David J. Shea Chairman and Chief Executive Officer
		April 15, 2009

		Cordially,

 

PROXY STATEMENT

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders Scheduled for May 19, 2009:

 

The Company’s Proxy Statement and Annual Report are available online at www.proxydocs.com/bne.

 

The Board of Directors urges you to give instructions to the Company’s representatives to vote on your behalf at the Annual Meeting. If you cannot attend, or you do not wish to vote by a written ballot at the meeting, these Company representatives will act in your place as your proxies, and they will cast your vote in the way you tell them to. The following pages explain how you can give your voting instructions to the Company representatives either using the internet, over the telephone, or by mailing the printed voting instructions card you received.

 

The Board of Directors proposes the following four nominees for election as directors of the Company, and recommends that you vote IN FAVOR OF all four:

 

Stephen V. Murphy

Gloria M. Portela

Vincent Tese

Richard R. West

 

If you choose the Company representatives to cast your vote, they will vote in favor of the four nominees listed above, unless you tell them to do otherwise.

 

The election of each director requires a plurality of the votes cast at the Annual Meeting. A plurality is any number of shares, which is larger than the numbers cast for competing candidates. You may vote for any or all of the four nominees, but you may not cast more than one vote for any one nominee. For an explanation of how votes will be counted for this proposal, please see “How do we count votes?” on page 10. If a nominee becomes unable to serve before the meeting begins, the Company representatives may vote your Company shares in favor of a substitute nominee proposed by the Board of Directors.

 

The Company has three classes of directors with staggered terms of three years each so that the term of one class expires at each annual meeting. The Board of Directors has nominated Stephen V. Murphy, Gloria M. Portela, Vincent Tese and Richard R. West to “Class I.” If they are elected, their terms will expire at the Company’s Annual Meeting in 2012. After the election of four directors at the meeting, there will be a total of 11 members on the Board of Directors of the Company, divided among the three classes. The Board of Directors has determined that eight of the current 11 board members, including all of the four nominees for election as directors, will be “independent” directors as defined by the rules of the New York Stock Exchange.

 

The four nominees already serve as directors of the Company. They have consented to their nomination and agree to continue to serve as directors if the stockholders reelect them at the meeting. On pages 12 to 14 you will find biographies of all the current directors including the four nominees, which we have highlighted. For each director we have included his or her age on the date of the meeting and principal occupation during the last five years. Additional information about the Board of Directors itself and its standing committees begins on page 15.

 

The Board of Directors proposes and recommends that you vote IN FAVOR OF approving the appointment of KPMG LLP as auditors of the Company.

 

If you choose the Company representatives to cast your vote, they will vote in favor of approving the appointment of KPMG LLP as auditors of the Company, unless you tell them to do otherwise.

 

Assuming the existence of a quorum at the Annual Meeting, the appointment of KPMG LLP to be auditors of the Company for the current fiscal year ending December 31, 2009 will be approved if a majority of all the votes cast at the Annual Meeting are in favor of approval.

 

On March 4, 2009, the Board of Directors ratified the Audit Committee’s selection of the independent registered public accounting firm of KPMG LLP to be auditors of the Company for the current fiscal year ending December 31, 2009. KPMG LLP has served as the Company’s auditors since 1998, and is independent with respect to the Company and its subsidiaries. KPMG LLP audits the Company’s financial statements and provides other professional services requested by the Company from time to time. Representatives of KPMG LLP will be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so. The representatives of KPMG LLP will also have an opportunity to respond to appropriate questions from stockholders at the Annual Meeting. The professional services provided by KPMG LLP and the aggregate fees for those services rendered during the years ended December 31, 2008 and 2007 were as follows:

 

Audit Fees.  The aggregate fees billed for audit services for the years ended December 31, 2008 and 2007 were $1,720,712 and $1,812,484, respectively. Audit services include the audit of the financial statements included in the Company’s annual reports on Form 10-K, the audit of the effectiveness of the Company’s internal control over financial reporting, the reviews of the financial statements included in the Company’s quarterly reports on Form 10-Q, statutory audits of the Company’s foreign subsidiaries, and other services normally provided by the independent auditor in connection with statutory and regulatory filings. In addition, the aggregate fees billed for audit services for the year ended December 31, 2008 include $238,075 for additional services related to the completion of the 2007 audit of the Company’s financial statements, which were billed and paid during 2008.

 

Audit-Related Fees.  The aggregate fees billed for audit-related services in the years ended December 31, 2008 and 2007 were $140,500 and $116,975, respectively. Audit-related services include audits of the financial statements of the Company’s employee benefit plans, due diligence related to acquisition candidates and consultations concerning financial accounting and reporting standards.

 

Tax Fees.  The aggregate fees billed for tax compliance services in the years ended December 31, 2008 and 2007 were $75,511 and $53,484, respectively. Tax compliance services include the preparation and review of the Company’s domestic and international tax returns and assistance with tax audits. The aggregate fees billed for tax consulting and advisory services in the years ended December 31, 2008 and 2007 were $45,468 and $124,892, respectively. Tax consulting and advisory services include advice and planning related to state, local and foreign taxes.

 

All Other Fees.  There were no other services performed by KPMG LLP during the years ended December 31, 2008 and 2007 that were not included in the above categories.

 

The Board of Directors proposes and recommends that you vote IN FAVOR OF approving the Company’s amended and restated 1999 Incentive Compensation Plan.

 

The full text of the proposed amended and restated Bowne & Co., Inc. 1999 Incentive Compensation Plan (the “1999 Amended Plan”) appears in Appendix A to this Proxy Statement. The Compensation and Management Development Committee (the “Compensation Committee”) of the Board of Directors approved the proposal at its regular meeting on March 25, 2009, subject to approval by stockholders. Assuming the existence of a quorum at the Annual Meeting, approval of the Company’s amended and restated 1999 Incentive Compensation Plan requires the affirmative vote of a majority of all the votes cast at the Annual Meeting. The proxies who will vote on your behalf at the meeting intend to vote to approve this proposal, unless you specify otherwise. Certain amendments to the 1999 Amended Plan will take effect on May 21, 2009 if stockholders vote at least a majority of the common stock at the meeting, whether represented in person or by proxy, in favor of approving the 1999 Amended Plan. Other amendments to the 1999 Amended Plan took effect on December 31, 2008, in accordance with applicable law. No shareholder approval was necessary with respect to those amendments.

