DEF 14A 1 d485278ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.     )

Filed by the Registrant x

Filed by a Party other than the Registrant ¨

Check the appropriate box:

 

¨ Preliminary Proxy Statement

 

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

 

x Definitive Proxy Statement

 

¨ Definitive Additional Materials

 

¨ Soliciting Material Pursuant to §240.14a-12

Motorola Solutions, Inc.

 

(Name of Registrant as Specified In Its Charter)

 

 

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

Payment of Filing Fee (Check the appropriate box):

 

x No fee required.

 

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

 

  (1) Title of each class of securities to which transaction applies:

                                                                                                                                                                                                                                  

  (2) Aggregate number of securities to which transaction applies:

                                                                                                                                                                                                                                  

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

                                                                                                                                                                                                                                  

  (4) Proposed maximum aggregate value of transaction:

                                                                                                                                                                                                                                  

  (5) Total fee paid:

                                                                                                                                                                                                                                  

 

¨ Fee paid previously with preliminary materials.

 

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

 

  (1) Amount Previously Paid:

                                                                                                                                                                                                                                  

  (2) Form, Schedule or Registration Statement No.:

                                                                                                                                                                                                                                  

  (3) Filing Party:

                                                                                                                                                                                                                                  

  (4) Date Filed:

                                                                                                                                                                                                                                  


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LOGO

 

 

 

PRINCIPAL EXECUTIVE OFFICES:

   PLACE OF MEETING:

1303 East Algonquin Road

Schaumburg, Illinois 60196

   Willard InterContinental

1401 Pennsylvania Avenue NW
Washington, DC 20004

March 18, 2013

 

  

 

NOTICE OF 2013 ANNUAL MEETING OF STOCKHOLDERS

To our Stockholders:

Our Annual Meeting will be held at the Willard InterContinental, 1401 Pennsylvania Avenue NW, Washington, DC 20004 on Monday, May 6, 2013 at 5:00 P.M., EDT. For your convenience, we are pleased to offer a live webcast (audio only) of the meeting at www.motorolasolutions.com/investors.

The purpose of the meeting is to:

 

  1. elect ten directors for a one-year term;

 

  2. hold a stockholder advisory vote to approve the Company’s executive compensation;

 

  3. ratify the appointment of KPMG LLP as Motorola Solutions’ independent registered public accounting firm for 2013;

 

  4. consider and vote upon stockholder proposals, if properly presented at the meeting; and

 

  5. act upon such other matters as may properly come before the meeting.

Only Motorola Solutions stockholders of record at the close of business on March 8, 2013 (the “record date”) will be entitled to vote at the meeting. Please vote in one of the following ways:

 

   

visit the website shown on your Motorola Solutions Notice of Internet Availability of Proxy Materials for the 2013 Annual Meeting (your “Notice”) or proxy card to vote via the Internet;

 

   

use the toll-free telephone number shown at the website address listed on your proxy card;

 

   

if you received a printed copy of the proxy card, mark, sign, date and return the enclosed proxy card using the postage-paid envelope provided; or

 

   

in person at the Annual Meeting.

 

PLEASE NOTE THAT ATTENDANCE AT THE MEETING WILL BE LIMITED TO STOCKHOLDERS OF MOTOROLA SOLUTIONS AS OF THE RECORD DATE (OR THEIR AUTHORIZED REPRESENTATIVES). YOU WILL BE REQUIRED TO PROVIDE THE ADMISSION TICKET THAT IS DETACHABLE FROM YOUR PROXY CARD OR PROVIDE OTHER EVIDENCE OF OWNERSHIP. IF YOUR SHARES ARE HELD BY A BANK OR BROKER, PLEASE BRING TO THE MEETING YOUR BANK OR BROKER STATEMENT EVIDENCING YOUR BENEFICIAL OWNERSHIP OF MOTOROLA SOLUTIONS STOCK ON THE RECORD DATE TO GAIN ADMISSION TO THE MEETING.

By order of the Board of Directors,

 

LOGO

Lewis A. Steverson

Secretary


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LOGO

ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 6, 2013

March 18, 2013

Dear Fellow Motorola Solutions Stockholders:

You are cordially invited to attend Motorola Solutions’ 2013 Annual Stockholders Meeting. The meeting will be held on Monday, May 6, 2013 at 5:00 P.M., EDT, at the Willard InterContinental, 1401 Pennsylvania Avenue NW, Washington, DC 20004.

We encourage you to vote your shares through one of the three convenient methods described in the enclosed Proxy Statement and, if your schedule permits, to attend the meeting. We would appreciate your support on the following management proposals:

 

   

the election of the ten nominated directors;

 

   

the advisory approval of the Company’s executive compensation; and

 

   

the ratification of the appointment of KPMG LLP as our independent registered public accounting firm.

Your vote is important, so please act at your first opportunity.

On behalf of your Board of Directors, thank you for your continued support of Motorola Solutions.

 

LOGO

Gregory Q. Brown

Chairman and CEO

Motorola Solutions, Inc.


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TABLE OF CONTENTS

PROXY STATEMENT

 

•     ABOUT THE 2013 ANNUAL MEETING

     1   

•     PROXY STATEMENT SUMMARY

     5   

•     PROPOSAL NO. 1 — ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

     7   

•     NOMINEES

     7   

•     CORPORATE GOVERNANCE MATTERS

     14   

•     BOARD OF DIRECTORS MATTERS

     18   

•     What Are the Committees of the Board?

     20   

•     How Are the Directors Compensated?

     24   

•     Director Compensation for 2012

     26   

•     Director Retirement Plan and Insurance Coverage

     28   

•     Related Person Transaction Policy and Procedures

     29   

•     PROPOSAL NO.  2 — ADVISORY APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION

     30   

•     PROPOSAL NO.  3 — RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2013

     32   

•     PROPOSAL NO.  4 — STOCKHOLDER PROPOSAL RE: “ENCOURAGE SUPPLIER(S) TO PUBLISH AN ANNUAL SUSTAINABILITY REPORT”

     33   

•     PROPOSAL NO.  5 — STOCKHOLDER PROPOSAL RE: “POLITICAL DISCLOSURE AND ACCOUNTABILITY”

     36   

•     EQUITY COMPENSATION PLAN INFORMATION

     39   

•     OWNERSHIP OF SECURITIES

     41   

•     Security Ownership of Management and Directors

     41   

•     Security Ownership of Principal Stockholders

     43   

•     COMPENSATION DISCUSSION AND ANALYSIS

     44   

•     COMPENSATION AND LEADERSHIP COMMITTEE REPORT

     73   

•      COMPENSATION AND LEADERSHIP COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     73   

•     NAMED EXECUTIVE OFFICER COMPENSATION

     74   

•     2012 Summary Compensation Table

     74   

•     Grants of Plan-Based Awards in 2012

     77   

•     Outstanding Equity Awards at 2012 Fiscal Year-End

     79   

•     Option Exercises and Stock Vested in 2012

     82   

•     Nonqualified Deferred Compensation in 2012

     82   

•     Retirement Plans

     83   

•     Pension Benefits in 2012

     87   

•     Employment Contracts

     88   

•     Termination of Employment and Change in Control Arrangements

     89   

•     AUDIT COMMITTEE MATTERS

     101   

•     Report of Audit Committee

     101   

•     Independent Registered Public Accounting Firm Fees

     103   

•     Audit Committee Pre-Approval Policies

     104   

•     COMMUNICATIONS

     105   

•     OTHER MATTERS

     106   


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PROXY STATEMENT      

 

1

 

                                                      

PROXY STATEMENT

ABOUT THE 2013 ANNUAL MEETING

This proxy statement (the “Proxy Statement”) is being furnished to holders of common stock, $0.01 par value per share (the “Common Stock”), of Motorola Solutions, Inc. (“we,” “our,” “Motorola Solutions,” or the “Company”). Proxies are being solicited on behalf of the Board of Directors of the Company (the “Board”) to be used at the 2013 Annual Meeting of Stockholders (the “Annual Meeting”) to be held at the Willard InterContinental, 1401 Pennsylvania Avenue NW, Washington, DC 20004 on Monday, May 6, 2013 at 5:00 P.M., EDT, for the purposes set forth in the Notice of 2013 Annual Meeting of Stockholders.

All stockholders may view and print Motorola Solutions’ Proxy Statement and the 2012 Annual Report at the Company’s website at www.MotorolaSolutions.com/investor. The information contained on Motorola Solutions’ website is not a part of this Proxy Statement and is not deemed incorporated by reference into this Proxy Statement or any other public filing made with the Securities and Exchange Commission (the “SEC”).

 

 

 

Who Is Entitled to Vote?

Only stockholders of record at the close of business on March 8, 2013 (the “record date”) will be entitled to notice of, and to vote at, the Annual Meeting or any adjournments or postponements thereof. On the record date, there were issued and outstanding 272,311,256 shares of Common Stock entitled to vote at the Annual Meeting. The Common Stock is the only class of voting securities of the Company.

A list of stockholders entitled to vote at the meeting will be available for examination at the corporate offices of Motorola Solutions, Inc., 1303 E. Algonquin Road, Door 51, Schaumburg, Illinois 60196 for ten days before the Annual Meeting and at the Annual Meeting.

Why Did I Receive a Notice of Internet Availability?

The SEC has adopted rules for the electronic distribution of proxy materials. We have elected to provide our stockholders access to our proxy materials and 2012 Annual Report on the Internet instead of sending a full set of printed

proxy materials to all of our stockholders. This enables us to reduce costs, provide ease and flexibility for our stockholders and lessen the environmental impact of our Annual Meeting by mailing most of our stockholders a Notice of Internet Availability of Proxy Materials (“Notice”). If you receive a Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you request them. Instead, the Notice instructs you on how to access and review all of the information contained in the 2013 Proxy Statement and 2012 Annual Report. The Notice also instructs you on how you may submit your proxy over the Internet or by telephone. If you receive a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice.

The Notice, which contains instructions on how to access this Proxy Statement, the form of proxy and the Company’s 2012 Annual Report, is being mailed to stockholders on or about March 18, 2013.

 


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      PROXY STATEMENT
                                                   

How Can I Vote Without Attending the Annual Meeting?

There are three convenient methods for registered stockholders to direct their vote by proxy without attending the Annual Meeting. Stockholders can:

 

   

Vote by Internet. The website address for Internet voting is provided on your Notice or proxy card. You will need to use the control number appearing on your Notice or proxy card to vote via the Internet. You can use the Internet to transmit your voting instructions up until 11:59 P.M. EDT on Sunday, May 5, 2013. Internet voting is available 24 hours a day. If you vote via the Internet you do NOT need to vote by telephone or return a proxy card.

 

   

Vote by Telephone. You can also vote by telephone by calling the toll-free telephone number provided on your proxy card. You will need to use the control number appearing on your proxy card to vote by telephone. You may transmit your voting instructions from any touch-tone telephone up until 11:59 P.M. EDT on Sunday, May 5, 2013. Telephone voting is available 24 hours a day. If you vote by telephone you do NOT need to vote over the Internet or return a proxy card.

 

   

Vote by Mail. If you received a printed copy of the proxy card, you can vote by marking it, dating it and signing it, and returning it in the postage-paid envelope provided. Please promptly mail your proxy card to ensure that it is received prior to the closing of the polls at the Annual Meeting.

How Can I Change My Vote?

Registered stockholders can revoke their proxy at any time before it is voted at the Annual Meeting by either:

 

   

Submitting another timely, later-dated proxy by Internet, telephone or mail;

 

   

Delivering timely written notice of revocation to the Secretary, Motorola Solutions, Inc., 1303 East Algonquin Road, Schaumburg, Illinois 60196; or

 

   

Attending the Annual Meeting and voting in person.

If your shares are held in the name of a bank, broker or other nominee, you must obtain a proxy, executed in your favor, from the holder of record (that is, your bank, broker or nominee) to be able to vote at the Annual Meeting.

How Many Votes Must be Present to Conduct Business at the Annual Meeting?

In order for business to be conducted, a quorum must be represented in person or by proxy at the Annual Meeting. A quorum is a majority of the shares entitled to vote at the Annual Meeting. Shares represented by a proxy marked “abstain” will be considered present at the Annual Meeting for purposes of determining a quorum.

How Many Votes Am I Entitled to Cast?

You are entitled to cast one vote for each share of Common Stock you own on the record date. Stockholders do not have the right to vote cumulatively in electing directors.

What if I Hold My Shares in the Name of a Bank, Broker or Other Nominee?

If you are a beneficial owner, or you hold your shares in “street name,” please check your voting instruction card or contact your bank, broker or nominee to determine whether you will be able to vote by Internet or telephone.

If you are the beneficial owner of shares held in “street name” by a broker, the broker, as the record holder of the shares, is required to vote those shares in accordance with your instructions. If you do not give instructions to your broker, your broker will be entitled to vote the shares with respect to “discretionary” items, but will not be permitted to vote the shares with respect to “non-discretionary” items (resulting in a “broker non-vote”). The ratification of the appointment of KPMG LLP is the only “discretionary” item. The election of directors, the advisory approval of the Company’s executive compensation and the stockholder proposals are “non-discretionary” items.

 


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PROXY STATEMENT      

 

3

 

                                                      

Who Represents My Proxy at the Annual Meeting?

If you do not vote in person at the Annual Meeting, but have voted your shares by Internet, telephone, or mail, you have authorized certain members of Motorola Solutions’ senior management designated by the Board and named in your proxy to represent you and to vote your shares as instructed.

What if I Return a Proxy But Do Not Provide Specific Voting Instructions For Some or All of the Items?

All shares that have been properly voted—whether by Internet, telephone, or mail—and not revoked will be voted at the Annual Meeting in accordance with your instructions. If you sign your proxy but do not give voting instructions with respect to one or more items, the shares represented by that proxy will be voted as recommended by the Board with respect to those items. The Board recommends a vote: (1) “For” the election of the ten director nominees named in this Proxy Statement, (2) “For” the advisory approval of the Company’s executive compensation, (3) “For” the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2013, (4) “Against” the stockholder proposal regarding encouraging supplier(s) to publish an annual sustainability report, and (5) “Against” the stockholder proposal regarding requiring the Company to provide a report on corporate political contributions.

What if Other Matters Are Voted on at the Annual Meeting?

If any other matters are properly presented at the Annual Meeting for consideration and if you have voted your shares by Internet, telephone or mail, the persons named as proxies in your proxy will have the discretion to vote on those matters for you. As of the date we filed this Proxy Statement with the SEC, the Board did not know of any other matter to be raised at the Annual Meeting.

How Do I Vote if I Participate in the Company’s 401(k) Plan?

If you own shares of Common Stock through the Motorola Solutions 401(k) Plan (the “401(k) Plan”), the Notice or proxy card includes the shares you hold in the 401(k) Plan as well as the shares you hold outside of the 401(k) Plan. Under the 401(k) Plan, participants are “named fiduciaries” to the extent of their authority to direct the voting of shares of Common Stock credited to their 401(k) Plan accounts and their proportionate share of allocated shares for which no direction is received and unallocated shares, if any (together, “Undirected Shares”). The trustee of the 401(k) Plan will vote Undirected Shares in the same proportion as the shares for which directions are received, except as otherwise provided in accordance with the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). By submitting voting instructions by Internet, telephone, or, if hardcopies are requested, by mail, you direct the trustee of the 401(k) Plan to vote these shares, in person or by proxy, as designated therein, at the Annual Meeting.

How Many Votes Are Required to Elect Directors?

The Company has adopted a majority vote standard for non-contested director elections. Because the number of nominees properly nominated for the Annual Meeting is the same as the number of directors to be nominated for election at the Annual Meeting, the election of directors is a non-contested election. As set forth in the Company’s Bylaws, to be elected in a non-contested election, a director nominee must receive more “For” votes than “Against” votes. Abstentions and broker non-votes will have no effect on the director election because only votes “For” and “Against” a nominee will be counted.

How Many Votes Are Required for Advisory Approval of Executive Compensation?

With regard to the stockholder advisory approval of the Company’s executive compensation, the

 


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      PROXY STATEMENT
                                                   

affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting will be required to approve our executive compensation. Abstentions will have the same effect as a vote “Against” the advisory approval resolution. Broker non-votes will have no effect on the outcome of the advisory vote. The results of this vote are not binding on the Board.

How Many Votes Are Required to Ratify the Appointment of KPMG LLP as Motorola Solutions’ Independent Registered Public Accounting Firm?

The affirmative vote of the holders of a majority of the shares present in person or by proxy and

entitled to vote at the Annual Meeting will be required to ratify the selection of KPMG LLP. Abstentions will have the same effect as a vote “Against” the proposal.

How Many Votes Are Required to Pass the Stockholder Proposals?

In order to recommend that the Board consider adoption of any stockholder proposal, the affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting will be required. Abstentions will have the same effect as a vote “Against” any stockholder proposal. Broker non-votes will have no effect on the outcome of the stockholder proposals.

 


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PROXY STATEMENT      

 

5

 

                                                      

PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider. You should read the entire Proxy Statement carefully before voting. For more complete information regarding the Company’s 2012 performance, please review the Company’s Annual Report on Form 10-K.

2013 Annual Meeting of Stockholders

 

   

Date and Time: May 6, 2013, 5:00 p.m., local time

 

   

Location: Willard InterContinental, 1401 Pennsylvania Avenue NW, Washington, DC 20004

 

   

Record Date: March 8, 2013

 

   

Voting: Stockholders as of the close of business on the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the other proposals to be voted on.

 

   

Meeting Webcast (audio only): www.motorolasolutions.com/investors

 

   

Common Shares Outstanding as of Record Date: 272,311,256

 

   

Stock Symbol: MSI

 

   

Registrar & Transfer Agent: Computershare Shareowner Services

Items to be Voted On

 

    Our Board’s Recommendation

Election of Directors (page 7)

  FOR

Advisory vote to approve Executive Compensation (page 30)

  FOR

Ratification of Auditors (page 32)

  FOR
Stockholder proposal to encourage suppliers to publish an annual sustainability report (page 33)   AGAINST
Stockholder proposal on political disclosure and accountability (page 36)   AGAINST

Director Nominees

 

                       

Board Committees

(as of March 1, 2013)

 
Name   Director
Since
    Other
Public
Company
Boards
    Position   Audit     Comp.     Gov. &
Nom.
 

Gregory Q. Brown

    2007        1      Chairman and CEO, Motorola Solutions, Inc.                        

William J. Bratton*

    2011        0      CEO, Bratton Group LLC             X           

Kenneth C. Dahlberg*

    2011        1      Former Chairman and CEO, Science Applications International Corporation     X        X           

David W. Dorman*

    2006        2      Non-Executive Chairman of the Board, CVS Caremark Corporation             X           

Gen. Michael V. Hayden*

    2011        0      Principal, Chertoff Group                     X   

Judy C. Lewent*

    2011        2      Former EVP and CFO, Merck & Co., Inc.     X                X   

Anne R. Pramaggiore*

    2013        1      President and CEO, Commonwealth Edison                     X   

Samuel C. Scott*

    1993        2      Former Chairman, President and CEO, Corn Products International                     X   

Bradley E. Singer*

    2012        0      Partner, ValueAct Capital     X                   

Dr. John A. White*

    1995        1      Distinguished Professor of Industrial Engineering, University of Arkansas     X                   

*Independent Director


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      PROXY STATEMENT
                                                   

2012 Business Highlights

In 2012, the Company delivered strong operating results. Business highlights included:

 

   

Increased net sales by 6% to $8.7 billion from 2011 to 2012

 

   

Operating earnings of $1.3 billion for full year 2012

 

   

Earnings Per Share up 34% for full year over 2011

 

   

Repurchased $2.4 billion, or 49.6 million shares in 2012, at an average purchase price $49.14 per share

 

   

Paid $270 million in cash dividends in 2012

 

   

Generated $1.1 billion cash from operating activities in 2012

Executive Compensation

CEO:    Gregory Q. Brown (age 52)

Fiscal 2012 CEO Total Direct Compensation:

 

   

Base Salary: $1,200,000

   

Annual Incentive Plan Compensation: $3,370,000

   

Long-Term Incentives: $3,931,709 grant date fair value

Key Elements of our 2012 Executive Compensation Program:

 

   

Long-Term Incentives for our named executive officers (“NEOs”) were targeted at 65% of our CEO’s and, on average, 55% of our other NEOs’ target total compensation in fiscal 2012 and are comprised of:

  ¡   

Performance-contingent stock options granted to our CEO that vest on the later of (i) the third anniversary of the date of grant, and (ii) when the average closing price of our Common Stock for any fifteen consecutive trading days is 115% of the average closing price of our Common Stock for the fifteen trading days immediately preceding the grant date (“15% Stock Price Appreciation Hurdle”). Performance-contingent stock options granted to the other NEOs that vest on the later of (i) one-third per year from the date of grant, and (ii) the date the 15% Stock Price Appreciation Hurdle is met.

  ¡   

Performance-contingent Restricted Stock Units (“RSUs”) granted to our CEO and the NEOs, respectively, with the same performance-contingent vesting as the stock options described above.

  ¡   

Long Range Incentive Plan (“LRIP”) is a multi-year incentive plan. Current LRIP cycles are for a 3 year performance period and are each based on Motorola Solutions three year total shareholder return relative to our comparator group.

   

Annual Cash Incentive: the amount of an executive’s performance bonus, if any, under our Annual Incentive Plan (“AIP”) depends on the extent to which annual performance criteria are achieved. AIP awards were targeted at 24% of our CEO’s and, on average, 21% of our other NEOs’ target total compensation in fiscal 2012.

   

Competitive Base Salary

   

Other Benefit Plans and Programs available to most of the Company’s employees such as the 401(k) Plan and minimal perquisites.

Recoupment Policy:    Yes


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PROXY STATEMENT      

 

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PROPOSAL NO. 1 — ELECTION OF DIRECTORS FOR A ONE-YEAR TERM

How Many Directors Are Standing For Election and For What Term?

 

The number of directors of the Company to be elected at the Annual Meeting is ten. The directors elected at the Annual Meeting will serve until their respective successors are elected and qualified or until their earlier death, resignation or removal.

NOMINEES

Who Are the Nominees?

 

Each of the nominees named below is currently a director of the Company. Nominees Gregory Q. Brown, William J. Bratton, Kenneth C. Dahlberg, David W. Dorman, Gen. Michael V. Hayden, Judy C. Lewent, Samuel C. Scott, and Dr. John A. White were elected at the Annual Meeting of Stockholders held on April 30, 2012. Nominee Bradley E. Singer was elected at a Special Meeting of the Board of Directors held on October 26, 2012. Nominee Anne R. Pramaggiore was elected at a Special Meeting of the Board of Directors held on January 17, 2013. The ages shown are as of January 1, 2013.

