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UNITED
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SECURITIES AND EXCHANGE
COMMISSION
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Washington, D.C.
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SCHEDULE 14A
INFORMATION
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Proxy
Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment
No. )
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Filed
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Filed
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Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential, for Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Under Rule 14a-12
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HNI
CORPORATION
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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Title
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applies:
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Aggregate
number of securities to which transaction applies:
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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):
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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.
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Amount
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HNI
CORPORATION
408
EAST SECOND STREET
MUSCATINE,
IOWA 52761
563/272-7400
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
The 2009
Annual Meeting of Shareholders (the "Meeting") of HNI Corporation (the
"Corporation") will be held at the Holiday Inn, 2915 North Highway 61,
Muscatine, Iowa, on Tuesday, May 12, 2009, beginning at 10:30 a.m. (local time),
for the following purposes:
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To
elect four Directors for terms of three years each or until their
successors are elected and qualify;
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2.
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To
approve an amendment to the HNI Corporation 2002 Members' Stock Purchase
Plan to increase the number of authorized shares available for issuance
under the plan;
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3.
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To
ratify the Audit Committee's selection of PricewaterhouseCoopers LLP as
the Corporation's independent registered public accountant for the fiscal
year ending January 2, 2010; and
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To
transact any other business that may properly be brought before the
Meeting or any adjournment or postponement of the
meeting.
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The
holders of record of the Corporation's Common Stock, par value $1.00 per share,
as of the close of business on March 13, 2009, are entitled to vote at the
Meeting.
You are
encouraged to attend the Meeting.
By
Order of the Board of Directors,
Steven M.
Bradford
Vice
President, General Counsel and Secretary
March 30,
2009
YOUR
VOTE IS VERY IMPORTANT. PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY
THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PREPAID ENVELOPE, WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING.
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A-1
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HNI
Corporation
408
East Second Street
Muscatine,
Iowa 52761
PROXY
STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD MAY 12, 2009
HNI
Corporation (the "Corporation," "we," "our" or "us") is mailing this Proxy
Statement, with the accompanying proxy card, to you on or about March 30, 2009
in connection with the solicitation of proxies by and on behalf of the
Corporation's Board of Directors (the "Board" or "Directors") for the 2009
annual meeting of shareholders and any adjournment or postponement of that
meeting (the "Meeting"). The Meeting will be held on Tuesday, May 12,
2009, beginning at 10:30 a.m., local time, at the Holiday Inn, 2915 North
Highway 61, Muscatine, Iowa.
Who
can attend and vote at the Meeting?
Shareholders
of record as of the close of business on March 13, 2009 (the "Record Date") are
entitled to attend and vote at the Meeting. Each share of the
Corporation's common stock, par value $1.00 per share ("Common Stock"), is
entitled to one vote on all matters to be voted on at the Meeting and can be
voted only if the shareholder of record is present to vote or is represented by
proxy. The proxy card provided with this Proxy Statement indicates
the number of shares of Common Stock that you own and are entitled to vote at
the Meeting.
What
constitutes a quorum at the Meeting?
The
presence at the Meeting, in person or represented by proxy, of the holders of a
majority of the outstanding shares of Common Stock ("Outstanding Shares") on the
Record Date will constitute a quorum for purposes of the Meeting. On
the Record Date, there were 44,880,734 Outstanding Shares. For
purposes of determining whether a quorum exists, proxies received but marked
"abstain" and so-called "broker non-votes" (described on the following page)
will be counted as present.
How
do I vote by proxy?
If you
properly complete your proxy card and the Corporation's transfer agent, Wells
Fargo Bank, N.A. ("Wells Fargo"), receives it in time to vote at the Meeting,
your "proxy" (one of the individuals named on your proxy card) will vote your
shares as you have directed. No postage is required if your proxy
card is mailed in the United States in the return envelope that has been
enclosed with this Proxy Statement.
If you
sign, date and return the proxy card but do not specify how your shares are to
be voted, then your proxy will vote your shares as follows:
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"FOR"
the election of the four nominees for Director named on page 4 of this
Proxy Statement under "Proposal No. 1 – Election of
Directors."
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"FOR"
the adoption of the proposed amendment to the HNI Corporation 2002
Members' Stock Purchase Plan, as described on page 11 of this Proxy
Statement under "Proposal No. 2 – Approval of
an Amendment to the HNI Corporation 2002 Members' Stock Purchase
Plan to Increase
the Number of Authorized Shares Available for Issuance Under the
Plan."
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"FOR"
the ratification of the Audit Committee's selection of
PricewaterhouseCoopers LLP as the Corporation's independent registered
public accountant for the fiscal year ending January 2, 2010, as described
on page 14 of this Proxy Statement under "Proposal No. 3 – Ratification
of Audit Committee's Selection of PricewaterhouseCoopers LLP as the
Corporation's Independent Registered Public Accountant for Fiscal
2009."
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In
your proxy's discretion as to any other business which may properly come
before the Meeting or any adjournment or postponement of the
Meeting.
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How
do I vote if my shares of Common Stock are held through a broker, trustee or
other nominee?
If your
shares of Common Stock are held for you as the beneficial owner through a
broker, trustee or other nominee (such as a bank) in "street name," rather than
held directly in your name, you will need to instruct your broker, trustee or
other nominee how to vote your shares. Since a beneficial owner is
not the shareholder of record, you may not vote these shares in person at the
Meeting unless you obtain a "legal proxy" from the broker, trustee or other
nominee that holds your shares, giving you the right to vote the shares at the
Meeting. Your broker, trustee or other nominee has enclosed with this
Proxy Statement, or will provide upon request, voting instructions for you to
use in directing the broker, trustee or other nominee how to vote your
shares.
What
discretion does my broker, trustee or other nominee have to vote my shares of
Common Stock held in "street name"?
A broker,
trustee or other nominee holding your shares of Common Stock in "street name"
must vote those shares according to specific instructions it receives from
you. If specific instructions are not received, your broker, trustee
or other nominee generally may vote your shares at its discretion, depending on
the type of proposal involved. Under New York Stock Exchange ("NYSE")
rules, there are certain proposals ("Non-Routine Proposals") on which brokers
may not vote without specific instructions from you. If a Non-Routine
Proposal comes to a vote at the Meeting, your shares will not be voted on that
Non-Routine Proposal, giving rise to what is called a "broker
non-vote." Shares represented by broker non-votes will be counted for
purposes of determining the existence of a quorum.
At the
Meeting, your broker, trustee or other nominee may vote your shares in its
discretion with respect to Proposal No. 1 and Proposal No.
3. Proposal No. 2 is a Non-Routine Proposal for which your broker,
trustee or other nominee may not vote your shares in its discretion and requires
your instruction.
Can
I change my vote after I return my proxy card?
Yes. You
may change your vote at any time before your proxy is voted at the
Meeting. To change your vote, you may:
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Deliver
to the Corporation's Corporate Secretary a written notice revoking your
earlier vote;
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Deliver
to the Corporation's transfer agent, if you are the shareholder of record,
a properly completed and signed proxy card with a later
date;
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Deliver
to your broker, trustee or other nominee, if your shares are held in
"street name," a properly completed and signed proxy card with a later
date; or
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Vote
in person at the Meeting.
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Your
attendance alone at the Meeting will not revoke a previously delivered
proxy. If you choose any of the above methods to change your vote,
you must take the described action no later than the beginning of the
Meeting. Once voting is completed at the Meeting, you will not be
able to revoke your proxy or change your vote. Unless your proxy is
so revoked or changed, the shares of Common Stock represented by your proxy
received by the Corporation's transfer agent will be voted at the Meeting and at
any adjournment or postponement of the Meeting.
How
do I vote my shares in the Corporation's retirement plan?
If you
participate in the Corporation's retirement plan, the proxy card you receive
will also include Common Stock allocated to your account. Properly
completed and signed proxy cards will serve to instruct the plan trustee on how
to vote any shares allocated to your account and a portion of all shares as to
which no instructions have been received (the "undirected shares") from plan
participants. The proportion of the undirected shares to which your
instructions will apply will be equal to the proportion of the shares to which
the trustee receives instructions represented by your shares.
How
is the Corporation soliciting proxies?
The
Corporation bears the cost of preparing, assembling and mailing the proxy
material related to the solicitation of proxies by and on behalf of the Board
for the Meeting. In addition to the use of the mails, certain of the
Corporation's officers may, without additional compensation, solicit proxies in
person, by telephone or through other means of communication.
How
will my vote get counted?
Wells
Fargo, the Corporation's transfer agent, will use an automated system to
tabulate the votes and will serve as the Inspector of Election.
Is
my vote confidential?
Proxy
instructions, ballots and voting tabulations that identify individual
shareholders are handled in a manner that protects your voting
privacy. Your vote will not be disclosed either within the
Corporation or to third parties, except: (1) as necessary to meet
applicable legal requirements; (2) to allow for the tabulation of votes and
certification of the vote; and (3) to facilitate a successful proxy
solicitation. Occasionally, shareholders provide written comments on
their proxy cards, which are then forwarded to the Corporation's
management.
How
do I get to the Meeting location?
The
Meeting is being held at the Holiday Inn, 2915 North Highway 61, Muscatine,
Iowa. If driving to the Meeting from the Quad City International
Airport, from the main exit traffic light go straight onto I-74 to I-280, turn
right (cloverleaf) onto I-280 West, drive approximately 10-12 miles crossing the
Mississippi River Bridge, take the second exit in Iowa (Exit 6 – Muscatine), at
the traffic light turn left (west) onto Highway 61 South, continue approximately
22 miles to Muscatine, Holiday Inn is on the right. If driving to the
Meeting on I-80, take Exit 271 (Highway 38 South), drive approximately 12
miles to Highway 61, turn left (east) at the traffic light, Holiday Inn is one
block on the left.
What
should I do if I receive more than one set of voting materials?
You may
receive more than one set of voting materials, including multiple copies of this
Proxy Statement and multiple proxy cards or voting instruction
cards. For example, if you hold your shares in more than one
brokerage account, you may receive a separate voting instruction card for each
brokerage account in which you hold shares in "street name." If you
are a shareholder of record and your shares are registered in more than one
name, you will receive more than one proxy card. Please complete,
sign, date and return each proxy card and voting instruction card that you
receive.
The
Securities and Exchange Commission (the "SEC") has adopted rules that allow us
to deliver a single annual report and/or proxy statement to any household at
which two or more shareholders reside, whom the Corporation believes to be
members of the same family. If you wish to participate in this
program and receive only one copy of future annual reports and/or proxy
statements, please write to the Corporation's transfer agent at Wells Fargo
Bank, N.A., Attention: Wells Fargo Shareowner Services, 160 N.
Concord Exchange, South St. Paul, Minnesota 55075-1139. Your consent
to receive only one copy of the annual report and/or proxy statement will remain
in effect until the Corporation's transfer agent receives a written revocation
notice from you, in which case the Corporation will begin sending individual
copies within thirty days thereof. The Corporation will continue to
separately mail a proxy card for each registered shareholder
account. The Corporation will promptly deliver separate copies of its
annual report and/or proxy statement upon request. Shareholders may
request such separate copies by writing to the Corporate Secretary at HNI
Corporation, 408 East Second Street, Muscatine, Iowa 52761 or calling the
Corporation's Assistant Corporate Secretary at 563/272-7590.
Did
the Corporation utilize the SEC's notice and access proxy rules for delivery of
the voting materials this year?
No. The
Corporation delivered its voting materials in the same manner as it has in the
past. However, many shareholders have previously consented to receive
electronic delivery of the proxy statement and annual report and therefore did
not receive hard copies of these materials.
Where
can I find the voting results of the Meeting?
The
Corporation intends to announce preliminary voting results at the Meeting and
publish final results in the Corporation's Quarterly Report on Form 10-Q for the
second quarter of the Corporation's fiscal year ending January 2, 2010 ("Fiscal
2009").
The
2009 Proxy Statement and Annual Report on Form 10-K are available at www.hnicorp.com.
The
Corporation provides its annual reports, notices to shareholders of the annual
meetings and proxy statements over the Internet. If you wish to give
your consent to access such documents in the future over the Internet, please
check the box in the CONSENT section on your proxy card. These
documents will be available on or about March 30, 2009, on the Corporation's
website at www.hnicorp.com,
under "Investor Information—Annual & Quarterly
Reports" and "Investor
Information—Proxy Report." Once you give your consent, it will
remain in effect until you notify the Corporation that you wish to resume mail
delivery of the annual reports and proxy statements. Even though you
give your consent, you still have the right at any time to request copies of
these documents at no charge by writing to the Corporate Secretary at HNI
Corporation, 408 East Second Street, Muscatine, Iowa 52761 or calling the
Corporation's Assistant Corporate Secretary at 563/272/7590.
What
is the proposed amendment to the HNI Corporation 2002 Members' Stock Purchase
Plan?
The
proposed amendment would increase the number of authorized shares of Common
Stock available for issuance under the HNI Corporation 2002 Members' Stock
Purchase Plan (the "MSPP") from 800,000 to 1,800,000 shares. The MSPP
allows members (i.e., employees) to purchase Common Stock at 85% of the closing
share price on each quarterly exercise date up to an annual aggregate amount of
$25,000 per year. In 2002, the Corporation's shareholders approved
the MSPP and authorized 800,000 shares of Common Stock for issuance under the
MSPP. Due to significant member participation in the MSPP and recent
volatility in the Corporation's share price, it is likely there will no longer
be authorized shares of Common Stock available for issuance to member
participants under the MSPP by the end of the second quarter of Fiscal
2009.
The
Corporation's By-laws (the "By-laws") provide for thirteen
Directors. The Board currently consists of thirteen
Directors. Twelve of the thirteen Directors are independent Directors
as further discussed on page 6 of this Proxy Statement under "Information Regarding the Board –
Director Independence." Stan A. Askren, Chairman, President
and Chief Executive Officer, is the only Director currently employed by the
Corporation and is not independent under the NYSE listing standards pertaining
to director independence or the Corporation's categorical independence standards
for Directors (the "Categorical Standards").
The Board
is divided into three classes. One class is elected each year for a
term of three years. Four directors will be elected at the Meeting to
serve for a three-year term expiring at the Corporation's 2012 annual meeting of
shareholders.
Nominees
for Election
The Board
is nominating for election at the Meeting each of Stan A. Askren, Gary M.
Christensen, Joseph E. Scalzo and Ronald V. Waters, III, for a term of three
years (collectively, the "Nominees"). The Nominees elected as
Directors at the Meeting will
hold
office for such term or until their respective successors are elected and
qualify, subject to their prior death, resignation or removal.
Messrs.
Askren, Christensen, Scalzo and Waters were most recently elected as Directors
at the 2006 annual meeting of shareholders. Biographical information
about each of the Nominees follows.
Stan A. Askren, age 48, has
been a Director of the Corporation since 2003. Mr. Askren has also
been the Chairman and Chief Executive Officer of the Corporation since 2004 and
the President of the Corporation since 2003. Mr. Askren is a director
of Armstrong World Industries, Inc.
Gary M. Christensen, age 65,
has been a Director of the Corporation since 2000. Mr. Christensen
served as the Lead Director of the Board from 2005 to May 2008. Mr.
Christensen has been active with Wind Point Partners in private equity
investment since 2002. Mr. Christensen is a director of United
Subcontractors, Inc.
Joseph E. Scalzo, age 50, has
been a Director of the Corporation since 2003. Mr. Scalzo has been
the President and Chief Executive Officer of WhiteWave and Morningstar Foods
Companies, manufacturers of premium food products and wholly owned subsidiaries
of Dean Foods Company, since 2008 and, from 2005 to 2007, President and Chief
Executive Officer of WhiteWave Foods Company. Previously, from 2004
to 2005, he was the Group President, Personal Care and Global Value Chain of The
Gillette Company, a marketer and manufacturer of personal care and use
products.
Ronald V. Waters, III, age 57,
has been a Director of the Corporation since 2002. Mr. Waters has
been a Director and the President and Chief Executive Officer of LoJack
Corporation, a premier worldwide marketer of wireless tracking and recovery
systems for valuable mobile assets and a leader in global stolen vehicle
recovery, since 2009 and, from 2007 to 2008, Mr. Waters was a Director and the
President and Chief Operating Officer of LoJack
Corporation. Previously, from 2004 to 2006, Mr. Waters was the Chief
Operating Officer of Wm. Wrigley Jr. Company, a leader in the confectionery
industry and the world's largest manufacturer and marketer of
gum. Mr. Waters is a director of Fortune Brands, Inc.
We have
no reason to believe that any of the Nominees listed above will be unavailable
to serve if elected. However, if any one of them becomes unavailable,
the persons named as proxies in the accompanying proxy card have discretionary
authority to vote for a substitute chosen by the Board. Any vacancies
not filled at the Meeting may be filled by the Board.
Incumbent
Directors
Ms. Bell,
Ms. Smith and Messrs. Halbrook, Jenkins and Martin comprise a class of Directors
whose term will expire at the Corporation's 2010 annual meeting of
shareholders. The following is the biographical information about
each of these Directors.
Mary H. Bell, age 48, has been
a Director of the Corporation since 2006. Ms. Bell has been Vice
President, Building Construction Products Division of Caterpillar Inc., the
world's leading manufacturer of construction and mining equipment, diesel and
natural gas engines and industrial gas turbines, since
2007. Previously, from 2004 to 2007, Ms. Bell was a Vice President of
Caterpillar Inc. and Chairman and President of Caterpillar Logistics Services,
Inc., a wholly owned subsidiary of Caterpillar Inc.
John A. Halbrook, age 63, has
been a Director of the Corporation since 2004. Previously, from 1995
to 2008, Mr. Halbrook was Chairman of the Board and, from 1995 to 2005, he was
Chairman and Chief Executive Officer of Woodward Governor Company, a designer,
manufacturer, marketer and service provider of energy control solutions for
aircraft engines, industrial engines and turbines, power generation and process
automation equipment. Mr. Halbrook is a director of Amcore Financial
Inc. and Woodward Governor Company.
James R. Jenkins, age 63, has
been a Director of the Corporation since 2005. Mr. Jenkins has been
the Senior Vice President and General Counsel of Deere & Company (John
Deere), the world's leading manufacturer of agricultural and forestry equipment
and a major manufacturer of equipment for use in construction and lawn and turf
care, since 2000.
Dennis J. Martin, age 58, has
been a Director of the Corporation since 2000. Mr. Martin has been an
independent business consultant since 2005. Previously, from 2001 to
2005, he was the Chairman, President and Chief Executive Officer of General
Binding Corporation, a manufacturer and marketer of binding and laminating
office equipment. Mr. Martin is a director of Coleman Cable, Inc. and
Federal Signal Corporation.
Abbie J. Smith,
age 55, has been a Director of the Corporation since 2000. Ms. Smith
has been a Chaired Professor of the University of Chicago Booth School of
Business, a national leader in higher education and research, since
1999. Ms. Smith is a director of DFA Investment Dimensions Group,
Inc., Dimensional Investment Group Inc. and Ryder System, Inc. Ms.
Smith is also a trustee of The UBS Funds (Chicago), UBS Relations Trust and UBS
SMA Relationship Trust.
Ms.
Francis and Messrs. Calado, Porcellato and Stern comprise a class of Directors
whose term will expire at the Corporation's 2011 annual meeting of
shareholders. Biographical information about each of these Directors
follows.
Miguel M. Calado, age 53, has
been a Director of the Corporation since 2004. Mr. Calado has been a
Director and the Chief Financial Officer of Hovione SA, an international fine
chemicals company with manufacturing facilities and offices in the USA, Europe
and Asia, since 2006. Mr. Calado has also been an advising partner of
The Trion Group, a strategic management consulting group based in Dallas, Texas,
since 2006 and President of GAMCAL, LLC, an investment company, since
2006. Previously, from 1998 to 2005, he was the Executive Vice
President and President, International of Dean Foods Company, a processor and
distributor of dairy, soy and specialty foods. Mr. Calado also serves
as a member of the Advisory Board for the Business School of Catholic University
of Portugal.
Cheryl A. Francis, age 55, has
been a Director of the Corporation since 1999. Ms. Francis has been
an independent business and financial advisor since 2000 and the Co-Chairman of
the Corporate Leadership Center, a not-for-profit organization focused on
developing tomorrow's business leaders since 2008. Previously, from
2002 to 2008, Ms. Francis was the Vice Chairman of the Corporate Leadership
Center. Ms. Francis is a director of Hewitt Associates Inc. and
Morningstar, Inc.
