2011 PROXY STATEMENT

Notice of Annual Meeting

WESCO INTERNATIONAL, INC.
225 West Station Square Drive, Suite 700
Pittsburgh, Pennsylvania 15219-1122

 

NOTICE
OF 2011 ANNUAL MEETING OF STOCKHOLDERS

 

DATE AND TIME		Wednesday, May 25, 2011 at 2:00 p.m., E.D.T.
PLACE		Hyatt Regency Pittsburgh International Airport 1111 Airport Boulevard Pittsburgh, PA 15231
RECORD DATE		March 30, 2011
ITEMS OF BUSINESS		1.  Elect three Class III Directors for a three-year term expiring in 2014.
		2.  Conduct advisory vote on executive compensation.
		3.  Conduct advisory vote on frequency of advisory votes on executive compensation.
		4.  Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2011.
		5.  Transact any other business properly brought before the Annual Meeting.

 

 

Dear Fellow Stockholders:

 

I am pleased to invite you to attend our 2011 Annual Meeting of Stockholders. It will be held on May 25, 2011, at the Hyatt Regency Pittsburgh International Airport, 1111 Airport Boulevard, Pittsburgh, Pennsylvania. Details regarding the items of business to be conducted at the Annual Meeting are described in the accompanying Proxy Statement.

 

We are sending a Notice of Internet Availability of Proxy Materials to you on or about April 6, 2011. Stockholders of record at the close of business on March 30, 2011 will be entitled to vote at our Annual Meeting or any adjournments or postponements of the meeting. You have a choice of voting in person, over the Internet, by telephone, or by requesting a paper copy of the proxy materials and a proxy card and then executing and returning the proxy card. In order to assure a quorum, please vote over the Internet or by telephone, or request a paper copy of a proxy card and then complete, sign, date and return the proxy card, whether or not you plan to attend the meeting.

 

Thank you for your ongoing support of WESCO.

 

By order of the Board of Directors,

 

Alessandra S. Michelini
Corporate Secretary

WESCO INTERNATIONAL, INC.
225 West Station Square Drive, Suite 700
Pittsburgh, Pennsylvania 15219-1122
(412) 454-2200

 

PROXY STATEMENT

 

TABLE OF CONTENTS

 

 

INTERNET ACCESS TO THIS PROXY STATEMENT

 

IMPORTANT NOTICE
REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 25, 2011

 

The 2011 Proxy Statement and 2010 Annual Report of
WESCO International, Inc.
are available to review at: www.proxydocs.com/wcc.

 

 

We are pleased this year to take advantage of the Securities and Exchange Commission (“SEC”) rule that permits companies to furnish proxy materials to stockholders over the Internet. On or about April 6, 2011, we will begin mailing proxy materials. A Notice of Internet Availability of Proxy Materials (“Notice”) contains instructions on how to vote online or by telephone, or in the alternative, request a paper copy of the proxy materials and a proxy card. By furnishing a Notice and access to our proxy materials by the Internet, we are lowering the costs and reducing the environmental impact of our Annual Meeting.

 

We encourage you to sign up for direct email notice of the availability of future proxy materials by submitting your email address when you vote your proxy via the Internet.

 

 

If you held shares of WESCO International, Inc. (“WESCO” or the “Company”) Common Stock at the close of business on March 30, 2011, you may vote at the Annual Meeting. Each share is entitled to one vote on each matter presented for consideration and action at the Annual Meeting.

 

In order to vote, you must either designate a proxy to vote on your behalf or attend the Annual Meeting and vote your shares in person. The Board of Directors requests your proxy so that your shares will count toward a quorum and be voted at the meeting.

 

 

Proposal 1 — The election of three Director nominees with terms expiring at the 2014 Annual Meeting of Stockholders.

 

Proposal 2 — An advisory (non-binding) vote on executive compensation.

 

Proposal 3 — An advisory (non-binding) vote on the frequency of advisory votes on executive compensation.

 

Proposal 4 — The ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2011.

 

Action may be taken at the Annual Meeting with respect to any other business that properly comes before the meeting, and the proxy holders have the right to and will vote in accordance with their judgment on any additional business.

 

 

There are four different ways you may cast your vote. You may vote by:

 

 

  The deadline for voting by Internet or telephone is 11:59 p.m., Eastern Time, on Tuesday, May 24, 2011.

 

If you return your signed proxy card but do not mark the boxes showing how you wish to vote, your shares will be voted “FOR” the election of each of the Director nominees named in this Proxy Statement, “FOR” the approval of the Company’s executive compensation in an advisory vote, to select “ONE YEAR” in the advisory vote regarding the frequency of advisory votes on executive compensation and “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as our Company’s independent registered public accounting firm for the year ending December 31, 2011.

 

 

If you have returned a proxy via mail, telephone or Internet, you may revoke it at any time before it is voted at the Annual Meeting by:

 

 

 

If your shares are registered differently and are in more than one account (for example, some shares may be registered directly in your name and some may be held in the Company’s 401(k) Retirement Savings Plan), you may receive more than one Notice from the Company or a broker, bank or other nominee account with respect to your shares held in “street name”. Please carefully follow the instructions on each Notice you receive and vote all of the proxy requests to ensure that all your shares are voted.

 

 

Shares held beneficially through a broker, bank or other nominee may not be voted in person at the Annual Meeting UNLESS you obtain a “Legal Proxy”. A “Legal Proxy” must be obtained from your broker, bank or other nominee that holds your shares. Without a “Legal Proxy”, you will not be able to attend and vote those shares in person at the Annual Meeting at the Hyatt Regency Pittsburgh International Airport, located at 1111 Airport Boulevard, Pittsburgh, Pennsylvania.

 

Shares registered directly in your name with our transfer agent, BNY Mellon Shareowner Services, may be voted in person at the Annual Meeting.

 

Directions to the Annual Meeting at the Hyatt Regency Pittsburgh International Airport, 1111 Airport Boulevard, Pittsburgh, Pennsylvania, are available at www.wesco.com.

 

 

Representatives of Broadridge Financial Solutions, Inc. will tabulate the votes, and there will be a duly appointed inspector of election who will certify his or her examination of the list of stockholders, the number of shares held and outstanding as of the record date, and the necessary quorum for transaction of the business for this meeting. These persons will count the votes at the Annual Meeting.

 

 

Stockholders can elect to receive future WESCO Proxy Statements and Annual Reports via paper copies in the mail.

 

If you are a “stockholder of record” you can choose to receive future Annual Reports and Proxy Statements via paper copy at no charge by writing to WESCO International, Inc., 225 West Station Square Drive, Suite 700, Pittsburgh, Pennsylvania, 15219-1122, Attention: Corporate Secretary. If you hold your WESCO stock in “street name” (such as through a broker, bank, or other nominee account), follow the information provided by your nominee for instructions on how to elect to receive paper copies of future Proxy Statements and Annual Reports.

 

If you enroll to receive paper copies of WESCO’s future Annual Reports and Proxy Statements, your enrollment will remain in effect for all future stockholders’ meetings unless you cancel the enrollment.

PROXY SOLICITATION AND VOTING INFORMATION

 

Holders of our Common Stock at the close of business on the record date of March 30, 2011, may vote at our Annual Meeting. On the record date, 43,070,279 shares of our Common Stock were outstanding. A list of stockholders entitled to vote will be available at the Annual Meeting at the Hyatt Regency Pittsburgh International Airport, located at 1111 Airport Boulevard, Pittsburgh, Pennsylvania, and during ordinary business hours for 10 days prior to the Annual Meeting at the Company’s principal executive offices. Any stockholder of record may examine the list for any legally valid purpose.

 

The Board of Directors is soliciting your proxy to vote at our Annual Meeting of Stockholders, and at any adjournment or postponement of the meeting. In addition to soliciting proxies by mail, telephone, and the Internet, our Board of Directors, without receiving additional compensation, may solicit in person. We have engaged Morrow & Co., LLC, 470 West Ave., Stamford, CT 06902 to assist us in the solicitation of proxies, and we expect to pay Morrow & Co., LLC approximately $8,000 for these services plus expenses. Brokerage firms and other custodians, nominees, and fiduciaries will forward proxy soliciting material to the beneficial owners of our Common Stock, held of record by them, and we will reimburse these brokerage firms, custodians, nominees, and fiduciaries for reasonable out-of-pocket expenses incurred by them in doing so. The cost of this proxy solicitation will consist primarily of printing, legal fees, and postage and handling. We will pay the cost of this solicitation of proxies.

 

To conduct the business of the Annual Meeting, we must have a quorum. The presence, in person or by proxy, of stockholders holding at least a majority of the shares of our Common Stock outstanding will constitute a quorum. Abstentions, broker non-votes and votes withheld from Director nominees count as shares present for purpose of determining a quorum. A broker non-vote occurs when a broker, bank or other nominee holder does not vote on a particular item because the nominee holder does not have discretionary authority to vote on that item and has not received instructions from the beneficial owner of the shares. In the absence of voting instructions from the beneficial owner of the shares, nominee holders will not have discretionary authority to vote the shares at the Annual Meeting in the election of Directors, the advisory vote on executive compensation or the advisory vote on the frequency of advisory votes on executive compensation, but will have discretionary authority to vote on the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2011. Broker non-votes will not affect the outcome of any of the matters scheduled to be voted upon at the Annual Meeting, and they are not counted as shares voting with respect to any matter on which the broker has not voted expressly. Proxies that are transmitted by nominee holders for beneficial owners will count toward a quorum and will be voted as instructed by the nominee holder.

