UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

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the Securities Exchange Act of 1934 (Amendment No.     )

 

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West Pharmaceutical Services, Inc.

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West Pharmaceutical Services, Inc.
Notice of 2015 Annual Meeting

 

 

 

530 Herman O. West Drive
Exton, Pennsylvania 19341

 

 

March 24, 2015

 

The 2015 Annual Meeting of Shareholders of West Pharmaceutical Services, Inc. will be held at our corporate headquarters on:

 

Tuesday, May 5, 2015

9:30 AM, local time

530 Herman O. West Drive

Exton, Pennsylvania 19341

 

The items of business are:

 

1.              Election of ten nominees named in the Proxy Statement as directors, each for a term of one year.

2.              Consideration of an advisory vote to approve named executive officer compensation.

3.              Approval of amendments to our Amended and Restated Articles of Incorporation to adopt a majority voting standard for uncontested director elections.

4.              Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the 2015 year.

Shareholders of record of West common stock at the close of business on March 9, 2015, are entitled to vote at the meeting and any postponements or adjournments of the meeting.

 

 

 

 

  William J. Federici

 

Sr. Vice President and

 

Chief Financial Officer

 

 

Important Notice Regarding the Internet Availability of Proxy Materials for the Shareholder Meeting on May 5, 2015

 

This Notice of Annual Meeting and Proxy Statement and the 2014 Annual Report (“2014 Annual Report”) are available on our website at http://www.westpharma.com/en/Investors/Pages/AnnualReport.aspx.

 

 

Your Vote is Important

 

Please vote as promptly as possible electronically via the Internet or by completing, signing, dating and returning the proxy card or voting instruction card.

 


 


 

 

Table of Contents

 

 

 

Proxy Summary

 

1

General Information About the Meeting

 

4

Corporate Governance and Board Matters

 

7

Corporate Governance Principles

 

7

Code of Business Conduct

 

7

Board Leadership Structure

 

8

The Board’s Role in Risk Oversight

 

10

Director Independence

 

11

Director Mandatory Retirement

 

11

Share Ownership Goals for Directors and Executive Management

 

12

Communicating with the Board

 

12

Nomination of Director Candidates

 

12

Related Person Transactions and Procedures

 

13

Director Compensation

 

14

2014 Director Compensation

 

14

Director Deferred Compensation Plan

 

16

Executive Compensation

 

17

Executive Summary

 

17

Compensation Committee Report

 

21

Compensation Discussion and Analysis

 

22

Compensation Tables

 

38

2014 Pension Benefits

 

44

2014 Nonqualified Deferred Compensation

 

45

Payments on Disability

 

46

Payments on Death

 

47

Estimated Payments Following Termination

 

47

Payments on Termination in Connection With a Change-in-Control

 

49

Independent Auditors and Fees

 

53

Audit Committee Report

 

54

Items to Be Voted On

 

55

Proposal 1 – Election of Ten Directors

 

55

Proposal 2 – Advisory Vote to Approve Named Executive Officer Compensation

 

62

Proposal 3 – Approval of Amendments to our Amended and Restated Articles of Incorporation to Adopt a Majority Voting Standard in Uncontested Director Elections

 

63

Proposal 4 – Ratification of Appointment of Independent Registered Public Accounting Firm for 2015 Year

 

65

Other Information

 

66

Stock Ownership

 

66

Section 16(a) Beneficial Ownership Reporting Compliance

 

67

2014 Annual Report and SEC Filings

 

67

2016 Shareholder Proposals or Nominations

 

67

Other Matters

 

68

 


 


 

GENERAL INFORMATION

GRAPHIC

 

 

Proxy Summary

 

 

Here are highlights of important information you will find in this Proxy Statement.  This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting.

 

Summary of Shareholder Voting Matters

 

 

Description      

Recommendation     

 

 

 

Proposal 1: Election of Ten Directors

Page
55

 

ü  FOR

Mark A. Buthman

William F. Feehery

Thomas W. Hofmann

Paula A. Johnson

Myla P. Lai-Goldman

Douglas A. Michels

Donald E. Morel, Jr.

John H. Weiland

Anthony Welters

Patrick J. Zenner

 

Each Nominee

 

 

 

 

 

 

 

 

Proposal 2:

 

Page
62

ü  FOR

Advisory Vote on Named Executive Officer Compensation

 

 

 

 

 

 

 

 

Proposal 3:

Page
63

ü  FOR

Approval of Amendments to our Amended and Restated Articles of Incorporation to Adopt a Majority Voting Standard for Uncontested Director Elections

 

 

 

 

 

 

 

 

Proposal 4:

Page
65

ü  FOR

Ratification of Appointment of Independent Registered Public Accounting Firm for 2015 Year

 

 

 

 

 

 

Our Director Nominees

 

You are being asked to vote on these ten directors.  All directors are currently elected annually by a plurality of votes cast.  Detailed information about each director’s background and areas of expertise can be found beginning on page 56.

 

 

 

 

 

Committee Memberships

Other

Name

Age

Director
Since

Occupation

AC

CC

NCGC

ITC

SPC

Current
Public
Company
Boards

 

 

 

 

 

 

 

 

 

 

Mark A. Buthman

54

2011

CFO, Kimberly-Clark

C

 

M

 

 

--

William F. Feehery

44

2012

President, Industrial Biosciences, E.I. Du Pont de Nemours and Company

 

 

 

C

 

--

Thomas W. Hofmann

63

2007

Retired Sr. VP & CFO, Sunoco, Inc.

M

M

 

 

M

3

Paula A. Johnson

55

2005

Cardiologist; Exec. Dir. of Connors Center for Women’s Health and Gender Biology Brigham and Women’s Hospital

M

 

 

M

 

--

Myla P. Lai-Goldman

57

2014

CEO and President of GeneCentric Diagnostics, Inc.

 

 

 

M

M

1

Douglas A. Michels

58

2011

President & CEO, OraSure Technologies, Inc.

M

M

 

 

 

1

Donald E. Morel, Jr.

57

2002

CEO & Chairman, West

 

 

 

 

 

1

John H. Weiland

59

2007

President & Chief Operating Officer, C. R. Bard

 

C

 

 

M

1

Anthony Welters

60

1997

Executive Chairman, BlackIvy Group LLC

 

 

M

 

 

3

Patrick J. Zenner

68

2002

Retired, Hoffmann-La Roche

 

 

C

 

C

1

 

2015 Annual Meeting and Proxy Statement  | 1

 



 

GENERAL INFORMATION

GRAPHIC

 

Legend for Director Nominee chart above:

 

AC

Audit Committee

CC

Compensation Committee

NCGC

Nominating and Corporate Governance Committee

M

Member

ITC

Innovation and Technology Committee

SPC

Succession Planning Committee (ad hoc)

 

 

C

Chair

 

NOTE: All Directors except Dr. Morel are independent.

 

2014 Performance and Compensation Highlights

 

We believe that Dr. Morel and the other named executive officers performed extremely well in 2014 and that their compensation is appropriate in relation to that performance.

 

Under their leadership, our Company achieved a total shareholder return (“TSR”) of 10% in 2014 and a cumulative three-year TSR of 191%.  Those returns reflect our growing sales and profitability.  Compared to 2013, net sales grew 3.9% (or 4.3% at constant exchange rates), gross profit grew by 3.0%, and operating profit grew by 12.1%.

 

GRAPHIC

 

The following table shows the components of 2014 compensation paid to our continuing named executive officers, including total “realizable” pay.  Realizable pay takes a retrospective look at pay and performance.  It is calculated using actual bonuses earned, end-of-period stock values and in-the-money value of stock options during the measurement period.  Realizable pay is the sum of: (1) base salary paid; (2) annual incentive plan amounts actually earned for 2014 performance; (3) the in-the-money value of stock option grants made in 2014; and (4) the current estimate for payouts for the Performance-Vesting Share Unit award made in 2014 (at 95.24% of target).  The table is not a substitute for our 2014 Summary Compensation Table set forth on page 38.

 

2014 Summary Compensation and Realizable Compensation (1)

 

Name and

Principal Position

Salary

Stock
Awards

Option
Awards

Non-Equity
Incentive Plan
Compensation

Change in

Pension Value

and

Nonqualified

Deferred

Compensation

Earnings

All
Other
Compensation

SEC Total

SEC Total
Without
Change in
Pension
Value
(2)

Total
Realizable

Compensation

 

 

 

 

 

 

 

 

 

 

Donald E. Morel, Jr.

Chairman of the Board and CEO

 

837,721

1,200,022

1,199,996

723,880

832,608

95,755

4,889,982

4,057,374

3,529,677

William J. Federici

Senior Vice President and CFO

 

467,023

349,985

349,998

281,967

241,242

39,949

1,730,164

1,488,922

1,333,440

John E. Paproski

President, Pharma. Deliv. Sys.

 

350,339

299,944

300,004

234,191

336,873

93,136

1,614,487

1,277,614

1,092,598

Karen A. Flynn

President, Pharma. Packg. Sys.

 

345,954

310,043

300,002

214,757

93,798

33,848

1,298,402

1,204,604

952,319

Warwick Bedwell(3)

President, Pharma. Packg. Sys, Asia-Pacific Region

 

339,071

150,020

150,002

148,889

-0-

184,358

972,340

972,340

749,636

 

(1)             Does not include compensation information for Jeffrey C. Hunt, who resigned in July 2014.  See Summary Compensation Table below.

(2)             This column is each officer’s total compensation, as determined under applicable SEC rules, minus the change in pension value reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column of the Summary Compensation Table.  It shows the impact that change in pension values had on total compensation, as determined under applicable SEC rules, which vary substantially due to actuarial calculations.  The amounts reported in the SEC Total Without Change in Pension Value column may differ substantially from the amounts reported in the Total column required under SEC rules and are not a substitute for total compensation under the 2014 Summary Compensation Table.

(3)             Amounts in the Salary and All Other Compensation columns for Mr. Bedwell have been converted from Singapore dollars to U.S. dollars at a rate of 0.7991 U.S. dollars per Singapore dollar or 0.9013 per Australian Dollar.  These are the average of the daily-average monthly rates for 2014.

 

2015 Annual Meeting and Proxy Statement  | 2

 


 


 

GENERAL INFORMATION

GRAPHIC

 

Key 2014 Compensation-Related Actions

 

·            Reaffirmed compensation philosophy to target our executive compensation at the median (50th percentile) of comparator group companies.

 

·            Conducted formal pay-for-performance review of CEO compensation versus peers.

 

·            Conducted realizable pay analysis to assess whether Company performance and CEO realizable pay are aligned over a given period of time.

 

·            Adopted policy to provide for continued vesting of future PVSUs and stock option awards for recipients who are at least 57 years of age at the time of retirement and have been with the Company for at least 10 years.

 

·            Eliminated regional PPS annual incentive plans and created a global PPS annual incentive plan to foster greater cooperation and coordination among our regions.

 

·            Modified treatment of LTIP awards upon an executive’s termination due to death, disability or retirement.

 

·            Revised our equity grant policy to be consistent with best practices.

 

·            Set compensation for our new President, PPS, Karen A. Flynn, who was promoted from President, PPS, Americas.

 

 

 

 

Other Existing Key Compensation Features

 

·            Clawback of incentive compensation

 

·            No (excise) tax gross-ups

 

·            No “single trigger” feature on parachute payments in change-in-control agreements offered to future executives

 

·            No-hedging/no-pledging of company stock

 

·            Independent compensation consultant

 

·            Annual CEO realizable pay-for-performance alignment analyses versus our peer groups

 

·            Limited perquisites and personal benefits

 

 

 

 

Auditors

 

Set forth below is summary information with respect to PricewaterhouseCoopers LLP’s fees for services provided in 2014 and 2013.

 

Type of Fees

 

2014

 

2013

 

 

 

 

 

 

 

Audit Fees

 

$1,527,742

 

$1,608,548

 

Audit-Related Fees

 

94,977

 

38,347

 

Tax Fees

 

165,677

 

183,923

 

All Other Fees

 

        23,098

 

        12,261

 

Total

 

$1,811,494

 

$1,843,079

 

 

2015 Annual Meeting and Proxy Statement  | 3

 



 

GENERAL INFORMATION

GRAPHIC

 

 

General Information About the Meeting

 

 

Proxy Solicitation

 


Our Board of Directors is soliciting your vote on matters that will be presented at our 2015 Annual Meeting of Shareholders and at any adjournment or postponement.  This Proxy Statement contains information on these matters to assist you in voting your shares.

The Notice of Annual Meeting and Proxy Statement, the accompanying proxy card or voting instructions and our 2014 Form 10-K Annual Report, including our annual report wrapper, are being mailed starting on or about March 24, 2015.


 

 

Shareholders Entitled to Vote

 


All shareholders of record of our common stock, par value $.25 per share, at the close of business on March 9, 2015, are entitled to receive the Notice of Annual Meeting and to vote their

shares at the meeting.  As of that date, [71,697,992] shares of our common stock were outstanding.  Each share is entitled to one vote on each matter properly brought to the meeting.

