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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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

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REGAL BELOIT CORPORATION

200 State Street
Beloit, Wisconsin 53511

Notice of 2016 Annual Meeting of Shareholders
To Be Held April 25, 2016

To the Shareholders of Regal Beloit Corporation:

You are hereby notified that the 2016 Annual Meeting of Shareholders of Regal Beloit Corporation will be held at the James L. Packard Learning Center located at our corporate headquarters, 200 State Street, Beloit, Wisconsin 53511, on Monday, April 25, 2016 at 9:00 a.m., Central Daylight Time, for the following purposes:

1.                                      To elect three directors for terms expiring at the 2017 Annual Meeting of Shareholders.

2.                                      To consider a shareholder advisory vote on the compensation of our named executive officers as disclosed in the accompanying proxy statement.

3.                                      To approve the Regal Beloit Corporation 2016 Incentive Compensation Plan.

4.                                      To ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2016.

5.                                      To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

The Board of Directors has fixed the close of business on March 2, 2016 as the record date for the determination of the shareholders entitled to notice of and to vote at the annual meeting.

We are furnishing our proxy materials to our shareholders over the Internet.  This process expedites the delivery of proxy materials, maintains convenient access to the proxy materials by our shareholders and provides clear instructions for receiving proxy materials and voting your shares.  It is also friendly to the environment.

On March 16, 2016, we mailed to our shareholders the Notice of Internet Availability of Proxy Materials.  That Notice contains instructions on how to access our 2016 Proxy Statement and 2015 Annual Report and how to vote online.  In addition, the Notice of Internet Availability of Proxy Materials contains instructions on how our shareholders can (i) receive a paper copy of the Proxy Statement and Annual Report, if they received only a Notice of Internet Availability of Proxy Materials this year, or (ii) elect to receive their Proxy Statement and Annual Report only over the Internet, if they received them by mail this year.

We hope that you will be able to attend the meeting in person, but if you are unable to do so, it is important that your shares are represented at the Annual Meeting. You may vote your shares over the Internet at the website identified in the Notice of Internet Availability of Proxy Materials or via the toll-free telephone number identified in that Notice. If you received a paper copy of the proxy card by mail, then you may sign and date the proxy card and return it by mail in the envelope provided. The Notice of Internet Availability of Proxy Materials contains instructions for use of all three methods of voting.  If, for any reason, you should subsequently change your plans, you may, of course, revoke your proxy at any time before it is actually voted.

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PROXY STATEMENT

This Proxy Statement relates to the solicitation by Regal Beloit Corporation (“we” or the “Company”), on behalf of its Board of Directors (the “Board”), of your proxy to vote your shares of the Company’s common stock at the 2016 annual meeting of shareholders and all adjournments or postponements thereof (the “Annual Meeting”).  We mailed our Notice of Internet Availability of Proxy Materials and we are making available this proxy statement on March 16, 2016.  We solicit proxies to give all shareholders of record an opportunity to vote on matters that will be presented at the Annual Meeting.  In this proxy statement, you will find information on these matters, which is provided to assist you in voting your shares.

COMMONLY ASKED QUESTIONS AND ANSWERS
ABOUT THE ANNUAL MEETING

Q:                                   What am I being asked to vote on?

A:                                   ·      The election of directors;

·                  An advisory vote on the compensation of our named executive officers as disclosed in this proxy statement;

·                  Approval of the Regal Beloit Corporation 2016 Incentive Compensation Plan; and

·                  Ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2016.

Q:                                   Who can vote?

A:                                   Holders of our common stock as of the close of business on the record date, March 2, 2016, may vote at the Annual Meeting, either in person or by proxy.  Each share of common stock is entitled to one vote.

Q:                                   How do I vote?

A:                                   On March 16, 2016, we mailed our Notice of Internet Availability of Proxy Materials, which includes instructions for accessing this proxy statement and our 2015 Annual Report, as well as instructions for our shareholders to vote over the Internet, via a toll-free telephone number or by mail by signing, dating and returning a paper proxy card.  You can vote in the following ways:

By Proxy—Before the Annual Meeting, you can give a proxy to vote your shares of common stock in one of the following ways:

·                  by telephone;

·                  by using the Internet; or

·                  by completing and signing a proxy card and mailing it in time to be received prior to the Annual Meeting if you request to receive a paper copy of a proxy card.

The telephone and Internet voting procedures are designed to confirm your identity, to allow you to give your voting instructions and to verify that your instructions have been properly recorded. If you wish to vote by telephone or Internet, please follow the instructions that are printed on the

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Notice of Internet Availability of Proxy Materials.

If you mail your properly completed and signed proxy card to us, or vote by telephone or the Internet, then your shares of common stock will be voted according to the choices that you specify. If you sign and mail your proxy card to us without making any choices, your proxy will be voted:

·                  FOR the election of all persons nominated by the Board for election as directors;

·                  FOR the approval of the compensation of our named executive officers;

·                  FOR the approval of the Regal Beloit Corporation 2016 Incentive Compensation Plan; and

·                  FOR the ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2016.

Other than the election of directors, approval of the compensation of our named executive officers, approval of the Regal Beloit Corporation 2016 Incentive Compensation Plan and the ratification of the selection of our independent registered public accounting firm, we are not currently aware of any other matters that will be brought before the Annual Meeting.  However, by giving your proxy, you appoint the persons named as proxies as your representatives at the Annual Meeting.  If a matter comes up for a vote at the Annual Meeting that is not included in the proxy materials, then the proxy holders will vote your shares in accordance with their best judgment.

In Person—You may come to the Annual Meeting and cast your vote there.  If your shares are held in the name of your broker, bank or other nominee and you wish to vote at the Annual Meeting, then your broker, bank or other nominee will provide you with instructions for voting your shares.

Q:                                   May I change or revoke my vote?

A:                                   You may change your vote or revoke your proxy at any time prior to your shares being voted by:

·                  notifying our Secretary in writing that you are revoking your proxy;

·                  giving another signed proxy that is dated after the date of the proxy that you wish to revoke;

·                  using the telephone or Internet voting procedures; or

·                  attending the Annual Meeting and voting in person (attendance at the Annual Meeting alone will not revoke your proxy).

Q:                                   Will my shares be voted if I do not provide my proxy?

A:                                   It depends on whether you hold your shares in your own name or in the name of a brokerage firm.  If you hold your shares directly in your name, then they will not be voted unless you provide a proxy or vote in person at the Annual Meeting.  Brokerage firms or other nominees generally have the authority to vote customers’ uninstructed shares on certain “routine” matters.  If your shares are held in the name of a brokerage firm, the brokerage firm has the discretionary authority to vote your shares in connection with the ratification of our independent

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registered public accounting firm if you do not timely provide your proxy because this matter is considered “routine” under the New York Stock Exchange (“NYSE”) listing standards.

However, if you have not provided directions to your broker, your broker will not be able to vote your shares with respect to the election of directors, the approval of the compensation of our named executive officers or the approval of the Regal Beloit Corporation 2016 Incentive Compensation Plan.  We strongly encourage you to submit your proxy card and exercise your right to vote as a shareholder.

Q:                                   What constitutes a quorum?

