Definitive Proxy Statement
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

Filed by the Registrant  þ

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

¨   Preliminary Proxy Statement

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

þ   Definitive Proxy Statement

¨   Definitive Additional Materials

¨   Soliciting Material Pursuant to §240.14a-12

Rockwell Automation, Inc.

 

(Name of Registrant as Specified In Its Charter)

  

 

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

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¨   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1)

Title of each class of securities to which transaction applies:

  

 

 

  (2)

Aggregate number of securities to which transaction applies:

  

 

 

  (3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

  

 

 

  (4)

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  (5)

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  ¨

Fee paid previously with preliminary materials.

 

¨

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  (1)

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LOGO

December 16, 2011

Dear Shareowner:

You are cordially invited to attend our 2012 Annual Meeting of Shareowners.

We will hold the annual meeting in Bradley Hall at the Rockwell Automation Global Headquarters, 1201 South Second Street, Milwaukee, Wisconsin, USA on Tuesday, February 7, 2012, at 5:30 p.m. (Central Standard Time). At the meeting I will report on the Corporation’s activities and performance during the past fiscal year, and we will discuss and act on the matters described in the accompanying Proxy Statement. You will then have an opportunity to comment on or inquire about the Corporation’s affairs.

At this year’s meeting, you will have an opportunity to vote on whether to:

 

   

elect three directors named in the Proxy Statement;

 

   

approve the selection of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2012;

 

   

approve the Rockwell Automation, Inc. 2012 Long-Term Incentives Plan; and

 

   

approve on an advisory basis the compensation of our named executive officers.

Your vote is important to us. Whether or not you plan to attend the meeting, please return your proxy card or vote via the Internet or by telephone so that your shares will be voted and represented at the meeting.

If you plan to attend the meeting, please request an admittance card in one of the ways described on the last page of the Proxy Statement.

We sincerely hope that as many shareowners as can conveniently attend will do so.

We have enclosed the Proxy Statement for our 2012 Annual Meeting of Shareowners and our 2011 Annual Report. We hope you find them interesting and useful in understanding your company.

Sincerely yours,

LOGO

Keith D. Nosbusch

Chairman and Chief Executive Officer


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Rockwell Automation, Inc.

 

1201 South Second Street, Milwaukee, Wisconsin 53204, USA

Notice of 2012 Annual Meeting of Shareowners

 

 

To the Shareowners of

ROCKWELL AUTOMATION, INC.:

The 2012 Annual Meeting of Shareowners of Rockwell Automation, Inc. will be held in Bradley Hall at the Rockwell Automation Global Headquarters, 1201 South Second Street, Milwaukee, Wisconsin, USA on Tuesday, February 7, 2012, at 5:30 p.m. (Central Standard Time) for the following purposes:

 

  (a)

to vote on whether to elect as directors the three nominees named in the accompanying proxy statement;

 

  (b)

to vote on a proposal to approve the selection by the Audit Committee of our Board of Directors of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2012;

 

  (c)

to vote on a proposal to approve the Rockwell Automation, Inc. 2012 Long-Term Incentives Plan;

 

  (d)

to vote on a proposal to approve on an advisory basis the compensation of our named executive officers; and

 

  (e)

to transact such other business as may properly come before the meeting.

Only shareowners of record at the close of business on December 12, 2011 will be entitled to notice of, and to vote at, the meeting.

By order of the Board of Directors.

LOGO

Douglas M. Hagerman

Secretary

December 16, 2011

Note: The Board of Directors solicits votes by the execution and prompt return of the

accompanying proxy in the enclosed return envelope or by use of the

Corporation’s telephone or Internet voting procedures.


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Rockwell Automation, Inc.

Proxy Statement for 2012 Annual Meeting

INDEX

 

2012 Annual Meeting

     1   

General Information About this Proxy Statement and the Annual Meeting

     1   

Rockwell Automation

     5   

Stock Ownership by Certain Beneficial Owners

     5   

Corporate Governance

     5   

Election of Directors

     9   

Information About Director Nominees and Continuing Directors

     10   

Board of Directors and Committees

     12   

Director Compensation

     17   

Director Compensation Table

     19   

Audit Committee Report

     21   

Ownership of Equity Securities by Directors and Executive Officers

     22   

Executive Compensation

     23   

Compensation Discussion and Analysis

     23   

Summary Compensation Table

     38   

Grants of Plan-Based Awards Table

     40   

Outstanding Equity Awards at Fiscal Year-End Table

     42   

Option Exercises and Stock Vested Table

     43   

Pension Benefits Table

     44   

Non-Qualified Deferred Compensation

     46   

Non-Qualified Deferred Compensation Table

     48   

Potential Payments Upon Termination or Change of Control

     49   

Compensation Committee Report

     52   

Proposal to Approve the Selection of Independent Registered Public Accounting Firm

     52   

Proposal to Approve 2012 Long-Term Incentives Plan

     53   

Proposal to Approve Compensation of our Named Executive Officers

     61   

Other Matters

     63   

Section 16(a) Beneficial Ownership Reporting Compliance

     64   

Annual Report

     64   

Shareowner Proposals for 2013 Annual Meeting

     64   

Expenses of Solicitation

     64   

Supplemental Financial Information

     64   

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareowners to be held on February 7, 2012

     66   

Appendix A: Rockwell Automation, Inc. 2012 Long-Term Incentives Plan

     A-1   


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Rockwell Automation, Inc.

Proxy Statement

2012 ANNUAL MEETING

 

The 2012 Annual Meeting of Shareowners of Rockwell Automation, Inc. will be held at 5:30 p.m. (Central Standard Time) on February 7, 2012, for the purposes set forth in the accompanying Notice of 2012 Annual Meeting of Shareowners. This proxy statement and the accompanying proxy are furnished in connection with the solicitation by our Board of Directors of proxies to be used at the meeting and at any adjournment of the meeting. We will refer to your company in this proxy statement as “we,” “us,” “our,” the “Corporation,” the “Company” or “Rockwell Automation.”

GENERAL INFORMATION ABOUT

THIS PROXY STATEMENT AND

THE ANNUAL MEETING

Distribution and Electronic Availability of Proxy Materials

Again this year we are taking advantage of Securities and Exchange Commission (SEC) rules that allow companies to furnish proxy materials to shareowners via the Internet. If you received a Notice of Internet Availability of Proxy Materials (Notice) by mail, you will not receive a printed copy of the proxy materials, unless you specifically request one. The Notice instructs you on how to access and review this proxy statement and our 2011 Annual Report as well as how to vote by Internet. If you received the Notice and would still like to receive a printed copy of our proxy materials, you should follow the instructions for requesting these materials included in the Notice.

We will mail the Notice to certain shareowners by December 29, 2011. We will continue to mail a printed copy of this proxy statement and form of proxy to certain shareowners and we expect that mailing to begin on December 22, 2011.

Shareowners Sharing the Same Address

SEC rules permit us to deliver only one copy of our annual report and this proxy statement or the Notice to multiple shareowners who share the same address and have the same last name, unless we received

contrary instructions from a shareowner. This delivery method, called “householding,” reduces our printing and mailing costs. Shareowners who participate in householding will continue to receive separate proxy cards.

We will deliver promptly upon written or oral request a separate copy of our annual report and proxy statement or Notice to any shareowner who received these materials at a shared address. To receive a separate copy, please write or call Rockwell Automation Shareowner Relations, 1201 South Second Street, Milwaukee, Wisconsin 53204, USA, telephone: +1-414-382-8410.

If you are a holder of record and would like to revoke your householding consent and receive a separate copy of our annual report and proxy statement or Notice in the future, please contact Broadridge Financial Solutions, Inc. (Broadridge), either by calling +1-800-542-1061 (toll free in the United States and Canada only) or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717, USA. You will be removed from the householding program within 30 days.

Any shareowners of record who share the same address and wish to receive only one copy of future Notices, proxy statements and annual reports for your household should contact Rockwell Automation Shareowner Relations at the address or telephone number listed above.

If you hold your shares in street name with a broker or other nominee, please contact them for information about householding.

Location and Date of Annual Meeting

We are holding the Annual Meeting at our Global Headquarters, 1201 South Second Street, Milwaukee, Wisconsin, USA on Tuesday, February 7, 2012 at 5:30 p.m. (Central Standard Time). You will find directions and instructions for parking and entering the building on your admittance card.

 

 

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What am I voting on?

You will be voting on whether to:

 

Ÿ  

elect as directors the three nominees named in this proxy statement;

 

Ÿ  

approve the selection by the Audit Committee of Deloitte & Touche LLP (D&T) as our independent registered public accounting firm for fiscal year 2012 (the D&T appointment);

 

Ÿ  

approve our 2012 Long-Term Incentives Plan; and

 

Ÿ  

approve on an advisory basis the compensation of our named executive officers.

Who is entitled to vote at the Annual Meeting?

Only holders of record of our common stock at the close of business on December 12, 2011, the record date for the meeting, may vote at the Annual Meeting. Each shareowner of record is entitled to one vote for each share of our common stock held on the record date. On December 12, 2011, 142,362,616 shares of our common stock were outstanding.

Who may attend the Annual Meeting?

Shareowners as of the record date, or individuals holding their duly appointed proxies, may attend the Annual Meeting. Please note that if you hold your shares in street name through a broker or other nominee, you will need to provide a copy of a brokerage statement reflecting your stock ownership as of the record date to be admitted to the Annual Meeting.

How do I vote my shares?

We encourage shareowners to vote their shares in advance of the Annual Meeting even if they plan to attend. Shareowners may vote in person at the Annual Meeting. If you are a record holder and wish to vote in person at the meeting, you may vote by obtaining a ballot at the meeting. If you hold your shares in street name and wish to vote in person at the meeting, you should contact your broker or other nominee to obtain a broker’s proxy card and bring it, together with proper identification and your brokerage statement reflecting your stock ownership as of the record date, with you to the meeting.

In addition you may vote by proxy:

 

Ÿ  

if you received a Notice, by submitting the proxy over the Internet by following the instructions on the Notice; and

 

Ÿ  

if you received a paper copy of the proxy materials:

 

   

for shareowners of record and participants in our savings plans and BNY Mellon Shareowner Services Program (dividend reinvestment and stock purchase plan), by completing, signing and returning the enclosed proxy card or direction card, or via the Internet or by telephone; or

 

   

for shares held in street name, by using the method directed by your broker or other nominee. You may vote over the Internet or by telephone if your broker or nominee makes those methods available, in which case they will provide instructions with your proxy materials.

How will my proxy be voted?

If you properly complete, sign and return a proxy or use our telephone or Internet voting procedures to authorize the named proxies to vote your shares, your shares will be voted as specified. If your proxy card is signed but does not contain specific instructions, your shares will be voted as recommended by our Board of Directors, subject to applicable New York Stock Exchange (NYSE) regulations.

For shareowners participating in our savings plans or in the BNY Mellon Shareowner Services Program (dividend reinvestment and stock purchase plan), the trustee or administering bank will vote the shares that it holds for a participant’s account only in accordance with instructions given in a signed, completed and returned proxy card or direction card, or in accordance with instructions given pursuant to our Internet or telephone voting procedures. If they do not receive instructions, the shares will not be voted. To allow sufficient time for voting by the trustees of the savings plans, your voting instructions for shares held in the plans must be received by February 2, 2012.

 

 

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May I revoke or change my proxy?

For shareowners of record, you may revoke or change your proxy at any time before it is voted by:

 

 

delivering a written notice of revocation to the Secretary of the Corporation;

 

 

submitting a properly signed proxy card with a later date;

 

 

casting a later vote using the telephone or Internet voting procedures; or

 

 

voting in person at the Annual Meeting (except for shares held in the savings plans).

If you hold your shares in street name, you must contact your broker or other nominee to revoke or change your proxy. Your proxy is not revoked simply because you attend the Annual Meeting.

Will my vote be confidential?

It is our policy to keep confidential all proxy cards, ballots and voting tabulations that identify individual shareowners, except (i) as may be necessary to meet any applicable legal requirements, (ii) in the case of any contested proxy solicitation, as may be necessary to permit proper parties to verify the propriety of proxies presented by any person and the results of the voting, and (iii) if a shareowner writes comments on the proxy card directed to our Board of Directors or management. Representatives of Broadridge will tabulate votes and act as the independent inspector of election at this year’s meeting. The independent inspector of election and any employees involved in processing proxy cards or ballots and tabulating the vote are required to comply with this policy of confidentiality.

What is required for there to be a quorum at the Annual Meeting?

Holders of at least a majority of the shares of our common stock issued and outstanding on the record date for the Annual Meeting must be present, in person or by proxy, for there to be a quorum in order to conduct business at the meeting.

How many votes are needed to approve each of the proposals?

Election of Directors.  Directors are elected by a plurality of votes cast. This means that the three

nominees for election as directors who receive the greatest number of votes cast by the holders of our common stock entitled to vote at the meeting will become directors. The election of directors, however, is subject to our majority vote policy.

Our Guidelines on Corporate Governance set forth our policy if a director is elected by a plurality of votes cast but receives a greater number of votes “withheld” from his or her election than votes “for” such election. In an uncontested election, any nominee for director who receives more votes “withheld” than votes “for” his or her election must promptly tender his or her resignation to the Board. The Board Composition and Governance Committee will consider the resignation offer and make a recommendation to the Board of Directors. The Board will act on the tendered resignation within 90 days following certification of the election results. The Board Composition and Governance Committee, in making its recommendation, and the Board of Directors, in making its decision, may consider any factors or other information that it considers appropriate and relevant, including any stated reasons why the shareowners withheld votes from the director, the director’s tenure, the director’s qualifications, the director’s past and expected contributions to the Board, and the overall composition of the Board. We will promptly disclose the Board’s decision regarding whether to accept or reject the director’s resignation offer in a Form 8-K furnished to the SEC. If the Board rejects the tendered resignation or pursues any additional action, the disclosure will include the rationale behind the decision. Any director who tenders his or her resignation may not participate in the Board Composition and Governance Committee deliberations and recommendation or in the Board’s decision whether to accept or reject the resignation offer.

D&T Appointment.  An affirmative vote of the holders of a majority of the voting power of our common stock present in person or represented by proxy and entitled to vote on the matter is necessary to approve the D&T appointment.

Compensation of Named Executive Officers.  An affirmative vote of the holders of a majority of the voting power of our common stock present in person or represented by proxy and entitled to vote on the matter is necessary to approve on an advisory basis the compensation of our named executive officers, although such vote will not be binding on us.

 

 

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2012 Long-Term Incentives Plan.  An affirmative vote of the holders of a majority of the voting power of our common stock present in person or represented by proxy and entitled to vote on the matter is necessary to approve our 2012 Long-Term Incentives Plan. In addition, under NYSE rules, the total votes cast on the proposal must represent a majority of the shares of our common stock issued and outstanding on the record date.

How are votes counted?

Under Delaware law and our Restated Certificate of Incorporation and By-Laws, all votes entitled to be cast by shareowners present in person or represented by proxy at the meeting and entitled to vote on the subject matter, whether those shareowners vote “for,” “against” or abstain from voting, will be counted for purposes of determining the minimum number of affirmative votes required to approve the D&T appointment and our 2012 Long-Term Incentives Plan and approve on an advisory basis the compensation of our named executive officers.

What is the effect of an abstention?

The shares of a shareowner who abstains from voting on a matter will be counted for purposes of determining whether a quorum is present at the meeting so long as the shareowner is present in person or represented by proxy. An abstention from voting on a matter by a shareowner present in person or represented by proxy at the meeting has no effect in the election of directors, but has the same legal effect as a vote “against” the proposals to approve the D&T appointment, our 2012 Long-Term Incentives Plan and the compensation of our named executive officers.

How will votes be counted on shares held through brokers?

Brokers are not entitled to vote on the election of directors, the proposal to approve our 2012 Long-Term Incentives Plan or the advisory proposal to approve the compensation of our named executive officers unless they receive voting instructions from the beneficial owner. If a broker does not receive voting instructions, the broker may return a proxy card with no vote on the election of directors, the proposal to approve our 2012 Long-Term Incentives Plan or the advisory proposal to approve the

compensation of our named executive officers, which is usually referred to as a broker non-vote. The shares of a shareowner whose shares are not voted because of a broker non-vote on a particular matter will be counted for purposes of determining whether a quorum is present at the meeting so long as the shareowner is represented by proxy. A broker non-vote on a matter has no effect in the election of directors or the proposals to approve the D&T appointment, our 2012 Long-Term Incentives Plan and the compensation of our named executive officers. However, since broker non-votes are not counted as votes cast for purposes of the requirement of the NYSE that the total votes cast on the proposal to approve our 2012 Long-Term Incentives Plan represent a majority of the shares of our common stock issued and outstanding on the record date, broker non-votes could impair our ability to satisfy this requirement.

Can I receive electronic access to shareowner materials?

As noted above, under SEC rules we are permitted to furnish proxy materials to shareowners via the Internet. However, we may choose to continue to provide printed copies to certain shareowners. If we send you printed copies, you can save us printing and mailing costs by electing to access proxy statements, annual reports and related materials electronically instead of receiving these documents in print. You must have an e-mail account and access to the Internet and expect to have such access in the future to be eligible for electronic access to these materials. To enroll for these services, please go to https://enroll1.icsdelivery.com/rok_/Default.aspx or visit our website at www.rockwellautomation.com, click on the heading: “About Us,” then the heading: “Investor Relations,” then the heading “Shareowner Information,” then the heading “Transfer Agent & Dividends.” If you own your shares through a broker or other nominee, you may contact them directly to request electronic access.

Your consent to electronic access will be effective until you revoke it. You may cancel your consent at no cost to you at any time by going to https://enroll1.icsdelivery.com/
rok_/Default.aspx
and following the instructions or by contacting your broker or other nominee.

 

 

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ROCKWELL AUTOMATION

 

We are a leading global provider of industrial automation power, control, and information solutions that help manufacturers achieve a competitive advantage for their businesses. We were incorporated in 1996 in connection with a tax-free reorganization completed on December 6, 1996, pursuant to which we divested our former aerospace and defense business (the A&D Business) to The Boeing Company. In the reorganization, the former Rockwell International Corporation (RIC) contributed all of its

businesses, other than the A&D Business, to us and distributed all of our capital stock to RIC’s shareowners. Boeing then acquired RIC. RIC was incorporated in 1928. Our principal executive office is located at 1201 South Second Street, Milwaukee, Wisconsin 53204, USA. Our telephone number is +1-414-382-2000 and our website is located at www.rockwellautomation.com. Our common stock trades on the NYSE under the symbol ROK.

 

 

STOCK OWNERSHIP BY CERTAIN BENEFICIAL OWNERS

Based on filings made under Sections 13(d) and 13(g) of the Securities Exchange Act of 1934, as amended (Exchange Act), on or before December 12, 2011, the following table lists persons who we believe beneficially owned more than 5% of our common stock as of such date.

 

Name and Address of Beneficial Owner

       Number of Shares Beneficially Owned           Percent of Class (1)    

BlackRock, Inc.

   7,559,846(2)   5.33%

40 East 52nd Street, New York, NY 10022

    

The Vanguard Group, Inc.

   7,686,546(3)   5.42%

100 Vanguard Boulevard, Malvern, PA 19355

    

 

 

 

(1)

The percent of class owned has been computed in accordance with Rule 13d-3(d)(1) under the Exchange Act.

 

(2)

Based on a Schedule 13G filed by BlackRock, Inc. with the SEC on February 8, 2011. BlackRock and its named subsidiaries reported sole power to vote and dispose of all the shares.

 

(3)

Based on a Schedule 13G filed by The Vanguard Group, Inc. (Vanguard) with the SEC on February 10, 2011. Vanguard beneficially owns the shares as an investment adviser and through a wholly-owned subsidiary as a result of its serving as investment manager of collective trust accounts. Vanguard reported sole power to vote and dispose of 179,642 shares and shared power to dispose of 7,506,904 shares.

CORPORATE GOVERNANCE

 

Guidelines on Corporate Governance.  The Board of Directors has adopted Guidelines on Corporate Governance, which contain general principles regarding the responsibilities and function of our Board and Board Committees. The Guidelines set forth the Board’s governance practices with respect to leadership structure, Board meetings and access to senior management, Board compensation, director qualifications, Board performance, management development and succession planning, director stock ownership, and enterprise risk management. The Guidelines are available on our website at

www.rockwellautomation.com/investors/get/bodguidelines.pdf.

Related Person Transactions.  The Board of Directors adopted a written policy regarding how it will review and approve of related person transactions (as defined below). The Board Composition and Governance Committee is responsible for administering this policy. The policy is available on our website at www.rockwellautomation.com/investors/get/
relatedpersontransactionspolicy.pdf
.

 

 

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The policy defines a related person transaction as any transaction in which we are or will be a participant, in which the amount involved exceeds $120,000, and in which any director, director nominee, executive officer or more than 5% shareowner or any of their immediate family members has or will have a direct or indirect material interest. The policy sets forth certain transactions, arrangements and relationships not reportable under SEC rules that do not constitute related person transactions.

Under this policy, each director, director nominee and executive officer must report each proposed or existing transaction between us and that individual or any of that individual’s immediate family members to our general counsel. Our general counsel will assess and determine whether any transaction reported to him or of which he learns constitutes a related person transaction. If our general counsel determines that a transaction constitutes a related person transaction, he will refer it to the Board Composition and Governance Committee. The Committee will approve or ratify a related person transaction only if it determines that the transaction is in, or is not inconsistent with, the best interests of the Corporation and its shareowners. In determining whether to approve or ratify a related person transaction, the Committee will consider factors it deems appropriate, including:

 

   

the fairness to the Corporation;

 

   

whether the terms of the transaction would be on the same basis if a related person was not involved;

 

   

the business reasons for the Corporation to participate in the transaction;

 

   

whether the transaction may involve a conflict of interest;

 

   

the nature and extent of the related person’s and our interest in the transaction; and

 

   

the amount involved in the transaction.

There are no related person transactions to report in this proxy statement.

Potential Director Candidates.  The Board Composition and Governance Committee is responsible for screening potential director

candidates and recommending qualified candidates to the full Board.

The Committee will consider candidates for director recommended by shareowners. Shareowners can recommend director candidates by writing to the Corporate Secretary at Rockwell Automation, 1201 South Second Street, Milwaukee, Wisconsin 53204, USA. The recommendation must include the candidate’s name, biographical data and qualifications and any other information required by the SEC to be included in a proxy statement with respect to a director nominee. Any shareowner recommendation must be accompanied by a written statement from the candidate indicating his or her willingness to serve if nominated and elected. The recommending shareowner also must provide evidence of being a shareowner of record of our common stock at that time.

The Committee, the Chairman and Chief Executive Officer or other members of the Board may identify a need to add new members to the Board or fill a vacancy on the Board. In that case, the Committee will initiate a search for qualified director candidates, seeking input from senior management and Board members, and to the extent it deems it appropriate, outside search firms. During fiscal 2011, the Committee retained a search firm to assist in identifying and evaluating potential candidates to fill the vacancies created by the retirement of two directors. The Committee will evaluate qualified candidates and then make its recommendation to the Board.

In making its recommendations to the Board with respect to director candidates, the Committee considers various criteria set forth in our Board Membership Criteria (see Exhibit A to the Committee’s Charter), including experience, professional background, specialized expertise, diversity and concern for the best interests of shareowners as a whole. In addition, directors must be of the highest character and integrity, be free of conflicts of interest with the Corporation, and have sufficient time available to devote to the affairs of the Corporation. The Committee from time to time reviews with the Board our Board Membership Criteria.

The Committee will evaluate properly submitted shareowner recommendations under substantially the

 

 

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same criteria and in substantially the same manner as other potential candidates.

In addition to recommending director candidates to the Committee, shareowners may also nominate candidates for election to the Board at annual shareowner meetings by following the procedures set forth in our By-Laws. See “Shareowner Proposals for 2013 Annual Meeting” set forth later in this proxy statement.

Diversity.  The Board does not have a formal policy with respect to diversity, but recognizes the value of a diverse Board and thus has included diversity as a factor that is taken into consideration in its Board Membership Criteria.

When it considers the composition of the Board, especially when adding new directors, the Board Composition and Governance Committee assesses the skills and experience of Board members and compares them to the skills that might benefit the Corporation, in light of the current Board membership. The Committee seeks people with a variety of occupational and personal backgrounds to ensure that the Board benefits from a range of perspectives and to enhance the diversity of the Board in such areas as experience, geography, race, gender and ethnicity. When selecting director candidates, the Committee may establish specific skills, experiences or backgrounds that it believes the Board should seek in order to achieve balance and effectiveness.

The Board believes that it is important that its members reflect diverse viewpoints so that, as a group, the Board includes a sufficient mix of perspectives to allow the Board best to fulfill its responsibilities to shareowners.

Communications to the Board and Ombudsman. Shareowners and other interested parties may send communications to the Board, an individual director, the non-management directors as a group, or a Board Committee at the following address:

Rockwell Automation, Inc.

c/o Corporate Secretary

1201 South Second Street

Milwaukee, Wisconsin 53204, USA

Attn: Board of Directors

The Secretary will receive and process all communications before forwarding them to the addressee. The Secretary will forward all communications unless the Secretary determines that a communication is a business solicitation or advertisement, or requests general information about us.

In accordance with procedures approved by the Audit Committee of our Board of Directors, concerns about accounting, internal controls or auditing matters should be reported to the Ombudsman as outlined in our Code of Conduct, which is available on our website at www.rockwellautomation.com/about_us/ethics.html. These standards are also available in print to any shareowner upon request. The Ombudsman is required to report promptly to the Audit Committee all reports of questionable accounting or auditing matters that the Ombudsman receives. You may contact the Ombudsman by addressing a letter to:

Ombudsman

Rockwell Automation, Inc.

1201 South Second Street

Milwaukee, Wisconsin 53204, USA

You may also contact the Ombudsman by telephone at 1-800-552-3589 (US only) or +1-414-382-8484, e-mail at ombudsman@rockwell.com, fax at +1-414-382-8485, or, if you wish to remain anonymous, by going to:

https://rockwellautomationombudsman.alertline.com.

Board Leadership Structure.  Our Board of Directors adheres to a flexible approach to the question of whether to separate or combine the roles of Chairman and CEO. The Board believes that these are matters that should be discussed and determined by the Board from time to time and that they depend upon the current performance of the Corporation and the experience, knowledge and temperament of the CEO. Currently the Board has combined the roles of Chairman and CEO in Mr. Nosbusch. It has done so because the Board believes that at this time it strengthens the leadership of the Corporation and does not impair its independence, its ability to control its agenda and its oversight of management.

The Board further has concluded that this structure improves the efficiency of decision-making by the Board, in light of Mr. Nosbusch’s long experience

 

 

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and extensive knowledge of the Corporation’s operations, its customers and the major business issues that it faces. For similar reasons, we have not appointed a lead director at this time. However, in order to ensure the effectiveness of the independent directors, the Board has established a practice of holding independent director sessions at each Board meeting, with a presiding director and a clear process for communicating with Mr. Nosbusch about the matters discussed in these sessions.

Board’s Role in Risk Oversight.  The responsibility for managing risk rests with executive management. The Board has primary responsibility for oversight of management’s program of enterprise risk management for the Corporation. The standing committees of the Board address the risks related to their respective areas of oversight, and the Audit Committee is responsible for reviewing the overall guidelines and policies that govern our process for risk assessment and management.

Management periodically reports to the Board regarding the system that management has implemented to assess, manage and monitor risks. Management also reports to the Board on which risks it has assessed as the most significant, together with management’s plans to mitigate those risks.

Our risk management system seeks to ensure that the Board is informed of major risks facing the Corporation. The Audit Committee provides oversight regarding financial risks. The Audit Committee receives regular reports on management policies and practices relating to the Corporation’s financial statements, and the effectiveness of internal controls over financial reporting. The Audit Committee also receives regular reports from the Corporation’s independent auditors and general auditor as well as the general counsel regarding legal and compliance risks. The Compensation and Management Development Committee considers the risk implications of the incentives created by our compensation programs as well as risk issues related to talent management and succession planning. The Technology and Corporate Responsibility Committee provides oversight regarding risks related to technology, safety, and environmental protection, among other corporate responsibility matters. The

Board Composition and Governance Committee provides oversight regarding governance-related risks including conflicts of interest, director independence, and board and committee structure and performance.

Our risk oversight is aligned with the Board’s oversight of the Corporation’s strategies and plans. Thus, the Board ordinarily receives reports on the risks implicated by the Corporation’s strategic decisions concurrent with the deliberations leading to those decisions. From time to time, the Board will receive reports from management on enterprise risks that are not specifically assigned to the standing committees.

We believe we have an effective risk management system that fosters an appropriate culture of risk-taking. We have strong internal processes and a strong control environment to identify and manage risks. We also believe that our leadership structure, with Mr. Nosbusch serving as both Chairman and CEO, enhances the Board’s effectiveness in overseeing risk. Mr. Nosbusch’s extensive knowledge of the Corporation’s business and operations helps the Board to identify and address key risks facing the Corporation. Executive officers are assigned responsibility for managing the risks deemed most significant. These officers periodically report to the full Board or the applicable Committee on efforts to address the risks for which they are responsible.

Our Annual Report on Form 10-K for the year ended September 30, 2011 contains an extensive description of the most significant enterprise risks that we face.

Independent Director Sessions.  The independent directors meet in executive session without any officer or member of management present in conjunction with regular meetings of the Board. The independent directors designate the chair of one of the Board Committees as chair of the executive session, in part depending upon whether the principal items to be considered at the session are within the scope of the applicable Committee. The Board has adopted an annual schedule designating the presumptive chair for executive sessions from among the chairs of the Board Committees, which the Board may override as appropriate by designating the chair of another Board Committee.

 

 

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Corporate Governance Documents.  You may find current copies of the following corporate governance documents on our website at http://www.rockwellautomation.com/
investors/corpgov.html
:

 

   

Board of Directors Guidelines on Corporate     Governance

   

Audit Committee Charter

   

Compensation and Management Development     Committee Charter

   

Board Composition and Governance     Committee Charter

   

Technology and Corporate Responsibility     Charter

   

Code of Conduct

   

Social Responsibility Principles

   

Related Person Transactions Policy

   

Shareowner Communications to the Board and     Ombudsman

   

Certificate of Incorporation

   

By-laws

We will provide any of this information in print to any shareowner upon written request to Rockwell Automation Shareowner Relations, 1201 South Second Street, Milwaukee, WI 53204, USA.

ELECTION OF DIRECTORS

Our Restated Certificate of Incorporation provides that the Board of Directors will consist of three classes of directors serving staggered three-year terms that are as nearly equal in number as possible. One class of directors is elected each year with terms extending to the third succeeding Annual Meeting after election.

The terms of three directors expire at the 2012 Annual Meeting. The Board has nominated these current directors, upon the recommendation of the Board Composition and Governance Committee, for election as directors with terms expiring at the 2015 Annual Meeting.

Proxies properly submitted will be voted at the meeting, unless authority to do so is withheld, for the election of the three nominees specified in Nominees for Election as Directors below, subject to applicable NYSE regulations. If for any reason any of these nominees is not a candidate when the election occurs (which is not expected), proxies and shares properly authorized to be voted will be voted at the meeting for the election of a substitute nominee. Alternatively, the Board of Directors may reduce the number of directors.

 

 

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INFORMATION ABOUT DIRECTOR NOMINEES AND CONTINUING DIRECTORS

For each director nominee and continuing director, we have stated the person’s name, age (as of December 16, 2011) and principal occupation; the position, if any, with the Corporation; the period of service as a director of the Corporation (or a predecessor corporation); and other directorships held.

 

 

NOMINEES FOR ELECTION AS DIRECTORS WITH TERMS EXPIRING IN 2015

 

       
LOGO  

Betty C. Alewine

 

Director Since 2000

  Age 63    
 

Retired President and Chief Executive Officer, COMSAT Corporation (now part of Lockheed Martin Corporation) (global satellite services and digital networking services and technology). Ms. Alewine joined COMSAT in 1986 as Vice President of Sales and Marketing, and then served as the Vice President and General Manager and in 1994 as President of COMSAT International, the company’s largest operating unit. Ms. Alewine was named Chief Executive Officer of COMSAT in July 1996 and served in that position until the merger of COMSAT and Lockheed Martin Corporation in August 2000. Ms. Alewine is a director of New York Life Insurance Company and The Brink’s Company. She also serves as a director or member of a number of civic and charitable organizations.

       

LOGO

 

Verne G. Istock

 

Director Since 2003

  Age 71    
 

Retired Chairman and President, Bank One Corporation (now part of JPMorgan Chase & Co.) (financial holding company). Mr. Istock served as Chairman of the Board of Bank One Corporation from October 1998, following completion of the merger of First Chicago NBD Corporation and Banc One Corporation, until October 1999, and as President of Bank One Corporation from October 1999 until September 2000. He served as Acting Chief Executive Officer of Bank One Corporation from December 1999 until March 2000. He served as Chairman of First Chicago NBD from 1996 to 1998 and as President and Chief Executive Officer of First Chicago NBD from 1995 to 1998. Mr. Istock is presiding director of Masco Corporation and a former director of Kelly Services, Inc. He also serves as a director or member of a number of civic and community organizations.

       

LOGO

 

David B. Speer

 

Director Since 2003

  Age 60    
 

Chairman and Chief Executive Officer, Illinois Tool Works Inc. (engineered components and industrial systems and consumables). Mr. Speer joined Illinois Tool Works in 1978. In October 1995, he was elected Executive Vice President of worldwide construction products businesses and in 2003 assumed similar responsibilities for the company’s Wilsonart businesses. He was elected President of Illinois Tool Works in August 2004, Chief Executive Officer in August 2005 and Chairman in May 2006. Mr. Speer is a director of Deere & Company. He is also a member of the Chicago Economic Club and a director or member of a number of other business and community organizations.

CONTINUING DIRECTORS WITH TERMS EXPIRING IN  2013

LOGO

 

Barry C. Johnson, Ph.D.

 

Director Since 2005

  Age 68    
 

Retired Dean, College of Engineering, Villanova University. Dr. Johnson served as Dean, College of Engineering, Villanova University from August 2002 until March 2006. He served as Chief Technology Officer of Honeywell International Inc. (diversified technology and manufacturing company) from July 2000 to April 2002. Before that, he served as Corporate Vice President of Motorola, Inc. (global communications company) and Chief Technology Officer for that company’s Semiconductor Product Sector. Dr. Johnson also serves as a director of Cytec Industries Inc. and IDEXX Laboratories, Inc.

 

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LOGO

 

William T. McCormick, Jr.

 

Director Since 1989

  Age 67    
 

Retired Chairman of the Board and Chief Executive Officer, CMS Energy Corporation (diversified energy). Mr. McCormick served as Chairman of the Board and Chief Executive Officer of CMS Energy Corporation from November 1985 until May 2002. Before joining CMS, he had been Chairman and Chief Executive Officer of American Natural Resources Company (natural gas company) and Executive Vice President and a director of its parent corporation, The Coastal Corporation (energy holding company).

       

LOGO

 

Keith D. Nosbusch

 

Director Since 2004

  Age 60    
 

Chairman of the Board, President and Chief Executive Officer. Mr. Nosbusch has been our Chairman of the Board since February 2005 and our President and Chief Executive Officer since February 2004. He served as Senior Vice President and President, Rockwell Automation Control Systems from November 1998 until February 2004. Mr. Nosbusch is a director of The Manitowoc Company, Inc. and serves as a director or member of a number of business, civic and community organizations.

CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2014
       

LOGO

 

  Donald R. Parfet   Director Since 2008   Age 59    
 

Managing Director, Apjohn Group, LLC (business development); General Partner, Apjohn Ventures Fund (venture capital fund). Mr. Parfet has served as Managing Director of Apjohn Group since 2001. Before that, he served as Senior Vice President of Pharmacia Corporation (pharmaceuticals). Mr. Parfet is a director of Kelly Services, Inc. and serves as a director or trustee of a number of business, civic and charitable organizations.

       

LOGO

  Steven R. Kalmanson   Director Since 2011   Age 59    
 

Retired Executive Vice President, Kimberly-Clark Corporation (consumer package goods). Mr. Kalmanson joined Kimberly-Clark Corporation in 1977. He held various marketing and business management positions within the consumer products businesses. He was appointed President, Adult Care in 1990, President, Child Care in 1992, President, Family Care in 1994, Group President of the Consumer Tissue segment in 1996, Group President-North Atlantic Personal Care in 2004 and Group President-North Atlantic Consumer Products in 2005. Mr. Kalmanson was president and sole owner of Maxair, Inc., an aviation services company, from 1988 until October 2011 when he sold the company.

       

LOGO

  James P. Keane   Director Since 2011   Age 52    
 

President, Steelcase Group (part of Steelcase Inc.) (office furniture). Mr. Keane joined Steelcase Inc. in 1997. He served as Senior Vice President and Chief Financial Officer of Steelcase Inc. from 2001 through 2006. He was named President of the Steelcase Group in October 2006, where he oversees sales, marketing and product development activities of certain brands primarily in North America. In January 2011, he assumed leadership of the Steelcase brand across the Americas and Europe, the Middle East and Africa. Previously, he has led corporate strategy, IT, Steelcase Design Partnership, and research and development since 1997. He serves as a director or trustee of a number of civic and charitable organizations.

The Board of Directors recommends that you vote “FOR” the election as directors of the three nominees described above, which is presented as item (a).

 

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BOARD OF DIRECTORS AND COMMITTEES

 

Our business is managed under the direction of the Board of Directors. The Board has established four standing committees: the Audit Committee, the Board Composition and Governance Committee, the Compensation and Management Development Committee and the Technology and Corporate Responsibility Committee, whose principal functions are briefly described below. Each committee has a written charter that sets forth the duties and responsibilities of the committee. Current copies of the committee charters are available on our website at www.rockwellautomation.com/investors/
corpgov.html.
The committee charters are also available in print to any shareowner upon request. The committees review and assess the adequacy of their charters each year and recommend any proposed changes to the Board for approval. During fiscal 2011, each committee reviewed its charter, and the Compensation and Management Development Committee and the Board Composition and Governance Committee revised their charters to move responsibility for director compensation and stock ownership guidelines from the Compensation and Management Development Committee to the Board Composition and Governance Committee. The Audit Committee and Technology and Corporate Responsibility Committee did not make any changes to their charters in fiscal 2011.

In fiscal 2011, the Board held seven meetings. Attendance by incumbent directors at Board and Committee meetings was 100%. Directors are expected to attend the Annual Meeting of Shareowners. However, none of the directors (except Mr. Nosbusch) attended the 2011 Annual Meeting due to inclement weather that forced the other directors to cancel their plans to travel to the Annual Meeting.

Director Independence.  Our Guidelines on Corporate Governance require that a substantial majority of the members of the Board be independent directors. For a director to be independent, the Board must affirmatively determine that the director has no direct or indirect material relationship with the Corporation. The Board has established guidelines, which are contained in our Guidelines on Corporate Governance, to assist it in determining director independence in conformity with the NYSE listing requirements. These guidelines are available on our

website at www.rockwellautomation.com/investors/
corpgov.html.

After considering these guidelines and the independence criteria of the NYSE, the Board has determined that none of the current directors, director nominees, or retired directors who served during part of fiscal 2011, other than Mr. Nosbusch (who is a current employee of the Corporation), has a material relationship with the Corporation and each of these directors (other than Mr. Nosbusch) meets the independence requirements of the NYSE and our Guidelines on Corporate Governance. There were no transactions, relationships or arrangements that required review by the Board for purposes of determining director independence.

Director Qualifications.  We believe that our directors should possess the highest character and integrity and be committed to working constructively with others to oversee the management of the business and affairs of the Corporation. Our Board Membership Criteria provide that our directors should (i) have a variety of experience and backgrounds, (ii) have high level managerial experience or be accustomed to dealing with complex problems, and (iii) represent the balanced best interests of all shareowners, considering the overall composition and needs of the Board factors such as diversity, age, international background, experience and specialized expertise. The Criteria attach importance to directors’ experience, ability to collaborate, integrity, ability to provide constructive and direct feedback, lack of bias, and independence. Our Board seeks to maintain members with strong collective abilities that allow it to fulfill its responsibilities.