 

The Bowne & Co., Inc. 1999 Incentive Compensation Plan (the “1999 Plan”) was originally adopted by the Board on February 25, 1999, approved by the stockholders on May 27, 1999 and amended by the stockholders on May 25, 2006. It was subsequently amended and restated effective December 31, 2008 to reflect the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, (the “Code”), and most recently amended on March 25, 2009 with respect to the issues now before you for approval. The 1999 Amended Plan, which allows for grants of stock options, stock appreciation rights (“SARs”), full-value stock-based awards, and cash awards to employees, non-employee directors and consultants of the Company and its subsidiaries, is an integral part of the Company’s pay-for-performance philosophy, which is more fully described in the “Compensation Discussion and Analysis” section of this Proxy Statement. Approval of the 1999 Amended Plan offers a number of important benefits to stockholders, including:

 

 

When the 1999 Plan was approved by stockholders in 1999, the total number of shares of Common Stock available under the 1999 Plan was 3,450,000, with no more than 300,000 shares of Common Stock to be used for full-value stock-based awards (e.g., restricted stock or performance-based restricted stock units). During the fourth quarter of 2004, the Company transferred 409,550 shares of Common Stock remaining under the 1992 Stock Option Plan and 967,950 shares of Common Stock remaining under the 1997 Stock Option Plan (that either had not previously been issued or were not subject to outstanding awards) to the 1999 Plan. These additional shares of Common Stock were made available for stock option grants only. In 2006, the 1999 Plan was amended to increase the available reserve by 3,000,000 shares. As of March 31, 2009, the Company had 42,177 total shares of Common Stock remaining in the 1999 Plan out of the authorization of 6,450,000. In

March 2009, the Company’s eight executive officers voluntarily surrendered 794,500 outstanding options (with exercise prices ranging from $10.58 to $15.75). There was no consideration provided to these officers in return for surrendering the option awards. They will be eligible to receive awards under the 1999 Amended Plan in December 2009 (during the normal annual grant cycle), but are not guaranteed to receive awards at that or any other time. As of March 31, 2009, there were 1,945,201 options with a weighted average exercise price of $9.07 and a weighted average remaining term of 4.56 years and 860,323 full value awards outstanding under the Company’s existing equity plans. There were no outstanding SARs as of March 31, 2009.

 

There are insufficient shares available to meet the Company’s needs with regard to grants and awards expected to be made in 2009 and thereafter. The Board has proposed amendments to the 1999 Plan, as follows:

 

 

The 1999 Amended Plan permits options, SARs and performance-based awards that may be granted after stockholder approval of the 1999 Amended Plan to be considered “qualified performance-based compensation” as defined under regulations interpreting Section 162(m) of the Code. Section 162(m) of the Code limits the deductibility of compensation in excess of $1 million paid by a publicly traded corporation to certain “covered employees” unless it is qualified performance-based compensation. Under current regulations interpreting Section 162(m), the grant by a committee of “outside directors” of options, SARs, performance-based restricted stock units, and other performance-based awards under a stockholder approved plan is generally considered qualified performance-based compensation if the following requirements are met: (i) the options and SARs are granted with an exercise price equal to or greater than the stock’s value on date of grant, (ii) the plan expressly limits the amount of such grants that can be made to any individual employee over a specified period of time, (iii) the plan sets forth the list of potential performance criteria that the committee of outside directors may consider and (iv) in the case of performance based awards other than options and SARs, the Compensation Committee establishes the actual performance goals before the first 90 days (or 25%, if earlier) of the corresponding period has elapsed. Notwithstanding stockholder approval of the 1999 Amended Plan at the 2009 Annual Meeting, the Company reserves the right to pay its employees, including recipients of awards under the 1999 Amended Plan, amounts that may not be deductible under Section 162(m) or other provisions of the Code.

 

If the 1999 Amended Plan is approved by stockholders at the 2009 Annual Meeting, it will be effective with respect to all awards granted thereafter. If the 1999 Amended Plan is not approved by stockholders, all awards granted under the 1999 Plan will be made in accordance with the terms of the 1999 Plan approved by stockholders at the 2006 Annual Meeting, and as amended and restated effective December 31, 2008.

NUMBER OF SHARES AUTHORIZED.  If approved by the stockholders, the 1999 Amended Plan will increase the share reserve by an additional 1,500,000 shares of Common Stock. When combined with the 41,177 shares remaining available for grant from the original reserve, the available pool will be 1,541,177 shares of Common Stock. This number of available shares represents approximately 5.7% of the Company’s outstanding Common Stock on the record date. These shares of Common Stock may be treasury shares or other currently unissued shares. The number of shares of Common Stock originally authorized by the 1999 Plan was 3,450,000. The 1999 Plan was amended in 2006 and an additional 3,000,000 shares of Common Stock were added to the share reserve. If the 1999 Amended Plan is approved by the stockholders, the total number of authorized shares of Common Stock will increase, by the addition of 1,500,000 shares of Common Stock added to the share reserve, to bring the total authorized under the 1999 Amended Plan to 7,950,000 shares of Common Stock.

 

1999 Amended Plan awards may take a number of forms, including stock options, SARs, restricted stock, restricted stock units, deferred stock units, bonus shares, stock granted in place of another kind of compensation, annual incentive awards, dividend equivalents and other awards tied to the market value of the stock or factors that influence its value.

 

The Company will equitably adjust the number of shares of Common Stock authorized by the 1999 Amended Plan, including, without limitation, if there is a stock split, stock dividend, merger or other extraordinary event. In those cases, the Company may also adjust the option exercise price and the other terms of the individual awards outstanding under the 1999 Amended Plan in addition to adjusting the limit, mentioned earlier, on the number of shares of Common Stock available for awards. These adjustments will not enlarge the proportionate interest which the shares of Common Stock represented before the extraordinary event, but they will prevent an unfair reduction in the value of the shares of Common Stock authorized by the 1999 Amended Plan.

