Our Board of Directors is soliciting your vote on matters that will be presented at our 2015 Annual Meeting of Shareholders and at any adjournment or postponement.  This Proxy Statement contains information on these matters to assist you in voting your shares.

The Notice of Annual Meeting and Proxy Statement, the accompanying proxy card or voting instructions and our 2014 Form 10-K Annual Report, including our annual report wrapper, are being mailed starting on or about March 24, 2015.

All shareholders of record of our common stock, par value $.25 per share, at the close of business on March 9, 2015, are entitled to receive the Notice of Annual Meeting and to vote their shares at the meeting.  As of that date, 71,947,844 shares

of our common stock were outstanding.  Each share is entitled to one vote on each matter properly brought to the meeting.

In each case, your shares will be voted as you instruct.  If you return a signed card, but do not provide voting instructions, your shares will be voted FOR each of the proposals. You may revoke or change your vote any time before the proxy is exercised by filing with our Corporate Secretary a notice of revocation or a duly executed proxy bearing a later date.  You may also vote in person at the meeting, although attendance at the meeting will not by itself revoke a previously granted proxy.

Plan Participants.  Any shares you may hold in the West Pharmaceutical Services, Inc. 401(k) Plan or the Tech Group Puerto Rico Savings and Retirement Plan have been added to your other holdings on your proxy card.  Your completed proxy card serves as voting instructions to the trustee of those plans.  You may direct the trustee how to vote your plan shares by submitting your proxy vote for those shares, along with the rest of your shares, by Internet, phone or mail, all as described on the enclosed

proxy card.  If you do not instruct the trustee how to vote, your plan shares will be voted by the trustee in the same proportion that it votes shares in other plan accounts for which it received timely voting instructions.

Deadline for Voting.  The deadline for voting by telephone or Internet is 11:59 PM Eastern Time

on May 4, 2015.  If you are a registered shareholder and attend the meeting, you may deliver your completed proxy card in person.  “Street name” shareholders who wish to vote at the meeting will need to obtain a proxy form from the institution that holds their shares.

If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of shares held in street name.  The Notice has been forwarded to you by your broker, bank or other holder of record who is considered the shareholder of record of those shares.  As the beneficial owner, you may direct your broker, bank or other holder of record on how to vote your shares by using the proxy card included in the materials made available or by following

their instructions for voting on the Internet. A broker non-vote occurs when a broker or other nominee that holds shares for another does not vote on a particular item because the nominee does not have discretionary voting authority for that item and has not received instructions from the owner of the shares.  Although there is no controlling precedent under Pennsylvania law regarding the treatment of broker non-votes in certain circumstances, we intend to apply the following principles.

We must have a quorum to conduct business at the 2015 Annual Meeting.  A quorum consists of the presence at the meeting either in person or represented by proxy of the holders of a majority of the outstanding shares of our common stock entitled to vote.  For the purpose of establishing

a quorum, abstentions, including brokers holding customers’ shares of record who cause abstentions to be recorded at the meeting, and broker non-votes are considered shareholders who are present and entitled to vote, and count toward the quorum.

We have adopted a procedure called “householding” for making the Proxy Statement and the Annual Report available.  Householding means that shareholders who share the same last name and address will receive only one copy of the materials, unless we are notified that one or more of these shareholders wishes to continue receiving additional copies.

We will continue to make a proxy card available to each shareholder of record.  If you prefer to receive multiple copies of the proxy materials at the same address, please contact us in writing or by telephone: Corporate Secretary, West Pharmaceutical Services, Inc., 530 Herman O. West Drive, Exton, PA 19341, (610) 594-3309.

We are pleased to be distributing our proxy materials to certain shareholders via the Internet under the “notice and access” approach permitted by the rules of the SEC.  This method conserves natural resources and reduces our costs of printing and mailing while providing a convenient way for shareholders to review our materials and vote their shares.

On March 24, 2015, we mailed a “Notice of Internet Availability” to participating shareholders, which contains instructions on how to access the proxy materials on the Internet.