 

 

 

LOGO

  

 

GREGORY Q. BROWN, Principal Occupation: Chairman and Chief Executive Officer, Motorola Solutions, Inc.

Director since 2007; Chairman since 2011; Age—52

Mr. Brown joined the Company in 2003 and was elected to the Company’s board of directors in 2007. Mr. Brown has served as the Company’s Chief Executive Officer since January 2011, and was appointed Chairman of the Board in May 2011. From August 2008 to January 2011, Mr. Brown served as Co-Chief Executive Officer of Motorola, Inc. and Chief Executive Officer of the Broadband Mobility Solutions business, and as President and Chief Executive Officer of Motorola, Inc. from January 2008 until August 2008. Prior to joining the Company, Mr. Brown was Chairman and Chief Executive Officer of Micromuse, Inc., a network management software company. Mr. Brown currently serves on the board of directors of Cisco Systems, Inc. He is the Deputy Chair of the Federal Reserve Bank of Chicago and Vice Chairman of the U.S. – China Business Council (USCBC). He is also a member of the Business Roundtable and Chair of their Select Committee on Comprehensive Immigration Reform, The Business Council, and the Technology CEO Council. Mr. Brown earned a bachelor’s degree in economics and an honorary doctorate in humane letters from Rutgers University and currently serves on the University’s Board of Governors.

 

Director Qualifications:

•     Mr. Brown’s leadership experience as Chairman and CEO of the Company and his significant global business experience within the telecommunications industry.

 


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      PROXY STATEMENT
                                                   

 

LOGO

  

 

WILLIAM J. BRATTON, Principal Occupation: Chief Executive Officer of the Bratton Group, LLC

Director since 2011; Age—65

Mr. Bratton is Chief Executive Officer of the Bratton Group LLC, a New York City-based public safety and law enforcement consulting firm. He also serves as Senior Advisor to Kroll Advisory Solutions, a global security solutions and specialized law enforcement company, and business of Altegrity. He formerly served as Chairman of Kroll from September 2010 through November 2012. Mr. Bratton joined Altegrity in November 2009 as Chairman of Altegrity Risk International where he consulted on security for criminal justice agencies worldwide. Prior to joining Altegrity, Mr. Bratton served as Chief of the Los Angeles Police Department (LAPD) from October 2002 to October 2009. From 1994 to 1996, he served as Commissioner of the New York City Police Department. Prior to the NYPD appointment, Mr. Bratton served as head of a number of other police agencies including commissioner of the Boston Police Department, Chief of Police of the New York City Transit Police Department, Superintendent of the Massachusetts Metropolitan District Commission of Police and Chief of Police for the Massachusetts Bay Transportation Authority. From 1996 until his appointment as LAPD Chief, Mr. Bratton worked in the private sector and in 2000 formed the Bratton Group, LLC, which consulted extensively in the United States and Latin America on policing, public safety and rule-of-law initiatives. During this period Mr. Bratton also served as Senior Consultant to Kroll’s Public Services Safety Group and Crisis and Consulting Management Group. Mr. Bratton is the Vice Chairman of the Homeland Security Advisory Council. He holds a bachelor’s degree in law enforcement from Boston State College/University of Massachusetts, and is a graduate of the FBI National Executive Institute and the Senior Executive Fellows Program at Harvard’s John F. Kennedy School of Government.

 

Director Qualifications:

•     Mr. Bratton’s significant experience in law enforcement both in the U.S. and abroad and his insight in criminal justice system operations.

 


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LOGO

  

 

KENNETH C. DAHLBERG, Principal Occupation: Retired; Formerly Chairman of the Board and Chief Executive Officer of Science Applications International Corporation

Director since 2011; Age—68

Mr. Dahlberg served as Chief Executive Officer of Science Applications International Corporation (SAIC), a research and engineering firm specializing in information systems and technology, from November 2003 through September 2009. Mr. Dahlberg also served as Chairman of the board of directors of SAIC from July 2004 until his retirement in June 2010. Prior to joining SAIC, Mr. Dahlberg served as Executive Vice President of General Dynamics Corp., where he was responsible for its Information Systems and Technology Group, and prior to that served as President and Chief Operating Officer of Raytheon Systems. Mr. Dahlberg is currently a director of Teledyne Technologies Incorporated and Parsons Corporation. He is a member of the Institute of Electrical and Electronic Engineers, the Surface Navy Association, the Association of the United States Army, and a Lifetime Member of the United States Navy League. He served as a member of the Board of Governors at Aerospace Industries Association and National Defense Industrial Association. He also served as a member of the President of the United States’ National Telecommunications Security Advisory Committee from October 2004 to January 2010. Mr. Dahlberg received a bachelor’s degree in electrical engineering from Drexel University in 1967, a master’s degree in Electrical Engineering from the University of Southern California in 1969 and attended the University of California business school for advanced education for executives.

 

Director Qualifications:

•     Mr. Dahlberg’s significant business experience, previously held senior-executive level positions and his service on other public company boards.

 


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LOGO

  

 

DAVID W. DORMAN, Principal Occupation: Non-Executive Chairman of the Board, CVS Caremark Corporation

Director since 2006; Age—58

Mr. Dorman is the Lead Independent Director of the board of the Company and the Non-Executive Chairman of the board of CVS Caremark Corporation. Previously he was the Non-Executive Chairman of the board of the Company and was also a Managing Director and Senior Advisor with Warburg Pincus, a global leader in private equity. He was Chairman and Chief Executive Officer of AT&T, a provider of internet and transaction-based voice and data services, from November 2002 until the completion of the AT&T Corp. and SBC Communications merger in November 2005. Mr. Dorman joined AT&T as President in December 2000. He began his career in the telecommunications industry at Sprint Corp. in 1981. Mr. Dorman also serves on the boards of YUM! Brands, Inc. and the Georgia Tech Foundation. In the last five years, Mr. Dorman previously served on the board of Phorm, Inc. Mr. Dorman received a B.S. degree in Industrial Management with high honors from the Georgia Institute of Technology.

 

Director Qualifications:

•     Mr. Dorman’s experience in private equity, as the chief executive officer of a global public company in the telecommunications industry, and his service on other public company boards.

 

 

LOGO

  

 

GEN. MICHAEL V. HAYDEN, Principal Occupation: Principal, Chertoff Group

Director since 2011; Age—67

General Hayden is currently a principal at the Chertoff Group, a security consultancy company. General Hayden’s distinguished career includes several leadership positions with the U.S. Federal Government. General Hayden served as the director of the Central Intelligence Agency from May 2006 until his retirement from federal service in February 2009. From May 2005 to May 2006, General Hayden served as Principal Deputy Director of National Intelligence. He was also the director of National Security Agency from 1999 until 2005. General Hayden is a retired United States Air Force four-star general who entered active duty in the U.S. Air Force in 1969 and retired in July 2008. General Hayden also serves on the board of Alion Science and Technology and serves as a distinguished Visiting Professor at George Mason University School of Public Policy. General Hayden received a B.A. degree in History and an M.A. degree in Modern American History, both from Duquesne University. He is a graduate of the Air Force ROTC program.

 

Director Qualifications:

•     General Hayden’s experience as a career soldier, as the nation’s top military intelligence officer and his background in national security.

 


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JUDY C. LEWENT, Principal Occupation: Retired; Formerly Executive Vice President & Chief Financial Officer, Merck & Co., Inc.

Director since 2011; Age—63

Ms. Lewent joined Merck & Co., a pharmaceutical company, in 1980 and served as chief financial officer from 1990 until her retirement in 2007, where she was responsible for worldwide financial, corporate development and licensing matters as well as for strategic planning. Ms. Lewent also served as President, Human Health Asia from January 2003 until July 2005. Ms. Lewent currently is a director of GlaxoSmithKline plc and Thermo Fisher Scientific, Inc. She served on the Company’s board of directors from May 1995 to May 2010, and on the board of Dell, Inc. from May 2001 to July 2011. She is a trustee of the Rockefeller Family Trust, a life member of the Massachusetts Institute of Technology Corporation, and a member of the American Academy of Arts and Sciences. Ms. Lewent received a bachelor’s degree from Goucher College and a master’s degree from the MIT Sloan School of Management.

 

Director Qualifications:

•     Ms. Lewent’s experience as the chief financial officer of a global public company in the pharmaceutical industry and her service on other public company boards.

 

 

LOGO

  

 

ANNE R. PRAMAGGIORE, Principal Occupation: President and Chief Executive Officer, Commonwealth Edison Company (“ComEd”)

Director since 2013; Age—54

Ms. Pramaggiore has served as President and Chief Executive Officer of ComEd, an electric utility company and a business unit of Exelon Corporation and has been a member of the ComEd board of directors since February 2012. Prior to her current position, she served as ComEd’s President and Chief Operating Officer from May 2009 until February 2012. Ms. Pramaggiore joined ComEd in 1998 and previously served as its Executive Vice President, Customer Operations, Regulatory and External Affairs from September 2007 to May 2009, Senior Vice President, Regulatory and External Affairs from November 2005 to September 2007 and Vice President, Regulatory and Strategic Services from October 2002 to November 2005. She also served as its Lead Counsel. Ms. Pramaggiore also serves on the boards of The Babcock & Wilcox Company, the Art Institute of Chicago, DePaul University, Chicago Botanic Garden, Chicago Council on Global Affairs, Chicago Urban League, Governor State University, the Lincoln Park Zoo, After School Matters, the Illinois Manufacturers’ Association (“IMA”), and Northwestern Memorial Hospital. She is a member of The Chicago Network, the Economic Club of Chicago, and serves as an Advisor on the Miami University Business Council. Ms. Pramaggiore has a B.A. degree in Communications and Theater from Miami University, Oxford, Ohio and a J.D. degree from DePaul University School of Law where she served as editor-in-chief of the school’s Law Review.

 

Director Qualifications:

•     Ms. Pramaggiore’s experience as a chief executive officer of a company in the electric utilities industry, as a licensed attorney, and her service on other public company boards.

 


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SAMUEL C. SCOTT III, Principal Occupation: Retired; Formerly Chairman of the Board, President and Chief Executive Officer, Corn Products International

Director since 1993; Age—68

Mr. Scott served as Chairman, President and Chief Executive Officer of Corn Products International, a corn refining business, from February 2001 until his retirement in May 2009. Prior to that Mr. Scott was President and Chief Operating Officer of Corn Products International from January 1998 to February 2001. Mr. Scott serves on the board of directors of Bank of New York Mellon, Abbott Laboratories, the Chicago Council on Global Affairs, World Business Chicago, and The Chicago Urban League. He also serves on the board of Northwestern Memorial HealthCare and as Chairman of Chicago Sister Cities. Mr. Scott received a B.S. degree in Engineering and an M.B.A. from Fairleigh Dickinson University.

 

Director Qualifications:

•     Mr. Scott’s experience as the chairman and chief executive officer of a global public company in the corn refining industry and his service on other public company boards.

 

 

LOGO

  

 

BRADLEY E. SINGER, Principal Occupation: Partner, ValueAct Capital

Director since 2012; Age—46

Mr. Singer is a partner at ValueAct Capital. Prior to joining ValueAct Capital in May 2012, Mr. Singer was the Senior Executive Vice President and Chief Financial Officer of Discovery Communications, Inc. from July 2008 to March 2012 and served as its Treasurer from February 2009 to September 2011. He served as Chief Financial Officer and Senior Executive Vice President of Discovery Communications Holding, LLC from July 15, 2008 to March, 2012 and as its Treasurer from February 2009 to September 2011. Prior to that, he served as Chief Financial Officer and Treasurer of American Tower Corporation, a wireless and broadcast communications infrastructure company, from December 2001 to June 2008. Prior to American Tower, Mr. Singer worked as an investment banker at Goldman, Sachs & Co. for four years in New York and London. He served on the board of Frontier Communications Corporation from June 2005 to May 2008. He served on the board of Martha Stewart Living Omnimedia, Inc. from December 2003 to March 2008. In addition, he currently serves on the boards of the Posse Foundation and the McIntire School of Commerce at the University of Virginia. Mr. Singer has a B.S. from the University of Virginia and an M.B.A. with Distinction from Harvard Business School.

 

Director Qualifications:

•     Mr. Singer’s experience as the chief financial officer of two public companies in the communications industry and his service on other public company boards.

 


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DR. JOHN A. WHITE, Principal Occupation: Distinguished Professor of Industrial Engineering, University of Arkansas

Director since 1995; Age—73

Dr. White is a Distinguished Professor of Industrial Engineering at the University of Arkansas. Previously, he was Chancellor of the University of Arkansas from 1997 until he retired in June 2008. Dr. White served as Dean of Engineering at Georgia Institute of Technology from 1991 to early 1997, having been a member of the faculty since 1975. He is also a director of J.B. Hunt Transport Services, Inc. In the last five years, Dr. White previously served on the board of Logility, Inc. A member of the National Academy of Engineering, Dr. White received a B.S.I.E. from the University of Arkansas, an M.S.I.E. from Virginia Polytechnic Institute and State University and a Ph.D. from The Ohio State University.

 

Director Qualifications:

•     Dr. White’s experience as the chancellor of a university, as the dean of an engineering college, as an author of financial textbooks, and his service on other public company boards.

 

 

RECOMMENDATION OF THE BOARD

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE TEN NOMINEES NAMED HEREIN AS DIRECTORS. UNLESS OTHERWISE INDICATED ON YOUR PROXY, YOUR SHARES WILL BE VOTED FOR THE ELECTION OF SUCH TEN NOMINEES AS DIRECTORS.

What Are Our Directors’ Qualifications to Serve on the Motorola Solutions Board?

 

The Board believes it should be comprised of individuals with appropriate skills and experiences to meet its board governance responsibilities and contribute effectively to the Company. Our Governance and Nominating Committee carefully considers the skills and experiences of current directors and new nominee candidates to ensure that they meet the needs of the Company before nominating directors for election to the Board. All of our non-employee directors serve on Board committees, further supporting the Board by providing expertise to those committees. The needs of the committees also are reviewed when considering nominees to the Board.

The Board is comprised of active and former CEOs and CFOs of major corporations and individuals with experience in high-tech fields, government, law enforcement, private equity and academia. As such, they have a deep working knowledge of matters common to large companies, generally including experience with financial statement preparation, compensation determinations, regulatory compliance, corporate governance, public affairs and legal matters. Specific experience, qualifications, attributes or skills are listed above in the biographies.

What if a Nominee is Unable to Serve as Director?

 

If any nominee named above is not available to serve as a director for any reason at the time of the Annual Meeting, the proxies will be voted for the election of such other person or persons as the Board may designate, unless the Board, in its discretion, reduces the number of directors.


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CORPORATE GOVERNANCE MATTERS

What Are the Board’s Corporate Governance Principles?

 

The Board has long adhered to governance principles designed to assure the continued vitality of the Board and excellence in the execution of its duties. The Board has responsibility for management oversight and providing strategic guidance to the Company. The Board believes that it must continue to renew itself to ensure that its members understand the industries and the markets in which the Company operates. The Board also believes that it must remain well-informed about the opportunities and challenges facing Motorola Solutions and its industries and markets so that the Board members can exercise their fiduciary responsibilities to Motorola Solutions stockholders.

What Are Some of the Major Corporate Governance Initiatives the Board Has Adopted in Recent Years?

 

The Board recognizes the importance of evolving the Company’s corporate governance practices and is committed to regularly reviewing specific elements of the Company’s corporate governance and making changes when the Board deems them in the best interests of the Company and its stockholders. As a result, Motorola Solutions is a leader in adopting many corporate governance best-practices, including many compensation related best practices.

 

   

An early adopter of the “say-on-pay” vote. We hold an advisory vote to seek stockholder approval of our NEOs’ compensation on an annual basis.

 

   

All of our directors are elected annually and we have a majority voting standard for non-contested director elections.

 

   

Holders of 20% or more of our Common Stock have the ability to request a special meeting of stockholders.

 

   

We have a recoupment or “clawback” policy to recover certain executive pay in the event of misconduct leading to a financial restatement.

 

   

The Board adopted a new change in control plan in 2011, which covers our NEOs, other than Mr. Brown, and our other senior executives, and will be in effect for existing senior executives after the notice period expires and is currently in effect for any new senior executives. The new plan limits the participants in the plan, eliminates excise tax gross up provisions, and reduces the cash severance multiple.

 

   

The Board removed a share recycling provision from the Motorola Solutions Omnibus Incentive Plan of 2006 (“2006 Plan”), so that shares withheld for tax purposes may not be reissued for future grants.

 

   

Our stock ownership guidelines require non-employee directors to own five times the annual retainer within a five-year time period and our CEO to own six times the annual salary within a five-year time period.

 

   

Our Board Governance guidelines require non-employee directors to hold all shares paid or awarded by the Company until termination of Board service.

 

   

In December 2012, the Board amended the Director Independence Guidelines to require a four-year look back for evaluating certain activities when determining independence, strengthened the clawback policy, and amended each of the Committee charters to reflect these more stringent requirements.


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Which Directors Are Independent?

 

On February 11, 2013, the Board made the determination, based on the recommendation of the Governance and Nominating Committee and in accordance with the Motorola Solutions, Inc. Director Independence Guidelines, that the former non-employee director, Mr. Intrieri, and the current non-employee directors, Mr. Bratton, Mr. Dahlberg, Mr. Dorman, General Hayden, Ms. Lewent, Ms. Pramaggiore, Mr. Scott, Mr. Singer and Dr. White, were independent during the periods in 2012 and 2013 that they were members of the Board. Mr. Brown does not qualify as an independent director since he is an employee of the Company. Mr. Intrieri resigned from the Board on March 1, 2012. See What is Motorola Solutions’ Relationship with Entities Associated with Independent Directors? for further details.

How Was Independence Determined?

 

The Motorola Solutions, Inc. Director Independence Guidelines include both the NYSE independence standards and categorical standards the Board has adopted to determine if a relationship that a Board member has with the Company is material. With respect to the NYSE independence standards, the Company has adopted a stricter application of such standards requiring a look-back of four years when assessing independence in connection with a directors (i) status as an employee of the Company, (ii) direct compensation in excess of $120,000, and (iii) relationship with our internal or external auditor. The categorical standards adopted by the Board are as follows:

 

  Ÿ  

Contributions or payments (including the provision of goods or services) from Motorola Solutions to a charitable organization (including a foundation), a university, or other not-for-profit organization, of which a director or an immediate family member of a director (defined to include a director’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law and anyone (other than domestic employees) who shares the director’s home) is an officer, director, trustee or employee, will not impair independence unless the contribution or payment (excluding Motorola Solutions matches of charitable contributions made by employees or directors under Motorola Solutions’ or the Motorola Solutions Foundation’s matching gift programs):

(i) is to an entity of which the director or the director’s spouse currently is an officer, director or trustee, and such person held such position at the time of the contribution,

(ii) was made within the previous three years, and

(iii) was in an amount which, in the entity’s last fiscal year prior to the year of the contribution or payment, exceeded the greater of $300,000 or 5% of such entity’s consolidated gross revenues (or equivalent measure).

 

  Ÿ  

Indebtedness of Motorola Solutions to a bank or similar entity of which a director or a director’s immediate family member is a director, officer, employee or 10% Owner (as defined below) will not impair independence unless the following are applicable:

(i) the director or the director’s spouse is an executive officer of such entity or an owner who directly or indirectly has a 10% or greater equity or voting interest in such entity (a “10% Owner”) and he or she held that position at any time during the previous twelve months, and

(ii) the total amount of Motorola Solutions’ indebtedness during the previous twelve months is more than 5% of the total consolidated assets of such entity in its last fiscal year.


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Except as expressly provided in the Disqualifying Relationship concerning personal services contracts set forth in the Independence Guidelines, any other business relationships between a director or a director’s immediate family member, such as consulting, legal or financial advisory services provided to Motorola Solutions, will not impair independence unless the following are applicable:

(i) the director or the director’s spouse is a partner, officer or 10% Owner of the company or firm providing such services, and he or she held such position at any time during the previous twelve months, and

(ii) the services that were provided during the previous twelve months were in an amount which, in the company’s or firm’s last fiscal year, exceeded the greater of $1 million or 2% of such company’s or firm’s consolidated gross revenues.

This categorical standard does not include business relationships with Motorola Solutions’ independent registered public accounting firm because those relationships are covered by the NYSE independence standards.

 

  Ÿ  

Motorola Solutions’ ownership of voting stock of a company of which the director or the director’s immediate family member is a director, officer, employee or 10% Owner will not impair independence unless the following are applicable:

(i) the director or the director’s spouse is an executive officer of that company, and

(ii) Motorola Solutions is currently a 10% Owner of that company.

The ownership of Motorola Solutions Common Stock by a director or a director’s immediate family member will not be considered to be a material relationship that would impair a director’s independence.

When applying the NYSE independence standards, including the Company’s stricter look-back periods, and the categorical standards set forth above, “Motorola Solutions” includes Motorola Solutions, Inc. and any of its subsidiaries and the Motorola Solutions Foundation.

A complete copy of the Motorola Solutions, Inc. Director Independence Guidelines is available on the Company’s website at www.MotorolaSolutions.com/investor. The information contained on Motorola Solutions’ website is not a part of this Proxy Statement and is not deemed incorporated by reference into this Proxy Statement or any other public filing made with the SEC.

What is Motorola Solutions’ Relationship with Entities Associated with Independent Directors?

 

When assessing independence, each of Mr. Bratton, General Hayden, Ms. Pramaggiore, Mr. Scott and Dr. White had relationships with entities that were reviewed by the Board under the NYSE’s independence standards (including our stricter four-year look-back period) and/or the Board’s categorical standards described above covering contributions or payments to charitable or similar not-for-profit organizations. In each case, the payments or contributions were significantly less than the NYSE independence standards or the categorical standards and were determined by the Board to be immaterial.


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Are the Members of the Audit, Compensation and Leadership and Governance and Nominating Committees Independent?

 

The Board has determined that all of the current members of the Audit Committee, the Compensation and Leadership Committee and the Governance and Nominating Committee are independent within the meaning of the Motorola Solutions, Inc. Director Independence Guidelines, applicable rules of the SEC and the NYSE listing standards for independence.

Where Can I Receive More Information About Motorola Solutions’ Corporate Governance Practices?

