executive session of the non-management directors.

 

DRC has standing Audit, Compensation, and Nominating and Governance Committees. The committee members are as follows:

 

 

 

 

The Audit, Nominating and Governance and Compensation Committees held 8, 4, and 8 meetings, respectively, in 2010.

 

The principal responsibilities and functions of the standing Board committees are summarized below and described in more detail in the written charters adopted by the Audit Committee, Compensation Committee, and Nominating and Governance Committee, each of which may be found under the Corporate Governance portion of the Investors link on the Company’s website (www.dresser-rand.com). DRC’s Corporate Governance guidelines also are available on the Corporate Governance portion of the Investors link on the Company’s website. In addition, any stockholder may obtain a print copy of these charters or DRC’s Corporate Governance Guidelines by contacting our Corporate Secretary.

Audit Committee

 

Our Audit Committee currently consists of Michael L. Underwood, who serves as Chairman, Rita V. Foley, Louis A. Raspino and Philip R. Roth. The Board has determined that Michael L. Underwood is an Audit Committee “financial expert” as such term is defined in Item 407(d)(5) of Regulation S-K. The Audit Committee’s authorities and responsibilities include: (1) appointing, compensating, retaining, evaluating, overseeing and terminating the independent auditor; (2) pre-approving all auditing services, internal control-related services and permitted non-audit services by the independent auditor; (3) retaining independent legal, accounting and other advisors to the extent it deems necessary; (4) making regular reports to and reviewing with the full Board any issues that arise with respect to the quality or integrity of the Company’s financial statements, compliance with legal or regulatory requirements, performance and independence of the independent auditors, or performance of the internal audit function; (5) reviewing and reassessing the adequacy of the Committee’s charter annually and recommending any proposed changes to the Board; (6) conducting an annual performance self-evaluation; (7) preparing a report as required by the rules of the SEC to be included in the Company’s annual proxy statement; and (8) taking such other actions as it deems necessary or appropriate in meeting its responsibilities. The Audit Committee has adopted a written charter, a copy of which may be obtained as described above.

 

As previously discussed, the Board has concluded that Ms. Foley and Messrs. Underwood, Raspino and Roth are independent for purposes of serving on the Audit Committee.

 

Nominating and Governance Committee

 

Our Nominating and Governance Committee currently consists of Philip R. Roth, who serves as Chairman, Stephen A. Snider, Michael L. Underwood and Joseph C. Winkler III. The Nominating and Governance Committee’s authorities and responsibilities include: (1) retaining, compensating and terminating search firms used to identify director candidates and legal and other advisors as the Committee deems necessary; and (2) conducting an annual performance self-evaluation and reviewing and assessing the adequacy of the Committee’s charter and recommending changes to the Board. To the extent deemed necessary or appropriate, the Committee will: (i) develop, recommend and review annually the Company’s Corporate Governance Guidelines; (ii) establish criteria for the selection of new directors to serve on the Board, including any policies regarding the consideration of director candidates recommended by stockholders; (iii) identify, screen and recommend to the Board the nominees to be proposed by the Company at the annual meeting of stockholders, or fill vacancies on the Board, based on an assessment of each nominee’s particular experience, qualifications, attributes or skills and potential to contribute to diversity, and recommend changes in the size of the Board; (iv) assess the independence of the directors, assess the financial literacy of each Audit Committee member, and review the experience of the Audit Committee members in light of the attributes of an “audit committee financial expert”; (v) review the material facts of all interested party transactions that require the Committee’s approval and determine whether to approve such transactions; (vi) review and evaluate the leadership structure of the Board; (vii) review the Board committee structure and composition and recommend to the Board directors to serve as members of each committee; (viii) oversee the annual evaluation of management, the Board, the directors, and Board committees; (ix) establish criteria for and lead the annual performance self-evaluation of the Board and monitor annual committee performance self-evaluations; (x) establish director policies and guidelines for retirement and stock ownership; (xi) oversee director orientation and continuing education; (xii) review whether continued Board or committee participation is appropriate in light of employment changes and/or service on additional boards of other companies; and (xiii) establish the compensation and benefits of directors and Board committee members.

 

The Nominating and Governance Committee has adopted a written charter, a copy of which may be obtained as described above. As discussed above, the Board has made an affirmative determination that Messrs. Roth, Snider, Underwood and Winkler are independent.

 

Prospective director nominees are identified through the contacts of the Directors or members of senior management, by stockholders or through reputable search firms. Once a prospective director nominee has been identified, the Nominating and Governance Committee makes an initial determination as to whether to conduct a full evaluation of the candidate based on the information provided to the Committee and the Committee’s own knowledge of the candidate, which may be supplemented by the Committee through its own inquiries. If the

Committee determines that additional consideration is warranted, it may request a professional search firm to gather additional information about the candidate. The Committee will evaluate director nominees, including nominees that are submitted to DRC by a stockholder, taking into consideration certain criteria, including the candidate’s industry knowledge and experience, wisdom, integrity, actual or potential conflicts of interest, skills such as understanding of finance and marketing, and educational and professional background. The Committee will also assess the candidate’s qualifications as an independent director under the current independence standards of the NYSE. In addition, the Committee will consider the prospective candidate in light of the current composition of the Board and the collective Board members’ skills, expertise, industry and regulatory knowledge, and diversity of perspectives. The candidate must also have time available to devote to Board activities and the ability to work collegially and to serve the interests of all stockholders. In the case of candidates recommended by stockholders, the Committee will also consider the capability of the candidate to discharge his or her fiduciary obligations to all stockholders. As necessary, DRC may engage the services of a third party for a fee to identify and evaluate prospective nominees.

 

In determining whether to recommend a director for re-election, the Nominating and Governance Committee considers the director’s past attendance at meetings and participation in and contribution to the activities of the Board.

 

DRC’s Nominating and Governance Committee will consider recommendations for candidates for the Board of Directors received from its stockholders. Any stockholder wishing to recommend a candidate for consideration by the Nominating and Governance Committee should submit the recommendation in writing to the Nominating and Governance Committee, care of the Company’s Corporate Secretary and must include: (i) the name of the stockholder making the recommendation; (ii) the recommended candidate’s name and a brief resume setting forth the recommended candidate’s business and educational background and qualifications for service; (iii) a summary of the recommended candidate’s qualifications for membership on the Board; (iv) the number of shares of the Company’s common stock owned beneficially or of record by both the stockholder making the recommendation and the recommended candidate; and (v) a notarized consent signed by the recommended candidate stating the recommended candidate’s willingness to be nominated and to serve if elected. The Nominating and Governance Committee may request additional information from the stockholder making the recommendation and/or the recommended candidate. The Nominating and Governance Committee will evaluate candidates recommended by stockholders using the same process and criteria that are used in evaluating candidates through the normal process of the Nominating and Governance Committee, with the additional consideration described above.

 

In accordance with DRC’s Amended and Restated Bylaws, any stockholder entitled to vote for the election of directors at an Annual Meeting may nominate persons for election as directors. For the 2012 Annual Meeting, a stockholder may nominate persons for election as directors only if the Secretary of DRC receives written notice of any such nominations no earlier than January 11, 2012, and no later than February 10, 2012. Any stockholder notice of intention to nominate a director shall include all of the information required by DRC Bylaws, including:

 

 

Compensation Committee

 

Our Compensation Committee currently consists of Louis A. Raspino, who serves as Chairman, Rita V. Foley and Joseph C. Winkler III. The Compensation Committee is responsible for discharging the responsibilities of the Board with respect to DRC and its subsidiaries’ compensation programs including the compensation of key employees and executives. The Compensation Committee’s authorities and responsibilities include: (1) monitoring governance standards, rule changes, the impact of new legislation and related practices and suggesting changes to the Committee’s charter to the Board; (2) forming and delegating specific responsibilities on a project or issue basis to a sub-committee or other authorized individual; (3) conducting an annual performance self-evaluation; (4) selecting, retaining, and terminating an independent compensation consulting firm to assist in the evaluation of CEO or executive officer compensation; (5) periodically establishing and reviewing the overall compensation philosophy of the Company, (6) recommending for approval by the independent directors of the full Board the goals and objectives relevant to CEO compensation, including annual performance objectives, and the CEO’s compensation; (7) for other executive officers, reviewing the goals and objectives relevant to their underlying compensation programs and the relative benchmarks and benchmarking process used to establish the awards and reviewing and approving the CEO’s annual recommendations for compensation; (8) preparing and providing the Compensation Committee report on executive compensation in the annual proxy statement and reviewing and participating in the development of the narratives and tables to be included in the Compensation Discussion and Analysis in the annual proxy statement; (9) reviewing, at least annually, the Company’s compensation policies and practices of compensating its employees, including non-executive officers, as they relate to the Company’s risk management practices and risk-taking initiatives, and determining whether such policies and practices create risks that are reasonably likely to have a material adverse effect on the Company; (10) reviewing, at least annually, management’s recommendations for the Company’s annual incentive plan, its competitiveness and financial implications of funding and payouts, including associated award criteria; (11) reviewing and approving all executive perquisite programs, if any; (12) monitoring the Company’s long-term incentive programs; (13) reviewing and approving all employment and compensation agreements and contracts for executive officers; (14) reviewing and approving change-in-control protection offered by the Company to its employees; and (15) providing recommendations to the Board on such programs that are subject to Board approval. The Compensation Committee has adopted a written charter, a copy of which may be obtained as described above.

 

More information describing the Committee’s processes and procedures for considering and determining executive compensation, including the role of consultants in determining or recommending the amount or form of director and executive compensation is included in the Compensation Discussion and Analysis.

 

As discussed above, the Board has concluded that Ms. Foley and Messrs. Raspino and Winkler are independent.

 

The Compensation Committee retained Mercer, a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. (“MMC”), to assist the Compensation Committee with its responsibilities related to the Company’s executive and Board of Directors compensation programs. Mercer’s fees for executive compensation consulting to the Compensation Committee in 2010 were $268,595.

 

Mercer provided analysis/perspectives to the Board or Compensation Committee of the Board on the following items in 2010 related to Dresser-Rand’s executive compensation programs: dilution and overhang levels vs. peers, analysis of stockholder value transfer vs. peers, change in control severance analysis, perspectives and details on performance-based equity programs, typical long-term incentive vehicle prevalence and weighting, peer group evaluation, updates on regulatory environment, analysis of equity-related retirement provisions, incentive plan analysis, review of incentive compensation targets and payouts over the past three years, and review of executive compensation.

 

Management recommended and the Compensation Committee approved the continued engagement with Mercer and its MMC affiliates to provide other services unrelated to executive compensation, which have been approved by the Compensation Committee. Mercer and its MMC affiliates had provided these types of services to the Company prior to the Compensation Committee selecting Mercer as its independent consultant. The aggregate

fees paid for these other services were $174,053 (all figures converted to U.S. Dollars as of December 31, 2010). These fees were primarily to purchase a variety of U.S. and international compensation surveys, U.S. insurance premium administration and benefits brokerage services in Norway and Malaysia.

 

Although the Company retains Mercer and its MMC affiliates for other services, the Compensation Committee is confident that the advice it receives from the individual executive compensation consultant is objective and not influenced by Mercer’s or its affiliates’ relationships with the Company because of the procedures Mercer and the Compensation Committee have in place. These include:

 

 

While it is necessary for the consultant to interact with management to gather information, the Compensation Committee has adopted protocols governing if and when the consultant’s advice and recommendations can be shared with management. These protocols are included in the consultant’s engagement letter. This approach protects the Compensation Committee’s ability to receive objective advice from the consultant so that the Compensation Committee may make independent decisions about executive pay at the Company. The Compensation Committee has also directed that the Company is not to engage Mercer for any consulting compensation advice other than that which is provided to the Compensation Committee to facilitate decisions regarding executive compensation.

 

The Company believes that a diverse board has benefits that can enhance the performance of the Company. The Nominating and Governance Committee charter provides that the Nominating and Governance Committee is responsible for establishing criteria for the selection of new directors to serve on the Board, including any policies regarding the consideration of director candidates recommended by stockholders. The charter provides that the Committee will identify, screen and recommend nominees to the Board based on an assessment of each nominee’s particular experience, qualifications, attributes or skills and potential to contribute to diversity. As described above, the Committee reviews and assesses its performance and the adequacy of its charter annually. The Corporate Governance Guidelines emphasize that, as noted above, collectively Board members will bring to the Company a broad range of complementary and diverse skills, expertise, industry and regulatory knowledge, and diversity of perspectives in order to build a capable, responsive, and effective Board.

 

The Board of Directors adopted a policy that no director shall be nominated for election or re-election to the Board after reaching the age of 72.

 

The Board of Directors adopted a policy that prior to any change of a director’s employment during his or her tenure as a director, that director shall offer to tender his or her resignation for consideration by the Board of Directors. After proper evaluation, the Board shall advise the director of its decision whether to accept the offer.

 

The Board plans for succession to the position of Chief Executive Officer as well as certain other senior management positions. To assist the Board, the Chief Executive Officer annually provides the Board with an assessment of senior managers and of their potential to succeed him. He also provides the Board with an assessment of persons considered potential successors to certain senior management positions. The Board meets annually to evaluate such succession and to oversee the Company’s management development process. Also, during 2009, the Nominating and Governance Committee adopted a procedure to facilitate communication and outline a process in the event our Chief Executive Officer is unable to perform his duties due to unforeseen circumstances.

 

Our full Board oversees our executive officers’ identification and management of risks of the Company, with the Audit, Compensation, and Nominating and Governance Committees overseeing risks in accordance with each Committee’s charter. The Board’s oversight is fostered by the leadership structure of the Board, as the Chairman of the Board and each Committee chairperson are independent directors.

 

Mr. Macaulay has served as our Chairman of the Board since October 2004, including during the period in which an affiliate of FRC Founders Corporation, formerly named First Reserve Corporation, the company for which he also serves as Chairman, Chief Executive Officer and a Managing Director, had a controlling interest in the Company. Correspondingly, Mr. Volpe has served as President and Chief Executive Officer since October 2004 and, prior to that, in various capacities within Dresser-Rand since 1981.

 

These roles have been split historically based on the talents, experience and contributions that each of the two leaders provide to the organization and based on the Board’s then and current opinion that the separate contributions are of value to the Company.

 

The Board sets an appropriate “tone at the top” with a commitment to maximizing stockholder returns while maintaining the highest standards of business ethics, governance and integrity. The Board reviews and provides guidance to our management in developing our long range plans and annual operating plans as well as individual objectives of our executive officers. The Board has promoted the formation of our Enterprise Risk Council, chaired by the Chief Executive Officer and facilitated by the Director of Global Risk Management. The Council’s membership is comprised of senior managers from across all functions of the Company. In concert with the Company’s annual assessment of its strengths, weaknesses, opportunities and threats, the long range plan and the annual operating plan, the Council identifies and assesses the Company’s risks, including strategic, operational, financial reporting and compliance risks. The Council is responsible for mitigating such risks and monitoring the Company’s progress. Its findings are communicated to the Board quarterly.

 

On February 12, 2010, the Board approved changes to the Charter of the Compensation Committee directing it to review, at least annually, the Company’s policies and practices of compensating its employees, including non-executive officers, as they relate to the Company’s risk management practices and risk-taking initiatives and to determine whether such policies and practices create risks that are reasonably likely to have a material adverse effect on the Company. The Committee successfully completed this review on March 11, 2011. During this review, the Committee concluded that any risks arising from the Company’s compensation policies and practices for its employees were not reasonably likely to have a material adverse effect on the Company.

 

DRC has a Code of Conduct that applies to all employees, executive officers and Directors of DRC. The Code of Conduct is posted on DRC’s website, www.dresser-rand.com, and is available in print upon written request by any stockholder at no cost. The request should be submitted to DRC, c/o Mark F. Mai, West8 Tower, Suite 1000, 10205 Westheimer Road, Houston, Texas, 77042. Any waiver of any provision of the Code of Conduct granted to an executive officer or Director may only be made by the Board or a Committee of the Board authorized to do so and will be promptly disclosed on DRC’s website at www.dresser-rand.com or in a report on Form 8-K.

 

The Company does not require a super-majority vote to approve mergers/business combinations pursuant to the Company’s Amended and Restated Bylaws.

 

Stockholders and other parties may communicate with one or more members of the Board, the Chairman of the Board, or the non-management Directors as a group by the following means:

 

E-Mail: mmai@dresser-rand.com

Mail:  Board of Directors

West8 Tower, Suite 1000

10205 Westheimer Road

Houston, TX 77042

 

Stockholders and other parties should clearly specify in each communication the name of the individual Director or group of Directors to whom the communication is addressed. Stockholder and other party communications will be promptly forwarded by the Secretary of DRC to the specified Director addressee. Communications addressed to the full Board of Directors or the group of non-management directors will be forwarded by the Secretary of DRC to the Chairman of the Board. Concerns relating to accounting, internal controls or auditing matters are immediately brought to the attention of the Chairman of the Audit Committee and handled in accordance with procedures established by the Audit Committee.

 

The following table sets forth the names and positions of our current executive officers and their age as of March 16, 2011:

 

 

Vincent R. Volpe Jr. is our President and Chief Executive Officer and has served as a member of our Board of Directors since October 2004. Mr. Volpe has been with Dresser-Rand Group Inc., its affiliates and predecessor companies to the business since 1981. He has held positions in Engineering, Marketing and Operations residing and working in various countries, including: Applications Engineer in Caracas, Venezuela; Vice President Dresser-Rand Japan in Tokyo, Japan; Vice President Marketing and Engineering Steam and Turbo Products in Olean, New York; Executive Vice President European Operations in Le Havre, France; and President Dresser-Rand Europe in London, U.K. In January 1997, Mr. Volpe became President of Dresser-Rand Company’s Turbo Product Division, a position he held until September 2000. In April 1999, he assumed the additional role of Chief Operating Officer for Dresser-Rand Company, responsible for worldwide manufacturing, technology and supply chain management, serving in that position until September 2000. Mr. Volpe became President and Chief Executive Officer of Dresser-Rand Company in September 2000. He has served as an independent director of FMC Corporation since 2007. Mr. Volpe earned a B.S. in Mechanical Engineering and a B.A. in German literature, both from Lehigh University.

 

Mark E. Baldwin has been our Executive Vice President and Chief Financial Officer since August 2007. Prior to joining the Company, he served as the Executive Vice President, Chief Financial Officer, and Treasurer of Veritas DGC Inc., a public energy service company from August 2004 until February 2007. From April 2003 to July 2004 he was an Operating Partner at First Reserve Corporation. Mr. Baldwin served as the Executive Vice President and Chief Financial Officer for NexitraOne, LLC, a voice and data products distribution company, from October 2001 to August 2002. Other previous experience includes four years as Chairman and Chief Executive Officer for Pentacon Inc. and 17 years with Keystone International Inc. in a variety of finance and operations positions, including Treasurer, Chief Financial Officer, and President of the Industrial Valves and Controls Group. On May 23, 2002, thirteen months after Mr. Baldwin’s departure from Pentacon, Pentacon and its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the Southern District of Texas. In its last Form 10-Q filed on August 14, 2002, Pentacon cited the downturn in its business, a substantial portion of which involved sales to the aerospace industry, since the September 11, 2001 terrorist attacks in New York and Washington D.C., combined with the decrease in credit availability as reasons for it seeking the protection of the federal bankruptcy laws. Mr. Baldwin served as an independent director of Seahawk Drilling, Inc. from August 2009 to February 2011. On February 11, 2011, Seahawk announced that substantially all of its assets would be sold to Hercules Offshore, Inc., such sale being implemented through a Chapter 11 bankruptcy filing, citing heavy losses due to the slow issuance of shallow water drilling permits in the U.S. Gulf of Mexico following the Macondo well blowout and other factors. Mr. Baldwin has a B.S. in Mechanical Engineering from Duke University and an MBA from Tulane University.

 

Raymond L. Carney Jr. joined Dresser-Rand in August 2008 as Corporate Controller and was elected to the position of Vice President, Controller and Chief Accounting Officer in November 2008. Prior to joining the Company, Mr. Carney worked for Alcoa, Inc., an aluminum producer, between 2002 to 2008, where he was Group Controller from 2006 to 2008 for a $10 billion global division with 27 plants around the world and headquartered in New York City and previously served as Manager of Financial Transactions and Policy. Prior to his time with Alcoa, he spent 13 years with Ernst & Young, a big four public accounting firm, in their Pittsburgh office serving a variety of clients including several that were publicly owned. Mr. Carney is a Certified Public Accountant (CPA) with a BS from Penn State University.

 

Nicoletta Giadrossi has been our Vice President and General Manager, Europe, Middle East and Africa since January 2009. In this leadership position, Ms. Giadrossi is responsible for our production operations in France, United Kingdom, Germany and Norway and for all new equipment and aftermarket sales and support operations serving Eastern and Western Europe, Scandinavia, Middle East, Africa, and Russia. Prior to joining the Company, she restructured and managed the divestiture of her family’s textile and real estate businesses in France between 2006 and 2008. From 2005 until 2006, she served as an operating partner of LBO France, a niche French private equity firm. Before that she held several leadership roles in General Electric between 1995 and 2005, the most recent one being General Manager, Downstream division. Within General Electric, Ms. Giadrossi also oversaw several business units in the GE Equipment Management division, as a Chief Operating Officer for GE European Equipment Management, and as General Manager for GE Fleet Services, Italy. Ms Giadrossi also had experience in strategic management consulting with the Boston Consulting Group early in her career. Ms Giadrossi earned a

Bachelor Degree in Mathematics and Economics from Yale University, and a Master of Business Administration from Harvard Business School.