 

The 1999 Amended Plan spells out counting rules to assure that all awards are properly counted and not counted twice. These rules will take account of shares previously authorized under any other plan when they become subject to the 1999 Amended Plan. For most purposes, the rules will also recognize all forms of awards permitted by the 1999 Amended Plan as interchangeable. Forfeited, terminated or expired awards of shares of Common Stock, as well as awards settled in cash without issuing any shares of Common Stock, will become available for future awards. In addition, if the Company issues shares of Common Stock in substitution for awards under a stock-based plan of an acquired corporation, those shares of Common Stock will not count against the shares of Common Stock authorized under the 1999 Amended Plan. The 1999 Amended Plan will, however, otherwise govern the shares of Common Stock issued for the acquired corporation.

 

ELIGIBILITY.  Executives and other key employees of the Company, non-employee directors and consultants who provide services to the Company and its subsidiaries will be eligible for awards under the 1999 Amended Plan. A person who is offered employment will also be eligible for, but cannot receive any benefit under, an award until after beginning employment. As discussed later, the 1999 Amended Plan puts limits on the awards that any one individual may receive in a particular year. The Compensation Committee currently estimates that as many as 700 people could be eligible for awards under the 1999 Amended Plan, but the number of actual participants is likely to be much smaller.

 

ADMINISTRATION OF THE PLAN.  The Compensation Committee will have authority to administer the 1999 Amended Plan. The Board of Directors may appoint another committee to administer the 1999 Amended Plan, but only independent directors may serve on it. The Board of Directors itself may also administer the 1999 Amended Plan, and may make awards to directors. Administration includes selecting the individuals who will

receive awards, determining the type of awards and their specific terms, and deciding whether specific awards should be accelerated or cancelled in appropriate cases. In fixing the terms of each award, the Compensation Committee will determine the valuation of the shares of Common Stock, the vesting schedule, the expiration date, and the extended period of time following retirement or termination of employment within which an employee may exercise an award.

 

STOCK OPTIONS AND SARS.  The 1999 Amended Plan authorizes the Compensation Committee to grant stock options and SARs. Options include both incentive stock options (“ISOs”), which can result in favorable tax treatment to the participant, and non-qualified stock options. A SAR entitles the participant to receive payment of the amount of appreciation in the market value of the shares on the date of exercise over the original grant price. The Compensation Committee will determine exercise prices for options and grant prices for SARs, but these may not be less than the fair market value of the stock on the grant date. Options will have a maximum term of seven years. The participant may pay the exercise price of an option in cash, stock, other awards that have in-the-money value, or other means approved by the Compensation Committee.

 

RESTRICTED STOCK, RESTRICTED STOCK UNITS AND DEFERRED STOCK UNITS.  Under the 1999 Amended Plan, the Compensation Committee may also grant restricted stock, restricted stock units or deferred stock units. Restricted stock is a grant of shares of Common Stock that are subject to a risk of forfeiture if employment or service terminates, and are non-transferable for a period set by the Compensation Committee. Restricted stock units give a participant the right to receive shares of Common Stock at the end of a restriction or vesting period. Deferred stock units give a participant the right to receive shares of Common Stock at the end of a defined deferral period. In each case, a participant may forfeit the award if his or her employment or service terminates before a fixed date. Restricted stock normally carries voting and dividend rights, while restricted stock units and deferred stock units do not, but the Compensation Committee may authorize the payment of dividend equivalents on restricted stock units and deferred stock units.

 

PERFORMANCE-BASED AWARDS INCLUDING ANNUAL INCENTIVE AWARDS.  The Compensation Committee may require a participant to meet performance goals as a condition of any award or as a condition to exercise a settlement. Performance goals will consist of one or more business criteria and a targeted performance level. We have described some of the business criteria for performance awards on page 7 under the heading “Compliance with Section 162(m).” Performance awards may take the form of annual incentive awards that are subject to settlement in cash or in shares of Common Stock when the participant achieves the performance goals for a particular year. In this way, the Compensation Committee intends to qualify such annual incentive awards in order to avoid the loss of tax deductions under Section 162(m) of the Code. The Compensation Committee may adjust performance conditions and other terms of performance awards in keeping with extraordinary corporate events or changes in laws, regulations or accounting principles, but any such adjustment to an award intended to qualify as performance-based must still conform to the requirements of Section 162(m).

 

OTHER TERMS.  The Compensation Committee may settle awards under the 1999 Amended Plan in cash, shares of Common Stock, or other property. Prior to settlement, all awards will be nontransferable, except upon death or as may be permitted in individual cases for estate planning and similar purposes. Participants will not normally pay consideration for awards under the 1999 Amended Plan, other than their services to the Company. The Compensation Committee may withhold any taxes that apply to these awards, and may allow a participant to withhold or surrender shares of Common Stock to meet tax obligations.

If a change in control occurs, as defined in the 1999 Amended Plan, outstanding awards will immediately vest and become fully exercisable, while any settlement deferral, forfeiture conditions and other restrictions will lapse. The Compensation Committee may also decide that participants have met their performance goals and other conditions in the event of a change in control. The 1999 Amended Plan will terminate when no shares of Common Stock remain available for issuance and when the Company has no further obligations under outstanding awards. Before termination, the Board of Directors may amend, suspend or terminate the 1999 Amended Plan without further stockholder approval unless the law or New York Stock Exchange rules require such approval, but no amendment may have a negative effect on awards previously granted. In its discretion, however, the Board of Directors may submit other amendments for stockholder approval.

 

FEDERAL INCOME TAX CONSEQUENCES.  The following is a brief summary of the usual federal income tax consequences of plan awards. The grant of an option or SAR will trigger no federal income tax for a participant or a deduction for the Company. Nor will the participant have taxable income upon exercising an ISO, although the alternative minimum tax may apply. On the exercise of a nonqualified option, the difference between the exercise price and the fair market value of the option shares is taxable to the participant as ordinary income. On the exercise of a SAR, the cash or the fair market value of the shares of Common Stock received will also be taxable as ordinary income. If a participant disposes of ISO shares before the end of applicable ISO holding periods, the participant will be taxed on ordinary income equal to the lesser of (1) the fair market value of the shares of Common Stock at exercise minus the exercise price, or (2) the amount realized upon the disposition minus the exercise price. Otherwise, a disposition of shares of Common Stock acquired by exercising an option or SAR will result in short-term or long-term capital gain or loss equal to the sale price minus the participant’s tax basis in such shares of Common Stock. The tax basis is the exercise price paid plus any amount previously taxed as ordinary income upon exercise of the award. The Company is normally entitled to a tax deduction equal to the amount taxed as ordinary income to the participant. The Company will not be entitled to a tax deduction for amounts taxed as capital gains to the participant. Therefore, the Company will not be entitled to a tax deduction if a participant exercises an ISO and holds the shares of Common Stock received for the ISO holding periods.