 


 

 

 

 

Voting Methods

 

You may vote at the Annual Meeting by delivering a proxy card in person or you may cast your vote in any of the following ways:

 

GRAPHIC

 

GRAPHIC

 

GRAPHIC

 

 

 

 

 

Mailing your signed proxy card or voter instruction card.

 

Using the Internet at  www.ProxyVote.com.

 

Calling toll-free from the United States, U.S. territories and Canada to 1-800-690-6903.

 

 

 

How Your Shares Will Be Voted

 


In each case, your shares will be voted as you instruct.  If you return a signed card, but do not provide voting instructions, your shares will be voted FOR each of the proposals. You may revoke or change your vote any time before the proxy is exercised by filing with our Corporate Secretary a notice of revocation or a duly executed proxy bearing a later date.  You may also vote in person at the meeting, although attendance at the meeting will not by itself revoke a previously granted proxy.

 

Plan ParticipantsAny shares you may hold in the West Pharmaceutical Services, Inc. 401(k) Plan or the Tech Group Puerto Rico Savings and Retirement Plan have been added to your other holdings on your proxy card.  Your completed proxy card serves as voting instructions to the trustee of those plans.  You may direct the trustee how to vote your plan shares by submitting your proxy vote for those shares, along with the rest of your shares, by Internet, phone or mail, all as described on the enclosed


2015 Annual Meeting and Proxy Statement  | 4

 



 

GENERAL INFORMATION

GRAPHIC

 


proxy card.  If you do not instruct the trustee how to vote, your plan shares will be voted by the trustee in the same proportion that it votes shares in other plan accounts for which it received timely voting instructions.

 

Deadline for Voting.  The deadline for voting by telephone or Internet is 11:59 PM Eastern Time

on May 4, 2015.  If you are a registered shareholder and attend the meeting, you may deliver your completed proxy card in person.  “Street name” shareholders who wish to vote at the meeting will need to obtain a proxy form from the institution that holds their shares.


 

 

 

 

Broker Voting

 


If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of shares held in street name.  The Notice has been forwarded to you by your broker, bank or other holder of record who is considered the shareholder of record of those shares.  As the beneficial owner, you may direct your broker, bank or other holder of record on how to vote your shares by using the proxy card included in the materials made available or by following

their instructions for voting on the Internet. A broker non-vote occurs when a broker or other nominee that holds shares for another does not vote on a particular item because the nominee does not have discretionary voting authority for that item and has not received instructions from the owner of the shares.  Although there is no controlling precedent under Pennsylvania law regarding the treatment of broker non-votes in certain circumstances, we intend to apply the following principles.


 

 

Proposal

Votes Required

Treatment of Abstentions and Broker
Non-Votes

Broker
Discretionary

Voting

Proposal 1 - Election of Ten Directors

Plurality of the votes cast

Abstentions and broker non-votes will not be taken into account in determining the outcome of the proposal

 

No

Proposal 2 - Advisory Vote on Named Executive Officer Compensation

Majority of the shares present and entitled to vote on the proposal in person or represented by proxy

 

Abstentions will have the effect of negative votes and broker non-votes will not be taken into account in determining the outcome of the proposal

 

No

Proposal 3 - Approval of Amendments to our Amended and Restated Articles of Incorporation to Adopt a Majority Voting Standard for Uncontested Director Elections

 

Majority of the shares present and entitled to vote on the proposal in person or represented by proxy

Abstentions will have the effect of negative votes and broker non-votes will not be taken into account in determining the outcome of the proposal

No

Proposal 4 - Ratification of Appointment of  Independent Registered Public Accounting Firm for the 2015 Year

 

Majority of the shares present and entitled to vote on the proposal in person or represented by proxy

 

Abstentions and broker non-votes will have the effect of negative votes

Yes

 

2015 Annual Meeting and Proxy Statement  | 5

 


 

 


 

GENERAL INFORMATION

GRAPHIC

 

Quorum

 


We must have a quorum to conduct business at the 2015 Annual Meeting.  A quorum consists of the presence at the meeting either in person or represented by proxy of the holders of a majority of the outstanding shares of our common stock entitled to vote.  For the purpose of establishing

a quorum, abstentions, including brokers holding customers’ shares of record who cause abstentions to be recorded at the meeting, and broker non-votes are considered shareholders who are present and entitled to vote, and count toward the quorum.


 

 

 

 

Mailings to Multiple Shareholders at the Same Address

 


We have adopted a procedure called “householding” for making the Proxy Statement and the Annual Report available.  Householding means that shareholders who share the same last name and address will receive only one copy of the materials, unless we are notified that one or more of these shareholders wishes to continue receiving additional copies.

 

We will continue to make a proxy card available to each shareholder of record.  If you prefer to receive multiple copies of the proxy materials at the same address, please contact us in writing or by telephone: Corporate Secretary, West Pharmaceutical Services, Inc., 530 Herman O. West Drive, Exton, PA 19341, (610) 594-3309.


 

 

 

Electronic Availability of Proxy Statement and Annual Report

 


We are pleased to be distributing our proxy materials to certain shareholders via the Internet under the “notice and access” approach permitted by the rules of the SEC.  This method conserves natural resources and reduces our costs of printing and mailing while providing a convenient way for shareholders to review our materials and vote their shares.

 

On March 24, 2015, we mailed a “Notice of Internet Availability” to participating shareholders, which contains instructions on how to access the proxy materials on the Internet.

 

If you would like to receive a printed copy of our proxy materials, we will send you one free of charge.  Instructions for requesting such materials are included in the Notice.


 

 

This Proxy Statement and our 2014 Annual Report are available at:

http://www.westpharma.com/en/Investors/Pages/AnnualReport.aspx

 

 

 

 

 

Proxy Solicitation Costs

 


We pay the cost of soliciting proxies.  Proxies will be solicited on behalf of the Board by mail, telephone, and other electronic means or in person.  We have retained Georgeson Inc., 199 Water Street, 26th Floor, New York, NY 10038, to help with the solicitation for a fee of $7,000,

plus reasonable out-of-pocket costs and expenses.  We will reimburse brokerage firms and other custodians, nominees and fiduciaries their reasonable out-of-pocket expenses for forwarding solicitation materials to shareholders and obtaining their votes.


 

2015 Annual Meeting and Proxy Statement  | 6

 



 

CORPORATE GOVERNANCE AND BOARD MATTERS

GRAPHIC

 

Corporate Governance and Board Matters

 


During 2014, our Board met five times.  Each director attended at least 75% of the Board meetings and the meetings of the Board committees on which he or she served.  All directors are expected to attend the 2015 Annual Meeting, and all of our directors, except John H. Weiland, attended the 2014 Annual Meeting.

 

Our principal governance documents are our Corporate Governance Principles, Board Committee Charters, Independence Standards and Code of Business Conduct.  Aspects of our governance documents are summarized below. 

We encourage our shareholders to read our governance documents, as they present a comprehensive picture of how the Board addresses its governance responsibilities to ensure our vitality and success.  The documents are available in the “Who We Are—Investor Information—Corporate Governance” section of our website at www.westpharma.com and copies of these documents may be requested by writing to our Corporate Secretary, West Pharmaceutical Services, Inc., 530 Herman O. West Drive, Exton, PA 19341.


 

 

 

Corporate Governance Principles

 


Our Board has adopted Corporate Governance Principles to provide guidance to our Board and its committees on their respective roles, director qualifications and responsibilities, Board and committee composition, organization and leadership.  Our Principles address, among other things:

 

·            director qualifications standards, including our Independence Standards;

 

·            the requirement to hold separate executive sessions of the independent directors;

 

·            the role of independent directors in executive succession planning;

·            the Board’s policy on setting director compensation and director share-ownership guidelines;

 

·            guidelines on Board organization and leadership, including the number and structure of committees and qualifications of committee members;

 

·            policies on access to management;

 

·            director orientation and education; and

 

·            self-assessments of board and committee performance to determine their effectiveness.


 

 

 

Code of Business Conduct

 


All of our employees, officers and directors are required to comply with our Code of Business Conduct.  The Code of Business Conduct covers fundamental ethical and compliance-related principles and practices such as accurate accounting records and financial reporting, avoiding conflicts of interest, the protection and use of our property and information and

compliance with legal and regulatory requirements.  The Board has adopted a comprehensive Compliance and Ethics Program and has named Susan A. Morris our interim Chief Compliance Officer.  Our Chief Compliance Officer delivers regular reports on program developments and initiatives to the Audit Committee and the Board.


 

2015 Annual Meeting and Proxy Statement  | 7

 



 

CORPORATE GOVERNANCE AND BOARD MATTERS

GRAPHIC

 

Board Leadership Structure

 


The Board has determined that combining the CEO and Chairman positions is currently the best leadership structure for the Company.  The Board believes that our CEO is best situated to serve as Chairman because, given his day-to-day involvement with and intimate understanding of our business, industry and management team, he is the director most capable of effectively identifying and implementing strategic priorities.

 

Independent directors and management have different perspectives and roles in strategy development.  Our independent directors bring experience, oversight skills and expertise from outside our organization and industry, while our CEO brings Company-specific experience and expertise.  The Board believes that the combined role of Chairman and CEO promotes strategy development and implementation and facilitates information flow between management and the Board, which are essential to effective governance.

 

The Board further believes that combining these roles fosters clear accountability, effective

decision-making and alignment on the development and execution of corporate strategy.

 

One of the key responsibilities of the Board is to develop strategic direction and hold management accountable for implementing the strategy once it is developed.  The Board also believes the combined role of Chairman and CEO is an effective structure for the Board to understand the risks associated with the Company’s strategic plans and objectives.  Combining these positions places the Company’s senior-most executive in a position to guide the Board’s agenda in setting priorities for the Company and addressing the risks and challenges the Company faces.

 

Additionally, maintaining an independent board with a Chairman, Independent Directors permits open discussion and assessment of the Company’s ability to manage these risks and provides the appropriate balance between strategy development and independent oversight of management.


 

 

 

Chairman, Independent Directors

 


Patrick J. Zenner, an independent director who serves as Chairman of the Nominating and Corporate Governance Committee, was selected by the Board in 2014 to serve as the Chairman, Independent Directors for all meetings of non-management directors held in executive session.  The duties and responsibilities of the Chairman, Independent Directors include:

 

·      conferring with the CEO on Board agenda items, meeting schedules, presentations and other communications;

 

·      acting as chair for Board discussions on any subject where the CEO would not be the

appropriate person to chair such discussion; and

 

·      serving as principal liaison between the CEO and the independent directors.

 

The CEO and the Chairman, Independent Directors create the agenda for each Board meeting.  Each independent director may add items to the agenda.

 

Independent directors meet in regularly scheduled executive sessions and in special executive sessions called by the Chairman, Independent Directors.


 

 

Committees

 


The Board has four standing committees: the Audit Committee; the Compensation Committee;

the Nominating and Corporate Governance Committee; and the Innovation and Technology


 

2015 Annual Meeting and Proxy Statement  | 8

 



 

CORPORATE GOVERNANCE AND BOARD MATTERS

GRAPHIC

 


Committee.  From time to time the Board may form ad hoc committees to address specific situations as they may arise. Currently, the Board has one ad hoc committee:  the Succession Planning Committee. Each committee consists solely of independent directors.  Each standing

committee has a written charter, which is posted in the “Who We Are—Investors—Corporate Governance” section of our website at www.westpharma.com.  You may request a printed copy of each standing committee’s charter from our Corporate Secretary.


 

 

Audit Committee

 

 

 

Mark A. Buthman (Chair)

Thomas W. Hofmann

Paula A. Johnson

Douglas A. Michels

The Audit Committee assists our Board in its oversight of (1) the integrity of our financial statements; (2) the independence and qualifications of our independent auditors; (3) the performance of our internal audit function and independent auditors; and (4) our compliance with legal and regulatory requirements.  In carrying out these responsibilities, the Audit Committee, among other things:

 

·  Reviews and discusses our annual and quarterly financial statements with management and the independent auditors;

 

·  Manages our relationship with the independent auditors, including having sole authority for their appointment, retention and compensation; reviewing the scope of their work; approving non-audit and audit services; and confirming the independence of the independent auditors; and

 

·  Oversees management’s implementation and maintenance of disclosure controls and procedures and internal control over financial reporting.

 

The Board has determined that Mr. Buthman and Mr. Hofmann are each an “audit committee financial expert” within the meaning of SEC regulations.  In 2014, the Audit Committee met six times.  All members of the Audit Committee are independent within the meaning of the listing standards of the New York Stock Exchange (“NYSE”) and the Company’s Corporate Governance Principles.

 

 

Compensation Committee

 

 

 

John H. Weiland (Chair)

Thomas W. Hofmann

Douglas A. Michels

The Compensation Committee develops our overall compensation philosophy, and, either as a committee or together with the other independent directors, determines and approves our executive compensation programs, makes all decisions about the compensation of our executive officers and oversees our cash and equity-based incentive compensation plans.

