DEF 14A 1 col121814proxymasterdoc14a.htm DEF 14A COL 12/18/14 Proxy Master Doc 14A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

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¨     Soliciting Material Pursuant to §.240.14a-12
Rockwell Collins, Inc
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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December 17, 2014

Dear Shareowner:
You are cordially invited to attend the 2015 Annual Meeting of Shareowners of the Corporation.
The meeting will be held at the Cedar Rapids Marriott, 1200 Collins Road NE, Cedar Rapids, Iowa, on Thursday, February 5, 2015, at 11:00 a.m. (Central Standard Time). At the meeting we will present a current report of the activities of the Corporation followed by discussion and action on the matters described in the Proxy Statement. Shareowners will have an opportunity to comment on or inquire about the affairs of the Corporation that may be of interest to shareowners generally.
If you plan to attend the meeting, please indicate your desire in one of the ways described in the box on the last page of the Proxy Statement.
We sincerely hope that as many shareowners as can conveniently attend will do so.
Sincerely yours,
 
Anthony J. Carbone
 
Robert K. Ortberg
Non-Executive Chairman of the Board
 
Chief Executive Officer and President

                
                        
                            



Notice of 2015 Annual Meeting of Shareowners

To the Shareowners of
ROCKWELL COLLINS, INC.:
Notice Is Hereby Given that the 2015 Annual Meeting of Shareowners of Rockwell Collins, Inc. will be held at the Cedar Rapids Marriott, 1200 Collins Road NE, Cedar Rapids, Iowa, on Thursday, February 5, 2015, at 11:00 a.m. (Central Standard Time) for the following purposes:
(1)
to elect the three nominees named in the accompanying proxy statement as members of the Board of Directors with terms expiring at the Annual Meeting in 2018;
(2)
to consider and vote upon a proposal to approve an advisory resolution relating to executive compensation;
(3)
to consider and vote upon a proposal to approve the selection by the Audit Committee of the Board of Directors of Deloitte & Touche LLP as auditors of the Corporation for fiscal year 2015;
(4)
to consider and vote upon a proposal to adopt our 2015 Long-Term Incentives Plan; and
(5)
to transact such other business as may properly come before the meeting.
Only shareowners of record at the close of business on December 8, 2014 will be entitled to notice of, and to vote at, the meeting. We will begin distributing proxy materials to shareowners on or about December 22, 2014.
By order of the Board of Directors.
Robert J. Perna
Secretary
December 17, 2014
Note: The Board of Directors solicits votes by mail or by use of our telephone or Internet voting procedures.




CONTENTS
Proxy Statement Summary
Governance
 
 
2015 Annual Meeting of Shareowners
 
Voting Securities
 
Election of Directors
 
Information as to Nominees for Directors and Continuing Directors
 
Corporate Governance: Board of Directors and Committees
 
Certain Transactions and Other Relationships
 
Audit Committee Report
 
Equity Ownership of Certain Beneficial Owners and Management
Compensation
 
 
Compensation of Directors
 
Compensation Discussion and Analysis
 
Compensation Committee Report
 
Summary Compensation Table
 
Grants of Plan-Based Awards
 
Outstanding Equity Awards at Fiscal Year-End
 
Option Exercises and Stock Vested
 
Pension Benefits
 
Non-Qualified Deferred Compensation
 
Potential Payments Upon Termination or Change of Control
 
Advisory Vote on Executive Compensation
Auditors
 
 
Proposal to Approve the Selection of Auditors
Management Proposal
 
 
Proposal to Adopt 2015 Long-Term Incentives Plan
Additional Information
 
 
Vote Required
 
Voting for Directors
 
Other Matters
 
Section 16(a) Beneficial Ownership Reporting Compliance
 
Annual Reports
 
Shareowner Proposals for Annual Meeting in 2016
 
Expenses of Solicitation
 
General Q&A About the Meeting
Appendices
 
 
Appendix A - General Industry Market Data Group
 
Appendix B - 2015 Long-Term Incentives Plan

2014 Proxy Statement | 1


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, and you should read the entire proxy statement carefully before voting.
Annual Meeting of Shareowners
Date and Time:
February 5, 2015
11:00 a.m. (Central Standard Time)
Place:
Cedar Rapids Marriott
1200 Collins Road NE
Cedar Rapids, IA
Record Date:
December 8, 2014
Meeting Agenda
CEO business update
Election of three director nominees
Advisory vote on executive compensation
Vote on the proposal to approve the selection of Deloitte & Touche LLP (Deloitte) as our auditors
Vote on the proposal to adopt the 2015 Long-Term Incentives Plan
Question and answer session
Proposals for Voting
Board Vote Recommendation
Page Reference
(for more details)
Election of three directors
FOR
5
Advisory vote on executive compensation
FOR
51
Approve Deloitte as our auditors
FOR
52
Approve 2015 Long-Term Incentives Plan
FOR
53









2 | 2014 Proxy Statement

NOMINEES


Board Nominees
The following table provides summary information about each director nominee. The nominees receiving a plurality of the votes cast at the meeting will be elected as directors, unless otherwise determined in accordance with the majority voting policy described under the heading “Voting for Directors.”
Name
Age
Director Since
Occupation
Experience/Qualifications
Independent
Committee Memberships
Anthony J. Carbone
73
2001
Our Non-Executive Chairman of the Board

Retired Vice Chairman of the Board and Senior Consultant, The Dow Chemical Company
Leadership, Management, International Business
Yes
Executive
(Chairman)
Robert K. Ortberg
54
2013
Our Chief Executive Officer and President
Leadership, Management, Aerospace and Defense Industry
No
Executive
Cheryl L. Shavers
60
2002
Chairman and Chief Executive Officer, Global Smarts, Inc.
Leadership, Operations, Technology
Yes
Technology (Chairman), Board Nominating and Governance
During the fiscal year, each nominee attended 100% of the meetings of the Board and Committees on which he or she serves.
Advisory Vote on Executive Compensation
We are asking shareowners to approve a non-binding advisory resolution, often referred to as “say on pay,” relating to our named executive officer compensation for fiscal year 2014. Last year, 97.2% of the votes cast, not including abstentions and broker non-votes, voted to approve our named executive officers’ compensation for fiscal year 2013. The design of our 2014 executive compensation program is largely unchanged from 2013 and continues to emphasize pay-for-performance.
Independent Auditors
We are asking shareowners to approve the selection of Deloitte as our independent auditors for fiscal year 2015. Last year, 98.9% of the votes cast, not including abstentions and broker non-votes, voted to approve Deloitte as our independent auditors for fiscal year 2014.
Adoption of 2015 Long-Term Incentives Plan
We are asking shareowners to approve the adoption of our 2015 Long-Term Incentives Plan (2015 Plan). The 2015 Plan, if approved, will replace our 2006 Long-Term Incentives Plan (2006 Plan) and no more awards will be granted under the 2006 Plan if the 2015 Plan is approved. The 2006 Plan will otherwise expire on February 7, 2016.


2014 Proxy Statement | 3


2015 ANNUAL MEETING OF SHAREOWNERS
The 2015 Annual Meeting of Shareowners of Rockwell Collins, Inc. will be held on February 5, 2015, for the purposes set forth in the accompanying Notice of 2015 Annual Meeting of Shareowners.
This statement and the accompanying proxy, which are first being sent to shareowners on or about December 22, 2014, are furnished in connection with the solicitation by the Board of Directors of proxies to be used at the meeting and at any adjournment thereof. If a shareowner duly executes and returns a proxy in the accompanying form or uses our telephone or Internet voting procedures to authorize the named proxies to vote the shareowner’s shares, those shares will be voted as specified. If no specification is made and your shares are registered directly in your name with our transfer agent, Wells Fargo Shareowner Services, the shares will be voted in accordance with the recommendations of the Board of Directors. If your shares are not registered in your name (i.e., they are held in “street name” through a bank or broker) and no voting specification is made to your bank or broker, your bank or broker may be able to vote your shares depending on whether the item for consideration is a discretionary or non-discretionary item. Brokers and banks are not permitted to vote on non-discretionary items and are permitted to vote on discretionary items. With the exception of the proposal to approve Deloitte as our auditors, all of the items for consideration are non-discretionary items which may not be voted by brokers or banks who have not received specific voting instructions.
The proxy and any votes cast using our telephone or Internet voting procedures may be revoked prior to exercise at the meeting by delivering written notice of revocation to the Secretary of the Corporation, by executing a later dated proxy, by casting a later vote using the telephone or Internet voting procedures or by attending the meeting and voting in person.
VOTING SECURITIES
Only shareowners of record at the close of business on December 8, 2014, the record date for the meeting, are entitled to notice of, and to vote at, the meeting. On December 8, 2014, we had outstanding 132,945,592 shares of our common stock, par value $0.01 per share. Each holder of our common stock is entitled to one vote for each share held. We have no other class or series of shares currently outstanding other than our common stock.
ELECTION OF DIRECTORS
Our Restated Certificate of Incorporation provides that the Board of Directors shall generally consist of three classes of directors with overlapping three-year terms. One class of directors is to be elected each year with terms extending to the third succeeding Annual Meeting after election. The Restated Certificate of Incorporation provides that the Board of Directors shall maintain the three classes so as to be as nearly equal in number as the then total number of directors permits. The three directors in Class II who are elected at the 2015 Annual Meeting will serve for a term expiring at our Annual Meeting in the year 2018. The three directors in Class I and the three directors in Class III are serving terms expiring at our Annual Meetings in 2017 and 2016, respectively.

Last year, our Board of Directors recommended that shareowners approve a management proposal to declassify the Board of Directors. The proposal failed to achieve the affirmative vote of at least 80% of our outstanding shares as required by our Restated Certificate of Incorporation.

It is intended that proxies in the accompanying form properly executed and returned to our proxy tabulator or shares properly authorized to be voted in accordance with our telephone or Internet voting procedures will be voted at the meeting, unless authority to do so is withheld, for the election as directors of the three nominees specified in Class II - Nominees for Directors with Terms Expiring in 2018 (Anthony J. Carbone, Robert K. Ortberg and Cheryl L. Shavers), each of whom now serves as a director with a term extending to the 2015 Annual Meeting and until a successor is elected and qualified. If for any reason any of the nominees is not a candidate (which is not expected) when the election occurs, it is expected that proxies in the accompanying form or shares properly authorized to be voted in accordance with our telephone or Internet voting procedures will be voted at the meeting for the election of a substitute nominee or, in lieu thereof, the Board of Directors may reduce the number of directors.

4 | 2014 Proxy Statement

GOVERNANCE

INFORMATION AS TO NOMINEES FOR DIRECTORS AND CONTINUING DIRECTORS
Shown below for each nominee for director and each continuing director, as reported to us as of December 8, 2014, are the nominee’s or continuing director’s name, age and principal occupation; the position, if any, with us; the period of service as a director of our company; other public company directorships held within the past five years; the committees of the Board of Directors on which the nominee or continuing director serves, and experiences, qualifications, attributes or skills that qualify the nominee or continuing director to serve as a director.
CLASS II - NOMINEES FOR DIRECTOR WITH TERMS EXPIRING IN 2018
 
Experiences, qualifications, attributes and skills:
• Experience in management, leadership and manufacturing as an executive and vice chairman of The Dow Chemical Company
• Experience with a variety of domestic and international business matters

Anthony J. Carbone
 
 
 
Mr. Carbone is our Non-Executive Chairman of the Board and Chairman of the Executive Committee. He has served as our Non-Executive Chairman since August 2014 and he served as our Lead Independent Director from November 2012 until August 2014. Mr. Carbone served as Vice Chairman of the Board of Directors of The Dow Chemical Company (chemical, plastic and agricultural products) from February 2000 to October 2005 and Senior Consultant of Dow from November 2000 to October 2005. He served as Executive Vice President of Dow from November 1996 to November 2000. He is a former member of the American Chemical Society and former Board Member and Chairman of the American Plastics Council and the Society of Plastics Industries. Mr. Carbone has served on the Advisory Council of the Heritage Foundation.

Age: 73
Director since
Jun. 2001
Independent
 
Non-Executive Chairman of the Board

Retired Vice Chairman of the Board and Senior Consultant, The Dow Chemical Company
 

2014 Proxy Statement | 5


 
Experiences, qualifications, attributes and skills:
• Leadership, management and aerospace and defense industry knowledge and experience as CEO and President of Rockwell Collins and through his previous Rockwell Collins positions
• Strategic and business acumen, engineering and program management experience and operational execution

 
 
 
Robert K. Ortberg
 
Mr. Ortberg is a member of the Executive Committee. He has been our Chief Executive Officer since August 2013 and has served as our President since September 2012. He served as our Executive Vice President, Chief Operating Officer, Government Systems from February 2010 to September 2012 and as our Executive Vice President, Chief Operating Officer, Commercial Systems from October 2006 to February 2010. He served as a director of Bucyrus International, Inc., from July 2008 to July 2011. He serves on the Board of Governors for the Aerospace Industries Association, is a member of The Business Council, and he serves on the Board of Directors of FIRST® (For Inspiration and Recognition of Science and Technology) and the Hawkeye Council of the Boy Scouts of America. He also serves on the University of Iowa Engineering Advisory Board and on the Board of Trustees of the United Way of East Central Iowa.

Age: 54
Director since
Aug. 2013

 
Chief Executive Officer and President of the Corporation
 
 
Experiences, qualifications, attributes and skills:
• Significant leadership and operations experience as CEO of Global Smarts, Inc.
• Experience with developing technology plans and the transition of advanced technology into business opportunities

 
 
 
Cheryl L. Shavers
 
Dr. Shavers is Chairman of the Technology Committee and a member of the Board Nominating and Governance Committee. Dr. Shavers has been the Chairman and Chief Executive Officer of Global Smarts, Inc. (business advisory services) since February 2001. She served on the Advisory Board for E.W. Scripps Company, and as Under Secretary of Commerce for Technology for the United States Department of Commerce from November 1999 to February 2001 after having served as its Under Secretary Designate from April 1999 to November 1999. She served as Sector Manager, Microprocessor Products Group for Intel Corporation prior to April 1999. She served as Non-Executive Chairman of BitArts Ltd. from 2001 to December 2003.

Age: 60
Director since
Sep. 2002
Independent
 
Chairman and Chief Executive Officer, Global Smarts, Inc.
 

6 | 2014 Proxy Statement

GOVERNANCE

CLASS I - CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2017
 
Experiences, qualifications, attributes and skills:
• Management and leadership experience as past Chair, Chief Executive Officer, Chief Operating Officer and Chief Financial Officer of McLeodUSA, as well as Executive Vice President and Chief Financial Officer of Gulfstream
• Financial and management oversight experience of portfolio investments at Forstmann Little and audit committee experience on various boards.
Chris A. Davis
 
 
 
Ms. Davis is the Chairman of the Audit Committee and a member of the Executive Committee. She served as a General Partner with Forstmann Little & Co. (private equity firm) from October 2005 to July 2012 after having served them as a Special Limited Partner since August 2001. She served as Chairman of McLeodUSA Incorporated (telecommunications) from August 2005 to January 2006, Chairman and Chief Executive Officer of McLeodUSA from April 2002 to August 2005 and Chief Operating and Financial Officer of McLeodUSA from August 2001 to April 2002. She served as Executive Vice President, Chief Financial Officer of ONI Systems (telecommunications) from May 2000 to August 2001. She served as Executive Vice President, Chief Financial and Administrative Officer and director of Gulfstream Aerospace Corporation (business aircraft) from July 1993 to April 2000. She is a member of the Board of Directors of Cytec Industries, Inc. and is a former director of Aviall, Inc., IMG Worldwide, 24 Hour Fitness, ENK International and Wolverine Tube, Inc.
Age: 64
Director since
Feb. 2002
Independent
 
Former General Partner, Forstmann Little & Co.
 