 

The election of Directors will be determined by a plurality of the votes cast. The ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2011 and the approval, by non-binding vote, of our executive compensation, will require affirmative votes by a majority of the shares present, in person or by proxy, and entitled to vote and voting on the proposal at the Annual Meeting. The frequency of the advisory vote on executive compensation (every one, two or three years) receiving the affirmative vote by a majority of the shares present, in person or by proxy, and entitled to vote and voting thereon at the Annual Meeting will be considered the frequency recommended by stockholders. If no frequency receives the affirmative vote of a majority of the shares present, in person or by proxy, and entitled to vote and voting thereon at the Annual Meeting, the Board will consider the frequency receiving the greatest number of votes as the frequency recommended by stockholders. Abstentions and broker non-votes will have no effect on the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2011, the approval, by non-binding vote, of our executive compensation and the frequency of the advisory vote on executive compensation. Only votes “FOR” or “WITHHELD” affect the outcome of the election of Directors.

 

The following Directors have been nominated for election to our Board:

 

 

 

 

BOARD OF DIRECTORS

 

From the beginning of 2010 to May 2010, our Board consisted of twelve members divided into three equal classes. Upon former Director Kenneth L. Way’s retirement effective at the 2010 Annual Meeting of Stockholders, the Board was reduced to eleven members divided into three classes — Class I (four members), Class II (three members) and Class III (four members). With Director Roy W. Haley’s retirement effective at the close of the 2011 Annual Meeting of Stockholders, the Board will be reduced to ten members divided into three classes — Class I (four members), Class II (three members) and Class III (three members).

 

The three classes of Directors serve staggered, three-year terms which end in successive years. The current term of the Class III Directors expires this year, and their successors are to be elected at the Annual Meeting for a three-year term expiring in 2014. The terms of the Class I and Class II Directors do not expire until the Annual Meetings of Stockholders to be held in 2012 and 2013, respectively.

 

Should all nominees be elected as indicated in the proposal above, the following is the complete list of individuals who will comprise our Board of Directors and Board Committees following the Annual Meeting, unless otherwise noted.

 

 

Class III Directors — Present Term Expires in 2011

 

Class I Directors — Present Term Expires in 2012

 

Class II Directors — Present Term Expires in 2013

 

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Our executive officers and their respective ages and positions as of March 30, 2011, are set forth below.

 

 

Richard P. Heyse has served as our Vice President and Chief Financial Officer since June 2009. From April 2005 to May 2009, he served as Vice President and Chief Financial Officer of Innophos Holdings, a North American producer of specialty phosphates. From 2001 to 2005, he served as Division Controller for the chemical and specialty polymers businesses of Eastman Chemical Company. Mr. Heyse also has held various positions in Finance, IT and Engineering with Koch Industries, Eaton Corporation and International Paper.

 

Daniel A. Brailer has served as our Vice President, Treasurer, Investor Relations and Corporate Affairs since February 2011. From May 2006 to February 2011, he served as our Vice President, Treasurer and Investor Relations. From 1999 to May 2006, he served as our Treasurer and Director of Investor Relations. Prior to joining the Company, Mr. Brailer served in various positions at Mellon Financial Corporation, most recently as Senior Vice President.

 

Allan A. Duganier has served as our Director of Internal Audit since January 2006. From 2001 to January 2006, Mr. Duganier served as our Corporate Operations Controller and, from 2000 to 2001, as a Group Controller.

 

Timothy A. Hibbard has served as our Corporate Controller since July 2006. From 2002 to July 2006, he served as Corporate Controller at Kennametal Inc. From 2000 to February 2002, Mr. Hibbard served as Director of Finance of Kennametal’s Advanced Materials Solutions Group, and, from 1998 to 2000, he served as Controller of Greenfield Industries, Inc., a subsidiary of Kennametal Inc.

 

Diane E. Lazzaris has served as our Vice President, Legal Affairs since February 2010. From February 2008 to February 2010, Ms. Lazzaris served as Senior Vice President — Legal, General Counsel and Corporate Secretary of Dick’s Sporting Goods, Inc. From 1994 to February 2008, she held various corporate counsel positions at Alcoa Inc., most recently as Group Counsel to a group of global businesses.

 

Kimberly G. Windrow has served as our Vice President, Human Resources since August 2010. From 2004 until July 2010, Ms. Windrow served as Senior Vice President of Human Resources for The McGraw Hill Companies in the Education segment. From 2000 until July 2004, she served as Senior Vice President of Human Resources for The MONY Group, and from 1988 until 1999, she served in various Human Resource positions at Willis, Inc.

 

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Corporate Governance Guidelines

 

We have adopted Corporate Governance Guidelines in conformity with the New York Stock Exchange (NYSE) listed company standards to assist members of our Board in fully understanding and effectively implementing their responsibilities while assuring our on-going commitment to high standards of corporate conduct and compliance.

 

We have adopted a Code of Business Ethics and Conduct which applies to our Board of Directors and all of our employees and covers all areas of professional conduct, including customer relations, conflicts of interest, insider trading, financial disclosure, and compliance with applicable laws and regulations.

We also have adopted a Senior Financial Executive Code of Business Ethics and Conduct, referred to as the Senior Financial Executive Code, which applies to our Chief Executive Officer, Chief Financial Officer and Corporate Controller. We will disclose future amendments to, or waivers from, the Senior Financial Executive Code on the corporate governance section of our website within four business days of any amendment or waiver.

 

You may access our Corporate Governance Guidelines, Committee Charters, Code of Business Ethics and Conduct, Senior Financial Executive Code, Independence Policy, and related documents on our website at www.wesco.com/governance.

 

Director Independence

 

Our Board has adopted independence standards that meet or exceed the independence standards of the NYSE. Also, as part of our independence standards, our Board has adopted categorical standards to assist it in evaluating the independence of each of its Directors. The categorical standards are intended to assist our Board in determining whether or not certain direct or indirect relationships between its Directors and our Company or its subsidiaries are “material relationships” for purposes of the NYSE independence standards. The categorical standards establish thresholds at which any relationships are deemed to be material.

 

In February 2011, the independence of each Director was reviewed, applying our independence standards. The review considered relationships and transactions between each Director and his or her immediate family and affiliates and our management and our independent registered public accounting firm.

 

Based on this review, our Board affirmatively determined that the following Directors have no relationships with our Company other than as disclosed in this Proxy Statement and are independent as defined in our categorical standards and consistent with the independence standards of the NYSE: Ms. Beach Lin, Mr. Miles, Mr. Morgan, Mr. Raymund, Mr. Singleton, Mr. Tarr, Ms. Utter and Mr. Vareschi. Mr. Haley is considered an inside Director because of his status as our Chairman of the Board and his past employment as our Chief Executive Officer. Messrs. Engel and Van Oss are also considered inside Directors because of their employment as President and Chief Executive Officer and Senior Vice President and Chief Operating Officer, respectively.

 

Director Qualifications

 

Our Nominating and Governance Committee reviews with the Board at least annually the qualifications of new and existing Board members, considering the level of independence of individual members, together with such other factors, including overall skills and experience. Each Director’s particular and specific experience, qualifications, attributes or skills which support their position as a Director on our Board are identified for each Director on pages 3 to 5.

 

Director Diversity

 

The Nominating and Governance Committee considers various factors in determining whether to recommend a candidate for nomination as a Director, including an individual’s aptitude for independent analysis, level of integrity, personal and professional ethics, soundness of business judgment and ability and willingness to commit sufficient time to Board activities. Although the Company does not have a formal written diversity policy, the Nominating and Governance Committee consults with the Board to determine the most appropriate combination of characteristics, skills and experiences for the Board as a whole with the objective of having a Board whose members have diverse backgrounds and experiences. The Committee considers candidates diverse in geographic origin, gender, ethnic background and professional experience and evaluates each individual in the context of the individual’s potential contribution to the Board as a whole to best promote the success of the Company’s business, represent stockholder interests through the exercise of sound judgment, and allow the Board to benefit from the group’s diversity of backgrounds and experiences. The Committee also reviews the characteristics of various Board members and prospective Board members to ensure that the Board, as a whole, possesses the experience, expertise and competencies that are relevant or desirable, such as CEO experience, financial or marketing expertise, supply chain or industry experience, mergers and acquisitions experience, international experience, technology expertise, and operational or strategy experience, among others. The Committee may also target prospective candidates for Board membership based on their attributes compared to current Board members to achieve a good overall Board composition. The Committee applies the same criteria to all candidates that it considers, including any candidates submitted by stockholders.