 

Motorola Solutions maintains a corporate governance page on its website at www.MotorolaSolutions.com/investor that includes information about its corporate governance practices. The following documents are currently included on the website:

 

  Ÿ  

The Motorola Solutions, Inc. Board Governance Guidelines, the current version of which the Board adopted on December 11, 2012;

 

  Ÿ  

The Motorola Solutions, Inc. Director Independence Guidelines, the current version of which the Board adopted on December 11, 2012;

 

  Ÿ  

The Principles of Conduct for Members of the Motorola Solutions, Inc. Board of Directors, the current version of which the Board adopted on December 11, 2012;

 

  Ÿ  

The Motorola Solutions, Inc. Code of Business Conduct, which applies to all employees;

 

  Ÿ  

The charters of the Audit Committee, Compensation and Leadership Committee and Governance and Nominating Committee, the current versions of each of which the Board adopted on December 11, 2012;

 

  Ÿ  

The Motorola Solutions, Inc. Restated Certificate of Incorporation, as amended through January 4, 2011; and

 

  Ÿ  

The Motorola Solutions, Inc. Amended and Restated Bylaws, the current version of which the Board adopted on January 17, 2013.

The Company intends to disclose amendments to the above documents, or waivers applicable to its directors, chief executive officers, chief financial officer or corporate controller from certain provisions of its ethical policies and standards for directors and its employees, on the Motorola Solutions website within four business days following the date of the amendment or waiver. There were no waivers in 2012. The information contained on our website is not part of this Proxy Statement and is not deemed incorporated by reference into this Proxy Statement or any other public filing made with the SEC.

What Important Recent Events have occurred at Motorola Solutions?

 

On January 4, 2011, the separation of Motorola Mobility Holdings, Inc. (“Motorola Mobility”) from Motorola, Inc. (the “Separation”) was completed. Pursuant to the Separation, on January 4, 2011, the stockholders of record as of the close of business on December 21, 2010 received one (1) share of Motorola Mobility common stock for each eight (8) shares of Motorola, Inc. common stock held as of


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December 21, 2010. Immediately following the distribution of Motorola Mobility common stock, Motorola, Inc. completed a 1-for-7 reverse stock split (the “Reverse Stock Split”) and changed its name to Motorola Solutions, Inc. Stockholders received cash in lieu of fractional shares produced by the Separation and the Reverse Stock Split. Motorola Mobility was subsequently acquired by Google Inc. on May 22, 2012.

Motorola Solutions Employees and Directors:

With respect to all individuals remaining as employees or directors of Motorola Solutions, all outstanding stock options and unvested restricted stock units were adjusted to reflect the Separation and the Reverse Stock Split.

Board of Directors:

Directors who own deferred stock units are entitled to dividend equivalents and therefore the deferred stock units were treated in the same manner as shares of Motorola, Inc. common stock, as described above. However, cash in lieu of fractional shares was not paid. The distribution ratio (1-for-8) and reverse stock split ratio (1-for-7) were applied and then rounded down to the nearest whole share.

In addition, instead of receiving a distribution of shares of Motorola Mobility common stock, each director received a distribution of Motorola Mobility deferred stock units and we agreed to be responsible for settling the Motorola Mobility deferred stock units for our directors following their termination of service from our Board. Upon completion of the acquisition of Motorola Mobility by Google, Inc., each director was entitled to receive the cash proceeds of such merger with respect to each Motorola Mobility deferred stock unit, without interest, upon termination of Board service. However, each of the directors who received Motorola Mobility deferred stock units elected to convert the right to receive such cash proceeds into deferred stock units of Motorola Solutions, Inc. at the time of the merger. Accordingly, on May 22, 2012, we replaced the right to receive such cash proceeds with Motorola Solutions deferred stock units with terms that mirror the original Motorola Solutions deferred stock unit award by dividing the total cash proceeds such director was eligible to receive by the closing price of our Common Stock on that date.

BOARD OF DIRECTORS MATTERS

How Often Did the Board Meet in 2012?

 

The Board held six meetings during 2012. Overall attendance at Board and committee meetings was 97%, excluding Ms. Pramaggiore. Each incumbent director attended 91% or more of the combined total meetings of the Board and the committees on which he or she served during 2012, with the exception of Ms. Pramaggiore, who was elected on October 26, 2012 and resigned on December 12, 2012 in order to seek approval from the Federal Energy Regulatory Commission (“FERC”) to serve on our Board and did not attend the December 10, 2012 Governance and Nominating Committee meeting or the December 11, 2012 Board meeting. Ms. Pramaggiore received approval from FERC in January 2013 and was again elected to the Board on January 17, 2013.


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How Many Directors will Comprise the Board?

 

The Board is currently comprised of, and immediately following the Annual Meeting will consist of, ten directors. The Board has the authority under the Company’s Bylaws to increase or decrease the size of the Board and to fill vacancies between Annual Meetings.

How Many Executive Sessions of the Board Were Held in 2012?

 

Independent directors of the Company meet regularly in executive session without management as required by the Motorola Solutions, Inc. Board Governance Guidelines and NYSE listing standards. Generally, executive sessions are held in conjunction with regularly-scheduled meetings of the Board. In 2012, the non-employee independent members of the Board met in executive session six times.

What is the Leadership Structure of the Board? Why was that Structure Chosen? Who Serves as Chairman of the Board?

 

At the Annual Board meeting held in May 2011, the Board combined the roles of Chairman and Chief Executive Officer and appointed Gregory Q. Brown to serve as both Chief Executive Officer and Chairman of the Board (referred to as “CEO” throughout) and Mr. Dorman to serve as Lead Independent Director. The Board reappointed Mr. Brown as Chairman of the Board and Mr. Dorman as Lead Independent Director at the Annual Board meeting held in May 2012. The Board determined that Mr. Brown’s thorough knowledge of Motorola Solutions business, strategy, people, operations, competition and financial position coupled with his leadership and vision made him well positioned to chair Board meetings and bring key business and stakeholder issues to the Board’s attention. A joint role for Motorola Solutions provides a vital link between management and the Board, allowing the Board to perform its oversight role with the benefit of management’s perspective on our business strategy and all other aspects of the business. As Lead Independent Director, Mr. Dorman chairs the executive sessions of the Board and acts as a liaison between our Chairman and independent directors.

Will the Directors Attend the Annual Meeting?

 

Board members are expected to attend the Annual Meeting as provided in the Motorola Solutions, Inc. Board Governance Guidelines. All of our directors who stood for election at the 2012 Annual Meeting attended that meeting.

What is the Board’s Role in the Oversight of Risks?

 

The Board oversees the business of the Company, including CEO and senior management performance and risk management, to assure that the long-term interests of the stockholders are being served. Each committee of the Board is also responsible for reviewing the risk exposure of the Company related to the committee’s areas of responsibility and providing input to management on such risks.

Management and our Board have a robust process embedded throughout the Company to identify, analyze, manage and report all significant risks facing the Company. The Company’s CEO and other


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senior managers regularly report to the Board on significant risks facing the Company, including financial, operational and strategic risks. Each of the Board committees reviews with management significant risks related to the committee’s area of responsibility and reports to the Board on such risks, which includes the Compensation and Leadership Committee’s review of Company-wide compensation-related risks. While each committee is responsible for reviewing significant risks in the committee’s area of responsibility, the entire Board is regularly informed about such risks through committee reports. The oversight of specific risks by Board committees enables the entire Board to oversee risks facing the Company more effectively and develop strategic direction taking into account the effects and magnitude of such risks. The independent Board members also discuss the Company’s significant risks when they meet in executive session without management. Our Audit Services department has a very important role in the risk management program. The role of this department is to provide management and the Audit Committee with an overarching and objective view of the risk management activity of the enterprise. This department’s engagements span financial, operational, strategic and compliance risks and the engagement results assist management in maintaining tolerable risk levels. This department conducts engagements utilizing an enterprise risk management model. The director of the department reports directly to the Audit Committee and meets regularly with the committee, including in executive session.

What Are the Committees of the Board?

 

To assist it in carrying out its duties, the Board has delegated certain authority to several committees. The Board currently has the following standing committees: (1) Audit, (2) Compensation and Leadership, (3) Governance and Nominating, and (4) Executive. Committee membership as of December 31, 2012 and the number of meetings of each committee during 2012 are described below (Anne R. Pramaggiore was appointed to the Governance and Nominating Committee on January 17, 2013):

 

Non-Employee Directors   Audit   Compensation &
Leadership
 

Governance

&

Nominating

  Executive

William J. Bratton

      X        

Kenneth C. Dahlberg

  X   X        

David W. Dorman *

      Chair       X

Gen. Michael V. Hayden

          X    

Judy C. Lewent

  Chair       X   X

Samuel C. Scott III

          Chair   X

Bradley E. Singer

  X            

John A. White

  X            

Employee Directors

               

Gregory Q. Brown

              Chair

Number of Meetings in 2012

  11   8   6   0

*Lead Independent Director

Where Can I Locate the Current Committee Charters?

 

Current versions of the charters for each of the Audit Committee, Compensation and Leadership Committee and Governance and Nominating Committee are available on our website at www.MotorolaSolutions.com/investor. The information contained on our website is not a part of this


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Proxy Statement and is not deemed incorporated by reference into this Proxy Statement or any other public filing made with the SEC.

What Are the Functions of the Audit Committee?

 

 

   

Assist the Board in fulfilling its oversight responsibilities as they relate to the Company’s accounting policies, internal controls, disclosure controls and procedures, financial reporting practices and legal and regulatory compliance.

 

   

Engage the independent registered public accounting firm.

 

   

Monitor the qualifications, independence and performance of the Company’s independent registered public accounting firm and the performance of the Company’s internal auditors.

 

   

Maintain, through regularly scheduled meetings, a line of communication between the Board and the Company’s financial management, internal auditors and independent registered public accounting firm.

 

   

Oversee compliance with the Company’s policies for conducting business, including ethical business standards.

 

   

Review the Company’s overall financial position, asset utilization and capital structure.

 

   

Review the need for equity and/or debt financing and specific outside financing proposals.

 

   

Review and approve certain major transactions, such as restructurings, acquisitions, divestitures, joint ventures and equity investments.

 

   

Monitor the performance and investments of employee retirement and related funds.

 

   

Review the Company’s dividend payment plans and practices.

 

   

Prepare the report of the Audit Committee included in this Proxy Statement.

What Are the Functions of the Compensation and Leadership Committee?

 

 

   

Assist the Board in overseeing the management of the Company’s human resources, including:

 

   

compensation and benefits programs;

 

   

CEO performance and compensation;

 

   

executive development and succession; and

 

   

diversity efforts.

 

   

Oversee the evaluation of the Company’s senior management.


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Review and discuss the Compensation Discussion and Analysis (“CD&A”) with management and make a recommendation to the Board on the inclusion of the CD&A in this Proxy Statement.

 

   

Prepare the report of the Compensation and Leadership Committee included in this Proxy Statement.

What Are the Functions of the Governance and Nominating Committee?

 

 

   

Identify individuals qualified to become Board members, consistent with the criteria approved by the Board.

 

   

Recommend director nominees and individuals to fill vacant positions and to serve on committees.

 

   

Assist the Board in interpreting the Company’s Board Governance Guidelines, the Board’s Principles of Conduct and any other similar governance documents adopted by the Board.

 

   

Oversee the evaluation of the Board and its committees.

 

   

Review the independence of directors and evaluate and/or approve related party transactions.

 

   

Generally oversee the governance and compensation of the Board.

What Are the Functions of the Executive Committee?

 

 

   

Act for the Board between meetings on matters already approved in principle by the Board.

 

   

Exercise the authority of the Board on specific matters assigned by the Board from time to time.

What is the Decision-Making Process to Determine Executive Compensation?

 

The Board has delegated to the Compensation and Leadership Committee the responsibility to oversee the programs under which compensation is paid or awarded to Motorola Solutions’ senior executives and to evaluate their performance. The Compensation and Leadership Committee is responsible for bringing recommended compensation actions involving the CEO to the Board for its concurrence. The specific functions of the Compensation and Leadership Committee are described in this Proxy Statement under What Are the Functions of the Compensation and Leadership Committee? and in the Compensation and Leadership Committee’s charter, which the Compensation and Leadership Committee and the Board annually review and revise as necessary.

Motorola Solutions’ Human Resources organization supports the Compensation and Leadership Committee in its work and, in some cases, acts pursuant to delegated authority from the Compensation and Leadership Committee to fulfill various functions in administering Motorola Solutions’ compensation programs.


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In carrying out its duties, the Compensation and Leadership Committee has direct access to outside advisors, independent compensation consultants and others to assist them in their review of the compensation for Motorola Solutions’ senior executives. Since 2009, the Committee has retained Compensation Advisory Partners, LLC (“Compensation Advisory Partners”) as its independent compensation consultant.

For more information on the decisions made by the Compensation and Leadership Committee, see the Compensation Discussion and Analysis.

What is the Decision-Making Process to Determine Director Compensation?

 

The Governance and Nominating Committee recommends to the Board the compensation for non-employee directors, which is to be consistent with market practices of other similarly situated companies and takes into consideration the impact on non-employee directors’ independence and objectivity. The Board has asked the Compensation and Leadership Committee to assist the Governance and Nominating Committee in making such recommendations. The charter of the Governance and Nominating Committee does not permit it to delegate director compensation matters to management, and management has no role in recommending the amount or form of director compensation.

What is the Role of Independent Compensation Consultants in Executive and Director Compensation Determinations?

 

In accordance with the Compensation and Leadership Committee’s charter, this committee has the sole authority, to the extent deemed necessary and appropriate, to retain and terminate any compensation consultants, outside counsel or other advisors, including the sole authority to approve the firm’s fees and retention terms.

In accordance with this authority, since 2009, the Compensation and Leadership Committee has retained Compensation Advisory Partners as its independent consultant firm. Compensation Advisory Partners provides insight and advice on matters regarding trends in executive compensation, relative executive pay and benefits practices, assessment of pay of our senior executives relative to performance and other measures as the Compensation and Leadership Committee deems appropriate. See Independent Consultant Engagement in the Compensation Discussion and Analysis for further details on the compensation-related elements the Compensation and Leadership Committee requested to be reviewed by Compensation Advisory Partners.

The Compensation and Leadership Committee intends to engage its external independent consultant to perform a comprehensive evaluation of the Company’s executive rewards program on a periodic basis. The Compensation and Leadership Committee also intends to engage its external independent consultant to review the specific compensation of the CEO and all members of the management executive committee, comprised of the CEO and certain executives designated by the CEO, annually.

What Role, if any, do Executive Officers Play in Determining or Recommending Executive and Director Compensation?

 

Motorola Solutions’ management executive committee provides recommendations regarding the design of the Company’s compensation program to the Compensation and Leadership Committee.


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Additionally, the Compensation and Leadership Committee’s independent compensation consultant provides input on these recommendations from time to time, assists in reviewing the compensation for the management executive committee and participates in Compensation and Leadership Committee meetings. Upon Compensation and Leadership Committee approval, the management executive committee is responsible for executing the objectives of approved compensation programs.

Each member of Motorola Solutions’ management executive committee is ultimately responsible for approving all compensation actions for their respective organizations. When these compensation actions involve other Motorola Solutions executives, the involved management executive committee member is accountable for ensuring adherence to all established governance procedures.

The CEO is responsible for recommending all compensation actions involving any member of the management executive committee or Section 16 Officer to the Compensation and Leadership Committee for its approval. The CEO takes an active role in Compensation and Leadership Committee meetings at which compensation actions involving the above officers are discussed.

Motorola Solutions’ Human Resources organization, together with the Compensation and Leadership Committee’s independent compensation consultant, provides information and comparative data regarding CEO compensation and brings that information to the Compensation and Leadership Committee to assist them in determining CEO compensation. The Compensation and Leadership Committee is responsible for bringing recommended compensation actions involving the CEO to the independent members of the Board for their concurrence. The Compensation and Leadership Committee cannot unilaterally approve compensation changes for the CEO. The CEO is not involved in the preparation of recommendations related to his compensation and does not participate in the discussions regarding his compensation at Compensation and Leadership Committee or Board meetings. The independent consultant is also available at such committee meetings where the CEO’s compensation is being discussed.

As stated above, management does not recommend or determine director compensation.

What Are the Director Stock Ownership Guidelines?

 

On November 9, 2011, our Board stock ownership guidelines were increased to provide that, by the later of five years after that date or joining the Board, non-employee directors are expected to own Common Stock with a value equivalent to at least five times the annual cash retainer fee for directors. In addition, directors are required to hold all shares paid or awarded by the Company until their termination of service; this requirement does not apply to shares acquired through the exercise of options awarded to directors. For the purposes of these guidelines, Common Stock includes deferred stock units. Until such time as the obligation to own five times the annual cash retainer has passed, the previous requirement of four times the annual cash retainer within five years of joining the Board will remain in effect for all members of the Board as of November 9, 2011. As of December 31, 2012, all non-employee directors were in compliance with the stock ownership guidelines.

How Are the Directors Compensated?

 

During 2012, the annual cash retainer fee paid to each non-employee director was $100,000. In addition: (1) the Lead Independent Director received an additional annual fee of $25,000; (2) the chair of the Audit Committee received an additional annual fee of $20,000; (3) the chair of the Compensation and Leadership Committee received an additional annual fee of $15,000; (4) the non-employee chairs


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of the other committees each received an additional annual fee of $10,000; and (5) the members of the Audit Committee, other than the chair, each received an additional annual fee of $5,000. Commencing January 2013, the additional fee for the chair of the Governance and Nominating Committee is $15,000. All fees are paid quarterly. The Company also reimburses its directors and, in certain circumstances, spouses who accompany directors, for travel, lodging and related expenses they incur in attending Board and committee meetings or other meetings as requested by Motorola Solutions.

During 2012, a director could elect to receive all or a portion of his or her annual cash retainer and other cash fees in the form of (i) deferred stock units that settle when the director terminates service, (ii) deferred stock units that settle after one year (unless service is earlier terminated), or (iii) outright shares. These choices allow directors to engage in tax planning appropriate for their circumstances. Notwithstanding earlier settlement or receipt of shares, directors must hold all shares awarded or paid to them until termination of service from the Board.

In 2012, non-employee directors received an annual grant of $140,000 of deferred stock units in the second quarter of the fiscal year that settle either when the director terminates service, or one year after the date of grant (unless service is earlier terminated), as elected by the director. On May 2, 2012, each then non-employee director received a deferred stock unit award of 2,728 shares of Common Stock. The number of deferred stock units awarded was determined by dividing $140,000 by the fair market value of a share of Common Stock on the date of grant (rounded up to the next whole number) based on the closing price on the date of grant.

For a non-employee director who becomes a member of the Board of Directors after the annual grant of deferred stock units, the award will be prorated based on the number of full months to be served until the next annual meeting of stockholders ($10,000 per month prior to May 2012; $11,666.67 per month commencing in May 2012) divided by the closing price of the Common Stock on the day of election to the Board. On October 26, 2012, Mr. Singer and Ms. Pramaggiore were elected to the Board and each received a grant of deferred stock units equal to $70,000, however, Ms. Pramagiorre waived such compensation in connection with her resignation from the Board on December 12, 2012. When Ms. Pramaggiore was reelected to the Board on January 17, 2013, she received a grant of deferred stock units equal to $35,000.

Except for Dr. White, non-employee directors are not eligible to participate in the Motorola Solutions Management Deferred Compensation Plan. Motorola Solutions does not have a non-equity incentive plan or pension plan for non-employee directors. Non-employee directors do not receive any additional fees for attendance at meetings of the Board or its committees, or for additional work done on behalf of the Board or a committee. Mr. Brown, who was an employee during 2012, received no additional compensation for serving on the Board or its committees.


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The following table further summarizes compensation paid to the non-employee directors during 2012.

Director Compensation for 2012

 

Name

(a)

  Fees
Earned or
Paid in
Cash($)(1)
(b)
   

Stock
Awards($)
(2)(3)

(c)

    Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings($)
(f)
    All Other
Compensation($)(4)
(g)
    Total($)
(h)
 

William J. Bratton

    100,000        140,028                      240,028   

Kenneth C. Dahlberg

    52,500        192,610                      245,110   

David W. Dorman

    0        279,675               5,000 (5)      284,675   

Michael V. Hayden

    100,000        140,028                      240,028   

Judy C. Lewent

    115,013        140,028                      255,041   

Anne R. Pramaggiore(6 )

    25,000 (6)      70,048 (6)                    95,048 (6) 

Samuel C. Scott III

    112,500        140,028                      252,528   

Bradley E. Singer

    26,250        70,048                      96,298   

John A. White

    112,500        140,028        2,416 (7)      10,000 (5)      264,944   

Former Directors

         

Vincent J. Intrieri(8 )

    0        26,279                      26,279   

 

(1) During 2012, directors could elect to receive all or a portion of their annual cash retainer or other cash fees in the form of (i) deferred stock units (“DSUs”) that settle when the director terminates service, (ii) DSUs that settle after one year (unless service is earlier terminated), or (iii) outright shares. The amounts in column (b) are the portion of the annual cash retainer and any other fees the non-employee director has elected to receive in cash. With respect to annual cash compensation, Mr. Dorman elected to receive DSUs that settle after one year with respect to $137,587.50; Mr. Dahlberg elected to receive outright shares of stock with respect to $52,500; and Mr. Intrieri elected to receive DSUs that settle at termination of service with respect to $26,250.

 

(2)

Certain directors have elected to receive DSUs or common stock for all or a portion of their annual cash retainer or other cash fees as described in footnote 1 above. In addition, all non-employee directors received an annual grant of DSUs on May 2, 2012. With respect to the annual grant of equity, Messrs. Bratton, Hayden, Intrieri, Scott, Singer and White elected to receive DSUs that settle at termination of service, and Messrs. Dahlberg and Dorman and Ms. Lewent elected to receive DSUs that settle on the first anniversary of the date of grant, and these amounts are included in column (c). All amounts in column (c) are the aggregate grant date fair value of DSUs computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“ASC Topic 718”), including dividend equivalents, as applicable. In connection with her resignation from the Board in December 2012, Ms. Pramaggiore waived the 1,357 DSUs awarded on October 26, 2012 (the grant date fair value of which was $70,048) and the grant was rescinded as reported to the SEC on


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  December 14, 2012, therefore that award is not reflected below. The number of DSUs or common shares received and the fair value on each date of grant are as follows:

 

    March 31     May 2     June 30     September 30     October 26     December 31  
Directors   Common
Shares
   

Annual Grant of
Deferred Stock

Units

(Award Date

May 1, 2012)

    Common
Shares
    Common
Shares
    Common
Shares
    Common
Shares
 

Kenneth C. Dahlberg

    259        2,728        273                260                —        236   

Fair Value

  $ 13,165      $ 140,028        $13,134        $13,143        $ 13,140   
    March 31        May 2        June 30        September 30        October 26        December 31   
Directors  

Deferred

Stock Units

   

Annual Grant of
Deferred Stock

Units

(Award Date

May 1, 2012)

    Deferred
Stock Units
    Deferred
Stock Units
    Deferred
Stock Units
    Deferred
Stock Units
 

William J. Bratton

           2,728                               

Fair Value

    $ 140,028           

David W. Dorman

    664        2,728        745          693               629   

Fair Value

  $ 33,751      $ 140,028      $ 35,842        $ 35,031        $ 35,023   

Michael V. Hayden

           2,728                               

Fair Value

    $ 140,028           

Judy C. Lewent

           2,728                               

Fair Value

    $ 140,028           

Samuel C. Scott III

           2,728                               

Fair Value

    $ 140,028           

Bradley E. Singer

                                1,357          

Fair Value

          $ 70,048     

John A. White

           2,728                               

Fair Value

          $ 140,028                                   

Former Director

           

Vincent J. Intrieri

    517                                      

Fair Value

  $ 26,279                                           

In addition, on May 22, 2012, in connection with the acquisition of Motorola Mobility by Google, Inc., the cash value of Motorola Mobility shares of common stock that would be due to each of the directors listed below upon termination of board service as a result of the Motorola Mobility deferred stock units each director held at the time of the acquisition was replaced, at their election, with DSUs that settle upon termination from the Board, in the following amounts:

 

Directors    Deferred Stock Units          

David W. Dorman

Fair Value

    

$

16,130

772,304

  

  

Samuel C. Scott

Fair Value

    

$

7,167

343,156

  

  

John A. White

Fair Value

    

$

11,350

543,438

  

  


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(3) As of December 31, 2012, the aggregate stock and option awards outstanding for the directors were as set forth below. For each director, the options to purchase Common Stock listed below were exercisable at year end. The aggregate number of Motorola Solutions DSUs includes accrued dividend equivalents.

