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BELDEN INC.

(Name of Registrant as Specified in Its Charter)

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

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April 21, 2008

 

Dear Stockholder:

 

You are invited to attend the 2008 Annual Meeting of Stockholders to be held on Thursday, May 22, 2008, at 11 a.m. (local time) at the Saint Louis Club (16^th Floor), Pierre Laclede Center, 7701 Forsyth Boulevard, St. Louis, Missouri. This year you will be asked to vote in favor of one proposal concerning the election of eleven directors.

 

Whether or not you plan to attend, please sign, date and return your proxy card or vote over the phone or Internet, as soon as possible so that your shares can be voted at the meeting in accordance with your instructions.

 

Thank you for your support and continued interest in Belden.

 

Sincerely,

 

John Stroup

President and Chief Executive Officer

BELDEN INC.
7701 Forsyth Boulevard
Suite 800
St. Louis, Missouri 63105
(314) 854-8000
April 21, 2008

Notice of Annual Meeting of Stockholders

 

 

 

By Authorization of the Board of Directors,

 

Kevin Bloomfield

Vice President, Secretary and General Counsel

 

This proxy statement and accompanying proxy card are being distributed on or about April 21, 2008.

PROXY STATEMENT FOR THE
2008 ANNUAL MEETING OF STOCKHOLDERS

BELDEN INC.
To be held on Thursday, May 22, 2008

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If your shares are registered directly in your name with Belden’s transfer agent, ComputerShare, you are considered (with respect to those shares) the shareholder of record and these proxy materials are being sent directly to you by Belden. As the shareholder of record, you have the right to grant your voting proxy directly to Belden or to vote in person at the meeting. Belden has enclosed a proxy card for you to use.

 

 

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name” (that is, the name of your stock broker, bank or other nominee) and these proxy materials are being forwarded to you by your broker or nominee who is considered, with respect to those shares, the shareholder of record. As the beneficial owner, you have the right to direct your broker or nominee how to vote and are also invited to attend the meeting. However, since you are not the shareholder of record, you may not vote these shares in person at the meeting. Your broker or nominee has enclosed a voting instruction card for you to use.

 

 

 

Even if you plan to attend the annual meeting, we recommend that you also submit your proxy as described below so that your vote will be counted if you decide later not to attend the meeting.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholder Proposals:  To be included in the Company’s proxy statement and form of proxy for the 2009 annual meeting, a stockholder proposal must, in addition to satisfying the other requirements of the Securities and Exchange Commission’s rules and regulations, be received at the Company’s principal executive offices not later than December 15, 2008.

 

Nomination of Director Candidates:  The Nominating and Corporate Governance Committee will consider nominees recommend-ed by stockholders if such nominations are submitted to the Company prior to the deadline for proposals to be included in future proxy statements as noted in the above paragraph. To have a candidate considered by the Committee, a stockholder must submit the recommendation in writing and must include the following information:

 

 

 

In considering candidates submitted by stockholders, the Committee will take into consideration the needs of the Board and the qualifications of the candidate. The Committee may also take into consideration the number of shares held by the recommending stockholder and the length of time that such shares have been held. The Committee believes that the minimum qualifications for serving as a director of the Company are that a nominee demonstrate, by significant accomplishment in his or her field, an ability to make a meaningful contribution to the Board’s oversight of the business and affairs of the Company and have an impeccable record and reputation for honest and ethical conduct in both his or her professional and personal activities. In addition, the Committee examines a candidate’s specific experiences and skills, time availability in light of other commitments, potential conflicts of interest and independence from management and Belden. The Committee also seeks to have the Board represent a diversity of backgrounds and experience.

 

The Committee will identify potential nominees by asking current directors and executive officers to notify the Committee if they become aware of persons, meeting the criteria described above, who have had a change in circumstances that might make them available to serve on the Board. The Committee also, from time to time, may engage firms that specialize in identifying director candidates. As described above, the Committee will also consider candidates recommended by stockholders.

 

Once a person has been identified by the Committee as a potential candidate, the Committee may collect and review publicly available information regarding the person to assess whether the person should be considered further. If the Committee determines that the candidate warrants further consideration, the Chairman or another member of the Committee may contact the person. Generally, if the person expresses a willingness to be considered and to serve on the Board,

the Committee will request information from the candidate, review the person’s accomplishments and qualifications, and conduct one or more interviews with the candidate. In certain instances, Committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate’s accomplishments. The Committee’s evaluation process will not vary based on whether or not a candidate is recommended by a stockholder, although, as stated above, the Board may take into consideration the number of shares held by the recommending stockholder and the length of time that such shares have been held.

 

 

The Belden Board has eleven members and three standing committees: Audit, Compensation, and Nominating and Corporate Governance. The Board had twelve meetings during 2007; eight were telephonic. All directors attended 75% or more of the Board meetings and the Board committee meetings on which they served. The maximum number of directors authorized under the Company’s bylaws is eleven.