Compensation Committee Interlocks

 

None of our executive officers serves as an executive officer of, or as a member of, the compensation committee of any public company that has an executive officer, director or other designee serving as a member of our Board. Also, no member of our Compensation Committee has been an executive officer of the Company.

 

Executive Sessions and Presiding Director

 

During 2010, the non-management members of our Board met in executive session at the conclusion of each regularly scheduled Board of Director’s meeting. Mr. Vareschi presided over these executive sessions as Presiding Director. The Presiding Director has broad authority to call and conduct meetings of the independent Directors. He also has the duties and responsibilities described in the next section below.

 

Board Leadership Structure

 

As previously reported, a major management succession event occurred in 2009 with John J. Engel being named as President and Chief Executive Officer, with Roy W. Haley serving during a transition period as Chairman of the Board until his retirement at the close of the Annual Meeting of the Stockholders in 2011. Prior to September 2009, Mr. Haley had been Chairman and Chief Executive Officer. Having separate roles of Chairman of the Board and Chief Executive Officer during the transition period benefited the Company by maintaining continuity of leadership of the Board. As announced in March 2011, the Board appointed Mr. Engel Chairman of the Board, Chief Executive Officer and President, effective May 25, 2011 upon Mr. Haley’s retirement at the close of the Annual Meeting. The Board took this action after careful deliberation, and it marks the culmination of the executive management succession plan and successful completion of the leadership transition.

 

The Board believes that Mr. Engel’s combined role of Chairman and Chief Executive Officer is in the best interests of the Company and its stockholders and that Mr. Engel is the Director best situated to serve as Chairman because of his detailed and in-depth knowledge of the issues, opportunities and challenges facing the Company, his familiarity with the Company’s business and industry, and his ability to identify strategic priorities essential to the future success of the Company. Mr. Engel has also served on the Board since 2008, readying him for the additional responsibility of the role of Chairman and providing consistency to the Board leadership structure. The Board believes that the structure is best for the Company because it provides for clear leadership responsibility and accountability, while providing for effective corporate governance and oversight by an independent Board of strong and seasoned Directors with an independent Presiding Director.

 

The Board’s Presiding Director, Mr. William Vareschi, serves as the Board’s lead independent Director and presides over executive sessions of the Board. The Board meets in executive session at each regularly scheduled Board meeting. The Audit, Compensation and Nominating & Governance Committees are all chaired by and comprised solely of independent outside Directors, and thus oversight of key matters is entrusted to the independent Directors. Each of these Committees also meets in executive session without members of management present. Mr. Vareschi’s responsibilities as Presiding Director include the following:

 

 

The Presiding Director assures that appropriate independence is brought to bear on important Board and governance matters. In addition, there is strong leadership vested in and exercised by the independent Committee chairs, and each Director may request inclusion of specific items on the agendas for Board and Committee meetings.

 

Considering all of the above, the Board believes that a combined Chairman and Chief Executive Officer is an appropriate Board leadership structure after Mr. Haley’s retirement and is in the best interests of the Company and its stockholders at this time.

 

Communications with Directors

 

Our Board has established a process by which stockholders and other interested parties may communicate with the Board, our Board Committees, and/or individual Directors by confidential e-mail. Such communications should be sent in writing to the e-mail addresses noted in the corporate governance section of our website at www.wesco.com/governance under the caption “Contact Our Board.”

 

Our Director of Internal Audit will review all of these communications on a timely basis and will forward appropriate communications, (i.e., other than solicitations, invitations, advertisements, or irrelevant material) to the relevant Board members on a timely basis.

 

Stockholders who wish to communicate with our Board in writing via regular mail should send correspondence to: WESCO International, Inc., 225 West Station Square Drive, Suite 700, Pittsburgh, Pennsylvania, 15219-1122, Attention: Director of Internal Audit.

 

Our Board members routinely attend our Annual Meeting of Stockholders. This provides you with additional access to our Board. All of our Board members were present at our 2010 Annual Meeting of Stockholders.

 

Director Nominating Procedures

 

Our Nominating and Governance Committee recommends potential candidates for nomination as Director based on a number of criteria, including the needs of our Board. Any stockholder who would like the Nominating and Governance Committee to consider a candidate for Board membership should send a letter of recommendation containing:

 

 

You should send the information described above to: WESCO International, Inc., 225 West Station Square Drive, Suite 700, Pittsburgh, Pennsylvania, 15219-1122, Attention: Corporate Secretary. To allow for timely consideration, recommendations must be received not less than 90 days prior to the first anniversary of the date of our most recent Annual Meeting. In addition, the Company may request additional information regarding any proposed candidates.

 

Board’s Role in Oversight of Risk Management

 

Management is responsible for risk management, and the Board’s role is to oversee management’s efforts in this area. As part of their regular meetings and deliberations, the Board and its Committees review and discuss matters of significance regarding operational, financial and other risks that are relevant to the Company’s

business. Strategic risks and operating risks are monitored by the Board through discussions regarding the Company’s strategic and operating plans and regular reviews of the Company’s operating performance. The Audit Committee of the Board discusses and reviews guidelines and policies with respect to risk assessment and risk management and discusses with management the Company’s major financial risk exposures and the steps management takes to monitor and control such exposures. In addition, management assesses the Company’s enterprise risk and reviews with the Board significant risks and associated mitigating factors on an annual basis.

 

Stockholder Proposals for 2011 and 2012 Annual Meeting

 

No stockholder proposals were submitted for consideration by our Board for the 2011 Annual Meeting.

 

If you wish to have a stockholder proposal included in the Company’s proxy soliciting materials for the 2012 Annual Meeting of Stockholders, you must do so by our deadline which is 120 days prior to the first anniversary of the mailing of this Proxy Statement, or December 8, 2011. For any other business to be properly brought before the 2012 Annual Meeting by a stockholder, notice in writing must be delivered to the Company in accordance with the Company’s amended and restated By-laws not less than 90 days nor more than 120 days prior to the first anniversary of the 2011 Annual Meeting, or between January 26, 2012 and February 25, 2012. We may be required to include certain limited information concerning any such proposal in our Proxy Statement so that proxies solicited for the 2012 Annual Meeting may confer discretionary authority to vote on that matter. Any stockholder proposals should be addressed to our Corporate Secretary, 225 West Station Square Drive, Suite 700, Pittsburgh, Pennsylvania, 15219-1122.

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Our Board has four standing committees: an Executive Committee, a Nominating and Governance Committee, an Audit Committee, and a Compensation Committee. Each Committee operates under a separate charter, which is available on the corporate governance section of our website at www.wesco.com/governance.

 

The full Board held four meetings in 2010. Each Director attended 100% of the aggregate number of meetings of the full Board held in 2010 and the total number of meetings held by all Committees of the Board on which he or she served.

 

Executive Committee

 

During 2010, the Executive Committee consisted of Ms. Beach Lin and Messrs. Engel, Haley, Raymund, Singleton, Tarr and Vareschi, with Mr. Vareschi serving as Chairman of the Committee. With the exception of Messrs. Engel and Haley, all Committee members have been determined by our Board to be independent Directors according to the independence standards of the NYSE. The Committee may exercise all the powers and authority of the Directors in the management of the business and affairs of our Company and has been delegated authority to exercise the powers of our Board between Board meetings. Our Executive Committee met three times during 2010.

 

Nominating and Governance Committee

 

The members of our Nominating and Governance Committee are required to be, and were determined by our Board to be, independent under the independence standards of the NYSE. During 2010, the Committee consisted of Messes. Beach Lin and Utter and Messrs. Miles and Tarr, with Ms. Beach Lin serving as Chairman of the Committee. The Committee is responsible for identifying and nominating candidates for election or appointment to our Board and determining compensation for Directors. It is also the responsibility of our Nominating and Governance Committee to review and make recommendations to our Board with respect to our corporate governance policies and practices and to develop and recommend to our Board a set of corporate governance principles. Our Nominating and Governance Committee held three meetings in 2010.

 

Audit Committee

 

The members of our Audit Committee are required to be, and were determined by our Board to be, independent Directors according to the independence standards of the SEC and the NYSE. During 2010, the Committee consisted of Messrs. Tarr, Raymund, Morgan and Vareschi, with Mr. Tarr serving as Chairman of the Committee. Our Board has determined that Mr. Tarr is an Audit Committee Financial Expert, as defined under applicable SEC regulations. Our Audit Committee is responsible, among other things, for: (a) appointing the independent registered public accounting firm to perform an integrated audit of our financial statements and to perform services related to the audit; (b) reviewing the scope and results of the audit with the independent registered public accounting firm; (c) reviewing with management our quarterly and year-end operating results; (d) considering the adequacy of our internal accounting and control procedures; (e) reviewing the Annual Report on Form 10-K; and (f) reviewing any non-audit services to be performed by the independent registered public accounting firm and the potential effect on the registered public accounting firm’s independence. Our Audit Committee held six meetings in 2010.