 
Experiences, qualifications, attributes and skills:
• Experience in leadership, operations and technology in the U.S. Defense Department from 36 years of experience in the U.S. Air Force and senior positions in the U.S. Military, including assignments as Commander of NORAD and U.S. Northern Command
• Knowledge of financial services and life insurance industries as Chairman and President of the Armed Forces Benefit Association
Ralph E. Eberhart
 
 
 
General Eberhart is the Chairman of the Compensation Committee and is a member of the Technology Committee. He has been President of the Armed Forces Benefit Association since 2005 and Chairman and President since February 2009. He served as Commander of the North American Aerospace Defense Command (NORAD) and U.S. Northern Command from October 2002 to January 2005. His active military career spanned 36 years. He is a member of the Board of Directors of VSE Corporation, Jacobs Engineering Group Inc. and Triumph Group, Inc., and he is a director of several private companies.
Age: 67
Director since
Nov. 2007
Independent
 
Chairman and President, Armed Forces Benefit Administration
 

2014 Proxy Statement | 7


 
Experiences, qualifications, attributes and skills:
• U.S. and international management and leadership experience as past Chairman and CEO of Cytec Industries
• Global business perspective, operational knowledge and financial experience
 
 
 
David Lilley
 
Mr. Lilley is a member of the Audit Committee and Board Nominating and Governance Committee. He served as Chairman of Cytec Industries (specialty chemicals and materials) from January 1999 to December 2008, Chief Executive Officer of Cytec Industries from May 1998 to December 2009, and Non-Executive Director of Cytec Industries from January 2009 through April 2009. He was President of Cytec Industries from January 1997 through June 2008. From 1994 until January 1997, he was a Vice President of American Home Products Corporation, responsible for its Global Medical Device business. Prior to that he was a Vice President and a member of the Executive Committee of American Cyanamid Company (medical and agricultural products). Mr. Lilley is also a director of Public Service Enterprise Group Inc. and Tesoro Coporation and a former director of Arch Chemicals, Inc.
Age: 67
Director since
Dec. 2008
Independent
 
Retired Chairman and Chief Executive Officer, Cytec Industries Inc.
 
CLASS III - CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2016
 
Experiences, qualifications, attributes and skills:
• Management, leadership and business acumen as past Chairman and Chief Executive Officer of CDW Corporation
• Aerospace and international experiences
 
 
 
John A. Edwardson
 
Mr. Edwardson is a member of the Compensation Committee and the Technology Committee. Mr. Edwardson was Chairman of the Board of Directors of CDW Corporation (provider of technology solutions) from 2001 to December 2012 and from 2001 to 2011 he also served as CDW’s Chief Executive Officer. Prior to joining CDW, he served as Chairman and Chief Executive Officer of Burns International Services Corporation (security company) from 1999 to 2000 and as a Director (1994–1998), President (1994–1998) and Chief Operating Officer (1995–1998) of UAL Corporation and United Airlines. Prior to UAL Corporation and United Airlines, he served as Executive Vice President and Chief Financial Officer of Ameritech Corporation. He is currently on the Board of Directors of FedEx Corporation, Ace Limited, The University of Chicago and is a member of the board of other professional and civic organizations.
Age: 65
Director since
Nov. 2012
Independent
 
Former Chairman of the Board, CDW Corporation
 

8 | 2014 Proxy Statement

GOVERNANCE

 
Experiences, qualifications, attributes and skills:
• Experience in management and leadership as Dean of business schools
• Significant business acumen and corporate governance knowledge
 
 
 
Andrew J. Policano
 
Dr. Policano is the Chairman of the Board Nominating and Governance Committee and a member of the Audit Committee. Dr. Policano is on the faculty of The Paul Merage School of Business, University of California-Irvine and was the Dean of that business school from August 2004 through July 1, 2013. Prior thereto, he served on the faculty and as Dean at the School of Business, University of Wisconsin-Madison. Dr. Policano is a director of Badger Meter, Inc., a Trustee of Payden & Rygel (Investment Manager) and a former director of Physicians Insurance Company of Wisconsin. He is a member of the board of other professional and civic organizations.
Age: 65
Director since
Apr. 2006
Independent
 
Director, Center for Investment and Wealth Management, chaired Professor and former dean, The Paul Merage School of Business, University of California-Irvine
 
 
Experiences, qualifications, attributes and skills:
• Management, leadership and aerospace industry experience as past President and Chief Executive Officer of Spirit AeroSystems Holdings, Inc.
• Operational, strategy and international experience
 
 
 
Jeffrey L. Turner
 
Mr. Turner is a member of the Compensation Committee and the Nominating and Governance Committee. Mr. Turner has been a director of Spirit AeroSystems Holdings, Inc. (commercial aerospace assemblies and components) since November 2006, and served as its President and Chief Executive Officer from June 2005 to April 2013, he also served as President and Chief Executive Officer of Spirit AeroSystems, Inc. Mr. Turner joined The Boeing Company in 1973, and was appointed as Vice President/General Manager of Boeing, Wichita Division in November 1995. Prior to his appointment as Vice President/General Manager of Boeing Wichita Division, Mr. Turner held various management positions in systems development, quality, production, services and finance in Boeing Computer Services, Boeing Military Airplane Company and Boeing Commercial Airplane Company. Mr. Turner currently serves on the Board of Directors of INTRUST Financial Corporation.
Age: 63
Director since
Apr. 2011
Independent
 
Former President and Chief Executive Officer, Spirit AeroSystems Holdings, Inc.
 

The Board of Directors recommends that you vote “FOR” the election as directors of the three Class II nominees named above, presented as item (1) on the accompanying proxy card.

2014 Proxy Statement | 9


CORPORATE GOVERNANCE: BOARD OF DIRECTORS AND COMMITTEES
Our Board of Directors provides oversight and direction of our business. Our Board seeks to maintain high corporate governance standards.
We continue to enhance our corporate governance structure based upon a review of recommended best practices and in light of regulatory activity. Our corporate governance documents are available free of charge on our website at www.rockwellcollins.com under the Investor Relations tab and within the Corporate Governance link. We will provide, without charge, upon written request, copies of our corporate governance documents. These documents include our Restated Certificate of Incorporation, By-Laws, Board of Directors Guidelines on Corporate Governance, Committee Charters, Board Membership Criteria, Code of Ethics, Categorical Standards and Policy for Director Independence, and Related Person Transaction Policy.
Leadership Structure
Mr. Carbone, an independent director, is the Non-Executive Chairman of the Board. He was appointed to this role in August 2014, following the retirement of Clayton M. Jones from the Board of Directors. The Board does not have a specific policy regarding the separation or combination of the roles of Chairman and CEO. It believes that it is in the Company's best interests to maintain flexibility to have any individual serve as Chairman based on what is in the Company's best interests at a given point in time, rather than mandating a particular leadership structure. The Board believes its programs for overseeing risk, as described below under “Board's Role in Risk Oversight,” and corporate governance structure would be effective under a variety of leadership frameworks and therefore do not materially affect its choice of leadership structure.
As Non-Executive Chair, Mr. Carbone’s powers and duties include the following:
Chairing Board meetings and executive sessions of the independent directors
Chairing the Executive Committee of the Board
Serving as the liaison between management and the independent directors (including communicating, to the extent appropriate, matters emanating from the executive sessions of the independent directors)
Reviewing and providing input on Board of Directors meeting agenda items
Leading the Board’s review of the succession plan for the Chief Executive Officer and other key senior executives
Advising on the quality, quantity and timeliness of information supplied by management to the independent directors
Having authority to call and chair meetings of the independent directors
Having authority to retain consultants for the Board
Working with the Chair of the Board Nominating and Governance Committee and the Chief Executive Officer on the recruitment and selection of new board members and the composition of Board Committees
Being available for consultation and direct communication with major shareowners to the extent the Board of Directors deems it appropriate
To ensure effective independent leadership, our independent directors meet regularly in executive sessions without the presence of management. Mr. Carbone as Non-Executive Chairman of the Board, or a director designated by the independent directors who has the relevant background to lead the discussion of a particular matter, chairs these sessions. In addition, the independent directors review and advise management regarding the schedule and agendas for Board and Committee meetings. Moreover, the independent directors participate in the annual review of the CEO’s performance.

10 | 2014 Proxy Statement

GOVERNANCE

Board Independence
The Board of Directors has determined that no director other than Mr. Ortberg has a material relationship with us. Accordingly, eight of our nine current directors are “independent” directors based on an affirmative determination by our Board of Directors in accordance with the listing standards of the New York Stock Exchange (NYSE) and Securities and Exchange Commission (SEC) rules.
The standards relied upon by the Board in affirmatively determining whether a director is independent are primarily comprised of those objective standards set forth in the NYSE and SEC rules. In addition to these rules, the Board has adopted Categorical Standards and Policy for Director Independence, which is available in the Investor Relations section of our website at www.rockwellcollins.com, to assist it in making determinations regarding the independence of its members.
Board Meetings and Attendance
In fiscal year 2014, the Board of Directors held 6 meetings and acted on 4 occasions by unanimous written consent in lieu of a meeting. All of our directors attended all of the meetings of the Board and the Committees on which they served. In addition, non-Committee directors routinely attend and participate in discussions at Committee meetings. Directors are expected to attend the Annual Meeting of Shareowners. Last year, all of our then serving directors attended the 2014 Annual Meeting of Shareowners.
Board Committees
The Board has established five Committees whose principal functions are briefly described below. The specific functions and responsibilities of each Committee are outlined in more detail in its charter, which is available in the Investor Relations section of our website at www.rockwellcollins.com.
Audit Committee
The Audit Committee has three independent directors. It assists the Board in overseeing (i) the Corporation’s accounting and financial reporting processes; (ii) the integrity and audits of its financial statements; (iii) its compliance with legal and regulatory requirements; (iv) the qualifications and independence of independent auditors; and (v) the performance of internal and independent auditors. The Audit Committee:
 
 
 
• has sole authority to appoint or replace our independent auditors, with that appointment being subject to shareowner approval;
• has sole authority to approve in advance the fees, scope and terms of all audit and non-audit engagements with our independent auditors;
• reviews and discusses policies with respect to risk management as well as internal controls over financial reporting;
• monitors compliance of our employees with our standards of business conduct and conflicts of interest policies;
• meets at least quarterly with our senior executive officers, the head of our internal audit department and our independent auditors; and
• reviews and approves at least annually our policies on the use of financial derivative contracts and related hedging strategies.
Number of meetings in 2014:
10
 
Committee Members:
Chris Davis (C, I)
David Lilley (I)
Andrew J. Policano (I)

C: Chairman; I: Independent
 

2014 Proxy Statement | 11


Compensation Committee
The Compensation Committee has three independent directors. The principal functions of the Compensation Committee are to:
 
 
• evaluate the performance of the CEO and other senior executives;
• determine compensation for the CEO and other senior executives;
• review and approve the design and competitiveness of compensation plans, executive benefits and perquisites;
• review and approve goals under the annual and long-term incentive plans;
• oversee the Corporation’s annual and long-term incentive plans and deferred compensation plans;
• review and evaluate compensation arrangements to assess whether they could encourage unreasonable risk taking;
• periodically review and make recommendations to the Board regarding the competitiveness of director compensation;
• retain, compensate and terminate, in its sole discretion, an independent compensation consultant used to assist in the evaluation of director, CEO or senior executive compensation;
• review the Corporation’s Compensation Discussion and Analysis; and
• consider the most recent advisory vote on executive compensation.
Number of meetings in 2014:
5
 
Committee Members:

Ralph E. Eberhart (C,I)
John A. Edwardson (I)
Jeffrey L. Turner (I)

Mr. Carbone was a member until August 1, 2014.
C: Chairman; I: Independent
Board Nominating and Governance Committee
The Board Nominating and Governance Committee has four independent directors. For more information regarding the Committee’s role in director nominations, see “Director Nominations” below. The principal functions of the Committee are to:
 
 
• seek, consider and recommend qualified candidates for election as directors and recommend a slate of nominees for election as directors at the Annual Meeting;
• periodically prepare and submit to the Board for adoption the Committee’s selection criteria for director nominees (“Board Membership Criteria”);
• review and make recommendations on matters involving the general operation of the Board and our corporate governance;
• annually recommend nominees for each committee of the Board;
• annually facilitate the assessment of the Board’s performance as a whole and of the individual directors and reporting thereon to the Board; and
• retain and terminate any search firm to be used to identify director candidates.
Number of meetings in 2014:
5
 
Committee Members:
Andrew J. Policano (C, I)
David Lilley (I)
Cheryl Shavers (I)
Jeffery L. Turner (I)
C: Chairman; I: Independent
 


12 | 2014 Proxy Statement

GOVERNANCE

Technology Committee
The Technology Committee has three independent directors. The principal functions of the Technology Committee are to:
 
 
 
• review and provide guidance on important technology-related issues;
• review our technology competitiveness;
• review the strength and competitiveness of our engineering processes and disciplines;
• review our technology planning processes to support our growth objectives; and
• review our focus on engineering leadership and critical technologists development and replacement planning.
Number of meetings in 2014:
2
 
 
 
Committee Members:
Cheryl L. Shavers (C, I)
Ralph E. Eberhart (I)
John A. Edwardson (I)
C: Chairman; I: Independent
 
Executive Committee
The Executive Committee has three directors. The Committee may exercise all of the powers of the Board of Directors, except it has no power or authority to adopt, amend or repeal any sections or articles of our By-Laws or Restated Certificate of Incorporation; elect or remove officers, or fill vacancies in the Board of Directors or in committees; fix compensation for officers, directors or committee members; amend or rescind prior resolutions of the Board; make recommendations to shareowners or approve transactions that require shareowner approval; issue additional stock of the Corporation or fix or determine the designations and any of the rights and preferences of any series of stock (other than pursuant to a specific delegation of authority from the Board related to a shelf registration statement) or take certain other actions specifically reserved for the Board.
The principal function of the Executive Committee is to:

 
 
The principal function of the Executive Committee is to discharge certain responsibilities of the Board of Directors between meetings of the Board of Directors.
Number of meetings in 2014:
2
 
Committee Members:
Anthony J. Carbone (C, I)
Chris A. Davis (I)
Robert K. Ortberg


C: Chairman; I: Independent

2014 Proxy Statement | 13


The membership of each committee as of December 8, 2014 is listed below.
 
Audit
Compensation
Board Nominating and Governance
Technology
Executive
Anthony J. Carbone
 
 
 
 
C
Chris A. Davis
C
 
 
 
Ralph E. Eberhart
 
C
 
 
John A. Edwardson
 
 
 
David Lilley
 
 
 
Robert K. Ortberg
 
 
 
 
Andrew J. Policano
 
C
 
 
Cheryl L. Shavers
 
 
C
 
Jeffrey L. Turner
 
 
 
C: Chairman
Director Nominations
The Board Nominating and Governance Committee is responsible for identifying individuals who meet the Board’s membership criteria and recommending to the Board the election of such individuals. The Committee identifies qualified candidates in many ways including using outside search firms and by receiving suggestions from directors, management and shareowners. Shareowners wishing to recommend director candidates for consideration by the Committee can do so by writing to the Board Nominating and Governance Committee, c/o the Secretary of the Corporation at our corporate headquarters in Cedar Rapids, Iowa, giving the candidate’s name, biographical data and qualifications. Any such recommendation must be accompanied by a written statement from the individual of his or her consent to be named as a candidate and, if nominated and elected, to serve as a director. In addition to recommending nominees to the Committee, shareowners may also propose nominees for consideration at shareowner meetings. These nominee proposals must be provided timely and otherwise meet the requirements set forth in our By-Laws. See “Shareowner Proposals for Annual Meeting in 2016” set forth later in this proxy statement.
The Committee evaluates the qualifications of candidates properly submitted by shareowners under the same criteria and in the same manner as potential nominees identified by the Corporation. Director candidates are reviewed by the Committee as authorized under the Committee’s Charter using various general guidelines set forth in the Board Membership Criteria, a copy of which is attached to the Board Nominating and Governance Committee Charter. Candidates are chosen with the primary goal of ensuring that the entire Board is balanced and collectively serves the interests of our shareowners. While the Committee does not have a formal policy with respect to diversity, the guidelines include taking into account such factors as diversity, background and experience, age and specialized expertise in the selection of candidates. In addition to the general guidelines, the Committee has identified the following minimum qualifications for Board membership: each nominee for director should be an individual of the highest character and integrity, have solid leadership skills, have experience at strategy/policy setting, have good communication skills, have a reputation for working constructively with others, have sufficient time available to devote to the affairs of the Corporation, be free of any conflict of interests that would interfere with the proper performance of the responsibilities of a director and be under the age of 74 as of the meeting of shareowners at which he or she will stand for election.
Board’s Role In Risk Oversight
The Board oversees the management of risks inherent in the operation of the Corporation’s businesses and the implementation of its strategic plan. The Board reviews the risks associated with the Corporation’s strategic plan at an annual strategic planning session and periodically throughout the year as part of its consideration of the strategic direction of the Corporation. In addition, the Board addresses the primary risks associated with the business of the Corporation on an ongoing basis at regular meetings of the Board.