A:                                   As of the record date, March 2, 2016, 44,669,195 shares of our common stock were issued and outstanding and entitled to vote at the Annual Meeting.  To conduct the Annual Meeting, a majority of the shares entitled to vote must be present in person or by proxy. This is referred to as a “quorum.” If you submit a properly executed proxy card or vote by telephone or the Internet, then you will be considered present at the Annual Meeting for purposes of determining the presence of a quorum.  Abstentions and broker “non-votes” will be counted as present and entitled to vote for purposes of determining the presence of a quorum.  A broker “non-vote” occurs when a broker or other nominee who holds shares for another person has not received voting instructions from the owner of the shares and, under NYSE rules, does not have discretionary authority to vote on a proposal.

Q:                                   What vote is needed for these proposals to be adopted?

A:                                   Proposal 1—The affirmative vote of the holders of a majority of the shares of our common stock represented in person or by proxy at the Annual Meeting is required to elect each director (assuming a quorum is present).  Abstentions and broker “non-votes” will have the effect of votes against the election of director nominees.

Proposal 2—The affirmative vote of the holders of a majority of the shares of our common stock represented in person or by proxy at the Annual Meeting is required to approve the compensation of our named executive officers (assuming a quorum is present).  Because this vote is advisory, the results of the vote are not binding on our Board of Directors or our Compensation and Human Resources Committee.  However, if there is a significant vote against the compensation of our named executive officers, then our Board of Directors and our Compensation and Human Resources Committee will carefully evaluate whether any actions are necessary to address those concerns.  Abstentions and broker non-votes will have the effect of votes against this proposal.

Proposal 3— The affirmative vote of the holders of a majority of the shares of our common stock represented in person or by proxy at the Annual Meeting (assuming a quorum is present) is required to approve the Regal Beloit Corporation 2016 Incentive Compensation Plan.  Abstentions and broker “non-votes” will have the effect of votes against the Regal Beloit Corporation 2016 Incentive Compensation Plan.

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Proposal 4—The affirmative vote of the holders of a majority of the shares of our common stock represented and voted at the Annual Meeting (assuming a quorum is present) is required to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2016.  Abstentions will have the effect of votes against this proposal.

Q:                                   Who conducts the proxy solicitation and how much will it cost?

A:                                   We are requesting your proxy for the Annual Meeting and will pay all costs of soliciting shareholder proxies.  In addition to soliciting proxies by mail and through the Internet, we may request proxies personally and by telephone, fax or other means.  We can use our directors, officers and regular employees to request proxies.  These people do not receive additional compensation for these services. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket and clerical expenses for forwarding solicitation materials to beneficial owners of our common stock.

Q:                                   Are the Company’s proxy materials available on the Internet?

A:                                   Yes.  The Company’s proxy statement for the 2016 Annual Meeting of Shareholders and 2015 Annual Report to Shareholders are available at www.proxyvote.com.

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PROPOSAL 1:  ELECTION OF DIRECTORS

The Board is currently comprised of ten directors, divided into two classes of three members each and one class of four members, with the terms of one class of directors expiring each year.  The Board has nominated Christopher L. Doerr, Mark J. Gliebe, and Curtis W. Stoelting, each of whom is currently serving as a director, for election at the Annual Meeting to serve until the 2017 annual meeting of shareholders and until their successors are duly elected and qualified. All of our other directors are expected to serve on the Board until their respective terms expire as indicated below.

At our 2015 Annual Meeting of Shareholders, our shareholders approved an amendment and restatement of our Articles of Incorporation that resulted in our Board’s classified nature being phased-out over the next three years. Beginning with this Annual Meeting, directors will be elected and will hold office for terms as follows: (i) at this Annual Meeting, directors for whom this Annual Meeting is the annual meeting held in the third year following the year of their election (or such directors’ successors) will be elected to hold office for a term expiring at the 2017 Annual Meeting of Shareholders and until their successors have been elected and qualified, and the remaining directors will hold office for the term for which they were elected and until their successors have been elected and qualified, (ii) at the 2017 Annual Meeting of Shareholders, directors for whom such annual meeting is the Annual Meeting of Shareholders held in the third year following the year of their election and directors elected at this Annual Meeting (or such directors’ successors) will be elected to hold office for a term expiring at the 2018 Annual Meeting of Shareholders and until their successors have been elected and qualified, and the remaining directors will hold office for the term for which they were elected and until their successors have been elected and qualified, and (iii) at the 2018 Annual Meeting of Shareholders and each annual meeting thereafter, all directors will be elected to hold office for a term expiring at the next annual meeting and until their successors have been elected and qualified.

Unless shareholders otherwise specify, the shares represented by the proxies received will be voted in favor of the Board’s nominees for election as directors.  The Board has no reason to believe that any of the listed nominees will be unable or unwilling to serve as a director if elected.  However, in the event that any nominee should be unable or unwilling to serve, the shares represented by proxies received will be voted for another nominee selected by the Board.

Our Corporate Governance and Director Affairs Committee periodically reviews and recommends to the Board the qualities, skills and attributes desired in our directors to reflect the unique challenges facing, and business strategies of, our company.  The Corporate Governance and Director Affairs Committee reviews the qualities, skills and attributes of proposed nominees when it makes director nominee recommendations to the Board and compares them against the desired qualities, skills and attributes.  The Board reviews this information when considering proposed nominees.  Some of the challenges and strategies we face in our business, and the corresponding desired qualities, skills and attributes, are described in the following table.

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The following sets forth certain information, as of March 2, 2016, about each of the Board’s nominees for election at the Annual Meeting and each director whose term will continue after the Annual Meeting.  Except as otherwise noted, each nominee has engaged in the principal occupation or employment and has held the offices shown for more than the past five years.

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Nominees for Election at the Annual Meeting:

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THE BOARD RECOMMENDS THE FOREGOING NOMINEES FOR ELECTION AS DIRECTORS AND URGES EACH SHAREHOLDER TO VOTE “FOR” ALL NOMINEES.

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Directors Continuing in Office:

Terms Expiring at the 2017 Annual Meeting of Shareholders

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BOARD OF DIRECTORS

Corporate Governance and Independent Directors

The Board has in effect Corporate Governance Guidelines that, in conjunction with the Board committee charters, establish processes and procedures to help ensure effective and responsive governance by the Board.  The Corporate Governance Guidelines are available, free of charge, on our website at www.regalbeloit.com.  We are not including the information contained on or available through our website as a part of, or incorporating such information by reference into, this Proxy Statement.

The Corporate Governance Guidelines provide that a majority of the members of the Board must be independent directors under the listing standards of the NYSE.  The Board has also adopted certain categorical standards of director independence to assist it in making determinations of director independence and which are contained in the Corporate Governance Guidelines.  The categorical standards of director independence adopted by the Board are available on our website at www.regalbeloit.com.

Based on these standards, the Board has affirmatively determined by resolution that Messrs. Burt, Doerr, Fischer, Foate, Sachdev and Stoelting and Ms. Warner and Ms. Chaibi have no material relationship with the Company, and, therefore, each is independent in accordance with the NYSE listing standards and with the categorical standards of director independence adopted by the Board.  The Board will regularly review the continuing independence of the directors.

Code of Business Conduct and Ethics

The Board has adopted the Regal Beloit Corporation Code of Business Conduct and Ethics, which applies to our directors, officers and employees. The Code is available, free of charge, on our website at www.regalbeloit.com.