 

Compensation Committee

 

The members of our Compensation Committee are required to be, and were at all times, independent Directors according to the independence standards of the NYSE. From January 2010 to May 2010, the Committee consisted of Messes. Beach Lin and Utter and Messrs. Singleton and Way, with Mr. Singleton serving as Chairman. Upon Mr. Kenneth L. Way’s retirement in May 2010, Mr. Morgan became a member of the Compensation Committee, and from May 2010 to the present time, the Committee consisted of Messes. Beach Lin and Utter and Messrs. Morgan and Singleton, with Mr. Singleton serving as Chairman. Our Compensation Committee is responsible for the review, recommendation and approval of compensation arrangements for executive officers and for the administration of certain benefit and compensation plans and arrangements of the Company. Our Compensation Committee held seven meetings in 2010.

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The following table sets forth the beneficial ownership of the Company’s Common Stock as of March 30, 2011, by each person or group known by the Company to beneficially own more than five percent of the outstanding Common Stock, each Director, each of the named executive officers, and all Directors and executive officers as a group. Unless otherwise indicated, the holders of all shares shown in the table have sole voting and investment power with respect to such shares. In determining the number and percentage of shares beneficially owned by each person, shares that may be acquired by such person pursuant to options or convertible stock exercisable or convertible within 60 days of March 30, 2011, are deemed outstanding for purposes of determining the total number of outstanding shares for such person and are not deemed outstanding for such purpose for all other stockholders.

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Under the federal securities laws of the United States, the Company’s Directors, its executive officers, and any persons beneficially holding more than ten percent of the Company’s Common Stock are required to report their ownership of the Company’s Common Stock and any changes in that ownership to the SEC and NYSE. Specific due dates for these reports have been established. The Company is required to report in this Proxy Statement any failure to file by these dates. For the year ended December 31, 2010, all such filings were made within the required time periods.

 

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Review and Approval of Related Person Transactions

 

Our Company has a written policy and has implemented processes and controls in order to obtain information from our Directors and executive officers with respect to related person transactions and for then determining whether our Company or a related person has a direct or indirect material interest in the transaction, based on the facts and circumstances. Our Board reviews all relationships and transactions between our Directors, executive officers and our Company or its customers and suppliers in order to determine whether the parties have a direct or indirect material interest. Its evaluation includes: the nature of the related person’s interest in the

transaction; material terms of the transaction; amount and type of transaction; importance of the transaction to our Company; whether the transaction would impair the judgment of a Director or executive officer to act in the best interest of our Company; and any other relevant facts and circumstances. Transactions that are determined to be directly or indirectly material to our Company or a related person are disclosed in this Proxy Statement.

 

Related Party Transactions

 

Our Company made purchases from our supplier, Coleman Cable, in the amount of $9.4 million during 2010 and will make purchases estimated at $2.4 million during the first quarter of 2011. The Group Vice President of the Retail Group for Coleman Cable is the spouse of Mr. Ronald Van, our Vice President of Operations. The business relationship with Coleman Cable has existed for more than 30 years. These transactions were approved by our Company’s senior management and were determined by our Board to have no known direct material benefit to the relevant individuals in these transactions.

 

This year, the Company is seeking an advisory vote of the stockholders on the compensation of the Company’s named executive officers (commonly referred to as “say-on-pay”) as described in the “Compensation Discussion and Analysis” section, the tabular disclosure regarding named executive officer compensation and the narrative description accompanying such disclosure. This vote is advisory only, meaning it is non-binding on the Company; however the Board and Compensation Committee will review and carefully consider the results when evaluating future compensation decisions.

 

 

 

We encourage stockholders to review the “Compensation Discussion and Analysis” section beginning on page 17. As described in detail under “Compensation Discussion and Analysis,” our compensation program is designed to attract and retain the highest caliber executives possible and to motivate and reward them for achieving results that create stockholder value. The Compensation Committee believes that the Company’s compensation program and practices reflect a pay-for-performance philosophy designed to maximize alignment with our stockholder’s long-term interests.

 

Performance: We believe that our compensation program was instrumental in the Company achieving strong financial results in 2010. Despite an uncertain economic climate in 2010 following the global challenges of 2008 and 2009, total shareholder return (TSR) in 2010 over the prior one-year period was 95% compared to an industry median based on the Global Industrial Classification Group of “Capital Goods” companies over the same period of approximately 32%. Over three years, on an annualized basis, TSR was 10% compared to an industry median of less than 2%. Our CEO has served in his position since September 2009.

 

Compensation Structure: Elements of our program include the following:

 

 

 

The Board endorses the Company’s executive compensation program and recommends that the stockholders vote in favor of the following resolution:

 

RESOLVED, that the stockholders approve the compensation of the Company’s named executive officers as disclosed pursuant to Item 402 of SEC Regulation S-K, including that described under the “Compensation Discussion and Analysis” section, as well as the accompanying compensation tables and the related narrative disclosure, in this proxy statement.

­ ­

 

This Compensation Discussion and Analysis section discusses the Company’s compensation philosophy, policies and arrangements for the 2010 year that are applicable to our Named Executive Officers (NEOs): Roy W. Haley, John J. Engel, Stephen A. Van Oss, Richard P. Heyse, and Diane E. Lazzaris. This discussion and analysis should be read in conjunction with the Summary Compensation Table on page 32, its accompanying footnotes and the additional tables and narrative disclosure that follows the Summary Compensation Table.

 

The Compensation Discussion and Analysis includes the following key sections:

 

 

EXECUTIVE SUMMARY

 

Introduction

 

Consistently, our management and our Board of Directors have believed that a simple and transparent philosophy and approach to compensation design is fundamental to creating shareholder value. Our straightforward program comprises three main elements: (1) base salaries; (2) annual cash incentive bonuses; and (3) long-term incentive awards. We believe that this approach has enabled us to attract and retain extraordinary management talent and to deliver results to our shareholders.

 

Total shareholder return (TSR) for our Company was in the top quartile compared to our compensation comparator group, as described on page 20, and exceeded an industry median based on the Global Industrial Classification Group of “Capital Goods” (GICS #2010) companies for the last one and three years, on an annualized basis.

 

Annual Total Shareholder Return

 

 

Elements of our program also include:

 

Pay for Performance: The annual cash incentive and long-term incentive components of our compensation program reflect our pay-for-performance philosophy, since annual cash incentive bonuses are paid upon the achievement of a set of measurable Company financial performance metrics and individual performance objectives, and equity award values depend on the value of the Company’s stock, thus encouraging achievement of long-term value creation that benefits all stockholders.

 

Ownership Guidelines, Hedging and Clawbacks — We have stock ownership guidelines for officers and Directors, and our officers and Directors are prohibited from engaging in hedging transactions involving our stock. Once the SEC adopts final rules regarding “clawback” of incentive compensation, we intend to adopt a “clawback” policy in

accordance with those rules providing for recovery of incentive compensation, if any, in excess of what would have been paid to officers of the Company in the event that the Company is required to restate financial results.

 

Limited Perquisites — We use perquisites on a very limited basis (the value of which was approximately $25,000 for the CEO in 2010), and we do not provide tax gross-ups on executive-only perquisites. We have committed to not enter into any new or materially amended agreements with executive officers providing for excise tax gross-ups with respect to payments contingent upon a change in control, and, indeed, we have not entered into any such agreements. We have only two pre-existing employment contracts (entered into prior to 2010) that include excise tax gross-ups under certain change in control circumstances (based on a double-trigger).

 

In this Executive Summary, we describe our philosophy, approach and the way we assess our compensation practices. We believe that this process is a pillar of our high performance corporate culture and important to our ongoing success.

 

Compensation Philosophy

 

Structuring a balanced, fair and properly-crafted compensation program for our executive leaders is a critical component that promotes our high performance culture and contributes to our ongoing success. Our compensation philosophy begins with the recognition that our success depends on the talent of our workforce and our relationships with customers and suppliers. Our focus on consistency, service and continuous improvement are critical factors, and to encourage high level performance of our leaders we have constructed a compensation plan that rewards the behavior of our executives in their pursuit of these three broad goals.

 

The first of our philosophical tenets is to retain an excellent management team. Fielding a consistent and high performing team is critical to our success as a company. Developing and strengthening our corporate relationships with our customers and suppliers over the long term puts us in an opportune position to grow our business intelligently and profitably. Equally important is the consistency of internal leadership in support of our corporate mission and sustaining our high performance culture.

 

The second philosophical goal of our compensation planning is to put the Company in a position to recruit strong leaders as we grow our business and expand our product and service offerings. Our Chief Executive Officer was recruited seven years ago as our Chief Operating Officer. We were able to recruit and retain him because of our culture and a compensation package that aligned his performance with our strategy of creating value for our customers, suppliers and shareholders. Recently, we have recruited two other leaders at our executive leadership level who joined the Company for the same reasons. Our consistency of approach in aligning our compensation plans to our strategy has been an important reason for our recruiting successes.