 

 

X — Committee member * — Chair ** — Mr. Balk is no longer on the Compensation Committee but continues to serve on the Nominating and Corporate Governance Committee *** — Appointed to the Board and Audit Committee on February 21, 2008 **** — Appointed to the Board on February 28, 2008 and will serve on the Compensation Committee

 

At its regular meeting in February 2008, the Board determined that Ms. Brown and Messrs. Aldrich, Bain, Balk, Cressey, Harris, Kalnasy, Monter, and Rethore, each met the independence requirements of the NYSE listing standards. As part of this process, the Board determined that each such member had no material relationship with the Company. In connection with Ms. McLeod’s appointment, the Board conducted a review of her background to ensure that she would be independent of the Company and management.

 

The Audit Committee operates under a Board-approved written charter and each member meets the independence requirements of the NYSE’s listing standards. The Committee assists the Board in overseeing the Company’s accounting and reporting practices by:

 

 

 

A representative of Ernst & Young LLP is expected to be present at the annual meeting and will have the opportunity to make a statement if the representative desires to do so, and is expected to be available to respond to appropriate questions.

 

At its February 21, 2008 meeting, the Board determined that Messrs. Rethore, Bain, and Harris each was an Audit Committee Financial Expert as defined in the rules pursuant to the Sarbanes-Oxley Act of 2002 and each is independent. Because of Ms. Brown’s recent appointment to the Board and Audit Committee (February 21, 2008), the Board will wait until next year to determine if she is an Audit Committee Financial Expert.

 

The Audit Committee assists the Company’s Board of Directors in its general oversight of the Company’s financial reporting process. Management is responsible for the preparation and presentation of the Company’s financial statements. Ernst & Young LLP (“EY”), the Company’s independent registered public accounting firm for 2007, is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of the Company’s financial statements with accounting principles generally accepted in the United States.

 

The Committee has reviewed and discussed the Company’s audited financial statements for 2007 with management and has discussed with EY the matters that are required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended.

 

EY has provided to the Committee the written disclosures and the letter required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, and the Committee has discussed with EY and confirmed that firm’s independence. The Committee has concluded that EY’s provision of non-audit services to the Company and its subsidiaries is compatible with EY’s independence.

 

Based on these reviews and discussions, the Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for 2007.

 

Bernard G. Rethore (Chair)

Lorne D. Bain

Judy Brown

Michael F.O. Harris

 

The following table presents fees for professional services rendered by EY for the audit of the Company’s annual financial statements and internal control over financial reporting for 2007 and 2006 as well as other permissible audit-related and tax services.

 

 

“Audit fees” primarily represent amounts paid or expected to be paid for audits of the Company’s financial statements and internal control over financial reporting under SOX 404, and reviews of SEC Forms 10-Q, Forms 8-K, Form S-4, and Form 10-K and statutory audit requirements at certain non-U.S. locations.

 

“Audit-related fees” are primarily related to due diligence services on completed and potential acquisitions.

 

“Tax fees” for 2007 and 2006 are for domestic and international compliance totaling $20,252 and $176,876, respectively, and tax consulting totaling $59,714 and $27,985, respectively.

 

In approving such services, the Audit Committee did not rely on the pre-approval waiver provisions of the applicable rules of the SEC.

 

Audit Fees:  For 2007, the Committee reviewed and pre-approved the audit services and estimated fees for the year. Throughout the year, the Committee received project updates and, if appropriate, approved or ratified any amounts exceeding the original estimates.

 

Non-Audit Services and Fees:  Annually, and otherwise as necessary, the Committee reviews and pre-approves all non-audit services and the estimated fees for such services. For recurring services, such as tax compliance, expatriate tax returns, and statutory filings, the Committee reviews and pre-approves the services and estimated total fees for such matters by category and location of service. The projected fees are updated quarterly and the Committee considers and, if appropriate, approves any amounts exceeding the original estimates.

 

For non-recurring services, such as special tax projects, due diligence or other tax services, the Committee reviews and pre-approves the services and estimated fees by individual project. The projections are updated quarterly and the Committee reviews, and, if appropriate, approves any amounts exceeding the original estimates.

 

Should an engagement need pre-approval before the next Committee meeting, the Committee has delegated to the Committee Chair (or if he were unavailable, another Committee member) authority to grant such approval. Thereafter, the entire Committee will review such approval at its next quarterly meeting.

 

The Compensation Committee of Belden determines, approves and reports to the Board on all elements of compensation for the Company’s elected officers. The Committee reviews the design, funding and competitiveness of the Company’s retirement programs. The Committee also assists the Company in developing compensation and benefit strategies to attract, develop and retain qualified employees. The Committee operates under a written charter approved by the Board.