Board Leadership Structure

Our Board does not have a policy on whether or not the roles of CEO and Chairman should be separate.  Our Board reserves the right to vest the responsibilities of the CEO and Chairman in different individuals or in the same individual if in the Board’s judgment a combined CEO and Chairman position is in the best interest of our company.  In the circumstance where the responsibilities of the CEO and Chairman are vested in the same individual, or where the Chairman is not considered independent, the Board will designate a Presiding Director from among the independent directors to preside at non-employee director executive sessions.

Our Board believes that Mr. Gliebe, as Chairman of the Board, best serves the needs of the Board and our shareholders.  Our Board made this determination in part because it believes that Mr. Gliebe’s extensive experience and qualifications within our industries and in-depth knowledge of our markets and customer base allows him to provide strong leadership and act as a unified spokesperson on behalf of the Company.  Our Board also believes that having Mr. Gliebe serve as both our Chief Executive Officer and our Chairman of the Board will allow him to leverage the information gained from both roles to lead the Company most effectively.

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Presiding Director

To supplement the combined Chairman and CEO position, our Board created a Presiding Director role.  The position of the Presiding Director rotates periodically among the non-employee directors as determined by the Board upon the recommendation of the Corporate Governance and Director Affairs Committee.  Mr. Stoelting currently serves as the Presiding Director, and Mr. Sachdev will serve as Presiding Director commencing March 31, 2016.  The Presiding Director is an independent and empowered director who is appointed by the independent directors and who works closely with the Chairman.

In addition to serving as the principal liaison between the independent directors and the Chairman in matters relating to the Board as a whole, the primary responsibilities of the Presiding Director are as follows:

·                  Preside at all meetings of the Board at which the Chairman is not present, including any executive sessions of the independent directors, and establish agendas for such executive sessions in consultation with the other directors and the Chairman;

·                  Review and approve proposed Board meeting agendas;

·                  Review and approve Board meeting schedules to help assure that there is sufficient time for discussion of all agenda items;

·                  Have the authority to call meetings of the independent directors as appropriate;

·                  Participate, with the Chair of the Compensation and Human Resources Committee, in communicating to the CEO the results of the Board’s annual review of the CEO’s performance; and

·                  Be available, as deemed appropriate by the Board, for consultation and direct communication with shareholders.

Oversight of Risk Management

Our full Board is responsible for the oversight of our company’s operational and strategic risk management process. The Board believes that oversight of risk management belongs at the full Board level rather than with any one particular committee primarily because of the importance of understanding and mitigating risk to the overall success of the Company.  In furtherance of the Board’s risk management oversight goals, the Board oversees the work of a Risk and Compliance Committee comprised of senior management and key managers of certain of our company’s business units and functions around the world.  The Risk and Compliance Committee is charged with, among other things, identifying, assessing and developing a mitigation strategy for significant risks that could impact our ability to meet our objectives and execute our strategies.

The Risk and Compliance Committee identifies and clarifies significant risks that may impact our company and assesses those risks, resulting in the establishment of a plan response/mitigation strategy for significant risks.  The Risk and Compliance Committee delivers a summary of its activities and findings directly to our CEO, the Audit Committee, and our full Board.  The summary is also used by our

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management team as part of our disclosure controls and procedures to ensure that information regarding risks applicable to our company are appropriately disclosed in our public filings.

While our Board has determined to maintain responsibility for oversight of risk management, it relies on our Audit Committee to address significant financial risk exposures facing our company and the steps management has taken to monitor, control and report such exposures, with appropriate reporting of these risks to be made to the full Board.  Our Board also relies on our Compensation and Human Resources Committee to address significant risk exposures facing our company with respect to compensation programs and incentives, also with appropriate reporting of these risks to be made to the full Board.  Our Board’s role in our company’s risk oversight has not affected our leadership structure.

Executive Sessions

The Board will have at least four regularly scheduled meetings per year at which the non-employee directors will meet in executive session without members of our management being present, and at least one regularly scheduled meeting per year at which the independent directors will meet in executive session without members of management or other directors present.  The non-employee directors may also meet without management present at such other times as they determine appropriate.  Members of the Company’s senior executive management who are not members of the Board will participate in Board meetings to present information, make recommendations, and be available for direct interaction with members of the Board.

Communications with the Board

Shareholders and other interested parties may communicate with the full Board, the Chairman of the Board, non-management directors as a group or individual directors, including the Presiding Director, by delivering a written communication to Regal Beloit Corporation, Attention: Board of Directors, 200 State Street, Beloit, Wisconsin 53511, or by sending an e-mail communication to board.inquiry@regalbeloit.com.  The communications should be addressed to the specific director or directors whom the shareholder or interested party wishes to contact and should specify the subject matter of the communication. The Company’s Secretary will deliver appropriate communication directly to the director or directors to whom it is addressed.  The Secretary will generally not forward to the director or directors communication that he determines to be primarily commercial in nature or concerns our day-to-day business activities, or that requests general information about the Company.

Concerns about accounting or auditing matters or possible violations of the Regal Beloit Corporation Code of Business Conduct and Ethics should be reported pursuant to the procedures outlined in the Code of Business Conduct and Ethics, which is available on our website at www.regalbeloit.com.

Committees

We have standing Audit, Compensation and Human Resources, and Corporate Governance and Director Affairs Committees of the Board.  Each committee is appointed by and reports to the Board.  The Board has adopted, and may amend from time to time, a written charter for each of the Audit, Compensation and Human Resources, and Corporate Governance and Director Affairs Committees.  We make copies of each of these charters available free of charge on our website at www.regalbeloit.com.

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Audit Committee.  The Audit Committee consists of Messrs. Fischer (Chairperson) and Stoelting and Ms. Warner.  Each of the members of the committee is independent as defined by the NYSE listing standards and the rules of the Securities and Exchange Commission (the “SEC”).  The Board has determined that each of Messrs. Fischer and Stoelting qualifies as an “audit committee financial expert” as defined in SEC rules and meets the expertise requirements for audit committee members under the NYSE listing standards.  The principal functions performed by the Audit Committee, which met six times in 2015, are to assist the Board in monitoring the overall quality of the Company’s financial statements and financial reporting, our independent registered public accounting firm’s qualifications and independence, our accounting controls and policies, the performance of our internal audit function and independent registered public accounting firm, and our compliance with legal and regulatory requirements. The Audit Committee has the sole authority to appoint, retain, compensate and terminate our independent registered public accounting firm and to approve the compensation paid to our independent registered public accounting firm.  The Audit Committee has presented to shareholders for ratification at the Annual Meeting its selection of our independent registered public accounting firm for 2016.  See “Proposal 4: Ratification of Deloitte & Touche LLP as Our Independent Registered Public Accounting Firm for 2016.”

One member of the Audit Committee, Mr. Fischer, serves on the audit committees of three other public companies.  On January 23, 2016, the Board of Directors considered what it believes to be all of the relevant facts and responsibilities relating to such simultaneous service by Mr. Fischer and affirmatively determined that the simultaneous service would not impair Mr. Fischer’s ability to serve effectively on our Audit Committee.