The Board has determined that each director and nominee is financially literate and possesses the skills, judgment, experience, reputation and commitment to make a constructive contribution to the Board.

We have provided certain information about the skills and experience of our continuing directors in their biographies set forth above. In addition, the Board considered other qualifications in concluding that each current director and director nominee is qualified to serve as a director of the Corporation, including the following experience, qualifications, attributes and skills.

 

 

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Betty Alewine.  Ms. Alewine has significant leadership experience having served as the CEO of COMSAT Corporation and executive-level experience with international business operations, strategic business development, technology and sales and marketing. She brings valuable experience and knowledge through her service on the boards of other public companies in finance, risk oversight, audit and corporate governance matters. She serves as chair of the Audit Committee of New York Life Insurance Company and chair of the Finance and Strategy Committee of The Brink’s Company. She also has global industrial knowledge having served as the United States representative to the Board of Governors of the International Telecommunications Satellite Organization (INTELSAT) and Chairman and Vice Chairman of the INTELSAT Board, as well as on the President’s National Security Telecommunications Advisory Council.

Verne Istock.  Mr. Istock has extensive executive-level finance experience having served as CEO of a bank and bank holding company for five years, with responsibility for overseeing risk management, including financial risks. His comprehensive understanding of finance and banking assists the Board in evaluating and understanding the impact of business decisions on our financial statements and capital structure. He has experience relevant to our industry having served as a commercial bank lender to many businesses including manufacturing companies with both domestic and international operations. He also has extensive knowledge of board procedures and practices and audit, finance and corporate governance matters through his service on the boards of other public companies. He serves as Presiding Director of Masco Corp., where he also chairs the Governance and Nominating Committee and serves on the Audit and Compensation Committees. He was a director of Kelly Services Co., where he served as chair of the Audit Committee, Lead Director, and also as interim non-executive Chairman. He is a former director of the Federal Reserve Bank of Chicago. Mr. Istock holds an M.B.A. from the University of Michigan.

Barry Johnson.  Dr. Johnson brings specialized experience in science and technology to the Board. During his 17 years at Motorola and Honeywell, he utilized risk management methods as an integral part of research and product development programs. He employed such processes as project management, six

sigma and roadmapping to manage technology development risks at Motorola, and expanded their use to risk management in Honeywell’s business and technology strategies and programs. From 1991 to 2000 at Motorola, he was involved in the global development and manufacturing of analog and digital devices, integrated circuits and modules for use in the automation and related industries. From 2000 to 2002 at Honeywell, he participated in the development of business and technology strategies and products for the automation components, systems, software and solutions markets. Dr. Johnson has been inducted into the National Academy of Engineering (USA) and the Fraunhofer Society (Germany) in recognition of his experience in global technology development. He also serves on the boards of other public companies, which gives him experience in technology, finance, audit, risk oversight and corporate governance matters. He earned a Ph.D. in metallurgical engineering and materials science from Carnegie-Mellon University.

Steven Kalmanson.  Mr. Kalmanson brings extensive business and executive management experience to the Board having served in various officer management positions for Kimberly-Clark Corporation, a global publicly traded company. Throughout his career, he successfully initiated and managed change to assist in the transformation of Kimberly-Clark Corporation from a pulp and paper company to a globally recognized consumer package goods conglomerate marketing some of the most recognized brands in the world. His business vision, strategic insight and specific knowledge and experience add value and a diverse perspective to the Corporation. In addition to his US experience, he has international management experience through his responsibilities for Kimberly-Clark’s European and Canadian businesses and sales organizations, global procurement and supply chain organizations and marketing research and services organizations. He successfully innovated, restaged and grew Kimberly-Clark’s global consumer brands and businesses. He has experience leading mergers and acquisitions, organizational restructurings and facility closures and divestitures. In addition, he owned and operated his own aviation services business from 1988 until October 2011, which gives him insights into economic, operational, regulatory and other challenges beneficial to the Corporation. Mr. Kalmanson holds an M.B.A. from the University of Witwatersrand, Johannesburg, South Africa.

 

 

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James Keane.  As a current executive of a global company, Mr. Keane brings current business experience and knowledge to the Board. Through his executive roles at Steelcase Inc., he has extensive leadership experience and a comprehensive understanding of business operations, processes and strategy as well as sales, marketing and product development. In addition, he has a high level of financial literacy and accounting experience having served as CFO of Steelcase. His understanding of financial statements, accounting principles, internal controls and audit committee functions provide the Board with expertise in addressing the complex issues that can be raised by the Corporation’s financial reporting and matters related to the Corporation’s financial position. Mr. Keane holds a masters degree in management from the Kellogg School of Management, Northwestern University.

William McCormick.  Mr. McCormick brings significant leadership and executive experience to the Board having served as Chairman and CEO of CMS Energy Corporation, a publicly-traded Fortune 500 company, for 17 years. CMS was involved in large energy technology development projects in oil and gas, pipeline, power generation, and electric and gas distribution. As Chairman and CEO, he was regularly exposed to issues facing leadership of a large global company, including risk management, strategic planning, corporate governance, human resources and executive compensation. He previously chaired the Nominating and Governance Committee and the Compensation Committee at Schlumberger Ltd. He also chaired the Risk Management Committee of the Board of First Chicago NBD Bank for two years. He holds a Ph.D. in nuclear engineering from the Massachusetts Institute of Technology.

Keith Nosbusch.  As our Chairman and CEO, Mr. Nosbusch has significant experience with and knowledge of the Corporation. He rose through management having served in various positions including president of our control systems business. His long experience and extensive knowledge of the Corporation’s operations, its customers, and the major business issues that it faces enhances overall board effectiveness and interaction with

management. He also serves on the board of another public company, where he has gained experience with corporate governance, audit and risk oversight and overall board procedures and functioning. Mr. Nosbusch earned an M.B.A. from the University of Wisconsin — Milwaukee.

Donald Parfet.  Mr. Parfet brings extensive finance and industry experience to the Board. He has served as General Partner of Apjohn Ventures Fund, a venture capital fund, since 2003. During his years at The Upjohn Company and its successor Pharmacia & Upjohn he had extensive financial and corporate staff management responsibilities and ultimately senior operational responsibilities for multiple global business units. He is experienced in leading strategic planning, risk assessment, human resource planning and financial planning and control as well as the manufacturing of pharmaceuticals, chemicals and research instruments. He is currently the Lead Director on the Board of Directors of Kelly Services, Inc. and previously chaired its Audit Committee. In his current role at Apjohn, he is an active investor in early stage pharmaceutical companies and as such actively evaluates financial and development risk associated with emerging medicines. Mr. Parfet holds an M.B.A. from the University of Michigan.

David Speer.  As current Chairman and CEO of Illinois Tool Works Inc. (ITW), a Fortune 500 company, Mr. Speer brings extensive leadership and board experience to our Board. He is knowledgeable of the multitude of issues facing boards and management of global public companies. His current leadership and operational experience give him a comprehensive understanding of organizations, processes, strategy, risk management and how to drive change and growth. As Chairman and CEO of ITW, which serves a number of end markets such as automotive, energy and pharmaceuticals that overlap with the Corporation’s markets, he has detailed insights into the major trends and issues in these industries. He also has finance experience having served on the audit committee of another public company for two years and currently serves on the Board of another Fortune 500 company. Mr. Speer holds an M.B.A. from the Kellogg School of Management, Northwestern University.

 

 

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Committees of the Board

 

     Audit Committee   Board Composition and
Governance Committee
 

Compensation and
Management
Development

Committee

  Technology and
Corporate
Responsibility
Committee

Members

  Verne G. Istock*   David B. Speer*   William T. McCormick, Jr.*   Betty C. Alewine*
    Steven R. Kalmanson   Verne G. Istock   Betty C. Alewine   Barry C. Johnson
    James P. Keane   Barry C. Johnson   Donald R. Parfet   Steven R. Kalmanson
    Donald R. Parfet   William T. McCormick, Jr.   David B. Speer   James P. Keane

Number of meetings

in fiscal 2011

  7   7   6   3

 

 

*

Chair

 

Audit Committee.  The Audit Committee assists the Board in overseeing and monitoring the integrity of our financial reporting processes, our internal control and disclosure control systems, the integrity and audits of our financial statements, our compliance with legal and regulatory requirements, the qualifications and independence of our independent registered public accounting firm and the performance of our internal audit function and independent registered public accounting firm. The main duties of the Committee are to appoint our independent registered public accounting firm, subject to shareowner approval; approve all audit and audit-related fees and services and permitted non-audit fees and services of our independent registered public accounting firm; review with our independent registered public accounting firm and management our annual audited and quarterly financial statements; discuss periodically with management our quarterly earnings releases; review with our independent registered public accounting firm and management the quality and adequacy of our internal controls and discuss with management our risk assessment and risk management policies. All members of the Audit Committee meet the independence and financial literacy standards and requirements of the NYSE and the SEC. The Board has determined that Messrs. Istock, Parfet and Keane qualify as “audit committee financial experts” as defined by the SEC.

Board Composition and Governance Committee.  The principal functions of the Board Composition and Governance Committee are to consider and recommend to the Board qualified candidates for election as directors of the Corporation, to consider

matters of corporate governance, and administer the Corporation’s related person transactions policy. The Committee annually assesses and reports to the Board on the performance of the Board of Directors as a whole and of the individual directors. The Committee also recommends to the Board the members of the committees of the Board and the terms of our Guidelines on Corporate Governance and conducts an annual review of director compensation and recommends to the Board any changes. See “Director Compensation” below. All members of the Committee are independent directors as defined by the NYSE.

Compensation and Management Development Committee.  The principal functions of the Compensation and Management Development Committee are to evaluate the performance of our senior executives, review management succession and development plans for the CEO and other senior executives, review the design and competitiveness of our compensation plans, review and approve salaries, incentive compensation, equity awards and other compensation of officers and review the salary plan for other executives who are direct reports to the CEO, review and approve corporate goals and objectives and administer our incentive, deferred compensation and long-term incentives plans. All members of the Committee are independent directors as defined by the NYSE and are not eligible to participate in any of our plans or programs administered by the Committee, except our 2003 Directors Stock Plan and Directors Deferred Compensation Plan.

 

 

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Role of Executive Officers. The Chief Executive Officer and certain other executives assist the Committee with its review of compensation of our officers. See “Executive Compensation — Compensation Discussion and Analysis — Compensation Review Process” below.

 

   

Role of Compensation Consultants. The Compensation Committee has engaged Towers Watson, an executive consulting firm that is directly accountable to the Compensation Committee, to provide advice on compensation trends and market information to assist the Compensation Committee in fulfilling its duties.

Towers Watson has served as the Committee’s advisor for eight years, was directly engaged by and is accountable to the Committee, and has not been engaged by management for any significant other services, except as described below. During fiscal 2011, Towers Watson was paid $142,000 for executive compensation advice, other services to the Committee, and other services to the Board Composition and Governance Committee. Responsibility for the annual review of director compensation moved from the Committee to the Board Composition and Governance Committee during fiscal 2011. During fiscal 2011, Towers Watson was also paid $2,671,000 of which $2,308,000 or 86% was for core actuarial services and $363,000 or 14% was for other human resource services to the Corporation and its benefit plans. The engagements for these other services were recommended by management and approved by the Compensation Committee.

Based on the following facts, the Compensation Committee has concluded that it is receiving objective, unbiased and independent advice from Towers Watson:

 

   

In January 2010, Towers Perrin merged with Watson Wyatt — the Corporation’s long-time actuary — to create Towers Watson. The Committee’s relationship with the compensation consultants at Towers Watson pre-dates the merger by over six years.

   

The Towers Watson consultants to the Committee have worked with the Committee since Towers Perrin was engaged by the Committee in November 2003; their performance and counsel over this period have indicated objectivity and independence.

 

   

The Committee’s oversight of the relationship between the Corporation and Towers Watson mitigates the possibility that management could misuse the actuarial engagement to influence Towers Watson’s compensation work for the Committee.

 

   

Towers Watson has adopted internal safeguards to ensure that its executive compensation advice is independent.

 

   

The Committee retains ultimate decision-making authority for all executive pay matters, and understands Towers Watson’s role is simply that of advisor.

The Committee intends to continue to oversee all relationships between the Corporation and Towers Watson to ensure that the Committee continues to receive unbiased compensation advice from Towers Watson. In addition, the Committee will review and approve the type and scope of all services provided by Towers Watson and the amounts paid by the Corporation for such services.

Technology and Corporate Responsibility Committee.  The Technology and Corporate Responsibility Committee reviews and assesses our technological activities as well as our policies and practices in the following areas: employee relations, with emphasis on diversity and inclusion; the protection and enhancement of the environment and energy resources; product integrity and safety; employee health and safety; and community and civic relations, including programs for and contributions to educational, cultural and other social institutions. All members of the Committee are independent directors as defined by the NYSE.

 

 

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DIRECTOR COMPENSATION

 

Our director compensation program is designed to attract and retain qualified directors, fairly compensate directors for the time they must spend in fulfilling their duties and align their compensation directly with the interests of shareowners. In February 2011, responsibility for director compensation was transferred to the Board Composition and Governance Committee. The

Committee determines the form and amount of director compensation, with discussion and approval by the full Board. The Board believes that a meaningful portion of director compensation should be in our common stock to further align the economic interests of directors and shareowners. Employees who serve as directors do not receive any compensation for their director service.

 

 

There are three elements of our director compensation program: an annual retainer, equity awards and committee fees. The following table describes each element of director compensation for fiscal 2011.

 

     Annual Retainer   Equity Awards   Committee Fees
     Cash   Common Stock   Common Stock   Cash

Amount or Number

of Shares

  $70,000   $70,000   500   Varies by Committee

Timing of

Payment/Award

 

Paid in equal

installments on 1st business day of each quarter

  Granted on 1st business day of fiscal year (or pro-rata amount upon initial election to the Board)   Granted on date of Annual Shareowners Meeting (or pro-rata amount upon initial election to the Board)   Paid in equal installments on 1st business day of each quarter

Deferral Election

Available

  Yes   Yes   Yes   Yes

Dividend/Dividend Equivalent Eligible

  Not Applicable   Yes   Yes   Not Applicable

 

Annual Retainer.  Directors receive an annual retainer that consists of cash and shares of common stock. The total annual retainer, excluding committee fees, is $140,000, of which $70,000 is paid in cash and $70,000 in shares of common stock under the 2003 Directors Stock Plan. The $70,000 equated to 1,132 shares granted on October 1, 2010 based on the closing price of our common stock on the NYSE of $61.87.

Equity Awards.  Directors receive an annual grant of 500 shares of common stock under the

2003 Directors Stock Plan immediately after our Annual Meeting of Shareowners (and for directors elected after the Annual Meeting, a pro-rated number of shares are awarded upon election).

Committee Fees.  Directors receive additional annual compensation for serving on committees of the Board. The fees for the Chair and for serving on certain committees are higher than others due to the greater work-load and responsibilities.

 

 

During fiscal 2011, annual committee fees were as follows:

 

    

Audit

Committee

 

Compensation

and Management

Development

Committee

 

Board

Composition

and Governance

Committee

 

Technology

and Corporate

Responsibility

Committee

       
       
       

Chair

  $25,000   $16,000   $12,000   $12,000

Member

  $12,500   $8,000   $6,000   $5,000

 

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Deferral Election.  Under the terms of our Directors Deferred Compensation Plan, directors may elect to defer all or part of the cash payment of Board retainer or committee fees until such time as the director specifies, with interest on deferred amounts accruing quarterly at 120% of the federal long-term rate set each month by the Secretary of the Treasury. In addition, under the 2003 Directors Stock Plan, each director has the opportunity each year to defer all or any portion of the annual grant of common stock, cash retainer, common stock retainer and committee fees by electing to instead receive restricted stock units valued, in the case of cash deferrals, at the closing price of our common stock on the NYSE on the date each payment would otherwise be made in cash.

Other Benefits.  We reimburse directors for transportation, lodging and other expenses actually incurred in attending Board and committee meetings. We also reimburse directors for similar travel, lodging and other expenses for their spouses to accompany them to a limited number of Board meetings held as retreats to which we invite spouses for business purposes. Spouses were invited to one Board meeting in fiscal 2011. The directors’ spouses are generally expected to attend Board meetings held as retreats. From time to time and when available, directors and their spouses are permitted to use our corporate aircraft for travel to Board meetings.

Directors are eligible to participate in a matching gift program under which we match donations made to eligible educational, arts or cultural institutions. Gifts are matched up to an annual calendar year maximum of $10,000. This same program is available to all of our U.S. salaried employees.

Stock Ownership Requirement.  Non-management directors are subject to stock ownership guidelines. To further align directors’ and shareowners’ economic interests, our Guidelines on Corporate Governance provide that non-management directors are required to own, within five years after joining the Board, shares of our common stock (including restricted stock units) equal in value to five times the portion of the annual retainer that is payable in cash. All directors, except Messrs. Kalmanson and Keane, who have been directors since February 2011, meet the guidelines as of September 30, 2011.

Changes to Directors Compensation for Fiscal 2012.  Effective October 1, 2011, we changed the method for determining a portion of our director compensation. In fiscal 2011, Directors received an annual grant of 500 common shares on the date of the Annual Meeting pursuant to the 2003 Directors Stock Plan, which permits the grant of up to 1,000 shares as determined by the Board. In February 2012, directors will instead receive the equivalent of $40,000 in shares of common stock, not to exceed 1,000 shares.

 

 

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The following table shows the total compensation earned by each of our directors during fiscal 2011.

DIRECTOR COMPENSATION TABLE

 

Name

 

Fees
Earned or

Paid In
Cash (1)

($)

   

Stock

Awards
(2) (3)

($)

   

Option

Awards (3)

($)

   

Non-Equity
Incentive
Plan

Compensation

($)

   

Change in
Pension
Value and
Nonqualified

Deferred
Compensation
Earnings (4)

($)

   

All
Other

Compensation (5)

($)

   

TOTAL

($)

 
             
             
               

Betty C. Alewine

 

   

 

90,000

 

  

 

   

 

110,735

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

5,000

 

  

 

   

 

205,735

 

  

 

         

Verne G. Istock

 

   

 

101,000

 

  

 

   

 

110,735

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

211,735

 

  

 

         

Barry C. Johnson

 

   

 

84,250

 

  

 

   

 

111,130

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

4,658

 

  

 

   

 

200,038

 

  

 

         

Steven R. Kalmanson (6)

 

   

 

58,333

 

  

 

   

 

87,402

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

145,735

 

  

 

         

James P. Keane (6)

 

   

 

58,333

 

  

 

   

 

87,402

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

145,735

 

  

 

         

William T. McCormick, Jr.

 

   

 

92,000

 

  

 

   

 

110,735

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

8,000

 

  

 

   

 

210,735

 

  

 

         

Donald R. Parfet

 

   

 

89,500

 

  

 

   

 

110,735

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

12,432

 

  

 

   

 

212,667

 

  

 

         

Bruce M. Rockwell (7)

 

   

 

27,897

 

  

 

   

 

70,000

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

97,897

 

  

 

         

David B. Speer

 

   

 

92,250

 

  

 

   

 

110,735

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

202,985

 

  

 

         

Joseph F. Toot, Jr. (7)

 

   

 

28,233

 

  

 

   

 

70,000

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

0

 

  

 

   

 

16,000

 

  

 

   

 

114,233

 

  

 

 

(1)

This column represents the amount of cash compensation earned in fiscal 2011 for Board and committee service (whether or not deferred and whether or not the directors elected to receive restricted stock units in lieu of cash fees).