 

The Nominating and Corporate Governance Committee identifies, evaluates and recommends nominees for the Board for each annual meeting (and to fill vacancies during interim periods); evaluates the composition, organization, and governance of the Board and its committees; oversees senior management succession planning; and develops and recommends corporate governance principles and policies applicable to the Company. The Nominating and Corporate Governance Committee will consider nominees recommended by stockholders if such nominations are submitted to the Company prior to the deadline for proposals to be included in future proxy statements as noted above under the caption “Nomination of Director Candidates.”

 

The Committee’s responsibilities with respect to its governance function include considering matters of corporate governance and reviewing (and recommending to the Board revisions to) the Company’s corporate governance guidelines and its code of ethics, which applies to all Company employees, officers and directors. The Committee is governed by a written charter approved by the Board.

 

Current copies of the Audit, Compensation and Nominating and Corporate Governance charters, as well as the Company’s governance principles and code of ethics, are available on the Company’s website at www.belden.com under the heading “Corporate Governance.” Printed copies of these materials are also available to stockholders upon request, addressed to the Corporate Secretary, Belden Inc., 7701 Forsyth Boulevard, Suite 800, St. Louis, Missouri 63105.

 

The Company’s Board has established a process to receive communications from stockholders and other interested parties. Stockholders and other interested parties may contact any member (or all members) of the Board (including Bryan Cressey, Chairman of the Board and presiding director for non-management director meetings), any Board committee or any chair of any such committee by U.S. mail, through calling the Company’s hotline or via e-mail.

 

To communicate with the Board, any individual director or any group or committee of directors, correspondence should be addressed to the Company’s Board or

any such individual directors or group or committee of directors by either name or title. All such correspondence should be sent “c/o Corporate Secretary, Belden Inc.” at 7701 Forsyth Boulevard, Suite 800, St. Louis, MO 63105. To communicate with any of our directors electronically or through the Company’s hotline, stockholders should go to our corporate website at www.belden.com. Under the headings “Corporate Governance,” you will find the Company’s hotline number (with access codes for dialing from outside the U.S.) and an e-mail address that may be used for writing an electronic message to the Board, any individual directors, or any group or committee of directors. Please follow the instructions on our website to send your message.

 

All communications received as set forth in the preceding paragraph will be opened by (or in the case of the hotline, initially reviewed by) our corporate ombudsman for the sole purpose of determining whether the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the Board or any group or committee of directors, the corporate ombudsman’s office will send copies of the contents to each director who is a member of the group or committee to which the envelope or e-mail is addressed.

 

In addition, it is the Company’s policy that each director attends the annual meeting absent exceptional circumstances. Messrs. Aldrich, Bain, Balk, Cressey, Harris, Kalnasy, Monter, and Stroup attended the Company’s 2007 annual meeting.

 

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be
held on May 22, 2008

 

The notice of annual meeting, proxy statement and our 2007 annual report may be viewed online at https://www.proxydocs.com/bdc. You may find more information about the date, time and location of the annual meeting of stockholders, as well as the items to be voted on by stockholders at the annual meeting, in the sections entitled “Notice of Annual Meeting of Stockholders” and “Questions and Answers About the Proxy Materials and the Annual Meeting” beginning on page one of this proxy statement. There, you will also find information about attending the annual meeting and voting your proxy, including where you may find the individual control numbers necessary to vote your shares by telephone or over the Internet.

 

 

Each non-employee director receives a $60,000 annual cash retainer; a time vested (twelve month) annual restricted share (RSU) award of $115,000 divided by the then-current share price; an additional $10,000 per year for the chair of the Audit Committee; an additional $5,000 per year to the chairs of the Compensation and Nominating and Corporate Governance Committees; an additional $5,000 per year to members of the Audit Committee and members of other committees who serve on more than one committee; and upon appointment, a non-employee director receives a time-vested RSU award of 2,500 shares. With respect to Ms. Brown’s appointment award, her RSU’s vest in twelve months; with respect to Ms. McLeod’s appointment award, the Board decided to begin

emphasizing the retention aspect of the award by having the RSUs vest equally over three years. The following table provides information on non-employee director compensation for 2007.

 

 

 

 

 

The Board’s policy is that each non-employee director holds Company stock equal in value to five times his or her annual cash retainer (currently 5 times $60,000). Upon appointment, a member has five years to meet this requirement, but must meet interim goals during the five-year period of: 20% after one year; 40% after two years; 60% after three years; and 80% after four years. The in-the-money value of vested stock options and the value of unvested RSUs are included in making this determination at the higher of their grant date value or current market value. Messrs. Bain, Balk, Cressey, Harris, Kalnasy, Monter and Rethore each meet 100% of the stock holding requirement. Mr. Aldrich, who was appointed to the Board in February 2007, meets the second-year interim requirement and Ms. Brown and Ms. McLeod, who were appointed to the Board in February 2008, meet the first-year interim requirement.