 

In the case of awards other than options and SARs, the participant generally will be taxed on ordinary income equal to the fair market value of shares of Common Stock, cash or other property received. This tax will accrue at the time of receipt, except in the case of an award that is nontransferable and subject to a risk of forfeiture. In that case, the tax may not accrue until lapse of at least one of the restrictions, although the participant may elect to be taxed at the time of grant. Subject to an exception discussed below, the Company will be entitled to a tax deduction in an amount equal to the ordinary income taxed to the participant.

 

COMPLIANCE WITH SECTION 162(m).  The Compensation Committee intends that some awards under the 1999 Amended Plan should qualify as performance-based, as defined in Section 162(m) of the Code. Section 162(m) generally imposes a cap of $1 million on the amount of tax deductions the Company may take for compensation to of the Company’s Chief Executive Officer or next three highest paid executive officers (other than the Chief Financial Officer) in a single year, but qualifying performance-based compensation remains fully deductible regardless of its amount. Under the 1999 Amended Plan, therefore, options and SARs, annual incentive awards to employees whom the Compensation Committee expects to be named executives, and other awards conditioned on achievement of performance goals are intended to qualify as performance-based compensation. By approving the 1999 Amended Plan, stockholders will also be approving the eligibility of executive officers and others to participate, the per person limitations, and general business criteria on which performance objectives for performance-based awards may be based. The 1999 Amended Plan imposes per

person limitations, so that a participant may not receive awards intended to qualify as performance-based in excess of a participant’s annual limit. For each type of equity-based award a participant’s annual limit is 1,500,000 shares, plus the unused portion of the participant’s annual limit relating to the same type of award from the prior year. For all other forms of awards not denominated in shares, a participant’s annual limit is $3,500,000, plus the unused portion of the participant’s annual limit relating to the same type of award from the prior year. A participant’s annual limit applies if it is potentially earnable, even if there is a deferral of payout. Options, SARs, restricted stock, deferred stock units, other stock-based awards, annual incentive awards and long-term performance awards each represent a separate type of award for purposes of the annual limit.

 

In establishing goals for a performance-based award to a participant who is subject to Section 162(m), the Compensation Committee may select any of the following business criteria: (1) earnings per share; (2) revenues; (3) cash flow, free cash flow, or cash flow return on investment; (4) interest expense after taxes; (5) return on net assets, return on assets, return on investment, return on invested capital, or return on equity; (6) value created; (7) operating margin; (8) net income before or after taxes, pre-tax earnings, pre-tax earnings before interest, depreciation and amortization, pretax operating earnings after interest expense and before incentives, service fees, and extraordinary or special items, operating earnings, or net cash provided by operations; (9) stock price or total stockholder return; (10) sales above a specified threshold or in relation to prior periods; (11) reductions in operating expenses; (12) productivity improvements; and (13) an executive’s attainment of objective and measurable strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion goals, cost targets, management of employment practices and employee benefits, supervision of litigation and information technology, and goals relating to acquisitions or divestitures. These business criteria may apply to the Company on a consolidated basis or to specified subsidiaries or business units. Both annual incentive awards and long-term performance awards may incorporate these criteria. Stockholder approval of the 1999 Amended Plan, including these business criteria without specific targeted levels of performance, will qualify awards as performance-based for a period of five years. A number of other requirements must be met in order for particular compensation to qualify as performance-based under Section 162(m). There can be no assurance that compensation resulting from 1999 Amended Plan awards intended to qualify under Section 162(m) will in fact be fully deductible. In addition, the 1999 Amended Plan would authorize a number of types of awards that will not qualify as performance-based. Compensation paid as a result of these awards may be subject to the cap on deductibility under Section 162(m) if it and other non performance-based compensation paid to any “covered employee” under Section 162(m) exceed $1 million in a given year.

 

COMPLIANCE WITH SECTION 409A.  The American Jobs Creation Act of 2004 introduced a new section of the Code (Section 409A) covering certain nonqualified deferred compensation arrangements. Section 409A generally establishes rules that must be followed with respect to covered deferred compensation arrangements in order to avoid the imposition of an additional 20% tax (plus interest) upon the person who is entitled to receive the deferred compensation. Certain awards that may be granted under the 1999 Amended Plan may constitute “deferred compensation” within the meaning of and subject to Section 409A of the Code. The 1999 Amended Plan is intended to be interpreted and operated in accordance with Section 409A, including any regulations or guidance issued by the Treasury Department, and contains a number of provisions intended to avoid the imposition of additional taxes on the 1999 Amended Plan participants under Section 409A of the Code.

 

Who may vote?  The record date for the Annual Meeting was April 1, 2009. This means you are entitled to vote if our records show you held one or more shares of Common Stock when business closed on that day. A total of 27,310,604 shares of Common Stock were outstanding and entitled to vote on the record date, and each share of Common Stock is entitled to one vote. The Company has no other voting securities. The voting instructions card enclosed with this booklet shows the number of shares of Common Stock you held on the record date, and you may cast that same number of votes. A list of all stockholders on the record date will be available for inspection at the Company’s executive offices ten days before the meeting.

 

We will not hold the meeting unless a quorum of the stockholders attend in person or appoint the Company representatives or other proxies to vote in their place. Stockholders entitled to vote just over half the number of shares of Common Stock outstanding on the record date (that is, at least 13,655,303 shares of Common Stock) will constitute the necessary quorum.

