UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 14A

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Check the appropriate box:

o		Preliminary Proxy Statement
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þ		Definitive Proxy Statement
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o		Soliciting Material Pursuant to §240.14a-12

AVNET, INC.

 

AVNET, INC.

 

 

 

NOTICE OF 2009 ANNUAL MEETING OF SHAREHOLDERS

 

 

To Be Held Thursday, November 5, 2009

 

TO ALL SHAREHOLDERS OF AVNET, INC.:

 

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of AVNET, INC., a New York corporation (“Avnet”), will be held at the Avnet, Inc. Corporate Headquarters, 2211 South 47th Street, Phoenix, Arizona 85034 on Thursday, November 5, 2009, at 11:00 a.m., mountain standard time, for the following purposes:

 

 

The Board of Directors has fixed the close of business on September 8, 2009 as the record date for the Annual Meeting. Only holders of record of shares of Avnet’s Common Stock at the close of business on such date shall be entitled to notice of and to vote at the Annual Meeting or any adjournment thereof.

 

By Order of the Board of Directors

 

 

Jun Li

Secretary

 

September 18, 2009

 

TABLE OF CONTENTS

 

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS

 

AVNET, INC.
2211 South 47th Street
Phoenix, AZ 85034

 

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on November 5, 2009

 

Our Proxy Statement and Form 10-K are available at
http://www.ir.avnet.com

 

The Annual Meeting of Shareholders of AVNET, INC. will be held at the Avnet, Inc. Corporate Headquarters, 2211 South 47th Street, Phoenix, Arizona 85034 on Thursday, November 5, 2009, at 11:00 a.m., mountain standard time.

 

At the meeting you will be asked to elect 9 directors and ratify the appointment of KPMG LLP as the independent registered public accounting firm for the 2010 fiscal year. The Company’s Board of Directors is asking for your support of the director nominees and the selection of KPMG LLP.

 

This year we are again using the U.S. Securities and Exchange Commission rule that allows companies to furnish proxy materials to their shareholders primarily over the Internet. We believe that this process should expedite shareholders’ receipt of proxy materials, lower the costs of our annual meeting, and help to conserve natural resources. It is anticipated that the Notice of Internet Availability of Proxy Materials will be available to shareholders on or about September 18, 2009 containing instructions on how to access our 2009 Proxy Statement and 2009 Annual Report and vote online. The notice will also include instructions on how to receive a paper copy of your annual meeting materials, including the notice of annual meeting, proxy statement, annual report on Form 10-K and proxy card. If you received your annual meeting materials by mail, the notice of annual meeting, proxy statement, and proxy card from our Board of Directors were enclosed. If you received your annual meeting materials via e-mail, the e-mail contained voting instructions and links to the annual report and the proxy statement on the Internet, which are both available at http://www.ir.avnet.com.

 

DIRECTIONS TO THE ANNUAL MEETING

 

From Phoenix Sky Harbor International Airport:

Go East on East Sky Harbor Boulevard

Turn slight left to stay on East Sky Harbor Boulevard

Merge onto AZ-153 South toward East Exit AZ-143/I-10

Merge onto East University Drive via Exit 1 toward I-10/AZ-143

Turn left onto South 47th Street

Turn right to stay on South 47th Street

Avnet Corporate Headquarters is on the left

Parking is available in the front of the building

Proceed to lobby

AVNET, INC.

2211 South 47th Street

Phoenix, Arizona 85034

 

 

 

 

PROXY STATEMENT

FOR ANNUAL MEETING OF SHAREHOLDERS

To Be Held November 5, 2009

 

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors of Avnet, Inc. (“Avnet” or the “Company”) to be voted at the Annual Meeting of Shareholders to be held at Avnet’s Corporate Headquarters, 2211 South 47th Street, Phoenix, Arizona 85034 on November 5, 2009, and at any and all postponements or adjournments thereof (the “Annual Meeting”), with respect to the matters referred to in the accompanying notice. The approximate date on which this Proxy Statement and the enclosed form of proxy are first being sent or given to shareholders is September 18, 2009. Only holders of record of outstanding shares of Common Stock (as defined below) at the close of business on September 8, 2009, the record date, are entitled to notice of and to vote at the Annual Meeting. Each shareholder is entitled to one vote per share held on the record date. The aggregate number of shares of Common Stock outstanding (net of treasury shares) at September 8, 2009 was 151,244,635, comprising all of Avnet’s capital stock outstanding as of that date.

 

Proxies for shares of Avnet Common Stock, par value $1.00 per share (the “Common Stock”), may be submitted by completing and mailing the proxy card that accompanies this Proxy Statement or by submitting your proxy voting instructions by telephone or through the Internet. Shareholders who hold their shares through a broker, bank or other nominee should contact their nominee to determine whether they may submit their proxy by telephone or Internet. Shares of Common Stock represented by a proxy properly signed or submitted and received at or prior to the Annual Meeting will be voted in accordance with the shareholder’s instructions. If a proxy card is signed, dated and returned without indicating any voting instructions, shares of Common Stock represented by the proxy will be voted “FOR” each of Proposals 1 and 2. The Board of Directors is not currently aware of any business to be acted upon at the Annual Meeting other than as described herein. If, however, other matters are properly brought before the Annual Meeting, the persons appointed as proxies will have discretion to vote according to their best judgment, unless otherwise indicated on any particular proxy. The persons appointed as proxies will have discretion to vote on adjournment of the Annual Meeting. Proxies will extend to, and be voted at, any adjournment or postponement of the Annual Meeting to the extent permitted under the Business Corporation Law of the State of New York.

 

Any person who signs and returns the enclosed proxy or properly votes by telephone or Internet may revoke it by submitting a written notice of revocation or a later dated proxy that is received by Avnet prior to the Annual Meeting, or by voting in person at the Annual Meeting. However, a proxy will not be revoked by simply attending the Annual Meeting and not voting. All written notices of revocation and other communications with respect to revocation by Avnet shareholders should be addressed as follows: Secretary, Avnet, Inc., 2211 South 47th Street, Phoenix, Arizona 85034. To revoke a proxy previously submitted by telephone or Internet, a shareholder of record can simply vote again at a later date, using the same procedures, in which case the later submitted vote will be recorded and the earlier vote will thereby be revoked. Please note that any shareholder whose shares are held of record by a broker, bank or other nominee and who provides voting instructions on a form received from the nominee may revoke or change his or her voting instructions only by contacting the nominee who holds his or her shares. Such shareholders may not vote in person at the Annual Meeting unless the shareholder obtains a legal proxy from the broker, bank or other nominee.

 

The presence at the Annual Meeting, in person or by proxy, of the shareholders of record entitled to cast at least a majority of the votes that all shareholders are entitled to cast is necessary to constitute a quorum. Each vote represented at the Annual Meeting in person or by proxy will be counted toward a quorum. If a quorum should not be present, the Annual Meeting may be adjourned from time to time until a quorum is obtained.