If you would like to receive a printed copy of our proxy materials, we will send you one free of charge.  Instructions for requesting such materials are included in the Notice.

We pay the cost of soliciting proxies.  Proxies will be solicited on behalf of the Board by mail, telephone, and other electronic means or in person.  We have retained Georgeson Inc., 199 Water Street, 26th Floor, New York, NY 10038, to help with the solicitation for a fee of $7,000,

plus reasonable out-of-pocket costs and expenses.  We will reimburse brokerage firms and other custodians, nominees and fiduciaries their reasonable out-of-pocket expenses for forwarding solicitation materials to shareholders and obtaining their votes.

During 2014, our Board met five times.  Each director attended at least 75% of the Board meetings and the meetings of the Board committees on which he or she served.  All directors are expected to attend the 2015 Annual Meeting, and all of our directors, except John H. Weiland, attended the 2014 Annual Meeting.

Our principal governance documents are our Corporate Governance Principles, Board Committee Charters, Independence Standards and Code of Business Conduct.  Aspects of our governance documents are summarized below. 

We encourage our shareholders to read our governance documents, as they present a comprehensive picture of how the Board addresses its governance responsibilities to ensure our vitality and success.  The documents are available in the “Who We Are—Financial Results—Investor Information—Corporate Governance” section of our website at www.westpharma.com and copies of these documents may be requested by writing to our Corporate Secretary, West Pharmaceutical Services, Inc., 530 Herman O. West Drive, Exton, PA 19341.

Our Board has adopted Corporate Governance Principles to provide guidance to our Board and its committees on their respective roles, director qualifications and responsibilities, Board and committee composition, organization and leadership.  Our Principles address, among other things:

·            director qualifications standards, including our Independence Standards;

·            the requirement to hold separate executive sessions of the independent directors;

·            the role of independent directors in executive succession planning;

·            the Board’s policy on setting director compensation and director share-ownership guidelines;

·            guidelines on Board organization and leadership, including the number and structure of committees and qualifications of committee members;

·            policies on access to management;

·            director orientation and education; and

·            self-assessments of board and committee performance to determine their effectiveness.

All of our employees, officers and directors are required to comply with our Code of Business Conduct.  The Code of Business Conduct covers fundamental ethical and compliance-related principles and practices such as accurate accounting records and financial reporting, avoiding conflicts of interest, the protection and use of our property and information and

compliance with legal and regulatory requirements.  The Board has adopted a comprehensive Compliance and Ethics Program and has named Susan A. Morris our interim Chief Compliance Officer.  Our Chief Compliance Officer delivers regular reports on program developments and initiatives to the Audit Committee and the Board.

The Board has determined that combining the CEO and Chairman positions is currently the best leadership structure for the Company.  The Board believes that our CEO is best situated to serve as Chairman because, given his day-to-day involvement with and intimate understanding of our business, industry and management team, he is the director most capable of effectively identifying and implementing strategic priorities.

Independent directors and management have different perspectives and roles in strategy development.  Our independent directors bring experience, oversight skills and expertise from outside our organization and industry, while our CEO brings Company-specific experience and expertise.  The Board believes that the combined role of Chairman and CEO promotes strategy development and implementation and facilitates information flow between management and the Board, which are essential to effective governance.

The Board further believes that combining these roles fosters clear accountability, effective

decision-making and alignment on the development and execution of corporate strategy.

One of the key responsibilities of the Board is to develop strategic direction and hold management accountable for implementing the strategy once it is developed.  The Board also believes the combined role of Chairman and CEO is an effective structure for the Board to understand the risks associated with the Company’s strategic plans and objectives.  Combining these positions places the Company’s senior-most executive in a position to guide the Board’s agenda in setting priorities for the Company and addressing the risks and challenges the Company faces.

Additionally, maintaining an independent board with a Chairman, Independent Directors permits open discussion and assessment of the Company’s ability to manage these risks and provides the appropriate balance between strategy development and independent oversight of management.