Larry B. Porcellato, age 50,
has been a Director of the Corporation since 2004. Mr. Porcellato has
been the Chief Executive Officer of The Homax Group, Inc., a leading specialty
application consumer products supplier to the home care and repair markets,
since January 2009. Previously, from February 2007 through December
2008, Mr. Porcellato was an independent business consultant and, from 2002
through January 2007, Mr. Porcellato was the Chief Executive Officer of ICI
Paints North America, a manufacturer and distributor of decorative coatings and
a subsidiary of Imperial Chemical Industries PLC. Mr. Porcellato is a
director of OMNOVA Solutions Inc.
Brian E. Stern, age 61, has
been a Director of the Corporation since 1998 and the Lead Director of the Board
since May 2008. Mr. Stern has been a director of Starboard Capital
Partners, LLC, a financial sponsor that initiates, finances and partners with
management and private equity investors in the acquisition of companies, since
July 2007. Previously, from 2004 to June 2007, he was the Senior Vice
President, Xerox, Fuji Xerox Operations of Xerox Corporation, a developer,
marketer, manufacturer, financier and servicer of document processing products
and services.
Required
Vote
Election
of the Nominees as Directors requires the affirmative vote of the holders of a
majority of the Outstanding Shares entitled to vote at the Meeting.
Recommendation
of the Board
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THE
BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES AS
DIRECTORS.
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Director
Independence
For
purposes of determining director independence, the Corporation is subject to the
NYSE listing standards pertaining to director independence as currently in
effect and as they may be changed from time to time and the Categorical
Standards.
Pursuant
to the NYSE listing standards, no Director qualifies as "independent" unless the
Board affirmatively determines that the Director has no material relationship
with the Corporation or any of its subsidiaries (either directly or as a
partner, shareholder or officer of an organization that has a relationship with
the Corporation or any of its subsidiaries). In addition,
a
Director
is not independent under the NYSE listing standards if: (i) the
Director is, or has been within the last three years, a member of the
Corporation, or an immediate family member is, or has been within the last three
years, an executive officer of the Corporation; (ii) the Director has received,
or has an immediate family member who has received, during any twelve-month
period within the last three years, more than $120,000 in direct compensation
from the Corporation, other than director and committee fees and pension or
other forms of deferred compensation for prior service (provided such
compensation is not contingent in any way on continued service); (iii) (A) the
Director or an immediate family member is a current partner of a firm that is
the Corporation's internal or external auditor; (B) the Director is a current
employee of such a firm; (C) the Director has an immediate family member who is
a current employee of such a firm and personally works on the Corporation's
audit; or (D) the Director or an immediate family member was, within the last
three years (but is no longer), a partner or employee of such a firm and
personally worked on the Corporation's audit within that time; (iv) the Director
or an immediate family member is, or has been within the last three years,
employed as an executive officer of another company where any of the
Corporation's present executive officers at the same time serves or served on
that company's compensation committee; or (v) the Director is a current
employee, or an immediate family member is a current executive officer, of a
company that has made payments to, or received payments from, the Corporation
for property or services in an amount which, in any of the last three fiscal
years, exceeds the greater of $1 million, or 2 percent of such other company's
consolidated gross revenues.
In
addition to the NYSE listing standards pertaining to director independence set
forth above, the Corporation adopted the Categorical Standards, which are
attached as Exhibit A to the HNI Corporation Corporate Governance Guidelines
(the "Governance Guidelines") and available on the Corporation's website at
www.hnicorp.com,
under "Corporate Governance –
Governance Guidelines." Under the Categorical Standards, the
following relationships will not, in and of themselves, be considered material
relationships, unless otherwise expressly provided for with respect to a
particular interest or relationship, under the NYSE listing
standards: (i) contributions or payments (including the provision of
goods and services) by the Corporation to a charitable organization (including a
foundation), a university or other not-for-profit organization in which a
Director or a Director's immediate family member is a director, trustee, officer
or employee, unless the contribution or payment (excluding matching gifts)
was: (A) made to an entity for which the Director or the Director's
spouse currently serves as a director, trustee or officer and he or she served
in such position at the time of the contribution or payment; (B) made within the
three fiscal years preceding the date of any determination; and (C) in an amount
exceeding the greater of $1,000,000 or two percent of the charitable
organization's aggregate annual charitable receipts during the organization's
last completed fiscal year prior to the date of the contribution or payment; and
(ii) other business relationships between a Director or a Director's immediate
family member and the Corporation, such as a purchase by the Corporation of
products or services, including consulting, legal or financial advisory
services, unless: (A) the Director or the Director's spouse is a
partner, officer or 10 percent owner of a company or firm providing such
products or services, and he or she held such position at any time within the 12
months preceding the date of any determination; (B) the products or services
were provided within the three fiscal years preceding the date of any
determination; and (C) the products or services provided during any 12-month
period were in an aggregate amount exceeding the greater of $1,000,000 or 1
percent of such company's or firm's consolidated gross revenues for its last
completed fiscal year. The Categorical Standards in clause (ii) above
do not include business relationships with the Corporation's internal or
external auditors that are covered by the criteria set forth above and the NYSE
listing standards.
Under the
Governance Guidelines, at least three-fourths of its Directors must meet the
NYSE listing standards pertaining to director independence and the Categorical
Standards. The Board has determined that each of the current
non-management Directors, including Mary H. Bell, Miguel M. Calado, Cheryl A.
Francis, John A. Halbrook, James R. Jenkins, Dennis J. Martin, Larry B.
Porcellato, Abbie J. Smith, and Brian E. Stern (each of whom are current members
of the Board), Gary M. Christensen, Joseph E. Scalzo and Ronald V. Waters, III
(each of whom are current members of the Board standing for re-election) and
each of the current members of the Audit Committee, the Human Resources and
Compensation Committee and the Public Policy and Corporate Governance Committee,
has no material relationship with the Corporation (either directly or as a
partner, shareholder or officer of an organization that has a relationship with
the Corporation) and is independent under the NYSE listing standards and the
Categorical Standards.
Mr.
Askren does not meet such independence standards because he is the Chairman,
President and Chief Executive Officer of the Corporation.
Board
Committees
The Board
has three standing committees, the Audit Committee, the Human Resources and
Compensation Committee and the Public Policy and Corporate Governance
Committee. The Public Policy and Corporate Governance Committee
fulfills the role of a nominating committee. Each committee operates
under a written charter, which has been approved by the Board. The
Board reviews each committee charter at least annually. Current
copies of the committees' charters can be found on the Corporation's website at
www.hnicorp.com,
under "Corporate Governance –
Committee Charters." Shareholders may
request
a paper
copy of the Board's committees' charters by writing to the Corporate Secretary
at HNI Corporation, 408 East Second Street, Muscatine, Iowa
52761. Each Director attended the total number of committee meetings
for the committees on which such Director served held during the Corporation's
fiscal year ended January 3, 2009 ("Fiscal 2008"), except one Director did not
attend one committee meeting for the committee on which he served.
Audit
Committee. The Audit Committee, established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (the "Exchange Act"),
consists of four independent Directors: Miguel M. Calado, Chair,
James R. Jenkins, Joseph E. Scalzo and Ronald V. Waters, III. The
Board has determined that each Audit Committee member is "independent" as
independence for audit committee members is defined by the NYSE listing
standards pertaining to director independence, in Exchange Act Rule 10A-3(b)(1)
and under the Categorical Standards. The Board has determined that
all members of the Audit Committee are financially literate pursuant to the NYSE
listing standards. The Board has also determined that Messrs. Calado
and Waters are each an "audit committee financial expert," as defined by Item
407(d)(5) of Regulation S-K. In accordance with the Audit Committee
Charter, none of the Audit Committee members serve simultaneously on audit
committees of more than three public companies. The Audit Committee
met eight times during Fiscal 2008. The Audit Committee appoints the
Corporation's independent registered public accountant and reviews the
independent registered public accountant's performance, independence, fees and
audit plans. The Audit Committee also reviews the annual and
quarterly financial statements; internal audit staffing, plans and reports;
nonaudit services provided by the independent registered public accountant; the
Corporation's insurance coverage; and any other financial matters as directed by
the Board.
Human Resources
and Compensation Committee. The Human Resources and
Compensation Committee (the "Compensation Committee") is comprised of Abbie J.
Smith, Chair, Cheryl A. Francis, John A. Halbrook and Brian E.
Stern. Each member of the Compensation Committee is an independent
director as that term is defined by the NYSE listing standards pertaining to
director independence and under the Categorical Standards. The
Compensation Committee met four times during Fiscal 2008. The
Compensation Committee reviews executive compensation, executive succession
planning, benefit programs for all members, management's recommendations on
election of officers and human resources development and oversees the evaluation
of the Chief Executive Officer by the Board.
Public Policy and
Corporate Governance Committee. The Public Policy and
Corporate Governance Committee (the "Governance Committee") consists of Dennis
J. Martin, Chair, Mary H. Bell, Gary M. Christensen and Larry B.
Porcellato. Each member of the Governance Committee is an independent
director as that term is defined by the NYSE listing standards pertaining to
director independence and under the Categorical Standards. The
Governance Committee met four times during Fiscal 2008. The
Governance Committee serves as the nominating committee and identifies
individuals qualified to serve as Directors of the Corporation consistent with
criteria approved by the Board; recommends director nominees to the Board for
the next annual meeting of shareholders; develops and recommends to the Board
corporate governance principles applicable to the Corporation; and oversees the
Corporation's finance policy, capital structure and the evaluation of the Board
and the Corporation by the Directors.
Director
Nominations
The Board
has adopted guidelines for identifying and evaluating candidates for
Director. Under those guidelines, the Governance Committee takes into
account a number of factors when identifying potential nominees,
including: possession of the desired skills, experience and abilities
identified by the Governance Committee; ability to communicate ideas and
contribute to Board deliberations; independence from management; diversity;
judgment, skill, integrity and reputation; existing commitments to other
businesses; potential conflicts of interest with other pursuits; and legal
restraints. The Governance Committee may use a variety of means to
identify potential nominees, including recommendations from the Chairman,
Directors or others associated with the Corporation. The Governance
Committee may also retain third-party search firms to identify potential
nominees based on the Corporation's established criteria for director candidates
discussed above. The Governance Committee then screens the potential
candidates and eventually recommends suitable candidates to the Board for
nomination.
The
Governance Committee will consider candidates for Director recommended by
shareholders by applying the criteria for candidates described above and
considering the following additional information. Shareholders
wishing to recommend a candidate for Director should write to the Corporation's
Corporate Secretary before October 1, 2009, and include the following
information: a statement that the writer is a shareholder and is
recommending a candidate for Director; the name of and contact information for
the candidate; a statement of the candidate's business and educational
experience; information about each of the factors listed above, sufficient to
enable the Governance Committee to evaluate the candidate; a statement detailing
any relationship between the candidate and any customer, supplier or competitor
of the Corporation; detailed information about any relationship or understanding
between the writer or any other shareholder and the candidate; a statement
whether such person, if
elected,
intends to tender, promptly following such person's election or re-election, an
irrevocable resignation that is effective 90 days after the date of the
certification of the election results upon such person's failure to receive the
required vote for re-election at the next meeting at which such person would
face re-election; and a statement that the candidate is willing to be considered
and will serve as a Director if nominated and elected.
The
Corporation does not have any minimum qualifications for Director
nominees. However, the Board believes that it should be comprised of
Directors with varied and complimentary backgrounds. Directors should
also possess the highest personal and professional integrity and ethics and be
willing and able to devote the required time to the Corporation.
Processes
and Procedures for the Consideration and Determination of Director Compensation
by Governance Committee
The
Governance Committee is responsible for annually reviewing the compensation paid
to Directors for service on the Board and for recommending changes to such
compensation to the Board, if appropriate. The Board is responsible
for approving Director compensation annually based on recommendations of the
Governance Committee. Neither the Governance Committee nor the Board
delegates its authority with respect to Director compensation to any other
person or group. However, the Corporation's management may, at the
request of the Governance Committee, assist the Governance Committee in its
annual review of Director compensation, which may include recommending changes
to such compensation. Although it has not done so recently, the
Governance Committee has authority to retain and terminate any consultant to
assist in the evaluation of the compensation and benefits for Directors and to
approve the consultant's fees and other retention terms.
Processes
and Procedures for the Consideration and Determination of Executive Compensation
by Compensation Committee
The
Compensation Committee is responsible for developing and implementing the
Corporation's compensation policies and programs for the Chairman and Chief
Executive Officer and other senior executives as further discussed throughout
the Compensation Discussion and Analysis (the "CD&A") which begins on page
17 of this Proxy Statement. With regard to senior executives, other
than the Chairman and Chief Executive Officer, the Compensation Committee
reviews and considers management's recommendation, assesses the compensation of
such senior executives and approves compensation and benefit levels (1)
consistent with the Corporation's compensation philosophy and (2) necessary to
attract and retain senior executives. This includes determining the
following, without the need for approval or ratification by the
Board:
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Total
compensation, including base salaries, and benefit levels for senior
executives who report to the Chairman, President and Chief Executive
Officer;
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Participants
and aggregate award levels for the HNI Corporation Executive Bonus Plan
(the "Executive Plan"); and
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Participants
and awards for the HNI Corporation Long-Term Performance Plan (the
"Performance Plan") and the HNI Corporation ERISA Supplemental Retirement
Plan (the "ESRP").
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For all
senior executives, including the Chairman and Chief Executive Officer, the
Compensation Committee recommends stock option or other equity compensation
awards under the HNI Corporation 2007 Stock-Based Compensation Plan (the "2007
Compensation Plan") to the Board for approval. The Compensation
Committee also reviews and approves the base salaries for other executive
officers of the Corporation who are subject to Section 16 of the Exchange Act
and who do not report directly to the Chairman, President and Chief Executive
Officer.
With
regard to the Chairman and Chief Executive Officer, at least annually the
Compensation Committee:
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Reviews
and recommends to the Board (1) corporate goals and objectives relevant to
Chairman and Chief Executive Officer compensation and (2) compensation and
benefits for the Chairman and Chief Executive Officer, including Executive Plan,
Performance Plan and ESRP awards and stock option or other equity
compensation awards under the 2007 Compensation
Plan;
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Evaluates
the Chairman and Chief Executive Officer's performance in light of such
goals and objectives and, together with other independent Directors,
approves the Chairman and Chief Executive Officer's compensation and
benefits based on this evaluation and the Compensation Committee's
recommendation;
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Reviews
the Chairman and Chief Executive Officer's performance evaluation form for
appropriateness;
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Issues
the Chairman and Chief Executive Officer performance evaluation form to
all independent Directors;
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Compiles
and reviews the Chairman and Chief Executive Officer performance
evaluation results;
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Reviews
the Chairman and Chief Executive Officer performance evaluation results
with the Board for additional comment;
and
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Chair
of Compensation Committee reviews the Board's evaluation results of the
Chief Executive Officer's performance with the Chairman and Chief
Executive Officer.
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In
determining the long-term incentive component of Chairman and Chief Executive
Officer compensation, the Compensation Committee, together with the other
independent Directors, considers the Corporation's performance and shareholder
return, the value of similar incentive awards granted to chairmen and chief
executive officers in the marketplace and the awards granted to the
Corporation's Chairman and Chief Executive Officer in past years. The
Corporation uses the Compensation Analysis (as described under "Annual Incentives" on page 19
of this Proxy Statement) to evaluate the competitiveness of the long-term
incentive component of the Chairman and Chief Executive Officer's
compensation.
Role of
Compensation Consultants. The
Compensation Committee's Charter provides that any outside compensation
consultants who offer advice on compensation levels and benefits for the
Chairman and Chief Executive Officer or other senior executives will be retained
by the Compensation Committee, report to the Chair of the Compensation Committee
and submit fee statements to the Chair of the Compensation Committee for
approval. The consultants' findings are reported directly to the
Compensation Committee. Any other consulting services by such compensation
consultants must be approved in advance by the Compensation Committee
Chair.
Approximately
every three to five years, the Board, with the assistance of a compensation
consultant, conducts an extensive competitive assessment of our executive
compensation programs. From time to time, the Compensation Committee
retains independent compensation consultants to offer professional assistance on
other select executive compensation matters. During the Corporation's
fiscal year ended January 1, 2005, the Compensation Committee retained Mercer
Human Resource Consulting ("Mercer"), a national compensation consulting
firm, to conduct the Compensation Analysis under the oversight of the
Compensation Committee. In the Compensation Analysis, Mercer concluded
that: (1) the Corporation's executive compensation programs are
fundamentally sound and consistent with its stated pay strategy, culture and
business direction; (2) total compensation was structurally at market, with
greater emphasis on variable pay; and (3) there is a demonstrated link between
executive pay and performance with a balance of strategic and financial
measures.
In the
Corporation's fiscal year ended December 30, 2006 ("Fiscal 2006"), the
Compensation Committee retained Mercer to advise the Compensation Committee on
the competitiveness and appropriateness of the Corporation's form of change in
control employment agreement ("CIC Agreement") and to recommend
changes. A detailed description of the Corporation's form of CIC
Agreement is set forth under "Post-Employment and Other Events –
Change in Control Employment Agreements" on page 27 of this Proxy
Statement.
The
Compensation Committee hired Mercer for two executive compensation projects in
the Corporation's fiscal year ended December 29, 2007 ("Fiscal
2007"). The first project involved Mercer's review of the CD&A
and executive compensation tables for the Corporation's 2007 Proxy
Statement. In the second project, per the Compensation Committee's
request, Mercer reviewed the Corporation's policies and practices aimed at
executive retention and outlined potential issues for consideration by the
Compensation Committee.
In Fiscal
2008, the Compensation Committee retained Semler Brossy Consulting Group, LLC
("Semler"), a national compensation consulting firm, for an executive
compensation project involving executive retention. Semler noted
potential issues with the Corporation's executive retention policies and
practices for consideration by the Compensation Committee.
For
additional details regarding the process and procedures followed by the
Compensation Committee in establishing the Corporation's compensation policies
and programs for the Chairman and Chief Executive Officer and other senior
executives, see the Compensation Committee's Charter, which is posted on the
Corporation's website at www.hnicorp.com,
under "Corporate Governance –
Committee Charters."
Board
Meetings
The Board
held four regular meetings and no special meetings during Fiscal
2008. All Directors attended 100 percent of the total
number of meetings of the Board.
In
accordance with the NYSE listing standards regarding corporate governance, the
Corporation's non-management Directors meet at regularly scheduled executive
sessions without management present. Mr. Stern, Lead Director,
presides at these executive sessions. The Corporation's
non-management Directors met four times during Fiscal 2008.
Director
Attendance at Annual Meetings of Shareholders
All
Directors are encouraged to attend annual meetings of shareholders when
possible. Directors may attend either in person or by
telephone. Last year each Director attended the 2008 annual meeting
of shareholders in person.
Shareholder
Communications with the Board
Shareholders
and interested parties may communicate with the Lead Director, the Chair of the
Governance Committee and the Vice President, General Counsel and Secretary, or
with the Corporation's non-management Directors as a group, by sending an email
to "BoardOfDirectors@hnicorp.com" or by writing to Lead Director, Chair of the
Governance Committee, Vice President, General Counsel and Secretary or
Non-Management Directors at HNI Corporation, 408 East Second Street, Muscatine,
Iowa 52761, Attention: Corporate Secretary. All
communications received will be opened by the office of the Corporate Secretary
for the sole purpose of determining whether the contents are a message to the
Directors. Any communications not in the nature of advertising or
promotions of a product or service will be promptly forwarded to the appropriate
party.
PROPOSAL
NO. 2 – APPROVAL OF AN AMENDMENT TO THE HNI CORPORATION 2002
MEMBERS' STOCK PURCHASE PLAN TO INCREASE THE NUMBER OF AUTHORIZED SHARES AVAILABLE FOR ISSUANCE
UNDER THE PLAN
The Board
has approved, and recommends to the shareholders for approval, an amendment to
the HNI Corporation 2002 Members' Stock Purchase Plan ("MSPP") to increase the
number of authorized shares of Common Stock available for issuance under the
MSPP from 800,000 to 1,800,000 shares. All other material terms and
conditions of the MSPP remain unchanged. A copy of the MSPP is
attached as Exhibit B to the Corporation's 2002 Proxy Statement filed with the
SEC on March 22, 2002.
Background
The
Corporation takes pride in its member-owner culture and for more than 40 years
has maintained programs to facilitate the purchase of Common Stock by
members. The MSPP allows members to purchase Common Stock from the
Corporation at 85% of the closing share price on each quarterly exercise date up
to an aggregate annual amount of $25,000 per year. The Corporation's
shareholders approved the MSPP in 2002 and authorized 800,000 shares of Common
Stock for issuance to members under the MSPP. The MSPP expires in
2012 and is available on equal terms to all members working 20 hours or more per
week. Shareholder approval is required to increase the number of
authorized shares available for issuance to members under the
MSPP. Mr. Askren, Kurt A. Tjaden, Vice President and Chief Financial
Officer, HNI Corporation, and Marco V. Molinari, Executive Vice President, HNI
Corporation and President, HNI International Inc., currently participate in the
MSPP.