 

Finally, the third goal of our compensation planning is to reward our executives fairly and provide proper and balanced incentives for long-term value creation. Essentially, we want to provide a level of annual base compensation that is fair. When our executives perform at a level of high achievement, we reward them with attractive but capped annual cash bonus awards. In years when they perform below agreed upon standards, they may receive little or no bonus. In terms of long-term incentives, we believe that the performance of our stock is the purest measure of our performance. Fundamentally, we are owned by our shareholders who can sell their stock when they believe that we are underperforming and who typically purchase more shares as we perform at higher levels of growth and profitability. Given our history as a management led leveraged buyout, we believe that the opportunity to participate in the performance of our equity is the most direct link between performance and pay. We reward our executives with equity incentives to align their interests with those of the shareholders and maintain ownership guidelines to instill that mindset.

 

Compensation Approach

 

The three central elements to our executive total compensation approach, base salary, short-term incentives, and long-term incentives, are further refined by design: our base salary and short-term incentives are cash based; and our long-term incentives are equity based. We believe our fair and balanced objectives are accomplished by targeting our three compensation elements at approximately the 50th percentile of comparable companies in the peer group. We use the services of an independent compensation consultant who provides us with research information and data. We query our consultant on new developments, best practices and trends in compensation, and so our consultant works with our Compensation Committee as a resource, but the Committee makes its own

decisions, uses its own judgment and comes to its own conclusions relating to elements regarding plan design and absolute determinations of total compensation rewards.

 

Compensation Assessment

 

For our compensation philosophy and approach to work properly, the Committee must assess the effectiveness of our compensation programs at least annually, using a variety of external and internal resources. In conjunction with our compensation consultant, our Committee reviews the composition of our peer group annually. We purposely choose a large selection of similarly sized companies because we believe that those companies are representative of the talent pool that we would reach into to recruit successors for any of our senior management leaders, and in fact, the last two senior executives that we hired came from large corporations who were not direct competitors of ours and not in the distribution industry. We also believe that a large pool of comparable companies is better than choosing a smaller group. When we engage professional search firms to assist us in identifying senior executive talent, they survey a set of corporations even larger than our peer group.

 

Our management team conducts a thorough leadership review process every year. Our focus on talent management is critical to our high performance culture and ongoing success. In the course of that intensive, annual review process, the entire Board and our Committee are informed of relevant issues relating to our senior management team. We are thus able to review personal development plans, actual performance, and alignment to corporate standards and expectations. From that feedback, we are able to drive a deeper understanding of whether our total compensation plans are promoting positive action or not. The Committee can use this information to help assess the appropriateness of our compensation approach for any individual whose compensation we review.

 

Summary

 

Our philosophy, approach, and the manner in which we assess our total compensation planning have been consistently applied since we became a public company. We intend to maintain our high standards and make sure that the objectives and total compensation of our senior executives are aligned with objectives of our shareholders.

 

COMPENSATION SETTING PROCESS

 

Our Board has delegated to the Committee, composed entirely of independent, non-employee Directors, the responsibility of administering executive compensation and benefit programs, policies and practices. The Committee annually reviews the performance of the management team relative to financial results and non-financial measures, including the areas of strategic and organizational development. The Committee then reviews, approves, and recommends to the Board (and the Board jointly approves) the compensation levels for our NEOs on an annual basis.

 

Our compensation setting process for NEOs consists of the following steps:

 

 

The Committee also engages an independent compensation consultant to assist in reviewing its processes, to provide market comparison information, and to make recommendations.

USE OF COMPENSATION CONSULTANTS

 

To assist in the compensation setting process, the Committee engaged Meridian Compensation Partners, LLC (“Meridian”), an internationally recognized executive compensation consultancy, to provide information and advice regarding compensation and benefit levels and incentive plan designs. In particular, the Committee retained Meridian to gather market data, prepare compensation plan reviews, identify general trends and practices in executive compensation programs, perform a study of the compensation of senior management at comparable and similarly-sized (by revenue) companies, and furnish its input regarding the compensation and incentives of the Chief Executive Officer and other executives. In addition, the Committee sought the recommendation of the Chief Executive Officer regarding the other NEOs relative to compensation adjustments and individual performance objectives he believed would be appropriate to achieve the Company’s strategic and operational goals. Our Committee meets in person or telephonically at least five times each year, and our Committee’s Chairman meets with management and our independent compensation consultant more regularly throughout the course of the year. The working relationship between the Committee and management is constructive and independent. Our Committee reports to the entire Board of Directors at every Board meeting on its activities, the research commissioned from our compensation consultant and on the Committee’s specific compensation deliberations and decisions that directly affect our executive leadership team.

 

COMPENSATION COMPARATOR GROUP

 

In 2010, the Committee reviewed analyses of compensation paid by companies in our comparator group through the use of marketplace compensation profiles prepared by Meridian. At the Committee’s request, Meridian conducted a comprehensive review of the comparator group used in prior years, and no changes were made in 2010. In December 2010, Meridian recommended a few changes to the peer group starting in 2011 to reflect the companies with which the Company competes for executive talent.⁽¹⁾ The comparator group comprises comparably-sized, industrial firms, distribution companies and businesses with dispersed locales for which logistics are important, companies in industries in which asset management, in addition to operating margin, is a relevant measure of company performance, and other large distributors, wholesalers and retailers, which are potential competitors for executive talent of interest to WESCO.

 

The current comparator group includes the following 45 companies:

 

COMPENSATION COMPARATOR GROUP

 

Andersen Corporation

Applied Ind. Technologies

AutoZone, Inc.

Avis Budget Group

Belk, Inc.

Big Lots, Inc.

Boise Cascade LLC

Boise, Inc.

BorgWarner

Brinker International, Inc.

Camron International  Corporation

Corn Products Int’l Inc.

Cooper Industries, Inc.

Darden Restaurants, Inc.

Dover Corporation

Ecolab

FMC Technologies

General Parts International, Inc.

Hubbell Incorporated

Hy-Vee, Inc.

Kohler Company

Lennox International, Inc.

Molson Coors Brewing Co.

NCR Corporation

Pitney Bowes, Inc.

Praxair, Inc.

Rockwell Automation

Ross Stores, Inc.

Ryder System, Inc.

Sauer-Danfoss, Inc.

Schneider National, Inc.

Smurfit-Stone Container  Corporation

Sonoco Products Company

Spartan Stores, Inc.

NewPage Corporation

OfficeMax Incorporated

Temple-Inland Inc.

The Bon-Ton Stores, Inc.

The Pantry, Inc.

Thomas & Betts Corp.

Trane Inc.

United Stationers Inc.

Vulcan Materials Company

W.W. Grainger, Inc.

Waste Management, Inc.

 

The Committee reviews compensation practices among these companies to provide the Committee with relevant data in setting appropriate compensation levels for its NEOs. This market analysis, which is conducted by Meridian, makes it possible to evaluate and assess compensation for numerous executive positions that are not

 

 

(1) For 2011, Anixter International, Inc., Fastenal Company, MSC Industrial Direct Co., Inc. and Watsco, Inc. will be added to the peer group, and Molson Coors Brewing Co. will be removed.

included in proxy statements or other public filings. To adjust for a variation in size among our Company and the companies in the comparator group, Meridian uses regression analysis to adjust market values for differences in company size, based on annual revenues, which is consistent with industry practices.

 

Management Succession Plan

 

The Board has a succession planning process in which it considers and reviews succession plans for executive positions annually. As disclosed previously, a major management succession event occurred in 2009 with John J. Engel being named as President and Chief Executive Officer and with Roy W. Haley serving during a transition period as Chairman of the Board until his retirement at the close of the Annual Meeting of the Stockholders in 2011. Prior to September 2009, Mr. Haley had been Chairman and Chief Executive Officer since 1998.

 

ELEMENTS OF COMPENSATION

 

Base Salaries

 

Base salaries are intended to provide our NEOs with a level of competitive cash compensation that is critical for retention and appropriate given their position, responsibilities and accomplishments with the Company. Salaries for executives are reviewed annually. The Committee reviews detailed individual salary history for the NEOs and compares their base salaries to salaries for comparable positions at companies within our comparator group. From time to time, the Committee adjusts base salaries for executive officers to reflect performance, changes in job scope, and market practices among the comparator group generally based on the 50th percentile of base salaries for comparable positions.

 

In 2010:

 

 

Mr. Engel, the President and Chief Executive Officer, makes base salary recommendations to the Committee for all of the NEOs, excluding himself. In determining adjustments to base salaries, the Committee considers Company performance, prevailing economic conditions, base salaries of recent additions to management, performance assessments, changes in duties and responsibilities, comparable salary practices of companies within our peer group, the recommendation of Mr. Engel (in the case of the other NEOs), and any other factors the Committee deems relevant.

 

For 2011, the Committee approved the following annualized base salaries for the NEOs, effective April 1, 2011: Mr. Engel, $800,000; Mr. Van Oss, $625,000; Mr. Heyse, $400,000; and Ms. Lazzaris, $325,000. Mr. Haley’s base salary was unchanged.

 

Short-Term Incentives

 

Our practice is to award cash incentive bonuses for achievement of our strategic, financial, operational, and organizational development objectives. Target short-term incentives are designed to provide compensation opportunities generally approximating the 50th percentile of the comparator group.