 

 

The Company has eleven directors — Ms. Brown, Ms. McLeod, and Messrs. Aldrich, Bain, Balk, Cressey, Harris, Kalnasy, Monter, Rethore and Stroup. The term of each director will expire at this annual meeting and the Board proposes that each of them be reelected for a new term of one year and until their successors are duly elected and qualified. Each nominee has consented to serve if elected. If any of them becomes unavailable to serve as a director, the Board may designate a substitute nominee. In that case, the persons named as proxies will vote for the substitute nominee designated by the Board.

 

 

The Belden Board of Directors Unanimously Recommends a Vote “For” the Proposal.

 

 

 

 

 

The following table shows the amount of Belden common stock beneficially owned (unless otherwise indicated) by our directors, the executive officers named in the Summary Compensation Table below and the directors and named executive officers as a group. Except as otherwise noted, all information is at March 1, 2008.

 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Based upon a review of filings with the Securities and Exchange Commission and other reports submitted by our directors and officers, we believe that all of our directors and executive officers complied during 2007 with the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934.

 

 

The following table shows information regarding those shareholders known to the Company to beneficially own more than 5% of the outstanding Belden shares for the period ending on December 31, 2007.

 

 

 

 

 

The Compensation Committee has reviewed and discussed with management the following Compensation Discussion and Analysis section of this proxy statement. Based on such review and discussion, the Committee recommended to the Board of Belden that the Compensation Discussion and Analysis be included in the proxy statement.

 

Glenn Kalnasy (Chair)

David Aldrich

John Monter

 

Principles and Objectives

 

The Compensation Committee sets the general compensation philosophy for Belden. The Committee’s overriding objectives are to ensure that executive compensation is competitive and performance-based so Belden can attract, motivate, reward and retain key executive personnel and can ensure that executive compensation is closely aligned with the Company’s short-term and long-term objectives.

 

The Committee achieves these objectives through the various elements of Belden’s executive compensation program. The structure of this program relates a significant part of an executive’s compensation opportunity to Belden’s stock performance, its financial performance and performance against its three-year strategic plan.

 

Annual Process for Determining Total Compensation

 

The Compensation Committee is responsible for determining and approving the total compensation of the CEO and other executive officers based on the Committee’s evaluation of Company performance and the executive’s individual performance relative to pre-established performance goals and objectives. The Committee’s approval of compensation actions with respect to executive officers other than the CEO is based on the CEO’s performance evaluation of each such officer. The Committee also considers recommendations from Mr. Stroup regarding total compensation for those executives reporting directly to him.

 

The Committee annually reviews a summary of each component of compensation for each executive officer. The Committee’s independent compensation consultant, Deloitte Consulting LLP, prepares this summary. The summary includes information concerning the executive’s current salary, annual cash incentive opportunity, outstanding vested and unvested equity awards, retirement benefits, health benefits, perquisites and the amounts payable upon separation of employment or upon a change-in-control of the Company.

 

Under the Committee’s direction, Deloitte also conducts an annual review of the Company’s total compensation program for its executive officers. Deloitte provides the Committee with current market data on executive compensation and advises the Committee periodically on executive compensation philosophy, strategy and implementation. In its most recent review, the Committee concluded that annual compensation for its executive officers — with respect to compensation levels as well as structure — remained consistent with its philosophy and objectives.

 

The Company targets salaries of executive officers at the 50^th percentile of the competitive market and targets annual cash incentive and long-term equity opportunities at the 75^th percentile of the competitive market. Any salary increase for an executive officer must be approved by the Compensation Committee. Information on survey data and Belden’s peer group used to review comparable executive compensation is included below under the heading “Benchmarking.” A discussion of the Company’s incentive plans is provided below under the headings “Annual Cash Incentive Awards” and “Long-Term Equity Incentive Plan.”

 

Elements of Executive Compensation

 

Compensation for executive officers consists of the following elements:

 

 

Salaries of the named executive officers are reviewed annually and at the time of a promotion or other change in responsibilities. Increases in salary are based on a review of the individual’s performance, the competitive market, the individual’s experience

and internal equity. Mr. Stroup annually reviews each executive officer’s performance and the Board reviews Mr. Stroup’s performance. Each executive officer’s performance is scored on a scale 1 (least effective) to 5 (exceptional), and based on the outcome of such review, an officer may receive a merit increase in salary, which the Compensation Committee must approve.

 

Merit increases are based on where the executive officer falls relative to median market targets that are divided into three categories — below market, market and above market. Anyone who scores “least effective” or “needs improvement” will not receive a merit increase and may be given an opportunity to improve performance or be dismissed. The named executive officers’ salaries with respect to their median market targets at December 31, 2007 were: Mr. Stroup, 78%; Mr. Benoist, 98%, Mr. Rose, 113%; Mr. Sheehan, 143%; and Mr. Bloomfield, 92%. (Messrs. Sheehan and Rose left the Company in February 2008 and Mr. Canny, another named executive officer, left the Company in September 2007. Information on each of their separation arrangements is included below under the heading “Departures of Former Executive Officers.”)