14 | 2014 Proxy Statement

GOVERNANCE

Each of the Board’s Committees also oversees the management of risks that fall within the Committee’s areas of responsibility. In performing this function, each Committee has full access to management, as well as the ability to engage advisors. Non-Committee directors routinely attend each of the Committee meetings to help facilitate the Board’s oversight role. The following paragraphs highlight risk matters overseen by two of the Board’s Committees.
The Audit Committee oversees the operation of our Enterprise Risk Management program, including a review of the status of matters involving the primary risks for the Corporation. The Vice President and General Auditor, who regularly provides reports to the Audit Committee, assists in identifying, evaluating and monitoring risk management controls to address identified risks. Key risk topics, such as cybersecurity and anti-bribery, are periodically reviewed and discussed. The Committee also oversees and monitors management’s internal controls over financial reporting and its preparation of the Corporation’s financial statements. The Committee oversees internal and external audits including the risk based approach used in the selection of audit matters. The Audit Committee provides reports to the Board that include these activities.
As part of its oversight of the Corporation’s executive compensation program, the Compensation Committee, with the assistance of its independent compensation consultant, annually conducts a risk assessment of the Corporation’s compensation policies and practices and reviews the internal controls and processes as they apply to compensation decisions and policies. The Compensation Committee provides reports to the Board that include its risk assessment and compensation decisions. Based upon its risk assessment, the Committee has identified several mitigating factors that help reduce the likelihood of undue risk taking related to compensation arrangements including, but not limited to, the use of multiple measures (operating margin, sales, return on sales, operating cash flow and total shareowner return) in a balanced mix of annual and long-term incentive plans, use of multiple types of incentives (cash, stock options and performance shares), use of incentive payout caps in our annual and long-term incentive plans and executive stock ownership requirements that help to align incentives with long-term growth in equity values. Based on its review, the Compensation Committee has concluded that the Corporation’s compensation policies and procedures do not encourage unreasonable risk taking by management.
Communicating With Board Members
As discussed above, the Non-Executive Chairman generally presides at regular executive sessions of our independent directors. Any shareowner or other interested party may communicate directly with the Non-Executive Chairman by sending an email to nonexecutivechairman@rockwellcollins.com or writing to: Non-Executive Chairman, Rockwell Collins, Inc., 400 Collins Road NE, Cedar Rapids, IA 52498. Communications by shareowners or other interested parties may also be sent to non-employee directors, as a group or individually, by sending an email to boardofdirectors@rockwellcollins.com or by writing to Board of Directors (or one or more directors by name), Attn: Corporate Secretary, Rockwell Collins, Inc., 400 Collins Road NE, Cedar Rapids, IA 52498. Upon receipt of any communication, the Corporate Secretary will determine the nature of the communication and, as appropriate, facilitate direct communication with the appropriate director.
Shareowner Engagement
We interact with our shareowners on a regular basis through a variety of ways. Shareowner engagements include quarterly earnings calls and periodic investor conferences with time for questions and answers, numerous group and individual meetings with institutional investors, annual report and proxy statement distribution to all shareowners and various other interactions tailored to the circumstances. In the past, members of the Board have been directly involved with shareowner engagement in appropriate circumstances.
CERTAIN TRANSACTIONS AND OTHER RELATIONSHIPS
The Board has adopted a Related Person Transaction Policy providing for the review and approval or ratification by the Audit Committee of certain transactions or relationships involving Rockwell Collins and its directors, executive officers, certain shareowners and their affiliates. The Audit Committee is responsible for reviewing these transactions and takes into account the pertinent facts and circumstances presented, and any other information they deem appropriate, to determine the disposition action that is in the best interests of the Corporation.

2014 Proxy Statement | 15


This written policy sets forth procedures for the review, approval or ratification and monitoring of transactions involving Rockwell Collins and “related persons.” For the purposes of the policy, “related persons” include executive officers, directors and director nominees or their immediate family members, or shareowners owning five percent or greater of Rockwell Collins’ outstanding stock. The Related Person Transaction Policy defines “related person transactions” in accordance with applicable SEC rules as any transaction in which the Corporation was or is to be a participant, and in which a related person has a material direct or indirect interest that exceeds $120,000. The policy requires these related person transactions to be reviewed and approved or ratified by the Audit Committee. In addition, this policy requires related persons to disclose to the Audit Committee the material terms of the related person transaction, including the approximate dollar value of the amount involved in the transaction and the related person’s direct or indirect material interest in, or relationship to, the related person transaction.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors consists entirely of directors who meet the independence and other requirements of the New York Stock Exchange and applicable law. All three members have been deemed “audit committee financial experts” (as defined by applicable SEC rules) by our Board. The Committee has furnished the following report:
We assist the Board of Directors in overseeing and monitoring the integrity of the Corporation’s financial reporting process, compliance with legal and regulatory requirements and the quality of the internal and external audit processes. Our roles and responsibilities are set forth in the Audit Committee Charter, which was adopted by the Board of Directors. We review and reassess the Charter periodically and recommend any changes to the Board for approval.
As part of our oversight of the external auditors we are involved from time to time in each of the following matters:
the selection of the audit firm’s lead client service partner and occasionally other key audit firm personnel working on the audit;
the negotiation of the audit firm’s fees; and
the on-going review of the audit firm’s performance, including as part of executive session discussions with each of management, internal audit and the audit firm.
We are responsible for overseeing the Corporation’s overall financial reporting process. In fulfilling our responsibilities for the financial statements for fiscal year 2014, we:
reviewed and discussed the audited financial statements for fiscal year 2014 with management and Deloitte & Touche LLP (Deloitte), our independent auditors, as well as the quarterly financial statements and management representation letters provided to Deloitte;
reviewed and discussed management’s report and Deloitte’s report and attestation on internal control over financial reporting in accordance with the Sarbanes-Oxley Act;
discussed with Deloitte the matters required to be discussed by Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 16 relating to the conduct of the audit; and
received written disclosures from Deloitte regarding its independence as required by applicable requirements of the PCAOB. We discussed with Deloitte its independence, and considered whether the provision of non-audit services by Deloitte is compatible with maintaining its independence. All audit and non-audit services provided by Deloitte to the Corporation in fiscal year 2014 were pre-approved.
Based on our review of the audited financial statements and discussions with management and Deloitte, we recommended to the Board of Directors that the audited financial statements be included in the Corporation’s Annual Report on Form 10-K for fiscal year 2014 for filing with the SEC.
The Audit Committee reviewed the performance, quality, qualifications and independence of Deloitte in considering the engagement of Deloitte’s services in fiscal year 2015. We believe it is in the best interests of the Corporation and our shareowners to select Deloitte as the Corporation’s independent auditors for fiscal year 2015 and, as a result, we recommend that shareowners approve the selection of Deloitte.
Audit Committee
Chris A. Davis, Chairman
David Lilley
Andrew J. Policano
EQUITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareowners
The following table provides information about each shareowner known to us to own beneficially more than five percent of the outstanding shares of our Common Stock.
Name and Address of Beneficial Owner
Shares
Percent of Class(1)
Capital World Investors(2)
333 South Hope Street
Los Angeles, CA 90071



16,325,600

12.3



The Vanguard Group(3)
100 Vanguard Blvd.
Malvern, PA 19355



8,962,338

6.7


ValueAct Capital Master Fund, L.P.(4)
One Letterman Drive, Building D, Fourth Floor
San Francisco, CA 94129



7,803,303

5.9



BlackRock, Inc.(5)
40 East 52 Street
New York, NY 10055



7,370,300

5.5



(1)
Percent of class calculation is based on shares of Common Stock outstanding as of December 8, 2014.
(2)
Based on a Schedule 13G filed with the SEC by this shareowner reporting beneficial ownership of these shares as of December 31, 2013.
(3)
Based on a Schedule 13G filed with the SEC by this shareowner reporting beneficial ownership of these shares as of December 31, 2013.
(4)
Based on a Schedule 13D/A filed with the SEC by this shareowner reporting beneficial ownership of these shares as of October 30, 2014.
(5)
Based on a Schedule 13G filed with the SEC by this shareowner reporting beneficial ownership of these shares as of December 31, 2013.

16 | 2014 Proxy Statement

GOVERNANCE



Management and Director Equity Ownership
The following table shows the beneficial ownership, reported to us as of December 1, 2014, of our Common Stock, including shares as to which a right to acquire ownership within 60 days of that date exists (for example, through the exercise of stock options or through various trust arrangements) within the meaning of Rule 13d-3(d)(1) under the Securities Exchange Act of 1934, as amended, of each director, each executive officer listed in the Summary Compensation Table on page 38 and of such persons and other executive officers as a group.
Name
Beneficial Ownership on
December 1, 2014
Shares(1)
Percent of Class(2)
Robert K. Ortberg
403,342
(3,4,5) 
*
Anthony J. Carbone
59,399
(4,6,7) 
*
Chris A. Davis
52,138
(4,6,7) 
*
Ralph E. Eberhart
15,386
(7) 
*
John A. Edwardson
7,380
(7) 
*
David Lilley
25,653
(7) 
*
Andrew J. Policano
20,413
(7) 
*
Cheryl L. Shavers
26,907
(4,6,7) 
*
Jeffrey L. Turner
6,747
(7) 
*
Patrick E. Allen
283,840
(3,4,5) 
*
Philip J. Jasper
90,562
(3,4,5) 
*
Martha L. May
9,652
(3,4,5) 
*
Kent L. Statler
203,206
(3,4,5) 
*
All of the above and other executive officers as a group (22 persons)
1,670,551
(3,4,5,6,7) 
1.2%
* Less than one percent
(1) Each person has sole voting and investment power with respect to the shares listed unless otherwise indicated.
(2) The shares owned by each person, and by the group, and the shares included in the number of shares outstanding have been adjusted, and the percentage of shares owned has been computed, in accordance with Rule 13d-3(d)(1) under the Securities Exchange Act of 1934, as amended.
(3) Includes shares held under our Retirement Savings Plan as of December 1, 2014. Does not include, 2,816 share equivalents for Mr. Ortberg, 2,561 share equivalents for Mr. Allen, 52 share equivalents for Ms. May, 336 share equivalents for Mr. Jasper, 2,405 share equivalents for Mr. Statler and 21,762 share equivalents for the entire group, inclusive held under our Non-Qualified Savings Plan as of December 1, 2014. Share equivalents under the Non-Qualified Savings Plan are settled in cash in connection with retirement or termination of employment and may not be voted or transferred.
(4) Includes shares that may be acquired upon the exercise of outstanding stock options that are or will become exercisable within 60 days as follows: 342,699 for Mr. Ortberg, 5,000 for Ms. Davis, 5,000 for Dr. Shavers, 239,366 for Mr. Allen, 9,400 for Ms. May, 82,419 for Mr. Jasper, 161,744 for Mr. Statler and 1,166,917 for the entire group.
(5) Does not include performance shares held by such persons for which shares of our common stock may be issued following the completion of any open three-year performance period, which shares are dependent on the level of achievement of our performance goals and our total shareowner return relative to certain Aerospace and Defense companies.
(6) Includes 11,984 shares for Mr. Carbone, 6,413 shares for Ms. Davis, and 4,632 shares for Dr. Shavers granted as restricted stock as compensation for director services.
(7) Includes 34,324 shares for Mr. Carbone, 34,773 shares for Ms. Davis, 15,386 shares for General Eberhart, 7,380 shares for Mr. Edwardson, 25,653 shares for Mr. Lilley, 20,413 shares for Dr. Policano, 17,275 shares for Dr. Shavers and 6,747 shares for Mr. Turner granted as restricted stock units as compensation for services as directors.

2014 Proxy Statement | 17


COMPENSATION OF DIRECTORS
2014 DIRECTOR COMPENSATION TABLE
The following table sets forth information regarding compensation for each of our non-employee directors for fiscal year 2014. Mr. Ortberg, who is a director and our chief executive officer, does not participate in the compensation program for non-employee directors. Mr. Jones, our former Chief Executive Officer and Chairman of the Board, ceased serving as a non-employee director on July 31, 2014.
Name
Fees Earned or Paid in Cash ($)
Stock Awards ($)
Option Awards ($)
Non-Equity Incentive Plan Compensation ($)
Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)
All Other Compensation ($)
Total ($)
Anthony J. Carbone
132,500

157,816




15,880
306,196
Chris A. Davis
120,000

149,786




7,695
277,481
Ralph E. Eberhart
102,500

127,896





230,396
John A. Edwardson
100,000

118,380





218,380
David Lilley
105,000

140,098




5,000
250,098
Clayton M. Jones
350,000

362,950




10,000

722,950
Andrew J. Policano
115,000

133,871




5,000

253,871
Cheryl L. Shavers
110,000

130,141




5,558
245,699
Jeffery L. Turner
100,000

117,628






217,628
The following is an explanation of the above table:
Fees. All non-employee directors receive an annual retainer fee of $100,000 that they may elect to receive in cash or restricted stock units (RSUs) in lieu of cash. As described below, Mr. Jones was entitled to additional fees for his service as Non-Executive Chairman and Mr. Carbone is also entitled to additional fees for his service as Non-Executive Chairman. Please see “Cash Compensation” below for a description of director fees that are paid in addition to the annual retainer. Generally, these fees may be paid in cash or in RSUs in lieu of cash, at the election of each Committee member. Ms. Davis elected to defer 100% of her 2014 director and Committee fees into RSUs and Mr. Carbone elected to defer $124,167 of his 2014 director and Committee fees into RSUs.
Stock Awards and Options. The dollar value for stock awards represents the aggregate grant date fair value of the RSUs determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (FASB ASC Topic 718) and does not reflect a reduction for possible forfeitures. Under the 2006 Long-Term Incentives Plan, non-employee directors receive an annual grant of RSUs determined by dividing $110,000 by our closing stock price on the date of the Annual Meeting. Dividend equivalents on RSUs accrue quarterly and are included in this column. For more information see “Stock-Based Compensation” below. Mr. Carbone received a prorated annual RSU grant in August for his service as Non-Executive Chairman from August 2014 to the 2015 Annual Meeting. The portion of this prorated grant attributable to his service as our Non-Executive Chairman in 2014 is included in this column. No options have been awarded to non-employee directors since 2005.
The outstanding equity awards held at the end of fiscal year 2014 by each non-employee director are shown in the following table. This table does not include awards that were granted to Mr. Jones in his capacity as an employee. All RSUs granted to Mr. Jones for his service as a director vested and settled on his retirement from the Board.

18 | 2014 Proxy Statement

COMPENSATION


Name
Options
Restricted Stock
RSUs
Anthony J. Carbone

11,984

34,000

Chris A. Davis
5,000

6,413

34,384

Ralph E. Eberhart


15,386

John A. Edwardson


7,380

Clayton M. Jones



David Lilley


25,653

Andrew J. Policano


20,413

Cheryl L. Shavers
5,000

4,632

17,275

Jeffrey L. Turner


6,747

All Other Compensation
For Ms. Davis and Dr. Shavers, the amount shown represents dividends paid on restricted stock.
For Mr. Carbone, the amount shown includes dividends paid on restricted stock and a $1,500 matching gift under our charitable matching gift program.
For Mr. Lilley and Dr. Policano, the amounts are matching gifts under our charitable matching gift program.
For Mr. Jones, the amount represents a donation to the Alzheimer’s Association made by the Rockwell Collins Charitable Corporation to honor his retirement from the Board of Directors.
Our non-employee director compensation program is reviewed on a periodic basis by the Compensation Committee’s independent consultant. The Board of Directors sets non-employee director compensation at approximately the median of non-employee director compensation for Fortune 500 companies. The components of the program are described below.
Cash Compensation
All non-employee directors receive an annual retainer of as described above. Additional annual retainers are paid to the Non-Executive Chairman, to the chairmen of certain board committees and to the members of the Audit Committee as shown in the table below. Each annual retainer is payable in advance in equal quarterly installments. Before Mr. Carbone became our Non-Executive Chairman on August 1, 2014, he served as our Lead Independent Director and was entitled to an additional annual cash retainer of $20,000. He received a pro-rated portion of this retainer for his service to August 1, 2014.
Non-Executive Chairman
$
50,000

Audit Committee Chair
$
20,000

Board Nominating and Governance Chair
$
10,000

Compensation Committee Chair
$
15,000

Technology Committee Chair
$
10,000

Audit Committee Member
$
5,000

Under the 2006 Long-Term Incentives Plan (2006 LTIP), each director has the option each year to determine whether to defer all or any part of his or her retainer fees by electing to receive RSUs valued at the closing price on the date the cash retainer payment would otherwise be paid. Non-employee directors are reimbursed for all reasonable expenses associated with attending Board and Committee meetings and otherwise relating to their director duties. Non-employee directors are also eligible to receive up to $5,000 in matching charitable gifts under our matching gift program. Mr. Jones was entitled to a further retainer in respect of his service as our Non-Executive Chairman as described below under “Transition and Consulting Agreement with Mr. Jones.”