 

Annually, the Board reviews and approves the Company’s performance criteria and financial and operational targets for the upcoming year. For purposes of our annual incentive program, the performance measures for our President and Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, as NEOs who are corporate officers with broad-ranging responsibilities across the entire enterprise or for multiple operating and corporate support functions (i.e., Messrs. Engel, Van Oss and Heyse), consist of the achievement of earnings before interest, taxes, depreciation and amortization (EBITDA), free cash flow and return on invested capital (ROIC) targets, and individual performance objectives. For purposes of our annual incentive program, the performance measures for our corporate Vice Presidents in charge of a key company-wide support functions

consist of achievement of EBITDA and individual performance objectives. Under the terms of Mr. Haley’s 2009 amended and restated employment agreement, he is not eligible for a 2010 cash incentive bonus.

 

The performance measures we used to determine annual cash incentive bonuses for Messrs. Engel, Van Oss and Heyse, the relative weightings of such measures, and the related payout as a percentage of opportunity are reflected below:

 

								Payout Percent of
Performance Measure		Weighting				Percent Achievement		Maximum Opportunity(1)
Earning Before						< 85%		0%
Interest Taxes			25	%		85% to 100%		Up to 50%
Depreciation and						>100% to 115%		Between 50% and 100%
Amortization
						< 85%		0%
Free Cash Flow			25	%		85% to 100%		Up to 50%
						>100% to 115%		Between 50% and 100%
						< 85%		0%
Return on Invested Capital			25	%		85% to 100%		Up to 50%
						>100% to 115%		Between 50% and 100%
						<25%		0%
Individual Performance			25	%		25% to 100%		Up to 100%
Total (as a percent of Opportunity)			100	%				0% to 100%

(1)		Amounts interpolated, as appropriate.

 

For 2010, the cash incentive bonuses for each NEO were determined as follows:

 

Mr. Engel received a 2010 cash incentive bonus of $1,230,000, which was based on a base salary of $725,000 for the year with a maximum incentive payout percentage opportunity of 200%. Thus, in dollars, his maximum bonus opportunity was $1,450,000 (i.e., $725,000 x 200%). The actual achievement of each of the financial components in the chart above was: (1) the Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) payout percentage was 87.5%, since 2010 EBITDA of $234.9 million represented an actual achievement level of 113.6%; (2) the Free Cash Flow payout percentage was 62.5%, since 2010 actual Free Cash Flow of $112.2 million represented an achievement level of 106.0%; and (3) the Return on Invested Capital (“ROIC”) payout percentage was 100%, since the actual level of 9.3% represented a 119.2% achievement level. For the fourth component of individual achievement, which represents the Committee’s overall review and qualitative assessment of performance and accomplishments during the year, the Committee awarded approximately 90% in recognition of Mr. Engel’s efforts in developing and refining the Company’s strategy, advancing organization development and talent management, establishing the leadership team, improving investor relations, and executing the Company’s sales growth initiatives and LEAN efficiency improvements. Thus, Mr. Engel’s total cash incentive bonus of $1,230,000 for 2010 was calculated by multiplying $1,450,000 by ((25% weighting x 87.5% for EBITDA) + (25% weighting x 62.5% for Free Cash Flow) + (25% weighting x 100% for ROIC) + (25% weighting x 90% for individual performance)), or approximately $1,230,000.

 

Mr. Van Oss received a 2010 cash incentive bonus of $800,000, which was based on a base salary of $600,000 for the year with a maximum incentive payout percentage opportunity of 160%. Thus, in dollars, his maximum bonus opportunity was $960,000 (i.e., $600,000 x 160%). Mr. Van Oss’ total cash incentive bonus of $800,000 was calculated by multiplying $960,000 by ((25% weighting x 87.5% for EBITDA) + (25% weighting x 62.5% for Free Cash Flow) + (25% weighting x 100% for ROIC) + (25% weighting x 83% for individual performance)), or approximately $800,000 in total. The portion for individual performance, which represents the Committee’s overall review and qualitative assessment of performance and accomplishments during the year, was based on the Committee’s recognition of Mr. Van Oss’ efforts in accelerating execution and improving effectiveness of sales and marketing initiatives, advancing billing and gross margin improvement efforts, refining the Company’s acquisition strategy and improving operations and organizational efficiency.

Mr. Heyse received a 2010 cash incentive bonus of $290,000, which was based on a base salary of $325,000 for three months of the year and a base salary of $365,000 for nine months of the year with a maximum incentive payout percentage opportunity of 100%. Thus, in dollars, Mr. Heyse’s maximum bonus opportunity was $355,000 (i.e., $325,000 x 3/12 x 100% plus $365,000 x 9/12 x 100%). His total cash incentive bonus of $290,000 was calculated by multiplying $355,000 by ((25% weighting x 87.5% for EBITDA) + (25% weighting x 62.5% for Free Cash Flow) + (25% weighting x 100% for ROIC) + (25% weighting x 77% for individual performance)), or approximately $290,000 in total. The portion for individual performance, which represents the Committee’s overall review and qualitative assessment of performance and accomplishments during the year, was based on the Committee’s recognition of Mr. Heyse’s efforts in leading the implementation of financial software, improving working capital performance, developing and implementing enterprise risk management plans and increasing efficiency of administrative functions.

 

The performance measures we used to determine annual cash incentive bonuses for Ms. Lazzaris, the relative weightings of such measures, and the related payout as a percentage of opportunity are reflected below:

 

								Payout Percent of
Performance Measure		Weighting				Percent Achievement		Maximum Opportunity(1)
Earning Before						< 85%		0%
Interest Taxes			60	%		85% to 100%		Up to 50%
Depreciation and						>100% to 115%		Between 50% and 100%
Amortization
Individual Performance			40	%		<25% 25% to 100%%		0% Up to 100%
Total (as a percent of
Opportunity)			100	%				0% to 100%

(1)		Amounts interpolated, as appropriate.

 

Ms. Lazzaris received a 2010 cash incentive bonus of $225,000. She was employed by the Company for approximately 11 months of the year at an annualized base salary of $275,000 with a maximum incentive payout percentage opportunity of 100%. Thus, in dollars, Ms. Lazzaris’ maximum bonus opportunity was $252,083 (i.e., $275,000 x 11/12 x 100%). Her total cash incentive bonus of $225,000 was calculated by multiplying $252,083 by ((60% weighting x 87.5% for EBITDA) + (40% weighting x 92% for individual performance)), or approximately $225,000 in total. The portion for individual performance, which represents the Committee’s overall review and qualitative assessment of performance and accomplishments during the year, was based on the Committee’s recognition of Ms. Lazzaris’ efforts in completing the general counsel assimilation plan, leading the legal department in support of the Company’s business objectives, developing and implementing enterprise risk management plans and supporting the Company’s organic and acquisition growth objectives.

 

The Committee and the Board retain the right to increase or decrease performance objectives or to make discretionary adjustments to annual incentive awards to reflect acquisitions, changes in responsibility, external changes, or unanticipated business conditions that have a material impact on the fairness of the previously established performance factors.

 

Long-term Incentives

 

The purpose of long-term incentives is to carefully align the shareholder value creation objectives with the needs of the business. Executing the business strategy necessarily requires tradeoffs of short and long-term performance. Accordingly, our incentives are designed to encourage and reward both short and long-term performance. The Committee believes that the optimal method to deliver long-term incentives is through stock appreciation rights (SARs) and restricted stock units (RSUs). We use RSUs to strengthen the retention qualities of our equity program and to be consistent with prevailing market practices. The mix, however, of these equity awards is geared purposefully toward motivating and rewarding management for achieving shareholder value creation. The grant date value of equity awards is 80% in SARs and 20% in RSUs.

Our philosophy is to grant SARs and RSUs having an economic value (based on the Company’s standard stock award assumptions for accounting purposes) which generally approximates the 50th percentile of grants by companies in our comparator group. We believe this target allows us to attract, motivate and retain the executive talent necessary to develop and execute our business strategy. Our SARs vest ratably over three years, and our RSUs cliff vest after three years.

 

In 2010, the Committee authorized a total issuance of 708,949 SARs and 153,318 RSUs. The authorized awards were approximately equal to 2% of the weighted average outstanding stock of the Company. With respect to the NEOs other than himself, the Chief Executive Officer makes grant recommendations to the Committee based on each individual executive’s expected long-term contributions to the value creation of the Company and consideration of market data. The Committee considers the Chief Executive Officer’s recommendations and Meridian’s analysis in making its grant determinations. With respect to the Chief Executive Officer, the Committee determines (without the input of the Chief Executive Officer) the amount of his grant, which it then recommends to the Board for approval.

 

It has been the recent practice of the Committee to issue equity awards annually, on or about July 1st of each year. Awards are generally determined several weeks prior to the grant date, which we set to occur on a date that does not conflict with any material events that are likely to positively or negatively affect the stock price. Starting in 2011, annual grants will be made in February to coincide with the Committee’s February meeting so that a total compensation review including base salary, bonus and equity awards may be undertaken at one time. We believe that this timing will not conflict with any material events that are likely to positively or negatively affect the stock price.

