Communications with Directors

Shareholders and other parties interested in communicating directly with the Chairman, any Committee Chair, or with the non-employee directors as a group may do so by contacting the Chairman of the Board, c/o Corporate Secretary, FLIR Systems, Inc., 27700 SW Parkway Avenue, Wilsonville, Oregon 97070. Concerns relating to accounting, internal controls or auditing matters are promptly brought to the attention of the Audit Committee and handled in accordance with procedures established by the Audit Committee.

Shareholder Engagement

Shareholder engagement is an important element of our overall corporate governance. Our chief executive officer,

chief financial officer and other members of our management team regularly engage in dialogue with our shareholders. During 2018 and the first quarter of 2019, Company management and members of the Compensation Committee actively solicited input from the Company’s top 65 institutional shareholders regarding the Company’s executive compensation program, including the Company’s 2018 non-binding vote on executive compensation (commonly referred to as the “say-on-pay vote”), corporate governance matters and other topics of interest to the shareholder. Telephone calls and meetings were scheduled with every institutional shareholder who agreed to speak with the Company directly.

Meetings

During 2018, the Company’s Board of Directors held six meetings and acted by unanimous written consent one time. In 2018, each director attended more than 75% of the total board and committee meetings. Pursuant to FLIR’s Corporate Governance Principles, each director is expected to commit

the time necessary to prepare for and attend all board and committee meetings, as well as the Annual Meeting of Shareholders. All members of the Board attended the 2018 Annual Meeting of Shareholders and all members of the Board are expected to attend the 2019 Annual Meeting of Shareholders.

Board of Directors Independence

FLIR’s Corporate Governance Principles provide that the Board of Directors must be comprised of a majority of independent directors. The Board of Directors reviews annually the relationship that each director has with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) and determines the independence of each director. The Board has determined that each of the directors of the Company is “independent” as defined by applicable NASDAQ rules, except for Mr. Lewis, who retired as President and Chief Executive Officer of the Company in May 2013, and Mr. Cannon, the Company’s current Chief Executive Officer. The Board of Directors took into account all relevant facts and circumstances in making this determination.

Board of Directors Committees

The Board of Directors has standing Audit, Compensation and Corporate Governance Committees. In 2016 the Board of Directors established an Ethics and Compliance Committee to provide enhanced focus specifically on ethics and compliance matters involving the Company and to highlight the Board’s commitment to Company compliance efforts. Each committee operates pursuant to a written charter, which is reviewed annually. The charter of each committee may be viewed online at www.flir.com/about/investor-relations. The performance of each committee is reviewed annually. Each committee may obtain advice and assistance from internal or external legal, accounting and other advisors. The members of the Audit, Compensation, Corporate Governance and Ethics and Compliance Committees have all been determined to be “independent” as defined by applicable NASDAQ rules. The current members of each committee are identified in the following table.

The Audit Committee is responsible for, among other things: overseeing the integrity of the Company’s financial statements and financial reporting process; the independent registered public accounting firm’s qualifications, appointment and independence; the performance of the internal audit function; the review of all third-party transactions involving, directly or indirectly, the Company and any of its directors or officers; and the adequacy of the Company’s accounting and internal control systems. During fiscal year 2018, the Audit Committee held five meetings.

The Compensation Committee is responsible for, among other things: all matters relating to the compensation of the Company’s executives, including salaries, bonuses, fringe benefits, incentive compensation, equity-based

compensation, retirement benefits, severance pay and benefits, and compensation and benefits in the event of a change of control of the Company, oversee and evaluate the performance of the Company’s CEO, oversee the administration of the Company’s talent management process, and executive talent management and succession. The Compensation Committee also administers the Company’s equity compensation plans. See also the “Compensation Discussion and Analysis” section of this Proxy Statement for additional details on the governance of the Compensation Committee and a description of the Company’s processes and procedures for determining executive compensation. During 2018, the Compensation Committee held eight meetings.

The Corporate Governance Committee is responsible for, among other things: recommending to the Board operating policies to ensure an appropriate level of corporate governance; overseeing the Board’s annual self- evaluation; identifying qualified candidates to serve on the Board; determining the qualification of Board members; evaluating the size and composition of the Board and its committees; reviewing the Company’s Corporate Governance Principles; in conjunction with the Compensation Committee, reviewing the compensation policies for non-employee directors; providing oversight assistance of management activities relating to the integrity and security of the Company’s information technology systems, including with the full Board review and oversight of the Company’s cybersecurity initiatives; and recommending nominees to stand for election at each annual meeting of shareholders. The Corporate Governance Committee seeks candidates to serve on the Board who are persons of integrity, with significant accomplishments and recognized business experience, but does not have any specific minimum qualifications or criteria for director nominees. As required by its charter, the Corporate Governance Committee considers diversity of backgrounds, experiences, expertise, skill sets and viewpoints when considering nominees for director. We actively seek director candidates who bring diversity of age, gender, nationality, race, ethnicity, and sexual orientation. During each board meeting, the Corporate Governance Committee reviews candidates for directorship assembled in the previous quarter. During 2018, the Corporate Governance Committee held four meetings.

The Ethics and Compliance Committee was established in 2016 to provide enhanced focus specifically on ethics and compliance matters involving the Company and to highlight the Board’s commitment to Company compliance efforts and is responsible for, among other things: at the direction of the Board, to make recommendations regarding the Company’s corporate compliance and ethics posture, programs, policies and procedures to facilitate the operation of the Company in a compliant and ethical manner; as may be requested by the Board from time to time, to develop and recommend to the Corporate Governance Committee or Board for approval, revisions to the Company’s corporate governance principles with respect to the Company’s ethics and compliance; as requested by the Board, review and make recommendations regarding the content of the Company’s Code of Ethical Business Conduct and Code of Ethics for Senior Financial Officers; and as requested by the Board, review and make recommendations to the Board or Corporate Governance Committee with respect to policies and programs to facilitate compliance with the Company’s Code of Ethical Business Conduct, Corporate Governance Principles, and Corporate policies and procedures addressing the ethical and compliance operations of the Company, as adopted and amended from time to time by the Board. The members of the Ethics and Compliance Committee were instrumental in reviewing and remediating the Company’s compliance efforts and facilitating the Company’s Consent Agreement with the United States Department of State. During 2018, the Ethics and Compliance Committee held five meetings.

Shareholder Nominations and Proxy Access

The Corporate Governance Committee will review recommendations from shareholders of individuals for consideration as candidates for election to the Board of Directors. Any such recommendation should be submitted in writing to the Corporate Secretary, FLIR Systems, Inc., 27700 SW Parkway Avenue, Wilsonville, Oregon 97070. Our Bylaws set forth procedures that must be followed by shareholders seeking to nominate directors. Our Fourth Restated Bylaws include proxy access, which permits eligible shareholders to nominate candidates for election to the Board. Our Bylaws allow a shareholder or a group of no more than 20 shareholders that has maintained continuous ownership of 3% or more of the Company’s Common Stock for at least three years to include in the Company’s proxy materials nominees for election as director for an annual meeting of shareholders. With our current board consisting of eleven members, eligible shareholders may nominate a number of director nominees not to exceed two of the directors then in office. To nominate a director, the shareholder must provide the information required by our Bylaws. In addition, the shareholder must give timely notice to our Corporate Secretary in accordance with our Bylaws, which, in general, require that the notice be received by our Corporate Secretary within the period described under “Dates for Submission of Shareholder Proposals for 2020 Annual Meeting of Shareholders” section of this Proxy Statement. Each notice given by a shareholder with respect to nominations for the election of directors must comply with the requirements of Section 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and our Bylaws.

Corporate Governance

FLIR maintains a Governance page on its website that provides specific information about its corporate governance initiatives, including FLIR’s Corporate Governance Principles, Code of Ethical Business Conduct, Code of Ethics for Senior Financial Officers and charters for the committees of the Board of Directors. The Governance page can be found on our website at www.flir.com/about/investor-relations. To the extent mandated by legal requirements, we intend to disclose on our website any amendments or waivers to our Corporate Governance Principles, Code of Ethical Business Conduct, and Code of Ethics for Senior Financial Officers.

On February 6, 2019, the Board of Directors, based on the recommendation of the Corporate Governance Committee, determined that it was in the best interest of the Company and its shareholders to remove the mandatory retirement age provision of our Corporate Governance Principles. In making this determination, the Board of Directors considered not only the valuable guidance and experience that each of the specific director nominees that would have otherwise been impacted by this policy provides the Board, but also the fact that an arbitrary limitation on the age of a potential director limits the Board of Directors’ ability to consider the widest

variety of potential director nominees, especially given that age does not necessarily diminish a person’s ability to bring a history of significant accomplishments and leadership, and valuable experience, skills and characteristics to the Board. In making this change the Board also reconfirmed its commitment to complete diversity of its Board.

FLIR’s policies and practices reflect corporate governance initiatives that are compliant with the listing requirements of NASDAQ and the corporate governance requirements of the Sarbanes-Oxley Act of 2002, as amended (“SOX”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended (the “Dodd-Frank Act”), including:

You may obtain copies of the documents posted on FLIR’s Governance page on its website by writing to the Corporate Secretary, FLIR Systems, Inc., 27700 SW Parkway Avenue, Wilsonville, Oregon 97070.

Board Leadership Structure and Role in Risk Oversight

The Company has a separate Chairman of the Board and Chief Executive Officer structure. In addition, the Chairman of

the Company’s Corporate Governance Committee serves as Presiding Director for the executive sessions of the independent directors. The Board has determined that this structure is appropriate for the Company at this time as it most fully maximizes our Chairman’s extensive knowledge of the Company’s business and industry. The Board acknowledges that no single leadership model is right for all companies, however, so the Board periodically reviews its leadership structure.

The Board is actively involved in oversight of risks inherent in the operation of the Company’s business including, without limitation, those risks described in the Company’s reports filed from time to time with the Securities and Exchange Commission (“SEC”). It is management’s responsibility to manage risk and bring to the Board’s attention the material risks to the Company. The Board has oversight responsibility for the processes established to report and monitor systems for material risks applicable to the Company. The Board manages this responsibility at the Board level with assistance from its four committees, as appropriate. The Board has delegated to the Audit Committee certain tasks related to the Company’s risk management process. The Audit Committee (i) serves as an independent and objective body to monitor the Company’s financial reporting process and internal control systems and (ii) assists the Board in oversight of the Company’s compliance with legal and regulatory requirements. The Board has delegated to the Compensation Committee responsibility for oversight of management’s compensation risk assessment, including the annual determination of whether or not the Company’s compensation policies and practices are reasonably likely to have a material adverse effect on the Company. The Corporate Governance Committee oversees the Company’s risks in the areas of corporate governance and is primarily responsible for the integrity and security of the Company’s information technology systems, including the review and oversight of the Company’s cybersecurity initiatives, Board and committee performance and membership and compensation and director nomination/succession. The Ethics and Compliance Committee at the direction of the Board of Directors provides enhanced oversight and makes recommendations concerning the Company’s compliance and ethics posture. These committees report the results of their review processes to the full Board during regularly scheduled Board meetings or more frequently, if warranted. In addition to review and discussion of reports prepared by the committees of the Board, the Board periodically discusses risk oversight in specific areas as they arise, including as part of its corporate strategy review.

Compensation Risk

Company management annually conducts an assessment of our compensation policies and practices, including our executive compensation programs, to evaluate the potential risks associated with these policies and practices. Management has reviewed and discussed the findings of the assessment with the Compensation Committee concluding that our compensation programs are designed with an

appropriate balance of risk and reward and do not encourage excessive or unnecessary risk-taking behavior. As a result, we do not believe that risks relating to our compensation policies and practices for our employees are reasonably likely to have a material adverse effect on the Company.

In conducting this review, management considered the following attributes of our programs:

In addition, our Compensation Committee considered compensation risk implications during its deliberations on the design of our 2019 executive compensation programs with the goal of appropriately balancing short-term incentives and long-term performance.

Introduction

This Compensation Discussion and Analysis describes the principles and material elements of our executive compensation program, how we applied those principles in determining the material elements of the compensation for our Named Executive Officers (“NEOs”) for 2018 and how we use our executive compensation program to drive performance.

Our executive compensation program is designed to align the interests of our executive officers with those of our shareholders by providing market-competitive compensation opportunities to our executives upon the achievement of a variety of short-term and long-term objectives. The Compensation Committee reviews at least annually all elements of executive officer compensation and makes changes as needed to remain competitive, fair, reasonable and consistent with our goals of pay for performance and alignment with shareholder interests. We believe that our actions in 2018 and in prior years effectively link pay to performance.

Executive Summary

2018 was the first full year following our transition to Jim Cannon as Chief Executive Officer, the realignment of the Company’s operating structure from six segments to three operating business units, and implementation of The FLIR Method (“TFM”). In 2018, we achieved growth in our 2018 Annual Incentive Plan (“2018 AIP”) targets of organic revenue, adjusted operating margin and working capital turns, and enhanced profitability.

Our 2018 executive compensation program reflected our objectives of establishment of a foundation for building consistent long-term revenue and earnings growth, operational efficiency and improved capital management.

Our Business and Strategy

We are a world leader in sensor systems that enhance perception and awareness. Our advanced sensors and integrated sensor systems enable the creation, gathering, and analysis of critical data and images for use in a wide variety of applications in commercial, industrial, and government markets worldwide.

Our operational task is to consistently exceed shareholder commitments with integrity. And our purpose as an entity is to save lives and livelihoods. We will operate with these in mind all the time and will drive our strategies with the intention to succeed in the eyes of our customers, employees, and shareholders.

Our core values are: Be Ready, Be Bold, Be Brave, and Be Ambitious. First is Be Ready, which speaks to prioritizing speed and agility in reacting to an ever- changing technology landscape. Second is Be Bold, by pioneering and innovating to continue pushing the boundaries of what is possible in both our technology as well as our daily operations. Third is Be Brave in our actions to exhibit the utmost integrity and ethics in our daily decision-making—not usually, but always. And Fourth is Be Ambitious with a will to win, a tenacity to find the best ways to accomplish our tasks, and collaborate with the utmost respect for our teammates and our customers.

These core values serve as the standards by which our people operate and behave at FLIR, aligning culture with our business strategy. We expect our teams to feel accountable for upholding these values each and every day, and by doing so, we expect to see tangible results in our business performance.

During 2018 we also continued a business transformation through the initiative that we call The FLIR Method (“TFM”). This is a long-term investment that we expect to better enable organic growth, increase our profitability, and generate excess cash to utilize in ways that enhance shareholder returns. TFM initiatives have been launched throughout the organization with a focus on enhancing our productivity, refining our product pricing strategy, standardizing our core business terminology to better share best practices globally, implement expanded talent development programs, boost our acquisition and integration processes, and continue to develop world-class products that exceed our customers’ expectations.

2018 Business Highlights

During 2018, Revenue was $1.78 Billion, compared to $1.80 Billion for 2017, a decrease of 1.4% compared to prior year, which included $140 million of revenue from the security products businesses which were divested in February 2018. Excluding the revenue from the divested security businesses, organic revenue growth was 6% in 2018. Organic Revenue (defined as Revenue excluding the impact of acquisitions, divestitures and foreign currency translation changes) was a

metric accounting for 50% of the 2018 AIP. The 6% organic revenue growth achieved 109% of the target Organic Revenue metric for our 2018 AIP.

During 2018, we achieved GAAP operating margin of 17.9% compared to 16.1% in 2017. Operating Margin is defined as the Company’s earnings from operations divided by revenue for the same period. Adjusted Operating Margin for purposes of the Company’s annual incentive plan is defined as Adjusted non-GAAP earnings from operations divided by Organic Revenue. Adjusted non-GAAP earnings from operations is defined as non-GAAP earnings from operations (defined as GAAP earnings from operations excluding amortization of acquired intangible assets, purchase accounting adjustments, restructuring charges, acquisition related expenses, loss on sale of business, executive transition costs, export compliance matters and other) divided by Organic Revenue. During 2018, we achieved Adjusted Operating Margin of 23.12% compared to Adjusted Operating Margin in 2017 of 21.90%, an increase in Adjusted Operating Margin of 122 basis points year over year. Adjusted Operating Margin was a metric accounting for 30% of 2018 annual incentive plan. The 122 basis point increase in Adjusted Operating Margin achieved 169% of the target Operating Margin metric for our 2018 AIP.

2018 Working Capital Turnover was 2.82x compared to 2.60x for 2017, an increase in Working Capital Turnover of 0.22x year over year. Increase in Working Capital Turnover was a metric accounting for 20% of our 2018 AIP. The increase in

Working Capital Turnover achieved 72% of the target Working Capital Turnover metric for our 2018 annual incentive plan. Working Capital Turnover is calculated as revenue divided by the trailing five-quarter average of the Company’s net working capital balances comprised of accounts receivable, inventories, demonstration assets, and accounts payable, excluding the impact of current year acquisitions and dispositions.

2018 GAAP net earnings per diluted share was $2.01 compared to $0.77 in 2017. GAAP net earnings in 2018 were negatively impacted by pre-tax charges of $23.3 million associated with export compliance matters including a penalty accrued in connection with a consent agreement, a pre-tax charge of $13.7 million for the loss on the sale of business, and other items, partially offset by discrete tax benefits including the release of a $33.1 million previously recorded unrecognized tax position. GAAP net earnings in 2017 were negatively impacted by discrete tax charges of $94.4 million related to the U.S. Tax Cuts and Jobs Act, as well as a $23.6 million pre-tax loss on assets held for sale.

Stock Price Performance

Over the three- and five-year periods ending December 31, 2018, we outperformed the Standard & Poor’s 500 Index (the “S&P 500”) and underperformed our 2018 Peer Group (see below) in relative total shareholder return (“TSR”), as reflected in the following graph. At December 31, 2018, the closing price of our Common Stock was $43.54.

During 2018, the Compensation Committee made several key decisions:

Key details of Mr. Cannon’s amended employment agreement are:

The compensation levels in Mr. Cannon’s amended employment agreement were based on the Committee’s assessment of 2018 Comparator Group data and its compensation philosophy of targeting compensation at 50^th percentile of the 2018 Comparator Group.

For Mr. Buffum, we paid a sign on cash bonus and RSU grant to recruit him to our Company.

Further details about these practices and the reasons behind them are discussed below under “Base Salary,” “Annual Incentive Compensation,” “Long-Term Incentive Program,” “CEO Leadership Performance Grant,” “Employment Agreements,” and “Post-Termination Compensation.”

We regularly review our executive compensation plans and practices based on such factors the Compensation Committee deems appropriate, which may include evolving market practices, executive officer retention, feedback from our shareholders, changes in our strategy or financial performance, or changes in accounting and tax rules. For 2018, our Compensation Committee solicited input from several of our key shareholders regarding the Company’s compensation program and has taken shareholder feedback into account in designing our 2018 compensation program for executive officers.

Our NEOs for 2018 are:

Pay for Performance Overview

Pay Mix

In 2018, we continued our strong commitment to a pay for performance executive compensation program by aligning a significant portion of executive compensation with demonstrated performance. As shown by the charts below, fixed compensation for our CEO was only 11% of annual total

direct compensation (27% on average for our other NEOs) with CEO at risk performance-based compensation (annual cash incentives and annual long-term equity incentives) making up the remaining 89% of annual total direct compensation (73% on average for our other NEOs). Compensation described in this paragraph and the charts set forth below reflects annual target compensation and does not include any special or one-time awards.

Overall Alignment of Pay and Performance

Our executive compensation program is designed to limit the amount of fixed (not at risk) compensation and to pay out incentive (at risk) compensation at or above pre-established target amounts only upon the achievement of superior financial results. For our executive officers, we seek to establish target annual total direct compensation (which includes both at risk and not at risk compensation annually at or about the 50th percentile of our 2018 Comparator Group (see below)). At risk incentive compensation is paid only if objective Company financial metrics are met. As a result,

because most of our annual total direct compensation is at risk and subject to stringent Company performance criteria, it is intended that our executive officers will earn compensation only at or above the 50th percentile of our 2018 Comparator Group if the Company achieves superior results. Company failure to achieve target metrics significantly impacts the amount of performance-based compensation earned and is intended to result in total realized compensation for executive officers below the 50th percentile of our 2018 Comparator Group. We believe this pay-for-performance philosophy incentivizes our executive officers to meet Company short- term and long-term objectives.

The charts below illustrate the alignment between key metrics (our TSR and adjusted EPS) on which our compensation decisions (annual total direct compensation and annual cash incentives paid to our CEO) were based for each of the last

five fiscal years. Any one-time cash and equity compensation paid to our CEO are excluded for purposes of the charts below.

Corporate Governance and Decision-Making

General Philosophy

Our executive compensation program is designed to:

The Compensation Committee uses these principles to determine base salaries, annual cash incentives and long- term equity incentives. The Compensation Committee also considers our business objectives, the skills and experience of the executive, competitive practices and trends and corporate considerations, including the compensation level of an executive officer relative to our other executive officers and affordability of the compensation program. The Compensation Committee further considers the results of the annual advisory “say-on-pay” vote and shareholder feedback.

Impact of Shareholder Advisory Vote on 2018 Executive Compensation Program

The Board of Directors recommended, and our shareholders approved in 2017, a revision in the frequency with which the Company would hold an advisory vote on the compensation of our NEOs, commonly referred to as a “say-on-pay vote,” from every three years to annually.

In April 2018, we conducted our first annual non-binding, advisory “say-on-pay” vote on the compensation of our NEOs at our 2018 Annual Meeting of Shareholders.

Our shareholders approved the compensation of the NEOs, with approximately 60% of the votes cast in favor of our executive compensation program.

In response to the 2018 “say-on-pay” vote the Compensation Committee approved changes in the executive compensation program by: (i) amending the employment contract of the Company’s CEO to, among other things, eliminate the partial bonus guarantee contained in the CEO’s employment agreement; (ii) adopting long-term incentive grants for NEOs having three-year cliff vesting and eliminating any benefit for partial term performance and generally aligning design with shareholder feedback in mind; and (iii) soliciting input with respect to the Company’s executive compensation program and corporate governance design from the Company’s top institutional shareholders that responded to our shareholder outreach, and designing our compensation program consistent with the shareholder feedback received. As a result of this process, the Compensation Committee determined that its philosophy and general practices were sound but that metrics and plan design should be modified from prior years. As a result, the Compensation Committee decided to maintain an emphasis on incentive compensation that rewards our most senior executives when they deliver value for our shareholders and, except as noted above, made no significant changes to our executive compensation program.

Fiscal 2018 Peer Group

The Compensation Committee, in consultation with management and Aon Hewitt’s technology compensation consulting group, Radford (“Radford”), compares our executive compensation program with compensation paid by a peer group consisting of a broad range of high-technology companies whose businesses are similar to ours and with which we typically compete for executive talent.

For our 2018 peer group (the “2018 Peer Group”), we considered publicly-traded companies of similar size (based on revenues, employee size and market capitalization) and in the test and measurement and sensor systems industries. Each of the companies below met most, if not all, of these criteria. We also qualitatively evaluated each 2018 Peer Group member based on its business focus and corporate strategy and ultimately selected companies most similar to us with regards to business focus and financial profile.

After reviewing our Peer Group in September 2017, the Compensation Committee removed FEI which was no longer an independent public company and Lam Research due to its significant increase in market capitalization and added HEICO and National Instruments, which have criteria in-line with those described in the above paragraph.

Based on data compiled by Radford in August 2017, the below chart illustrates our positioning versus our 2018 Peer Group in relation to our employee size, revenues, net income, gross margin and market capitalization.

Radford provided data for our 2018 Peer Group with respect to base salary, annual cash incentive opportunities, annual total target cash compensation, long-term equity incentives, and annual total direct compensation. Radford supplemented the 2018 Peer Group data with data from the Radford Global Technology Survey. The survey data was blended equally with the 2018 Peer Group data, where possible, to create our comparison group (the “2018 Comparator Group”). The Compensation Committee, in consultation with management, used this data to assess the compensation levels paid by the 2018 Comparator Group and the levels paid at approximately the 50th percentile of the 2018 Comparator Group. The Compensation Committee retains the discretion to set any element of an executive officer’s compensation outside this target level based on such factors as it deems appropriate including, but not limited to, the experience and responsibilities of such executive officer, the expected future contribution of each executive officer, the overall mix of base salary and short-term and long-term incentives being offered to the executive, internal pay equity based on the impact on the business and performance, retention and such other individual and business factors that may be relevant to an executive officer.

Role of Compensation Committee

Each member of the Compensation Committee has been determined to be independent under rules and regulations issued by NASDAQ, the SEC and the Internal Revenue Service.

Role of Compensation Consultant

The Compensation Committee has the authority to engage independent advisors to assist it in carrying out its responsibilities.

The Compensation Committee has a written charter approved by the Board that specifies the Compensation Committee’s duties and responsibilities, which is available on our website at: www.flir.com/about/investor-relations. In accordance with its charter, the Compensation Committee is responsible for all compensation for our executive officers.

In discharging this responsibility, the Compensation Committee annually reviews and establishes our compensation strategy to ensure that our executive officers are rewarded appropriately for their contributions to our growth and profitability, and responsibilities. For 2018, the Compensation Committee engaged Radford as its independent executive compensation consultant. Radford reported directly to the Compensation Committee and not to management. In November 2018 for executive compensation beginning in 2019 the Compensation Committee engaged Pay Governance as its independent executive compensation consultant, reporting directly to the Compensation Committee. The Compensation Committee assessed the independence of Radford and Pay Governance pursuant to NASDAQ and SEC rules and concluded that each firm’s engagement did not raise any conflict of interest. Radford provides (and Pay Governance will provide) the Compensation Committee with an annual update of its services and related fees. Radford’s aggregate fees rendered for consulting services for the Compensation Committee in 2018 were $43,528. Pay Governance did not receive any payments from FLIR in 2018.

Company management separately engages Radford for compensation surveys to benchmark non-executive officer employee compensation and also engages the Radford affiliate, Aon Risk Services, for risk related insurance products, such as property and casualty insurance and director and officer liability insurance. Neither of these engagements is approved by the Compensation Committee. The fees paid in aggregate by the Company to Radford and Aon Risk Services for all other services excluding Compensation Committee consulting services, totaled $110,587.

Role of Management

The Chief Executive Officer, with the assistance of other members of our management team and our human resources team, works closely with the Compensation Committee in determining the compensation of the other executive officers, including our other NEOs. Each year, the Chief Executive Officer reviews the performance of the other executive officers for the previous year, and then shares these evaluations with, and, with the assistance of our human resources team, makes recommendations to the Compensation Committee for each element of compensation. These recommendations concern the base salary, annual incentive compensation, and long-term equity incentives for each executive officer (other than himself) based on our

financial results from the previous fiscal year and the individual executive officer’s contribution to these results and to our Company. The Compensation Committee then reviews these recommendations and considers the other factors described above and makes decisions as to each individual compensation element for the executive officers. The Chief

Executive Officer, in collaboration with our Chief Financial Officer and other members of management, also assists the

Compensation Committee with the identification of performance objectives for the AIP and long-term equity incentive program.

Certain executive officers attend Compensation Committee meetings at the invitation of the Compensation Committee. No executive officer attends an executive session at which the executive officer’s compensation is determined.

We believe that each individual component is useful in achieving one or more of the objectives of our executive compensation program and that together, these components are effective in achieving our overall objectives.

Compensation Setting and Elements of Compensation

At the beginning of 2018, the Compensation Committee evaluated the annual total direct compensation (annual base salary, annual cash incentives and long-term equity incentive) for each of our executive officers, including our NEOs, who was employed with us at the time. In determining these NEOs’ target annual total direct compensation, the Compensation Committee considered, among other factors, each element of compensation, the compensation package as a whole and compensation levels at our peer companies for comparable positions, as well as the impact of our financial performance on executive compensation. The Compensation Committee generally targeted the 50th percentile of the 2018 Comparator Group for each component of each of these NEO’s annual total direct compensation (base salary, annual cash incentives, and time-based and performance-based equity grants).

We believe that this design allows us to meet the objectives of our executive compensation program, including attracting and retaining talented executives in a highly competitive

market, while retaining flexibility to tailor compensation based on individual circumstances.

The Compensation Committee retained the discretion to set any element of an NEO’s compensation outside the applicable target percentiles based on such factors as it deemed appropriate including, but not limited to, the experience and responsibilities of such NEO, the expected future contribution of the applicable NEO, the overall mix of base salary and short-term and long-term incentives being offered to the NEO, internal pay equity based on the impact on the business and performance, retention and such other individual and business factors that may be relevant to the NEO.

Base Salary

We provide base salary to compensate our executive officers, including our NEOs, for their day-to-day efforts based on demonstrated experience, competencies and performance. Except as provided in the paragraph below, in the first quarter of 2018 the Compensation Committee made market-based increases to the base salaries of each of our NEOs based on the data provided by Radford at that time regarding market positioning of each NEO’s annual base salary and the recommendations of Mr. Cannon (except with respect to his own base salary), in recognition of each executive officer’s strong performance as well as the other factors described

above in this section of this report.

Effective January 1, 2018, our CEO’s base salary was increased to $850,000. This increase was made in recognition of our CEO’s immediate contribution to Company performance and his skilled leadership in transition from our former management team and to bring him closer to the 50th percentile of the 2018 Comparator Group. No changes were made to our CFO’s base salary, which was negotiated in connection with her hiring in October 2017. Mr. Buffum’s base salary was negotiated in connection with his hiring and approved by the Compensation Committee.

The 2018 base salary decisions were based on the Compensation Committee’s competitive review of pay versus our comparator group, an assessment of individual performance and our compensation philosophy (target 50th percentile).

Except as described in the previous two paragraphs, the base salaries for 2018 were effective as of February 2018. The chart below summarizes the base salaries of our NEOs for 2018:

2018 Base Salary

The base salaries paid to the NEOs during 2018 are set forth in the “Summary Compensation Table,” under “Compensation of Named Executive Officers.”

Annual Incentive Compensation

We use annual incentive compensation in the form of cash incentives to motivate and reward achievement of annual strategic goals and to better align executive officer, including our NEOs, interests with shareholder interest by promoting strong, annual financial and business results.

The 2018 AIP covers all employees that are not eligible for sales incentives or profit sharing. The 2018 AIP is designed to pay cash incentives based on our achieving preestablished financial objectives intended to incentivize management to drive strong operating performance, invest in innovation to drive future growth and create shareholder value.

Target Cash Incentive Opportunities

Target cash incentive opportunities for each of our executive officers, including our NEOs, are expressed as a percentage of base salary. In the first quarter of 2018, the Compensation Committee reviewed the 2017 target cash incentive opportunities of each NEO, taking into consideration cash incentive data provided by Radford pursuant to a competitive market analysis and the recommendations of Mr. Cannon (except with respect to his own target cash incentive opportunity), as well as the other factors described above under the “Compensation Setting and Elements of Compensation” section of this report. We set each of these NEO’s target cash incentive opportunity at a level that, when considered with his or her base salary, was market competitive and provided appropriate motivational and retention incentives to drive long-term Company financial objectives.

Except as provided in this paragraph, the Compensation Committee did not make any changes to the target cash incentive opportunities for any of these NEOs in 2018 as it believed the 2017 cash incentive opportunities provided were market-competitive and designed to motivate and reward achievement of established financial objectives. Our CEO’s target cash incentive opportunity was increased to 110%, per his amended employment agreement in April 2018. This increase was made in recognition of our CEO’s excellent leadership. Mr. Buffum’s target cash incentive opportunity was negotiated in connection with his hiring and approved by the Compensation Committee. The 2018 target cash incentive opportunities generally were between the 50th percentile and 75th percentile of the 2018 Comparator Group. Our CFO’s target annual cash incentive opportunity was slightly above this range, which she negotiated in connection with her hiring.

The target cash incentive opportunities of the NEOs for 2018 were:

2018 Target Cash Incentives & Actual Payments Received

The annual incentive payments made to the NEOs for 2018 are also set forth in the “Summary Compensation Table,” under “Compensation of Named Executive Officers.”

The Compensation Committee, with input from management, approved the following performance metrics and relative

weightings under the 2018 AIP applicable to our executive officers, including our NEOs:

We believe these performance metrics incented executive officers, including our NEOs, to achieve the financial, business, and strategic objectives reflected in our 2018 operating plan and were appropriately linked to the interests of our shareholders. To enhance the connection between executive compensation and benefit to shareholders from stock price appreciation,

growth in organic revenue (the most heavily weighted performance metric), was included along with operational efficiency metrics of increased adjusted operating margin and increased working capital turnover designed to facilitate long-term operational profitability improvement and accelerated cash flow generation for our shareholders.

The incentive payments to our executive officers, including our NEOs, have fluctuated from year-to-year in relation to our performance relative to our targets. The chart below details the past five years of payouts as a percentage of the target awards. We believe that the AIP results illustrate our emphasis on pay for performance and the rigor of our goal setting process.

Annual Incentive Plan Historical Payouts

Long-Term Incentive Program

We use long-term incentives to incentivize management to build long-term growth in our business thereby linking the interests of management and our shareholders. Historically, equity awards have represented an integral part of our executive compensation program, and the largest component of each executive officer’s annual total direct compensation.

Over the past several years, we issued equity awards annually following our annual meeting of shareholders. Pursuant to our Equity Granting Policy, annual equity awards to executive officers, including NEOs, are made on the second trading day after the first public announcement of earnings following Compensation Committee grant approval. We have not granted, nor do we intend to grant, equity awards in anticipation of the release of material, nonpublic information that is likely to result in changes to the price of our common stock, such as a significant positive or negative earnings announcement.

Structure of Company Long-Term Equity Incentive Program.

The Compensation Committee has designed long-term compensation utilizing time-based equity awards that vest annually and performance-based equity awards that cliff vest only upon Company achievement of pre-determined financial results.

Structure of 2018 Long-Term Equity Incentive Program.

In 2018, the Compensation Committee, with input from Radford and our shareholders modified the structure of our long-term equity incentive program to remove stock options from the 2018 annual awards, and grant annual equity awards solely in the form of time-based and performance-based RSUs in order to better align our executive equity

compensation program with our competitive market. As was the case in 2017, we emphasized performance-based equity awards for our executive officers, including our NEOs, by including performance-based equity awards as a core component of our 2018 long-term equity incentive program. However, for 2018 based on feedback received from shareholders regarding our 2017 long-term equity design, the performance metrics are measured over a full three-year performance period with no interim measurement or banking period and no “overlay” or enhanced equity program. The Compensation Committee believed that this approach was consistent with market practices and our pay-for-performance compensation philosophy and was responsive to feedback solicited by the Compensation Committee from key shareholders.

The 2018 long-term equity incentive program for our NEOs consists of two parts:

The Compensation Committee believes that a mix of time-based and performance-based full-value awards is important for remaining competitive with the group of companies to which we compare our compensation and other comparable high-growth technology companies with which we compete for talent, most of whom offer full-value awards as a central, or in some cases, exclusive piece of their executive equity compensation program.

The Compensation Committee also believes that granting performance-based equity offers an economically efficient way to further enhance the alignment between the interests of our shareholders and our executive officers, including our NEOs, because the amount that each NEO ultimately realizes from the award depends on the executive officer’s ability to (i) contribute to the successful execution of long-term financial objectives and (ii) achieve those objectives in a manner that is reflected in the actual value of the shares that are earned under the award.

The Compensation Committee believes the use of adjusted EBITDA and a longer-term CAGR measurement of organic revenue growth for the performance-based RSUs provides incentives for our executive officers to drive both top-line and bottom-line sustainable, long-term growth in our business.

Size of 2018 Long-Term Equity Incentives.

In determining the size of the 2018 long-term equity incentives for each of our NEOs, the Compensation Committee considered a competitive market analysis performed by Radford and the recommendations of Mr. Cannon (except with respect to his own long-term equity

incentives), as well as the other factors described above under the “Compensation Setting and Elements of Compensation” of this report.

For the 2018 long-term equity incentives of each of these NEOs, the Compensation Committee targeted the 50th percentile of the 2018 Comparator Group, which the Compensation Committee believed provided the appropriate incentives for our business. The Compensation Committee believed the respective sizes of the 2018 annual equity awards were appropriate for achieving our objectives and in line with the competitive market and consistent with shareholder feedback.

The values of the equity awards granted to the NEOs (other than to Mr. Buffum whose awards were granted on November 1, 2018) on April 27, 2018 were:

2018 Equity Awards

Performance Formula. Following the end of the performance period, adjusted EBITDA and organic revenue three-year performance for the performance period is assessed. The number of shares subject to each part of the performance-based RSU grant corresponding to an applicable performance metric that may be achieved equals (1) the number of target shares subject to that part of the performance-based RSU grant multiplied by (2) the payout percentage amount identified in the table below that corresponds to the CAGR achievement of that performance metric.

Performance RSUs The performance-based RSUs are divided into two parts: 50% vest based on our adjusted EBITDA growth over the performance period and 50% vest based on our organic revenue growth over the performance period. In each case, the performance period is the three-year period beginning January 1, 2018 and ending on December 31, 2020 (which may be truncated in the event of a corporate transaction as described below). For this purpose, growth is calculated based on achievement of an increase the applicable performance metric at a compound annual growth rate (CAGR) over the three-year performance period. Based on the feedback received from shareholders, we believe a three-year performance period (without payment for partial performance periods) provided the appropriate long-term incentives.

Performance Metrics. For this purpose, “adjusted EBITDA” and “organic revenue” have the following definitions:

For purposes of calculating CAGR, annual adjusted EBITDA or annual Organic Revenue, as the case may be, for the fiscal year ended December 31, 2017 is the base year, and annual adjusted EBITDA or annual Organic Revenue, as the case may be, for fiscal year ending December 31, 2020 will be the year for which final annual achievement is determined. Except in the case of a corporate transaction, CAGR achievement during any interim period will not result in any shares becoming eligible to vest.

For performance falling between the achievement levels in the table above, the payout percentage will be calculated by a linear interpolation between (1) the two identified CAGR achievement levels represented as a percentage of the CAGR target and (2) the two payout percentage set forth in the applicable “Payout” column that correspond to the two identified CAGR achievement levels.

All calculations of CAGR and the relevant “Payout” percentages will be rounded to the nearest 0.01% with the final result rounded to the nearest 0.1% for determination of achievement.

The performance-based RSU grants will be subject to additional vesting restrictions as described in the “Additional Restrictions for Performance Awards” section below.

Additional Restrictions for Performance Awards

Vesting Restrictions. In addition to the performance criteria set forth above, the grantees must remain in continuous service as an employee or consultant to the Company or its subsidiaries through April 27, 2021 to vest in the achieved portion(s) of the performance-based RSUs except in the case

of death or “qualifying disability,” then grantee (or his or her successors, as applicable) will vest in the same portion of the applicable performance-based RSUs that would have vested had such grantee remained an employee or consultant through April 27, 2021. Grantees whose service terminates prior to April 27, 2021 due to “retirement,” will vest in the portion of the applicable performance-based RSUs that are earned based on achievement of the performance metrics during the performance period, but prorated to reflect the number of days as to which grantee remained in service.

Additional vesting rules apply in the event of a corporate transaction. These provide that if a corporate transaction occurs before the end of the applicable three-year performance period, each performance-based RSU grant will vest as to the greater of:

CEO Leadership Performance Award

In recognition of Mr. Cannon’s immediate and significant contribution to Company performance and his skilled leadership in transition from our former management team and to provide Mr. Cannon with continued incentives to remain with the Company and drive and grow the Company’s business, the Compensation Committee approved a performance-based restricted stock award having a value of $2,000,000, that will be earned only if achievement of the same three-year metrics applicable to Mr. Cannon’s 2018 LTI award are met, and then only if Mr. Cannon remains CEO on each of the fourth (as to 50% of the shares earned) and fifth (as to the remaining 50% of the shares earned) anniversaries of the grant date.

The leadership performance award is not an ongoing component of Mr. Cannon’s annual compensation. Mr. Cannon’s 2019 LTI award target is expected to be $3.85 million, which is 34% less than his actual total 2018 LTI award that consisted of both an annual LTI award and a leadership performance award. The 2019 LTI award to Mr. Cannon and the Company’s other NEOs is expected to be made in April 2019 in accordance with our normal annual LTI granting practice.

Perquisites and Other Benefits

In general, we minimize the value and number of perquisites provided to our executive officers, including our NEOs. We believe this makes our overall compensation program simpler, easier to understand, and more transparent to shareholders. The primary perquisite for our NEOs is an automobile allowance. We also agreed to reimburse our CEO for the cost of relocation to a Company location, including any loss of sale of our CEO’s current residence and a monthly car allowance of $1,500.

In addition, our NEOs have supplemental life insurance benefits beyond those provided to other United States-based employees. Our standard life insurance benefit is equal to two times an employee’s annual salary up to a maximum benefit of $500,000. The NEOs supplemental life insurance benefit provides three times the NEO’s salary, up to a maximum benefit of $1,200,000. The values of all perquisites for our NEOs are included in the 2018 All Other Compensation Table on page 34.

Our executive officers, including our NEOs, are also eligible to participate in our other benefit plans on the same terms as other employees. These plans include health plans, disability plans, retirement plans and an employee stock purchase plan.

Non-Qualified Deferred Compensation Plans

We have a non-qualified deferred compensation (“NQDC”) plan and a stock deferral plan. Participation by our employees, including our NEOs, is optional. The NQDC plan provides an additional pre-tax savings vehicle for our more highly compensated United States-based employees whose

retirement savings opportunity is limited under our 401(k) plan. The stock deferral plan allows eligible employees to defer the receipt of vested RSUs. The NQDC plan does not allow for Company contributions to be made to the plan on behalf of any employee, including the NEOs.

Employment Agreements

Mr. Cannon has an employment agreement, as most recently amended on April 24, 2018, approved by the Compensation Committee that established his updated base salary as CEO, one-time equity award, and annual incentive and long-term awards under our approved plans (i.e., AIP and long-term incentive program). Pursuant to his amended employment agreement, Mr. Cannon has an AIP target of 110% of his base salary. In addition, the amended employment agreement provides that Mr. Cannon will be reimbursed for relocation costs, including temporary living expenses and any loss of sale of Mr. Cannon’s current residence and a monthly car allowance of $1,500. Mr. Cannon’s amended employment agreement has a term ending April 24, 2022 and may be renewed by mutual agreement of the Company and Mr. Cannon.

Mr. Cannon’s employment agreement also includes provisions regarding various termination scenarios which are described in the “Post-Termination Compensation” section set forth below.

Ms. Lowe has an employment offer letter, dated October 16, 2017, approved by the Compensation Committee that established her initial base salary as CFO and provides for one-time sign-on bonus, one-time equity award, and annual incentive and long-term awards under our approved plans (i.e., AIP and long-term incentive program). Pursuant to her employment agreement, Ms. Lowe has an AIP target of 85% of her base salary. In addition, Ms. Lowe’s employment offer letter includes provisions regarding various termination scenarios which are described in the Post-Termination Compensation section set forth below.

Mr. Buffum has an employment offer letter, dated August 21, 2018, approved by the Compensation Committee that established his initial base salary and provides a sign-on bonus and equity award to compensate him for loss of unvested equity incentives scheduled to vest in the near term and other incentives forfeited because of his leaving his former employer to join the Company, an annual incentive and long-term awards under our approved plans (i.e. AIP and long-term incentive program). Mr. Buffum is obligated to repay the cash bonus if he voluntarily terminates his employment within 12 months of hi start date. Pursuant to his employment agreement, Mr. Buffum has an AIP target of 60% of his base salary. Mr. Buffum’s employment offer letter includes provisions regarding various termination scenarios which are described in the “Post-Termination Compensation” Section set forth below.

Post-Termination Compensation

Severance Agreements

Our employment arrangements with our CEO, CFO and

Mr. Buffum provide for severance.

Mr. DuChene is resigning from the Company effective March 31, 2019. For the Company’s benefit, in order to assist in the transition of his duties and certain ongoing matters, Mr. DuChene agreed to remain employed longer than he was required to do so and also entered into a consulting agreement with us. In connection with his resignation, he became entitled to, and will receive, certain severance benefits, based on the circumstances of his resignation. Specifically, Mr. DuChene will receive (i) cash severance equal to the sum of: (a) twelve (12) months of base salary, (b) his annual auto allowance, and (c) one hundred percent of Mr. DuChene’s target bonus amount payable in twenty-six equal installments in accordance with the Company’s normal payroll practices, (ii) full vesting acceleration of any unvested time-based outstanding equity awards and performance-based equity awards which only depend on additional service for vesting, and (iii) reimbursement of the premium costs for continued health coverage under COBRA for a period of up to twelve (12) months following termination of his employment.

In 2017, we adopted a severance plan for our executive officers, including our other NEOs, and certain other key employees. We determined that it was important to adopt a severance plan at that time due to the uncertainty regarding an former CEO transition and to secure the continued dedication of these participants to their work, notwithstanding the possibility of a termination of employment by us, and provide these individuals with an incentive to continue their employment with us. The severance plan provides for severance payments and benefits upon certain qualifying terminations of employment and the participant’s compliance with certain requirements, including entry into a release of claims in favor of the company. The severance plan expires on May 1, 2020.

Change of Control Agreements

We consider a sound and vital management team to be essential in protecting and enhancing the best interests of the Company and our shareholders. To this end, we recognize that the possibility of a change of control could arise and that such possibility may result in the departure or distraction of management to the detriment of the Company and our shareholders. In order to encourage their continued attention and dedication to their assigned duties without distraction in circumstances arising from the possibility of a change of control of the Company, we have change of control agreements in place for our NEOs.

We believe that the severance payments and benefits are competitive relative to the severance protection provided to similarly situated individuals at companies with which we compete for talent. The terms and value of these severance

and change of control termination benefits are further described starting on page 40.

Clawback Policy

The Company’s clawback policy requires any current or former officer of the Company subject to Section 16 of the Exchange Act to repay certain cash-based incentive compensation if such officer was found by the Compensation Committee to have caused the Company to materially restate its financial statements as a result of such officer’s gross negligence, intentional misconduct, or fraud.

Insider Trading Policy

The Company’s insider trading policy prohibits our executive officers and directors from pledging our securities or engaging in hedging transactions with respect to our securities.

Impact of Tax on Compensation Decisions

As a general matter, the Compensation Committee takes into account the various tax implications of the compensation vehicles employed by the Company but it is not a determining factor in the Compensation Committee’s compensation decisions.

Deductibility of Executive Compensation. Section 162(m) of the Code, as amended by the 2017 Tax Reform Act limits the amount of compensation that we may deduct in any one year for compensation paid to certain current and former officers to $1,000,000. Under Section 162(m) of the Code, as amended, compensation that qualifies as “performance-based” under Section 162(m) of the Code that is paid prior to 2018 or payable pursuant to a “written binding contract” prior to November 2, 2017 and not subsequently modified may be excluded from the $1,000,000 limit. Prior to 2018, the Compensation Committee awarded certain compensation that is “performance-based” and thus intended to be fully tax-deductible by us. While the Compensation Committee considers the deductibility of compensation as a factor in making compensation decisions, the Compensation Committee retains the flexibility to provide compensation that is consistent with our goals for our executive compensation program even if such compensation is not fully tax deductible. The Compensation Committee may make decisions that result in compensation expense that is not fully deductible under Section 162(m) of the Code as amended. The Compensation Committee is continuing to assess the impact of Section 162(m) of the Code, as amended, on the Company’s executive compensation programs and practices.

Taxation of Parachute Payments. Sections 280G and 4999 of the Code provide that executive officers, directors who hold significant equity interests, and certain other service providers may be subject to significant additional taxes if they receive payments or benefits in connection with a change of control that exceed certain prescribed limits, and that we (or our successor) may forfeit a deduction on the amounts subject to

this additional tax. We do not provide any executive, including any NEO, with a “gross-up” or other reimbursement payment for any tax liability that the executive might owe as a result of the application of Sections 280G or 4999 during 2018, and we have not agreed and are not otherwise obligated to provide any executive with such a “gross-up” or other reimbursement.

Accounting for Stock-Based Compensation. We follow Financial Accounting Standards Board’s Accounting Standards Codification Topic 718 (“ASC Topic 718”) in connection with the financial reporting of our stock options and other stock-based awards. ASC Topic 718 requires companies to calculate the grant date “fair value” of their stock option grants using a variety of assumptions, as well as the grant date “fair value” of their other stock-based awards. This

calculation is performed for accounting purposes and reported in the compensation tables below, even though our executives may never realize any value from their options or other stock-based awards. ASC Topic 718 also requires companies to recognize the compensation cost of their stock option grants and other stock-based awards in their income statements over the period that an executive is required to render service in exchange for vesting of the option or other award. When determining the types and amounts of equity compensation granted to the NEOs, the Compensation Committee considers the advantages and disadvantages of various equity vehicles, such as stock options, RSU awards and performance-based equity awards. As part of this consideration, the Compensation Committee takes into account the overall program cost, which includes the associated compensation expense for financial reporting purposes.

We have reviewed and discussed the Compensation Discussion and Analysis with our management and, based on our review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

THE COMPENSATION COMMITTEE

Catherine A. Halligan, Chair

William W. Crouch

Angus L. Macdonald

Cathy A. Stauffer

Michael T. Smith