Patrick J. Zenner, an independent director who serves as Chairman of the Nominating and Corporate Governance Committee, was selected by the Board in 2014 to serve as the Chairman, Independent Directors for all meetings of non-management directors held in executive session.  The duties and responsibilities of the Chairman, Independent Directors include:

·      conferring with the CEO on Board agenda items, meeting schedules, presentations and other communications;

·      acting as chair for Board discussions on any subject where the CEO would not be the

appropriate person to chair such discussion; and

·      serving as principal liaison between the CEO and the independent directors.

The CEO and the Chairman, Independent Directors create the agenda for each Board meeting.  Each independent director may add items to the agenda.

Independent directors meet in regularly scheduled executive sessions and in special executive sessions called by the Chairman, Independent Directors.

The Board has four standing committees: the Audit Committee; the Compensation Committee;

the Nominating and Corporate Governance Committee; and the Innovation and Technology

Committee.  From time to time the Board may form ad hoc committees to address specific situations as they may arise. Currently, the Board has one ad hoc committee:  the Succession Planning Committee. Each committee consists solely of independent directors.  Each standing

committee has a written charter, which is posted in the “Who We Are—Financial Results—Investors—Corporate Governance” section of our website at www.westpharma.com.  You may request a printed copy of each standing committee’s charter from our Corporate Secretary.

The Board’s role in risk oversight is consistent with our leadership structure, with management having day-to-day responsibility for assessing and managing our risk exposure and the Board actively overseeing management of our risks—both at the Board and committee level.

The Board regularly reviews and monitors the risks associated with our financial condition and operations and specifically reviews the enterprise risks associated with our five-year plan.  In particular, the Board reviews our risk portfolio, confirms that management has established risk-management processes that are functioning effectively and efficiently and are consistent with our corporate strategy, reviews the most significant risks and determines whether management is responding appropriately.

The Board performs its risk oversight role by using several different levels of review.  Each Board meeting begins with a strategic overview

by the CEO that describes the most significant issues, including risks, affecting the Company and also includes business updates from each reportable segment.  In addition, the Board reviews in detail the business and operations of each reportable segment quarterly, including the primary risks associated with that segment.

The Board focuses on the overall risks affecting us.  Each committee has been delegated the responsibility for the oversight of specific risks that fall within its areas of responsibility.  For example:

·            The Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation policies, plans and arrangements and the extent to which those policies or practices increase or decrease risk for the Company.

·            The Audit Committee oversees management of financial reporting, compliance and litigation risks as well as the steps management has taken to monitor and control such exposures.

·            The Nominating and Corporate Governance Committee manages risks associated with the independence of the Board, potential conflicts of interest and the effectiveness of the Board.

·            The Innovation and Technology Committee reviews risks associated with intellectual

property, innovation efforts and our technology strategy.

·            The Succession Planning Committee reviews risks associated with choosing a new Chief Executive Officer and ensuring an effective transition from Dr. Morel to his successor.

Although each committee is responsible for evaluating certain risks and overseeing the management of those risks, the full Board is regularly informed about those risks through committee reports.

Our Board has adopted a formal set of categorical director qualification standards used to determine director independence.  The standards meet or exceed the independence requirements of the NYSE corporate governance listing standards.  Under the standards, a director must be determined to have no material relationship with us other than as a director.  The standards specify the criteria for determining director independence, including strict guidelines for directors and their immediate families regarding employment or affiliation with us, members of our senior management or their affiliates.  The full text of our standards may be found under the “Who We Are—Financial Results— Investor Information— Corporate

Governance” section on our website at www.westpharma.com.

The Board undertook its annual review of director independence in February 2015.  As a result of this review, the Board did not substantively revise the existing standards.  Subsequently, the Board considered whether there were any relationships described under the standards for each director.  As a result of this review, the Board affirmatively determined that each of its non-employee directors is independent of us and our management under our standard of independence.

Our Board also holds regular executive sessions of only independent directors to conduct a self-assessment of its performance and to review management’s strategy and operating plans, the criteria by which our CEO and other senior

executives are measured, management’s performance against those criteria and other relevant topics.  Last year, our independent directors held four executive sessions.

All non-employee directors must retire on the date of the annual meeting of shareholders immediately following his or her 72nd birthday. 

An employee director must submit his or her resignation upon the date he or she ceases to be an executive of the Company.

To encourage significant share ownership by our directors and further align their interests with the interests of our shareholders, directors are expected to acquire within three years of appointment, and to retain during their Board tenure, shares of our common stock equal in value to at least five times their annual retainer.

The Board has set share ownership goals for senior executive management, which are set forth in “Compensation Discussion and Analysis—Other Compensation Policies.”

You may communicate with the Chairman, Independent Directors or the independent directors as a group by sending a letter addressed to the Board of Directors, c/o Corporate Secretary, West Pharmaceutical Services, Inc., 530 Herman O. West Drive, Exton, Pennsylvania 19341.  Communications to a particular director should be addressed to that director at the same address.

Our Corporate Secretary maintains a log of all communications received through this process.  Communications to specific directors are forwarded to those directors.  All other communications are given directly to the Chairman, Independent Directors, who decides whether they should be forwarded to a particular Board committee or to management for further handling.

Candidates for nomination to our Board are selected by the Nominating and Corporate Governance Committee in accordance with the Committee’s charter, our Amended and Restated Articles of Incorporation, our Bylaws and our Corporate Governance Principles.  All persons recommended for nomination to our Board, regardless of the source of the recommendation, are evaluated in the same manner by the Committee.

The Board and the Nominating and Corporate Governance Committee consider, at a minimum, the following factors in recommending potential new Board members or the continued service of existing members:

·      A director is nominated based on his or her professional experience.  A director’s traits, expertise and experience add to the skill-set of the Board as a whole and provide value in areas needed for the Board to operate effectively.

·      A director must have high standards of integrity and commitment, and exhibit independence of judgment, a willingness to ask hard questions of management and the ability to work well with others.

·      A director should be willing and able to devote sufficient time to the affairs of the Company and be free of any disabling conflict.

·      All of the directors, except for the Chief Executive Officer, should be “independent” as outlined in our Independence Standards.

·      A director should exhibit confidence and a willingness to express ideas and engage in constructive discussion with other Board members, Company management and all relevant persons.

·      A director should actively participate in the decision-making process, be willing to make difficult decisions, and demonstrate diligence

and faithfulness in attending Board and committee meetings.

·      The Board generally seeks active or former senior-level executives of public companies, particularly those with international operations, leaders in the healthcare or public health fields, science or technology backgrounds and individuals with financial expertise.

When reviewing nominees, the Nominating and Corporate Governance Committee may also consider whether the candidate possesses the qualifications, experience and skills it considers appropriate in the context of the Board’s overall composition and needs.  The Nominating and Corporate Governance Committee also considers the value of diversity on the Board in the director nominee identification and nomination process.

Accordingly, the Committee’s evaluation of director nominees includes consideration of their ability to contribute to the diversity of personal and professional experiences, opinions, perspectives and backgrounds on the Board.  The Committee regularly assesses the effectiveness of this approach as part of its review of the Board’s composition.

To assist it with its evaluation of the director nominees for election at the 2015 Annual Meeting, the Committee took into account the factors listed above and used a skills matrix highlighting the experience of our directors in areas such as pharmaceutical and biopharmaceutical services, medical device components, leadership, financial literacy, risk management expertise and independence.

Under the heading “Director Qualifications and Biographies,” we provide an overview of each nominee’s principal occupation, business experience and other directorships of publicly-traded companies, together with the qualifications, experience, key attributes and skills the Committee and the Board believe will best serve the interests of the Board, the Company and our shareholders.

Shareholders who wish to recommend or nominate director candidates must provide information about themselves and their candidates and comply with procedures and timelines contained in our Bylaws.  These procedures are described under “Other Information—2016  Shareholder Proposals or Nominations” in this Proxy Statement.

The Board has adopted a written policy and procedures relating to the Nominating and Corporate Governance Committee’s review and approval of transactions with related persons that are required to be disclosed in proxy statements under SEC regulations.  A “related person” includes our directors, officers, 5% shareholders and immediate family members of these persons.

Under the policy, the Nominating and Corporate Governance Committee reviews the material facts of all related-person transactions, determines whether the related person has a material interest in the transaction and may approve, ratify, rescind or take other action with respect to the transaction.

In approving a transaction, the Committee will take into account, among other factors, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third

party under the same or similar circumstances and the extent of the related person’s interest in the transactions.

The Committee reviews and pre-approves certain types of related person transactions, including: (1) director and executive officer compensation that is otherwise required to be reported in our Proxy Statement under SEC regulations; (2) certain transactions with companies at which the related person is an employee only; and (3) charitable contributions that would not disqualify a director’s independent status.  The policy and procedures can be found in the “Who We Are—Financial Results—Investors—Corporate Governance—Related Party Transaction Policies and Procedures” section of our website at www.westpharma.com.

We have no related person transactions required to be reported under applicable SEC rules.

The amounts in the “Fees Earned or Paid in Cash” column are retainers earned for serving on our Board, its committees and as committee chairs and Chairman, Independent Directors.  All annual retainers are paid quarterly.  The amounts are not reduced to reflect elections to defer fees under the Non-Qualified Deferred Compensation Plan for Non-Employee Directors (“Director Deferred Compensation Plan”).  During 2014,

Mr. Buthman, Mr. Michels, Mr. Weiland, and Mr. Welters deferred 100% of their cash compensation.

Stock Awards

The amounts in the “Stock Awards” column reflect the grant date fair value of stock-settled

RSU awards made in 2014.  The grant date fair value is determined under Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718.  In 2014, each non-employee director was awarded 3,016 RSUs, with a grant date fair market value of $43.10 per share based on the closing price of our common stock on the award date, May 6, 2014.  For a discussion on RSU grant date fair value, refer to Note 12 to the consolidated financial statements included in our 2014 Form 10-K.

RSUs are granted on the date of our annual meeting and vest on the date of the next annual meeting when the awards become fully vested if a director remains on the Board.  Vesting ceases upon termination for any reason.  However, if a director retires during the calendar year that retirement is required under our Director’s Retirement Policy, the award will vest pro rata on a monthly basis through the date of retirement.

Stock-settled RSUs are distributed upon vesting, unless a director elects to defer the award under the Director Deferred Compensation Plan.  In 2014, all continuing directors elected to defer their awards except for Mr. Hofmann and Dr. Johnson.  All awards are distributed as shares of common stock, as described below.  When dividends are paid on common stock,

additional shares of deferred stock and RSUs are credited to each director’s deferred stock account as if those dividends were used to purchase additional shares.

All Other Compensation

The amounts in the “All Other Compensation” column are the sum of: (1) the dividend-equivalent units (“DEUs”) credited to accounts under the Director Deferred Compensation Plan,  (2) with respect to Mr. Zenner and Mr. Weiland, a charitable contribution of $1,000 each made under our charitable contribution matching program, which is available to our employees, retirees and directors on a non-discriminatory basis, and (3) with respect to Mr. Johnson, a distribution of $1,025,935 deferred under the Director Deferred Compensation Plan following his retirement in May 2014.

Stock Options

Prior to 2007, non-employee directors received annual grants of stock options, which vested on the first anniversary of the grant date.  After benchmarking this practice, our Board ceased granting stock options to directors.  All stock options are vested and expire ten years after the original date of grant.  The following table sets forth all stock and stock options held by each director at the end of 2014.

Director Deferred Compensation Plan

All non-employee directors may participate in the Director Deferred Compensation Plan, which permits participants to defer all or a part of their annual cash compensation until their Board service terminates.  Deferred fees may be credited to a “stock-unit” account that is deemed invested in our common stock or to an account that earns interest at the prime rate of our principal commercial bank.  Stock-unit accounts are credited with DEUs based on the number of stock units credited to the account as of the dividend record date.

The value of a director’s account balance is distributed on termination of Board service.  The value of a director’s stock-unit account is determined by multiplying the number of units credited to the account by the fair market value of our common stock on the termination date.

RSUs that a director elects to defer (and all shares of deferred stock) are distributed in shares of stock.  Pre-2014 stock units may be distributed in cash in lieu of stock, if a director made an election in 2013.  All post-2013 stock units are only distributable in stock.  Partial shares are distributed in cash.

Directors may receive their distribution as a lump sum or in up to ten annual installments.  Separate elections apply to amounts earned and vested before 2005 and amounts earned and vested after December 31, 2004.  If a director elects the installment option, any cash-account balances during the distribution period will earn interest at the prime rate of our principal commercial bank and deferred stock and stock-settled units will be credited with dividends until paid.

We believe that our long-term success is directly related to our ability to attract, motivate and retain highly talented individuals committed to continually improving financial performance, achieving profitable growth and enhancing shareholder value.

To that end, our Compensation Committee has developed a pay-for-performance compensation philosophy that closely aligns our executives’ incentive compensation with Company performance and shareholder interests on a short- and long-term basis without promoting excessive risk.  When we deliver expected performance, our pay should approximate the market median.  Actual compensation, however, varies with our performance.

The Annual Incentive Plan (“AIP”), our annual cash incentive bonus plan, is based primarily on our performance on two financial measures: adjusted diluted earnings-per-share (“EPS”) and adjusted operating cash flow.  Performance

standards for regional and divisional heads, including Mr. Paproski, Ms. Flynn and Mr. Bedwell, also include targets for divisional sales, operating profit and cash flow.  Mr. Paproski, who leads our Delivery Systems business unit, where innovation is key to our success, is also subject to goals based on reaching milestones for our key innovative projects.  No awards are made unless performance exceeds the thresholds.

Our long-term incentive awards are aligned with shareholder interests because they deliver value based on share-price growth and the achievement of the three-year compound annual growth rate (“CAGR”) and the return on invested capital (“ROIC”) targets, encourage share ownership and promote retention of key talent.

A significant portion of the total compensation opportunity for each of our executives, including the named executive officers or “NEOs,” is directly dependent on the achievement of pre-established corporate goals.

At our 2014 annual meeting of shareholders, we held a shareholder “Say-on-Pay” advisory vote to approve the compensation of our NEOs as disclosed in our Proxy Statement.  Shareholders expressed overwhelming support for the compensation of our NEOs, with approximately  96% of the votes (present at the meeting and entitled to vote) cast to approve NEO compensation.

The Committee considered this vote as demonstrating strong support for our compensation programs and continued to apply the same effective principles and philosophies

that have been applied in prior years when making compensation decisions for 2014.  These principles and philosophies are highlighted above and described more fully below.

To ensure that the Committee considers shareholder views on compensation matters, we maintain an active shareholder engagement program, meeting with our largest investors throughout the year.  The Committee receives regular updates on investor feedback and understands that shareholders remain very focused on the alignment of pay and performance.

The Company delivered exceptional financial performance in 2014, achieving record net sales, operating profit and diluted EPS.  Compared to 2013, net sales increased 3.9% (4.3% at constant exchange rates), operating profit increased 12.1% and diluted EPS increased 11.5%.

Our shareholders also benefitted as we delivered total shareholder returns (“TSR”) well above the average of the S&P 500 and the Business Segment Comparator Group of companies we use for benchmarking our executive

compensation programs on a three-year (2012-2014) cumulative basis.  While our one-year TSR did not meet targeted levels, we believe our long-term success more accurately reflects our performance over time and removes some of the inherent annual variability in our business.  As discussed in more detail below, our long-term incentive plan uses three-year metrics and, due to our strong performance, paid at a higher level than our annual incentive plan, which uses one-year metrics.

AIP payouts for all executives, including the NEOs, are based on our performance against two principal corporate financial metrics: adjusted diluted EPS and adjusted operating cash flow.  Payouts for executives who manage regional and divisional business units also depend partially on divisional performance.  The target bonus is set as a percentage of base salary, which for the NEOs, ranges from 60% to 100%.  2014 AIP target goals were set by the Committee based on

the budget approved by the Board and the Committee’s determination that the targets contained sufficient “stretch.”  During 2014, we achieved greater than 91.5% of our established corporate targets, which apply to all AIP participants.  This resulted in payouts for our NEOs of 85% or more.  While we achieved our threshold levels in 2014, the results were less favorable compared to 2013, when we significantly exceeded our target levels. 

However, these results and consequent payouts demonstrate our pay-for-performance philosophy discussed in the “Compensation Discussion and Analysis” below.  During 2013, the payouts under the AIP, which measures short-term performance, exceeded 100%, while in 2014,

when the short-term performance was not at target levels, the payouts were correspondingly lower.  A reconciliation of the adjusted EPS and adjusted operating cash flow to amounts reported under U.S. GAAP is provided below under “Financial Measures.”

Long-term incentive compensation opportunities for our executives, including the NEOs, are entirely equity based.  Executives receive an award of PVSUs and time-vested stock options, approximately equal in expected value.  The value of each NEO’s long-term grant is determined by the Committee based on its review of peer-group market data, the

executive’s roles and responsibilities, his or her impact on our results, and advancement potential.  PVSUs entitle the recipient to receive common shares based on achievement of three-year CAGR and ROIC targets.  The following chart shows actual performance against target and threshold performance  for the three-year period that ended on December 31, 2014.

Part 1 – 2014 Performance, Compensation Committee Actions, Compensation Practices and Decisions

In an effort to further align with best practices and provide competitive compensation that aligns executives’ interests with those of our shareholders, the Committee made the following changes to its equity compensation grant practices.  First, the Committee revised its equity grant procedures to ensure that all equity awards at its annual grant meeting are made at least two business days following the release of our annual financial results for the preceding fiscal year.

Second, the Committee adopted a policy of providing vesting of future equity awards made to certain executive officers, including the NEOs, following their retirement.  Under the policy, future awards of PVSUs and stock options will continue to vest during their term for individuals who are executive officers at the time of their retirement so long as they are at least 57 years of age, have 10 years of service with the Company, and have not been terminated for “cause” as defined under the 2011 Omnibus Incentive Compensation Plan.

Vesting will immediately cease and all outstanding equity awards will be forfeited if the

executive competes with the Company during the period of continued vesting or fails to comply with his or her confidentiality obligations.  We may also cause the equity to be forfeited at any time if we discover that the executive should have been terminated for cause.  In addition, all equity awards will continue to be subject to our Incentive Compensation Recovery (“clawback”) Policy during the continued vesting period.

We also amended our standard LTIP award agreements for awards made after October 14, 2014 so that effective upon death or disability, any unvested options become fully vested and exercisable and any PVSUs granted will continue to vest through the end of the performance period.  These changes were made to be consistent with market practices, and to provide all of our employees and their survivors with additional security in the event of death or disability.

The following highlights the Committee’s key NEO compensation decisions for 2014, as reported in the Summary Compensation Table on page 38.  The decisions were made after

considering input from the Committee’s independent compensation consultant, Pay Governance LLC (“Pay Governance”).

CEO Compensation

In February 2014, the Committee took the following actions on Dr. Morel’s compensation:

·                  Annual base salary was increased 2.5% to $845,654;

·                  Annual incentive target award opportunity was maintained at 100% of base salary ($845,654); and

·                  Long-term incentive target expected value was maintained at $2.4 million.

After benchmarking Dr. Morel’s compensation with our Business Comparator Group, the Committee determined that he was below the 50th percentile for total direct compensation (“TDC”), which is the sum of base salary and annual and long-term incentive opportunities.  Having increased his long-term incentive opportunity by 20% in 2013, and not having increased his salary or AIP opportunity since 2013, the Committee determined to increase his base salary by 2.5% to bring him close to the 50th percentile.

Compensation of Other NEOs

The Committee approved salaries and set incentive-compensation targets of the other NEOs taking into account the CEO’s recommendations, the advice of Pay Governance, comparator group salary data, relative duties and responsibilities, advancement potential and impact on our financial and strategic performance.  Consistent with the approach for the CEO, the Committee provided a modest increase (2% to 4%) in annual base salary for all other NEOs, with the exception of Ms. Flynn.  Ms. Flynn was promoted from President, PPS, Americas to President, PPS, and she received a 4% increase at the same time as other NEOs and an adjustment for her promotion in September 2014.

These increases are in line with our Business Segment Comparator Group increases during 2014, which averaged 3.8%.

Pay Mix

Our compensation philosophy is to put the greatest emphasis on creating long-term shareholder value.  Therefore, the largest percentage of NEO’s pay is awarded under our long-term incentive plan (split equally between options and performance shares).  Almost 60% of Dr. Morel’s TDC is based upon long-term value, and the remainder of his pay is divided equally among salary and short-term incentives.  For our other executives, approximately 46% of their pay is based upon long-term awards.  Consistent with market practices, a larger portion of their pay mix is salary, but it is still less than one-third of their TDC.

Plan Criteria and Rationale

The annual incentives for all AIP participants, including the NEOs, are based on our financial performance as a whole measured by adjusted diluted EPS and adjusted operating cash flow.

AIP payouts for divisional participants (Paproski, Flynn, Bedwell and Hunt) rely on achieving divisional net sales, operating profit and cash flow targets, adjusted to reflect budget exchange rates.

In 2014, as in past years, the Committee evaluated the continued use of the AIP financial measures using the following principles:

·       Metrics that support achievement of an annual Board-approved operating plan;

·       Metrics that support profitable growth while preserving cash for longer-term investment;

·       Metrics that provide a clear line of sight—i.e., that are clearly understood and can be

affected by the performance of our executives and employees; and

·       Metrics that are consistent with market practice and commonly used within our comparator group.

Following this review, the Committee concluded that the continued use of the AIP financial measures support the foregoing principles for the following reasons:

·       EPS is a comprehensive measure of income and provides an emphasis on profitable growth while focusing managers on expense control.

·       Operating cash flow provides a focus on generating cash in the short term to fund operations, research and longer-term capital projects and focuses managers on expense control.

·       Divisional cash flow, sales and operating profit provide line of sight for operating

managers and encourage cooperation among the various regions and business platforms.

The Committee eliminated regional cash flow, sales and operating profit metrics in 2014 for our PPS Division.  These regional metrics comprised 20% of the PPS regional staff’s AIP target in 2013.  This 20% was redistributed to the PPS divisional goals, increasing the percentage of AIP target that is based on divisional goals from 40% to 60%.  This elimination reflects the growing globalization of our business and the expectations of our customers that the Company acts as a single company.  It helps to foster cooperation among our regions and provides a greater incentive to increase divisional revenue and profit without focusing on the impact on any particular region.

Target Setting

The target annual incentive awards for our NEOs are set as a percentage of base salary.  Target awards are reviewed annually to ensure alignment with our compensation philosophy to target each compensation element and total direct compensation at the market median.

Variances from this goal are based on an evaluation of competitive market data, internal

equity considerations among the CEO’s direct reports and individual performance evaluations.

For 2014, target annual-incentive opportunities for the NEOs ranged from 60% to 100% of their year-end base salary rate.

The payout curve is structured to reflect our philosophy that management should be rewarded for exceeding goals and penalized when targets are missed.

The payout factor is a pre-established multiplier that corresponds, on a sliding scale, to the percentage achievement of the AIP target objective so that if actual performance is less than target, the multiplier decreases on a sliding scale based on the percentage achievement.

Thus, for example, at the 85% achievement level, executives would receive 50% of their target award.  No payouts would be made if actual financial performance falls below 85% of the target level.   If AIP targets are exceeded, the multiplier increases on a sliding scale up to the 150% of target award level for achievement of 115% of the performance target level.

Achievement between the threshold and maximum levels is straight-line interpolated.