 

In 2010, we granted SAR and RSU awards to approximately 136 employees. The SAR and RSU grants to our NEOs in 2010 were as follows:

 

										SARs		RSU Cliff-
		SAR		RSU				Grant		Expiration		Vesting
NEO		Awards		Awards		Grant Date		Price(1)		Date		Date
Haley		0		78,669		7/1/10		$33.05		N/A		(2)
Engel		125,597		13,918		7/1/10		$33.05		7/1/2020		2013
Van Oss		81,911		9,077		7/1/10		$33.05		7/1/2020		2013
Heyse(3)		39,863		4,418		7/1/10		$33.05		7/1/2020		2013
Lazzaris(4)		15,017		1,664		7/1/10		$33.05		7/1/2020		2013

(1)		Represents the exercise price for the SARs granted and the RSUs at issuance price, which was the closing price of our Company stock on the July 1, 2010 grant date in accordance with Compensation Committee action on June 17, 2010.
(2)		RSU awards to Mr. Haley were made in accordance with his 2009 Employment Agreement, as described on page 27, which provides for vesting upon retirement.
(3)		For SAR grants to Mr. Heyse pursuant to the grant provisions described on page 27, see the tables on pages 37 and 38.
(4)		For SAR grants to Ms. Lazzaris pursuant to the grant provisions described on page 27, see the tables on pages 37 and 38.

 

Our Insider Trading Policy prohibits Directors and officers from engaging in hedging transactions involving Company securities.

 

Retirement Savings

 

Our Company maintains a 401(k) Retirement Savings Plan for all eligible employees, including the NEOs. In 2010, the Company provided two types of 401(k) plan contributions with respect to eligible employees. The Company matched employee contributions at a rate of $0.50 per $1.00 of contributions up to 6% of eligible compensation. Previously, the match had been temporarily suspended due to economic conditions, but it was reinstated for 2010 for all employees. The Company may also make discretionary contributions to the 401(k) plan. There was, however, no discretionary payment made in 2010 for the plan year ended in December 2009. The Company plans to make a discretionary payment in 2011 for the plan year ended in December 2010, for which contribution

amounts are expected to be based on age and years of service and will vary from 1% - 7% of an employee’s annual base salary.

 

We also maintain an unfunded non-qualified deferred compensation plan for a select group of qualifying management or highly compensated employees, including the NEOs, under certain provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). Participants may defer a portion of their salary and are eligible for a Company match at a rate of $0.50 per $1.00 up to 6% of eligible compensation less any Company match paid under the Retirement Savings Plan. Previously, the match had been temporarily suspended due to economic conditions, but it was reinstated for 2010 for all employees. Earnings are credited to employees’ accounts based on their selection from offered investment funds. Notwithstanding any provision of the Deferred Compensation Plan or benefit election made by any participant deemed to be a key employee, benefits payable under the Deferred Compensation Plan will not commence until at least six months after the key employee’s separation from employment. See the “Non-Qualified Deferred Compensation” table on page 34 for more information regarding the NEOs’ benefits under the Deferred Compensation Plan.

 

Our Company does not have a defined benefit or supplementary retirement plan or a plan providing for post-retirement health benefits.

 

Health and Welfare Benefits

 

We provide health benefits to full-time employees, including the NEOs, who meet the eligibility requirements. Employees pay a portion of the cost of healthcare on an increasing scale correlated to higher annual incomes. Accordingly, the NEO’s share of the cost of benefit coverage under our plan is higher than other employees. Our health and welfare benefits are evaluated periodically by external benefits consultants to assess plan performance and costs and to validate that benefit levels approximate the median value provided to employees of peer companies.

 

Perquisites

 

During 2010, the Company provided a limited number of perquisites to the NEOs. They primarily consist of a vehicle allowance and club memberships. The Compensation Committee determined that it is in the Company’s best interest to continue providing these perquisites in order to offer a competitive pay package. The Company does not provide tax-gross ups on executive-only perquisites. See the “All Other Compensation” table on page 33 for more information regarding the perquisites given to our NEOs.

 

Clawback Provisions

 

The Committee and the Company intend, upon the Securities and Exchange Commission’s adoption of final rules complying with the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act’s provisions regarding incentive compensation, to adopt a “clawback” policy in accordance with those rules. The “clawback” policy will provide for recovery of incentive compensation, if any, in excess of what would have been paid to officers of the Company in the event that the Company is required to restate financial results.

 

OTHER COMPENSATON AND EMPLOYMENT ARRANGEMENTS

 

Stock Ownership Guidelines for Executive Officers

 

Our Board has adopted stock ownership guidelines for certain executive officers. For the NEOs, the ownership guidelines are as follows:

 

 

These officers are expected to acquire their initial ownership positions within three years of their appointment and to hold these initial ownership positions during their service as executives of the Company. All of our NEOs have acquired or are acquiring equity in accordance with the guidelines. See “Security Ownership” on page 12 for more information on their ownership positions. See also “Director Compensation” on page 29 for information about Stock Ownership Guidelines for Directors.

Chief Executive Officer Compensation

 

Mr. Engel’s compensation is higher than the compensation of other NEO’s due to the broad scope of his responsibilities as Chief Executive Officer, including executive leadership in the development, articulation and promotion of the Company’s vision, goals and values, the development and execution of the Company’s long-term strategy and annual operating and financial plans, the development and motivation of the senior management team, ensuring the recruitment, training and development of the required human resources to meet the needs of the Company, and overall service as the principal spokesperson for the Company in communicating with stockholders, employees, customers, suppliers, and our Board and Board committees. During the year, Mr. Engel’s base salary was approximately 75% of the 50^th percentile for the Company’s peer group, and his target total compensation for 2010, including salary, cash incentive bonus and equity grants, was approximately 71% of the 50th percentile for the Company’s peer group.

 

Employment, Severance or Change in Control Arrangements

 

Mr. Engel has a 2009 Employment Agreement that provides for, among other things, an annual base salary of $725,000, as may be adjusted in the Compensation Committee’s discretion, with a target bonus of 100% of base salary and a bonus opportunity of up to 200% of his base salary. Mr. Engel also receives long-term equity-based incentives under the Company’s Long-Term Incentive Plan as determined by the Committee. In the event that prior to a change in control Mr. Engel’s employment is terminated by the Company without cause or by Mr. Engel for good reason, he will be entitled to receive monthly cash payments for 24 months in an amount equal to his monthly base salary as of the termination date, a lump sum cash amount equal to his target annual incentive opportunity for the year in which he was terminated and accelerated vesting of all stock-based awards, exercisable for up to 18 months, except for performance based awards where operational or performance criteria have not been met. If such termination occurs within two years after a change in control, Mr. Engel will instead be entitled to receive, (i) a lump sum cash payment equal to two times the sum of his annual base salary and his annual target incentive opportunity as of the termination date, (ii) a gross-up payment to offset certain excise taxes, if any, (iii) prorated incentive compensation for the year in which he was terminated and (iv) accelerated vesting of all stock-based awards, exercisable for up to 18 months, except for performance-based awards where operational or performance criteria have not been met. As disclosed previously, other than the two pre-existing employment agreements with Messrs. Engel and Van Oss, the Company has no other agreements with executive officers providing for excise tax gross-ups with respect to payments contingent upon a change in control. In addition, the Company committed that it will not enter into any new or materially amended agreements with executive officers providing for excise tax gross-ups with respect to payments contingent upon a change in control and, indeed, has not entered into any such agreements. See “Potential Payments Upon Termination” on page 41 for additional information. The 2009 employment agreement has a term of three years and thereafter is subject to one-year automatic extensions. Mr. Engel is subject to confidentiality obligations during the term of his employment and for five years thereafter. He is bound by restrictive covenants in the form of non-competition and non-solicitation of employees and customers during the term of his employment and for a period of two years thereafter.

 

Mr. Van Oss has a 2009 Employment Agreement that provides for, among other things, an annual base salary of $600,000, as may be adjusted in the Compensation Committee’s discretion, with a target bonus of 80% of base salary and a bonus opportunity of up to 160% of his base salary. Mr. Van Oss also receives long-term equity-based incentives under the Company’s Long-Term Incentive Plan as determined by the Committee. In the event that prior to a change in control Mr. Van Oss’ employment is terminated by the Company without cause or by Mr. Van Oss for good reason, he will be entitled to receive monthly cash payments for 24 months in an amount equal to his monthly base salary as of the termination date, a lump sum cash amount equal to his target annual incentive opportunity for the year in which he was terminated and accelerated vesting of all stock-based awards, exercisable for up to 18 months, except for performance-based awards where operational or performance criteria have not been met. If such termination occurs within two years after a change in control, Mr. Van Oss will instead be entitled to receive, (i) a lump sum cash payment equal to two times the sum of his annual base salary and his annual target incentive opportunity as of the termination date, (ii) a gross-up payment to offset certain excise taxes, if any, (iii) prorated incentive compensation for the year in which he was terminated and (iv) accelerated vesting of all stock-based awards, exercisable for up to 18 months, except for performance-based awards where

operational or performance criteria have not been met. As disclosed previously, other than the two pre-existing employment agreements with Messrs. Engel and Van Oss, the Company has no other agreements with executive officers providing for excise tax gross-ups with respect to payments contingent upon a change in control. In addition, the Company committed that it will not enter into any new or materially amended agreements with executive officers providing for excise tax gross-ups with respect to payments contingent upon a change in control and, indeed, has not entered into any such agreements. See “Potential Payments Upon Termination” on page 43 for additional information. The 2009 employment agreement has a term of three years and thereafter is subject to one-year automatic extensions. Mr. Van Oss is subject to confidentiality obligations during the term of his employment and for five years thereafter. He is bound by restrictive covenants in the form of non-competition and non-solicitation of employees and customers during the term of his employment and for a period of two years thereafter.