Compensation and Human Resources Committee.  The Compensation and Human Resources Committee consists of Messrs. Doerr (Chairperson), Foate and Burt.  Each of the members of the Compensation and Human Resources Committee is independent as defined by the NYSE listing standards.  The principal functions of the Compensation and Human Resources Committee, which met seven times in 2015, are to help develop our overall compensation philosophy; administer our incentive compensation plans (including our equity incentive plans); determine and approve the compensation of the Chief Executive Officer and the other principal corporate officers; review and monitor succession and leadership development planning; and review, formulate, recommend and administer short- and long-range compensation programs for the principal corporate officers and key employees.  A more complete description of our Compensation and Human Resources Committee’s practices can be found in the Compensation Discussion and Analysis section of this Proxy Statement.  The Compensation and Human Resources Committee from time to time uses independent compensation consultants to assist the Committee in the performance of its responsibilities.  As part of its evaluation of potential compensation consultants, the Committee considers all factors relevant to the consultant’s independence from management and potential conflicts of interest in accordance with applicable SEC rules and NYSE listing standards.  After selecting an independent compensation consultant, the Committee periodically meets with that consultant throughout the year at such times as the Committee deems appropriate, and receives reports and advice from the consultant on matters of executive compensation.  In 2015, the Committee selected Willis Towers Watson PLC (“Towers Watson”) to serve as its independent compensation consultant.  Towers Watson does not perform any other services for us or our named executive officers other than the services provided at the direction of the Committee.

Corporate Governance and Director Affairs Committee.  The Corporate Governance and Director Affairs Committee consists of Messrs. Sachdev (Chairperson) and Burt and Ms. Chaibi.  Each of the members of the Corporate Governance and Director Affairs Committee is independent as defined by the

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NYSE listing standards.  The principal functions of the Corporate Governance and Director Affairs Committee, which met four times in 2015, are to develop and recommend to the Board a set of corporate governance principles applicable to our company, including matters of Board organization, membership, compensation, independence and function, and committee structure and membership; take a leadership role in shaping our corporate governance; identify directors qualified to serve on the committees established by the Board; and to recommend to the Board the members and the chairperson for each committee to be filled by the Board. This Committee also serves as the nominating committee of the Board and is responsible for identifying individuals qualified to become directors (consistent with the criteria approved by the Board) and to recommend candidates for all directorships to be filled by the Board or by our shareholders.

Nominations of Directors

The Corporate Governance and Director Affairs Committee will consider persons recommended by shareholders to become nominees for election as directors in accordance with the criteria set forth in the Corporate Governance Guidelines under the heading “The Directors-Qualifications.”  The Corporate Governance and Director Affairs Committee will only review recommendations for director nominees from any shareholder or group of shareholders beneficially owning in the aggregate at least 5% of the issued and outstanding shares of our common stock for at least one year as of the date that the recommendation is made.  Recommendations with respect to the 2017 annual meeting of shareholders must be submitted between January 5, 2017 and January 30, 2017 for the recommendation to be considered by the Corporate Governance and Director Affairs Committee.

In identifying and evaluating nominees for director, the Corporate Governance and Director Affairs Committee believes that all directors should be financially literate and must be committed to understanding the Company and its industry, and must also possess the highest personal and professional ethics, integrity and values, and commitment to representing the long-term interest of the shareholders.  Directors must also possess a diverse set of skills and experience with a background in areas that are relevant to our activities. Directors should also be inquisitive and have an objective perspective, a practical wisdom and mature judgment. Directors must be willing and able to devote whatever time is necessary to carry out their duties and responsibilities effectively. Directors will not be nominated unless they are willing to serve for an extended period of time.

While the Corporate Governance and Director Affairs Committee does not have a formal policy relating specifically to the consideration of diversity in its process to select and evaluate director nominees, the Committee does consider diversity of viewpoint, background, industry knowledge and perspectives, as well as ethnic and gender diversity, as part of its overall evaluation of candidates for director nominees.  Specifically, our criteria for director nominees, included as Appendix A to our Corporate Governance Guidelines, provide that directors should be selected so that our Board represents diverse backgrounds and perspectives.

For a timely recommendation submitted by a shareholder to be considered by the Corporate Governance and Director Affairs Committee, the candidate recommended by a shareholder must be “independent” as defined in the NYSE independence standards and the SEC regulations, and meet the minimum expectations for a director set forth in the Company’s Corporate Governance Guidelines.  The Corporate Governance and Director Affairs Committee will have sole discretion whether to nominate an individual recommended by a shareholder. As to any candidate identified by the Corporate Governance and Director Affairs Committee to become a nominee, the candidate must possess the requisite

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qualifications, although the Corporate Governance and Director Affairs Committee need not require such nominee to be independent. Nevertheless, we strive to have all directors, other than those directors who are current or former members of our management, be independent as defined by the NYSE independence standards and the SEC regulations.

Policies and Procedures Regarding Related Person Transactions

Our Board of Directors has adopted written policies and procedures regarding related person transactions.  For purposes of these policies and procedures:

·                  a “related person” means any of our directors, executive officers, nominees for director or greater than 5% shareholder, and any of their immediate family members, as well as any entity in which any of these persons is employed or is a partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest; and

·                  a “related person transaction” generally is a transaction in which we were or are to be a participant and the amount involved exceeds $120,000, and in which any related person had or will have a direct or indirect interest.

The related person, the director, executive officer, nominee or beneficial owner who is an immediate family member of a related person, or a business unit or function/department leader of the Company responsible for a proposed related person transaction must notify our General Counsel of certain information relating to proposed related person transactions.  If our General Counsel determines that a proposed transaction is a related person transaction subject to the policy, then he will submit the transaction to the Corporate Governance and Director Affairs Committee for consideration at the next committee meeting or, if expedited consideration is required, to the committee chairperson.  The committee or chairperson, as applicable, will consider all of the relevant facts and circumstances available regarding the proposed related person transaction and will approve only those related person transactions that are in, or are not inconsistent with, the best interests of our company and our shareholders.  The chairperson is required to report to the committee at the next committee meeting any approval granted under the policy.

The policy also provides for ongoing review by the General Counsel of any amounts paid or payable to, or received or receivable from, any related person.  Additionally, at least annually, the Corporate Governance and Director Affairs Committee is required to review any previously approved or ratified related person transactions that remain ongoing and have a remaining term of more than six months or remaining amounts payable to or receivable from us of more than $60,000.  Based on all relevant facts and circumstances, the committee will determine if it is in the best interests of our company and our shareholders to continue, modify or terminate the related person transaction.

If any of our Chief Executive Officer, Chief Financial Officer or General Counsel becomes aware of a pending or ongoing related person transaction that has not been previously approved or ratified under the policy, then the transaction must be disclosed to the Corporate Governance and Director Affairs Committee or its chairperson.  The committee or the chairperson must then determine whether to ratify, amend or terminate the related person transaction, or take any other appropriate action.  If the related person transaction is complete, then the committee or its chairperson will evaluate the transaction to determine if rescission of the transaction and/or any disciplinary action is appropriate.

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In 2015, there were no proposed, pending or ongoing related person transactions subject to review by the Corporate Governance and Director Affairs Committee under the policy.

Meetings and Attendance

The Board held four quarterly meetings in 2015.  Each director attended at least 75% of the aggregate of (a) the total number of meetings of the Board and (b) the total number of meetings held by all committees of the Board on which the director served during 2015, in each case during the period in which the director was serving on the Board or the applicable committee.