 

(2)

Values in this column represent the grant date fair value of stock awards computed in accordance with accounting principles generally accepted in the United States (U.S. GAAP). On February 1, 2011 (the date of our annual meeting) each director received 500 shares of common stock under the 2003 Directors Stock Plan with a grant date fair value of $82.26 per share (equal to the closing price of our stock on the grant date) for directors who elected to receive restricted stock units and $81.47 per share (calculated based on the average high and low prices of our stock on the grant date) for directors who elected to receive shares. On October 1, 2010 each director received 1,132 shares with an aggregate grant date fair value of $70,000 in payment of the share portion of the annual retainer. On February 1, 2011 Messrs. Kalmanson and Keane each received 568 shares of common stock with an aggregate grant date fair value of $46,667 in payment of a pro-rated portion of the share portion of the annual retainer. The amounts shown do not correspond to the actual value that may be realized by the directors. Directors can elect to defer the annual retainer by electing instead to receive restricted stock units. Three directors have made such an election with respect to some of their compensation. The aggregate number of restricted stock units outstanding as of September 30, 2011 was 4,140, and 2,162 for Messrs. Johnson and Parfet, respectively. Mr. Rockwell had 4,140 restricted stock units at the time of his retirement on February 1, 2011. He received one share of common stock for each restricted stock unit with an aggregate value of $340,556 based on the closing price of our common stock on the NYSE on February 1, 2011.

 

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(3)

Before fiscal 2009, director compensation included stock options. The following table shows the aggregate number of option awards outstanding as of September 30, 2011 for the non-employee directors:

 

Director   

Option Awards

(#)

 

Betty C. Alewine

     3,000   

Barry C. Johnson

     4,500   

William T. McCormick, Jr.

     6,000   

Donald R. Parfet

     8,125   

David B. Speer

     7,500   

Joseph F. Toot, Jr.

     8,500   

 

(4)

Aggregate earnings in fiscal 2011 on the directors’ deferred cash compensation balances were $24,512 for Ms. Alewine. We do not pay “above market” interest on non-qualified deferred compensation; therefore, this column does not include these amounts.

 

(5)

This column consists of cash dividend equivalents paid on restricted stock units and, for Ms. Alewine and Messrs. McCormick, Parfet, and Toot the Corporation’s matching donations of $5,000, $8,000, $10,000, and $16,000 ($6,000 for fiscal 2010 and $10,000 for fiscal 2011), respectively, under our matching gift program. This column does not include the perquisites and personal benefits provided to each non-employee director because the aggregate amount provided to each director was less than $10,000. During fiscal 2011, one Board meeting was held as a retreat at which we provided leisure activities for the directors and their spouses. The directors’ spouses generally are expected to attend Board retreats.

 

(6)

Messrs. Kalmanson and Keane became directors on February 1, 2011.

 

(7)

Messrs. Rockwell and Toot retired as directors immediately before the 2011 Annual Meeting held on February 1, 2011.

 

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AUDIT COMMITTEE REPORT

 

The Audit Committee assists the Board in overseeing and monitoring the integrity of the Corporation’s financial reporting processes, its internal control and disclosure control systems, the integrity and audits of its financial statements, the Corporation’s compliance with legal and regulatory requirements, the qualifications and independence of its independent registered public accounting firm and the performance of its internal audit function and independent registered public accounting firm.

Our Committee’s roles and responsibilities are set forth in   a   written Charter adopted by the Board, which is available    on the Corporation’s website at www.rockwellautomation.com/investors/charters.html. We review and reassess the Charter annually, and more frequently as necessary to address any changes in NYSE corporate governance and SEC rules regarding audit committees, and recommend any changes to the Board for approval.

Management is responsible for the Corporation’s financial statements and the reporting processes, including the system of internal control. Deloitte & Touche LLP (D&T), the Corporation’s independent registered public accounting firm, is responsible for expressing an opinion on the conformity of those audited financial statements with U.S. generally accepted accounting principles, and on the Corporation’s internal control over financial reporting.

Our Committee is responsible for overseeing the Corporation’s overall financial reporting processes. In fulfilling our responsibilities for the financial statements for fiscal year 2011, we:

 

   

Reviewed and discussed the audited financial statements for the fiscal year ended September 30, 2011 and quarterly financial statements with management and D&T;

 

   

Reviewed management’s assessment of the Corporation’s internal control over financial reporting and D&T’s report pursuant to Section 404 of the Sarbanes-Oxley Act;

 

   

Discussed with D&T the matters required to be discussed by Public Company Accounting Oversight Board (United States) (PCAOB) Audit Standard AU Section 380 “Communication with Audit Committees” and Rule 2-07 of SEC Regulation S-X relating to the conduct of the audit; and

   

Received written disclosures and the letter from D&T regarding its independence as required by PCAOB Ethics and Independence Rule 3526. We also discussed with D&T its independence.

We reviewed and approved all audit and audit-related fees and services. For information on fees paid to D&T for each of the last two years, see “Proposal to Approve the Selection of Independent Registered Public Accounting Firm” on page 52 of this proxy statement.

We considered the non-audit services provided by D&T in fiscal year 2011 and determined that engaging D&T to provide those services is compatible with and does not impair D&T’s independence.

In fulfilling our responsibilities, we met with the Corporation’s General Auditor and D&T, with and without management present, to discuss the results of their examinations, the evaluations of the Corporation’s internal control over financial reporting and the overall quality of the Corporation’s financial reporting. We considered the status of pending litigation, taxation matters and other areas of oversight relating to the financial reporting and audit processes that we determined appropriate. We discussed with management the Corporation’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Corporation’s risk assessment and risk management policies. We also met separately with the Corporation’s Chief Executive Officer, Chief Financial Officer, Controller, General Counsel and Ombudsman.

Based on our review of the audited financial statements and the discussions and reports referred to above, we recommended to the Board that the audited financial statements be included in the Corporation’s Annual Report on Form 10-K for the fiscal year ended September 30, 2011 for filing with the SEC.

The Audit Committee has selected D&T as the independent registered public accounting firm of the Corporation for the fiscal year ending September 30, 2012, subject to the approval of shareowners.

Audit Committee

Verne G. Istock, Chair

Steven R. Kalmanson

James P. Keane

Donald R. Parfet

 

 

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OWNERSHIP OF EQUITY SECURITIES BY DIRECTORS AND EXECUTIVE OFFICERS

The following table shows the beneficial ownership, reported to us as of October 31, 2011, of our common stock, including shares as to which a right to acquire ownership within 60 days exists, of each director, and each executive officer listed in the table on page 38 (named executive officers) and of these persons and other executive officers as a group. On October 31, 2011 we had outstanding 141,916,926 shares of our common stock.

 

     Beneficial Ownership on October 31, 2011  

Name

   Shares of
Common Stock (1)
    Derivative
Securities (2)
     Total
Shares (1)
     Percent of
Class (3)
 

Betty C. Alewine

     19,182        3,000         22,182           

Verne G. Istock

     18,703                18,703           

Barry C. Johnson

     4,834 (4)      4,500         9,334           

Steven R. Kalmanson

     2,352                2,352           

James P. Keane

     2,352                2,352           

William T. McCormick, Jr. 

     17,184        6,000         23,184           

Keith D. Nosbusch

     375,852 (5,6)      1,157,165         1,533,017         1.07   

Donald R. Parfet

     9,231 (4)      8,125         17,356           

David B. Speer

     16,935 (4)      7,500         24,435           

Theodore D. Crandall

     64,972 (5,6)      309,632         374,604           

Steven A. Eisenbrown

     30,257 (5,6)      179,083         209,340           

Douglas M. Hagerman

     31,219 (5,6)      245,421         276,640           

Robert A. Ruff

     42,697 (5,6)      168,232         210,929           

All of the above and other executive officers as a group (25 persons)

     846,259 (4,5,6)      3,007,742         3,854,001         2.66   

 

 

(1)

Each person has sole voting and investment power with respect to the shares listed (either individually or with spouse).

 

(2)

Represents shares that may be acquired upon the exercise of outstanding stock options and, for executive officers, settlement of performance shares, within 60 days.

 

(3)

The shares owned by each person, and by the group, and the shares included in the number of shares outstanding have been adjusted, and the percentage of shares owned (where such percentage exceeds 1%) has been computed, in accordance with Rule 13d-3(d)(1) under the Exchange Act.

 

(4)

Does not include 5,424 and 2,162 restricted stock units granted under the 2003 Directors Stock Plan as compensation for services as directors for Messrs. Johnson and Parfet, respectively. Includes 3,900 shares and 4,500 stock options held by a family limited partnership for Mr. Speer.

 

(5)

Includes shares held under our savings plan. Does not include 2,643; 1,687; 2,540; 2,505; 2,318; and 14,060 share equivalents for Messrs. Nosbusch, Crandall, Eisenbrown, Hagerman, Ruff and the group, respectively, held under our supplemental savings plan.

 

(6)

Includes 32,570; 9,360; 9,440; 7,340; and 9,540 shares granted as restricted stock under our 2000 and 2008 Long-Term Incentives Plans for Messrs. Nosbusch, Crandall, Eisenbrown, Hagerman and Ruff, respectively, and 121,051 shares granted as restricted stock for the group.

 

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

 

Rockwell Automation has a long-standing strong orientation toward pay for performance in its executive compensation programs. This orientation has held constant throughout the business cycles that our organization has encountered over time. Our executive compensation programs balance rewards with appropriate risk and the creation of shareowner value. The Compensation and Management Development Committee (the Compensation Committee) makes compensation decisions for officers based on a number of factors, including the market compensation rates for each position, the Company’s performance against pre-established goals and the relative share performance of the Company compared to the broader stock market, as well as the experience and contribution of each individual. Our executive remuneration programs include base salary, annual incentive compensation, long-term incentives, defined benefit and defined contribution pension plans and a very limited perquisite package.

The Company had a record year in fiscal 2011, as our strong performance continued. The compensation decisions made for fiscal 2011 reflect our Company’s strong business performance relative to the goals set out for the year. We believe the decisions described in this proxy statement reflect our orientation toward pay for performance and demonstrate our ongoing commitment to our shareowners, employees and other stakeholders.

Fiscal 2011 Performance

Early in the year, the Board of Directors approved an annual operating plan that reflected our expectations for our performance during fiscal 2011. Despite the continued economic uncertainty around the globe, the annual operating plan called for a significant improvement in our financial results from fiscal 2010 (which saw strong financial and operational results). The Compensation Committee used the annual operating plan as the basis for setting goals for sales, diluted earnings per share from continuing operations (EPS), free cash flow, return on invested capital (ROIC), and segment operating earnings under our incentive compensation plans (ICP). In establishing

these goals, the Compensation Committee considered the uncertainty related to the timing and pace of an economic recovery. The Compensation Committee determined that meeting these goals would require significant effort and achievement on the part of the management team and all Company employees in the continued execution of our growth and performance strategy.

We are pleased to report that fiscal 2011 was an outstanding year for our Company. We set record levels for sales, EPS and ROIC. Our sales increased 24% year over year (20% excluding the effect of currency and acquisitions), and our EPS increased 57% from the prior year. ROIC was 31.6%, up from 22.8% in fiscal 2010, and we exceeded fiscal 2011 free cash flow goals. These financial results were materially better than the goals established at the start of the year.

Fiscal 2011 Pay Decisions

Executive base salaries were reviewed and approved by the Compensation Committee early in fiscal 2011 and increases were provided to the named executive officers (NEOs) ranging from 2.7% to 3.9% of current salaries. These percentage increases were in line with those provided to all employees and were intended to align salaries with market pay levels as well as individual experience and contribution. As discussed in the prior section, the ICP was based primarily on company and segment financial results, consistent with prior years. In light of the very strong results for fiscal 2011, the calculated ICP awards for our NEOs averaged 187% of target payout. Though the Compensation Committee retains the discretion to modify the awards calculated by the formula based on its assessment of Company performance, no adjustments to the calculated payouts were made.

The Company maintained its strategy of providing a combination of stock options, performance shares and restricted stock as a means to align the long-term interests of our management team with those of our shareowners. Grants of each of these forms of incentive awards were made in early fiscal 2011. The

 

 

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size of these grants was based on market pay practices and the performance of the Company during fiscal 2010. Market practices reflected higher values of long-term incentives granted at other companies during 2010 and the Company had very strong performance during fiscal 2010. Taking these factors into consideration, the Compensation Committee provided equity grants in fiscal 2011 to the NEOs that had a grant date fair value that was approximately 6% higher than the grant date fair value of the fiscal 2010 grants, positioning the awards between the 50th and 75th percentiles of market practice.

As a result of these decisions by the Compensation Committee, Total Direct Compensation (base salary, ICP, grant date fair value of long term incentive (LTI) grants) for the NEOs was 6.7% higher than in fiscal 2010. We believe this level of increase is justified given the very positive results achieved by the Company during fiscal 2011 as well as prevailing market compensation practice.

The Compensation Committee also determined the number of performance shares earned for the fiscal 2009 through 2011 performance period. The number of shares earned is based on the Company’s total shareowner return (TSR) as compared to the S&P 500 Index. The Company needed to perform at the 60th percentile of the Index companies in order for the target number of shares to be earned, with a lesser or greater number of shares earned for performance below or above the 60th percentile. The performance share program has been in place since fiscal 2006. Awards earned for the first three grant cycles ranged from 0% to 42% of target, reflecting TSR performance that fell short of target for each of the three cycles.

Over the performance period from October 1, 2008 to September 30, 2011, our cumulative TSR was 55.8%, which was at the 85th percentile of the companies in the S&P 500 Index. The median TSR for S&P 500 Index companies was 5.9%. Since our TSR performance exceeded the 75th percentile of the companies in the S&P 500 Index, the Compensation Committee approved awards equal to 200% of the

target number of performance shares, consistent with the formula established at the time of grant. This payout for performance shares reflects the Company’s strong performance during the performance cycle. Coupled with the payout history of the plan since inception, it also illustrates our consistent approach to paying for performance.

The Compensation Committee and the Board believe that the skill and motivation of our employees, and especially our executive leaders, are essential to the Corporation’s performance and creation of shareowner value. We believe our compensation programs motivate performance that differentiates us from our competitors, encourages appropriate risk taking, and is consistent with our pay-for-performance philosophy. We will continue to provide a compensation program that we believe is effective, serves shareowner interests and is worthy of shareowner support.

Compensation Philosophy

Our long-term business strategy seeks sustained organic growth through, among other things, expanding our served markets and enhancing our market access. We have developed a strong productivity culture that has allowed us to reinvest in organic growth. We believe that our employees’ knowledge of our customers and their applications, and our technology is a key factor that makes this strategy work. We also believe that it is important to align the compensation of our leadership with this strategy and therefore we choose the factors in our short and long-term incentive plans, among other things, to focus the management team’s efforts in the areas that are critical to the success of this strategy.

The quality of our leadership has a direct impact on our performance, and with the oversight of the Compensation Committee, we offer compensation plans, programs and policies intended to attract and retain executive talent and “pay for performance,” including the creation of shareowner value. Our compensation programs include base salary, annual incentive compensation, long-term incentives, defined benefit and defined contribution pension plans and a very limited perquisite package.

 

 

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The following table highlights the principal purposes of the main elements of our compensation programs:

 

          Pay for Performance
     Attraction &
Retention
   Current Year
Financial &
Operational
Performance
   Long-Term
Financial
Performance
   Creation of
Shareowner
Value

Base Salary

   X    X      

Annual Incentive Compensation

   X    X       X

Long-Term Incentives

   X       X    X

Pension Plans

   X         

 

We believe that a significant portion of an executive’s compensation should be directly linked to our performance and the creation of shareowner value. In fiscal 2011, for our named executive officers, the Compensation Committee planned a targeted mix of Total Direct Compensation in which 74% to 86% was based on pay for performance. The Compensation Committee targeted 53% to 69% of Total Direct Compensation of our named executive officers in the form of long-term incentives directly linked to the creation of shareowner value. These target percentages have been similar throughout fiscal years 2009, 2010, and 2011. Total Direct Compensation consists of base salary, annual ICP awards and LTI grants (calculated at the grant date fair value outlined in the Grants of Plan-Based Awards Table). As shown in the following graphs:

   

Our actual mix in fiscal 2011 differed from the targeted mix as a result of ICP payments. We significantly exceeded our pre-established goals and the Committee approved the calculated ICP payments for our named executive officers of 187% of target on average.

 

   

We have a strong pay-for-performance orientation where our executives’ pay is linked to how well we perform compared to the goals set for the fiscal year.

 

   

Actual Total Direct Compensation has varied from year to year based on our performance. For example, as shown in the graphs below, Mr. Nosbusch’s Total Direct Compensation has varied each year based on our performance.

 

 

LOGO

 

 

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LOGO

The following table illustrates the changes in Mr. Nosbusch’s actual Total Direct Compensation compared to the changes in EPS. As the table shows, Mr. Nosbusch’s compensation has been aligned with the performance of the Company over this period of time.

 

Change in CEO Total Direct  Compensation Compared to Change in EPS  
     Earnings Per Share
Percent Change from
Prior Year
    CEO Total Direct
Compensation Percent
Change from  Prior Year
 

Fiscal 2009

    -60.7     -28.7

Fiscal 2010

    99.3     68.6

Fiscal 2011

    57.0     10.5

Compensation Review Process

 

We evaluate and take into account market data in setting each element of our officers’ compensation. We define market practice by using the results of executive compensation surveys of major companies (the Major Companies) provided by Towers Watson and Aon Hewitt (collectively, the Survey Providers). The Towers Watson database includes over 300 companies and the Aon Hewitt database includes over 275 companies. In setting compensation levels for each element of pay, we analyze data relating to the Major Companies using regression analyses developed by the Survey Providers based on our sales. The market data analysis is typically the starting point for, and a significant factor in, our compensation determinations, but is not the only factor as we also consider the scope of the individual officer’s responsibilities and more subjective factors, such as the Compensation Committee’s (and the CEO’s in the case of other officers) assessment of the officer’s individual performance and expected future contributions and leadership.

The Compensation Committee has engaged Towers Watson, who is directly accountable to the Compensation Committee, to provide advice on compensation trends and market information to assist the Compensation Committee in fulfilling its duties. See page 16 for a description of the services provided by Towers Watson to the Corporation and the Compensation Committee’s assessment of Towers Watson’s independence.

We consider the total compensation (earned or potentially available) of each of the named executive officers and the other officers in establishing each element of compensation. As part of our compensation review process, we conduct a total compensation or “Tally Sheet” review with the Compensation Committee for each of our officers. This review encompasses all elements of compensation, including base salary, annual incentives, LTI grants, perquisites, health benefits and retirement and termination benefits. This review includes a consideration of amounts to be paid and

 

 

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other benefits accruing to our officers upon their retirement or other termination of employment. We consider the potential outcomes of annual incentives and LTI grants under a variety of performance scenarios. We also review the officers’ current balances in various compensation and benefit plans. Based upon the results of this analysis the Compensation Committee concluded that our compensation programs are in line with our compensation philosophy and provide an appropriate range of outcomes.

We do not believe our compensation programs encourage our executives to take excessive risk. Our ICP provides a balance among revenue, earnings, cash flow and asset performance, limiting the effect of over-performance in one area at the expense of others. Additionally, payouts under our ICP are capped at twice the individual’s ICP target, limiting excessive rewards for short-term results. The Compensation Committee can reduce or withhold the incentive if it determines that the executive has caused the Corporation to incur excessive risk. Moreover, the majority of the Total Direct Compensation for our executives is in the form of long-term incentives. We believe our mix of equity vehicles appropriately motivates long-term performance. In addition, the majority of equity vests over a period of several years with performance shares and restricted stock vesting at three years. We also have stock ownership guidelines for our named executive officers, which encourage a long-term view. In September 2009, the Corporation entered into letter agreements with Mr. Nosbusch as CEO and Mr. Crandall as CFO with respect to the reimbursement (or claw-back) of certain compensation. If we are required to restate any financial statements for periods from and after fiscal 2009 due to a material non-compliance with any financial reporting requirement under the securities laws, Messrs. Nosbusch and Crandall have agreed to reimburse the Corporation for any incentive- or equity-based compensation received during the 12 months following the public filing of such financial statements with the SEC. Incentive compensation subject to the claw-back includes: ICP, equity-based compensation received, profits realized from the sale of securities of the Corporation, and other incentive-based compensation. The Committee also engaged Towers Watson to conduct a review of all of our compensation programs relative to the potential for incentives to motivate excessive risk-

taking in a way that could materially affect the Corporation. Towers Watson reviewed the measures used in each program, the target setting process, and our overall governance of our compensation plans. The review concluded that we have strong governance procedures and that our plans do not present a material risk to the Corporation or encourage excessive risk taking by participants.

