The annual meeting of stockholders of Pitney Bowes Inc. will be held on Monday, May 9, 2016, at 9:00 a.m. at the Hyatt Regency Hotel, 1800 East Putnam Avenue, Old Greenwich, Connecticut 06870.

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be held on May 9, 2016:

 

Pitney Bowes’ 2016 Proxy Statement and Annual Report to Stockholders, including the Report on Form 10-K for the year ended December 31, 2015, are available at www.proxyvote.com.

 

The items of business at the annual meeting are:

 

	1.		Election of 11 directors named in the proxy statement.
	2.		Ratification of the Audit Committee’s Appointment of the Independent Accountants for 2016.
	3.		Advisory Vote to Approve Executive Compensation.
	4.		Approval of Material Terms of Performance Goals Pursuant to Internal Revenue Code Section 162(m) for the Following Incentive Plans: Proposal 4(a): Pitney Bowes Inc. Key Employees Incentive Plan Proposal 4(b): Pitney Bowes Inc. 2013 Stock Plan.

 

Stockholders also will act on such other matters as may properly come before the meeting, including any adjournment or postponement of the meeting.

 

March 11, 2016 is the record date for the meeting.

 

This proxy statement and accompanying proxy card are first being distributed or made available via the Internet beginning on or about March 24, 2016.

 

Daniel J. Goldstein

Executive Vice President, Chief Legal Officer & Corporate Secretary

 

NOTICE: Your vote is important. Brokers are not permitted to vote on any proposals to be considered at the meeting except on proposal 2, ratification of the Audit Committee’s appointment of the Independent Accountants for 2016, without instructions from the beneficial owner. Therefore, if your shares are held through a broker, please instruct your broker, bank or other nominee on how to vote your shares. For your vote to be counted with respect to proposals 1, 3 or 4, you will need to communicate your voting decisions to your broker, bank, financial institution or other nominee.

 

 

Proxy Summary

 

In this summary we highlight certain information contained elsewhere in this proxy statement. This is only a summary and does not contain all the information you should consider before you submit your proxy or vote. Please read the complete proxy statement and Annual Report on Form 10-K before you submit your proxy or vote.

 

Annual Meeting Information

 

Time and Date:	Monday, May 9, 2016 at 9:00 a.m.
Place:	Hyatt Regency Hotel, 1800 East Putnam Avenue, Old Greenwich, Connecticut 06870
Requirements for Attending the Meeting:	Admission ticket, which is attached to your proxy card, or Notice of Internet Availability of Proxy Materials, together with a form of valid, government-issued photo identification, such as a driver’s license. If your shares are held in the name of a bank, broker or nominee, you must present proof of your ownership as of the record date (such as bank or brokerage account statement).
Record Date:	March 11, 2016
Voting:	Registered stockholders as of the record date (March 11, 2016) are entitled to submit proxies by Internet at www.proxyvote.com; telephone at 1-800-690-6903; or completing your proxy card; or you may vote in person at the annual meeting. If you hold your shares through a broker, bank, trustee or other nominee, you are a beneficial owner and should refer to instructions provided by that entity on voting methods.

 

Governance Structure and Leadership Roles

 

The board reappointed Michael Roth, an independent member of the board of directors, to serve as Non-Executive Chairman of the Board in May 2015. A description of the Chairman role appears in the Board of Directors Governance Principles, which can be found on the company’s website at www.pitneybowes.com under the caption “Our Company—Meet Our Leaders—Corporate Governance.”

 

2015 Summary of Business Performance

 

Pitney Bowes continued to achieve significant progress in 2015 against its three strategic initiatives to transform the company and unlock shareholder value by 1) stabilizing and reinventing the mail business, 2) driving operational excellence, and 3) growing its business through expansion in digital commerce. The progress across the company’s overall business over the course of 2015 provides optimism for the long-term future of the Company. While trends across many areas of the business improved throughout the year, the Company had expected revenue to improve from the prior year at a better rate than reported.

 

In 2015, the Company continued development on its ambitious business process re-engineering and systems project, and deployed the new system in Canada. The Company expects to deploy the system in the United States in the first half of 2016. The revenue decline in the Small and Medium business segment has continued to moderate as our new go-to-market model matures. The stabilization of equipment sales in North America is clear evidence of the effectiveness of the Company’s new go-to-market strategy. Although the Company did not achieve the degree of financial returns from its software business as expected, it continued to move its software business into new markets and develop new channels. In 2015, the Company grew Digital Commerce Solutions by changing the overall capability mix and focus with the acquisition of Borderfree and the divestiture of Imagitas, thus making the Company’s portfolio more focused and better positioned for future growth. Enterprise Business Solutions was flat on a constant currency basis. The Company also improved its balance sheet by reducing debt by over $280 million in 2015 and over $1 billion in the past three years. The Company cut its inventory levels by more than half since 2012 and continues to improve earnings before interest and taxes (EBIT) margins. The Company’s capital allocation priorities have evolved into a more balanced approach of deploying capital for growth and returning capital to our shareholders.

 

From a financial perspective, in 2015, the Company:

 

	•	Returned $150 million to shareholders in dividend payments on Pitney Bowes common stock and repurchased $135 million worth of its common stock.
	•	Achieved a 29.96% Total Shareholder Return (TSR) for the three-year period ending December 31, 2015, calculated as a compound annual growth rate (CAGR), placing the company second among its peer group.

 

	•	Strengthened its balance sheet by reducing $280 million of debt using cash on the balance sheet and the issuance of commercial paper and refinancing $110 million of other debt.
	•	Reported $1.75 in adjusted earnings per diluted share from continuing operations, within public guidance, compared to $1.90 in 2014. Earnings per share for the year were reduced by $0.07 due to the negative impact of foreign exchange.
	•	Reduced SG&A expenses year-over-year by approximately $100 million, down to $1.3 billion.
	•	Reported $716 million in adjusted earnings before interest and taxes, compared to $731 million in 2014.
	•	Achieved free cash flow of $456 million in 2015, compared to $571 million in 2014. In comparison to last year, free cash flow was lower primarily due to the timing of working capital requirements.
	•	Reported revenue of $3.6 billion, down 3% on a constant currency basis and 6% on a reported basis compared to the prior year.

 

In short, the objective of the Company’s transformation has been and continues to be to create long term value. In 2016, the Company has embarked on the most significant advertising campaign in twenty years to further expand and capitalize on the Company’s brand. We are in the early stages of providing expanded products and solutions to our clients. Results from investing in transformation will not be linear, as seen in 2015, but nevertheless it is important that the Company continues to invest in its future, like its systems, its brand and its organizational capability.

 

For a reconciliation and additional information on the calculation of the financial metrics described above, please see “Non-GAAP Measures” on page 59 of this proxy statement.

 

2015 Summary of Compensation Payouts

 

The Company divides its performance-based compensation into an annual performance component and a three-year performance component. It does so to incent management to strike an appropriate balance between the short and long term. The 2015 compensation payouts reflect this balance.

 

	•	Short Term Incentive Plan. In 2015, the Company fell short of its objectives. Consequently, the annual incentive paid was substantially less on a year to year basis and well less than target. Even though the combination of the financial metrics and the strategic modifier would have resulted in an annual incentive pool of 69% of target, management recommended, and the Executive Compensation Committee approved, a downward performance adjustment of 12% and reduced the annual incentive pool to 57% of target. This 57% incentive was significantly less than the prior year’s pool of 125% of target.
	•	Long Term Incentive Plan. The Company is focused on creating long-term value. Over the last three years, the total shareholder return of 29.96%, calculated as a three-year compound annual growth rate (CAGR), placed the Company second among its peer group of companies. Significantly, the Company exceeded its threshold levels and in most instances its target levels for all of its long term financial objectives over the three-year period ending with the 2015 fiscal year while at the same time making extensive investments for the future, such as its enterprise resource planning system, its re-branding efforts, and its overhaul of the Company’s go-to-market structure. The Company’s performance over the 2013-2015 time period supported a payout of $1.69 per unit for the cash incentive units awarded in 2013.

 

Based on the relative short and long term Company financial performance, the Company’s Short Term Incentive and Long Term Incentive Plans functioned as they were intended.

 

See “Funding of the 2015 Annual Incentive Pool and Cash Incentive Unit Pool” waterfall charts on page 40 in the Compensation Discussion and Analysis section of this proxy statement.

 

2015 CEO Compensation Actions

 

The following are highlights of compensation actions taken in February 2015 for the CEO as approved by the board of directors:

 

	•	Base salary increased to $950,000 (from $900,000 in 2014) to bring Mr. Lautenbach closer to the market(1) and the peer group median;
	•	Annual incentive target remained at 135%, positioning Mr. Lautenbach’s total target cash compensation close to the market(1) median, and resulting in a payout of $731,025 (after applying the Committee-approved 2015 performance adjustment (see pages 45 to 47 for details);
	•	Long-term incentive target increased to $5,000,000 (from $4,500,000 in 2014) moving Mr. Lautenbach’s total target direct compensation closer to the market(1) median, with the February 2015 grant consisting of 70% PSUs and 30% RSUs.

 

(1)	Market median is the average of the median CEO pay as reported in the Towers Watson Regressed Compensation Report and the Radford Global Technology Survey.

 

Direct Compensation Components and Mix

 

The overwhelming majority, 87%, of our CEO’s target total direct compensation, and 72% of target total direct compensation for the other executive officers, is variable, and is subject to financial performance metrics. In addition, more than two-thirds of the total compensation paid to our CEO, and half of the total compensation paid to the NEOs, is equity-based and aligned with shareholder interests.

 

 

 

The percentages in the above illustrations are based on target compensation.

 

2016 CEO Pay Action. Following the end of fiscal 2015, Mr. Lautenbach requested that the board not increase his annual salary or annual incentive target for 2016. Mr. Lautenbach made this request because he has asked other Company stakeholders also to focus on the long term. Management’s effort has been and will continue to be to focus on long term value. Achieving that goal has required the Company to make significant investments in the short term, with the expectation that these investments will reap benefits to the Company for many years to come. Consistent with this vision, the Board determined to keep Mr. Lautenbach’s base salary and annual incentive target constant from 2015 to 2016. In recognition of its support for Mr. Lautenbach’s focus on the long term, the Company’s progress in executing on the strategic vision to achieve positive longer-term results, and the fact that his overall package was below the median for the peer group, the Board approved an increase in Mr. Lautenbach’s long-term incentive award for 2016. As a result of these actions, Mr. Lautenbach’s total compensation for 2016 will be at approximately the median level for the Company’s peer group and with a greater emphasis on long-term compensation.

 

Meeting Agenda Items

 

Proposal 1: Election of Directors

 

You are being asked to elect eleven directors. Each of the director nominees is standing for election to a one-year term ending at the next annual meeting of stockholders in 2017 and until his or her successor has been duly elected and qualified.

 

All current directors attended over 75% of the meetings of the board and board committees on which they served in 2015.

 

Summary Information about our Director Nominees

 

Director Nominee

Age

Director Since

Occupation

Independent

Committees

Other Public Boards

Linda G. Alvarado

64

1992

President and CEO, Alvarado Construction, Inc.

X

• Finance • Governance

3M Company

Anne M. Busquet

66

2007

Principal, AMB Advisors, LLC

X

• Executive   Compensation • Governance

Medical Transcription Billing Corp., InterContinental Hotels Group PLC

Roger Fradin

62

2012

Vice Chairman, Honeywell International Inc.

X

• Audit • Finance

MSC Industrial Direct Co., Inc.

Anne Sutherland Fuchs(1)

68

2005

Consultant to private equity firms

X

• Executive   Compensation • Governance

Gartner, Inc.

S. Douglas Hutcheson

59

2012

CEO, Laser, Inc.

X

• Audit • Finance

InterDigital, Inc.

Marc B. Lautenbach

54

2012

President and CEO, Pitney Bowes Inc.

• Executive

Campbell Soup Company

Eduardo R. Menascé

70

2001

Co-Chairman, The Taylor Companies

X

• Executive • Executive   Compensation** • Governance

John Wiley & Sons Inc., Hill-Rom Holdings, Inc., Hillenbrand, Inc.

Michael I. Roth*

70

1995

Chairman and CEO, The Interpublic Group of Companies, Inc.

X

• Audit • Executive** • Finance**

Ryman Hospitality Properties Inc., The Interpublic Group of Companies, Inc.

Linda S. Sanford

63

2015

Retired Senior Vice President, International Business Machines Corporation

X

• Audit • Executive   Compensation

RELX Group, Consolidated Edison, Inc.

David L. Shedlarz

67

2001

Retired Vice Chairman, Pfizer Inc.

X

• Audit** • Executive • Finance

Teachers Insurance and Annuity Association, The Hershey Company

David B. Snow, Jr.

61

2006

Chairman and CEO, Cedar Gate Technologies, Inc.

X

• Executive • Executive   Compensation • Governance**

Teladoc, Inc.

 

(1)	Ms. Sutherland-Fuchs served on the Audit and Executive Compensation Committees through September 21, 2015. Subsequent to Ms. Sanford joining the board on September 21, 2015, Ms. Sutherland-Fuchs became a member of the Governance Committee, along with the Executive Compensation Committee.
*	Non-Executive Chairman, Pitney Bowes Inc.
**	Committee Chair

 

Proposal 2: Ratification of the Audit Committee’s Appointment of the Independent Accountants for 2016

 

The board is asking stockholders to ratify the selection of PricewaterhouseCoopers LLP as our independent accountants for 2016.

 

Proposal 3: Advisory Vote to Approve Executive Compensation

 

The board is asking stockholders to approve, on an advisory basis, the compensation of the named executive officers as disclosed in this proxy statement. The board has determined to hold this advisory vote on an annual basis. The next advisory vote will be at the 2017 annual meeting of stockholders.

 

Proposal 4: Approval of the Material Terms of the Performance Goals Pursuant to Internal Revenue Code Section 162(m) for the Following Incentive Plans:

 

Proposal 4(a) Pitney Bowes Inc. Key Employees Incentive Plan
Proposal 4(b) Pitney Bowes Inc. 2013 Stock Plan

 

The board is asking stockholders to approve the material performance criteria that can be utilized by the Company with respect to its performance-based compensation pursuant to Internal Revenue Code Section 162(m) under the Company’s Key Employees Incentive Plan and the 2013 Stock Plan. Stockholder approval of these goals is necessary every five years to ensure that performance compensation paid by the Company to its named executive officers remains tax deductible.

 

The Annual Meeting and Voting

 

Our board of directors is soliciting proxies to be used at the annual meeting of stockholders to be held on May 9, 2016, at 9:00 a.m. at the Hyatt Regency Hotel, 1800 East Putnam Avenue, Old Greenwich, Connecticut 06870, and at any adjournment or postponement of the meeting. This proxy statement contains information about the items being voted on at the annual meeting.

 

Annual Meeting Admission

 

An admission ticket, which is required for entry into the annual meeting, is attached to your proxy card if you hold shares directly in your name as a registered stockholder. If you plan to attend the annual meeting, please submit your proxy but keep the admission ticket and bring it to the annual meeting.

 

If your shares are held in the name of a bank, broker or nominee and you plan to attend the meeting, you must present proof of your ownership of Pitney Bowes stock as of the record date (such as a bank or brokerage account statement) to be admitted to the meeting.

 

If you have received a Notice of Internet Availability of Proxy Materials (a “Notice”), your Notice is your admission ticket. If you plan to attend the annual meeting, please submit your proxy, but keep the Notice and bring it to the annual meeting.

 

Stockholders also must present a form of photo identification, such as a driver’s license, in order to be admitted to the annual meeting. No cameras, recording equipment, large bags, or packages will be permitted in the annual meeting. Many cellular phones have built-in cameras, and, while these phones may be brought into the annual meeting, the camera function may not be used at any time.

 

Each stockholder may appoint only one proxy holder or representative to attend the meeting on his or her behalf.

 

Who is entitled to vote?

 

Record stockholders of Pitney Bowes common stock and $2.12 convertible preference stock at the close of business on March 11, 2016 (the record date) can vote at the meeting. As of the record date, 189,637,569 shares of Pitney Bowes common stock and 18,169 shares of $2.12 convertible preference stock were issued and outstanding. Each stockholder has one vote for each share of common stock owned as of the record date, and 16.53 votes for each share of $2.12 convertible preference stock owned as of the record date.

 

How do I vote?

 

If you are a registered stockholder which means you hold shares in your name, you may choose one of three methods to grant your proxy to have your shares voted:

 

•

you may grant your proxy on-line via the Internet by accessing the following website and following the instructions provided: www.proxyvote.com;

 

	•	you may grant your proxy by telephone (1-800-690-6903); or
	•	if you received your annual meeting material by mail, you also may choose to grant your proxy by completing and mailing the proxy card.

 

Alternatively, you may attend the meeting and vote in person.

 

If you hold your shares through a broker, bank, trustee or other nominee, you are a beneficial owner and should refer to instructions provided by that entity on voting methods. Please note that if you are a beneficial owner and you wish to vote in person at the meeting, you must first obtain a legal proxy issued in your name from the broker, bank, trustee or other nominee that holds your shares.

 

May I revoke my proxy or change my vote?

 

If you are a registered stockholder, you may revoke your proxy or change your vote at any time before your proxy is voted at the meeting by any of the following methods:

 

	•	you may send in a revised proxy dated later than the first proxy;
	•	you may vote in person at the meeting; or
	•	you may notify the corporate secretary in writing prior to the meeting that you have revoked your proxy.

 

Attendance at the meeting alone will not revoke your proxy.

 

If you hold your shares through a broker, bank, trustee or other nominee, you are a beneficial owner and should refer to instructions provided by that entity on how to revoke your proxy or change your vote.

 

What constitutes a quorum?

 

The holders of shares representing a majority of the votes entitled to be cast at the annual meeting constitutes a quorum. If you submit your proxy by Internet, telephone or proxy card, you will be considered part of the quorum. Abstentions and broker non-votes are included in the count to determine a quorum.

 

What vote is required for a proposal to pass?

 

If a quorum is present, director candidates receiving the affirmative vote of a majority of votes cast will be elected. Proposals 2, 3 and 4 will be approved if a quorum is present and a majority of the votes cast by the stockholders are voted for the proposal.

 

How are votes counted?

 

Your broker is not permitted to vote on your behalf on any proposals to be considered at the meeting except on proposal 2, the ratification of the selection of PricewaterhouseCoopers LLP as independent accountants for 2016, unless you provide specific instructions by completing and returning the voting instruction form or following the instructions provided to you to vote your stock via telephone or the Internet. If you do not own your shares of record, for your vote to be counted with respect to proposals

1, 3 or 4, you will need to communicate your voting decisions to your broker, bank, financial institution or other nominee.

 

Under New York Stock Exchange rules, if your broker holds your shares in its “street” name, the broker may vote your shares in its discretion on proposal 2 if it does not receive instructions from you.

 

If your broker does not have discretionary voting authority and you do not provide voting instructions, or if you abstain on one or more agenda items, the effect would be as follows:

 

Proposal 1: Election of Directors

 

Broker non-votes and abstentions would not be votes cast and therefore would not be counted either for or against. As a result, broker non-votes and abstentions will have no effect in the election of directors.

 

Proposal 2: Ratification of Audit Committee’s Appointment of the Independent Accountants for 2016

 

If you choose to abstain in the ratification of the Audit Committee’s selection of the independent accountants for 2016, the abstention will have no effect on the ratification of the Audit Committee’s selection of the independent accountants for 2016.

 

Proposal 3: Advisory Vote to Approve Executive Compensation

 

The vote to approve executive compensation is an advisory vote and the results will not be binding on the board of directors or the Company. The board of directors will review the results and take them into consideration when making future decisions regarding executive compensation. Broker non-votes and abstentions would not be votes cast and therefore would not be counted either for or against. As a result, broker non-votes and abstentions will have no effect on the advisory vote to approve executive compensation.

 

Proposal 4 (including Proposal 4(a) and Proposal 4(b)): Approval of the Material Terms of the Performance Goals Pursuant to Internal Revenue Code Section 162(m) for the Pitney Bowes Key Employee Incentive Plan and the 2013 Stock Plan

 

The vote to approve the material terms of the performance goals utilized under the Company’s performance-based compensation is to ensure that such compensation when paid is tax deductible. Broker non-votes and abstentions would not be votes cast and therefore would not be counted either for or against. As a result, broker non-votes and abstentions will have no effect on the approval of the material terms of the performance goals pursuant to IRC 162(m) for the Pitney Bowes Key Employee Incentive Plan and the 2013 Stock Plan.

 

How do Dividend Reinvestment Plan participants or employees with shares in the 401(k) plans vote by proxy?

 

If you are a registered stockholder and participate in our Dividend Reinvestment Plan, or our employee 401(k) plans, your proxy includes the number of shares acquired through the Dividend Reinvestment Plan and/or credited to your 401(k) plan account.

 

Shares held in our 401(k) plans are voted by the plan trustee in accordance with voting instructions received from plan participants. The plans direct the trustee to vote shares for which no instructions are received in the

same proportion (for, against or abstain) indicated by the voting instructions given by participants in the plans.

 

Who will count the votes?

 

Broadridge Financial Solutions, Inc. (Broadridge) will tabulate the votes and act as Inspector of Election.

 

Want more copies of the proxy statement? Getting too many copies?

 

Only one Notice or, if paper copies are requested, only one proxy statement and annual report to stockholders including the report on Form 10-K are delivered to multiple stockholders sharing an address unless one or more of the stockholders give us contrary instructions. You may request to receive a separate copy of these materials, either now or in the future, and we will promptly deliver the requested materials.

 

Similarly, any stockholder currently sharing an address with another stockholder but nonetheless receiving separate copies of the materials may request delivery of a single copy in the future.

 

Requests can be made to:

 

Broadridge Householding Department by phone at 1-866-540-7095 or by mail to:

 

Broadridge Householding Department
51 Mercedes Way
Edgewood, New York 11717.

 

If you own shares of stock through a bank, broker, trustee or other nominee and receive more than one copy of the materials, please contact that entity to eliminate duplicate mailings.

 

Additional copies of our annual report to stockholders, including the report on Form 10-K or the proxy statement will be sent to stockholders free of charge upon written request to:

 

Investor Relations, Pitney Bowes Inc.

3001 Summer Street
Stamford, CT 06926-0700.

 

Want Electronic Delivery of the Annual Report and Proxy Statement?

 

We want to communicate with you in the way you prefer. You may receive:

 

	•	a Notice of Internet Availability of Proxy Materials or a full set of printed materials, including the proxy statement, annual report and proxy card; or
	•	an email with instructions for how to view the annual meeting materials and vote online.

 

If you received the Notice of Internet Availability of Proxy Materials or a full set of annual meeting materials by mail, you may choose to receive future annual meeting materials electronically by following the instructions when you vote online or by telephone. With electronic delivery, you will receive an e-mail for future meetings listing the website locations of these documents and your choice to receive annual meeting materials electronically will remain in effect until you notify us that you wish to resume mail delivery of these documents. If you hold your Pitney Bowes stock through a bank, broker, trustee or other nominee, you should refer to the information provided by that entity for instructions on how to elect this option. This proxy statement and our 2015 annual report may be viewed online at www.proxyvote.com.

Stockholder Proposals and Other Business for the 2017 Annual Meeting

 

If a stockholder wants to submit a proposal for inclusion in our proxy material for the 2017 annual meeting, which is scheduled to be held on Monday, May 8, 2017, it must be received by the Corporate Secretary by the close of business on November 24, 2016. Also, under our By-laws, a stockholder can present other business at an annual meeting, including the nomination of candidates for director, only if written notice of the business or candidates is received by the Corporate Secretary no earlier than the close of business on January 9, 2017 and no later than the close of business on February 8, 2017. However, in the event that the date of the 2017 annual meeting is more than 30 days before or more than 60 days after the anniversary of our 2016 annual meeting, then the stockholder’s notice must be delivered no earlier than the close of business on the 120th day prior to the

meeting and no later than the close of business on the later of the 90th day prior to the meeting or, if the first public announcement of the date of the annual meeting is less than 100 days prior to the date of such meeting, the 10th day after the first public announcement of the meeting date. There are other procedural requirements in the By-laws pertaining to stockholder proposals and director nominations. The By-laws are posted on our Corporate Governance website at www.pitneybowes.com under the caption “Our Company—Meet Our Leaders—Corporate Governance.” If notice of a matter is not received within the applicable deadlines or does not comply with the By-laws, the chairman of the meeting may refuse to introduce such matter. If a stockholder does not meet these deadlines, or does not satisfy the requirements of Rule 14a-4 of the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the annual meeting.

Since 2012, the board of directors has separated the roles of Chairman and CEO. Michael I. Roth, an independent director, is our Non-Executive Chairman of the board of directors last reappointed by the board for an additional one-year term in May 2015. The board of directors believes it should have the flexibility to establish a leadership structure that works best for the company at a particular time, and it reviews that structure from time to time, including in the context of a change in leadership. The board believes that its current leadership structure best serves the objective of effective board oversight of management at this time and allows our

CEO to focus primarily on the operations and management of the company, while leveraging the experience of the Non-Executive Chairman to lead the board.

 

The board of directors has established well-defined responsibilities, qualifications and selection criteria with respect to the Chairman role. This information is set forth in detail in the Governance Principles of the Board of Directors, which can be found on our website at www.pitneybowes.com under the caption “Our Company—Meet Our Leaders—Corporate Governance.”

Among the board’s most important responsibilities is to oversee short and long-term succession planning and leadership development. As part of this process, the Governance Committee oversees long-term and short-term plans for CEO succession. The board of directors is responsible for evaluating the performance of the CEO and for selection of successors to that position. The criteria used when assessing the qualifications of potential CEO successors include, among others, strategic vision and leadership, operational excellence, financial management, executive officer leadership development, ability to motivate employees, and an ability to develop an effective working relationship with the board. The

Governance Principles of the Board of Directors, which are posted on the company’s website at www.pitneybowes.com under the caption “Our Company—Meet Our Leaders—Corporate Governance,” include additional information about succession planning.

 

Periodically, but not less than annually, the board of directors considers management’s recommendations concerning succession planning for senior management roles other than the role of CEO. As part of this process, the board reviews development plans to strengthen and supplement the skills and qualifications of internal succession candidates.

The Governance Committee periodically updates and reviews the skills and types of experience that should be represented on the board of directors in light of the company’s current business needs and future strategy. The Committee then compares these desired skills and experiences to those which current board members possess to determine whether all the identified skills and experience are sufficiently represented on the board. Based upon its review, and on its discussion with the CEO, the Committee may recommend to the board that additional expertise is advisable. The Committee would then develop for the board’s consideration a skill and experience profile to be used in identifying additional board candidates as appropriate.

The board believes that, in planning for board succession, it is advisable to maintain a board that includes both experienced directors with extensive knowledge of the company’s businesses, as well as newer directors who can refresh the board’s collective experience and expertise as business needs require. The board, as well as each of its committees, circulates to its members on an annual basis, a performance assessment questionnaire. The results of the assessment are reviewed by the respective committees, with a view toward taking action to address issues presented. The Governance Committee assesses the contributions of each director annually, and determines the skill set required for new members joining the board. The average tenure of our board members is approximately 10.5 years.

The board of directors is responsible for oversight of the risk assessment and risk management process. Management is responsible for risk management, including identification and mitigation planning. The company established an enterprise risk management process to identify, assess, monitor and address risks across the entire company and its business operations. The description, assessments, mitigation plan and status for each enterprise risk are developed and monitored by management, including management “risk owners” and an oversight management risk committee.

We review with both the Audit Committee and the entire board on an ongoing basis the structure of the company’s enterprise risk management program, including the overall process by which management identifies and manages risks. Upon the recommendation of the Governance Committee, the board of directors assigns oversight responsibility for each of the enterprise-wide risks to either a specific committee of the board, or to the full board. The board and each committee, with the exception of the Executive Committee, are responsible for oversight of one or more risks. The assignments are

generally made based upon the type of enterprise risk and the linkage of the subject matter to the responsibilities of the committee as described in its charter or the nature of the enterprise risk warranting review by the full board. For example, the Finance Committee oversees risks relating to liquidity and the Audit Committee oversees risks relating to cybersecurity. Each enterprise risk and its related mitigation plan is reviewed by either the board of directors or the designated board committee on an annual basis. On an annual basis, the board of directors receives a report on the status of all enterprise risks and their related mitigation plans.

Management monitors the risks and determines, from time to time, whether new risks should be considered either due to changes in the external environment, changes in the company’s business, or for other reasons. Management also determines whether previously identified risks should be combined with new or emerging risks.

 

Over the course of the year, management presents to the board for discussion purposes, the company’s overall strategic plan, as well as the strategic plan for each business unit.

The board of directors conducts an annual review of the independence of each director under the New York Stock Exchange listing standards and our standards of independence, which are set forth in the Governance Principles of the Board of Directors available on our website at www.pitneybowes.com under the caption “Our Company—Meet Our Leaders—Corporate Governance.” In making these determinations, the board of directors considers, among other things, whether any director or the director’s immediate family members have had any direct or indirect material relationship with Pitney Bowes or its management, including current or

past employment with Pitney Bowes or its independent accountants.

 

Based upon its review, the board of directors has concluded in its business judgment that the following directors are independent: Linda G. Alvarado, Anne M. Busquet, Roger Fradin, Anne Sutherland Fuchs, S. Douglas Hutcheson, Eduardo R. Menascé, Michael I. Roth, Linda S. Sanford, David L. Shedlarz, and David B. Snow, Jr.

 

Marc B. Lautenbach is not independent because he is a Pitney Bowes executive officer.

Stockholders and other interested parties may communicate with the Non-Executive Chairman of the board via e-mail at boardchairman@pb.com, the Audit Committee chair via e-mail at audit.chair@pb.com or they may write to one or more directors, care of the Corporate Secretary, Pitney Bowes Inc., 3001 Summer Street, Stamford, CT 06926-0700.

 

The board of directors has instructed the Corporate Secretary to assist the Non-Executive Chairman, Audit Committee chair and the board in reviewing all electronic and written communications, as described above, as follows:

 

(i)	Customer, vendor or employee complaints or concerns are investigated by management and copies are forwarded to the Chairman;
(ii)	If any complaints or similar communications regarding accounting, internal accounting controls or auditing matters are received, they will be forwarded by the Corporate Secretary to the General Auditor and

	to the Audit Committee chair for review and copies will be forwarded to the Chairman. Any such matter will be investigated in accordance with the procedures established by the Audit Committee; and
(iii)	Other communications raising matters that require investigation will be shared with appropriate members of management in order to permit the gathering of information relevant to the directors’ review, and will be forwarded to the director or directors to whom the communication was addressed.

 

Except as provided above, the Corporate Secretary will forward written communications to the full board of directors or to any individual director or directors to whom the communication is directed unless the communication is threatening, illegal or similarly inappropriate. Advertisements, solicitations for periodical or other subscriptions, and other similar communications generally will not be forwarded to the directors.

During 2015, each director attended at least 75% of the total number of board meetings and meetings held by the board committees on which he or she served. The board of directors met eight times in 2015, and the independent directors met in executive session, without any member of management in attendance, six times. Members of the board of directors serve on one or more of the five standing committees described below. As the need arises, the board may establish ad hoc committees of the board to consider specific issues. Mr. Lautenbach is a member of the Executive Committee.

The members of all other board committees are independent directors pursuant to New York Stock Exchange independence standards. Each committee of the board operates in accordance with a charter. The members of each of the board committees are set forth in the following chart.

 

It is the longstanding practice and the policy of the board of directors that the directors attend the annual meeting of stockholders. All directors then serving on the board attended the May 2015 annual meeting.

The Audit Committee monitors our financial reporting standards and practices and our internal financial controls to confirm compliance with the policies and objectives established by the board of directors and oversees our ethics and compliance programs. The committee appoints independent accountants to conduct the annual audits, and discusses with our independent accountants the scope of their examinations, with particular attention to areas where either the committee or the independent accountants believe special emphasis should be directed. The committee reviews the annual financial statements and independent accountant’s report, invites the independent accountant’s recommendations on internal controls and on other matters, and reviews the evaluation given and corrective action taken by management. It reviews the independence of the independent accountants and approves their fees. It

also reviews our internal accounting controls and the scope and results of our internal auditing activities, and submits reports and proposals on these matters to the board. The committee is also responsible for overseeing the process by which management identifies and manages the company’s risks. The committee meets in executive session with the independent accountants and internal auditor at each committee meeting.

 

The board of directors has determined that the following members of the Audit Committee are “audit committee financial experts,” as that term is defined by the SEC: S. Douglas Hutcheson, Michael I. Roth and David L. Shedlarz. All Audit Committee members are independent as independence for audit committee members is defined in the New York Stock Exchange standards.

The Executive Compensation Committee is responsible for our executive compensation policies and programs. The Committee chair frequently consults with, and the Committee meets in executive session with, Pay Governance LLC, its independent compensation consultant. The Committee recommends to all of the independent directors for final approval policies, programs and specific actions regarding the compensation of the CEO and the COO, and approves the same for all of our other

executive officers. The Committee also recommends the “Compensation Discussion and Analysis” for inclusion in our proxy statement, in accordance with the rules and regulations of the SEC, and reviews and approves stock grants and other stock-based compensation awards. All Executive Compensation Committee members are independent as independence for compensation committee members is defined in the New York Stock Exchange standards.

The Finance Committee reviews our financial condition and capital structure, and evaluates significant financial policies and activities, oversees our major retirement programs, advises management and recommends financial action to the board of directors. The committee’s duties include monitoring our current and projected financial condition, reviewing and recommending for board approval quarterly dividends, share repurchases, and

other major investment decisions including financing, mergers and acquisitions, divestitures and overseeing the financial operations of our retirement plans. The committee recommends for approval by the board of directors the establishment of new retirement and post-retirement benefit plans and any amendments that materially affect cost, benefit coverages, or liabilities of the plans.

The Governance Committee recommends nominees for election to the board of directors, recommends membership in, and functions of, the board committees, reviews and recommends to the board of directors the amount and form of compensation to non-employee members of the board, and oversees CEO and senior management succession planning. The Governance Principles of the Board of Directors, which are posted on our website at www.pitneybowes.com under the caption “Our Company—Meet Our Leaders—Corporate Governance,” include additional information about succession planning. The committee reviews and evaluates the effectiveness of board administration and its governing documents, and reviews and monitors company programs and policies relating to directors. The committee reviews related-person transactions in accordance with company policy.

 

The Governance Committee generally identifies qualified candidates for nomination for election to the board of directors from a variety of sources, including other board members, management and stockholders. The committee also may retain a third-party search firm to assist the committee members in identifying and evaluating potential nominees to the board of directors.

 

Stockholders wishing to recommend a candidate for consideration by the Governance Committee may do so by writing to: c/o Corporate Secretary, Pitney Bowes Inc., 3001 Summer Street, Stamford, CT 06926-0700. Recommendations submitted for consideration by the committee must contain the following information: (i) the name and address of the stockholder; (ii) the name and address of the person to be nominated; (iii) a representation that the stockholder is a holder of our stock entitled to vote at the meeting; (iv) a statement in support of the stockholder’s recommendation, including a description of the candidate’s qualifications; (v) information regard-

ing the candidate as would be required to be included in a proxy statement filed in accordance with the rules of the SEC; and (vi) the candidate’s written, signed consent to serve if elected.

 

The Governance Committee evaluates candidates stockholders recommend based on the same criteria it uses to evaluate candidates from other sources. The Governance Principles of the Board of Directors, which are posted on our Corporate Governance website at www.pitneybowes.com under the caption “Our Company—Meet Our Leaders—Corporate Governance,” include a description of director qualifications. A discussion of the specific experience and qualifications the committee identified for directors and nominees may be found under “Director Qualifications” on page 22 of this proxy statement.

 

If the Governance Committee believes that a potential candidate may be appropriate for recommendation to the board of directors, there is generally a mutual exploration process, during which the committee seeks to learn more about the candidate’s qualifications, background and interest in serving on the board of directors, and the candidate has the opportunity to learn more about the company, the board, and its governance practices. The final selection of the board’s nominees is within the sole discretion of the board of directors.

 

Alternatively, as referenced on page 12 of this proxy statement, stockholders intending to nominate a candidate for election by the stockholders at the meeting must comply with the procedures in Article I, Section 5 of the company’s By-laws. The By-laws are posted on our Corporate Governance website at www.pitneybowes.com under the caption “Our Company—Meet Our Leaders—Corporate Governance.”

In accordance with the Governance Principles of the board, the Governance Committee reviews and recommends to the board of directors the amount and form of compensation to non-employee members of the board of directors. The Governance Committee reviews the director compensation policy periodically and may consult from time to time with a compensation consultant, to be selected and retained by the committee, as to the competitiveness of the program.

 

The non-employee directors’ compensation program was last revised effective in May 2014. In connection

with its 2014 revision, the Governance Committee retained an independent compensation consultant with no other company business, Farient Advisors, to assist in its review of the director compensation program.

 

To date, the Governance Committee has set director compensation levels at approximately the 50th percentile of the total compensation in the peer and broader benchmark groups. The revised board compensation program became effective on May 12, 2014, when the company’s stockholders approved the amended and restated Directors’ Stock Plan.

Each non-employee director receives an annual retainer of $75,000 for board service and an additional retainer for service on the committees to which he or she is assigned. The non-executive chairman of the board receives an additional retainer of $100,000 commensurate with the additional responsibilities required of the chairman role.

 

Annual retainers for committee service are: $12,000 for service on the Audit Committee (with the committee chairman receiving an additional annual retainer of $12,000); $10,500 for service on the Executive Compensation Committee (with the committee chairman receiving an additional annual retainer of $10,500);

$9,000 for service on the Governance Committee (with the committee chairman receiving an additional annual retainer of $9,000); and $9,000 for service on the Finance Committee (with the committee chairman receiving an additional annual retainer of $9,000).

 

A meeting attendance fee of $2,000 is paid with respect to meetings of the Executive Committee. The Executive Committee met two times in 2015.

 

All directors are reimbursed for their out-of-pocket expenses incurred in attending board and committee meetings.

Under the amended and restated Directors’ Stock Plan, each director who was not an employee of the Company received an award of restricted stock units which are fully vested one year after the date of grant. (Directors appointed by the board to fill a vacancy during the year receive a prorated grant of restricted stock units as described in the Directors’ Stock Plan.) The units have no voting rights until they are converted to shares of common stock. Each non-employee director receives a quarterly cash payment equal to the amount that would

have been paid as a dividend with respect to shares represented by the restricted stock units held as of the record date for the payment of the common stock dividend. Non-employee directors may elect to defer the conversion of restricted stock units to shares until the date of termination of service as a director.

 

Shares shown in the table on page 20 of this proxy statement disclosing security ownership of directors and executive officers include shares granted to the directors under the Directors’ Stock Plan.

The board of directors maintains directors’ stock ownership guidelines, requiring, among other things, that each director accumulate and retain a minimum of Company common stock with a market value of five times the base retainer, or $375,000, within five years of becoming a director of Pitney Bowes. All members of the board of

directors are currently in compliance with these guidelines. The directors’ stock ownership guidelines are available on our Corporate Governance website at www.pitneybowes.com under the caption “Our Company—Meet Our Leaders.”

We maintain a Directors’ Deferred Incentive Savings Plan under which directors may defer all or part of the cash portion of their compensation. Deferred amounts will be notionally “invested” in any combination of several

institutional investment funds. The investment choices available to directors under this plan are the same as those offered to employees under the company’s 401(k) plan.

Directors may elect to defer all of their equity portion of their compensation on an annual basis. Deferral of restricted stock units (RSU) defers settlement of the RSU into Company common stock until termination from board service. RSU awards, whether deferred or not, vest on the first anniversary of the award. Deferred

RSUs continue to receive dividend equivalents. Deferred RSUs do not have any voting rights until converted into common stock. Deferred RSUs are converted into Company common stock upon the expiration of 90 days following termination of board service.

The board discontinued the Directors’ Retirement Plan, with all benefits previously earned by directors frozen as of May 12, 1997.

 

Linda G. Alvarado is the only current director who is eligible to receive a retirement benefit under the plan after termination of service on the board of directors. As of

the date the plan was frozen, she had completed five years of service as a director, the minimum years of service required to receive an annual retirement benefit of 50% of her retainer as of May 12, 1997. Therefore she will receive an annual benefit of $15,000 after termination from board service.

 

DIRECTOR COMPENSATION FOR 2015

 

		Name		Fees Earned or Paid in Cash ($)(1)			Stock Awards ($)(2)			Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3)			All Other Compensation ($)(4)			Total ($)
		Linda G. Alvarado		93,000			100,000			0			3,192			196,192
		Anne M. Busquet		94,500			100,000			0			3,192			197,692
		Roger Fradin		96,000			100,000			0			3,192			199,192
		Anne Sutherland Fuchs		97,500			100,000			0			3,192			200,692
		S. Douglas Hutcheson		96,000			100,000			0			5,339			201,339
		Eduardo R. Menascé		107,000			100,000			0			5,339			212,339
		Michael I. Roth		209,000			100,000			0			3,192			312,192
		Linda S. Sanford		27,083			63,834			0			586			91,503
		David L. Shedlarz		112,000			100,000			0			3,192			215,192
		David B. Snow, Jr.		107,500			100,000			0			5,339			212,839

(1)	Each non-employee director receives an annual retainer of $75,000 ($18,750 per quarter). The non-executive chairman receives an additional annual retainer of $100,000 ($25,000 per quarter). Each committee member receives the following annual retainer: $12,000 for Audit, $10,500 for Executive Compensation and $9,000 each for Finance and Governance. The committee chairmen receive an additional retainer of equal amounts for their respective committees.
(2)	Represents the grant date fair value of 4,403 restricted stock units granted on May 11, 2015. The number of restricted stock units was derived by dividing $100,000 by $22.71, the closing price on May 11, 2015 on the New York Stock Exchange. Neither restricted stock nor stock options were awarded to non-employee directors during 2015. Ms. Sanford received a grant of 3,123 restricted stock units granted on September 21, 2015. The number of restricted stock units was derived by pro-rating the annual stock award fair value of $100,000 and dividing the number by $20.44, the closing price on September 21, 2015 on the New York Stock Exchange. See Note 21 “Stock-Based Compensation” in the Notes to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2015 for the valuation assumptions used in determining the fair value of equity grants.
(3)	Ms. Alvarado is the only non-employee director who served on the board of directors during 2015 eligible to receive payments from the discontinued Directors’ Retirement Plan. Ms. Alvarado is eligible to receive payments upon her retirement from the board of directors. In 2015, Ms. Alvarado experienced a $2,499 reduction in her pension value.
(4)	During 2015, dividend equivalents were paid quarterly in cash to non-employee directors with respect to (a) the first quarter on the award of 3,816 restricted stock units granted in May 2014 and (b) to the second, third and fourth quarter on the 4,403 restricted stock units granted in May 2015. In addition, with respect to Messrs. Hutcheson, Menascé and Snow, dividend equivalents were paid with respect to the vested restricted stock units previously deferred. In addition, with respect to Linda Sanford, dividend equivalents were paid in the fourth quarter on the award of 3,123 restricted stock units granted when she joined the board on September 21, 2015.

The board of directors has a written “Policy on Approval and Ratification of Related-Person Transactions” which states that the Governance Committee is responsible for reviewing and approving any related person transactions between Pitney Bowes and its directors, nominees for director, executive officers, beneficial owners of more than five percent of any class of Pitney Bowes voting stock and their “immediate family members” as defined by the rules and regulations of the SEC (related persons).

 

Under the related-person transaction approval policy, any newly proposed transaction between Pitney Bowes and a related person must be submitted to the Governance Committee for approval if the amount involved in the transaction or series of transactions is greater than $120,000. Any related-person transactions that have not been pre-approved by the Governance Committee must be submitted for ratification as soon as they are identified. Ongoing related-person transactions are reviewed on an annual basis. The material facts of the transaction and the related person’s interest in the transaction must be disclosed to the Governance Committee. It is the expectation and policy of the board of directors that any related-person transactions will be at arms’ length and on terms that are fair to the company.

 

If the proposed transaction involves a related person who is a Pitney Bowes director or an immediate family member of a director, that director may not participate in the deliberations or vote regarding approval or ratification of the transaction but may be counted for the purposes of determining a quorum.

 

The following related-person transactions do not require approval by the Governance Committee:

 

1.	Any transaction with another company with which a related person’s only relationship is as an employee

	or beneficial owner of less than ten percent of that company’s shares, if the aggregate amount invested does not exceed the greater of $1 million or two percent of that company’s consolidated gross revenues;
2.	A relationship with a firm, corporation or other entity that engages in a transaction with Pitney Bowes where the related person’s interest in the transaction arises only from his or her position as a director or limited partner of the other entity that is party to the transaction;
3.	Any charitable contribution by Pitney Bowes to a charitable organization where a related person is an officer, director or trustee, if the aggregate amount involved does not exceed the greater of $1 million or two percent of the charitable organization’s consolidated gross revenues;
4.	Any transaction involving a related person where the rates or charges involved are determined by competitive bids; and
5.	Any transaction with a related person involving services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture, or similar services.

 

The Governance Committee may delegate authority to approve related-person transactions to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any approval or ratification decisions to the Governance Committee at its next scheduled meeting.

 

During 2015, no transactions were submitted to the Governance Committee for review.

The board of directors believes that, as a whole, the board should include individuals with a diverse range of experience to give the board depth and breadth in the mix of skills represented for the board to oversee management on behalf of our stockholders. In addition, the board of directors believes that there are certain attributes that each director should possess, as described below. Therefore, the board of directors and the Governance Committee consider the qualifications of directors and nominees both individually and in the context of the overall composition of the board of directors.

 

The board of directors, with the assistance of the Governance Committee, is responsible for assembling appropriate experience and capabilities within its membership as a whole, including financial literacy and expertise needed for the Audit Committee as required by applicable law and New York Stock Exchange listing standards. The Governance Committee is responsible for reviewing and revising, as needed, criteria for the selection of directors. It also reviews and updates, from time to time, the board candidate profile used in the context of a director search, in light of the current and anticipated needs of the company and the experience and talent then represented on the board of directors. The Governance Committee reviews the qualifications of director candidates in light of the criteria approved by the board of directors and recommends candidates to the board for election by the stockholders at the annual stockholders meeting.

 

The Governance Committee seeks to include individuals with a variety of occupational and personal backgrounds on the board of directors in order to obtain a range of viewpoints and perspectives and to enhance the diversity of the board of directors in such areas as experience and geography, as well as race, gender, ethnicity and age.

 

Among other things, the board of directors has determined that it is important that the board should include members with the following skills and experiences: 

•

Financial acumen for evaluation of financial statements and capital structure.

	•	International experience and experience with emerging markets to evaluate our global operations.
	•	Software and technology acumen, coupled with in-depth understanding of our business and markets, to provide counsel and oversight with regard to our strategy.
	•	Operating experience, providing specific insight into developing, implementing and assessing our operating plan and business strategy.
	•	Human resources experience, including executive compensation experience to help us attract, motivate and retain world-class talent.
	•	Corporate governance experience at publicly traded companies to support the goals of transparency, accountability for management and the board, and protection of stockholder interests.
	•	Understanding of customer communications and marketing channels to support our client focus and customer communications and marketing strategy.
	•	Turnaround experience to help us assess opportunities to reposition certain of our businesses.
	•	Leadership to motivate others and identify and develop leadership qualities in others.

 

Additionally, the board believes all directors should demonstrate integrity and ethics, business acumen, sound judgment, and the ability to commit sufficient time and attention to the activities of the board of directors, as well as the absence of any conflicts with our interests.

 

The Governance Committee assesses the effectiveness of its criteria when evaluating and recommending new candidates.

 

Each director brings experience and skills that complement those of the other directors. The board of directors believes that all the directors nominated for election are highly qualified, and have the attributes, skills and experience required for service on the board of directors. Additional information about each director, including biographical information, appears on the following pages. 

Directors are elected to terms of one year. The board of directors has eleven members whose terms expire in 2016. Upon determining to fill an open board position, the board considers candidates submitted by outside independent recruiters, directors, members of management and others. Ms. Sanford was recommended to the Governance Committee for consideration by company management. After being interviewed by various members of the board and the Governance Committee, Ms. Sanford was appointed to the board on September 21, 2015. Each of the nominees for election at the 2016 annual meeting of stockholders is a current board member and was selected by the board of directors as a nominee in accordance with the recommendation of the Governance Committee. If elected at the 2016 annual

meeting of stockholders, each of the nominees would serve until the 2017 annual meeting of stockholders and until his or her successor is elected and has qualified, or until such director’s death, resignation or removal.

 

Information about each nominee for director as of March 1, 2016, is set forth below.

 

Should any nominee become unable to accept nomination or election as a director (which is not now anticipated), the persons named in the enclosed proxy will vote for such substitute nominee as may be selected by the board of directors, unless the size of the board is reduced. At the annual meeting, proxies cannot be voted for more than the eleven director nominees.

Report of the Audit Committee

 

The Audit Committee functions pursuant to a charter that is reviewed annually and was last amended in September 2013. The committee represents and assists the board of directors in overseeing the financial reporting process and the integrity of the company’s financial statements. The committee is responsible for the appointment, compensation and retention of the independent accountants, pre-approving the services they will perform, selecting the lead engagement partner, and for reviewing the performance of the independent accountants and the company’s internal audit function. The board of directors, in its business judgment, has determined that all six of the members of the committee are “independent,” as required by applicable listing standards of the New York Stock Exchange. Three of the five members of the committee have the requisite experience to be designated as an Audit committee financial expert as defined by the rules of the Securities and Exchange Commission.

 

In the performance of its responsibilities, the committee has reviewed and discussed the audited financial statements with management and the independent accountants. The committee has also discussed with the independent accountants the matters required to be discussed under the rules adopted by the Public Company Accounting Oversight Board (“PCAOB”). Finally, the committee has received the written disclosures and the letter from the independent accountants required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with the independent accountants their independence.

 

In determining whether to recommend that the stockholders ratify the selection of PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) as Pitney Bowes’ independent accountants for 2016, management and the committee, as they have done in prior years, engaged in a review of PricewaterhouseCoopers. In that review, the committee considers the continued independence of PricewaterhouseCoopers, its geographic presence compared to that of Pitney Bowes, its industry knowledge, the quality of the audit and its services, the audit approach and supporting technology, any Securities and Exchange Commission actions and other legal issues as well as PCAOB inspection reports. Pitney Bowes management prepares an annual assessment that includes an analysis of (1) the above criteria for PricewaterhouseCoopers and the other “Big Four” accounting firms; (2) an assessment of whether firms outside of the “Big Four” should be considered; and (3) a detailed analysis of the PricewaterhouseCoopers’ fees. In addition, PricewaterhouseCoopers reviews with the committee its analysis of its independence. Based on the results of this review this year, the committee concluded that PricewaterhouseCoopers is independent and that it is in the best interests of Pitney Bowes and its investors to appoint PricewaterhouseCoopers, who have been independent accountants of the Company since 1934, to serve as Pitney Bowes’ independent registered accounting firm for 2016.

 

Based upon the review of information received and discussions as described in this report, the committee recommended to the board of directors that the audited financial statements be included in the company’s Annual Report on Form 10-K for the year ended December 31, 2015 as filed with the Securities and Exchange Commission on February 22, 2016.

 

By the Audit Committee of the board of directors,

 

David L. Shedlarz, Chair
Roger Fradin
S. Douglas Hutcheson
Michael I. Roth
Linda S. Sanford

The Audit Committee has appointed PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) as the independent accountants for Pitney Bowes for 2016. Although not required by law, this matter is being submitted to the stockholders for ratification, as a matter of good corporate governance. If this proposal is not ratified at the annual meeting by the affirmative vote of a majority of the votes cast, the Audit Committee intends to recon-

sider its appointment of PricewaterhouseCoopers as its independent accountants. PricewaterhouseCoopers has no direct or indirect financial interest in Pitney Bowes or any of its subsidiaries. A representative from PricewaterhouseCoopers is expected to attend the annual meeting and to be available to respond to appropriate questions and will have the opportunity to make a statement if he or she desires to do so.

Aggregate fees billed for professional services rendered for the company by PricewaterhouseCoopers for the years ended December 31, 2015 and 2014, were (in millions):

 

		2015						2014
Audit			$	6.3				$	7.2
Audit-Related				.9					.3
Tax				.7					.5
All Other				—					—
Total			$	7.9				$	8.0

 

Audit fees: The Audit fees for the years ended December 31, 2015 and 2014 were for services rendered for the audits of the consolidated financial statements and internal control over financial reporting of the company and selected subsidiaries, statutory audits, issuance of comfort letters, consents, income tax provision procedures, and assistance with review of documents filed with the SEC.

 

Audit-Related fees: The Audit-Related fees for the years ended December 31, 2015 and 2014 were for assurance and related services related to employee benefit plan audits, procedures performed for SSAE 16 reports, attestation services pertaining to financial reporting that are not required by statute or regulation, consultations concerning financial accounting and reporting standards and for assessing and advising in the pre-implementation of the new ERP system. The services provided for the system pre-implementation was the principal reason for the increase under this heading.

 

Tax fees: The Tax fees for the years ended December 31, 2015 and 2014 were for services related to tax compli-

ance, including the preparation and/or review of tax returns and claims for refunds.

 

The Audit Committee has adopted policies and procedures to pre-approve all services to be performed by PricewaterhouseCoopers. Specifically the committee’s policy requires pre-approval of the use of PricewaterhouseCoopers for audit services as well as detailed, specific types of services within the following categories of audit-related and non-audit services: merger and acquisition due diligence and audit services; employee benefit plan audits; tax services; procedures required to meet certain regulatory requirements; assessment of and making recommendations for improvement in internal accounting controls and selected related advisory services. The Audit Committee delegates to its Chairman the authority to address requests for pre-approval services between Audit Committee meetings, if it is deemed necessary to commence the service before the next scheduled meeting of the Audit Committee. Such pre-approval decisions are discussed at the next scheduled meeting. The committee will not approve any service prohibited by regulation or for services which, in their opinion, may impair PricewaterhouseCoopers’ independence. In each case, the committee’s policy is to pre-approve a specific annual budget by category for such audit, audit-related and tax services which the company anticipates obtaining from PricewaterhouseCoopers, and has required management to report the actual fees (versus budgeted fees) to the committee on a periodic basis throughout the year. In addition, any new, unbudgeted engagement for audit services or within one of the other pre-approved categories described above must be pre-approved by the committee or its chair.

In accordance with SEC rules, stockholders are being asked to approve, on an advisory or non-binding basis, the compensation of our named executive officers (NEOs) as disclosed in this proxy statement.

 

This proposal, commonly known as a “Say-On-Pay” proposal, provides our stockholders with the opportunity to express their views, on an advisory (non-binding) basis, on our executive compensation for our NEOs for fiscal year 2015 as described in the “Compensation Discussion and Analysis” or (CD&A) beginning on page 36 of this proxy statement, as well as the “Summary Compensation Table” and other related compensation tables and narratives, on pages 61 through 75 of this proxy statement.

 

The stockholders have approved the board of directors’ recommendation to hold advisory votes on executive compensation annually. At the company’s annual meeting of stockholders in 2015, stockholders voted in favor of the company’s executive compensation by over 98% of the votes cast.

 

The Executive Compensation Committee (Committee) and the board of directors believe that the compensation program described in the CD&A establishes effective incentives for the sustainable achievement of positive results without encouraging unnecessary or excessive risk-taking. Our compensation program appropriately aligns pay and performance incentives with stockholder

interests and enables the company to attract and retain talented executives. The company and the Committee have reached out to stockholders to solicit their views on the company’s executive compensation structure.

 

As discussed in the CD&A, the Committee has structured our executive compensation program based on the following central principles:

 

	(1)	Compensation should be tied to performance and long-term stockholder return and performance-based compensation should be a greater part of total compensation for more senior positions;
	(2)	Compensation should reflect leadership position and responsibility;
	(3)	Incentive compensation should reward both short-term and long-term performance;
	(4)	Compensation levels should be sufficiently competitive to attract and retain talent; and
	(5)	Executives should own meaningful amounts of Pitney Bowes stock to align their interests with Pitney Bowes stockholders.

 

We believe our executive compensation program demonstrates a strong link between pay and performance in its design and exhibits strong pay governance practices.

Existing Pay for Performance and Strong Pay Governance Practices

 

•	Strong Pay-for-Performance Practices:
	•	87% of our CEO’s target total direct compensation, and 72% of target total direct compensation for the other executive officers, is variable, and is subject to financial performance metrics.
	•	More than two-thirds of the total compensation paid to our CEO, and half of the total compensation paid to the NEOs, is equity-based and aligned with shareholder interests.
	•	100% of the 2015 long-term incentive mix is equity-based;
	•	100% of the annual incentive and long-term incentive program is based on financial objectives; and
	•	The long-term incentive program includes a three-year cumulative TSR modifier.
•	Strong Pay Governance Practices:
	•	No employment agreements with our executive officers;
	•	No tax gross-ups on Change-of-Control payments;
	•	No special arrangements whereby extra years of prior service are credited under our pension plans;
	•	No perquisites other than limited financial counseling and an executive physical examination benefit;
	•	“Double-trigger” vesting provisions in our Change-of-Control arrangements;
	•	A “clawback” policy that permits the company to recover incentives from senior executives whose fraud or misconduct resulted in a significant restatement of financial results;
	•	Prohibitions against pledging and hedging of our stock;
	•	Executive stock ownership policy that aligns executives’ and directors’ interests with those of stockholders, recently expanded to: (i) include more senior executives, and (ii) count only vested shares toward stock holding requirement.
•	Other Strong Pay Governance Practices:
	•	Separate roles of CEO and chairman of the board of directors;
	•	An annual risk assessment of our pay practices;
	•	An annual stockholder advisory vote on executive compensation;
	•	A direct line of communication between our stockholders and the board of directors;
	•	Committee uses tally sheets to review each component of executive officer compensation;
	•	Use of two independent third-party compensation surveys (Radford Global Technology Survey and Towers Watson Regressed Compensation Report) in determining the competitiveness of executive compensation;
	•	Use of an independent compensation consultant that advises the Committee directly on the company’s compensation structure and actions and performs no other services for the company; and
	•	Enhanced disclosure of performance targets.

We have for the past several years regularly contacted many of our stockholders to give them an opportunity to share their views about our executive compensation program. In 2015 we reached out to holders representing approximately 50% of our outstanding shares to answer questions concerning the 2015 proxy statement, including the executive compensation program. Over the past few years, the Committee has implemented features in the executive compensation program that directly related to comments received from the stockholders. We also invite our largest stockholders to provide input on executive compensation matters during the month prior to our annual meeting.

 

We urge stockholders to read the CD&A beginning on page 36 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the “Summary Compensation Table” and other related compensation tables and narratives on pages 61 through 75, which provide detailed information on the compensation of our NEOs.

 

We also invite stockholders to read our Annual Report on Form 10-K for the year ended December 31, 2015,

as filed with the Securities and Exchange Commission on February 22, 2016, which describes our business and 2015 financial results in more detail.

 

In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking stockholders to indicate their support for our NEO compensation by voting FOR this advisory resolution at the 2016 Annual Meeting:

 

RESOLVED, that the stockholders of Pitney Bowes Inc. approve on an advisory basis the compensation of the company’s named executive officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narratives in this proxy statement for the company’s 2016 Annual Meeting of Stockholders.

 

This advisory resolution, commonly referred to as a “Say-On-Pay” resolution, is non-binding on the board of directors. Although non-binding, our board of directors and the Committee will carefully review and consider the voting results when making future decisions regarding our executive compensation program. The next “Say-on-Pay” advisory vote will occur at the 2017 annual meeting.

Proposal 4(a) Pitney Bowes Inc. Key Employees Incentive Plan

 

Proposal 4(b) Pitney Bowes Inc. 2013 Stock Plan

 

In order to allow for certain awards under the Key Employees Incentive Plan (KEIP) and the Pitney Bowes Inc. 2013 Stock Plan (Stock Plan) to qualify as tax deductible “performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code (Code), the Company is asking stockholders to reapprove the material terms of the performance goals under both of the plans. One of the requirements of “performance-based compensation” for purposes of Code Section 162(m) is that the material terms of the performance goals under which compensation may be paid be disclosed to and approved by the Company’s stockholders every five years. The last time stockholders approved the material terms of the performance goals under these plans was in 2011.

 

Stockholders are not being asked to approve any amendment to the KEIP or the Stock Plan or to approve the KEIP or the Stock Plan themselves, but are only asked to re-approve the material terms of the performance goals for compliance with Section 162(m) of the Code.

 

Background. Pitney Bowes Inc.’s awards under its short and long term incentive plans are intended to be granted in a way designed to attract and retain top talent, and to provide additional incentives to eligible employees in order to align their efforts with the company and its stockholders, including through the ownership of shares of the company.

 

The KEIP is designed to provide additional cash incentives for key employees of the company through awards related to the achievement of certain performance criteria. The awards are made in the form of short-term incentives (e.g., annual cash incentives), long- term cash based incentives (e.g., Cash Incentive Units (“CIUs”) which have not been used since 2013), and such other cash incentives as the company deems reasonable and appropriate (e.g., retention awards).

 

The Stock Plan is designed to align the interest of employees with those of the stockholders through the ownership of stock in the company and to attract, motivate and retain experienced and highly qualified employees who will contribute to the company’s long-term success. Awards are made in the form of restricted stock, restricted stock units, performance stock units, options and stock appreciation rights granted under the Stock Plan.

 

Performance Based Compensation. Certain awards made under the KEIP and the 2013 Stock Plan, to the extent granted with appropriate performance conditions, are designed in a manner intended to qualify for the performance-based compensation exception under Code Section 162(m).

 

In order to continue to allow awards granted under the KEIP and the Equity Awards granted under the Stock

Plan in a manner intended to qualify as tax-deductible performance-based compensation under Section 162(m) of the Code, the company is asking stockholders to re-approve the material terms of the performance goals under each plan for compliance with Code Section 162(m).

 

IRC Section 162(m). In general, Section 162(m) of the Code places a limit on the deductibility for federal income tax purposes of the compensation paid to a company’s Chief Executive Officer or any of its three other most highly compensated executive officers (other than its Chief Financial Officer). Under Section 162(m) of the Code, compensation paid to such persons in excess of $1 million in a taxable year is not generally tax deductible. However, compensation that qualifies as “performance-based” under Section 162(m) of the Code does not count against the $1 million limitation and is tax deductible. One of the requirements of “performance-based” compensation is that the material terms of the performance goal under which compensation may be paid be disclosed to and approved by the company’s stockholders. For purposes of Section 162(m), the material terms include (a) the employees eligible to receive compensation, (b) a description of the business criteria on which the performance goal is based and (c) the maximum amount of compensation that can be paid to an employee under the performance goal. Each of these aspects of the Stock Plan and the KEIP is discussed below, and stockholder approval of this Proposal will be deemed to constitute approval of each of these aspects of the Stock Plan and the KEIP for purposes of the approval requirements of Section 162(m) of the Code.

 

Stockholder approval of the performance goals under the KEIP or for the Equity Awards under the Stock Plan is only one of several requirements under Code Section 162(m) that must be satisfied for amounts realized under the KEIP or for the Equity Awards made under the Stock Plan to qualify for the “performance-based” compensation exemption. Submission of the material terms of the performance goals for the KEIP or for the Equity Awards under the Stock Plan for stockholder approval should not be viewed as a guarantee that the company can deduct all compensation under the KEIP or under the Equity Awards of the Stock Plan. Nothing in this proposal precludes the company, the Committee or the board of directors, as applicable, from making any payment or granting awards under either the KEIP or the Stock Plan that do not qualify for tax deductibility under Section 162(m) of the Code.

 

Performance Goals. Performance goals under both the KEIP and the Stock Plan are one or more objective performance goals established by the Committee at the time the grant is made, relating to the attainment of targets for one or any combination of the following criteria with respect to the company, any of its subsidiaries, divisions, departments or units or any combination thereof. The following performance goals include any adjustments to the goals predetermined by the Committee at the time an award is made.

revenue

revenue growth

net income

gross profit

earnings before interest and taxes (EBIT)

earnings before interest, taxes, depreciation and

amortization (EBITDA)

income from continuing operations

operating income

operating profit

free cash flow

earnings per share

 

Performance goals are set by the Committee within the time period prescribed by Code Section 162(m). The Committee also establishes all adjustments that will be considered regarding the above goals.

 

The board of directors believes that it is in the best interests of the company and its stockholders to enable the company to implement compensation arrangements that qualify as fully tax deductible performance-based compensation in the KEIP and in the Stock Plan. The board of directors is therefore asking stockholders to approve, for purposes of Section 162(m) of the Code, the material terms of the performance goals in both the KEIP and the Stock Plan set forth herein.

 

Proposal 4(a) Pitney Bowes Inc. Key Employees Incentive Plan

 

Eligible Employees. Key employees of the company, generally meaning management and executive-level employees, are eligible for grants under the KEIP. The KEIP provides flexibility in creating incentive packages for specific individuals as well as various groups of key employees. The Committee determines who is a key employee. The annual incentive portion of the KEIP includes approximately 1700 plan participants, while the long-term incentive portion of the KEIP, if utilized by the Committee, would include approximately 130 plan participants.

 

Maximum Compensation. With respect to employees subject to the performance requirements under Code 162(m), no payment will be made for an award granted under the KEIP until the Committee certifies that the applicable performance goals have been attained. Amounts paid on awards granted to covered employees during any fiscal year of the company will not exceed $4,000,000 for annual cash awards and $8,000,000 for long-term cash awards, including CIUs.

 

Principal features of the KEIP. The KEIP is a cash incentive compensation plan administered by the Committee for executives, except the CEO and COO, in which cases the plan is administered by the board. Board or the Committee, as the case may be, has discretion to determine the type, terms and conditions and recipients of awards granted under the KEIP. Awards

return on investment

total earnings

return on operating assets

adjusted earnings before interest and taxes (EBIT)

organic revenue growth

total stockholder return

 

return on stockholder equity

growth of book or market value of capital stock

economic value added

achievement of cost control

stock price

 

granted to participants in the KEIP may be in the form of annual incentives, CIUs or any other form of cash award permitted under the KEIP, and will be made subject to the achievement of one or more pre-determined performance goals.

 

Annual incentives are annual cash payments of specified percentages of base salary, which are paid based upon the achievement of pre-determined corporate, unit and/or individual performance objectives. CIUs represent a right to receive cash, contingent upon the extent to which specified performance criteria are achieved during the related three-year period.

 

The KEIP does not have a stated term but may be terminated by the board of directors at any time. The board of directors may amend the KEIP to conform to any change in applicable law or for any other reason.

 

A summary description of the other terms of the KEIP can be found on page 22 of our 2006 proxy statement filed with the SEC on March 23, 2006, and such summary description is incorporated herein by reference.

 

Awards under the KEIP. Please refer to the Summary Compensation Table on pages 61 and 62 of this proxy statement for the amounts paid under the KEIP for the past three fiscal years to the named executive officers. For fiscal year 2015, all executive officers as a group were paid $2,287,983 under the KEIP. Because payments in the KEIP for fiscal 2016 will be determined by comparing actual performance to the performance targets set by the Committee, it is not possible to state the amounts that will be paid under the KEIP in fiscal 2016. In addition in 2014 the Committee started using performance stock units instead of CIUs in the company’s long-term incentive mix. Consequently the amount of awards under the KEIP were reduced to those made under the annual incentive program.

 

Proposal 4(b) Pitney Bowes Inc. 2013 Stock Plan

 

Eligible Employees. All employees of the company are eligible to receive awards under the Stock Plan, but awards are generally limited to management and executive-level employees. There are approximately 650 eligible plan participants.

Maximum Compensation. As of December 31, 2015, of the total 20,092,604 shares remaining and available for future issuance 8,967,828 are available for full value share awards. A participant may receive multiple awards under the Stock Plan. A maximum of 1,200,000 shares that are the subject of awards may be granted under the Stock Plan to an individual during any calendar year.

 

Principal features of the Stock Plan. The Stock Plan is an “omnibus” stock plan that provides for a variety of equity award vehicles to maintain flexibility. The Stock Plan permits the grant of stock options, stock appreciation rights or SARs, restricted stock awards, restricted stock units (RSUs), performance stock units (PSUs), stock awards and other stock-based awards.

 

Participants at the vice president level and above are generally granted a combination of, PSUs, RSUs and starting in 2016 stock options. Participants at the director levels are generally granted RSUs. In unique circumstances where needed for attracting, retaining and motivating executive talent, restricted stock may be awarded.

 

All of the full-time employees of the company and its affiliates are eligible to participate in the Stock Plan as

determined by the Company. From time to time, the Committee will determine who will be granted awards, the number of shares subject to such grants and all other terms of awards.

 

The Stock Plan has a term of ten years expiring on February 10, 2023, unless terminated earlier by the board of directors. The board of directors may at any time and from time to time and in any respect amend or modify the Stock Plan.

 

A summary description of the other terms of the Stock Plan can be found on pages 32 through 39 of our 2013 proxy statement filed with the SEC on March 25, 2013, and such summary description is incorporated herein by reference.

 

Awards under the Stock Plan. Please refer to the Summary Compensation Table on pages 61 and 62 of this proxy statement for the amounts paid under the Stock Plan for the past three fiscal years to the named executive officers. For fiscal year 2015, all executive officers as a group were granted $11,420,000 in PSUs and RSUs under the Stock Plan.

Equity Compensation Plan Information

 

The following table provides information as of December 31, 2015 regarding the number of shares of common stock that may be issued under our equity compensation plans.

 

Plan Category		(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights				(b) Weighted-average exercise price of outstanding options, warrants and rights				(c) Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a)
Equity compensation plans approved by security holders			11,792,073				$28.03				20,092,604
Equity compensation plans not approved by security holders			—				—				—
Total			11,792,073				$28.03				20,092,604	(1)

 

(1)	These shares are available for stock awards made under both the Stock Plan of 2013. As of December 31, 2015, of the total 20,092,604 shares remaining and available for future issuance 8,967,828 are available for full value share awards.

Report of the Executive Compensation Committee

 

The Executive Compensation Committee (Committee) of the board of directors (1) has reviewed and discussed with management the section included below in this proxy statement entitled “Compensation Discussion and Analysis” (CD&A) and (2) based on that review and discussion, the Committee has recommended to the board of directors that the CD&A be included in the company’s Annual Report on Form 10-K for the year ended December 31, 2015 and this proxy statement.

 

By the Executive Compensation Committee of the board of directors,

 

Eduardo R. Menascé, Chairman
Anne M. Busquet
Anne Sutherland Fuchs
Linda S. Sanford
David B. Snow, Jr.

 

 

Executive Summary

 

Overview

 

This CD&A section explains our compensation philosophy, summarizes the material components of our compensation programs and reviews compensation decisions made by the Committee and the independent board members. The Committee, comprised of only independent directors, makes all compensation decisions regarding the executives identified as Named Executive Officers (NEOs) in the Summary Compensation Table below, other than the Chief Executive Officer (CEO) and the Chief Operating Officer and Chief Financial Officer (COO). The independent board members, based on recommendations by the Committee, determine compensation actions impacting the CEO and the COO.

 

2015 Named Executive Officers
	•	Marc B. Lautenbach, President and Chief Executive Officer
	•	Michael Monahan, Executive Vice President, Chief Operating Officer and Chief Financial Officer
	•	Mark L. Shearer, Executive Vice President and President, Pitney Bowes SMB Solutions
	•	Mark F. Wright, Executive Vice President and President, Pitney Bowes Digital Commerce Solutions (Effective January 4, 2016, Mr. Wright was appointed to the newly created position of Executive Vice President, Strategic Growth Initiatives)
	•	Daniel J. Goldstein, Executive Vice President and Chief Legal & Compliance Officer (Effective January 1, 2016, Mr. Goldstein was elected to the position of Executive Vice President, Chief Legal Officer and Corporate Secretary)

 

Effective February 9, 2015 Mr. Monahan was appointed to the newly created role of Chief Operating Officer, while retaining his role as Chief Financial Officer.

 

Since December 3, 2012, Pitney Bowes has bifurcated the role of President and CEO and chairman of the board of directors. Marc B. Lautenbach is President and CEO and Michael I. Roth is non-executive chairman of the board of directors.

 

2015 Summary of Business Performance

 

Pitney Bowes continued to achieve significant progress in 2015 against its three strategic initiatives to transform the company and unlock shareholder value by 1) stabilizing and reinventing the mail business, 2) driving operational excellence, and 3) growing its business through expansion in digital commerce. The progress across the company’s overall business over the course of 2015 provides optimism for the long-term future of the Company. While trends across many areas of the business improved throughout the year, the Company had expected revenue to improve from prior year at a better rate than reported.

 

In 2015, the Company continued development on its ambitious business process re-engineering and systems project, and deployed the new system in Canada. The Company expects to deploy the system in the United States in the first half of 2016. The revenue decline in the Small and Medium business segment has continued to moderate as our new go- to-market model matures. The stabilization of equipment sales in North America is clear evidence of the effectiveness of the Company’s new go-to-market strategy. Although the Company did not achieve the degree of financial returns from its software business as expected, it continued to move its software business into new markets and develop new channels. In 2015, the Company grew Digital Commerce Solutions by changing the overall capability mix and focus with the acquisition of Borderfree and the divestiture of Imagitas, thus making the Company’s portfolio more focused and better positioned for future growth. Enterprise Business Solutions was flat on a constant currency basis. The Company also improved its balance sheet by reducing debt by over $280 million in 2015 and over $1 billion in the past three years. The Company cut its inventory levels by more than half since 2012 and continues to improve earnings before interest and taxes (EBIT) margins. The Company’s capital allocation priorities have evolved into a more balanced approach of deploying capital for growth and returning capital to our shareholders.

 

From a financial perspective, in 2015, the Company:

 

	•	Returned $150 million to shareholders in dividend payments on Pitney Bowes common stock and repurchased $135 million worth of its common stock.
	•	Achieved a 29.96% Total Shareholder Return (TSR) for the three-year period ending December 31, 2015, calculated as a compound annual growth rate (CAGR), placing the company second among its peer group.
	•	Strengthened its balance sheet by reducing $280 million of debt using cash on the balance sheet and the issuance of commercial paper and refinancing $110 million of other debt.
	•	Reported $1.75 in adjusted earnings per diluted share from continuing operations, within public guidance, compared to $1.90 in 2014. Earnings per share for the year were reduced by $0.07 due to the negative impact of foreign exchange.
	•	Reduced SG&A expenses year-over-year by approximately $100 million, down to $1.3 billion.
	•	Reported $716 million in adjusted earnings before interest and taxes, compared to $731 million in 2014.
	•	Achieved free cash flow of $456 million in 2015, compared to $571 million in 2014. In comparison to last year, free cash flow was lower primarily due to the timing of working capital requirements.
	•	Reported revenue of $3.6 billion, down 3% on a constant currency basis and 6% on a reported basis compared to prior year.

 

In short, the objective of the Company’s transformation has and continues to be to create long term value. In 2016, the Company has embarked on the most significant advertising campaign in twenty years to further expand and capitalize on the Company’s brand. We are in the early stages of providing expanded products and solutions to our clients. Results from investing in transformation will not be linear, as seen in 2015, but nevertheless it is important that the Company continue to invest in its future, like its systems, its brand and its organizational capability.

 

For a reconciliation and additional information on the calculation of the financial metrics described above, please see “Non-GAAP Measures” on page 59 of this proxy statement.

 

Some of the amounts in the CD&A portion of this proxy statement are shown on a non-GAAP basis. For additional detail on the calculation of the financial results reported, please refer to page 59 “Non-GAAP measures.” We urge stockholders to read our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on February 22, 2016, which describes our business and 2015 financial results in more detail.

 

CEO 2015 Compensation

 

The compensation package of our President and CEO reflects Pitney Bowes’ enhanced performance-linked pay philosophy and is competitive when compared to our peer group and two third-party compensation survey reports (see description on competitive benchmarking of compensation on pages 54 to 55). The following are characteristics of Mr. Lautenbach’s compensation compared against our peer group, the Towers Watson Regressed Compensation Report and the Radford Global Technology Survey (Survey Reports);

 

	Percentage of median Peer Group CEOs	Percentage of median Survey Reports CEOs
Base Compensation*	95%	95%
Total Cash Compensation*	94%	102%
Total Direct Compensation*	98%	113%

 

*	See page 44 for definitions of compensation terms.

 

 

The following are highlights of compensation actions taken in February 2015 for the CEO approved by the board of directors:

 

	•	Base salary increased to $950,000 (from $900,000 in 2014) to bring Mr. Lautenbach close to market(1) and peer group median;
	•	Annual incentive target remained at 135%, positioning Mr. Lautenbach’s total target cash compensation close to market(1) median, resulting in a payout of $731,025 (after applying the Committee-approved 2015 annual incentive multiplier (see pages 46 to 47 for details));
	•	Long-term incentive target increased to $5,000,000 (from $4,500,000 in 2014) moving Mr. Lautenbach’s total target direct compensation closer to market(1) median, with the February 2015 grant consisting of 70% Performance Stock Units (PSUs) and 30% Restricted Stock Units (RSUs).

 

(1)	Market median is calculated based upon a comparison to the Towers Watson Regressed Compensation Report, the Radford Global Technology Survey and the company’s peer group.

2016 CEO Pay Action. Following the end of Fiscal 2015, Mr. Lautenbach requested that the board not increase his annual salary or annual incentive target for 2016. Mr. Lautenbach made this request because he has asked other Company stakeholders also to focus on the long term. Management’s effort has been and will continue to be focused on long-term value. Achieving that goal has required the Company to make significant investments in the short term, with the expectation that these investments will reap benefits to the Company for many years to come. Consistent with this vision, the board determined to keep Mr. Lautenbach’s base salary and annual incentive target constant from 2015 to 2016. In recognition of its support for Mr. Lautenbach’s focus on the long term, the Company’s progress in executing on the strategic vision to achieve positive longer-term results, and the fact that his overall package was below the median for the peer group, the Board approved an increase in Mr. Lautenbach’s long-term incentive award for 2016. As a result of these actions, Mr. Lautenbach’s total compensation for 2016 will be at approximately the median level for the Company’s peer group and with a greater emphasis on long-term compensation.

 

Snapshot of 2015 Pay for Performance Actions

 

The Company divides its performance-based compensation into an annual performance component and a three-year performance component. It does so to incent management to strike an appropriate balance between the short and long term. The 2015 compensation payouts reflect this balance. 

	•	Short Term Incentive Plan. In 2015, the Company fell short of its objectives. Consequently, the annual incentive paid was substantially less on a year to year basis and well less than target. Even though the combination of the financial metrics and the strategic modifier would have resulted in an annual incentive pool of 69% of target, management recommended, and the Executive Compensation Committee approved, a downward performance adjustment of 12% and reduced the annual incentive pool to 57% of target. This 57% incentive was significantly less than the prior year’s pool of 125% of target.
	•	Long Term Incentive Plan. The Company is focused on creating long-term value. Over the last three years, the total shareholder return of 29.96%, calculated as a three-year compound annual growth rate (CAGR), placed the Company second among its peer group of companies. Significantly, the Company exceeded its threshold levels and in most instances its target levels for all of its long term financial objectives over the three-year period ending with the 2015 fiscal year, while at the same time making extensive investments for the future, such as its enterprise resource planning system, its re-branding efforts, and its overhaul of the Company’s go-to-market structure. The Company’s performance over the 2013-2015 time period supported a payout of $1.69 per unit for the cash incentive units awarded in 2013.

 

Based on the relative short and long term Company financial performance, the Company’s Short Term Incentive and Long Term Incentive Plans functioned as they were intended.

 

See “Funding of the 2015 Annual Incentive Pool and Cash Incentive Unit Pool waterfall charts on page 40 in the Compensation Discussion and Analysis section of this proxy statement.

 

The following tables compare the actual payouts in 2015 and 2014:

 

Annual Incentive		2015 Actual Payout Factor as a % of Target				2014 Actual Payout Factor as a % of Target				Percentage change 2015 vs. 2014
Financial Objectives			62.2	%			115.7	%
Strategic Modifier(1)			7.0	%			9.4	%
Subtotal			69.2	%			125.1	%
Performance Adjustment			(12.2	%)			0	%
Total Payout Factor			57	%			125.1	%			(54.4	%)
Long-Term Incentive		2015 Actual Unit Payout Value (2013 – 2015 cycle)				2014 Actual Unit Payout Value (2012 – 2014 cycle)				Percentage change 2015 vs. 2014
Adjusted Earnings per Share			$0.79				$0.85
Adjusted Free Cash Flow			$0.56				$0.71
TSR Modifier(2)			$0.34				($0.23	)
Subtotal			$1.69				$1.33
Total Payout Value			$1.69				$1.33				27.1	%

 

(1)	The strategic modifier in 2015 included achievement of targets against a Net Promoter Score as well employee engagement measures including sustainable engagement, client focus and team metrics based on employee survey results. See page 47 for additional details.
(2)	The TSR Modifier is a cumulative three-year modifier, which modifies the final payout by up to +/– 25% based on the company’s TSR as compared to the company’s peer group. The relative TSR modifier for the 2012 – 2014 cycle and 2013 – 2015 cycle was –15% and +25%, respectively.

 

For additional detail on the calculation of the financial metrics described above, please refer to page 59 “Non-GAAP Measures” and corresponding table. Also see “2015 Compensation” beginning on page 45 of this proxy statement for a discussion of each of the compensation components and the respective payouts.

 

Funding of the 2015 Annual Incentive Pool and Payout Multiplier

 

 

Funding of the 2015 Cash Incentive Unit Pool and Payout Value

 

 

Summary of 2015 Executive Compensation Changes

 

At the company’s annual meeting of stockholders in 2015, stockholders voted in favor of our executive compensation program by over 98% of votes cast. Management and the Committee maintain a commitment to obtaining and considering stockholder feedback on the company’s compensation program by soliciting feedback over the course of the year. Although no specific changes were made to the compensation program as a result of the 2015 say on pay vote, the following highlights the changes that were made to the program from 2013 through February 2016, some of which were made as a result of stockholder outreach.

 

Key Compensation Actions Taken in Last Four Years

 

 

 

While there were no material changes in the executive compensation program in 2015, for 2016, the Committee reintroduced stock options as a component of the company’s long-term incentive plan along with performance stock units and restricted stock units. In addition, the Performance Stock Unit awards made in 2016 adopt three-year cumulative performance metrics in determining payouts, a change from the previous single year aggregated metrics approach. The Company also elim-

inated the Total Shareholder Return modifier previously utilized in the plan design for 2016.

 

The company continued its use of a strategic modifier as part of its annual incentive program which included the use of (i) a net promoter score, a universal metric to measure client satisfaction and (ii) an employee survey to capture employee engagement. The strategic modifier can increase the annual incentive pay-out by up to ten percentage points.

In February 2015, based on the business results for 2014, the Committee and the independent directors increased the CEO’s base salary by 5.6%, bringing his

base salary closer to market median based on competitive benchmarks. For the NEOs, excluding the CEO, base salary increases in 2015 averaged 2.3%.

We believe that together these financial objectives effectively measure how well our business is performing on a short-term basis and represent appropriate metrics upon which to base annual incentive awards. We limited the number of duplicative metrics across annual and long-term incentives to just one: adjusted free cash flow. We believe that the ability to generate free cash flow both on a short and long-term basis is extremely important as it allows the company to manage its current financial needs and is central to the company’s future health and ability to take advantage of growth opportunities as presented.

 

In addition to adjusted free cash flow (Adjusted FCF), the 2015 annual incentive program also includes the following metrics below.

 

	•	Adjusted earnings before interest and taxes (Adjusted EBIT). This is an appropriate measure for annual incentive compensation because it directly reflects current profitability and performance.
	•	Adjusted revenue growth (Adjusted RG). This is an appropriate measure because it indicates whether our business is expanding, after excluding the impact of foreign currency translation and the disposal of certain business operations.

 

Each of these metrics excludes the impact of certain special items, both positive and negative, which could mask the underlying trend or performance within a business. The adjustments for special items are made consistently year-to-year and are explained on page 59 in “Non-GAAP Measures.”

 

We set the targets for the Adjusted EBIT, Adjusted RG and Adjusted FCF financial objectives relative to overall guidance provided to stockholders and the financial community at the beginning of 2015. The only revision to targets during the course of the year reflected the revision to guidance announced as a result of the sale of the Imagitas business and acquisition of Borderfree. We believe that the 2015 financial objectives at each level

(threshold, target and maximum) accurately balance the difficulty of attainment of the level with the related payout.

 

Strategic metrics (Strategic Modifier) are applied as a modifier to compensation payouts by up to ten percentage points. Strategic goals are targets that are important to the successful operation of the enterprise above and beyond financial goals. The strategic goals for 2015 were (i) Voice of the Client, measured as a net promoter score and (ii) High Performance Culture, measured from employee surveys. (See discussion on page 47 below for more details.) These important strategic goals are the foundation for our future business success and essential for positive financial results.

 

Funding of the Annual Incentive Pool and 2015 Actual Payout

 

Funding of the annual incentive pool begins with the sum of the annual incentive targets of eligible Pitney Bowes Incentive Plan (PBIP) participants. For more information on setting the target see “Assessing Competitive Practice” on page 54.

 

For NEOs, executive officers, unit presidents and staff vice presidents, the annual incentive would only be paid if the company achieves its Section 162(m) threshold goal of $271,190,000 in income from continuing operations, excluding certain special events. (See “Treatment of Special Events” beginning on page 59 of this proxy statement.) This target is intended to allow payments under the annual incentive program to qualify as performance-based compensation for purposes of Code Section 162(m). Actual 2015 income from continuing operations, excluding all special events, was $351,726,000.

 

The chart below shows actual financial results and the payout as compared to target with respect to the financial objectives under the annual incentive plan.

In determining the final annual incentive payout, the Committee compared the company’s 2015 performance against each of the annual incentive plan’s financial targets (see above). Based solely on the financial targets above, the payout percentage would be 62.2%.Then the Committee calculated the results of the annual incentive’s strategic modifier to be 7% (see above) bringing the payout percentage to a total of 69.2%. Based on the overall financial performance of the company, this year the Committee, and independent board members with

respect to the CEO and COO, applied a (12.2%) performance adjustment, producing a final payout percentage of 57.0%.

 

Mr. Lautenbach made annual incentive payout recommendations to the Committee for the other NEOs, based on the percentages calculated above, including the downward performance adjustment. The chart below indicates the annual incentive payouts to all NEOs.

Long-term incentives link the NEOs’ rewards to the company’s long-term financial performance and stock price. We also pay long-term incentives in order to be competitive in the markets in which we operate and in order to attract and retain high-performing executives.

 

Since 2014, 100% of executive long-term incentive awards are linked to changes in shareholder value. (70% PSUs and 30% performance-based RSUs).

As a result of the way equity-based PSUs and cash-based CIUs are reported on the Summary Compensation Table, in 2015 and 2014, you will see a “bunching” of award values. The outstanding and previously granted cash-based CIU awards are reflected as required under SEC rules when paid, but the equity denominated PSUs are required to be reported when granted. Although it may appear from a review of the Summary Compensation Table that the total value of LTI has increased, in

fact, it only reflects the different timing of when cash versus equity is reported in accordance with SEC requirements. Depending when an NEO first was awarded CIUs, the “bunching” effect may have initially appeared in either 2014 or 2015 compensation. Since the final CIU award payout is reported in this proxy, there should be no “bunching” effect in 2016 compensation reported in next year’s proxy statement.

 

In 2016, long-term incentives were modified as follows: (1) stock options were reintroduced, resulting in a new mix of 60% PSUs, 20% RSUs and 20% stock options, (2) with respect to PSUs, (i) new three-year cumulative metrics were substituted for the current series of one-year metrics aggregated over three years, and (ii) the three-year Total Shareholder Return versus peers modifier was eliminated. The reintroduction of stock options further strengthens our commitment to strong long-term growth from a stockholder perspective, as these awards have value only if Company stock price increases. The new three-year cumulative metrics underlying the 2016-2018 PSU awards, demonstrates our commitment to the sustainable long-term growth of the company. Finally, given the changes just discussed, it was determined that the relative three-year TSR modifier was no longer needed.

 

Performance Stock Units (PSUs)

 

PSUs are long-term equity awards granted annually with three year performance and vesting cycles and in 2015 constituted 70% of an NEO’s long-term incentive award. At any given time, after three years of PSU awards there will be three PSU cycles outstanding. The vesting of long-term incentive awards are generally subject to achieving an average income from continuing operations (IFCO) financial threshold target established for purposes of Code Section 162(m). If the average IFCO target is not met, then the entire award is forfeited. In addition, vesting of PSUs is based on achieving various challenging enterprise-wide financial objectives established at the beginning of each year of the three-year performance cycle. If the enterprise-wide financial objectives are not met for a calendar year, one-third of the award will be forfeited.

 

The enterprise-wide financial objectives set by the Committee include adjusted earnings per share and adjusted free cash flow. We believe both of these financial factors are important indicators of the company’s long-term viability and performance and thus are appropriate metrics upon which to base long-term incentive awards. Adjusted earnings per share (Adjusted EPS) is an appropriate measure of long-term profitability, and strong Adjusted FCF provides us with needed resources to reposition and pursue new growth opportunities.

 

The one year financial objectives for fiscal 2014 and 2015 relating to the outstanding 2014-2016 and 2015-2017 PSU awards are the same as the 2014 and 2015 fiscal year objectives for the 2013-2015 CIU awards. Please see “CIU Objectives and Metrics” on page 49 for these measures.

The Committee generally sets the financial targets close to the midpoint of the guidance we provide to stockholders and the financial community at the beginning of each year. Subsequent revisions of guidance during the course of the year do not affect the targets set at the beginning of a year. Before finalizing payouts, the Committee ranks the company’s cumulative three-year TSR against the cumulative three-year TSR of each Company in the peer group and can adjust the final payout by plus or minus 25%. The TSR modifier cannot result in a positive adjustment if there is a negative TSR over the three-year cycle, notwithstanding the company’s relative TSR to peers. The Committee believes it set the 2015 objectives with the appropriate level of difficulty and stretch for each target.

 

The number of PSUs granted at target in 2015 was determined using Monte-Carlo simulation modelling. Monte-Carlo simulation modelling is a generally accepted statistical technique used, in this instance, to simulate a range of possible future prices for Pitney Bowes common stock based on various inputs, including stock volatility, dividend yield, expected term, and risk-free rates.

 

The number of shares vesting at the end of the cycle can range from 0 to 200% of the initial number granted based on achievement of the Committee approved financial goals and application of the cumulative three-year TSR modifier. The Committee also can employ negative discretion to reduce the payout even if the financial goals are achieved based on overall company performance.

 

Performance-Based Restricted Stock Units

 

An annual grant of performance-based restricted stock units (RSUs) is made during the first quarter of the year.

 

For NEOs, executive officers, unit presidents and staff vice presidents, no RSUs will vest unless the company achieves at least the Section 162(m) threshold target of $271,190,000 income from continuing operations, excluding certain special events in 2015. (See “Treatment of Special Events” beginning on page 59 of this proxy statement.) Actual 2015 income from continuing operations, excluding all special events, was $351,726,000, which exceeded the target. The Section 162(m) threshold targets for income from continuing operations and actual 2015 income from continuing operations were adjusted to eliminate the impact of the disposal of certain business operations in accordance with the predetermined definition of income from continuing operations.

 

In 2015 performance-based RSUs comprised 30% of an NEO’s long-term incentive award. The 2015 award vests in three equal installments if the executive is still employed on the vesting date. If the initial income from continuing operations target had not been achieved, the RSUs granted in 2015 would have been forfeited.

Cash Incentive Units (CIUs)

 

CIUs were long-term cash awards granted prior to 2014 with three year performance and vesting cycles. The last remaining CIU award cycle vested at the end of 2015 and was paid in February 2016. The vesting of CIUs was subject to achieving an average IFCO financial threshold target over the cycle period, established for purposes of Code Section 162(m). CIU payouts were based on achieving challenging enterprise-wide financial objectives established at the beginning of each year of the three-year cycle. A threshold level of performance for enterprise-wide financial objectives was necessary for each year’s vesting. Beginning with the 2014 - 2016 cycle, we eliminated this component of LTI compensation and replaced it with PSUs, discussed above.

The Committee believes it set the 2015 objectives as it relates to previously awarded CIUs with the appropriate level of difficulty and stretch for each target. The Committee generally sets the financial targets close to the midpoint of the guidance we provide to stockholders and the financial community at the beginning of each year. Subsequent revisions of guidance during the course of the year do not affect the targets set at the beginning of a year. The enterprise-wide financial objectives set by the Committee include Adjusted EPS and Adjusted FCF. Before finalizing payouts, the Committee ranks the company’s cumulative three-year TSR against the cumulative three-year TSR of each company in the peer group.

2015 Funding of the Cash Incentive Unit Pool and Actual Payout

 

For the 2013 – 2015 CIU cycle, the unit value at target is $1.00. The CIU value range is between $0 and $2.00 based upon the achievement of the pre-determined financial objectives described above, each weighted at 50%. The Committee modifies the resulting unit value by up to +/– 25% based on our cumulative three-year TSR as ranked against the cumulative three-year TSR of companies within our peer group linking payout to our relative TSR. If TSR is negative for the cumulative three year period, there is no positive application of the TSR modifier.

For NEOs, executive officers, unit presidents and staff vice presidents the 2013 – 2015 CIU cycle is only paid if the company achieves the restated Section 162(m) threshold goal of average income from continuing operations over the cycle of $264,482,000, excluding certain special events. (See “Treatment of Special Events” beginning on page 59 of this proxy statement.) Average annual income from continuing operations for the 2013 –2015 CIU cycle was $373,269,000, which exceeded the performance threshold. The chart below shows actual results as compared to target before and after applying the TSR Modifier for the 2013 – 2015 cycle.

Performance-Based Market Stock Units

 

Performance-based market stock units (MSUs) were granted to executive officers, including NEOs, in February 2012 for the first and only time. In 2013, the Committee determined that MSUs would no longer be a part of the company’s executive compensation structure. The number of MSUs that can vest is capped at 200% of the number of MSUs originally granted. A minimum number of shares, comprising 50% of the award, were eligible to vest at the end of the three-year performance period.

 

The number of performance-based MSUs that vested on February 3, 2015 was based on (i) the company’s

TSR over the vesting period and (ii) the executives’ continued employment until the vesting date. The number of units which vested was determined by multiplying the number of units awarded by a fraction, the numerator of which is the Pitney Bowes ending stock price, $24.01⁽¹⁾, plus cumulative dividends paid on outstanding company stock during the vesting period, $3.19, and the denominator, of which is the Pitney Bowes beginning stock price, $19.26⁽²⁾. Vesting of the MSU awards was also based on the company’s achievement of an IFCO target, $383,665,000, in the initial year of the award, which was met. Based on the company’s TSR over the award period, a multiplier of 1.41 was applied to the target number of 2012 MSU awards.

Periodic Off-Cycle Long-Term Awards

 

In special circumstances, the Committee, or in the case of the CEO and COO, the independent board members, may determine that it is appropriate to make additional long-term award grants to executives during the course

of the year. In some cases, these awards are part of the long-term incentive awards made to hires during the course of a calendar year, and in other cases, these awards are in addition to the long-term incentive awards made in any given year. No off-cycle long-term awards were made to NEOs in 2015.

Retirement Compensation

 

In the United States, retirement benefits include:

 

	•	Qualified and nonqualified restoration pension plans for employees hired prior to January 1, 2005.
	•	Qualified and nonqualified restoration 401(k) plans with company matching contributions up to 4% of eligible compensation and 2% company core contribution for those not eligible for the Pension Plan. Participants become eligible for the company matching and company core contributions after one year of employment with the company.

 

Nonqualified restoration plans (pension and 401(k)) are based on the same formulas as are used under the qualified plans and make up for benefits that would have been provided under the qualified plan except for limitations set forth under the Internal Revenue Code of 1986, as amended. Restoration plans are available to a select group of management or highly compensated employees, including the NEOs.

 

Nonqualified plans are unfunded obligations of the company subject to claims by our creditors. An individual account under the 401(k) Restoration Plan:

 

	•	is adjusted on the basis of notional investment returns of publicly-available mutual fund investments; and
	•	does not receive any above-market earnings.

 

The Pension Restoration Plan applies the same standard actuarial rules as are applied under the qualified Pension Plan.

Effective December 31, 2014, the board of directors approved the freezing of all future Pension Plan benefit accruals for all employees.

 

Similar amendments were adopted with respect to the Pension Restoration Plan. At the same time, the board of directors amended the 401(k) Plan and the 401(k) Restoration Plan, effective January 1, 2015, to provide eligibility to participate in the 2% employer core contribution to those employees who will no longer accrue benefits under the Pension Plan. The 2% employer core contribution has been in effect since 2005 when the Pension Plan was closed to new employees hired after December 31, 2004.

 

For additional information, please see the narrative accompanying the “Pension Benefits as of December 31, 2015” table on page 68 and the narrative accompanying the “Nonqualified Deferred Compensation for 2015” table on pages 60 to 70 of this proxy statement.

 

Other Benefits

 

Other benefits include:

 

•

Nonqualified Deferred Incentive Savings Plan:

	Ο	Provides a savings vehicle in a tax efficient manner
	Ο	Provides certain executives the ability to voluntarily defer payouts of annual cash incentives, CIUs and base pay into a nonqualified deferred compensation plan

	•	Effective February 2015, certain executives with RSUs and PSUs who are subject to the executive stock ownership policy, may voluntarily elect to defer settlement of RSUs and PSUs until termination or retirement. Executives who choose deferral receive dividend equivalents after the award vests which are also deferred.
	•	Limited additional benefits, including, financial counseling to assist with tax law compliance and to provide guidance in managing complex investment, tax, legal and estate matters.

	•	Relocation assistance for executives asked to move to a new work location facilitates the placement of the right person in the job and aids in developing talent
	•	Executive physical
	•	Spousal travel

The Committee is responsible for reviewing the performance of and approving compensation awarded to our executive officers, other than the CEO and COO. The independent board members, with the input of the Committee, (i) set individual target compensation annually for the CEO and COO, (ii) review their performance, (iii) determine their compensation pay-outs by comparing actual performance against the established objectives,

and (iv) approve the TSR modifier. In addition, the Committee, and the independent board members with respect to the CEO and COO, may exercise negative discretion in its sole determination. The Committee works closely with its independent consultant, Pay Governance LLC, and management to examine various pay and performance matters throughout the year.

The Committee retains Pay Governance as its independent compensation consultant and considers advice and information provided by Pay Governance in determining the compensation for the CEO and the other NEOs. The consultant regularly attends the Committee meetings and advises on a range of matters, including peer group composition, plan design, and competitive pay practices. The consultant does not perform other services for the company. We incurred $66,405 in fees for Pay Governance for services performed for the Committee during 2015. The Committee considered the following six factors and determined there was no conflict in the engagement of Pay Governance and that Pay Governance is independent: (i) the provision of other services to the company by Pay Governance; (ii) the amount of fees received from the company by Pay

Governance, as a percentage of the total revenue of Pay Governance; (iii) the policies and procedures of Pay Governance that are designed to prevent conflicts of interest; (iv) any business or personal relationship of the Pay Governance consultant with a member of the Committee; (v) any company stock owned by the Pay Governance consultants; and (vi) any business or personal relationship of the Pay Governance consultant or Pay Governance with any of the company’s executive officers. The Committee has the sole authority to hire and terminate its consultant.

 

The Committee also reviews independence factors applicable to other consultants, including, outside law firms and Towers Watson, management’s compensation consultant.

At the beginning of each year our CEO, on behalf of senior management, recommends to the Committee financial objectives for the annual and long-term incentive plans based on the financial objectives set by the board of directors. The Committee and the independent directors review the recommendations of management particularly with respect to the appropriateness and rigor of the objectives and approve the final annual and long term objectives.

After reviewing benchmarking data presented by external consultants, our CEO and Executive Vice President and Chief Human Resources Officer recommend compensation target levels for total direct compensation as well as the annual and long-term incentive compensation for executive officers, including the NEOs, other than the CEO and COO. The Committee reviews management’s recommendations and determines the appropriate financial objectives, base salary and the target levels

of annual and long-term incentive compensation. The Committee also recommends for approval by the independent board members the base salary and annual and long-term incentive target levels for the CEO and COO. Generally at this time, the Committee also approves any changes to the compensation program for the coming year.

 

At the end of each year, each NEO completes a written self-assessment of his or her performance against his or her objectives. The CEO evaluates the performance of his executive officer direct reports and recommends incentive compensation actions other than for himself to the Committee. The Committee recommends to the independent board members an individual rating for the CEO. The Committee reviews the financial accomplishments of the company, taking into account predetermined objectives for the preceding year, and determines actual base salary increases as well as the annual and long-term incentive compensation for the NEOs and recommends for approval by the independent board members the compensation for the CEO and COO. The actual payout levels for annual incentive compensation are based upon the company’s performance against the predetermined financial objectives and other criteria, as discussed in further detail under “Annual Incentives” beginning on page 45. For long-term incentive compensation, the recommendation to the Committee for payout levels is based on pre-determined financial objectives and a TSR Modifier, as discussed in further detail under “Long-term Incentives” beginning on page 47 of this proxy statement.

To assist in this process, the Committee also reviews tally sheets prepared by the Human Resources department to evaluate the individual components and the total mix of compensation. The tally sheets show the dollar amount of each of the components of each executive officer’s compensation, summarizing the total compensation opportunity, including the executive’s fixed and variable compensation, perquisites and potential payments upon termination or Change of Control. In addition, the tally sheets include a summary of historical compensation. These tally sheets aid the Committee in analyzing the individual compensation components as well as the compensation mix and weighting of the components within the total compensation package.

 

To evaluate whether each NEO’s compensation package is competitive with the marketplace, the Committee, and with respect to the CEO and COO, the independent board members, also review each executive’s total direct compensation against market data during the benchmarking process as more fully described in “Assessing Competitive Practice” below. Based on the structure of our current management team, the Committee and the board strive to ensure that the relationship between the compensation paid to the CEO and the second highest paid NEO are within acceptable market norms, subject to considerations such as performance, the market median compensation of the respective positions, contributions to the company and experience that may lead to deviations from market relationships.

To evaluate whether Pitney Bowes’ executive compensation is competitive in the marketplace, the Committee annually compares each executive’s total direct compensation (base salary, annual incentive and long-term incentives) against two independent reports with a view towards determining the optimal mix and level of compensation, the Towers Watson Regressed Compensation Report (Towers Watson Report) and the Radford High-Tech Industry Survey Report (Radford Report). We then review the targets and actual payouts against publicly available data from our peer group to evaluate ongoing compensation opportunity and competitiveness. Finally, the Committee’s independent compensation consultant reviews the data presented to the Committee, before the Committee establishes the target total direct compensation structure. The Committee sets compensation targets assuming achievement of specific incentive award performance objectives at target.

 

The Towers Watson data is regressed for corporate revenue of approximately $4.0 billion for corporate leaders and actual regressed revenue for business unit leaders. The Towers Watson Report is a sub-section of the 2014 US Compensation Data Bank (CDB) General Industry Executive Database. The Radford Report bases its analysis on applicable revenue ranges as they pertain to various roles. The Radford Report is derived from a database of survey results from high-tech companies.

The Committee believes using the Towers Watson Report regressed revenue scope and the revenue ranges in the Radford Report more accurately reflect market competitiveness against outside companies. However, the exact number of companies included in the data for each executive position may vary depending on the structure of the applicable company and whether the company submitted the relevant data.

 

This market data provides important reference points for the Committee but is not the sole basis for determining appropriate compensation design, compensation targets, or individual pay levels. Use of comparative industry data and outside surveys only serves to indicate to the Committee whether those decisions are in line with industry in general and our peer group in particular. The Committee believes that the comparative industry data used from the Towers Watson Report, the Radford Report and the peer group are consistent with our compensation philosophy. In addition, compensation targets and individual pay levels may vary from the median for various reasons, including:

 

	•	the value of the total rewards package;
	•	program design and strategic considerations;
	•	affordability;
	•	changing competitive conditions;

	•	program transition considerations;
	•	the definition and scope of the executive’s role;
	•	the executive’s individual contributions to the company; or
	•	succession or retention considerations.