 

Executive officers participate in Belden’s annual cash incentive plan. Five hundred eleven (511) employees participated in the plan’s 2007 performance period. Under the plan, participants earn cash awards based on the achievement of Company and individual performance goals. For 2007, the amount paid under the plan to all participants was $11,231,006 — 0.55% of 2007 revenue. Annual cash incentive awards primarily reward short-term performance. The targeted annual cash incentive is based on an analysis of compensation for comparable positions in Belden’s peer group.

 

The actual cash incentive award for executive officers is computed using the following formula:

 

Actual Award = Target Award X a Financial Factor X a Personal Performance Factor.

 

(The terms “Financial Factor” and “Personal Performance Factor” are discussed below.)

 

The 2007 target and actual cash incentive awards paid to the named executive officers are shown below.

 

2007 Annual Cash Incentive Awards

 

 

 

Financial Factor

 

The Financial Factor for Messrs. Stroup, Benoist and Bloomfield was based entirely on consolidated results — 80% on consolidated net income from continuing operations and 20% on consolidated working capital turns. These goals were chosen because in management’s view they are the key elements that drive annual improvement in operating results and are instrumental in the Company achieving its three-year strategic objectives.

 

Working capital turns is calculated using a twelve point average of working capital turns at the end of each month during the calendar year computed by taking the ratio at the end of each month of (i) annualized actual cost of goods sold for the prior month and the current month plus the forecasted cost of goods sold for the next month to (ii) operating working capital at the end of the month.

 

The Financial Factor for Mr. Rose was divided equally between his division results (50%) and consolidated results (50%). This split was used so division presidents would provide appropriate focus on their achieving division operating and financial goals. The Financial Factor for division performance was based on division operating income (70%) and division working capital turns (30%). Mr. Sheehan’s Financial

Factor was based on the period in which he headed the Company’s Belden Americas Division and the period in which he headed the Company’s global marketing group, the latter of which was based on consolidated results.

 

The table below shows threshold, target and actual levels of the Financial Factor for Messrs. Stroup, Benoist and Bloomfield. The objectives in the Financial Factors reflect a significant level of difficulty for the executives given the business environment and challenges faced by the Company in 2007 and are intended to reflect 75^th percentile performance levels. The target level for the consolidated net income component of the Financial Factor was the same as used by the Company in its 2007 operating budget and the target level for the working capital turns component of the Financial Factor was the actual 2006 working capital turns plus one turn improvement.

 

Both of these represent stretch goals compared to 2006 performance — i.e., 2006 consolidated operating income from continuing operations was $103.5 million compared to a 2007 target of $130 million and the 2006 consolidated working capital turns was 3.7 compared to a 2007 target of 4.7. Although there is no maximum level of financial performance, the annual cash incentive plan is capped with respect to the payment of individual awards at a maximum award of $5 million per year and the amount payable to all participants in any one-year performance period is capped at three times the total target amounts for all participants.

 

2007 Financial Factor for Consolidated Results

 

 

The table below shows threshold, target and actual levels of the Financial Factors for Mr. Rose and Mr. Sheehan, who headed the Company’s Belden Americas Division for seven months during 2007. Similar to the corporate level goals, there is no maximum level to financial performance.

 

2007 Financial Factor for Division Results

 

 

 

Consolidated net income, consolidated working capital, division operating income and division working capital were adjusted to reflect certain unusual events during the year. These one-time adjustments primarily concerned restructuring of the Company’s operations. The Committee believed it was appropriate to adjust the financial results for these matters in order to encourage timely restructuring of the Company’s operations. These restructurings were necessary for the Company to achieve its operating income and working capital goals, which are key elements in improving operating and financial performance. Had these adjustments not been made, the Financial Factor for Messrs. Stroup, Benoist and Bloomfield would have been 1.14; the Financial Factor for Mr. Rose would have been 1.02; and the Financial Factor for Mr. Sheehan would have been 1.15.

Personal Performance Factor

 

Awards based on the Financial Factor are adjusted by each executive officer’s Personal Performance Factor, which ranges from 0.5 to 1.5 based on the attainment of 2007 personal performance goals. The personal performance goals reflected in the Personal Performance Factor measure the attainment of short and long-term annual goals, including those set out in the Company’s three-year strategic plan. The Company’s key strategic initiatives include consolidating its manufacturing to low cost regions, expanding its presence in Asia, expanding beyond its legacy copper cable products into fiber, wireless and connectivity, pursuing global marketing and solutions selling, and improving its product portfolio and brand management. The cornerstone of the Company’s strategy is to use its new talent management process to recruit and retain the talent necessary to achieve these strategic goals.