 

Brokers holding shares of record for a customer have the discretionary authority to vote on some matters if they do not receive timely instructions from the customer regarding how the customer wants the shares voted. There are also some matters (“non-discretionary matters”) with respect to which brokers do not have discretionary authority to vote if they do not receive timely instructions from the customer. When a broker does not have discretion to vote on a particular matter and the customer has not given timely instructions on how the broker should vote, then what is referred to as a “broker non-vote” results. Any broker non-vote would be counted as present at the meeting for purposes of determining a quorum, but would be treated as not entitled to vote with respect to non-discretionary matters. Therefore, a broker non-vote would not count as a vote in favor of or against such matters and, accordingly, would not affect the outcome of the vote. Brokers will have discretionary authority to vote on Proposals 1 and 2 in the absence of timely instructions from their customers. In July 2009, the Securities and Exchange Commission approved an amendment to New York Stock Exchange Rule 452 which added the election of directors to the list of “non-routine” matters as to which brokers may not exercise any voting discretion. This rule change is effective for shareholder meetings held on or after January 1, 2010, and will not be effective as to our annual meeting held in 2009.

 

Proposal 1

 

To be elected, each director nominee must receive the affirmative vote of a plurality of the votes of the Common Stock present or represented at the Annual Meeting and entitled to vote. Votes may be cast in favor of or withheld with respect to each nominee. Votes that are withheld will be counted toward a quorum, but will be excluded entirely from the tabulation of votes for the election of directors and, therefore, will not affect the outcome of the vote on such election. However, Avnet’s Corporate Governance Guidelines (the “Guidelines”) require that, in an uncontested election, any director nominee who receives a greater number of votes “withheld” than votes “for” in the election must promptly submit a letter of resignation to the Board following the certification of the shareholder election results. The Guidelines specify the procedures that the Board of Directors must follow in such event and the time frame within which the Board must determine and publicly announce the results of its deliberation.

 

Proposal 2

 

Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for fiscal 2010 requires the affirmative vote of the holders of a majority of the Common Stock present or represented at the meeting and entitled to vote. Abstentions are not counted in determining the votes cast in connection with the ratification of the appointment of KPMG LLP, but do have the effect of reducing the number of affirmative votes required to achieve a majority for this matter by reducing the total number of shares from which the majority is calculated.

 

Avnet is committed to good corporate governance practices. This commitment is not new — the Company has developed and evolved its corporate governance practices over many years. The Board of Directors believes that good corporate governance practices provide an important framework that promotes long-term value, strength and stability for shareholders.

 

In September 2003, the Board of Directors adopted Corporate Governance Guidelines, which collect in one document many of the corporate governance practices and procedures that had evolved at Avnet over the years. Among other things, the Guidelines address the duties of the Board of Directors, director qualifications and selection process, director compensation, Board operations, Board committee matters and director orientation and continuing education. The Guidelines also provide for annual self-evaluations by the Board and its committees. The Board reviews the Guidelines on an annual basis, most recently at its regularly scheduled meeting in August 2009. The Guidelines are available on the Company’s website at www.ir.avnet.com/documents.cfm

 

As a general policy, as set forth in the Corporate Governance Guidelines, the Board recommends certain limits as to the service of directors on other boards of public companies. These limits are as follows: (1) the Company’s Chairman of the Board and Chief Executive Officer may serve on up to two additional boards; (2) Directors who are actively employed on a full-time basis may serve on up to two additional boards; and (3) Directors who are retired from active full-time employment may serve on up to four additional boards.

 

The Board of Directors believes that a substantial majority of its members should be independent directors. The Board adopted the following “Director Independence Standards,” which are consistent with criteria established by the New York Stock Exchange, to assist the Board in making these independence determinations.

 

No Director can qualify as independent if he or she has a material relationship with the Company outside of his or her service as a Director of the Company. A Director is not independent if:

 

 

 

The Board has reviewed all known material transactions and relationships between each Director, or any member of his or her immediate family, and the Company, its senior management and its independent registered public accounting firm. Based on this review and in accordance with its independence standards set forth above, the Board has affirmatively determined that all of the non-employee directors — Eleanor Baum, J. Veronica Biggins, Lawrence W. Clarkson, Ehud Houminer, Frank R. Noonan, Ray M. Robinson, William P. Sullivan and Gary L. Tooker — are independent (“Independent Directors”).

 

The Corporate Governance Committee is responsible for identifying, screening and recommending candidates for election to the Company’s Board of Directors. The Committee reviews the business experience, education and skills of candidates as well as character, judgment and issues of diversity in factors such as age, gender, race and culture. These factors, and others considered useful by the Board, are reviewed in the context of an assessment of the perceived needs of the Board at a particular point in time.

 

Directors must also possess the highest personal and professional ethics, integrity and values and be committed to representing the long-term interests of all shareholders. Board members are expected to diligently prepare for, attend and participate in all Board and applicable Committee meetings. Each Board member is expected to see that other existing and future commitments do not materially interfere with the member’s service as a Director.

 

The Corporate Governance Committee also reviews whether a potential candidate will meet the Board’s Independence Standards and any other director or committee membership requirements imposed by law, regulation or stock exchange rules.

 

Director candidates recommended by the Corporate Governance Committee are subject to full Board approval and subsequent election by the shareholders. The Board of Directors is also responsible for electing directors to fill vacancies on the Board that occur due to retirement, resignation, expansion of the Board or other events occurring between the shareholders’ annual meetings. The Corporate Governance Committee may retain a search firm, from time to time, to assist in identifying and evaluating director candidates. When a search firm is used, the Committee provides specified criteria for director candidates, tailored to the needs of the Board at that time, and pays the firm a fee for these services. Recommendations for director candidates are also received from Board members and management and may be solicited from professional associations as well.

 

The Corporate Governance Committee will consider recommendations of director candidates received from shareholders on the same basis as recommendations of director candidates received from other sources. The director selection criteria discussed above will be used to evaluate all recommended director candidates. Shareholders who wish to suggest an individual for consideration for election to the Company’s Board of Directors may submit a written recommendation to the Corporate Governance Committee by sending it to: Secretary, Avnet, Inc., 2211 South 47th Street, Phoenix, Arizona 85034. Shareholder recommendations must contain the following information:

 

 

 

To be considered by the Committee for the slate recommended in the proxy statement for the 2010 annual meeting, shareholders should submit any director recommendation and all required information to the Secretary no later than May 22, 2010.

 

Under the Company’s By-laws, shareholders may also nominate a candidate for election at an annual meeting of shareholders. Details regarding this nomination procedure and the required notice and information are set forth elsewhere in this Proxy Statement under the heading “2010 Annual Meeting.”

 

Shareholders and other interested parties may contact any or all of the Company’s Directors by writing to the Board of Directors or to the Secretary, Avnet, Inc., 2211 South 47th Street, Phoenix, AZ 85034. They may also submit an email to the Lead Director, the chair of the Audit Committee or the non-employee Directors as a group, by filling out the email form on the Company’s website at www.ir.avnet.com/governance.cfm under the caption “Committee Composition.”

 

Communications received are distributed to the Board, or to any individual Director or group of Directors as appropriate, depending on the facts and circumstances outlined in the communication. The Avnet Board of Directors has requested that items that are unrelated to the duties and responsibilities of the Board be excluded, including spam, junk mail and mass mailings, product and services inquiries, product and services complaints, resumes and other forms of job inquiries, surveys and business solicitations or advertisements. Any product and services inquiries or complaints will be forwarded to the proper department for handling. In addition, material that is unduly hostile, threatening, illegal or similarly unsuitable will be excluded. Any such communication will be made available to any non-employee Director upon request.

 

The Company has adopted a Code of Conduct that applies to Directors, officers and employees, including the Chief Executive Officer and all financial and accounting personnel. A copy of the Code of Conduct can be reviewed at www.ir.avnet.com/documents.cfm. Any future amendments to, or waivers for executive officers and Directors from, certain provisions of the Code of Conduct, will be posted on the Company’s website.

 

The Audit Committee of the Board of Directors has established procedures for employees, shareholders, vendors and others to communicate concerns about the Company’s ethical conduct or business practices,

including accounting, internal controls or financial reporting issues. Matters may be reported in the following ways:

 

Employees of the Company are encouraged to contact their manager, Human Resources representative or the Code of Conduct Advisor(s) assigned to their facility to report and discuss matters of concern.

 

All persons, including employees, may contact:

 

 

The Board of Directors has established a rotation system for Lead Director service. Each Independent Director serves as the Lead Director from time to time as service rotates among the Independent Directors on an annual basis. Mr. Ray Robinson currently serves as the Lead Director. Mr. Gary L. Tooker will be the Lead Director serving a one year term beginning upon the adjournment of the Board of Directors meeting immediately following the Annual Meeting of the shareholders on November 5, 2009.

 

The Lead Director has the following responsibilities:

 

 

To promote free and open discussion and communication, Independent Directors meet in executive session without management present at regularly scheduled Board meetings. Non-employee Directors may meet at other times at the discretion of the Lead Director or upon the request of any Independent Director.

 

The Board has adopted stock ownership guidelines providing that each Director should own, within four years of joining the Board, 10,000 shares of Avnet Common Stock. Shares that are awarded to Directors as part of director compensation, as well as Phantom Share Units acquired by Directors under the Avnet Deferred Compensation Plan for Outside Directors, count towards the ownership requirements under the guidelines, but options, even if vested, do not. All Directors are in compliance with this requirement.

 

In addition to the information about Avnet and its subsidiaries contained in this Proxy Statement, extensive information about the Company can be found on its website located at www.avnet.com, including

information about the Company’s management team, products and services and its corporate governance practices.

 

The corporate governance information on Avnet’s website includes the Company’s Corporate Governance Guidelines, the Code of Conduct, the charters for each of the standing committees of the Board of Directors, how a shareholder can nominate a director candidate for election and how shareholders and other interested parties can communicate with the Lead Director, the chair of the Audit Committee and the non-employee Directors as a group. In addition, amendments to the Code of Conduct and waivers granted to the Company’s Directors and executive officers under the Code of Conduct, if any, will be posted in this area of the website. These documents can be accessed at www.ir.avnet.com/documents.cfm. Printed versions of the Corporate Governance Guidelines, the Code of Conduct and the charters for the Board committees can be obtained, free of charge, by writing to the Company at: Secretary, Avnet, Inc., 2211 South 47th Street, Phoenix, AZ 85034.

 

In addition, the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those Reports, if any, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as well as Section 16 filings made by any of the Company’s executive officers or Directors with respect to Avnet Common Stock, are available on the Company’s website (www.avnet.com under the “Investor Relations — SEC Filings” caption) as soon as reasonably practicable after the report is electronically filed with, or furnished to, the Securities and Exchange Commission (SEC).

 

This information about Avnet’s website and its content, together with other references to the website made in this Proxy Statement, is for information only. The content of the Company’s website is not and should not be deemed to be incorporated by reference in this Proxy Statement or otherwise filed with the SEC.

 

Avnet’s Board of Directors held six meetings during fiscal 2009 — four regular quarterly meetings, a meeting held in connection with management’s presentation of its annual strategic plan and one special meeting. The non-employee Directors met separately in executive session four times during fiscal 2009.

 

During fiscal 2009, each Director standing for re-election attended at least 75% of the combined number of meetings of the Board held during the period for which the Director served and of the committees on which such Director served. All members of the Board of Directors are expected to attend the annual meeting of shareholders, unless unusual circumstances prevent such attendance. Board and committee meetings are scheduled in conjunction with the annual meeting of shareholders. All of the Directors standing for election attended Avnet’s 2008 annual meeting of shareholders.

 

The Board currently has, and appoints the members of, a standing Audit Committee, Compensation Committee, Corporate Governance Committee and Finance Committee. Each committee is comprised solely of non-employee Directors, reports regularly to the full Board and annually evaluates its performance. The members of the committees are identified in the following table.

 

 

The Audit Committee is charged with assisting and representing the Board of Directors in fulfilling its oversight responsibilities with respect to the integrity of the financial statements of the Company, the independence and performance of the Company’s corporate audit and independent registered public accounting firm, and compliance with legal and regulatory requirements, as well as the Company’s internal ethics and compliance program and enterprise risk management activities. Moreover, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm. All of the members of the Audit Committee are independent under the independence requirements of the New York Stock Exchange (“NYSE”) listing standards, the categorical independence standards adopted by the Board, and also meet the additional requirements for audit committee independence established by the SEC. The Board of Directors has determined that three members of the Board (Messrs. Clarkson, Houminer and Noonan) qualify as “audit committee financial experts,” as defined in rules adopted by the SEC. Please see the Audit Committee Report set forth elsewhere in this Proxy Statement for more information about the Committee and its operations. The Committee operates under a written charter that outlines the Committee’s purpose, member qualifications, authority and responsibilities. The Committee reviews its charter and conducts an evaluation of its own effectiveness annually. The charter is available on the Company’s website at www.ir.avnet.com/documents.cfm. During fiscal 2009, the Audit Committee held thirteen meetings.

 

The Compensation Committee is responsible for reviewing and approving compensation of all of the Company’s executive officers other than the CEO and for evaluating the performance of the CEO and, on the basis of such evaluation, for recommending to the Independent Directors the CEO compensation for consideration and approval. In addition, the Compensation Committee administers all of Avnet’s equity

compensation plans and oversees Avnet’s diversity and community relations programs. All of members of the Committee meet the independence requirements of the NYSE listing standards and the independence standards adopted by the Board of Directors. The Committee operates under a written charter that outlines the purpose, member qualifications, authority and responsibilities of the Committee. The Committee reviews its charter and conducts an evaluation of its own effectiveness annually. A copy of the Committee charter is available on the Company’s website at www.ir.avnet.com/documents.cfm. During fiscal 2009, the Compensation Committee held five meetings.

 

The Corporate Governance Committee is charged with identifying, screening and recommending to the Board of Directors appropriate candidates to serve as directors of the Company and is responsible for overseeing the process for evaluating the Board of Directors and its Committees. This Committee also oversees and makes recommendations with respect to corporate governance issues affecting the Board of Directors and the Company. All of the members of the Corporate Governance Committee are independent under Avnet’s Director Independence Standards and the NYSE listing standards. The Committee operates under a written charter that outlines the Committee’s purpose, member qualifications, authority and responsibilities. The Committee reviews its charter and conducts an evaluation of its own effectiveness annually. The charter is available on the Company’s website at www.ir.avnet.com/documents.cfm. During fiscal 2009, the Corporate Governance Committee held four meetings.

 

The Finance Committee is responsible for evaluating the Company’s short and long-term financing needs and capital structure and for making recommendations about future financing. The Committee also has the oversight responsibility for the Avnet Pension Plan and Trust and the Avnet 401(k) Plan and Trust. The Committee operates under a written charter that outlines the Committee’s purpose, member qualifications, authority and responsibilities. The Committee reviews its charter and conducts an evaluation of its own effectiveness annually. The Committee’s charter is available on the Company’s website at www.ir.avnet.com/documents.cfm. During fiscal 2009, the Finance Committee held four meetings.

 

The Board of Directors has an Executive Committee which is charged with the authority of the full Board and, between meetings of the Board, is authorized to exercise the powers of the Board in the management of the business and affairs of Avnet to the extent permitted by law. The Executive Committee is comprised of the Chairman and four other Directors. All of the Independent Directors rotate service on the Executive Committee. The Executive Committee did not meet in fiscal 2009.

 

Nine Directors are to be elected at the Annual Meeting to hold office until the next annual meeting of shareholders and until their successors have been elected and qualified. It is the intention of the persons named in the enclosed proxy card to vote each properly signed and returned proxy (unless otherwise directed by the shareholder executing such proxy) for the election as Directors of Avnet of the nine persons listed below. Each nominee has consented to being named herein and to serving if elected. All of the nominees were elected Directors at the Annual Meeting of Shareholders held on November 6, 2008.

 

Directors will be elected by a plurality of the votes properly cast at the Annual Meeting. Only votes cast “for” the election of Directors will be counted in determining whether a nominee for Director has been elected. Thus, shareholders who do not vote, or who withhold their vote, will not affect the outcome of the election. Under the Corporate Governance Guidelines, however, any director nominee who receives a greater number of votes “withheld” than votes “for” in the election must promptly submit a letter of resignation to the Board following the certification of the election results. The Board must then determine whether to accept the director’s resignation in accordance with the procedures set forth in the Corporate Governance Guidelines and publicly announce the results of its deliberation.

 

In case any of the nominees below should become unavailable for election for any presently unforeseen reason, the persons named in the enclosed form of proxy will have the right to use their discretion to vote for a substitute or to vote for the remaining nominees and leave a vacancy on the Board of Directors. Under Avnet’s By-laws, any such vacancy may be filled by a majority vote of the Directors then in office or by the shareholders at any meeting thereof. Alternatively, the Board of Directors may reduce the size of the Board to eliminate the vacancy.

 

The information set forth below as to each nominee has been furnished by such nominee as of September 8, 2009:

 

 

The Audit Committee represents and assists the Board in fulfilling its oversight responsibilities with respect to the integrity of the Company’s financial statements, the independence, qualification and performance of the Company’s corporate auditor and its independent registered public accounting firm, and compliance with legal and regulatory requirements. The Audit Committee operates under a written charter, which sets forth its purpose, member qualifications, authority and responsibilities. The Audit Committee reviews its charter on a regular basis and most recently reviewed and approved it at the Committee’s regularly scheduled meeting on May 7, 2009. The charter is available on the Company’s website at www.ir.avnet.com/governance.cfm.

 

The Audit Committee monitors the activities and performance of the Company’s internal audit function, including scope of reviews, department staffing levels and reporting and follow-up procedures. The Audit Committee also oversees the Company’s efforts and plans in enterprise risk management. In addition, the Audit Committee oversees the Company’s internal ethics and compliance program and receives quarterly reports from the Chief Ethics and Compliance Officer. The Audit Committee also meets quarterly with KPMG LLP, the Company’s independent registered public accounting firm (“KPMG”), and with the Company’s Director of Corporate Audit and the Chief Financial Officer in separate, executive sessions. Management has responsibility for the preparation, presentation and integrity of the Company’s financial statements and the reporting process, including the system of internal controls.

 

The Audit Committee meets with KPMG and management to review the Company’s interim financial results before publication of the Company’s quarterly earnings press releases and the filing of the Company’s quarterly reports on Form 10-Q and annual report on Form 10-K. The Committee also monitors the activities and performance of KPMG, including audit scope, audit fees, auditor independence and non-audit services performed by KPMG. All services to be performed by the Company’s independent registered public accounting firm are subject to pre-approval by the Audit Committee and management provides quarterly reports to the Committee on the status and fees for all such projects.

 

The Audit Committee has reviewed and discussed the consolidated financial statements for fiscal year 2009 with management and KPMG. This review included a discussion with KPMG and management of Avnet’s accounting principles, the reasonableness of significant estimates and judgments, including disclosure of critical accounting estimates, and the conduct of the audit. The Committee has discussed with KPMG the matters required to be discussed by Statement on Auditing Standards No. 61 “Communication with Audit Committees,” as amended by Statement on Auditing Standards No. 90 “Audit Committee Communications.” KPMG provided the Audit Committee with the written disclosures and the letter required by Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees,” and the Committee discussed with KPMG its independence. The Audit Committee has concluded that KPMG is independent from the Company and its management. KPMG also discussed with the Committee its internal quality control procedures and the results of its most recent peer review. In reliance on this review and these discussions, and the report of KPMG, the Audit Committee has recommended to the Board, and the Board has approved, the inclusion of the audited financial statements

in the Company’s Annual Report on Form 10-K for the year ended June 27, 2009 for filing with the Securities and Exchange Commission.

 

Frank R. Noonan, Chair

Ehud Houminer

Eleanor Baum

Gary Tooker

 

 

The table below provides information relating to fees charged for services performed by KPMG LLP, the Company’s independent registered public accounting firm, in both fiscal 2009 and fiscal 2008.

 

 

Audit Fees.  In both years, Audit Fees consisted of work performed by the principal auditor associated with the audit of the Company’s consolidated financial statements, including reviews performed on the Company’s Form 10-Q filings, statutory audits required for the Company’s subsidiaries, and fees incurred in connection with the audit of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002. Audit fees in fiscal 2008 also included assistance with registration statements filed by the Company, including comfort letters and consents.

 

Audit-Related Fees.  In both years, Audit-Related Fees included certain compliance-related, agreed-upon procedures and assistance with certain acquisition due diligence efforts.

 

Tax Fees.  In both years, Tax Fees consisted primarily of assistance with respect to global tax compliance (federal, international, state and local), tax audits, tax-related transfer pricing studies, tax advice associated with organizational structure, tax-related due diligence in connection with certain acquisitions and expatriate tax services.

 

All services to be provided by the Company’s independent registered public accounting firm are subject to pre-approval by the Audit Committee. The Audit Committee has adopted an “External Auditor Scope of Services Policy,” which requires the Audit Committee’s pre-approval of all services to be performed by the Company’s independent registered public accounting firm. In each case, pre-approval is required either by the Audit Committee or by the Chair of the Audit Committee, who is authorized to approve individual projects up to $250,000 with the total for such projects is not to exceed $500,000, and must then report them to the full Committee by the next Committee meeting. Management provides quarterly reports to the Audit Committee on the status and fees for all projects requiring services by KPMG, LLP.

 

The following table sets forth information with respect to the Common Stock of Avnet beneficially owned at September 10, 2009 or, in respect of any 5% Holder, the date of such holder’s most recent Schedule 13D filed with the SEC, by (a) persons that, to Avnet’s knowledge, were the beneficial owners of more than 5% of Avnet’s outstanding Common Stock (“5% Holders”), (b) each Director and director nominee of Avnet, (c) each of the executive officers named in the Summary Compensation Table in this Proxy Statement (“named executive officers” or “NEOs”), and (d) all Directors and executive officers of Avnet as a group. Except where specifically noted in the table, all the shares listed for a person or the group are directly held by such person or group members, with sole voting and dispositive power.

 

 

 

 

 

Pursuant to Section 16(a) of the Securities Exchange Act of 1934, Avnet’s Directors, executive officers and beneficial owners of more than 10% of the outstanding Common Stock are required to file reports with the Securities and Exchange Commission concerning their ownership of and transactions in Avnet Common Stock and are also required to provide Avnet with copies of such reports. Based solely on such reports and related information furnished to Avnet, Avnet believes that in fiscal 2009 all such filing requirements were complied with in a timely manner by all Directors and executive officers except for Steven C. Church who inadvertently filed one late Form 4 in June 2009.

 

The current executive officers of the Company are:

 

 

Mr. Vallee joined the Company in February 1977 and has been Chairman of the Board and Chief Executive Officer since June 1998. Prior thereto, he served as Vice Chairman of the Board from November 1992 until June 1998 and also President and Chief Operating Officer from March 1992 until his election as CEO in June 1998.

 

Mr. Birk has been Senior Vice President of Avnet since November 1992. Mr. Birk was elected Vice President and General Counsel in September 1989 and previously held the position of Secretary from July 1997 to November 2003 and from January 2005 to November 2007.

 

Mr. Church has been Senior Vice President of Avnet since November 1995 and currently serves as Chief Operational Excellence Officer. Mr. Church has held various senior management positions with the Company and most recently served as Chief Human Resources and Organizational Development Officer.

 

Mr. Feldberg became an executive officer in July 2004 when he was promoted to President of Avnet Electronics Marketing. Mr. Feldberg previously served as President of Avnet Electronics Marketing Americas from June 2002 until June 2004 and has served as a corporate Vice President since November 1996. Mr. Feldberg served as President of Avnet Electronics Marketing Asia from December 2000 to June 2002.

 

Mr. Gallagher was appointed President of Avnet Technology Solutions in March 2009, and has been Senior Vice President of Avnet since November 2007. Mr. Gallagher served as President of Avnet Electronics Marketing Americas from July 2004 until March 2009.

 

Mr. Hamada was appointed as Chief Operating Officer in July 2006 and has been Senior Vice President of Avnet since November 2002. Mr. Hamada served as President of Avnet Technology Solutions from July 2003 until March 2007, and President of the Computer Marketing operating group from January 2002 until July 2003 and was appointed Vice President of Avnet in November 1999.

 

Ms. Miller was appointed Chief Human Resources Officer in May 2009 and has held various human resources positions since joining the Company in 2006. Prior to joining Avnet, Ms. Miller served as Vice President, Human Resources at Goodrich Corporation from July 2001 to July 2006.

 

Mr. Phillips is Vice President and Chief Information Officer of Avnet. He joined Avnet with the July 2005 acquisition of Memec where he had served as Senior Vice President and Chief Information Officer since May 2004. Prior to joining Memec, Mr. Phillips was Senior Vice President and Chief Information Officer for

Gateway Inc. He joined Gateway in June 1999 and served as Vice President of Information Technology in London and San Diego before his appointment in August 2003 as Chief Information Officer.

 

Mr. Sadowski has been Senior Vice President of Avnet since November 1992 and Chief Financial Officer since February 1993. Prior thereto, Mr. Sadowski has held various management positions in Avnet’s finance organization including the position of Controller.

 

Mr. Smith joined Avnet in 2000 and was promoted to President of Avnet Logistics in June 2006 and was elected a corporate vice president in November 2007. He previously served as Senior Vice President of Warehousing & Distribution Worldwide for Avnet Logistics from October 2004 to June 2006 and served as Senior Vice President and Director of operations for Avnet Electronics Marketing Americas from October 2000 to September 2004.

 

Officers of the Company are generally elected each year at the meeting of the Board of Directors following the annual meeting of shareholders and hold office until the next such annual meeting or until their earlier death, resignation or removal.

 

The Compensation Committee has reviewed the Compensation Discussion and Analysis (“CD&A”) and discussed it with management. Based on its review and discussion with management, the Committee recommended to the Board of Directors that the CD&A be included in the Company’s 2009 Proxy Statement and incorporated by reference into the Company’s annual report on Form 10-K. This Report is provided by the following independent directors, who comprise the Committee:

 

Ehud Houminer, Chair

J. Veronica Biggins

William P. Sullivan

Gary Tooker

 

 

Introduction

 

This section explains how the Compensation Committee of Avnet’s Board of Directors made its compensation decisions for the fiscal year ended June 27, 2009 (“fiscal 2009”) for the Named Executive Officers (the “NEOs”). The compensation paid to the NEOs for fiscal 2009 is set forth in the Summary Compensation Table, which is included elsewhere in this Proxy Statement. These officers and their titles for fiscal 2009 are:

 

 

Avnet’s compensation philosophy for total target remuneration, including all elements of compensation, benefits and perquisites for the executive officers including the NEOs, is that such remuneration should be approximately at the median of the marketplace for target performance. The Company pays particular attention to the compensation trends and information regarding the companies that the Company believes are its most direct competitors for management talent. For fiscal 2009, the Committee has, with its independent compensation consultant’s assistance, identified thirteen companies (“comparator group”) to use when reviewing and evaluating the compensation the Company pays to its executive officers, including

the NEOs. See the section on “Role of Compensation Consultants and Benchmarking” for more information on the use of benchmarking data and the list of the comparator group.

 

The compensation program at Avnet seeks to:

 

 

In recognition of these goals, the Company strives to position pay for its executives such that:

 

 

As executives gain responsibility and seniority in Avnet and exercise a more direct influence over the Company’s financial and operational performance, base salary will typically decrease as a percentage of total compensation, and annual cash incentive and long-term equity-based incentive compensation will increase as a percentage of total compensation. Additionally, the Company believes that executive ownership of Avnet shares further builds a strong alignment with Avnet’s shareholders. As such, share ownership requirements and compensation programs that provide a meaningful portion of compensation in the form of equity-based awards support the goal of having executives think and behave like owners.

 

Role of the Compensation Committee.  The Compensation Committee has had the primary responsibility for the approval and implementation of the compensation programs for the executive officers and to recommend the compensation of the CEO to the independent directors of the Board. During the first quarter of each new fiscal year, the Committee leads the Board in conducting an annual assessment of the performance of the CEO in light of the performance goals and objectives that had been established for the Company and for the CEO in particular for the preceding fiscal year. The Committee also solicits input from each Director using a written form of CEO evaluation adopted by the Board, analyzes the input and reports back to the full Board. The evaluation typically covers topics including, among others, “Leadership,” “Values,” “Strategic Planning and Management,” “Financial Results,” and “Succession Planning and Management Development”. Along with the CEO evaluation form, each Director also receives a written self-evaluation from the CEO. The results of the evaluations are discussed with the CEO and are then considered by the Committee in setting new goals and the compensation plan for the CEO for the new fiscal year. The Committee decided in early 2008 to engage Steven Hall & Partners as the Committee’s independent consultant to assist in setting executive compensation plans. The Committee has sole authority in the hiring and firing of, and the approval of fees for, its independent consultant. In assessing the compensation plans for the CEO and the other executive officers, the Committee considers total compensation opportunities, both short- and long-term, while at the same time focusing attention on the competitiveness of each component of compensation. Actual cash incentive payouts, actual value received from long-term incentive awards and actual overall compensation levels with respect to any

given year for any particular officer may vary from the targeted levels based on Avnet’s enterprise and business unit performance, and relative performance to its industry.

 

As it relates to the design of the annual and long-term incentive plans, the Committee has determined that the goal-setting process, including the metrics utilized and specific targets established, were generally appropriate for Avnet in its current circumstances and that the metrics are directed at items that are necessary to drive long term growth. Based upon the extraordinary economic environment, the Committee has determined that certain changes are required to the Performance Share Plan portion of the long-term equity incentive plans as described below so that the plan can more effectively achieve its objectives. The Committee believes that it is not likely that the design of either the annual or long-term incentive plan, or the specific performance targets used, would cause our management to take excessive risks in operating the Company’s business.

 

Role of Compensation Consultants and Benchmarking.  As the independent advisor to the Compensation Committee on matters related to executive compensation, Steven Hall & Partners during 2009 conducted a comprehensive review of the executive compensation program at the Company. This review included the development of a thirteen-company comparator group based on industry focus, and a wide range of financial metrics similar to those in Avnet’s industry thereby representing a peer group with which we compete for talent broadly.

 

The comparator group is comprised of:

 

 

The comparator group was used to benchmark compensation levels as well as compensation practices with regard to incentive plans.

 

To benchmark Avnet compensation levels, data derived from the SEC filings of the comparator group for the CEO, COO, CFO, Division Presidents and General Counsel were supplemented with a variety of relevant, published surveys which provided data on compensation in the technology sector and general industry. For other positions, only survey data was utilized. All of the data sources were weighted based on relevance, reliability and an assessment of the appropriateness of the match of responsibilities. Following the completion of the benchmarking review by the consultants, the Committee and management reviewed the data in light of trends, past compensation levels and the percentage changes as part of the executive compensation decision-making process.

 

Role of Management.  At the beginning of each fiscal year, the CEO evaluates the performance of the Chief Operating Officer (“COO”); and the CEO or COO evaluates the performance of the other executive officers against the strategic operating plan for the prior fiscal year. In addition, the CEO’s and the COO’s evaluations of individual performance also focus on executive officers’ performance relative to personal goals. Objectives for an individual executive officer are tailored to the duties and responsibilities of the particular officer, to the challenges that his or her business or functional unit faces during a particular period (such as implementation of new enterprise reporting software, or integrating a significant acquisition, or assuming significant new or additional duties and responsibilities).

 

As part of the performance management process, each executive officer is evaluated on ten performance dimensions, which reference “how” the individual accomplishes his or her goals. Among the performance dimensions is a commitment to Avnet’s “core values” of integrity, customer service, accountability, teamwork and innovation. These core values form the foundation of Avnet’s performance-and values-based culture used in developing its overall strategies focused on profitable growth, operational excellence and people development — the driving forces behind Avnet’s march toward becoming the premier

technology marketing, distribution and services company, globally. While this “qualitative” evaluation does not carry a specific weight, it does weigh in the overall assessment of the executive’s performance.

 

The CEO and COO, in consultation with the Company’s Chief Human Resources and Organizational Development Officer (CHRO), then develop compensation recommendations for the other executive officers related to base salary and annual and long-term incentives. Factors that are weighed in making individual target compensation recommendations include:

 

 

The Company does not have a pre-defined framework that determines which of these factors may be more or less important, and the emphasis placed on specific factors may vary among the executives depending on the specific roles and responsibilities of an executive officer, as well as the particular challenges — both in terms of business and professional development — faced by the executive. Once an executive officer’s role and responsibilities are defined, “value of the job in the marketplace” and “relative importance of the position within the executive ranks” are the most determinative factors in setting the compensation plan for that executive officer, adjusted to take into consideration the executive officer’s experience. Contributions to the results as used in this Compensation Discussion and Analysis (“CD&A”) refers to the contribution from the business unit or support unit over which an executive officer has direct responsibility or, in the case of executives with responsibilities over multiple business units or Avnet as a whole, from Avnet’s overall results.

 

Guided by the overall executive compensation philosophy and objectives described at the beginning of this CD&A, discussions with respect to executive compensation typically start in conjunction with the review of the Company’s budget for the new fiscal year at the Board’s strategic planning session held in June. The strategic planning session is focused heavily on the review of management’s proposed budget for the new fiscal year in a format conducive to in-depth discussions on strategic issues and initiatives around management’s 3-year business planning. At the Committee’s regularly scheduled meeting in August, the CEO and CHRO present the findings, marketplace data developed by the independent consultant and compensation recommendations for each executive officer to the Committee for its review and consideration. The CHRO assists the Committee in its deliberations with respect to CEO compensation and in gathering market and industry data and analyses relating to CEO compensation. The other executive officers, except as described above, do not play a role in setting executive compensation.

 

The Committee uses the comparative data as a reference for determining whether the compensation plans and levels paid by the Company and targeted by the Committee appear to be near the median amount paid by peer companies, recognizing that the SEC-derived data from other public company filings is historic information regarding compensation decisions and resulting payment amounts that were usually set a year before the date the information was included in a filed report.

 

Deductibility of Executive Compensation.  Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”), disallows a federal income tax deduction to publicly held companies for certain compensation paid to the Company’s chief executive officer and certain other executive officers to the extent that compensation exceeds $1 million per executive officer covered by Section 162(m) in any fiscal year. The limitation applies only to compensation that is not considered “performance based” as defined in the Section 162(m) regulations.

 

In designing the Company’s compensation programs, the Committee considers the effect of Section 162(m), as well as other factors relevant to the Company’s business needs. The Company has historically taken, and

intends to continue to take, reasonable and appropriate actions in respect of achieving deductibility of annual incentive and long-term compensation.

 

Avnet executive compensation consists of three components — base salary, annual cash incentive compensation and long-term incentive compensation in the form of equity. The Committee believes that these three components serve different purposes and, together, serve the best interests of the Company and its shareholders.

 

In considering the marketplace compensation values, the Committee focuses on the data from not only the comparator group, but also from other relevant data sources. The combination of comparator group data plus survey data provides a broader view of the market values for talent.

 

Base Salary.  Base salary is the guaranteed element of an executive’s annual cash compensation. The value of base salary reflects the executive’s long-term performance, skill set and the market value of that skill set. As is described in more detail under the heading “Employment Agreements and Change in Control Agreements” in this Proxy Statement, each of the NEOs has an employment agreement, which provides for an annual review of total compensation, including base salary. Each year, the Company undertakes the process described above in this CD&A in the “Overview of Avnet’s Compensation Practices.” As noted above, the Committee uses market and industry compensation data, gathered from multiple sources, to test for reasonableness and competitiveness of the Company’s compensation program.

 

Annual Cash Incentive Compensation.  In addition to base salary, executive officers are eligible to receive annual incentive cash compensation based on the performance of the Company and business unit (where appropriate) for which the executive has direct responsibility pursuant to the Executive Incentive Plan (the “Incentive Plan”) most recently approved by shareholders at the Company’s 2007 annual meeting. Cash incentive awards are tied to performance goals measuring, depending on the executive, performance of either operating income, pre-tax income or net income to budgeted levels, adjusted by a factor measuring performance of return on working capital or return on total capital employed against pre-established goals. Performance goals for operating group presidents are weighted more heavily on the performance of the applicable operating group but contain a component based on the performance of the entire Company as well. Generally, the Committee sets the threshold, target and maximum levels so that the relative difficulty of achieving the target level is consistent from year to year. Even though the payout amount can vary greatly from year to year, the expectation is that the Company should achieve “at target” or better performance the majority of the time over any given period of years. The table below outlines the payout factor (or multiple range) that applies to each performance level.

 

 

For fiscal 2009, cash incentive compensation for the executive officers including the NEOs was based upon the percentage achievement of Avnet’s fiscal 2009 budgeted net income after tax (NIAT) or the business unit’s budgeted income before tax (IBT), as applicable, modified by the ratio of actual return on capital employed (ROCE) to target ROCE. The factor on the NIAT and/or IBT portion of the incentive will be linear for actual results between 95% and 105% of the budget. If actual NIAT to budget is less than 95% or greater than 105%, the factor will be equal to the percentage of actual results to budget squared. For example, if actual NIAT is 110% of the budget, a factor of 121% (110% times 110%) will be applied to the target incentive. Additionally, maximum incentive is limited to 225% of the target incentive. If actual performance is less than 50% of budget, no incentive will be earned.

Long-Term Incentive Compensation.  The Committee grants long-term incentive compensation awards under the Company’s Long Term Incentive Plan (“LTIP”) based generally on each executive’s individual contribution in a particular fiscal period and the executive’s potential to contribute to the long-term success of the Company. The Committee believes that equity ownership for all executive officers is a useful compensation component for purposes of incentive, retention and alignment of interests with shareholders. During the 2009 fiscal year, the Committee awarded long-term incentive compensation pursuant to the 2006 Stock Compensation Plan (the “2006 Plan”), under which options, restricted stock, stock appreciation rights and other equity-based awards may be granted. Typically, the long-term incentive awards to an executive officer including the NEOs include incentive shares, stock options and performance shares, with each type representing one third in value of the total award.

 

 

As has been disclosed in a current report on Form 8-K dated August 19, 2009, the Committee reviewed the overall performance share program, performance goals and the status of the particular outstanding performance share awards. As a result of this review, the Committee determined that the program covering the three-year period 2007-2009 would remain unchanged and will be measured on absolute and relative economic performance (“EP”), as previously established. However, for the three-year periods covering 2008-2010 and 2009-2011, the Committee determined that it would be in the best interest of the Company to eliminate absolute performance as a performance criterion due to the uncertain economic environment and to focus performance goals only on relative economic profit, or EP, performance. For those two programs that are in progress, the maximum shares a participant could earn will be capped at 100%, rather than 200% of the target amounts. PSP shares for the 2008-2010 and the 2009-2011 performance programs as well as the new 2010-2012 performance programs will heretofore be based on relative EP only and will be delivered (vest) based on a sliding scale within the parameters of the following schedule except that, as noted above, any payout under the 2008-2010 and 2009-2010 programs will be limited to 100% of target:

 

 

The Committee also reviews the positioning of Avnet’s executive compensation program on a target total direct compensation basis. Target total direct compensation is defined as current base salary plus the target annual cash and long term incentive opportunities. For fiscal year 2009, Avnet NEO’s target total direct compensation ranges from 30% below to 8% above median of the comparator group. When compared to the blended market data, NEO’s target total direct compensation ranges from 30% below to 4% above median.

 

Equity Grant Practices.  As was mentioned earlier in this CD&A, the exercise price of each stock option awarded to the executive officers under the option plan is the closing price of Avnet’s common stock on the date of grant, which typically is the date of the regularly scheduled meeting of the Compensation Committee in August of each year. Options may also be granted in connection with a new hire or a promotion, in which case options may be granted at or about the time of hiring or promotion. PSPs and RSUs are also granted to eligible employees including the NEOs at the August meeting. Board and committee meetings are generally scheduled at least one year in advance. Scheduling decisions are made without regard to anticipated earnings or the major announcements by the Company. Repricing of stock options without shareholder approval is prohibited under the 2006 Plan.

 

Stock Ownership Guidelines.  With a significant portion of each executive officer’s total compensation in the form of equity-based incentives, the executive officers have a substantial interest and incentive to take steps to ensure profitable growth of the Company to drive long-term shareholder value. To further reinforce this focus, the Committee has established stock ownership guidelines for all executive officers. The guidelines provide that the NEOs should hold shares of the Company’s Common Stock, with a market value equal to a multiple of each officer’s base salary, as set forth below:

 

Shares that count toward the guidelines include shares actually owned by the officer. Unvested RSUs and Performance Shares and options, vested or unvested, do not count towards the ownership requirement under the guidelines. Until the ownership requirement under the guidelines is met, a covered officer must hold at least 50% of any net shares he or she receives upon the exercise of options or upon the delivery of any RSU or PSP awards. The Company and the Committee believe that this mandatory holding feature under the Stock Ownership Guidelines effectively requires each of the covered officers of the Company to hold a certain number of the Company’s stock for as long as they are an executive officer of the Company.

 

Actual Compensation for the NEOs in Fiscal 2009

 

During fiscal 2009, the Company was negatively affected by the global macro economic conditions. The Committee and management conducted extensive research to determine the appropriate Company response to these conditions relative to the pre-established targets under the Company’s cash Incentive Plan and LTIP. As stated above, the Company’s compensation philosophy is that an executive officer’s annual incentive opportunity provides for total cash compensation (base salary plus cash incentive) and long term equity compensation that is near the market median for expected performance, above the median for superior performance, and below the market for performance that does not reach target levels.

 

After much deliberation and considering the unprecedented recessionary conditions, management recommended, and the Committee approved, that no adjustment be made to the executive compensation goals for purposes of determining incentive earnouts for fiscal 2009 under the Incentive Plan and the LTIP program. As a result, based on the Company’s actual financial performance in net income after tax and return on capital employed measured against the pre-established targets, Mr. Vallee received approximately 21.3% of his target annual cash incentive. The actual payouts in annual cash incentive for the other NEOs range from approximately 20.9% to 21.3% of their respective annual cash incentive targets.

 

The second 3-year cycle under the Performance Share Program started in fiscal 2007 and ended at the end of fiscal 2009. The actual payouts to the NEOs, which amounted to 50% of target, are included in columns (d) and (e) of the table entitled “Option Exercises and Stock Vested” of this Proxy Statement, with additional discussion in the narratives following that table.

 

As at the end of fiscal 2009 on June 27, 2009, the 2008-2010 and the 2009-2011 performance programs and cycles, as modified, were performing at approximately 175% and 100%, respectively, against the pre-established targets for the performance period. As was disclosed earlier in this CD&A section, the Compensation Committee has approved certain amendments to the 2008-2010 and 2009-2011 performance programs to cap the maximum payment under the two programs to 100%.

 

Pension Plan and SERP.  An important retention tool is the Avnet Pension Plan (the “Pension Plan”) which covers United States employees of Avnet, including all of the named executive officers. The Pension Plan is a broad-based tax-qualified defined benefit plan with a cash balance feature. In addition, Avnet has in place the Executive Officers’ Supplemental Life Insurance and Retirement Program (“SERP”) in which each named executive officer participates. The SERP is another retention tool because entitlement to the SERP benefits is contingent upon the satisfaction of certain age and service requirements. The Company balances the effectiveness of these plans as a compensation and retention tool with the cost to the company of providing them. The benefit formula under the Pension Plan and the SERP is described in the Pension Benefits Table.

 

Deferred Compensation.  The Company has a Deferred Compensation Plan for highly compensated employees including all of the named executive officers, allowing these employees to set aside a portion of their income for retirement on a pre-tax basis, in addition to the amounts allowed under the Company’s 401(k) Plan, at a minimal cost to the Company. Under this unfunded program, amounts deferred by a participant are credited with earnings based upon the returns actually obtained through the “deemed investment” selected by the executive, as described in more detail following the Nonqualified Deferred Compensation Table.

Perquisites.  The Company provides named executive officers with a limited number of perquisites that the Company and the Committee believe are reasonable and consistent with its overall compensation program, and necessary to remain competitive. The Committee periodically reviews the level of perquisites provided to the named executive officers. Costs associated with perquisites provided by the Company are included under All Other Compensation in the following Summary Compensation Table.

 

Employment Agreements and Change in Control Agreements.  Each of the named executive officers has entered into an employment agreement and a change in control agreement with the Company. The change in control agreements are intended to encourage retention in the face of the disruptive impact of an actual or attempted change in control of the Company. The agreements are also intended to align executive and shareholder interests by enabling executives to consider corporate transactions that are in the best interests of the shareholders and other constituents of the Company without undue concern over whether the transactions may jeopardize the executives’ own employment. The Company has also modified all such agreements to the extent necessary to comply with Section 409A of the Code. More detailed descriptions of these programs are included under the heading “Potential Payouts Upon Termination and Change in Control.”

 

D&O Insurance

 

As permitted by Section 726 of the Business Corporation Law of New York, Avnet has in force directors’ and officers’ liability insurance and corporate reimbursement insurance. The policy insures Avnet against losses from claims against its directors and officers when they are entitled to indemnification by Avnet, and insures Avnet’s directors and officers against certain losses from claims against them in their official capacities. All duly elected directors and officers of Avnet and its subsidiaries are covered under this insurance. The primary insurer is Federal Insurance Company, a Chubb Group insurance company. Excess insurers include ACE American Insurance Company, Arch Insurance Company, Zurich American Insurance Company, National Union Fire Insurance Co. of Pittsburgh, PA, Allied World National Assurance Company and Federal Insurance Company. The coverage was renewed effective August 1, 2009 for a one year term. The total premium paid for both primary and excess insurance was $1,336,500.

 

The following table sets forth information concerning the compensation during Avnet’s last three fiscal years of its Chief Executive Officer, the Chief Financial Officer and the three executive officers at the end of last fiscal year who had the highest individual total compensation during Avnet’s fiscal year ended June 27, 2009:

 

SUMMARY COMPENSATION TABLE

 

 

 

 

Grants of Plan-Based Awards

 

The following table provides information about equity and non-equity plan-based awards to the named executive officers in fiscal 2009 relating to (1) annual cash incentive awards; (2) the RSUs; (3) the PSPs and (4) the option grants. The actual payouts in fiscal 2009 under the Non-Equity Incentive Plan Awards are included in the Summary Compensation Table as are the expenses recorded by the Company associated with the awards under the Equity Incentive Plan in accordance with SFAS 123R.

 

 

 

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table provides information on the current holdings of stock option and stock awards by the named executive officers as of June 27, 2009. This table includes unexercised and unvested option grants, unvested RSUs, or PSPs with performance conditions that have not yet been satisfied. Each equity grant is shown separately for each named executive officer. The vesting schedule for each grant is shown following this table, based on the option grant date or stock award date. The market value of the stock awards is based on the closing market price of Avnet stock as of June 27, 2009, which was $21.52. The PSPs are subject to specified performance objectives over the performance period. The market values as of June 27, 2009, shown in columns (h) and (j) below, assume 100% achievement of these performance objectives. For additional information about the option grants and stock awards, see the description of equity incentive compensation in the Compensation Discussion and Analysis included elsewhere in this Proxy Statement and note 12 of the Notes to the financial statements included in Avnet’s Form 10-K for the fiscal year ended June 27, 2009, as filed with the SEC.