Reason
for the Amendment
Due to
significant member participation in the MSPP and recent volatility in the
Corporation's share price, it is likely there will no longer be authorized
shares of Common Stock available for issuance to member participants under the
MSPP by the end of the second quarter of Fiscal 2009. Without
additional authorized shares of Common Stock, the Corporation would be forced to
prematurely terminate the MSPP. The amendment would increase the
number of authorized shares of Common Stock available for issuance under the
MSPP from 800,000 to 1,800,000 shares and allow the Corporation to continue to
offer the MSPP to members.
Effective
Date of Amendment
The Board
has approved the amendment to the MSPP, subject to approval of the
shareholders. Once approved by the shareholders, the amendment will
become effective immediately. Before additional shares of Common
Stock can be issued to member participants under the MSPP, the Corporation will
need to file a listing application with the NYSE to reserve the additional
1,000,000 shares of Common Stock for issuance under the MSPP. The
filing is expected to occur shortly after shareholder approval.
Description of the
MSPP
Purpose. The
MSPP is intended to (i) advance the interests of the Corporation and its
shareholders by strengthening the Corporation's ability to attract and retain
members who have the training, experience and ability to enhance the
profitability of the Corporation and (ii) align the interests of members with
the interests of shareholders by rewarding members upon whose judgment,
initiative and effort the success of the Corporation largely
depends.
Administration. The MSPP is administered
by a committee consisting of not less than three members appointed by the Board
(the "Committee"). The Committee has the authority to (i) interpret
and construe the MSPP and the options granted thereunder, (ii) establish
policies, procedures and rules related to the operation and administration of
the MSPP, (iii) make adjustments in the option price and the number and kind of
optioned shares as may be equitably required as a result of certain transactions
and events affecting the Common Stock and (iv) subject to certain limitations,
amend the provisions of the MSPP. The interpretation and construction
by the Committee of any provision of the MSPP or of any option granted under it
will be final.
Eligibility. Any person who is
employed by the Corporation or a Subsidiary (as defined below) and who
customarily works 20 hours or more per week, and who customarily works for 5
months or more in any calendar year is eligible to participate in the
MSPP. A "Subsidiary" is defined under the MSPP as any majority owned
subsidiary of the Corporation or of any majority owned subsidiary of the
Corporation. As of the Record Date, approximately 10,000 members were
eligible to participate in the MSPP.
Terms of Options
and Acceptance. On the first business
day of each fiscal quarter during which the MSPP is in effect (the "Entry
Date"), each eligible, participating member will be granted an option to
purchase shares of Common Stock. A member will evidence acceptance of
the option by executing and providing to the Corporation a Subscription and
Authorization Form (the "Form"). The Form may provide for the
subscription of any dollar amount of Common Stock not to exceed 20% of his or
her current earnings. Notwithstanding the foregoing, a member will
not be granted options under the Plan if (i) immediately after the option is
granted, the member would have the right to purchase shares of Common Stock
having a fair market value as of the relevant Exercise Date (as defined below)
in excess of $21,250.00 (85% of $25,000) in any calendar year, or (ii)
immediately after the option was granted (and assuming the purchase of all stock
which such member has the right to purchase), such member would own 5% or more
of the total combined voting power or value of all classes of stock of the
Corporation.
Once a
member accepts an option under the MSPP, the member automatically will be deemed
to have accepted all further options to be granted on subsequent Entry Dates
unless he or she withdraws from the MSPP or reaches one of the limitations
described in the preceding paragraph. A member's subscription to
purchase shares during a quarter may be reduced by the Committee without notice
to the member to the extent necessary to avoid exceeding a limitation imposed by
the MSPP or by law.
Purchase of
Stock. The
purchase of shares of Common Stock takes place automatically on the last
business day of each fiscal quarter during which the MSPP is in effect (the
"Exercise Date"). The option shall be deemed automatically exercised
on the Exercise Date to the extent of payments received from the
member. If the number of shares which may be registered on any
Exercise Date exceeds the number of shares authorized for issuance under the
MSPP, the shares authorized for issuance will be made available for purchase on
a pro-rata basis.
Participants
may also have cash dividends on all their shares purchased through the MSPP
automatically reinvested. The Corporation's agent (Wells Fargo)
purchases Common Stock on the open market for participants under the dividend
reinvestment program at the full market price, rather than the discounted price
used when exercising options under the MSPP. No commission or service
charge is paid by participants in connection with the purchase of Common Stock
with reinvested dividends under the MSPP.
Price and
Payment. The
option price of shares purchased on any Exercise Date will be 85% of the fair
market value ("FMV") of such stock on the Exercise Date. Payment of
the option price through payroll deductions must be paid in full in U.S. dollars
no later than the applicable Exercise Date. Minimum payroll
deductions are $5.00 for members paid weekly and $10.00 for members paid
bi-weekly. No interest is earned on any money paid by
members.
Termination of
Employment. If a member terminates employment for any reason,
the accumulated funds in his or her account at the time of termination will be
used to purchase shares of Common Stock on the next Exercise Date, and the
member will have no further rights under the MSPP.
Resales by
Affiliates. The resale of Common
Stock acquired upon exercise of options granted under the MSPP is generally not
restricted by the terms of the MSPP. Resales by members who are
officers or directors must comply with Rule 144 under the Securities Act of
1933, but without a six-month holding period.
Rights as a
Shareholder. The members shall have
no rights as shareholders with respect to any Common Stock covered by options
until the options are exercised and the purchase price is paid in
full.
Amendment. The Committee may at any
time amend the MSPP. Except for the adjustments provided for in the
MSPP, approval of shareholders is required for any amendment that (i) increases
the total number of shares available under the MSPP, (ii) materially modifies
the requirements as to eligibility for participation in the MSPP, (iii) causes
the options issued under the MSPP to fail to meet the requirements applicable to
"employee stock purchase plans" as defined in Section 423 of the Code or (iv)
causes the transactions under the MSPP to cease to qualify as exempt
transactions pursuant to Rule 16b-3 under the Exchange Act. In
addition, any amendment that must be approved by shareholders in order to comply
with applicable laws or the rules and listing standards of the NYSE or any other
principal exchange on which the Common Stock is then trading shall not be
effective unless and until such approval has been obtained.
Duration. No options may be
granted pursuant to the MSPP after May 5, 2012.
Inapplicability
of ERISA. The MSPP is unfunded and
does not give participants any rights that are superior to those of the
Corporation's creditors. The MSPP is not subject to the provisions of
the Employee Retirement Income Security Act of 1974 and is not qualified under
Section 401(a) of the Code.
Federal Income
Tax Consequences. The following is a brief
summary of the federal income tax consequences that may occur based on the
federal income tax laws currently in effect. This summary is not
intended to be exhaustive and does not describe state or local tax
consequences.
The MSPP
is intended to qualify as an "employee stock purchase plan" within the meaning
of Section 423 of the Code. Assuming the MSPP continues to qualify
under Section 423 of the Code, participants will not recognize income for
federal income tax purposes either upon enrollment in the MSPP or upon
purchasing shares under the MSPP.
If the
shares are held more than two years from the applicable Exercise Date, the
participant will be taxed on the sale of such shares at long-term capital gains
rates, except to the extent that the participant realizes ordinary income in an
amount equal to the lesser of (i) 15% of the FMV of the shares on the Exercise
Date or (ii) the amount by which the FMV of the shares at the time of the sale
exceeds the purchase price.
If the
shares are not held for the minimum period described in the preceding paragraph,
the participant will have ordinary income in the amount by which the fair market
value of the shares on the Exercise Date exceeded the option
price. This ordinary income is not limited to the gain from the sale
of the stock. The participant's basis in the stock is increased by
the amount of the ordinary income. The difference between the
increased basis and the selling price of the stock is a capital gain or
loss.
If a
participant should die owning shares acquired under the Plan, he or she will be
deemed to have disposed of his or her shares on the date of death and will
realize ordinary income to the extent of the ordinary income component described
in the preceding paragraphs, as applicable, but no capital gain will result
until the time of a subsequent sale, when the amount of gain will typically be
equal to the excess of the selling price over the FMV of the shares on the date
of death or the alternative valuation date for federal estate tax
purposes.
Required
Vote
Approval
of the amendment of the MSPP requires the affirmative vote of the holders of a
majority of the Outstanding Shares entitled to vote at the Meeting.
Recommendation
of the Board
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THE
BOARD RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE MSPP TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AVAILABLE FOR ISSUANCE UNDER
THE MSPP.
|
PROPOSAL NO.
3 –– RATIFICATION OF AUDIT COMMITTEE'S SELECTION OF
PRICEWATERHOUSECOOPERS
LLP AS THE CORPORATION'S INDEPENDENT
REGISTERED
PUBLIC ACCOUNTANT FOR FISCAL 2009
The Audit
Committee has selected PricewaterhouseCoopers LLP as the Corporation's
independent registered public accountant for Fiscal 2009.
The Board
proposes that the shareholders ratify the selection by the Audit Committee of
PricewaterhouseCoopers LLP to serve as the Corporation's independent registered
public accountant for Fiscal 2009. The Audit Committee is directly
responsible for the appointment of the independent registered public
accountant. Although shareholder ratification of the Audit
Committee's selection of the independent registered public accountant is not
required by the By-laws or otherwise, the Corporation is submitting the
selection of PricewaterhouseCoopers LLP to its shareholders for ratification to
permit shareholders to participate in this important decision. If the
shareholders fail to ratify the Audit Committee's selection of
PricewaterhouseCoopers LLP as the Corporation's independent registered public
accountant for Fiscal 2009 at the Meeting, the Audit Committee will reconsider
the selection, although the Audit Committee will not be required to select a
different independent registered public accountant. Representatives
of PricewaterhouseCoopers LLP will be present at the Meeting, have an
opportunity to make a statement if they so desire and be available to respond to
appropriate questions.
Recommendation
of the Board
|
THE
BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE AUDIT COMMITTEE'S
SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE CORPORATION'S INDEPENDENT
REGISTERED PUBLIC ACCOUNTANT.
|
AUDIT COMMITTEE REPORT
The Board
has adopted a written charter for the Corporation's Audit
Committee. A current copy of the charter is available on the
Corporation's website at www.hnicorp.com,
under "Corporate Governance –
Committee Charters." The primary functions of the Audit
Committee are set forth in its charter and on page 8 of this Proxy Statement
under "Board
Committees."
All
members of the Audit Committee are independent as defined in Section 303A.02 of
the NYSE Listed Company Manual, Exchange Act Rule 10A-3(b)(1) and the
Categorical Standards.
Management
has represented to the Audit Committee that the Corporation's consolidated
financial statements were prepared in accordance with accounting principles
generally accepted in the United States of America, and the Audit Committee has
reviewed and discussed the consolidated financial statements with management and
PricewaterhouseCoopers LLP, the Corporation's independent registered public
accountant. Management has also represented that it has assessed the
effectiveness of the Corporation's internal control over financial reporting as
of January 3, 2009, and has determined that, as of that date, the Corporation
maintained effective internal control over financial reporting. The
Audit Committee has reviewed and discussed with management and the Corporation's
independent registered public accountant this assessment of internal control
over financial reporting. The Audit Committee has also discussed with
the Corporation's independent registered public accountant its evaluation of the
accounting principles, practices and judgments applied by management, and the
Audit Committee has discussed any items required to be communicated to it by the
Corporation's independent registered public accountant in accordance with
regulations promulgated by the SEC and the Public Company Accounting Oversight
Board, including, but not limited to, the matters required to be discussed by
PCAOB AU Section 380 and PCAOB Rule 3600T.
The Audit
Committee received and reviewed the written disclosures and the letter from the
Corporation's independent registered public accountant required by applicable
requirements of the Public Company Accounting Oversight Board regarding the
Corporation's independent registered public accountant's communications with the
Audit Committee concerning independence, and discussed with the Corporation's
independent registered public accountant its independence.
Based on
the reviews and discussions referred to above, the Audit Committee recommended
to the Board that the financial statements referred to above be included in the
Corporation's Annual Report on Form 10-K for the year ended January 3, 2009, for
filing with the SEC.
AUDIT
COMMITTEE
Miguel M.
Calado, Chair
James R.
Jenkins
Joseph E.
Scalzo
Ronald V.
Waters, III
The
following table sets forth the aggregate fees billed to the Corporation for the
audit and other services provided by PricewaterhouseCoopers LLP for Fiscal 2008
and for Fiscal 2007:
|
Fiscal 2008
|
Fiscal 2007
|
|||||||
|
Audit
Fees (1)
|
$ | 1,148,504 | $ | 986,459 | ||||
|
Audit-Related
Fees
|
- | - | ||||||
|
Tax
Fees
|
- | - | ||||||
|
All
Other Fees
|
- | - | ||||||
|
Total
|
$ | 1,148,504 | $ | 986,459 | ||||
|
(1)
|
|
Audit
fees represent fees for professional services provided in connection with
the audit of the financial statements, review of quarterly financial
statements and audit services provided in connection with other statutory
or regulatory filings.
|
Pre-Approval
of Fees
The Audit
Committee has delegated to the Chair of the Audit Committee authority to
pre-approve audit-related and non-audit services not prohibited by law to be
performed by the Corporation's independent registered public accountant and
associated fees. The Chair must report any decisions to pre-approve
such audit-related or non-audit related services and fees to the Audit Committee
at its next regular meeting. All of the fees incurred in Fiscal 2008
and Fiscal 2007 were approved by the Audit Committee.
REVIEW, APPROVAL
OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS
The
Corporation has adopted a written policy (the "Policy") for review of
transactions between the Corporation (including the Corporation's subsidiaries)
and its Directors, executive officers and other related persons. The
transactions subject to the Policy include any transaction, arrangement or
relationship (including charitable contributions and including any series of
similar transactions, arrangements or relationships) with the Corporation in
which any Director, executive officer or other related person has a direct or
indirect material interest except:
|
·
|
Transactions
available to all members generally;
|
|
·
|
Transactions
involving less than $100,000 when aggregated with all similar
transactions;
|
|
·
|
Transactions
involving compensation or indemnification of executive officers and
Directors duly authorized by the appropriate Board
committee;
|
|
·
|
Transactions
involving reimbursement for routine expenses in accordance with
Corporation policy; and
|
|
·
|
Purchases
of any products on the same terms available to all members
generally.
|
The
Corporation's Office of the General Counsel (the "General Counsel") performs the
initial review of all transactions subject to the Policy. Factors to
be considered by the General Counsel in reviewing the transaction
include:
|
·
|
Whether
the transaction is in conformity with the Corporation's Collective &
Personal Integrity Manual (our code of business conduct and ethics), the
Governance Guidelines, the By-laws and other related policies, including
Outside
|
|
|
Business
Activities of Officers and Managers, Outside Directorships of Officers and
Conflicts of Interest, and is in the best interests of the
Corporation;
|
|
·
|
Whether
the transaction would be in the ordinary course of the Corporation's
business;
|
|
·
|
Whether
the transaction is on terms comparable to those that could be obtained in
arm's length dealings with an unrelated third
party;
|
|
·
|
The
disclosure standards set forth in Item 404 of Regulation S-K or any
similar provision; and
|
|
·
|
Whether
the transaction could call into question the status of any Director or
Director nominee as an independent director under the NYSE listing
standards pertaining to director independence and the Categorical
Standards.
|
After
reviewing the terms of the proposed transaction and taking into account the
factors set forth above, the General Counsel will either:
|
·
|
Approve
the transaction if it is to be entered into in the ordinary course of the
Corporation's business, is for an aggregate amount of $120,000 or less and
is on terms comparable to those that could be obtained in arm's length
dealings with an unrelated third
party;
|
|
·
|
Disallow
the transaction if it is not in the best interests of the
Corporation;
|
|
·
|
Recommend
that the Audit Committee review the transaction in advance;
or
|
|
·
|
Allow
the transaction, subject to ratification by the Audit Committee, but only
if the interests of the Corporation will be best served by allowing the
transaction to proceed.
|
At each
regularly scheduled Audit Committee meeting, the General Counsel shall report
each known transaction to be entered into by the Corporation and to be
considered by the Audit Committee, including the proposed aggregate value of
each transaction and any other relevant information. After review,
the Audit Committee shall approve, ratify or disallow each such transaction in
accordance with the guidelines set forth above.
For
purposes of the Policy, an "executive officer" is an executive officer of the
Corporation subject to Section 16 of the Exchange Act.
For
purposes of the Policy, a "related person" is:
|
·
|
An
executive officer, Director or Director nominee of the
Corporation;
|
|
·
|
A
person who is an immediate family member (including a person's spouse,
parents, stepparents, children, stepchildren, siblings, fathers- and
mothers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law,
and anyone (other than members) who share such person's home) of an
executive officer, Director or Director
nominee;
|
|
·
|
A
shareholder owning in excess of 5 percent of the Corporation's voting
securities (or its controlled affiliates), or an immediate family member
of such 5 percent shareholder; or
|
|
·
|
An
entity which is owned or controlled by a related person or an entity in
which a related person has a substantial ownership
interest.
|
CODE OF BUSINESS
CONDUCT AND ETHICS
The
Corporation maintains a Collective & Personal Integrity Manual (our code of
business conduct and ethics) (the "Ethics Code") as part of its corporate
compliance program. The Ethics Code applies to all Directors and
members, including the Corporation's principal executive officer, principal
financial officer, principal accounting officer or controller or persons
performing similar functions. The Ethics Code is available on the
Corporation's website at www.hnicorp.com,
under "Corporate
Governance—Code of Conduct." The Corporation intends to
disclose amendments to or waivers of the Ethics Code granted to the individual
executive officers listed above and the Directors on the Corporation's website
within four business days of such amendment or waiver. Shareholders
may request a paper copy of the Ethics Code by writing to the Corporate
Secretary at HNI Corporation, 408 East Second Street, Muscatine, Iowa
52761.
The
Governance Guidelines are available on the Corporation's website at www.hnicorp.com,
under "Corporate
Governance—Governance Guidelines." Shareholders may request a
paper copy of the Governance Guidelines by writing to the Corporate Secretary at
HNI Corporation, 408 East Second Street, Muscatine, Iowa 52761.
Overview
of Objectives
Our
executive compensation program has a pay-for-performance philosophy that aligns
the interests of executives with those of our shareholders. The
program is designed to support annual and long-term business goals by rewarding
our executives for creating aggressive profitable growth and long-term value for
shareholders.
The
objectives of our executive compensation program are to:
|
|
·
|
attract,
motivate and retain highly qualified
executives;
|
|
|
·
|
link
total compensation to both individual performance and the performance of
the Corporation or relevant operating unit or operating
segment;
|
|
|
·
|
appropriately
balance incentives for short-term and long-term performance;
and
|
|
|
·
|
align
executive and shareholder interests by including equity as a component of
total compensation.
|
Elements
of Compensation Program
Our
executive compensation program includes three elements: base salary,
annual incentive compensation under the Executive Plan and long-term incentive
compensation under the Performance Plan and the 2007 Compensation
Plan. We believe that total compensation is the key factor in
determining the level of compensation for our executives and, using the market
compensation survey reports described below, we consider all three elements of
executive compensation in determining the amounts for each individual
element.
Our
executive compensation strategy is to target total compensation, including base
salary, short-term or annual incentives and long-term incentives, at
approximately 100 percent of the market median. Our compensation
strategy emphasizes pay for performance by setting base salary targets at
approximately 90 percent of the market median and allocating a greater portion
of executive compensation to performance-based incentive compensation
programs.
Base
Salary
Base
salary is the basic element of our executive compensation program and the
foundation for setting our incentive compensation target awards. The
Compensation Committee, together with the other independent Directors, evaluates
and approves the base salary of the Corporation's Chairman, President and Chief
Executive Officer (the "CEO"). The Compensation Committee approves
the base salary for the Corporation's Vice President and Chief Financial Officer
(the "CFO") and the three other most highly compensated
executives. Throughout the CD&A, the CEO, CFO and three other
most highly compensated executives are referred to collectively as the "Named
Executive Officers."