 

Mr. Stroup annually scores each executive officer on the achievement of their goals and the Board scores Mr. Stroup on the attainment of his goals. The 2007 Personal Performance Factors for the named executive officers used in determining annual cash incentive awards are as a follows: Mr. Stroup, 1.5; Messrs. Benoist and Bloomfield, 1.15; and Messrs. Rose and Sheehan, 1.0.

 

Prior Long-Term Cash Incentive Plan

 

The Company also has a long-term cash incentive plan that is being phased out. Payments under the last performance cycle under the plan (2004-2007 cycle) will be made later this year. Messrs. Rose and Bloomfield are the only named executive officers who currently participate in this plan. The performance measures under the plan compare the Company’s average annual growth rate to a peer group of approximately fifty electrical and electronic equipment companies over the four-year performance cycle. Cash payments made in 2007 for the 2003-2006 cycle to Messrs. Rose and Bloomfield and the estimated amount payable in 2008 for the 2004-2007 cycle to Messrs. Rose and Bloomfield, are noted below in the “Non-Equity Incentive Plan” column of the Summary Compensation Table. Once the 2004-2007 cycle payment is made later this year, the plan will terminate.

 

The long-term equity incentive plan is designed to ensure that the Company’s executive officers have a continuing stake in the long-term success of the Company. In addition, the plan emphasizes pay-for-performance. In general, under the plan the Company’s executives receive half of their equity awards in the form of stock appreciation rights (SARs) and the other half in the form of performance share units (PSUs). The SARs are granted at the fair market value of Belden shares on the grant date. As such, they provide a material incentive to executives to obtain a significant stock ownership stake in the Company, but only if the Company’s share price increases during their ten-year term.

 

The PSUs serve several purposes. They have value to the holder only if targeted financial performance goals are achieved during their one-year performance measurement period and they serve as a retention tool because awards made for the attainment of the targeted financial performance goals are in the form of restricted stock units that vest equally over two years.

 

Each year, the Compensation Committee makes equity awards to executive officers and key managers (other than those to new hires) at its February meeting. Eligibility for equity awards is generally based on a threshold salary level, individual performance and the competitive market. However, the Company will selectively grant awards to certain individuals who do not meet the salary threshold based on their exemplary individual performance.

 

2007 Awards

 

Under the plan, the Company may grant various forms of equity awards, including SARs, PSUs and RSUs. At its February 2007 meeting, the Compensation Committee made 454,050 equity awards in the form of 372,800 SARs, 62,900 PSUs and 18,350 RSUs. The total represented approximately 1% of outstanding shares of Belden stock on March 3, 2008.

 

Messrs. Stroup and Benoist’s 2007 equity awards were based on their employment agreements. Mr. Stroup’s agreement provides that, for the three-year period of 2006 through 2008, he will receive equity awards having a grant date value of not less than $2.5 million per year. Mr. Benoist’s agreement provides that he will receive equity awards in 2007 valued at 200% of his base salary.

 

2007 Equity Awards

 

 

 

RSUs awarded in February 2008 to named executive officers for the attainment of objectives for the 2007 performance period covered by their 2007 PSU awards

 

 

 

 

Each named executive officer participates in the following retirement plans:

 

 

The Company offers these plans to be competitive so it can attract and retain the talent necessary to achieve its strategic goals. The Company, using outside independent consultants, periodically benchmarks the competitive market and strives to be at the 50th percentile of those companies with which it competes for management talent.

 

The Retirement Savings Plan is a funded, qualified defined contribution plan under Section 401(k) of the IRC. It is generally available to all active U.S. employees of Belden or its subsidiaries. Participants may contribute from 1% to 50% of their pay on a before-tax basis, subject to limits imposed by the IRC. Belden matches a participant’s contributions at 100% for the first 3% of a participant’s salary deferral and thereafter at 50% on the next 3% deferral. All contributions (including Company matching contributions) are invested in employee-directed investment funds.

 

The Excess Defined Contribution Plan is an unfunded, nonqualified defined contribution plan that provides the benefits of the Retirement Savings Plan to certain employees whose participation in the Retirement Savings Plan is capped at certain compensation levels established by the IRC.

 

The Pension Plan is a funded, qualified defined benefit plan under the IRC. It is generally available to all U.S. active employees of Belden and its subsidiaries. Pursuant to the plan, the Company credits to each participant’s account 4% of his or her annual total compensation up to the Social Security wage base for the year, plus 8% of total compensation that exceeds such limit. The Excess Defined Benefit Pension Plan is an unfunded, nonqualified plan that provides the benefits of the pension plan to certain employees whose participation is capped beyond a certain compensation level set by the IRC.

 

The Company pays account balances under all of these retirement plans upon the employee’s retirement, termination of employment, permanent disability or death.

 

The Company’s healthcare, insurance and other welfare and employee benefit programs are substantially the same for all eligible employees, including executive officers. The Company shares the cost of health and welfare benefits with its associates, a cost that is

dependent on the level of benefit coverage that each associate elects.