 

Mark F. Mai has been our Vice President, General Counsel and Secretary since October 2007. He has also been acting as our Vice President, Human Resources since October 2010. Prior to October 2007, Mr. Mai held various positions at Cooper Industries, an international manufacturing company, between 1991 and 2000 and 2003 and 2007. As Cooper’s Associate General Counsel, Corporate, from 2003 until 2007, Mr. Mai led a team that handled the legal needs of Cooper’s business operations and its mergers and acquisitions. As Cooper’s Associate General Counsel, Litigation from 1999 to 2000, he managed Cooper’s global litigation issues. From 2000 to 2003, Mr. Mai was a partner at the law firm of Thompson & Knight LLP, heading up the Corporate and Securities practice for its Austin, Texas office. He began his professional career in 1986 as an associate of Baker, Brown, Sharman & Parker, which later merged into Thompson & Knight LLP. Mr. Mai earned a B.B.A. with a concentration in finance from the University of Notre Dame and a J.D. from the University of Texas.

 

Luciano Mozzato has been our Executive Vice President, Services Worldwide, responsible for all Product Services including Field Operations since January 2009. Mr. Mozzato has held a variety of leadership positions in sales, operations, and the aftermarket business within United Technology’s Otis Elevator division, the world’s largest company in the manufacture, installation and service of elevators, escalators and moving walkways, including from 2004 until 2008 as Vice President and General Manager of their Latin America business and Vice President and General Manager of their Italian subsidiary. In addition, Mr. Mozzato served as the Vice President of Global Supply Chain and Logistics Worldwide from 2000 until 2004. Prior to that he served in United Technology’s Italian subsidiary as Product Director, Director of Engineering, and Field Service Manager. He started his career as a mechanic and earned a diploma in electronic engineering from the ITI Institute in Italy. Mr. Mozzato also holds a Bachelor of Science in Mechanical Engineering from Hartford University in the U.S.

 

Jesus M. Pacheco was appointed Executive Vice President, New Equipment Worldwide in June 2007. He is responsible for all company new equipment sales and client services worldwide. Mr. Pacheco has been with Dresser-Rand Group Inc., its affiliates and predecessor companies to the business since 1990. He has held various leadership positions in Application Engineering, Extended Scope and Marketing for Dresser-Rand Company, including responsibilities as Regional Director for the former Soviet Union, based in London, UK, and Marketing Manager for the European Served Area (Europe, Africa and the Middle East) based at our manufacturing facility in Le Havre, France. From January 1999 to August 2000, Mr. Pacheco served as Vice President, Client Services for the Latin America Region. He assumed Client Services responsibilities for the Americas Region in August 2000, expanding them to include the European Served Area in July 2006. Mr. Pacheco has over 28 years of experience in the global energy industry, including 8 years with a major oil and gas operator in Venezuela, working with compressors, turbines and compression facilities for process, oil and gas applications. Mr. Pacheco earned a BSE in Mechanical Engineering and a BS in Economics from the University of Michigan at Ann Arbor.

 

Christopher Rossi has served as our Vice President, Technology and Business Development since January 2009. Mr. Rossi has been with Dresser-Rand Group Inc., its affiliates and predecessor companies to the business since 1987. He has held various leadership positions within Dresser-Rand in the areas of Engineering, Production, Materials Management, and Supply Chain Management. From February 2007 until December 2008, Mr. Rossi was our Executive Vice President, Product Services. In that role, he had worldwide responsibility for sales of our aftermarket parts and services business. Prior to that, he had been our Vice President and General Manager, North American Operations since October 2003, and was responsible for all U.S. plants, and worldwide development engineering. Mr. Rossi served as Vice President and General Manager Painted Post Operation from February 2001 to October 2003 and as Vice President, Supply Chain Management Worldwide from March 1998 to January 2001. Mr. Rossi earned a B.S.M.E. from Virginia Tech and an M.B.A. in Corporate Finance and Operations Management from the University of Rochester’s Simon School of Business.

Jerome T. Walker has been our Vice President and General Manager, Americas and Asia Pacific since January 2009. He served as General Manager, Olean from September until December 2008. Prior to joining Dresser-Rand, Mr. Walker held various senior leadership roles at Honeywell International, a diversified technology and manufacturing company, between 1993 and 2008. His most recent position was Vice President of Global Operations from 2005 to 2008 where he led all aspects of Manufacturing, Supply Chain and Project Operations for Honeywell’s global industrial automation and control business. Prior to that, he led Honeywell’s Europe, Middle East and Africa industrial business unit for three years as Vice President and General Manager, based in Brussels, Belgium. He also served as Vice President of Sales, Vice President of Business Development and Director of Marketing at Honeywell. He started his career in operations at the BP (formerly Amoco) Whiting Refinery outside Chicago and also worked in Product Marketing at Emerson Electric. Mr. Walker has a BS in Chemical Engineering from The University of Notre Dame and an MBA from Northwestern University Kellogg Graduate School of Management.

 

Overview

 

We believe executive compensation has a direct impact on the Company’s business performance, and therefore on stockholder value. Our goal is to design and implement an executive compensation program that maximizes value to stockholders over the long term. We also believe an effective program should reinforce the Company’s corporate objectives in simple and easy to understand ways and be flexible enough to remain effective in each of the global employment markets in which the Company operates. To that end, the Compensation Committee, working with the Company’s human resources compensation team and outside advisors, has designed a program to:

 

 

In this section, we discuss and analyze compensation policies and decisions with respect to the material elements of compensation for each of the Company’s named executive officers (“NEOs”) in 2010 in light of our goals and objectives. For 2010 these named executive officers were as follows:

 

 

Summary of Compensation Philosophy, Practices and 2010 Decisions

 

In order to support the guiding principles outlined above, the Company’s executive compensation program has been designed as follows:

 

 

Following an outstanding year in 2009 where the Company achieved records in many important categories, including sales, operating income, net income, earnings per share and worldwide safety performance, the Company recognized that 2010 would be challenging as it anticipated lower revenues driven by lower 2009 new unit bookings. However, we believed that Dresser-Rand was well positioned to weather this challenge through its flexible manufacturing model, strong leadership, and historically dependable aftermarket business.

The business environment was factored into all of our 2010 compensation decisions. Also factored into our decisions about the allocation of the Company’s program elements were continued interest to incentivize superior working capital performance and concerns over the challenges of anticipated, continued slower bookings in 2010. In light of these challenges, the Company made some modifications to its executive compensation program, including:

 

 

In addition to the above actions, the Compensation Committee also approved implementing another market-competitive, performance-based equity component in the 2010 Dresser-Rand long-term incentive program, replacing a portion of stock options. Prior to implementing this new program, the long-term incentive program consisted of 60% stock options and 40% time-based restricted stock. The new program consists of 30% stock options, 30% performance-based restricted stock units, and 40% time based restricted stock units. We believe that introducing the performance-based restricted stock units, which are based on relative total stockholder return, reinforces the alignment between the financial interests of our executives with those of our stockholders. Program details are outlined further in this discussion.

 

The following sections provide greater detail regarding each of the program elements of executive compensation.

 

Program Elements

 

Material elements of the executive compensation program for 2010 for named executive officers are listed below, together with the principal program objectives that we believe each element supports. Overall, the program elements added together are generally targeted between the 50th and 75th percentile of survey or peer group data (as applicable) based on the Company’s performance and the executive’s individual responsibility, leadership, performance, potential, skills, knowledge and impact.

 

 

While each of the named executive officers receives healthcare and other benefits available to employees generally, we do not consider these to be a material part of annual compensation decisions for these officers.