 

Additional information about the roles and responsibilities of the Compensation Committee can be found under the heading “Compensation Discussion and Analysis.”  In 2014, the Compensation Committee met five times.  All members of the Compensation Committee are independent within the meaning of the listing standards of the NYSE and the Company’s Corporate Governance Principles.

 

 

Nominating and Corporate Governance Committee

 

 

Patrick J. Zenner (Chair)

Mark A. Buthman

Anthony Welters

The Nominating and Corporate Governance Committee identifies qualified individuals to serve as board members; recommends nominees for director and officer positions; determines the appropriate size and composition of our Board

 

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and its committees; monitors a process to assess Board effectiveness; reviews related-party transactions; and considers matters of corporate governance.  The Committee also reviews and makes recommendations to the Board regarding compensation and benefits for non-employee directors and administers director equity-based compensation plans.

 

In 2014, the Nominating and Corporate Governance Committee met three times.  All members of the Committee are independent within the meaning of the listing standards of the NYSE and our Corporate Governance Principles.

 

 

Innovation and Technology Committee

 

 

William F. Feehery (Chair)

Paula A. Johnson

Myla P. Lai-Goldman

The Innovation and Technology Committee provides guidance to our Board on technical and commercial innovation strategies, reviews emerging technology trends that may affect our business, reviews our major innovation and technological programs and overall patent strategies, and assists our Board in making well-informed choices about investments in new technology.  In 2014, the Innovation and Technology Committee met two times.

 

 

Succession Planning Committee (Ad Hoc)

 

 

Patrick J. Zenner (Chair)

Thomas W. Hofmann

Myla P. Lai-Goldman

John H. Weiland

The Succession Planning Committee is an ad hoc committee formed in 2014 to provide guidance to our Board on succession planning for the impending retirement of Dr. Morel, announced in October 2014.  Dr. Morel’s retirement is expected to occur in May 2015 or such later time as a successor is found and appointed.  In 2014, the Succession Planning Committee met twelve times.  Once a successor to Dr. Morel is appointed, the Company anticipates that this Committee will be dissolved.

 

 

 

 

 

 

 

The Board’s Role in Risk Oversight

 


The Board’s role in risk oversight is consistent with our leadership structure, with management having day-to-day responsibility for assessing and managing our risk exposure and the Board actively overseeing management of our risks—both at the Board and committee level.

 

The Board regularly reviews and monitors the risks associated with our financial condition and operations and specifically reviews the enterprise risks associated with our five-year plan.  In particular, the Board reviews our risk portfolio, confirms that management has established risk-management processes that are functioning effectively and efficiently and are consistent with our corporate strategy, reviews the most significant risks and determines whether management is responding appropriately.

 

The Board performs its risk oversight role by using several different levels of review.  Each Board meeting begins with a strategic overview

by the CEO that describes the most significant issues, including risks, affecting the Company and also includes business updates from each reportable segment.  In addition, the Board reviews in detail the business and operations of each reportable segment quarterly, including the primary risks associated with that segment.

 

The Board focuses on the overall risks affecting us.  Each committee has been delegated the responsibility for the oversight of specific risks that fall within its areas of responsibility.  For example:

 

·            The Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation policies, plans and arrangements and the extent to which those policies or practices increase or decrease risk for the Company.


 

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·            The Audit Committee oversees management of financial reporting, compliance and litigation risks as well as the steps management has taken to monitor and control such exposures.

 

·            The Nominating and Corporate Governance Committee manages risks associated with the independence of the Board, potential conflicts of interest and the effectiveness of the Board.

 

·            The Innovation and Technology Committee reviews risks associated with intellectual

property, innovation efforts and our technology strategy.

 

·            The Succession Planning Committee reviews risks associated with choosing a new Chief Executive Officer and ensuring an effective transition from Dr. Morel to his successor.

 

Although each committee is responsible for evaluating certain risks and overseeing the management of those risks, the full Board is regularly informed about those risks through committee reports.


 

 

 

 

 

Director Independence

 


Our Board has adopted a formal set of categorical director qualification standards used to determine director independence.  The standards meet or exceed the independence requirements of the NYSE corporate governance listing standards.  Under the standards, a director must be determined to have no material relationship with us other than as a director.  The standards specify the criteria for determining director independence, including strict guidelines for directors and their immediate families regarding employment or affiliation with us, members of our senior management or their affiliates.  The full text of our standards may be found under the “Who We Are— Investor Information— Corporate

Governance” section on our website at www.westpharma.com.

 

The Board undertook its annual review of director independence in February 2015.  As a result of this review, the Board did not substantively revise the existing standards.  Subsequently, the Board considered whether there were any relationships described under the standards for each director.  As a result of this review, the Board affirmatively determined that each of its non-employee directors is independent of us and our management under our standard of independence.


 

 

 

 

 

Executive Sessions of Independent Directors

 


Our Board also holds regular executive sessions of only independent directors to conduct a self-assessment of its performance and to review management’s strategy and operating plans, the criteria by which our CEO and other senior

executives are measured, management’s performance against those criteria and other relevant topics.  Last year, our independent directors held four executive sessions.


 

 

 

 

 

 

Director Mandatory Retirement

 


All non-employee directors must retire on the date of the annual meeting of shareholders immediately following his or her 72nd birthday. 

An employee director must submit his or her resignation upon the date he or she ceases to be an executive of the Company.


 

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Share Ownership Goals for Directors and Executive Management

 


To encourage significant share ownership by our directors and further align their interests with the interests of our shareholders, directors are expected to acquire within three years of appointment, and to retain during their Board tenure, shares of our common stock equal in value to at least five times their annual retainer.

 

The Board has set share ownership goals for senior executive management, which are set forth in “Compensation Discussion and Analysis—Other Compensation Policies.”


 

 

 

 

Communicating with the Board

 


You may communicate with the Chairman, Independent Directors or the independent directors as a group by sending a letter addressed to the Board of Directors, c/o Corporate Secretary, West Pharmaceutical Services, Inc., 530 Herman O. West Drive, Exton, Pennsylvania 19341.  Communications to a particular director should be addressed to that director at the same address.

 

Our Corporate Secretary maintains a log of all communications received through this process.  Communications to specific directors are forwarded to those directors.  All other communications are given directly to the Chairman, Independent Directors, who decides whether they should be forwarded to a particular Board committee or to management for further handling.


 

 

 

 

Nomination of Director Candidates

 


Candidates for nomination to our Board are selected by the Nominating and Corporate Governance Committee in accordance with the Committee’s charter, our Amended and Restated Articles of Incorporation, our Bylaws and our Corporate Governance Principles.  All persons recommended for nomination to our Board, regardless of the source of the recommendation, are evaluated in the same manner by the Committee.

 

The Board and the Nominating and Corporate Governance Committee consider, at a minimum, the following factors in recommending potential new Board members or the continued service of existing members:

 

·      A director is nominated based on his or her professional experience.  A director’s traits, expertise and experience add to the skill-set of the Board as a whole and provide value in areas needed for the Board to operate effectively.

 

·      A director must have high standards of integrity and commitment, and exhibit independence of judgment, a willingness to ask hard questions of management and the ability to work well with others.

 

·      A director should be willing and able to devote sufficient time to the affairs of the Company and be free of any disabling conflict.

 

·      All of the directors, except for the Chief Executive Officer, should be “independent” as outlined in our Independence Standards.

 

·      A director should exhibit confidence and a willingness to express ideas and engage in constructive discussion with other Board members, Company management and all relevant persons.

 

·      A director should actively participate in the decision-making process, be willing to make difficult decisions, and demonstrate diligence


 

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and faithfulness in attending Board and committee meetings.

 

·      The Board generally seeks active or former senior-level executives of public companies, particularly those with international operations, leaders in the healthcare or public health fields, science or technology backgrounds and individuals with financial expertise.

 

When reviewing nominees, the Nominating and Corporate Governance Committee may also consider whether the candidate possesses the qualifications, experience and skills it considers appropriate in the context of the Board’s overall composition and needs.  The Nominating and Corporate Governance Committee also considers the value of diversity on the Board in the director nominee identification and nomination process.

 

Accordingly, the Committee’s evaluation of director nominees includes consideration of their ability to contribute to the diversity of personal and professional experiences, opinions, perspectives and backgrounds on the Board.  The Committee regularly assesses the effectiveness of this approach as part of its review of the Board’s composition.

 

To assist it with its evaluation of the director nominees for election at the 2015 Annual Meeting, the Committee took into account the factors listed above and used a skills matrix highlighting the experience of our directors in areas such as pharmaceutical and biopharmaceutical services, medical device components, leadership, financial literacy, risk management expertise and independence.

 

Under the heading “Director Qualifications and Biographies,” we provide an overview of each nominee’s principal occupation, business experience and other directorships of publicly-traded companies, together with the qualifications, experience, key attributes and skills the Committee and the Board believe will best serve the interests of the Board, the Company and our shareholders.

 

Shareholders who wish to recommend or nominate director candidates must provide information about themselves and their candidates and comply with procedures and timelines contained in our Bylaws.  These procedures are described under “Other Information—2016  Shareholder Proposals or Nominations” in this Proxy Statement.


 

 

 

 

 

Related Person Transactions and Procedures

 


The Board has adopted a written policy and procedures relating to the Nominating and Corporate Governance Committee’s review and approval of transactions with related persons that are required to be disclosed in proxy statements under SEC regulations.  A “related person” includes our directors, officers, 5% shareholders and immediate family members of these persons.

 

Under the policy, the Nominating and Corporate Governance Committee reviews the material facts of all related-person transactions, determines whether the related person has a material interest in the transaction and may approve, ratify, rescind or take other action with respect to the transaction.

 

In approving a transaction, the Committee will take into account, among other factors, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third

party under the same or similar circumstances and the extent of the related person’s interest in the transactions.

 

The Committee reviews and pre-approves certain types of related person transactions, including (1) director and executive officer compensation that is otherwise required to be reported in our Proxy Statement under SEC regulations; (2) certain transactions with companies at which the related person is an employee only; and (3) charitable contributions that would not disqualify a director’s independent status.  The policy and procedures can be found in the “Investors—Corporate Governance—Related Party Transaction Policies and Procedures” section of our website at www.westpharma.com.

 

We have no related person transactions required to be reported under applicable SEC rules.


 

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Director Compensation

 

 

2014 Director Compensation

 

Our non-employee directors receive annual grants of stock-settled restricted stock units (“RSUs”) equal to $130,000 and a cash annual retainer of $70,000.  Prior to 2013, these awards were made in the form of Deferred Stock, which is substantially similar to stock-settled RSUs.

 

The following tables show the total 2014 compensation of our non-employee directors.

 

Non-Employee Director Compensation Elements

 

Compensation Item

2014 Amount

 

 

 

 

Annual Retainers and Chair Fees

Board

Chairman, Independent Directors (NCGC Chair)

Audit Committee Chair

Compensation & ITC Committee Chairs

 

 

$70,000

20,000

15,000

10,000

 

 

 

2014 Non-Employee Director Compensation

 

Name

Fees Earned
or Paid
in Cash

($)

Stock Awards
($)

All Other
Compensation

($)

Total
($)

Mark A. Buthman

85,000

130,000

 

7,875

 

222,875

 

William F. Feehery

80,000

130,000

 

5,658

 

215,658

 

Thomas W. Hofmann

80,000

130,000

 

13,648

 

223,648

 

L. Robert Johnson (1)

17,500

-0-

 

1,025,935

 

1,043,435

 

Paula A. Johnson

70,000

130,000

 

17,158

 

217,158

 

Myla P. Lai-Goldman

58,333

130,000

 

635

 

188,968

 

Douglas A. Michels

70,000

130,000

 

9,314

 

209,314

 

John H. Weiland

80,000

130,000

 

23,111

 

233,111

 

Anthony Welters

70,000

130,000

 

40,672

 

240,672

 

Patrick J. Zenner

90,000

130,000

 

21,774

 

241,774

 

 

(1)              L. Robert Johnson retired pursuant to the Board’s retirement policy in May 2014.

 

Fees Earned or Paid in Cash

 


 

The amounts in the “Fees Earned or Paid in Cash” column are retainers earned for serving on our Board, its committees and as committee chairs and Chairman, Independent Directors.  All annual retainers are paid quarterly.  The amounts are not reduced to reflect elections to defer fees under the Non-Qualified Deferred Compensation Plan for Non-Employee Directors (“Director Deferred Compensation Plan”).  During 2014,

 

Mr. Buthman, Mr. Michels, Mr. Weiland, and Mr. Welters deferred 100% of their cash compensation.

 

Stock Awards

 

The amounts in the “Stock Awards” column reflect the grant date fair value of stock-settled

 


 

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RSU awards made in 2014.  The grant date fair value is determined under Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718.  In 2014, each non-employee director was awarded 3,016 RSUs, with a grant date fair market value of $43.10 per share based on the closing price of our common stock on the award date, May 6, 2014.  For a discussion on RSU grant date fair value, refer to Note 12 to the consolidated financial statements included in our 2014 Form 10-K.