 

Directors    Options     

Deferred Stock

Units – Motorola
Solutions

    

Restricted        

Stock        

 

William J. Bratton

             6,501           

Kenneth C. Dahlberg

             6,107           

David W. Dorman

             52,967           

Michael V. Hayden

             6,501           

Judy C. Lewent

     11,553         6,501           

Anne R. Pramaggiore

                       

Samuel C. Scott III

     7,562         22,710         1,739   

Bradley E. Singer

             1,357      

John A. White

     7,562         33,869         77   

Former Directors

        

Vincent J. Intrieri

                       

 

(4) The aggregate amount of perquisites and personal benefits given to each named director valued on the basis of aggregate incremental cost to the Company was less than $10,000 for each director. Accordingly, no such amounts are reported in this column.

 

(5) These amounts represent matching gift contributions made by the Motorola Solutions Foundation at the request of the director to charitable institutions in the director’s name pursuant to the Company’s charitable matching gift program that is available to all U.S. employees and directors.

 

(6) Ms. Pramaggiore resigned from the Board on December 12, 2012. In connection with her resignation, Ms. Pramaggiore waived receipt of all compensation, accordingly no cash was paid to Ms. Pramaggiore and the equity grant was rescinded, as reported to the SEC on December 14, 2012.

 

(7) This amount consists of earnings under the Motorola Solutions Management Deferred Compensation Plan in excess of the threshold for 2012 above-market earnings established pursuant to SEC rules. As of January 1, 2006, new non-employee directors were not eligible to participate in the plan. Dr. White is the only non-employee director who participates in this plan.

 

(8) Mr. Intrieri resigned from the Board on March 1, 2012.

Director Retirement Plan and Insurance Coverage

 

In 1996, the Board terminated its retirement plan and no current non-employee directors are entitled to receive retirement benefits. In 1998, Mr. Scott and Dr. White, the only current directors with interests in the plan, converted their accrued benefits in the retirement plan into shares of restricted Common Stock. They may not sell or transfer these shares and these shares are subject to repurchase by Motorola Solutions until such directors are no longer members of the Board because: (1) they do not stand for re-election or are not re-elected, or (2) of their disability or death.


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Non-employee directors are covered by insurance that provides accidental death and dismemberment coverage of $500,000 per person. The spouse of each such director is also covered by such insurance when traveling with the director on business trips for the Company. The Company pays the premiums for such insurance. The total premiums for coverage of all such non-employee directors and their spouses during the year ended December 31, 2012 was $1,820.

Related Person Transaction Policy and Procedures

 

The Company has established written policies and procedures (the “RPT Policy”) to assist it in reviewing transactions in excess of $120,000 (“Transactions”) involving the Company and its subsidiaries and Related Persons (as defined below). The RPT Policy supplements our other conflict of interest policies set forth in the Principles of Conduct for Members of the Motorola Solutions, Inc. Board of Directors and the Motorola Solutions Code of Business Conduct for employees and our other internal procedures. A summary description of the RPT Policy is set forth below.

For purposes of the RPT Policy, a Related Person includes directors, director nominees and executive officers of the Company and its subsidiaries since the beginning of the Company’s last fiscal year, beneficial owners of 5% or more of any class of voting securities of the Company and its subsidiaries (“5% Holder”) and members of their respective Immediate Family (as defined in the RPT Policy).

The RPT Policy provides that any Transaction since the beginning of the last fiscal year is to be promptly reported to the Company’s General Counsel. The General Counsel will assist with gathering important information about the Transaction and present the information to the Board committee responsible for reviewing the Transaction. The appropriate Board committee will determine if the Transaction is a Related Person Transaction and approve, ratify or reject the Related Person Transaction. In approving, ratifying or rejecting a Related Person Transaction, the applicable committee will consider such information as it deems important to conclude if the transaction is fair to the Company and its subsidiaries. The Governance and Nominating Committee will make all determinations regarding transactions involving a director or director nominee. The Audit Committee will make all determinations involving an executive officer or 5% Holder.

Throughout 2012, Paul Czerwinski, our CEO’s son-in-law, was employed by the Company, as a senior account manager. Mr. Czerwinski’s total compensation in 2012 was approximately $206,500, which includes salary and bonus. Mr. Czerwinski also participates in the Company’s general welfare plans and receives benefits comparable to those received by persons in similar positions within the Company. The Audit Committee reviewed and approved this relationship as required by the RPT Policy.

Motorola Solutions had no other Related Person Transactions in 2012.

What is the Process for Identifying and Evaluating Director Candidates?

 

As stated in the Motorola Solutions, Inc. Board Governance Guidelines, when selecting directors, the Board and the Governance and Nominating Committee review and consider many factors, including: experience in the context of the Board’s needs; leadership qualities; ability to exercise sound judgment; existing time commitments; years to retirement age; and independence from management. They also consider ethical standards and integrity. While the Company does not have a formal policy regarding


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diversity, diversity is one of several factors considered by the Board and the Governance and Nominating Committee when selecting director nominees. The Board and the Governance and Nominating Committee strive to nominate directors with a variety of complementary skills, backgrounds and perspectives so that, as a group, the Board will possess the appropriate talent, skills, experience and expertise to oversee the Company’s businesses. The Governance and Nominating Committee annually assesses the effectiveness of its director nomination process and the Board Governance Guidelines.

The Governance and Nominating Committee will consider nominees recommended by Motorola Solutions stockholders, provided that the recommendation contains sufficient information, including the candidate’s qualifications as required by the Company’s Bylaws, for the Governance and Nominating Committee to assess the suitability of the candidate. Stockholder-recommended candidates that comply with these procedures will receive the same consideration that candidates recommended by the Governance and Nominating Committee and management receive.

The Governance and Nominating Committee considers recommendations from many sources, including members of the Board, management and search firms. From time to time, Motorola Solutions hires search firms to help identify and facilitate the screening and interview process of director candidates. The search firm screens candidates based on the Board’s criteria, performs reference checks, prepares a biography for each candidate for the Governance and Nominating Committee’s review and helps arrange interviews. The Governance and Nominating Committee and the Chairman of the Board conduct interviews with candidates who meet the Board’s criteria. In connection with identifying Ms. Pramaggiore, we retained a third-party search firm to review her qualifications. In addition, ValueAct Capital, one of our largest stockholders in 2012, recommended Bradley E. Singer as a director candidate. The Governance and Nominating Committee interviewed both Ms. Pramaggiore and Mr. Singer and as a result, each of Bradley E. Singer and Anne R. Pramaggiore were nominated by the Governance and Nominating Committee for election on October 26, 2012. As previously reported, Ms. Pramaggiore resigned from the Board to seek approval from the FERC prior to actively serving on the Board. Upon receipt of approval from the FERC, Ms. Pramaggiore was reelected on January 17, 2013. The Governance and Nominating Committee has full discretion in considering potential candidates and making its nominations to the Board.

 

 

PROPOSAL NO. 2 — ADVISORY APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION

In accordance with Section 14A of the Exchange Act we are providing our stockholders with the opportunity to vote to approve, on a nonbinding, advisory basis, the compensation of our NEOs as disclosed in this Proxy Statement. The Board has adopted a policy providing for annual “say-on-pay” advisory votes. Although the vote is non-binding, the Board and Compensation and Leadership Committee will review and consider the outcome of the vote when considering future executive compensation arrangements.

At the 2012 Annual Meeting, our stockholders approved the advisory vote on our executive compensation with 58% support. This result was a strong contrast to the 89% favorable vote received in 2011. Because investor feedback is a key consideration in our compensation program design and individual pay actions, we actively engaged a number of our stockholders on their views and insights on our 2011 program design and individual pay actions to better understand the basis for how and why they cast their vote.


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We conducted extensive outreach efforts during and after the proxy voting season, engaging in discussions about our executive compensation programs and corporate governance with institutional investors representing more than 50% of our outstanding shares, as well as with stockholder advocates and proxy advisory firms. We received generally positive support for our compensation program design, including pay programs, approach and overall governance. However, in relation to our 2011 individual pay actions, some concerns were raised surrounding the special equity grants made to the CEO in relation to the Separation in 2011. We attribute the 58% approval vote in 2012 primarily to the concerns that were raised surrounding these equity grants. A significant proportion of the 2011 special equity grants related to the circumstances associated with the Separation which was a one-time event. Because (i) this feedback was in relation to a one-time event, (ii) stockholders were otherwise generally supportive of our overall pay practices, and (iii) we implemented a number of compensation changes in 2011, we made no further changes to executive compensation programs in 2012, other than strengthening our performance-contingent vesting requirement on certain awards.

In connection with the Separation, we addressed several legacy compensation-related practices. Several general corporate governance improvements were also made in 2011 (see the Compensation Discussion and Analysis section for a more complete discussion of these improvements), and we continue to maintain practices that represent strong corporate governance and compensation practices, including:

 

Practice   Description

Heavily weighted “at risk” pay for our senior executives

  Weighted to include more short-term and long-term incentives (variable pay) than base salary (fixed pay) to create a strong link to driving stock price performance in a responsible manner without creating undue risk for the Company.

“Double trigger” feature in our Senior Executive Change in Control Plan

  Requires that an executive be separated from service in conjunction with a change in control event before receiving any payouts made in connection with a change in control.

“Modified double trigger” in our Motorola Solutions Omnibus Incentive Plan of 2006 for a change in control

  Provides that there is no acceleration of equity or performance awards if such awards are assumed or replaced by the successor company, unless otherwise provided by the Compensation and Leadership Committee. For awards that are assumed or replaced during a change in control, accelerated treatment is only provided if the executive is terminated without cause or voluntarily resigns for good reason within 24 months of the change in control event.

“Clawback” policy

  Provides for recoupment of incentive payments that are determined to be overstated in the event we restate our financial earnings.

“Anti-hedging” policy

  Precludes employees and directors from engaging in any transaction in which they may profit from short-term speculative swings in the value of our securities.

Compensation and Leadership Committee consisting entirely of independent directors

  Complies with independent status as a non-employee director under SEC Rule 16b-3 and as an outside director under Section 162(m) of the Internal Revenue Code for purposes of membership on a compensation committee.


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Practice   Description

Independent compensation consultant engaged by the Compensation and Leadership Committee

  Compensation and Leadership Committee reviews and approves all plans under its purview and also seeks input from its independent compensation consultant, which provides third-party input and an unbiased perspective on external market practices.

An annual risk assessment on pay that is reviewed by the Compensation and Leadership Committee

  Reviews global employee compensation programs to determine if there is inappropriate or excessive risk exposure that could have a material adverse effect on the Company.

We believe these practices, coupled with the compensation actions we took in 2011, demonstrate a reasonable and responsible approach to designing and managing the Company’s compensation programs. We continuously monitor our compensation practices to ensure we maintain consistency with our compensation philosophy, guiding principles and business strategy, and are responsive to current market conditions and new developments in corporate governance. In addition, we will continue to take into account the results of future stockholder votes and ongoing dialogues with our stockholders when reviewing our compensation programs and practices.

For the reasons discussed above, the Board unanimously recommends that stockholders vote in favor of the following resolution:

“Resolved, that the stockholders approve, on an advisory basis, the compensation of the named executive officers, as described in the Compensation Discussion and Analysis, the 2012 Summary Compensation Table and other related tables and disclosures in this Proxy Statement.”

 

RECOMMENDATION OF THE BOARD

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION. UNLESS OTHERWISE INDICATED ON YOUR PROXY, YOUR SHARES WILL BE VOTED FOR THE APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION.

 

 

PROPOSAL NO. 3 — RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2013

The Audit Committee of the Board has appointed KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2013. Services provided to the Company and its subsidiaries by KPMG in fiscal years 2011 and 2012 are described under Audit Committee Matters—Independent Registered Public Accounting Firm Fees.

We are asking our stockholders to ratify the selection of KPMG as our independent registered public accounting firm. Although ratification is not required by our Bylaws or otherwise, the Board is submitting the selection of KPMG to our stockholders for ratification as a matter of good corporate governance.

 


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Representatives of KPMG are expected to be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so and will have the opportunity to respond to appropriate questions from stockholders.

The affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting will be required to ratify the selection of KPMG. Abstentions will have the same effect as a vote “Against” the proposal.

In the event stockholders do not ratify the appointment, the appointment will be reconsidered by the Audit Committee and the Board. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.

 

RECOMMENDATION OF THE BOARD

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT PUBLIC ACCOUNTING FIRM FOR 2013. UNLESS OTHERWISE INDICATED ON YOUR PROXY, YOUR SHARES WILL BE VOTED FOR THE RATIFICATION OF KPMG LLP.

 

 

PROPOSAL NO. 4 — STOCKHOLDER PROPOSAL RE: “ENCOURAGE SUPPLIER(S) TO PUBLISH AN ANNUAL SUSTAINABILITY REPORT”

The Company has been advised that the Comptroller of the City of New York, as custodian and a trustee for (i) the New York City Employees’ Retirement System, beneficial owner of 232,627 shares, (ii) the New York City Teachers’ Retirement System, beneficial owner of 254,217 shares, (iii) the New York City Fire Department Pension Fund, beneficial owner of 41,171 shares, (iv) the New York City Police Pension Fund, beneficial owner of 126,494 shares, and as custodian for the New York City Board of Education Retirement System, beneficial owner of 12,438 shares, intends to submit the following proposal for consideration at the Annual Meeting. We have not modified the language of the stockholder’s proposal.

RESOLVED: Shareholders request that the Board of Directors take the steps necessary to require to Company’s significant suppliers to each publish an annual, independently verifiable, sustainability report that the Company makes available to its shareholders. Among other important disclosures, reports should include the suppliers’ objective assessments and measurements of performance on workplace safety, human and worker rights, and environmental compliance using internationally recognized standards, indicators and measurement protocols. In addition, reports should include incidents of non-compliance, actions taken to remedy those incidents, and measures taken to contribute to long-term prevention and mitigation.

Significant suppliers are those from which the Company reasonably expects to purchase at least $1 million in goods and services annually.

SUPPORTING STATEMENT

Increasingly, global companies recognize that their suppliers’ impacts and sustainability are inextricably intertwined with their own success. According to “A New Era of Sustainability, UN Global


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Company-Accenture CEO Study 2010,” 93% of CEOs agree that integrating sustainability issues is critical to the future success of their business and 88% believe they should integrate sustainability through their supply chains. The CEOs identified the difficulty of implementing across supply chains as the top barrier to the full integration of sustainability.

This raises significant concerns for shareholders given that human and worker rights abuses can occur in a company’s supply chain, creating legal, reputational and operational risks.

Leading companies require suppliers to adhere to international labor and human rights protocols, including the core conventions of the International Labor Organization and the United Nations Guiding Principles on Business and Human Rights. However, a Harvard Law School study by Aaron Bernstein and Christopher Greenwald, “Benchmarking Corporate Policies on Labor and Human Rights in Global Supply Chains,” (Nov. 2009), found a significant gap between general policies against labor and human rights abuse and more detailed standards and enforcement mechanisms required to carry them out.

Independent supplier audits are essential, but insufficient. Requiring suppliers to prepare annual sustainability reports using the Global Reporting Initiative (GRI) guidelines that the Company itself uses for sustainability reporting would strengthen the Company’s ability to assess its suppliers’ performance and hold them accountable; enable shareholders to better understand and assess potential reputational and/or operational risks; and, consistent with the principle that “what gets measured gets managed,” prompt more responsible business practices by suppliers.

As Microsoft explained in announcing its plan in October 2011 to require sustainability reporting from key hardware vendors, “The new reporting mechanism complements and strengthens Microsoft’s existing auditing and assurance programs, which include third-party monitoring of its contract hardware manufacturers. The reporting requirement will also drive sustainability improvements in Microsoft’s supply chain.”

Other leading corporations taking steps to require or encourage suppliers to prepare GRI-based sustainability reports include Apple, Hewlett Packard, Intel, and PUMA. In some cases, the companies provide guidance to suppliers who need assistance, show preferences to suppliers who meet or exceed expectations, and/or include web links to their suppliers’ sustainability reports.

We urge shareholders to vote for this proposal.

 

RECOMMENDATION OF THE BOARD

THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ADOPTION OF THIS STOCKHOLDER PROPOSAL FOR THE REASONS SET FORTH BELOW. UNLESS OTHERWISE INDICATED ON YOUR PROXY, YOUR SHARES WILL BE VOTED AGAINST THE ADOPTION OF THIS PROPOSAL.

BOARD OF DIRECTORS STATEMENT IN OPPOSITION

The Company agrees with the principles on which this proposal is based and already addresses the concerns it raises in other ways, making adoption of this proposal unnecessary and potentially detrimental to the Company as noted below, even if it is limited to the Company’s significant suppliers. The Company is committed to being a leader in corporate responsibility, and we publish our performance annually in our “corporate responsibility” report, available on our website. The Company has published an annual corporate responsibility report since 1998.


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Since 2003, our supplier code of conduct has set forth the corporate responsibility requirements for our suppliers, and our vendor contracts state that compliance with our corporate responsibility requirements is a condition of doing business with the Company. We expect compliance by our suppliers, as well as their sources in the supply chain. We have a three-pronged approach to supplier responsibility – comprehensive risk assessments, audits and training.

Our suppliers are required to provide informative, comprehensive self-assessments on their environmental and labor policies and management systems through our electronic assessment system. This allows us to analyze the information and associated risks presented by suppliers, to identify areas for improvement and to target our on-site audits.

We commission detailed on-site audits of certain suppliers, which are conducted by either internal audit or a third-party firm. We decide which suppliers and facilities to audit based on information collected through the risk assessment process described above, from specific reports made to our Ethics Line and other reporting channels, as well as from other factors such as activity, location and reputation. Following the self-assessments and/or audits, we provide feedback to suppliers and work with them to correct any issues identified. In situations where we identify serious violations, we will place the supplier on “new-business hold,” meaning no new business will be placed with the supplier until the issue is resolved. If a supplier refuses or is unable to cooperate, we will terminate the relationship.

We annually publish a report of our assessments and audit process, including a breakdown of the issues identified and status of corrective actions, in our corporate responsibility report.

We realize that lasting improvements will be achieved only if suppliers have the capability to manage labor, health, safety and environmental impacts themselves. We include sustainability as a component of our global supplier meeting with key executives from our preferred suppliers. We hold training sessions that help suppliers understand our expectations and standards. In addition, we provide guidance on how suppliers can establish internal corporate responsibility and monitoring programs for their own supply chains.

While we believe it is important to purchase products from suppliers that comply with high standards of legal and ethical treatment of workers and workplace safety, regardless of the amount of business we do with a supplier, we do not believe that asking our suppliers to publish a corporate responsibility report is the best method to drive such performance in our supply chain. Forcing our suppliers (even if just limited to our larger suppliers) to incur the significant expense in publishing an externally verifiable annual sustainability report of the type required by the proposal could lead to higher prices for the Company and for our customers without any guaranty of additional benefits. This would place the Company at a competitive disadvantage if such costs were passed along to the Company, which is not beneficial to our stockholders.

Ultimately we believe the Company has and can continue to make the most impact by continuing to work directly with all our suppliers to identify and correct specific issues as well as to help them meet our high corporate responsibility standards through our existing approach of comprehensive risk-assessments, audits and training. For these reasons and the others stated above, the Board of Directors recommends that you vote AGAINST the adoption of this stockholder-submitted proposal.


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PROPOSAL NO. 5 — STOCKHOLDER PROPOSAL RE: “POLITICAL DISCLOSURE AND ACCOUNTABILITY”

The Company has been advised that Mr. Michael Loeb, beneficial owner of 135 shares, intends to submit the following proposal for consideration at the Annual Meeting. We have not modified the language of the stockholder’s proposal.

Resolved, that the shareholders of Motorola Solutions Inc. (“Motorola Solutions” or “Company”) hereby request that the Company provide a report, updated semiannually, disclosing the Company’s:

 

  1. Policies and procedures for making, with corporate funds or assets, contributions and expenditures (direct or indirect) to (a) participate or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office, or (b) influence the general public, or any segment thereof, with respect to an election or referendum.

 

  2. Monetary and non-monetary contributions and expenditures (direct and indirect) used in the manner described in section 1 above, including:

 

  a. The identity of the recipient as well as the amount paid to each; and

 

  b. The title(s) of the person(s) in the Company responsible for decision-making.

The report shall be presented to the board of directors or relevant board committee and posted on the Company’s website.

Stockholder Supporting Statement

Long-term shareholders of Motorola Solutions support transparency and accountability in corporate spending on political activities. These activities include direct and indirect political contributions to candidates, parties, or organizations; independent expenditures; or electioneering communications on behalf of federal, state or local candidates.

Disclosure is in the best interest of the company and its shareholders, and critical for compliance with federal ethics laws. Gaps in transparency and accountability may expose the company to risks that could threaten long-term shareholder value. The Supreme Court’s Citizens United decision recognized the importance of political spending disclosure for shareholders when it said, “[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”

Motorola Solutions contributed at least $446,800 in corporate funds since the 2010 election cycle. (CQ: http://moneyline.cq.com and National Institute on Money in State Politics: http://www.followthemoney.org)

However, relying on publicly available data does not provide a complete picture of the Company’s political spending. For example, the Company’s payments to trade associations or any “social welfare organizations” – organized under the 501(c)4 section of the IRS codes – used for political activities are undisclosed and unknown. At many companies, management does not know how third-party groups use corporate money politically.

