- Additional Proxy Soliciting Materials (definitive) (DEFA14A)
April 30 2012 - 3:58PM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section
14(a) of the Securities
Exchange Act of
1934
Filed by
Registrant
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Definitive Proxy
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Definitive Additional
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Soliciting Materials
Pursuant to §240.14a-12
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Pitney Bowes
Inc.
(Name of Registrant as Specified
in its Charter)
(Name of Person(s)
Filing Proxy Statement, if Other Than the Registrant)
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Date Filed:
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April 30, 2012
Re: Pitney Bowes Inc. (Company)
2012 Annual Meeting of Stockholders May 14, 2012
Proposal 3 Advisory Vote to Approve Executive Compensation (Say on Pay
Proposal)
Dear Shareholder:
We are writing to ask you to support the board of directors
recommendation and vote FOR Say on Pay Proposal included in Proposal 3 in the
Companys Proxy Statement (the Proxy) filed on March 23, 2012. We believe our
shareholders recognized the alignment of our compensation program with our
business strategy by their 83.9% approval of last years Say on Pay proposal.
The design of the compensation program has not changed in any material way
since the positive vote in 2011.
Institutional Shareholders Services (ISS) and Glass Lewis have
recommended a vote against the Say on Pay Proposal citing various
pay-for-performance concerns.
The board of directors strongly disagrees with ISS and Glass Lewis for
the following reasons:
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1.
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The Companys
compensation program reinforces our strong pay for performance philosophy and
rigorous goal setting process.
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2.
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The board of
directors believes that the Companys CEO compensation is appropriate given
the business circumstances faced by the Company.
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3.
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The Companys
selected peer group (Company Peer Group) accurately reflects the breadth
and uniqueness of the Companys business.
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4.
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The Company has
managed controllable business challenges responsibly as it repositions itself
for the future.
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Below is a more detailed discussion of each of these points:
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1.
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The Companys
compensation program reinforces our strong pay for performance philosophy and
rigorous goal setting process.
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The Executive
Compensation Committee (ECC) of the board engages each year in a thorough
review and discussion of the annual and long-term financial and strategic
goals that are most meaningful to the Companys future success and sees that
each approved goal is challenging yet realistic.
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The targets for
our financial goals are generally set at or close to the midpoint of our
initial guidance to investors and are not changed at any point during the
year.
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The rigor of the
goals is demonstrated by the fact that both short and long-term payouts on
average have been below target over the last three and five year periods
which aligns to the shareholder value and business results produced over that
period.
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The Income from
Continuing Operations (IFCO) measurement, which ISS raised as a concern, is
used solely as an initial threshold to determine award funding. The actual
payout
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amount of any
award is based on achievement of the predetermined financial and strategic
goals that align with our market guidance.
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Except for base
salary, pension and
de minimis
other benefits, each element
of Named Executive Officer compensation, including 87% of the 2011 CEO total
direct compensation, is at risk and directly aligned to the performance of
the Company.
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Regarding the
portions of executive pay that are not performance-based, pension is
determined using a broad-based formula applicable to all eligible employees
and changes to pension value are not determined by the ECC. The applicable
pension plans will be frozen on December 31, 2014 with no further accruals.
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ISS assigns an
overall low concern in its compensation Governance Risk Indicator (GRId)
for the Company which is a more favorable conclusion than last years medium
concern.
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2.
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The board of
directors believes that the Companys CEO compensation is appropriate given
the business circumstances faced by the Company.
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From 2010 to 2011,
CEO compensation increased by less than 1%, or $49,872, excluding change in
pension value. The change in pension value represents nearly all of the
year-over-year pay change, and, as discussed above, is determined using a
formula applicable to all eligible employees.
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Using ISS
valuation of stock options, CEO total compensation reported by ISS actually
decreases by 3% if the change in pension value is excluded.
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CEO base pay has
increased less than 4% since 2008, the CEOs first full year in that
position. The current CEOs base pay remains below that of the former CEOs
during his last full year in that position. The current CEOs total
compensation in 2011 is substantially the same as the prior CEOs was in
2006.
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The Companys CEO
total direct compensation is at the median of the Company Peer Group and
slightly below the median of the Towers Watson Compensation Report (see peer
group discussion below).
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Although individual
elements of the CEO total direct compensation, including base, incentive
target, and long-term awards, may vary, none are significantly above or below
the median of the Company Peer Group or the Towers Watson Compensation
Report.