 

RSUs are granted on the date of our annual meeting and vest on the date of the next annual meeting when the awards become fully vested if a director remains on the Board.  Vesting ceases upon termination for any reason.  However, if a director retires during the calendar year that retirement is required under our Director’s Retirement Policy, the award will vest pro rata on a monthly basis through the date of retirement.

 

Stock-settled RSUs are distributed upon vesting, unless a director elects to defer the award under the Director Deferred Compensation Plan.  In 2014, all continuing directors elected to defer their awards except for Mr. Hofmann and Dr. Paula Johnson.  All awards are distributed as shares of common stock, as described below.  When dividends are paid on common stock,

 

additional shares of deferred stock and RSUs are credited to each director’s deferred stock account as if those dividends were used to purchase additional shares.

 

All Other Compensation

 

The amounts in the “All Other Compensation” column are the sum of: (1) the dividend-equivalent units (“DEUs”) credited to accounts under the Director Deferred Compensation Plan,  (2) with respect to Mr. Zenner and Mr. Weiland, a charitable contribution of $1,000 each made under our charitable contribution matching program, which is available to our employees, retirees and directors on a non-discriminatory basis, and (3) with respect to Mr. Johnson, a distribution of $1,025,935 deferred under the Director Deferred Compensation Plan following his retirement in May 2014.

 

Stock Options

 

Prior to 2007, non-employee directors received annual grants of stock options, which vested on the first anniversary of the grant date.  After benchmarking this practice, our Board ceased granting stock options to directors.  All stock options are vested and expire ten years after the original date of grant.  The following table sets forth all stock and stock options held by each director at the end of 2014.

 


 

 

Outstanding Director Stock Awards and Stock Options at Year-End 2014

 

Name

Vested Deferred Stock
Awards

(#)

Unvested Deferred
Stock and RSU Awards

(#)

Total Deferred Stock
and RSU Awards

(#)

Stock Options
Outstanding

(#)

Mark A. Buthman

13,969

 

3,016

 

16,985

 

 

William F. Feehery

9,102

 

3,016

 

12,118

 

 

Thomas W. Hofmann

31,936

 

3,016

 

34,952

 

 

L. Robert Johnson

8,094

 

-0-

 

29,785

 

 

Paula A. Johnson

33,339

 

3,016

 

36,355

 

7,800

 

Myla P. Lai-Goldman

14

 

3,016

 

3,030

 

 

Douglas A. Michels

13,969

 

3,016

 

16,985

 

 

John H. Weiland

33,339

 

3,016

 

36,355

 

 

Anthony Welters

33,339

 

3,016

 

36,355

 

-0-

 

Patrick J. Zenner

33,339

 

3,016

 

36,355

 

25,600

 

 

 


 


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Director Deferred Compensation Plan

 

All non-employee directors may participate in the Director Deferred Compensation Plan, which permits participants to defer all or a part of their annual cash compensation until their Board service terminates.  Deferred fees may be credited to a “stock-unit” account that is deemed invested in our common stock or to an account that earns interest at the prime rate of our principal commercial bank.  Stock-unit accounts are credited with DEUs based on the number of stock units credited to the account as of the dividend record date.

 

The value of a director’s account balance is distributed on termination of Board service.  The value of a director’s stock-unit account is determined by multiplying the number of units credited to the account by the fair market value of our common stock on the termination date.

 

RSUs that a director elects to defer (and all shares of deferred stock) are distributed in shares of stock.  Pre-2014 stock units may be distributed in cash in lieu of stock, if a director made an election in 2013.  All post-2013 stock units are only distributable in stock.  Partial shares are distributed in cash.

 

Directors may receive their distribution as a lump sum or in up to ten annual installments.  Separate elections apply to amounts earned and vested before 2005 and amounts earned and vested after December 31, 2004.  If a director elects the installment option, any cash-account balances during the distribution period will earn interest at the prime rate of our principal commercial bank and deferred stock and stock-settled units will be credited with dividends until paid.

 


 

The following table summarizes the amounts credited to each Director Deferred Compensation Plan account as of December 31, 2014:

 

Name

Cash-Settled
Stock Units

Value( 1)
($)

Stock-Settled
Stock Units

Value (1)
($)

Deferred Stock
and RSU Value 
(1)
($)

Amount
Invested in
Cash Account 
(2)
($)

Total Account
Balance

($)

Mark A. Buthman

-0-

 

261,687

 

904,266

 

-0-

 

1,165,953

 

William F. Feehery

-0-

 

170,873

 

646,547

 

-0-

 

817,420

 

Thomas W. Hofmann

-0-

 

-0-

 

1,860,854

 

-0-

 

1,860,854

 

L. Robert Johnson

-0-

 

430,909

 

1,585,732

 

-0-

 

2,016,641

 

Paula A. Johnson

-0-

 

383,755

 

1,935,539

 

-0-

 

2,319,294

 

Myla P. Lai-Goldman

 

8,654

 

161,317

 

 

169,971

 

Douglas A. Michels

334,034

 

439,124

 

904,266

 

-0-

 

1,677,424

 

John H. Weiland

959,497

 

1,086,141

 

1,935,539

 

-0-

 

3,981,177

 

Anthony Welters

-0-

 

3,196,212

 

1,935,539

 

73,789

 

5,205,540

 

Patrick J. Zenner

-0-

 

856,020

 

1,935,539

 

-0-

 

2,791,559

 

 

(1)          Value is determined by multiplying the number of stock units or shares of deferred stock, as applicable, times $53.24, the fair market value of a share of stock on December 31, 2014.  Stock units relate to deferred compensation that has previously been reported in the “Fees Earned or Paid in Cash” column for the year the compensation was earned.

(2)          This account earned interest at a rate of 3.25% compounded quarterly, which resulted in $600 being credited to Mr. Welters’ account in 2014.

 

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EXECUTIVE COMPENSATION

 

 

Executive Summary

 

Our Compensation Philosophy and Goals

 


 

We believe that our long-term success is directly related to our ability to attract, motivate and retain highly talented individuals committed to continually improving financial performance, achieving profitable growth and enhancing shareholder value.

 

To that end, our Compensation Committee has developed a pay-for-performance compensation philosophy that closely aligns our executives’ incentive compensation with Company performance and shareholder interests on a short- and long-term basis without promoting excessive risk.  When we deliver expected performance, our pay should approximate the market median.  Actual compensation, however, varies with our performance.

 

The Annual Incentive Plan (“AIP”), our annual cash incentive bonus plan, is based primarily on our performance on two financial measures: adjusted diluted earnings-per-share (“EPS”) and adjusted operating cash flow.  Performance

 

standards for regional and divisional heads, including Mr. Paproski, Ms. Flynn and Mr. Bedwell, also include targets for divisional sales, operating profit and cash flow.  Mr. Paproski, who leads our Delivery Systems business unit, where innovation is key to our success, is also subject to goals based on reaching milestones for our key innovative projects.  No awards are made unless performance exceeds the thresholds.

 

Our long-term incentive awards are aligned with shareholder interests because they deliver value based on share-price growth and the achievement of the three-year compound annual growth rate (“CAGR”) and the return on invested capital (“ROIC”) targets, encourage share ownership and promote retention of key talent.

 

A significant portion of the total compensation opportunity for each of our executives, including the named executive officers or “NEOs,” is directly dependent on the achievement of pre-established corporate goals.

 


 

 

 

 

Investor Outreach and 2014 Say-on-Pay Results

 


 

At our 2014 annual meeting of shareholders, we held a shareholder “Say-on-Pay” advisory vote to approve the compensation of our NEOs as disclosed in our Proxy Statement.  Shareholders expressed overwhelming support for the compensation of our NEOs, with approximately  96% of the votes (present at the meeting and entitled to vote) cast to approve NEO compensation.

 

The Committee considered this vote as demonstrating strong support for our compensation programs and continued to apply the same effective principles and philosophies

 

that have been applied in prior years when making compensation decisions for 2014.  These principles and philosophies are highlighted above and described more fully below.

 

To ensure that the Committee considers shareholder views on compensation matters, we maintain an active shareholder engagement program, meeting with our largest investors throughout the year.  The Committee receives regular updates on investor feedback and understands that shareholders remain very focused on the alignment of pay and performance.

 


 

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2014 Financial Highlights

 


 

The Company delivered exceptional financial performance in 2014, achieving record net sales, operating profit and diluted EPS.  Compared to 2013, net sales increased 3.9% (4.3% at constant exchange rates),  consolidated operating profit increased 12.1% and adjusted diluted EPS increased 11.5%.

 

Our shareholders also benefitted as we delivered total shareholder returns (“TSR”) well above the average of the S&P 500 and the Business Segment Comparator Group of companies we

 

use for benchmarking our executive compensation programs on a three-year (2012-2014) cumulative basis.  While our one-year TSR did not meet targeted levels, we believe our long-term success more accurately reflects our performance over time and removes some of the inherent annual variability in our business.  As discussed in more detail below, our long-term incentive plan uses three-year metrics and, due to our strong performance, paid at a higher level than our annual incentive plan, which uses one-year metrics.

 


 

One-Year Comparative TSR

 

Three-Year Cumulative TSR

 

GRAPHIC

 

GRAPHIC

 

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Executive Compensation Elements

 

Compensation
Component

Objectives

Key Features

 

 

 

 

 

 

Base Salary

Fair and competitive compensation to attract, retain and reward executive officers by providing a fixed level of cash compensation tied to experience, skills and capability relative to the market

·         Annual cash compensation that is not at risk

 

·         Targeted to the 50th percentile of our compensation comparator groups, with variations based on experience, skills and other factors

 

·         Adjustments considered annually based on level of pay relative to the market, individual and Company performance

 

 

 

 

 

 

Annual Incentive Award

Focuses executives on annual results by rewarding them for achieving key budgeted financial targets

 

Links executives’ interests with those of shareholders by promoting profitable growth

 

Helps retain executives by providing market-competitive compensation

·         At-risk cash awards based on adjusted diluted EPS and adjusted operating cash flow, calculated at budgeted exchange rates and adjusted for unusual or non-recurring items

 

·         Annual award payouts may vary from 0% to 150% of the targeted amount

 

 

 

 

 

 

Long-Term Incentive Award (PVSUs and Stock Options)

Aligns executives’ interests with those of shareholders by linking compensation with long-term corporate performance that benefits our shareholders

 

Retains and provides incentives to executives through multi-year performance-vesting share units (“PVSUs”) and stock options

 

Promotes a sensible balance of risk and reward, without encouraging unnecessary or unreasonable risk taking

·         At-risk long-term compensation

 

·         Generally targeted at a level that, when aggregated with AIP and base salary, will provide total direct compensation at the 50th percentile of comparator groups

 

·         Uses PVSUs and stock options to provide rewards for both financial performance and increased stock price

 

·         PVSUs have a three-year performance period; stock options vest in annual increments over a four-year period

 

·         Shares earned under PVSU awards vary from 0% to 200% of targeted amount

 

 

 

 

 

 

Retirement Plan and Non-Qualified Deferred Compensation Plan

Attracts and retains executives by providing a level of retirement income and retirement savings in a tax-efficient manner

·         Provides a defined-benefit plan that transitioned to a cash-balance plan formula in 2007

 

·         Executives may elect to defer up to 100% of their annual cash compensation

 

 

 

 

 

2014 Performance-Based Bonuses (Cash)

 


 

AIP payouts for all executives, including the NEOs, are based on our performance against two principal corporate financial metrics: adjusted diluted EPS and adjusted operating cash flow.  Payouts for executives who manage regional and divisional business units also depend partially on divisional performance.  The target bonus is set as a percentage of base salary, which for the NEOs, ranges from 60% to 100%.  2014 AIP target goals were set by the Committee based on

 

the budget approved by the Board and the Committee’s determination that the targets contained sufficient “stretch.”  During 2014, we achieved greater than 91.5% of our established corporate targets, which apply to all AIP participants.  This resulted in payouts for our NEOs of 85% or more.  While we achieved our threshold levels in 2014, the results were less favorable compared to 2013, when we significantly exceeded our target levels. 

 


 

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However, these results and consequent payouts demonstrate our pay-for-performance philosophy discussed in the “Compensation Discussion and Analysis” below.  During 2013, the payouts under the AIP, which measures short-term performance, exceeded 100%, while in 2014,

 

when the short-term performance was not at target levels, the payouts were correspondingly lower.  A reconciliation of the adjusted EPS and adjusted operating cash flow to amounts reported under U.S. GAAP is provided below under “Financial Measures.”

