UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.       )

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WOLVERINE WORLD WIDE, INC.

(Name of Registrant as Specified In Its Charter)

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

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SEC 1913 (02-02)

 

Notice of 2010

Annual Meeting of Stockholders

and

Proxy Statement

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on April 22, 2010.

 

Wolverine’s Proxy Statement for the 2010 Annual Meeting of Stockholders and the Annual Report to Stockholders for the fiscal year ended January 2, 2010, are available at www.wolverineworldwide.com/2010annualmeeting.asp.

 

 

Wolverine World Wide, Inc.

9341 Courtland Drive, N.E.

Rockford, Michigan 49351

 

March 12, 2010

Dear Stockholder,

 

You are invited to attend the 2010 Annual Meeting of Stockholders which will be held on Thursday, April 22, 2010, in Rockford, Michigan.

 

The annual meeting will begin with an introduction of management attendees and directors, followed by voting on the matters set forth in the accompanying notice of annual meeting and proxy statement and any other business matters properly brought before the meeting. The meeting will adjourn for a presentation on the Company’s business operations, and then resume for a report on the voting.

 

Whether or not you plan to attend, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone or by Internet, or by completing, signing, dating and returning your proxy form in the enclosed envelope.

 

Sincerely,

 

 

Blake W. Krueger

Chairman of the Board

CONTENTS

 

 

10:00 a.m., April 22, 2010

Wolverine World Wide, Inc.

9341 Courtland Drive, N.E.

Rockford, Michigan 49351

 

March 12, 2010

 

To our Stockholders:

 

We invite you to attend Wolverine’s Annual Meeting of Stockholders at Wolverine’s headquarters located at 9341 Courtland Drive, N.E., Rockford, Michigan, on Thursday, April 22, 2010, at 10 a.m. The annual meeting will begin with an introduction of management attendees and directors, after which stockholders will:

 

(1) vote on election of four directors for three-year terms expiring in 2013;

 

 

(3) vote on the proposed Stock Incentive Plan of 2010; and

 

(4) transact other business that may properly come before the meeting.

 

The meeting will adjourn for a presentation on the Company’s business operations, then resume for a report on the voting. You can vote at the meeting and any adjournment of the meeting if you were a stockholder of record on March 1, 2010.

 

By Order of the Board of Directors

 

 

Kenneth A. Grady, Secretary

 

Wolverine World Wide, Inc.

9341 Courtland Drive, N.E.

Rockford, Michigan 49351

 

We are furnishing you this proxy statement and enclosed proxy card in connection with the solicitation of proxies by the Board of Directors of Wolverine World Wide, Inc. to be used at the Annual Meeting of Stockholders of the Company. Distribution of this proxy statement and enclosed proxy card to stockholders is scheduled to begin on or about March 12, 2010.

 

You can ensure that your shares are voted at the meeting by submitting your instructions by telephone or by Internet, or by completing, signing, dating and returning your proxy form in the enclosed envelope. Submitting your instructions or proxy by any of these methods will not affect your right to attend and vote at the meeting. We encourage stockholders to submit proxies in advance. A stockholder who gives a proxy may revoke it at any time before it is exercised by voting in person at the annual meeting, by delivering a subsequent proxy or by notifying the inspectors of election in writing of such revocation. If your Wolverine World Wide shares are held for you in a brokerage, bank or other institutional account, you must obtain a Legal Proxy from that entity and bring it with you to hand in with your ballot, in order to be able to vote your shares at the meeting.

 

 

Our Board of Directors currently consists of 11 directors. Wolverine’s Amended and Restated By-laws provide that the Board of Directors is divided into three classes, with each class to be as nearly equal in number as possible. Each class serves a term of office of three years, with the term of one class expiring at the annual meeting in each successive year.

 

As stated our Corporate Governance Guidelines, the Company seeks to achieve an appropriate level of diversity in the Company’s Board membership and to assemble a broad range of skills, expertise, knowledge and contacts to benefit the company’s business. The Governance Committee and the Board annually assess the current make-up of the Board, considering diversity across many dimensions, including gender, race, industry experience, functional areas (e.g., manufacturing, marketing, and finance), geographic scope, public and private company experience, and director experience in the context of an assessment of the current and expected needs of the Board, and the Governance Committee uses this assessment when defining the criteria for a director search. The Governance Committee and the Board assess the effectiveness of the diversity objective when assessing the composition of the Board. The Committee reviews director candidates based on the Board’s needs as identified through the assessment, and other factors, including their relative skills and characteristics, their exemplification of the highest standards of personal and professional integrity, their independence under NYSE listing standards and the Company’s Director Independence Standards, their potential contribution to the composition and culture of the Board, and their ability and willingness to actively participate in the Board and committee meetings and to otherwise devote sufficient time to Board duties.

 

The Company’s business focuses on the international marketing of footwear, apparel and accessories, both in the wholesale and retail markets. The Company has identified expanding its apparel and retail businesses as two important growth initiatives. Given the nature of its business, the Company believes it is important for members of the Board of Directors collectively to have experience in the footwear, retail and apparel industries, experience in branded marketing and experience in international operations. The Company also believes that it is important for members of the Board of Directors collectively to have corporate or other relevant leadership experience, public company officer and director experience and public company finance and accounting experience, including experience serving on other public company audit committees and experience in senior finance roles at public companies. The Company believes that its Board of Directors collectively possesses these types of experience. Below is a summary of each Director’s most relevant experience.

 

Four directors will be elected at the annual meeting on April 22, 2010 for three-year terms expiring at the annual meeting of stockholders to be held in 2013 or until their respective successors, if any, have been elected and are qualified. The Company’s nominees for the election of directors at the annual meeting include three independent directors, as defined in the applicable rules for companies whose securities are traded on the New York Stock Exchange (“NYSE”) and the Company’s independence standards, and one outside, but not independent, director.

 

All director nominees currently serve on the Board. The Company does not know of any reason why any nominee would be unable to serve as a director. However, if a nominee is unable to serve or is otherwise unavailable for election, the incumbent Board of Directors may or may not select a substitute nominee. If a substitute nominee is selected, your shares will be voted for the substitute nominee (unless you give other instructions).

 

 

Board Recommendation

 

The Board recommends that you vote “FOR” the election of the above nominees for terms expiring in 2013.

 

CONTINUING DIRECTORS – TERMS EXPIRING IN 2012

 

 

CONTINUING DIRECTORS – TERMS EXPIRING IN 2011

 

 

CORPORATE GOVERNANCE PRINCIPLES

 

The Company’s Corporate Governance Guidelines include the following key elements:

 

 

Governance Documents

 

The Company’s Corporate Governance Guidelines (including the Director Independence Standards); Articles of Incorporation and Amended and Restated By-laws; the Charter for each of the Audit, Compensation and Governance Committees; the Code of Conduct & Compliance; and the Accounting and Finance Code of Ethics, are available on the Wolverine website at http://www.wolverineworldwide.com/investors_governance.asp. At least annually, the Board and committees review the Guidelines, Charters and key governance documents and practices and update those documents as appropriate.

 

Director Independence

 

The Board annually assesses the independence of all directors. No director qualifies as “independent” unless the Board affirmatively determines that the director is independent under the Company’s Director Independence Standards and the listing standards of the NYSE. For over 15 years, Wolverine has functioned with not more than two active or former management employees as directors. When determining whether a director is independent, the Board considers the factors identified below and such other factors that the Board deems relevant. An “Independent Director” is defined as a director who:

 

 

“Immediate Family Member” covers spouses, parents, children, siblings, in-laws, and any person (other than a tenant or employee) sharing the household of any director, nominee for director, executive officer, or significant stockholder of a company.

 

Under these standards, and in conformity with the listing standards of the NYSE, the Board has determined the following directors are independent: Jeffrey M. Boromisa, William K. Gerber, Joseph R. Gromek, David T. Kollat, Brenda J. Lauderback, David P. Mehney, Shirley D. Peterson, and Michael A. Volkema. Mr. Mehney is independent even though there are indirect related party transactions between the Company and Mr. Mehney. Wolverine purchases promotional materials from a company which is one-third owned by one of Mr. Mehney’s sons, but the total annual purchases fall substantially below the annual $1,000,000 threshold. Mr. O’Donovan is not independent because he was the Company’s CEO within the last three years. Mr. Krueger is not independent because he currently is the Company’s CEO and President. Mr. Grimoldi is not independent because he is the Chairman and 35% owner of a company that made payments to Wolverine in excess of $1,000,000 per year in the last three years.

 

Independent directors continue to represent a substantial majority (more than 70%) of the Board. These directors meet by themselves periodically each year. All of the Board’s committees are comprised entirely of independent directors. The Board believes that this structure ensures that independent directors provide meaningful and effective oversight of the Company’s management.

Board Leadership

 

The Board of Directors has the following leadership structure:

 

 

Identification and Evaluation of Director Candidates

 

The Board prides itself on its ability to recruit and retain directors who have a diversity of experience, who have the highest personal and professional integrity, who have demonstrated exceptional ability and judgment and who are effective (in conjunction with the other members of the Board) in collectively serving the long-term interests of the stockholders.

 

The Governance Committee of the Board acts as the Board’s nominating committee. The Committee members all are independent under the NYSE listing standards and the Company’s Director Independence Standards. The Committee seeks individuals qualified to become directors and recommends candidates for all director openings to the full Board. For a discussion of the Board’s membership criteria and how the Company seeks to achieve diversity in the Company’s Board membership and to attract directors with a broad range of skills, expertise, knowledge and contacts to benefit the Company’s business, see page 6. The Committee considers director candidates in anticipation of upcoming director elections and other potential or expected Board vacancies.

The Committee considers director candidates suggested by directors, senior management and stockholders. The Committee evaluates all nominees for director in the same manner. Stockholders may recommend individual nominees for consideration by the Committee by communicating with the Committee through one of the Board communication mechanisms described under the heading “Stockholders Communications Policy.” The Board of Directors ultimately determines the individuals the Company nominates at each annual meeting. Stockholders must comply with the procedures set forth in the Company’s by-laws, which are posted on the Company’s website.

 

The Committee from time-to-time retains, at the expense of the Company, a search firm to assist in identifying potential director candidates and may retain other external parties to assist with a search. The Committee delegates responsibility for day-to-day management and oversight of the search firm engagement to the CEO and the Company’s Senior Vice President of Human Resources.

 

Board and Committee Membership and Meetings

 

The stockholders elect the Board to oversee management of the Company. The Board delegates authority to the CEO and senior management to pursue the Company’s mission, and oversees the CEO’s and senior management’s conduct of the Company’s business. In addition to its general oversight function, the Board reviews and assesses the Company’s strategic and business planning, senior management’s approach to addressing significant risks, and has additional responsibilities including, but not limited to, the following:

 

 

During 2009, the Board held eight meetings. We expect directors to make every effort to attend every meeting of the Board and the committees on which they serve and attend the annual meeting of stockholders. In 2009, each director then serving on the Board attended the 2009 Annual Meeting of Stockholders and all directors attended at least 75% of the meetings of the Board and the committees on which they served. The following table identifies the current committee members of each of the Board’s three standing committees (Audit, Compensation and Governance) and the number of meetings each committee held in 2009.

 

 

*     Current Committee Chairperson

 

Audit Committee. The current members of the Audit Committee are Messrs. Boromisa and Gerber and Mmes. Lauderback and Peterson, all of whom the Board has determined are “independent” as defined by NYSE rules and the Sarbanes-Oxley Act of 2002, as applicable to audit committee members, and all of whom satisfy the NYSE “financial literacy” requirement. Mr. Boromisa is the Chairperson of the Audit Committee and he and Mr. Gerber are “audit committee financial experts” under SEC rules. The Audit Committee:

 

 

Compensation Committee. The current members of the Compensation Committee are Messrs. Gerber, Gromek, Kollat and Volkema, all of whom the Board has determined to be “independent” as defined by NYSE rules. Mr. Volkema is the Chairperson of the Compensation Committee. None of the members of the Compensation Committee were, during the fiscal year, an officer or employee of Wolverine or formerly an officer of Wolverine. None of our executive officers served and currently none of them serves on the board of directors or compensation committee of any other entity with executive officers who have served or will serve on our Board of Directors or Compensation Committee. The Compensation Committee:

 

 

See the “Compensation Discussion and Analysis” section below for more information regarding the Compensation Committee’s processes and procedures.

 

Governance Committee.  The current members of the Governance Committee are Mmes. Lauderback and Peterson and Mr. Volkema, all of whom the Board has determined to be “independent” as defined by NYSE rules. Ms. Lauderback is the Chairperson of the Governance Committee. The Governance Committee:

 

 

Risk Oversight

 

The Board of Directors oversees the Company’s risk management activities. The Board implements its risk oversight function both as a whole and through delegation to various committees. These committees meet regularly and report back to the full Board. The Audit Committee has primary oversight responsibility with respect to financial risks as well as oversight responsibility for the Company’s overall risk assessment and risk management policies and systems. The Audit Committee oversees the Company’s procedures for the receipt,

retention and treatment of complaints relating to accounting and auditing matters and oversees the Company’s management of legal and regulatory compliance systems. The Compensation Committee also oversees risks relating to the Company’s compensation plans and programs.

 

The Company’s Director of Internal Audit coordinates the day-to-day risk management process for the Company and reports directly to the Chief Financial Officer and to the Audit Committee. The Director of Internal Audit updates the Audit Committee at least quarterly and updates the full Board at least annually regarding the Company’s risk analyses and assessments and risk mitigation strategies and activities.

 

Code of Conduct & Compliance

 

The Company has a Code of Conduct & Compliance for its directors, officers and employees. The Company will disclose, in accordance with all applicable laws and regulations, amendments to, or waivers from, its Code of Conduct & Compliance.

 

Accounting and Finance Code of Ethics

 

The Board has adopted an Accounting and Finance Code of Ethics (“Accounting and Finance Code”). This Accounting and Finance Code focuses on the financial reporting process and applies to our CEO, Chief Financial Officer and Corporate Controller. The Company will disclose, in accordance with all applicable laws and regulations, amendments to, or waivers from, its Accounting and Finance Code.

 

Stockholder Communications Policy

 

Stockholders and interested parties may communicate with members of Wolverine’s Board through various links provided on Wolverine’s website at http://www.wolverineworldwide.com/investors_governance.asp, or by sending correspondence to the Board, a specific Board committee or a director c/o Corporate Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, Michigan 49351. The Corporate Secretary reviews all communications to determine whether the contents include a message to a director and will provide a summary and copies of all correspondence (other than solicitations for services, products or publications) to the applicable directors at each regularly scheduled meeting. The Corporate Secretary will alert individual directors to items which warrant a prompt response from the individual director prior to the next regularly scheduled meeting. Items warranting prompt response, but not addressed to a specific director, will be routed to the applicable committee chairperson.

 

Any suggestions, concerns or reports of misconduct at Wolverine or complaints or concerns regarding Wolverine’s financial statements and accounting, auditing, internal control and reporting practices can be reported by submitting a report on www.WolverineReportLine.com (anonymously, if desired) or by writing to the Audit Committee c/o the Corporate Secretary at the above address.

Non-Employee Director Compensation

 

The following table provides information concerning the compensation of our non-employee directors for our fiscal year 2009 ended January 2, 2010 (“fiscal year 2009” or “2009”).

 

 

 

 

 

 

*    Mr. O’Donovan was granted most of the stock options when he was an executive officer of the Company.

 

 

 

The Company compensates non-employee directors as follows:

 

 

 

Wolverine also pays director expenses associated with attending Board and committee meetings and other Wolverine functions, and industry functions such as trade shows, and pays spouse travel expenses in connection with Board international strategic planning meetings, which typically happen every other year. In addition, the Company provides office space and administrative assistance to directors who visit the Company’s headquarters or other locations. From time-to-time, Wolverine provides directors with samples of Wolverine products of nominal value for review and assessment. Wolverine reimburses directors for certain approved expenses relating to director education. Directors who are also employees of Wolverine or any of its subsidiaries do not receive an annual cash or equity retainer and do not receive compensation for attendance at Board or committee meetings.

 

Deferred Compensation Plan. In 2008, Wolverine adopted the Deferred Compensation Plan, a supplemental nonqualified deferred compensation plan for directors who are not employees of Wolverine or its subsidiaries. Wolverine continues to maintain a separate non-employee director deferred compensation plan that applies to benefits accrued under that plan before January 1, 2005. The Deferred Compensation Plan permits all non-employee directors to defer 25%, 50%, 75% or 100% of their directors’ fees. Deferred compensation is deemed to be invested in Wolverine common stock. If a director elects to defer directors’ fees, Wolverine establishes an account on its books for such director and credits to such account a number of stock units equal to the amounts deferred and annual equity retainer amounts described above divided by the closing market

price of common stock on the payment date (“stock units”). The Company also credits stock units with dividend equivalents in the form of additional stock units.

 

Upon termination of service as a director or as of such later date selected by a director, the Company distributes accumulated stock units in the director’s account, in shares of Wolverine common stock, in a single lump-sum payment or annual installment payments over a period of up to 20 years (10 years under the prior plan). The Company converts each stock unit to one share of Wolverine common stock.

 

Upon a “change in control” as defined in the current Deferred Compensation Plan, the Company distributes to the director in a single lump sum payment, Wolverine shares of common stock equal to the stock units credited to a director’s account. For purposes of the Deferred Compensation Plan, “change in control” is defined as:

 

 

Non-Employee Director Stock Ownership Guidelines

 

Through stock ownership guidelines, the Company requires that each non-employee director maintain a stock ownership level equal to five times the non-employee director cash retainer to align further the interests of these individuals with the stockholders. Each non-employee director must meet the ownership requirement by the end of the fifth year after he or she becomes subject to the guidelines. All non-employee directors who have passed the end of their fifth year meet the ownership requirement.

 

Securities Ownership of Officers and Directors and Certain Beneficial Owners

 

Five Percent Stockholders

 

The following table sets forth information as to those holders known to Wolverine to be the beneficial owners of more than five percent of Wolverine’s outstanding shares of common stock as of December 31, 2009:

 

 

 

Stock Ownership by Management

 

The following table sets forth the number of shares of common stock beneficially owned as of March 1, 2010, by each of our directors and named executive officers and all of our directors and named executive officers as a group. The address of each of the persons in the table is c/o of Wolverine World Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351.

 

 

 

The Compensation Discussion and Analysis section of our proxy statement provides an overview and analysis of Wolverine’s executive compensation program and policies, the material compensation decisions made about 2009 compensation and the material factors considered in making those decisions. We have divided it into four parts:

 

 

This section refers only to the compensation of Wolverine’s “named executive officers” (or “NEOs”) unless we note otherwise:

 

 

Compensation Philosophy and Objectives

 

The Compensation Committee of the Board of Directors oversees Wolverine’s compensation program. The Compensation Committee reviews and approves the compensation of the NEOs other than the CEO, and together with the other independent directors, approves the compensation of the CEO.

 

Wolverine’s executive compensation philosophy is to provide competitive salaries and incentives to achieve superior financial performance. Wolverine’s compensation program for NEOs and other executives has four primary objectives:

 

 

The program balances base salaries with performance-based compensation, and rewards annual performance while maintaining emphasis on longer-term objectives. The program also balances the cash, non-cash, long-term, and short-term components and current and future compensation. The Committee considers qualitative and quantitative factors when setting compensation for each NEO. Each NEO’s compensation mix and cash-to-equity ratio depends on his or her responsibilities, experience, skills, and potential to affect Wolverine’s overall performance. In general, an NEO’s compensation increases as the NEO’s level of responsibilities increases. The Committee believes the CEO has the broadest scope of responsibilities and typically approves higher compensation for the CEO than for any other NEO.

 

Compensation Consultant and Market Comparisons

 

The Compensation Committee engaged Towers Perrin as an outside compensation consultant to assist in reviewing Wolverine’s 2009 executive compensation program. Towers Perrin and its affiliates did not provide any other services to Wolverine in 2009. Effective January 1, 2010, Towers Perrin and Watson Wyatt

Worldwide, Inc. merged to form Towers Watson & Co. Watson Wyatt also provided actuarial services to the Company in 2009. Wolverine is using Towers Watson in 2010 for actuarial and executive compensation services.

 

The Compensation Committee and management sought the views of Towers Perrin about market intelligence on compensation trends, and its views on specific compensation programs designed by management with oversight from the Compensation Committee. In addition, Towers Perrin provided survey information comparing direct compensation for the NEOs to market data from two databases. “Direct compensation” was defined as base salary, annual bonus opportunities, long-term incentive compensation and equity grants. Towers Perrin used the Towers Perrin 2007 U.S. CDB General Industry Executive Database (with more than 700 participants) and Mercer Human Resource Consulting 2007 U.S. Benchmark Database (with over 2,000 participants). Both are general industry, national compensation, survey databases and include information from participants in a broader range of industries other than solely the footwear, apparel and retail industries. Towers Perrin also provided an analysis of direct compensation for the CEO and Chief Financial Officer (“CFO”) based on proxy statement disclosures by companies in the footwear, apparel and retail industries which are comparable to the Company (the “Peer Group”):

 

 

The Committee considered the survey information, information the Company learned through recruiting NEOs, and the experience levels and responsibilities of the NEOs prior to joining the Company as reference points in evaluating the compensation types and levels for the NEOs.

 

Overview of Executive Compensation Components

 

The following table describes the Company’s compensation program components for NEOs:

 

 

2009 Compensation Decisions

 

Base Salary

 

As part of approving an NEO’s base salary, the Compensation Committee considers the scope of the NEO’s responsibilities, years of service with the Company and in similar positions at other companies, skills, and knowledge; market conditions; economic conditions; and Wolverine’s compensation philosophy. For promotions from within Wolverine, the Compensation Committee determines the NEO’s base salary after considering the above factors. For NEOs hired from outside the Company, the Compensation Committee sets the NEO’s base salary after reaching a recommended base salary through arms-length negotiation with the NEO. After hiring or promotion, the Compensation Committee, approves changes to an NEO’s base salary to reflect increased experience, changes in responsibilities, years of service, and market information. Management provides input to these decisions, except in the case of the CEO’s compensation. NEO base salaries are reviewed approximately every 12 months.

 

For 2009, management considered the current and projected economic conditions, the Company’s cost structure, and its estimated future financial performance in light of economic conditions, and implemented a base salary freeze for all employees not covered by a collective bargaining agreement. Consistent with the freeze on employee base salaries, the Compensation Committee decided in early 2009, based in part on management’s recommendation, to implement a base salary freeze for all NEOs. Accordingly, the base salary of Wolverine’s CEO and other NEOs stayed the same for 2009 as they were in 2008, except for Mr. Zwiers whose base salary was increased to reflect additional responsibilities he assumed when he was promoted to President, Outdoor Group.

 

Annual Incentive Compensation

 

NEOs have the opportunity to earn annual bonuses (“Annual Bonus”) under the Company’s Annual Bonus Plan, based on achieving combinations of performance criteria the Compensation Committee sets for the

Company and for individual business units. NEOs also can earn discretionary bonuses (“Discretionary Bonus”) under the Company’s Discretionary Bonus Plan, based on personal objectives set for each NEO. In any given year, an NEO might earn one, both, or neither of the bonuses.

 

For 2009, the Committee increased the Annual Bonus percentage weight to 85% from 80%, and decreased the Discretionary Bonus percentage weight to 15% from 20%, to place more emphasis on objective performance criteria used to determine the Annual Bonus. Each year, the Committee also sets for each NEO a bonus goal, expressed as a percentage of the NEO’s base salary (the “Target Percentage”). The 2009 Target Percentages are shown in the table below. The Committee generally sets the Target Percentages higher for NEOs who have greater influence on profits and sales, which puts a larger percentage of their total potential cash compensation “at risk.” At target performance under both the Annual Bonus Plan and Discretionary Bonus Plan, an NEO would receive 100% of his or her Target Percentage bonus opportunity. The total annual incentive compensation opportunity for each NEO in 2009 ranged from 0% to 200% of his or her Target Percentage, consistent with the opportunity in 2008.

 

For 2009, the Annual Bonus for each NEO is based on the Company’s or individual business unit’s performance on the applicable performance criteria, weighted by the percentages listed in the table below and then multiplied by the Target Percentage, and the Discretionary Bonus is based on the NEO’s performance on his or her personal objectives, weighted by 15% and then multiplied by the Target Percentage.

 

 

 

The Compensation Committee believes the annual incentive compensation opportunities for NEOs should stay competitive with incentive compensation at companies of similar size to Wolverine and companies with whom Wolverine competes to hire NEOs. The Committee considered each NEO’s performance, experience level, and potential to affect Wolverine’s short-term performance when setting his or her annual incentive compensation opportunity. The Committee also recognized that Wolverine competes with footwear, apparel and retail companies for hiring NEOs, and that it has been the Company’s experience that the compensation levels in those industries generally exceed the levels reported in general industry surveys. The Committee evaluated the potential annual incentive compensation each NEO could earn at the target payout level, considering it in the context of the Towers Perrin general industry survey information described above in “Compensation Consultant and Market Comparisons,” the Peer Group data, information provided by management from the Company’s experience recruiting NEOs, and the experience and responsibilities of the NEOs. Based on its review of this

information, the Committee decided to increase the Target Percentage for each NEO’s 2009 Target Percentage for the Annual Bonus and the Discretionary Bonus from the 2008 level as follows:

 

 

*    Includes the NEO’s Annual Bonus payout and the Discretionary Bonus payout.

 

2009 Annual Bonuses

 

The Compensation Committee sets performance criteria early each year for Wolverine and major business units. Soon after the end of each year, the Committee measures actual performance against those criteria and then approves annual bonuses. The Committee ties each NEO’s bonus to the performance of Wolverine, one or more business units, or both based on the Committee’s determination of the parts of the Company the NEO reasonably influences. Management provides input to these decisions, except in the case of the CEO’s compensation. The performance criteria for the Company are revenue and pre-tax earnings, with four performance levels: threshold (50% payout), target (100% payout), goal (150% payout) and stretch (200% payout). Revenue is weighted 30% and pre-tax earnings 55% of the total annual incentive compensation opportunity, compared to 16% and 64%, respectively, in 2008. The Committee changed the weights to more closely align the Annual Bonus Plan with the Company’s strategic objectives. These criteria were selected because the Committee believes there is a strong relationship between performance on these financial measures and stockholder value. For 2009, the Committee set the following performance levels for each of the Company’s Performance Criteria:

 

 

The performance criteria for the individual business units, which are listed above, also have four performance levels: threshold (50% payout), target (100% payout), goal (150% payout) and stretch (200% payout). Corporate performance goals are based on business unit performance goals. The level of difficulty in attaining threshold, target, goal and stretch performance goals for a business unit is intended to be substantially similar to the level of difficulty in attaining the Company’s Performance Criteria. Performance goals for the Global Operations Group, the Outdoor Group, the Retail Group and the Human Resources Department, which determine a portion of the bonus awarded to Messrs. McBreen and Zwiers and Ms. Linton, were set using this level-of-difficulty standard. Target performance goals for the business units were set at levels that the Compensation Committee believed were achievable with strong management performance given the expected challenging economic and market conditions, based on a review of the business unit’s historical performance and its 2009 operating plan.

 

Wolverine’s 2009 revenue was $1.101 billion, falling between threshold and target, resulting in a payout of 91.87% of target for this performance measure. Wolverine’s pre-tax earnings for 2009 were $121.3 million

adjusted for non-recurring restructuring charges ($85.7 million before the adjustment), falling between the goal and stretch performance levels, resulting in a payout of 164.30% of target for this performance measure. The Outdoor Group’s revenue of $416.2 million was between goal and stretch performance (which corresponds to a payout of 165.00% of target), and its performance on pre-tax earnings was between target and goal (which corresponds to a payout of 144% of target), resulting in an overall payout of 151.20% of target. The Global Operations Group’s performance was between threshold and target on pre-tax earnings, resulting in an overall payout of 53.68% of target. The Retail Group’s performance was above stretch on both revenue and pre-tax earnings, resulting in a payout of 200% of target. The Human Resource Department’s performance was above stretch on actual Department expenses compared to projected expenses in the Department’s 2009 operating plan, resulting in an overall payout of 200% of target. For fiscal 2009, the Company paid the NEOs the following bonuses under the Annual Bonus Plan:

 

*    Not including Discretionary Bonus.

 

2009 Discretionary Bonuses

 

For 2009, the Committee changed the Discretionary Bonus payout range, increasing the range to 0% to 200% of an NEO’s Target Percentage to make the new range consistent with the ranges set for performance on other incentive compensation criteria.

 

The Committee determines, each NEO’s Discretionary Bonus based on the NEO’s individual performance measured against his or her personal objectives. Management provides input to these decisions, except in the case of the CEO’s compensation. Those objectives may include elements such as executing strategies supporting Wolverine’s vision, developing people, supporting social and environmental responsibility, growing new business initiatives and driving operational excellence. Performance under the Discretionary Bonus Plan is a subjective measurement, generally based on qualitative factors. Early each year, the Compensation Committee and the independent Directors of the Board meet with the CEO and agree upon the CEO’s personal objectives for the year. During the year, the Compensation Committee meets with the CEO to evaluate his performance compared to his personal objectives and at the end of the year, the Committee and the independent Directors of the Board evaluate the CEO’s performance and approve any Discretionary Bonus to the CEO. The Committee determines the Discretionary Bonus for other NEOs based on management’s recommendations and input from the CEO. For 2009, the Compensation Committee approved the following Discretionary Bonuses for the NEOs:

 

*    Not including Annual Bonus.

 

Long-Term Incentive Compensation

 

Each NEO has the opportunity to earn long-term incentive compensation in the form of: (1) cash or performance shares, (2) stock option grants, and (3) restricted stock awards.

 

Long-Term Incentive Cash and Performance Share Bonuses

 

Each NEO has long-term incentive compensation opportunities under the Company’s Long-Term Incentive Plan (“LTIP”) and stock incentive plans based on performance criteria covering three-year periods (“3-Year Bonus”). Early in the first year of each three-year period, the Compensation Committee sets the performance criteria for the three-year period. Soon after the period ends, the Committee certifies actual performance compared to the criteria set at the beginning of the period. The Company pays the NEOs bonuses based on the certified performance level and payout schedule for the three-year period. The Committee may adjust the bonuses within the discretion the Committee is granted under the applicable plan.

 

3-Year Cash Bonus (Fiscal 2007-2009)

 

The Compensation Committee had established two performance criteria for the 2007-2009 performance period, each weighted 50%: (1) total shareholder return ranking within Wolverine’s Peer Group (defined on page 24), and (2) fully diluted earnings per share:

 

 

The Committee believed these criteria would balance the NEOs’ focus on near-term profitability and longer-term shareholder value. The Committee evaluated Wolverine’s performance against these criteria and certified that Wolverine’s performance on the earnings per share criterion was $5.50 (adjusted to exclude restructuring and related costs and other special charges), falling between goal and stretch performance levels, and on the total shareholder return criterion Wolverine’s performance rank was 4th, resulting in a weighted average payout level of 158.8%. The NEOs received the following cash 3-Year Bonuses for the 2007-2009 performance period:

 

 

 

3-Year Performance Share Bonus (Fiscal 2009-2011)

 

The Compensation Committee believes that long-term incentive compensation opportunities for NEOs should be competitive with long-term incentive compensation opportunities at companies of similar size to Wolverine and companies with whom Wolverine competes to hire NEOs. The Committee evaluated the potential long-term incentive payout for each NEO, considering it in the context of the Towers Perrin general industry survey information described above in “Compensation Consultant and Market Comparisons,” the Peer Group data, information provided by management from the Company’s experience recruiting NEOs, and the experience and responsibilities of the NEOs. The Committee recognized that for positions other than CEO and CFO, the general industry survey information covered positions with narrower responsibilities than those of Messrs. McBreen and Zwiers, and that Ms. Linton’s years of experience as the leader of Human Resources functions for much larger companies was not reflected in the survey data. The Committee also understood that Wolverine competes with footwear, apparel and retail companies for hiring NEOs, and that it has been the Company’s experience that compensation levels in those industries generally exceed the levels reported in general industry surveys. In addition, the Committee recognized that Mr. Zwiers’ promotion to President, Outdoor Group, had significantly expanded his responsibilities.

 

Based on these considerations, the Committee decided to increase the NEOs’ long-term incentive compensation opportunities at the target performance level. The Committee increased the Target Percentage levels for Messrs. Krueger, Grimes, McBreen and Zwiers and Ms. Linton for the 3-Year Bonus opportunity, as follows:

 

For the 2009-2011 performance period, the Compensation Committee replaced cash payouts with equity payouts for the 3-Year Bonus opportunity (“performance shares”). The Committee considered the relative contributions of cash and equity to each NEO’s compensation package, the objectives of the long-term incentive component of each NEO’s compensation package (including more closely aligning NEOs’ interests with stockholder interests), the Company’s strategic business objectives, market information, and qualitative factors such as responsibilities. No single factor drove the changes made to the 3-Year Bonus program.

 

In addition, the Committee also replaced the total shareholder return criterion with a business value added criterion (“BVA”). BVA reflects changes in after-tax operating profit and asset management. The Committee believed focusing NEOs’ interests on increasing BVA would align their interests more closely with stockholder interests, and that BVA is superior to TSR in measuring management’s long-term influence over company performance. The Committee defined BVA as a measurement that equals the operating income for a fiscal year reduced by (i) a provision for income taxes equal to the operating income multiplied by the Company’s total effective tax rate for the same fiscal year; and (ii) a capital charge equal to a two-point average of “net operating assets” at the beginning and end of a fiscal year (with “net operating assets” defined as the net of

trade receivables (net of reserves), inventory (net of reserves), other current assets, property, plant and equipment, trade payables and accrued liabilities) multiplied by 10%. The Committee increased the weight given to the earnings per share performance criterion from 50% to 65% of the total performance, and set the weight for the BVA performance criterion at 35%. The Committee believed that earnings per share is an important indicator of stockholder value and that increasing the weight given to this criterion would further align NEOs’ interests with stockholders’ interests. The Committee intended the level of difficulty in attaining threshold, target, goal and stretch performance goals it set for the 2009-2011 performance period to be substantially similar to the level of difficulty in attaining the performance goals for the 2007-2009 performance period.

 

In February 2009, the Committee awarded performance shares to each NEO with a fair market value at the time the award was made equal to the maximum bonus payout the NEO could earn as the 3-Year Bonus for the 2009-2011 performance period. The Committee granted the awards under the Company’s 2005 Stock Incentive Plan, and details of the awards are included in the table “Grants of Plan-Based Awards” on page 36. The Company accrues, but does not pay, dividends on the performance shares during the performance period. Following the end of the 2009-2011 performance period, the Compensation Committee will certify the Company’s performance compared to the performance criteria. Depending on the Company’s performance, the restrictions on none, some or all of the performance shares awarded to each NEO will lapse. At that time, the Company will pay to the NEO the accrued dividends on those shares on which the restrictions do lapse.

 

Stock Option Grants and Restricted Stock Awards

 

The Compensation Committee believes that NEO stock ownership benefits stockholders and has approved stock option grants and restricted stock awards to NEOs and other executives for many decades. The Committee administers the stock incentive plans for stock option grants and restricted stock awards, and approves the amount of and terms applicable to all grants and awards. In addition to annual grants and awards, the Compensation Committee may approve special grants or awards to NEOs, such as a grant or award to a new hire or for a promotion.

 

The Compensation Committee considers the NEO’s position, responsibilities, years of service, performance, number of stock options and amount of restricted stock previously granted, and market information, when setting the amount of stock option grants and restricted stock awards. Management provides input to these decisions, except in the case of the CEO’s compensation. The Committee compares NEO equity awards to the market information as part of evaluating NEO total long-term incentive compensation at target to broader compensation trends. In general, position and responsibilities are the primary factors. Based on these considerations, the Committee increased the percent of Mr. Krueger’s base salary targeted for the fair market value of the annual stock option grants and restricted stock awards to him.

 

The Committee approves annual stock option grants and restricted stock awards at its regularly scheduled meeting in February. The exercise price of stock options is the fair market value of Wolverine’s common stock on the grant date, and the fair market value is the closing price of Wolverine’s stock on that date. The stock option grants typically vest one-third each year over three years. The restrictions on restricted stock awards typically lapse 25% each on the third and fourth anniversary and 50% on the fifth anniversary of the award.

 

The Committee targeted the following percentages of base salary when determining the combined total grant date fair value for the stock options and restricted stock (not including the performance share awards) it awarded NEOs for 2009. The “Grants of Plan-Based Awards” table on page 36 shows the actual grants and awards for 2009.

 

The restricted stock award, not including performance shares, was approximately 60%, and the stock option grants were approximately 40%, of the combined value of the equity awarded to each NEO. The Committee believed this mix was appropriate based on the retentive nature of restricted stock and the incentive nature of stock options.

 

Equity Grant Practices

 

The exercise price of each stock option granted is the closing price of Wolverine’s stock on the date of the grant, which is the date of the Compensation Committee meeting at which equity awards for the NEOs are determined. The Company generally schedules Board and Committee meetings at least one year in advance. The Compensation Committee also has delegated to the CEO the authority to award restricted stock to employees, other than himself and other NEOs, during the Company’s 2010 fiscal year to recognize outstanding performance by employees. These awards may not exceed 20,000 shares in aggregate.

 

NEO Stock Ownership Guidelines

 

Through stock ownership guidelines, the Company requires that NEOs maintain a minimum stock ownership level to align further the interests of these individuals with the stockholders.

 

Each NEO must meet the ownership requirement by the end of the fifth year after he or she becomes subject to the guidelines. All NEOs who have passed the end of their fifth year meet the ownership requirement.

 

Retirement, Welfare and Other Benefits

 

The NEOs participate in Wolverine’s medical and dental plans and receive life and disability insurance. Subject to variations to account for requirements in local jurisdictions, variances in local compensation structure (for example, as applicable to Wolverine’s employees in the United Sates versus certain overseas offices), and to requirements under collective bargaining agreements, all Wolverine employees receive the same retirement, health and welfare benefit opportunities. In addition, Wolverine provides some basic tax and estate planning services for the NEOs. The NEOs also participate in Wolverine’s Defined Benefit Pension Plan and Supplemental Executive Retirement Plan. For a description of the benefits under Wolverine’s retirement plans, see “Pension Plans and 2009 Pension Benefits” below.

 

Impact of Accounting and Tax Treatments on Compensation

 

Section 162(m) of the Internal Revenue Code provides that publicly held companies may not deduct compensation paid to the CEO and the three next most highly-paid executive officers (other than the CFO) in excess of $1,000,000 annually, with certain exceptions for qualified “performance-based” compensation. Wolverine has obtained stockholder approval of the Annual Bonus Plan, the LTIP, and its stock incentive plans, and is seeking stockholder approval of the Stock Incentive Plan of 2010, to permit certain amounts payable under these plans to qualify as “performance-based” compensation for purposes of Section 162(m). Incentives under these plans, other than time-based restricted stock awards, were not included in the $1,000,000 limit for purposes of calculating Wolverine’s deduction for compensation paid to its NEOs. Wolverine does not require all of its compensation programs to be fully deductible under Section 162(m), because Wolverine believes it is important to preserve flexibility in administering compensation programs in a manner designed to promote varying corporate goals. Wolverine may pay certain compensation that does not qualify as performance-based compensation and that is excluded from the limitation on deductibility.

Post-Employment Compensation

 

Each NEO is party to an Executive Severance Agreement that provides for certain payments and benefits upon termination of employment after a change in control of Wolverine. The Board believes Executive Severance Agreements will promote management stability during the transition period accompanying a change in control. Each NEO is eligible to receive compensation if his or her employment is terminated within two years (Messrs. Grimes, McBreen and Zwiers and Ms. Linton) or three years (Mr. Krueger) following a change in control of Wolverine. The Compensation Committee believes this “double trigger” requirement of change in control plus termination of employment is appropriate, because each NEO is not materially harmed by a change in control unless his or her employment is terminated. Each Executive Severance Agreement does not require an NEO to mitigate payments by seeking employment, but does reduce compensation paid during the fourth and later months after termination by an amount equal to any other compensation earned by the NEO during that period. An NEO does not receive payment under the Executive Severance Agreement if his or her employment is terminated:

 

 

All NEOs also may be eligible under Wolverine’s retirement plans or equity plans to receive certain payments and benefits upon termination of employment or in connection with a change in control. The Compensation Committee believes that such single-trigger accelerated vesting is appropriate because by protecting a significant component of the NEOs total compensation, the acceleration of equity vesting mitigates any potential conflicts of interest that might otherwise arise between the NEOs and the stockholders and serves as a substantial incentive for those NEOs to obtain the highest possible value for the stockholders, should the Company become an acquisition target. The Compensation Committee also retains the discretion to modify or eliminate the accelerated vesting.

 

Mr. Krueger also is party to a Separation Agreement that provides he will receive certain payments and benefits upon termination of his employment by Wolverine other than for “cause” or by him for “good reason.” The Compensation Committee determined upon appointing Mr. Krueger as CEO, that given the Company’s strategic initiatives the Board had asked him to lead, it was appropriate for the Company to enter into a separation arrangement. You will find information on benefits payable to Mr. Krueger and each other NEO and the specific elements comprising the payment under the Separation Agreement, Executive Severance Agreements, and other retirement and equity plans of Wolverine, in the “Potential Payments Upon Termination or Change in Control” section of this proxy statement.

 

The Compensation Committee has reviewed and discussed with management the information provided under the heading “Compensation Discussion and Analysis.” Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Company include the Compensation Discussion and Analysis section in this proxy statement and incorporate it by reference into the Company’s Annual Report on Form 10-K.

 

Respectfully submitted,

 

Michael A. Volkema (Chairperson), William K. Gerber, Joseph R. Gromek, David T. Kollat

 

 

 

 

 

 

 

The following table provides information concerning each grant of an award made to the NEOs in the last completed fiscal year: