UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

 

Filed by the Registrant þ

 Filed by a Party other than the Registrant  o

Check the appropriate box:

o  Preliminary Proxy Statement

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

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to §240.14a-12

 

Rockwell Automation, Inc.

(Name of Registrant as Specified In Its Charter)

 

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

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 12, 2008

 

Dear Shareowner:

 

 

You are cordially invited to attend our 2009 Annual Meeting of Shareowners.

 

 

We will hold the annual meeting in the Imperial Ballroom at The Pfister Hotel, 424 East Wisconsin Avenue, Milwaukee, Wisconsin, USA on Wednesday, February 4, 2009, at 10 a.m. (Central Standard Time). At the meeting I will report on the Corporation’s activities and performance during the past fiscal year, and we will discuss and act on the matters described in the accompanying Proxy Statement. At this year’s meeting, you will have an opportunity to vote on whether to:

 

 

 

 

Shareowners will then have an opportunity to comment on or to inquire about the affairs of the Corporation that may be of interest to shareowners generally.

 

 

Your vote is important to us. Whether or not you plan to attend the meeting, please return your proxy card as soon as possible. You also have the option of voting via the Internet or by telephone.

 

 

If you plan to attend the meeting, please request an admittance card in one of the ways described on the last page of the Proxy Statement.

 

 

We sincerely hope that as many shareowners as can conveniently attend will do so.

 

 

We have enclosed the Proxy Statement for our 2009 Annual Meeting of Shareowners and our 2008 Annual Report. I hope you find them interesting and useful in understanding your company.

 

Sincerely yours,

 

 

Keith D. Nosbusch

 

Chairman and Chief Executive Officer

 

 

 

Rockwell Automation, Inc.

1201 South Second Street, Milwaukee, Wisconsin 53204, USA

 

Notice of 2009 Annual Meeting of Shareowners

 

To the Shareowners of

ROCKWELL AUTOMATION, INC.:

 

 

The 2009 Annual Meeting of Shareowners of Rockwell Automation, Inc. will be held in the Imperial Ballroom at The Pfister Hotel, 424 East Wisconsin Avenue, Milwaukee, Wisconsin, USA on Wednesday, February 4, 2009, at 10 a.m. (Central Standard Time) for the following purposes:

 

 

 

 

Only shareowners of record at the close of business on December 8, 2008 will be entitled to notice of, and to vote at, the meeting.

 

 

By order of the Board of Directors.

 

 

Douglas M. Hagerman

Secretary

 

December 12, 2008

 

Note: The Board of Directors solicits votes by the execution and prompt return of the
accompanying proxy in the enclosed return envelope or by use of the
Corporation’s telephone or Internet voting procedures.

 

Rockwell Automation, Inc.
Proxy Statement for 2009 Annual Meeting

 

INDEX

 

Rockwell Automation, Inc.

Proxy Statement

 

2009 ANNUAL MEETING

 

The 2009 Annual Meeting of Shareowners of Rockwell Automation, Inc. will be held on February 4, 2009, for the purposes set forth in the accompanying Notice of 2009 Annual Meeting of Shareowners. This proxy statement and the accompanying proxy are furnished in connection with the solicitation by our Board of Directors of proxies to be used at the meeting and at any adjournment of the meeting. We will refer to your company in this proxy statement as “we,” “us,” “our,” the “Corporation” or “Rockwell Automation.”

 

GENERAL INFORMATION ABOUT THIS PROXY STATEMENT AND THE ANNUAL MEETING

 

Distribution and Electronic Availability of Proxy Materials

 

Again this year we are taking advantage of Securities and Exchange Commission (SEC) rules that allow companies to furnish proxy materials to shareowners via the Internet. If you received a Notice of Internet Availability of Proxy Materials (Notice) by mail, you will not receive a printed copy of the proxy materials, unless you specifically request one. The Notice instructs you on how to access and review all of the important information contained in this proxy statement and our 2008 annual report as well as how to vote by Internet. If you received the Notice and would still like to receive a printed copy of our proxy materials, you should follow the instructions for requesting these materials included in the Notice.

 

We will mail the Notice to certain shareowners by December 24, 2008. We will continue to mail a printed copy of this proxy statement and form of proxy to certain shareowners and we expect that mailing to begin on December 19, 2008.

 

Shareowners Sharing the Same Address

 

SEC rules permit us to deliver only one copy of the annual report and this proxy statement or the Notice to multiple shareowners who share the same address and have the same last name, unless we received contrary instructions from a shareowner. This delivery method, called “householding,” reduces our printing and mailing costs. Shareowners who participate in householding will continue to receive separate proxy cards.

 

We will deliver promptly upon written or oral request a separate copy of our annual report and proxy statement or Notice to any shareowner who received these materials at a shared address. To receive a separate copy, please write or call Rockwell Automation Shareowner Relations, 1201 South Second Street, Milwaukee, Wisconsin 53204, USA, telephone: +1-414-382-8410.

 

If you are a holder of record and would like to revoke your householding consent and receive a separate copy of the annual report and proxy statement or Notice in the future, please contact Broadridge Financial Solutions, Inc. (Broadridge), either by calling toll free at +1-800-542-1061 or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717, USA. You will be removed from the householding program within 30 days.

 

Any shareowners of record who share the same address and wish to receive only one copy of future Notices, proxy statements and annual reports for your household should contact Rockwell Automation Shareowner Relations at the address or telephone number listed above.

 

If you hold your shares in street name with a broker or other nominee, please contact them for information about householding.

 

What am I voting on?

 

You will be voting on whether to:

 

 

Who is entitled to vote at the Annual Meeting?

 

Only holders of record of our common stock at the close of business on December 8, 2008, the record date for the meeting, may vote at the Annual Meeting. Each shareowner is entitled to one vote for each share of our common stock held on the record date. On December 8, 2008, we had outstanding 141,760,986 shares of our common stock.

 

Who may attend the Annual Meeting?

 

Shareowners as of the record date, or individuals holding their duly appointed proxies, may attend the Annual Meeting. Please note that if you hold your shares in street name through a broker or other nominee, you will need to provide a copy of a brokerage statement reflecting your stock ownership as of the record date to be admitted to the Annual Meeting.

 

How do I vote my shares?

 

Shareowners may vote in person at the Annual Meeting. If you hold your shares in street name and wish to vote in person at the Annual Meeting, you should contact your broker or other nominee to obtain a broker’s proxy card and bring it, together with proper identification and your brokerage statement reflecting your stock ownership as of the record date, with you to the Annual Meeting.

 

In addition you may vote by proxy:

 

 

How will my proxy be voted?

 

If you duly complete, sign and return a proxy or use our telephone or Internet voting procedures to authorize the named proxies to vote your shares, your shares will be voted as specified. If your proxy card is signed but does not contain specific instructions, your shares will be voted as recommended by our Board of Directors.

 

For shareowners participating in our savings plans or in the BNY Mellon Shareowner Services Program (dividend reinvestment and stock purchase plan), the trustee or administering bank will vote the shares that it holds for a participant’s account only in accordance with instructions given in a signed, completed and returned proxy card or direction card, or in accordance with instructions given pursuant to our Internet or telephone voting procedures. If we do not receive instructions, the shares will not be voted. To allow sufficient time for voting by the trustees of the savings plans, your voting instructions for shares held in the plans must be received by February 1, 2009.

 

May I revoke or change my proxy?

 

For shareowners of record, you may revoke or change your proxy at any time before it is voted by:

 

 

If your shares are held in street name, you must contact your broker or other nominee to revoke or change your proxy. Your proxy is not revoked simply because you attend the Annual Meeting.

Will my vote be confidential?

 

It is our policy to keep confidential all proxy cards, ballots and voting tabulations that identify individual shareowners, except (i) as may be necessary to meet any applicable legal requirements, (ii) in the case of any contested proxy solicitation, as may be necessary to permit proper parties to verify the propriety of proxies presented by any person and the results of the voting, and (iii) if a shareowner writes comments on the proxy card directed to our Board of Directors or management. Representatives of Broadridge Financial Solutions, Inc. will tabulate votes and act as the independent inspector of election at this year’s meeting. The independent inspector of election and any employees involved in processing proxy cards or ballots and tabulating the vote are required to comply with this policy of confidentiality.

 

What is required for there to be a quorum at the Annual Meeting?

 

Holders of at least a majority of the shares of our common stock issued and outstanding on the record date for the Annual Meeting must be present, in person or by proxy, for a quorum in order to conduct business at the meeting.

 

How many votes are needed to approve each of the proposals?

 

Election of Directors.   Directors are elected by a plurality of votes cast. This means that the four nominees for election as directors who receive the greatest number of votes cast by the holders of our common stock entitled to vote at the meeting will become directors.

 

Majority Vote Policy.   Our Guidelines on Corporate Governance set forth our policy if a director is elected by a plurality of votes cast but receives a greater number of votes “withheld” from his or her election than votes “for” such election. In an uncontested election, any nominee for director who receives more votes “withheld” than votes “for” his or her election must promptly tender his or her resignation to the Board. The Board Composition and Governance Committee will consider the resignation offer and make a recommendation to the Board of Directors. The Board will act on the tendered resignation within 90 days following certification of the election results. The Board Composition and Governance Committee, in making its recommendation, and the Board of Directors, in making its decision, may consider any factors or other information that it considers appropriate and relevant, including any stated reasons why the shareowners withheld votes from the director, the director’s tenure, the director’s qualifications, the director’s past and expected contributions to the Board, and the overall composition of the Board. We will promptly disclose the Board’s decision regarding whether to accept or reject the director’s resignation offer in a Form 8-K furnished to the SEC. If the Board rejects the tendered resignation or pursues any additional action, the disclosure will include the rationale behind the decision. Any director who tenders his or her resignation may not participate in the Board Composition and Governance Committee deliberations and recommendation or in the Board’s decision whether to accept or reject the resignation offer.

 

Selection of our Independent Registered Public Accounting Firm.   An affirmative vote of the holders of a majority of the voting power of our common stock present in person or represented by proxy and entitled to vote on the matter is necessary to approve the selection of D&T as our independent registered public accounting firm.

 

How are votes counted?

 

Under Delaware law and our Restated Certificate of Incorporation and By-Laws, all votes entitled to be cast by shareowners present in person or represented by proxy at the meeting and entitled to vote on the subject matter, whether those shareowners vote “for,” “against” or abstain from voting, will be counted for purposes of determining the minimum number of affirmative votes required to approve the selection of D&T as our independent registered public accounting firm. The shares of a shareowner who abstains from voting on a matter or whose shares are not voted because of a broker non-vote on a particular matter will be counted for purposes of determining whether a quorum is present at the meeting so long as the shareowner is present in person or represented by proxy. An abstention from voting on a matter by a shareowner present in person or represented by proxy at the meeting has no effect in the election of directors but has the same legal effect as a vote “against” the proposal to approve the selection of D&T as our independent registered public accounting firm. A broker non-vote on a matter has no effect in the election of directors or the proposal to approve the selection of D&T as our independent registered public accounting firm.

Can I receive electronic access to shareowner materials?

 

As noted above, under SEC rules we are permitted to furnish proxy materials to shareowners via the Internet. However, we may choose to continue to provide printed copies to certain shareowners. If we send you printed copies, you can save us printing and mailing costs by electing to access proxy statements, annual reports and related materials electronically instead of receiving these documents in print. You must have an e-mail account and access to the Internet and expect to have such access in the future to be eligible for electronic access to these materials. To enroll for these services, please go to https://enroll1.icsdelivery.com/rok_/Default.aspx or visit our website at www.rockwellautomation.com, click on the heading: “About Us,” then the heading: “Investor Relations,” then the heading “Shareowner Information,” “Transfer Agent & Dividends.” If you own your shares through a broker or other nominee, you may contact them directly to request electronic access.

 

Your consent to electronic access will be effective until you revoke it. You may cancel your consent at no cost to you at any time by going to https://enroll1.icsdelivery.com/rok_/Default.aspx and following the instructions or by contacting your broker or other nominee.

 

ROCKWELL AUTOMATION

 

We are a leading global provider of industrial automation power, control and information solutions that help manufacturers achieve a competitive advantage for their businesses. We were incorporated in 1996 in connection with a tax-free reorganization completed on December 6, 1996, pursuant to which we divested our former aerospace and defense business to The Boeing Company. In the reorganization, the former Rockwell International Corporation (RIC) contributed all of its businesses, other than the aerospace and defense business, to us and distributed all of our capital stock to RIC’s shareowners. Boeing then acquired RIC. RIC was incorporated in 1928. Our principal executive office is located at 1201 South Second Street, Milwaukee, Wisconsin 53204, USA. Our telephone number is +1-414-382-2000 and our website is located at www.rockwellautomation.com. Our common stock trades on the New York Stock Exchange (NYSE) under the symbol ROK.

 

STOCK OWNERSHIP BY CERTAIN BENEFICIAL OWNERS

 

The following table lists persons who we believe beneficially own more than 5% of our common stock as of December 8, 2008. The information below is from their filings with the SEC.

 

 

Guidelines on Corporate Governance.  The Board of Directors has adopted Guidelines on Corporate Governance, which are available at www.rockwellautomation.com under the “Investor Relations” page under the link “About Us,” then the heading “Corporate Governance.” They are also available in print to any shareowner upon request. The Guidelines contain general principles regarding the responsibilities and function of our Board and Board Committees.

Related Person Transactions.  The Board of Directors adopted a written policy regarding how it will review and approve of related person transactions (as defined below), which is available at www.rockwellautomation.com under the “Investor Relations” page under the link “About Us,” then the heading “Corporate Governance.” The Board Composition and Governance Committee is responsible for administering this policy.

 

The policy defines a related person transaction as any transaction in which we are or will be a participant, in which the amount involved exceeds $120,000, and in which any director, director nominee, executive officer or more than 5% shareowner or any of their immediate family members has or will have a direct or indirect material interest. The policy sets forth certain transactions, arrangements and relationships not reportable under SEC rules that do not constitute related person transactions.

 

Under this policy, each director, director nominee and executive officer must report each proposed or existing transaction between us and that individual or any of that individual’s immediate family members to our general counsel. Our general counsel will assess and determine whether any transaction reported to him or of which he learns constitutes a related person transaction. If our general counsel determines that a transaction constitutes a related person transaction, he will refer it to the Board Composition and Governance Committee. The Committee will approve or ratify a related person transaction only if it determines that the transaction is in, or is not inconsistent with, the best interests of the Corporation and its shareowners. In determining whether to approve or ratify a related person transaction, the Committee will consider factors it deems appropriate, including:

 

 

There are no related person transactions to report in this proxy statement.

 

Potential Director Candidates.  The Board Composition and Governance Committee is responsible for screening potential director candidates and recommending qualified candidates to the full Board.

 

The Committee will consider candidates for director recommended by shareowners. Shareowners can recommend director candidates by writing to the Secretary at 1201 South Second Street, Milwaukee, Wisconsin 53204, USA. The recommendation must include the candidate’s name, biographical data and qualifications and any other information required by the SEC to be included in a proxy statement with respect to a director nominee. Any shareowner recommendation must be accompanied by a written statement from the candidate indicating his or her willingness to serve if nominated and elected. The recommending shareowner also must provide evidence of being a shareowner of record of our common stock at that time.

 

The Committee, the Chairman and Chief Executive Officer or other members of the Board may identify a need to add new members to the Board or fill a vacancy on the Board. In that case, the Committee will initiate a search for qualified director candidates, seeking input from senior management and Board members, and to the extent it deems it appropriate, outside search firms. The Committee will evaluate qualified candidates and then make its recommendation to the Board.

 

In making its recommendations to the Board with respect to director candidates, the Committee considers various criteria set forth in our Board Membership Criteria (see Exhibit A to the Committee’s Charter), including experience, professional background, specialized expertise and concern for the best interests of shareowners as a whole. In addition, directors must be of the highest character and integrity, be free of conflicts of interest with the Corporation, and have sufficient time available to devote to the affairs of the Corporation. The Committee from time to time reviews with the Board our Board Membership Criteria.

 

The Committee will evaluate properly submitted shareowner recommendations under substantially the same criteria and in substantially the same manner as other potential candidates.

In addition to recommending director candidates to the Committee, shareowners may also nominate candidates for election to the Board at annual shareowner meetings by following the procedures set forth in our By-Laws. See “Shareowner Proposals for 2010 Annual Meeting” set forth later in this proxy statement.

 

Communications to the Board and Ombudsman.  Shareowners and other interested parties may send communications to the Board, an individual director, the non-management directors as a group, or a Board Committee at the following address:

 

Rockwell Automation, Inc.
c/o Corporate Secretary
1201 South Second Street
Milwaukee, Wisconsin 53204, USA
Attn: Board of Directors

 

The Secretary will receive and process all communications before forwarding them to the addressee. The Secretary will forward all communications unless the Secretary determines that a communication is a business solicitation or advertisement, or requests general information about us.

 

In accordance with procedures approved by the Audit Committee, concerns about accounting, internal controls or auditing matters should be reported to the Ombudsman as outlined in our Standards of Business Conduct and Code of Conduct, which are available on our website at www.rockwellautomation.com; please click on the heading: “About Us,” then the heading: “Who We Are,” then the heading: “Ethics.” These standards are also available in print to any shareowner upon request. The Ombudsman is required to report promptly to the Audit Committee all reports of questionable accounting or auditing matters that the Ombudsman receives. You may contact the Ombudsman by addressing a letter to:

 

Ombudsman
Rockwell Automation, Inc.
1201 South Second Street
Milwaukee, Wisconsin 53204, USA

 

You may also contact the Ombudsman by telephone at +1-800-552-3589 (US only) or +1-414-382-8484, e-mail at ombudsman@rockwell.com or fax at +1-414-382-8485.

 

Executive Sessions.  The non-management directors meet in executive session without any corporate officer or member of management in conjunction with regular meetings of the Board. The Board has adopted an annual schedule designating the presumptive chair for executive sessions from among the chairs of the Board Committees.

 

Our Restated Certificate of Incorporation provides that the Board of Directors will consist of three classes of directors serving staggered three-year terms that are as nearly equal in number as possible. One class of directors is elected each year with terms extending to the third succeeding Annual Meeting after election.

 

The terms of three directors expire at the 2009 Annual Meeting. The Board has nominated these directors, upon the recommendation of the Board Composition and Governance Committee, for election as directors with terms expiring at the 2012 Annual Meeting. In addition, the Board, upon the recommendation of the Board Composition and Governance Committee, has designated Donald R. Parfet as an additional nominee for election as a director with a term extending to the 2011 Annual Meeting. Mr. Parfet is a current member of the Board, having been first elected by the Board in May 2008.

 

Proxies properly submitted will be voted at the meeting, unless authority to do so is withheld, for the election of the four nominees specified in Nominees for Election as Directors below. If for any reason any of these nominees is not a candidate when the election occurs (which is not expected), proxies and shares properly authorized to be voted will be voted at the meeting for the election of a substitute nominee. Alternatively, the Board of Directors may reduce the number of directors.

 

For each director nominee and continuing director, we have stated the person’s name, age (as of December 12, 2008) and principal occupation; the position, if any, with the Corporation; the period of service as a director of the Corporation (or a predecessor corporation); and other directorships held.

 

NOMINEES FOR ELECTION AS DIRECTORS WITH TERMS EXPIRING IN 2012

 

 

The Board of Directors recommends that you vote “FOR” the election as directors of the four nominees described above, which is presented as item (a).

 

Our business is managed under the direction of the Board of Directors. The Board has established the Audit Committee, the Board Composition and Governance Committee, the Compensation and Management Development Committee and the Technology and Corporate Responsibility Committee, whose principal functions are briefly described below. The duties and responsibilities of each committee are set forth in committee charters that are available on our website at www.rockwellautomation.com; click on the heading: “About Us,” then the heading: “Investor Relations,” then the heading: “Corporate Governance.” The committee charters are also available in print to any shareowner upon request. In fiscal 2008, the Board held seven meetings and acted on two occasions by written consent in lieu of a meeting. Average attendance by incumbent directors at Board and committee meetings was 95%, and all of the directors attended more than 75% of the meetings of the Board and the committees on which they served. Directors are expected to attend the Annual Meeting of Shareowners. All directors attended the 2008 Annual Meeting.

 

Director Independence.  Our Guidelines on Corporate Governance require that a substantial majority of the members of the Board be independent directors. For a director to be independent, the Board must affirmatively determine that the director has no direct or indirect material relationship with the Corporation. The Board has established guidelines, which are contained in our Guidelines on Corporate Governance, to assist it in determining director independence in conformity with the New York Stock Exchange listing requirements. The full text of these guidelines is attached as Appendix A to this proxy statement.

 

After considering these guidelines and the independence criteria of the NYSE, the Board has determined that none of the current directors, other than Mr. Nosbusch (who is a current employee of the Corporation), has a material relationship with the Corporation and each of our current directors (other than Mr. Nosbusch) meets the independence requirements of the NYSE. There were no transactions, relationships or arrangements that required review by the Board for purposes of determining director independence.

 

Committees of the Board

 

 

 

Audit Committee.  The Audit Committee assists the Board in overseeing and monitoring the integrity of our financial reporting processes, our internal control and disclosure control systems, the integrity and audits of our financial statements, our compliance with legal and regulatory requirements, the qualifications and independence of our independent registered public accounting firm and the performance of our internal audit function and independent registered public accounting firm. The main duties of the Committee are to appoint our independent registered public accounting firm, subject to shareowner approval; approve all audit and audit-related fees and services and permitted non-audit fees and services of our independent registered public accounting firm; review with our independent registered public accounting firm and management our annual audited and quarterly financial statements; discuss periodically with management our quarterly earnings releases; and review with our independent registered public accounting firm and management the quality and adequacy of our internal controls. All members of the Audit Committee meet the independence and financial literacy standards and requirements of the NYSE and the SEC. The Board has determined that Messrs. Istock, Parfet and Speer qualify as “audit committee financial experts” as defined by the SEC.

Board Composition and Governance Committee.  The principal functions of the Board Composition and Governance Committee are to consider and recommend to the Board qualified candidates for election as directors of the Corporation, to consider matters of corporate governance, and administer the Corporation’s related person transactions policy. The Committee annually assesses and reports to the Board on the performance of the Board of Directors as a whole and of the individual directors. The Committee also recommends to the Board the members of the committees of the Board and the terms of our Guidelines on Corporate Governance. All members of the Committee are independent directors as defined by the NYSE.

 

Compensation and Management Development Committee.  The principal functions of the Compensation and Management Development Committee are to evaluate the performance of our senior executives, review management succession and development plans for the CEO and other senior executives, review the design and competitiveness of our compensation plans, review and approve salaries, incentive compensation, equity awards and other compensation of officers and review the salary plan for other executives who are direct reports to the CEO, review and approve corporate goals and objectives and administer our incentive, deferred compensation and long-term incentives plans. All members of the Committee are independent directors as defined by the NYSE and are not eligible to participate in any of our plans or programs administered by the Committee, except our 2003 and 1995 Directors Stock Plans and Directors Deferred Compensation Plan.

 

 

Technology and Corporate Responsibility Committee.  The Technology and Corporate Responsibility Committee reviews and assesses our technological activities as well as our policies and practices in the following areas: employee relations, with emphasis on diversity and inclusiveness; the protection and enhancement of the environment and energy resources; product integrity and safety; employee health and safety; and community and civic relations, including programs for and contributions to educational, cultural and other social institutions. All members of the Committee are independent directors as defined by the NYSE.

 

Our director compensation program is designed to attract and retain qualified directors, fairly compensate directors for the time they must spend in fulfilling their duties and align their compensation directly with the interests of shareowners. We use a combination of cash and equity based awards. Directors who are our employees do not receive any compensation for their director service. Our director compensation program is comprised of an annual retainer, equity awards and committee fees. The following table sets forth the components of each element of director compensation for fiscal 2008.

 

 

 

Annual Retainer.  During fiscal 2008, the amount of this retainer was $87,000, of which $60,000 was paid in cash and $27,000 was paid in restricted stock (or for directors first elected after November 7, 2007, restricted stock units) under the 2003 Directors Stock Plan. The $27,000 equated to 381 restricted shares granted on October 1, 2007. Mr. Parfet, who was not a director at the time, received 154 restricted stock units upon his initial election to the Board with a value of $9,000, which is the pro-rata amount based on his election date of May 30, 2008. Grants of restricted stock units had substantially identical terms and conditions as the grants of restricted stock.

 

Equity Awards.  Immediately after our 2008 Annual Meeting of Shareowners, directors then serving received an annual grant of 500 shares of common stock under the 2003 Directors Stock Plan. Mr. Parfet received 375 shares of common stock under the 2003 Directors Stock Plan upon his initial election to the Board, which is the pro-rata amount based on his election date of May 30, 2008. Immediately after our 2008 Annual Meeting, each non-employee director also received an annual grant of options to purchase 1,500 shares of common stock under the 2003 Directors Stock Plan. Mr. Parfet received options to purchase 1,125 shares of common stock under the 2003 Directors Stock Plan upon his initial election to the Board, which is the pro-rata amount based on his election date of May 30, 2008. During fiscal 2008, additional options to purchase

7,000 shares of our common stock were awarded under the 2003 Directors Stock Plan to Mr. Parfet upon his initial election to the Board. All options vest 1/3 per year beginning on the first anniversary of the grant date.

 

Committee Fees.  Directors receive additional annual compensation for serving on committees of the Board. The fees are paid in cash in four installments on the first business day of each fiscal quarter. The fees for the Chair and for serving on certain committees are higher than others due to the greater work-load and responsibilities.

 

During the fiscal year ended September 30, 2008, annual committee fees were as follows:

 

 

Deferral Election.  Under the terms of our Directors Deferred Compensation Plan, directors may elect to defer all or part of the cash payment of Board retainer or committee fees until such time as the director specifies, with interest on deferred amounts accruing quarterly at 120% of the federal long-term rate set each month by the Secretary of the Treasury. In addition, under the 2003 Directors Stock Plan, each director has the opportunity each year to defer all or any portion of the annual grant of common stock and cash retainer or committee fees by electing to instead receive restricted shares (or, after November 7, 2007, restricted stock units) valued, in the case of cash deferrals, at the closing price of our common stock on the NYSE on the date each payment would otherwise be made in cash.

 

Other Benefits.  Until November 2007, we provided each director with life insurance in the amount of $100,000. This benefit was discontinued in November 2007 and each director received a cash payment of $25,000 to compensate for its elimination. We reimburse directors for transportation, lodging and other expenses actually incurred in attending Board and committee meetings. We also reimburse directors for similar travel, lodging and other expenses for their spouses to accompany them to a limited number of Board meetings held as retreats to which we invite spouses for business purposes. The directors’ spouses are generally expected to attend Board meetings held as retreats. From time to time and when available, directors and their spouses are permitted to use our corporate aircraft for travel to Board meetings.

 

Directors are eligible to participate in a matching gift program under which we will match donations made to eligible educational, arts or cultural institutions. Gifts will be matched up to an annual maximum of $10,000. This same program is available to all of our U.S. salaried employees.

 

Stock Ownership Requirement.  Non-management directors are subject to stock ownership guidelines. To further the direct correlation of directors’ and shareowners’ economic interests, our Guidelines on Corporate Governance provide that non-management directors are required to own, within five years after joining the Board, shares of our common stock (including restricted shares and restricted stock units) equal in value to three times the portion of the annual retainer that is payable in cash. All directors, except Mr. Parfet, who has been a director since May 2008, meet the guidelines as of September 30, 2008.

 

Changes to Directors Compensation for Fiscal 2009.  Effective October 1, 2008, we changed our director compensation. Among other things, we eliminated annual stock option awards because our review of practices and trends in director compensation of Fortune 200 companies and companies with revenues of $4 to $8 billion that had filed proxy statements as of April 30, 2008 showed a move away from stock options. Directors will now receive annual compensation that consists of cash and shares of common stock. Directors may continue to elect to defer all or any portion of their cash or stock awards as described above. The total annual retainer, excluding committee fees, was changed to $132,000, of which $70,000 will be paid in cash and $62,000 in shares of common stock under the 2003 Directors Stock Plan. The amount of the stock portion was determined by adding the value of the former $27,000 restricted share/restricted stock unit grant to the average value of the former option grants over the past four years. In adjusting the annual retainer, we also considered director compensation data for companies with revenues of $4 to $8 billion that had filed proxy statements as of April 30, 2008. Directors will continue to receive a grant of 500 common shares on the date of the Annual Meeting (or a pro-rata amount upon initial election to the Board). No changes were made to committee fees.

 

The following table shows the total compensation for each of our directors during fiscal 2008.

 

 

 

 

 

 

 

The Audit Committee assists the Board in overseeing and monitoring the integrity of the Corporation’s financial reporting processes, its internal control and disclosure control systems, the integrity and audits of its financial statements, the Corporation’s compliance with legal and regulatory requirements, the qualifications and independence of its independent registered public accounting firm and the performance of its internal audit function and independent registered public accounting firm.

 

Our Committee’s roles and responsibilities are set forth in a written Charter adopted by the Board, which is available on the Corporation’s website at www.rockwellautomation.com under the heading “About Us,” then the heading “Investor Relations.” We review and reassess the Charter annually, and more frequently as necessary to address any changes in NYSE corporate governance and SEC rules regarding audit committees, and recommend any changes to the Board for approval.

 

Management is responsible for the Corporation’s financial statements and reporting processes, including the system of internal control. Deloitte & Touche LLP (D&T), the Corporation’s independent registered public accounting firm, is responsible for expressing an opinion on the conformity of those audited financial statements with U.S. generally accepted accounting principles, and on the Corporation’s internal control over financial reporting.

Our Committee is responsible for overseeing the Corporation’s overall financial reporting processes. In fulfilling our responsibilities for the financial statements for fiscal 2008, we:

 

 

We reviewed and approved all audit and audit-related fees and services. For information on fees paid to D&T for each of the last two years, see “Proposal to Approve the Selection of Independent Registered Public Accounting Firm” on page 41.

 

We considered the non-audit services provided by D&T in fiscal 2008 and determined that engaging D&T to provide those services is compatible with and does not impair D&T’s independence.

 

In fulfilling our responsibilities, we met with the Corporation’s General Auditor and D&T, with and without management present, to discuss the results of their examinations, the evaluations of the Corporation’s internal control over financial reporting and the overall quality of the Corporation’s financial reporting. We considered the status of pending litigation, taxation matters and other areas of oversight relating to the financial reporting and audit processes that we determined appropriate. We also met separately with the Corporation’s Chief Executive Officer, Chief Financial Officer, Controller, General Counsel and Ombudsman.

 

Based on our review of the audited financial statements and discussions with, and the reports of, management and D&T, we recommended to the Board that the audited financial statements be included in the Corporation’s Annual Report on Form 10-K for the fiscal year ended September 30, 2008 for filing with the SEC.

 

The Audit Committee has selected D&T as the independent registered public accounting firm of the Corporation for the fiscal year ending September 30, 2009, subject to the approval of shareowners.

 

Audit Committee
Verne G. Istock, Chair
Barry C. Johnson
Donald R. Parfet
David B. Speer

 

The following table shows the beneficial ownership, reported to us as of October 31, 2008, of our common stock, including shares as to which a right to acquire ownership within 60 days exists, of each director, each executive officer listed in the table on page 29 (named executive officers) and of these persons and other executive officers as a group.

 

 

 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Executive Summary

 

Rockwell Automation has had a long-standing strong orientation in its executive compensation program toward pay for performance. This orientation has held constant throughout the business cycles that our organization has confronted over time. The environment in which decisions regarding fiscal 2008 incentive payments and fiscal 2009 incentive design were made was unprecedented in the modern business era, as our company and the global economy in general faced challenges as a result of the global recession and credit crisis. We believe the decisions described in this proxy statement reflect our orientation toward pay for performance, even in the face of such extreme uncertainty and demonstrate our ongoing commitment to our shareowners, employees and other stakeholders.

 

Fiscal 2008 Performance

 

Early in the year, the Board of Directors approved a business plan that reflected very aggressive goals for sales, earnings per share (EPS), free cash flow, return on invested capital (ROIC), and segment operating earnings. These goals served as targets for our incentive compensation plans (ICP), and the Compensation and Management Development Committee (the Compensation Committee) determined that meeting these goals would require strong execution of our growth and productivity initiatives.

 

Despite the fact that the global economy deteriorated significantly in the second half of the year, fiscal 2008 was another good year of operating and financial performance for Rockwell Automation. EPS grew by 11%, while sales grew by 14% (9% excluding the effects of currency). In addition, ROIC for the year was 24%. We also expanded our presence in emerging markets with 16% growth (excluding the effects of currency) in Asia-Pacific and 14% growth (excluding the effects of currency) in Latin America, positioning us for future growth and success in some of the world’s fastest growing economies. Although we had strong financial performance, we did not achieve all of our ICP financial goals.

 

The Compensation Committee believes that management performed very well during fiscal 2008 and delivered strong overall results in light of the difficult market conditions even though the Corporation missed the ICP financial goals.

 

Fiscal 2008 Pay Implications

 

We have a strong pay for performance philosophy and, despite our strong financial performance, we missed our goals, and as a result, fiscal 2008 ICP awards for our executives were significantly lower compared to fiscal 2007. ICP awards for our named executive officers averaged 57% of target, or 40% below fiscal 2007. The decrease in share price in the second half of the year had a significant negative impact on the value of outstanding equity grants (stock options and restricted stock), and also resulted in no performance shares being earned for the three-year period ending September 30, 2008. The grant date fair market value of the fiscal 2008 long-term incentive grants was up an average of 1.5% over the grant date fair market value of the fiscal 2007 grants. The net result is that overall compensation for the named executive officers was lower than in fiscal 2007.

 

Our executives’ base salaries were set at the start of fiscal 2008, coming off a strong fiscal 2007 and were in line with market changes. We provided no relief to offset the decrease in fiscal 2008 ICP payouts or the impact of no performance shares being earned for the three-year performance period ending in fiscal 2008, even though these declines were largely due to the economic slowdown and liquidity crisis rather than management’s performance.

 

The Compensation Committee and the Board believe that the skill and motivation of our employees, and especially our executive leaders, are essential to the Corporation’s performance and creation of shareowner value. We believe our compensation program motivates performance that differentiates us from our competitors. We will continue to provide a compensation program that we believe is effective, serves shareowner interests and is worthy of shareowner support.

Compensation Philosophy

 

Our long-term growth and performance business strategy seeks sustained organic growth through expanding our served markets and enhancing our market access. We have developed a strong productivity culture that has allowed us to reinvest in organic growth. We believe that our employees’ knowledge of our customers, their applications, and our technology is a key factor that makes this strategy work. We also believe that it is important to align the compensation of our leadership with this strategy and therefore we choose the factors in our short and long-term incentives plans, among other things, to focus the management team’s efforts in the areas that measure and are critical to the success of this strategy.

 

The quality of our leadership has a direct impact on our performance, and with the oversight of the Compensation Committee, we offer compensation plans, programs and policies intended to attract and retain executive talent and “pay for performance,” including the creation of shareowner value. Our compensation programs include base salary, annual incentive compensation, long-term incentives, defined benefit and defined contribution pension plans and a limited perquisite package.

 

The following table highlights the principal purposes of the main elements of our compensation programs:

 

 

We believe that a significant portion of an executive’s compensation should be directly linked to our performance and the creation of shareowner value. In fiscal 2008, 70% to 82% of the total direct compensation of our named executive officers was based on pay for performance, and 60% to 74% of total direct compensation of our named executive officers was in the form of long-term incentives directly linked to the creation of shareowner value. Total direct compensation consists of base salary, annual ICP awards and long-term incentives (calculated at the grant date fair market value outlined in the Grants of Plan-Based Awards Table).

 

2008 Total Direct Compensation Mix

 

 

* Average mix for other named executive officers (NEOs).

 

Compensation Review Process

 

We evaluate and take into account market data in setting each element of our officers’ compensation. As we do not believe that a peer group of companies directly comparable to us exists, we instead use the results of executive compensation surveys of major companies (the Major Companies) provided by Towers Perrin and Hewitt Associates (collectively, the Survey Providers). The Towers Perrin database includes over 650 companies

and the Hewitt Associates database includes over 450 companies. In setting compensation levels for each element of pay, we analyze data relating to the Major Companies using regression analyses developed by the Survey Providers based on our sales. The market data analysis is typically the starting point for, and a significant factor in, our compensation determinations, but is not the only factor as we also consider the scope of the individual officer’s responsibilities and more subjective factors, such as the Compensation Committee’s (and the CEO’s in the case of other officers) assessment of the officer’s individual performance and expected future contributions and leadership.

 

The Compensation Committee has also engaged Towers Perrin, an independent executive compensation consulting firm that is directly accountable to the Compensation Committee, to provide advice on compensation trends and market information to assist the Compensation Committee in fulfilling its duties. Towers Perrin does not provide any other services to us, except for our utilization of general compensation surveys conducted by Towers Perrin. The Compensation Committee has limited our expenditures for use of these surveys to no more than $20,000 per year.

 

We consider the total compensation (earned or potentially available) of each of the named executive officers and the other officers in establishing each element of compensation. As part of our compensation review process we conduct a total compensation or “Tally Sheet” review with the Compensation Committee for each of our officers in which we review all elements of compensation, including base salary, annual incentives, long-term incentive grants, perquisites, health benefits and retirement and termination benefits. This review includes a consideration of amounts to be paid and other benefits accruing to our officers upon their retirement or other termination of employment. We consider the potential outcomes of annual incentives and long-term incentive grants under a variety of scenarios from low to high performance. We also review the officers’ current balances in various compensation and benefit plans. Based upon the results of this analysis we concluded that our compensation programs are in line with our compensation philosophy and provide an appropriate range of outcomes.

 

We review the amounts of prior equity grants held by our officers, but do not take these values into account in determining future long-term incentive grants for the following reasons:

 

 

In making determinations and recommendations regarding each of our officers’ compensation, the Compensation Committee and the CEO also consider internal comparisons to the compensation we pay to our other executives.

 

Role of Management.  The Compensation Committee assesses the performance of the CEO and sets the CEO’s compensation in executive session without the CEO present. The CEO reviews the performance of our other officers, including the named executive officers, with the Compensation Committee and makes recommendations regarding each element of their compensation for the Compensation Committee’s review and approval. The Compensation Committee and the CEO are assisted in their review by Towers Perrin, the Senior Vice President, Human Resources and the Vice President, Compensation & Benefits. The other named executive officers do not play a role in their own compensation determination other than discussing their performance with the CEO.

 

Elements of Compensation

 

Base Salary

 

We set base salaries for our officers generally at the median of the Major Companies, using regression analyses developed by the Survey Providers based on our sales. However, the Compensation Committee may

deviate from the median in setting base salaries based on the scope of the individual’s responsibilities and more subjective factors, such as the Compensation Committee’s (and the CEO’s in the case of other officers) assessment of the officer’s individual performance and expected future contributions and leadership. The Compensation Committee reviews base salaries for our officers every year.

 

Annual Incentive Compensation

 

Our annual incentive compensation plans (ICP) are designed to reward our executives for achieving Corporation and business segment results and for individual performance. Under our ICP, we establish for each executive at the start of each fiscal year an incentive compensation target equal to a percentage of the individual’s base salary. The target for annual incentive compensation is generally the median of the Major Companies, using regression analyses developed by the Survey Providers based on our sales. Actual incentive compensation payments under our ICP may be higher or lower than the incentive compensation target based on financial, operating and individual performance as described below.

 

In the early part of each fiscal year, the CEO reviews with the Compensation Committee, and the Compensation Committee establishes, financial and operating goals for the fiscal year for purposes of our ICP. These goals include:

 

 

Each year, the Compensation Committee allocates a weighting of the target incentive compensation among the various goals that it establishes. For certain of these goals, in fiscal 2008 participants did not receive any credit under our ICP unless the results for those goals exceeded the prior year’s financial performance.

 

After the end of the fiscal year, the Compensation Committee and the CEO evaluate our performance and the performance of our business segments and consider the results against the pre-established goals. As a starting point, target amounts under our ICP are generally earned if we achieve our financial and operating goals set for the year, above-target amounts are earned for superior performance and below-target amounts are earned if we fail to achieve these goals. Awards to each officer under our ICP may be adjusted based on the Compensation Committee’s assessment (and except in the case of the CEO, based on the CEO’s recommendation) as to the individual’s achievement of individual goals and objectives and certain more subjective assessments of leadership acumen and the individual’s expected future contributions. Accordingly, while achieving our financial and operating goals is extremely important in determining our annual incentive compensation, the Compensation Committee maintains discretion to adjust annual incentive compensation upward or downward, notwithstanding achievement of these goals. For fiscal 2008, the Compensation Committee determined in the early part of the year that no payments were to be made under our ICP if the earnings per share performance was below the previous year’s results.

 

Under our Annual Incentive Compensation Plan for Senior Executive Officers (“Senior ICP”), which applies to the CEO and our four other most highly compensated officers, annual incentive compensation payments to those officers in total may not exceed 1% of our applicable net earnings (as defined in that plan) with the CEO’s maximum payment not to exceed 35% of the available funds, and each of the other four officers’ maximum payouts not to exceed 15% of the available funds.

 

The annual incentive compensation for Messrs. Nosbusch, Crandall, Hagerman and McDermott was based upon our overall performance and the annual incentive compensation for Mr. Eisenbrown was based upon a combination of our overall performance and the performance of his segment.

The following table shows our principal 2008 financial goals used for determining awards under our ICP for fiscal 2008 and our performance against those goals:

 

ICP FACTORS

 

 

 

The Compensation Committee viewed the 2008 goals as challenging goals in light of expected business conditions. Our sales goal for the Corporation’s continuing operations reflected an increase of 10.9% over fiscal

2007 actual performance. Our goals for EPS, Segment Operating Earnings, ROIC and Free Cash Flow required substantial increases compared to fiscal 2007 actual performance as outlined in the following table.

 

 

The Compensation Committee determined that meeting these goals would require strong execution of our growth and productivity initiatives in light of business conditions. The Compensation Committee also considered the impact of our share repurchase program, which was included in our annual operating plan and taken into account in establishing our goal at the start of the year, and noted that actual share repurchases were similar to the amount included in that plan. The Compensation Committee determined that it was appropriate to exclude the special charges related to the restructuring actions that the Corporation voluntarily elected to implement at the end of fiscal 2008. We did this because EPS before special charges better reflects operating performance in fiscal 2008 and because the restructuring actions prepare us to manage the Corporation’s cost structure for fiscal 2009 and beyond in light of the uncertainty related to the economic slowdown and liquidity crisis. The Compensation Committee noted that fiscal 2008 was far more challenging than fiscal 2007 due to the deterioration of the North American and European economies and the liquidity crisis. The Compensation Committee believes that management performed very well during fiscal 2008 and delivered strong results in light of the deteriorating market conditions, even though we missed certain ICP financial goals. The Compensation Committee viewed the ICP payout for fiscal 2008 to be in line with performance compared to the ambitious goals that it set at the beginning of the year.

 

Long-Term Incentives

 

The principal purposes of our long-term incentives are to reward management for creating shareowner value and to align the financial interests of management with shareowners. Our long-term incentive awards are designed to reward the increase in both absolute and relative shareowner value. Our annual long-term incentive awards for executives include a combination of stock options, performance shares and restricted stock.

 

We grant annual long-term incentive awards with an aggregate anticipated value that is generally set between the 50th and 75th percentile of the Major Companies participating in the Towers Perrin executive compensation database, using a regression analysis developed by Towers Perrin based on our sales (the Hewitt Associates executive compensation database does not provide a regression analysis on long-term equity incentives). For fiscal 2008 we calculated the number of options and shares based on the anticipated value of these grants using the 90 day average of our stock price prior to the September 1 before the grant. We used this approach to avoid single day anomalies in our stock price when determining the anticipated value of the long-term incentive grants. The actual value of the grants to our executives may be higher or lower based upon the stock price on the day of the grant, and the ultimate amount realized by the executives from the grants.

 

We generally make long-term incentive grants near the beginning of each fiscal year at the same time the Compensation Committee performs our annual management performance evaluation and takes other compensation actions. Annual equity grants for officers occur on the same dates as our annual equity grants for our other professional and managerial employees, which in fiscal 2008 was the date of the Compensation Committee’s December meeting. As the grant date for our annual long-term incentive awards generally occurs at a Compensation Committee meeting held in the first quarter of our fiscal year, the grant date is effectively set approximately one year in advance when all Compensation Committee meetings for the next year are scheduled. We do not grant equity awards in anticipation of the release of material non-public information. Similarly, we do not time the release of information based on equity award grant dates.

The CEO recommends to the Compensation Committee the equity grants for other executives, and the Compensation Committee approves all equity grants for executives. We also at times award equity grants to new executives as they are hired or promoted during the year. These grants are approved by the Compensation Committee, and the grant date is the date the Compensation Committee approves the grant or, if later, the start date for a new executive.

 

In fiscal 2008, our equity grants to vice presidents and above had three components. We targeted stock options at approximately 5/8 of the anticipated value of the long-term incentive grant, performance shares at approximately 1/4 of the anticipated value of the grant and restricted stock at approximately 1/8 of the anticipated value of the grant. We determined this allocation of equity vehicles taking into account a review of approximately 233 Fortune 500 companies that had filed proxy statements as of March 31, 2008. This review was conducted by Towers Perrin. Compared to this review, we grant a greater percentage of our long-term incentives as stock options and performance shares than market practice because we believe that a greater proportion of long-term incentives should depend on an increase in shareowner value.

 

Options:  We believe that stock options are an appropriate vehicle to reward management for increases in shareowner value, as they provide no value if share price does not increase. Our stock option grants vest in 1/3 increments at one, two and three years from the grant date and have a 10 year life. The exercise price of all stock option grants is the fair market value of our stock at the close of trading on the date of the grant. Our long-term incentives plan does not allow us to reprice stock options. During fiscal 2008, stock options equal to approximately 1% of the average outstanding shares during the year were granted to executives and other employees. Total options outstanding at the end of fiscal 2008 were approximately 6% of outstanding shares. The Compensation Committee takes these figures into account when determining the annual stock option grant.

 

Performance Shares:  Performance shares are designed to reward management for our relative performance compared to the performance of companies in the S&P 500 Index over a three-year period. The payout in respect of performance shares granted in December 2006, December 2007, and December 2008 will be made in shares of our common stock or cash, and will range from zero to 200% of the target number of shares awarded based on our total shareowner return compared to the performance of companies in the S&P 500 Index over a three-year period. The payouts will be at zero, the target amount and the maximum amount if our total shareowner return is equal to or less than the 30th percentile, equal to the 60th percentile and equal to or greater than the 75th percentile of the total shareowner return of companies in the S&P 500 Index, respectively, over the applicable three-year period, with the payout interpolated for results between those percentiles. If performance shares are earned and total shareowner return is negative, the amount of shares earned will be reduced by 50%.

 

Restricted Stock:  We grant restricted shares primarily in order to retain high quality executives throughout a business cycle. Accordingly, restricted shares generally do not vest until three years after the grant date.

 

Perquisites

 

During fiscal 2008, our officers received a limited perquisite package that included personal liability insurance, tickets to cultural and sporting events, recreational activities at Board retreats, spouse travel and recreational activities at Board retreats and an annual physical. Upon retirement, officers may elect to continue the personal liability insurance coverage at their own expense. Effective October 1, 2007, we discontinued other perquisites consisting of an automobile allowance, social and country club membership and financial counseling services for all officers. The Compensation Committee took into account the discontinuation of these perquisites in determining our officers’ base salaries for 2008. The perquisite adjustments for the 2008 base salaries of Messrs. Crandall, Eisenbrown, Hagerman and McDermott were $27,900, $21,900, $26,500, and $27,600 respectively. The CEO did not receive any of these perquisites in fiscal 2007 and accordingly there was no adjustment to his base salary.

Other

 

With regard to other benefits, our officers receive the same benefits as other eligible U.S. salaried employees. They participate on the same basis as other eligible U.S. salaried employees in:

 

 

Compensation Deductibility

 

Internal Revenue Code Section 162(m) provides that we may not deduct in any taxable year compensation in excess of $1 million paid in that year to our chief executive officer and our other three most highly compensated executive officers, other than the chief financial officer, unless the compensation is “performance based.” Grants of stock options, performance shares and awards under our Senior ICP are considered “performance based” compensation for this purpose. Base salaries, restricted stock awards and other annual incentive compensation awards do not qualify as “performance based” compensation for this purpose. With the exception of the restricted stock granted to Mr. Nosbusch, the portion of his base salary in excess of $1 million, his perquisites, dividends and tax gross-up amounts, we do not anticipate that any portion of our fiscal 2008 compensation to the named executive officers covered by Section 162(m) will exceed the deductibility limitations of Section 162(m).

 

Change of Control and Severance Agreements

 

We do not have employment contracts with any officers. However, in November 2007, we entered into change of control agreements with Messrs. Nosbusch, Crandall, Eisenbrown, Hagerman and McDermott and certain other officers. There are two main purposes of these agreements.

 

 

In short, they seek to ensure that we may rely on key executives to continue to manage our business consistent with our best interests and the best interests of our shareowners despite concerns for personal risks. For a description of these change of control agreements, see “Potential Payments Upon Termination or Change of Control.”

 

In the case of terminations other than those to which our change of control agreements apply, we have no severance agreements in place. However, in the past we have at times entered into severance agreements with executives upon termination of their employment with the terms and conditions depending upon the individual circumstances of the termination, the transition role we expect from the executive and our best interests.

 

Executive Stock Ownership

 

We believe our focus on “pay for performance” is sharpened by aligning closely the financial interests of our officers with those of shareowners. Accordingly, we have set the following minimum ownership guidelines for our named executive officers. These guidelines must be met within 5 years after becoming an officer.

 

 

Shares owned directly (including restricted shares) or through our savings plans (including share equivalents under our non-qualified savings plans) and the after-tax value of vested unexercised stock options are considered in determining whether an officer meets the guidelines, except that no more than 50% of the guidelines can be met by the after-tax value of vested unexercised stock options. At September 30, 2008, the five named executive officers owned an aggregate of 269,762 shares (including share equivalents under our non-qualified savings plans) of our common stock, with an aggregate market value of $10.1 million. As of September 30, 2008, three of the named executive officers met the guidelines. The two officers who did not meet the guidelines became officers within the past five years and thus are within the transition period for meeting the guidelines. If an officer subject to the guidelines does not make appropriate progress to meet the guidelines, the officer’s future long-term incentive grants may be adversely affected.

 

Compensation of the Chairman of the Board and Chief Executive Officer

 

Mr. Nosbusch’s base salary was increased to $1,040,000 from $1,000,000 in December 2007. This change was made to position his salary near the median for CEOs as compared to the Major Companies, using regression analyses developed by the Survey Providers based on our sales. His total annual compensation continues to depend significantly on incentive compensation tied to the Compensation Committee’s assessment of his and our performance. The Compensation Committee considered the market value for CEOs, Mr. Nosbusch’s salary as a multiple of other named executive officers and Mr. Nosbusch’s performance, in determining his compensation.

 

Near the beginning of fiscal 2008, we granted to Mr. Nosbusch options for 130,500 shares, 9,000 restricted shares and 21,100 performance shares. Consistent with our executive compensation philosophy, the anticipated value of this grant was between the 50^th and 75^th percentile of long-term incentives grants to CEOs of the Major Companies using the regression analysis developed by Towers Perrin based on our sales. In determining these grants, the Compensation Committee considered:

 

 

The grant date fair market value of these awards in fiscal 2008 was $4,403,352, which is up slightly from the fiscal 2007 grant date fair market value of $4,338,391, or a 1.5% increase. The amounts in the Summary Compensation Table are based on SFAS 123(R), except that, pursuant to SEC rules, those amounts exclude the impact of estimated forfeitures related to service-based vesting conditions. Amounts in the Summary Compensation Table include awards granted in previous years.

 

In determining Mr. Nosbusch’s annual incentive compensation for fiscal 2008, the Compensation Committee concluded that under his leadership in 2008 the Corporation performed well against ambitious goals and in light of the challenging economic environment. The Compensation Committee also considered:

 

 

The following line graph compares the cumulative total shareowner return on our common stock against the cumulative total return of the S&P 500 Index for the period of five years from October 1, 2003 to September 30, 2008, assuming in each case a fixed investment of $100 at the respective closing prices on September 30, 2003 and reinvestment of all dividends. Our 5-year performance still outpaces the S&P 500, including the effect of the reduction in our share price in 2008.

 

Comparison of Five-Year Cumulative Total Return

 

Rockwell Automation and S&P 500 Index

 

 

The cumulative total returns on Rockwell Automation common stock and the S&P 500 Index as of each September 30, 2003-2008 plotted in the above graph are as follows:

 

 

* Includes the reinvestment of all dividends in our common stock

 

We believe the returns to shareowners shown in this graph indicate that our pay for performance philosophy and our emphasis on long-term incentives are well in line with the interests of shareowners.

 

Based on the foregoing, Mr. Nosbusch was awarded $561,600 in annual incentive compensation, which was 54% of target and equal to the award that was earned due solely to our performance compared to pre-established financial goals.

 

Compensation of Other Named Executive Officers

 

In determining the compensation for Messrs. Crandall, Eisenbrown, Hagerman and McDermott we considered:

 

 

In December 2007, the base salaries for Messrs. Crandall, Eisenbrown, Hagerman and McDermott were increased to $542,900, $536,900, $493,500 and $447,600, respectively.

 

At the beginning of fiscal 2008, Messrs. Crandall and Eisenbrown were each granted options for 35,500 shares, 2,500 restricted shares and 5,800 performance shares, and Messrs. Hagerman and McDermott were each granted options for 28,400 shares, 2,000 restricted shares and 4,600 performance shares. Consistent with our executive compensation philosophy, in determining these grants, we considered:

 

 

As with the case for Mr. Nosbusch, the grant date fair market value of these awards was up slightly (1.5% on average) from equity awards granted in fiscal 2007 and differ from the amounts in the Summary Compensation Table as described above.

 

In determining the fiscal 2008 ICP payouts for Messrs. Crandall, Eisenbrown, Hagerman and McDermott, we considered:

 

 

In December 2008, Messrs. Crandall and Hagerman were awarded ICP payments of $183,200 and $166,200, respectively, in December 2008. This payout was 54% of target and equal to the award that was earned due solely to our performance compared to pre-established financial goals. Messrs. Eisenbrown and McDermott were awarded ICP payments of $174,500 and $196,200 respectively. In addition to the considerations discussed above, Mr. Eisenbrown’s ICP payout was increased to reflect his leadership of our Global Process Transformation initiative and was equal to 52% of target or 8% above the award due solely to performance compared to pre-established financial goals. Mr. McDermott’s ICP payout was decreased to reflect

region and mix performance and was equal to 70% of target or 6% below the award due solely to performance compared to pre-established financial goals.

 

Changes in Compensation Program for Fiscal 2009

 

Base Salary

 

The base salaries for Messrs. Nosbusch, Crandall, Eisenbrown, Hagerman and McDermott were not increased for fiscal 2009. They remain at the salary levels set in December 2007.

 

Annual Incentive Compensation

 

The Compensation Committee considered the uncertainty related to the current economic slowdown and liquidity crisis in determining the ICP structure for fiscal 2009 and decided that greater discretion will be required in determining incentive awards than was required in prior years. For fiscal 2009, the ICP financial measures will remain the same (sales, EPS, free cash flow, ROIC or segment operating earnings). In establishing the fiscal 2009 ICP goals and target compensation levels, the Compensation Committee considered the uncertainty related to the impact of the liquidity crisis, economic recession, and currency exchange rate volatility. Target amounts will be earned under our ICP if we achieve our financial goals for the year. The Compensation Committee, in its discretion, will determine the payout levels for performance above or below the pre-determined goals after considering:

 

 

Long-Term Incentives

 

For the fiscal 2009 grants, the overall structure of our long-term incentive program remains unchanged from fiscal 2008 (stock options, performance shares, and restricted stock, with value allocated as in fiscal 2008). We calculated the number of options and shares using the three-month average of our stock price prior to November 15, 2008. We moved the three-month window this year so that our planning price would be determined closer to the grant date and in order to have an equal number of days before and after the end of fiscal 2008. This affects only the number of options and shares that are granted, not the exercise price, which continues to be the closing price on the date of the grant. At the grant date closing price, these awards will have an accounting value that is less than the value of the awards granted in fiscal 2008. We expect the value of these grants will be on average near the median of the Major Companies.

 

The following table sets forth the total compensation earned by each of the named executive officers for the fiscal years ended September 30, 2008 and 2007.

 

 

 

 

ALL OTHER COMPENSATION TABLE

 

The following table describes each element of the All Other Compensation column in the Summary Compensation Table for fiscal 2008.

 

 

 

 

 

The following table provides information about equity and non-equity awards made to the named executive officers in fiscal 2008.