Directors are expected to attend our annual meeting of shareholders each year.  All of our directors then serving on the Board attended the 2015 annual meeting in person.

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STOCK OWNERSHIP

Management

The following table sets forth information, as of March 2, 2016, regarding beneficial ownership of our common stock by each director and nominee, each of our current named executive officers as set forth in the Summary Compensation Table, and all of the directors and current executive officers as a group.  As of March 2, 2016, no director or executive officer beneficially owned one percent or more of our common stock.  On that date, the directors and executive officers as a group beneficially owned 2.0% of our common stock.  Except as otherwise indicated in the footnotes, all of the persons listed below have sole voting and investment power over the shares of our common stock identified as beneficially owned.

(1)                                 Includes shares subject to currently exercisable rights to acquire common stock and options exercisable within 60 days of March 2, 2016 as follows:  Mr. Colvin, 62,770 shares; Mr. Gliebe, 271,800 shares; Mr. Hinrichs, 32,850 shares; Mr. Schlemmer, 24,800 shares; Mr. Underwood 24,800 shares; and all directors and executive officers as a group, 487,024 shares.

(2)                                 The amount shown for Mr. Knueppel includes 12,522 shares that are held in a non-Company sponsored individual retirement account. The amount shown for Mr. Knueppel also includes 192,055 shares held in a trust account.

(3)                                 The amount shown for Mr. Stoelting includes 9,202 shares held in the Curtis W. Stoelting 1994 Revocable Trust over which Mr. Stoelting retains sole voting and investment power during his lifetime and 805 shares held by Mr. Stoelting’s children, over which he retains investment power.

(4)                                 Amounts shown for Messrs. Colvin, Gliebe and Schlemmer include 1,318 shares, 610 shares and 898 shares, respectively, held in trust under the Company’s 401(k) plans as of December 31, 2015.

(5)                                 This column includes shares of restricted stock or restricted stock units that are subject to forfeiture until they vest on the third anniversary of the date of grant.

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Other Beneficial Owners

The following table sets forth information, as of December 31, 2015, regarding beneficial ownership by the only persons known to us to own more than 5% of our outstanding common stock.  The beneficial ownership information set forth below has been reported on filings made on Schedule 13G with the SEC by the beneficial owners.

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COMPENSATION DISCUSSION AND ANALYSIS

Compensation Philosophy

What is your compensation philosophy?

Our overall compensation philosophy can be summarized as follows:

·                  In order to attract and retain talented executives, we believe we should offer overall compensation levels that are competitive in the marketplace.  As a result, we seek to set compensation levels so that our named executive officers (whom we call our “NEOs”) can earn total compensation at approximately the median level compared to similarly situated executives in our peer group.  We consider compensation within a 15% range above or below the fiftieth (50th) percentile of peer group data to be at approximately the “median” level.

·                  The compensation of our NEOs should be structured so that their interests are aligned with the long-term interests of our shareholders.  We have a “pay-for-performance” philosophy, meaning that we will pay higher compensation to the NEOs if the performance of the company delivers incremental value to the shareholders.

·                  To further align our NEOs’ interests with the interests of our shareholders, and to reinforce our pay-for-performance philosophy, we believe our NEOs should have the opportunity to earn above-median total compensation if the company performs well, and should earn below-median total compensation if it does not.

We believe this to be a conservative approach to executive compensation.

Do you consider the results of the shareholders’ “say on pay” vote in your philosophy and in determining compensation?

Our shareholders cast a non-binding vote on our NEOs’ compensation annually (the “say on pay” vote).  Each year we scrutinize the results of that vote and consider other shareholder inputs to determine whether our shareholders believe we need to change our compensation philosophy or practices.  Most recently, in May 2015, our shareholders supported our NEOs’ compensation with more than 90% of votes cast in favor.  Consistent with this strong vote of shareholder approval, we have not undertaken any material changes to our executive compensation philosophy or programs in response to the outcome of the vote.  However, as described below under “The Elements of Total Compensation — Annual Cash Incentives — What changes to the annual cash incentive awards have been made for fiscal 2016?,” we have modified our annual incentive compensation program for 2016.

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What compensation policies and practices reflect your compensation philosophy?

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Did the NEOs’ compensation in 2015 align with corporate performance and the creation of shareholder value?

We believe our executive compensation in fiscal 2015 aligned well with the objectives of our compensation philosophy and with our corporate performance.  Our company achieved revenues of $3.5 billion, the highest in our company’s history, and adjusted earnings per share of $5.33, an increase of 24% compared to fiscal 2014.  In addition, the company achieved the two primary goals it set out at the beginning of the year:  a successful integration of the recently acquired Power Transmission Solutions (“PTS”) business and significant progress in improving operating margins.  We paid our 222nd consecutive quarterly dividend and increased the dividend 5% in fiscal 2015.  Further, we repurchased 180,000 shares of our common stock in fiscal 2015, offsetting the dilutive impact of management equity compensation for the year.

These operating results led our Committee to approve annual cash incentives under our shareholder-approved Shareholder Value Added (“SVA”) Plan, which we refer to as our SVA Cash Incentive Plan, at 67% of target for fiscal 2015 for our NEOs, compared to zero in fiscal 2014 and 35% in fiscal 2013.  The Committee’s determination of the annual cash incentives is described further below under “What were the NEOs’ target cash incentive amounts for 2015 and how much did they earn?”

We believe our compensation of our NEOs aligns well with our performance, but we also believe that this alignment is not always reflected in the Summary Compensation Table in the same way we view the alignment for our internal purposes.  This is because the Summary Compensation Table values are required by Securities and Exchange Commission rules to include the full grant date fair value of equity awards in the year the awards are granted.  The grant date fair value is an accounting value that projects the potential value of awards based on assumptions about, among other things, certain future events.  The grant date fair value is different from the economic value of the awards to our NEOs, which may be lower or higher than the grant date fair value depending on the price of our common stock.  For this reason, we are including in this proxy statement, as a supplement to the required Summary Compensation Table, a comparison of our NEOs’ realizable pay for 2015 with their total compensation as shown in the Summary Compensation Table.

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The realizable pay disclosure in the table above is the same as the compensation shown in the Summary Compensation Table except that it values equity-based compensation based on the price of our common stock at fiscal year end and, in the case of PSUs, the relevant performance trend at fiscal year end.  Restricted stock units (“RSUs”) are valued as the product of the number of shares granted to the officer during the year multiplied by the year-end stock price, assuming for purposes of this disclosure that the grants were vested.  Stock appreciation rights (“SARs”) are valued as the product of the number of rights granted to the officer during the year multiplied by the excess, if any, of the year-end stock price over the grant price of the rights, assuming for purposes of this disclosure that the grants were vested.  Performance share units with a performance metric of relative total shareholder return (“TSR PSUs”) are valued using 126% of the target number of shares under the grants made during the year (which is approximately the number of shares that would vest if our total relative total shareholder return for the entire applicable performance period is the same as it was for 2015), multiplied by the year-end stock price.  Performance share units with a performance metric of adjusted operating profit (“EBIT”) rate improvement are valued using 100% of the target number of shares under the grant made during the year (which is approximately the number of shares that would vest if our EBIT rate improvement for the entire applicable performance period is the same as it was for 2015).