 

How We Generally Make Compensation Decisions

 

The Company’s compensation goals and objectives drive our decision-making process. Decisions about individual levels of each compensation element begin with a thorough review of relevant market data. The market data provides the broadly defined boundaries which we take into account in making specific awards. The Committee evaluates numerous factors before arriving at each specific determination. The use of market data coupled with an effort to individualize decisions for each executive reflects a philosophy of providing market competitive compensation, while at the same time rewarding individual responsibility, leadership, performance, potential, skills, knowledge and impact on the Company.

 

In order to ensure objectivity in reviewing and analyzing market data and trends, the Compensation Committee engages an outside compensation consulting firm. In 2010, the Committee engaged Mercer (U.S.) Inc. as its expert compensation consulting firm (its “Advisor”), and a lead consultant from the Advisor participated in each Compensation Committee meeting held in 2010 in order to provide input on competitive compensation practices and advice on related matters.

 

•  First Step — Defining the Range with Market Data

 

Because we believe market data should play a fundamental role in informing our decisions about program design, compensation and performance targets, and individual awards, the Committee instructs its Advisor to conduct an annual market review of the value of the Company’s compensation program to its named executive officer positions and other top leadership positions to assess whether we are providing competitive compensation to the executives. Market data provides the basis for establishing targeted compensation levels for each of the named executive officers’ positions. However, when determining the actual compensation level for each named executive officer, their individual responsibility, leadership, performance, potential, skills, knowledge and impact are considered (with no particular goals or weighting assigned to these items).

•  Selection of Market Data

 

We consider two types of market data: peer group data and broader based survey data. In 2010, we utilized peer group data as the sole basis for determining market competitive compensation levels for the CEO and CFO positions because we believe there was significant comparability in terms of position and responsibility with the corresponding positions at the peer companies. However, we used broad based survey data for the remaining named executives to ensure an appropriate match between position and responsibility for these officers.

 

Peer Group Data.  Peer group data from publicly available proxy statements is collected. Based on data collected by its Advisor and our management team, the Compensation Committee determines which group of companies comprises the peer group based upon similarities in:

 

 

In the fourth quarter of 2009, the Compensation Committee reviewed the peer group with the objective of ensuring continued alignment between the attributes of the peer group companies with the Company’s stated objectives and made no changes to the group for 2010. We believe that this group represents the types of companies with which Dresser-Rand competes for executive talent. At the time of the peer group review, the Company’s annual revenues and overall market value were between the 50th and 75th percentiles, in comparison to its peer group, as illustrated below:

 

 

 

 

For 2010, the list of 16 peer companies consisted of:

 

 

Survey Data.  The Advisor has an extensive database of executive compensation data that it regularly collects and analyzes. Its surveys incorporate data from a broad range of public and private companies. Together with the Advisor, the human resources compensation team identifies key job responsibilities for each named executive officer and then matches the job responsibilities to comparable job descriptions contained within the Advisor’s executive compensation survey sources for positions other than CEO and CFO.

 

•  Use of Market Data in Decision-Making for 2010

 

We use market data to provide a starting point for our evaluation of compensation levels for base salary, total cash compensation (base plus actual annual cash incentives), short-term incentive targets as a percentage of base salary and long-term incentives. For each of these elements of compensation, we identify position-comparable 25th, 50th (median), and 75th percentiles. These data points help set a general range of compensation levels for the named

executive officers and meet our positioning objectives. For each element, the target level of compensation awarded is generally within the 50th to 75th percentile range. However, where the actual level of compensation falls in relation to these end points is a function of several subjective factors, which are discussed below. We used peer group data to determine the values for the CEO and CFO roles. For our other named executive officers, however, we found position responsibilities to be significantly less comparable in the peer group and therefore we relied upon broad based survey data. With respect to the CEO, his base salary in comparison to the peer group was above the 75th percentile based on a number of factors, including his significant experience in the position, his outstanding leadership of the Company since its initial public offering, and changes in the base salary levels of the CEOs in the peer group, where base salaries at the 75th percentile declined from the prior year.

 

At least annually we compare the total compensation packages of the named executive officers to market in order to proactively identify any variations that may be developing and to help ensure that the total compensation mix continues to meet our objectives. For 2010, the results of our CEO and CFO compensation review (conducted using proxy data on peers) concluded that the mix of total compensation elements (at target) and their relative weights (see Figure 1) remain market competitive.

 

Figure 1

 

The following charts depict peer group allocation of the targeted total compensation (base salary, short-term incentive at target (“STI”) and long-term incentive (“LTI”)) for the CEO and CFO positions. This analysis indicates that the Company’s compensation mix remains in line with current market practice.

 

 

 

•  Second Step — Evaluating Individual Circumstances

 

To determine the appropriate use of the market data, we consider several person-specific factors. The CEO subjectively evaluates whether the responsibility, leadership, performance, potential, skills, knowledge and impact of each executive justifies special consideration in establishing the compensation awarded, and makes applicable recommendations to the Compensation Committee. The Compensation Committee considers the same factors with respect to the CEO and makes any applicable recommendations to the independent directors of the Board.

•  Third Step — Finalizing the Decision

 

The independent directors of the Board evaluate the Compensation Committee’s recommendations with respect to the CEO’s compensation, including the Compensation Committee’s rationale for where particular elements fall within the market data, and for any exercise of discretion in the recommendation, and have the final authority to approve, disapprove or make changes to compensation recommendations for the CEO. For 2010, the independent directors of the Board unanimously approved all of the Compensation Committee’s recommendations for the CEO.

 

The Compensation Committee makes a similar judgment about the CEO’s recommendations regarding the other named executives. For 2010, following a discussion with the Company’s management and the Advisor, the Committee, after providing input which the CEO took into account, approved the CEO’s recommendations.

 

The results of our final compensation decisions for 2010 reflect the decision process described above. After taking into consideration the effect of individual circumstances for each position, actual 2010 base pay and cash incentive targets established in 2010 for the named executive officers fell between the 50th percentile and 75th percentile of the market compensation data.

 

2010 Compensation Decisions

 

Adjusting Base Salaries

 

As described earlier, base salaries for our NEOs, other than the CEO, who received no increase, were delayed several months and increased only moderately to ensure alignment with the desired target market position. Messrs. Baldwin and Mai were awarded a 2.5% increase in base salary. Mr. Rossi received a 3.5% increase, and Mr. Walker received a 3.0% increase in base salary.

 

Annual Incentive Program

 

In structuring the annual incentive awards for 2010, the Compensation Committee reviewed incentive target levels (expressed as a percentage of base salary) for each named executive officer relative to market data. After evaluating the market data for each named executive officer with its Advisor, the Compensation Committee determined that no adjustment to the target incentive levels for the CEO or other named executive officers was warranted.

 

The Compensation Committee also sets the objectives of the Annual Incentive Program (“AIP”) to ensure that the program continues to align management’s financial interests with those of stockholders, and to reward individual performance with respect to key initiatives and goals of the Company. The independent directors of the Board approved the objectives, compensation and performance targets recommended by the Compensation Committee for the CEO. All of the named executive officers are eligible for a non-equity annual incentive award.

 

•  Program Design

 

After reviewing the market data pertaining to maximum payout opportunities for the AIP, the Committee determined that the current maximum total payout opportunity of 200% of target continued to be at the median market practice. The financial performance aspect of the program, which accounted for 80% of the program’s payout potential, remained consistent with the 2009 plan.

 

Individual objectives account for the remaining 20% of the 2010 program’s payment potential. The CEO had four individual objectives approved by the Board and all other named executive officers had four to five individual objectives. Individual objectives are intended to be within the control of, or significantly impacted by, the individual and support specific initiatives or goals that are approved or reviewed by the Board or Compensation Committee, as applicable.

 

The maximum payout that can be generated for each incentive component (financial and individual) is 250% of target. However, while each component may generate a payout up to 250%, the overall maximum payout that can be earned is capped at 200% of target.

•  Program Objectives

 

The Compensation Committee reviewed the financial and individual objectives for the other named executive officers based on the CEO’s recommendations, and recommended to the independent directors of the Board the financial and individual objectives for the CEO. For 2010, financial objectives accounted for 80% of the award potential and were tied to financial results of operations of either the Company as a whole or a combination of overall Company and business unit results in the case of Mr. Walker. In reviewing the threshold, target and maximum values of each financial objective, the Committee considered the following:

 

 

Individual objectives accounted for 20% of the award potential. The Compensation Committee assessed the performance of the CEO against pre-established objectives at the end of the year and made payout recommendations to the independent directors of the Board. The Compensation Committee also reviewed the individual objectives Mr. Volpe recommended for his direct reports.

 

Financial Objectives.  For 2010, the Compensation Committee determined that the corporate financial measures would consist of operating income and net working capital (“NWC”) as a percentage of sales. Operating income was weighted at 75% and NWC at 25% of the financial component. To incentivize performance within his business unit, Mr. Walker’s plan had specific financial measures related to his business unit in addition to the corporate financial measures. In Mr. Walker’s plan, 45% was tied to overall Company operating income and NWC consistent with the corporate allocation, 35% was tied to his business unit operating income and NWC, and 20% was tied to individual objectives.

 

The Company defines “operating income” in the same way that it is presented in its quarterly and annual filings under U.S. Generally Accepted Accounting Principles (“GAAP”). This objective is measured on a year-to-date basis each quarter with each cumulative quarterly result carrying equal weight in the calculation of the operating income component.

 

The Company defines “net working capital” as the net of:

 

 

When calculating average NWC, NWC was summed at the end of each of the 12 calendar months and divided by 12. This result was then divided by the 2010 annual consolidated sales to determine the NWC to sales ratio.

 

The Compensation Committee approved these financial measures because it believes maximizing operating income and minimizing NWC as a percentage of sales are direct contributors to increasing stockholder value, consistent with the Company’s strategic initiatives.

 

Operating Income.  For the operating income metric the threshold for payout begins at 80.1% of the performance target, the maximum being available at 115% of the performance target, and 100% being available for 100% of the performance target.

 

The operating income financial objective was set as a series of four, cumulative, year-to-date performance targets at the three, six, nine and twelve month periods based on the Company’s Board-approved annual operating plan. Achieving planned operating income was expected to require a significant effort.

Figure 2

 

The following chart depicts the performance result relationship for the operating income financial objective. The line illustrates the higher payout levels associated with higher YTD operating income. For the operating income financial objective, the Committee varied the scale of the eligible payout over the range of potential achievements in a manner that results in larger incremental reductions in payout below the 90% achievement compared to the payout for performance between 90% and 100% achievement; and in larger incremental benefits in payout above 100%.

 

 

The operating income metric is divided into four targets that reflect cumulative, year-to-date performance based on the annual operating plan as explained above. The average of the four payout results is used to determine the operating income component result. This emphasis on cumulative results was implemented to focus the leadership team on achieving quarterly and year-to-date earnings targets and to facilitate risk management by not incenting risky business judgments to achieve annual results in the final quarter of the year. The corporate operating income performance targets and payout results for calculation of the 2010 Annual Incentive Program were:

 

 

NWC.  The target level for NWC was made more challenging for 2010 by moving the target to 4% from 6%. The Company believes the target level is considerably better than that of its peer group. The threshold for payout under the 2010 NWC objective began at two percentage points above target, 100% being available for 100% of the target and the maximum being available if the result was two percentage points below the target (see Figure 3).

 

The Company also believes that the target level of achievement is best in class compared to industry norms. The Company performed well in 2010, especially with respect to efforts to minimize the investment in net working capital. The Company’s strong focus on cash management, including receivables, progress payments, inventories, and payables, resulted in achieving NWC as a percent of sales of 3.6% based on a 12-point average, which generated a payment of 130% of the compensation target.

Figure 3

 

The following chart depicts the performance result relationships for the NWC financial objective. The line illustrates the lower payout levels associated with higher NWC as a percent of sales.

 

 

The corporate Net Working Capital performance target and payout results used for calculation of the 2010 Annual Incentive Program were:

 

 

In the second quarter of 2010, the Compensation Committee requested that its Advisor conduct a study to evaluate the Company’s 2007-2009 financial performance compared to its peers and to assess whether actual annual incentive payments have been disproportionate given relative financial performance, and in relation to the decision to have each annual incentive metric earn up to 250% of target (although total payment is capped at 200%) beginning in 2008. The Committee’s Advisor collected and analyzed data from peer company proxy statements and financial statements, including both target and actual incentive payment data for CEOs and the next four highest paid named executive officers (including the CFO). The Advisor’s analysis indicated that when comparing actual payout amounts as a percentage of the target incentive, the actual payout amounts for the named executive officers were slightly lower than what would be expected based on the Company’s financial performance when compared to its peers over this three-year period. The CEO’s bonus payouts, however, were on par with what would be expected based on the relative financial comparison over the three-year period.

 

2010 Individual Objectives.  For 2010, the Compensation Committee reviewed four to five individual objectives for each named executive officer (other than the CEO). The independent directors of the Board determined that the CEO would have four individual objectives. These objectives:

 

 

Consistent with the goal of recognizing individual responsibility, leadership, performance, potential, skills, knowledge and impact, the CEO submitted to the Compensation Committee his recommendations for individual objectives (and their associated weightings) for each of the named executive officers, including himself. These

individual objectives reinforced the Company’s strategic objectives. The specific performance criteria were customized for each named executive officer in order to maximize achievement of the Company’s objectives.

 

In 2010 the individual objectives for the named executive officers were:

 

 

In early 2011, the CEO evaluated the other named executive officers’ performance for these objectives using various qualitative and quantitative criteria for each, with a view to determining an overall achievement rating for the individual objectives. In setting the overall achievement rating, the CEO also considered each executive’s own self assessment of achievement, as well as his assessment of the difficulty the executive faced in achieving his objectives, including unforeseen factors that arose after the objectives were established. The Compensation Committee conducted a similar assessment with respect to the CEO’s performance toward his individual objectives, including reviewing the CEO’s self-assessment.

 

No single individual objective for a named executive officer was weighted at more than 5% of the total target incentive payout. Guidance for payout percentages for the individual objective component of the annual incentive calculation is based on performance achieved for each individual objective and the difficulty of achieving that objective. The difficulty assessment looks back at the obstacles that each named executive officer faced in meeting his individual objectives, which may be different (easier or harder) than what was expected when the objective was set. A rating of “somewhat difficult”, “difficult”, “more difficult”, or “very difficult” was then assigned to each individual objective. This difficulty assessment was then considered based on the performance result of each individual objective, which was rated as either “met some”, “met most”, “met all”, or “substantially exceeded”. The weighted average of each objective’s performance produced the overall individual objective result for each named executive officer.