As evidence of this, the 2012 CPA-Zicklin Index of Corporate Political Accountability and Disclosure ranked Motorola Solutions near the bottom of the top 200 of the S&P 500 companies for political


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disclosure – with a score of 15 out of 100 points. This proposal asks the Company to disclose all of its political expenditures, including payments to trade associations and other tax-exempt organizations. This would bring our Company in line with a growing number of leading companies, including Exelon, Merck and Microsoft that support political disclosure and accountability and present this information on their websites.

The Company’s Board and its shareholders need comprehensive disclosure to be able to fully evaluate the political use of corporate assets. We urge your support for this critical governance reform.

 

RECOMMENDATION OF THE BOARD

THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ADOPTION OF THIS STOCKHOLDER PROPOSAL FOR THE REASONS SET FORTH BELOW. UNLESS OTHERWISE INDICATED ON YOUR PROXY, YOUR SHARES WILL BE VOTED AGAINST THE ADOPTION OF THIS PROPOSAL.

BOARD OF DIRECTORS STATEMENT IN OPPOSITION

The Board has considered the above proposal and believes that full implementation is not in the best interest of the Company or our stockholders. The Board agrees that compliance with applicable federal, state and local laws is critical, as reflected in the Company’s current policies and practices. In addition, the Company has added disclosures to its website describing the policies and procedures for making political contributions, as well as disclosures on trade association memberships over $50,000.

In order to express and advocate for the Company and its shareholders’ interests, the Board believes it is important for the Company to evaluate and appropriately engage in the public policy-making process, including, from time to time, the political campaigns of candidates who understand and share the Company’s views on matters impacting our industry. The Company prudently and constructively promotes legislative and regulatory actions that further the business objectives of the Company and attempts to protect the Company from unreasonable, unnecessary or burdensome legislative or regulatory actions at all levels of government. The Company has not used corporate funds to make any direct independent expenditure on behalf of candidates running for public office and does not currently have plans to use direct independent expenditures as part of the Company’s corporate political contributions program.

When participating in the political process, the Company adheres to high standards of ethics, transparency, and accountability. Accordingly, the Company has a robust corporate policy and an on-line political contribution approval process that governs the internal review and oversight for ensuring compliance with current campaign finance and disclosure laws, as well as with the Company’s Code of Business Conduct. A separate committee of the North America Government Affairs organization annually develops a plan identifying the candidates and campaigns who will receive contributions based on non-partisan effort to advance and protect the interests of the Company, our stockholders and employees. This overall plan is reviewed by the Vice President of North America Government Affairs, and all political contributions are reviewed in advance by legal counsel. In addition, an annual report of all corporate contributions is submitted to the Board.

The Company also provides an opportunity for its employees to participate in the political process by joining the Company’s non-partisan political action committee (“MSI PAC”). MSI PAC allows our


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employees to pool their financial resources to support federal, state and local candidates, political party committees and political action committees. The political contributions made by MSI PAC are funded entirely by the voluntary contributions of our employees and all contributions through the MSI PAC plan are approved by the MSI PAC board of directors and an annual report of MSI PAC contributions is also submitted to the Board.

In addition, the Company is a member of trade associations in the U.S. that represent its business priorities. The primary purpose of membership in these trade associations is the policy, technical, and industry expertise these organizations provide not participation in political campaigns. Trade associations take a wide variety of positions on various matters, not all of which the Company supports. The Company has added disclosure to its website which provides the names of such associations where annual dues are $50,000 or more.

Corporate and MSI PAC political contributions are subject to comprehensive regulation by federal, state, and local governments, including detailed disclosure requirements, which includes filing reports with the Federal Election Commission in the case of MSI PAC contributions, and with state and local election boards in the case of corporate political contributions. Those reports are publicly available at www.fec.gov or the applicable state and local election boards. The Company exceeds the legally mandated requirements by publicly disclosing all MSI PAC contributions and the total of corporate contributions on its website.

The Board believes that sufficient public disclosure exists regarding our political contributions to alleviate the concerns cited in this proposal.

The expanded disclosure requested in this proposal could place the Company at a competitive disadvantage by revealing its corporate strategies and priorities. Many of our competitors also participate in the political process and any unilaterally expanded disclosure by the Company regarding its political contributions could benefit those parties to the detriment of the Company and its stockholders. The Company believes that any reporting requirements that go beyond those required under existing law should be applicable to all participants in the political process.

By requiring expanded disclosure of corporate political contributions, this proposal disregards the Company’s existing policies and practices with regard to disclosure and compliance with the law. The Board is satisfied that the Company has in place a system of accountability and oversight to ensure that Company assets are used for political objectives that are in the best long-term interest of the Company and its shareholders and believes that full implementation of this proposal is unnecessary, as a comprehensive system of reporting political contributions already exists and applies equally to all contributors. Accordingly, the Board recommends that you vote AGAINST this proposal.


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EQUITY COMPENSATION PLAN INFORMATION

The following table summarizes the Company’s equity compensation plan information as of December 31, 2012.

 

Plan Category   Number of
securities to be
issued upon exercise
of outstanding
options and rights
(a)
    Weighted-average
exercise price of
outstanding
options and
rights
(b)(1)
    Number of securities
remaining available
for future issuance under
equity compensation
plans (excluding
securities reflected
in column (a))
(c)
 

Equity compensation plans approved by Motorola Solutions stockholders

    18,917,861 (2)(3)(4)    $ 69.60        26,762,538 (5) 

Equity compensation plans not approved by Motorola Solutions stockholders(6)

    13,960      $ 62.83        0   
 

 

 

     

 

 

 

Total

    18,931,821      $ 69.59        26,762,538   

 

(1) The weighted-average exercise price does not include outstanding restricted or deferred stock units.

 

(2) Includes shares subject to outstanding options granted under the 2006 Plan and prior stock incentive plans no longer in effect for new grants.

 

(3) Includes an aggregate of 6,224,104 restricted or deferred stock units that have been granted or accrued pursuant to dividend equivalent rights under the 2006 Plan and prior stock incentive plans which are no longer in effect for new grants. Each restricted or deferred stock unit is intended to be the economic equivalent of one share of Common Stock. It does not include 1,636 restricted stock units which provide by their terms for cash settlement.

 

(4) Includes 186,367 shares subject to outstanding stock appreciation rights (“SARs”) granted under the 2006 Plan (“2006 Plan SARs”) but does not include 5,085 SARs granted under prior stock incentive plans that are no longer in effect for new grants (“Prior SARs”). These SARs enable the recipient to receive, for each SAR granted, a settlement amount equal to the excess of the fair market value of one share of Common Stock on the date the SAR is exercised over the fair market value of one share of Common Stock on the date the SAR was granted. The settlement amount for the Prior SARs may only be paid in cash. No security is issued upon the exercise of these Prior SARs. The settlement amount of the 2006 Plan SARs is payable in shares of Common Stock. The 186,367 shares subject to the 2006 Plan SARs assumes the exercise of 605,695 2006 Plan SARs on December 31, 2012 at $55.68, the closing price of the Common Stock on December 31, 2012.

 

(5)

Of these shares: (i) 4,555,631 shares remain available for future issuance under the Motorola Solutions Employee Stock Purchase Plan of 1999, as amended; and (ii) an aggregate of 22,206,907 shares remain available for future issuance under the 2006 Plan. In addition to stock


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  options, other equity benefits which may be granted under the 2006 Plan are SARs, restricted stock, restricted stock units, deferred stock units, performance shares and other stock awards. In addition, at the discretion of the Compensation and Leadership Committee, shares of Common Stock may be issued under the 2006 Plan in payment of awards under the Company’s long-range incentive plans.

 

(6) The Company’s non-stockholder approved plan is the Motorola Compensation/Acquisition Plan of 2000 (the “C/A Plan”), under which no further grants may be made. Since its inception, the major purposes of the C/A Plan were to grant awards: (i) to persons newly hired by the Company, and (ii) in connection with the acquisition of businesses. Otherwise, grants were generally made by the Company under the Company’s stockholder approved incentive plans. Awards could not be made under the C/A Plan to directors or executive officers of the Company. The C/A Plan is more fully described below.

Compensation/Acquisition Plan of 2000

 

The C/A Plan was initially adopted on November 7, 2000 by the Board. Upon the adoption of the 2006 Plan, no further grants may be made under the C/A Plan. The C/A Plan provided that awards could be granted to employees of the Company and its subsidiaries who were not executive officers or directors of the Company, in connection with its recruiting and retention efforts. From its inception, the major purposes of the C/A Plan were to grant awards: (i) to persons newly hired by the Company, and (ii) in connection with the acquisition of businesses. The C/A Plan permitted the granting of stock options, stock appreciation rights, restricted stock and restricted stock units, performance stock, performance units and other stock awards. Options to acquire shares are the only awards outstanding under the C/A Plan, and all such awards are fully vested and exercisable.

Each option granted has an exercise price of 100% of the market value of the Common Stock on the date of grant. Generally, options under the C/A Plan expire ten years from the date of grant and vest and become exercisable in 25% increments over four years.


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OWNERSHIP OF SECURITIES

Security Ownership of Management and Directors

 

The following table sets forth information as of the close of business on March 1, 2013 (except where otherwise noted), regarding the beneficial ownership of shares of Common Stock by each director and nominee for director of the Company, by the persons named in the Summary Compensation Table, and by all current directors, nominees and Section 16 Officers of the Company as a group. Each director, nominee and NEO owns less than 1% of the outstanding Common Stock based on 272,371,787 shares of Common Stock outstanding on March 1, 2013. All current directors, nominees and current executive officers as a group own 1.5% of the outstanding Common Stock.

 

Name   Shares Owned(1)     Shares Under
Exercisable
Options and
SARs(2)
    Stock Units(3)     Total Shares
Beneficially
Owned(4)(5)
 

Gregory Q. Brown

    456,626        2,057,000        30,935        2,544,561 (6) 

Edward J. Fitzpatrick

    58,560        235,374        0        293,990   

Eugene A. Delaney(7)

    82,534        552,596        8,824        644,761   

Mark F. Moon

    40,923        148,904        0        189,827   

Lewis A. Steverson

    4,132        51,733        0        55,865   

William J. Bratton

    1,025        0        6,531        7,556   

Kenneth C. Dahlberg

    1,028        0        5,103        6,131   

David W. Dorman

    0        0        53,255        53,255   

Michael V. Hayden

    0        0        6,531        6,531   

Judy C. Lewent

    13,137        11,553        6,531        31,221   

Anne R. Pramaggiore

    0        0        604        604   

Samuel C. Scott

    6,056        7,562        22,828        34,707 (8) 

Bradley E. Singer

    0        0        1,363        1,363   

John A. White

    6,402        7,562        34,064        47,951 (9) 

All current directors, nominees and current executive officers as a group (16 persons)

    708,827        3,258,614        176,572        4,145,665 (10) 

 

(1) Includes shares over which the person currently holds or shares voting and/or investment power but excludes interests, if any, in shares held in the Motorola Solutions Stock Fund of the Company’s 401(k) Plan and the shares listed under “Shares Under Exercisable Options and SARs” and “Stock Units.”

 

(2) Includes shares under options and SARs exercisable on March 1, 2013 and which may become exercisable within 60 days thereafter.

 

(3) Includes stock units which are deemed to be beneficially owned on March 1, 2013 or within 60 days thereafter. Stock units are not deemed beneficially owned until the restrictions on the units have lapsed. Each stock unit is intended to be the economic equivalent of one share of Common Stock.

 

(4) Unless otherwise indicated, each person has sole voting and investment power over the shares reported.


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(5) Includes interests, if any, in shares held in the Motorola Solutions Stock Fund of the Company’s 401(k) Plan, which is subject to certain investment restrictions, the shares listed under “Shares Under Exercisable Options” and units listed under “Stock Units.”

 

(6) Mr. Brown’s holdings under “Total Shares Beneficially Owned” include: 53,915 unvested market-based options granted on January 31, 2008 that only vest if the market price of the Common Stock reaches defined levels as discussed in the footnotes to the Outstanding Equity Awards at 2012 Fiscal Year End table and 168,522 shares subject to exercisable stock settled stock appreciation rights (“SARs”). The number of shares subject to the stock settled SARs, assumes the exercise of 134,297 shares of stock settled SARs at an exercise price of $40.33 and the exercise of 314,265 stock settled SARs at an exercise price of $38.04, on March 1, 2013. The closing price of the Company stock on March 1, 2013 was $62.03. Mr. Brown has no investment power over 36,633 shares of restricted stock and has shared voting and investment power over 83,220 shares, included under “Total Shares Beneficially Owned”. He disclaims beneficial ownership over 81,000 shares held in a trust of which his wife is trustee and 2,220 shares held by his wife, except to the extent of his pecuniary interest in these shares.

 

(7) Mr. Delaney will retire from the Company at the end of June 2013 and is no longer considered an executive officer or Section 16 reporting officer. Mr. Delaney’s “Shares Owned” are as of February 11, 2013, the date on which he ceased to be subject to the reporting requirements of Section 16 of the Securities and Exchange Act.

 

(8) Mr. Scott does not have investment power over 1,739 of these shares.

 

(9) Dr. White has shared voting and investment power over 4,364 of these shares and shared voting and no investment power over 77 of these shares.

 

(10) All directors, nominees and current executive officers as a group have sole voting and investment power over 3,983,000 of these shares and shared voting and/or investment power over 162,666 of these shares.

No directors, nominees or current executive officers have pledged shares of Common Stock pursuant to any loan or arrangement.


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Security Ownership of Principal Stockholders

 

The following table sets forth information with respect to any person who is known to be the beneficial owner of more than 5% of Common Stock as of December 31, 2012, except as noted below.

 

Name and Address   Number of Shares of
Motorola Solutions, Inc.
and Nature of
Beneficial
Ownership
  Percent of
Outstanding Shares(1)
 

ValueAct Capital Master Fund, L.P. and
related entities

435 Pacific Ave.,

San Francisco, California 94133

  28,907,623 (2)

shares of

Common
Stock

    10.6

FMR LLC

82 Devonshire Street

Boston, MA 02109

  16,454,444 (3)

shares of

Common
Stock

    6.0

Morgan Stanley

1585 Broadway

New York, NY 10036

  14,819,347  (4)

shares of

Common
Stock

    5.4

 

(1) The percentage calculations set forth above are based on 272,371,787 shares of Common Stock outstanding as of March 1, 2013 rather than the percentages set forth on various stockholders’ Schedule 13D and 13G filings.

 

(2) Solely based on information in a Schedule 13D/A filed with the SEC on October 30, 2012, filed jointly by ValueAct Capital Master Fund, L.P., VA Partners I, LLC, ValueAct Capital Management, L.P., ValueAct Capital Management, LLC, ValueAct Holdings, L.P. and ValueAct Holdings GP, LLC (collectively “ValueAct”). The Schedule 13G/A indicates that as of October 26, 2012, ValueAct was the beneficial owner with shared voting power as to 28,907,623 shares and shared dispositive power as to 28,907,623 shares.

 

(3) Solely based on information in a Schedule 13G/A dated February 14, 2013 filed with the SEC by FMR LLC. The Schedule 13GA indicates that as of December 31, 2012, FMR LLC was the beneficial owner with sole dispositive power as to 16,454,444 shares and with sole voting power as to 762,141 shares.

 

(4) Solely based on information in a Schedule 13G/A dated February 13, 2013 filed with the SEC jointly by Morgan Stanley, and Morgan Stanley Investment Management, Inc., whose address is 522 Fifth Avenue, New York, NY 10036. The Schedule 13G/A indicates that as of December 31, 2012, Morgan Stanley was the beneficial owner with sole voting power as to 14,623,414 shares and sole dispositive power as to 14,819,347 shares. Additionally, according to such filing, Morgan Stanley Investment Management, Inc. was the beneficial owner with sole voting power as to 14,623,414 shares and with sole dispositive power as to 14,819,347 shares.


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COMPENSATION DISCUSSION AND ANALYSIS

Introduction

 

This Compensation Discussion and Analysis (the “CD&A”) describes our executive compensation philosophy and programs during 2012. Executive compensation arrangements with our NEOs are governed by the Compensation and Leadership Committee (the “Committee”). In this CD&A, you will find detailed compensation information for our NEOs, which consist of our CEO, our Chief Financial Officer (“CFO”), and our three other most highly compensated officers during 2012, as listed below:

 

   

Gregory Q. Brown, Chairman and Chief Executive Officer.

 

   

Edward J. Fitzpatrick, Executive Vice President and Chief Financial Officer.

 

   

Eugene A. Delaney, Executive Vice President.

 

   

Mark F. Moon, Executive Vice President and President, Sales & Product Operations.

 

   

Lewis A. Steverson, Senior Vice President, General Counsel and Secretary.

On January 7, 2013, the Company announced that Mr. Delaney will retire at the end of June 2013 after a 35-year career. On January 7, 2013, Mr. Moon assumed all responsibilities for product operations, including product development, engineering and supply chain, in addition to his existing responsibilities.

Executive Summary

 

We Delivered on our 2012 Operating Plan

Motorola Solutions had a solid year in 2012. We strengthened our portfolio, generated strong cash flow, delivered substantial operating earnings expansion and returned significant capital to our stockholders. Net sales increased 6% compared to 2011, reflecting the strength in our product portfolio as well as our go-to-market capabilities. Our Government segment posted sales growth of 12%, driven by a combination of factors including core market growth, new product introductions, analog to digital transition, international expansion and narrow-banding in the United States. Our Enterprise segment declined 5% compared to 2011, as the business faced macro-economic headwinds, fewer large deals and foreign currency pressure. Operating earnings grew faster than net sales, increasing 46% compared to 2011, reflecting the Company’s focus on profitable growth and operating leverage along with reduced intangible amortization. We generated approximately $1.1 billion of cash flow from operations in 2012, compared to $848 million in 2011. In addition, the Company returned significant capital to stockholders in the form of both share repurchases and dividends. During 2012, we increased our regular quarterly dividend by 18% to 26 cents per share and repurchased a total of $2.4 billion in shares at an average repurchase price of $49.14, returning a total of $2.7 billion in capital to our shareholders.


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LOGO

Our stock price increased 20% during 2012 and increased 49% from our opening price on January 4, 2011, the date we completed the Separation.

 

LOGO    LOGO

In 2012, we continued to operate our business with a sharpened strategic focus on our government and enterprise customers and a purpose to help people be their best in the moments that matter. To enhance our strategic focus and fulfill our purpose, in 2012 we continued to transform our organization through a number of major initiatives to streamline operational efficiencies (for example, system and process transformational efforts in human resources, payroll, finance and information technology) that we expect to drive top-line sales growth and enhance our bottom-line profitability by better meeting the needs of our customers. In addition, we broadened our product and solutions portfolio with a number of important product and service launches that enable us to deliver mission critical communications to customers in both our Government and Enterprise segments. We also strengthened our industry-leading mobile computing portfolio by acquiring Psion, which enhances our position in ruggedized handheld products and vehicle-mount terminals.

Our Approach to Pay is Aligned to our Business Performance

In 2012, we structured our executive compensation programs so that more than 73% of an NEO’s targeted total direct compensation was delivered in the form of short-term and long-term incentive programs linked to financial


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and stock price performance. The awards delivered by these programs in 2012 reflect our solid financial performance. Please refer to the sections Compensation Philosophy and Executive Compensation Principles and Our 2012 Compensation Mix for additional details.

We align our AIP, our short term incentive program, to the operating earnings and free cash flow business goals in our annual operating plan that is approved by the Board. Operating earnings measures our profits from sales, and free cash flow provides a clear view of our ability to generate cash to both invest in future growth and appropriately return to stockholders. Operating earnings and free cash flow are fundamental measurements often used to indicate levels of profitability, business liquidity, and rates of return. Both operating earnings and free cash flow are important to the Company and are common performance measures inside and outside of our industry, and we believe they are appropriate performance measures that drive our annual business performance, and ultimately long-term sustainable stockholder value, which belief was validated during conversations with our stockholders during 2012.

Our financial performance in 2012 included operating earnings that were 101% of our target, which correlated to a payout of 101% of target on that measure, and free cash flow that was 105% of our target, which correlated to a payout of 105% of target on that measure. After applying a 65% weighting to operating earnings and 35% weighting to free cash flow, the total payout under our AIP was 102% of target, excluding individual performance adjustments. Our 2012 AIP payouts to our NEOs were further differentiated based on individual performance. On average, our NEOs received 2012 AIP payouts based on business and individual performance that were 123% of target. Please refer to the section Short-Term Incentives for additional details.

 

LOGO

We design our long-term incentive (“LTI”) programs to reward our senior executives, including our NEOs, for absolute stock price appreciation as well as strong relative total shareholder return performance compared to our comparator group. Our long-term incentives for senior executives are delivered in the form of stock options, RSUs and the performance cycles under our Long Range Incentive Plan (“LRIP”). Stock options and RSUs reward absolute stock price growth. Our stock option and RSU awards to our NEOs also incorporate a performance hurdle that must be achieved before awards may vest, providing further incentive for absolute stock price growth. Our LRIP is designed to reward superior total shareholder return relative to our comparator group. We had strong stock price appreciation (20%) over 2012 and total return to stockholders (stock price appreciation plus our quarterly dividend), benefiting both our stockholders and employees who have received LTI awards. Please refer to the section Long-Term Incentives for additional details.


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We Have a Strong Focus on Talent Management

At Motorola Solutions, our talent programs are designed to foster the development and promotion of globally diverse executives from within our own organization. We believe this philosophy encourages our key talent to adopt a long-term focus on our business and our organization, avoids lengthy and disruptive transitions associated with extensive external hiring, and promotes consistent delivery of well-considered pay programs. In addition to individual and Company performance, our pay decisions support our talent processes by considering long term potential, key retention needs and organizational succession plans. To support our philosophy of promoting from within, we have developed our CEO Leadership Forum, a robust approach to executive development. The CEO Leadership Forum is a comprehensive, accelerated development experience for our high potential executives through a multi-faceted process, comprised of new and expanded job assignments, formal learning and coaching and engagement with our management executive committee, our CEO and the Board. The CEO Leadership Forum is also an opportunity to drive increased engagement and retention by communicating to participating executives their long-term value to the organization.

2012 CEO and NEO Compensation and Leadership Actions Were Aligned with our Compensation Philosophy

Our 2012 financial and operating performance, the importance of maintaining a sharpened strategic focus (including the strong execution of our transformation initiatives), and our focus on senior executive succession and development influenced our pay decisions for Mr. Brown and our other NEOs. The table below summarizes the CEO and other NEO compensation and leadership actions that were taken in 2012.

 

Component    Summary of NEO Actions
Base Salary    The base salaries for some of our NEOs were increased during 2012 in connection with market adjustments. In 2012, Mr. Brown’s base salary was reaffirmed at $1,200,000 by the Committee and Board.
2012 AIP    2012 AIP payouts were earned by our eligible employees, including our NEOs, and reflected the solid business performance and each individual’s outstanding leadership performance.
2012-2014 LRIP    A new 2012-2014 LRIP cycle was implemented for our senior executives, including our NEOs.
Equity Grants    At the time of our annual equity grant in 2012, our NEOs received stock options and RSU grants with performance-contingent vesting with a 15% Stock Price Appreciation Hurdle (please refer to the section 2012 Equity Awards to NEOs for additional details). The NEOs did not receive any other equity grants in 2012.
Executive Talent Development and Succession Planning    In 2012, executive talent development and succession planning were regularly discussed by the Committee. The Committee has created a framework to assess and develop our executive talent, and has engaged internal and external advisors to evaluate our top executives. The CEO, Committee and Board will continue taking an active role in monitoring the development of our key executive talent in 2012 and beyond.


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We Maintain Good Pay Governance

We continue to take actions to ensure our compensation decisions are responsive to investor feedback and interests. To that end, effective in 2012, we decreased the number of employees eligible for an annual equity grant by over 85% to ensure our stock-based compensation programs are market competitive, reduce our share usage (stock options and RSUs granted as a percent of our common shares outstanding, also known as burn rate), and reduce our annual stock-based compensation expense to be more in line with competitive levels. We closely monitor employee turnover and engagement and have not seen a material adverse impact to our turnover on the basis of this decision.

 

LOGO

To further strengthen the connection between pay and performance, in 2012, we made equity grants to our NEOs with a 15% Stock Price Appreciation Hurdle, which was a more difficult stock price appreciation hurdle than used in the 2011 equity grants to our CEO (please refer to the section 2012 Equity Awards to NEOs for additional details). Since the Separation in 2011, we have addressed several legacy compensation-related practices and we believe these actions will lead to strengthened stockholder satisfaction with our executive compensation programs. Please refer to the section Pay Governance for additional details.

How We Responded to Our 2012 Stockholder “Say-On-Pay” Vote

 

At the 2012 Annual Meeting, our stockholders approved the advisory vote on our executive compensation with 58% support. This result was a strong contrast to the 89% favorable vote we received in 2011. Because investor feedback is a consideration in our compensation program design and individual pay actions, we actively engaged our stockholders on their views and insights on our 2011 program design and individual pay actions to better understand the basis for how and why they cast their vote.

We conducted extensive outreach efforts during and after the proxy voting season, engaging in discussions about our executive compensation programs and governance with institutional investors representing more than 50% of our outstanding shares, as well as with stockholder advocates and proxy advisory firms. We received generally positive support for our compensation program design, including pay programs, approach and overall governance. In relation to our 2011 individual pay actions, some concerns were raised surrounding the special equity grants made to the CEO in relation to the Separation in 2011.


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We attribute the lower Say-on-Pay vote in 2012 primarily to the concerns that were raised surrounding the special equity grants made to the CEO in 2011. A significant proportion of the 2011 special equity grants related to the circumstances associated with the Separation – a one-time event. We made no one-time grants in 2012. Because this feedback was in relation to a one-time event and stockholders were otherwise generally supportive of our overall pay practices, the only change to our executive compensation programs in 2012 was to incorporate performance-contingent vesting for the 2012 equity grants to all NEOs with a more difficult stock price appreciation hurdle than the 10% stock price appreciation hurdle used in the 2011 equity grants to the CEO. Previous changes in 2011 included introducing a new change in control plan, requiring higher stock ownership levels and removing the share recycling provision from our stock plan, some of which took effect in 2011 while others will take effect over time following expiration of notice periods. Please refer to the section Pay Governance for additional details.

Our stockholder engagement is not just a one-time event, but rather leverages our ongoing overall investor relations program, which monitors best practices, engages on pay topics, targets specific stockholder groups, and seeks feedback on pay practices. We will continue to take into account the results of future stockholder votes and ongoing dialogues with our stockholders when reviewing our compensation program and practices.

Our Compensation Philosophy, Guiding Principles, and Roles in Determining Compensation

 

Compensation Philosophy and Executive Compensation Guiding Principles

Our philosophy is to provide reward programs that attract, retain and motivate the right people, in the right place, at the right time. We strive to provide a total compensation package that is competitive with the prevailing practices in the industries and countries in which we operate, allowing for above average total compensation when justified by business results and individual performance.

Our compensation philosophy is further guided by the following principles that are specific to our executives:

 

Guiding Principle    Rationale
Business Driven    We offer appropriate incentives which are aligned with the Company’s business goals and avoid excessive risk taking.
Performance Differentiated    We design our compensation programs to foster an effective link between pay and performance — both at the Company and the individual level.
Market Competitive    We provide a competitive total compensation package that enables us to attract, retain and motivate the top talent needed to successfully execute our business strategy.
Ownership Oriented    We align compensation with our stockholders’ interests by providing meaningful equity awards and maintaining robust guidelines that require significant stock ownership by our senior executives, including our NEOs.
Simplicity    Our programs are intended to drive employee engagement through their simple and cost-efficient plan design.


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In establishing the pay of our executive officers (including our NEOs), the Committee references the market median for total direct compensation (in other words, total cash compensation plus long-term incentive awards) of our comparator group, in addition to considering individual performance, internal equity and succession plans, and external market conditions.

Roles in Determining Our Compensation

The following chart provides an overview of the roles and responsibilities for the various parties involved in determining our compensation:

 

Party   Role
Compensation and
Leadership Committee
 

• Oversees certain employee compensation and benefit programs, including approval of annual and long-term incentive plan performance goals.

• Evaluates the performance and development of senior management and approves compensation actions involving Section 16 Officers.

• Reviews CEO performance and recommends CEO compensation actions to the independent members of the Board for their concurrence.

• Recommends the compensation program for non-employee directors to the Governance and Nominating Committee.

• Regularly assesses the risk exposure of all programs under the Committee’s purview.

Board of Directors  

• Reviews and concurs with CEO compensation actions, as approved by the Committee.

• Approves non-employee director compensation, as recommended by the Committee and the Governance and Nominating Committee.

• Takes action regarding certain compensation and benefit plan matters, as required by the Committee’s charter.

CEO  

• Recommends all compensation actions involving members of the management executive committee or any Section 16 Officer to the Committee for its approval.

• Takes an active role in Committee meetings at which the performance and compensation actions for the above executives are discussed.

• Recommends annual and long-term incentive plan performance goals to the Committee for its approval.

Management Executive
Committee
 

• Executes the objectives of the Company’s total compensation program.

• Each member approves all compensation actions for his or her respective function and is accountable for compliance with established governance procedures.

Human Resources  

• Supports the Committee in its work.

• Per delegated authority, fulfills various functions in administering the Company’s total compensation programs.

• Prepares recommendations regarding Section 16 Officer compensation.

Independent
Consultant to the
Committee
 

• Prepares recommendations regarding CEO compensation.

• Carries out compensation reviews as directed by the Committee.

• Participates in Committee meetings, provides input on compensation recommendations and programs, and provides regulatory updates and trends from time to time.


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The CEO is not involved in the preparation of recommendations related to his compensation and does not participate in the discussions regarding his compensation at Committee or Board meetings. The Committee cannot unilaterally approve compensation or compensation changes for the CEO without the Board’s concurrence.

Our Components and Mix of Our 2012 Executive Compensation Program

 

Components of Our 2012 Executive Compensation Program

The 2012 total compensation program for our NEOs consisted of the following components:

 

Compensation Component   Rationale
Base salary  

• Provides market competitive fixed compensation to attract and retain qualified talent.

Short-term incentives through AIP  

• Rewards executives based on achievement against the established annual business goals of the Company and their own individual performance in the achievement of these business results.

Long-term incentives through
equity grants and participation in
the LRIP
 

• Equity awards encourage ownership in the Company, align our management’s interests with those of our stockholders, reward increases in the absolute value of our stock and enhance long-term retention of our top talent.

• The LRIP rewards relative stock performance by measuring total shareholder return against our comparator group.

Benefits and perquisites  

• Selected benefits and perquisites, in addition to broad-based employee benefits, provide our senior executives with a market-competitive total compensation package.

Our 2012 Compensation Mix

When making 2012 compensation decisions, the Committee considered the total direct compensation levels for each executive position against the median of similar positions in the 2012 Motorola Solutions Comparator Group. We intend to provide competitive total compensation, as well as competitive compensation for each element comprising our total compensation. As a result, we do not specifically limit one element of compensation in response to the amounts potentially realizable under other compensation elements. However, we place certain limits on benefits available under our life and disability plans and our investment plans, including our pension plans, while ensuring competitiveness in the marketplace. Our qualified retirement plans are also subject to IRS limits. Although we reference the median of our comparator group in structuring our executive compensation program, the exact percentile may differ by individual and is based on their specific performance, experience, skill set, position and ability to impact business results.


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In keeping with our guiding principles of being “business driven” and “performance differentiated,” more than 73% of our NEOs’ targeted total direct compensation was delivered in the form of short-term and long-term incentives. The below table highlights the specific 2012 target pay mix of each NEO:

 

LOGO

We believe our target pay program is appropriately designed and positioned versus the market. The actual pay of our NEOs is a direct result of performance results at both a business and individual level. In determining actual compensation for an NEO, in addition to referencing the market median compensation data, the Committee uses the NEO’s role, responsibilities, experience, performance and skill set as general reference points in making a judgment of his or her value to the Company and in the marketplace. These are generally subjective judgments and there is no formulaic weighting of these reference points in making specific compensation element decisions.

Our Comparator Group

 

The Committee reviews the composition of the comparator group at least annually to determine the appropriateness and applicability of the group for establishing the Company’s compensation programs and making individual pay decisions for our NEOs.

As described last year in our proxy statement, following the Separation the Company continued to evaluate and gain a better understanding of our comparator companies, based in part on input received from our stockholders. After reviewing the comparator companies, the Committee approved the 2012 Motorola Solutions Comparator Group that includes companies from the government and enterprise industries, as well as multi-industrial companies. We use the 2012 Motorola Solutions Comparator Group as the single comparator group for both pay and performance comparison purposes in our executive compensation program. The 2012 Motorola Solutions Comparator Group was referenced for competitive pay levels when the Committee made 2012 NEO pay decisions and is also used as the comparator group in the 2012-2014 LRIP cycle for relative total shareholder return purposes. We continue to believe the 2012 Motorola Solutions Comparator Group appropriately compares the Company to those in the group when considering both revenue (Motorola Solutions is at the 36th percentile) and market capitalization (Motorola Solutions is at the 60th percentile) and that the enterprise and government industries and multi-industrials are well represented by the companies in


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this comparator group. The 2011 Motorola Solutions Comparator Group was in place prior to establishing the 2012 Motorola Solutions Comparator Group and is used as the comparator group in the 2011-2013 LRIP cycle for relative total shareholder return measurement purposes.

The 2011 Motorola Solutions Comparator Group and the 2012 Motorola Solutions Comparator Group are listed below:

 

2011 Motorola Solutions

Comparator Group

Danaher Corp.    L-3 Communications Holdings Inc.
Emerson Electric Co.    NCR Corp.
FLIR Systems, Inc.    Raytheon Company
Harris Corp.    Rockwell Collins Inc.
Honeywell International Inc.    TE Connectivity Ltd.
Intermec, Inc.    Trimble Navigation Ltd.
ITT Corporation    Tyco International Ltd
Juniper Networks, Inc.    Zebra Technologies Corp.

2012 Motorola Solutions

Comparator Group

Aruba Networks, Inc.    Johnson Controls, Inc.
Danaher Corp.    JVC Kenwood Corp.
Eaton Corp.    NCR Corp.
Emerson Electric Co.    Parker-Hannifin Corp.
Harris Corp.    Raytheon Company
Honeywell International, Inc.    Rockwell Collins, Inc.
Ingersoll-Rand PLC    TE Connectivity Ltd.
Intermec, Inc.    Tyco International Ltd.
 

 

To supplement our comparator group data and obtain a more complete picture of the overall compensation environment for the broader executive group (and, from time to time, our NEOs), we look to multiple survey sources. During the 2011 Motorola Solutions executive compensation review (which is discussed below), we utilized supplemental data for Lewis Steverson, our Senior Vice President, General Counsel and Secretary from the following survey sources:

 

Survey   Publisher
U.S. Compensation Data Bank (CDB) TriComp Executive Database   Towers Watson & Co.
Radford Global Technology Survey   Radford, an Aon Hewitt consulting company
US Global Premium Executive Remuneration Suite—Fortune 500® Organizations   Mercer LLC

Because these surveys contain competitive compensation market data on a number of companies spanning different industries, our market analysis involves narrowing the available information to “data cuts” that more accurately reflect our size, industry and competitive labor market.


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The “data cuts” for the supplemental data used for some of the NEOs during the 2011 Motorola Solutions executive compensation review (which is discussed below), were:

 

   

The 16 companies that comprised our 2011 Motorola Solutions Comparator Group and participated in the above surveys;

 

   

An expanded comparator company group that included other high-tech companies that participated in the above surveys; and

 

   

Technology companies generally with annual revenue greater than $3 billion.

Independent Consultant Engagement

 

The Committee engages an independent consultant to advise them on the Company’s executive compensation strategy and program design and to provide regulatory and market trend updates. The consultant carries out compensation reviews as directed by the Committee and provides recommendations on specific compensation of our CEO and reviews and provides input on specific compensation recommendations regarding our other Section 16 Officers.

During 2012, the Committee continued to engage Compensation Advisory Partners as its independent compensation consultant. Compensation Advisory Partners participates in Committee meetings, including occasional discussions with the Committee without management present to ensure impartiality on certain decisions. During 2012, the Committee also reviewed an assessment of the independence of Compensation Advisory Partners. The criteria used in the assessment aligned with the rules that were newly adopted by the SEC during 2012 and related rules proposed by the New York Stock Exchange during 2012. The Committee concluded that the work of Compensation Advisory Partners did not raise any conflict of interest.

2011 Motorola Solutions Executive Compensation Review (As applied to 2012 Pay Decisions)

In 2011, the Committee engaged Compensation Advisory Partners to independently review our executive rewards program and the compensation of our management executive committee. The review analyzed the 2011 core compensation levels of Motorola Solutions’ executive officers, which is the compensation we grant on a normal, ongoing basis and excluded the one-time components of the 2011 Leadership Grant, compared to the 2011 Motorola Solutions Comparator Group proxy data and broader industry survey data. Following the review in 2011, in early 2012 Compensation Advisory Partners provided the Committee with updated proxy data for the 2012 Motorola Solutions Comparator Group. The Committee referenced the updated proxy data for the 2012 Motorola Solutions Comparator Group and the broader industry survey data to determine 2012 pay decisions for the Company’s executive officers, including the NEOs.

With respect to the competitiveness of our NEOs’ 2011 target compensation levels:

 

   

Mr. Brown’s base salary was positioned between the median and 75th percentile, his target total annual cash compensation (base salary plus target annual incentive) was above the 75th percentile, and his target total direct compensation (target total annual cash compensation plus long-term incentive compensation) was between the median and 75th percentile.


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Mr. Fitzpatrick’s base salary was positioned between the 25th percentile and the median and his target total annual cash compensation and his target total direct compensation approximated the median.

 

   

Mr. Delaney’s base salary approximated the median, his target total annual cash compensation was positioned between the median and 75th percentile, and his target total direct compensation was between the 25th percentile and the median.

 

   

Mr. Moon’s base salary approximated the 25th percentile and his target total annual cash compensation and target total direct compensation was between the 25th percentile and the median.

 

   

Mr. Steverson’s base salary was positioned at the 25th percentile and his target total annual cash compensation and target total direct compensation was between the 25th percentile and the median.

2012 Named Executive Officer Compensation

 

Base Salary

When setting the base salary level for each NEO, the Committee references the median of the comparator group, external market conditions, and each NEO’s individual performance, experience, internal comparisons, and succession plans. The table below displays the 2012 year-end base salary for each NEO along with the rationale for how it was established.

 

Named

Executive Officer

 

Current

Base Salary

  Effective Date    Rationale

Mr. Brown

  $1,200,000   January 1, 2011   

• In January 2012, the Committee and Board reaffirmed Mr. Brown’s base salary of $1,200,000 for 2012.

Mr. Fitzpatrick

  $565,000   January 26, 2012   

• In January 2012, Mr. Fitzpatrick’s base salary increased from $525,000 to $565,000 as a market adjustment.

Mr. Delaney

  $595,000   January 26, 2012   

• In January 2012, Mr. Delaney’s base salary increased from $575,000 to $595,000 as a market adjustment.

Mr. Moon

  $565,000   January 26, 2012   

• In January 2012, Mr. Moon’s base salary increased from $525,000 to $565,000 as a market adjustment.

Mr. Steverson

  $465,000   July 17, 2012   

• In January 2012, Mr. Steverson’s base salary increased from $425,000 to $445,000 as a market adjustment.

 

• In July 2012, Mr. Steverson’s base salary increased from $445,000 to $465,000 as an additional market adjustment to bring Mr. Steverson to the market median of his external benchmark.


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Short-Term Incentives

The AIP is the 2012 annual cash incentive plan that applied to all of our employees (excluding those employees participating in a sales incentive plan), including our NEOs.

The objectives of our AIP are to:

 

   

Focus our employees’ attention on achievement of the critical operating goals of the Company.

 

   

Link employee rewards to their individual contributions in achieving our business results.

 

   

Provide pay opportunities that are competitive with our comparator group in order to attract and retain a high-performing workforce.

AIP Incentive Formula

AIP awards are a function of an individual’s target incentive opportunity, the Company’s annual business performance and each participant’s individual performance. The payout value of an AIP award to each NEO is based on the following formula:

 

                    Performance Factors            

Individual

Base Pay

  x  

Individual

Incentive

Target %

  x   Business
Performance

Factor

  x   Individual

Performance

Factor

    =      AIP

Award

Individual Base Pay

Base pay equals the NEO’s base salary earnings during the incentive plan year.

AIP Individual Incentive Target Percentage

Individual incentive target percentages are based on market-competitive data and are established as a percentage of base pay. At the beginning of each plan year, the Committee designates individual incentive target percentages for each of our NEOs. For 2012, individual incentive target percentages for our NEOs were generally targeted at the median of the 2012 Motorola Solutions Comparator Group.

The 2012 AIP individual incentive targets for our NEOs were as follows:

 

Named

Executive Officer

 

Individual AIP Target

as % of Base Pay

   

Individual   

AIP $ Target

 

Mr. Brown

    220   $ 2,640,000   

Mr. Fitzpatrick

    95   $ 533,389   

Mr. Delaney

    95   $ 563,569   

Mr. Moon

    95   $ 533,389   

Mr. Steverson

    75   $ 339,000   


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AIP Business Performance Factor

At the beginning of each AIP plan year, the Committee establishes performance targets for the measures determining the Company’s Business Performance Factor (“BPF”). The final BPF can range from 0% (no award paid) for below minimum financial performance to 140% for exceptional performance. The 2012 BPF for our NEOs and all employees was based on Company-wide business goals to reinforce the Motorola Solutions “partnership” value and to align to the “simplicity” guiding principle of our compensation philosophy.

In 2012, the Company-wide business goals were based on operating earnings (“OE”) and free cash flow (“FCF”) and aligned to the OE and FCF targets in our annual operating plan. OE is important to the Company since it measures our profits from sales and FCF is important since it measures the cash available after capital expenditures. OE and FCF are common performance measures inside and outside of our industry, and we believe they are appropriate performance measures that drive our annual business performance, and ultimately long-term stockholder value. Additionally, OE and FCF are fundamental measurements that are used in many other financial calculations we measure that show levels of profitability, business liquidity and rates of return.

When we set our annual operating plan, and ultimately our OE and FCF targets, we analyze several factors, including our prior year actual financial results, projected revenue growth, margins, operating expenditures, macroeconomic and industry considerations and market share. We analyze these factors against the overall global economic environment, relative to our comparator group and compared to our previous year’s performance. Once these factors are analyzed, the annual operating plan for the upcoming year is presented to the Board for approval. Our OE and FCF performance goal targets for the AIP are directly linked to the annual operating plan that is approved by the Board.

Due to its importance in the Company’s financial success, OE carried 65% weight in determining our BPF. OE for incentive plan purposes is defined according to GAAP, excluding the effect of the following items: (i) earnings from discontinued operations as reported externally; (ii) highlighted items as reported externally, such as reorganization of business charges, asset impairments, and extraordinary, unusual and/or non-recurring items of gain or loss; (iii) stock-based compensation expense; and (iv) intangible assets amortization expense.

FCF carried 35% weight in determining our BPF. FCF for incentive plan purposes is defined as operating cash flow according to GAAP less capital expenditures. A capital expenditure is defined as the original cost of acquiring property, plant and equipment, as reported in the investing section of the cash flow statement per GAAP.

At the end of each plan year, the Committee reviews full year performance and the corresponding management recommendations regarding each component of the BPF. The Committee exercised its discretion and approved an adjustment to the final BPF for the 2012 AIP. The adjustment and associated rationale is described below.

 

   

An anticipated cash payment related to a legal settlement was originally forecast to be paid in 2012 and was included in our 2012 FCF AIP target. During 2012 it was determined that the cash payment would not be made in 2012, which correspondingly increased our 2012 FCF by the amount of this payment. The adjustment the Committee approved reduced the 2012 AIP results by the amount of the forecast payment, thereby decreasing our 2012 BPF. The Committee believed this was an appropriate adjustment since the payment was originally forecast as to be included in continuing operations and included in our 2012 operating plan and the adjustment aligns to how the 2012 performance target was originally determined.


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2012 AIP Business Performance Targets and Results

The following table reflects the minimum, target and maximum levels for each of the 2012 BPF measures that pertain to all eligible employees, including our NEOs, as well as the actual and adjusted (for the impact of the above-noted adjustment) 2012 performance levels. Assuming OE and FCF business performance meets the minimum threshold for a payout, the BPF formula allows for a range of 30.25% of the established target award level (at the minimum level of performance) to 140% of the established target award level (at the maximum level of performance).