We review the value of prior equity grants held by our officers, but do not take these values into account in determining future long-term incentive grants for the following reasons:

 

   

we want to encourage long-term holding of equity grants, rather than encourage early sales in order to receive future grants;

 

   

the value of prior equity grants varies from year to year;

 

   

we have stock ownership guidelines for our officers that require officers to hold an amount of equity we believe sufficient to align the financial interests of our officers with those of our shareowners;

 

   

our officers are not allowed to sell shares if their equity holdings are not above our ownership guidelines, subject to limited exceptions for tax purposes; and

 

   

we want to continue to provide additional incentives for increasing shareowner value.

In making recommendations and determinations regarding each of our officers’ compensation, the Compensation Committee and the CEO also consider internal comparisons to the compensation we pay to our other executives.

Role of Management.  The Compensation Committee assesses the performance of the CEO and sets the CEO’s compensation in executive session without the CEO present. The CEO reviews the performance of our other officers, including the named executive officers, with the Compensation Committee and makes recommendations regarding each element of their compensation for the Compensation Committee’s review and approval. The Compensation Committee and the CEO are assisted in their review by Towers Watson, the Senior Vice President, Human Resources and the Vice President, Compensation & Benefits. The other named executive officers do not play a role in their own compensation determination other than discussing their performance with the CEO.

 

 

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Elements of Compensation

Base Salary

We develop base salary guidelines for our officers generally at the median of the Major Companies, employing regression analyses developed by the Survey Providers based on our sales. However, the Compensation Committee’s salary decisions reflect the market data as well as the individual’s responsibilities and more subjective factors, such as the Compensation Committee’s (and the CEO’s in the case of other officers) assessment of the officer’s individual performance, skills and experience and expected future contributions and leadership. The Compensation Committee reviews base salaries for our officers every year.

Annual Incentive Compensation

Our annual incentive compensation plans (ICP) are designed to reward our executives for achieving Corporate and business segment or region results and for individual performance. Under our ICP, we establish for each executive at the start of each fiscal year an incentive compensation target equal to a percentage of the individual’s base salary. The target for annual incentive compensation is generally set at the median of the Major Companies as defined using regression formulas developed by the Survey Providers based on our sales. Actual incentive compensation payments under our ICP may be higher or lower than the incentive compensation target based on financial, operating and individual performance as described below. In line with our pay-for-performance orientation and as demonstrated in the graphs in the Compensation Philosophy section above, actual ICP payouts vary significantly from year to year based on performance compared to goals.

In the early part of each fiscal year, the CEO reviews with the Compensation Committee recommended financial goals for the fiscal year for purposes of our ICP. These goals include:

 

   

measurable financial goals with respect to our overall performance; and

 

   

for certain officers engaged in our business segments, measurable financial goals with respect to the performance of those business segments.

The Compensation Committee approves a set of financial goals, taking into account the CEO’s recommendations, and allocates a weighting of the target incentive compensation among the various goals that it establishes. For fiscal 2011, the Compensation Committee determined in the early part of the year that no payments were to be made under our ICP if EPS were less than the previous year’s results.

After the end of the fiscal year, the Compensation Committee and the CEO evaluate our performance and the performance of our business segments and consider the results compared to the pre-established goals. As a starting point, target amounts under our ICP are generally earned if we achieve our financial goals for the year. Awards to each officer under our ICP may be adjusted based on the Compensation Committee’s assessment (and except in the case of the CEO, based on the CEO’s recommendation) as to the individual’s achievement of individual goals and objectives and certain more subjective assessments of leadership acumen and the individual’s expected future contributions. Accordingly, while achieving our financial goals is extremely important in determining our annual incentive compensation, the Compensation Committee maintains discretion to adjust annual incentive compensation upward or downward, notwithstanding achievement of these goals.

Under our Annual Incentive Compensation Plan for Senior Executive Officers (Senior ICP), which applies to the CEO and the other NEOs, annual incentive compensation payments to those officers in total may not exceed 1% of our applicable net earnings (as defined in that plan) with the CEO’s maximum payment not to exceed 35% of the available funds, and each of the other four NEOs’ maximum payouts, respectively, not to exceed 15% of the available funds. The process for determining ICP awards for these individuals is the same as that used for the other ICP participants with the exception being that these individuals are subject to the noted limit on payments.

The annual incentive compensation for Messrs. Nosbusch, Crandall and Hagerman is based upon corporate performance. The annual incentive compensation for Mr. Eisenbrown is based upon a combination of corporate performance and the performance of the segment he led until April 1, 2011

 

 

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and upon corporate performance after April 1, 2011. The annual incentive compensation for Mr. Ruff is based upon a combination of corporate performance and the

performance of the segment he led until April 1, 2011 and upon a combination of corporate performance and regional sales after April 1, 2011.

 

 

The following table shows the 2011 corporate and segment financial goals used for determining awards under our ICP for fiscal 2011 and our performance compared to those goals:

ICP FACTORS

 

     Sales (1)     EPS (2)  

Return on

Invested Capital (3)

 

Segment Operating

Earnings (4)

    Free Cash Flow (5)  
  Goal     Performance     Goal   Performance   Goal   Performance   Goal     Performance     Goal     Performance  

Corporation

    $5,267 million        $5,767 million      $4.00    $4.79   27.2%    31.6%             $572 million        $672 million   
Architecture & Software     $2,285 million        $2,491 million                $569 million        $647 million           

Control Products 

& Solutions

    $2,982 million        $3,276 million                $324 million        $350 million           

 

(1)

Sales for the Corporation are from continuing operations only and exclude the favorable effect of changes in currency exchange rates ($223 million) and the net favorable impact of acquisitions and divestitures during the year ($10 million). Sales for Architecture & Software exclude the favorable effect of changes in currency exchange rates ($103 million). Sales for Control Products & Solutions exclude the favorable effect of changes in currency exchange rates ($120 million) and the net favorable impact of acquisitions and divestitures during the year ($10 million). We use sales excluding the effect of changes in currency exchange rates as one measure to monitor and evaluate our performance. We determine the effect of changes in currency exchange rates, for this internal performance measure, by translating the respective period’s sales using currency exchange rates that were incorporated into our 2011 annual operating plan.

 

(2)

Earnings per share are diluted earnings per share from continuing operations.

 

(3)

For a complete definition and explanation of our calculation of return on invested capital, see Supplemental Financial Information on page 64.

 

(4)

Architecture & Software segment operating earnings exclude the favorable effect of changes in currency exchange rates ($12 million). Control Products & Solutions segment operating earnings exclude the favorable effect of changes in currency exchange rates ($20 million) and the net unfavorable impact of acquisitions during the year ($1 million). Information regarding how we define segment operating earnings is set forth in note 18, Business Segment Information, to our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011.

 

(5)

We calculated the $672 million in free cash flow performance, an internal performance measure, as cash provided by continuing operating activities ($644 million), plus excess income tax benefit from share-based compensation ($38 million), plus discretionary after-tax U.S. pension contribution ($110 million), minus capital expenditures ($120 million). We account for share-based compensation under U.S. GAAP, which requires that we report excess tax benefits related to share-based compensation as a financing cash flow rather than as an operating cash flow. We have added this benefit back to our calculation of free cash flow in order to generally classify cash flows arising from income taxes as operating cash flows. We have added the discretionary after-tax U.S. pension contribution because it was not considered in the goal. Our definition of free cash flow for this internal performance measure also takes into consideration the capital investment required to maintain the operations of our businesses and execute our strategy. Cash provided by continuing operating activities adds back non-cash depreciation expense to earnings and thus does not reflect a charge for necessary capital expenditures. We use free cash flow as one measure to monitor and evaluate performance. Our definition of free cash flow may differ from definitions used by other companies.

 

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Long-Term Incentives

The principal purpose of our long-term incentives is to reward management for creating shareowner value and to align the financial interests of management with shareowners. The creation of shareowner value is important not only on absolute terms, but also relative to the value created as compared to other investment alternatives available to our shareowners. Our practice is to make annual grants of LTI awards to executives using a combination of stock options, performance shares and restricted stock.

As a critical element of our executive compensation programs, long-term incentives make up the largest component of total pay for our named executive officers. We establish baseline long-term incentive values at the median (50th percentile) of the Major Companies, the same process we use to establish base salary guidelines and ICP target opportunities. The companies used in determining these values are included in the Towers Watson executive compensation database described above.

The Committee then considers a variety of factors in determining whether actual grant date values for long-term incentive awards should deviate from the baseline values. These factors include:

 

   

the Company’s recent financial performance;

   

changes in market long-term incentive grant practices;

   

share availability and usage patterns at the Company;

   

individual performance;

   

scope of an individual’s role; and

   

internal equity.

These factors are not weighted and there is no formula for how the factors are applied in determining actual grant date values. Instead, the Committee uses its judgment in considering these factors to ensure there is a strong correlation between pay and performance, a theme prevalent throughout the executive pay programs. Actual grant date values are expected to approximate the median baseline level in years when these factors do not warrant increased grant values. Actual grant date values are positioned between the 50th and 75th percentile of the relevant market in years when performance and the factors noted above warrant higher than median

grant date values. Actual realized values from these grants will reflect changes in Company stock price over time and how the Company’s stock price performs relative to the S&P 500 Index. For fiscal 2011, we calculated the number of options, performance shares and shares of restricted stock based on the grant date values and the fair market value of Company stock on December 7, 2010, the date of grant.

We generally make long-term incentive grants near the beginning of each fiscal year at the same time the Compensation Committee performs its annual management performance evaluation and takes other compensation actions. Annual equity grants for officers occur on the same date as our annual equity grants for our other professional and managerial employees, which in fiscal 2011 was the date of the Compensation Committee’s December meeting. As the grant date for our annual long-term incentive awards generally occurs on the day the Compensation Committee meeting is held in the first quarter of our fiscal year, the grant date is effectively set approximately one year in advance when all Compensation Committee meetings for the next year are scheduled. We do not grant equity awards in anticipation of the release of material non-public information. Similarly, we do not time the release of information based on equity award grant dates.

The CEO recommends to the Compensation Committee the equity grants for other executives, and the Compensation Committee approves all equity grants for executives. We also at times award equity grants to new executives as they are hired or promoted during the year. These grants are approved by the Compensation Committee, and the grant date is the date the Compensation Committee approves the grant or, if later, the start date for a new executive.

In fiscal 2011, our equity grants to vice presidents and above continued to have three components. We targeted stock options at approximately 62.5% of the anticipated total value of the long-term incentive grant, performance shares at approximately 25% of the anticipated total value of the grant and restricted stock at approximately 12.5% of the anticipated total value of the grant. We determined this allocation of equity vehicles taking into account a review of market practice. This review was conducted by Towers Watson. Compared to this review, we grant a

 

 

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greater percentage of our long-term incentives as stock options and performance shares than market practice because we believe that a greater proportion of long-term incentives should reward future performance determined by an increase in shareowner value.

Options:  We believe that stock options are an appropriate vehicle to reward management for increases in shareowner value, as they provide no value if share price does not increase. Our stock option grants vest in 1/3 increments at one, two and three years from the grant date and have a 10 year life. The exercise price of all stock option grants is the fair market value of our stock at the close of trading on the date of the grant. Our long-term incentives plan does not allow us to reprice stock options. Stock options granted to executives and other employees during fiscal 2011 represented approximately 1.2% of outstanding common shares at the end of fiscal 2011. Total options outstanding at the end of fiscal 2011 were approximately 5.5% of outstanding shares at the end of fiscal 2011. The Compensation Committee takes these figures into account when determining the annual stock option grant.

Performance Shares:  Performance shares are designed to reward management for our relative performance compared to the companies in the S&P 500 Index over a three-year period. The payout in respect of performance shares granted in December 2009, December 2010, and December 2011 will be made in shares of our common stock or cash, and will range from zero to 200% of the target number of shares awarded based on our total shareowner return compared to the performance of companies in the S&P 500 Index over a three-year period. The payouts will be at zero, the target amount and the maximum amount if our total shareowner return is equal to or less than the 30th percentile, equal to the 60th percentile and equal to or greater than the 75th percentile of the total shareowner return of companies in the S&P 500 Index, respectively, over the applicable three-year period. The number of shares earned will be interpolated for results between those percentiles. If performance shares are earned but total shareowner return is negative, the amount of shares earned will be reduced by 50%.

For the performance period from October 1, 2008 to September 30, 2011, our total shareowner return

(TSR) was at the 85th percentile of the companies in the S&P 500 Index, resulting in 200% of the target number of performance shares being earned for that performance period. The starting price for this performance period of $39.75 was based on the 20-day average trading price prior to October 1, 2008 and the ending price of $56.97 was based on the 20-day average trading price prior to October 1, 2011. The Committee determined that the performance shares would be paid to participants in shares of Rockwell Automation common stock.

Restricted Stock:  We grant restricted shares primarily in order to retain high quality executives throughout a business cycle. Accordingly, restricted shares do not vest until three years after the grant date.

Perquisites

During fiscal 2011, our officers received a very limited perquisite package that included personal liability insurance, annual physicals, spouse travel and recreational activities at Board retreats, and expatriate assignment. Upon retirement, officers may elect to continue the personal liability insurance coverage at their own expense. During fiscal 2011, Mr. Ruff transitioned to President of Asia Pacific Region with an international assignment based in Hong Kong. Mr. Ruff’s expense reimbursement related to his standard expatriate package, including housing, travel and standard allowances, is considered a perquisite.

Other

With regard to other benefits, our officers receive the same benefits as other eligible U.S. salaried employees. They participate on the same basis as other eligible U.S. salaried employees in:

 

   

our health and welfare plans, pension plan and 401(k) savings plan;

 

   

our non-qualified pension and savings plans (these plans use the same formulas as our qualified plans and provide benefits that may not be paid under our qualified plans due to Internal Revenue Code limitations); and

 

   

our deferred compensation plan (this plan offers investment measurement options similar to those in our 401(k) savings plan and does not have any guaranteed rates of return).

 

 

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Compensation Deductibility

Internal Revenue Code Section 162(m) provides that we may not deduct in any taxable year compensation in excess of $1 million paid in that year to our chief executive officer and our other three most highly compensated executive officers, other than the chief financial officer, unless the compensation is “performance based.” Grants of stock options, performance shares and awards under our Senior ICP are considered “performance based” compensation for this purpose. Base salaries and restricted stock awards do not qualify as “performance based” compensation for this purpose. With the exception of the restricted stock granted to Mr. Nosbusch and the portion of his base salary in excess of $1 million, we do not anticipate that any portion of our fiscal 2011 compensation to the named executive officers covered by Section 162(m) will exceed the deductibility limitations of Section 162(m).

Change of Control and Severance Agreements

We do not have employment contracts with any officers. However, on September 27, 2010, we entered into change of control agreements with Mr. Nosbusch, each of the other named executive officers, and certain other officers. These agreements become effective if there is a change of control of the Corporation after September 30, 2010 and before October 1, 2013. The terms and conditions are substantially the same as those in the agreements that expired on September 30, 2010, except that:

 

   

the agreements do not include a provision that entitles the executives to receive tax gross-ups related to any excise tax imposed on change of control agreements; and

 

   

in the year of termination following a change of control, the executive will receive a pro-rated ICP payment based upon the average

   

of the previous three years ICP instead of the highest ICP payment in the previous three years.

There are two main purposes of these agreements.

 

   

First, they provide protection for the executive officers who would negotiate any potential acquisitions of the Corporation, thus encouraging them to negotiate a good outcome for shareowners, without concern that their negotiating stance will put at risk their financial situation immediately after an acquisition.

 

   

Second, the agreements seek to ensure continuity of business operations during times of potential uncertainty, by removing the incentive to seek other employment in anticipation of a possible change of control.

In short, they seek to ensure that we may rely on key executives to continue to manage our business consistent with the Corporation’s best interests despite concerns for personal risks. We do not believe these agreements encourage our executives to favor or oppose a change of control. We believe these agreements strike a balance that the amounts are neither so low to cause an executive to oppose a change of control nor so high as to cause an executive to favor a change of control.

For a description of the value of the change of control agreements, see “Potential Payments Upon Termination or Change of Control.”

In the case of terminations other than those to which our change of control agreements apply, we have no severance agreements in place. However, in the past we have at times entered into severance agreements with executives upon termination of their employment with the terms and conditions depending upon the individual circumstances of the termination, the transition role we expect from the executive and our best interests.

 

 

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Executive Stock Ownership

We believe our focus on pay for performance is sharpened by aligning closely the financial interests of our officers with those of shareowners. Accordingly, we have set the following minimum ownership guidelines for our named executive officers. These guidelines must be met within five years after becoming an officer.

 

     Common Stock
Market Value
(Multiple of
Base Salary)
 

Chief Executive Officer

     5   

Other NEOs and Senior Vice Presidents

     3   

 

Shares owned directly (including restricted shares) or through our savings plans (including share equivalents under our non-qualified savings plans) and the after-tax value of vested unexercised stock options are considered in determining whether an officer meets the guidelines, except that no more than 50% of the guidelines can be met by the after-tax value of vested unexercised stock options. If a named executive officer subject to the guidelines does not make appropriate progress to meet the guidelines, the named executive officer’s future long-term incentive grants may be adversely affected.

At September 30, 2011, the five named executive officers owned an aggregate of 556,606 shares (including share equivalents under our non-qualified savings plans) of our common stock, with an aggregate market value of $31.2 million. As of September 30, 2011, all of the named executive officers met the guidelines.

Compensation of the Chairman of the Board and Chief Executive Officer

Mr. Nosbusch’s base salary was increased to $1,100,000 from $1,040,000 effective January 2011. Mr. Nosbusch’s base salary was positioned slightly above the median for CEOs of the Major Companies using regression analyses developed by the Survey Providers based on our revenues. His total annual compensation continues to depend significantly on incentive compensation tied to the Compensation Committee’s assessment of the Company’s and his performance.

In December 2011, Mr. Nosbusch was awarded an ICP payment of $2,112,000. Mr. Nosbusch’s ICP payment was 192% of his target annual incentive compensation. In determining Mr. Nosbusch’s annual incentive compensation for fiscal 2011, the Compensation Committee concluded that under his leadership the

Corporation significantly outperformed our financial goals and the underlying economic environment. The Committee also considered:

 

   

Our performance, under Mr. Nosbusch’s leadership, compared to our operating goals and objectives;

 

   

Mr. Nosbusch’s personal performance;

 

   

information on Mr. Nosbusch’s annual cash compensation compared to annual cash compensation of CEOs of the Major Companies in the Survey Providers database, using regression analyses developed by the Survey Providers based on our sales; and

 

   

ICP awards to other named executive officers.

For fiscal 2011 Mr. Nosbusch was granted stock options for 135,300 shares, 8,270 restricted shares and 15,030 performance shares. Consistent with our executive compensation philosophy, the anticipated value of this grant was first set at the median of LTI grants to CEOs of the Major Companies using the regression analysis developed by Towers Watson based on our sales. Then the grants were adjusted by the Compensation Committee based on the following considerations:

 

   

information on Mr. Nosbusch’s total compensation compared to the total compensation of CEOs of the Major Companies in the Survey Providers compensation databases, using regression analyses developed by the Survey Providers based on our sales. For long-term incentives the results of the Towers Watson database were used for conducting the comparison. The data showed that Mr. Nosbusch’s total

 

 

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compensation and long-term incentives compensation are consistent with our compensation philosophy and are largely based on performance;

 

   

internal comparisons with the other named executive officers. Mr. Nosbusch’s pay relative to the other named executive officers is in line with the survey data of CEOs to other named executive officers of the Major Companies in the Survey Providers database using the regression analyses developed by the Survey Providers based on our sales. Mr. Nosbusch’s pay is higher than the other named executive officers due to his greater level of responsibility and accountability;

 

   

historical information regarding Mr. Nosbusch’s long-term compensation opportunities. This information indicated that Mr. Nosbusch’s long-term compensation opportunities have yielded significant realized and unrealized value for Mr. Nosbusch, particularly with respect to equity awards. The value is a product of Mr. Nosbusch’s long service to the Corporation, the fact that he has held his equity awards rather than cashing them in, and most importantly, the value of his equity awards has varied along with the returns to our shareowners. We believe this is in line with the creation of shareowner value

   

objective of our pay-for-performance philosophy; and

 

   

Mr. Nosbusch’s past and expected future contributions to our long-term performance. The Compensation Committee concluded that Mr. Nosbusch and the management team skillfully guided the Corporation through the 2009 economic crisis, and that the Corporation was positioned to perform well in an economic recovery. The Committee believes that he has contributed significantly to our growth and profitability over time, and is expected to continue to contribute to our success for the benefit of shareowners, customers and other stakeholders. Based on his contribution, expected future performance and position relative to annual cash compensation, the Committee determined that it was appropriate to increase the weighting of long-term incentives in Mr. Nosbusch’s Total Direct Compensation.