 

Tickets required.  Because seating will be limited at the Annual Meeting, a stockholder who wishes to attend in person must have a ticket of admission. Each stockholder may request one ticket either by mail addressed to the Corporate Secretary in care of Bowne & Co., Inc. at 55 Water Street, New York, New York 10041 or by e-mail to [email protected]. If you forget to bring your admission ticket, you can attend the Annual Meeting only if you are a stockholder on the Company’s records and offer satisfactory identification. If you hold your shares of Common Stock through a broker, bank or nominee, you will need a voting instructions card from your broker as proof of ownership.

 

How to vote shares registered in your own name.  If you owned one or more shares of Common Stock in your own name on the record date, then you are a holder of record and your shares of Common Stock are registered with the Company. This means you may use the voting instructions card enclosed with this booklet to tell the Company representatives how you want them to vote your shares of Common Stock. Be sure to sign, date and mail the card in the postage-paid envelope, which we sent with your card.

 

Alternatively, you may send your instructions by internet or by telephone in the United States or by internet if outside the United States, provided such instructions are received no later than the day prior to the day of the Annual Meeting. If you use the internet or telephone, the Company will confirm that we have received your instructions. Whether you use the internet or telephone, you will need the personalized control number we have printed on your voting card.

 

 

Participants in Bowne’s 401(k) Savings Plan on the record date will have the same choice of ways to vote. The Company’s annual report on Form 10-K describes that plan. If participants in Bowne’s 401(k) Savings Plan do not elect to vote by proxy, shares of Common Stock allocated to their Plan account will be voted by the Plan trustee as those shares of Common Stock held by the Plan for which the Plan trustee has received direction from Plan participants.

 

Stockholders who attend the Annual Meeting in person may vote by written ballot at that time. But even if you plan to attend, the Board still urges you to give your voting instructions to the Company

representatives before the meeting in case your plans change. At the meeting you can change or revoke any instructions you gave previously.

 

How to vote shares held by a broker.  If a broker, bank or other nominee holds Common Stock for your benefit, and the shares are not in your own name on the Company’s records, then your shares are “in street name.” In that case, your broker, bank or other nominee will advise you how to vote. Bowne reimburses them for forwarding this booklet and other material to you. If you have not heard from the broker, bank or nominee who holds your stock in street name, please contact them as early as possible. If you attend the meeting in person and want to vote shares held for you in street name, you must bring a written form of proxy from your broker, bank or nominee. It must name you as the sole representative entitled to vote those shares. Be sure to give the form to the Corporate Secretary of the Company before voting starts.

 

How will the representatives vote for you?  Whether you mail your instructions or send them by internet or telephone, the Company representatives will vote your shares of Common Stock exactly as you tell them to. If you do not indicate how you want your shares of Common Stock voted, the Company representative will vote in the way the Company’s Board of Directors recommends. If there is an interruption or adjournment of the meeting before we complete the agenda, the Company representatives may still vote your shares of Common Stock when the meeting resumes. If a broker, bank or other nominee holds your shares of Common Stock in street name, they will normally ask for your instructions and vote your shares of Common Stock accordingly. If you give instructions to a broker, bank or nominee, they will tell the Company representatives to vote in the way you instruct.

 

How to revoke voting instructions.  You may change or revoke your voting instructions at any time before the stockholders vote at the Annual Meeting. To revoke or change voting instructions you have given, you must tell the Corporate Secretary of the Company in writing before the stockholders vote. If your proxy is not properly revoked, we will vote your shares as indicated by your most recent valid proxy. Of course, you may come to the Annual Meeting in person and vote your shares of Common Stock by written ballot at that time. If you want to vote in person, be sure to revoke in writing any voting instructions you gave before the meeting begins.

 

How do we count votes?  Voting at the Annual Meeting will be confidential. Mediant Communications, LLC, the Company’s agent, will count all the votes. Whether you choose the Company representatives to vote for you or you attend the meeting in person, your shares of Common Stock will count in determining whether we have the necessary quorum, even if you decide to abstain from voting or to vote against one or both of the proposals. Likewise, shares of Common Stock represented at the meeting by a broker, bank or other nominee will be counted in determining whether there is a quorum, regardless of whether you vote or abstain. But if a stockholder fails to vote or chooses to abstain from voting or fails to give instructions to a broker, bank or other nominee on the proposal to approve the 1999 Amended Plan, his or her shares of Common Stock will not count as votes for or against the proposals provided that, in the case of the proposal to approve the 1999 Amended Plan, stockholders vote at least a majority of the Common Stock at the meeting. This means that the unvoted shares of Common Stock will generally not affect the outcome of the voting.

 

If you give no instructions.  If you are a beneficial owner of shares of Common Stock held in street name and do not provide the organization that holds your shares of Common Stock with specific voting instructions, under the rules of the New York Stock Exchange, the organization that holds your shares may generally vote on “routine” matters but cannot vote on “non-routine” matters. The New York Stock Exchange has determined that the proposal to elect directors and the proposal to appoint auditors are “routine” under the applicable rules. This means that brokers, banks and other nominees will be able to vote shares of Common Stock they hold for you in

street name even if you have not given instructions on the proposal. On the tenth day before the meeting, unless you have specified otherwise, your broker, bank or nominee will then direct the Company representatives to vote your shares in favor of electing the four nominees and in favor of appointing the auditors. If the organization that holds your shares of Common Stock does not receive instructions from you on how to vote your shares of Common Stock on the proposal to approve the Amended and Restated Bowne & Co., Inc. 1999 Incentive Compensation Plan, a “non-routine” matter, the organization that holds your shares of Common Stock will inform the Company’s agent that it does not have the authority to vote on such matters with respect to your shares of Common Stock. This is generally referred to as a “broker non-vote.” Accordingly, the Board of Directors urges you to give instructions to your broker, bank or nominee on a timely basis.

Who pays for this solicitation?  The Company will pay the cost of solicitating your voting instructions. Employees and agents of the Company may solicit by personal interview or by any other means of communication including mail, fax, e-mail and telephone. These persons do not receive additional compensation for these services. The Company reimburses brokers, banks and other nominees for expenses they incur in forwarding copies of this booklet and other Company material to stockholders and in gathering their voting instructions. The Company has retained the proxy-soliciting firm of D. F. King & Co., Inc. to assist in this solicitation for a fee that will not exceed $14,000, plus out-of-pocket expenses.