Criteria for
Determining Base Salary. We derive the base salary market
median from the three market compensation survey reports discussed in further
detail below. As disclosed above, the Compensation Committee
generally sets base salary targets at approximately 90 percent of the market
median. In most cases, the Compensation Committee sets base salary
for an executive between 80 and 120 percent of the below-market base salary
target resulting in a range of between 72 and 108 percent of the market
median. Based on individual circumstances, however, actual base
salaries may be higher or lower. For Fiscal 2008, the base salaries
for each of the Named Executive Officers fell within the base salary range noted
above. The Compensation Committee uses the following factors in
determining base salary, including when it considers setting base salary outside
of the established base salary range:
|
|
·
|
the
duties, complexities and responsibilities of the
position;
|
|
|
·
|
salary
levels of comparable positions both within and outside the Corporation
which are based in part on the survey reports described
below;
|
|
|
·
|
potential
for advancement;
|
|
|
·
|
individual
performance and competency; and
|
|
|
·
|
the
length and nature of a Named Executive Officer's
experience.
|
The
Compensation Committee annually reviews base salaries paid to the Corporation's
executives using the following commercially available, broad-based, comparative
market compensation survey reports developed by independent professional
organizations (collectively, the "Survey Reports"):
|
|
·
|
Towers
Perrin Human Resources Services ("Towers Perrin") Compensation Data Bank –
Executive Compensation Database – Single Regression Report dated March 1,
2008;
|
|
|
·
|
Mercer
– US Mercer Benchmark Database – Executive Survey dated March 1, 2008;
and
|
|
|
·
|
Watson
Wyatt Data Services ("Watson Wyatt") – CompQuest Online – Top Management
Compensation dated April 1, 2008.
|
The
Survey Reports made available by Towers Perrin, Mercer and Watson Wyatt cover a
significant number of companies over a broad range of industries. A
list of companies participating in the Survey Reports is attached to this Proxy
Statement as Appendix
A.
For
purposes of the Compensation Committee's review, management provides information
that combines and averages market data from the Survey Reports to balance data
outliers and increase reliability. No particular industry peer group
is selected for competitive review because we compete for executives within
industries other than the office furniture and hearth products
industries. The Compensation Committee believes that the size of the
business and scope of the executive officer's responsibility are the most
important benchmarking factors for attracting and retaining executive
officers. In establishing appropriate compensation targets for our
executives, management correlates business revenue and compensation across
various industries to compare executives with responsibilities of similar size
and scope.
Based on
the factors identified above and the data derived from the Survey Reports, the
Board or the Compensation Committee, as the case may be, has typically increased
the annual base salary for each of the Named Executive Officers at the
Compensation Committee's annual review of each such officer's base
salary. The Compensation Committee normally conducts annual base
salary reviews at the Board meeting prior to the anniversary date of each
officer's appointment. The Compensation Committee conducts the CEO's
annual base salary review at the February Board meeting. At the
February 2008 Board meeting, the CEO requested he not be considered for a base
salary increase at such time due to economic uncertainty. The
Compensation Committee honored his request. Due to recent adverse
market conditions and the financial performance of the Corporation, for Fiscal
2009, management recommended and the Compensation Committee approved a freeze in
the annual base salaries of each of the Named Executive
Officers. This is the second year in a row in which the CEO requested
he not receive a base salary increase.
Fiscal 2008 Base
Salary. In Fiscal 2008, the Compensation Committee, after
reviewing the criteria described above, set (1) base salary targets for each
Named Executive Officer, except the CEO whose base salary remained unchanged, at
approximately 90 percent of the market median, which was derived from the Survey
Reports as described above and (2) base salaries for each Named Executive
Officer between 80 and 120 percent of the base salary target. The
table below sets forth for each Named Executive Officer the
following: annual base salary as of the last day of Fiscal 2008;
market median annual base salary for comparable positions based on our review of
the Survey Reports; annual base salary as a percentage of market median; annual
base salary target (90 percent of market median annual base salary); and annual
base salary as a percentage of target. The variations in annual base
salary among each of the Named Executive Officers are based on their individual
performance against the criteria for determining base salary set forth
above.
|
Named
Executive Officer (1)
|
Annual
Base Salary
($)
(2)
|
Market
Median Annual Base Salary ($)
|
Percentage
of Market Median (%)
|
Annual
Base Salary Target ($)
|
Percentage
of Annual Base Salary Target (%)
|
|
Stan
A. Askren
Chairman,
President and Chief Executive Officer,
HNI
Corporation
|
735,004
|
849,780
|
86
|
764,800
|
96
|
|
Kurt
A. Tjaden
Vice
President and Chief Financial Officer,
HNI
Corporation
|
330,000
|
408,010
|
81
|
367,210
|
90
|
|
Bradley
D. Determan
Executive
Vice President,
HNI
Corporation
President,
Hearth
& Home Technologies Inc.
|
330,000
|
364,420
|
91
|
327,980
|
101
|
|
Named Executive
Officer (1)
|
Annual Base Salary
($)
(2)
|
Market Median
Annual
Base Salary ($)
|
Percentage of
Market
Median (%)
|
Annual Base
Salary
Target ($)
|
Percentage of Annual
Base
Salary Target (%)
|
|
Jerald K.
Dittmer
Executive Vice President,
HNI Corporation
President, The HON Company
|
355,000
|
421,200
|
84 | 379,080 | 94 |
|
Marco V.
Molinari
Executive Vice President,
HNI Corporation
President,
HNI International Inc.
|
332,300 | 379,670 | 88 | 341,700 | 97 |
|
Notes
|
|
|
(1)
|
On
March 10, 2008, Mr. Dittmer resigned his position as Vice President and
Chief Financial Officer of the Corporation to become an Executive Vice
President of the Corporation and President of The HON
Company. On April 1, 2008, Mr. Askren was appointed the acting
Chief Financial Officer and held that position until August 25, 2008, when
Mr. Tjaden was appointed the Vice President and Chief Financial Officer of
the Corporation.
|
|
(2)
|
This
column sets forth the annual base salary for each of the Named Executive
Officers as of the last day of Fiscal 2008, which amounts differ from
those set forth in the salary column of the Summary Compensation Table for
Fiscal 2008, Fiscal 2007 and Fiscal 2006 (the "Summary Compensation
Table"). The amounts set forth in the salary column of the
Summary Compensation Table reflect the actual salary earned by each of the
Named Executive Officers during Fiscal 2008. We typically
increase the annual base salary for each of the Named Executive Officers
once per year at the Board meeting prior to the anniversary date of their
appointment and such increases are usually 10 percent or
less. For example, on February 12, 2008, the Compensation
Committee approved a 4 percent increase to Mr. Molinari's annual base
salary from $319,501 to $332,300 beginning April 20,
2008. Hence, for the first 16 weeks of Fiscal 2008, Mr.
Molinari earned $98,308, and for the last 37 weeks of Fiscal 2008, Mr.
Molinari earned $236,444, for a total salary earned during Fiscal 2008 of
$334,752. In addition, the Corporation follows a 52/53-week
fiscal year which ends on the Saturday nearest December
31. Fiscal 2008 ended on Saturday, January 3, 2009, and is a
53-week year. This means each of the Named Executive Officers
will have effectively earned an additional week of salary in Fiscal
2008. The amounts set forth in the salary column of the Summary
Compensation Table reflect this additional week of salary for each of the
Named Executive Officers.
|
Annual
Incentives
The Named
Executive Officers are eligible for annual incentive compensation under the
Executive Plan, which was re-approved by shareholders at the 2005 annual meeting
of shareholders. We use the Executive Plan to motivate executives annually
to achieve specific financial performance goals and individual strategic
objectives. The Compensation Committee approves the annual incentive
targets, set as a percent of base salary, for each of the Named Executive
Officers except the CEO, whose target is approved by the independent Directors
after recommendation by the Compensation Committee. The CEO's 2008 annual
incentive target is equal to 100 percent of the CEO's annual base salary as of
the end of Fiscal 2008. The other Named Executive Officers have a
2008 annual incentive target of 75 percent of their annual base salary as
of the end of Fiscal 2008. The CEO's annual incentive target is a
greater percentage of his annual base salary than the targets for the other
Named Executive Officers because the CEO has the greatest potential impact on
the Corporation's annual strategic objectives.
As noted
above, our executive compensation strategy is to target total compensation,
including base salary, annual or short-term incentives and long-term incentives,
at approximately 100 percent of the market median. The Compensation
Committee believes that the market level of incentive compensation remains
relatively consistent from year to year and, accordingly, retains an independent
consultant every three to five years to conduct a thorough, competitive review
and analysis of our total executive compensation program. Mercer most
recently conducted this analysis in late 2004 (the "Compensation Analysis"), and
the Compensation Committee utilized this analysis to establish annual and
long-term incentive targets for the Named Executive Officers for 2005, 2006,
2007 and 2008. Management annually monitors the market level of
annual and long-term incentive compensation using the Survey Reports and the
same benchmarking approach as described above under "Base Salary – Criteria for Determining Base
Salary" on page 17 of this Proxy Statement.
The
Compensation Committee typically establishes or recommends to the Board for
approval annual incentive targets under the Executive Plan for each of the Named
Executive Officers slightly above the market median for annual incentive
compensation to offset the fact that base salary targets are set slightly below
the market median, emphasize pay for performance and encourage the achievement
of established financial performance goals and individual strategic
objectives. The above-market annual incentive targets, after taking
into account the below-market base salary targets, provide an opportunity for
Named Executive Officers to earn market-competitive cash
compensation. To achieve a payout at 100 percent of target,
executives must achieve superior results relative to economic and competitive
conditions.
The
annual incentives are weighted 60 percent on attainment of the Corporation's (or
one of the Corporation's particular operating unit's) annual financial
performance goals and 40 percent on attainment of individual strategic
objectives. We believe this weighting encourages the proper focus by
the Named Executive Officers on both annual financial returns and individual
contributions to the Corporation's strategic objectives.
Financial
Goals. We believe financial performance goals
create a strong and objective link between executive compensation and
shareholder value creation. We use economic profit as the measurement
for financial performance goal achievement because it promotes the simultaneous
optimization of growth, earnings and capital efficiency. We define
economic profit as after-tax operating profit less a capital charge for invested
capital. We believe economic profit is the best indicator of
long-term shareholder value creation and correlates well with long-term stock
price appreciation because it accounts for the investment required to generate a
return by including a capital charge on invested capital.
Each
year, the Compensation Committee evaluates historical performance, peer
performance, external macroeconomic forecasts, market performance expectations
for the Corporation and industry peers and other relevant data to determine the
reasonableness of all financial performance goals and maintain an alignment of
pay and performance. In addition, management prepares an annual
financial plan that the Board approves and the Compensation Committee utilizes
to establish economic profit goals that the Board also approves. The
economic profit goals are based on current strategic market conditions (e.g.,
downturn in the housing market or strong corporate earnings) and business
opportunities (e.g., launch of new product line or integration of recently
acquired business) factored into the annual financial plan.
The
Compensation Committee ties the economic profit goals to a predetermined payout
percentage set forth in an award matrix. Payout achievement
percentages range between 0 and 200 percent of target based on economic profit
achievement. As part of our compensation philosophy, the Compensation
Committee establishes and, in 2008 established, economic profit achievement
representing a 100 percent payout level as an aggressive but achievable goal for
the Corporation as a whole or any operating unit based on economic and
competitive conditions at the time goals are established. If a
threshold level of economic profit is not achieved, no payout is made with
respect to the financial component of the annual incentive. Economic
profit achievement representing a 50 percent payout level reflects threshold
performance required to receive a payout, while economic profit achievement
representing a 200 percent payout level reflects the maximum incentive for
exceptional performance. We expect that (1) payout levels will be
between 80 and 120 percent of target in most years and average approximately 100
percent of target over time and (2) failure to achieve a 50 percent payout level
or achievement of a 200 percent payout level will occur
infrequently.
The Board
sets separate economic profit goals for the Corporation and each operating unit
to align executives' interests with the financial performance of either the
Corporation or their individual area of responsibility, which may be one or more
individual operating units. The goals of the CEO and the CFO are
linked to the overall economic profit of the Corporation. The goals
of the other Named Executive Officers are linked to the economic profit of their
specific areas of responsibility.
The
financial component of the annual incentive awards for Messrs. Askren and Tjaden
is based on achievement of the economic profit goal of the Corporation as a
whole because both are executive officers of the Corporation and responsible for
its overall economic performance. For Fiscal 2008, the economic
profit goal for the Corporation as a whole was $40,952,000.
The
financial component of Mr. Determan's annual incentive award is based on
achievement of the economic profit goal of Hearth & Home Technologies Inc.
("HHT"), the Corporation's operating unit for which he is responsible (HHT is
the only operating unit included in the Corporation's hearth products operating
segment). The economic profit goal for Fiscal 2008 for HHT was
$(17,944,000), and economic profit achievement was $(21,275,000).
The
financial component of Mr. Dittmer's annual incentive award is based partially
on the achievement of the economic profit goal of the Corporation as a whole and
partially on achievement of the economic profit goal of The HON Company ("HON"),
the Corporation's operating unit for which he is responsible. This
proration is a result of Mr. Dittmer serving as Chief Financial Officer of the
Corporation for part of the year and as President of HON for the remainder of
the year. The financial component of Mr. Molinari's annual incentive
award is based on achievement of the economic profit goals of HNI International
Inc. ("HNII"), the Corporation's operating unit for which he is responsible, and
HNI Hong Kong Limited, or Lamex, the Corporation's Chinese subsidiary for which
he is also responsible. In addition, the financial component of Mr.
Molinari's annual incentive award is increased or decreased based on the level
of Lamex sales (i.e., for a given level of economic profit achievement, the
greater the level of Lamex sales, the greater the financial component of Mr.
Molinari's annual incentive award). The Corporation considers the
economic profit goals and achievements of HON, HNII and Lamex to be
confidential.
As for
all Named Executive Officers, the economic profit performance goals for Messrs.
Dittmer and Molinari require superior performance by such officers and their
corresponding operating units and areas of
responsibility. Nonetheless, because we expect superior performance
on a consistent basis, the Corporation and its operating units expect to achieve
the annual economic profit performance goals when such goals are
established. Accordingly, we expect Messrs. Dittmer and Molinari to
achieve 100 percent of target over time on the financial incentive component of
their respective annual incentive compensation awards under the Executive
Plan.
The
amount of the annual incentive attributable to financial performance goals for
each of the Named Executive Officers is listed in the chart on the following
page. The chart also includes specific payouts and target percentages
for each of the Named Executive Officers. In Fiscal 2008, Messrs.
Askren, Tjaden and Dittmer did not receive any payout for that portion of their
annual incentive award attributable to the achievement of financial performance
goals based on the financial performance of the Corporation and HON, which was
adversely affected by the ongoing credit crisis, global recession and uncertain
business climate.
Due to
current economic uncertainty, a rapidly changing business climate and the
associated difficulty with establishing meaningful financial performance goals
for an entire year, for Fiscal 2009, the Compensation Committee (i) reduced the
percent payout level threshold from 50 percent to 25 percent and (ii) bifurcated
the annual performance period into two 6-month performance periods with each
period looked at separately for purposes of determining whether a threshold
level of economic profit was achieved. Any resulting award will be
based on the average achievement of the two 6-month performance
periods. Actual payment of the annual incentive award, as discussed
below, will remain the same for Fiscal 2009.
Individual Strategic
Objectives. Each Named Executive Officer's individual
strategic objectives are based on broad strategic objectives of the Corporation
or a particular operating unit and are defined and measured within the
Corporation's fiscal year. The independent Directors annually review
and approve the CEO's individual strategic objectives. The CEO
annually reviews and approves the individual strategic objectives of each of the
other Named Executive Officers. Individual strategic objectives are
designed to focus each Named Executive Officer on those matters having a
significant impact on his individual area of responsibility. A
summary of each Named Executive Officer's individual strategic objectives for
Fiscal 2008 is set forth below.
Mr. Askren. Mr.
Askren's individual strategic objectives were to (1) enhance customer value and
market impact by building powerful brands, using split and focused business and
selling models and aggressive end-user product and solutions development; (2)
build best cost, lean enterprise by implementing step function cost reductions,
extending lean enterprise to total value stream, becoming a global best-cost
provider and implementing greater Corporation-wide cooperation; and (3) enhance
culture and capabilities by leveraging and enhancing core culture and values,
adding critical business skills and diversifying the workforce and
thinking.
Mr. Tjaden. Mr.
Tjaden's individual strategic objectives were to (1) deploy a strategic plan for
the finance and information technology departments; (2) reduce the Corporation's
operating costs and improve cash flow; and (3) develop a succession plan for key
finance positions and implement a process for improved collaboration among
corporate functions and operating units.
Mr. Determan. Mr.
Determan's individual strategic objectives were to (1) successfully integrate
the Harman acquisition into HHT; (2) strengthen the market position of the
hearth products operating segment by increasing product sales, launching new
programs and implementing a new delivery model; and (3) reduce voluntary
turnover and OSHA recordable and lost-time injuries.
Mr. Dittmer. Mr.
Dittmer's individual strategic objectives were to (1) develop a strategic plan
for new products and product extensions; (2) reduce operating costs of the
business unit; (3) improve the customer buying experience; and (4) align
resources by channel.
Mr. Molinari. Mr.
Molinari's individual strategic goals were to (1) profitably grow Lamex sales in
Asia, expand Lamex dealer distribution and enhance Lamex brand and image; (2)
strengthen the Corporation's international market position through product
development and sourcing capabilities; (3) reduce international operating costs
by implementing Rapid Continuous Improvement initiatives and procurement
processes; (4) develop new international market opportunities; and (5) enhance
international culture and capabilities by improving depth of skill and talent
and improving succession planning processes.
At
year-end, each of the Named Executive Officers evaluates his performance against
his individual strategic objectives. Next, the CEO, after reviewing
these self-evaluations, recommends the achievement percentage for each of the
other Named Executive Officers' individual strategic objectives for Compensation
Committee approval. The independent Directors, after reviewing the
CEO's self-evaluation, determine the achievement percentage of the CEO's
individual strategic objectives.
Achievement
percentages range from 0 to 125 percent. There is no threshold
performance level for the individual strategic objective component of the annual
incentive. The individual strategic objectives of each of the Named
Executive Officers represent aggressive goals that are challenging to
achieve. Historically, achievement of 100% is difficult and most
achievement percentages have ranged between 75 and 95 percent, although future
achievement percentages may vary from year to year. The amount of
annual incentive attributable to individual strategic objectives for each of the
Named Executive Officers is set forth in the chart below.
For each
Named Executive Officer, achievement of individual strategic objectives accounts
for 40 percent of the current year's annual incentive award under the Executive
Plan. If a Named Executive Officer fails to achieve an individual
strategic objective, the portion (40 percent) of the Named Executive Officer's
annual incentive award based solely on achievement of individual strategic
objectives will be reduced. Moreover, the failure to achieve
individual strategic objectives is considered, together with other factors
discussed above under "Base Salary" on page 17 of
this Proxy Statement, by the independent Directors or the Compensation Committee
in establishing the officer's base salary for the following fiscal
year. Due to the importance of each of the Named Executive Officers
to the financial performance of the Corporation, the Compensation Committee also
believes that a low level of achievement by a Named Executive Officer on his
individual strategic objectives could, in some years, negatively impact the
Corporation's or operating unit's financial performance and result in a decrease
in the portion (60 percent) of the officer's annual incentive award based solely
on the Corporation's or operating unit's financial performance.
The chart
below sets forth detailed information regarding the calculation of the annual
incentive awards under the Executive Plan for each of the Named Executive
Officers for Fiscal 2008:
|
Participant
|
01/02/09
Annual
Base
Salary
($)
|
Target
%
of
Annual
Base
Salary
(%)
|
Annual
Incentive
Award
Target
($)
(1)
|
Actual
Annual
Incentive
Award
Attributable
to
Financial
Goals (Financial Performance Goal)
($)
|
Actual
Annual
Incentive
Award
Attributable
to
Strategic
Objectives
(Individual
Strategic
Objective)
($)
|
Annual
Incentive
Award
Payout
($)
|
|
Stan
A. Askren
|
735,004
|
100
|
735,004
|
0
|
276,360
|
276,360
|
|
Kurt
A. Tjaden
|
330,000
|
75
|
85,673
|
0
|
33,584
|
33,584
|
|
Bradley
D. Determan
|
330,000
|
75
|
247,500
|
118,800
|
100,980
|
219,780
|
|
Jerald
K. Dittmer
|
355,000
|
75
|
266,250
|
0
|
101,175
|
101,175
|
|
Marco
V. Molinari
|
332,300
|
75
|
249,225
|
96,749
|
96,699
|
193,448
|
|
Notes
|
|
|
(1)
|
Mr.