 

AIP Business

Performance

Measure

 

Performance

Level for

Minimum

Payout

 

Performance

Level for

Target

Payout

 

Performance

Level for

Maximum

Payout

 

Actual

Fiscal Year

2012

Performance

 

Adjusted

Fiscal Year

2012

Performance

 

Resulting

Business

Performance

Factor

   

Performance

Measure

Weight

   

Weighted

Contributing

Result

 

OE

  $1.271 billion   $1.495 billion   $1.719 billion   $1.503 billion   $1.503 billion     100.5     65     65

FCF

  $608 million   $810 million   $972 million   $881 million   $847 million     105.3     35     37

2012 AIP Business Performance Factor

  

    102

2012 AIP Individual Performance Factors for NEOs

We strive to establish a clear line of sight by linking our performance management process with the rewards our employees receive. Individual performance is measured by both what an individual accomplishes (in other words, goal achievement) and how the individual accomplishes those goals (in other words, demonstration of our leadership behaviors). The Committee has the discretion to adjust AIP awards by establishing an Individual Performance Factor (“IPF”) for each NEO to account for differences in individual contribution and performance. IPFs can range from 0 (in other words, no award paid) for poor performance to 1.4 (in other words, 140% of the formula-driven award) for exceptional performance.


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To recognize the performance and leadership delivered by our NEOs in 2012, the Committee established IPFs for each of our NEOs as follows:

 

Named

Executive Officer

 

Individual

Performance

Factor

  Rationale
Mr. Brown   125%   To recognize Mr. Brown’s leadership in the achievement of several Company-wide goals. The Company achieved solid revenue growth, demonstrated by an increase in sales to $8.7 billion, up six percent from 2011. Operating earnings increased to $1.3 billion, up 46 percent from 2011 and non-GAAP earnings per share increased to $3.20, up 23 percent. The Company generated $1.1 billion in operating cash flow for the full year, bringing our cash position on Dec. 31, 2012 to $3.6 billion. As a result of the Company’s performance, our stock price increased 20% during 2012 and 49% from our opening price on January 4, 2011. In addition to our strong financial results during the year, Mr. Brown strengthened the executive succession pipeline and drove the organization’s transformation agenda.
Mr. Fitzpatrick   110%   To recognize Mr. Fitzpatrick’s performance in successfully executing our 2012 capital allocation strategy of returning capital to our stockholders by repurchasing $2.4 billion of shares at an average stock price of $49.14 and paying cash dividends of $270 million. Mr. Fitzpatrick was instrumental developing and engaging key stockholders on our long term financial model, and repatriating $1 billion in cash from non-US locations. In addition, Mr. Fitzpatrick led significant transformation initiatives within our Finance organization to increase efficiencies in resources and systems.
Mr. Delaney   125%   To recognize Mr. Delaney’s performance in the strengthening of our product and solution portfolio through the launch of numerous products, particularly in the professional and commercial radio segments. Mr. Delaney successfully drove the innovation agenda across MSI by strategically investing $1billion into our innovation pipeline to develop products and services. Mr. Delaney also completed successful outsourcing of elements of our repair and distribution network, thus enhancing our operational excellence.
Mr. Moon   125%   To recognize Mr. Moon’s performance in the successful growth of our global sales six percent compared to 2011. He achieved this through a global sales force and channel partner network that has a deep understanding of our customers’ operational challenges and the complete solutions that help them drive their business results. In addition, Mr. Moon strengthened our channel partner network by implementing our Partner Empower program across all regions. Mr. Moon also continued his focus on senior management development by taking actions to further strengthen his strong leadership team.
Mr. Steverson   116%   To recognize Mr. Steverson’s performance in successfully managing significant litigation to resolutions that were favorable to the Company, facilitating agreements with significant former and current stockholders, and supporting corporate transactions. In addition, to recognize Mr. Steverson’s strong focus on talent and the transformation of the Legal organization during 2012.


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2012 AIP Payouts

Based on the approved 2012 BPFs and IPFs, the actual 2012 AIP award for each NEO is set forth in the following table:

 

Named

Executive Officer

 

Eligible

Earnings

   

AIP

Target

   

Business

Performance

Factor

   

Individual

Performance

Factor

   

Actual 2012

AIP Award

 
Mr. Brown   $ 1,200,000        220     102     125   $ 3,370,000   
Mr. Fitzpatrick   $ 561,462        95     102     110   $ 600,000   
Mr. Delaney   $ 593,231        95     102     125   $ 720,000   
Mr. Moon   $ 561,462        95     102     125   $ 680,000   
Mr. Steverson   $ 452,000        75     102     116   $ 400,000   

Long-Term Incentives

We consider several factors in the design of our LTI programs, including the need to attract and retain top talent, the competition for top talent in the marketplace, the cost impact of equity expensing, the impact on stockholder dilution, the evolving regulatory landscape and the Company’s long-term business strategy.

Our NEOs receive a large proportion of their overall targeted compensation (approximately 57%) in the form of LTI in order to align their interests with those of stockholders and to promote a focus on long-term results. In 2012, we delivered LTI to our NEOs through a portfolio of three LTI vehicles: the 2012-2014 LRIP, performance-contingent stock options, and performance-contingent RSUs. This portfolio of LTI vehicles incents our NEOs on (1) our total shareholder return over a three-year period relative to our comparator group, and (2) sustained absolute stock price performance. The wealth creation of these LTI vehicles is maximized only when best-in-class performance against the Company’s comparator group is combined with sustained absolute stock price growth. Each LTI vehicle is described further below, along with the targeted values for each NEO.

Long Range Incentive Plan

The LRIP is a performance-based, multi-year incentive plan that we provide to our senior executives, including the NEOs. During 2012, we implemented a three-year LRIP cycle for the 2012-2014 performance period (“2012-2014 LRIP”). There is one other LRIP cycle in effect, for the 2011-2013 performance period (“2011-2013 LRIP”) and we anticipate implementing overlapping LRIP cycles annually. The design parameters for the 2011-2013 LRIP and 2012-2014 LRIP are described below.

LRIP Performance Measure

The LRIP is solely focused on our three-year total shareholder return (“TSR”) relative to the three-year TSR of the applicable comparator group (the 2011 Motorola Solutions Comparator group for the 2011-2013 LRIP and the 2012 Motorola Solutions Comparator Group for the 2012-2014 LRIP).


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LRIP Incentive Formula

LRIP awards are a function of an individual’s base salary at the start of the LRIP cycle, individual incentive target percentage and our TSR payout factor.

 

Base Salary

At Cycle

Start

  x  

Individual

Incentive

Target %

  x  

TSR

Payout

Factor

  =  

LRIP

Award

LRIP Individual Incentive Targets

In setting the 2012-2014 LRIP targets for the NEOs, the Committee targeted an award that equals one-third of the total value we targeted for each NEO’s 2012 LTI, which was based in part on the LTI market value for each NEO’s benchmark to the 2012 Motorola Solutions Comparator Group, and for Mr. Steverson, his General Counsel benchmark to compensation surveys, as proxy data for his comparable position within the 2012 Motorola Solutions Comparator Group was not readily available. In addition, in setting Mr. Brown’s 2012-2014 LRIP target, the Committee considered his 250% minimum LRIP target required by his employment agreement. The table below contains the individual incentive targets for our NEOs for the 2012-2014 LRIP.

 

Named
Executive Officer
  

January 1, 2012

Base Salary

    

2012-2014 LRIP

Target %

   

2012-2014 LRIP

Target $

 

Mr. Brown

   $ 1,200,000         250   $ 3,000,000   

Mr. Fitzpatrick

   $ 525,000         115   $ 603,750   

Mr. Delaney

   $ 575,000         105   $ 603,750   

Mr. Moon

   $ 525,000         115   $ 603,750   

Mr. Steverson

   $ 425,000         95   $ 403,750   

TSR Payout Factor

The TSR Payout Factor is calculated in a two-step process:

Step 1: Measure the three-year TSR for the Company and each of the companies in the applicable comparator group, as follows:

 

       

Ending stock price

(daily average stock price during the final three months of the

Performance Cycle)

   

+

 

Value of reinvested dividends over the Performance Cycle

   

=

 

Total ending value

   

-

 

Beginning stock price

      (daily average stock price during the three months preceding the Performance Cycle)(1)
   

=

 

Total value created

   

÷

 

Beginning stock price

   

=

 

TOTAL SHAREHOLDER RETURN

   

(1)   Note that, for the 2011-2013 performance period, the beginning stock price is the daily average stock price during the first three months of the Performance Cycle.


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Step 2: Rank Motorola Solutions’ TSR against the TSR of each of the companies in the applicable comparator group to determine Relative TSR Payout Factor.

 

    

TSR

Rank

  Relative TSR
Payout Factor
      

TSR

Rank

  Relative TSR
Payout Factor
      

TSR

Rank

 

Relative TSR

Payout Factor

Performance

above median

pays out above

target:

  1   200%   Performance

at median

pays at target
payout:

  9   100%   Performance

below median

pays out below

target:

  10   75%
  2   185%           11   50%
  3   170%           12   25%
  4   155%           13   0%
  5   140%           14   0%
  6   130%           15   0%
  7   120%           16   0%
  8   110%           17   0%

If the resulting TSR performance for Motorola Solutions is negative, the Committee will have discretion to reduce the final payout up to a 25% reduction of the calculated payout.

Equity Awards

We deliver equity awards in the form of stock options and RSUs. In May 2012, the Committee granted equity to approximately 1,900 employees, including our NEOs, as part of our annual equity award process. Both components of the annual equity grant, stock options and RSUs, will vest and become exercisable in three equal annual installments commencing on the one year anniversary of the date of grant, except the CEO has three-year performance-contingent cliff vesting and the other NEOs have performance-contingent installment vesting, as described below. The stock options expire ten years from the date of grant.

The exercise price of options is set at the closing price of our stock on the date of grant. We do not structure the timing of equity award grants to precede or coincide with the disclosure of material non-public information. Grants made outside the annual equity grant cycle (e.g., new hire, promotion and special recognition grants) are made on the first trading day of the month following the date of hire/promotion/recognition. Since 2002, the grant date for our annual equity awards has been within a few days of the annual stockholders meeting. This practice is expected to continue in 2013.

In 2012, we implemented significant changes to our equity granting practices to ensure our stock-based compensation programs are market competitive, reduce our share usage rate and reduce our annual stock-based compensation expense, which were disclosed in last year’s CD&A. The significant changes included (1) limiting annual equity grant eligibility to a narrower population of approximately 1,900 employees, and (2) maintaining eligibility for special equity grants on a highly selective basis as part of recruiting, retention and recognition.


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As a result of these significant changes, our share usage in 2012 was significantly less than in 2011, as shown in the table below, and we expect our stock-based compensation expense to materially decrease over the next three years as the expense from previous grants made to a broader population continues to be recognized. We plan to continue to closely manage our equity granting practices to ensure our share usage and stock-based compensation expense remains in line with competitive levels.

 

Fiscal Year-End  

Stock
Options

Granted In
Each Year
(000s)

    Weighted
Average
Exercise
Price
   

Full Grant

Date

Fair Value
of Stock
Options
Granted
In Each
Year(1)

   

RSUs

Granted In
Each Year
(000s)

   

Full Grant

Date

Fair Value
of RSUs
Granted
In Each
Year(1)

 

Full Grant

Date

Fair Value

of Options

and RSUs
Granted In
Each
Year(1)

 

Stock
Options

and RSUs

Granted In
Each Year
(000s)

   

Stock Options

and RSUs

Granted In

Each

Year As A %
of Common
Shares

Outstanding

at FYE

 

Dec 31, 2011

    3,155        $39.00        $41.8        5,150      $228.0   $269.8     8,305        2.6

Dec 31, 2012

    1,286        $51.00        $12.3        1,657      $81.0   $93.3     2,943        1.1

Change

    (1,869     $12.00        ($29.5     (3,493   ($147.0)   ($176.5)     (5,362     (1.5 %) 

 

(1)

The amounts reflect the aggregate grant date fair value of the stock options and RSUs granted in the respective fiscal year, as computed in accordance with ASC Topic 718, excluding the effect of estimated forfeitures. These aggregate grant date fair values will be recognized over the vesting period of each award.

2012 Equity Awards to NEOs

In determining 2012 equity awards for the NEOs, the Committee considered the 2011 Leadership Grant made to each NEO, which was a unique, one-time award of (i) performance-contingent stock options and RSUs in the case of the CEO, and (ii) stock options and RSUs to the other NEOs, as disclosed in last year’s CD&A, among other considerations described in the following paragraph. The Committee determined at the time the 2011 Leadership Grant was made, that the NEOs would not automatically receive an annual equity grant in 2012, but they would be eligible for an annual equity grant in 2012 at the discretion of the CEO, and, in the case of our NEOs, subject to the approval of the Committee, and, in the case of the CEO, subject to the concurrence of the Board. In 2012, based on the continued strong business performance and other considerations described in the following paragraph, the Committee determined that each NEO would receive 2012 equity awards with performance-contingent vesting. The Committee also determined that the performance-contingent vesting for the 2012 equity grants to NEOs would have a more difficult stock price appreciation hurdle than the 10% stock price appreciation hurdle used in the 2011 equity grants to the CEO, as described below.

In setting the 2012 equity grant values for the NEOs, the Committee referenced two-thirds of the total value we targeted for each NEO’s 2012 LTI, which was based in part on the LTI market value for each NEO’s benchmark to the 2012 Motorola Solutions Comparator Group, and for Mr. Steverson, his compensation survey benchmark to the General Counsel role. In addition, the Committee considered each NEO’s award delivered through the 2011 Leadership Grant, individual performance, expected contribution to the long-term success of the Company, internal comparisons, succession plans, and external market conditions. Based on these considerations, the Committee set the 2012 equity award values for Mr. Brown and Mr. Moon at the value that was referenced and below the value that was referenced for Mr. Fitzpatrick, Mr. Delaney, and Mr. Steverson. The NEOs did not receive any other equity grants in 2012.

The equity awards made to the NEOs in 2012 were structured to provide 67% of the total equity grant value in performance-contingent stock options and 33% of the total equity grant value in performance-contingent RSUs. The performance-contingent stock options and RSUs granted to Mr. Brown in 2012 will vest on the later of (i) the third anniversary of the date of grant, and (ii) when the average closing price of our Common Stock for any fifteen consecutive trading days is greater than $57.01, the 15%


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Stock Price Appreciation Hurdle. The performance-contingent stock options and RSUs granted to the other NEOs will vest on the later of (i) one-third per year from the date of grant, and (ii) achievement of the 15% Stock Price Appreciation Hurdle. The 15% Stock Price Appreciation Hurdle was achieved on January 22, 2013 when the fifteen-day closing average stock price of $57.05 exceeded the stock price hurdle of $57.01; therefore the restrictions will lapse on the third anniversary of the grant date for Mr. Brown and in three substantially equal installments on the first, second, and third anniversaries of the grant date for Messrs. Fitzpatrick, Delaney, Moon, and Steverson.

The 2012 equity awards to our NEOs that are described in this section are shown in the table below:

 

    Mr. Brown   Mr. Fitzpatrick   Mr. Delaney   Mr. Moon   Mr. Steverson

Total 2012 Equity Grant Value

  $4,000,000   $500,000   $800,000   $1,200,000   $500,000

Stock Option Value(1)

(67% of Total Equity Grant Value)

  $2,668,000   $333,500   $533,600   $800,400   $333,500

Stock Options Granted

  281,731   35,529   56,846   85,269   35,529

Stock Option Exercise Price

  $51.33   $51.33   $51.33   $51.33   $51.33

RSU Value(1)

(33% of Total Equity Grant Value)

  $1,332,000   $166,500   $266,400   $399,600   $166,500

RSUs Granted

  25,949   3,243   5,189   7,784   3,243

 

(1) The stock option and RSU values were targeted values, and the actual aggregate grant date fair value delivered to each participant varied slightly from the targeted value. The actual aggregate grant date fair value of each grant, as computed in accordance with ASC Topic 718, is disclosed in the 2012 Summary Compensation Table.

Greg Brown’s 2012 Total Compensation

Mr. Brown’s 2012 total compensation of $10,325,173 significantly decreased from his 2011 total compensation of $29,329,052, as reported in the 2012 Summary Compensation Table. The decrease is due to the one-time equity awards made to Mr. Brown during 2011. Mr. Brown’s 2012 total compensation is representative of the approximate total compensation we would expect to target for Mr. Brown in a typical year. Further, Mr. Brown’s 2012 total compensation amount includes the donation of $1,500,000 that the Company agreed to make to the Rutgers University Foundation, a 501(c)(3) charitable organization, to establish and name an endowed chair in honor of Mr. Brown. This gift to the Rutgers University Foundation was not requested by Mr. Brown, and Mr. Brown will not receive any of the funds associated with such gift or receive any pecuniary or other benefit from the Rutgers University Foundation as a result of this gift, other than the honor of the establishment of an endowed chair in his name in the area of neuroscience. While the Company has not concluded that the donation constitutes a compensatory arrangement with Mr. Brown, the amount is included to comply with any interpretive reporting requirement that may be deemed to exist by virtue of the arrangement.

Executive Benefits and Perquisites

To enhance our ability to attract and retain senior executives in a highly competitive market for top talent, we seek to align our executive total compensation program offerings with those commonly provided by companies in our comparator group. To ensure we remain competitive, the core elements


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of our total compensation program—including our cash and equity based compensation plans—are supplemented by a few executive-only benefits and perquisites. Our executive benefits and perquisites are described below.

Change in Control (CIC) Plans. The Company maintains two Board-approved CIC Plans which cover our NEOs (except for Mr. Brown, whose employment agreement contains CIC provisions) and our other senior executives. The Board considers the maintenance of an effective and stable management team as essential to protecting and enhancing the value of the Company for the benefit of our stockholders. To that end, we recognize that the possibility of a change in control may exist and that this possibility, and the uncertainty and questions it may raise amongst our senior executives, may result in the distraction, and potential departure, of management personnel to the detriment of the Company and our stockholders. The change in control provisions help to encourage the continued attention and dedication of our senior management to their assigned duties without the distraction that may arise from the possibility of a change in control event.

As disclosed in last year’s CD&A, in January 2011 the Board approved a new Senior Officer CIC Plan (“New CIC Severance Plan”), which has superseded our Legacy Senior Officer CIC Plan (“Legacy CIC Severance Plan”) for all participants who became eligible on or after February 1, 2011, and on February 1, 2014 will supersede our Legacy CIC Severance Plan for participants that were eligible for the Legacy CIC Severance Plan as of January 31, 2011. Because the Legacy CIC Severance Plan required three years’ advance notification to participants to amend the Plan, the Legacy CIC Severance Plan will remain in effect until January 31, 2014 for all eligible participants as of January 31, 2011. The New CIC Severance Plan will go into effect for these employees on February 1, 2014 (including Messrs. Fitzpatrick, Delaney, Moon, and Steverson). The New CIC Severance Plan will expire on February 1, 2015, at which time the Committee will consider whether or not to recommend to the Board to adopt a new Plan.

Both the New CIC Severance Plan and the Legacy CIC Severance Plan employ a “double trigger” before benefits are paid to a plan participant. In other words, in order for severance benefits to be paid, both a change in control event must occur and an executive must be involuntarily terminated without “cause” or the executive must leave for “good reason” within 24 months of the change in control.


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The table below highlights certain provisions of both the New CIC Severance Plan and the Legacy CIC Severance Plan. For definitions and a description of the full benefits provided under both our CIC Plans, please refer to the section Change in Control Arrangements in this Proxy Statement.

 

CIC Provision   Legacy CIC Severance Plan   New CIC Severance Plan
Plan Life   Expires on January 31, 2014   Expires on February 1, 2015
Eligibility  

Executives with the following titles as of January 31, 2011:

 

•     Executive Vice Presidents

 

•     Senior Vice Presidents

 

•     Corporate Vice Presidents

 

Newly elected or promoted executives with the following titles on or after February 1, 2011 (effective February 1, 2011) and executives eligible for the Legacy CIC Plan with the following titles (effective February 1, 2014):

 

•     Executive Vice Presidents

 

•     Senior Vice Presidents

CIC Cash Severance Multiple   Three times base salary and bonus   Two times base salary and bonus
Definition Of Severance Base Salary   The highest annual salary during the last three years   Current base salary
Definition Of Severance Bonus   The highest annual bonus received in the prior five full fiscal years   Current target annual bonus
Medical Benefit Continuation   Three years   Two years
Excise Tax Gross Up  

If parachute payments exceed the threshold under the Internal Revenue Code’s Golden Parachute Rules, known as the “Safe Harbor Amount”, by more than 110%, the executive is entitled to an excise tax gross-up. Otherwise, parachute payments are reduced to the Safe Harbor Amount and no excise tax gross up is payable.

  None. In the event change in control benefits are subject to the excise tax under Section 4999 of the Code, either the participant will pay the excise taxes or the benefits will be cut back to an amount that eliminates imposition of the excise taxes, whichever option is more favorable to the participant on an after-tax basis.
Participant Advance Notification of Plan Amendment   Three years   One year

Executive Financial Planning Program. The Executive Financial Planning Program provides our senior management, including our NEOs, with comprehensive financial planning assistance designed to help them achieve the highest value from their compensation package. The annual allowance for our NEOs is up to $16,500 in the first and last year of receiving this benefit, and up to $12,000 for the years in between the first and last year’s participation. The Company imputes the cost of this benefit as income and does not provide a tax gross up to the executive.

Executive Physical Program. The Executive Physical Program provides our senior executives in the United States, including our NEOs, with an annual comprehensive physical examination including up to three specialist consultations. If a senior executive chooses to receive benefits under this program, the


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Company imputes the fair market value of this benefit, above the average cost for similar examinations under the Motorola Solutions Employee Medical Benefits Plan, as income and does not provide a tax gross up to the executive.

Deferred Compensation Plan. Due to low participation, we closed the Motorola Solutions Management Deferred Compensation Plan (the “Deferred Compensation Plan”) to new deferrals on January 1, 2008. The Plan has remained closed since taking this action. When active, the Deferred Compensation Plan is a non-qualified deferred compensation plan that is unfunded and unsecured, and allows our eligible executives, including our NEOs, the opportunity to defer taxes on their base salary and cash incentive compensation. The Company does not contribute to this plan. The plan is not intended to provide above-market or preferential earnings (as these terms are defined under SEC regulations) on compensation deferred under the plan. The actual earnings on Mr. Delaney’s (the only NEO participating in the Deferred Compensation Plan) account in 2012 and 2010 were above-market under SEC regulations and the actual earnings on his account in 2011 were not above-market under SEC regulations.

Personal Use of Corporate Aircraft. Mr. Brown is active in professional and civic organizations and travels extensively. In addition, he has strong visibility in the media and other public forums, as well as significant amounts of private and personal information readily available about him on the internet. As a result, he is required to use our corporate aircraft for all travel as part of our corporate security program. From time to time and on a limited basis, we permit other executives to use our aircraft for personal travel. The Company does not provide tax gross ups on any imputed income resulting from this benefit. Please refer to the 2012 Summary Compensation Table footnotes for information about how the personal aircraft expenses are calculated.