 

In accordance with Mr. Haley’s 2009 Employment Agreement, Mr. Haley’s compensation as Chairman of the Board was reduced to $600,000 for the period July 1, 2010 through June 30, 2011, down from an annualized rate of $865,000 during the first half of 2010. Mr. Haley also received a grant of RSUs on July 1, 2010 with a grant date value of $2.6 million. In the event that Mr. Haley’s employment is terminated by the Company without cause or by Mr. Haley for good reason or by reason of Mr. Haley’s death or disability, he will be entitled to receive his unpaid base salary until June 2011. In addition, upon such termination all of Mr. Haley’s stock-based awards will become immediately vested and exercisable for up to 24 months. In the event of Mr. Haley’s retirement, his stock-based awards will become immediately vested and exercisable for up to 36 months. Mr. Haley is subject to confidentiality obligations during the term of his employment and for five years thereafter. He is bound by restrictive covenants in the form of non-competition and non-solicitation of employees and customers during the term of his employment and for a period of two years thereafter.

 

Mr. Heyse received SARs equal to the number of shares he purchased for long-term investment within the first twelve months of employment (up to the equivalent of three times his initial annual base salary) at a strike price set at the closing price on the date of purchase on the open market in one or more transactions, not to exceed three trading days. Mr. Heyse will be entitled to receive a severance payment equal to one year’s base salary if he is terminated by the Company without cause or if he terminates his employment for good reason.

 

Ms. Lazzaris is entitled to receive SARs equity grants equal to the number of shares she purchases for long-term investment within the first twelve months of employment (up to the equivalent of two times annual base salary) at a strike price set at the closing price on the date of purchase on the open market in one or more transactions, not to exceed three trading days. Ms. Lazzaris will be entitled to receive a severance payment equal to one year’s base salary if she is terminated by the Company without cause, if she terminates her employment for good reason, or if her employment is terminated within one year following a change in control of the Company (other than for cause).

 

During 2006, our Board adopted the WESCO Distribution, Inc. 2006 Severance Plan which provides severance benefits to all eligible employees, not limited to executives. In accordance with the WESCO Distribution, Inc. 2006 Severance Plan, in the event of an involuntary not for cause termination, an eligible employee would receive severance payments of up to 52 weeks of base pay based on the employee’s completed years of service.

 

Compensation Practices and Risk

 

The Committee reviewed the potential for risk regarding our compensation program design, including incentive compensation. The Committee has reviewed the Company’s compensation programs for employees generally and has concluded that these programs do not create risks that are reasonably likely to have a material adverse effect on the Company. The Compensation Committee believes that the design of the Company’s annual cash and long-term equity incentives provides an effective and appropriate mix of incentives to help ensure the Company’s performance is focused on long-term stockholder value creation and does not encourage the taking of short-term risks at the expense of long-term results.

 

Deductibility of Executive Compensation

 

The Company intends for compensation paid to its executive officers to be within the limits of, or exempt from, the deductibility limits of Section 162(m) of the Internal Revenue Code and expects that all compensation will be deductible. However, the Company reserves the right to pay compensation that is not deductible if it determines

that to be in the best interests of the Company and its stockholders. Section 162(m) generally imposes a $1 million limit on the amount that a public company may deduct for compensation paid to the Company’s named executive officers who are employed as of the end of the year. This limitation does not apply to compensation that meets the requirements under Section 162(m) for “qualifying performance-based” compensation (i.e., compensation paid only if the individual’s performance meets pre-established objective goals based on performance criteria). For 2010, the payments for the annual incentive awards were designed to satisfy the requirements for deductible compensation. As required under applicable tax laws, the Company generally must obtain shareowner approval every five years of the material terms of the performance goals for qualifying performance-based compensation.

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The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management and, based on that review and those discussions, it recommended to the Board of Directors that the foregoing Compensation Discussion and Analysis be included in our Proxy Statement, and incorporated by reference in our Annual Report on Form 10-K for the year ended December 31, 2010.

 

Respectfully Submitted:

 

The Compensation Committee

 

James L. Singleton, Chairman

Sandra Beach Lin

John K. Morgan

Lynn M. Utter

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Compensation

 

Independent members of the Board of Directors receive compensation in the form of an annual retainer and an annual equity award. Directors have the ability to defer 25% to 100% of the retainer. Deferred amounts are converted into stock units and credited to an account in the Director’s name using the average of the high and low trading prices of our Common Stock on the first trading day in January of that year. During 2010, non-employee Directors received an annual retainer of $70,000, payable in shares of our Common Stock or a combination of cash and shares of our Common Stock (of which a maximum of 50% may consist of cash) at each Director’s election. The Chair of our Audit Committee received an additional retainer of $10,000 payable annually. For 2011, the Board adjusted the annual retainer to $80,000 from $70,000, and the Presiding Director will receive an additional retainer of $15,000. The Chair of the Audit Committee will receive an additional retainer of $15,000 (increased from $10,000), each other member of the Audit Committee will receive an additional retainer of $5,000, and the Chairs of the Nominating & Governance Committee and Compensation Committee will each receive an additional retainer of $10,000.

 

In addition to the retainer, non-employee Directors are reimbursed for travel and other reasonable out-of-pocket expenses related to attendance at Board and Committee meetings. Directors receive no additional compensation for Board or Committee meeting attendance. Members of our Board who are also our employees do not receive compensation for their services as Directors.

 

In addition, as of July 1, 2010, each continuing non-employee Director received an equity grant. For 2010, Directors received a grant of non-qualified SARs and RSUs. Starting in 2011, each non-employee Director’s equity grant will be in the form of RSUs, and grants will be made in February to coincide with the Committee’s February meeting, which as described on page 24 is the same timing of annual equity award grants to employees, and thus equity awards to Directors will be made at the same time for administrative efficiency. We believe that this timing will not conflict with any material events that are likely to positively or negatively affect the stock price. The exercise price of the SARs is equal to the fair market value per share of our Common Stock on the date of grant. A non-employee Director’s equity awards granted through 2007 vest on the third anniversary of the date of grant. SARs granted since 2007 vest in one-third increments on the anniversary date of the grant. RSUs granted in 2009 and 2010 vest on the third anniversary of the date of the grant. If a Director’s Board service ends as a result of a scheduled Board term expiration, then all of the Director’s equity will vest in full. If a Director’s Board service is terminated prior to a normal termination or re-election date, then unvested equity is forfeited. It was determined at the May 19, 2010 meeting of the Board to award 4,642 SARs and 514 RSUs to each Director for 2010. The SARs and RSUs awarded July 1, 2010, have a grant price of $33.05, the closing price of our Common Stock on July 1, 2010. The expiration date of the SARs is July 1, 2020.

 

Distribution of deferred stock units will be made in a lump sum or in installments, in the form of shares of our Common Stock, in accordance with the distribution schedule selected by the Director at the time the deferral election is made. All distributions will be made or begin as soon as practical after January 1 of the year following the Director’s termination of Board service.

 

Stock Ownership Guidelines

 

Our Board has adopted stock ownership guidelines for Directors. Directors are expected to acquire beneficial ownership of an amount of equity in our Company with an initial value of at least two times their annual retainer, and beginning in 2011, the Board increased this ownership guideline amount to four times the annual retainer. Directors are expected to hold these initially acquired ownership positions during their service as Directors.

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SUMMARY COMPENSATION TABLE

 

 

 

2009: Represents annual cash incentive bonus amounts which reflect compensation earned in year 2009, but approved and paid in year 2010. See page 21 for a description of our annual incentive plan. Under the terms of Mr. Haley’s 2009 Employment Agreement, he will not be eligible for an annual cash incentive during his employment term.

 

2008: Represents annual cash incentive bonus amounts which reflect compensation earned in year 2008, but approved and paid in year 2009. See page 21 for a description of our annual incentive plan.

 

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The following table describes each component of the All Other Compensation column in the Summary Compensation Table. The most significant component of this table is Company payments or contributions to employee retirement savings programs. These payments are further analyzed in the table contained in footnote (4) and include payments which are also presented and discussed there.

 

 

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The table below provides information on the non-qualified deferred compensation of the named executives in 2010.

 

 

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