Tjaden's annual incentive award target was prorated for Fiscal 2008 based
on his start date of August 25,
2008.
|
The
Compensation Committee recommends and the independent Directors approve the
payment of the CEO's annual incentive award under the Executive
Plan. The Compensation Committee approves the payment of the annual
incentive awards for the other Named Executive Officers. The awards
are paid in February following the fiscal year for which they are earned,
subject to a participant's employment with the Corporation on the last day of
the fiscal year for which an award is earned. The awards are paid in
cash unless the executive requests and the Compensation Committee approves
taking the payment or part of the payment in the form of Common
Stock. All of the Named Executive Officers received 100 percent of
their respective Fiscal 2008 annual incentive awards in cash.
Long-Term
Incentives
We design
long-term incentives to focus executives on long-term value creation and to
provide balance to the annual incentives. We provide long-term
incentives through annual (1) Performance Plan awards with rolling three-year
performance periods or restricted stock unit awards and (2) stock option grants
to select executives, including all of the Named Executive Officers under the
2007 Compensation Plan. As discussed below, in most years we believe
the two types of long-term incentives provide an appropriate balance between
emphasizing financial performance (the Performance Plan) and stock price
performance (stock options). We generally set targeted long-term
incentive compensation for each of the Named Executive Officers at the market
median consistent with our executive compensation strategy noted
above.
The
Compensation Committee approves all long-term incentive award payouts under the
Performance Plan, if any, for the CFO and the three other most highly
compensated executives, whether in the form of cash or stock, in February of the
year following
the end
of the fiscal year for which the incentive awards were earned. For
the CEO, the Compensation Committee recommends long-term incentive award payouts
under the Performance Plan, if any, to the Board for approval. The
Compensation Committee and the Board typically hold scheduled meetings during
the second full week of February after the prior fiscal year's results are
available to facilitate the determination of the Performance Plan awards payouts
for each of the Named Executive Officers.
For
administrative convenience and because year-end results are first available at
that time, the Board typically awards stock options under the 2007 Compensation
Plan only once per year at the Board's February meeting. However, the
Board may grant stock options or Performance Plan awards throughout the year for
a new hire, a significant promotion or other special
circumstances. In Fiscal 2008, the Board granted stock options for
each of the Named Executive Officers, except Mr. Tjaden, at the Board's February
meeting. The Board also granted stock options to Messrs. Dittmer and
Determan at the Board's May meeting and to Mr. Tjaden at the Board's November
meeting. In Fiscal 2009, the Board granted stock options for the
Named Executive Officers effective on February 23, 2009, 12 days after the
Board's February meeting. The reason for the delayed effective date
was, unlike prior years, the Corporation's insider trading window was not yet
open at the time of the Board's February meeting. The trading window
opened February 23, 2009.
The CEO's
long-term incentive award target is equal to 200 percent of base salary, which
approximates the market median for long-term incentive
compensation. In Fiscal 2008, one-quarter of the CEO's long-term
incentive awards, or 50 percent of base salary, was delivered as Performance
Plan awards, and three-quarters, or 150 percent of base salary, was granted as
stock options. The other Named Executive Officers' long-term
incentive award targets are equal to 150 percent of base salary. As
with the CEO, the long-term incentive award target for each of the other Named
Executive Officers is set approximately at the market median. In
Fiscal 2008, one-half, or 75 percent of base salary, of the long-term incentive
awards for Messrs. Determan and Molinari was delivered as Performance Plan
awards, and the other half was delivered as stock options. For
Messrs. Dittmer and Tjaden, one-quarter, or 37.5 percent of base salary, was
delivered as Performance Plan awards, and three-quarters, or 112.5 percent of
base salary, was delivered as stock options. Both Mr. Tjaden's Fiscal
2008 Performance Plan and stock option awards were prorated based on his August
25, 2008 start date. The Compensation Committee and the Board
annually evaluate the award targets and determines the appropriate balance
between Performance Plan awards and stock options for each of the Named
Executive Officers.
Performance
Plan. The
Board approved the Performance Plan in 2000 and amended it in 2004 and
2007. The shareholders approved the Performance Plan at the 2005 annual
meeting of shareholders. The Performance Plan reinforces our goal of
long-term shareholder value creation. Performance Plan awards are
typically granted annually. The payout value of each award is
determined after a three-year performance period and is based on cumulative
economic profit during the three-year period. Economic profit is used
as the performance measure for the Performance Plan for the reasons set forth
above under "Annual Incentives
– Financial Goals" on page 20 of this Proxy Statement.
Awards
under the Performance Plan are based on separate financial goals for the
Corporation overall and each of the Corporation's two operating segments, office
furniture and hearth products. The CEO's and the CFO's performance is
measured against the Corporation as a whole, and the performance of the other
Named Executive Officers is measured against their respective operating
segments.
The
Compensation Committee recommends and the Board approves cumulative three-year
economic profit goals based on the same current strategic market conditions and
business opportunities on which the economic profit goals for the annual
incentive awards are based, but with a longer time horizon (three years as
opposed to one year). Examples of such conditions and opportunities
are noted above under "Annual Incentives – Financial
Goals" on page
20 of this Proxy Statement.
The
Compensation Committee ties the economic profit goals to a predetermined payout
percentage set forth in an award matrix. Performance Plan awards are
not paid unless a threshold level of cumulative economic profit is achieved, but
when paid, range from 50 to 200 percent, depending on cumulative economic profit
achievement, with 100 percent as the target. Fifty percent of target
is the minimum award paid if economic profit exceeds a specified
threshold. If economic profit does not reach the threshold level, no
award is paid. Two hundred percent is the maximum award for
exceptional economic profit performance.
As part
of our compensation philosophy, the Compensation Committee establishes and, in
2008 established, economic profit achievement representing a 100 percent payout
level as an aggressive but achievable goal for the Corporation as a whole or any
operating segment based on economic and competitive conditions at the time goals
are established. We expect payout levels will average approximately
100 percent across multiple performance periods and failure to achieve a 50
percent payout level or achievement of a 200 percent payout level will occur
infrequently.
For the
2006-2008 performance period, the cumulative economic profit goal for the
Corporation as a whole was $273,582,000. The cumulative economic
profit goal for the office furniture operating segment was
$233,546,000. The cumulative economic profit goal for the hearth
products operating segment was $60,547,000. The chart below sets
forth detailed information regarding the calculation of awards under the
Performance Plan for the 2006-2008 performance period for each of the Named
Executive Officers. None of the Named Executive Officers received
payouts under the Performance Plan for the 2006-2008 performance period due to
the financial performance of the Corporation and the office furniture and hearth
products operating segments over the three-year performance
period. This was also based in part on the aggressiveness of the
three-year performance goal, the significant downturn in the housing market and
the current credit crisis, global recession and uncertain business
climate.
|
Name
|
Operating
Segment
|
2006-2008
Performance
Plan
Award Target
($)
(1)
|
2006-2008
Cumulative
Economic
Profit Goal
($)
|
Total
Payout
($)
|
|
Stan
A. Askren
|
HNI
Corporation
|
337,500
|
273,582,000
|
0
|
|
Kurt
A. Tjaden
|
HNI
Corporation
|
N/A
|
N/A
|
0
|
|
Bradley
D. Determan
|
Hearth
Products
|
206,900
|
60,547,000
|
0
|
|
Jerald
K. Dittmer
|
Office
Furniture
|
177,200
|
233,546,000
|
0
|
|
Marco
V. Molinari
|
Office
Furniture
|
222,000
|
233,546,000
|
0
|
|
Notes
|
|
|
(1)
|
Mr.
Tjaden was not granted a 2006-2008 Performance Plan Award Target as he did
not begin employment with the Corporation until August 25, 2008, almost
three years after the Compensation Committee and the Board established the
award targets.
|
The
Compensation Committee approves the payment of Performance Plan awards for the
CFO and the three other most highly compensated executives. For the
CEO, the Compensation Committee recommends payment of Performance Plan awards to
the Board for approval. Awards, if earned, are paid in February
following the close of the applicable three-year performance
period. To encourage Common Stock ownership by executives, one-half
of each award is paid in cash and one-half of each award is paid in Common
Stock. We use the average of the high and low transaction prices of a
share of Common Stock on the date the award is paid to determine the number of
shares to issue. The payment of a Performance Plan award is
conditioned upon continued employment through the end of the three-year
performance period. Any early termination of employment other than
due to retirement, death or disability prior to the end of the three-year period
results in forfeiture of any outstanding awards. We believe this
policy motivates executives to focus on long-term value creation and supports
retention.
In Fiscal
2009, the Board granted time-based restricted stock units, or RSUs, to the Named
Executive Officers in place of the typical Performance Plan
awards. The RSUs will vest three years from the date of grant and
represent 80 percent of each of the Named Executive Officers' long-term
incentive awards for Fiscal 2009. The remaining 20 percent of such
awards were granted in the form of stock options. The Compensation
Committee and the Board granted RSUs instead of Performance Plan awards due to
current economic uncertainty, the global recession, the resulting difficulty in
establishing meaningful three-year financial performance goals and to encourage
retention and further align the interests of executives with the interests of
shareholders.
Stock Option
Awards. In Fiscal 2008, the Board granted stock options
pursuant to the 2007 Compensation Plan, which shareholders last approved at the
2007 annual meeting of shareholders. Stock options align the
interests of the Named Executive Officers with the interests of shareholders by
tying a portion of executive compensation to long-term stock
price. The Board limits recipients of stock option grants to a small
number of executives (34 in Fiscal 2008, including all of the Named Executive
Officers) who have the ability through their leadership and strategic actions to
significantly impact the Corporation's long-term performance and, consequently,
its stock price.
Under the
2007 Compensation Plan, the Board grants stock options with an exercise price
equal to the closing price of a share of Common Stock on the date of
grant. Annual grants typically occur at the February Board meeting,
during which the options are authorized, priced and issued. The
amount of income realized by an executive from an option is equal to the stock
appreciation between the grant and the exercise dates, providing direct
alignment between shareholder and executive interests over the long term (i.e.,
increase in stock price). The exercise price may be
paid: (a) in cash; (b) in shares of Common Stock at
fair
market value on the date of delivery; (c) by authorizing the Corporation to
withhold shares of Common Stock, which would otherwise be delivered upon
exercise of the option, having a fair market value equal to the exercise price;
(d) in cash by a broker-dealer to whom the executive has submitted an
irrevocable notice of exercise; or (e) by any combination of the
above.
The
targeted dollar value of stock option awards generally ranges between 25 and 150
percent of an executive's base salary as of the end of the fiscal year prior to
grant. Executives with the ability to significantly impact long-term
strategic objectives typically receive a higher percentage of long-term
incentives in the form of stock options. Consequently, the CEO and
the CFO typically receive a higher percentage of long-term incentives in the
form of stock options than any of the other Named Executive Officers as the
Compensation Committee believes these individuals have the greatest potential
impact on the Corporation's long-term strategic
objectives. Consistent with market practices, we use the
Black-Scholes option valuation method to calculate the number of options
granted, which is based on the targeted dollar value of the
award. All stock options vest four years after the grant date and
expire ten years after the grant date. This provides a balance
between the shorter three-year period Performance Plan awards or RSUs and the
longer term options. Early termination of employment other than due
to retirement, death or disability results in forfeiture of unvested option
awards and a reduction in the exercise period of vested option
awards. We believe this policy motivates executives to focus on
long-term value creation and supports retention.
In Fiscal
2008, the CEO received an option grant equal to 150 percent of his base salary
as of the end of Fiscal 2007, or 126,434 options. The other Named
Executive Officers, other than Mr. Tjaden, received option grants equal to
between 62.5 and 75 percent of their respective base salaries as of the end of
Fiscal 2007 or between 23,258 and 27,480 options.
The Board
authorized, priced ($31.69) and issued stock option grants to each of the Named
Executive Officers, except Mr. Tjaden, in Fiscal 2008 at the regularly scheduled
Board meeting on February 13, 2008. The Board authorized, priced
($22.56) and issued additional stock option grants to Messrs. Dittmer and
Determan at the regularly scheduled Board meeting on May 6, 2008. The
Board authorized, priced ($17.01) and issued a stock option grant to Mr. Tjaden
at the regularly scheduled Board meeting on November 7, 2008.
The Board
granted the stock option awards to Messrs. Determan and Dittmer on May 6, 2008
with a Black-Scholes value of $5.18 per option. Mr. Determan's May 6,
2008 award of 57,915 options was valued at $300,000 and was granted to recognize
his outstanding efforts during the downturn in the housing market and to
encourage retention. The award to Mr. Dittmer of 17,133 options on
May 6, 2008 was valued at $88,750 and was granted to recognize his promotion to
Executive Vice President of the Corporation and President of HON. The
award to Mr. Tjaden of 36,923 options on November 7, 2008 was valued at
$135,507, with a Black-Scholes value of $3.67 per option. The Board
approved this award to reflect Mr. Tjaden's appointment as Vice President and
Chief Financial Officer of the Corporation.
We make
no attempt to influence executive compensation by timing the stock option grants
in coordination with disclosure of material information to the public which may
result in an increase or decrease of the stock price. See the option
valuation chart below for additional details regarding stock option awards in
Fiscal 2008 for each of the Named Executive Officers:
|
Name
|
Targeted
Value of
Options
Granted in
2008
(February)
($)
|
Targeted
Value of
Options
Granted in
2008
(Special Grant)
($)
|
Black-Scholes
Value
of
Stock
Option
($)
(1)
|
Number
of
Options
Granted
(#)
|
Percentage
of
Base
Salary
(%)
|
|
Stan
A. Askren
|
1,102,504
|
N/A
|
8.72
|
126,434
|
150
|
|
Kurt
A. Tjaden
|
N/A
|
135,507
|
3.67
|
36,923
|
N/A
|
|
Bradley
D. Determan
|
215,183
|
300,000
|
8.72
5.18
|
24,677
57,915
|
75
N/A
|
|
Jerald
K. Dittmer
|
202,810
|
88,750
|
8.72
5.18
|
23,258
17,133
|
62.5
N/A
|
|
Marco
V. Molinari
|
239,626
|
N/A
|
8.72
|
27,480
|
75
|
|
Notes
|
|
|
(1)
|
The
Black-Scholes option value for award purposes differs from the
Black-Scholes option value calculated in accordance with Financial
Accounting Standards Board Statement of Financial Accounting Standards No.
123 (revised 2004), Share-Based Payment, or FAS 123(R), for financial
statement reporting purposes. The difference between the
Black-Scholes option value for award purposes and the Black-Scholes option
value for financial statement reporting purposes results from utilizing a
ten-year option life when calculating the value of an award and a
seven-year expected option life when reporting the value of the award
under FAS 123(R). Our utilization of
the
|
|
|
ten-year
option life when calculating the value of an award results in fewer
options granted to executives due to the higher option value
produced.
|
Other
Compensation Elements
Supplemental
Retirement Plan. The ESRP is available to select key
executives who consistently earn income above compensation caps on our qualified
plan (i.e., 401(k) plan) and cash profit-sharing benefits. The 2008
statutory compensation limit for qualified plan and cash profit-sharing benefits
was $230,000. Any compensation in excess of that amount is excluded
from the eligible earnings used to calculate such benefits.
Each
year, the Compensation Committee approves and the Board ratifies participation
in the ESRP. The ESRP provides a benefit to the plan's participants,
including the Named Executive Officers, equal to the additional amounts the
participants would have earned had the qualified plan and cash profit-sharing
benefits not been subject to compensation caps, except no income attributable to
the Performance Plan is considered. The benefit is paid on an
after-tax basis in the form of fully vested shares of Common Stock issued under
the 2007 Compensation Plan and bear a restrictive legend prohibiting the
transfer by sale, pledge, gift or otherwise while the participant is employed by
the Corporation. We calculate the number of shares of Common Stock by
dividing the amount of the benefit by the average of the high and low
transaction prices of a share of Common Stock on the date the award is paid,
with cash payable in lieu of any fractional share. The Corporation
pays all ESRP awards on February 15 (or the next closest business day if such
day is a weekend or holiday) of each year. Participation in the ESRP
is provided to assure the overall competitiveness of our executive compensation
program. The transfer restriction is intended to facilitate long-term
stock ownership by executives, thereby further aligning the interests of
executives with the interests of shareholders.
Deferred
Compensation Plan. Executives eligible for compensation under
the Executive Plan, which include all of the Named Executive Officers, are
eligible to participate in the HNI Corporation Executive Deferred Compensation
Plan (the "Deferred Plan"). The Deferred Plan allows executives to
voluntarily defer base salary, Executive Plan awards, profit sharing,
Performance Plan awards and other amounts. The purpose of the
Deferred Plan is to provide eligible executives the opportunity to voluntarily
defer the receipt of compensation to supplement retirement and achieve personal
financial planning goals. Amounts can be deferred to a cash account
that earns interest at a rate set each year at one percent above the prime
interest rate or to our notional stock account that fluctuates in value based on
the price increase or decrease of Common Stock and earns dividends distributed
to all shareholders. The only Named Executive Officer currently
participating in the Deferred Plan is the CEO.
Profit-Sharing
Retirement Plan. Each of the Named Executive Officers
participates in the HNI Corporation Profit-Sharing Retirement Plan (the
"Retirement Plan"). The Retirement Plan is a defined contribution
plan that includes both pre- and after-tax member contributions as well as
various employer contributions and is generally available to all
members. Members are eligible to make voluntary (pre- and/or
after-tax) contributions immediately upon hire. One year of service
is typically required to be eligible for employer contributions. Each
of the Named Executive Officers, with the exception of Mr. Tjaden, is eligible
for employer contributions.
Cash
Profit-Sharing Plan. Each of the Named Executive Officers,
with the exception of Mr. Tjaden, participates in and is eligible for
distributions under the HNI Corporation Cash Profit-Sharing Plan (the "Cash
Profit-Sharing Plan"). The Cash Profit-Sharing Plan consists of cash
profit-sharing calculated and generally paid twice per year. The
actual amount of the profit-sharing benefit paid is based upon the profitability
(net profit) of each respective operating unit for those members employed by an
operating unit or consolidated adjusted net profit of the Corporation for those
members employed directly by the Corporation. Members (who are not
members of a bargaining unit) are generally eligible to participate after
completion of one year of continuous service. To be eligible for
distribution, a member must be (1) employed at the date of distribution, (2)
retired in accordance with the retirement policy during the most recent
profit-sharing period or (3) on leave of absence or disability pay.
Perquisites. We do not provide
executives with any special perquisites, such as reserved parking spaces,
company cars, country club memberships or personal use of the Corporation's
aircraft. Executives participate in the same health, retirement,
profit sharing, disability and life insurance programs and member stock purchase
plan as other members.
Post-Employment
and Other Events
Retirement,
death, disability and change in control ("CIC") events trigger the payment of
certain compensation to the Named Executive Officers that is not available to
all salaried members. Such compensation is discussed below and
quantified under "Potential Payments Upon Termination or
Change in Control" on page 36 of this
Proxy Statement.
Change in Control
Employment Agreements. We have entered into CIC Agreements with
certain corporate officers and other key managers, including each of the Named
Executive Officers. In 2006, the Compensation Committee retained Mercer to
advise the Compensation Committee on the competitiveness and appropriateness of
the form of CIC Agreement and to recommend changes. After
thorough analysis, the Board adopted an amended and restated agreement,
determining it was in the best interest of shareholders. The
description of the amended form of agreement set forth below is qualified in its
entirety by the actual form of CIC Agreement, attached as Exhibit 10.1 to the
Corporation's Current Report on Form 8-K filed November 16, 2006.
The CIC
Agreement is designed to (1) assure the continuity of executive management
during a threatened takeover and (2) ensure executive management is able to
objectively evaluate any CIC proposal and act in the best interests of
shareholders during a possible acquisition, merger or combination. We
designed the agreement to be part of a competitive compensation package,
thereby aiding in attracting and retaining top-quality executives.
The CIC
Agreement defines a CIC as having occurred (1) when a third person or entity
becomes the beneficial owner of 20 percent or more Common Stock, subject to
certain exceptions, (2) when more than one-third of the Board is composed of
persons not recommended by at least three-fourths of the incumbent Board, (3)
upon the occurrence of certain business combinations involving the Corporation
and (4) upon approval by our shareholders of a complete liquidation or
dissolution.
Upon a
CIC, a two-year employment contract between the Corporation and the executive
becomes effective. The executive is entitled to certain benefits if,
at any time within two years of the CIC, any of the following triggering events
occurs: (1) employment is terminated by the Corporation for any reason
other than cause or disability of the executive; or (2) employment is terminated
by the executive for good reason.