 


 

 

2014 AIP Performance Against Primary Metrics

Threshold, Target and Actual Performance

 

GRAPHIC

 

 

2014 Long-Term Incentive Awards (Equity)

 


 

Long-term incentive compensation opportunities for our executives, including the NEOs, are entirely equity based.  Executives receive an award of PVSUs and time-vested stock options, approximately equal in expected value.  The value of each NEO’s long-term grant is determined by the Committee based on its review of peer-group market data, the

 

executive’s roles and responsibilities, his or her impact on our results, and advancement potential.  PVSUs entitle the recipient to receive common shares based on achievement of three-year CAGR and ROIC targets.  The following chart shows actual performance against target and threshold performance  for the three-year period that ended on December 31, 2014.

 


 

Performance Against Long-Term Metrics (1) – 2012-2014 Performance Period

 

GRAPHIC

 

(1)          Calculated at 2014 budgeted foreign exchange translation rates.

 

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Our Compensation Practices

 

We continue to incorporate leading practices into our compensation programs:

 

·                  Our compensation philosophy targets total direct compensation of our NEOs at the 50th percentile of comparator group companies.

 

·                  We prohibit our officers and directors from hedging, pledging or engaging in any derivatives trading with respect to our common stock.

 

·                  We do not provide tax “gross-ups” for perquisites provided to our executive officers.

 

·                  Our equity incentive plan prohibits the repricing or exchange of awards without shareholder approval.

 

·                  Dividend-equivalent units (“DEUs”) are paid on equity awards only if the underlying award is earned.

 

·                  We conduct realizable-pay analyses on our CEO compensation and review tally sheets to provide additional benchmarking information on executive pay.

 

·                  We require a “double-trigger” feature and have not provided golden parachute excise tax gross-ups in any change-in-control agreements offered to executives in 2011 or later.

 

·                  We require our executive officers to meet share-ownership guidelines, and to take a portion of their bonus in shares until their ownership guidelines are met.  The ownership guideline for our CEO is six times base salary and the guideline for our other executives is two times base salary.

 

·                  The Committee has engaged an independent outside compensation consultant.  See “Role of the Compensation Consultant and Executives.”

 

·                  The Committee may cancel or recover any cash- or equity-based incentive compensation based on achievement of specified financial results that are the subject of a subsequent restatement.  We will seek repayment of any amount determined to have been inappropriately received due to mathematical errors, fraud, misconduct or gross negligence.

 

Compensation Committee Report

 

The Compensation Committee has reviewed and discussed with management the “Compensation Discussion and Analysis.”  Based on its review and discussions with management, the Compensation Committee recommended to the Board, and the Board approved, the inclusion of the “Compensation Discussion and Analysis” in this Proxy Statement and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

 

 

Compensation Committee

 

 

 

John H. Weiland, Chairman

 

Thomas W. Hofmann

 

Douglas A. Michels

 

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Compensation Discussion and Analysis

 

This section discusses our executive compensation program for 2014, the compensation decisions made under those programs and the factors that were considered by the Committee in making those decisions.  It focuses on the compensation for each of our NEOs for 2014:

 

·                  Donald E. Morel, Jr., Chairman and Chief Executive Officer;

 

·                  William J. Federici, Senior Vice President and Chief Financial Officer;

 

·                  John E. Paproski, President, Pharmaceutical Delivery Systems;

 

·                  Karen A. Flynn, President, Pharmaceutical Packaging Systems;

 

·                  Warwick Bedwell, President, Pharmaceutical Packaging Systems, Asia Pacific Region; and

 

·                  Jeffrey C. Hunt, Former President, Pharmaceutical Packaging Systems.

 

This Compensation Discussion and Analysis is divided into two parts:

 

Part 1 discusses our 2014 performance, the Committee’s actions in 2014, our compensation practices and the compensation decisions for our NEOs.

 

Part 2 discusses our compensation framework in more detail, including how we apply our compensation philosophy and determine competitive positioning of our executive compensation and other policies.

 

Part 1 – 2014 Performance, Compensation Committee Actions, Compensation Practices and Decisions

 

2014 Performance Overview

 

2014 was an outstanding year for the Company and its shareholders.  Among the accomplishments of our executive team, led by Dr. Morel, were:

 

·                  Net sales increased by $58.5 million, or 4.3% (excluding foreign currency effects).

 

·                  Excluding foreign currency effects, gross profit increased 3.0%, operating profit increased 12.1%, and our operating profit margin increased by 0.9 margin points to 12.8%.

 

·                  Increased emphasis on higher quality, higher revenue products in PPS and an increasing percentage of total sales from higher margin proprietary products in PDS.

 

·                  Advanced innovative product development with achievement of milestones for certain of our proprietary products, including in-human trials of the SmartDose® electronic wearable injector.

 

·                  Geographic expansion with commercial production beginning in our China elastomers facility and operating licenses issued to our India metals facility.

 

·                  Increased quarterly dividend to $0.11 per share.

 

As discussed in this Proxy Statement, our one-year performance during 2014 did not meet targeted levels, and payouts under our annual incentive plan accordingly were less than 100% of target.  However, our three-year performance was outstanding when measured by CAGR and ROIC.  Therefore, payouts

 

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under our long-term incentive plan were considerably higher.  Over the three-year period we also significantly outperformed our peer group and the S&P 500 as measured by TSR.

 

2014 Committee Actions

 

The Committee regularly evaluates the design and performance of our executive compensation programs to ensure they are operating as intended and consistent with relevant benchmarks and market practices.  The

 

Committee also reviews its compensation philosophy each year.  As a result of these evaluations and reviews, the Committee took the following actions in 2014:

 

Action

Rationale

 

 

Equity Grant Timing Revised equity grant procedures to ensure that all equity awards at its annual grant meeting are made at least two business days following the release of our annual financial results for the preceding fiscal year.

 

Aligns with best practices to ensure that annual awards are made at a time when all material information has been disseminated to our shareholders.

 

 

 

 

Treatment of LTIP Awards On Retirement Revised our standard award agreements to provide for continued vesting in the event of terminations for certain retiring executives.

 

Provides a greater incentive for long-term executives who are nearing retirement to continue to make long-term strategic decisions. 

 

 

 

 

Treatment of LTIP Awards On Death and Disability Revised our standard award agreements to provide for accelerated vesting of options upon death or disability and continued vesting for PVSUs.

 

Aligns with best practices.

 

 

 

 

Pay-for-Performance Review Conducted a formal pay-for-performance review of CEO compensation versus peers.

 

Provides a complete view of the alignment of compensation and company performance versus our peers and the market.

 

 

 

 

Realizable Pay Analysis Conducted a realizable pay analysis, which assesses whether Company performance and CEO realizable pay are aligned over a given period of time.

 

Provides a complete view of the alignment of compensation and company performance versus our peers and the market.

 

 

 

 

 

Performance Goal Difficulty Analysis Conducted an analysis regarding the difficulty of achievement of performance goals established under the AIP and LTIP.

 

Provides the Committee with perspective regarding the difficulty of attaining established performance goals, the rigor of the process establishing those goals and the motivational aspects of those awards.

 

 

 

 

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Action

Rationale

 

 

 

Business Segment Comparator Group Reviewed the criteria for selecting members of the Business Segment and Talent Market Comparator Groups and made no changes.

 

Ensures robust comparative compensation data.

 

 

 

 

 

Executive Compensation Elements

 

The following chart summarizes the key features of each element of our executive compensation program: Cash (salary and annual bonus); equity (long-term incentive); retirement (Retirement Plan, Supplemental Employee Retirement Plan, 401(k) Plan, Nonqualified Deferred Compensation Plan and Superannuation Plan (Mr. Bedwell only)); and other compensation (perquisites).  Each type is discussed in detail in the remainder of this Compensation Discussion and Analysis, and the accompanying tables.

 

 

 

 

Element

Type

Key Features

 

 

 

 

 

 

Cash

Salary

·         Fixed amount of compensation based on experience, contribution and responsibilities.

 

·         Salaries reviewed annually and adjusted based on market practice, individual performance and contribution, length of service and other internal factors.

 

 

Annual Incentive Plan

 

·         Performance-based cash awards based on adjusted diluted EPS and adjusted operating cash flow, calculated at budgeted exchange rates and adjusted for unusual or non-recurring items.  See “Financial Results for AIP Purposes” on page 28.

 

·         Annual awards vary from 0% to 150% of the targeted amount.

 

 

 

 

 

 

Long-Term Incentive Compensation (100% Equity)

PVSUs

(50% of grant value)

·         PVSUs are settled three years from the grant date based on performance over a three-year period.

 

·         DEUs are accumulated on PVSUs during the vesting period.

 

·         Both PVSUs and DEUs are paid in shares of West common stock and only upon vesting.

 

·         The number of shares that may be earned over the performance period is based on achievement against target of two equally weighted measures—CAGR and ROIC—and ranges from 0% to 200% of the target award.  See “Our Long-Term Equity Incentive Program,” beginning on page 29.

 

 

Non-qualified stock options

(50% of grant value)

 

·         Vest over four years and expire 10 years from the grant date.

 

 

 

 

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Retirement

Retirement Plan

·         Provides retirement income for eligible participants based on years of service and highest average earnings up to tax code limits.

 

 

 

 

Supplemental Employee Retirement Plan

·         Provides retirement income, on a non-qualified basis, in excess of tax code limits on the same basis as the Retirement Plan.

 

 

 

 

401(k) Plan

·         Qualified 401(k) plan that provides participants the opportunity to defer taxation on a portion of their income, up to code limits, and receive a matching Company contribution.

 

 

 

 

Nonqualified Deferred Compensation Plan

·         Extends, on a non-qualified basis, the 401(k) in excess of code limits on the same terms.

 

 

 

 

Superannuation Plan

·         Permits Mr. Bedwell to defer some taxation and receive a matching contribution of the amounts deferred.

 

 

 

 

 

 

Other

Perquisites

·         Perquisites are limited to the use of a Company-leased automobile and expatriate assistance.

 

 

 

 

 

·         Beginning late in 2014, the Committee began the phase-out of automobile payments for several senior executives as leases expire.

 

 

 

 

Summary of Key 2014 Compensation Decisions

 


In an effort to further align with best practices and provide competitive compensation that aligns executives’ interests with those of our shareholders, the Committee made the following changes to its equity compensation grant practices.  First, the Committee revised its equity grant procedures to ensure that all equity awards at its annual grant meeting are made at least two business days following the release of our annual financial results for the preceding fiscal year.

 

Second, the Committee adopted a policy of providing vesting of future equity awards made to certain executive officers, including the NEOs, following their retirement.  Under the policy, future awards of PVSUs and stock options will continue to vest during their term for individuals who are executive officers at the time of their retirement so long as they are at least 57 years of age, have 10 years of service with the Company, and have not been terminated for “cause” as defined under the 2011 Omnibus Incentive Compensation Plan.

 

Vesting will immediately cease and all outstanding equity awards will be forfeited if the

executive competes with the Company during the period of continued vesting or fails to comply with his or her confidentiality obligations.  We may also cause the equity to be forfeited at any time if we discover that the executive should have been terminated for cause.  In addition, all equity awards will continue to be subject to our Incentive Compensation Recovery (“clawback”) Policy during the continued vesting period.

 

We also amended our standard LTIP award agreements for awards made after October 14, 2014 so that effective upon death or disability, any unvested options become fully vested and exercisable and any PVSUs granted will continue to vest through the end of the performance period.  These changes were made to be consistent with market practices, and to provide all of our employees and their survivors with additional security in the event of death or disability.

 

The following highlights the Committee’s key NEO compensation decisions for 2014, as reported in the Summary Compensation Table on page 38.  The decisions were made after


 

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considering input from the Committee’s independent compensation consultant, Pay Governance LLC (“Pay Governance”).

 

CEO Compensation

 

In February 2014, the Committee took the following actions on Dr. Morel’s compensation:

 

·                  Annual base salary was increased 2.5% to $845,645;

 

·                  Annual incentive target award opportunity was maintained at 100% of base salary ($845,645); and

 

·                  Long-term incentive target expected value was maintained at $2.4 million.

 

After benchmarking Dr. Morel’s compensation with our Business Comparator Group, the Committee determined that he was below the 50th percentile for total direct compensation (“TDC”), which is the sum of base salary and annual and long-term incentive opportunities.  Having increased his long-term incentive opportunity by 20% in 2013, and not having increased his salary or AIP opportunity since 2013, the Committee determined to increase his base salary by 2.5% to bring him close to the 50th percentile.

Compensation of Other NEOs

 

The Committee approved salaries and set incentive-compensation targets of the other NEOs taking into account the CEO’s recommendations, the advice of Pay Governance, comparator group salary data, relative duties and responsibilities, advancement potential and impact on our financial and strategic performance.  Consistent with the approach for the CEO, the Committee provided a modest increase (2% to 4%) in annual base salary for all other NEOs, with the exception of Ms. Flynn.  Ms. Flynn was promoted from President, PPS, Americas to President, PPS, and she received a 4% increase at the same time as other NEOs and an adjustment for her promotion in September 2014.

 

These increases are in line with our Business Segment Comparator Group increases during 2014, which averaged 3.8%.

 

Pay Mix

 

Our compensation philosophy is to put the greatest emphasis on creating long-term shareholder value.  Therefore, the largest percentage of NEO’s pay is awarded under our long-term incentive plan (split equally between options and performance shares).  Almost 60% of Dr. Morel’s TDC is based upon long-term value, and the remainder of his pay is divided equally among salary and short-term incentives.  For our other executives, approximately 46% of their pay is based upon long-term awards.  Consistent with market practices, a larger portion of their pay mix is salary, but it is still less than one-third of their TDC.


 

GRAPHIC

GRAPHIC

 

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2014 NEO Base Salaries, Annual Incentive Target and Long-Term Expected Value

 

Name

Salary as of
1/1/14

Salary as of
12/31/14
(1)

2014 Salary
Median
Target

%
Increase

AIP Target
as % of
Salary

Long-Term
Expected
Value

Total Direct
Compensation as %
of Median Target
(2)

Donald E. Morel, Jr.

$825,028

$845,654

$813,000

  2.5%

100%

$2,400,000

  85%

William J. Federici

$461,345

$470,572

$439,000

  2.0%

  70%

   $700,000

107%

John E. Paproski

$345,030

$353,656

$380,000

  2.5%

  70%

   $600,000

120%

Karen A. Flynn (3)

$324,800

$400,000

$450,000

23.2%

  70%

   $600,000

  87%

Warwick Bedwell (4)

$313,344

$319,611

$285,000

  2.0%

  60%

   $300,000

118%

Jeffrey C. Hunt

$397,800

$407,745

$450,000

  2.5%

  70%

   $600,000

  89%

 

(1)             All NEO salary increases for incumbents were effective May 2014.

(2)             Total direct compensation consists of base salary, annual bonus target and long-term expected value.  Percentages are based on the 50th percentile of the Business Segment Comparator Group for Dr. Morel and Mr. Federici, and the 50th percentile of the Talent Market Comparator group for the other NEOs.

(3)             Ms. Flynn received an increase in base salary, annual bonus target and long-term expected value on September 29, 2014, when she was promoted to President, PPS.  The following table shows salary information and Total Direct Compensation for Ms. Flynn.

 

Title

Salary

Effective Date

% Increase

2014 Salary
Median Target

AIP Target as
% of Salary

Long-Term
Expected Value

TDC as % of
Median Target

 

 

 

 

 

 

 

 

President, PPS Americas

$337,792

  5/5/2014

  4.0%

$350,000

60%

$300,000

99%

President, PPS

$400,000

9/29/2014

18.4%

$450,000

70%

$600,000

87%

 

 

 

 

 

 

 

 

 

(4)             Mr. Bedwell’s salary as of 12/31/2014 has been converted from Australian dollars to U.S. dollars at a rate of 1.1095, as was used elsewhere in this Proxy Statement.  His salary was set by the Committee using 354,609 AUD.

 

 

Our Annual Incentive Compensation Program

 


 

Plan Criteria and Rationale

 

The annual incentives for all AIP participants, including the NEOs, are based on our financial performance as a whole measured by adjusted diluted EPS and adjusted operating cash flow.

 

AIP payouts for divisional participants (Paproski, Flynn, Bedwell and Hunt) rely on achieving divisional net sales, operating profit and cash flow targets, adjusted to reflect budget exchange rates.

 

In 2014, as in past years, the Committee evaluated the continued use of the AIP financial measures using the following principles:

 

·       Metrics that support achievement of an annual Board-approved operating plan;

 

·       Metrics that support profitable growth while preserving cash for longer-term investment;

 

·       Metrics that provide a clear line of sight—i.e., that are clearly understood and can be

 

affected by the performance of our executives and employees; and

 

·       Metrics that are consistent with market practice and commonly used within our comparator group.

 

Following this review, the Committee concluded that the continued use of the AIP financial measures support the foregoing principles for the following reasons:

 

·       EPS is a comprehensive measure of income and provides an emphasis on profitable growth while focusing managers on expense control.

 

·       Operating cash flow provides a focus on generating cash in the short term to fund operations, research and longer-term capital projects and focuses managers on expense control.

 

·       Divisional cash flow, sales and operating profit provide line of sight for operating

 


 

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managers and encourage cooperation among the various regions and business platforms.

 

The Committee eliminated regional cash flow, sales and operating profit metrics in 2014 for our PPS Division.  These regional metrics comprised 20% of the PPS regional staff’s AIP target in 2013.  This 20% was redistributed to the PPS divisional goals, increasing the percentage of AIP target that is based on divisional goals from 40% to 60%.  This elimination reflects the growing globalization of our business and the expectations of our customers that the Company acts as a single company.  It helps to foster cooperation among our regions and provides a greater incentive to increase divisional revenue and profit without focusing on the impact on any particular region.

 

Target Setting

 

The target annual incentive awards for our NEOs are set as a percentage of base salary.  Target awards are reviewed annually to ensure alignment with our compensation philosophy to target each compensation element and total direct compensation at the market median.

 

Variances from this goal are based on an evaluation of competitive market data, internal

 

equity considerations among the CEO’s direct reports and individual performance evaluations.

 

For 2014, target annual-incentive opportunities for the NEOs ranged from 60% to 100% of their year-end base salary rate.

 

The payout curve is structured to reflect our philosophy that management should be rewarded for exceeding goals and penalized when targets are missed.

 

The payout factor is a pre-established multiplier that corresponds, on a sliding scale, to the percentage achievement of the AIP target objective so that if actual performance is less than target, the multiplier decreases on a sliding scale based on the percentage achievement.

 

Thus, for example, at the 85% achievement level, executives would receive 50% of their target award.  No payouts would be made if actual financial performance falls below 85% of the target level.   If AIP targets are exceeded, the multiplier increases on a sliding scale up to the 150% of target award level for achievement of 115% of the performance target level.

 

Achievement between the threshold and maximum levels is straight-line interpolated.

 


 

Financial Results for AIP Purposes

 

The Committee set the AIP targets based on its evaluation of the budget amounts and its assessment that the targets contained a sufficient degree of “stretch.”  Our performance level for all metrics was 91% or greater.  Therefore, payouts were in the 85-95% range.  This demonstrates our link between pay and short-term performance.  The slightly reduced payouts reflect that target performance was not reached during the challenges of 2014.

 

2014 AIP Corporate and Division

Performance Metrics, Weight and Achievement

(all amounts in millions except EPS)

 

 

Metric

Weight

Financial Objectives

 

Plan Unit and NEO Participants

Threshold

Target

Maximum

Results

% of Target

Corporate Unit:

(Morel, Federici)

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EPS (1)

80%

 

1.57

 

1.84

 

2.12

 

1.78

 

96.7%

 

Adj. Operating Cash Flow (2)

20%

 

187.3

 

220.3

 

253.4

 

202.1

 

91.7%

 

Packaging Systems Unit:

(Flynn, Bedwell, Hunt)

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EPS (1)

40%

 

1.57

 

1.84

 

2.12

 

1.78

 

96.7%

 

 

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Metric

Weight

Financial Objectives

 

Plan Unit and NEO Participants

Threshold

Target

Maximum

Results

% of Target

Division Metrics (60% of total) –

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Sales (3)

15%

 

923.4

 

1,086.4

 

1,249.4

 

1,025.0

 

94.3%

 

Adjusted Operating Profit (3)

30%

 

200.9

 

236.4

 

271.9

 

224.6

 

95.0%

 

Adjusted Divisional Cash Flow (3)

15%

 

233.6

 

274.8

 

316.0

 

264.0

 

96.1%

 

Delivery Systems Unit:

(Paproski)

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EPS (1)

40%

 

1.57

 

1.84

 

2.12

 

1.78

 

96.7%

 

Division Metrics (60% of total) –

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Sales (3)

5%

 

340.7

 

400.8

 

460.9

 

402.0

 

100.3%

 

Adjusted Operating Profit (3)

5%

 

11.65

 

13.70

 

15.76

 

13.00

 

94.6%

 

Innovation Milestones (4)

50%

 

 

 

 

 

 

 

99.8%

 

99.8%

 

 

(1)                  Adjusted EPS for annual incentive purposes is based on budgeted foreign exchange rates and excludes restructuring and certain non-recurring items.  Therefore, they differ from the comparable U.S. GAAP measures. See “Financial Measures” for a reconciliation of U.S. GAAP diluted EPS to adjusted diluted EPS for annual incentive purposes.

(2)                  Adjusted operating cash flow for annual incentive purposes is based on budgeted foreign exchange rates.  See “Financial Measures” for a reconciliation of U.S. GAAP operating cash flow to adjusted operating cash flow.

(3)                  Divisional adjusted net sales and adjusted operating profit are based on budgeted foreign exchange rates.  See “Financial Measures” for a reconciliation of the comparable U.S. GAAP financial measures to the adjusted regional and divisional adjusted financial measures for annual incentive purposes.

(4)                  A portion of Mr. Paproski’s AIP payout is based upon the achievement of certain innovation product development milestones, which are reviewed and approved by senior management with input from the Board of Directors.

 

2014 AIP Threshold, Target, Maximum and Actual Payouts and Achievement

 

 

Name

2014 Target
Award

(% of Base Salary)

2014 Threshold
Award (50% of
Target Award)

($)

2014 Target
Award (100% of
Target Award)

($)

2014 Maximum
Award (150% of
Target Award)

($)

2014 Actual
Award

($)

Actual
Achievement

% of Target

Donald E. Morel, Jr.

100.0%

$422,827

$845,654

$1,268,481

$723,880

85.6%

William J. Federici

  70.0%

$164,700

$329,400

   $494,100

$281,967

85.6%

John E. Paproski

  70.0%

$123,780

$247,559

   $371,339

$234,191

94.6%

Karen A. Flynn (1)

  62.6%

$125,150

$250,300

   $375,450

$214,757

85.8%

Warwick Bedwell (2)

  60.0%

  $95,883

$191,767

   $287,650

$148,889

85.8%

Jeffrey C. Hunt (3)

  70.0%

$142,711

$285,422

   $428,133

$122,446

85.8%

 

 

(1)                  Ms. Flynn’s blended rate is calculated using a target of 60% through her promotion on 9/29/2014 and 70% for the remainder of the year.

(2)                  Amounts are payable in Singapore dollars and converted to U.S. dollars at the then-applicable spot conversion rate for the date the targets were established and amounts were paid.

(3)                  Aa result of his resignation effective 7/27/2014, Mr. Hunt will receive 50% of his AIP payout.

 

 

 

Our Long-Term Equity Incentive Program

 

Plan Criteria and Rationale

 


 

Long-term compensation for all our executives, including our NEOs, is entirely equity-based.  Our long-term awards are structured to align our executives’ interests with those of our shareholders and to emphasize the Committee’s expectation that our executive officers should

 

focus their efforts on growing our business while carefully managing capital.

 

To help further these objectives, we use CAGR and ROIC as the performance measures for determining PVSU payouts.  Each metric is weighted equally because we believe CAGR and

 


 

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ROIC are equally important in creating shareholder value.

 

The use of stock options is intended to align our executives’ longer-term interests with those of our shareholders because options gain value only when and to the extent that share price exceeds the exercise price of the option.  Therefore, options provide a strong performance-based link between shareholder value and executive pay.

 

Performance-Vesting Share Units

 

The number of shares that may be earned under the PVSUs is based on achievement of CAGR and ROIC targets.

 

Each PVSU award agreement contains a target payout for the recipient.  The number of shares an executive earns at the end of a performance period is calculated by multiplying the target number of PVSUs awarded at the beginning of the period times the applicable “payout factor” for each performance metric times the weighting for that performance metric.


 

 

Target PVSUs

(i.e., number of shares to be earned if
performance equals 100% target)

x

Payout Factor

(based on achievement against
CAGR and ROIC targets)

x

Weighting

(50% for each
metric)

=

Number of
Shares Earned

 


 

2014 Long-Term Equity Awards

 

In 2014, long-term plan participants, including our NEOs, received a grant of PVSUs and a grant of non-qualified stock options.  The total grant value was divided equally between the two forms of awards.

 

The total award value of each NEO was targeted to the market median as represented by comparator group data, as well as relative duties and responsibilities, advancement potential, and each NEO’s impact on our financial results.  The grant values are shown in the following table. The 2014 PVSU threshold, target and maximum CAGR and ROIC goals follow.

 


 

2014 Long-Term Equity Award Value

 

Name

PVSUs (1) 
2014-2016 Performance Period
($)

Stock Options (1)
($)

Total Award Value
($)

Donald E. Morel, Jr.

$1,200,022

$1,199,996

$2,400,018

William J. Federici

   $349,985

   $349,998

   $699,983

John E. Paproski

   $299,994

   $300,004

   $599,998

Karen A. Flynn

   $300,018

   $300,002

   $600,020

Warwick Bedwell

   $150,020

   $150,002

   $300,022

Jeffrey C. Hunt

   $299,994

   $300,004

   $599,998

 

(1)                    The expected value of PVSUs is based on a grant date fair value of $47.34 per share on February 24, 2014 and $44.95 on September 29, 2014, and the expected value of options was based on a grant date fair value of $10.37 per share on February 24, 2014 and $9.66 on September 29, 2014.  For the assumptions made in determining grant date fair values, refer to Note 12 to the consolidated financial statements included in our 2014 Form 10-K.