The grant date fair value of these awards to Mr. Nosbusch in fiscal 2011 was $4,762,138, which was up 10.7% from the grant date fair value of equity awards granted to Mr. Nosbusch in fiscal 2010. These amounts were determined using the valuation method described in the Grants of Plan-Based Awards Table.

 

 

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The following line graph compares the cumulative total shareowner return on our common stock against the cumulative total return of the S&P 500 Index for the period of five years from October 1, 2006 to September 30, 2011, assuming in each case a fixed investment of $100 at the respective closing prices on September 30, 2006 and reinvestment of all dividends. Our cumulative 5-year performance outpaced the S&P 500.

Comparison of Five-Year Cumulative Total Return

Rockwell Automation and S&P 500 Index

LOGO

The cumulative total returns on Rockwell Automation common stock and the S&P 500 Index as of each September 30, 2006-2011 plotted in the above graph are as follows:

 

     10/1
2006
     9/30
2007
     9/30
2008
     9/30
2009
     9/30
2010
     9/30
2011
 

Rockwell Automation*

   $   100.00       $   121.75       $   66.78       $   79.28       $   117.54       $   108.87   

S&P 500 Index

     100.00         116.44         90.85         84.58         93.17         94.24   

Cash dividends per common share

     0.90         1.16         1.16         1.16         1.22         1.475   

 

 

 

*

Includes the reinvestment of all dividends in our common stock

 

We believe the returns to shareowners shown in this graph indicate that our pay-for-performance philosophy and our emphasis on long-term incentives are well in line with the interests of shareowners, and that Mr. Nosbusch’s compensation is appropriate given both the fiscal 2011 and long-term performance of our company.

Compensation of Other Named Executive Officers

In determining the compensation for Messrs. Crandall, Eisenbrown, Hagerman and Ruff we considered:

 

   

the market data for their positions;

   

internal equity between each named executive officer and our other officers;

 

   

salary increase plans for other employees; and

 

   

our performance and the performance of their business segments and regions (where applicable) as well as their performance compared to their operating and leadership objectives.

In determining the fiscal 2011 ICP payouts for Messrs. Crandall, Eisenbrown, Hagerman and Ruff, we considered:

 

   

our performance compared to pre-established financial goals;

 

 

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each officer’s achievement of individual goals and objectives; and

 

   

certain more subjective assessments of leadership acumen and the individual’s expected future contributions.

As discussed earlier in this document, the financial results for fiscal 2011 significantly exceeded the target level of performance, which itself was an increase over prior year results. As a result, in December 2011, Messrs. Crandall, Eisenbrown, Hagerman and Ruff were awarded ICP payments of $687,000, $682,900, $624,600 and $612,000, respectively, which represent awards that were 192%, 191%, 192% and 173% of target, respectively.

At the beginning of fiscal 2011, Messrs. Eisenbrown and Ruff were each granted options for 38,300 shares, 2,340 restricted shares and 4,250 performance shares; Mr. Crandall was granted options for 35,300 shares, 2,160 restricted shares and 3,930 performance shares; and Mr. Hagerman was granted options for 26,800 shares, 1,640 restricted shares and 2,980 performance shares. Consistent with our executive compensation philosophy, in determining these grants, we considered:

 

   

information on the officers’ total compensation compared to the compensation of similar positions at the Major Companies in the Towers Watson executive compensation database, using a regression analysis developed by Towers Watson based on our sales;

 

   

internal comparisons with other officers;

 

   

historical information regarding their long-term compensation opportunities; and

 

   

past and expected future contributions to our long-term performance.

Changes in Compensation Programs for Fiscal 2012

At our 2011 Annual Meeting of Shareowners 93% of the shares voted at the meeting voted to approve the advisory vote on our executive compensation programs. Based on this strong endorsement, the Compensation Committee did not implement any changes in our executive compensation program as a

result of such vote. The Compensation Committee did approve, however, certain small adjustments to our executive compensation program for fiscal 2012, which are discussed in the following sections.

Base Salary

The salaries for Messrs. Nosbusch, Crandall, Eisenbrown, Hagerman and Ruff were increased effective January 2012 to $1,130,000, $588,000, $586,800, $534,600 and $578,600, respectively. These changes average 2.6%.

Annual Incentive Compensation

For fiscal 2012, the ICP financial measures will remain the same (sales, EPS, free cash flow and ROIC or segment operating earnings); however the weightings were adjusted to increase emphasis on EPS. No awards will be earned unless EPS at least equals fiscal 2011 EPS performance. Target amounts will generally be earned under our ICP if we achieve our financial goals for the year, and maximum payouts will be earned if we significantly exceed the goals. In determining the payout curves, the Compensation Committee considered:

 

   

actual fiscal 2011 performance,

 

   

the rate of growth required to achieve our goals, and

 

   

the impact of global macroeconomic factors on the Corporation’s business prospects.

The Compensation Committee retains the discretion to modify the formula award based on their assessment of our performance.

Long-Term Incentives

For the fiscal 2012 grants, the overall structure of our long-term incentive program remains unchanged from fiscal 2009 through fiscal 2011 (stock options, performance shares and restricted stock). However, the Committee adjusted the proportion of options, performance shares and restricted stock from 62.5%, 25% and 12.5% to 50%, 37.5% and 12.5% respectively, going forward. We believe that this adjusted mix maintains our strong emphasis on shareowner value creation while increasing the percentage of pay tied to whether the Company outperforms alternative investment choices.

 

 

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We calculated the number of options, performance shares and shares of restricted stock using the closing price of our common stock on December 1, 2011, which was the date of grant. The exercise price of options continues to be the closing price on the date of the grant. As discussed under the earlier section

describing Mr. Nosbusch’s 2011 compensation, the Committee started with market median grants and then adjusted the grants based on the factors described above, including Company and individual performance to determine the actual grant date value of long-term incentive awards.

 

 

The Compensation Committee approved at the December 2011 meeting the following grants of equity awards to the NEOs for fiscal 2012:

 

Name

   Options      Performance Shares        Shares of Restricted Stock  

Keith D. Nosbusch

       101,800          17,680          8,030  

Theodore D. Crandall

       25,700          4,460          2,030  

Steven A. Eisenbrown

       21,400          3,720          1,690  

Douglas M. Hagerman

       19,500          3,380          1,540  

Robert A. Ruff

       21,400          3,720          1,690  

The performance shares and restricted stock grants have terms and conditions that are substantially the same as the grants made in fiscal year 2011. See footnotes 2 and 4 to the Grants of Plan-Based Awards Table.

 

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SUMMARY COMPENSATION TABLE

The following table sets forth the total compensation of each of the named executive officers for the fiscal years ended September 30, 2011, 2010 and 2009.

 

Name and
Principal Position
  Year    

Salary

($)

    Bonus (1)
($)
    Stock
Awards (2)
($)
    Option
Awards (3)
($)
    Non-Equity
Incentive Plan
Compensation (4)
($)
   

Change in
Pension Value

and
Nonqualified
Deferred
Compensation
Earnings (5)

($)

   

All Other

Compensation (6)
($)

   

TOTAL

($)

 

Keith D. Nosbusch

    2011        1,092,414        0        1,882,954        2,879,184        2,112,000        2,908,545        81,054        10,956,151   

President &

    2010        993,962        0        1,847,428        2,455,713        1,911,021        1,478,058        75,490        8,761,672   

Chief Executive Officer

    2009        941,977        0        1,483,024        1,849,925        0        2,447,238        63,170        6,785,334   

Theodore D. Crandall

    2011        568,707        0        492,181        751,184        687,000        735,215        30,979        3,265,266   

Senior Vice President &

    2010        532,544        7,300        549,555        722,988        655,100        350,260        30,633        2,848,380   

Chief Financial Officer

    2009        517,315        0        435,190        539,400        0        415,591        26,154        1,933,650   

Steven A. Eisenbrown

    2011        567,538        0        532,544        815,024        682,900        1,068,025        26,473        3,692,504   

Senior Vice President

    2010        526,673        7,250        523,015        686,295        656,000        492,524        28,971        2,920,728   
      2009        511,598        0        435,190        539,400        0        620,962        26,033        2,133,183   

Douglas M. Hagerman

    2011        517,036        0        373,355        570,304        624,600        212,288        26,457        2,324,040   

Senior Vice President,

    2010        484,093        6,650        439,644        578,934        595,500        86,022        26,523        2,217,366   

General Counsel & Secretary

    2009        470,243        0        345,117        428,575        0        117,462        22,799        1,384,196   

Robert A. Ruff

    2011        561,207        0        532,544        815,024        612,000        1,370,444        220,628        4,111,847   

Senior Vice President (7)    

    2010        499,425        25,000        549,555        722,988        587,200        363,150        29,844        2,777,162   
    2009        454,215        0        435,190        539,400        0        500,536        25,397        1,954,738   

 

(1)

This column represents a one-time lump sum payment, in an amount equal to 50% of the salary increase instituted July 5, 2010, in respect of the period from January 1, 2010 to July 4, 2010. All employees except Mr. Nosbusch received this award.

 

(2)

Amounts in this column represent the grant date fair value of restricted stock and performance share awards granted calculated in accordance with U.S. GAAP. The grant date fair value of restricted stock was $69.57, $46.16 and $29.37 per share for 2011, 2010 and 2009, respectively. Performance share awards are valued at target shares with a grant date fair value of $87.00, $54.81 and $31.82 for 2011, 2010 and 2009, respectively. The assumptions applicable to these valuations are set forth in note 11, Share-Based Compensation, to our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011. The amounts shown may not correspond to the actual value that may be realized by the named executive officers. For additional information on awards made in fiscal 2011, see the Grants of Plan-Based Awards Table and Outstanding Equity Awards Table.

 

(3)

Amounts in this column represent the grant date fair value of option awards granted computed in accordance with U.S. GAAP. The grant date fair value was $21.28, $13.59 and $7.75 per share for 2011, 2010 and 2009, respectively. The assumptions applicable to these valuations are set forth in note 11, Share-Based Compensation, to our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011. The amounts shown may not correspond to the actual value that may be realized by the named executive officers. For additional information on awards made in fiscal 2011, see the Grants of Plan-Based Awards Table and Outstanding Equity Awards Table.

 

(4)

This column represents amounts paid under our ICP for performance in the fiscal year. For more information about our ICP, see the “Compensation Discussion and Analysis” and Grants of Plan-Based Awards Table.

 

(5)

We do not pay “above market” interest on non-qualified deferred compensation; therefore, this column reflects changes in pension values only. The changes in pension value amounts for each year represent the difference from September 30 of the prior year to September 30 of each year in the actuarial present value of the named executive officers’ accrued pension benefit at their unreduced retirement age under our qualified and non-qualified pension plans. For additional information, including the assumptions used to calculate these amounts, see the Pension Benefits Table.

 

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(6)

This column represents the Corporation matching contributions for the named executive officers under our savings plans and, for Mr. Eisenbrown, under our deferred compensation plan and cash dividends paid on restricted stock held. The aggregate amount of personal benefits and perquisites (such as personal liability insurance, annual physicals, and spouse travel and recreational activities at Board retreats and customer events) provided to each named executive officer during fiscal 2011, 2010 and 2009 are less than $10,000 and, therefore, are not included in All Other Compensation with the exception of Mr. Ruff. The amount for Mr. Ruff includes expenses related to his standard expatriate package for his international assignment in Hong Kong based on the incremental cost to the Company for these benefits as well as other personal benefits as set forth below in the All Other Compensation Table.

 

(7)

During fiscal 2011, Mr. Ruff transitioned to President of the Asia Pacific region with an international assignment based in Hong Kong.

ALL OTHER COMPENSATION TABLE

The following table describes each element of the All Other Compensation column in the Summary Compensation Table for fiscal 2011.

 

Name   

Value of
Company
Contributions to

Savings Plans (1)
$

    

Dividends on
Restricted Stock (2)

$

    

Perquisites (3)

$

    

TOTAL

$

 

Keith D. Nosbusch

   $ 32,758       $ 48,296               $ 81,054   

Theodore D. Crandall

     17,054         13,925                 30,979   

Steven A. Eisenbrown

     12,493         13,980                 26,473   

Douglas M. Hagerman

     15,504         10,953                 26,457   

Robert A. Ruff

     17,090         13,953         189,585         220,628   

 

(1)

This column includes the Corporation matching contributions to the named executive officers’ 401(k) savings plan and non-qualified savings plan accounts and, for Mr. Eisenbrown, to his deferred compensation plan account. This is consistent with the practice we use for all eligible employees.

 

(2)

This column represents cash dividends paid on restricted shares held by the named executive officers.

 

(3)

The aggregate amount of personal benefits and perquisites provided to each named executive officer during fiscal 2011, 2010 and 2009 are less than $10,000 and, therefore, are not included in All Other Compensation with the exception of Mr. Ruff. Mr. Ruff’s expenses related to his standard expatriate package for his international assignment in Hong Kong, personal liability insurance, and spouse travel and recreational activities at a Board retreat and customer event are included based on the incremental cost to the Company for the benefits. Mr. Ruff’s international assignment to Hong Kong effective April 2011 includes housing, travel and standard allowances related to relocation and other assignment expenses under our standard expatriate package for all employees of $187,359.

 

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GRANTS OF PLAN-BASED AWARDS TABLE

The following table provides information about equity and non-equity awards made to the named executive officers in fiscal 2011.

 

 

 

Name

 

 

 

Grant Type

 

 

 

Grant Date

           Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards  (1)
   

Estimated Future Payouts Under

Equity Incentive Plan Awards (2)

   

All Other

Stock
Awards (4):

Number of
Shares of
Stock or
Units

(#)

   

All Other

Option
Awards (5):

Number of
Securities
Underlying
Options

(#)

   

Exercise or
Base Price

of Option

Awards (6)

 

($ / Sh)

   

Grant Date

Fair Value
of Stock

and Option
Awards (7)

 

($)

 
     

 

Compensation
Committee
Approval Date
(3)

 

   

Threshold

 

($)

   

Target

 

($)

   

Maximum

 

($)

   

Threshold

 

(#)

   

Target

 

(#)

   

Maximum

 

(#)

         
Keith D. Nosbusch   Incentive Compensation     12/7/2010        12/7/2010        0        1,100,000        2,200,000                                                           
  Performance Shares     12/7/2010        12/7/2010                    0        15,030        30,060                    1,307,610   
  Restricted Shares     12/7/2010        12/7/2010                                8,270                575,344   
    Stock Options     12/7/2010        12/7/2010                                                                135,300        69.57        2,879,184   
Theodore D. Crandall   Incentive Compensation     12/7/2010        12/7/2010        0        357,813        715,626                               
  Performance Shares     12/7/2010        12/7/2010                    0        3,930        7,860                    341,910   
  Restricted Shares     12/7/2010        12/7/2010                                2,160                150,271   
    Stock Options     12/7/2010        12/7/2010                                                                35,300        69.57        751,184   
Steven A. Eisenbrown   Incentive Compensation     12/7/2010        12/7/2010        0        358,125        716,250                               
  Performance Shares     12/7/2010        12/7/2010                    0        4,250        8,500                    369,750   
  Restricted Shares     12/7/2010        12/7/2010                                2,340                162,794   
    Stock Options     12/7/2010        12/7/2010                                                                38,300        69.57        815,024   
Douglas M. Hagerman   Incentive Compensation     12/7/2010        12/7/2010        0        325,313        650,626                               
  Performance Shares     12/7/2010        12/7/2010                    0        2,980        5,960                    259,260   
  Restricted Shares     12/7/2010        12/7/2010                                1,640                114,095   
    Stock Options     12/7/2010        12/7/2010                                                                26,800        69.57        570,304   
Robert A. Ruff   Incentive Compensation     12/7/2010        12/7/2010        0        353,125        706,250                               
  Performance Shares     12/7/2010        12/7/2010                    0        4,250        8,500                    369,750   
  Restricted Shares     12/7/2010        12/7/2010                                2,340                162,794   
    Stock Options     12/7/2010        12/7/2010                                                                38,300        69.57        815,024   

 

(1)

These columns show the potential value of the cash payout for each named executive officer under the ICP for fiscal 2011 if the target and maximum goals are met. For each named executive officer, an incentive compensation target equal to a percentage of the individual’s base salary is set at the beginning of the year. Amounts shown are based on base salary at September 30, 2011. Actual incentive compensation payments under the plan may be higher or lower than the target based on financial, operating and individual performance. The Compensation Committee has discretion to change the amount of any award irrespective of whether the measures are met. For fiscal year 2012, ICP targets as a percentage of base salary remain unchanged from fiscal year 2011 and are 100% for Mr. Nosbusch and 62.5% for each of the other named executive officers. Incentive compensation payments under the Senior ICP may not exceed 1% of our applicable net earnings (as defined in the plan).

 

(2)

These columns show the threshold, target and maximum payouts under performance shares awarded during fiscal year 2011. The payout in respect of these performance shares will be made in shares of our common stock and/or cash in an amount determined based on the total shareowner return of our common stock, assuming reinvestment of all dividends, compared to the performance of companies in the S&P 500 Index for the period from October 1, 2010 to September 30, 2013, if the individual continues as an employee until the third anniversary of the grant date (subject to provisions relating to the grantee’s death, disability or retirement or a change of control of the Corporation). The payouts will be at zero, the target amount and

 

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the maximum amount if our shareowner return is equal to or less than the 30th percentile, equal to the 60th percentile and equal to or greater than the 75th percentile of the total shareowner return of companies in the S&P 500 Index, respectively, over the applicable three-year period, with the payout interpolated for results between those percentiles. We use the 20-trading day average ending September 30 to determine the starting price and the final TSR. The potential value of a payout will fluctuate with the market value of our common stock.

 

(3)

In fiscal 2011 annual equity grants were made at the Compensation Committee meeting on December 7, 2010.

 

(4)

This column shows the number of shares of restricted stock granted in fiscal 2011 to the named executive officers. The restricted stock vests on December 7, 2013 (three years from the grant date), provided the individual is still employed by the Corporation on that date. Restricted stock owners are entitled to any cash dividends paid, but are not entitled to any dividends paid in shares until the restricted shares vest. Cash dividends are paid at the Corporation’s regular dividend rate. The grant date fair value of these awards was $69.57 per share computed in accordance with U.S. GAAP and the assumptions set forth in note 11, Share-Based Compensation, to our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011.

 

(5)

This column shows the number of stock options granted in fiscal 2011 to the named executive officers under our 2008 Long-Term Incentives Plan. The options vest and become exercisable in three substantially equal installments beginning on December 7, 2011, one year after the grant date. The grant date fair value of these awards computed in accordance with U.S. GAAP was $21.28 per share. This amount was calculated using the Black-Scholes pricing model and the assumptions set forth in note 11, Share-Based Compensation, to our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011.

 

(6)

This column shows the exercise price for stock options granted, which was the closing price of our common stock on December 7, 2010, the grant date of the options.

 

(7)

This column shows the aggregate grant date fair value of the performance share awards at target, which was based on $87.00 per share computed in accordance with U.S. GAAP and the assumptions set forth in note 11, Share-Based Compensation, to our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011. The aggregate grant date fair value of the performance share awards at two times the target number of shares was $2,615,220, $683,820, $739,500, $518,520, and $739,500 for Messrs. Nosbusch, Crandall, Eisenbrown, Hagerman, and Ruff, respectively.

 

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE

The following table provides information about equity awards made to the named executive officers that are outstanding as of September 30, 2011.