Cause is
defined as: (a) an act or acts of dishonesty on the executive's part
that are intended to result in his or her substantial personal enrichment at our
expense; or (b) repeated violations by the executive of his or her obligations
under the agreement which are demonstrably willful and deliberate on the
executive's part and resulted in material injury to the
Corporation. Good reason is defined as: (1) assignment to
the executive of any duties substantially inconsistent with the executive's
position, authority or responsibilities, or any other substantial adverse
changes in the executive's position (including title), authority or
responsibilities; (2) our failure to comply with any of the provisions of the
agreement; (3) a required change of more than 50 miles in the
executive's principal place of work, except for travel reasonably required in
performing the executive's responsibilities; (4) a purported termination of the
executive's employment by the Corporation that is not permitted by the
agreement; (5) our failure to require a successor company to assume the
agreement; or (6) the executive's good faith determination that the CIC resulted
in the executive being substantially unable to carry out authorities or
responsibilities attached to his or her position held prior to the
CIC.
When a
triggering event occurs following a CIC, the executive is entitled to a
severance payment equal to two times (three times for the CEO) the sum of (1)
the executive's annual base salary and (2) the average of the executive's annual
incentive awards for the prior two years. The executive is also entitled
to receive his or her annual salary through the date of termination and a bonus
equal to the average of the executive's annual incentive awards for the prior
two years prorated based on the length of employment during the year in which
termination occurs.
If a
triggering event occurs, the executive is also entitled to a continuation of
certain employee benefits for up to eighteen months and group life insurance
benefits for up to two years if comparable benefits are not otherwise available
to the executive. In addition, the executive is entitled to receive a
lump-sum payment in an amount equal to the present value of the cost of health
and dental coverage for an additional six months and an additional lump-sum
payment equal to the value, in our reasonable determination, of two years of
continued participation in our disability plans.
The
Corporation must fulfill certain obligations to the executive, or pay certain
amounts to the executive, through the date of the executive's termination if, at
any time within two years of the CIC, the executive is terminated by reason of
death, disability or cause, or if the executive terminates employment other than
for good reason. Disability and certain other benefits must be
provided to the executive after the date of termination if the executive is
terminated by reason of disability.
The
Corporation must pay the full amount due under the agreement and "gross-up"
the executive's compensation for any excise tax, for any federal, state and
local income taxes applicable to the excise tax "gross-up" and for tax penalties
and interest imposed on "excess parachute payments" (i.e., excess severance or
CIC payments), as defined in Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code"). A gross-up payment is payable only to the
extent the aggregate present value of the severance or CIC payments payable to
the executive exceeds 110 percent of three times the executive's annualized
includible compensation for the most recent five taxable years ending before the
date on which the CIC occurred. If the 110 percent hurdle is not
exceeded, the severance or CIC payments to the executive are reduced (or repaid
to us) to the minimum extent necessary such that no portion of the executive's
benefit constitutes an excess parachute payment.
In
exchange for receipt of the severance payment, salary, bonus and benefits
pursuant to the agreement as described above, the executive is prohibited, for a
period of one year from the date of termination, from entering into any
relationship with any enterprise, business or division thereof (other than the
Corporation), that is engaged in the same business in those states within the
United States in which we are, at the time of such termination of employment,
conducting our business and which has annual sales of at least
$10,000,000. In addition, the executive shall not, without our prior
written consent, communicate or divulge any confidential information, knowledge
or data relating to us or any of our affiliated companies to anyone other than
us and our designees.
The
executive is entitled to receive reimbursement for any legal fees and expenses,
plus interest thereon, that may be incurred in enforcing or defending his or her
agreement. The agreement is automatically renewed, on an annual basis, for
a period of two years. The Board may terminate the agreement if it
determines that the executive is no longer a key executive; provided, however,
that such a determination shall not be made, and if made shall have no effect,
within two years after the occurrence of a CIC.
The
Compensation Committee's rationale for our CIC Agreements is a desire by the
Compensation Committee to strike an appropriate balance between executive and
shareholder interests, preserve productivity, avoid disruption and limit
distraction during a period when we are, or are rumored to be, involved in a CIC
transaction. The Compensation Committee wants executives to be able
to objectively evaluate any CIC proposal presented to us without being so
advantaged by the potential CIC that he or she would overstate the value of the
potential transaction. Likewise, the Compensation Committee intends
to ease the consequences of an unexpected termination of employment so that
offers that are in our and our shareholders' best interests are given careful
and thoughtful review. In establishing the payment and benefit levels
for each of the Named Executive Officers under their individual CIC Agreements,
the Compensation Committee evaluated several different options and selected the
option that best met the objectives outlined above. The selected
option is also consistent with market practices.
The
Compensation Committee does not view the CIC Agreements as an element of current
compensation, and such agreements do not necessarily affect the Compensation
Committee's annual decisions with respect to the compensation elements of our
executive compensation program. The Compensation Committee receives
and reviews information pertaining to compensation that would be payable to
Named Executive Officers upon a CIC, including information contained in this
Proxy Statement under the heading "Potential Payments Upon Termination or Change
in
Control."
Other
Compensation
Triggered by Change in Control
Event. Pursuant
to both the HNI Corporation Stock-Based Compensation Plan (the "Compensation
Plan") and the 2007 Compensation Plan, upon a CIC, each outstanding option is
immediately exercisable in full and remains exercisable for the remaining term
of the option. Pursuant to the Performance Plan, the Board values
each outstanding Performance Plan award prior to the effective date of a CIC and
such values are payable without proration within 30 days of the date of a
CIC. In addition, pursuant to the Executive Plan, the maximum bonus
award for the current fiscal year is immediately payable in cash on a prorated
basis, offset by the bonus actually paid. The foregoing payments
occurring on or after a CIC are not conditioned on termination of
employment.
Compensation
Triggered By Retirement, Death or Disability. Upon
retirement at age 65, or after age 55 with ten years of service, or upon
disability or death, all outstanding Executive Plan awards, Performance Plan
awards and stock option awards immediately vest. Option holders who
terminate employment due to disability may exercise stock options, which fully
vest as of the date of disability, until the earlier of the expiration date of
the stock option or the second anniversary of the date of
disability. The representative of option holders whose employment is
terminated due to death may exercise stock options, which shall fully vest as of
the date of death, until the earlier of the expiration date of the stock option
or the second anniversary of the date of death. Option holders who
terminate employment due to retirement may exercise stock options, which shall
fully vest as of the date of retirement, until the earlier of the expiration of
the stock option, or the third anniversary of the date of
retirement.
In the
event of a termination of employment not due to a CIC event, retirement, death
or disability, the Named Executive Officers receive only those benefits
available to all members. However, in such event, the Named Executive
Officers may exercise stock options which are vested as of the date of
termination until the earlier of the expiration of the stock option or 180 days
following the date of termination.
Tax
Deductibility of Executive Compensation
The
Corporation seeks to maximize the tax deductibility of all components of
executive compensation. Section 162(m) of the Code ("Section
162(m)") limits the ability of public companies to deduct compensation in excess
of $1,000,000 paid annually to the chief executive officer and the three other
most highly compensated executive officers, not including the chief financial
officer. There are exceptions to this limit, including compensation that
qualifies as "performance-based." The portion of the Executive Plan award
linked to financial performance, the Performance Plan award and stock option
awards comply with the exception to Section 162(m) and are not considered in
determining the $1,000,000 limit.
Impact
of Prior Compensation in Setting Elements of Compensation
Prior
compensation of the Named Executive Officers does not impact how we set elements
of current compensation. The Compensation Committee believes the
competitive environment mandates current total compensation be sufficient to
attract, motivate and retain top management. The Compensation
Committee analyzes outstanding option grants, outstanding plan awards and
ownership of Common Stock for each of the Named Executive Officers to ensure
that future stock option grants, CIC Agreements and other benefits provide
appropriate and relevant incentives to the executives. Based on the
current analysis, the Compensation Committee believes prior compensation will
not impact the ongoing effectiveness of our compensation
objectives.
Executive
Stock Ownership Guideline
We have
adopted an Executive Stock Ownership Guideline based on the belief that key
executives who can impact shareholder value through their achievements should
own significant amounts of Common Stock. Under the guideline, ownership
levels are provided for executives to acquire and hold a recommended amount of
Common Stock based on their position and compensation level. The guideline
is intended to align the interests of key executives with shareholder
interests. The guideline ownership levels range from four times base
salary for the CEO to two times base salary for the other Named Executive
Officers, as shown below:
|
Position
|
$ Value of Shares
|
|
Chairman
of the Board, President and CEO
|
4.0
x Base Salary
|
|
Operating
Company (Unit) Presidents,
Chief
Financial Officer, and Executive Vice Presidents
|
2.0
x Base Salary
|
|
Other
Officers
|
1.5
x Base Salary
|
Executives
to whom the guideline applies are encouraged to reach their respective stock
ownership level within five years of the date the individual assumes an
executive position covered by the guideline. At the February Board
meeting each year, the Compensation Committee reviews each executive's progress
toward his or her goal. If the Compensation Committee determines an
executive is not achieving appropriate progress toward the ownership goal, it
can specify that a percentage of such executive's annual incentive compensation
be paid in shares of Common Stock.
In
addition to shares directly owned by the executive, the guideline credits the
executive with vested shares allocated to the executive under our qualified
and non-qualified retirement plans and with the number of shares (net of
the exercise price) that would be issued to the executive if the executive
exercised vested stock options.
Impact
of Restatements that Retroactively Impact Financial Goals
We have
not restated or retroactively adjusted financial information that has materially
impacted the financial goals related to previous annual or long-term incentive
awards. If financial results are significantly restated due to fraud
or intentional misconduct, the Board will review any performance-based
compensation paid to executive officers who are found to be personally
responsible for the fraud or intentional misconduct that led to the restatement
and may, to the extent permitted by applicable law, seek recoupment of amounts
paid in excess of the amounts that would have been paid based on the restated
financial results.
The
Role of the Compensation Committee
Operating
within the framework of the duties and responsibilities established by the
Board, the Compensation Committee's role is to assure our compensation:
(1) strategy is aligned with the long-term interests of shareholders and
members; (2) structure is fair and reasonable; and (3) reflects both corporate
and individual performance.
The
Compensation Committee evaluates management's executive compensation
recommendations and provides independent review of the Corporation's executive
compensation program. The Compensation Committee is comprised solely of
Directors who are not current or former members of the Corporation and each is
independent as defined by the NYSE listing standards pertaining to director
independence and the Categorical Standards. Prior to Fiscal 2008, the
Compensation Committee had been responsible for recommending compensation
policies to the Board for approval, as well as developing and implementing the
compensation programs for the Named Executive Officers and other key
members. Significant components of compensation for the Named
Executive Officers such as base salary increases, Executive Plan, Performance
Plan and ESRP awards and stock option grants were submitted to the Board for
approval following the review and recommendation of the Compensation
Committee. In the case of the CEO, only the independent Directors approved
the Compensation Committee's recommendation.
Beginning
in Fiscal 2008, the Compensation Committee reviewed and approved base salary
increases, Executive Plan, Performance Plan and ESRP awards for each of the
Named Executive Officers other than the CEO, without Board
ratification. The Compensation Committee continues to review and
recommend to the Board for approval by the independent Directors (1) base salary
increases and Executive Plan, Performance Plan and ESRP awards for the CEO and
(2) stock option or other equity compensation awards under the 2007 Compensation
Plan for each of the Named Executive Officers.
In
discharging its responsibilities, the Compensation Committee utilized the Survey
Reports. The Corporation's Member and Community Relations Department
purchases the survey reports on behalf of the Compensation
Committee. The Compensation Committee did not retain any consultants
in connection with the acquisition of the Survey Reports. As
discussed above, the data from the Survey Reports was utilized to calculate
targeted amounts of base salary and annual and long-term incentive compensation
for the Named Executive Officers.
The
Corporation's Law, Finance and Member and Community Relations departments
support the Compensation Committee in a variety of ways related to executive
compensation. This support includes filing necessary documents with
regulatory bodies, interpreting laws and regulations, conducting executive
compensation benchmark analysis, preparing compensation-related materials and
providing recommendations on matters such as base salary increase percentages
and target annual and long-term incentive award levels. The CEO, in
conjunction with the Law, Finance and Member and Community Relations
departments, compiles information for review by the Compensation Committee at
each quarterly Board meeting addressing the foregoing executive compensation
topics.
The
Compensation Committee has reviewed and discussed the CD&A, which begins on
page 17 of this Proxy Statement, with management, and based on such review and
discussions, the Compensation Committee recommended to the Board that the
CD&A be included in this Proxy Statement.
HUMAN
RESOURCES AND COMPENSATION COMMITTEE
Abbie J.
Smith, Chair
Cheryl A.
Francis
John A.
Halbrook
Brian E.
Stern
Summary Compensation Table for Fiscal 2008, Fiscal
2007 and Fiscal 2006
The table
below sets forth the compensation awarded to, earned by or paid to, each of the
Named Executive Officers for Fiscal 2008, Fiscal 2007 and Fiscal
2006. Other than the CIC Agreements described above, the Corporation
has no employment agreements with any of its executives. While
employed, executives are entitled to base salary, participation in the executive
compensation programs identified in the tables below and discussed in the
CD&A and other benefits common to all members. The
performance-based conditions associated with Performance Plan and Executive Plan
awards as well as salary and bonus in proportion to total compensation are
discussed in detail throughout the CD&A, which begins on page 17 of this
Proxy Statement.
Performance
Plan awards are disclosed in two separate columns in the table
below. Performance Plan awards are payable 50 percent in Common Stock
and 50 percent in cash. The portion of the Performance Plan awards
paid in cash is considered non-equity incentive compensation. This
portion of the awards is reported in the final year of the three-year
performance period when the awards are fully earned. The portion of
the Performance Plan awards payable in Common Stock is considered equity
incentive compensation because, although the target is set at a dollar value,
the award settles in Common Stock. The stock portion of the
Performance Plan awards is reported each year an award is outstanding in an
amount equal to the annual expense incurred by the Corporation under FAS
123(R).
|
Name
and Principal Position (1)
|
Year
|
Salary
($)
(2)
|
Bonus
($)
(3)
|
Stock
Awards
($)
(4)
|
Option
Awards
($)
(5)
|
Non-Equity
Incentive
Plan
Compensation
($)
(6)
|
All
Other
Compensation
($)
(7)
|
Total
($)
|
|
Stan
A. Askren
|
2008
|
749,139
|
6,693
|
(59,008)
|
924,824
|
276,360
|
174,097
|
2,072,105
|
|
Chairman,
President and
|
2007
|
731,477
|
9,731
|
314,141
|
874,452
|
763,315
|
171,622
|
2,864,738
|
|
Chief
Executive Officer,
|
2006
|
704,250
|
10,538
|
38,464
|
746,377
|
616,032
|
239,098
|
2,354,759
|
|
HNI
Corporation
|
||||||||
|
Kurt
A. Tjaden
|
2008
|
120,577
|
50,000
|
0
|
5,585
|
33,584
|
17,409
|
227,155
|
|
Vice
President and Chief
|
||||||||
|
Financial
Officer,
|
||||||||
|
HNI
Corporation
|
||||||||
|
Bradley
D. Determan
|
2008
|
321,432
|
1,855
|
0
|
211,695
|
219,780
|
26,446
|
781,208
|
|
Executive
Vice President,
|
2007
|
286,915
|
6,723
|
0
|
174,627
|
184,630
|
33,933
|
686,828
|
|
HNI
Corporation
|
||||||||
|
President,
|
||||||||
|
Hearth
& Home Technologies Inc.
|
||||||||
|
Jerald
K. Dittmer
|
2008
|
355,962
|
7,406
|
(31,568)
|
172,360
|
101,175
|
65,822
|
671,157
|
|
Executive
Vice President,
|
2007
|
310,668
|
9,731
|
48,110
|
156,627
|
339,382
|
55,038
|
919,557
|
|
HNI
Corporation
|
2006
|
290,370
|
10,538
|
20,481
|
152,272
|
236,260
|
75,783
|
785,704
|
|
President,
|
||||||||
|
The
HON Company
|
||||||||
|
Marco
V. Molinari
|
2008
|
334,752
|
6,693
|
(57,725)
|
195,132
|
193,448
|
64,258
|
736,558
|
|
Executive
Vice President,
|
2007
|
315,913
|
9,731
|
64,416
|
258,963
|
360,574
|
73,017
|
1,082,614
|
|
HNI
Corporation
|
2006
|
304,197
|
10,835
|
41,734
|
221,634
|
369,633
|
75,705
|
1,023,738
|
|
President,
|
||||||||
|
HNI
International Inc.
|
|
Notes
|
|
|
(1)
|
On
March 10, 2008, Mr. Dittmer resigned his position as Vice President and
Chief Financial Officer of the Corporation to become an Executive Vice
President of the Corporation and President of HON. On April 1,
2008, Mr. Askren was appointed the acting Chief Financial Officer and held
that position until August 25, 2008, when Mr. Tjaden was appointed the
Vice President and Chief Financial Officer of the Corporation.
|
|
(2)
|
The
Corporation follows a 52/53-week fiscal year which ends on the Saturday
nearest December 31. Fiscal 2008 ended on Saturday, January 3,
2009, and is a 53-week year. This means each of the Named
Executive Officers will have effectively earned an additional week of
salary in Fiscal 2008. The amounts set forth in this column
reflect this additional week of
salary.
|
|
(3)
|
The
amounts in this column reflect the payments of cash profit-sharing during
calendar years 2008, 2007 and 2006 under the Cash Profit-Sharing
Plan. Cash profit-sharing is earned on a non-fiscal year
cycle. This column also reflects a $50,000 sign-on bonus for
Mr. Tjaden.
|
|
(4)
|
The
amounts in this column reflect the dollar amounts recognized for Fiscal
2008, Fiscal 2007 and Fiscal 2006 financial statement reporting purposes,
in accordance with FAS 123(R), for stock awards under the Performance Plan
for the performance periods noted
below:
|
For Fiscal 2008:
2006-2008: Mr. Askren – $-0-; Mr. Determan – $-0-; Mr. Dittmer –
$-0-; and Mr. Molinari – $-0-.
2007-2009: Mr. Askren – $(59,008); Mr. Determan – $-0-; Mr. Dittmer –
$(31,568); and Mr. Molinari – $(57,725).
2008-2010: Mr. Askren – $-0-; Mr. Tjaden – $-0-; Mr. Determan – $-0-;
Mr. Dittmer – $-0-; and Mr. Molinari – $-0-.
For Fiscal 2007:
2005-2007: Mr. Askren – $33,075; Mr. Determan – $-0-; Mr. Dittmer –
$16,542; and Mr. Molinari – $25,228.
2006-2008: Mr. Askren – $-0-; Mr. Determan – $-0-; Mr. Dittmer –
$-0-; and Mr. Molinari – $(18,537).
2007-2009: Mr. Askren – $59,008; Mr. Determan – $-0-; Mr. Dittmer –
$31,568; and Mr. Molinari – $57,725.
For Fiscal 2006:
2004-2006: Mr. Askren – $21,420; Mr. Dittmer – $11,957; and Mr.
Molinari – $8,124.
2005-2007: Mr. Askren – $17,044; Mr. Dittmer – $8,524; and Mr.
Molinari – $15,073.
2006-2008: Mr. Askren – $-0-; Mr. Dittmer – $-0-; and Mr. Molinari –
$18,537.
The
amounts in this column also reflect the dollar amounts recognized for Fiscal
2007 financial statement reporting purposes, in accordance with FAS 123(R),
pursuant to Mr.
Askren's election to receive approximately $222,058 of his annual
incentive award under the Executive Plan for Fiscal 2007 in the form of Common
Stock.
|
(5)
|
The
amounts in this column reflect the dollar amounts recognized for Fiscal
2007 and Fiscal 2006 financial statement reporting purposes for awards of
stock options under the Compensation Plan and for Fiscal 2008 financial
statement reporting purposes for awards of stock options under the 2007
Compensation Plan, in accordance with FAS 123(R). The amounts
reflect awards granted in 2003, 2004, 2005, 2006, 2007 and
2008. Assumptions used in the calculations of these amounts are
included in the footnote titled "Stock-Based Compensation" to the
Corporation's audited financial statements for (1) Fiscal 2008 included in
the Corporation's Annual Report on Form 10-K filed with the SEC on
February 27, 2009; (2) Fiscal 2007 included in the Corporation's Annual
Report on Form 10-K filed with the SEC on February 25, 2008; (3) Fiscal
2006 included in the Corporation's Annual Report on Form 10-K filed with
the SEC on February 26, 2007; and (4) Fiscal 2005 included in the
Corporation's Annual Report on Form 10-K filed with the SEC on February
27, 2006.
|
|
(6)
|
The
amounts in this column include annual incentive awards earned in Fiscal
2008, Fiscal 2007 and Fiscal 2006, respectively, and paid in February
2009, February 2008 and February 2007, respectively, under the Executive
Plan as follows: Mr. Askren – $276,360; $657,002; $453,632; Mr.