 

In making its determination that the Pitney Bowes compensation package is appropriate and competitive, the Committee takes the following actions.

 

The Committee first identifies for each NEO the median of the data presented in the Towers Watson and Radford Reports in determining target base salary, target total cash compensation and target total direct compensation. In making its final determination on any one position, the Committee will also take into account unique skill sets presented by the employee.

 

In addition, as a supplement to the Towers Watson and Radford Reports, the Committee asks Pay Governance to analyze the specific compensation program design and provide its opinion. The Committee and the board also consider the burn rate with respect to the equity awards when deciding how much of the total direct compensation package should be composed of equity-based awards. Burn rate is the total equity awarded in a fiscal year divided by the total common stock outstanding at the beginning of the year. Our three-year average burn rate for the time period from 2013 to 2015 is 0.85% (down from 0.86% based on the prior year three-year average), and is well below the median burn rate of 1.60% for S&P 1500 companies in fiscal year 2014 (source: Equilar 2015 Equity Trends Report).

 

Next, the Committee annually reviews our relative performance, compensation targets and actual payouts against the relative performance and compensation of the peer group listed below.

Based on this rigorous review, the Committee has determined that the Pitney Bowes total compensation package for 2015 is appropriate and competitive considering all the factors outlined above.

 

PEER GROUP

 

Although we do not have a single completely overlapping competitor due to the unique mix of our business, we use a peer group of companies similar in size and complexity to benchmark our executive compensation. In 2015, the Committee reviewed the composition of the peer group and decided that no changes were necessary. Pay Governance and the Committee designed our peer group so the Committee could analyze compensation packages, including compensation mix and other benefits, within the competitive market to attract and retain the talent and skill required to lead our business. This peer group consists of services, industrial and technology companies. When evaluating the appropriateness of the peer group, the Committee considered factors such as revenue, net income, market capitalization, number of employees, and complexity of the business to ensure a reasonable balance in terms of company size and an adequate number of peers. The Committee also considered any feedback received from stockholders. Our peer group consists of companies with revenues between $2.8 billion and $18.4 billion, and market capitalization between $0.5 billion and $20.9 billion.

 

The Committee continues to include Xerox in our peer group despite the revenue size difference because the Committee considers it our closest direct peer in the office equipment space and it also is undergoing a similar transformation in its core business.

We maintain an executive stock ownership policy that encourages executives to think as owners and to own substantial amounts of company stock to more closely align our key executives’ interests with the long-term interests of our stockholders.

 

The Committee reviews the executive stock ownership policy annually to make sure it is in line with the policy’s objectives.

 

Under the executive stock ownership policy the multiple of base salary ownership requirement for the CEO, COO and other executive officers is 5X, 3X and 2X, respectively. Unit presidents and staff vice presidents are required to own 1X multiple of base salary. Only shares owned outright, shares held in a trust and shares owned under a deferred compensation arrangement are counted toward the ownership requirement.

 

Beginning with RSU and PSU awards made in February 2015, executives who are required to own certain levels of company stock under the executive stock ownership policy may elect to defer the settlement of RSUs and PSUs upon vesting until the executives terminate employment or retire. Executives who choose to defer in this manner receive dividend equivalents once the awards vest, which are also deferred as vested RSUs.

 

		Stock Ownership as a
Title		Multiple of Base Salary
Chief Executive Officer		5X
Chief Operating Officer		3X
Other Executive Officers		2X
Unit Presidents and Staff Vice Presidents		1X

We calculate the number of shares targeted for retention by multiplying an executive’s annual base salary times the multiple of salary required and dividing by the average closing price of our common stock on the last trading day of each of the prior two calendar years.

 

The guidelines provide that the CEO and other executive officers have five years to achieve the required ownership levels from the date of the first award following the time they become covered by this policy or covered by an increased holding requirement. Until the CEO and other executive officers meet the required ownership levels, that executive is required to hold at least 75% of their “net profit shares” in the first five years, and 100% of the “net profit shares” thereafter.

 

Unit Presidents and Staff Vice Presidents must hold at least 50% of their “net profit shares” until the multiple is met. With respect to stock options, net profit shares are the shares remaining after the option is exercised, and, with respect to RSUs, PSUs and restricted stock, net profit shares are the shares remaining after vesting and payment of taxes. As long as the multiple of salary requirement is met, an executive may sell shares acquired previously in the market as well as shares acquired through the exercise of stock options or the vesting of equity awards, subject to normal trading restrictions. The company’s Stock Plan of 2013 allows executives subject to the stock ownership policy to defer settlement of RSUs and PSUs after vesting so that executives may achieve required ownership levels faster.

We believe that the cash payments and benefit levels provided to our executives following a Change of Control transaction are consistent with current market practice for companies of our size. Our Change of Control arrangements are intended to encourage those executives most closely connected to a potential Change of Control to act more objectively, and therefore, in the best interests of our stockholders, despite the fact that such a transaction could result in the executives’ termination. Our Change of Control protections also encourage executives to remain with the company until the completion of the transaction to enable a successful transition. Accelerated vesting of equity awards and Change of Control severance payments occur only when an employee is terminated without cause or when an employee voluntarily terminates for good reason (such as a reduction in position, pay or other constructive termination event) within two years following a Change of Control (a “double trigger” payment mechanism). The Change of Control, by itself, does not cause severance payments or accelerated vesting of equity awards.

 

The company does not gross up its executives for any excise tax imposed on Change of Control payments.

 

Under the Senior Executive Severance Policy (SESP), NEOs are entitled to severance equal to two times the

sum of the participant’s current annual salary and the participant’s average annual incentive award in the preceding three calendar years in the event their employment is terminated on account of a Change of Control period.

 

A Change of Control is defined as (i) an acquisition of 30% or more of our common stock, or 30% or more of the combined voting power of our voting securities by an individual, entity or group, (ii) replacement of a majority of the board of directors other than as approved by the incumbent board, (iii) as a result of a reorganization, merger, consolidation or sale, more than 50% of our common stock and voting power changes hands, or (iv) approval by stockholders of a liquidation or dissolution of the company.

 

Our Change of Control arrangements fit into our overall compensation objectives because they are aligned with our goal of providing a compensation package sufficiently competitive to attract and retain talent and aligned with stockholder interests. With the double trigger payment mechanism applicable to both equity vesting and cash payouts and the lack of any gross-up, we believe the Change of Control arrangements are market leading from a corporate governance perspective.

Our compensation programs are generally designed with the intent to satisfy the requirements for full deductibility under Code Section 162(m). Section 162(m) denies the company a tax deduction for certain compensation in excess of $1 million paid to “covered employees,” but exempts from this $1 million cap compensation that qualifies as performance-based compensation under Section 162(m).We generally structure our incentive compensation programs with the intention to qualify as performance-based compensation under Section 162(m). However, the Committee weighs the benefits of compliance with Section 162(m) against the potential limitations of such compliance, and may award compensation that may not be fully deductible if it determines that it is in the company’s best interest to do so. The rules and regulations promulgated under Code Section 162(m) are complicated and subject to change from time to time, sometimes with retroactive effect. In addition, a number of requirements must be met in order for particular compensation to qualify. As such, there can be no assurance that any compensation awarded or paid by the company will be fully deductible under all circumstances.

 

Stock options were not granted as part of the mix of long-term incentives in 2015, however, stock options will be introduced into the mix of long-term incentives for 2016. Special awards of stock options may be also be granted. In those cases we value stock options based upon the Black-Scholes valuation method, consistent with the provisions of FASB Accounting Standards Codification Topic 718 (ASC 718). Key assumptions used to estimate the fair value of stock options include:

	•	the volatility of our stock price;
	•	the risk-free interest rate;
	•	expected term; and
	•	our dividend yield.

 

We also use a Monte-Carlo simulation, which is a generally accepted statistical technique, to value PSUs. The technique simulates a range of possible future stock prices for the company. Key assumptions used to estimate the value of PSUs include:

 

	•	the volatility of our stock price;
	•	the risk-free interest rate;
	•	expected term; and
	•	our dividend yield.

 

The Monte-Carlo simulation uses generally the same metrics as Black-Scholes, but calculates its ultimate result using an iterative method that generates many possible future stock price paths. We believe that the valuation techniques and the approaches utilized to develop the underlying assumptions are appropriate in estimating the fair value of our stock option and PSU grants. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by the company under ASC 718.

 

In determining the number of PSUs to be awarded in the mix of long-term incentives, we value PSUs

based upon the Monte-Carlo simulated value on the date of grant. In reporting the value of PSU grants in the Summary Compensation Table, the value of PSUs shown represents the full value of the award based on a targeted number of shares multiplied by the Monte-Carlo value on the date of the award. The Monte-Carlo value also takes into account the non-payment of dividends during the vesting period.

 

In determining the number of RSUs to be awarded in the mix of long-term incentives, we value RSUs based

upon the closing price of our common stock on the grant date. In reporting the value of RSUs in the Summary Compensation Table, we discount the value of the RSUs for non-payment of dividends during the vesting period as required by accounting guidance under ASC 718.

 

For additional information on the accounting treatment for stock-based awards, see note 21 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015.

Non-GAAP Measures

 

Non-GAAP measures should not be construed as an alternative to our reported results determined in accordance with Generally Accepted Accounting Principles (GAAP). Further, our definitions of these non-GAAP measures may differ from similarly titled measures used by other companies. We use measures such as adjusted earnings per share, adjusted free cash flow, adjusted income from continuing operations and adjusted earnings before interest and taxes to exclude the impact of special items like restructuring charges, asset impairments and tax adjustments, because, while these are actual income or expenses of ours, they can mask underlying trends associated with our business. Such items are often inconsistent in amount and frequency and, as such, the adjustments allow greater insight into the current underlying operating trends of the business.

 

Adjusted earnings per share and adjusted income from continuing operations provide greater insight into the current underlying operating trends of the business by excluding special items such as restructuring charges, asset impairments and tax adjustments.

 

Free cash flow provides insight into the amount of cash that management could have available for other discretionary uses. It adjusts GAAP cash flow provided by operating activities for capital expenditures, as well as the cash impact of special items such as restructuring charges, unusual tax settlements or payments and special pension contributions.

 

Management uses earnings before interest and taxes (EBIT) to measure profitability and performance. EBIT is determined by deducting from revenue the related costs and expenses attributable to the segment. EBIT excludes interest and taxes, as well as special items such as restructuring charges and goodwill and asset impairments.

 

Revenue growth is presented on a constant currency basis and excludes the impact of disposals of certain business operations. Revenue growth is intended to provide a better understanding of the underlying operational performance of the business over the period.

Pitney Bowes Inc.

Reconciliation of Reported Consolidated Results to Adjusted Measures

(Unaudited)

 

(Dollars in thousands, except per share data)		2015				2014				2013(1)
GAAP diluted earnings per share from continuing operations, as reported		$	2.00			$	1.47			$	1.42
Restructuring charges and asset impairments			0.09				0.29				0.29
Gain on sale/disposition of businesses			(0.42	)			—				—
Acquisition and disposition transaction costs			0.06				—				—
Legal settlement			0.02				—				—
Acquisition related compensation expense			0.04				—				—
Investment divestiture			(0.04	)			(0.05	)			—
Extinguishment of debt			—				0.19				0.10
Diluted earnings per share from continuing operations, as adjusted(2)			1.75				1.90				1.81
Adjustment for businesses sold(1)			—				—				0.07
Investment divestiture			0.04				0.05				—
Adjusted earnings per share(2)		$	1.79			$	1.95			$	1.88
GAAP net cash provided by operating activities, as reported		$	514,639			$	655,526			$	624,824
Capital expenditures			(166,329	)			(180,556	)			(137,512	)
Reserve account deposits			(24,202	)			(15,666	)			(20,104	)
Restructuring payments			62,086				56,162				59,520
Payments (receipts) related to investment divestiture			20,602				(5,737	)			—
Acquisition related compensation payment			10,483				—				—
Tax payment related to sale of Imagitas			21,224				—				—
Cash transaction fees related to acquisitions and dispositions			17,971				—				—
Extinguishment of debt			—				61,657				32,639
Tax and other payments on sale of businesses and leveraged lease assets			—				—				75,545
Pension contribution			—				—				—
Free cash flow, as adjusted			456,474				571,386				634,912
Reserve account deposits			24,202				15,666				20,104
Net finance receivables(3)			(96,611	)			(119,668	)			—
Adjusted free cash flow		$	384,065			$	467,384			$	655,016
GAAP income from continuing operations after income taxes, as reported		$	402,672			$	300,006			$	287,612
Restructuring charges and asset impairments, after tax			18,089				59,349				59,024
Gain on sale/disposition of businesses			(84,250	)			—				—
Acquisition and disposition transaction costs			11,475				—				—
Legal settlement			4,250				—				—
Acquisition related compensation expense			7,246				—				—
Investment divestiture, after tax			(7,756	)			(9,774	)			—
Extinguishment of debt, after tax			—				37,833				19,911
Income from continuing operations after income taxes, as adjusted			351,726				387,414				366,547
Adjustment for businesses sold(1)			—				—				14,121
Adjusted income from continuing operations		$	351,726			$	387,414			$	380,668
GAAP income from continuing operations before income taxes, as reported		$	610,825			$	431,196			$	383,954
Interest expense, net, before tax			159,374				169,450				186,987
Restructuring charges and asset impairments, before tax			25,782				84,560				84,344
Gain on sale/disposition of businesses			(107,268	)			—				—
Acquisition and disposition transaction costs			9,930				—				—
Legal settlement			6,900				—				—
Acquisition related compensation expense			10,483				—				—
Investment divestiture, before tax			100				(15,919	)			—
Extinguishment of debt, before tax			—				61,657				32,639
Adjusted earnings before interest and taxes			716,126				730,944				687,924
Impacts of foreign currency compared to budget(4)			22,353				417				3,210
Alignment of management to shareholders(6)			(21,639	)			—				—
Adjustment for businesses sold(1)			—				—				22,600
Adjusted earnings before interest and taxes		$	716,840			$	731,361			$	713,734
Reported revenue growth			(6.4%	)			0.8%				(0.8%	)
Impacts of foreign currency			3.5%				0.4%				0.3%
Disposal of non-core businesses(5)			0.0%				0.4%				0.0%
Revenue growth, as adjusted			(2.9%	)			1.6%				(0.5%	)
Adjustment for businesses sold(1)			0.0%				0.0%				(0.3%	)
Adjusted revenue growth			(2.9%	)			1.6%				(0.8%	)

 

(1)	2013 has been restated for discontinued operations that occurred subsequent to the reported fiscal year. During 2014, we sold our Canadian Document Imaging Solutions business.
(2)	The sum of the earnings per share amounts may not equal the totals above due to rounding.
(3)	Adjusted free cash flow excludes the impact of finance receivables in 2015 and 2014.
(4)	Adjusted earnings before interest and taxes, as adjusted is translated at budget rates.
(5)	Adjusted revenue growth excludes the impact of the disposal of non-core businesses in 2014.
(6)	Adjusted earnings before interest and taxes excludes the impact of adjustments to performance-based accruals.