2014 Proxy Statement | 19


Stock-Based Compensation
In addition to the retainer fees described above, each non-employee director is granted RSUs under the 2006 LTIP concurrently with the director’s initial election to our Board. The value of the RSUs at initial election is equal to $100,000 plus a prorated amount determined by multiplying $110,000 by a fraction, the numerator of which is the number of days remaining until the next annual meeting of shareowners and the denominator of which is 365. Mr. Jones was not entitled to receive this RSU grant since he was not a non-employee director when he first joined the Board. Following each annual meeting, continuing non-employee directors are granted RSUs with a $110,000 value as of the date of the meeting. Mr. Jones received this RSU grant following the 2014 Annual Meeting. RSUs, which do not have voting rights, entitle the directors to a contractual right to receive at a future date the number of shares of Common Stock specified. Pursuant to the terms of the directors’ RSUs, dividend equivalents in the form of additional RSUs accumulate on the date we otherwise pay dividends on our Common Stock and directors receive unrestricted shares of our Common Stock in payment for RSUs upon termination of their Board service. Mr. Jones was entitled to additional stock-based compensation in respect of his service as our Non-Executive Chairman as described below under “Transition and Consulting Agreement with Mr. Jones.” For his service as Non-Executive Chairman, Mr. Carbone receives an additional annual RSU grant with a value of $50,000.
Transition and Consulting Agreement with Mr. Jones
In order to secure Mr. Jones’ services following his retirement on September 20, 2013 as an employee of the Corporation, and after the Compensation Committee sought input from its independent compensation consultant, we entered into a Transition and Consulting Agreement with him. Under this agreement, Mr. Jones agreed to serve as our Non-Executive Chairman of the Board until July 31, 2014 and thereafter, as our consultant for a two-year period.
As Non-Executive Chairman through July 31, 2014, Mr. Jones, as requested by the Board, consulted, advised and assisted with matters, including (i) presiding at Board meetings and the Annual Meetings, (ii) working with our Chief Executive Officer and Lead Independent Director to set Board meeting agendas, (iii) providing input and guidance on setting strategy and direction, (iv) playing a role in representing us to external stakeholders, (v) representing us in selected interactions with employee groups, industry associations and forums and at community events, (vi) providing advice and counsel to the Chief Executive Officer, (vii) providing feedback to the Board of Directors on the progress and development of the Chief Executive Officer and (viii) performing such other duties assigned by the Board of Directors from time to time.
While Non-Executive Chairman, in addition to receiving the standard compensation payable to our other non-employee directors, Mr. Jones received an additional retainer, consisting of $250,000 in cash paid in quarterly installments, subject to deferral into RSUs, and a grant of RSUs with a value of $250,000. The grant of RSUs was made following the 2014 Annual Meeting. While serving as Non-Executive Chairman, Mr. Jones received an office at our headquarters, administrative support, use of corporate aircraft while traveling on business, a cell phone and computer and reimbursement of his business-related expenses.
As our consultant, Mr. Jones is facilitating the orderly transition of his responsibilities to the new Chairman of the Board and is available to attend to Corporation matters as requested by the Board or the Chief Executive Officer. Mr. Jones is entitled to $300,000 during the first year of the consulting term and $150,000 in the second year. He will also be entitled to administrative support and reimbursement of his business-related expenses.
Mr. Jones is subject to non-competition and non-solicitation covenants and has agreed to comply with all of our policies relevant to his activities, including our Standards of Business Conduct.
Director Stock Ownership Guidelines
Each non-employee director is required to own shares of our Common Stock with a market value of at least three times the annual retainer amount within four years of joining the Board. The following are counted for purposes of meeting these ownership guidelines: shares owned outright (including in trusts and those held by a spouse), shares of restricted stock and restricted stock units. All of our non-employee directors meet or are on track to meet the ownership guidelines. The Compensation Committee’s independent consultant reviews the ownership guidelines on a periodic basis to ensure that they remain competitive with market practice.

20 | 2014 Proxy Statement

COMPENSATION


COMPENSATION DISCUSSION AND ANALYSIS
Introduction
In the discussion that follows, we provide an overview and analysis of our executive compensation programs and philosophies, the compensation decisions the Compensation Committee (Committee) made under those programs and the factors considered in making those decisions. Included within and following this section you will find a series of tables containing specific information about the compensation earned or paid in fiscal 2014 (September 28, 2013 to October 3, 2014) to the following individuals, whose positions as of October 3, 2014 are noted below, to whom we refer as our named executive officers (NEOs):
Robert K. Ortberg
Chief Executive Officer and President (CEO)
Patrick E. Allen
Senior Vice President, Chief Financial Officer (CFO)
Kent L. Statler
Executive Vice President, Chief Operating Officer, Commercial Systems
Philip J. Jasper
Executive Vice President, Chief Operating Officer, Government Systems
Martha L. May
Senior Vice President, Human Resources
Unless otherwise noted, references to years in this discussion are to our fiscal years.
It is not anticipated that Ms. May will be a NEO in future years. She received non-recurring compensation in connection with her recruitment and relocation.
Executive Summary
The Committee believes in pay-for-performance and approves programs that are aligned with corporate and shareowner goals. To attract and retain top talent, target compensation is set around the median of the competitive market with the opportunity to achieve greater compensation if superior performance is achieved. Payments under our annual incentives and long-term performance shares are 100% performance-based and dependent on the achievement of annual and long-term performance goals approved by the Committee. For 2014, our performance warranted payouts at 90% on annual incentives and 62% on performance shares as more fully described in the following paragraphs.
2014 Annual Incentive Plan Results
Annual incentive plan payments for 2014 were dependent on our performance against the operating margin, sales and operating cash flow goals established by the Committee. As a result of actual performance in 2014, annual incentive plan payments were paid at 90% of target. Details of our performance as computed under the plan are as follows:
Operating margin was 20.98%, which was below the target of 21.40%;
Total revenues of $4.64 billion, which was above the target of $4.55 billion, compared to total revenues of $4.58 billion in 2013; and
Operating cash flow of $609 million, which was above the target of $600 million, compared to operating cash flow of $617 million in 2013.
For more information on the 2014 annual incentive plan payments, see “2014 Annual Incentive Awards and Performance Results” on page 31 of this proxy statement. To calculate plan payments, we excluded results from our acquisition of ARINC and included the results we could have reasonably expected for the balance of the year from our divestitures of DataPath and KOSI. For information on the changes made to the annual incentive plan for 2014, see “Key 2014 Compensation Program Changes” on page 24 of this proxy statement.
2012-2014 Performance Share Results
Our performance shares provide our executives with the opportunity to earn share awards dependent on our cumulative sales, return on sales and relative total shareowner return (TSR) over a three-year performance period. Performance shares represent 50% of the annual target award value under our long-term incentive program. The

2014 Proxy Statement | 21


remaining 50% is granted in the form of stock options.
Our performance during the 2012–2014 performance period resulted in return on sales of 13.4%, which was above the target of 12.5%, and cumulative sales of $13.97 billion, which was below the target of $16.06 billion. This would have resulted in a payout of 78% of the target performance shares in the absence of any TSR adjustment. The payout was reduced by a factor of 20% to 62% due to the impact of the TSR modifier. For more information on the performance shares, see “2012–2014 Performance Period Share Paymentson page 34 of this proxy statement.
Financial results for purposes of calculating payments were adjusted for the impact of our ARINC acquisition, the DataPath and KOSI divestitures and certain other events in accordance with the terms of the performance share award agreements.
Executive Compensation Practices                                        
Additional features that strengthen our executive compensation governance practices are as follows:
What We Do
þ
We believe in pay for performance. As shown on page 28 of this proxy statement between 71-83% of the target annual compensation opportunity of our NEOs is tied to performance.
þ
We annually assess our executive compensation program to ensure that it remains well balanced and that it does not encourage unreasonable risk taking. For more information, see “Board’s Role in Risk Oversight” on page 14 of this proxy statement.
þ
We have strong stock ownership requirements to align our executive officers’ interests with those of our shareowners. These requirements are monitored annually. For more information, see “Stock Ownership Guidelines” on page 35 of this proxy statement.
þ
We have a robust clawback policy and other compensation recovery policies to allow us to recover compensation as appropriate. For more information, see “Payment Recovery Provisions” on page 36 of this proxy statement.
þ
We use an independent compensation consultant to advise the Committee and to keep abreast of compensation best practices.
 What We Don’t Do
ý
We do not provide excessive perquisites.
ý
We do not provide tax gross-ups to executive officers, except in connection with a relocation or international assignment.
ý
We do not allow hedging of our common stock by our directors, officers and employees.
ý
We do not allow pledging of our common stock without prior approval.
ý
We do not pay change of control benefits unless a change of control has occurred and a related qualifying termination of employment occurs. We do not pay change of control excise tax gross-ups.
Results of 2014 Shareowner Advisory Vote on Executive Compensation                
Each year, in accordance with its charter, the Committee considers the outcome of the shareowner advisory vote on executive compensation when making future decisions relating to the compensation of the NEOs and our executive compensation program and policies. In 2014, shareowners continued their strong support of our executive compensation program with 97.2% of the votes cast for approval (not counting abstentions and broker non-votes) of the “say on pay” proposal at the 2014 Annual Meeting of Shareowners. The Committee believes that the voting results conveyed our shareowners’ strong support of the philosophy, strategy and objectives of our executive compensation program. Nonetheless, the Committee continues to assess our executive compensation program and policies, based on our strategic needs and external market practices. For 2014, the executive compensation program remained largely unchanged with the exception of those components outlined in the following section. The

22 | 2014 Proxy Statement

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Committee considers the results of the annual advisory vote on executive compensation and incorporates such results as one of the many factors it considers in carrying out its responsibilities.
Key 2014 Compensation Program Changes                                
Annual Incentive Plan
After considering investor input and how participant line-of-sight under the plan could be improved, the Committee made the following changes to the annual incentive plan for 2014:
Operating margin, which is our operating earnings divided by our sales, replaced earnings per share under the plan. Operating margin was assigned a 50% weighting. In 2013, earnings per share had a 45% weighting.
The Board’s Qualitative Assessment, which previously had a 10% weighting, was eliminated.
The weighting assigned to sales was increased from 25% to 30%.
The level of performance necessary to achieve the minimum payout was decreased and the level necessary to achieve the maximum payout was increased to reduce volatility in the payout opportunity under the plan.
For a further discussion of these changes and the plan, see “Annual Incentive Compensation Plan” on page 28 of this proxy statement.
Executive Compensation Changes
The Committee approved salary increases for all of the NEOs effective December 28, 2013 and approved an increase in Mr. Jasper’s long-term incentive target and Ms. May’s annual incentive target for 2014:
Mr. Ortberg’s base salary was increased from $900,000 to $950,000;
Mr. Allen’s base salary was increased from $572,000 to $594,880;
Mr. Statler’s base salary was increased from $578,000 to $595,340;
Mr. Jasper’s base salary was increased from $450,000 to $470,250 and his target long-term incentive target was increased from $900,000 to $1,000,000;
Ms. May’s base salary was increased from $350,000 to $364,000 and her annual incentive target was increased from 55% to 60% of her base salary.
Executive Compensation - Roles and Responsibilities                            
Compensation Committee
The Committee, which consists entirely of independent directors, has responsibility for the development and oversight of our executive compensation program. The Committee's duties and responsibilities are described under “Compensation Committee” on page 12 of this proxy statement.
Independent Compensation Consultant
The Committee selects and retains the services of a compensation consultant to provide professional advice on our executive compensation program and the non-employee director compensation program. The Committee assesses the consultant’s independence and whether there are any conflicts of interest annually. In determining that the consultant was independent, the Committee considered the factors set forth in Rule 10C-1(b) of the Securities Exchange Act of 1934. The independent consultant, a managing director at Semler Brossy Consulting Group, LLC (independent consultant), is retained directly by the Committee and provides no other service to us other than those related to executive and director compensation. The independent consultant interacts directly with the Committee's chairman in preparation for meetings, provides advice in Committee meetings, assists with the design of compensation arrangements and provides an independent market assessment of peer companies and general industry compensation and practices. The independent consultant meets with new Committee members to orient them to the

2014 Proxy Statement | 23


policies, plans and programs managed by the Committee. The independent consultant meets with management to collect information, to solicit management's input and to fully understand our plans, goals and actual performance. The consulting relationship is reviewed by the Committee annually to determine its satisfaction with the services and advice provided by the independent consultant.
Management
The CEO reports to the Committee about enterprise performance, business unit performance and individual performance of the other executive officers. He also discusses the operational and financial plans for future performance periods (annual and long-term) as they relate to compensation decisions. The CEO provides input on the design of compensation programs and policies and makes recommendations for compensation changes for the other NEOs. The Senior Vice President, Human Resources provides support, analysis and counsel, including execution of the programs under the supervision of the Committee. Certain members of management, including the CEO, regularly attend Committee meetings. The CEO is delegated authority to approve the compensation arrangements other than for our executive officers and other designated senior executives, with limitations that are established by the Committee. The Committee meets for a portion of its meetings in executive session, with its independent consultant and without the CEO or other members of management. The Committee's deliberations on CEO compensation are held during a non-management executive session of the Committee that typically includes all non-employee board members.
Executive Compensation Design                                        
Our executive compensation policies, plans and programs are designed according to the following principles:
Design Principle
Alignment to Key Compensation Elements
Aligned with Shareowner Interests
The interests of executives should align with the interests of our shareowners by using performance measures that correlate well with shareowner value.
Our short-term and long-term incentive plans are both designed to use financial performance measures that correlate well with shareowner value.
Supportive of Our Vision
Compensation should support our vision roadmap defining who we are, what we stand for, what we hope to achieve and how we work to achieve our goals and meet customer and shareowner expectations.
We inherently believe that we are most successful when we work together. Our short-term and long-term incentive plans are designed to encourage the principle of working together.
Competitive
The total compensation package should be competitive with the general industry peer group and at a level appropriate to attract, retain and motivate highly qualified executives capable of leading us to greater performance.
Base salary and annual incentives provide a competitive annual total cash compensation opportunity for our executives in the short-term and equity incentives provide a competitive opportunity over the long-term. All serve to support our desire to attract and retain executive talent and are reviewed for competitiveness with the Committee’s independent compensation consultant.
Performance-Based
A significant portion of compensation should be at risk and tied to corporate, business unit and individual performance.
A substantial portion of executive pay is at risk and paid only on the achievement of specific pre-established performance goals. Annual incentive payouts for NEOs are subject to further adjustment based upon business unit and/or individual performance. Performance shares and stock options are both performance-based and at risk.
Balanced
Compensation plan design should promote an appropriate balance between annual and long-term business results.
We provide annual and long-term incentives to provide a balanced compensation program. However, as illustrated on page 28 of this proxy statement, more emphasis is provided to long-term incentives.

24 | 2014 Proxy Statement

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What Compensation is Intended to Reward                                
A substantial amount of NEO compensation is variable and tied to the achievement of both annual and long-term incentive plan goals. To support our pay-for-performance philosophy, performance is evaluated and compensation rewarded and adjusted as follows:
Corporate Performance
Our annual incentive plan is designed to reward the achievement of annual financial goals that are important to our current and future success. These goals are included in our annual operating plan that is prepared by management and approved by the Board of Directors. The same annual incentive plan design and performance metrics apply to all of our NEOs and most of our employees worldwide.
Our 2006 Long-Term Incentives Plan was established to reward the achievement of long-term financial goals and increased shareowner value. Under this plan, we grant executives three-year performance shares and stock options on an annual basis.
Business Unit Performance
The CEO reviews the performance of each business unit and shared service based on the achievement of goals included in our annual operating plan. Based on this overall assessment, the CEO has been delegated the discretion by the Committee to adjust the annual incentive pool upward or downward by five percent to reflect the business unit's or shared service's performance. In the case of a business unit adjustment impacting a NEO, the CEO will make a recommendation to the Committee for its approval.
Individual Performance
Our performance review and development plan applies to the majority of our salaried employees, including the NEOs. Under this plan, an employee's performance is evaluated against the expectations of his or her position, whether he or she exhibits our values in the performance of his or her job and whether he or she met or exceeded his or her individual performance goals. Individual performance goals are established at the beginning of each fiscal year and are aligned with our annual operating plan. Performance under the plan is evaluated at mid-year and at the end of the fiscal year. The CEO approves the individual performance goals of the other NEOs, evaluates their performance and recommends to the Committee any resulting performance adjustments to their salaries and annual incentive payments. The CEO's personal goals are reviewed and approved by the Committee each year. Following the end of the fiscal year, the Committee, with input from the other directors, formally evaluates the CEO's performance, including personal goals, during its executive session and approves any salary adjustment and/or individual performance adjustment to the annual incentive payment.
Market Assessment                                                
The Committee annually considers market data for total direct compensation (base salary plus annual incentive plan target and long-term incentive target) for the NEOs and other designated senior executives based on the independent consultant's review of market data. The Committee uses this market data and the analysis by the independent consultant to assess the competitiveness of the compensation paid to our NEOs as well as the mix between fixed (base salary) and variable (annual and long-term incentives) compensation.
The Committee generally establishes base salaries as well as annual and long-term incentive targets around the median of the general industry market data. Each executive can be paid above or below that amount based on years in the position, prior experience, individual performance and corporate performance. Although the Committee reviews market data, there is no commitment to tie any particular executive's compensation to the general industry market data.
The general industry market data provides consistency year-over-year due to the large number of participants in the survey. A wide variety of positions are reported in the general industry market data allowing more specific comparisons to our executive officers. We use the general industry market data because our senior executives have skills that are in demand outside of the aerospace and defense industry. In September 2013, the independent consultant provided an analysis using compensation information from 126 companies with revenues ranging from

2014 Proxy Statement | 25


$3 to $6 billion (our 2013 revenue was $4.6 billion) to obtain market data to support the compensation decisions made in November 2013. The Committee believes that these companies are good comparators and that the general industry market data allows a robust analysis of executive pay. The companies used as comparators are listed on Appendix A.
Comprehensive Compensation Review                                    
In the course of reviewing data from external sources and making decisions about CEO compensation or considering the CEO compensation recommendations for the other NEOs, the Committee also reviews comprehensive compensation information for each NEO. This information is presented in the form of a tally sheet and includes detailed modeling of the current dollar value of all aspects of compensation, including base salary, annual and long-term incentives, perquisites, pension and savings plans, and health and welfare benefits. The Committee also reviews modeling projections on the potential future value of long-term incentive grants. The Committee reviews this information to ensure that the total compensation awarded to each NEO is reasonable and consistent with the compensation philosophy and objectives discussed above.
Compensation Elements                                            
The following table lists the compensation elements of target direct compensation (base salary plus annual incentive plan target and long-term incentive target) for our 2014 executive compensation program. Each year the Committee approves the design and performance goals for both the annual and long-term incentives consistent with the Committee's compensation philosophy and objectives.
Compensation Element
Key Characteristics
Why We Pay This Element
How We Determine the Amount
2014 Decisions
Fixed
Base Salary
Fixed compensation component payable in cash.
Forms basis for a competitive compensation program and attracting and retaining top executive talent.
Reflects job scope and responsibilities, individual performance and experience, and market data.
All five of the NEOs received salary increases for 2014 ranging from 3.0-5.6%.
Variable
Annual Incentive Compensation Plan
Variable compensation component payable in cash based on performance against annually established goals and assessment of individual and business unit performance. For 2014, the performance measures were operating margin, sales and operating cash flow.
Aligns compensation with annual performance results.
Encourages achievement of annual corporate financial goals.
Each participant is eligible to receive a target bonus equal to a percentage of their salary for the year. The percentage is determined based on job scope, responsibilities and market data.
Business unit and individual payout adjustments provide focus on performance at the business unit and individual levels.
Our performance on all three measures resulted in an annual incentive plan payout at 90% of target.
Stock Options (Long Term Incentives Plan)
50% of the target value long term incentive award.
Aligns the interests of executives with shareowners and long-term company performance and serves to retain executive talent.
Target awards based on job scope, responsibilities, and market data.
The Committee continued its practice of granting stock options to executives.

Performance Shares
(Long Term Incentives Plan)
50% of the target value long term incentive award. Payout of shares depends on our cumulative sales and return on sales performance and our relative total shareowner return over a three-year period.
Aligns the interests of executives with shareowners and long-term company performance and serves to retain executive talent.
Target awards based on job scope, responsibilities, and market data.
Our performance resulted in 62% of target performance shares being earned for the 2012-2014 performance period.

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Compensation Mix
The mix of base salary (fixed) and annual and long-term (performance based) compensation elements varies by position. To support our pay-for-performance philosophy and consistent with our independent consultant’s external market assessment, the higher the level of responsibilities and accountability, the more compensation is at risk by being directly linked to achievement of our annual and long-term performance goals. For 2014, a significant portion of our CEO’s and other NEOs’ average annual target total direct compensation is variable since it is dependent on our performance and our stock price. The allocation of target compensation for our NEOs for fiscal year 2014 is as follows:
For purposes of determining the percentages shown above, it is assumed that annual incentives under our Annual Incentive Compensation Plan (represented by ICP above) will be earned at target levels, stock options have a value determined by a binomial option pricing model and the target number of performance shares awarded will have a value equal to the underlying value of the stock on the date of grant. Since these awards have both upside opportunity and downside risk, these percentages may not reflect the actual amounts realized.
Short-Term Compensation
Base Salary. Each of the NEOs is paid a base salary for performance of his or her job duties and responsibilities. Base salary targets are generally set around the median of the competitive data for each executive role; however, actual salaries can be below, at or above the median depending on performance and experience. Newly promoted executive officers are typically paid below the median of the competitive data with salary increases over time designed to move them to the median or above subject to meeting or exceeding their performance objectives.
Base salary is reviewed annually and consideration is given for base salary adjustments based on individual performance and available competitive data that is presented by the independent consultant. The salaries of the NEOs are approved by the Committee after considering input from the CEO regarding base salary adjustments for the other NEOs and consulting with the independent consultant and the Board of Directors.
Annual Incentive Compensation Plan. Each of the NEOs may receive cash payments based on the achievement of specific financial goals, but adjustments to NEO annual incentive compensation payments may occur at the individual and business unit level. Prior to the beginning of each year, the Committee, with input from other members of the Board of Directors, management and the independent consultant, determines the performance measures that are most important for the Corporation to achieve its goals.
The 2014 financial measures consisted of operating margin, sales and operating cash flow, which collectively made up the annual bonus opportunity. Operating margin (operating earnings divided by sales) replaced our historical

2014 Proxy Statement | 27


performance measure of earnings per share, as the Committee believes it better aligns with how we run our business and allows employees to have a better understanding and line-of-sight as to how they impact our financial goals. Earnings per share is impacted by share repurchases and other events which are not in our employees’ control. The Board of Directors Qualitative Assessment was also removed as a performance measure to simplify the plan and improve employee line-of-sight. The Committee believes that each performance measure in the plan is a key driver of our financial performance and that this combination of measures reflects an accurate representation of our overall annual financial performance.
Our 2014 operating margin (operating earnings divided by sales), sales and operating cash flow target goals were each set at the midpoint of our initial 2014 financial guidance. We created a broader range over which performance would be measured in the plan. This change was made to reduce the volatility of payouts thereby increasing the predictability of our earnings.
The weighting of the performance measures is evaluated each year. For 2014, performance measures and weights were changed as follows:
Measure
Operating Margin
Earnings
per share
Sales
Operating
Cash Flow
BOD Qualitative Assessment
2014 Weighting (1)
50%
N/A
30%
20%
N/A
2013 Weighting
-
45%
25%
20%
10%
(1) For 2014, earnings per share and the Board of Directors Qualitative Assessment were removed and operating margin was added.
Long-Term Incentives
The purpose of our long-term incentive compensation plan is to align an executive's performance with our long-term success. Compensation from long-term incentives makes up a significant portion of the overall compensation of our NEOs, is tied to growing our stock price and, in the case of performance shares, contingent on whether three-year cumulative sales and return on sales targets are achieved. Our 2006 Long-Term Incentives Plan provides the Committee with the flexibility to grant long-term incentive awards in a variety of forms. In 2014, the Committee granted stock options and three-year performance shares to our executives. Our long-term incentive award mix for the NEOs is shown on the following chart:
Stock Options. The Committee believes that stock options are an important element in our executive compensation as they reward increases in our share price as a result of successful long-term performance and creation of shareowner value, further aligning the interests of our NEOs with those of our shareowners. 50% of the target dollar value for each NEO’s long-term incentive award is granted as stock options. The options have a ten-year term and vest in three equal amounts on the first, second and third anniversaries of the grant date. The number of stock options granted is determined by dividing the targeted dollar value of stock options by the fair value of one stock option (using a binomial lattice option pricing model) and rounding up to the nearest 100 shares. The exercise price of the stock options is equal to our closing share price on the date of grant.

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COMPENSATION


Performance Shares. The Committee believes performance shares serve as an integral component of our executive compensation program. From an internal perspective, our performance share grants support the achievement of long-term financial and business success. Externally, our TSR modifier helps ensure that performance share awards reflect our stock price performance relative to our TSR modifier group helping to further drive shareowner value.
The number of target performance shares granted is determined by dividing the target dollar grant value of performance shares by the closing price of our common stock on the date of grant. The number of performance shares paid at the end of the three-year performance period can range from zero to 200% of the target and is dependent on the achievement of pre-established organic sales growth and return on sales (net income divided by total sales) goals for the performance period. 50% of the target dollar value for each NEO’s long-term incentive award is granted as performance shares. The weighting of the performance measures for the FY2014–2016 grant are as follows:
Measure
Cumulative Sales
Return on Sales
FY20142016 Weighting
40%
60%
TSR Modifier. The number of performance shares that are payable is subject to adjustment based upon our total shareowner return (TSR) performance relative to the TSR modifier group. TSR is defined as share price growth and dividend yield over the three-year period, which can drive an adjustment up or down by as much as 20% of the amount otherwise payable as noted below:
TSR Percentile
Payout Modifier
≥ 80%
120%
≥ 65% and < 80%
110%
≥ 40% and < 65%
100%
≥ 20% and < 40%
90%
< 20%
80%
The aerospace and defense companies in our TSR modifier group for the FY2014–2016 performance share cycle are listed below:
Company
 
AAR Corporation
Alliant Techsystems Inc.
Esterline Technologies Corporation
Exelis, Inc.
General Dynamics Corporation
Harris Corporation
L-3 Communications Holdings, Inc.
Lockheed Martin Corporation
Moog Inc.
Northrop Grumman Corporation
Raytheon Corporation
Spirit AeroSystems, Inc.
Teledyne Technologies Inc.
The Boeing Company
Equity Grant Practices. The Committee has continued to follow a practice of granting long-term incentives at its November meeting each year. The meeting date is scheduled at least one year in advance. This meeting follows the public release of annual earnings typically by about two weeks. This allows the market to absorb the impact of our public release of year-end financial results before the Committee makes the annual grant. The Committee on occasion will make grants at other regularly scheduled meetings when a new executive is named either as a result of an internal promotion or external hire. The Committee has delegated to the CEO the authority to make individual equity grants to positions below certain designated senior executive positions within certain parameters. These grants are approved by the CEO on the date of a regularly scheduled meeting of the Board of Directors. The Committee reviews the use of this delegation at its November meeting each year.

2014 Proxy Statement | 29


Compensation Earned and Awarded                                    
Base Salary Adjustments for 2014
The Committee approved a 5.6% base salary increase for Mr. Ortberg from $900,000 to $950,000 effective December 28, 2013. The increase for Mr. Ortberg brings his 2014 salary within the competitive range of pay for similarly sized companies within the general industry group of companies. Mr. Ortberg recommended and the Committee approved annual base salary adjustments for the other NEOs, ranging from 3.0% to 4.5%, using the same criteria, market position and performance, as for all other salaried employees.
2014 Annual Incentive Awards and Performance Results
The target awards are expressed as a percentage of salary paid during the fiscal year. Target annual incentive amounts for the NEOs are reviewed annually by the Committee using the competitive information provided by the independent consultant. The following table shows the annual incentive target for each of the NEOs for 2014 and 2013.
All of our NEO’s annual incentive targets remained the same with the exception of Ms. May’s target, which was increased to 60% based on market data from the general industry companies.
Target awards are set around the median of the competitive market data for each position. In assessing the competitive data, generally the Committee will make changes to targets only if the competitive data shows that increases have been sustained over a two-year period.
The annual incentive compensation plan is designed to provide competitive annual incentive payments if target goals are achieved, to provide above-target payments if these goals are exceeded and to provide below target payments or no payments if the goals are not achieved. Annual incentive payments can range from zero to 200% of the annual incentive target based on the performance achieved against the financial goals.
Each NEO’s annual incentive payout, other than the CEO’s, is subject to business unit, as well as individual, adjustments of plus or minus five percent in accordance with recommendations from the CEO to the Committee. The Committee may similarly adjust the CEO’s annual incentive payout.
For 2014 the Committee restored the target plan payout percentage to 100% from the reduced 2013 target of 75%. The 2013 target was reduced given the uncertain economic environment. Financial performance for 2014 resulted in a payout of 90% of the target award before any adjustments for business unit or individual performance. Mr. Statler received an additional $8,675 to recognize his organization’s strong performance driven by market share capture with key customer accounts.
Our 2014 operating margin, sales and operating cash flow target goals were each set at the midpoint of our 2014 financial guidance. The following table shows our 2014 financial goals, the weightings of the performance goals,

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COMPENSATION


the threshold, target and maximums for each goal and the associated payouts and our performance against those goals.
Measure
Operating Margin
Sales ($B)
Operating Cash Flow ($M)
Payout
Goal
Payout
Goal
Payout
Goal
Payout
Maximum
22.65
%
100%
$
5.10

60%
$690
40%
200%
Target
21.40
%
50%
$
4.55

30%
$600
20%
100%
Minimum
20.15
%
—%
$
4.00

—%
$510
—%
—%
2014 Results (1)
20.98
%
33%
$
4.64

35%
$609
22%
90%
(1) Results were adjusted for the ARINC acquisition, the DataPath and KOSI divestitures and certain other items in accordance with the plan.

The following table shows the 2014 annual incentive payments for the NEOs. The total annual incentive paid to each NEO is reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 38.
NEO 2014 Annual Incentive Payments
Named Executive Officer
Annual Base Salary
(Paid in FY14)
Target
Actual
Target Annual Incentive %
Target Annual Cash Incentive
Final Award
Final Award as % of Target
Robert K. Ortberg
$
955,769

110%
$
1,051,346

$
946,212

90%
Patrick E. Allen
$
600,600

75%
$
450,450

$
405,405

90%
Kent L. Statler
$
602,454

80%
$
481,963

$
442,443

92%
Philip J. Jasper
$
474,231

80%
$
379,385

$
341,447

90%
Martha L. May
$
367,500

60%
$
220,500

$
198,450

90%
In addition to her annual incentive payment, Ms. May received a $100,000 one-time bonus opportunity in connection with her hiring in April 2013. This bonus was subject to her completion of performance goals within one year of her hire date. This additional one-time bonus opportunity was intended to compensate Ms. May for compensation that she forfeited as a result of leaving her former employer. Ms. May's performance goals included implementing organizational efficiency changes, implementing health care plan changes to address the impacts of health care reform, proposing design changes to our annual incentive plans and offering employees cost, quality and transparency tools to evaluate their health care. Ms. May achieved the performance goals and was paid $100,000 in April 2014. This payment, along with Ms. May’s annual incentive payment, are shown in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table.
2014 Long-Term Incentives Grant Award
At its November 2013 meeting, after consulting with its independent consultant, the Committee granted stock options and three-year performance shares for the 2014-2016 performance period to the NEOs and certain other executives under the 2006 Long-Term Incentives Plan. The target awards in dollars for the NEOs were established after taking into account levels of responsibility, the past three years of competitive market data and the relative contribution of each position to the business (i.e., internal equity or consistency between positions). The target dollar value of the long-term incentives granted to each of the NEOs for the 2014-2016 and 2013-2015 fiscal year periods are shown below:

2014 Proxy Statement | 31



2014-2016 Performance Period
2013-2015 Performance Period

Target
Target
Named Executive Officer
Performance Shares
Stock Options
Total Value
Performance Shares
Stock Options
Total Value
Robert K. Ortberg
$
1,750,000

$
1,750,000

$
3,500,000

$
1,513,900

$
1,513,900

$
3,027,800

Patrick E. Allen
$
500,000

$
500,000

$
1,000,000

$
500,000

$
500,000

$
1,000,000

Kent L. Statler
$
550,000

$
550,000

$
1,100,000

$
550,000

$
550,000

$
1,100,000

Philip J. Jasper
$
500,000

$
500,000

$
1,000,000

$
450,000

$
450,000

$
900,000

Martha L. May
$
225,000

$
225,000

$
450,000

$
225,000

$
225,000

$
450,000

The total number of shares awarded for fiscal year 2014 in November 2013 to executives for stock options and performance shares at target payout represented in the aggregate 0.4% of the total shares outstanding as of the date of grant. The Committee will review the level of achievement against the pre-established financial goals at its November 2016 meeting and determine the payment, if any, earned by participants for the 2014-2016 performance period.
2014-2016 Performance Share Award Goals
The 2014-2016 financial goals focus on our long-term profitable growth as measured by cumulative sales and return on sales, and our TSR relative to the TSR modifier group. The cumulative sales and return on sales goals at the maximum, target and minimum performance levels are shown below.
Performance Level
Cumulative Sales (1)
Return on Sales (1)
Total Payout %
Goal ($B)
Payout %
Goal
Payout %
Maximum
$16.01
80%
15.5%
120%
200%
Target
$14.82
40%
12.5%
60%
100%
Minimum
$13.78
0%
8.5%
0%
0%
(1) The financial goals were established prior to our acquisition of ARINC in December 2013. The Committee intends to adjust the payout calculation in 2016 to account for results derived from the ARINC acquisition and to reflect the DataPath and KOSI divestitures.
In establishing goals for the 2014-2016 performance period, the Committee’s focus was to balance the need to pay for performance, retain executive talent and establish realistic goals that reflect the challenging economic environment in which we are operating. To accomplish this, several factors were considered by the Committee, including:
our five-year strategic plan;
analyst expectations of our performance and of the members of the TSR modifier group;
goals and performance achieved in the prior performance cycle; and
our annual operating plan for 2014.
The Committee determined that cumulative sales should continue to be used as a performance measure due to the substantial importance of growing sales. The Committee also determined that return on sales should continue to be used since it is a strong indicator of operational efficiency and the need to maintain profitable growth even during periods when revenue growth is challenged. Together, cumulative sales and return on sales provide strong and balanced financial goals that drive our long-term financial health. For 2014-2016, the Committee weighted the goals so that 60% of the award opportunity is dependent on return on sales to provide a greater emphasis on profitable growth. The remaining 40% of the award opportunity depends on our cumulative sales achievement.
The cumulative sales target reflects an average annual organic growth rate of 3.5% per year for both the 2014–2016 and 2013–2015 performance periods.
Return on sales is determined by dividing net income by the total sales for the years 2014-2016. The target was set at 12.5%, the same as the goal established in the prior cycle. This target reflects our historical strong return on sales performance. The return on sales goal encourages profitable growth and significantly exceeds the return on sales generally achieved by the members of the TSR modifier group companies.

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Total Shareowner Return (TSR) Performance Modifier
Consistent with performance share grants in prior years, the 2014-2016 performance shares are subject to a performance modifier based upon our TSR relative to the TSR modifier group companies. There can be a positive or negative adjustment in increments of 10% up to a maximum adjustment of positive or negative 20% for the 2014-2016 performance period. Any dividends paid are treated as reinvested for purposes of determining TSR.
2012–2014 Performance Period Share Payments
In November 2014, the Committee also determined the payments to participants for the three-year performance shares granted in November 2011 covering fiscal years 2012 through 2014. The pre-established measures for the three-year period were cumulative sales and return on sales. Performance for the three-year performance period is summarized below:
Payout Schedule for 2012-2014 Performance Shares
Measure
Cumulative Sales (1) 
(In Billions)
Return on Sales (1)
Total Payout Before TSR Modifier
Actual TSR Modifier
Final Payout
Goal
Payout
Goal
Payout
Maximum
$
17.34

80%
15.5
%
120%
200%
N/A
N/A
Target
$
16.06

40%
12.5
%
60%
100%
N/A
N/A
Minimum
$
14.87

0%
8.5
%
0%
0%
N/A
N/A
2014 Results (1)
$
13.97

—%
13.4
%
78%
78%
0.8
62%
(1) Results were adjusted for the ARINC acquisition, dispositions and other items

Our performance over 2012–2014 was mixed. We had favorable return on sales performance, but our cumulative sales were below target. The combination of these results resulted in a 78% payout, which was then reduced by 20% due to our TSR performance. As a result, 62% of the target performance shares were earned.
Employee and Other Benefits                                            
Benefits
The NEOs generally are covered by the same broad range of benefit programs available to most other U.S. salaried employees. These benefits include medical, prescription drug, dental, vision, wellness, flexible spending accounts, defined contribution savings plans, employee stock purchase plan, employee assistance plan, life insurance, short-term and long-term disability coverage, accidental death and dismemberment coverage and vacation. We provide a broad array of benefit programs to attract and retain a skilled and highly talented workforce and to provide employees with choices to meet their personal needs. These benefits are reviewed periodically to assure that they remain competitive and cost effective. It is our intention to provide a comprehensive benefits program that in total value is around the median of competitive practice.
Deferral Plans
To provide a tax-effective opportunity to save for retirement or other future needs, we offer plans that allow for the elective deferral of the receipt of base salary and annual incentive awards when earned and otherwise payable to eligible employees. Deferred amounts accrue earnings or losses based on each participant's selection of investment choices that generally mirror the funds provided in our qualified savings plan.
Perquisites
The Committee provides the NEOs with certain annual perquisites, including the following: car allowance, financial planning allowance, reimbursement for an executive physical exam, executive long-term disability coverage, event tickets and airline club memberships. Our NEOs are also permitted to use company aircraft for personal use on a very limited basis and their spouses may travel to and attend certain offsite events if spouses are expected to attend

2014 Proxy Statement | 33


such events. In 2014, the Committee decided to terminate the executive long-term disability coverage effective at the end of calendar year 2014 to reflect market practices.
The perquisites we provide are designed to be competitive within the general industry group of companies. They are reviewed annually by the Committee to assure that they continue to be competitive and consistent with the Committee's overall compensation philosophy. Details about the perquisites provided to our NEOs are described under the Summary Compensation Table. 
In 2013, in order to facilitate Ms. May's hiring, we paid to relocate her to Cedar Rapids and our third party relocation provider purchased her home based upon independent appraisals. We also provided her with a lump sum relocation allowance of $50,000. The allowance was subject to repayment if Ms. May did not remain employed with us until the first anniversary of her date of hire. Accordingly, this amount was not considered earned by her until 2014 and is reported in the Summary Compensation Table. Similar relocation benefits are provided to other senior executives who need to relocate to commence employment with us.
Executive Policies and Practices                                        
Stock Ownership Guidelines
The Committee believes that senior executives should have a significant equity interest in Rockwell Collins. To promote equity ownership and further align the interests of senior executives with our shareowners, the Committee has established ownership guidelines. These guidelines require that our NEOs own our shares with a market value of at least a specified multiple of his or her salary within a predetermined time period. The guidelines are as follows:
Position
Multiple of
Base Salary
Met or On
Track to Meet
Achievement Deadline
Mr. Ortberg
6
Yes
8/1/2019
Mr. Allen
3
Yes
1/1/2012
Mr. Statler
3
Yes
10/1/2012
Mr. Jasper
3
Yes
10/1/2018
Ms. May
2
Yes
4/1/2019
Progress toward meeting the guidelines is reviewed by the Committee annually. Based on our 2014 fiscal year end stock price of $77.35 per share, the ownership guidelines have been met, or are projected to be met, in accordance with the guidelines.
What Counts Toward the Guideline
What Does Not Count Toward the Guideline
ŸShares and share equivalents owned outright, including in trusts and those held by a spouse
ŸUnexercised stock options
ŸShares held in the qualified savings plan
ŸUnearned performance shares
ŸShare equivalents held in the non-qualified savings plan
 
Hedging, Pledging and Other Restrictions
Our insider trading guidelines prohibit our directors, executive officers and employees from selling our stock “short,” entering into any puts or calls relating to our stock or hedging. In addition, pledging of our stock by executive officers, Directors and certain other executives is subject to prior approval. Any pledge by the Chairman of the Board of Directors, the CEO and President, the Chief Financial Officer, the Vice President and Controller, the Vice President and General Auditor and the General Counsel and Secretary is not permitted without the consent of the Audit Committee of the Board of Directors. Any pledge by a Director or any other executive officer is not permitted without the consent of the Chairman of the Board of Directors. In deciding whether to grant consent, the Audit Committee or the Chairman, as the case may be, will consider the number of shares proposed to be pledged, the potential impact of a forced sale of the pledged stock on our stock price, the length of the loan, the ability of the individual to repay the loan without recourse to shares, stock ownership guidelines applicable to the individual and such other factors determined to be relevant under the circumstances. There are no outstanding pledges by anyone subject to the pledging policy.

34 | 2014 Proxy Statement

COMPENSATION


Employment, Severance and Change of Control Agreements
We do not generally enter into employment contracts with our executive officers, including severance arrangements. None of our NEOs have employment contracts. The executives serve at the will of the Board of Directors. This approach allows for removal of an executive officer prior to retirement whenever it is in our best interest to do so, with discretion on whether to provide any severance benefits (excluding vested benefits). On the rare occasion when an executive officer is removed, the Committee exercises its business judgment in approving an appropriate separation agreement in consideration of all relevant circumstances, including the individual's term of employment, past accomplishments and reasons for separation.
The Committee has approved change of control employment agreements for each of the NEOs and with certain other executives. Annually, the Committee reviews our agreements and market practices with the assistance of the independent consultant.  The Committee adopted the agreements to provide these executives with a strong incentive to continue their employment with us if there is a change of control, or the threat of such a transaction, and to maintain a competitive total compensation program. Our change of control employment agreements provide severance to executives if they have a qualifying termination of employment following a change of control.
Change of control severance payments are subject to a “double trigger” requiring that a change of control occur and a termination, or constructive termination, of employment also occur within the two-year protection period following the change of control. Additionally, stock options and performance shares have “double trigger” vesting. Our NEO's change of control agreements are automatically renewed each year with a one-year term unless 60-days notice of non-renewal is given prior to the renewal date. There are no excise tax gross-ups provided upon a change of control. As described in more detail under “Potential Payments Upon Termination or Change of Control,” the severance benefit under the change of control of agreement is equal to a multiple of the NEO's annual compensation, which is the sum of his or her annual salary and annual incentive bonus target. The Committee has determined, based upon its independent consultant's review of competitive practices, that the severance benefit will not exceed two times any new executive officer's annual compensation, except for the severance benefit that may be paid to a new chief executive officer. The multiple for our grandfathered executive officers is three.
The Committee has provided for the special treatment of long-term incentive awards upon death, disability and retirement, as well as change of control. The Committee evaluates these provisions from time to time and believes they are appropriate as part of a competitive total compensation program. For additional details about the terms and potential payments in the event of change of control and other separations, see the discussion of “Potential Payments upon Termination or Change of Control.”
Payment Recovery Provisions
Executive officers are subject to certain restrictive agreements upon a termination of employment, including confidentiality restrictions, mutual arbitration agreements, non-competition covenants and employee non-solicitation arrangements. An executive could lose all outstanding long-term incentives and/or be required to refund various long-term incentive benefits realized in the prior two-year period for breaching the non-compete or non-solicitation restrictions.
The CEO and CFO could also be required by law to reimburse the Corporation for certain incentive compensation amounts received associated with misconduct leading to an accounting restatement. In addition to the recovery provisions stated above, we have a clawback policy that allows the Board, at its discretion, to recover annual incentive payments, performance share payments and stock option gains from a covered executive if the Board determines that the covered executive engaged in fraud or illegal activity and as a result there was a substantial negative impact to us or our financial condition. Under the policy, the Board may recover the last three incentive compensation and performance share payments and any gains realized upon the exercise of stock options in the preceding three years. The clawback policy covers all of our executive officers, as well as our Vice President & General Managers and certain other executives.
Tax Deductibility of Executive Compensation
Under Internal Revenue Code Section 162(m), a publicly-held corporation may not deduct in any taxable year compensation in excess of one million dollars paid in that year to its CEO and its three other most highly

2014 Proxy Statement | 35


compensated NEOs (other than its CFO) who are employed on the last day of its taxable year unless the compensation is “performance-based.” Annual incentive plan payments, grants of stock options and grants of performance shares are intended to qualify as "performance-based" compensation. Since the Committee retains discretion with respect to base salaries and certain other compensation awards, those elements do not qualify as “performance based” compensation for these purposes. For fiscal year 2014, the Committee believes that all of the compensation for our NEOs is deductible under this tax code provision. Although the Committee takes into account the tax impact of Section 162(m), it has discretion to forego tax deductibility.
Bonuses under our annual incentive compensation plan for NEOs who are expected to be subject to Section 162(m) are paid pursuant to the 2006 Annual Incentive Compensation Plan for Senior Executive Officers to allow the payments to be fully deductible to us for tax purposes. This plan defines a maximum amount for the awards that can be allocated each year. The annual incentive awards actually paid have always been well below this plan's maximum. The Committee uses negative discretion to reduce the amount otherwise payable under this plan so these senior executives earn fully deductible annual incentive payments based on the achievement of the same performance goals set forth in the annual incentive plan that applies to all employees generally.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors acts on behalf of the Board to establish and oversee the executive compensation program in a manner that serves the interests of the Corporation and its shareowners. For a discussion of the policies and procedures, see “Corporate Governance; Board of Directors and Committees- Compensation Committee” in this proxy statement.
Management of the Corporation prepared the Compensation Discussion and Analysis of the compensation program for named executive officers. We reviewed and discussed the Compensation Discussion and Analysis for fiscal year 2014 (included in this proxy statement) with management. Based on this review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in the 2014 Form 10-K for filing with the Securities and Exchange Commission. The Board has approved that recommendation.
Compensation Committee
Ralph E. Eberhart, Chairman (effective August 2014)
John A. Edwardson
Jeffrey L. Turner
Anthony J. Carbone (prior Chairman and member until August 2014)


36 | 2014 Proxy Statement

COMPENSATION


SUMMARY COMPENSATION TABLE
The following table shows the compensation paid to our chief executive officer, chief financial officer and our three other most highly compensated executive officers serving at the end of our fiscal year. These individuals are referred to as our named executive officers or NEOs.
Name and Principal Position
Year
Salary
($)
Bonus ($)
Stock Awards
($)
Option Awards
($)
Non-Equity Incentive Plan Compensation
($)
Change in Pension Value
($)
All Other Compensation
($)
Total ($)
Robert K. Ortberg, Chief Executive Officer and President
2014
955,769


1,855,052

1,751,742

946,212

146,372

173,639

5,828,786

2013
732,309


1,495,942

1,515,323

667,196


120,561

4,531,331

2012
579,270


671,055

550,044

186,177

233,133

123,870

2,343,549

Patrick E. Allen,
SVP and CFO
2014
600,600


530,058

501,024

405,405

103,988

104,188

2,245,263

2013
567,750


565,046

500,088

433,038


89,947

2,155,869

2012
547,500


610,050

500,040

184,781

201,844

94,565

2,138,780

Kent L. Statler,
EVP and COO, Commercial Systems
2014
602,454


583,019

550,758

442,443

133,494

112,208

2,424,376

2013
573,751


621,508

551,092

422,969


89,115

2,258,435

2012
556,001


671,055

550,044

200,160

253,210

111,128

2,341,598

Philip J. Jasper,
EVP and COO Government Systems
2014
474,231


530,058

501,024

341,447

45,054

89,400

1,981,214

2013
450,002


508,523

450,328

338,726


74,317

1,821,896

Martha L. May, SVP, Human Resources
2014
367,500

100,000

238,549

226,566

298,450


406,399

1,637,464

The following is an explanation of the above table:
Salary. Salaries are reported on a fiscal year basis. Since salary increases are generally made effective for the start of a calendar year, the amounts shown in the column reflect three months of the salary approved for the 2013 calendar year and nine months of the salary approved for the 2014 calendar year. Salaries include any amounts deferred under our tax-qualified retirement savings plan, our non-qualified retirement savings plan and our deferred compensation plan. Since the number of days in our fiscal year may vary from year to year, the annual salary could vary, even if the salary was unchanged.
Bonus. Ms. May received a $100,000 sign on advance as part of her recruitment to us from her former employer to compensate her for compensation that she would have received from her former employer if she had remained employed with them. The sign on advance was paid in April 2013 when Ms. May commenced employment. This bonus is reportable for fiscal year 2014 because it was not considered earned until April 2014 since Ms. May would have been required to repay the amount to us if she voluntarily left our employment or if we terminated her employment for cause prior to April 2014.
Stock Awards. The amounts shown in this column reflect the aggregate grant date value of the three-year performance shares we granted to our NEOs in fiscal years 2014, 2013 and 2012, as applicable, based upon the probable outcome of the achievement of our cumulative sales and return on sales goals on the date of grant in accordance with FASB ASC Topic 718 and do not reflect a reduction for possible forfeitures. The aggregate grant date fair value is the amount we expect to expense on the date of grant in our financial statements over the three-year vesting schedule of the performance shares and do not correspond to the actual value, if any, that may be realized by the NEOs. The vesting of the performance shares is dependent on our achievement of cumulative sales and return on sales over a three year period. The number of shares that can be earned is also subject to adjustment based on our relative total shareowner return as described on page 30 of this proxy statement. Since the probable

2014 Proxy Statement | 37


outcome of achievement of our cumulative sales and return on sales goals on the date of grant may vary year over year, and individual performance share targets may also vary, the dollar values reported may vary year over year. The aggregate grant date fair value of the 2014 performance shares assuming that the cumulative sales and return on sales goals are fully achieved would result in an additional value of $1,645,046 to Mr. Ortberg, $517,017 to Mr. Statler, $470,052 to Mr. Allen, $470,052 to Mr. Jasper, and $211,543 to Ms. May. A discussion of the assumptions used in calculating the aggregate grant date fair values of these awards is set forth in Note 13 of the Notes to Consolidated Financial Statements in our 2014 Annual Report on Form 10-K.
Option Awards. The amounts shown in this column reflect the aggregate grant date value of the stock options we granted to our NEOs in fiscal years 2014, 2013 and 2012 in accordance with FASB ASC Topic 718 and do not reflect a reduction for possible forfeitures. The aggregate grant date fair value is the amount we expect to expense on the date of grant in our financial statements over the three-year vesting schedule of the stock options. Our stock options vest on the first three anniversaries of the date of grant. The amounts in this column represent our expected accounting expense and do not correspond to the actual value, if any, that may be realized by the NEOs upon exercise of the stock options. A discussion of the assumptions used in calculating the aggregate grant date fair values of our stock option awards is set forth in Note 13 of the Notes to Consolidated Financial Statements in our 2014 Annual Report on Form 10-K.
Non-Equity Incentive Plan Compensation. The amounts in this column represent payments made under our Annual Incentive Compensation Plan based upon the achievement of the performance goals. For Ms. May, the amount also includes a $100,000 payment made to her in April 2014 under a one-time individual performance bonus arrangement for achieving the goals under that arrangement. Ms. May received an individual performance arrangement as part of her recruitment to us from her former employer to compensate her for compensation she would have received from her former employer if she had remained employed with them. Mr. Statler’s payment under the Annual Incentive Compensation Plan was increased by $8,675 as described on page 31 of this proxy statement.
Change in Pension Value. The amounts shown in this column reflect the increase in the actuarial value of our frozen pension plan benefits. The actuarial value of these benefits increased in 2014 due to the fact that a lower discount rate was used to value these benefits this year. No additional amounts are payable to our NEOs under defined benefit pension plans, which were frozen in 2006 for all our salaried employees and closed for any non-union new hire. The actuarial value of our pension benefits fluctuate from year to year based on required changes in discount rates.
All Other Compensation. The following table summarizes the information included in the All Other Compensation column in the Summary Compensation Table.
Name
Contributions to Savings Plans ($)
Car
Allowance ($)
Executive Physical ($)
Financial Planning ($)
Relocation Expense ($)
Other ($)
Mr. Ortberg
137,339

25,200

2,750

3,222


5,128

Mr. Allen
76,696

20,400

2,750

1,600


2,742

Mr. Statler
86,735

20,400

253

895


3,925

Mr. Jasper
60,395

20,400

2,750

3,297


2,558

Ms. May
24,249

20,400

3,505

5,000

345,358

7,887

The amounts shown in the “Contributions to Savings Plans” column are the sum of the matching and retirement contributions made to our tax-qualified and non-qualified retirement savings plans. We match 50% of contributions under our retirement saving plans up to the first eight percent of the base salary contributed by participants. We also make retirement savings contributions, regardless of whether an employee makes contributions, based upon the combination of an employee’s age and years of service (points). These contributions can range from 0.5% (up to 34 points) to 6% (with 75 points) of the sum of the employee’s base salary and his or her annual incentive plan payment for the year.
The amount shown for Ms. May in the “Relocation Expense” column represents a $50,000 relocation allowance and other costs totaling $295,358 incurred in connection with Ms. May’s relocation to Cedar Rapids. These costs are comprised of moving expenses, closing costs incurred in connection with Ms. May’s acquisition of her home in

38 | 2014 Proxy Statement

COMPENSATION


Cedar Rapids, including the cost of appraisals and inspections, and costs incurred by our third party relocation provider that were paid by us, including the loss on the sale of Ms. May’s former home, broker’s commissions incurred on the sale, title charges and carrying costs incurred by the relocation provider until Ms. May’s former home was sold.
The amount in the “Other” column for all NEOs includes the incremental cost of the executive long-term disability benefit and incidental costs from spousal attendance at offsite meetings. In addition, for Messrs. Ortberg and Statler it includes event tickets, for Messrs. Statler and Jasper and Ms. May it includes the cost of an airline club, and for Ms. May it includes the aggregate incremental cost to use a corporate jet to attend to a family emergency. We determine the aggregate incremental cost of jet use on a per flight basis and it includes the cost of fuel, on-board catering, weather monitoring costs, landing fees, trip-related hangar and parking costs and variable crew-related costs such as hotels and meals. Messrs. Ortberg, Statler and Allen also receive complimentary airline clubs as a result of our travel contracts with certain airlines. Since there is no incremental cost for these clubs, no amount is included for these benefits in the “Other” column.
GRANTS OF PLAN-BASED AWARDS
Shown below is information on grants to the NEOs of plan-based awards during fiscal year 2014.
 
Name
Grant Date and Type
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards
Estimated Future Payouts Under Equity Incentive Plan Awards
All Other Stock Awards: Number of Shares of Stock or Units (#)
All Other Option Awards: Number of Securities Under-lying Options (#)
Exercise or Base Price of Option Awards
($/Sh)
Grant Date Fair Value of Stock and Option Awards
($)
 
Target
($)
Maximum ($)
Target (#)
Maximum (#)
 
 
Ortberg
9/28/2013
ICP
1,051,347

2,102,694












 
11/11/2013
Performance Shares




24,659

59,182






1,855,052

 
11/11/2013
Stock Options









95,100

70.97

1,751,742

 
Allen
9/28/2013
ICP
450,450

900,900












 
11/11/2013
Performance Shares




7,046

16,910






530,058

 
11/11/2013
Stock Options









27,200

70.97

501,024

 
Statler
9/28/2013
ICP
481,964

963,928












 
11/11/2013
Performance Shares




7,750

18,600






583,019

 
11/11/2013
Stock Options









29,900

70.97

550,758

 
Jasper
9/28/2013
ICP
379,386

758,771












 
11/11/2013
Performance Shares




7,046

16,910






530,058

 
11/11/2013
Stock Options









27,200

70.97

501,024

 
May
9/28/2013
ICP
220,500

441,000












 
11/11/2013
Performance Shares




3,171

7,610






238,549

 
11/11/2013
Stock Options









12,300

70.97

226,566

The following is an explanation of the above table:
ICP. The amount set forth in the “ICP” row represents the 2014 annual incentive established for each NEO under the Annual Incentive Compensation Plan (ICP), which is an incentive program designed to reward the achievement of annual performance goals. The performance measures and methodology for calculating payouts are described in the “Compensation Discussion and Analysis.” See the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table for the amounts paid for 2014. Incentive payments are subject to business unit, as well as individual, adjustments in accordance with recommendations from the CEO to the Compensation Committee.
Performance Shares. The amounts set forth in the “Performance Shares” row represent the 2014 annual performance share awards granted in November 2013 to each NEO under our 2006 Long-Term Incentives Plan.

2014 Proxy Statement | 39


These long-term incentive grants are designed to reward the achievement of return on sales and cumulative sales growth goals over a three-year performance period. Payouts can range from 0 to 200% of target and may be further adjusted based on our total shareowner return for the performance period as measured against the aerospace and defense TSR modifier companies. This adjustment is a multiplier that can range from plus 20% to minus 20%. See the “Compensation Discussion and Analysis” for more information. Until the distribution of any common stock after the performance period is complete, executives do not have rights to vote the shares, receive dividends or any other rights as a shareowner. NEOs must remain employed through the performance period to earn an award, although pro-rata vesting will occur if employment terminates earlier due to early or normal retirement, death or disability. See the “Potential Payments Upon Termination or Change of Control” for further discussion.
Stock Options. The amounts set forth in the “Stock Options” row are the number of stock options granted in November 2013 to each NEO under our 2006 Long-Term Incentives Plan. The grant date fair values were computed as described in Note 13 of the Notes to Consolidated Financial Statements in our 2014 Annual Report on Form 10-K. Stock options vest in three equal annual installments beginning on the first anniversary of the date of grant and have a ten year term. These stock options may also vest following a change of control upon a qualifying termination and all stock options vest upon death or disability. Upon an early or normal retirement, all stock options that were granted more than one year prior to retirement will continue to vest in accordance with their terms and be exercisable for up to five years after retirement. See “Potential Payments Upon Termination or Change of Control” for a discussion of the treatment of stock options in these situations. Stock options expire ten years from the date of the grant. No dividends or dividend equivalents are payable with respect to stock options. The exercise price for all stock options is equal to our closing price on the date of the grant.

40 | 2014 Proxy Statement

COMPENSATION



OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The following table provides outstanding stock options and unvested stock awards information for the NEOs as of the end of fiscal year 2014.
 
 
Option Awards
Stock Awards
Name
Grant Date
Number of Securities Underlying Unexercised Options (#) Exercisable
Number of Securities Underlying Unexercised Options (#) Unexercisable
Option Exercise Price
($)
Option Expiration Date
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
Equity Incentive Plan Awards: Market or Payout Value
of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Ortberg
11/02/04
2,735


36.55

11/02/14


11/17/05
6,500


44.85

11/17/15


11/09/06
27,200


57.92

11/09/16


11/13/07
20,200


74.05

11/13/17


11/21/08
77,800


30.39

11/21/18




11/20/09
43,000


53.08

11/20/19




11/19/10
37,400


55.75

11/19/20



11/14/11
26,400

13,200

55.01

11/14/21
19,998

1,546,845

11/12/12
24,133

48,267

54.37

11/12/22
33,108

2,560,904

09/18/13
11,033

22,067

73.99

09/18/23
16,596

1,283,701

11/11/13

95,100

70.97

11/11/23
49,318

3,814,747

Allen
11/09/06
19,700


57.92

11/09/16


11/13/07
14,900


74.05

11/13/17


11/21/08
63,700


30.39

11/21/18


11/20/09
35,200


53.08

11/20/19


11/19/10
34,000


55.75

11/19/20



11/14/11
24,000

12,000

55.01

11/14/21
18,180

1,406,223

11/12/12
13,400

26,800

54.37

11/12/22
18,394

1,422,776

11/11/13

27,200

$
70.97

11/11/23
14,092

1,090,016

Statler
11/17/05
2,229


44.85

11/17/15


11/09/06
1,726


57.92

11/09/16


11/13/07
10,600


74.05

11/13/17


11/21/08
3,290


30.39

11/21/18




11/20/09
27,400


53.08

11/20/19


11/19/10
37,400


55.75

11/19/20



11/14/11
26,400

13,200

55.01

11/14/21
19,998

1,546,845

11/12/12
14,766

29,534

54.37

11/12/22
20,232

1,564,945

11/11/13

29,900

70.97

11/11/23
15,500

1,198,925


2014 Proxy Statement | 41


Jasper
11/17/05
1,460


44.85

11/17/15


03/08/06
490


52.20

03/08/16


11/09/06
1,570


57.92

11/09/16


04/23/07
2,500


66.57

04/23/17


11/13/07
3,900


74.05

11/13/17


11/21/08
14,200


30.39

11/21/18


11/20/09
9,000


53.08

11/20/19


11/19/10
7,820


55.75

11/19/20



11/14/11
5,520

2,760

55.01

11/14/21
4,182

323,478

11/12/12
12,066

24,134

54.37

11/12/22
16,554

1,280,452

11/11/13

27,200

70.97

11/11/23
14,092

1,090,016

May
04/16/13
5,300

10,600

61.40

04/16/23
7,330

566,976

11/11/13

12,300

70.97

11/11/23
6,342

490,554

The following is an explanation of the above table:
Stock Options
Stock options vest in three equal annual installments beginning on the first anniversary of the date of grant. If an option recipient retires prior to the first anniversary of the grant date of the option, the option is terminated. All stock options are granted with an exercise price equal to our closing share price on the date of grant.
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
The amounts set forth in the “Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested” column were calculated by multiplying each NEO’s target performance shares by the maximum payout percentage assuming no adjustment for the TSR performance modifier. The actual number of shares that will be awarded, to the extent earned, will be determined after the applicable three-year performance period is complete. Vesting and payment of performance shares for the November 2012 grant (covering the fiscal year 2013–2015 performance period) will be based on performance for the three-year cycle ending with fiscal year 2015. Vesting and payment of performance shares for the November 2013 grant (covering the fiscal year 2014–2016 performance period) will be based on performance for the three-year cycle ending with fiscal year 2016. If a performance share recipient retires prior to the completion of a three-year performance cycle, the performance share payout is prorated for service that is completed prior to retirement.
The market value of performance shares that have not vested as of our fiscal year end was calculated using our fiscal year end closing share price of $77.35 multiplied by the number of shares displayed in the prior column.
OPTION EXERCISES AND STOCK VESTED
The following table provides information regarding stock options and stock awards, exercised and vested, for the NEOs during fiscal year 2014.
 
Option Awards
Stock Awards
Name
Number of Shares Acquired on
Exercise (#)
Value Realized on Exercise ($)
Number of Shares Acquired on Vesting (#)
Value Realized on Vesting ($)
Ortberg
14,082

536,648
6,199

479,493

Allen
26,400

928,990
5,636

435,945

Statler

0
6,199

479,493

Jasper
4,300

166,622

1,296

100,246

May




The following is an explanation of the above table:

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Value Realized on Exercise. The amounts shown in the “Value Realized on Exercise” column were calculated using the spread between the market price at exercise and the stock option exercise price, multiplied by the number of stock options exercised. The stock options exercised may include both incentive stock options and non-qualified stock options.
Value Realized on Vesting. The amounts shown in the “Value Realized on Vesting” column were calculated by multiplying the number of performance shares that vested with respect to the 2012–2014 performance period by $77.35, our fiscal year end closing share price.
PENSION BENEFITS
The following table provides information as of the end of fiscal year 2014 (the pension measurement date for purposes of our financial statements) for each NEO under our qualified and non-qualified defined benefit pension plans.
Name
Plan Name
Number of Years Credited Service (#)
Present Value of Accumulated Benefit ($)
Payments During Last Fiscal Year ($)
Ortberg
Rockwell Collins Pension Plan
19.2

646,394


Rockwell Collins Non-Qualified Pension Plan
19.2

168,550


2005 Rockwell Collins Non-Qualified Pension Plan
19.2

351,874


Allen
Rockwell Collins Pension Plan
11.8

297,180


Rockwell Collins Non-Qualified Pension Plan
11.8

166,030


2005 Rockwell Collins Non-Qualified Pension Plan
11.8

380,757


Statler
Rockwell Collins Pension Plan
19.8

488,429


Rockwell Collins Non-Qualified Pension Plan
19.8

133,162


2005 Rockwell Collins Non-Qualified Pension Plan
19.8

416,061


Jasper
Rockwell Collins Pension Plan
15.4

274,707


Rockwell Collins Non-Qualified Pension Plan
15.4



2005 Rockwell Collins Non-Qualified Pension Plan
15.4

8,866


May
Rockwell Collins Pension Plan



Rockwell Collins Non-Qualified Pension Plan



2005 Rockwell Collins Non-Qualified Pension Plan



In September 2006, we froze our qualified and non-qualified defined benefit pension plans and shifted our emphasis to our savings plans. Set forth below is further disclosure relating to our frozen qualified and non-qualified defined benefit pension plans.
We maintain qualified and non-qualified defined benefit pension plans for our employees. As part of the 2001 spin-off from Rockwell International, all of the qualified defined benefit pension plans were merged into one plan and renamed the Rockwell Collins Pension Plan (“Qualified Pension Plan”). Effective September 30, 2006, the plan was frozen to discontinue benefit accruals for salary increases and services rendered after that date, other than for employees covered by collective bargaining agreements. Each of the current NEOs, other than Ms. May, is eligible for a benefit under the Qualified Pension Plan that is included in the totals above. Benefit calculations for each NEO in the table is unique depending on age, years of service and average annual covered compensation. Covered compensation includes salary and annual incentive payments.
We also maintain non-qualified defined benefit pension plans (the Rockwell Collins Non-Qualified Pension Plan (“NQ Pension Plan”) and the 2005 Rockwell Collins Non-Qualified Pension Plan (“2005 NQ Pension Plan”)) to provide eligible employees with supplemental pension benefits in excess of the maximum benefit allowed under the Qualified Pension Plan by reason of limitations of the Internal Revenue Code. A participant’s supplemental retirement benefit is generally based on a continuation of the participant’s benefit calculation formula under the Qualified Pension Plan. We adopted the 2005 NQ Pension Plan to comply with the requirements of Internal

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Revenue Code Section 409A for non-qualified pension benefits earned after 2004. Non-qualified pension benefits for service and compensation earned before 2005 will be paid from the NQ Pension Plan and benefits for service and compensation earned after 2004 will be paid from the 2005 NQ Pension Plan.
Executive officers hired after January 1, 1993 are covered by an enhanced early build-up retirement benefit provision broadly available to the other salaried participants hired before 1993. This benefit was also frozen on September 30, 2006.
The Qualified Pension Plan does not have a permanent lump sum option. Payments from the NQ Pension Plan are made in the same form and at the same time as payments from the Qualified Pension Plan. Under the 2005 NQ Pension Plan, participants made an election at the end of calendar year 2008 as to the form and timing of the payments that will be made upon separation from employment. For benefits payable under the 2005 NQ Pension Plan, participants can elect to receive a life annuity, one lump sum or up to ten annual installments.
The present value of the accumulated pension benefit for each named executive officer is calculated as required by regulatory standards using a 3.97% discount rate as of October 3, 2014, and a retirement age of 62, the earliest age an executive can retire without a reduction in benefits. None of the NEOs are eligible to retire. For the Qualified Pension Plan and the NQ Pension Plan, the form of payment for the NEOs assumes a weighted average of a joint and 60% survivor annuity and a single life annuity. For the 2005 NQ Pension Plan, the form of payment is based on the NEOs’ election. For further discussion related to our pension assumptions, see Note 11 of the Notes to Consolidated Financial Statements in the 2014 Annual Report on Form 10-K.
We have established a rabbi trust, which was amended and restated on September 11, 2007 to reflect certain changes in respect of Internal Revenue Code Section 409A, relating to the NQ Pension Plans. The rabbi trust requires that, upon a change of control, we fund the trust in a cash amount equal to the unfunded accrued liabilities of the NQ Pension Plan and the 2005 NQ Pension Plan as of such time.
NON-QUALIFIED DEFERRED COMPENSATION
The table below provides information on the non-qualified deferred compensation of the NEOs in 2014, including the following elements:
Deferred Compensation Plan
The plan allows eligible employees to defer a portion of their income and earnings until a future date when distributions are received from the plan. Participation in the plan is an annual decision that covers only the upcoming calendar year and must generally be made during each year’s annual enrollment period. Participants are not allowed to change their deferral election during the year. We adopted the 2005 Deferred Compensation Plan to comply with Internal Revenue Code Section 409A requirements.
Participants may elect to defer up to 50% of their base salaries and/or as much as 100% of their annual incentive awards. The 2005 Deferred Compensation Plan also provides for a matching contribution for each participant to the extent participation in the plan reduces the matching contribution the executive would have received under our Qualified Retirement Savings Plan (Qualified Savings Plan). With respect to distributions, participants may elect to receive their balances on a future specified date while in-service, at retirement (up to 15 annual installments or as a lump sum) or upon termination (lump sum only). All deferrals of base salary and/or incentive awards made in a calendar year will be subject to the same distribution election.
Participants can choose any of the measurement funds offered by the plan, which generally mirror the funds provided in our Qualified Retirement Savings Plan, and have the ability to change their investment elections at any time. The measurement fund options are intended to mirror as closely as possible the performance of the underlying investment funds.
Non-Qualified Retirement Savings Plan
The primary purpose of our Non-Qualified Retirement Savings Plan (“Non-Qualified Savings Plan”) is to supplement our Qualified Savings Plan by allowing employees to receive credits for contributions that could not be made to the Qualified Savings Plan due to the Internal Revenue Code compensation limit or annual additions limit.

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Additionally, participants receive credits to the Non-Qualified Savings Plan for amounts that but for the Internal Revenue Code limits would have been contributed to the Qualified Savings Plan (a) as company matching contributions (equal to 50% of the first eight percent of employee contributions thereafter) and (b) as company retirement contributions (such defined contributions are expressed as a specified percentage of eligible compensation determined based on the sum of a participant’s age and years of service).
Participants may defer up to 50% of their base salaries to the plan. To comply with Internal Revenue Code Section 409A regulations, the contribution percent in effect for the Qualified Savings Plan on December 31 of the prior year will be the contribution percent in effect for the current year in the Non-Qualified Savings Plan. With respect to distributions, contributions made prior to 2005 permit participants to receive their balances upon termination of employment either through a lump sum payment or in annual installments up to ten years. Contributions made in 2005 through 2007 are paid in a lump sum only upon termination of employment. We adopted the 2005 Non-Qualified Savings Plan to comply with Internal Revenue Code Section 409A requirements. Beginning with deferral elections for 2008, participants can receive their resulting balances upon termination of employment either through a lump sum payment or in up to ten annual installments.
The investment funds available for the employee and company credits are identical to the investment funds in the Qualified Savings Plan.
Distributions for the Deferred Compensation Plan (DCP) and Non-Qualified Savings Plan (NQSP) are processed within the first 60 days of the calendar year following the year that an employee terminates or retires. However, if a participant terminates or retires after June 30, the distribution will be processed within the first 60 days following June 30 of the following calendar year.
Name
Plan
Executive Contributions in Last FY
($)
Registrant Contributions in Last FY
($)
Aggregate Earnings/(Losses) in
Last FY ($)
Aggregate Withdrawals/Distributions
($)
Aggregate Balance at Last FYE
($)
Ortberg
DCP


49,295


469,819

NQSP
57,046

111,339

52,676


859,506

Allen
DCP


98,916

53,346

664,388

NQSP
28,128

53,296

86,452


718,905

Statler
DCP





NQSP
28,286

60,735

60,837


693,615

Jasper
DCP


7,580


93,166

NQSP
17,831

36,995

9,106


131,497

May
DCP





NQSP
4,692

4,088

341


9,122

The following is an explanation of the above table:
Executive Contributions in the Last FY. The amounts in the “Executive Contributions in Last FY” column include contributions that were reported in the Summary Compensation Table in fiscal year 2014.
Registrant Contributions in the Last FY. The amounts in the “Registrant Contributions in Last FY” column include company contributions credited to each executive’s NQSP account during fiscal year 2014. Company contributions include credits equal to 50% of the first eight percent of the executive’s base salary, and retirement contributions equal to a percentage of eligible compensation (salary and incentive plan payments) based on the sum of the executive’s age and years of service. In each case, the contributions are only made to the extent they could not be made to the Qualified Savings Plan. The amounts in this column include registrant contributions that were reported in the Summary Compensation Table as All Other Compensation in fiscal year 2014.
Aggregate Earnings/(Losses) in Last FY. The amounts in the “Aggregate Earnings/(Loses) in Last FY” column include actual dividends and market value changes in the DCP and NQSP accounts during fiscal year 2014.

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Aggregate Withdrawals/Distributions. The amounts in the “Aggregate Withdrawals/Distributions” column show any withdrawals or distributions from the NEOs’ DCP and/or NQSP accounts during fiscal year 2014.
Aggregate Balance at Last FYE. The fiscal year-end balance reported for the DCP includes $5,103 that was previously reported in the Summary Compensation Table for fiscal year 2013 for Mr. Jasper. The fiscal year-end balances for the NQSP include the following executives' contribution amounts that were previously reported in the Summary Compensation Table for 2013 and 2012: Ortberg ($100,163 for 2013 and $93,343 for 2012), Allen ($65,340 for 2013 and $68,680 for 2012), Statler ($67,606 for 2013 and $80,667 for 2012), and Jasper ($29,113 for 2013).
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
The following information and table set forth amounts that would be payable to our NEOs upon certain termination scenarios and also upon the occurrence of a change of control of the Company without a termination.
We do not generally enter into employment contracts with our executive officers nor do we have any severance plan or arrangement for our executive officers. The executives serve at the will of the Board. This approach allows us to remove an executive officer prior to retirement whenever it is in our best interests to do so, with discretion on whether to provide any severance package (excluding vested benefits). On the rare occasion when an executive officer is removed, the Compensation Committee exercises its business judgment in approving any appropriate separation agreement in consideration of all relevant circumstances, including the individual’s term of employment, past accomplishments and reasons for separation.
Executive officers are subject to certain restrictive agreements with us upon termination of employment, including confidentiality restrictions, mutual arbitration agreements and non-competition covenants and employee non-solicitation covenants. An executive could lose all outstanding long-term incentives and/or be required to refund various long-term incentive benefits realized in the prior two-year period for breaching these non-compete or non-solicitation restrictions. In addition, executives will continue to be subject to our clawback policy following termination of employment.
Assumptions and General Principles
The following assumptions and general principles apply with respect to the table below and any termination of employment of an NEO. The amounts shown in the table assume that each NEO was terminated at the end of fiscal year 2014. Accordingly, the table includes estimates of amounts that would be paid to the NEO upon the occurrence of a termination or change of control. The actual amounts to be paid to an NEO can only be determined at the time of the termination or change of control.
An NEO is entitled to receive amounts earned during employment regardless of the manner in which his or her employment is terminated. These amounts include base salary and unused vacation. These amounts are not shown in the table because they are not specifically related to the termination of employment.
Pursuant to the awards under our long-term incentives plans, an NEO who terminates employment by death, disability or retirement during the performance period under the award is eligible to receive a pro-rata payment for the portion of the period that elapsed prior to the termination of employment. In the event of a voluntary termination or a termination for cause before the end of the performance period, no payments will be made. See the discussion of “Long-Term Incentives” in the “Compensation Discussion and Analysis” for a description of our long-term incentive compensation plans.
An NEO may exercise any stock options that vested prior to the date of termination. Any payments related to these vested stock options are not included in the table because they are not specifically related to the termination of employment.
An NEO will be entitled to receive all amounts accrued and vested under our retirement and savings programs, pension plans and deferred compensation plans in which the NEO participates. These amounts will be determined and paid in accordance with the applicable plan and are not included in the table because they are not specifically related to the termination of employment. Certain of these amounts are set forth in the Pension Benefits Table and the Non-Qualified Deferred Compensation Table.

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Normal and Early Retirement
An NEO is eligible to elect normal retirement at age 65 and early retirement between the ages of 55 and 64. All of our full-time salaried employees hired prior to October 1, 2006 with at least ten years of service are eligible for health care and life insurance benefits upon normal retirement subject to the terms of the plans and applicable limits on company contributions. In addition, upon normal and early retirement, all outstanding stock options will continue to vest in accordance with their terms and be exercisable for up to five years after retirement. As of the end of fiscal year 2014, none of our NEOs were eligible for normal or early retirement.
Death and Disability
In the event of the death of an NEO, all outstanding stock options will immediately vest and become exercisable. The amounts set forth in the table for stock options reflect the difference between the closing price of our common stock at fiscal year end 2014 and the exercise prices for each option for which vesting accelerated. In the event of the disability of a NEO, all stock options will continue to vest in accordance with their terms and the Corporation’s practices. Upon an NEO’s death or disability, the executive or the executive’s estate is entitled to a pro-rata payout in respect of outstanding performance shares. The payment will be made following the completion of the applicable performance period and will be based upon the performance achieved over the applicable performance period.
Each NEO is eligible for company-paid life insurance. Under our life insurance program, the beneficiary of an NEO is entitled to receive a death benefit equal to one times the executive’s annual salary. Life insurance benefits are not shown in the table because the one times salary amount is based on the same formula that is generally available to all salaried employees.
Each NEO also participates in our disability insurance programs, which consist of salary continuation, short-term disability, and long-term disability. The salary continuation and short-term disability benefits for named executive officers are based on the same formula as those generally available to all salaried employees, and are not shown in the table. For purposes of these programs, “disability” is defined as a condition caused by a non-occupational accident or sickness that results in an inability of the employee to perform the employee’s job, and the inability to do any other job for which the employee is fit by education, training or experience. The executive long-term disability program pays as follows: upon the occurrence of a disability under the program, an NEO will receive a monthly benefit equal to 50% of the base salary and 50% of the monthly average of their last five annual incentive payments until the earlier of: (a) age 65; (b) recovery from the disability; (c) date the NEO begins receiving retirement plan benefits; or (d) death. The amounts set forth in the table reflect the amount of the first year’s payments under the program and only reflect those amounts in excess of long-term disability benefits that would be generally available to all salaried employees. Effective January 1, 2015, the executive long-term disability plan will be discontinued.
Voluntary Termination and Termination for Cause
An NEO is not entitled to receive any severance payments or additional benefits upon his voluntary decision to terminate employment with us prior to being eligible for retirement or upon termination of employment by us for cause.
Change of Control
We have entered into change of control agreements with each of the NEOs. Forms of these agreements have been publicly filed as exhibits to our reports filed with the SEC. Each agreement is set to expire in June 2015 with the agreements automatically renewed annually unless 60-days advance notice is given. Each agreement becomes effective upon a “change of control” during the term, as follows:
the acquisition by any individual, entity or group of 20% or more of the combined voting power of our outstanding securities

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a change in the composition of a majority of our Board of Directors that is not supported by our current Board of Directors
a major corporate transaction, such as a reorganization, merger or consolidation or sale or other disposition of all or substantially all of our assets, that results in a change in the majority of our Board of Directors or of more than 50% of our shareowners or
approval by our shareowners of our complete liquidation or dissolution
Each agreement provides for the continued employment of the executive for two years after the change of control on terms and conditions no less favorable than those in effect before the change of control. Severance benefits are available after a change of control, if an NEO’s employment is terminated by us without “cause” (termination for reasons other than willful nonperformance of duties after written demand or willful engagement of illegal conduct or gross misconduct) or if the executive terminates employment for “good reason” (including decrease in position, authority, duties or responsibilities, failure to maintain compensation, change in office location by more than 35 miles or certain breaches of the agreement) within that two-year period. The agreements do not provide for excise tax gross-ups. The executive is entitled to severance benefits equal to two or three times the executive’s annual compensation, including bonus, and the value of other retirement, health and welfare benefits for two or three years. Our chief executive officer, and any executive officer who was already a party to a change of control agreement with us prior to April 2012, will receive severance benefits based upon the three times multiplier. Any new executive officers, other than a new chief executive officer, will receive severance benefits based upon the two times multiplier.
In addition to the change of control agreements, our long-term incentive agreements also include accelerated vesting and potentially enhanced payout provisions in the event of a loss of employment in connection with a change of control. These long-term incentive arrangements include:
performance shares that become fully vested upon a change of control and a qualifying termination of employment and are subsequently paid out at the prior three-year average payout percentage for performance shares
stock options become fully vested upon a change of control and a qualifying termination of employment
The 2005 NQ Pension Plan provides for a lump sum payment payable upon a change of control without the requirement of a loss of employment if a participant elected this benefit prior to the end of calendar year 2008.
The following table presents, as of the end of fiscal year 2014, the estimated incremental payments potentially payable to the named executive officers upon each of the specified events.

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COMPENSATION