Tjaden – $33,584; Mr. Determan – $219,780; $184,630; Mr. Dittmer –
$101,175; $286,210; $145,606; and Mr. Molinari – $193,448; $284,675;
$287,676. The portion of Mr. Askren's annual incentive award
for Fiscal 2007, which he elected to receive in the form of Common Stock,
approximately $222,058, is reflected in the Stock Awards column of the
Summary Compensation Table. The amounts in this column also
include the cash portion (50 percent) of Performance Plan awards earned
for the 2004-2006 performance period paid in February 2007, the 2005-2007
performance period paid in February 2008, and the 2006-2008 performance
period paid in February 2009 as follows: (1) 2006–2008
performance period: Mr. Askren – $-0-; Mr. Tjaden – $-0-; Mr.
Determan – $-0-; Mr. Dittmer – $-0-; and Mr. Molinari – $-0-; (2)
2005-2007 performance period: Mr. Askren – $106,313; Mr.
Determan – $-0-; Mr. Dittmer – $53,172; and Mr. Molinari – $75,899; and
(3) 2004-2006 performance period: Mr. Askren – $162,400; Mr.
Dittmer – $90,654; and Mr. Molinari –
$81,957.
|
|
(7)
|
The
amounts in this column include the Corporation's contributions to the
Retirement Plan, the dollar value of Corporation-paid life insurance
premiums under the HNI Corporation Group Term Life Insurance Plan (the
"Life Insurance Plan"), both of which are generally applicable to all
members, the dollar value of Common Stock paid under the ESRP and earnings
on deferred compensation, in each case for Fiscal 2008, Fiscal 2007 and
Fiscal 2006. Contributions under the Retirement Plan for Fiscal
2008, Fiscal 2007 and Fiscal 2006 were as follows: Mr. Askren –
$16,574; $19,176; $20,675; Mr. Tjaden – $-0-; Mr. Determan – $12,075;
$16,377; Mr. Dittmer – $17,238; $19,176; $20,675; and Mr. Molinari –
$17,044; $19,176; $19,432. The dollar values of
Corporation-paid life insurance premiums under the Life
Insurance Plan in Fiscal 2008, Fiscal 2007 and Fiscal 2006 were as
follows: Mr. Askren – $183; $180; $180; Mr. Tjaden – $62; Mr.
Determan – $187; $-0-; Mr. Dittmer – $212; $274; $180; and Mr. Molinari –
$185; $-0-; $-0-. The dollar values of Common Stock earned
under the ESRP for Fiscal 2008, Fiscal 2007 and Fiscal 2006 were as
follows: Mr. Askren – $147,186; $145,701; $214,512; Mr. Tjaden
– $-0-; Mr. Determan – $14,184; $17,556; Mr. Dittmer – $48,372; $35,588;
$54,928; and Mr. Molinari – $47,029; $53,841; $56,273. The ESRP
Common Stock for Fiscal 2008 was issued February 17, 2009, for Fiscal 2007
was issued February 15, 2008 and for Fiscal 2006 was issued February 15,
2007. Earnings on deferred compensation for Fiscal 2008, Fiscal
2007 and Fiscal 2006 were as follows: Mr. Askren – $10,154;
$6,565; $3,731. Mr. Tjaden also received a moving expense
reimbursement equal to $17,347, including the tax
gross-up.
|
Grants of Plan-Based Awards for Fiscal 2008
The table
below sets forth the grants of plan-based awards to the Named Executive Officers
during Fiscal 2008, including stock options granted under the 2007 Compensation
Plan, Performance Plan awards for the 2008-2010 performance period and Executive
Plan awards. The aggregate grant date fair value of stock option
awards and the stock portion of the Performance Plan awards are disclosed on a
grant-by-grant basis in the table below. For additional information
on the Executive Plan, the Performance Plan and the 2007 Compensation Plan, see
"Elements of Compensation
Program" on page 17 of this Proxy Statement.
The
2008-2010 Performance Plan awards reported in the table below were granted in
Fiscal 2008, vest at the end of the Corporation's fiscal year ended January 1,
2011, and are payable in 2011. The portion of the 2008-2010
Performance Plan awards payable in cash is reported in the Estimated Future
Payouts Under Non-Equity Incentive Plan Awards column. The portion of
the awards payable in Common Stock is reported in the Estimated Future Payouts
Under Equity Incentive Plan
Awards
column. The target values of the stock portion of the 2008-2010
Performance Plan awards are reported in the Grant Date Fair Value of Stock and
Option Awards column.
|
Name
|
Grant
Date
|
Estimated
Future Payouts Under
Non-Equity
Incentive Plan Awards (1)
|
Estimated
Future Payouts Under Equity Incentive Plan Awards (2)
|
All
Other
Option
Awards
Number
of
Securities
Underlying
Options
(#)
|
Exercise
or
Base
Price
of
Option
Awards
($/Sh)
|
Grant
Date Fair Value
of
Stock
and
Option Awards ($)
|
||||
|
Threshold
($)
|
Target ($)
|
Maximum
($)
|
Threshold
($)
|
Target ($)
|
Maximum
($)
|
|||||
|
Stan
A. Askren
|
||||||||||
|
Stock
Options
|
2/13/2008
|
126,434
|
31.69
|
839,522
|
||||||
|
2008-2010
Performance
Plan
|
2/15/2008
|
91,875
|
183,750
|
367,500
|
91,875
|
183,750
|
367,500
|
183,750
|
||
|
2008
Executive Plan
|
2/15/2008
|
735,004
|
1,249,507
|
|||||||
|
Kurt A. Tjaden
(3)
|
||||||||||
|
Stock
Options
|
11/7/2008
|
36,923
|
17.01
|
245,159
|
||||||
|
2008-2010
Performance Plan
|
11/5/2008
|
24,063
|
48,125
|
96,250
|
24,063
|
48,125
|
96,250
|
48,125
|
||
|
2008
Executive Plan
|
11/5/2008
|
85,673
|
145,644
|
|||||||
|
Bradley
D. Determan
|
||||||||||
|
Stock
Options
|
2/13/2008
5/06/2008
|
24,677
57,915
|
31.69
22.56
|
163,855
384,556
|
||||||
|
2008-2010
Performance
Plan
|
2/15/2008
|
53,800
|
107,600
|
215,200
|
53,800
|
107,600
|
215,200
|
107,600
|
||
|
2008
Executive Plan
|
2/15/2008
|
247,500
|
420,750
|
|||||||
|
Jerald
K. Dittmer
|
||||||||||
|
Stock
Options
|
2/13/2008
5/06/2008
|
23,258
17,133
|
31.69
22.56
|
154,433
113,763
|
||||||
|
2008-2010
Performance
Plan
|
2/15/2008
|
50,700
|
101,400
|
202,800
|
50,700
|
101,400
|
202,800
|
101,400
|
||
|
2008
Executive Plan
|
2/15/2008
|
266,250
|
452,625
|
|||||||
|
Marco
V. Molinari
|
||||||||||
|
Stock
Options
|
2/13/2008
|
27,480
|
31.69
|
182,467
|
||||||
|
2008-2010
Performance
Plan
|
2/15/2008
|
59,900
|
119,800
|
239,600
|
59,900
|
119,800
|
239,600
|
119,800
|
||
|
2008
Executive Plan
|
2/15/2008
|
249,225
|
423,683
|
|||||||
|
Notes
|
|
(1)
|
A
50 percent payout level is the minimum performance threshold required to
receive a payout under the Performance Plan and is reflected in the
Threshold sub-column for each of the Named Executive
Officers. There is no threshold performance level for the
individual strategic objective component of the annual incentive award
under the Executive Plan. However, with respect to the
financial goal component of the annual incentive award under the Executive
Plan, a 50 percent payout level is the minimum performance threshold
required to receive a payout. As the individual strategic
objective component and the financial goal component of the annual
incentive award are combined as one payment under the Executive Plan,
there is effectively no threshold performance level for payment of
Executive Plan awards. The threshold amounts for the financial
goal component of the annual incentive award under the Executive Plan for
Fiscal 2008 for each of the Named Executive Officers are as
follows: Mr. Askren – $220,501; Mr. Tjaden – $25,702; Mr.
Determan – $74,250; Mr. Dittmer – $79,875; and Mr. Molinari –
$74,768.
|
|
(2)
|
A
50 percent payout level is the minimum performance threshold required to
receive a payout under the Performance Plan and is reflected in the
Threshold sub-column for each of the Named Executive
Officers. This column includes the portion of the 2008-2010
Performance Plan awards that are payable in Common Stock. All
Performance Plan awards are denoted in dollars. The portion of
the award payable in Common Stock is converted to shares on the date the
award is paid by dividing such portion by the average of the high and the
low transaction prices of a share of Common Stock on such
date.
|
|
(3)
|
Mr.
Tjaden's 2008-2010 Performance Plan award and Fiscal 2008 stock option and
Executive Plan awards were prorated based on his August 25, 2008 start
date.
|
Outstanding Equity Awards at Fiscal Year-End
2008
The
following table sets forth the Named Executive Officers' outstanding equity
awards as of the end of Fiscal 2008. All outstanding stock option
awards reported in this table vest four years and expire ten years from the date
of grant. Prior to Fiscal 2009, the Corporation had not issued stock
awards to any of the Named Executive Officers except pursuant to the Performance
Plan. The awards under the Performance Plan are reflected in the
final two columns of the table below. These awards represent 50
percent of the Performance Plan award earned in Fiscal 2008 for the 2007-2009
and 2008-2010 performance periods, respectively, that, upon vesting, will be
settled in Common Stock. As described in the CD&A, which begins
on page 17 of this Proxy Statement, the Corporation is unable to determine the
actual number of shares of Common Stock underlying the portion of the
Performance Plan award payable in Common Stock until such time as the award
vests and is paid.
|
Option
Awards
|
Stock
Awards
|
|||||
|
Name
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable (1)
|
Option
Exercise
Price
($) (2)
|
Option
Expiration
Date
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#) (3)
|
Equity
Incentive
Plan
Awards:
Market
or
Payout Value
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($) (4)
|
|
Stan
A. Askren
|
15,000
|
23.47
|
02/10/09
|
5,456
|
88,600
|
|
|
25,000
|
18.31
|
02/16/10
|
5,657
|
91,875
|
||
|
13,000
|
23.32
|
02/14/11
|
||||
|
20,000
|
25.77
|
02/13/12
|
||||
|
43,000
|
25.82
|
02/12/13
|
||||
|
25,000
|
39.72
|
02/11/14
|
||||
|
25,000
|
37.57
|
05/04/14
|
||||
|
55,100
|
42.66
|
02/16/15
|
||||
|
40,712
|
58.06
|
02/15/16
|
||||
|
58,676
126,434
|
48.66
31.69
|
02/14/17
02/13/18
|
||||
|
Kurt
A. Tjaden
|
36,923
|
17.01
|
11/07/18
|
1,482
|
24,063
|
|
|
Bradley
D. Determan
|
10,000
|
32.93
|
08/04/13
|
3,313
|
53,800
|
|
|
8,000
|
39.72
|
02/11/14
|
3,313
|
53,800
|
||
|
7,200
|
42.66
|
02/16/15
|
||||
|
8,320
|
58.06
|
02/15/16
|
||||
|
11,876
24,677
57,915
|
48.66
31.69
22.56
|
02/14/17
02/13/18
05/06/18
|
||||
|
Jerald
K. Dittmer
|
5,250
|
18.31
|
02/16/10
|
2,919
|
47,400
|
|
|
6,000
|
23.32
|
02/14/11
|
3,122
|
50,700
|
||
|
12,000
|
25.77
|
02/13/12
|
||||
|
15,000
|
25.82
|
02/12/13
|
||||
|
9,000
|
39.72
|
02/11/14
|
||||
|
9,200
|
42.66
|
02/16/15
|
||||
|
7,125
|
58.06
|
02/15/16
|
||||
|
10,463
23,258
17,133
|
48.66
31.69
22.56
|
02/14/17
02/13/18
05/06/18
|
||||
|
Marco
V. Molinari
|
15,000
|
42.98
|
11/07/13
|
3,554
|
57,725
|
|
|
13,000
|
39.72
|
02/11/14
|
3,688
|
59,900
|
||
|
11,600
|
42.66
|
02/16/15
|
||||
|
8,926
|
58.06
|
02/15/16
|
||||
|
12,742
27,480
|
48.66
31.69
|
02/14/17
02/13/18
|
||||
|
Notes
|
|
|
(1)
|
All
stock options vest four years from the grant date. Vesting
dates for each unexercisable option award, in descending order, for each
of the Named Executive Officers are as follows: Mr. Askren –
February 16, 2009, February 15, 2010, February 14, 2011 and February 13,
2012; Mr. Tjaden – November 7, 2012; Mr. Determan – February 16, 2009,
February 15, 2010, February 14, 2011, February 13, 2012 and May 6, 2012;
Mr. Dittmer – February 16, 2009, February 15, 2010, February 14, 2011,
February 13, 2012 and May 6, 2012; and Mr. Molinari – February 16, 2009,
February 15, 2010, February 14, 2011 and February 13,
2012.
|
|
(2)
|
For
fiscal years prior to Fiscal 2008, the exercise price is the average of
the high and low transaction prices of a share of Common Stock on the date
of grant. Options granted in Fiscal 2008 under the 2007
Compensation Plan have an exercise price value equal to the closing price
of a share of Common Stock on the date of
grant.
|
|
(3)
|
This
column reflects the number of shares attributable to unvested outstanding
Performance Plan awards (stock portion) based on achievement of a 50%
payout level (the threshold or minimum level of performance required to
receive a payout under the Performance Plan) for the 2007-2009 and
2008-2010 performance periods, respectively, listed in descending order
for each Named Executive Officer (except Mr. Tjaden whose only outstanding
Performance Plan award is for the 2008-2010 performance period),
calculated based on a share price of $16.24 per share, the closing price
of a share of Common Stock on January 2, 2009, the last trading day of
Fiscal 2008. Such awards vest on the last day of the applicable
performance period – January 2, 2010 and January 1, 2011,
respectively.
|
|
(4)
|
This
column reflects the amount attributable to unvested outstanding
Performance Plan awards (stock portion) based on achievement of a 50%
payout level (the threshold or minimum level of performance required to
receive a payout under the Performance Plan) for the 2007-2009 and
2008-2010 performance periods, respectively, listed in descending order
for each Named Executive Officer (except Mr. Tjaden whose only outstanding
Performance Plan award is for the 2008-2010 performance
period).
|
Option Exercises and Stock Vested for Fiscal
2008
The Named
Executive Officers did not exercise any stock options and had no outstanding
stock awards vest during Fiscal 2008. The value of the stock portion
of the Performance Plan awards for the 2006-2008 performance period was
$-0-.
Nonqualified Deferred Compensation for Fiscal
2008
As
discussed in the CD&A, which begins on page 17 of this Proxy Statement, the
Deferred Plan allows executives to defer certain compensation to a cash account
that earns interest at a rate set annually at one percent above the prime
interest rate or to the Corporation's notional stock account that earns
dividends distributed to shareholders. The only Named Executive
Officer currently participating in the Deferred Plan is Mr.
Askren. Mr. Askren deferred into the Corporation's notional stock
account the after-tax-value of his 2007 ESRP award, which was granted in
February 2008, totaling $142,933 and is reflected in the table
below. The value of Mr. Askren's 2007 ESRP award, before taxes, was
$145,701. Mr. Askren's balance in the Deferred Plan as of the end of
Fiscal 2008 was 15,417 shares of notional stock. This balance will
not be distributed until the earlier of (1) January 31, 2016 for a portion of
the balance, (2) January 31, 2017 for the remaining portion of the balance or
(3) the date Mr. Askren is no longer employed by the Corporation, other than via
retirement or death, with respect to the entire balance. For
additional information on the Deferred Plan, see "Other Compensation Elements –
Deferred Compensation Plan" on page 26 of this Proxy
Statement.
|
Name
|
Executive
Contributions
in
Last FY
($)
(1)
|
Aggregate
Earnings
in
Last FY
($)
(2)
|
Aggregate
Balance
at
Last FYE
($)
(3)
|
|
Stan
A. Askren
|
142,933
|
(186,423)
|
245,362
|
|
Kurt
A. Tjaden
|
0
|
0
|
0
|
|
Bradley
D. Determan
|
0
|
0
|
0
|
|
Jerald
K. Dittmer
|
0
|
0
|
0
|
|
Marco
V. Molinari
|
0
|
0
|
0
|
|
Notes
|
|
|
(1)
|
The
amount of Mr. Askren's contribution, before taxes $145,701, is reflected
in the All Other Compensation Column of the Summary Compensation Table for
Mr. Askren's Fiscal 2007
compensation.
|
|
(2)
|
The
reported dollar value is the sum of (1) share price appreciation (or
depreciation) in the account balance during Fiscal 2008 not attributable
to contributions, withdrawals or distributions during Fiscal 2008 and (2)
dividends earned on the account balance during Fiscal 2008. The
share price appreciation (or depreciation) is calculated by first
multiplying 10,125 shares, the number of shares in Mr. Askren's account at
the end of Fiscal 2007 by $15.915, the average of the high and low
transaction prices of a share of Common Stock on January 2, 2009, the last
trading day of Fiscal 2008; and then subtracting from such amount Mr.
Askren's aggregate account balance at the end of Fiscal 2007 –
$357,716. The dividends earned are calculated by multiplying
638 shares, the numbers of shares earned from dividends during Fiscal
2008, by $15.915, the average of the high and low transaction prices of a
share of Common Stock on January 2, 2009, the last trading day of Fiscal
2008. The dividends earned are reflected in the All Other
Compensation Column of the Summary Compensation Table for Mr. Askren's
Fiscal 2008 compensation.
|
|
(3)
|
The
reported dollar value is calculated by multiplying 15,417 shares, the
number of shares in Mr. Askren's account at the end of Fiscal 2008 by
$15.915, the average of the high and low transaction prices of a share of
Common Stock on January 2, 2009, the last trading day of Fiscal
2008. Amounts deferred after Fiscal 2008 are not reflected in
this column.
|
Potential Payments Upon Termination or Change in
Control
The following tables quantify compensation that would be payable to the Named Executive Officers upon a CIC or the retirement, death or disability of the executive. The tables include only compensation items not available to all salaried members and assume that the event occurred on the last business day of Fiscal 2008. For a qualitative discussion of the Corporation's obligations to the Named Executive Officers in the event of a CIC or the retirement, death or disability of such Named Executive Officers, see "Post-Employment and Other Events" on page 27 of this Proxy Statement.