Other business at the meeting.  The Company does not know of any business to be presented at the Annual Meeting besides the proposals to elect four directors, to approve the appointment of KPMG LLP to be auditors of the Company for the fiscal year ending December 31, 2009 and the proposal to approve the 1999 Amended Plan. If other business comes before the meeting and is proper under Delaware law, the Company representatives will use their discretion in casting all the votes they are entitled to cast, except those votes for which they have contrary written instructions.

About this proxy statement.  The Company’s management prepared this booklet and began sending it to stockholders on or about April 15, 2009. In addition, the proxy statement, annual report and Form 10-K are available on the Company’s website (www.bowne.com).

 

When you give us your voting instructions, you may also indicate whether you want to receive Company materials by means of the internet in the future. Until the Company notifies you otherwise, enrolling to receive your documents by means of the internet will not remove your name from our regular mailing lists.

 

Some words have special meanings when we use them in this booklet. The terms “Company” and “Bowne,” as well as the words “we,” “us” and “our,” refer to Bowne & Co., Inc., a Delaware corporation.

 

The Company representatives are the two people (David J. Shea and Scott L. Spitzer) chosen to vote in your place as your proxies at the Annual Meeting, or anyone else they choose to be their substitutes. We refer to the New York Stock Exchange as the “Exchange.” Finally, the terms “common stock,” “stock” and “shares” all mean the Company’s Common Stock, par value $.01 per share, which trades on the Exchange.

Webcast of the meeting.  Stockholders who are unable to attend the meeting in person may follow it live on the internet. Beginning on or about May 11, 2009, the Company intends to post information on our website (www.bowne.com) about how this webcast will work. To follow the meeting live on the internet, stockholders must register electronically before the meeting begins by following the on-line instructions.

Results of the voting.  After the Annual Meeting, the results of the voting will be available on our website (www.bowne.com), together with a transcript of the meeting and an archive copy of the webcast.

 

 

The Board and its Committees

 

The Board of Directors.  Periodically throughout the year, the Board of Directors and its standing committees meet to direct and oversee management of the Company. The Board of Directors held seven meetings during 2008. In addition, the committees of the Board met a total of 20 times and took action without formal meetings by written consents when appropriate. Board members also share information and exchange views with the Chairman and with each other informally and in executive sessions of non-management directors and separate executive sessions of independent directors following Board meetings on matters that concern the Company and its stockholders. Mr. Schwarz, the Company’s Presiding Director, chairs these executive sessions.

How directors are chosen.  The Nominating and Corporate Governance Committee (the “Nominating Committee”) is responsible for assisting the Board in identifying individuals qualified to become Board members and recommending director nominees to the Board for each annual meeting of stockholders. It is the Nominating Committee’s policy to consider candidates recommended by stockholders (see the description of the procedure under the heading “Communications with the Board” on page 16), Company management, other Board members or any interested person. The same criteria the Nominating Committee uses for evaluating director nominees will be used to evaluate candidates recommended by stockholders. The Nominating Committee considers the qualifications of candidates based upon its charter and the Company’s corporate governance guidelines. The Nominating Committee selects individuals as director nominees who have the highest personal and professional integrity, who have demonstrated exceptional ability and judgment and who would be most effective, in conjunction with the other members of the Board of Directors, in collectively serving the long-term interests of the stockholders. The Nominating Committee has authority to retain search firms to assist in identifying and evaluating director candidates and to approve fees and retention terms for such advisors, but has not done so in connection with the selection of the four nominees for election as director listed on pages 13 to 14. The Nominating Committee did not receive any recommendations for nominees from a shareholder or group of shareholders that beneficially owned more than 5% of the Company’s common stock for at least one year. The Nominating Committee recommended the four nominees for election as directors. Stockholders may also nominate Board candidates at the Annual Meeting, and we have described the procedure for this, with the advance notice required, under the heading “Proposals and nominations by stockholders” on page 50.

Corporate Governance Information.  The Company’s corporate governance guidelines, the charters of the Nominating Committee, the Audit Committee and the Compensation Committee, the Company’s Code of Ethics and the Related Party Transactions Policy are available on the Company’s website (www.bowne.com) and in print to any shareholder or other person upon request. Requests should be sent to Scott L. Spitzer, Senior Vice President, General Counsel and Corporate Secretary, Bowne & Co., Inc., 55 Water Street, New York, New York 10041.

Director Independence.  It is the Board of Directors’ objective that at least a majority of the Board of Directors should consist of independent directors. For a director to be considered independent, the Board of Directors must determine that the director does not have any direct or indirect material relationship with the Company. The Board of Directors maintains categorical standards to assist it in determining director independence, which are consistent with the Exchange listing rules. The categorical standards are part of our corporate governance guidelines and are set forth on the Company’s website (www.bowne.com). In evaluating director independence, the Board considered the following: Mr. Shea is currently an executive of the Company; Mr. Kucera is formerly an executive of the

Company; and Mr. Crosetto is formerly an executive of the Company and is currently a consultant to the Company (see the description of the consulting agreement with Mr. Crosetto on page 18). The Board of Directors has determined that the following eight directors satisfy the Exchange’s independence requirements and Bowne’s categorical standards as described above: Mr. Fox, Ms. Hooper, Mr. Murphy, Ms. Portela, Mr. Schwarz, Ms. Stanley, Mr. Tese and Mr. West.

Executive Certifications.  The Company has submitted to the Exchange the annual Chief Executive Officer certification required by the rules of the Exchange. The Company also submitted to the Securities and Exchange Commission the certifications required under Section 302 and 906 of the Sarbanes-Oxley Act as exhibits to its quarterly reports on Form 10-Q and Annual Report on Form 10-K for fiscal 2008.