 

The Company reimburses Messrs. Stroup, Benoist, Sheehan and Bloomfield for dining club memberships and pays the cost of annual physical examinations and tax preparation services for each named executive officer. The total value of these for each named executive officer does not exceed $10,000 and has not been included in the Summary Compensation Table. Dining club memberships provide an efficient means for the executive officer to meet with customers, investors and others to conduct Company business. Each executive officer is solely responsible for any personal use of the club. Providing annual physical examinations benefits both the officer and Company in ensuring the physical health of the individual. The Company provides tax preparation services to ensure that the executive officer timely and accurately files annual tax returns.

 

Stock Ownership Guidelines

 

To align their interests with those of the Company’s stockholders, Company officers who are required to report their holdings of Belden stock to the Securities and Exchange Commission must hold stock whose value is at least two times their annual base salary (three times in the case of Mr. Stroup). Officers have five years from the May 2005 date the guidelines were implemented (or, if later, five years from becoming an officer) to acquire the appropriate shareholdings. In addition, officers must make interim progress toward the ownership requirement during the five year period — 20% after one year, 40% after two years, 60% after three years and 80% after four years. For purposes of determining ownership, unvested RSUs and the value of vested in-the-money options and SARs are included. For calculation purposes, the Company will use the higher of the current trading price or the acquisition price. As of February 29, 2008, each of the named executive officers either met his interim or five-year stock ownership guideline.

 

Tax Deductibility of Compensation

 

IRS Section 162(m) imposes a limit of $1 million on the amount of compensation that Belden may deduct in any one year with respect to certain executive officers, including the CEO. There is an exception to this limitation for performance-based compensation meeting certain requirements. Stock option and SAR awards are performance-based compensation meeting those requirements and, as such, should be fully deductible. The Company anticipates that its 2008 annual cash incentive and performance share awards will be performance-based compensation under IRC 162(m).

 

To maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals, the Compensation Committee has not adopted a policy requiring all compensation to be deductible but considers these tax considerations when reviewing executive compensation.

 

The Company leases corporate aircraft to provide flexibility to executive officers and other associates for business use and to allow more efficient use of executive time for Company matters. It is Company policy that corporate aircraft shall be used for business purposes only.

 

Benchmarking

 

For executive officers, the Company sets midpoint salaries at the 50th percentile and annual cash incentive awards and long-term equity awards at the 75th percentile of peer group and survey data assuming target performance levels. For 2007, survey salary data included 2007 Economic Research Institute Executive Compensation Assessor; 2007/2008 Watson Wyatt Survey Report on Top Management Compensation; and the 2007 William Mercer Executive Compensation Survey. The survey data was adjusted to reflect Belden’s revenue size.

 

Listed below are the companies in Belden’s peer group that are also reviewed in determining competitive levels:

 

Altera Corp.

Amkor Technology, Inc.

Amphenol Corp.

Atmel Corp.

AVX Corp.

CommScope, Inc.

Energizer Holdings, Inc.

Exide Technologies

Fairchild Semiconductor International

Harman International Industries Inc.

Hexcel Corp.

JDS Uniphase Corp.

Juniper Networks, Inc.

Molex, Inc.

ON Semiconductor Corp.

Plexus Corp.

Spectrum Brands, Inc.

Thomas & Betts Corp.

The peer group was established to include manufacturing companies comparable to Belden based on revenue and market capitalization, and their meeting three requirements — each has annual revenues in excess of $1 billion, has more than 30% of revenues derived from outside the U.S. and has three or more business segments. With the assistance of its compensation consultant (Deloitte), the Committee reviews the composition of the peer group annually to ensure that peer companies remain relevant, and also reviews the compensation data disclosed in the annual proxy statements.

 

Because comparative compensation information is one of several tools used in setting executive compensation, the Committee uses its discretion in determining the nature and extent of its use.

 

Chief Executive Officer Compensation

 

All elements of Mr. Stroup’s compensation are approved by the Board or the Compensation Committee. Upon his appointment in 2005, Mr. Stroup entered into an employment agreement with the Company, having an initial term of three years. Pursuant to his agreement, Mr. Stroup’s base salary of $600,000 per year is subject to annual review and his target annual cash incentive is 100% of his base salary. During 2007, the Committee did not adjust Mr. Stroup’s base salary or his annual equity award of $2.5 million, which have remained the same since the date of his appointment in October 2005. However, the Committee raised Mr. Stroup’s target annual incentive in 2007 from 100% of salary to 130% to reflect the competitive market, his 1.4 Personal Performance Factor for 2006 and the Company’s 2006 strong performance — the Company’s estimated organic growth in 2006 was 7%; its operating margins increased from 5.5% to 7.9%; and its free cash flow exceeded net income by $54 million, or 81%.