Since you have a pay-for-performance compensation philosophy, what percentage of your NEOs’ target compensation is “at risk”?

To focus on both our short and long-term success, our NEOs’ target compensation includes a significant portion—more than 66%, on average—that is “at risk” because the value of such compensation is determined based on the achievement of specified results or subject to forfeiture.  This “at risk” compensation includes compensation elements intended to reward the achievement of both short- and long-term financial goals.  If such goals are not achieved, then performance-related compensation will decrease.  If goals are exceeded, then performance-related compensation will increase.

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Payments under our SVA Cash Incentive Plan are “at risk” because the payments are dependent on achievement of one-year performance goals.  In addition, compensation paid in the form of equity awards, such as RSUs, SARs and PSUs, instead of cash is at-risk because its value varies with changes in the stock price.  By creating a total compensation package where a considerable percentage is paid in equity awards that are subject to vesting over multiple years or dependent on achieving multi-year performance goals, our executive officers have a significant stake in the long-term success of the Company and gain financially along with our shareholders.

As shown in the following charts, in fiscal 2015, 71% of the CEO’s target compensation and, on average, 64% of the other NEOs’ target compensation was at-risk.  For purposes of this disclosure, target compensation includes base salary, target annual incentive awards, grant date fair value of equity awards, change in pension value and all other compensation.

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Setting Executive Compensation

What is the role of the Board in setting NEOs’ compensation?

The Board’s primary roles in setting our executive compensation are:

·                  to annually review and consider our compensation philosophy;

·                  to appoint the members of the Committee; and

·                  to review and approve certain recommendations of the Committee relating to compensation.

The Committee consists entirely of independent directors who are “outside directors” for purposes of Section 162(m) of the Internal Revenue Code and “non-employee directors” for purposes of the Securities Exchange Act of 1934.  The current members of the Committee are Messrs. Doerr (Chairman), Burt and Foate.

What is the role of the Committee in setting NEOs’ compensation?

The Committee is responsible for determining the components of our executive compensation program, consistent with the compensation philosophy determined by our Board, and the executive compensation packages offered to our NEOs.  The Committee determines executive salaries, administers our SVA Cash Incentive Plan, administers our long-term equity incentive plans and makes awards under the plans.

The Committee reviews data from market surveys and proxy statements from our established peer group and retains an independent compensation consultant to assess our competitive position with respect to total executive compensation.

The Committee takes various factors into account in setting compensation levels and does not use a formulaic approach, but generally seeks to closely align target total direct compensation (i.e., the sum of base salary, target annual cash incentive opportunity, and target long-term incentives) with the peer group and survey median.

What is the role of the CEO in setting NEOs’ compensation?

In its decision-making process, the Committee receives and considers the recommendations of our CEO with respect to compensation to be paid to our executive officers other than himself.  Our CEO makes no recommendation with respect to his own compensation.

Does the Committee use an independent compensation consultant to help in setting NEOs’ compensation?

Yes.  The Committee periodically solicits proposals from independent compensation consultants to assist the Committee in the performance of its responsibilities.  As part of its evaluation of potential compensation consultants, the Committee considers all factors relevant to the consultant’s independence from management and potential conflicts of interest in accordance with applicable SEC rules and NYSE listing standards.  After selecting an independent compensation consultant, the

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Committee periodically meets with that consultant throughout the year at such times as the Committee deems appropriate, and receives reports and advice from the consultant on matters of executive compensation.  Our CEO has access to the independent compensation consultant only at the direction of the Committee.

Towers Watson served as the Committee’s independent compensation consultant for 2015.  In July 2015, the Committee reviewed the independence of Towers Watson and the individual representatives of Towers Watson who served as the Committee’ consultants, including considering factors contained in applicable SEC rules and NYSE listing standards.

The Committee concluded, based on the evaluation described in the preceding paragraph, that Towers Watson was independent and that no conflict of interest was raised by the services performed by Towers Watson.  Towers Watson did not perform any services for our company other than the services provided at the direction of the Committee.

How did the compensation consultant help the Committee in setting NEOs’ compensation for 2015?

In setting compensation for 2015, the Committee directed Towers Watson to assemble compensation data for our NEOs and compare the data against aggregated proxy data and general industry survey data for persons holding similarly situated positions in our peer group.  The Committee approved an updated peer group for use in setting compensation for 2015 to reflect the significantly increased size of our company following the acquisition of Emerson Electric Co.’s Power Transmission Solutions business.  Absent such material changes in our company, the Committee’s policy is generally to review the composition of the peer group every three years for potential changes in light of acquisitions, changes in our size, or other factors it deems appropriate.  Prior to the updates for 2015, the Committee had last updated our peer group in late 2014.  For the 2015 peer group, the Committee selected companies that it believed to be comparable to our Company by generally using the following criteria:

·                  Comparable revenue (target companies with annual revenues ranging from approximately 0.5 to 2.0 times our annual revenues and with an overall median revenue that approximates ours);

·                  Compete in an industry similar to ours and/or have the level of complexity and business model similar to ours; and

·                  Contains companies that we compete with for executive talent.

The Committee expects to review the peer group in 2018 unless there are substantial changes to the Company that would merit an earlier review.

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For 2015, the 20 companies in our peer group for purposes of NEO benchmarking were:

Towers Watson benchmarked our executive compensation opportunities using (i) the above referenced peer group as the primary benchmark for our CEO, Chief Financial Officer and General Counsel positions and (ii) general industry data from Towers Watson’s Executive Compensation Survey as the primary benchmark for our Chief Operating Officer and Vice President, Corporate Human Resources positions.

In reviewing and analyzing these data, Towers Watson considered information for each NEO position with respect to the following elements of compensation:

·                  Base salary;

·                  Target SVA annual cash incentive;

·                  Target total cash compensation (salary and actual annual cash incentive);

·                  Grant-date value of annual long-term incentives; and

·                  Target total direct compensation (sum of target cash and long-term incentives).

In keeping with the Committee approved methodology, Towers Watson analyzed each element of target total direct compensation for our NEOs compared to the market median from the two different data sources.  Towers Watson reported on the methodology that it used in its analysis, provided a summary of its findings, and its observations on our programs relative to the data and market trends in executive compensation.  In connection with this review, Towers Watson also analyzed our annual share utilization rate and dilution relative to market practice.

The Committee did not review peer group data relating to supplemental benefits and perquisites in 2015.  The Committee’s policy is to review such data every three years and it last did so in 2013.

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The Elements of Total Compensation

We achieve our executive compensation objectives through the following ongoing programs.  All of our NEOs participate in these programs.

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Base Salaries

How do you determine base salaries, and what were the NEOs’ base salaries for 2015?

We determine base salaries for our executives based upon job responsibilities, level of experience, individual performance and expectations with respect to contributions to our future performance as well as comparisons to the salaries of executives in similar positions as compared to our peer group.  In April 2015, the Committee increased the base salaries of our NEOs in accordance with the factors identified in the preceding paragraph.  Effective as of April 1, 2015, the base salaries of our NEOs were as follows:

The Committee compared these adjusted base salary levels to the salary levels of the executive officers in our peer group based on proxy statement data as well as general industry data from Towers Watson’s Executive Compensation Database.  Compared to the median base salaries of similarly situated executive officers in the data reviewed by the Committee, Mr. Gliebe’s salary for 2015 placed him 6% below the median, and the salaries of Messrs. Hinrichs, Schlemmer, Underwood and Colvin for 2015 placed them 3% below, at the median, 2% below and at the median, respectively.  The base salary levels set by the Committee did not affect decisions regarding other compensation elements.