Communications with the Board.  Interested parties who want to communicate with the Chairman, the Presiding Director, or with the non-management directors as a group, or a stockholder who wants to communicate with the Board of Directors, individual Board members or a board committee including the Nominating Committee to recommend a candidate, should address their communications to the Board of Directors, the Board members or the Board committee, as the case may be, and send them c/o Scott L. Spitzer, Senior Vice President, General Counsel and Corporate Secretary, Bowne & Co. Inc., 55 Water Street, New York, New York 10041. The Corporate Secretary will forward all such communications directly to such Board members. If the communication is a stockholder recommendation for Board of Directors membership, it must be in writing and must identify the proposer. It must also be accompanied by detailed information about the proposed nominee and that person’s consent to have his or her name put in nomination and agreement to serve, if elected. It must also be received in a timely manner and otherwise comply with the Company’s By-Laws. See the description of the procedure under the heading “Proposals and nominations by stockholders” on page 50.

Committees of the Board.  The Board of Directors has four standing committees. The principal functions and current membership of each committee is as follows:

 

 

 

Compensation and Management Development Committee interlocks and insider participation.  No member of the Compensation Committee was an officer or employee of the Company or any of its subsidiaries during fiscal year 2008 or was formerly an officer of the Company or any of its subsidiaries.

 

Participation at meetings.  During fiscal year 2008 each member of the Board of Directors participated in at least 75% of the Board of Director and committee meetings which he or she was entitled to attend. The Company’s corporate governance guidelines state that directors are expected to attend the Annual Meeting of Stockholders. All of the directors attended the previous year’s Annual Meeting of Stockholders.

Compensation of directors.  Directors who are employees of the Company (currently, Mr. Shea) receive no fees for Board and committee service. Except as described below with respect to Mr. Crosetto, each non-employee director received during 2008 an $85,000 annual retainer payable in quarterly installments following each fiscal quarter. The Presiding Director receives an additional annual retainer of $25,000 payable in quarterly installments following each fiscal quarter. Non-employee members of the Audit Committee receive an additional retainer of $10,000 per year, or $20,000 in the case of the chairman of that committee. Members of the Executive Committee receive an additional retainer of $8,000 per year, or $16,000 in the case of the chairman of that committee. The members of the Nominating Committee as well as the non-employee members of the Compensation Committee receive an additional retainer of $5,000 per year, or $10,000 in the case of the chairman of the committee. Directors who are not employees also receive a fee of $1,000 for each Board meeting attended. When directors take action by written consent without a formal meeting, they receive no compensation for that service.

 

In connection with Mr. Crosetto’s retirement as an executive of the Company in 2003, the Company signed a two-year consulting agreement with Mr. Crosetto. The consulting agreement was renewed in 2005 for one year ending December 31, 2006 and again in 2006 and 2008, each a renewal for a two-year term ending December 31, 2008 and December 31, 2010, respectively. Pursuant to the renewed consulting agreement, Mr. Crosetto continues as a member of the Board and provides the Company and its affiliates with assistance in sales and marketing and with other projects. In consideration of these services and non-competition provisions, Mr. Crosetto receives $255,000 in annual consulting fees and reimbursement for reasonable business-related expenses. The consulting agreement also provides that the consulting fees are in lieu of Board retainers and fees.

 

The Company has encouraged its Board members to hold substantial equity interests by requiring each director to defer at least $50,000 of the annual Board of Directors retainer and by permitting each director, on an annual basis, to elect voluntary deferral of some or all of the remaining fees and retainers. Until December 31, 2007, directors could choose either non-qualified stock options or Deferred Stock Units (“DSUs”) in place of cash. After December 31, 2007, directors may elect to defer fees and retainers in DSUs only, as long as they notify the company of their decision before the year begins. For 2008, five of the directors made voluntary deferrals of some or all of their compensation. The Stock Plan for Directors and the 1999 Stock Incentive Plan govern these deferrals of compensation.

 

DSUs represent the right to receive a like number of shares of Common Stock at a future date, subject to distribution rules. DSUs earn the equivalent of the Company’s dividends, which are paid in cash, but they do not confer voting rights. The Company further encourages deferral by adding a 20% match to any Board of Directors and committee compensation that a director voluntarily defers, but not that portion of the annual Board of Directors retainer which he or she must defer. The fair market value of the Common Stock based on the mean between the highest and lowest sales price for each day of the three day period following the date the DSU is granted is the value the Company uses in converting Board of Directors compensation for retainer payments or attendance fees earned during a calendar quarter into DSUs. When a non-employee director retires from the Board of Directors, the Company will issue him or her shares from the corporate treasury equal in number to the DSUs accrued through the retirement date. The Company normally distributes these shares in two installments within fifteen months following the director’s retirement.

 

Prior to January 2008, a director was given the choice to convert Board of Director compensation into stock options, rather than receiving it as cash or DSUs. In that case, the fair market value of the

Common Stock used to calculate the number of options to be granted was based on the average of high and low stock prices on the day before and the two days following the quarterly earnings call with investors. The dollar figure to which the Company applied this conversion value was three times the amount of compensation the director wanted to defer, after adding the Company’s 20% match mentioned earlier, to the extent that a particular deferral was voluntary. The Company believed that multiplication by three adjusted appropriately for the difference in the value of a stock option and a DSU. The Company then formally granted the resulting number of options to the director as of the last trading day of each quarter. These options, subject to a one year vesting requirement, became exercisable on the first anniversary of the formal grant, and expire on the tenth anniversary. When the director exercises his or her options by paying the fixed exercise price, the Company will issue the resulting shares of Common Stock.

 

As a further measure to increase equity participation by the Board of Directors and better align the directors’ interests with those of other stockholders, a new non-employee director who joins the Board of Directors receives an award of DSUs equivalent in market value to $30,000 for Board membership. This one-time award vests over the director’s first four years of Board service, and the Company will then issue the corresponding Common Stock when the director retires from Board service.

 

Beginning with the first quarter of 2009, all of the director’s compensation, including both the portion that was mandatorily deferred and the portion the director previously may have elected to defer and convert into DSUs, will be credited as a cash-based deferral to avoid the commitment of a large number of shares and the possibility of corresponding gains from a subsequent share price rebound. Any portion of the director’s compensation that was voluntarily deferred will continue to be deferred and credited with a 20% match and amounts attributable to DSU’s will be deferred with interest. Interest will be credited at the rate of 120% of the long term applicable federal rate as published by the IRS. All cash deferrals and credited interest upon the deferrals will be paid when a non-employee director retires from the Board of Directors. The Company will review director’s compensation during the first half of 2009 and expects that any new compensation arrangement will feature an equity component consistent with the philosophy stated above. The primary reason for the change in form of payment is the current and anticipated future volatility of the Common Stock price.