Value
in Event of Involuntary Termination or Voluntary Termination for Good Reason
Following a Change in Control
|
Name
|
Cash
Severance
Pursuant to CIC Agreement
($)
(1)
|
Total
Value
of Benefits Pursuant to CIC Agreement ($) (2)
|
Executive
Plan
Acceleration
($)
(3)
|
Performance
Plan
Acceleration
($) (4)
|
Stock
Options
Acceleration
($) (5)
|
Excise
Tax
Gross-Up
Pursuant to CIC Agreement ($) (6)
|
Total
($)
|
|
Stan
A. Askren
|
4,209,808
|
17,847
|
973,147
|
0
|
0
|
N/A
|
5,150,587
|
|
Kurt
A. Tjaden
|
665,758
|
17,847
|
112,060
|
0
|
0
|
0
|
795,665
|
|
Bradley
D. Determan
|
919,248
|
17,847
|
200,970
|
0
|
0
|
0
|
1,138,065
|
|
Jerald
K. Dittmer
|
1,147,574
|
17,847
|
351,450
|
0
|
0
|
0
|
1,516,871
|
|
Marco
V. Molinari
|
1,242,709
|
17,847
|
230,235
|
0
|
0
|
0
|
1,490,790
|
|
Notes
|
|
|
(1)
|
Pursuant
to the CIC Agreements for each of the Named Executive Officers, the
amounts in this column include the following: (1) an amount
equal to two times (three times for Mr. Askren) the sum of (a) the
executive's annual base salary and (b) the average of the executive's
annual incentive awards for the prior two years; (2) an amount equal to
the value of the cost of health and dental coverage for an additional six
months from the date of termination; and (3) an amount equal to the value
of 24 months of continued participation in the Corporation's accidental
death and travel accident insurance plan and disability
plans.
|
|
(2)
|
Represents
the value of benefits provided following termination of employment
pursuant to the CIC Agreements for each of the Named Executive
Officers. Such benefits consist of the
following: (1) medical and dental benefits for 18 months; and
(2) group life insurance benefits for 24
months.
|
|
(3)
|
Represents
the value of the maximum annual incentive award payable under the
Executive Plan for Fiscal 2008 to each of the Named Executive Officers,
prorated based on the length of employment during the year in which
termination occurs, minus the amount of such award which vested as of the
end of Fiscal 2008. Such awards are normally forfeited upon
termination by reason other than death, disability, retirement or CIC of
the Corporation.
|
|
(4)
|
Represents
the value of the outstanding long-term incentive awards under the
Performance Plan for the 2007-2009 and 2008-2010 performance periods based
on performance through the end of Fiscal 2008 without
proration. Such awards are normally forfeited upon termination
by reason other than death, disability, retirement or CIC of the
Corporation. The amounts in this column are zero as the
Corporation does not anticipate making any payouts for the 2007-2009 and
2008-2010 performance periods.
|
|
(5)
|
Represents
the value of accelerating the vesting of stock options not otherwise
vested in accordance with the Compensation Plan and the 2007 Compensation
Plan. Such options will remain exercisable until the expiration
date established at the time of award. The amounts in this
column are zero as the exercise price for all outstanding and unvested
stock options at the end of Fiscal 2008 exceeded the closing price of a
share of Common Stock on January 2, 2009, the last trading day of Fiscal
2008.
|
|
(6)
|
Represents
the payment to "gross-up" the executive's compensation pursuant to the
executive's CIC Agreement for any excise tax and for any federal, state
and local taxes applicable to the excise tax "gross-up." The
aggregate present value of Mr. Askren's payments do not exceed 110 percent
of three times his annualized includible compensation for the most recent
five taxable years ending before the date on which the CIC
occurred. As such, Mr. Askren's severance payment is reduced by
$50,215 so no portion of his payment is subject to any excise
tax. The aggregate present value of Messrs. Tjaden's,
Determan's, Dittmer's and Molinari's respective payments do not equal or
exceed three times their annualized includible compensation for the most
recent five taxable years ending before the date on which the CIC
occurred. As such, their respective cash severance payments
are not subject to any excise tax, and they are not eligible for any
"gross-up" payment.
|
Value
in Event of Change in Control with No Employment Termination
|
Name
|
Cash
Severance
Pursuant to CIC Agreement
($)
|
Total
Value
of Benefits Pursuant to CIC Agreement ($)
|
Executive
Plan
Acceleration
($)
(1)
|
Performance
Plan
Acceleration
($) (2)
|
Stock
Options
Acceleration
($) (3)
|
Excise
Tax
Gross-Up
Pursuant to CIC Agreement ($)
|
Total
($)
|
|
Stan
A. Askren
|
0
|
0
|
973,147
|
0
|
0
|
0
|
973,147
|
|
Kurt
A. Tjaden
|
0
|
0
|
112,060
|
0
|
0
|
0
|
112,060
|
|
Bradley
D. Determan
|
0
|
0
|
200,970
|
0
|
0
|
0
|
200,970
|
|
Jerald
K. Dittmer
|
0
|
0
|
351,450
|
0
|
0
|
0
|
351,450
|
|
Marco
V. Molinari
|
0
|
0
|
230,235
|
0
|
0
|
0
|
230,235
|
|
Notes
|
|
|
(1)
|
Represents
the value of the maximum annual incentive award payable under the
Executive Plan for Fiscal 2008 to each of the Named Executive Officers,
prorated based on the length of employment during the year in which
termination occurs, minus the amount of such award which vested as of the
end of Fiscal 2008. Such awards are normally forfeited upon
termination by reason other than death, disability, retirement or CIC of
the Corporation.
|
|
(2)
|
Represents
the value of the outstanding long-term incentive awards under the
Performance Plan for the 2007-2009 and 2008-2010 performance periods based
on performance through the end of Fiscal 2008 without
proration. Such awards are normally forfeited upon termination
by reason other than death, disability, retirement or CIC of the
Corporation. The amounts in this column are zero as the
Corporation does not anticipate making any payouts for the 2007-2009 and
2008-2010 performance periods.
|
|
(3)
|
Represents
the value of accelerating the vesting of stock options not otherwise
vested in accordance with the Compensation Plan and the 2007 Compensation
Plan. Such options will remain exercisable until the expiration
date established at the time of award. The amounts in this
column are zero as the exercise price for all outstanding and unvested
stock options at the end of Fiscal 2008 exceeded the closing price of a
share of Common Stock on January 2, 2009, the last trading day of Fiscal
2008.
|
Value
in Event of Retirement, Death or Disability
|
Name
|
Performance
Plan
Acceleration
($)
(1)
|
Stock
Options
Acceleration
($)
(2)
|
Total
($)
|
|
Stan
A. Askren
|
0
|
0
|
0
|
|
Kurt
A. Tjaden
|
0
|
0
|
0
|
|
Bradley
D. Determan
|
0
|
0
|
0
|
|
Jerald
K. Dittmer
|
0
|
0
|
0
|
|
Marco
V. Molinari
|
0
|
0
|
0
|
|
Notes
|
|
|
(1)
|
Represents
the value of the outstanding long-term incentive awards under the
Performance Plan for the 2007-2009 and 2008-2010 performance periods based
on performance through the end of Fiscal 2008, prorated according to the
time elapsed through the applicable performance period. Such
awards are normally forfeited upon termination by reason other than death,
disability, retirement or CIC of the Corporation. The amounts
in this column are zero as the Corporation does not anticipate making any
payouts for the 2007-2009 and 2008-2010 performance
periods.
|
|
(2)
|
Represents
the value of accelerating the vesting of stock options not otherwise
vested in accordance with the Compensation Plan and the 2007 Compensation
Plan. Such options will remain exercisable until three years
from the date of retirement or two years from the date of death or
disability. The amounts in this column are zero as the exercise
price for all outstanding and unvested stock options at the end of Fiscal
2008 exceeded the closing price of a share of Common Stock on January 2,
2009, the last trading day of Fiscal
2008.
|
The
Corporation's independent Directors generally receive an annual retainer of
$100,000, of which $50,000 is paid in cash in equal installments of $12,500 at
each quarterly Board meeting and $50,000 is paid in the form of a Common Stock
grant issued under the 2007 Equity Plan for Non-Employee Directors of HNI
Corporation (the "2007 Equity Plan") at the May Board meeting. Each
independent Director who serves as the Chair of a Board committee also receives
an additional annual retainer for his or her services. The Audit
Committee Chair and the Lead Director each receive an additional $7,500, and the
Chairs of the Compensation Committee and the Governance Committee each receive
an additional $4,000. Each Audit Committee member also receives an
additional annual retainer of $4,000. Independent Directors receive
an additional $1,000 for each meeting attended if they are required to travel
six hours or more on a round-trip basis. Directors are also
reimbursed for travel and related expenses incurred to attend
meetings. For purposes of determining Director compensation, an
independent Director is anyone who is not a member of the
Corporation. Directors who are members of the Corporation do not
receive additional compensation for service on the Board. The
Corporation's independent Directors did not receive an increase in their annual
retainers in Fiscal 2008.
The
Corporation's policy with regard to Common Stock ownership by Directors is for
each Director to own Common Stock with a market value of five times or more the
cash portion of the annual retainer. Pursuant to this policy,
independent Directors are required to receive one-half of the cash portion of
their annual retainer in the form of shares of Common Stock to be issued under
the 2007 Equity Plan or, to the extent the Director participates in the HNI
Corporation Directors Deferred Compensation Plan (the "Directors Deferred
Plan"), in the form of shares to be credited to the Director's share sub-account
under the Directors Deferred Plan. This requirement does not,
however, apply to any Director owning Common Stock with a market value of five
times or more the cash portion of the annual retainer.
In
addition to acquiring Common Stock as partial payment of their annual retainer,
independent Directors can also acquire Common Stock in several other
ways. Under the 2007 Equity Plan, Directors may elect to receive up
to 100% of their cash retainers in the form of shares of Common
Stock. Under the Directors Deferred Plan, each Director has the
opportunity to defer up to 100 percent of all his or her retainers earned as a
Director. Deferred compensation may be deferred in cash or in the
form of shares of Common Stock (determined by dividing the amount of the
compensation deferred by the fair market value per share of Common Stock on the
date such compensation would have otherwise been paid). Each Director
participating in the Directors Deferred Plan elects, on an annual basis, the
date or dates of distribution (i.e., a Director can elect a lump-sum
distribution or distribution via annual installments not to exceed 15) of any
cash amounts and/or shares he or she has deferred. In addition, each
independent Director is eligible to receive awards of stock options to purchase
Common Stock, restricted stock or Common Stock grants, or any combination
thereof, under the 2007 Equity Plan in such amounts as the Board may
authorize.
In May
2008, each independent Director serving on the Board as of May 6, 2008, was
issued 2,223 shares of Common Stock under the 2007 Equity Plan. The
Corporation does not have a non-equity incentive plan for independent
Directors. All shares of Common Stock issued in lieu of cash retainer
amounts, except amounts deferred into stock under the Directors Deferred Plan,
have heretofore been issued pursuant to the Compensation Plan, the 1997 Equity
Plan for Non-Employee Directors of HNI Corporation (the "1997 Equity Plan") or
the 2007 Equity Plan. As of the Record Date, (1) the Corporation has
never issued stock options to purchase Common Stock or shares of restricted
stock to the independent Directors and (2) all shares of Common Stock issued to
Directors under the Compensation Plan, the 1997 Equity Plan or the 2007 Equity
Plan were fully vested upon issuance.
Director
Compensation for Fiscal 2008
|
Name
|
Fees
Earned
or
Paid in
Cash
($) (1)
|
Stock
Awards
($)
(2)
|
Change
in Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(3)
|
All
Other
Compensation
($)
(4)
|
Total
($)
|
|
Mary
H. Bell
|
50,000
|
50,000
|
--
|
1,434
|
101,434
|
|
Miguel
M. Calado
|
60,750
|
50,000
|
--
|
1,434
|
112,184
|
|
Gary
M. Christensen
|
54,750
|
50,000
|
--
|
1,434
|
106,184
|
|
Cheryl
A. Francis
|
50,000
|
50,000
|
--
|
1,434
|
101,434
|
|
John
A. Halbrook
|
51,000
|
50,000
|
--
|
1,434
|
102,434
|
|
James
R. Jenkins
|
57,000
|
50,000
|
807
|
1,434
|
109,241
|
|
Name
|
Fees
Earned
or
Paid in
Cash
($) (1)
|
Stock
Awards
($)
(2)
|
Change
in Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(3)
|
All
Other
Compensation
($)
(4)
|
Total
($)
|
|
Dennis
J. Martin
|
55,000
|
50,000
|
--
|
1,434
|
106,434
|
|
Larry
B. Porcellato
|
50,000
|
50,000
|
188
|
1,434
|
101,622
|
|
Joseph
E. Scalzo
|
54,000
|
50,000
|
1,013
|
1,434
|
106,447
|
|
Abbie
J. Smith
|
54,000
|
50,000
|
--
|
1,434
|
105,434
|
|
Brian
E. Stern
|
54,750
|
50,000
|
--
|
1,434
|
106,184
|
|
Ronald
V. Waters, III
|
57,750
|
50,000
|
1,850
|
1,434
|
111,034
|
|
Notes
|
|
|
(1)
|
Each
independent Director received an annual retainer of $100,000, of which
$50,000 was paid in cash in equal installments of $12,500 at each
quarterly Board meeting and $50,000 was paid in the form of a Common Stock
grant issued under the 2007 Equity Plan at the May Board
meeting. Each independent Director may also receive an annual
retainer for service as a member of the Audit Committee ($4,000); as Lead
Director ($7,500); as Audit Committee Chair ($7,500); and as Compensation
Committee or Governance Committee Chairs ($4,000 each). As with
the cash portion of the annual retainer for Board service, annual
retainers for committee Chairs, Lead Director or Audit Committee service
are paid in equal installments at each quarterly Board
meeting. For Fiscal 2008, the independent Directors listed in
the Table above each earned the following fees: Ms. Bell, Ms.
Francis and Mr. Porcellato – $50,000 annual retainer; Mr. Halbrook –
$50,000 annual retainer and $1,000 for travel to a Board meeting in excess
of 6 hours on a round-trip basis; Ms. Smith – $50,000 annual retainer plus
a $4,000 annual retainer as Chair of the Compensation Committee; Mr.
Scalzo – $50,000 annual retainer plus a $4,000 annual retainer for service
on the Audit Committee; Mr. Martin – $50,000 annual retainer, $4,000
annual retainer as Chair of the Governance Committee and $1,000 for travel
to a Board meetings in excess of 6 hours on a round-trip basis; and Mr.
Jenkins – $50,000 annual retainer, $4,000 annual retainer for service on
the Audit Committee and $3,000 for travel to Board meetings in excess of 6
hours on a round-trip basis. Mr. Waters completed his term as
Chair of the Audit Committee in May 2008. Mr. Calado began
serving as Chair of the Audit Committee after the May 2008 Board
meeting. Messrs. Waters and Calado each earned the following
fees: $50,000 annual retainer, one-half of the Audit Committee
Chair annual retainer, or $3,750, and a $4,000 annual retainer for service
on the Audit Committee. Mr. Calado also received $3,000 for
travel to Board meetings in excess of 6 hours on a round-trip
basis. Mr. Christensen completed his term as Lead Director in
May 2008. Mr. Stern began serving as Lead Director after the
May 2008 Board meeting. Messrs. Christensen and Stern each
earned the following fees: $50,000 annual retainer, one-half of
the Lead Director annual retainer, or $3,750, and $1,000 for travel to a
Board meeting in excess of 6 hours on a round-trip
basis.
|
|
(2)
|
Includes
the share portion of the annual retainer – a $50,000 Common Stock grant
authorized by the Board under the 2007 Equity Plan. Each
independent Director serving on the Board as of May 6, 2008, was issued
2,223 shares of Common Stock at a price of $22.485 (the average of the
high and low transaction prices for a share of Common Stock on the date of
grant, May 6, 2008) for a total grant value of approximately
$49,984. The difference between the $50,000 Common Stock grant
authorized by the Board and the actual value of Common Stock issued
pursuant to such grant ($49,984) was approximately $16. As the
Corporation only issues fractional shares under the Directors Deferred
Plan, the Corporation paid each independent Director $16 either in the
form of cash in lieu of a fractional share for those Directors that did
not elect to defer their Common Stock grant under the Directors Deferred
Plan or in the form of a fractional share for those Directors that did
elect to defer their Common Stock grant under the Directors Deferred
Plan. Ms.
Bell, Ms. Smith and Messrs. Christensen, Jenkins, Porcellato, Scalzo and
Waters each deferred 100% of their Common Stock grant under the Directors
Deferred Plan. The closing price of Common Stock on May 6, 2008
was $22.56 per share. There are no unexercised option awards or
unvested stock awards outstanding as of the end of Fiscal 2008 for any of
the Directors.
|
|
(3)
|
Includes
above-market interest earned on cash compensation deferred under the
Directors Deferred Plan. Interest on deferred cash compensation
is earned at 1% over the prime rate, as determined by the Compensation
Committee. Messrs. Jenkins and Waters each deferred 50% of
their cash compensation. Above-market interest earned by Mr.
Scalzo is for cash compensation deferred prior to January 1,
2006. Above-market interest earned by Mr. Porcellato is for
cash compensation deferred prior to January 1,
2007.
|
|
(4)
|
Includes
dividends earned on Common Stock grants during Fiscal
2008.
|
Security
Ownership of Certain Beneficial Owners
On the
Record Date, there were 44,880,734 Outstanding Shares. On that date,
to the Corporation's knowledge, there were three shareholders who owned
beneficially more than 5 percent of all Outstanding Shares. The table
below contains information, as of that date (except as noted below), regarding
the beneficial ownership of these persons or entities. Unless
otherwise indicated, the Corporation believes that each of the persons or
entities listed below has sole voting and investing power with respect to all
the shares of Common Stock indicated.
|
Name
and Address of
Beneficial
Owner
|
Amount
and Nature of
Beneficial
Ownership
|
Percent
of
Class
|
|
State
Farm Insurance Companies (1)
One
State Farm Plaza
Bloomington,
Illinois 61710
|
7,386,662
(3)
|
16.5%
|
|
Barclays
Global Investors, NA
Barclays
Global Fund Advisors
Barclays
Global Investors, Ltd (2)
400
Howard Street
San
Francisco, California 94105
|
2,566,743
(4)
|
5.7%
|
|
Fidelity
Management & Research Company
82
Devonshire Street
Boston,
Massachusetts 02109
|
2,364,771
(5)
|
5.3%
|
|
Notes
|
|
|
(1)
|
State
Farm Insurance Companies consists of the following
entities: State Farm Mutual Automobile Insurance Company; State
Farm Fire and Casualty Company; State Farm Investment Management Corp.;
State Farm Insurance Companies Employee Retirement Trust; State Farm
Insurance Companies Savings and Thrift Plan for U.S. Employees; and State
Farm Mutual Fund Trust.
|
|
(2)
|
Barclays
Global Investors, NA, Barclays Global Fund Advisors and Barclays Global
Investors, Ltd, are collectively referred to as "Barclays." The
address for Barclays Global Investors, Ltd, is Murray House, 1 Royal Mint
Court, London, EC3N 4HH.
|
|
(3)
|
Information
is based on a Schedule 13G/A, dated February 3, 2009, filed with the SEC
by State Farm Insurance Companies for the period ended December 31,
2008. Of the 7,386,662 shares beneficially owned, State Farm
Insurance Companies has sole voting and investing power with respect to
7,366,400 shares and shared voting and investing power with respect to
20,262 shares.
|
|
(4)
|
Information
is based on a Schedule 13G, dated February 6, 2009, filed with the SEC by
Barclays for the period ended December 31, 2008. Of the
2,566,743 shares beneficially owned, Barclays has sole voting power with
respect to 2,126,149 shares.
|
|
(5)
|
Information
is based on a Schedule 13G, dated February 17, 2009, filed with the SEC by
FMR LLC, parent company of Fidelity Management & Research Company, for
the period ended December 31, 2008. Of the 2,364,771 shares
beneficially owned, Fidelity Management & Research Company does not
have sole voting power with respect to any
shares.
|
Security
Ownership of Directors and Executive Officers
The
following table sets forth the beneficial ownership of Common Stock as of the
Record Date for each Director and nominee for Director, each Named Executive
Officer and for all Directors (including nominees) and executive officers of the
Corporation as a group. The address of the persons listed below is
408 East Second Street, Muscatine, Iowa 52761.
|
Name
|
Common Stock
(1)
|
Common
Stock
Units
(2)
|
Options
Exercisable
as
of the Record Date
or
Within 60 Days
Thereof
|
Total
Stock and
Stock-Based
Holdings
|
|
Stan
A. Askren
|
51,963
|
27,144
|
221,100
|
300,207
|
|
Mary
H. Bell
|
0
|
8,455
|
0
|
8,455
|
|
Miguel
M. Calado
|
17,960
|
0
|
0
|
17,960
|
|
Gary
M. Christensen
|
0
|
23,271
|
0
|
23,271
|
|
Cheryl
A. Francis
|
22,422
|
0
|
0
|
22,422
|
|
John
A. Halbrook
|
7,878
|
4,598
|
0
|
12,476
|
|
James
R. Jenkins
|
0
|
7,859
|
0
|
7,859
|
|
Dennis
J. Martin
|
3,378
|
12,562
|
0
|
15,940
|
|
Larry
B. Porcellato
|
2,000
|
10,391
|
0
|
12,391
|
|
Joseph
E. Scalzo
|
0
|
14,497
|
0
|
14,497
|
|
Abbie
J. Smith
|
521
|
21,458
|
0
|
21,979
|
|
Brian
E. Stern
|
21,637
|
0
|
0
|
21,637
|
|
Ronald
V. Waters, III
|
0
|
13,534
|
0
|
13,534
|
|
Bradley
D. Determan
|
19,392
|
0
|
25,200
|
44,592
|
|
Jerald
K. Dittmer
|
19,362
|
0
|
56,450
|
75,812
|
|
Marco
V. Molinari
|
10,591
|
0
|
39,600
|
50,191
|
|
Kurt
A. Tjaden
|
101
|
0
|
0
|
101
|
|
Name
|
Common Stock
(1)
|
Common
Stock
Units
(2)
|
Options
Exercisable
as
of the Record Date
or
Within 60 Days
Thereof
|
Total
Stock and
Stock-Based
Holdings
|
|
All
Director and Executive Officers as a Group - (23 persons)
|