 

Final Award Calculation.  The award for each named executive was determined by multiplying (a) the achievement rating for each objective, times (b) the weighting for such objective, times (c) the target award level (as a percentage of base salary), times (d) the base salary rate at December 31, 2010. No achievement rating could exceed 250%. The products for all the objectives were summed to arrive at the final award amount. If the final calculated award exceeded 200% of the executive’s target incentive level, the actual award granted was reduced to 200% of his or her target incentive level. For 2010, the final annual incentive award values for the CEO and each of

 

 

Long-Term Incentives

 

In designing the 2010 long-term incentive program, the Compensation Committee approved several design changes, including:

 

 

As mentioned above, the Committee approved implementing a market-competitive, performance-based equity component in the 2010 Dresser-Rand long-term incentive program. Key features of the program include:

 

 

 

 

 

 

 

In addition to the program changes noted above, the Committee approved the following methodology for determining the number of grants:

 

 

In determining the mix of these three types of equity grants, one of the Compensation Committee’s principal goals was to provide value to the executives for future growth in stockholder value and, thus, the combination of stock options (stock appreciation rights) and performance-based restricted stock units were weighted more heavily. The Compensation Committee included the element of time-based restricted stock units to encourage retention of executives and to provide a market competitive long-term incentive portfolio.

 

The stock option, performance-based restricted stock units, and time-based restricted stock unit grants attributable to 2010 for each named executive officer vest one-third on February 15 of each of the final three years following the grant date. The expiration date of such stock options occurs on the tenth anniversary of the grant date.

 

In determining long-term incentive awards, the Compensation Committee reviewed available market-based long-term incentive compensation data provided by its Advisor. After discussion with management and its Advisor, the Compensation Committee applied individual factors, including individual responsibility, leadership, performance, potential, skills, knowledge and impact, for each named executive officer to determine the 2010 grant value. The Compensation Committee approved the long-term incentive grants to the named executive officers (other than

the CEO) based on the CEO’s recommendations. The independent directors of the Board approved the long-term incentive grant value of the CEO based on the Compensation Committee’s recommendations. Grant values for all named executive officers can be found in the section “Grants of Plan-Based Awards for 2010.”

 

In designing the long-term incentive program, the Compensation Committee considered the potential impact of shares granted in 2010 on the total number of shares outstanding. Specifically, prior to finalizing and implementing the long-term incentive program, the Compensation Committee reviewed the total equity awards outstanding (including estimated shares to be granted in 2010 to the executive leadership team and all other participants) as a percentage of total common shares outstanding. The Committee compared the result of this calculation (the “utilization rate”) to the utilization rates for peer companies listed on page 27. The Compensation Committee determined that the Company’s 2010 utilization rate was within an acceptable range, consistent with that of its peer group. This calculation and subsequent analysis were performed in order to compare the proposed annual share grants with both best practice guidelines set forth by independent governance organizations as well as with our peer companies.

 

The Compensation Committee continued its previously adopted practice of establishing fixed dates on which equity grants could occur in 2010. Five successive fixed dates of February 15, May 15, August 15, November 15, and December 30 were established for subsequent new hire or special grants.

 

Other Aspects of Executive Compensation

 

Stock Ownership Guidelines for Executive Officers

 

The Compensation Committee made changes to its existing stock ownership guidelines for 2010 by reducing the CEO’s multiple from 10 times to 5 times base salary based on market information provided by its Advisor. The Compensation Committee continues to believe that maintaining stock ownership guidelines is an important means of encouraging the executive officers to acquire and hold a significant ownership stake in the Company’s stock. Under these guidelines, executive officers, including the named executive officers, are expected to hold common stock having a value derived through applying a targeted multiple to the officer’s base salary.

 

The targeted multiples for 2010 varied among the executives depending upon their position and responsibilities. The stock ownership guidelines require a multiple of at least 5 times base salary for the CEO, a multiple of at least four times base salary for the CFO and a multiple of at least three times base salary for the other named executive officers. Each executive officer is expected to retain at least 50 percent of the shares acquired under awards granted under the long-term incentive program until achieving the ownership target (excluding any shares sold or forfeited to satisfy withholding obligations or to “net exercise” any option). For purposes of these guidelines, stock ownership includes shares over which the holder has direct or indirect ownership or control, including vested restricted stock, but does not include unvested restricted stock, stock options or unexercised stock options. Based on the December 31, 2010 stock price, the CEO exceeds the guidelines by owning stock valued at over 15 times his base salary. We expect the other named executive officers to meet the guidelines within five years of being appointed to an executive officer position. The Compensation Committee reviews each named executive officer’s progress toward achievement of targeted ownership on an annual basis.

 

Recoupment Provisions

 

Every participant in the AIP is obligated to reimburse the Company for all or such portion of any non-equity based incentive compensation paid after April 1, 2010, that would not have been provided but for such participant’s intentional misconduct (including knowingly creating a false document) that caused the material noncompliance of the Company with any financial reporting requirement under the securities laws requiring a restatement of the Company’s financial results. The Company conditioned any payment under the AIP to a participant on such participant’s express agreement to honor this obligation and the other terms and conditions of the AIP.

 

In addition, the long-term incentive program grants provide that if a participant’s employment is terminated for cause:

 

 

 

The Committee shall also determine whether a participant’s employment is a termination for cause and shall deem a participant’s termination of employment to be for cause if following the date the participant’s employment terminates, it determines that circumstances exist such that the participant’s employment could have been terminated for cause.

 

Retirement Benefits

 

The NEOs are eligible to participate in both a qualified retirement savings program and a non-qualified deferred compensation program, as described below:

 

 

Mr. Volpe and Mr. Rossi have accrued benefits under a frozen qualified defined benefit pension plan. Mr. Volpe received a lump sum payment of $48,064 in January 2010 for accrued benefits under a frozen non-qualified defined plan that was terminated.

 

Employment Agreements and Arrangements

 

International Assignment Benefits

 

In 2010, Messrs. Volpe, Mai and Rossi were assigned to Paris, France in furtherance of the Company’s announced plans to open an additional headquarters office there. Neither Mr. Baldwin nor Mr. Walker were assigned to Paris. Messrs. Volpe, Mai and Rossi, and certain other officers, entered into international assignment agreements with Dresser-Rand International Inc., a subsidiary of the Company (the “International Assignment Agreements”). These agreements provided certain assignment-related benefits, in accordance with the Company’s International Assignment Guidelines (the “Guidelines”), which apply to international assignments for all employees.

 

All salaried employees participating in international assignments are eligible for assignment-related benefits in accordance with the Guidelines. One of the objectives of the Guidelines is to create a financially neutral impact to the assignee such that the assignee experiences neither a financial windfall or hardship due to the international assignment. This can include adjustments for cost of living differences, allowances for housing, transportation, cultural and language courses, schooling for dependent children, among others. Most of the assignment-related benefits are treated as cash compensation for the assignee. The named executive officers who relocated in 2010 received these benefits, and, as a result, their 2010 cash compensation will reflect an increase. Without these benefits, their 2010 total direct compensation would have decreased from 2009.

 

International assignment benefits are customary for expatriate assignments in the industry, and the Company’s relocation benefits afforded to the applicable NEOs were designed to assist them in relocating to Paris. The Committee approved the benefits after taking into account standard market practices. The International Assignment Agreements provide for standard benefits under the Guidelines, with the exception of the potential severance benefit discussed below.

 

Depending on each executive’s personal circumstances and in accordance with the Guidelines, the International Assignment Agreements generally provide the following benefits:

 

 

 

All relocating executives have Confidentiality, Non-Compete, Severance and Change of Control Agreements (the “Severance Agreement”) with the Company (the “Executive Officer Agreements”), other than the CEO who has an Employment Agreement. Because the Relocation Agreements are not intended to diminish any current rights, the International Assignment Agreements for the executives other than the CEO clarify that, if an executive elects not to be localized in France after 5 years and the Company cannot return him to a comparable position in the US, the executive will be terminated and receive certain benefits under the Severance Agreement, including a payment based on a multiple of the executive’s base salary as well as a payment equal to the executive’s annual target cash incentive. With respect to the named executive officers receiving Relocation Agreements, both Mr. Mai and Mr. Rossi would receive 1.5 times base salary at the time of such severance. Because the CEO has an Employment Agreement, he is not eligible for this benefit.

 

280(g) Excise Tax Assistance

 

On April 30, 2009, the Compensation Committee adopted a policy providing that, other than an agreement with the CEO that the Committee authorized in 2008 and an agreement that was at that time being negotiated with Mr. Baldwin, the Company’s Chief Financial Officer, the Company will no longer enter into any new or materially amended agreements with executive officers providing for excise tax gross-up provisions with respect to payments contingent upon a change in control. The negotiations with Mr. Baldwin concluded successfully in an agreement that did not include such an excise tax gross-up provision.

 

Vincent R. Volpe Jr.

 

On June 11, 2008, the Company entered into an amended and restated employment agreement with Vincent R. Volpe Jr., the Company’s President and Chief Executive Officer. Mr. Volpe’s term of employment expires on June 10, 2012, and will automatically renew for one additional year on June 11 of each following year unless the Company provides timely written notice to the contrary. The term will expire upon Mr. Volpe’s attainment of age 65 or his earlier termination under the agreement. Mr. Volpe’s annual base salary is to be no less than it was prior to June 11, 2008, and his total compensation will be reviewed by the Company’s Board at least once every 12 months. Annual non-equity incentive compensation will be determined by the Board in accordance with the terms and conditions of the Company’s AIP.

 

Under the agreement, Mr. Volpe is also entitled to benefits in accordance with the terms and conditions of the benefit plans and programs maintained by us for individuals in positions comparable to Mr. Volpe.

 

The employment agreement with Mr. Volpe also contains provisions relating to a covenant not to compete and post-employment compensation, which are described below under the heading “Potential Payments Upon Termination or Change in Control.”

 

Confidentiality, Non-Compete, Severance and Change in Control Agreements

 

To fulfill commitments made in attracting new leadership and to provide a widespread, market benefit for retention purposes for the other executive officers, with the approval of the Compensation Committee, the Company entered into severance / change in control agreements with each named executive officer and other key executives in 2009. Under the agreements, the executives are subject to customary confidentiality and non-compete and non-

solicitation obligations during, and for certain specified periods after, their employment by the Company. These agreements are described in detail below under the heading “Potential Payments Upon Termination or Change in Control.”

 

Other Considerations — The Corporate Tax Deduction on Compensation in Excess of $1 Million per Year

 

Section 162(m) of the Internal Revenue Code of 1986, as amended, generally limits to $1 million the deductibility of compensation paid by a public company to any employee who on the last day of the year is the CEO, or one of the three other most highly compensated officers (excluding the CFO). A very important exemption from this requirement is provided for compensation qualifying as “performance-based compensation.”

 

The Compensation Committee considered the impact of this rule when developing and implementing the various elements of Dresser-Rand’s executive compensation program for 2010. We believe that it is important to preserve flexibility in administering compensation programs. Accordingly, Dresser-Rand has not adopted a policy that all compensation must qualify as deductible under Section 162(m), and amounts paid through the various elements of our compensation program may be determined to not qualify.

 

However, the Compensation Committee, where applicable, tries to maximize deductibility under Section 162(m) to the extent we believe that the action is not in conflict with the best interests of stockholders. To that end, the Committee began reviewing options with management and its Advisor in 2010 that could maximize tax deductibility where possible, without impeding the Committee’s ability to recognize the accomplishments of executives based on their performance. In March 2010, the Compensation Committee approved the establishment of a qualified Section 162(m) funding pool to maximize the tax deductibility to the Company for executives whose Section 162(m) compensation might otherwise exceed $1 million. The pool, which was established based on 2010 financial results, creates performance conditions to fund the annual incentives accrued in 2010 (but paid in 2011), and the time-based restricted stock unit grants anticipated for 2011. All 2010 incentive payments and the time-based restricted stock unit grants made in 2011 were covered within the pool, and the Compensation Committee exercised negative discretion in approving the incentive payments and grant amounts at levels less than the pool would have otherwise permitted.

 

The Roles of the Compensation Committee, Executive Officers and Compensation Consultants in Named Executive Officer Compensation

 

With respect to compensation for the named executive officers, the Compensation Committee has three primary roles: (a) selecting and structuring the elements of executive compensation, (b) reviewing and approving the Chief Executive Officer’s recommendations regarding compensation decisions for the other executive officers, including all of the other named executive officers, and (c) making recommendations to the independent directors of the Board regarding the Chief Executive Officer’s compensation.

 

To help achieve these roles, as mentioned above, the Compensation Committee engaged its Advisor to work with the human resources compensation team to obtain and review compensation data and trends, and give input prior to finalizing management’s proposals for presentation to the Compensation Committee. In November 2009, consistent with the process it has followed for the past four years, the Compensation Committee requested the Advisor conduct a competitive review of emerging executive compensation trends and a detailed review of the Company’s executive compensation program including base salary, annual incentive compensation targets and program metrics, total cash compensation, and long-term incentives. The data contained within this study provided the foundation for the Compensation Committee’s 2010 compensation decisions. Additionally, throughout its engagement with its Advisor, the Compensation Committee also called upon its Advisor to:

 

 

During 2010, the Compensation Committee met eight times. Each meeting concluded with an executive session in which the Committee met privately with its Advisor on various topics including executive compensation matters. The Compensation Committee met three times from November 2009 through January 2010, primarily to discuss and set 2010 executive compensation. During an executive session meeting in January 2010, the Committee and its Advisor analyzed market data and formulated its recommendations to the independent directors of the Board on all elements of the Chief Executive Officer’s compensation for 2010. The Committee met again in February 2011 to finalize annual incentive payments for 2010, making a recommendation to the Board for the CEO’s incentive payment and approving payments for the other executives. The independent directors of the Board approved the CEO’s compensation for 2010 in its February meeting.

 

For 2010, our Chief Executive Officer worked with our Chief Administrative Officer to develop recommendations to the Compensation Committee regarding compensation decisions for his direct reports and other executive officers, including all of the other named executive officers.

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s proxy statement issued in connection with the 2011 Annual Meeting of Stockholders.

 

THE COMPENSATION COMMITTEE

 

Louis A. Raspino, Chairman

Rita V. Foley

Joseph C. Winkler III

 

Directors Raspino, Foley and Winkler were members of the Compensation Committee during 2010.

 

In 2010, none of DRC’s executive officers:

 

 

The following table summarizes the compensation of our Chief Executive Officer, Chief Financial Officer and the next three most highly compensated executive officers for 2010, 2009, and 2008. We refer to these individuals as our named executive officers.

 

 

 

 

 

 

The following table provides details about the plan-based awards granted to our named executive officers for 2010.