Annual Cash Incentives

Do you provide annual cash incentive awards?  If so, how are they structured?

In fiscal 2015, as in prior years, we provided annual cash incentive awards through our SVA Cash Incentive Plan.  “SVA” is a calculation that attempts to approximate the value executives add to our company above our cost of capital.  SVA is calculated by subtracting a charge for the average net capital employed by us during a fiscal year from the net operating profit after tax that we earn during that same year.  The cost of capital we use for this purpose is our weighted average cost of capital, which is determined based on our cost of equity and our after-tax cost of debt.  Pursuant to the terms of the SVA Cash Incentive Plan, all calculations of financial results for purposes of SVA exclude the impact of new acquisitions for the first 12 months following the closing of the acquisition.  We chose SVA as the basis for annual cash incentive awards in 2015 because we believed it tied directly, both theoretically and empirically, to the creation of shareholder value.

As described in more detail below under “What changes to the annual cash incentive awards have been made for fiscal 2016?,” for fiscal 2016 we modified the structure of our annual cash incentive awards.

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How does SVA work?

In early fiscal 2015, the Committee established an SVA target (the “Target SVA”) for the year.  That target was determined pursuant to a formula described below.  Our executives earned annual cash incentives based on a comparison of the actual SVA amount achieved at the end of the year (the “Actual SVA”) compared to the Target SVA.  If Actual SVA for the year was 50% or less of Target SVA, then our NEOs would receive no cash incentive for the year.  If Actual SVA equaled Target SVA, then our NEOs would receive the target cash incentive for the year.  If Actual SVA equaled 150% or more of Target SVA, then our NEOs would earn double (or 200% of) the target cash incentive for the year.  Actual SVA amounts in between 50% and 150% of Target SVA would result in pro-rated cash incentives.  Annual cash incentive amounts earned above 100% of the target amount would be paid in installments, with one-third of the above-target amount being paid to the NEO in cash after the end of each of the following three years, as long as his or her employment with us had not been voluntarily terminated (other than upon retirement) or terminated for cause.  We do not credit participants with interest on amounts subject to payment in installments.

Expressed as a table:

How do you determine the Target SVA, and what was it for 2015?

The Target SVA for any given year is set by formula.  The formula is as follows:

To encourage improved performance, the Committee establishes an expected “improvement factor” as reflected in the formula above.  To determine the improvement factor in any given year, the Committee uses a formula established in 2010 with the help of Stern Stewart, an independent compensation consultant, and updated in 2012.  Using that formula for 2015, the improvement factor would have been $6.2 million; however, the Committee increased the improvement factor for 2015 to take into account the effect of the reduction in goodwill on the Company’s balance sheet that resulted from a non-cash goodwill impairment charge the Company recorded in 2014.  The Committee concluded that the reduction in the capital base would, regardless of the Company’s financial performance in 2015, result in the addition of approximately $12.5 million to the total SVA amount in 2015.  To offset the positive impact of this increase on total SVA, therefore, the Committee increased the improvement factor for 2015 by an additional $12.5 million, resulting in an improvement factor of $18.7 million for 2015.

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So, for 2015, the Target SVA was $68.7 million, determined as follows:

What were the NEOs’ target cash incentive amounts for 2015 and how much did they earn?

For each NEO, the target cash incentive amount is based on a percentage of the base salary paid to him or her.  The Committee, in consultation with Towers Watson and our CEO (other than with respect to his own compensation), set annual cash incentive targets under our SVA Cash Incentive Plan near the median level with respect to each respective position held by our NEOs relative to our peer group.  As a result, our NEOs were given the opportunity to earn above median annual cash incentive awards for generating improvements in our SVA while at the same time facing below median awards (or no awards at all) for failing to meet that objective.  For 2015, the target cash incentive amounts for each of our NEOs were as follows:

In the fourth quarter of fiscal 2015, we recorded a goodwill impairment charge of $58.1 million, net of tax, and recognized a loss of $12.8 million related to the wind down of our operations in Venezuela.  The Committee considered whether to include the impairment charge or the loss on Venezuelan assets in the SVA Cash Incentive Plan calculation of net operating profit for fiscal 2015.  In that context, it considered that excluding the charges would yield payouts of approximately 89.1% of target, and including the charges would result in negative Actual SVA and therefore payout amounts would be zero.  Following this analysis, the Committee determined to exclude the impairment charge and the loss on Venezuelan assets from the calculation of net operating profit for fiscal 2015.  The Committee felt this was the appropriate treatment to aid in retention of key executives and to avoid what it believed would be an unwarranted elimination of SVA Cash Incentive Plan payouts for 2015.  The Committee felt such an elimination would be unwarranted since (i) the impairment charge was non-cash and would not negatively affect our future cash flows; (ii) the loss on assets held in Venezuela resulted primarily from worsening political and economic conditions in Venezuela that are outside of the control of management, and (iii) in its view management achieved the two key goals that is established for 2015 including a significant (150 basis point) improvement in adjusted operating margin rate and a successful integration of the recently acquired PTS business.

Giving effect to the exclusion of the impairment charge and loss on Venezuelan assets, we achieved actual SVA of $65.0 million, or approximately 89.1% of the target annual cash incentive.  The Committee believed that management should nevertheless be held accountable for the impairment and

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loss in Venezuela, and as a result determined that their SVA Cash Incentive Plan bonus payouts for fiscal 2015 should be substantially reduced from the otherwise achieved 89.1% of target.  As a result, the Committee determined to reduce the fiscal 2015 payouts to the NEOs to a level of approximately 66.8% of the target annual cash incentive, rounded up to the nearest ten thousand dollars.  As a result, Messrs. Gliebe, Hinrichs, Schlemmer, Underwood and Colvin were paid annual cash incentives under the SVA Cash Incentive Plan of $740,000, $250,000, $300,000, $210,000 and $130,000, respectively

The target cash incentive levels set by the Committee did not affect decisions regarding other compensation elements.

What changes to the annual cash incentive awards have been made for fiscal 2016?

For fiscal 2016, we modified the structure of our annual cash incentive awards compared to prior years.  Instead of using an SVA-based performance goal, we will base our annual cash incentive awards for fiscal 2016 on performance goals relating to our sales, earnings before interest and taxes (EBIT) and working capital.

The Committee made this change after conducting a review of the annual cash incentive programs of our peer companies and available alternatives to an SVA-based plan. The Committee considered the ongoing complexity and cost of administering the SVA-based plan given the increasing size and scope of the Company. The Committee’s review indicated that only a small number of our peers use an annual incentive program similar to our SVA-based plan and that the majority of our peers used two or more metrics, including cash flow, operating income, earnings per share or revenue.  In addition, the Committee believed an approach other than SVA could help to drive fundamental metrics consistent with delivering shareholder value.  In light of these considerations, the Committee decided to restructure our annual cash incentive awards for fiscal 2016 to be based on goals relating to our sales and EBIT and working capital. We expect this change to increase the program’s effectiveness in providing incentives to participants and delivering shareholder value, as well as reducing the complexity and cost of setting and tracking performance under the program.

The fiscal 2016 annual cash incentive awards will be made under our new 2016 Incentive Compensation Plan, contingent on shareholder approval of the Plan at the Annual Meeting.

Long-Term Incentives

Do you provide long-term incentives?  If so, how are they structured?

We provide long-term incentives to our NEOs in the form of equity-based compensation.  Consistent with our compensation philosophy, we believe long-term equity incentives help to ensure that our NEOs have a continuing stake in the long-term success of our company and allow our NEOs to earn above-median compensation only if our shareholders experience appreciation in their equity holdings.

Other than in the case of newly hired executives, we generally make determinations concerning long-term equity-based awards in April of each year at the same time we complete our annual performance reviews.  In any event, we grant all equity-based awards effective two days after the release of either our quarterly or annual financial results.

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What long-term incentives were provided to NEOs in 2015?

In 2015, as in 2014, the Committee granted stock appreciation rights, or “SARs,” restricted stock units, or “RSUs,” and performance share units, or “PSUs.”  The proportion of overall long-term incentive target value represented by each form of award also remained the same, consisting of 40% SARs, 40% RSUs and 20% PSUs.  The Committee granted SARs, RSUs and PSUs to each of our NEOs in 2015 in the amounts indicated in the “Grants of Plan-Based Awards Table for Fiscal 2015” and the narrative following the table.  We value SARs using a Black-Scholes formula and PSUs using either a Monte Carlo methodology (in the case of PSUs using a TSR performance metric) or grant date fair market value (in the case of PSUs using an EBIT rate improvement metric).  Consistent with our overall compensation philosophy, the Committee, after consultation with Towers Watson, granted long-term compensation awards in 2015 at levels approximating the median level of these awards granted by the companies in our peer group.  The target long-term incentive levels set by the Committee did not affect decisions regarding other compensation elements.

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As indicated in the description above, the PSUs granted in fiscal 2015 have two performance metrics, TSR and EBIT rate improvement.  This was a change from prior years, when PSUs had only a TSR performance metric.  In the aggregate, the 2015 PSUs continued to represent 20% of the overall long-term incentive target value, with half of the 2015 PSUs being subject to the TSR performance metric and half of them being subject to the EBIT rate improvement performance metric.

What changes to the long-term incentive awards have been made for fiscal 2016?

For fiscal 2016, the Committee has approved a change in the proportion of overall long-term incentive target value represented by each form of award.  The proportion will be 34% SARs, 33% RSUs and 33% PSUs.

In addition, the Committee is in the process of considering revising the performance metrics used for a portion of the PSUs to be granted in fiscal 2016.  Specifically, the Committee has considered the impact of its proposed shift from the SVA Cash Incentive Plan to a different annual cash incentive plan as described in this proxy statement, and particularly the fact that the shift will result in more emphasis on working capital management and less emphasis on total invested capital management.  The Committee believes that management should be focused on being good stewards of both working capital and total invested capital.  The Committee also believes that a performance metric focused on total invested capital is more suited to a longer-term incentive compensation plan.  As a result, the Committee is considering utilizing a metric focused on total invested capital as one indicator of performance to determine the vesting of the PSUs to be granted in fiscal 2016.

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Other Benefits and Perquisites

Do you provide any other benefits or perquisites to your NEOs?

We have certain other plans that provide, or may provide, compensation and benefits to our NEOs.  The Committee considers all of these plans and benefits when reviewing total compensation of our NEOs.  These plans include the following:

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Executive Stock Ownership Requirements

To underscore the importance of linking executive compensation and shareholder interests, we have implemented stock ownership requirements for certain executives, including our NEOs.  Executives subject to these stock ownership requirements must own a certain dollar value amount of stock before they are permitted to sell shares (other than shares sold to pay option exercise prices or shares sold or surrendered to cover taxes).  Executives who sell shares in violation of these requirements may be ineligible for future long-term incentive awards.  The stock ownership policy requires the following levels of ownership:

Each of our NEOs are in compliance with this policy either because they own the target value of stock or because they have not sold shares.

Policy Against Hedging Transactions

We have adopted a policy prohibiting our employees, including our NEOs, and our directors from trading in puts, calls and other derivative securities relating to our common stock.  The prohibition includes the purchase of any financial instruments designed to hedge or offset any decrease in the market value of our common stock, whether or not such instruments are classified as derivative securities.

Severance and Change in Control Benefits

We have no employment agreements with any of our NEOs that provide benefits prior to a change in control of our company. However, we have entered into change in control and termination agreements with Messrs. Gliebe, Hinrichs, Schlemmer, Underwood and Colvin.

The Committee believes the change in control and termination benefits under the change in control and termination agreements and our equity incentive plans are consistent with the Committee’s overall objective of building shareholder value and contain terms that are similar to those offered to executives of comparable companies.

The purpose of the benefits is to focus our NEOs on taking actions that are in the best interests of our shareholders without regard to whether such action may ultimately have an impact on their job security, and to avoid the loss of key managers that may occur in connection with an anticipated or actual change in control.

All of our change in control agreements contain “double trigger” provisions, which means that, for an executive officer to receive severance benefits under the agreement, in addition to the change in control there must be some adverse change in the circumstances of the executive officer’s employment.

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The Committee selected the triggering events for change in control and termination benefits to our NEOs based on its judgment that these events were likely to result in the job security distractions and retention concerns described earlier in this paragraph.

Other than the change in control and termination agreements, we have no formal severance program in place for our NEOs.

The Committee has adopted a policy eliminating tax gross-ups from all new change in control and termination agreements that we enter into with our executive officers.  This policy was applied to the change in control and termination agreements entered into with Messrs. Hinrichs, Schlemmer and Underwood, which contain no tax gross-ups.

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EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth for each of our NEOs: (1) the dollar value of base salary and annual cash incentive earned during the years indicated; (2) the full grant date fair value of RSUs, SARs and PSUs granted during the years indicated, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718; (3) the dollar value of earnings for services pursuant to awards granted during the indicated year under non-equity incentive plans; (4) the change in pension value and non-qualified deferred compensation earnings during the years indicated; (5) all other compensation for the years indicated; and (6) the dollar value of total compensation for the years indicated.  Our NEOs are our Chairman and CEO, our Vice President and Chief Financial Officer and each of our three other most highly compensated executive officers as of January 2, 2016, the last day of our most recent fiscal year.  In accordance with the rules of the SEC, the table includes information for the fiscal years ended December 28, 2013, January 3, 2015 and January 2, 2016 for each NEO.

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SUMMARY COMPENSATION TABLE FOR FISCAL YEARS 2013-2015

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Grants of Plan-Based Awards

The following table sets forth information regarding all incentive plan awards that the Committee made to our NEOs during fiscal 2015, including incentive plan awards (equity-based and non-equity based) and other plan-based awards.  Disclosure on a separate line item is provided for each grant of an award made to a NEO during the year.  The information supplements the dollar value disclosure of stock, option and non-stock awards in the Summary Compensation Table by providing additional details about these awards.  Non-equity incentive plan awards are awards that are not subject to ASC Topic 718 and are intended to serve as an incentive for performance to occur over a specified period.

GRANTS OF PLAN-BASED AWARDS TABLE FOR FISCAL 2015