CEO Security. Mr. Brown is provided a security system at his personal residences with security alarm monitoring paid by the Company.

Broad-based Employee Benefits. As U.S. employees, our NEOs have the opportunity to participate in a number of benefit programs that are generally available to all regular U.S. employees. These benefits include: (1) health care plans (medical, vision, dental and wellness programs); (2) life and disability plans (group life insurance, business travel accident insurance, and short-term and long-term disability income plans); (3) investment plans (the 401(k) Plan) and employee stock purchase plan, as well as previously existing pension plans that were available to employees who began employment prior to January 1, 2005; and (4) work/life plans (programs that assist with daily needs such as child care, adoption assistance, dependent care accounts and long-term care insurance).

Pension Plans. Our pension plans were offered to pension-eligible employees hired before January 1, 2005. We offered a qualified pension plan, with two different benefit formulas, commonly referred to as the Portable Pension Plan and the Traditional Pension Plan (the “Pension Plans”). We also offered two non-qualified plans, the Motorola Solutions Supplemental Pension Plan (the “MSPP”) and the legacy Elected Officer Supplementary Retirement Plan (the “SRP”), to highly-compensated employees whose qualified pension plan benefits are reduced by annual salary limits imposed by the IRS. On December 15, 2008, the Board determined that, effective March 1, 2009, all future benefit accruals and compensation increases used to compute retirement benefit accruals would automatically cease for all individuals who were participants under the Pension Plans, MSPP and SRP as of February 28, 2009. However, participants continue to earn vesting credit towards their pension plan benefit on and after March 1, 2009. The MSPP was further amended to close the plan to new participants, effective January 1, 2009, unless such participation was due to a prior contractual entitlement. Mr. Delaney is the sole participant in the SRP and no other employee is eligible to participate in the SRP. Additional information regarding these plans is included in the Retirement Plans section.


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Other Compensation Policies and Practices

 

Stock Ownership Requirements

To ensure strong alignment of our senior management with the interests of our stockholders, the Company maintains stock ownership requirements for our senior executives, including each of our NEOs. Our stock ownership requirements are shown below:

 

    Minimum Stock
Ownership Required
 

Chairman and Chief Executive Officer

    6 times base salary   
Executive Vice Presidents and members of the management executive committee     3 times base salary   
Senior Vice Presidents (other than members of the management executive committee)     2 times base salary   
Corporate Vice Presidents (other than members of the management executive committee)     1 times base salary   

Each executive subject to the guidelines must meet their ownership requirement within five years from the date they first become subject to their applicable ownership requirement.

Additionally, executives who do not meet their applicable stock ownership requirement within five years must hold any shares acquired (net of tax withholding) on the exercise of stock options and the vesting of RSUs until compliance with the stock ownership requirement is achieved.

For purposes of meeting the stock ownership requirement, “stock” means shares of Common Stock owned outright, restricted stock, RSUs and stock owned in benefit plans such as the 401(k) Plan and the employee stock purchase plan. The Committee reviews adherence to the ownership guidelines annually. In the Committee’s last review of adherence to the ownership guidelines, it was determined that all NEOs had met their stock ownership requirement.


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Pay Governance

During 2011, we made several changes to enhance the corporate governance provisions of our compensation programs and to better align them to competitive market practices. The table below describes the actions taken in 2011:

 

Program   Program Change and Corporate Governance Improvement
New Change In Control Plan   Instituted a new Senior Executive Change in Control Plan that phases in for existing participants in 2014, which limits plan eligibility, eliminates excise tax gross-ups and reduces severance multiples, amongst other changes. Refer to the section Termination of Employment and Change In Control Arrangements of this Proxy Statement for additional details.
Executive Stock Ownership Guidelines   Expanded our stock ownership requirements to include Corporate Vice Presidents, in addition to Senior Vice Presidents, Executive Vice Presidents and our CEO, and also implemented consequences for failure to meet the applicable stock ownership requirement within a five-year time period. Refer to the section Stock Ownership Requirements in the CD&A for additional details.
Board Stock Ownership Guidelines   Amended our Board Governance Guidelines to increase non-employee director stock ownership guidelines from four times to five times the annual retainer within a five-year time period and implemented a requirement for non-employee directors to hold all shares paid or awarded by the Company until termination of Board service. Refer to the section Board of Director Matters: What Are The Director Stock Ownership Guidelines of this Proxy Statement for additional details.
Stock Plan Amendments   Amended our Motorola Solutions Omnibus Incentive Plan of 2006 to remove a share recycling provision which allowed shares withheld for tax purposes to be reissued for future grants. Additionally, we clarified our plan to affirmatively state that dividend equivalents cannot be accrued on options or stock appreciation rights and to specifically define fair market value in our stock plan as the closing price on the date of the transaction.
Elimination of Gross-Ups   Eliminated tax gross-ups for guests traveling with Section 16 Officers to special events. Section 16 Officers are responsible for taxes due on imputed income resulting from their guests attending special events.


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In addition to the general corporate governance improvements made in 2011, we continue to maintain several practices that represent strong corporate governance, including:

 

Practice   Description
Heavily weighted “at risk” pay for our senior executives   Weighted to include more short-term and performance-contingent long-term incentives (variable pay) than base salary (fixed pay) to create a strong link to driving stock price performance in a responsible manner without creating undue risk for the Company.
“Double trigger” feature in our Senior Executive Change in Control Plan   Requires that an executive be separated from service in conjunction with a change in control event before receiving any payouts made in connection with a change in control.
“Modified double trigger” in our Motorola Solutions Omnibus Incentive Plan of 2006 for a change in control   Provides that there is no acceleration of equity or performance awards if such awards are assumed or replaced by the successor company, unless otherwise provided by the Compensation and Leadership Committee. For awards that are assumed or replaced during a change in control, accelerated treatment is only provided if the executive is terminated without cause or voluntarily resigns for good reason within 24 months of the change in control event.
“Clawback” policy   Provides for recoupment of incentive payments that are overstated as a result of the restatement of our financial earnings.
“Anti-hedging” policy   Precludes employees and directors from engaging in any transaction in which they may profit from short-term speculative swings in the value of our securities.
Compensation and Leadership Committee consisting entirely of independent directors   Requires that each member of the Compensation and Leadership Committee comply with independent status requirements for Non-Employee Directors under SEC Rule 16b-3 and as an Outside Director under Section 162(m) of the Internal Revenue Code for purposes of membership on a compensation committee.
Independent compensation consultant engaged by the Committee   Compensation and Leadership Committee reviews and approves all plans under its purview and also seeks input from an independent compensation consultant, which provides third party input and an unbiased perspective on market practices.
An annual risk assessment on pay that is reviewed by the Compensation and Leadership Committee   Compensation and Leadership Committee reviews global employee compensation programs to determine if there is inappropriate or excessive risk exposure that could have a material adverse effect on the Company. The most recent assessment found no such inappropriate or excessive risk exposure.

We continuously monitor our compensation practices to ensure we are responsive to current market conditions and new developments in corporate governance.


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Recoupment of Incentive Compensation Awards Upon Restatement of Financial Results

 

The Company maintains strict audit policies and practices in order to identify, and ideally prevent, misconduct on the part of our employees as it relates to managing our business performance and reporting our financial results. In addition, we regularly conduct a risk assessment of our compensation programs and practices, and report on the results of this assessment to the Committee as a means to ensure our programs do not create undue risk or exposure to the Company and its stockholders.

If, in the opinion of the independent directors of the Board, the Company’s financial results require restatement due to the misconduct by one or more of the Company’s executive officers (including the NEOs), the independent directors may seek a number of remedies, all of which are subject to a number of conditions including (i) whether the executive officer engaged in the intentional misconduct, (ii) whether the bonus or incentive compensation to be recouped was calculated based upon the financial results that were restated, and (iii) whether the incentive compensation calculated under the restated financial results is less than the amount actually paid or awarded. The independent directors shall review whether to require one or more remedies by directing the Company to recover all or a portion of any incentive compensation received by the executive as a result of the misconduct, as well as cancel all or a portion of the outstanding equity-based awards held by the executive (commonly referred to as a “clawback” policy). In addition, the independent directors may also seek to recoup any gains realized by the executive with respect to their equity-based awards, including exercised stock options and vested RSUs, regardless of when they were issued.

In addition, the independent directors may take other disciplinary action, including, without limitation (i) adjustment of future compensation of the executive officer, (ii) termination of the executive officer’s employment, (iii) pursuit of any and all remedies available in law and/or equity in any country, and (iv) such other action as may fit the circumstances of the particular case. The independent directors may take into account penalties or punishments imposed by third parties, such as law enforcement agencies, regulators or other authorities. The independent directors’ power to determine the appropriate punishment for the wrongdoers is in addition to, and not in replacement of, remedies imposed by such entities and is in addition to any right of recoupment against the CEO or CFO under Section 304 of the Sarbanes-Oxley Act of 2002.

Impact of Favorable Accounting and Tax Treatment on Compensation Program Design

 

Favorable accounting and tax treatment of the various elements of our total compensation program is an important, but not the sole, consideration in its design. Section 162(m) of the Internal Revenue Code limits the deductibility of certain items of compensation paid to the CEO and certain other highly compensated executive officers (together, the “covered officers”) to $1,000,000 annually, unless such compensation qualifies as performance-based compensation. Our short-term and long-term incentive programs have been designed to qualify as performance-based compensation. In particular, in order to satisfy the Section 162(m) qualification requirements, under our 2006 Plan, each year the Committee allocates an incentive pool equal to 5% of our consolidated operating earnings to the covered officers under our AIP. Once the amount of the pool and the specific allocations are determined at the end of the year, the Committee can apply “negative discretion” to reduce (but not increase) the amount of any award payable from the incentive pool to the covered officers, as determined by the amount payable to each covered officer based on the AIP performance criteria and actual results.

For 2012, the Committee exercised this discretion to reduce the value of the awards payable under the incentive pool to the value of each such covered officer’s 2012 AIP award. For a discussion of the


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covered officers’ 2012 AIP awards, see Short-Term Incentives. The Committee reserves the right to provide for compensation to executive officers that may not be deductible pursuant to Section 162(m).

Securities Trading Policy

 

Executives and certain other employees, including our NEOs, may not engage in any transaction in which they may profit from short-term speculative swings in the value of our securities. This “anti-hedging” policy includes “short sales” (selling borrowed securities that the seller hopes can be purchased at a lower price in the future) or “short sales against the box” (selling owned, but not yet delivered, securities), “put” and “call” options (publicly available rights to sell or buy securities within a certain period of time at a specified price), “zero-cost collars” (a type of strategy that secures a range of return with a floor and a cap), “forward sale contracts” (a privately negotiated agreement to deliver shares at a set price at some point in the future) and other hedging-related transactions. Our securities trading policy is applicable to all employees and is designed to ensure compliance with all applicable insider trading rules.


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The following Report of the Compensation and Leadership Committee on Executive Compensation and related disclosure shall not be deemed incorporated by reference by any general statement incorporating this Proxy Statement into any filing under the Securities Act of 1933 (the “Securities Act”) or under the Exchange Act, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.

COMPENSATION AND LEADERSHIP COMMITTEE REPORT

Through the 2012 Annual Meeting, Director Samuel C. Scott III was the Chair of the Compensation and Leadership Committee (the “Committee”). At the Annual Board Meeting following the 2012 Annual Meeting, David W. Dorman was named the Chair of the Committee and Mr. Scott became the Chair of the Governance and Nominating Committee, relinquishing his position on the Committee. Directors William J. Bratton, Kenneth C. Dahlberg and David W. Dorman, when not serving as Chair, served as members of the Committee.

The Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with Company management. Based on such review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement on Schedule 14A and incorporated by reference into Motorola Solutions’ 2012 Annual Report on Form 10-K.

Respectfully submitted,

David W. Dorman, Chairman

William J. Bratton

Kenneth C. Dahlberg

COMPENSATION AND LEADERSHIP COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Director Samuel C. Scott III was the Chair of the Committee from January 1 to May 1, 2012. David W. Dorman served on the Committee from January 1 to May 1, 2012, and was named Chair of the Committee on May 1, 2012. Directors William J. Bratton and Kenneth C. Dahlberg served on the Committee throughout 2012. No member of the Committee was, during the fiscal year ended December 31, 2012, an officer, former officer, or employee of the Company or any of our subsidiaries. We did not have any compensation committee interlocks in 2012.


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NAMED EXECUTIVE OFFICER COMPENSATION

2012 Summary Compensation Table

 

 

Name and Principal
Position
(a)
 

Year

 

(b)

   

Salary

($)(1)

(c)

   

Bonus

($)

(d)

   

Stock
Awards

($)(2)

(e)

   

Option
Awards

($)(2)

(f)

   

Non-Equity
Incentive

Plan
Compensation
($)(3)

(g)

    Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(4)
(h)
   

All Other

Compensation

($)(5)

(i)

   

Total

($)

(j)

 

Gregory Q. Brown

    2012        1,200,000        0        1,263,716        2,667,993        3,370,000        21,352        1,802,112        10,325,173   

Chairman and Chief Executive Officer

    2011        1,200,000        0        8,674,602        15,095,318        4,100,000        15,188        243,944        29,329,052   
    2010        900,000        0        3,310,653        3,356,730        5,927,500        6,108        237,919        13,738,910   
                 

Edward J. Fitzpatrick

    2012        561,462        0        157,934        333,499        600,000        41,380        23,900        1,718,175   

Executive Vice President and Chief Financial Officer

    2011        512,500        0        1,290,697        1,936,068        555,000        26,603        21,138        4,342,006   
    2010        450,000        0        721,350        731,444        759,225        9,322        509,267        3,180,608   
                 
                 

Eugene A. Delaney

    2012        593,231        0        252,704        533,594        720,000        1,405,091        22,900        3,527,520   

Executive Vice President

    2011        575,000        0        1,007,109        1,510,688        845,000        677,995        3,232,377        7,848,169   
    2010        575,000        0        1,316,292        1,334,538        1,638,770        473,230        21,260        5,359,090   
                 

Mark F. Moon

    2012        561,462        0        379,081        800,392        680,000        100,264        27,270        2,548,469   

Executive Vice President and President, Sales & Product Operations

    2011        512,500        0        1,263,943        1,895,987        700,000        71,483        53,745        4,497,658   
                 
                 
                 
                 

Lewis A. Steverson

    2012        452,000        0        157,934        333,499        400,000        54,256        14,897        1,412,586   

Senior Vice President, General Counsel and Secretary

                 
                 

 

 

(1) Salary includes amounts deferred pursuant to salary reduction arrangements under the 401(k) Plan. Mr. Brown voluntarily took a 25% decrease in base salary in 2009, and his 2010 base salary remained at the 2009 reduced level. In 2011, Mr. Brown’s salary reverted to the amount agreed in his employment agreement.

 

(2) The amounts in columns (e) and (f) reflect the aggregate grant date fair value of the stock and option awards granted in the respective fiscal year as computed in accordance with ASC Topic 718, excluding the effect of estimated forfeitures. Assumptions used in the calculation of these amounts are included in Note 8, “Share-Based Compensation Plans and Other Incentive Plans” in the Company’s Form 10-K for the fiscal year ended December 31, 2012.

 

(3)

In 2012 and 2011, the amounts in column (g) consist of awards earned by eligible NEOs at that time under the AIP; there were no earned payments under any LRIP in 2012 or 2011, except for the pro-rata payments for the 2009-2011 and 2010-2012 LRIP cycles that were reported in 2010. In 2010, the amounts in column (g) consist of awards earned by eligible NEOs at that time under the 2009 Motorola Incentive Plan (“MIP”) and, for Messrs. Brown, Fitzpatrick and Delaney, the LRIP. There were no payments under the 2008-2010 LRIP cycle since threshold performance was not met. However, pro rata payouts were earned with respect to the 2009-2011 and 2010-2012 LRIP cycles when the remaining portions of the cycles were cancelled due to the


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  Separation. The performance was measured under the 2009-2011 LRIP and 2010-2012 LRIP cycles as of January 3, 2011 and pro rata payments were made to eligible participants in 2012 and 2013, respectively. Earned payments in column (g) during fiscal year 2010 are as follows:

 

       Mr. Brown          Mr. Fitzpatrick          Mr. Delaney    

2010 MIP

   $ 2,500,000       $ 487,350       $ 628,187   

2009-2011 Prorated LRIP

   $ 3,150,000       $ 211,875       $ 943,500   

2010-2012 Prorated LRIP

   $ 277,500       $ 60,000       $ 67,083   
  

 

 

    

 

 

    

 

 

 

TOTAL

   $ 5,927,500       $ 759,225       $ 1,638,770   

 

(4) The amounts in column (h) represent the aggregate change in present value of the respective officer’s benefits under all pension plans. If the aggregate change in value of benefits under all pension plans was negative, the value is reflected as $0. A summary of the specific values for each period are set forth below:

 

        CHANGE IN PRESENT VALUE OF BENEFIT            

NEO

  Period   Pension Plan   MSPP   General
Instrument
Pension Plan
  Motorola Elected
Officers
Supplementary
Retirement Plan
  Total

Gregory Q.
Brown

  Dec. 31, 2011 to
Dec. 31, 2012
  $21,352   $0   N/A   N/A   $21,352
  Dec. 31, 2010 to
Dec. 31, 2011
  $15,188   $0   N/A   N/A   $15,188
    Dec. 31, 2009 to
Dec. 31, 2010
  $6,108   $0   N/A   N/A   $6,108

Edward J.
Fitzpatrick

  Dec. 31, 2011 to
Dec. 31, 2012
  $34,436   $0   $6,944   N/A   $41,380
  Dec. 31, 2010 to
Dec. 31, 2011
  $24,094   $0   $2,509   N/A   $26,603
    Dec. 31, 2009 to
Dec. 31, 2010
  $7,913   $0   $1,409   N/A   $9,322

Eugene A.
Delaney

  Dec. 31, 2011 to
Dec. 31, 2012(1)
  $128,510   N/A   N/A   $1,093,224   $1,221,734(1)
  Dec. 31, 2010 to
Dec. 31, 2011
  $89,381   N/A   N/A   $588,614   $677,995
    Dec. 31, 2009 to
Dec. 31, 2010(1)
  $47,044   N/A   N/A   $294,917   $341,961(1)

Mark F. Moon

  Dec. 31, 2011 to
Dec. 31, 2012
  $100,264   N/A   N/A   N/A   $100,264
    Dec. 31, 2010 to
Dec. 31, 2011
  $71,483   N/A   N/A   N/A   $71,483

Lewis A.
Steverson

  Dec. 31, 2011 to
Dec. 31, 2012
  $54,256   N/A   N/A   N/A   $54,256

 

  (1) 

Mr. Delaney also had (i) $183,357 in 2012, and (ii) $131,269 in 2010, in earnings on nonqualified deferred compensation in excess of the thresholds for 2012 and 2010 above-market earnings, respectively, established pursuant to SEC rules.

 

(5)

The amounts in column (i) for 2012 consist of perquisite costs for personal use of Company aircraft, security system monitoring, financial planning, guest attendance at Company events, Company matching contributions to the 401(k) Plan and executive physicals. The incremental cost to the Company for any personal use of Company aircraft is calculated by multiplying the


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  number of hours an NEO travels in a particular plane by the direct cost per flight hour per plane. Direct costs include fuel, maintenance, labor, parts, loading and parking fees, catering and crew. Specific perquisites applicable to each NEO are identified below by an “X”. Where such perquisite exceeded the greater of $25,000 or 10% of the total amount of perquisites and personal benefits for such officer, the dollar amount is given in accordance with SEC rules.

 

NEO    Personal
Aircraft Use
   Security
System
Monitoring
   Financial
Planning
   Guest Attendance
at Company
Events
   401(k) Plan
Match
   Executive
Physical

Gregory Q. Brown

   $273,987    X    X       X   

Edward J. Fitzpatrick

         X       X    X

Eugene A. Delaney

         X       X    X

Mark F. Moon

         X    X    X   

Lewis A. Steverson

         X         

Further, the amount for Mr. Brown includes the donation on May 9, 2012 of $1,500,000, payable in two equal installments in 2012 and 2013, that the Company agreed to make to the Rutgers University Foundation, a 501(c)(3) charitable organization, to establish and name an endowed chair in honor of the Company’s CEO. This gift to the Rutgers University Foundation was not requested by Mr. Brown, and Mr. Brown will not receive any of the funds associated with such gift or receive any pecuniary or other benefit from the Rutgers University Foundation as a result of this gift, other than the honor of the establishment of an endowed chair in his name in the area of neuroscience. While the Company has not concluded that the donation constitutes a compensatory arrangement with Mr. Brown, the amount is included in this column in order to comply with any interpretive reporting requirement that may be deemed to exist by virtue of the arrangement.


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Grants of Plan-Based Awards in 2012

 

               

All Other
Stock
Awards:

Number of

    All Other
Option
Awards:
Number of
   

Exercise
or Base
Price  of
Option
Awards
($/Sh)(3)
(k)

 

   

Grant Date
Fair Value
of Stock
and
Option
Awards($)
(l)

 

 
 

Estimated Future Payouts Under

Non-Equity Incentive Plan Award

         Shares of
Stock  or
Units
(#)(1)
(i)
    Securities
Underlying
Options
(#)(2)
(j)
     
Name
(a)
  Grant
Type
   

Award

Date

    

Grant

Date
(b)

    Threshold
($)
(c)
    Target
($)
(d)
    Maximum
($)
(e)
                                  

Gregory Q. Brown

    AIP           1/1/2012 (4)      0        2,640,000        5,174,399                                   
    LRIP           1/1/2012 (5)      750,000        3,000,000        6,000,000                                   
    Equity        5/1/2012         5/2/2012                                 25,949 (6)                    1,263,716   
    Equity        5/1/2012         5/2/2012                                        281,731 (7)      51.33        2,667,993   

Edward J. Fitzpatrick

    AIP           1/1/2012 (4)      0        533,389        1,045,442                                   
    LRIP           1/1/2012 (5)      150,938        603,750        1,207,500                                   
    Equity        5/1/2012         5/2/2012                                 3,243 (8)                    157,934   
    Equity        5/1/2012         5/2/2012                                        35,529 (9)      51.33        333,499   

Eugene A. Delaney

    AIP           1/1/2012 (4)      0        563,570        1,104,596                                   
    LRIP           1/1/2012 (5)      150,938        603,750        1,207,500                                   
    Equity        5/1/2012         5/2/2012                                 5,189 (8)                    252,704   
    Equity        5/1/2012         5/2/2012                                        56,846 (9)      51.33        533,594