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ISS values the
equity compensation at the date of grant, and does not consider the
realized value of the award. For example, $0 of appreciation has been
realized by the CEO from stock options granted over the last five years and
the current value of RSU awards is significantly lower than the grant date
value. Importantly, equity awards account for approximately 30% of the CEO
total direct compensation opportunity. We believe this information (i.e.,
realized value) is critical in assessing a companys pay-for-performance
linkage.
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The use by ISS of
a five year average dividend yield to revalue annual stock option grants
results in an inflated ISS stock option value, particularly given the high
dividend yield on the Companys stock. As a result, CEO total pay reflected
by ISS is overstated by more than $1 million.
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3.
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The Company Peer
Group accurately reflects the breadth and uniqueness of the Companys
business.
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The ECC and its
independent compensation consultant annually review information from two
independent sources in calibrating executive compensation and assessing its
reasonableness: the Towers Watson Compensation Report and the Company Peer
Group.
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Although the
Company has few direct business peers, as disclosed in our recent Proxy, the
ECC and its independent compensation consultant designed and periodically
reassess the Company Peer Group to attract and retain the talent and skill
required to lead a business of complexity and size similar to us. The Company
Peer Group consists of services, industrial and technology companies. The ECC
considered factors such as revenue, net income, market capitalization, number
of employees and complexity of the business to ensure a reasonable balance in
terms of company size and adequate number of peers.
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ISS relies on an
inappropriately constituted peer group predicated on the Companys Global
Industry Classification Standards (GICS) code. In the Companys case, the
GICS code produces a group of companies that does not reflect the complexity
of the Company.
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Only one of ISS
peer group companies is actually within the Company Peer Group.
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A majority of the
ISS peer group are in businesses unrelated to the Company including three
manufacturers of industrial supplies, a solid waste collection company, a
secure transportation company, a uniform supply company and three furniture
and other office supply companies.
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As of the ISS
report date, we believe that 2011 CEO compensation data has been included for
only seven of the 14 ISS peer group companies (50%), resulting in current
year comparisons to outdated compensation and performance information for a
significant portion of the ISS peer group.
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The Equilar peer
group modeling tool confirms that the Company Peer Group better represents
our business than the peer group compiled by ISS. The peer group developed
using the tool matched nine of our 16 peer companies, whereas only one
company in the ISS peer group matched the Equilar selected peer group. Equilar
is an independent provider of executive compensation data.
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In last years ISS
review, the Company Peer Group category received a rating of low concern.
There were no changes in the Company Peer Group in 2011.
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Removal of the
change in pension value and the ISS inflated option value would reduce ISS
calculation of the Companys CEO total pay by approximately $2.4 million,
moving it significantly closer to the median of ISS selected peer group.
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4.
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The Company has
managed controllable business challenges responsibly as it repositions itself
for the future.
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While our primary
long-term objective is to create total shareholder value, ISS single-minded
focus on stock price overly diminishes the challenges faced by the Company in
the
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current business
environment and undervalues the strategic value brought by the CEO and his
leadership team to reposition the Company for future gains. While ISS
acknowledges, that management has a difficult task of repositioning the
Company for future growth, it gives no weight to this challenge in its
conclusion. To achieve this difficult task, we need to attract, retain and
engage the necessary leadership which in turn requires reasonable
compensation programs.
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In this environment,
2011 achievements included among other things the successful execution of our
Strategic Transformation program and development in the digital space.
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In light of
declining mail volumes the Company has moved aggressively to control its
costs, streamline its business operations and create a more flexible cost
structure. We achieved benefits from our Strategic Transformation program
that we expect to yield approximately $300 million net annual savings.
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Management
developed and invested in products, software, services and solutions such as
Volly
TM
and Connect+
TM
that it believes will position
the Company to grow its business more effectively in the physical and digital
environment.
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Conclusion
In considering your vote, please review the Compensation Discussion and
Analysis beginning on page 24 of the Companys Proxy and consider the
supplemental information provided in this additional filing. The Companys
board of directors has designed and implemented an executive compensation program
that is performance-based and delivers reasonable compensation to incentivize
management to deliver strong business results in an extremely challenging
business environment. We believe our shareholders recognized the alignment of
our compensation program by their 83.9% approval of last years Say on Pay
proposal. The design of the program has not changed in any material way since
last year when ISS recommended a FOR vote on Say on Pay. The board of directors
believes that the compensation paid under our program is appropriate given the
business circumstances faced by the Company. We believe ISS and Glass Lewis
voting recommendations are incorrect based on the reasons set forth above.
Therefore, we request your support in voting FOR the advisory Say on Pay
Proposal as recommended by management.
The
board of directors recommends that you vote FOR the advisory proposal to
approve executive officer compensation.
4
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