 

            Option Awards (1)     Stock Awards  

Name

 

Grant Date

   

Number of
Securities
Underlying
Unexercised
Options

EXERCISABLE

(#)

   

Number of Securities
Underlying
Unexercised Options

UNEXERCISABLE

(#)

   

Equity Incentive
Plan Awards:

Number of Securities
Underlying
Unexercised
Unearned Options

(#)

 

Option
Exercise Price

($)

    Option
Expiration
Date
   

Number of
Shares
or Units of
Stock
That Have
Not
Vested (2)

(#)

   

Market
Value of
Shares or
Units of
Stock
That Have
Not
Vested (3)

($)

   

Equity Incentive
Plan Awards:

Number of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested (4)

(#)

   

Equity Incentive
Plan Awards:

Market or
Payout Value of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested (3)

($)

 

Keith D. Nosbusch

    12/7/2010                135,300            69.5700        12/7/2020        8,270        463,120        15,030        841,680   
      12/9/2009        60,233        120,467            46.1600        12/9/2019        10,100        565,600        25,200        1,411,200   
      12/3/2008        159,132        79,568            29.3700        12/3/2018        14,200        795,200        33,500        1,876,000   
      12/5/2007        130,500              68.0400        12/5/2017               
      12/6/2006        113,850              63.5900        12/6/2016               
      11/7/2005        143,750              56.3600        11/7/2015               
      11/8/2004        297,800              43.9000        11/8/2014               

Theodore D. Crandall

    12/7/2010                35,300            69.5700        12/7/2020        2,160        120,960        3,930        220,080   
      12/9/2009        17,733        35,467            46.1600        12/9/2019        3,000        168,000        7,500        420,000   
      12/3/2008        46,399        23,201            29.3700        12/3/2018        4,200        235,200        9,800        548,800   
      12/5/2007        35,500              68.0400        12/5/2017               
      12/6/2006        31,400              63.5900        12/6/2016               
      11/7/2005        36,300              56.3600        11/7/2015               
      11/8/2004        70,000              43.9000        11/8/2014               

Steven A. Eisenbrown

    12/7/2010                38,300            69.5700        12/7/2020        2,340        131,040        4,250        238,000   
      12/9/2009        700        33,667            46.1600        12/9/2019        2,900        162,400        7,100        397,600   
      12/3/2008        1,133        23,201            29.3700        12/3/2018        4,200        235,200        9,800        548,800   
      12/5/2007        35,500              68.0400        12/5/2017               
      12/6/2006        31,400              63.5900        12/6/2016               
      11/7/2005        37,950              56.3600        11/7/2015               

Douglas M. Hagerman

    12/7/2010                26,800            69.5700        12/7/2020        1,640        91,840        2,980        166,880   
      12/9/2009        14,200        28,400            46.1600        12/9/2019        2,400        134,400        6,000        336,000   
      12/3/2008        16,455        18,434            29.3700        12/3/2018        3,300        184,800        7,800        436,800   
      12/5/2007        28,400              68.0400        12/5/2017               
      12/6/2006        25,100              63.5900        12/6/2016               
      11/7/2005        36,300              56.3600        11/7/2015               
      11/8/2004        67,800              43.9000        11/8/2014               

Robert A. Ruff

    12/7/2010                38,300            69.5700        12/7/2020        2,340        131,040        4,250        238,000   
      12/9/2009        17,733        35,467            46.1600        12/9/2019        3,000        168,000        7,500        420,000   
      12/3/2008        46,399        23,201            29.3700        12/3/2018        4,200        235,200        9,800        548,800   
      12/6/2006        12,600              63.5900        12/6/2016               
      11/7/2005        18,200                    56.3600        11/7/2015                                   

 

(1)

All options vest 1/3 per year beginning on the first anniversary of the grant date (subject to provisions related to the grantee’s death, retirement or a change of control).

 

(2)

All restricted stock vests in full on the third anniversary of the grant date (subject to provisions related to the grantee’s death, retirement or a change of control).

 

(3)

The market value of the stock awards is based on the closing market price of our common stock as of September 30, 2011, which was $56.00.

 

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(4)

This column shows the target number of performance shares outstanding. The payout can be from 0 to 200% of the target as described in footnote 2 to the Grants of Plan-Based Awards Table. All performance shares will vest and be paid out on the third anniversary of the grant date (subject to provisions relating to the grantee’s death, disability or retirement or a change of control). The performance shares awarded on December 3, 2008 were earned at 200% of target. The Compensation Committee approved at its November 2011 meeting the payout of such performance shares in shares of our common stock, which resulted in the following number of shares being delivered to the named executive officers:

 

        Name

 

Shares of Common Stock Delivered in Respect of

Performance Shares Awarded on

December 3, 2008 and Vested on December 3, 2011

 
 

Keith D. Nosbusch

  67,000

Theodore D. Crandall

  19,600

Steven A. Eisenbrown

  19,600

Douglas M. Hagerman

  15,600

Robert A. Ruff

  19,600

OPTION EXERCISES AND STOCK VESTED TABLE

The following table provides additional information about stock option exercises and shares acquired upon the vesting of stock awards, including the value realized, during the fiscal year ended September 30, 2011 by the named executive officers.

 

     OPTION AWARDS   STOCK AWARDS

Name

 

Number of Shares

Acquired on

Exercise (1)

(#)

 

Value Realized

on Exercise (2)

($)

 

Number of Shares

Acquired on

Vesting

(#)

 

Value Realized

on Vesting (2)

($)

       
       
       

Keith D. Nosbusch

  418,100   22,669,860   17,862   1,221,582

Theodore D. Crandall

  55,000   2,744,285   4,936   337,573

Steven A. Eisenbrown

  143,716   5,963,832   4,936   337,573

Douglas M. Hagerman

  27,781   1,466,385   3,932   268,909

Robert A. Ruff

  61,200   1,216,067   3,932   268,909

 

(1)

Messrs. Nosbusch, Crandall, Eisenbrown, Hagerman, and Ruff retained 251,900, 3,600, 1,750, 2,266, and 1,450 shares, respectively.

 

(2)

Based on the closing price of our common stock on the NYSE on the exercise date or vesting, as applicable.

 

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PENSION BENEFITS TABLE

The following table shows the present value of accumulated benefits as of September 30, 2011 payable to the named executive officers under the Rockwell Automation Pension (Qualified) Plan and Rockwell Automation Non-Qualified Pension Plan based on the assumptions described in Footnote 1 to the Table.

 

Name   Plan Name  

Number of Years

Credited Service

(#)

   

Present Value of

Accumulated
Benefit

($)

   

Payments During Last

Fiscal Year

($)

       
       

Keith D. Nosbusch

  Rockwell Automation Pension  (Qualified) Plan     37        1,603,006     
    Rockwell Automation Pension (Non-Qualified) Plan     37        15,438,123     

Theodore D. Crandall

  Rockwell Automation Pension (Qualified) Plan     25        645,650     
    Rockwell Automation Pension (Non-Qualified) Plan     25        1,997,005     

Steven A. Eisenbrown

  Rockwell Automation Pension (Qualified) Plan     36        1,044,909     
    Rockwell Automation Pension (Non-Qualified) Plan     36        3,082,049     

Douglas M. Hagerman 

  Rockwell Automation Pension (Qualified) Plan     7        148,563     
    Rockwell Automation Pension (Non-Qualified) Plan     7        421,181     

Robert A. Ruff

  Rockwell Automation Pension (Qualified) Plan     35        1,090,018     
    Rockwell Automation Pension (Non-Qualified) Plan     35        2,400,858     

 

(1)

These amounts have been determined using the assumptions set forth in note 12, Retirement Benefits, to our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011, and represent the accumulated benefit obligation for benefits earned to date, based on age, service and earnings through the measurement date of September 30, 2011.

 

The named executive officers participate in two pension plans with the same requirements/benefits as other employees: the Rockwell Automation Pension Plan (the Qualified Pension Plan), which is qualified under the Internal Revenue Code, and the Rockwell Automation Non-Qualified Pension Plan (the Non-Qualified Pension Plan), which is an unfunded, non-tax-qualified plan. The Qualified Pension Plan provides retirement benefits to nearly all U.S. employees of the Corporation hired before July 1, 2010. The Qualified Pension Plan and the Non-Qualified Pension Plan were closed to entrants hired or re-hired on or after July 1, 2010. In place of becoming a member of the Qualified Pension Plan and/or the Non-Qualified Pension plan, employees hired or re-hired on or after July 1, 2010, will be eligible for a non-elective contribution (the “NEC”) in the Qualified and/or Non-Qualified Savings Plan. The NEC is based on a combination of age and

service and the percentage contribution is outlined in the Non-Qualified Savings Plan section below. The NEC formula is the same for both the Qualified Savings Plan and the Non-Qualified Savings Plan.

The Non-Qualified Pension Plan provides benefits that may not be paid from the Qualified Pension Plan due to limitations imposed by the Internal Revenue Code on qualified plan benefits. Non-Qualified Pension Plan benefits are provided to any U.S. salaried employee whose benefits are affected by these limits. Our policy with respect to funding our pension obligations is to fund at least the minimum amount required by applicable laws and governmental regulations. We maintain a rabbi trust for our non-qualified plans, including the Non-Qualified Pension Plan, which we will fund in the event there is a change of control of the Corporation.

 

 

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Effective January 1, 2011, the pension plans were amended to allow participants to elect a lump sum payment instead of an annuity option offered under the plans. The present values in the above table are determined based on assumptions required by SEC rules, which are different from those used to calculate the lump sum payment under the plans. Note that due to Internal Revenue Code Section 409A regulations, if a named executive officer elected to receive his benefit from the Non-Qualified Plan in the form of a lump sum, he would not be eligible to receive the lump sum payment for at least five years.

For employees hired before July 1, 2010, benefits provided by both the Qualified Pension Plan and the Non-Qualified Pension Plan have the same requirements for vesting, which occurs at five years of service. Benefits in both plans are determined using the same formula. Named executive officers do not receive any additional service or other enhancements in determining the form, timing or amount of their benefits.

Normal retirement benefits

 

Ÿ  

Normal retirement benefits are payable at age 65 with five years of service.

Early retirement with reduced benefits

 

Ÿ  

Reduced early retirement benefits after 10 years of service are payable at the earlier of either:

 

   

age 55 or older; or

 

   

75 or more points (age plus credited service equals or exceeds 75).

The reduction for early retirement benefits is determined using an actuarial equivalence with an applicable interest rate and mortality table similar to those used for Social Security purposes. Currently, Messrs. Crandall, Eisenbrown and Ruff have met the eligibility requirements for early retirement with a reduced benefit.

Pension plan formula

 

Ÿ  

Pension plan benefits are payable beginning at a named executive officer’s normal retirement date and are determined by the following formula:

 

   

Two-thirds (66 2/3%) of the participant’s average monthly earnings up to $1,666.67;

Ÿ  

Multiplied by a fraction, not to exceed 1.00, the numerator of which is the participant’s years of credited service, including fractional years, and the denominator of which is thirty-five (35);

 

Ÿ  

Plus 1.50% of the participant’s average monthly earnings in excess of $1,666.67 times the participant’s years of credited service, including fractional years, up to a maximum of thirty-five (35) years;

 

Ÿ  

Plus 1.25% of the participant’s average monthly earnings in excess of $1,666.67 times the participant’s years of credited service, including fractional years, in excess of thirty-five (35) years;

 

Ÿ  

Less 50% of primary Social Security benefit times a fraction not to exceed 1.00, the numerator of which is the participant’s years of credited service, including fractional years, and the denominator of which is thirty-five (35).

Average monthly earnings represent the monthly average of the participant’s pensionable earnings for the highest five calendar years during the last 10 calendar years while the participant was actively employed. A participant’s earnings used for calculating pension plan benefits (pensionable earnings) include base salary and annual incentive compensation awards. Awards of stock options, restricted stock, performance shares and performance-based long-term cash awards, and all other cash awards are not considered when determining pension benefits.

Mr. Ruff was employed by our former subsidiary Reliance Electric at December 31, 1997 so his pension is determined in two parts. The pension plan formula described above applies only to credited service after December 31, 1997. For credited service prior to December 31, 1997, Mr. Ruff’s pension benefit under the former Reliance Electric plan formula applies and is adjusted for subsequent growth in average monthly earnings prior to his retirement.

Messrs. Eisenbrown and Crandall are also eligible to participate in our Supplemental Retirement Plan for Certain Senior Executives, which is a closed plan. Their benefit under that plan currently is zero.

 

 

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Disability pension benefits

 

Ÿ  

Disability pension benefits are available under the Qualified Pension Plan and the Non-Qualified Pension Plan to active employees before age 65 upon total and permanent disability if the participant has at least 15 years of credited service or at least 10 years of credited service with 70 points or more (age plus credited service is equal to or greater than 70). The benefit is generally calculated in the same manner as the normal retirement benefit.

Pension benefits payable to beneficiaries upon death of a participant

 

Ÿ  

Pension benefits under the Qualified Pension Plan and the Non-Qualified Pension Plan are payable to the participant’s beneficiaries upon the death of the participant while eligible for normal or early retirement.

 

Ÿ  

The surviving spouse will receive a monthly lifetime benefit calculated as if the participant retired and elected the 50% surviving spouse option.

 

Ÿ  

If the participant dies after starting to receive benefits, the benefit payments are processed in accordance with the benefit option selected.

 

Ÿ  

If the retiree has started monthly pension benefit payments, the beneficiary is eligible for a lump-sum death benefit equal to $150 per year of credited service up to $5,250.

 

Ÿ  

If the participant dies before he or she is eligible for early retirement, pension benefits may begin in the month following the date the participant would have attained earliest retirement date; otherwise they may begin in the month following the date of death.

 

Ÿ  

If the participant elects the lump sum payment option and the lump sum payment is made, no further benefits are provided to the beneficiary or surviving spouse upon death of the participant.

NON-QUALIFIED DEFERRED COMPENSATION

The following table provides information on our non-qualified defined contribution and other non-qualified deferred compensation plans in which all eligible U.S. salaried employees, including the named executive officers participate, which consist of the following:

 

Ÿ  

Rockwell Automation Non-Qualified Savings Plan (the Non-Qualified Savings Plan):  Our U.S. employees, including the named executive officers, whose earnings exceed certain applicable federal limitations on compensation that may be recognized under our Qualified Savings Plan, are entitled to defer earnings on a pre-tax basis to the Non-Qualified Savings Plan. Corporation matching contributions that cannot be made to the Qualified Savings Plan due to applicable federal tax limits are also made to the Non-Qualified Savings Plan. Under the Qualified Savings Plan, we match half up to 6% of the employee’s eligible earnings contributed to the Plan, subject to a maximum amount of earnings under applicable federal tax regulations. Earnings under the Non-Qualified Savings Plan are credited to participant accounts on a daily basis in the same manner as under the Qualified Savings Plan. Investment options are selected by the participant, may be changed daily, and include the same fund and Corporation stock investments that are offered by the Qualified Savings Plan. No preferential interest or earnings are provided under the Non-Qualified Savings Plan. Account balances under the Non-Qualified Savings Plan are distributed in a lump-sum cash payment within 60 days after the end of the month occurring six months after the employee terminates employment or retires.

 

 

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In addition to the Corporation matching contributions, a non-elective contribution (NEC) is provided for employees hired or rehired on or after July 1, 2010. If employed on the last day of the year, eligible employees receive an annual NEC benefit equal to eligible pay multiplied by a percentage based on “points”, which equal the sum of age and years of service as of each December 31 and based on the following chart. The NEC is provided by the end of the first quarter of the following year.

 

Total Points

(Age + Years
of Service as of 12/31)

   Percentage of  Pay
Contributed as NEC

<40

   3.00%

40-59

   4.00%

60-79

   5.00%

80+

   7.00%

 

Ÿ  

Rockwell Automation Deferred Compensation Plan (the Deferred Compensation Plan):  Our U.S. salaried employees whose base salary is at least $160,000 (those in career band E after January 1, 2012), including the named executive officers, may elect annually to defer up to 50% of base salary and up to 100% of their annual incentive compensation award to the Deferred Compensation Plan.

Matching.  For participants who defer base salary to the plan, we provide a matching contribution equal to what we would have contributed to the Qualified Savings Plan or Non-Qualified Savings Plan for the deferred amounts.

Distribution elections.

 

Ÿ  

For contributions before 2005:  Participants could opt to receive the deferred amounts on a specific date, at retirement, or in installments up to 15 years following retirement. Participants may make a one-time change of distribution election or timing (at least one year before payments would otherwise begin).

 

Ÿ  

Contributions after January 1, 2005: Participants may elect either a lump-sum distribution at termination of employment or installment distributions for up to 15 years following retirement. Participants may make a one-time change of the distribution election or timing (at least one year before payments

   

would otherwise begin), provided that the changed distribution cannot begin until five years after the original distribution date.

Timing of distributions.

 

Ÿ  

For contributions before 2005: We make distributions within the first 60 days of a calendar year.

 

Ÿ  

For contributions after January 1, 2005: We make distributions beginning in July of the year following termination or retirement. Ongoing installment payments are made in February of each year.

Earnings on deferrals.  Participants select investment measurement options, including hypothetical fund investments that correspond to those offered by the Qualified Savings Plan, excluding the Corporation’s stock. Investment measurement options may be changed daily. Earnings are credited to participant accounts on a daily basis in the same manner as under the Qualified Savings Plan. No preferential interest or earnings are provided under the Deferred Compensation Plan.

 

Ÿ  

Rockwell Automation Deferred Compensation Plan (the Old Plan):  Of the named executive officers, only Mr. Crandall participates in the Old Plan, which is a closed plan. Participants were only permitted to defer incentive compensation to this plan. Distributions are made annually in January; however, if a participant is considered a “key employee” under the terms of the Internal Revenue Code, there may be a six-month delay in the commencement of distributions. The plan provides an interest rate that is one-twelfth of the annual interest rate for quarterly compounding that is 120% of the applicable Federal long-term monthly rate for the three-month period ending on the last day of each calendar year quarter. The interest is applied to participant accounts quarterly on the last business day of the quarter.

We maintain a rabbi trust for our non-qualified plans, including the Non-Qualified Savings Plan and deferred compensation plans, which we will fund in the event there is a change of control of the Corporation.

 

 

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NON-QUALIFIED DEFERRED COMPENSATION TABLE

 

           
Name  

Executive
Contributions in Last
Fiscal Year (1)

($)

   

Registrant
Contributions in Last
Fiscal Year (2)

($)

    Aggregate Earnings in
Last Fiscal Year (3)
($)
   

Aggregate Withdrawals/
Distributions

($)

   

Aggregate Balance at
Last Fiscal Year End (4)

($)

 

Keith D. Nosbusch

    68,008        25,503        (44,142     0        1,019,903   

Theodore D. Crandall

    26,309        9,866        6,466        0        657,568   

Steven A. Eisenbrown

    70,485        5,317        (2,252     0        1,242,225   

Douglas M. Hagerman

    48,198        8,268        (20,187     0        1,189,472   

Robert A. Ruff

    38,713        9,678        (10,574     0        201,052   

 

(1)

These amounts include contributions made by each named executive officer to the Non-Qualified Savings Plan. It also includes amounts deferred by Mr. Eisenbrown to the Deferred Compensation Plan. These amounts are also reported in the “Salary” column in the Summary Compensation Table.

 

(2)

These amounts represent Corporation matching contributions for each named executive officer under the Non-Qualified Savings Plan, and for Mr. Eisenbrown under the Deferred Compensation Plan. Corporation matching contributions under the Deferred Compensation Plan are made for deferrals of base salary only. Only Mr. Eisenbrown elected to defer base salary to the Deferred Compensation Plan in 2011. These amounts are also reported in the “All Other Compensation” column in the Summary Compensation Table and as part of the “Value of Company Contributions to Savings Plans” column in the All Other Compensation Table.

 

(3)

These amounts include earnings (losses), dividends and interest provided on current contributions and existing balances, including the change in value of the underlying investment options in which the named executive officer is deemed to be invested. These amounts are not reported in the Summary Compensation Table as compensation.

 

(4)

These amounts represent each named executive officer’s aggregate balance in the Non-Qualified Savings Plan, for Messrs. Crandall, Eisenbrown and Hagerman in the Deferred Compensation Plan, and for Mr. Crandall in the “Old” Deferred Compensation Plan, in each case at September 30, 2011. The numbers also include the contributions made by each named executive officer to the Non-Qualified Savings Plan and amounts deferred by Mr. Eisenbrown to the Deferred Compensation Plan, which are also reported in the “Salary” column of the Summary Compensation Table, and the Corporation matching contributions, which are also reported in the “All Other Compensation” column in the Summary Compensation Table for each fiscal year. The amounts included in the Summary Compensation Table for fiscal 2009 for Messrs. Nosbusch, Crandall, Eisenbrown, Hagerman and Ruff are $65,636, $25,692, $82,394, $39,668 and $28,187, respectively; for fiscal 2010 for Messrs. Nosbusch, Crandall, Eisenbrown, Hagerman and Ruff are $91,355, $35,506, $88,251, $44,497 and $41,708, respectively; and for fiscal 2011 for Messrs. Nosbusch, Crandall, Eisenbrown, Hagerman and Ruff are $93,512, $36,174, $75,803, $56,466 and $ 48,391, respectively.

 

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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL

 

The tables and narrative below describe and quantify compensation that would become payable to the named executive officers under existing plans and arrangements if the named executive officer’s employment had terminated on September 30, 2011 for the reasons set forth below. We do not have employment agreements with the named executive officers, but do have change of control agreements with Messrs. Nosbusch, Crandall, Eisenbrown, Hagerman and Ruff and certain other officers. There are two main purposes of these agreements.

1. They provide protection for the executive officers who would negotiate any potential acquisitions of the Corporation, thus encouraging them to negotiate a good outcome for shareowners, without concern that their negotiating stance will put at risk their financial situation immediately after an acquisition.

2. The agreements seek to ensure continuity of business operations during times of potential uncertainty, by removing the incentive to seek other employment in anticipation of a possible change of control.

In short, the change of control agreements seek to ensure that we may rely on key executives to continue to manage our business consistent with the Corporation’s best interests despite concerns for personal risks. We do not believe these agreements encourage our executives to favor or oppose a change of control. We believe these agreements strike a balance that the amounts are neither so low to cause an executive to oppose a change of control nor so high as to cause an executive to favor a change of control. In addition, in the past we at times have entered into severance arrangements with executive officers upon termination of their employment, with the terms and conditions depending on the individual circumstances of the termination, the transition role we expect from the officer and our best interests. The information set forth below does not include payments and benefits to the extent they are provided on a non-discriminatory basis to salaried employees upon termination of employment, including unused vacation pay, distributions of balances under savings and deferred compensation plans and accrued pension benefits. The information set forth below also does not include any payments and benefits

that may be provided under severance arrangements that may be entered into with any named executive officer upon termination of their employment.

In September 2010, we re-entered into change of control agreements with Messrs. Nosbusch, Crandall, Eisenbrown, Hagerman and Ruff and certain other officers. Each agreement becomes effective if there is a “change of control” of the Corporation after September 30, 2010 and before October 1, 2013. Each agreement provides for the continuing employment of the executive for two years after the change of control on conditions no less favorable than those in effect before the change of control. If the executive’s employment is terminated by us without “cause” or if the executive terminates his employment for “good reason” within that two year period, each agreement entitles the executive to:

 

   

severance benefits payable as a lump sum equal to two times (three times in the case of Mr. Nosbusch) his annual compensation, including target ICP;

 

   

annual ICP payment prorated through the date of termination payable as a lump sum, based upon the average of the previous three years’ ICP payments; and

 

   

continuation of other benefits and perquisites for two years (three years in the case of Mr. Nosbusch).

The agreements do not include a provision that entitles the executives to receive tax gross-ups related to any excise tax imposed on change of control agreements. In each change of control agreement, the executive agreed to certain confidentiality provisions.

Under the change of control agreements, a change of control would include any of the following events:

 

   

any “person”, as defined in Section 13(d)(3) or 14(d)(2) of the Exchange Act, acquires 20 percent or more of our outstanding voting securities;

 

   

a majority of our directors are replaced by persons who are not endorsed by a majority of our directors;

 

 

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we are involved in a reorganization, merger, sale of assets or other business combination that results in our shareowners owning 50% or less of our outstanding shares or the outstanding shares of the resulting entity; or

   

shareowners approve a liquidation or dissolution of the Corporation.

 

 

The following table provides details with respect to potential post-employment payments to the named executive officers under our change of control agreements in the event of separation due to a change of control of the Corporation, assuming a termination covered by the change of control agreement occurred on September 30, 2011.

 

Name  

Cash

($) (1)

   

Equity

($) (2)

    Pension/
NQDC
($)
    Perquisites/
Benefits
($) (3)
    Tax
Reimbursement
($) (4)
    Other
($) (5)
   

Total

($)

 

Keith D. Nosbusch

    7,941,007        9,257,091        0        67,233        0        100,000        17,365,331   

Theodore D. Crandall

    2,307,992        2,679,878        0        31,699        0        100,000        5,119,569   

Steven A. Eisenbrown

    2,308,550        2,662,166        0        30,234        0        100,000        5,100,950   

Douglas M. Hagerman

    2,098,325        2,121,073        0        29,756        0        100,000        4,349,154   

Robert A. Ruff

    2,235,983        2,707,878        0        27,491        0        100,000        5,071,352   

 

(1)

This column includes the severance value, which is base salary plus target annual ICP multiplied by three for Mr. Nosbusch, and multiplied by two for Messrs. Crandall, Eisenbrown, Hagerman, and Ruff. In the year of termination, the executive is also entitled to receive a prorated ICP payout based on the average of the previous three years’ ICP payment (fiscal years 2009, 2010 and 2011). These amounts are $1,341,007, $447,366, $446,300, $406,700 and $399,733 for Messrs. Nosbusch, Crandall, Eisenbrown, Hagerman and Ruff, respectively.

 

(2)

Upon a change of control of the Corporation and, in the case of awards granted after February 2, 2010, if (1) the executive’s awards are assumed or substituted with comparable awards by the surviving corporation in the change of control and such executive’s employment is terminated within two years of the change of control for certain specified reasons or (2) the executive’s awards are not assumed or substituted with comparable awards by the surviving corporation in the change of control, all outstanding stock options would become fully exercisable; the restrictions on all shares of restricted stock would lapse; and grantees of performance shares would be entitled to a performance share payout equal to 100% of the target shares.

The following represents the value of unvested equity awards had a change of control occurred on September 30, 2011, using the fiscal year end price of $56.00.

 

Name   Unvested
Stock
Options ($)
    Unvested
Restricted
Stock ($)
    Performance
Shares ($)
 

Keith D. Nosbusch

    3,304,291        1,823,920        4,128,880   

Theodore D. Crandall

    966,838        524,160        1,188,880   

Steven A. Eisenbrown

    949,126        528,640        1,184,400   

Douglas M. Hagerman

    770,353        411,040        939,680   

Robert A. Ruff

    966,838        534,240        1,206,800   

 

(3)

Amounts do not include perquisite value for Mr. Ruff’s international assignment. See the All Other Compensation Table for additional information.

 

(4)

Agreements do not include a provision that entitles the executives to receive tax gross-ups related to any excise tax imposed on change of control agreements.

 

(5)

Estimated value of outplacement services.

 

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The following table sets forth the treatment of equity-based awards upon termination of employment for the following reasons:

 

Reason

 

Options

 

  

 

Restricted Stock

 

  

 

Performance Shares

Voluntary — Other than retirement  

Vested — can be exercised until the earlier of (i) three months after last date on payroll or (ii) the date the option expires Unvested — forfeited

 

      Unearned shares forfeited       Unearned shares forfeited
Voluntary — Retirement  

If retirement occurs 12 months or more after grant date, unvested options continue to vest; otherwise all unvested options are forfeited. Vested options can be exercised until the earlier of (i) five years after retirement or (ii) the date the option expires.

 

      If retirement occurs 12 months or more after grant date and before the end of the restriction period, pro rata shares earned at retirement. If retirement occurs before 12 months after the grant date, all unearned shares forfeited      

If retirement occurs 12 months or more after grant date and before the end of the performance period, pro rata shares earned at the end of the performance period. If retirement occurs before 12 months after the grant date, all unearned shares forfeited

 

Involuntary — Cause  

Vested — forfeited

Unvested — forfeited

 

      Unearned shares forfeited       Unearned shares forfeited
Involuntary — Not for cause  

Vested — can be exercised until the earlier of (i) three months after last date on payroll or (ii) the date the option expires

 

Unvested — continue to vest during salary continuation period; if vesting occurs in that period, can be exercised until the earlier of (i) three months after last date on payroll or (ii) the date the option expires; remaining unvested options forfeited

 

      Unearned shares forfeited      

Unearned shares forfeited

Death  

All options vest immediately and can be exercised until the earlier of (i) three years after death or (ii) the date the option expires

 

      All restrictions lapse       Shares earned on a pro rata basis at the end of the performance period
Disability  

Vested — can be exercised until the earlier of (i) three months after the employee’s last date on payroll or (ii) the date the option expires

Unvested — continue to vest during salary continuation period; if vesting occurs in that period, can be exercised until the earlier of (i) three months after last date on payroll or (ii) the date the option expires; remaining unvested options forfeited

 

      If disability continues for more than six months, all restrictions lapse       If disability continues for more than six months, pro rata shares earned at the end of the performance period

 

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COMPENSATION COMMITTEE REPORT

The Compensation and Management Development Committee has reviewed and discussed with management the Compensation Discussion and Analysis prepared by management and contained in this proxy statement. Based on this review and discussion, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

Compensation and Management

Development Committee

William T. McCormick, Jr., Chair

Betty C. Alewine

Donald R. Parfet

David B. Speer

PROPOSAL TO APPROVE THE SELECTION

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has selected the firm of Deloitte & Touche, LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2012, subject to the approval of the shareowners. D&T and its predecessors have acted as our independent registered public accounting firm since 1934.

Before the Audit Committee selected D&T, it carefully considered the independence and qualifications of that firm, including their performance in prior years and their reputation for integrity and for competence in the fields of accounting and auditing. We expect that representatives of D&T will attend the Annual Meeting to answer appropriate questions and make a statement if they desire to do so.

 

 

Audit Fees

The following table sets forth the aggregate fees for services provided by D&T for the fiscal years ended September 30, 2011 and 2010 (in millions), all of which were approved by the Audit Committee:

 

     Year Ended
September 30,
 
     2011      2010  

Audit Fees

     

Integrated Audit of Consolidated Financial Statements and Internal Control over Financial Reporting

   $ 3.09       $ 3.20   

Statutory Audits

     2.06         1.95   

Audit-Related Fees*

     0.09         0.14   

Tax Fees

     

Compliance

             0.01   

All Other Fees**

     0.04         0.08   
  

 

 

    

 

 

 

Total

   $ 5.28       $ 5.38   
  

 

 

    

 

 

 

 

 

*

Audit-related services primarily relate to non-US employee benefit plan audits as well as to other compliance services.

 

**

Other fees include International Financial Reporting Standards (IFRS) diagnostic assessment services and a license for an accounting research tool.

The Audit Committee considered and determined that the non-audit services provided by D&T were compatible with maintaining the firm’s independence.

 

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Audit Committee Pre-Approval Policies and Procedures

The Audit Committee is responsible for appointing, compensating and overseeing the work performed by D&T and audit services performed by other independent public accounting firms. The Audit Committee pre-approves all audit (including audit-related) services provided by D&T and others and permitted non-audit services provided by D&T in accordance with its pre-approval policies and procedures.

The Audit Committee annually approves the scope and fee estimates for the year-end audit, statutory audits and employee benefit plan audits for the next fiscal year. With respect to other permitted services to be performed by our independent registered public accounting firm, the Audit Committee has adopted a policy pre-approving certain categories and specific types of audit and non-audit services that may be provided by our independent registered public accounting firm on a fiscal year basis, subject to individual and aggregate monetary limits. The policy requires the Corporation’s Controller or Chief Financial Officer to pre-approve the terms and conditions of any engagement under the policy. The Audit Committee must specifically approve any proposed engagement for an audit or non-audit service that does not meet the guidelines of the policy. The Audit Committee also authorized the Chair of the Committee to pre-approve any individual service not covered by the general pre-approval policy, with any such approval reported by the Chair at the next regularly scheduled meeting of the Committee. The Audit Committee annually reviews and approves the categories of pre-approved services and monetary limits under the pre-approval policy. The Corporation’s Controller reports to the Audit Committee regarding the aggregate fees charged by D&T and other public accounting firms compared to the pre-approved amounts, by category.

The Board of Directors recommends that you vote “FOR” the proposal to approve the selection of D&T as our independent registered public accounting firm, which is presented as item (b).

PROPOSAL TO APPROVE 2012 LONG-TERM INCENTIVES PLAN

A proposal will be presented at the meeting to approve our 2012 Long-Term Incentives Plan (the

2012 Plan), which was adopted by our Board of Directors on November 2, 2011, subject to approval by our shareowners. The complete text of the 2012 Plan is set forth in Appendix A to this proxy statement, and shareowners are urged to review it together with the following information about certain material features of the 2012 Plan, which is qualified by reference to Appendix A. The 2012 Plan would replace our 2008 Long-Term Incentives Plan (the 2008 Plan), which was previously approved by our shareowners.

WHY YOU SHOULD APPROVE THE

2012 PLAN

Equity compensation is an essential part of our compensation program to help us attract and retain talent to deliver the Company’s strategy and create shareowner value. We believe that a significant portion of an executive’s compensation should be directly linked to our performance and the creation of shareowner value. Consistent with this philosophy, a majority of total direct compensation for senior executives is in the form of long-term incentive awards. We currently grant equity awards under the 2008 Plan, which was initially approved by shareowners at the Company’s 2008 annual meeting. The 2008 Plan has shares remaining available for grant. However, at current stock prices, it is possible that there will not be enough shares under the 2008 Plan for the fiscal 2013 annual equity awards, which are expected to be granted December 2012. Our principal reason for adopting the 2012 Plan is to make additional shares of common stock available for issuance as long-term incentive plan awards. If the 2012 Plan is approved by our shareowners, no further awards will be made under the 2008 Plan. We believe that approval of the 2012 Plan is critical to retaining and further incentivizing our employees and to attracting future key employees. We believe it is important for our employees to have long-term performance incentives and to be aligned with shareowner interests.

No awards have been made under the 2012 Plan. As of December 12, 2011, there were outstanding options to purchase 6,186,940 shares, 261,104 shares of restricted stock and 302,600 performance shares under the 2008 Plan. Outstanding awards under the 2008 Plan will continue in accordance with the terms and conditions of those awards and the 2008 Plan. As of December 12, 2011, there were 3,898,348 shares

 

 

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remaining available for delivery pursuant to the 2008 Plan. If shareowners approve the 2012 Plan, no further grants will be made under the 2008 Plan.

As of December 12, 2011, there were outstanding options to purchase 2,807,034 shares and 2,968 shares of restricted stock under our 2000 Long-Term Incentives Plan, and options to purchase 37,625 shares under our 2003 Directors Stock Plan. Outstanding awards will continue in accordance with the terms and conditions of those awards and those plans. As of December 12, 2011, there were 291,597 shares remaining available for delivery pursuant to the 2003 Directors Stock Plan.

As of December 12, 2011, in the aggregate there were outstanding options to purchase 9,031,599 shares, with a per share weighted average exercise price of $55.11 and weighted average remaining term of 7.1 years, and 566,672 shares subject to full-value awards (consisting of 264,072 shares of restricted stock and 302,600 performance shares).

2012 Plan Has Provisions Designed to Protect Shareowners

The 2012 Plan authorizes the granting of equity-based compensation in the form of options, stock appreciation rights (SARs), restricted shares, restricted stock units, performance shares and performance units. The 2012 Plan has a number of features that are designed to protect shareowner interests. Some of these features are set forth below and are described more fully under the heading “Summary of the 2012 Plan.”

 

   

Administration.  The 2012 Plan will be administered by a committee composed entirely of independent directors.

 

   

Revised Method for Counting Full Value Shares.  The number of shares available for delivery under the 2012 Plan is 6.8 million. Under the 2012 Plan, for any award that is not a stock option or stock appreciation right, 2.2 shares of common stock will be counted against the number of shares available under the plan for every share of common stock issued under the award. For awards of stock options and stock appreciation rights, one share of common stock will be counted against the maximum number of shares of common stock available

   

under the plan for every share of common stock granted under the award. Since we regularly include restricted stock and performance shares in our LTIP awards, the effect of this method is likely to be that substantially less than 6.8 million actual shares will be awarded under the 2012 Plan.

 

   

No Liberal Recycling Provisions.  The 2012 Plan provides that only shares with respect to awards granted under the 2012 Plan, 2008 Plan and 2000 Plan that expire or are forfeited or cancelled, or shares that were covered by an award where the benefit is paid in cash instead of shares, will again be available for issuance under the 2012 Plan. Shares (i) delivered or withheld to pay the exercise price or withholding taxes or (ii) repurchased with option proceeds will not be added back to the aggregate plan limit. There will be no adjustment to the available shares upon the exercise or settlement of stock appreciation rights regardless of the number of shares actually issued or delivered in connection with the exercise or settlement.

 

   

Exercise Price.  The exercise price of options and stock appreciation rights must be greater than or equal to 100% of the fair market value on the grant date.

 

   

No Repricing.  Awards may not be repriced or exchanged for substituted awards.

 

   

Minimum Vesting.  Awards of options, stock appreciation rights, restricted stock and restricted stock units cannot vest faster than one-third per year over three years, and no payout of any performance shares can be made before the first anniversary of the award date, subject, in each case, in the event of death, disability, retirement or change of control.

 

   

No Dividends on Performance Shares.  The 2012 Plan prohibits the payment of dividends on performance shares.

 

   

Change of Control Definitions.  In general, a change of control will be deemed to have occurred if (i) a person or group acquires 30% or more of the Corporation’s then outstanding stock, subject to limited exceptions; (ii) the

 

 

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individuals who currently constitute the Board of Directors cease for any reason to constitute a majority of the Board, unless their replacements are approved as provided in the 2012 Plan; (iii) there is a consummation of a reorganization, merger, consolidation or similar corporate transaction, subject to limited exceptions; or (iv) the Corporation’s shareowners approve a complete liquidation or dissolution of the Corporation. There is a second trigger provision for awards granted to executive officers that are assumed or substituted in a change of control that would require termination of the executive officer’s employment for one of certain specified reasons within two years of the change of control to occur before their awards become vested following a change of control.

 

   

Shareowner Approval.  Shareowner approval is required for any amendments that accelerate exercisability of awards, change the eligibility

   

requirements, increase the number of available shares or materially increase benefits to participants.

Dilution

With approval of the 2012 Plan, the overall dilution of our equity award program would be approximately 10.5% of our fully diluted shares outstanding.

Burn Rate

With approval of the 2012 Plan, we anticipate that we will have enough shares for our annual equity grants to maintain a competitive equity program through fiscal 2015, with an annual burn rate of less than 1.2%, assuming our stock price remains at or above current levels. We calculate burn rate as the annual amount of equity granted (including any awards that are subsequently forfeited or cancelled) divided by the number of shares outstanding.

 

 

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of September 30, 2011 about our common stock that may be issued upon the exercise of options, warrants and rights granted to employees, consultants or directors under all of our existing equity compensation plans, including our 2008 Plan, 2000 Long-Term Incentives Plan and 2003 Directors Stock Plan.

 

Plan Category   

Number of Securities to

be Issued Upon

Exercise of

Outstanding Options,

Warrants and Rights

 

Weighted Average

Exercise Price of

Outstanding

Options, Warrants

and Rights

  

Number of Securities

Remaining Available for

Future Issuance Under

Equity Compensation

Plans (Excluding

Securities Reflected in

Column (a))

     (a)   (b)    (c)

Equity compensation plans approved by shareowners

       8,554,915 (1)     $ 51.46          5,310,691 (2)

Equity compensation plans not approved by shareowners

               n/a           

Total

       8,554,915       $ 51.46          5,310,691  

 

(1)

Represents outstanding options and shares issuable in payment of outstanding performance shares and restricted stock units under our 2000 Long-Term Incentives Plan, 2008 Plan and 2003 Directors Stock Plan.

 

(2)

Represents 5,008,822 and 301,869 shares available for future issuance under our 2008 Plan and our 2003 Directors Stock Plan, respectively.

 

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SUMMARY OF 2012 PLAN