 

Based on the Board’s assessment of Mr. Stroup’s 2007 performance, Company performance for the period, and Deloitte’s summary of peer data and the competitive market, in 2008, the Board extended Mr. Stroup’s employment agreement to October 2011; increased his annual base salary to $700,000; and granted him a stock option award having a grant date value of approximately $3 million. The options vest on February 21, 2013 (subject to acceleration on certain events) and were granted at the closing price of Belden shares on the grant date. Mr. Stroup’s new base salary approximates the median of peer data and is between the 25th and 50th percentile of survey data. His total cash compensation (base salary and target annual cash incentive) is slightly above the median of peer and survey data. His target total direct compensation (base salary, annual cash incentive and long-term equity awards) approximates the median target proxy data and is slightly above the 75th percentile of survey data.

 

The Company had strong performance in 2007. Earnings from continuing operations rose from $1.48 per share in 2006 to $2.73 in 2007. Revenues increased from $1.5 billion to a record $2.0 billion. In 2006, the Company created and began deploying a three-year strategic plan that defined management’s priorities to improve performance.

 

In 2007, the first full year under the strategy, the Company made significant progress in achieving its priorities under the three-year plan. First, Belden strengthened its leading brand portfolio by completing three acquisitions, each involving a strong brand: Hirschmann Automation and Control GmbH (a supplier of industrial Ethernet solutions and industrial connectivity); LTK Wiring Limited (one of the largest manufacturers of electronic cable for the China market); and Lumberg Automation Components (a leading supplier of industrial connectivity products).

 

Second, through product portfolio management, the Company improved its (proforma/adjusted) operating margins. Third, the Company began recruiting (outside and within the Company) the talent necessary to carry out its strategic plan. It also developed a performance review process to reward and promote strong performance and to deal with performance that does not meet Company expectations. Fourth, the Company launched initiatives designed to eliminate waste and continuously improve processes throughout the Company through Lean Enterprise techniques.

 

Fifth, the Company improved manufacturing: it reduced lead-times and total landed cost; consolidated several North American facilities; transferred manufacturing to a new facility in Mexico; downsized its operations in Western Europe; began manufacturing in China as a result of its acquisition of LTK; and started constructing a new manufacturing facility in China that will begin making products later this year. Finally, in 2007, to foster growth, the Company implemented initiatives to pursue sales in the fast growing emerging markets of India and China. To recognize these achievements, the Board gave Mr. Stroup a 2007 Personal Performance Factor of 1.5.

Separation and Change in Control Arrangements

 

The Company has entered into an employment agreement with each of the named executive officers. These agreements address key provisions of the employment relationship, including payment of severance benefits upon a termination of employment before and after a change of control of the Company. Information regarding benefits under these agreements is provided following this Compensation Discussion and Analysis under the heading Payment upon Termination or Change of Control.

 

For each executive officer, the Committee (with the assistance of Deloitte and management) reviewed the key provisions of the executive employment agreements to ensure they were competitive based on peer group and survey data. The termination of employment provisions of these agreements were provided to address the competitive market for the positions filled by executive officers. In consultation with Deloitte, the Committee determined that it was necessary to provide executive officers with a fixed amount of compensation in the event they were to leave the Company under certain circumstances, including a termination of the executive officer’s employment without cause before or after a change in control of the Company.

 

Departures of Former Executive Officers

 

In September 2007, Mr. Canny, President of Specialty Products, left the Company. In connection with his departure, Mr. Canny entered into a separation agreement with the Company. Pursuant to the agreement, Mr. Canny received, among other things, severance of $486,200 (an amount equal to the sum of his annual salary and 2007 target annual cash incentive award), a prorata annual incentive award for 2007 of $187,535, and additional consideration for a six-month extension of his twelve-month non-compete covenant (as set out in his employment agreement) of $275,000.

 

At the end of February 2008, Mr. Sheehan, Global Vice President of Sales and Marketing, left the Com-

pany. In connection with his departure, Mr. Sheehan entered into a separation agreement with the Company. Pursuant to his agreement, Mr. Sheehan received, among other things, severance of $637,500 (an amount equal to the sum of his annual salary and 2007 target annual cash incentive award), his actual annual incentive award for 2007 of $330,500, and additional consideration for a six-month extension of his twelve-month non-compete covenant (as set out in his employment agreement) of $187,500.

 

On February 29, 2008, Mr. Rose retired from the Company as President of Belden Europe. In connection with his retirement, Mr. Rose entered into a separation agreement-retirement with the Company. Pursuant to the terms of his equity award agreements, the vesting of his issued and outstanding RSUs, SARs, and stock options was accelerated and he is entitled to exercise his SARs and stock options for the earlier of the expiration of the applicable award period or three years. Mr. Rose also will receive his award under the Company’s phased-out long-term cash performance plan for the 2004-2007 cycle once it is determined by the Compensation Committee.

 

The Compensation Committee reviewed in advance the key terms of each separation arrangement.

 

Additional Information

 

This Compensation Discussion and Analysis should be read in conjunction with the following tables: