ABM Industries Incorporated
ABM INDUSTRIES INC /DE/ (Form: DEF 14A, Received: 02/06/2012 09:01:47)

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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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Definitive Proxy Statement

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Soliciting Material under §240.14a-12

 

ABM Industries Incorporated

(Name of Registrant as Specified In Its Charter)

 

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GRAPHIC

551 Fifth Avenue, Suite 300
New York, New York 10176

February 6, 2012

Dear Fellow Shareholders:

You are cordially invited to attend the 2012 Annual Meeting of Shareholders of ABM Industries Incorporated at The Pierre Hotel, 2 East 61 st  Street, New York, New York 10065, on Tuesday, March 6, 2012, at 10:00 a.m. The Notice of Meeting and Proxy Statement and accompanying proxy card describe in detail the matters to be acted upon at the meeting.

Whether or not you plan to attend the meeting in person, please take the time to vote on the Internet, by telephone or by mailing your proxy card. As explained in the Proxy Statement, you may revoke your proxy at any time before it is actually voted at the meeting.

Only shareholders of record at the close of business on January 11, 2012 will be entitled to vote at the meeting and any adjournments thereof. A list of shareholders on that date will be available for inspection by any shareholder for ten days prior to the meeting during normal business hours at ABM's corporate headquarters located at 551 Fifth Avenue, Suite 300, New York, New York 10176. You may make an appointment to review the list of shareholders by contacting ABM at (212) 297-0200.

If you plan to attend the meeting in person and vote at the meeting, please remember to bring a form of personal identification with you. If you are acting as a proxy for another shareholder, please bring appropriate documentation from the record owner for whom you are acting as a proxy. If you will need any special assistance at the meeting, please contact ABM at (212) 297-0200 prior to the meeting.

We look forward to seeing you at the meeting.


GRAPHIC
 
GRAPHIC
Maryellen C. Herringer
Chairman of the Board of Directors
  Henrik C. Slipsager
President and Chief Executive Officer

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GRAPHIC

551 Fifth Avenue, Suite 300
New York, New York 10176




2012 ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, MARCH 6, 2012
10:00 A.M.
NOTICE OF MEETING AND PROXY STATEMENT


YOUR VOTE IS IMPORTANT

ABM Industries Incorporated ("ABM" or the "Company") will hold its 2012 Annual Meeting of Shareholders at The Pierre Hotel, 2 East 61 st  Street, New York, New York 10065, on Tuesday, March 6, 2012, at 10:00 a.m. The items of business at the annual meeting are:

If you are a shareholder of record, you may vote in any one of four ways: in person by attending the Annual Meeting, by Internet, by telephone, or by mail using the enclosed proxy card. Specific voting information is included under the caption "Voting Procedures." Only shareholders of record at the close of business on January 11, 2012, are entitled to vote. On that day 53,468,394 shares of ABM common stock were outstanding. Each share entitles the holder to one vote.

The ABM Board of Directors asks you to vote in favor of the director nominees, for the ratification of KPMG LLP as ABM's independent registered public accounting firm, for the approval, on an advisory basis, of the compensation of our executive officers and for the approval of amendments to the Company's 2006 Equity Incentive Plan. This Proxy Statement provides you with detailed information about each of these matters. We encourage you to read this Proxy Statement carefully. In addition, you may obtain information about ABM from our Annual Report on Form 10-K for the fiscal year ended October 31, 2011, and from the ABM 2011 Report to Shareholders, as well as from additional documents that we have filed with the Securities and Exchange Commission that are available on ABM's web site at www.abm.com .

This Notice and Proxy Statement are dated February 6, 2012, and were first mailed, together with a proxy card, to shareholders on or about February 6, 2012.


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Important Notice Regarding the Availability of Proxy Materials
for the Shareholder Meeting to be Held on March 6, 2012.

The Proxy Statement, Annual Report on Form 10-K for the fiscal year ended October 31, 2011 and ABM 2011 Report to Shareholders and the means to vote by Internet are available at www.proxyvote.com .

Instead of receiving paper copies of future annual reports and proxy statements in the mail, you can elect to receive an e-mail that will provide an electronic link to these documents. Choosing to receive your proxy materials online will save us the cost of producing and mailing documents to you as well as conserve natural resources. With electronic delivery, we will notify you by e-mail as soon as the annual report and proxy statement are available on the Internet, and you can easily submit your shareholder vote online. If you are a shareholder of record, you may enroll in the electronic delivery service at the time you vote by marking the appropriate box on your proxy card, or by selecting electronic delivery if you vote on the Internet, and following the enrollment instructions. If you are a beneficial holder, you may also have the opportunity to receive annual meeting materials electronically. Please check the information provided in the proxy materials mailed to you by your brokerage firm, bank or trustee.

You may contact ABM at 212-297-0200 to obtain directions to the site of the Annual Meeting.



Table of Contents

Voting Procedures and Annual Meeting Attendance

  3
 

Shareholder Proposals, Director Nominations and Communicating with our Board

 
5
 

Our Board of Directors

 
6
 

General

  6

Nominees

  6

Board of Directors' Skills Matrix

  6

Proposal 1—Election of Directors

 
7
 

Nominees for Election as Directors with Terms Expiring in 2015

  7

Directors with Terms Expiring in 2013

  8

Directors with Terms Expiring in 2014

  9

Corporate Governance

 
10
 

Corporate Governance Principles and Committee Charters

  10

Governance Information

  10

Meetings and Attendance

  11

Committees of the Board of Directors

  11

Identifying and Evaluating Nominees for Directors

  14

Director Compensation for Fiscal Year 2011

 
15
 

Director Compensation Elements

  15

Non-Employee Director Compensation Table

  16

Director Stock Ownership and Retention Guidelines

  16

Director Deferred Compensation Plan

  17

Other Arrangements

  17

Certain Relationships and Related Transactions

 
17
 

Policy for the Review, Approval or Ratification of Transactions with Related Persons

  17

Transactions with Related Persons

  18

Section 16(a) Beneficial Ownership Reporting Compliance

 
18
 

Executive Compensation

 
18
 

Compensation Discussion and Analysis

  18

Compensation Committee Report

  38

Compensation of Executive Officers

  39

Summary Compensation Table

  39

Grants of Plan-Based Awards During Fiscal Year 2011

  40

Outstanding Equity Awards at 2011 Fiscal Year-End

  42

Option Exercises and Stock Vested in Fiscal Year 2011

  44

Pension and Deferred Compensation Benefits

  44

Potential Benefits on Termination

  47

Compensation Risk Analysis

  52

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Audit-Related Matters

  53
 

Audit Committee Report

  53

Principal Accounting Firm Fees and Services

  54

Policy on Pre-approval of Independent Registered Public Accounting Firm Services

  54

Proposal 2—Ratification of Independent Registered Public Accounting Firm for 2012

 
54
 

Proposal 3—Advisory Vote on Executive Compensation

 
55
 

Proposal 4—Approve Amendments to the 2006 Equity Incentive Plan

 
55
 

Equity Compensation Plan Information

 
61
 

Security Ownership of Management and Certain Beneficial Owners

 
62
 

Other Matters

 
64
 

2013 Annual Meeting of Shareholders

 
64
 

Appendix A—Reconciliation of Non-GAAP Measures to GAAP Measures

   
 

Appendix B—2006 Equity Incentive Plan

   
 

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VOTING PROCEDURES AND ANNUAL MEETING ATTENDANCE

Who may vote and how many votes do I have?

Shareholders of record at the close of business on the record date, January 11, 2012, may vote. On that date, there were 53,468,394 outstanding shares of ABM common stock.

All of the shares of ABM's common stock are entitled to vote at the meeting. Shareholders of record will have one vote for each share they hold.

How many votes must be present to hold the annual meeting?

A majority of the votes that may be cast (at least 26,734,198 votes), present in person or represented by proxy, is needed to hold the 2012 Annual Meeting. If you properly vote on any proposal, your shares will be included in the number of shares to establish a quorum for the annual meeting. Shares represented by proxy cards marked " abstain " or returned without voting instructions will be counted as present for the purpose of determining whether the quorum for the annual meeting is satisfied. In addition, if you hold shares through a bank or brokerage account, your shares will be counted as present for the purpose of determining whether the quorum for the annual meeting is satisfied, even if you do not provide voting instructions to your bank or brokerage firm. However, neither these shares nor any abstentions will count in the voting results.

We urge you to vote by proxy even if you plan to attend the meeting. That will help us to know as soon as possible that we have enough votes to hold the meeting. Returning your proxy card will not affect your right to revoke your proxy or to attend the 2012 Annual Meeting and vote in person.

How do I vote my shares?

You may vote at the annual meeting by proxy or in person.

If you are a " holder of record" (that is, if your shares are registered in your own name with our transfer agent), you have several options. You may vote by telephone, on the Internet or by attending the meeting and voting in person. In addition, you may vote by mail using the enclosed proxy card.

If you hold your shares in " street name" (that is, if you hold your shares through a broker, bank or other holder of record), you received this proxy statement and voting instruction card from your broker, bank or other holder of record. The voting instruction card explains which voting options are available to you. As the beneficial owner of shares held in street name, you have the right to direct your bank or broker how to vote your shares, and it is required to vote your shares in accordance with your instructions. If you do not give instructions to your bank or brokerage firm, it will nevertheless be entitled to vote your shares with respect to "routine" items, but it will not be permitted to vote your shares with respect to "non-routine" items. In the case of a non-routine item, your shares will be considered "broker non-votes" on that proposal. If you want to vote in person at the annual meeting, you must obtain a power of attorney or proxy from your broker, bank or other holder or record authorizing you to vote. You must bring this power of attorney or proxy to the meeting.

How do I attend the annual meeting?

All shareholders as of the record date, January 11, 2012, or their proxy holders, are welcome to attend the annual meeting. If you are voting by mail, by telephone or via the Internet, but still wish to attend the meeting, follow the instructions on your proxy card or via the Internet ( www.proxyvote.com ) to tell us that you plan to attend. When you arrive at the meeting, please look for the "Shareholders' Welcome Desk," where you will be asked for photo identification in order to receive your admittance card.

If you hold your shares in street name and you decide to attend, you must bring to the meeting a copy of your bank or brokerage statement evidencing your ownership of ABM Industries Incorporated common

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stock as of the record date. Please go to the "Shareholders' Welcome Desk" and provide the bank or brokerage statement, as well as your photo identification, in order to obtain an admittance card.

What happens if the annual meeting is postponed or adjourned?

Your proxy will still be valid and may be voted at the postponed or adjourned meeting. You will still be able to change or revoke your proxy until it is voted.

Can I change or revoke my proxy?

Yes, you may change your vote or revoke your proxy at any time at or before the annual meeting. If you are a holder of record, you may change your vote or revoke your proxy through any of the following means:

What if I do not indicate my vote for one or more of the matters on my proxy card?

If you are a registered shareholder and you return a proxy card without indicating your vote, your shares will be voted in accordance with the Board's recommendations for proposals described in this proxy statement.

What if I do not return a proxy card or vote at the annual meeting?

If you are a registered shareholder and you do not return a proxy card or vote at the annual meeting, your shares will not be voted and will not count towards the quorum requirement to hold the annual meeting. Your shares that are not voted will not affect the outcome of any of the company's proposals.

What if my shares are held in "street name" and I do not give my bank or broker instructions on how to vote?

If your shares are held in "street name" and you do not give your bank or broker instructions on how to vote, your shares will be counted towards the quorum requirement for the annual meeting.

The failure to instruct your bank or broker how to vote will have one of two effects on the proposals for consideration at the annual meeting, depending upon the type of proposal. For the election of directors in Proposal 1, and for Proposals 3 and 4, absent instructions from you, the bank or broker may not vote your shares at all and your shares will be considered broker non-votes, which will have no effect on the outcome of the proposal. For Item 2 involving ratification of our independent registered public accounting firm for 2012, the broker may vote your shares at its discretion.

Will my vote be confidential?

Yes. Your vote is confidential and will not be disclosed to our directors or employees.

Will the Company's independent registered public accounting firm be present at the annual meeting?

Yes, representatives of KPMG LLP ("KPMG") will attend the meeting. They will be available during the meeting to answer your questions and they will have the opportunity to make a statement, if they desire to do so. The Audit Committee of our Board has approved the appointment of KPMG as our independent registered public accounting firm for our 2012 fiscal year.

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Will our directors attend the annual meeting?

It is expected that our directors will attend our annual meeting. All of our directors attended the 2011 Annual Meeting of Shareholders.

Who will be soliciting proxies on our behalf?

The Company pays the cost of preparing proxy materials and soliciting your vote. Proxies may be solicited on our behalf by our directors, officers or employees by telephone, electronic or facsimile transmission or in person.

Who will count the vote?

Broadridge Financial Solutions, Inc. will be the proxy tabulator and IVS Associates, Inc. will act as the Inspector of Election.

What is "householding"?

Shareholders who hold their shares in the name of their bank or broker and live in the same household as other shareholders may receive only one copy of this Proxy Statement. This practice is known as "householding." If you hold your shares in your broker's name and would like additional copies of these materials, please contact your broker. If you receive multiple copies and would prefer to receive only one, please contact your broker. ABM does not use householding for the copies of the proxy statement that it delivers directly to shareholders.


SHAREHOLDER PROPOSALS, DIRECTOR NOMINATIONS AND
COMMUNICATING WITH OUR BOARD

How do I submit a shareholder proposal or director nomination for consideration at the 2013 Annual Meeting?

Our 2013 Annual Meeting is currently scheduled for March 5, 2013. If you wish to submit a proposal to be included in the 2013 proxy statement, you must submit your proposal in writing so that we receive it no later than October 9, 2012. Proposals should be sent to the Corporate Secretary, Sarah H. McConnell, ABM Industries Incorporated, 551 Fifth Avenue, Suite 300, New York, New York 10176.

Under our bylaws, any shareholder wishing to make a nomination for director or wishing to introduce any business at the 2013 Annual Meeting of Shareholders (other than a proposal submitted for inclusion in the Company's proxy materials) must provide the Company advance notice of such business which must be received by the Company no earlier than November 6, 2012 and no later than December 6, 2012. Nominations for director for consideration by the Governance Committee should include the candidate's name and qualifications for Board membership and fulfill all of the requirements set forth in the Company's Bylaws, and should be sent within the time frame specified in the Bylaws.