 

 

2014 – 2016 Performance Period PVSU Goals

PVSU Award Performance Goals

 

 

Metric

Threshold

Target

Maximum

 ROIC

7.70%

11.00%

16.50%

 CAGR

5.53%

  7.90%

11.85%

 

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Equity Award Grant Practices

 


 

Under the Committee’s revised equity-based awards policy and procedures, equity awards are made once per year.  The awards are made at the annual grant meeting in February provided that the actual grant date must be at least two business days following the release of our annual results for the preceding fiscal year.  The policy contains rules on determining the grant date of equity awards and the exercise price of any stock options, which must be at least equal to the fair market value of our stock on the grant date.

 

The policy also delegates authority to a management committee to make a limited number of grants between meetings to

 

management below the officer level in connection with the hiring or promotion of employees or for retention purposes.

 

During 2013, the Committee increased LTIP values for several executives.  After benchmarking, the Committee did not make any changes for 2014.  Ms. Flynn received an increase to the appropriate level for her promotion from President, PPS, Americas to President, PPS in September 2014.  She received a second award with an approximate value of $300,000, which brought her to the level ($600,000) that her predecessor, Mr. Hunt, had received.

 


 

2014 Performance Share Award Payouts

 


 

The following tables show the performance against targets for the three-year PVSU performance period ending December 31, 2014, and the actual award values for each NEO.  During the three-year period from 2012-2014, our performance as measured by CAGR and ROIC significantly exceeded our targets and the performance of many of our peers.  When compared to our peer groups, and the S&P 500,

 

our three-year performance was superior when measured by TSR.  Accordingly, the payouts under our long-term plan are significant.  Participants in the long-term plan have also shared in the significant appreciation of our stock price to the same extent our shareholders have over the three-year period. Mr. Hunt forfeited his PVSU awards upon his resignation in July 2014.

 


 

2012 – 2014 PVSU Performance Period

Performance/Payout Results

 

Metric

Threshold

Target

Maximum

Result

Performance
as % of Target

Payout
Factor

Weighting

Payout as %
of Target

 ROIC 

5.6%

8%

  12%

10.05%

125.8%

151.25%

50%

    75.63%

 CAGR

3.5%

5%

7.5%

  7.11%

142.2%

184.40%

50%

    92.20%

 

 

 

 

 

Final Payout Result as a % of Target:

  167.83%

 

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2012 – 2014 PVSU Performance Period

Award Payouts

 

Name

 

Target Award at
Grant
(1)
(#)

Target Award Value
at Grant
(1)
($)

Actual
Award
Shares
(2) 
(#)

Actual Award
Value at $51.53
(3)
Per Share
($)

Donald E. Morel, Jr.

 

47,126

$1,000,014

81,768

4,213,505

William J. Federici

 

15,316

   $325,006

26,571

1,369,358

John E. Paproski

 

11,782

   $250,014

20,443

1,053,428

Karen A. Flynn

 

  7,734

   $187,532

13,341

    687,462

Warwick Bedwell

 

  7,068

   $149,983

12,263

    631,912

 

(1)                       Target award is based on achievement of 100% of performance metrics and target value is calculated by multiplying the target award by $21.22, the split-adjusted closing price of our common stock on February 21, 2012, the award grant date.  Includes additional grant for Ms. Flynn related to her promotion in 2012 from VP, Sales, PPS Americas to President, PPS Americas, which had a grant date fair value of $25.15.

(2)                       Includes shares credited due to dividend equivalent units.

(3)                       The closing price of our common stock on February 17, 2015, the award payout date.

 

 

 

Part 2 – Compensation Framework

 

 

 

Compensation Philosophy and Objectives

 


 

Our compensation philosophy is to provide competitive executive pay opportunities tied to our short-term and long-term success.  This overriding pay-for-performance approach enables us to attract, motivate and retain the type of executive leadership that will help us achieve our strategic objectives and realize increased shareholder value.  To reach these goals, we have adopted the following program objectives:

 

·           Have a strong pay-for-performance element with a major portion of executive pay “at risk” based on achievement of financial performance goals.

 

·           Support achievement of both operating performance and strategic objectives.

 

·           Link management compensation with the interests of shareholders.

 

·           Be fair and market-competitive to assure access to needed talent and encourage retention.

 

·           Provide compensation opportunities that are consistent with each executive’s responsibilities, experience and performance.

 

·           Design compensation incentive programs that promote a sensible risk/reward balance, and that do not encourage unnecessary or unreasonable risk-taking.

 

·           Use perquisites sparingly, which has led to the reduction of available perquisites over time, including the phase out, beginning in 2014, of automobile allowances.

 


 

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Applying our Compensation Philosophy

 

We apply our compensation philosophy and objectives as follows:

 

Compensation Component

Objectives

Base Salary

Fair and competitive compensation to attract, retain and reward executive officers by providing a fixed level of cash compensation tied to experience, skills and capability relative to the market.

 

Annual Incentive Award

At-risk cash bonuses focus NEOs on annual results by rewarding them for achieving key budgeted financial targets.

 

Links interests of NEOs with those of shareholders by promoting strong profitable growth.

 

Helps retain NEOs by providing market-competitive compensation.

 

Long-Term Incentive Award (PVSUs and Stock Options)

At-risk long-term compensation aligns interests of NEOs with those of shareholders by linking compensation with long-term corporate performance that benefits our shareholders.

 

Retains NEOs through multi-year PVSU performance period and stock option vesting.

 

Promotes a sensible balance of risk and reward, without encouraging unnecessary or unreasonable risk-taking.

 

Retirement Plan and Non-Qualified Deferred Compensation Plan

Attracts and retains NEOs by providing a level of retirement income and retirement savings in a tax-efficient manner.

 

 

 

Competitive Positioning

 


In support of our compensation philosophy, we target the median compensation values of two groups – a “Business Segment Comparator Group” and a “Talent Market Comparator Group.”  The Business Segment Comparator Group is composed of companies with operational and customer characteristics similar to our own.  The Talent Market Comparator Group is a size-appropriate sample of companies that participate in the Towers Watson annual executive compensation database with revenues between $500 million and $3 billion and that operate in the chemicals, electronics and scientific equipment, healthcare/medical products, industrial manufacturing or pharmaceuticals industries.

 

The Business Segment Comparator Group is used primarily to determine competitive pay practices and design details and for pay-for-performance comparisons.  Because most of the Business Segment Comparator Group companies disclose compensation data in SEC filings each

 

year, this group also serves as a primary pay-level reference for select executives, including Dr. Morel and Mr. Federici.

 

The companies in the Business Segment Comparator Group are identified by Pay Governance and approved by the Committee based on the following criteria: (1) size (approximately one-half to two times our revenues); (2) industry (healthcare equipment/supplies, industrial machinery and life sciences tools/services); and (3) operating structure (global footprint, manufacturing capabilities, raw materials and products, similar intellectual property profile and customer characteristics).

 

The Talent Market Comparator Group provides us with a consistent set of market data for all of our executive positions, representing a sample of companies with which we broadly compete for talent.  The companies in the Talent Market

 


 

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Comparator Group change each year based on survey participation.

 

Given our size and business portfolio, it is challenging to identify a single, robust sample of appropriate market compensation peers that fit conventional criteria.  We believe that using a balance of market references that reflect companies with which we compete for business and capital, and more broadly, those with which we compete for talent, provides the Committee

 

with decision-quality data and context, and is a reasonable representation of our labor market for executive talent.  The Committee annually evaluates and, if appropriate, updates the composition of the Business Segment Comparator Group.  In 2014, the Committee evaluated a few potential additions, but no changes were made to the groups used in 2013.  The Business Segment and Talent Market Comparator Groups used in 2014 consisted of the following companies:


 

2014 Business Segment Comparator Group

 

Aptar Group, Inc.

DENTSPLY International Inc.

Haemonetics Corporation

ResMed Inc.

CONMED Corporation

Edwards Lifesciences Corp.

IDEXX Laboratories, Inc.

Steris Corp.

The Cooper Companies Inc.

Gerresheimer AG

Invacare Corporation

Varian Medical Systems

C.R. Bard

Greatbatch, Inc.

Pall Corporation

 

 

2014 Talent Market Comparator Group

 

A.O. Smith Corporation

Catalent Pharma Solutions

Herman Miller

Nypro

Snap-on

Ameron International

Covance

Husky Injection Molding Systems

PerkinElmer

Stepan Company

Ametek

Cytec Industries

IDEXX Laboratories

Plexus

Swagelok

Ansell HealthCare Products

DENTSPLY International

International Flavors & Fragrances

Polymer Group, Inc.

Thomas & Betts

Barnes Group

Donaldson Company

Kinetic Concepts

PolyOne

Toro

Brady Corporation

Endo Pharmaceuticals

Lundbeck

Quintiles

Trinity Industries

Cabot Creamery

Goodman Manufacturing

Makino

Regal-Beloit

USG

Carlisle

Graco

Matthews International

ShawCor

Warner Chilcott

Chemtura

H. B. Fuller

Mine Safety Appliances

Sensata Technologies

 

ConvaTec

Hanger Orthopedic Group

Milacron

Sigma-Aldrich

 

 


 

Setting Targets and Performance Goals

 

The Committee annually reviews the total compensation of each executive officer—i.e., cash compensation (salary and target annual incentive opportunity) and long-term equity compensation (target long-term equity value).

 

The Committee, with input from its independent consultant, then sets the executive’s compensation target for the current year. Adjustments may be made to short- or long-term incentive award opportunities.  Salary adjustments, if any, typically become effective in April or May of each year or upon a promotion.  The compensation decision for the CEO is reviewed with and ratified by the independent directors in executive session.

 

In making its decisions, the Committee uses several resources and tools, including competitive market information and compensation trends within the comparator

 

groups and the larger executive compensation environment.

 

The Committee also reviews “tally sheets” for each of our executive officers as one of the tools to help assess the alignment of their pay with our performance and compensation philosophy.  The tally sheets include salary, equity and non-equity incentive compensation, perquisites and the value of compensation that would be paid in various termination scenarios.  The tally sheets help the Committee understand the different components of our compensation programs and the interrelationship of these amounts.

 

For 2014, the Committee set target levels for the financial objectives used in the AIP and for PVSU awards and concluded that there was an appropriate correlation between payout (at target, threshold and maximum) and target levels in light of the business environment, risks associated with achieving our five-year strategic plan and other factors.

 


 

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EXECUTIVE COMPENSATION

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During 2014, the Committee also conducted a retrospective look at the difficultly of attaining the performance goals established under the long-term and short-term incentive plans.  This analysis concluded that the goals were very challenging versus our Business Segment Comparator Group and the historic payouts demonstrated a robust qualitative goal-setting process, which has resulted in a strong pay-for-performance link.

 

Evaluating Performance

 

The Committee uses its judgment in making decisions about individual compensation elements and total compensation for our NEOs, with a focus on individual performance and competitive market data.  The Committee also considers each NEO’s performance against his or her individual performance objectives, as well as the Company’s overall financial performance.


 

 

 

Post-Employment Compensation Arrangements

 


Retirement Plans

 

Dr. Morel, Mr. Federici, Mr. Paproski, Ms. Flynn and Mr. Hunt participate in our defined benefit and defined contribution retirement programs for U.S.-based employees.  In addition to the standard benefits available to all eligible U.S.-based employees, we maintain non-qualified retirement plans in which these executives participate.

 

All tax-qualified defined benefit plans have a maximum compensation limit and a maximum annual benefit, which restrict the benefit to participants whose compensation exceeds these limits.  The non-qualified plans provide benefits to key salaried employees, including those five NEOs, using the same benefit formulas as the tax-qualified plans but without regard to the compensation limits and maximum benefit accruals for tax-qualified plans.

 

Under Mr. Bedwell’s employment agreement, we make a contribution to his defined contribution superannuation account.  This plan is maintained in Australia by him and is payable upon his retirement, death or disability.

 

Termination Payments

 

We also provide our NEOs with benefits upon termination in various circumstances, as described under “Estimated Payments Following Termination” and “Payments on Termination in Connection With a Change-in-Control” sections below.

 

We believe that our existing arrangements help executives remain focused on our business in the

 

event of a threat or occurrence of a change-in-control and encourage them to act in the best interests of the shareholders in assessing a transaction.

 

Beginning with agreements entered into after 2010, the Company eliminated excise tax gross-ups and single-triggers under these types of agreements.  Change-in-control agreements with Mr. Paproski and Ms. Flynn, which were entered into after 2010, do not include these features.  Mr. Hunt’s agreement also did not include these features, and expired on his resignation in July 2014.

 

Certain Payments to Mr. Hunt

 

In July 2014, we agreed to make certain salary continuation and other payments to Mr. Hunt in exchange for: (1) a release of claims against the Company, (2) a nondisparagement provision, (3) an agreement to cooperate with the Company following termination, and (4) a 9-month covenant not to: (a) compete with the Company, (b) solicit our customers or (c) solicit our employees for employment.

 

The amounts of these payments are described in the “Compensation Tables” section of this Proxy Statement.  The Company believes that securing these agreements from Mr. Hunt was critical to the ability of the Company to focus on future growth of the Company.  These covenants also protect the Company from the prospects of expensive litigation and secure future cooperation in the event it is needed.  Additionally, the covenants protect the Company from potential business harm due to competition or damage to the Company’s reputation.


 

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Other Compensation Policies

 


Personal Benefits

 

We provide our NEOs with other benefits that we believe are reasonable and competitive so that we may attract and retain talented senior executives.  In total, they represent a small percentage of each NEO’s overall compensation, and the Committee has reduced many of them in recent years.  During 2014, the Committee began phasing out the automobile allowance for U.S.-based executives whose leases were expiring.  We do not provide perquisite gross-ups.  These benefits are reflected in the “All Other Compensation” column of the 2014 Summary Compensation Table.

 

Share-Ownership Requirements

 

Share-ownership goals further align an executive’s interests with those of our shareholders and encourage a long-term focus.  Within five years of attaining their position, all executive officers must acquire shares of common stock with a value equal to particular multiples of their base salary.  The Committee established a goal of six-times base salary for the

 

CEO and two-times base salary for all other executive officers.

 

Until the goals are reached, executives are required to receive 25% of their annual bonus in shares.  All NEOs currently meet these guidelines.

 

We have benchmarked our share ownership requirements against the companies in our Business Segment Comparator Group.  Our requirements are generally at least as robust as those of our peers.

 

Policy on Hedging and Pledging

 

We prohibit directors, officers and employees from engaging in hedging or monetization transactions, such as zero-cost collars and forward sale contracts, that would allow them to continue to own our common stock, but without the full risks and rewards of ownership.  We also prohibit directors, NEOs and other senior employees from engaging in pledging, short sales or other short-position transactions in our common stock.


 

 

Risk Considerations in Our Compensation Programs

 


The Committee has reviewed our compensation policies and practices for our employees and concluded that any risks arising from these policies and programs are not reasonably likely to have a material adverse effect.  The Committee believes that the mix and design of the elements of our compensation program are appropriate and encourage executive officers and key employees to strive to achieve goals that benefit the Company and our shareholders over the long term.  Our compensation

 

policies and procedures are applied uniformly to all eligible participants.  By targeting both company-wide and business-unit performance goals in our annual bonus plans and long-term compensation, we believe we have allocated our compensation between base salary and short- and long-term target opportunities in a way that does not encourage excessive risk-taking by our employees.


 

 

Role of the Compensation Consultant and Executives

 


The Committee approves all compensation decisions for our NEOs, including discussing CEO compensation with the independent directors in executive session before making a final decision.

 

The Committee has engaged Pay Governance as its

 

independent consultant to assist the Committee in evaluating our executive compensation.

 

During 2014, the consultant performed the following tasks for the Committee:


 

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·      Prepared competitive market data for the compensation of the executive officer group;

 

·      Updated the Committee on executive compensation trends and regulatory developments;

 

·      Prepared a realizable pay analysis for the CEO and provided input on the Committee’s CEO pay recommendations;

 

·      Provided input on compensation program design and philosophy, incentive-pay mix and comparator groups against which executive pay is benchmarked; and

 

·      Prepared market data regarding vesting of equity upon retirement of executives.

 

The consultant provides no services to us other than its advice to the Committee on executive and director compensation matters.  The Committee determined Pay Governance to be independent from the Company under the NYSE and SEC regulations.

 

Our CEO annually reviews the performance of each of the other executive officers, including the other NEOs.  He then recommends annual merit salary adjustments and any changes in annual or long-term incentive opportunities for other executives.  The Committee considers the CEO’s recommendations in addition to data and recommendations presented by the consultant.

 

The CEO and other members of management also work with the Committee and consultant in determining the companies to be included in the Business Segment Comparator Group.


 

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Compensation Tables

 

The following tables, narrative and footnotes discuss the compensation of the NEOs during 2014.

 

2014 Summary Compensation Table

 

Name and Principal Position

Year

Salary

($)

Stock Awards

($)

Option
Awards

($)

Non-Equity
Incentive Plan
Compensation

($)

 

Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
(1)

($)

All Other
Compensation

($)

Total

($)

 

 

 

 

 

 

 

 

 

Donald E. Morel, Jr.
Chairman of the Board and Chief Executive Officer

2014
2013
2012

837,721
825,028
825,028

1,200,022
1,199,992
1,000,014

1,199,996
1,200,005
999,997

723,880
1,072,371
1,211,088

832,608
93,375
718,189

95,756
122,645
131,460

4,889,983
4,513,416
4,885,776

William J. Federici
Senior Vice President and Chief Financial Officer


2014
2013
2012

467,023
457,866
448,480

   349,985
   349,966
   325,000

349,998
350,005

325,003

281,967
419,759
464,762

241,242
90,474
206,533

39,949
39,635
48,574

1,730,164
1,707,705
1,818,352

John E. Paproski
President, Pharmaceutical Delivery Systems

2014
2013
2012

350,339
339,926
321,320

   299,944
   299,999
   250,014

300,004
300,005
250,001

234,191
286,322
306,347

336,873
55,201
261,106

93,137
45,710
46,815

1,614,488
1,327,163
1,435,603

Karen A. Flynn
President, Pharmaceutical Packaging Systems

2014



345,954

   310,043

300,002

214,757

93,798

33,848

1,298,402

Warwick Bedwell (2)
President, Pharmaceutical Packaging Systems, Asia Pacific Region

2014
2013
2012

339,071
359,274
349,555

   150,020
   162,789
   149,983

150,002
149,995
150,004

148,889
239,518
301,457





184,358
189,819
187,264

972,340
1,101,395
1,138,263

Jeffrey C. Hunt
Former President, Pharmaceutical Packaging Systems

2014
2013
2012

247,095
394,800
384,808

   344,446
   368,153
   260,030

300,004
300,005
250,001

122,446
365,948
381,521

51,019
49,230
39,752

408,192
37,012
28,031

1,473,202
1,515,148
1,344,143

 

(1)             These amounts are an estimate of the increase in actuarial present value of our NEOs’ age-65 accrued benefit under our retirement plans for 2014.  Amounts are payable only when a participant’s employment terminates, and may be reduced if benefits are commenced prior to retirement.  Assumptions underlying the estimates are described under the 2014 Pension Benefits Table.

(2)             Amounts in the Salary and All Other Compensation columns for Mr. Bedwell have been converted from Singapore dollars to U.S. dollars at a rate of  0.7992 U.S. dollars per Singapore dollar in 2014, 0.7991 U.S. dollars per Singapore dollar in 2013, and 0.8006 U.S. dollars per Singapore dollar in 2012.  The rates used are an average of the daily-average monthly rates for the applicable year.

 

Stock Awards

 

Stock Awards Grant Date Fair Value (Target) 2012-2014

 

 

2014

2013

2012

Name

PVSU

Awards

($)

Incentive
Shares

($)

PVSU

Awards

($)

Incentive
Shares

($)

PVSU

Awards

($)

Incentive
Shares

($)

 

 

 

 

 

 

 

Donald E. Morel, Jr.

1,200,022

-0-

1,199,992

-0-

1,000,014

-0-

William J. Federici

349,985

-0-

349,966

-0-

325,006

-0-

John E. Paproski

299,994

-0-

299,999

-0-

250,014

-0-

Karen A. Flynn

300,018

10,025

Warwick Bedwell

150,020

-0-

150,021

12,768

149,983

-0-

Jeffrey C. Hunt

299,994

44,828

299,999

68,154

250,014

10,016

 

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The table below shows the maximum payout for PVSU awards made in 2014, 2013 and 2012.

 

Stock Awards PVSU Grant Date Maximum Value 2012-2014

 

 

2014

2013

2012

Name

($)

($)

($)

 

 

 

 

 

 

 

 

Donald E. Morel, Jr.

2,400,044

2,399,984

2,000,028

William J. Federici

699,970

699,932

650,012

John E. Paproski

599,988

599,998

500,028

Karen A. Flynn

600,036

Warwick Bedwell

300,040

300,042

299,966

Jeffrey C. Hunt

599,988

599,998

500,028

 

Option Awards


The amounts in the “Option Awards” column reflect the grant date fair value in each year, computed according to FASB ASC Topic 718.  We use the Black-Scholes option pricing model to calculate grant date fair value based on the following assumptions:

 

 

September

2014

February

2014

March

2013

February

2013

February

2012

 

 

 

 

 

 

Expected Life (Years)

6.0     

6.0     

6.0    

6.0    

6.0    

Risk-Free Interest Rate

1.77%

1.57%

0.79%

0.89%

0.9%

Dividend Yield

0.98%

0.85%

1.18%

1.29%

1.7%

Expected Volatility

21.6%

22.1%

22.3%

22.5%

23.3%

For a more detailed discussion of the assumptions used to calculate grant date fair value for our options, refer to Note 12 to the consolidated financial statements included in our 2014 Form 10-K.

 

The per-share Black-Scholes value for option awards made to NEOs on February 24, 2014 was $10.37.  The per-share Black-Scholes value for the option granted to Ms. Flynn on September 29, 2014 was $9.66.


 

Non-Equity Incentive Plan Compensation


The amounts in the “Non-Equity Incentive Plan Compensation” column are AIP awards made with respect to 2014 performance.  AIP awards are paid in cash, except participants may elect to have up to 100% paid in West common stock.

 

With the exception of Ms. Flynn, all awards were paid in cash. Ms. Flynn elected to receive 25% of her total after-tax award in stock (25% of that amount was then deferred under the Employee Deferred Compensation Plan).  This election resulted in a grant of 973 shares of stock on February 17, 2015 with a grant date fair value of $50,139, at $51.53 per share. She also received 243 restricted incentive shares with a

grant date fair value of $12,522, with the same per-share grant date value of $51.53.

 

Mr. Hunt elected to receive a portion of his AIP award in stock, but this election became null and void upon his resignation from employment.

 

The amount of these shares is not included in this column, but will be included in our 2015 Proxy Statement in the “Stock Awards” column, and, if deferred under the Employee Deferred Compensation Plan, will also be reflected in next year’s “Nonqualified Deferred Compensation” Table.


 

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All Other Compensation


The amounts in the “All Other Compensation” column consist of: (1) costs of providing a company-leased vehicle, including lease payments, gas, maintenance and insurance; (2) for Dr. Morel, Mr. Federici, Mr. Paproski, Ms. Flynn and Mr. Hunt, the total of the Company matching contributions made in 2014 on cash deferrals to the Employee Deferred Compensation Plan and 401(k) plan and for Mr. Bedwell the Company contributions to his superannuation fund; (3) the annual incremental cost of medical benefits provided to executives that are not available to other similarly situated employees; (4) Company-paid life insurance premiums; and (5) DEUs credited in 2014 on unearned PVSUs (assuming a 100% performance level), whether or not those awards have been deferred.

 

For Mr. Bedwell, the incremental cost of medical benefits is equal to the amount reimbursed to

him for coverage (including worldwide expatriate coverage) not available to other employees in Singapore, which is his principal place of employment.  For Mr. Bedwell only, “All Other Compensation” also includes costs detailed in the chart below related to his overseas assignment.

 

For Mr. Paproski, “All Other Compensation” includes a Tax Reimbursement.  The amount reported shows what we paid to Mr. Paproski due to an erroneous distribution under our Employee Deferred Compensation Plan in 2013.  For a more detailed explanation of the error, see Note 5 to the Deferred Compensation Table.

 

For Mr. Hunt, “All Other Compensation” includes amounts we contractually agreed to pay him under a Separation and Release Agreement dated July 31, 2014 following his resignation on July 27, 2014.


 

The table below shows a breakdown of the total amount shown in the “All Other Compensation” column of the Summary Compensation Table.

 

Components of All Other Compensation – 2014

 

Name

 

Use of
Company
Car
($)

 

Defined
Contribution Plan
Company
Contributions
(1)
($)

 

Company Paid
Medical Plan
Costs
($)

 

Life
Insurance
($)

 

Dividends &
Dividend
Equivalents
($)

 

Tax Re-
imbursements
(2)
($)

 

Severance (3)
($)

 

Other (4)
($)

 

Total
($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Donald E. Morel, Jr.

 

14,065

 

33,509

 

 

3,653

 

44,529

 

 

 

 

95,756

William J. Federici

 

15,431

 

10,400

 

 

499

 

13,619

 

 

 

 

39,949

John E. Paproski

 

22,023

 

10,400

 

 

374

 

11,255

 

49,085

 

 

 

93,137

Karen A. Flynn

 

12,810

 

13,838

 

 

351

 

6,849

 

 

 

 

33,848