How do I communicate with the Board?

You may communicate with our entire Board or the independent directors as a group by sending an e-mail to boardofdirectors@abm.com or by writing to Board of Directors, ABM Industries Incorporated, 551 Fifth Avenue, Suite 300, New York, New York 10176. Our Corporate Secretary will forward all communications relating to ABM's interests, other than business solicitations, advertisements, job inquiries or similar communications, directly to the appropriate directors.

In addition, we maintain a Compliance Hotline that is available 24 hours a day, seven days a week, to receive calls, e-mails, and letters to report a concern or complaint, anonymous or otherwise. The Compliance Hotline can be reached at 1-877-253-7804 or online at abmhotline.ethicspoint.com .

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OUR BOARD OF DIRECTORS

General

Our Certificate of Incorporation provides that the Board of Directors shall be divided into three classes serving staggered three-year terms, each class to be as nearly equal in number as the other two. Our Board of Directors is currently comprised of nine members: Dan T. Bane, Linda Chavez, J. Philip Ferguson, Anthony G. Fernandes, Luke S. Helms, Maryellen C. Herringer, Henry L. Kotkins, Jr., Henrik C. Slipsager and William W. Steele. On January 18, 2012, Mr. Kotkins informed the Company that he will retire as a director, effective as of the 2012 annual meeting. At that time, our Board of Directors will consist of eight members. The terms of Ms. Chavez and Messrs. Ferguson and Slipsager expire at the 2012 annual meeting.


Nominees

Our Board has proposed the following nominees for election as directors with three-year terms expiring at the annual meeting in 2015: Linda Chavez, J. Philip Ferguson and Henrik C. Slipsager. Mr. Ferguson was elected by the Board to serve for his present term on December 6, 2009. Ms. Chavez and Mr. Slipsager were elected to serve for their present terms at the 2009 annual meeting of shareholders. The other continuing directors will remain in office until the expiration of their terms at the 2013 or 2014 annual meeting, as the case may be. The Board expects each nominee for election as a director to serve if elected. If a nominee is unable or unwilling to serve, proxies will be voted in favor of the other nominees and may be voted for a substitute nominee. Each nominee elected as a director will continue in office until his or her successor has been duly elected and qualified, or until his or her earlier death, resignation or retirement.

Each nominee was recommended by the Governance Committee, has been nominated by the Board of Directors for election and has consented to serve. In recommending Ms. Chavez and Messrs. Ferguson and Slipsager for election as directors, the Governance Committee considered these directors' service to our Board, their independence, skills, contributions to the Board, current and previous occupations and current and former directorships with other public companies.

Our Board is composed of individuals who have experience as current or former chief executive officers, current or former senior executives with significant operational, finance or audit responsibilities and individuals who have extensive experience in legal matters, investment management and finance, mergers and acquisitions, government and public policy as well as service on the boards of other public companies. As such, they have strong leadership skills and working knowledge of matters facing companies such as ours. The Board of Directors' Skills Matrix sets out selection criteria used by our Board in connection with nominations to our Board and also reflects the current skills and experience of the other continuing members of our Board.


Board of Directors' Skills Matrix

Skills and Experience
  Dan T.
Bane
  Linda
Chavez
  J. Philip
Ferguson
  Anthony G.
Fernandes
  Luke S.
Helms
  Maryellen C.
Herringer
  Henrik C.
Slipsager
  William W.
Steele

Operations Experience

  ü       ü   ü   ü       ü   ü

Compensation Expertise

  ü   ü   ü   ü       ü   ü   ü

Industry Experience

                          ü   ü

Board Experience

  ü   ü       ü   ü   ü   ü   ü

Financial Experience

  ü   ü   ü   ü   ü   ü   ü   ü

Mergers and Acquisitions Experience

  ü       ü   ü   ü   ü   ü   ü

Sales and Marketing

  ü       ü       ü       ü   ü

Government/Government relations

  ü   ü               ü        

Global

  ü           ü   ü   ü   ü    

Diversity

  ü   ü       ü   ü   ü   ü   ü

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PROPOSAL 1—ELECTION OF DIRECTORS

THE BOARD OF DIRECTORS RECOMMENDS VOTES "FOR" THE ELECTION OF ALL OF THE NOMINEES AS DIRECTORS

The three persons who receive a plurality of the votes cast will be elected as directors. This means that the three director nominees with the most votes are elected. Only votes "For" affect the outcome. Withheld votes do not affect the voting calculation.


Nominees for Election as Directors with Terms Expiring in 2015

    Linda Chavez   Director Since 1997   Age 64
     

 

 

Chairman of the Board, Center for Equal Opportunity


GRAPHIC

 

Ms. Chavez is the founder of the Center for Equal Opportunity and currently serves as chairman, a position she has held since January 2006. Prior to her appointment as chairman, Ms. Chavez served as president of the Center for Equal Opportunity from January 1995 through December 2005. Ms. Chavez was a director of Pilgrim's Pride Corporation from 2004 to 2008 where she served on the audit committee. Previously, she was a director of Greyhound Lines,  Inc. from 1995 to 1999, when it was acquired by another company. Ms. Chavez has held numerous appointed positions, including chief executive officer of the National Commission on Migrant Education from 1988 to 1992, chief executive officer of the U.S. Commission on Civil Rights from 1983 to 1985, and White House Director of Public Liaison in 1985. In 1992, she was elected by the United Nations Commission on Human Rights to serve a four-year term as U.S. Expert to the U.N. Sub-Commission on the Prevention of Discrimination and Protection of Minorities. She is a 2006 graduate of the UCLA Anderson Graduate School of Management Director Training and Certification Program and served on the advisory board of the Outstanding Directors Exchange in 2008 and 2009. Ms. Chavez serves or has served on numerous nonprofit boards, including the Campaign to Prevent Teen and Unplanned Pregnancies, and she is an author and nationally syndicated columnist and television commentator and writes extensively about public policy issues.

 

 

J. Philip Ferguson

 

Director Since 2009

 

Age 66
     

 

 

Vice Chairman, University of Texas Investment Management Company


GRAPHIC

 

Mr. Ferguson serves on the board of directors of the University of Texas Investment Management Company (UTIMCO), a position he has held since August 2003, and currently serves as vice chairman, a position he has held since January 2008. He chairs the UTIMCO compensation committee and serves on its risk and policy committees. Mr. Ferguson also serves on the advisory committee of the MBA Investment Fund at the McCombs School of Business at the University of Texas-Austin, a position held since March 2005, and is a member of the advisory board of Murphree Venture Partners. Mr. Ferguson held various executive positions with AIM Capital Management, Inc. (now Invesco AIM) from 2000 to 2007, serving most recently as president and chief investment officer. Previously, he held senior positions at several investment management firms, including: managing partner at Beutel, Goodman & Company; senior vice president at Lehman Brothers,  Inc.; and vice president of Goldman, Sachs & Company. Mr. Ferguson also serves or has served on various investment and civic boards, including the Houston Ballet, the Memorial Hermann Foundation, Museum of Fine Arts, Houston, and on the Chancellor's Advisory Council, Texas Christian University.

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Henrik C. Slipsager

 

Director Since 2000

 

Age 57
     

 

 

President and Chief Executive Officer, ABM Industries Incorporated


GRAPHIC

 

Mr. Slipsager is president and chief executive officer of the Company, a position held since November 2000. Previously, Mr. Slipsager served as executive vice president of the Company and president of ABM Janitorial Services from November 1999 to October 2000, and as senior vice president of the Company and executive vice president of ABM Janitorial Services from January 1997 to October 1999. From October 1994 to December 1996, he was president of 2M Invest of Denmark, a venture capital firm. Previously, he held executive roles at the ISS Group, a leading facility services company based in Denmark, which he joined in 1982 as corporate controller of ISS International. From 1984 to 1994, Mr. Slipsager served as chief financial officer, chief operating officer and later president and chief executive officer of ISS of America.


Directors with Terms Expiring in 2013

    Luke S. Helms   Director Since 1995   Age 68
     

 

 

Managing Director, Sonata Capital Group


GRAPHIC

 

Mr. Helms is the managing director of Sonata Capital Group, a privately owned registered investment advisory firm, a position held since June 2000. Previously, Mr. Helms served as vice chairman of KeyBank from April 1998 to March 2000 and held various senior executive positions at Bank of America Corporation, including vice chairman from May 1993 to October 1998. He also served as president of Seafirst Bank from November 1987 to September 1990 and chief executive officer from September 1990 to May 1993. Mr. Helms was a director of Lifelock, Inc., a privately owned company, from 2007 to 2008 and has served as a director of Manulife Financial Corporation since 2007.

 

 

William W. Steele

 

Director Since 1998

 

Age 75
     

 

 

Former President and Chief Executive Officer, ABM Industries Incorporated


GRAPHIC

 

Mr. Steele is a former officer and employee of the Company, who retired in October 2000 after 43 years of employment with the Company. Mr. Steele's positions with the Company included service as president from November 1991 to October 2000 and chief executive officer from November 1994 to October 2000. Mr. Steele also serves as a director of TrueBlue, Inc., a public company provider of temporary blue-collar staffing, a position he has held since 2001, where he chairs its governance and nominating committee, is a member of its compensation committee, and has served as its lead independent director since October 2008.

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Directors with Terms Expiring in 2014

    Dan T. Bane   Director Since 2008   Age 64
     

 

 

Chairman and Chief Executive Officer, Trader Joe's Company


GRAPHIC

 

Mr. Bane is chairman and chief executive officer of Trader Joe's Company, a position held since 2001. Previously, he served as president of Trader Joe's West from 1998 to 2001, and as senior vice president, finance and administration, for Certified Grocers of California from 1993 to 1998, and was an audit manager of KPMG Peat Marwick from 1969 to 1978. He was a director of The Ryland Group from 2003 to 2008, where he served on its audit committee. Currently he serves on the boards of the Southern California Sports Council and the Retail Management Institute at Santa Clara University. Mr. Bane is a certified public accountant.

 

 

Anthony G. Fernandes

 

Director Since 2007

 

Age 66
     

 

 

Former Chairman, Chief Executive Officer and President of Philip Services Corporation


GRAPHIC

 

Mr. Fernandes served as chairman, chief executive officer and president of Philip Services Corporation from August 1999 to April 2002. Prior to joining Philip Services Corporation, Mr. Fernandes had a 30-year career with the Atlantic Richfield Company (ARCO), serving as executive vice president and director of ARCO from 1994 to 1999; president of ARCO Coal, a subsidiary of ARCO, from 1990 to 1994 and corporate controller of ARCO from 1987 to 1990. He was a member of the ARCO board of directors and chairman of ARCO Chemical Company, a NYSE company 80% owned by ARCO. From 2003 to 2007, he was a director of Tower Automotive, Inc. He also currently serves as a director of Baker Hughes Incorporated, Cytec Industries, and Black and Veatch Corporation.

 

 

Maryellen C. Herringer

 

Director Since 1993

 

Age 68
     

 

 

Non-Executive Chairman of the Board, ABM Industries Incorporated


GRAPHIC

 

Ms. Herringer is an attorney-at-law. She is retired executive vice president, general counsel and secretary of APL Limited, an international provider of transportation and logistics (1991 to 1997). Prior to joining APL Limited, Ms. Herringer was a partner in the international law firm of Morrison & Foerster from 1989 to 1991, and senior vice president and general counsel of Transamerica Corporation (insurance and financial services) from 1981 to 1989. Ms. Herringer also serves as a director of PG&E Corporation and Pacific Gas and Electric Company, a subsidiary of PG&E Corporation, and is chair of such companies' nominating and governance committees and serves on their audit committees. She was interim lead director of PG&E Corporation and interim chairman of the board of Pacific Gas & Electric Company from May to September 2011. Ms. Herringer was a director of Wachovia Corporation from October 2006 and a member of that company's risk committee until it merged with Wells Fargo & Company in December 2008. Ms. Herringer currently is a member of the Board of Trustees of Mills College, Vassar College and the San Francisco Museum of Modern Art and has served on the boards of numerous educational institutions and not-for-profit organizations. She is also a former chair of the Business Law Section of the State Bar of California.

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CORPORATE GOVERNANCE

Corporate Governance Principles and Committee Charters

Our Board of Directors has adopted Corporate Governance Principles that reflect our commitment to good corporate governance and the role of governance in building long-term shareholder value. As described below, our Board committee charters are designed to assure that our Board fully discharges its responsibilities, and our Board regularly reviews these charters and Corporate Governance Principles in response to changing regulatory requirements, evolving best practices and the concerns of our shareholders and other constituents. Our Corporate Governance Principles, which include our independence standards, are published on our web site at http://investor.abm.com . Other information relating to our corporate governance is also available on our web site at the same address, including our Code of Business Conduct ("Code of Conduct"), and the Charters of our Audit Committee, Compensation Committee, Corporate Citizenship and Communications Committee, and Governance Committee. These documents are also available in printed hard-copy format upon written request to the Corporate Secretary at the Company's corporate headquarters.


Governance Information

Director Independence

Our Corporate Governance Principles provide that a majority of our directors will be independent and that our Audit Committee, Compensation Committee and Governance Committee shall consist solely of independent directors and that the Corporate Citizenship and Communications Committee shall consist solely of non-management directors. Each year our Governance Committee reviews the independence of each of our directors under the NYSE listing standards and considers any current or previous employment relationship as well as any transactions or relationships between our Company and our directors or any members of their immediate family (or any entity of which a director or an immediate family member is an executive officer, general partner or significant equity holder). The purpose of this review is to determine whether any relationships or transactions exist that preclude a director from being deemed independent under the NYSE listing standards or are otherwise inconsistent with a determination that the director is independent. To facilitate this process, our Governance Committee reviews directors' responses to our annual Directors' and Officers' Questionnaire, which requires disclosure of each director's and his or her immediate family's relationships to our Company, as well as any potential conflicts of interest that may otherwise be brought to the attention of our Governance Committee.

In this context, our Governance Committee considered the retirement benefits of Mr. Steele that are described under "Transactions with Related Persons." Our Governance Committee determined that this relationship was not material. Based on its analysis and our independence standards, our Governance Committee concluded and recommended to our Board that this relationship did not impair the independence of this director, and our Governance Committee affirmatively determined and recommended to our Board, and the Board confirmed, that all of our directors, other than our Chief Executive Officer ("CEO"), should be designated as independent.

Board Leadership Structure

The Company currently has separate persons serving as its Chairman of the Board and CEO in recognition of the differences between the two roles. As set forth in the Company's Bylaws, the CEO has general and active management over the business and affairs of the Company, subject to the control of the Board. Our Chairman, on the other hand, is charged with presiding over all meetings of the Board and our shareholders, as well as providing advice and counsel to the CEO, coordinating the preparation of agendas, keeping directors informed of matters impacting the Company, and maintaining contact with the Company's General Counsel. Maryellen Herringer serves as Chairman of the Board, a position she has held since 2006. The Board of Directors believes that by separating the roles of CEO and Chairman, the CEO is better able to focus his time and energy on managing the Company's operations. The Board of Directors believes that the separate CEO/Chairman structure is the most appropriate and effective leadership structure for the Company and its shareholders at this time.

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The Board's Role in Risk Management

Our Board of Directors exercises oversight of the Company's strategic, operational and financial matters, as well as compliance and legal risks. In connection with this role, the Board oversees our enterprise risk management process, which is designed to fortify our risk management capability as well as to monitor business risks. The Board, as permitted in the Company's Bylaws and committee charters, exercises its oversight, in part, through the Audit Committee, the Compensation Committee, the Corporate Citizenship and Communications Committee, and the Governance Committee. The Audit Committee reviews and discusses guidelines and policies with respect to risk assessment and risk management. The Compensation Committee annually reviews and assesses risks, if any, arising from the Company's compensation policies and practices for its employees and whether any such risks are reasonably likely to have a material adverse effect on the Company. The Corporate Citizenship and Communications Committee reviews and advises with respect to risks related to strategies, policies and communications targeted to various key constituencies and Company philanthropic initiatives. The Governance Committee considers risks in relationship to succession planning. The Board's role in risk oversight has not affected its leadership structure.

Executive Sessions of Directors

At least four times a year, after regularly scheduled and special Board meetings, our independent directors meet in executive session without management present and consider matters important to our Company and corporate governance. Executive sessions are chaired by our Chairman. During fiscal year 2011, our Board met in executive session ten times.

Code of Business Conduct

The Board of Directors has adopted the Code of Conduct. The Code of Conduct applies to all directors, officers and employees of ABM, including ABM's CEO, Chief Financial Officer ("CFO") and Chief Accounting Officer. The Code of Conduct is available on ABM's web site under "Governance" at http://investor.abm.com and in printed hard-copy format upon written request to the Corporate Secretary at the Company's corporate headquarters. If any amendments are made to the Code of Conduct or if any waiver, including any implicit waiver, of a provision of the Code of Conduct is granted to ABM's CEO, CFO or Chief Accounting Officer, ABM will disclose such amendment or the nature of such waiver on its web site.


Meetings and Attendance

During fiscal year 2011, the Board of Directors met eight times, with an average attendance rate of 100%. During this period, each of the Company's directors attended 96% or more of the aggregate number of meetings of the Board and committees on which he or she served. Information concerning committee meeting attendance is set forth below.


Committees of the Board of Directors

Audit Committee

Responsibilities.     The Audit Committee of the Board of Directors performs the responsibilities set forth in its Charter, which include overseeing the Company's financial reporting process and the internal and independent audits of ABM and the communication process among the Board, management and ABM's independent registered public accounting firm. The responsibilities of the Audit Committee include:

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Meetings.     Meeting agendas are developed by the Audit Committee chair in consultation with committee members and senior management, who regularly attend the meetings. On a regular basis, the committee holds executive sessions without members of management and it also meets privately with representatives of the Company's independent registered public accounting firm and separately with each of our CFO, James Lusk, our senior vice president, general counsel and corporate secretary, Sarah H. McConnell, and our vice president-internal audit, Karen Francis. The Audit Committee met ten times in fiscal year 2011, with a 98% attendance rate.

Members.     The members of the Audit Committee are: Mr. Fernandes, Chair, and Messrs. Bane, Ferguson, Helms, and Steele. Each member of the Audit Committee has been determined to be independent under the standards for independence for audit committee members established by the NYSE. In addition, the Board of Directors has determined that each member of the Committee is financially literate and that each qualifies as an "audit committee financial expert" under the definition promulgated by the Securities and Exchange Commission ("SEC").

Compensation Committee

Responsibilities.     The Compensation Committee performs the responsibilities set forth in its Charter, which include:

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Meetings.     Meeting agendas are developed by the Compensation Committee chair in consultation with committee members and senior management, who regularly attend each meeting. In addition, the committee's independent compensation consultant, Jeffrey Hyman of Exequity LLP, regularly attends meetings. The Committee meets in executive session without the CEO when discussing the CEO's compensation and certain other matters, including, from time to time, the compensation of other executives. The committee met eight times in fiscal year 2011, with a 100% attendance rate.

Members.     The members of the Compensation Committee are: Ms. Chavez, Chair, Mr. Bane, Ms. Herringer, and Mr. Kotkins. As described above, each member of the Compensation Committee has been determined to be independent.

Corporate Citizenship and Communications Committee

Responsibilities.     In September 2011, the Board created the Corporate Citizenship and Communications Committee. The Corporate Citizenship and Communications Committee is responsible for providing board-level oversight and advice on various matters, including the following:

Meetings.     Meeting agendas are developed by the Corporate Citizenship and Communications Committee chair in consultation with senior management. Having been formed in September 2011, the Committee met once in fiscal year 2011, with a 100% attendance rate.

Members.     The members of the Corporate Citizenship and Communications Committee are: Mr. Kotkins, Chair, Mr. Bane, Ms. Chavez and Mr. Steele. Each member of the Corporate Citizenship and Communications Committee has been determined to be independent.

Governance Committee

Responsibilities.     The Governance Committee performs the responsibilities set forth in its Charter, which include:

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Meetings.     Meeting agendas are developed the Governance Committee chair in consultation with the chairman of the Board, the CEO and the Senior Vice President, General Counsel and Corporate Secretary. The committee met five times in fiscal year 2011, with a 100% attendance rate.

Members.     The members of the Governance Committee are: Mr. Helms, Chair, Ms. Chavez, and Messrs. Ferguson and Kotkins. As described above, each member of the Governance Committee has been determined to be independent.

Executive Committee

The Executive Committee has the authority to exercise all power and authority of the Board in the management of the business and affairs of ABM, except: (1) any functions delegated to other committees of the Board, and (2) any powers that, under Delaware law, may only be exercised by the full Board. The members of the Executive Committee are: Mr. Steele, Chair, Ms. Herringer, and Messrs. Helms and Slipsager. The committee did not meet in fiscal year 2011.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee during fiscal year 2011 or as of the date of this Proxy Statement is or has been an officer or employee of the Company and no executive officer of the Company served on the compensation committee or board of any company that employed any member of the Company's Compensation Committee or Board of Directors.


Identifying and Evaluating Nominees for Directors

Our Board is responsible for selecting nominees for election as directors. The Board delegates the screening process to the Governance Committee with the expectation that other members of the Board, including the CEO, are asked to take part in the process as appropriate. Candidates recommended by the Governance Committee are subject to approval by the Board. Our Governance Committee regularly assesses the appropriate size of the Board, and whether any vacancies on the Board are expected because of retirement or otherwise. In the event that any vacancy is anticipated, or otherwise arises, the Governance Committee considers various potential candidates for director.

Our Governance Committee recommends to the Board the criteria for director candidates, and the Board establishes the criteria. The Governance Committee of the Board is responsible for reviewing with the Board the requisite skills and characteristics of new Board candidates and current Board members in the context of the current composition of the Board.

In analyzing director nominations and director vacancies, our Governance Committee seeks to recommend candidates for director positions who will create a collective membership on the Board with varied experience and perspectives and who maintain a Board that reflects diversity, including, but not limited to, gender, ethnicity, background, and experience. We do not have a policy that requires specified types of diverse backgrounds. The Governance Committee strives to recommend candidates who demonstrate leadership and significant experience in a specific area or endeavor, understand the role of a public company director, and can provide insights and practical wisdom based on their experience and expertise.

The Governance Committee and the Board of Directors focus on the areas set forth in the Board of Directors' Skills Matrix when analyzing whether directors and nominees have the requisite experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of the Company's business and structure. The Governance

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Committee utilizes a variety of methods for identifying and evaluating nominees for director, such as search firms and the relationships of current directors. Candidates may also come to the attention of the Governance Committee through shareholders or other persons. These candidates are evaluated at regular or special meetings of the Governance Committee and may be considered at any point during the year.

Our Directors are expected to prepare for, attend and participate in Board meetings and meetings of the Committees of the Board on which they serve and to spend the time needed and to meet as frequently as necessary to properly discharge their responsibilities and duties as directors. Each Board member is expected to arrange his or her schedule so that other existing and planned future commitments do not materially interfere with the member's service as a director. Ordinarily, directors who are full-time employees of ABM or who serve as chief executive officers or in equivalent positions at other companies may not serve on the boards of more than two other publicly traded companies. Other directors may not serve on the boards of more than four other publicly traded companies. Service on other boards and other commitments are considered by the Governance Committee and the Board when reviewing Board candidates.


DIRECTOR COMPENSATION FOR FISCAL YEAR 2011

Director Compensation Elements

ABM compensates non-employee directors through a combination of annual cash retainers, meeting fees and equity grants. Our non-employee director compensation policy is as follows:

Cash compensation

Equity compensation

The Governance Committee may recommend to the Board that directors who invest significant time above and beyond the normal requirements of service on the Board, or a committee thereof, receive $2,000 per day for such service. ABM reimburses its non-employee directors for their out-of-pocket expenses incurred in attending Board and committee meetings.

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2011 Non-Employee Director Compensation Table

The following table shows fiscal year 2011 compensation for ABM's non-employee directors based on the SEC's compensation disclosure requirements. Our CEO, Mr. Slipsager, does not receive additional compensation for his services as a director.

 

 

Name of Director

        Fees
Earned or Paid
in Cash (1)
($)
        Stock
Awards (2)
($)
        Other
Compensation (3)
($)
        Total
($)
   

 

  Dan T. Bane        
103,500
       
79,985
       
2,419
       
185,904
   

 

 

Linda Chavez

       
104,500
       
79,985
       
5,750
       
190,235
   

 

 

J. Philip Ferguson

       
97,500
       
79,985
       
1,009
       
178,494
   

 

 

Anthony G. Fernandes

       
111,000
       
79,985
       
0
       
190,985
   

 

 

Luke S. Helms

       
106,500
       
79,985
       
3,443
       
189,928
   

 

 

Maryellen Herringer

       
158,000
       
79,985
       
112
       
238,097
   

 

 

Henry L. Kotkins, Jr.

       
91,417
       
79,985
       
5,750
       
177,152

(4)
 

 

 

William W. Steele

       
96,500
       
79,985
       
5,884
       
182,369
   
(1)
Amount includes retainers and Board and Committee meeting fees. Amounts shown for Mss. Chavez and Herringer and Messrs. Fernandes and Helms also include a payment of $6,000 to each for work related to Board self-evaluation process and the evaluation of the performance of the Chief Executive Officer.

(2)
The value of stock awards shown in the "Stock Awards" column is based on grant date fair value computed in accordance FASB ASC Topic 718. The grant date fair value of the equity awards shown in the "Stock Awards" column is based on the closing price of the Company's common stock on the date of grant of the equity award. A director who becomes a Board member following the date of the last-held annual meeting of shareholders receives a grant of RSUs pro-rated to the next annual meeting. The grant for 2011 for each director on March 8, 2011 was 3,133 RSUs, which was calculated by dividing $80,000 by $25.53, which was the closing price of ABM common stock on March 8, 2011. As of October 31, 2011, the aggregate number of RSUs held by each current director was: Mr. Bane 10,549; Ms. Chavez 9,610; Mr. Ferguson 6,169; Mr. Fernandes 17,677; Mr. Helms 11,084; Ms. Herringer 16,022; Mr. Kotkins 20,924; and Mr. Steele 14,466. As of October 31, 2011, the aggregate number of stock options held by each current director was: Ms. Chavez 41,000; Mr. Helms 52,000; Ms. Herringer 52,000; Mr. Kotkins 26,000; and Mr. Steele 20,000.

(3)
Amounts shown represent dividend equivalents earned with respect to prior Director RSU awards that were paid to non-employee directors in fiscal year 2011.

(4)
Amount shown does not include $90,000 to be paid to Mr. Kotkins during fiscal year 2012 in connection with his retirement from the Board at the 2012 Annual Meeting of Shareholders. This payment is in recognition of his 16 years of service on the Board, contributions to the Company, and in connection with the early expiration of certain stock options resulting from his retirement from the Board.


Director Stock Ownership and Retention Guidelines

The Board of Directors believes that directors more effectively represent ABM's shareholders, whose interests they are charged with protecting, if they are shareholders themselves. To that end, the Board has adopted guidelines that within four years after joining the Board, non-employee directors should hold Company shares valued at three times his or her annual retainer fee. Directors who are not at their targeted stock ownership level must hold at least 50% of any net shares realized until they reach their target. "Net shares realized" means unrestricted shares acquired by a director under the 2006 Equity Incentive Plan net of any shares sold to pay the exercise price (if any) and an amount equal to the taxes that would have been withheld by ABM were the director an employee. The Governance Committee periodically assesses the guidelines and directors' ownership relative to these guidelines and makes recommendations as appropriate.

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Director Deferred Compensation Plan

Non-employee directors are eligible to participate in the ABM Deferred Compensation Plan for Non-Employee Directors ("Directors Deferred Compensation Plan"). Plan participants may elect to defer receipt of all or any portion of their annual cash retainers and meeting fees until they cease to be members of the Board, or to specified withdrawal dates (at least three years after the election), in accordance with the terms of the Directors Deferred Compensation Plan. The amounts held in each director's account are credited with interest quarterly at a rate based on the prime interest rate published in the Wall Street Journal on the last business day coinciding with or next preceding the valuation date. Any prime rate up to 6% will be considered in full and 1 / 2 of any prime rate over 6% will be considered; except that the interest rate will not exceed 120% of the long-term applicable federal rate as published by the Internal Revenue Service. In addition, this plan permits directors to defer the settlement of Director RSUs to a date later than the vesting date. Values presented in the table on the previous page include any deferred amounts.


Other Arrangements

ABM has entered into indemnification agreements with its directors. These agreements, among other things, require ABM to indemnify its directors against certain liabilities that may arise in connection with their services as directors to the fullest extent provided by Delaware law. ABM permits non-employee directors to participate in ABM's health benefit plans. Directors who elect to participate pay the entire direct costs of participation in such plans.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Policy for the Review, Approval or Ratification of Transactions with Related Persons

The Board of Directors has adopted a written policy for review of transactions involving more than $120,000 in any fiscal year in which ABM or its subsidiaries are a participant and in which any director, executive officer, holder of more than 5% of the outstanding shares of ABM common stock or any immediate family member of any of these persons has a direct or indirect material interest. Such transactions may include employment or consulting relationships with a related person or contracts under which ABM receives goods or services from (or provides goods and services to) a related person or a company for which the related person is an employee or otherwise affiliated. Directors and executive officers are required to inform ABM of any such transaction promptly after they become aware of it, and ABM also collects information from directors and executive officers about their affiliations and the affiliations of their family members. The policy does not require review of the following transactions:

Generally, transactions that are determined by ABM's General Counsel to be covered by the policy are subject to a determination of materiality by the Board and, if so determined to be material to the related party, must be approved or ratified by the Board. The Board approves or ratifies a transaction if it determines, in its business judgment based on the available information, that the transaction is fair and reasonable to ABM and consistent with the best interests of ABM.

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Transactions with Related Persons

The General Counsel informed the Board, based on a review of potential transactions with related persons, that there were no transactions involving related persons requiring review by the Board in fiscal year 2011 under the terms of the Related Party Transactions Policy.

Mr. Steele is a current director. He retired as an officer and employee of ABM in October 2000. Pursuant to his previous employment contract, ABM paid retirement benefits of $8,333 per month to Mr. Steele for a 10-year period which ended in June 2011. During fiscal year 2011, ABM also contributed $901 per month for medical and dental insurance for Mr. Steele and his spouse. ABM provides Mr. Steele with $150,000 in life insurance coverage for the remainder of his life. In fiscal year 2011, ABM paid certain club dues for Mr. Steele in an amount equal to $3,137.


SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires ABM's directors, officers and persons who own more than 10% of a registered class of ABM's securities to file reports of beneficial ownership and changes in ownership with the Securities and Exchange Commission. Based solely on a review of the reporting forms and representations of its directors and officers, ABM believes that during fiscal year 2011 all forms required to be filed by its executive officers and directors under Section 16(a) were filed on a timely basis, except that there was one inadvertently late Form 4 filing on March 14, 2011 for each of Messrs. Bane, Fernandes, Ferguson, Helms, Kotkins and Steele and Mss. Chavez and Herringer reporting annual grants of restricted stock units for non-employee directors on March 8, 2011, which annual grants were disclosed in ABM's proxy statement filed on February 7, 2011. There were failures to timely report five small acquisitions of ABM shares made by Mr. Lusk in fiscal years 2010 and 2011 and eight small acquisitions of ABM shares made by Mr. Helms in fiscal years 2009, 2010 and 2011, which transactions had not been disclosed to the Company, in connection with broker purchases of ABM shares from dividend proceeds. Forms reporting these transactions by Messrs. Lusk and Helms have been filed.


EXECUTIVE COMPENSATION


Compensation Discussion and Analysis

This Compensation Discussion and Analysis ("CD&A") provides information about our fiscal year 2011 compensation program for named executive officers ("NEOs"), who were:

On October 24, 2011, Mr. Zaccagnini ceased to be an executive officer of the Company and his employment with the Company ended on January 15, 2012.

Executive Summary

Fiscal Year 2011—An Overview of Business Results

The successful integration of The Linc Group, LLC ("Linc"), which we acquired in December 2010, was one of the highlights of our fiscal year and helped drive a 21.5% growth in revenues over the prior year. The acquisition of Linc and certain parking assets of the L & R companies in October 2010 strengthened our competitive position in our Engineering and Parking businesses while the acquisition of Diversco, Inc. in June 2010 expanded our Janitorial business in strategic geographical regions.

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In fiscal year 2011, our net income of $68.5 million represented a 6.8% increase over the prior year and our adjusted EBITDA of $184 million represented an 18% increase over the prior year and reflects a doubling of adjusted EBITDA in the past four fiscal years, despite one of the worst economic periods in recent history. Adjusted EBITDA is earnings before interest, taxes, depreciation and amortization, excluding discontinued operations and items impacting comparability. Adjusted EBITDA is among the financial indicators that management uses as a basis for planning and forecasting future periods.

From a cash-flow perspective, we achieved one of our strongest fiscal years with $156.8 million in cash flow from continuing operations while reducing our borrowings since the Linc acquisition by more than $150 million to $300 million at October 31, 2011. We consider cash flow from continuing operations (operating cash flow) to be an important indicator of financial performance. In addition, adjusted EBITDA and cash flow from continuing operations are performance measures used in our long-term performance share program, as described in Part 3.

In fiscal year 2011, we paid over $29 million to our shareholders in dividends, raised our dividend rate per share by 4%, and marked 182 consecutive quarterly dividend payments to our shareholders.

We urge shareholders to read our Annual Report on Form 10-K for the year ended October 31, 2011, filed with the SEC on December 23, 2011, which describes our business and fiscal year 2011 financial results in more detail.

As reflected in the table below, we have organized our CD&A into four parts which describe how we compensate our NEOs.

                         
    Part 1       Our Compensation Philosophy and Overall Goals
Explains the philosophy and goals that underlie our executive compensation program.
      Page 19    
    Part 2       Our Executive Compensation Process and Governance
Describes how we make decisions relating to executive compensation and explains how the Compensation Committee uses benchmarking to guide its decision-making and the role of the Committee's independent consultant.
      Page 20    
    Part 3       Elements of Compensation and Fiscal Year 2011 Awards
Describes each element of our program and explains how decisions relating to NEO compensation for fiscal year 2011 were made.
      Page 25    
    Part 4       Other Governance and Compensation Related Matters
Discusses the governance policies that support our executive compensation program, including, among others, stock ownership requirements and our recoupment policy.
      Page 35    

Part 1.    Our Compensation Philosophy and Overall Goals

Our executive compensation programs are designed to attract, motivate and retain qualified executives while at the same time balancing these goals with our desire to improve profitability and control costs in a service business largely characterized by narrow margins. Compensation is provided in the form of salary, annual cash performance incentives, equity awards and benefits. Generally, total compensation opportunity is weighted toward incentive compensation linked to the financial performance of ABM and to individual performance that contributes to ABM's strategic initiatives. Our executive compensation programs are designed to achieve the following goals, as demonstrated by the characteristics of our pay-for-performance program (all as further described below in this CD&A):

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In designing our executive compensation program, we seek to include features that will maintain an appropriate balance between providing incentives to perform and deliver competitive total compensation while protecting the Company against inappropriate risk-taking and conflicts among the interests of the Company, its shareholders and the executives. These features include:

Part 2.    Our Executive Compensation Process and Governance

The following table shows the roles of management, the Compensation Committee and our Board of Directors in recommending or approving actions relating to the compensation of our executive officers. The narrative following this table provides more detail about their respective roles and responsibilities. To the extent that our Board is involved in making decisions with respect to executive compensation for our CEO, only those members of the Board who are both independent and "outside" directors for purposes of Section 162(m) of the Internal Revenue Code take part in these decisions. We refer to those directors as

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the "CEO Committee." In fiscal year 2011, the CEO Committee consisted of all of our directors except Messrs. Slipsager and Steele.

    Action       For the CEO       For Other Executive Officers    

 

 

Design compensation program

 

 

 

Compensation Committee

 

 

 

Compensation Committee

 

 

 

 

Establish target and maximum incentive plan awards

 

 

 

Compensation Committee

 

 

 

Compensation Committee

 

 

 

 

Recommend annual cash incentive awards

 

 

 

Compensation Committee

 

 

 

CEO, with Compensation Committee review and discretion to revise

 

 

 

 

Approve annual cash incentive compensation

 

 

 

CEO Committee

 

 

 

Compensation Committee

 

 

 

 

Recommend equity grants

 

 

 

Compensation Committee

 

 

 

CEO, with Compensation Committee review and discretion to revise

 

 

 

 

Approve equity grants

 

 

 

CEO Committee

 

 

 

Compensation Committee

 

 

 

 

Performance appraisal

 

 

 

Compensation Committee, after consultation with the independent members of our Board of Directors

 

 

 

CEO, with Compensation Committee review and discretion to revise

 

 

 

 

Base salary

 

 

 

CEO Committee

 

 

 

Compensation Committee

 

 

The Compensation Committee has responsibility for the design of our executive compensation programs, including the determination of performance metrics related to our incentive-based compensation. The Compensation Committee annually reviews and assesses all components of pay in connection with the executive compensation program, including base salary, annual incentives, equity compensation (including accumulated vested and unvested equity compensation) and the value of benefits (including potential severance benefits) and perquisites. It also bases its assessment in part on tally sheets prepared by management for each NEO. A review of tally sheets gives the Compensation Committee detail with respect to the totality of each executive's compensation, as well as the components that comprise the overall compensation package, and how compensation earned by each executive compares to the compensation earned by others. The tally sheets also help the Committee understand the effect that changing any element of pay will have on total compensation.

The Compensation Committee considers the results of the advisory "say-on-pay" vote in connection with its determination of compensation policies and decisions. Last year, approximately 98.8% of shareholders voting on our say-on-pay proposal (excluding abstentions) voted "for" our executive compensation for fiscal year 2010. In light of this result and other considerations relating to our executive compensation structure, the Committee did not believe that any significant changes to our compensation practices were necessary.

Commencing at the end of the fiscal year, the Compensation Committee conducts a performance review of our CEO. The Compensation Committee evaluates the CEO and makes recommendations about the CEO's compensation to the CEO Committee. The CEO is not present during the deliberations about his compensation. This process is discussed in greater detail in Part 3 in relationship to CEO compensation.

Annually, our CEO provides the Compensation Committee with a performance assessment and compensation recommendation for each NEO, other than himself. This performance assessment is based on the individual's self-assessment and the CEO's assessment of the individual's achievements, strengths and weaknesses as well as the performance of the individual's business unit and other considerations. The

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Compensation Committee considers the recommendations of the CEO with respect to the level of base salary, the annual cash incentive awards and long-term equity incentive awards for those NEOs. The Compensation Committee also considers information about compensation levels and programs that it receives from the Senior Vice President-Human Resources, other members of management from whom it may request information and such consultants as may be engaged by the Compensation Committee or management from time to time. The Compensation Committee approves any changes to levels of compensation for the NEOS, other than the CEO, in its sole discretion.

Role of Independent Consultants

The Compensation Committee has exclusive authority under its charter to retain and approve fees and other terms of engagement for consultants to assist it in the evaluation of the compensation for our executive officers. The Committee has retained Exequity LLP ("Exequity") since 2008 as its independent executive compensation consultant. Exequity provides advice and ongoing recommendations concerning executive compensation programs to the Committee. From time to time, at the request of the Governance Committee, and with the approval of the Compensation Committee, Exequity has also provided information to the Board related to Board compensation. Exequity reports directly to the Compensation Committee. Under direction of the Compensation Committee, Exequity may work with management in connection with gathering information and reviewing our compensation programs and compensation levels. The Compensation Committee's consultant is expected to achieve the following objectives:

Management may retain consultants on behalf of the Company, from time to time, to provide benchmarking data, program design review and other services related to the implementation of executive compensation programs. In fiscal year 2011, management engaged Towers Watson to assist it in a review of compensation in relationship to the Company's peer group and related matters.

Use of Market Data and Benchmarking

The Compensation Committee uses benchmarking as one of its tools in connection with its assessment of our executive compensation programs and levels of compensation. Working with its compensation consultant, the Committee regularly reviews the various criteria by which it benchmarks ABM's pay practices. In fiscal year 2011, the Committee reviewed benchmark criteria and determined to maintain the peer group composition used in fiscal year 2010. The peer group companies were originally selected with reference to the following criteria:

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For fiscal year 2011, the following 25 companies (the "Peer Group") were selected by the Compensation Committee as ABM's primary peer group in reviewing pay and making compensation decisions:

Arkansas Best Corp.   Fiserv Inc.   Rent-A-Center, Inc.
Brinker International Inc.   G&K Services, Inc.   Republic Services Inc.
Brinks Co.   Hub Group Inc.   Robert Half Intl.
C. H. Robinson Worldwide   Iron Mountain   Rollins Inc.
Cintas Corp.   J B Transport Services   Spherion Corp.
Convergys Corp.   Johnson Controls   Standard Parking
Con-Way Inc.   Kelly Services   URS Corp.
Corrections Corp. America   Manpower Inc.   Werner Enterprises
Emcor Group Inc.        

The Compensation Committee's decisions relating to NEO pay are informed by its review of the compensation practices reported in the proxy statements filed by the companies in the Peer Group, as compiled for the Committee by its compensation consultant. This information forms the basis for the analysis the Committee uses to assess the competitiveness of NEO pay. The proxy analysis reviewed by the Committee in fiscal year 2011 compared base salaries, short-term incentives, long-term incentives and total compensation to corresponding Peer Group practices.

The Compensation Committee believes that the proxy data reviewed provides a reasonable indicator of total compensation paid by companies that recruit executives with skill sets similar to those that we seek in our executives. Compensation for our executives is generally managed within the ranges of compensation paid by companies in the Peer Group and the general industry community. While the Compensation Committee normally references the benchmark group median (50 th  percentile) for each compensation element, the Committee uses its subjective judgment to determine pay levels necessary to pay for performance and attract and retain executive talent. In exercising its judgment, the Committee looks beyond the competitive data and places significant weight on individual job performance (based on specific financial and operating objectives for each executive, as well as leadership skills), experience, compensation history, future potential, internal comparisons, affordability, retention risk, and, in the case of new hires, compensation at former employers, as well as, in the case of executives other than the CEO, the CEO's recommendations. The Compensation Committee's independent consultant reported that compensation expenditure in fiscal year 2011 was within the range of benchmark norms.

The following graph illustrates compensation of our NEOs in relationship to NEO compensation of our peer group. Each point on the graph represents three-year realizable compensation (the compensation actually paid, including the economic value of equity-based grants) of the NEOs in our peer group relative to his or her company's three-year performance in Total Shareholder Return ("TSR") over the 2008-2010 calendar year period. Compared to our peer group, we paid our NEOs at the median while the Company delivered TSR at the 75 th  percentile.

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Pay for Performance Alignment

Realizable Pay vs. 3 Year Total Shareholder Return Performance (2008-2010)

GRAPHIC

About this graph:

This graph is based on the 2010 proxy filings of our peer group.

TSR reflects share price appreciation, adjusted for dividends and stock splits.

Realizable pay consists of: 1) actual base salary paid over the three-year period, 2) actual short-term incentive payouts over the three-year period, and 3) the 12/31/10 market value of equity grants as listed:

The following chart shows our cumulative compensation positioning by pay rank for our NEOs, other than Mr. Zaccagnini, in fiscal year 2011 in relation to 50 th  percentile Peer Group practices. We did not include Mr. Zaccagnini since he was not an executive officer at the end of the fiscal year. Peer Group practices were derived from publicly available information included in the 2011 proxy statements of our peer group companies:

 
  Position compared to
50 th  Percentile

   
  Base
Salary

   
  Total Cash
Compensation

   
  Long-Term
Incentives (2)

   
  Total Direct Compensation (3)
   
    ABM Named Executive
Officers—at Target (1)
        +2 %       -10 %       -31 %       -13 %  
(1)
"At Target" reflects compensation levels assuming annual cash bonuses are paid at levels that reflect 100% goal attainment.

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(2)
"Long-Term Incentives" includes equity grants made in fiscal year 2011 other than the special grants of restricted stock units and stock options made in January 2011 to Mr. Price (which are excluded because they have a five-year cliff vesting date and so were not considered part of regular annual compensation).

(3)
"Total Direct Compensation" includes total cash compensation and the value of long-term incentive compensation granted during fiscal year 2011, other than the special grants of restricted stock units and stock options made in January 2011 to Mr. Price. A Black-Scholes valuation is used with respect to stock options.

Part 3.    Elements of Compensation and Fiscal Year 2011 Awards

Elements of Compensation

The principal elements of our executive compensation program are:

The Compensation Committee believes that each of these elements supports one or more of our compensation objectives and considers each element to be part of a total compensation package. For this reason, the Committee considers the impact of each of these elements on an NEO's total compensation when making decisions regarding compensation. The use of each compensation element is based on a subjective determination by the Committee of the importance of each compensation element in supporting ABM's business and talent strategies, as well as the prevalence, weight and value of these elements for executives at other companies. The Committee believes that the overall mix among base salary, cash and noncash incentives effectively balances short- and long-term performance objectives.

Base Salary

The Compensation Committee annually reviews total compensation, including base salaries, for executives in the first quarter of each fiscal year and, as needed, in connection with recruitment, promotions or other changes in responsibilities. Base salary amounts affect potential annual cash performance incentive payments and equity awards described in the following sections because these other elements are generally based on a percentage of base salary.

Following this review, the Compensation Committee establishes the base salary for the NEOs, other than the CEO, and reviews and recommends the base salary of the CEO to the CEO Committee. In general, base salaries are set at a level that the Committee believes will effectively reward, attract and retain necessary talent, considering the factors described previously. In establishing compensation levels for each NEO, or in the case of the CEO, making a recommendation as to base salary for the CEO to the CEO Committee, the Committee considers the internal relationship of positions based on scope and level of responsibility, impact on the Company or on the business unit, the background and skills required to perform the position responsibilities, and the NEO's experience and individual performance. This consideration also includes the relationship of each NEO's compensation to the CEO's compensation.

After taking into consideration the factors described above, the Committee recommended to the CEO Committee that Mr. Slipsager receive an increase of 3%, effective January 1, 2011. The CEO Committee approved this increase. The Committee increased each of Messrs. Lusk, McClure and Zaccagnini and Ms. McConnell's salary by 3%. In establishing Mr. Price's salary, the Compensation Committee considered his compensation with Linc and his new responsibilities.

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Annual Cash Performance Incentive Payments

The target bonuses, maximum bonuses, performance factors and weightings, along with the actual fiscal year 2011 bonus awards for the NEOs, are set forth in the following table. In January 2011, the Committee reviewed the weightings relative to business unit performance, corporate performance and, for NEOs whose responsibility was at the corporate level, departmental results. In the case of Messrs. Slipsager and Lusk, the Committee decided to change the weightings so that more weight would be given to financial performance (70%) and less weight would be allocated to individual performance (30%) in order to emphasize financial performance. This represented a change from the prior year where Mr. Slipsager's financial and nonfinancial objectives were weighted equally and Mr. Lusk's performance objectives relating to corporate results, department results and individual results were weighted 50%, 20% and 30%, respectively. The Committee also determined that, for executive vice presidents having responsibilities for operating divisions, weightings of 30% for corporate results, 40% for business unit results, and 30% for individual results were appropriate, representing a change from the prior year in which these results were weighted 20% (corporate results), 40% (business unit results) and 40% (individual results). The Committee believed that the greater emphasis on corporate results better reflected the fact that these individuals have influence that extends beyond their respective business units. The Committee also believed that it was appropriate to continue weightings of 50% for corporate results, 20% for department results and 30% for individual results for Ms. McConnell. A description of the principles behind our annual cash performance incentive payments and how fiscal year 2011 bonus awards were achieved follows the table.


Fiscal Year 2011 Bonus Targets, Weighting, and Awards

 

 

Named Executive
Officer

        Base
Salary
($)
        Target
Bonus
(as
Percentage
of Salary)
(%)
        Target
Bonus
($)
        Maximum
Bonus (1)
($)
      Performance Factors
and Weighting
        Achievement
(%)
        Fiscal
Year 2011
Bonus as
Percentage
of Target
(%)
        Fiscal
Year 2011
Bonus
($)
   

 

 

Henrik Slipsager,

        837,390         100         837,390         1,549,172       CEO Financial Objectives, 70%         98.0         105.0         879,260    

 

 

Chief Executive

                                              CEO Nonfinancial Objectives, 30%         122.0                        

 

 

Officer

                                                                                 

 

 

James Lusk,

       
485,579
       
60
       
291,347
       
538,993
     

Corporate Results, 70%

       
109.0
       
121.3
       
353,404
   

 

 

Executive Vice

                                              Individual Results, 30%         150.0                        

 

 

President and
Chief Financial
Officer

                                                                                 

 

 

James McClure,

       
598,945
       
75
       
449,209
       
831,036
     

Corporate Results, 30%

       
109.0
       
103.3
       
464,033
   

 

 

Executive Vice

                                              Business Unit Results, 40%         86.4                        

 

 

President

                                              Individual Results, 30%         120.0                        

 

 

Tracy Price,

       
634,480
       
75
       
475,860
       
880,341
     

Corporate Results, 30%

       
109.0
       
103.3
       
491,591

(2)
 

 

 

Executive Vice

                                              Business Unit Results, 40%         58.5                        

 

 

President

                                              Individual Results, 30%         130.0                        

 

 

Sarah McConnell,

       
400,670
       
50
       
200,335
       
350,586
     

Corporate Results, 50%

       
109.0
       
113.5
       
227,380
   

 

 

Senior Vice

                                              Department/Function Results, 20%         100.0                        

 

 

President

                                              Individual Results, 30%         130.0                        

 

 

Steven Zaccagnini,

       
485,579
       
60
       
291,347
       
538,993
     

Corporate Results, 30%

       
109.0
       
102.4
       
298,340
   

 

 

Executive Vice

                                              Business Unit Results, 40%         99.3                        

 

 

President

                                              Individual Results, 30%         100.0                        
                                                                                       

(1) Maximum bonus for the CEO and executive vice presidents is 185% of target. Maximum bonus for the senior vice president is 175% of target.

(2) Actual bonus reflects a discretionary positive adjustment of $39,048 for the reasons described below.

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In fiscal year 2011, the target bonus for the CEO was 100% of base salary. For the other NEOs, the target ranged from 50% to 75% of base salary. The Committee references the Peer Group median when it establishes an executive's target bonus. In establishing the bonus range for the NEOs, the Committee took into consideration the fact that both financial objectives and nonfinancial objectives are used to measure performance in connection with determining annual cash incentive compensation. The Committee believed that, for the portion of bonus that was based on financial objectives, the range of bonus should be from 0% to 200% of target, which reflects the bonus range median in the Peer Group. For the portion of bonus that was based on more subjective elements, the Committee believed that the range of bonus should be from 0% to 150% of target. It was the view of the Committee that the wider range of 0% to 200% was appropriate for measures that could be objectively determined, but that there should be a narrower range with respect to measures that were less capable of exact measurement.

    CEO Annual Cash Performance Incentive Payment

The CEO's annual cash performance incentive payment is based on an assessment of the CEO's performance against the CEO's performance objectives. The CEO's performance objectives are annually reviewed and approved in the first quarter of the Company's fiscal year by the Compensation Committee, in consultation with the independent directors, following a discussion of the most important objectives for the Company in the coming year. The CEO participates in this process by providing his proposed objectives to, and reviewing his proposed objectives with, the Committee.

In fiscal year 2011, the Compensation Committee established the potential range of bonus for the CEO as 0% to 185% of target. The target equals base salary. This bonus range is consistent with the range of bonus established by the Committee for the other NEOs.

In fiscal year 2011, the Compensation Committee continued its practice of utilizing a combination of financial metrics and Board evaluation of nonfinancial performance objectives in recommending the cash bonus for the CEO, reflecting its belief that year-to-year flexibility is important in connection with the nonfinancial objectives. At the beginning of the year, the Committee agreed upon Company financial goals on which the CEO's bonus would partly depend. The Committee also agreed upon key leadership and strategic objectives for the CEO. At the end of the year, the Committee first reviewed whether the financial objectives had been met. Then the Committee considered the nonfinancial objectives and also generally whether the CEO had shown effective leadership and helped position the Company for future growth.

Financial Objectives.     Mr. Slipsager's 2011 fiscal year financial performance objectives included achieving or exceeding budgeted targets for profit for fiscal year 2011, generating positive cash flow for the Company and strengthening the Company's balance sheet through enhanced attention to capital efficiency. Targets established with respect to financial objectives are set forth in the following table.

 
  CEO Financial Objectives
   
  Target Level
   
  Actual Results
   
  Approximate
Achievement
Level

   

 

 

Pre-tax income from continuing operations

      $113.1 million       $105.7 million         93 %  

 

 

EBITDA * margin

      4.3%       4.1%         95 %  

 

 

Earnings per share from continuing operations—Diluted

      $1.28       $1.27         99 %  

 

 

Operating cash flow

      $84.6 million       $160 million         189 %  

 

 

Organic revenue growth

      4.7%       1.0%         21 %  

 

 

Return on assets

      4.8%       4.6%         96 %  

 

 

Return on equity

      10.6%       9.8%         92 %  

 

 

Average/Total

                        98 %  

* EBITDA refers to earnings before interest, taxes, depreciation and amortization.

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Nonfinancial Objectives.     Mr. Slipsager's fiscal year 2011 nonfinancial performance objectives were:

    working with the Board to update the Company's five-year plan;

    engaging in on-going discussions with the Board relating to risk management;

    developing and implementing a leadership growth and management succession plan;

    working with operating executives to further develop their business acumen and leadership potential;

    ensuring the successful and timely integration of Linc with the Company;

    leveraging the strengths of Linc in relationship to other business units;

    achieving a fiscal year end run rate synergy savings in aggregate of $7.3 million relating to the Linc acquisition for fiscal year 2011; and

    reviewing the Company's capital structure in light of the acquisition of Linc and recommending and implementing changes consistent with the Company's risk profile and five-year plan.

In order to assess the extent to which Mr. Slipsager met, exceeded or did not meet his nonfinancial performance objectives, each independent Board member was interviewed and provided feedback as to the performance of the CEO in these and related areas. The Compensation Committee met in executive session and reviewed Mr. Slipsager's interactions and communications with the Board in relationship to the Company's five-year plan, and the extent of updates to this plan generated by the review. The Committee also reviewed the development of his leadership team and evaluated his role in working to develop bench strength and the talents of the Company's management. The Committee focused on the synergies achieved in connection with the acquisition of Linc, as well as success in leveraging the strengths of Linc in other business units of the Company. The Committee further noted the progress made in relationship to the review of the Company's capital structure in light of recent acquisitions and potential future growth. After considering these factors and the CEO's self-assessment, the Committee concluded that Mr. Slipsager had successfully positioned the Company for future growth, especially noting the significance of the Linc acquisition, and assigned a 122% achievement out of a possible 150% with respect to nonfinancial objectives. Given the nature of the decisions involved in evaluating the CEO's performance relating to nonfinancial objectives, the determination of percentage achievement against possible achievement involves subjective judgments and the Committee translates these into a percentage achievement for purposes of determining the overall bonus award without using a formula.

Overall Bonus Determination.     As indicated earlier, in fiscal year 2011, the Committee believed it was appropriate to weight the CEO's financial goals at 70% and nonfinancial goals at 30%. Since financial goals were achieved at 98% and nonfinancial goals at 122%, this resulted in an overall achievement of 105%. Following this determination, the Compensation Committee met with the other independent and "outside" members of the Board who, together with the Compensation Committee, constitute the CEO Committee. The CEO Committee discussed the Compensation Committee's determinations relating to Mr. Slipsager's achievement of his nonfinancial objectives and agreed with the conclusion that the financial objectives had been achieved at 98% and the nonfinancial objectives had been achieved at 122%. Accordingly, the CEO Committee approved an annual cash incentive payment equal to $879,259 (105% of target) for Mr. Slipsager.

    Other NEOs' Annual Cash Performance Incentive Payments

Annual cash performance incentive payments for the NEOs other than Mr. Slipsager are governed by the annual cash performance incentive program (the "PIP"). The PIP is an incentive cash program for executives and key employees that is designed to motivate and reward achievement of annual financial and individual performance objectives and provide a competitive total compensation opportunity in support of our compensation objectives. In the case of NEOs having responsibility for business units, awards under the PIP are based on the Company's financial performance ("Corporate Results"), business unit performance ("Business Unit Results"), and individual performance ("Individual Results"). Our Chief Financial Officer's award is based on Corporate Results and Individual Results and our General Counsel's

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award is based on Corporate Results, Department Results and Individual Results. The Compensation Committee establishes a target bonus for each NEO in the first quarter of the fiscal year based on a percentage of base salary. The Committee also assigns a relative weight to the components of the bonus amount. The CEO approves the individual performance objectives for the NEOs (other than himself). Generally, the performance criteria associated with the Company and business unit performance are objective, while those associated with department results and individual performance objectives are more subjective in nature.

In connection with its establishment of target bonus levels for these NEOs, the Compensation Committee evaluated the current duties and responsibilities of the NEOs and comparative compensation information with the Committee's independent compensation consultant. The following criteria were used in determining payments for NEOs under the fiscal year 2011 PIP:

    Corporate Results:   Company performance based on targets for income from continuing operations, subject to discretionary strategic results modifiers such as revenue growth, days sales outstanding, operating profit margins, cash flow, cost reduction and other strategic performance targets.

    Business Unit or Department Results:   Performance of our operating subsidiaries in the case of executives having responsibilities for operating subsidiaries (Messrs. Price, McClure and Zaccagnini) or department performance, in the case of Ms. McConnell.

    Individual Performance:   Individual performance in providing strategic leadership, employee leadership, and compliance and administration.

Since positions held by the NEOs participating in the PIP differ in terms of areas of focus, scope and impact on the Company, the relative weighting of these criteria varies based on position and responsibilities, and the individual performance objectives may vary depending on the nature of responsibilities of each executive.

Following the end of the fiscal year, Corporate Results and Business Unit Results are determined and submitted to the Committee. The CEO provides the Committee with his assessment of the achievement of Department Results and Individual Results. The Committee discusses the CEO's assessments of the other NEOs with the CEO and has discretion to modify his assessments. The Committee may adjust Corporate Results and Business Unit Results to take into consideration unusual items such as acquisitions or divestitures. Determining Individual Results and, to some extent, Department Results, involves subjective judgments by the Committee.

Corporate Results.     Under the 2011 Fiscal Year PIP, Corporate Results were measured by the Company's fiscal year 2011 net income from continuing operations relative to (1) fiscal year 2011 budget and (2) fiscal year 2010 net income from continuing operations, each weighted equally. The chart below reflects the 2011 Fiscal Year PIP as it relates to award funding and target levels for Corporate Results.


2011 Fiscal Year PIP Corporate Results

 
 
  Award Funding—Corporate
   
  % Budget for Fiscal Year 2011
   
  % Prior Fiscal Year
   

 

  175 %     ³ 125 %     ³ 125 %  

 

 

150

%     ³ 120 %     ³ 120 %  

 

 

100

%     ³ 100 %     ³ 100 %  

 

 

50

%     ³ 80 %     ³ 80 %  

No bonus would be earned if corporate results were below 80% of budget for fiscal year 2011 or 80% of actual performance for fiscal year 2010. In fiscal year 2011, the Company's net income from continuing operations was 99.6% of budget and 107.6% of fiscal year 2010 net income from continuing operations, which, on an interpolated basis, translated into funding levels of 99% and 119%, respectively, resulting in a Corporate Results funding level of 109%.

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Business Unit or Department Results

Janitorial.     Business Unit Results in connection with the Janitorial business were based on Janitorial's 2011 fiscal year income from continuing operations relative to (1) budget for fiscal year 2011 and (2) fiscal year 2010 income from continuing operations, with the two factors weighted equally.

The chart below shows possible award funding for the Janitorial business based on these factors.


2011 Fiscal Year PIP Janitorial Results

 

 

Award Funding

      Actual 2011 Income from
Continuing Operations as % of
Budget for Fiscal Year 2011
      Actual 2011 Income from
Continuing Operations as % of
Prior Fiscal Year Income from
Continuing Operations
   

 

  175 %     ³ 125 %     ³ 120 %  

 

 

150

%     ³ 120 %     ³ 115 %  

 

 

100

%     ³ 100 %     ³ 105 %  

 

 

50

%     ³ 85 %     ³ 85 %  

In fiscal year 2011, Janitorial's net income from continuing operations was 95.2% of budget and 100.5% of Janitorial's fiscal year 2010 net income from continuing operations, which, on an interpolated basis, translated into funding levels of 84.0% and 88.8%, respectively, for an overall funding level of 86.4%. Based on these results, the Committee approved funding of this portion of Mr. McClure's bonus at 86.4%.

Engineering .     Business Unit Results for the Engineering segment were measured by fiscal year 2011 net income from continuing operations relative to budget. Because results relating to Linc constitute a significant portion of the business unit's net income from continuing operations, and because results of Linc would not have been part of the prior fiscal year's net income from continuing operations for this segment, the Compensation Committee determined that it was appropriate to measure performance of the Engineering segment only with respect to actual income from continuing operations compared to budget.

The chart below shows possible award funding for the Engineering business based on these factors.


2011 Fiscal Year PIP Engineering Results

 

 

Award Funding

      Actual 2011 Income from
Continuing Operations as % of
Budget for Fiscal Year 2011
   

 

  175 %     ³ 125 %  

 

 

150

%     ³ 120 %  

 

 

100

%     ³ 100 %  

 

 

50

%     ³ 80 %  

In fiscal year 2011, Engineering's net income from continuing operations was 83.4% of budget, which, on an interpolated basis, translated into a funding level of 58.5%. Based on these results, Mr. Price would have received a bonus of $452,543. However, after taking into account Mr. Price's effective integration of the Company's Engineering operations into Linc, and the fact that Mr. Price had not been involved in establishing the fiscal year 2011 budget for Engineering, as well as the impacts of the delay by the U.S. government in approving its fiscal year 2011 budget on the results of the Engineering business unit, Mr. Slipsager recommended, and the Compensation Committee approved, an additional $39,048 in bonus, for a total bonus of $491,591.

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Parking and Security.     Mr. Zaccagnini's responsibilities in fiscal year 2011 included the Parking and Security business units. His Business Unit results were measured by the sum of fiscal year net income from continuing operations of these businesses relative to (1) the combined budget for these businesses and (2) the combined fiscal year 2010 net income from continuing operations for these businesses, with the two factors weighted equally. The chart below shows the possible award funding for the combined results for these businesses.


2011 Fiscal Year PIP Parking and Security Results

 

 

Award Funding

      Actual 2011 Income from
Continuing Operations as % of
Budget for Fiscal Year 2011
      Actual 2011 Income from
Continuing Operations as % of
Prior Fiscal Year Income from
Continuing Operations
   

 

  175 %     ³ 125 %     ³ 125 %  

 

 

150

%     ³ 120 %     ³ 120 %  

 

 

100

%     ³ 100 %     ³ 100 %  

 

 

50

%     ³ 80 %     ³ 80 %  

In fiscal year 2011, these business units' net income from continuing operations was 92.8% of the budgeted number and 106.6% of fiscal year 2010 net income from continuing operations, which, on an interpolated basis, translated into funding levels of 82.0% and 116.5%, respectively, for an overall funding level of 99.3%. Based on these results, the Committee approved funding of this portion of Mr. Zaccagnini's bonus at 99.3%.

Legal Department.     Ms. McConnell's responsibilities in fiscal year 2011 included the Company's legal department. Her department performance objectives included creating an environment conducive to learning and development, effective change management, and integrating Linc legal personnel. After taking into consideration Ms. McConnell's self-assessment and the CEO's assessment with respect to Ms. McConnell's department objectives, the Committee reviewed the legal department's performance against these objectives. The Committee did not assign numerical values to these objectives but rather assessed performance on a qualitative standard ranging from "Outstanding" to "Unsatisfactory." After considering the CEO's assessment of Ms. McConnell's overall success in achieving Department Results, the Committee agreed with the CEO that a multiplier of 100% was appropriate.

Individual Performance.     For each of Messrs. Lusk, Price, McClure and Zaccagnini and for Ms. McConnell, points were assigned to particular elements of each person's individual performance objectives, tailored to each NEO's particular responsibilities. The CEO assesses each NEO's performance and provides the Compensation Committee with his judgment of the NEO's achievement of his or her objectives, with a maximum possible score of 150%. In addition to the assessment by the CEO, each NEO completes a self-assessment, which is reviewed by the Compensation Committee. The Committee then finalizes its assessment of each NEO's Individual Results. The following describes each NEO's individual performance objectives and results:

    Mr. Lusk's objectives included components relating to general management, customer relations/market development, and compliance/administration. The CEO noted Mr. Lusk's role in the Linc integration and the overall strength of the areas that report to him. Based on the CEO's assessment of Mr. Lusk and its agreement with this assessment, the Committee approved a multiplier of 150% for Individual Results.

    Mr. McClure's objectives included components relating to general management, sales and marketing, compliance/administration, and individual objectives involving leadership and organizational improvements. The CEO noted Mr. McClure's effectiveness in organization and management, especially in the area of cash flow. Based on the CEO's assessment of Mr. McClure's

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      performance in these areas and its agreement with this assessment, the Committee approved a multiplier of 120% for Individual Results.

    Mr. Price's objectives included elements relating to the integration of Linc with the Company, financial elements relating to achieving EBITDA targets relating to the Engineering business, cash flow and favorable days sale outstanding relative to the Engineering business, operational goals relating to quality management and training, as well as objectives relating to strategic acquisitions, marketing, and government relations. The CEO noted Mr. Price's key role in the integration of Linc and his effectiveness with respect to managing the combined Linc and ABM engineering groups. Based on the CEO's assessment of Mr. Price's performance in these areas and its agreement with this assessment, the Committee approved a multiplier of 130% for Individual Results.

    Ms. McConnell's objectives included components related to the integration of Linc into the Company, assuring that the Company's enterprise risk management is appropriately used to drive business strategy, and other objectives related to records management and corporate governance. The CEO noted Ms. McConnell's effectiveness in overseeing good corporate governance practices and managing the legal aspects of the Company's acquisitions and litigation. Based on the CEO's assessment of Ms. McConnell's performance in these areas and its agreement with this assessment, the Committee approved a multiplier of 130% for Individual Results.

    Mr. Zaccagnini's objectives included components relating to the areas of general management, customer relations/market development, compliance/administration and certain specified individual objectives. Based on the CEO's assessment of Mr. Zaccagnini and its agreement with this assessment, the Committee approved a multiplier of 100% for Individual Results.

Equity Incentives

Equity incentives create a direct link between executive compensation and shareholder returns by tying a significant portion of total compensation to the performance of the Company's stock. The Committee also believes equity incentives encourage executives to remain at the Company. Equity awards may be granted to senior executives annually (or, in the case of newly hired executives, at the time they join ABM) but may also be granted from time to time in connection with promotions or assumption of additional responsibilities, as well as to promote retention, and/or to encourage focus on specific performance objectives. We grant the following types of equity awards:

    Performance Shares:   Performance shares are earned based on specified performance results combined with service requirements. Typically, our performance shares are based on one-, two- or three-year financial performance measures but do not vest until the third anniversary of the grant date. The threshold, target and maximum performance goals are established with reference to the Company's budgeted growth rate for the relevant periods and other factors determined by the Committee for the applicable performance period. The Committee believes that these awards align employee and shareholder interests by tying value to both business results and future stock price.

    Restricted Stock Units ("RSUs"):   To meet the Company's objective to retain key executive talent, the Company generally grants RSUs, representing full value shares of our common stock, that vest based on continued service with the Company. Typically, 50% of the RSUs vest two years from the grant date and the remaining 50% vest four years from the grant date. However, the Committee may provide a different vesting schedule if it determines, in its subjective judgment, that a different vesting schedule is appropriate. RSUs are intended to promote retention and alignment of executive interests with the interests of shareholders. The Committee believes that RSUs enhance retention because they offer compensation opportunities over a long-term vesting period.

    Stock Options:   The Committee believes that stock options focus executives on managing the Company from the long-term perspective of an owner with an equity stake in the business. Stock

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      options provide value to the recipient only if the price of the Company's common stock increases above the option exercise price, which is the fair market value of the stock on the date of grant. Typically, our stock options vest ratably over four years. However, the Committee may provide a different vesting schedule if it determines, in its subjective judgment, that a different vesting schedule is appropriate. Our stock options are granted for a maximum term of seven years and are subject to earlier termination three months following a termination of employment.

Fiscal Year 2011 Equity Incentives

The Compensation Committee believes that a significant portion of equity grants to our NEOs should be tied to performance, which it believes increases alignment between executive and shareholder interests. The Committee considers both grants of performance shares and stock options to be performance-based since performance shares are only earned if certain performance targets are met and stock option value to an executive is tied to the performance of the Company's stock.

When determining the number of equity awards granted to individual NEOs, the Committee looks to various factors, including Peer Group practices. Generally, the Committee reviews the 50 th  percentile of Peer Group practices and takes into account how equity grants to our NEOs compare to equity grants equal in size to the 50 th  percentile Peer Group awards to executives having comparable roles. In its subjective judgment, the Committee believes that the 50 th  percentile signifies the "typical" award level in the external market and is the appropriate reference point by which to assess equity grants to the NEOs. In addition, although there is not an exact formula, the Committee considers each individual's accumulated vested and unvested awards, the current value of the awards, comparison of individual awards between executives and in relation to other compensation elements, and total accounting expense of existing awards (because it considers share-based expense to be part of the Company's internal cost structure). The Committee also looks at the total mix of compensation (salary, cash bonus and long-term equity incentives) both by internal peer comparison and on an individual basis when it approves grants to the NEOs. The Committee uses its subjective judgment to determine grant amounts that are appropriate to retain and motivate executive officers while maintaining acceptable levels of compensation expense.

Special Equity Grants.     Mr. Price joined the Company in December 2010 in connection with the acquisition of Linc, where he held the position of Chief Executive Officer and President. Upon joining the Company, Mr. Price became an Executive Vice President of the Company, assuming additional responsibilities in connection with the Company's Engineering business unit. In connection with Mr. Price's new role in the Company, Mr. Slipsager requested that the Compensation Committee consider a special equity grant to Mr. Price, consisting of RSUs and stock options, in recognition of Mr. Price's additional responsibilities and new leadership position, as well as to serve as a retention vehicle. On January 10, 2011, the Compensation Committee made a special award of RSUs and stock options to Mr. Price in the amounts set forth in the table titled "Grants of Plan-Based Awards During Fiscal Year 2011." The stock options and RSUs do not vest until the fifth anniversary of the date of grant and do not contain accelerated vesting in the event of Mr. Price's resignation or termination prior to the vesting date, except for termination in the event of death or disability. The dollar value of these grants was allocated 50% to RSUs and 50% to stock options. The Compensation Committee believed that the long vesting schedule was consistent with Company retention objectives and that the mix of RSUs and stock options aligned with the long-term interests of Company shareholders. In the case of RSUs, the number of shares granted was based on the fair market value of the Company's stock on the date of grant. In connection with the January stock option grant, the number of shares granted was calculated on the basis of the Black-Scholes value.

Regular Equity Grants.     The Compensation Committee awarded performance shares to the NEOs and other eligible employees in January 2011, as part of the Company's regular grant cycle. The performance metrics relating to these performance shares are described below. The number of performance shares granted was based on the fair market value of the Company's stock on January 10, 2011, the date of grant.

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In September 2011, also as part of the Company's regular grant cycle, the Committee made equity grants of RSUs and stock options to NEOs and other eligible employees as described below. The Committee approved these awards at its regular meeting on September 7, 2011 but as the Company had not yet released earnings for the quarter ended July 31, 2011, in accordance with Company policy not to grant equity awards when the trading window is closed due an impending earnings release, the grants were not effective until September 13, 2011, which was the third business day following the Company's release of earnings on September 8, 2011. The number of RSUs awarded was based on the fair market value of ABM stock on September 13, 2011 and the number of stock options awarded was calculated based on the Black-Scholes value on this date.

In connection with regular equity grants, the Committee generally approves an equity award of a specific dollar value for each recipient based on a multiple of the recipient's base salary. For the CEO, the awards may range from 0% to 200% of base salary. For executive vice presidents, the awards may range from 0% to 125% of base salary, and for senior vice presidents, the awards may range from 0% to 100% of base salary.

The dollar value of the regular equity awards made in January 2011 and September 2011 was distributed among performance shares, RSUs and stock options. Generally, it is the Committee's belief that 50% of an NEO's regular equity grant should be in the form of performance shares, and RSUs and stock options should each constitute 25% of an NEO's regular equity grant.

This allocation among performance shares, RSUs, and stock options is based on the Committee's subjective determination that generally, 75% of equity grants should be related to Company performance: i.e ., in the case of performance shares, the shares would be earned if the Company met targets specified in the 2011-2013 Fiscal Year Performance Share Program, and, in the case of stock options, the value of the stock option to the recipient of the award would ultimately be based on Company share price exceeding the exercise price of the option on the date of vesting. The Committee believes that this allocation serves to align the interests of the NEOs with shareholder interests. In fiscal year 2011, the Committee awarded Ms. McConnell performance shares in an amount that exceeded her regular target award for performance shares based on its determination that this increase was appropriate in light of her performance and general compensation level. For this reason, the aggregate value of Ms. McConnell's fiscal year 2011 equity grant was allocated 67% to performance shares and 17% each to RSUs and stock options. Accordingly, 84% of Ms. McConnell's equity grant for fiscal year 2011 was performance-based.

Our Performance Share Program.     Our Performance Share Program is designed to motivate and reward long-term strategic management that results in profitable growth and sustained shareholder value creation. Performance shares may be earned based on performance during each of the three fiscal years in the program. Earned shares vest on the third anniversary of the grant date so long as the grantee is still employed by the Company. The first part of the award is based on "Value Creation," whereby shares may be earned annually based on a measurement which looks at annual budgeted operating cash flow and changes in EBITDA from the prior year multiplied by five. Each of the three years of the program related to Value Creation is weighted 20%, for a total of up to 60%. The second part of the award, which is weighted 40%, is based on continued growth and determined by the compounded three-year EBITDA growth result, which is measured at the end of the three-year performance period. As used in our performance share program, EBITDA is earnings before interest, depreciation and amortization, adjusted to exclude items impacting comparability and discontinued operations. Both the calculation of EBITDA and operating cash flow are subject to adjustments relating to major acquisitions, major divestitures and certain other defined items. In addition, the calculation of EBITDA and operating cash flow are subject to adjustment for certain defined items or events. At the beginning of each three-year program, the Compensation Committee establishes the EBITDA and operating cash flow targets for the years covered by the program and determines what adjustments, if any, shall be made to the calculation of EBITDA and operating cash flow. Results are measured at the end of each program year, in the case of objectives that

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are based on one-year performance and at the end of the three-year period in connection with results that are based on cumulative years.

The following tables and narrative summarize the results for fiscal year 2011 in each of 2010-2012 Fiscal Year and 2011-2013 Fiscal Year Performance Share Programs. Yearly targets under different performance share programs may be different for the same fiscal years as a result of the then-current Company conditions when the targets were established.


2010-2012 Fiscal Year Performance Share Program

 

          60%       40%    

 

 

Year

      Annual
Operating
Cash Flow
      EBITDA       Value
Creation*
      Weight       EBITDA       Weight    

 

  2010       $113.7 million       $161.3 million       $195.2 million       20%             n/a    

 

 

2011

      $100.6 million       $169.4 million       $141.1 million       20%             n/a    

 

 

2012

      $84.3 million       $177.8 million       $126.3 million       20%       $177.8 million       40    
                                                         
*
Value Creation = Operating Cash Flow + (change in EBITDA × 5)

For fiscal year 2011, performance shares under the 2010-2012 Fiscal Year Performance Share Program were earned at approximately 75.5% of target since Value Creation, as adjusted, was approximately $106.6 million. compared to the target of $141.1 million. In accordance with the provisions of the 2010-2012 Fiscal Year Performance Share Program, EBITDA and operating cash flow were adjusted for the impacts of the acquisitions of Linc, Diversco, Inc. ("Diversco") and certain assets of the L & R companies ("L & R"). Had Value Creation not been adjusted for the effects of these acquisitions, performance shares would have been earned at approximately 219.7% of target. The earned shares do not vest until January 2013.


2011-2013 Fiscal Year Performance Share Program

 

          60%       40%    

 

 

Year

      Annual
Operating
Cash Flow
      EBITDA       Value
Creation*
      Weight       EBITDA       Weight    

 

  2011       $84.6 million       $208.1 million       $355.1 million       20%             n/a    

 

  2012       $91.4 million       $218.5 million       $143.4 million       20%             n/a    

 

  2013       $90.2 million       $229.4 million       $144.7 million       20%       $229.4 million       40    
                                                         
*
Value Creation = Operating Cash Flow + (change in EBITDA × 5)

For fiscal year 2011, performance shares under the 2011-2013 Fiscal Year Performance Share Program were earned at approximately 87.3% of target since Value Creation was approximately $310.0 million compared to the target of $355.1 million. In accordance with the provisions of the 2011-2013 Fiscal Year Performance Share Program, no adjustments to the calculations of EBITDA or operating cash flow were made because the targets, as approved, had included the anticipated effects of the Linc, Diversco and L & R acquisitions. The earned shares do not vest until January 2014.

Part 4.    Other Governance and Compensation-Related Matters

Stock Ownership Guidelines

In October 2006, the Committee adopted stock ownership guidelines for certain officers, including NEOs, based on a multiple of base salary. From time to time, the Committee reviews the stock ownership guidelines and makes adjustments to these guidelines. Most recently, in March 2011, the Committee

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increased the stock ownership guidelines for the CEO from five times base salary to six times base salary. Current stock ownership guidelines are described below:

    Position       Guidelines    

 

 

CEO

 

 

 

Shares with a fair market value equal to six times base salary

 

 

 

 

Executive Vice Presidents

 

 

 

Shares with a fair market value equal to three times base salary

 

 

 

 

Senior Vice Presidents and certain subsidiary senior officers

 

 

 

Shares with a fair market value equal to base salary

 

 
                 

Executives are expected to achieve their targets within five years of becoming subject to the ownership guidelines. The Committee periodically assesses the guidelines and the officers' ownership relative to these guidelines. Progress toward targeted ownership levels may be taken into consideration in future grants to executives.

Benefits and Perquisites

The NEOs are eligible for customary employee benefits, which include participation in ABM's 401(k) Plan, as well as group life, health and accidental death and disability insurance programs and executive health examinations. In addition, Mr. Price receives certain perquisites that have carried over from his employment with Linc prior to its acquisition by the Company. These perquisites are set forth in the Summary Compensation Table.

NEOs, other than Messrs. Lusk and Price and Ms. McConnell, qualify for benefits under the Supplemental Executive Retirement Plan ("SERP"), an unfunded retirement plan that was closed to new participants prior to the employment of Messrs. Lusk and Price and Ms. McConnell. Messrs. Slipsager and McClure also participate in the Service Award Benefit Plan ("SAB"), which provides participants, upon termination of employment with a minimum of seven days of pay for each year of employment between November 1989 and January 2002. The SAB was closed to new participants prior to the employment of Messrs. Lusk, Price and Zaccagnini and Ms. McConnell.

The NEOs are eligible to participate in ABM's Employee Deferred Compensation Plan, which is an unfunded deferred compensation plan available to highly compensated employees. The Employee Deferred Compensation Plan benefits are shown in the "Nonqualified Deferred Compensation in Fiscal Year 2011" table, followed by a description of the plan. The Committee regularly reviews the benefits provided under this and other plans, and as a result of such a review, in January 2011, the Company entered into a trust agreement which will fund amounts due under the Employee Deferred Compensation Plan in the event of a change-in-control of ABM.

Change-in-Control and Other Severance Arrangements

In order to assure continuity of ABM's senior management in the event of a potential change-in-control, ABM has agreed to provide the NEOs with "double-trigger" severance compensation should their employment with ABM be terminated following a change-in-control. The payment of severance compensation is predicated upon the occurrence of two triggering events: (1) the occurrence of a change-in-control and (2) either the involuntary termination of employment with ABM (other than for "cause" as defined in the change-in-control agreements) or the termination of employment with ABM by the executive for "good reason" as defined in the change-in-control agreements.

In addition, our NEOs may be eligible for severance benefits outside of a change-in-control. In particular, the CEO has an employment agreement that provides him with severance payments if he is terminated

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without cause, and the Board of Directors has adopted a severance policy that provides compensation to executives whose employment is terminated without cause. ABM expects the severance policy to provide consistency of treatment for officers who are at similar levels in the organization and to protect ABM by requiring a release and post-employment non-competition restriction as a condition to a severance payment, which we believe helps to retain officers during periods of organizational change and assists in recruiting new executives. The policy was adopted following the Committee's review of similar policies in the Peer Group and general industry.

The potential benefits to executives under these severance and change-in-control arrangements are described and quantified under "Potential Benefits on Termination."

Compensation Recoupment Policy

In December 2009, the Board of Directors adopted a policy relating to the recoupment of cash and equity compensation. The policy provides that, if the Company's financial statements are the subject of a restatement due to misconduct, fraud or malfeasance, then, to the extent permitted by applicable law, the independent members of the Board, or a committee consisting of independent members of the Board designated by the Board, may, in their discretion, recover cash compensation paid to an executive officer of the Company or rescind or make other adjustments to an equity award made to an executive officer of the Company, including recovering cash proceeds relating to the sale or other disposition of an equity award, to the extent that the payment or award was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement. Where applicable, the Company may seek to recover any amount determined to have been inappropriately received by the individual executive officer. In addition, it is the Board of Directors' policy that, if the independent members of the Board, or a committee consisting of independent members of the Board, determine that an employee who has received a cash incentive payment or an equity award has engaged in conduct constituting "cause" (such as serious misconduct, dishonesty, disloyalty, conviction of a felony or misdemeanor involving moral turpitude, or failure to substantially perform employment-related duties or responsibilities), the Board or such Committee may take such action it deems necessary to address such conduct, including recovery of cash incentive payments, rescission of equity grants made to the employee in the 36-month period prior to the date on which the Board or such Committee makes such determination and recovery of proceeds relating to the sale or other disposition of an equity award during such 36-month period.

Accounting and Tax Considerations

The Compensation Committee takes into consideration the accounting, tax and related financial implications to the Company and executives when designing compensation and benefit programs. From an accounting perspective, in general, base salary, annual cash incentive bonus payments and the costs related to benefits and perquisites are recognized as compensation expense at the time they are earned or provided, and equity-based compensation expense is recognized over the vesting period of the grant.

Subject to the exceptions and limits described below, the Company deducts for federal income tax purposes payments of compensation and other benefits to executives. The Company does not deduct nonqualified deferred compensation until the year that the deferred compensation is paid to the executive.

Section 162(m) of the Internal Revenue Code generally does not allow a tax deduction to public companies for compensation over $1 million paid to the CEO or any of the three other most highly compensated executive officers (other than the chief financial officer) unless the compensation is paid based solely on the attainment of one or more pre-established objective performance goals and certain other requirements are met. It is the Compensation Committee's preference to qualify its executives' compensation for deductibility under Section 162(m), to the extent it is consistent with the Company's best interests, but deductibility is not the only factor in its compensation decisions. The Company's Executive Officer Incentive Plan and 2006 Equity Incentive Plan, both of which have been approved by the Company's

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shareholders, have been designed to permit the Company to make incentive payments and awards of performance shares and stock options that are not subject to the deduction limits of Section 162(m). From time to time, the Compensation Committee or, in the case of the CEO, the CEO Committee, has awarded, and may in the future award, compensation that is not fully deductible.

Our change-in-control arrangements do not provide for tax gross-ups in the event that executives become subject to excise taxes under Section 4999 and Section 280G of the Internal Revenue Code as a result of receiving benefits in connection with a change-in-control of ABM.

Section 409A of the Internal Revenue Code imposes significant additional taxes and interest on underpayments of taxes in the event an executive defers compensation under a plan that does not meet the requirements of Section 409A. ABM has structured its programs and individual arrangements in a manner intended to comply with the requirements of Section 409A.


Compensation Committee Report

The Compensation Committee has reviewed the Compensation Discussion and Analysis and discussed the Compensation Discussion and Analysis with management. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in ABM's Annual Report on Form 10-K for the fiscal year ended October 31, 2011 and ABM's 2012 Proxy Statement.

This report is provided by the following independent and outside directors, who comprise the Compensation Committee:

Linda Chavez, Chair
Dan T. Bane
Maryellen C. Herringer
Henry L. Kotkins, Jr.

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Compensation of Executive Officers

The following tables and accompanying narrative describe the compensation of the NEOs.


2011 Summary Compensation Table

 

 

Name

        Fiscal
Year
        Salary
($)
        Bonus
($)
        Stock
Awards (1)
($)
        Option
Awards (2)
($)
        Non-Equity
Incentive Plan
Compensation (3)
($)
        Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings (4)
($)
        All Other
Compensation
($)
        Total
($)
   

 

 

Henrik Slipsager

        2011         833,325         0         1,197,311         406,495         879,260         44,210         9,800 (5)       3,370,401    

 

 

  President & CEO

        2010         805,000         0         1,131,722         382,499         1,008,000         87,576         21,535         3,436,332    

 

            2009         765,000         0         573,731         161,157         1,050,000         106,414         47,317         2,703,619    

 

 

James Lusk

        2011         483,222         0         347,130         117,855         353,404         0         23,362 (5)       1,324,973    

 

 

  Executive Vice President

        2010         465,313         0         738,990         504,349         330,075         0         15,442         2,054,169    

 

 

    & CFO

        2009         434,700         0         162,997         45,785         268,986         0         27,318         939,786    

 

 

James McClure

        2011         596,038         0         476,016         159,907         464,033         10,812         9,800 (5)       1,716,606    

 

 

  Executive Vice President

        2010         576,250         0         1,193,948         893,137         270,833         21,744         11,413         2,967,325    

 

            2009         550,000         0         226,847         63,725         483,638         25,854         33,738         1,383,802    

 

 

Tracy Price (6)

        2011         634,480         0         990,560         674,476         491,591         0         41,150 (5)       2,832,257    

 

 

  Executive Vice President

                                                                                             

 

 

Sarah McConnell

        2011         398,725         0         285,372         58,350         227,380         0         9,800 (5)       979,627    

 

 

  Senior Vice President,

        2010         380,833         0         304,369         199,375         179,407         0         10,477         1,074,461    

 

 

    General Counsel &

        2009         340,000         0         64,189         18,036         147,433         0         37,960         607,618    

 

 

    Secretary

                                                                                             

 

 

Steven Zaccagnini*

        2011         483,222         0         347,130         117,855         298,340         10,857         11,662 (5)       1,269,066    

 

 

  Executive Vice President

        2010         465,313         0         738,990         504,349         305,702         15,141         9,794         2,039,289    

 

            2009         434,700         0         162,997         45,785         271,586         14,323         30,572         959,963    
*
Mr. Zaccagnini ceased to be an officer of the Company prior to the end of fiscal year 2011 and his employment with the Company ended on January 15, 2012.

(1)
The value shown is the aggregate grant date value for performance share and RSU awards computed in accordance with FASB ASC Topic 718, based on target levels of achievement (the probable outcome at grant), in the case of performance shares. A discussion of assumptions used in calculating these values may be found in Note 12. "Share-Based Compensation Plans" in the Notes to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2011. The maximum value for performance share awards granted in fiscal year 2011 under the 2011-2013 Fiscal Year Performance Share Program is as follows: Mr. Slipsager: $1,186,242; Mr. Lusk: $343,931; Mr. McClure: $474,178; Mr. Price: $474,178; Ms. McConnell: $340,549; and Mr. Zaccagnini: $343,931.

(2)
The value shown is the aggregate grant date value for stock option awards computed in accordance with FASB ASC Topic 718. A discussion of assumptions used in calculating these values may be found in Note 12. "Share-Based Compensation Plans" in the Notes to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2011.

(3)
Amounts shown in this column represent annual performance-based cash bonuses.

(4)
Fiscal Year 2011 amounts are attributable to the following:
Mr. Slipsager: change in value of SERP, $44,210; and change in value of SAB, $0.
Mr. McClure: change in value of SERP, $10,812; and change in value of SAB, $0.
Mr. Zaccagnini: change in value of SERP, $10,857.

(5)
Represents: ABM contributions to the 401(k) plan in the amounts of $9,800 for Mr. Slipsager; $9,800 for Mr. McClure; and $9,800 for Ms. McConnell. For Mr. Lusk: ABM contributions to the 401(k) plan, $9,800 and value of realized dividend equivalent units ("DEUs") upon distribution of RSUs, $13,562. For Mr. Price: ABM contributions to the 401(k) plan, $6,607; auto allowance, $16,800; credit card fees, $1,000; spouse and family travel benefit, $8,493; and an allowance for, among other things, certain benefits relating to investment advice and other professional services in the amount of $8,250. For Mr. Zaccagnini: ABM contributions to the 401(k) plan, $9,800 and value of realized DEUs upon distribution of RSUs, $1,862.

(6)
For Mr. Price, compensation for only fiscal year 2011 is shown because he was not an NEO in fiscal years 2010 and 2009.

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The annual bonuses for the NEOs in fiscal year 2011 were based on performance objectives described under "Compensation Discussion and Analysis."

Messrs. Slipsager, Lusk, Price, McClure and Zaccagnini and Ms. McConnell have employment agreements. Mr. Slipsager's agreement includes certain post-employment prohibitions on competition with the Company, and has a term ending on October 31, 2013. The employment agreements for the other NEOs terminate on October 31, 2012 and contain post-employment prohibitions on competition. Each employment agreement contains a provision providing for automatic one-year extensions unless, in the case of Mr. Slipsager, the Company provides notice 90 days prior to the expiration of the employment agreement that it does not wish to renew, and in the case of the other NEOs, the Company provides such notice 60 days prior to the expiration of the employment agreement. Payments which may be made to an NEO upon termination without cause are described under "Potential Payments Upon Termination Without Cause on October 31, 2011."

The table below shows payout ranges for the NEOs with respect to non-equity incentive plan awards and equity incentive plan awards, as well as other information.


Grants of Plan-Based Awards During Fiscal Year 2011

 

 








Named Executive Officer

      Grant Date       Committee
Approval
Date
        Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1) ($)
        Estimated Future Payouts Under
Equity Incentive Plan Awards(2) (#)
        All Other
Stock
Awards:
# of
Shares or
Stock
Units(3)
        All Other
Option
Awards:
# of
Securities
Underlying
Options(4)
        Exercise
or Base
Price
Options/
Awards
($/Share)
        Grant Date
Fair Value
of Stock and
Option
Awards(5)
($)
   

 

                            Threshold         Target         Maximum         Threshold         Target         Maximum                                            

 

 

Henrik Slipsager

      n/a                 n/a         837,390         1,549,172                                                                          

 

          1/11/2011       1/11/2011                                       15,611         31,221         46,832                                       790,828    

 

          9/13/2011       9/7/2011                                                                     21,293                             406,483    

 

          9/13/2011       9/7/2011                                                                               72,459         19.09         406,495    

 

 

James Lusk

      n/a                 145,674         291,347         538,993                                                                          

 

          1/11/2011       1/11/2011                                       4,526         9,052         13,578                                       229,287    

 

          9/13/2011       9/7/2011                                                                     6,173                             117,843    

 

          9/13/2011       9/7/2011                                                                               21,008         19.09         117,855    

 

 

James McClure

      n/a                 224,605         449,209         831,036                                                                          

 

          1/11/2011       1/11/2011                                       6,240         12,480         18,720                                       316,118    

 

          9/13/2011       9/7/2011                                                                     8,376                             159,898    

 

          9/13/2011       9/7/2011                                                                               28,504         19.09         159,907    

 

 

Tracy Price

      n/a                 237,930         475,860         880,341                                                                          

 

          1/10/2011       1/10/2011                                                                     19,349                             499,978    

 

          1/10/2011       1/10/2011                                                                               62,189         25.84         500,000    

 

          1/11/2011       1/11/2011                                       6,240         12,480         18,720                                       316,118    

 

          9/13/2011       9/7/2011                                                                     9,139                             174,464    

 

          9/13/2011       9/7/2011                                                                               31,101         19.09         174,477    

 

 

Sarah McConnell

      n/a                 100,168         200,335         350,586                                                                          

 

          1/11/2011       1/11/2011                                       4,482         8,963         13,445                                       227,033    

 

          9/13/2011       9/7/2011                                                                     3,056                             58,339    

 

          9/13/2011       9/7/2011                                                                               10,401         19.09         58,350    

 

 

Steven Zaccagnini

      n/a                 145,674         291,347         538,993                                                                          

 

          1/11/2011       1/11/2011                                       4,526         9,052         13,578                                       229,287    

 

          9/13/2011       9/7/2011                                                                     6,173                             117,843    

 

          9/13/2011       9/7/2011                                                                               21,008         19.09         117,855    
(1)
Represents the annual bonus opportunity for fiscal year 2011. The target award is calculated by multiplying each NEO's base salary by his/her target bonus percentage. Maximum bonus for the CEO and executive vice presidents is 185% of target. Maximum bonus for the senior vice president is 175% of target. Actual payments made for fiscal year 2011 are reported in the "Summary Compensation Table" in the "Non-Equity Incentive Plan Compensation" column. There is no applicable threshold for Mr. Slipsager. Under the 2011 Fiscal Year PIP, applicable performance thresholds are set forth for the other NEOs. However, even with achievement of threshold performance, an NEO may receive no award if personal performance objectives are not met.

(2)
Represents performance shares granted under the 2006 Equity Incentive Plan in fiscal year 2011. Shares are earned based on performance during each of fiscal years 2011, 2012 and 2013, and on cumulative performance with respect to these years, with vesting of earned awards to occur on January 11, 2014 if the NEO is an employee of the Company on the vesting date. As discussed under Fiscal Year 2011 Equity Incentives , based on fiscal year 2011 results, 20% of the performance award was achieved at 87.3% of target. Amounts set forth in the column "Threshold" represent the number of shares that could have been awarded if a minimum performance threshold was achieved. If such minimum threshold had not been attained, no shares would be awarded. When cash dividends are paid on ABM common stock, dividend equivalents are credited on performance shares which have been earned, subject to the same vesting conditions as the underlying performance shares. For a discussion of the criteria applicable to the determination of amounts awarded, see "Our Performance Share Program" above.

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Table of Contents

(3)
Represents RSUs granted under the 2006 Equity Incentive Plan in fiscal year 2011. With respect to RSUs granted on September 13, 2011, 50% vest on the second anniversary of the grant date and 50% vest on the fourth anniversary of the grant date. With respect to RSUs granted to Mr. Price on January 10, 2011, 100% vest on the fifth anniversary of the grant date. When cash dividends are paid on ABM common stock, dividend equivalents are credited which are converted into additional RSUs, subject to the same terms and conditions (including vesting conditions) as the underlying RSUs.

(4)
Represents options to acquire shares of Company common stock granted under the 2006 Equity Incentive Plan in fiscal year 2011. The exercise price of the options is the closing price of ABM stock on the grant date. With respect to options granted to Mr. Price on January 10, 2011, 100% vest on the fifth anniversary of the grant date. With respect to options granted on September 13, 2011, options vest equally on each of the first four anniversaries of the grant date. All options expire no more than seven years from the grant date.

(5)
The value shown is the grant date value for stock option awards computed in accordance with FASB ASC Topic 718, which were $5.61 on September 13, 2011 and $8.04 on January 10, 2011. The assumptions used to calculate the September 13, 2011 Black-Scholes value were: (1) expected life from date of grant of 5.63 years; (2) expected stock price volatility of 40.43%; (3) expected dividend yield of 2.59%; and (4) a risk-free interest rate of 0.98%. The assumptions used to calculate the January 10, 2011 Black-Scholes value were: (1) expected life from date of grant of 5.61 years; (2) expected stock price volatility of 39.20%; (3) expected dividend yield of 2.32%; and (4) a risk-free interest rate of 2.13%.

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Table of Contents

The following table shows the outstanding equity awards held by the NEOs at October 31, 2011.


Outstanding Equity Awards at 2011 Fiscal Year-End

 

            Option Awards         Stock Awards    

 

 















Named Executive Officer

        Option
Grant
Date
        Number of
Securities
Underlying
Unexercised
Options
Exercisable
        Number of
Securities
Underlying
Unexercised
Options
Unexercisable
        Option
Exercise
Price
($)
        Option
Expiration
Date
        Stock
Award
Grant
Date
        Number of
Shares or
Units of
Stock that
Have Not
Vested
        Market
Value of
Shares or
Units that
Have Not
Vested (9)
($)
        Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
that Have
Not Vested
        Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested (9) ($)
   

 

 

Henrik Slipsager

       
12/16/97

(1)
     
0
       
20,000
       
14.70
                 
1/8/08

(6)
     
14,453
       
292,240
                       

 

            3/17/98 (1)       0         5,000         18.30                   1/12/09 (6)       5,689         115,032                        

 

            12/19/00 (1)       0         5,000         15.38                   1/12/09 (7)       24,246         490,254                        

 

            9/9/02 (3)       100,000         0         16.83         9/9/12         1/11/10 (7)       11,776         238,111         23,042 (8)       465,909    

 

            6/14/05 (3)       100,000         0         18.30         6/14/15         9/8/10 (6)       18,218         368,368                        

 

            9/14/05 (2)       100,000         0         20.90         9/14/15