 

The Company has stock ownership guidelines that are designed to increase linkage between shareholders and non-employee directors, as well as senior executives, through retention of stock. The Company also reimburses reasonable travel expenses, that its directors incur in attending Board of Directors and committee meetings and fees and expenses in connection with director continuing education.

 

 

 

 

 

 

The Audit Committee of the Board of Directors (the “Audit Committee”) assists the Board in fulfilling its responsibility to relevant constituencies, including stockholders and potential stockholders of the Company, regarding internal controls, corporate accounting practices, reporting practices, and the quality and integrity of the financial reports of the Company. The Audit Committee also maintains free and open communication among the Board, the Company’s financial management, including its Chief Financial Officer and its Director of Internal Audit, other Company executives, including its General Counsel, and its independent registered public accountants, KPMG LLP (the “auditors”). Company management has primary responsibility for the financial statements, internal control over financial reporting, and for the Company’s compliance with legal and regulatory requirements. The Company’s auditors are responsible for expressing an opinion on conformity of the Company’s audited financial statements with generally accepted accounting principles in the United States, and annually auditing the effectiveness of internal control over financial reporting. It is the Audit Committee’s responsibility to monitor and oversee the performance of these responsibilities and to report to the full Board of Directors.

 

Our Board of Directors has determined that each member of the Audit Committee is an “independent director” as defined in the Listing Standards of the Exchange and the Company’s corporate governance standards. In addition, our Board of Directors has determined that Stephen V. Murphy, Douglas B. Fox and Marcia J. Hooper are “audit committee financial experts”, as defined by Securities and Exchange Commission rules.

 

The Audit Committee reviewed and discussed the audited financial statements and the auditor’s evaluation of the Company’s internal controls over financial reporting for fiscal 2008 with the Company’s auditors, with management, and with the entire Board of Directors. The Committee also discussed with the auditors the matters required to be discussed by Statement on Auditing Standards No. 61 (“Communication with Audit Committee,” as amended). In addition, the Audit Committee has received from the auditors the letter and written disclosures respecting fiscal 2008, which are required by the Public Company Accounting Oversight Board, and has discussed with them their independence from the Company and its management. Furthermore, the Audit Committee considered and determined that the auditors’ non-audit services to the Company were consistent with the guidelines established to ensure auditor independence.

 

Based upon our reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board agreed, that the audited financial statements for fiscal 2008 be included in the Company’s annual report on Form 10-K for the year ended December 31, 2008, for filing with the Securities and Exchange Commission.

 

This report by the Audit Committee is not to be deemed filed under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, and is not to be incorporated by reference into any other filing of the Company under those statutes except to the extent that the Company may expressly refer to this report for incorporation by reference in a particular instance.

 

The undersigned, being all the members of the Audit Committee, submit this report to the Company’s stockholders.

 

Stephen V. Murphy, Chairman

Douglas B. Fox

Marcia J. Hooper

Lisa A. Stanley

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

 

Consistent with Securities and Exchange Commission policies regarding auditor independence, the Audit Committee pre-approves all audit and non-audit services provided by the independent auditors prior to the engagement of the independent auditors with respect to such services. The Chairman of the Audit Committee, who is an independent director, has been delegated the authority by the Committee to pre-approve the engagement of the independent auditors if the fees for the service are estimated to be less than $50,000, unless the cumulative amount of fees for previously approved services exceeds 30% of the projected annual audit service fees, in which case pre-approval by the entire Audit Committee is required. Each quarter, the Audit Committee reviews the services provided by the independent auditor during the previous quarter as well as the services that were pre-approved by the Chairman of the Audit Committee during the quarter. All services provided by the Company’s independent auditor in 2008 and 2007 were pre-approved by the Audit Committee or its chairman in accordance with the Company’s policy.

 

The professional services provided by KPMG LLP and the aggregate fees for those services rendered during the years ended December 31, 2008 and 2007 were as follows:

 

Audit Fees.  The aggregate fees billed for audit services for the years ended December 31, 2008 and 2007 were $1,720,712 and $1,812,484, respectively. Audit services include the audit of the financial statements included in the Company’s annual reports on Form 10-K, the audit of the effectiveness of the Company’s internal control over financial reporting, the reviews of the financial statements included in the Company’s quarterly reports on Form 10-Q, statutory audits of the Company’s foreign subsidiaries, and other services normally provided by the independent auditor in connection with statutory and regulatory filings. In addition, the aggregate fees billed for audit services for the year ended December 31, 2008 include $238,075 for additional services related to the completion of the 2007 audit of the Company’s financial statements, which were billed and paid during 2008.

 

Audit-Related Fees.  The aggregate fees billed for audit-related services in the years ended December 31, 2008 and 2007 were $140,500 and $116,975, respectively. Audit-related services include audits of the financial statements of the Company’s employee benefit plans, due diligence related to acquisition candidates and consultations concerning financial accounting and reporting standards.

 

Tax Fees.  The aggregate fees billed for tax compliance services in the years ended December 31, 2008 and 2007 were $75,511 and $53,484, respectively. Tax compliance services include the preparation and review of the Company’s domestic and international tax returns and assistance with tax audits. The aggregate fees billed for tax consulting and advisory services in the years ended December 31, 2008 and 2007 were $45,468 and $124,892, respectively. Tax consulting and advisory services include advice and planning related to state, local and foreign taxes.

 

All Other Fees.  There were no other services performed by KPMG LLP during the years ended December 31, 2008 and 2007 that were not included in the above categories.

 

Securities ownership of certain beneficial owners.  The Company does not know of any individual who is the beneficial owner of more than 5% of the Company’s Common Stock that was outstanding on the record date for the Annual Meeting. The only institutional investors known to have held more than 5% of the Company’s Common Stock on that date are set forth in the following table which shows each firm’s percentage of shares actually outstanding on the record date. We took this information from the most recent reports on Schedule 13G, as filed for each such firm with the Securities and Exchange Commission before the record date for the Annual Meeting.

 

Notes:

 

 

Stock ownership of management.  The following table shows the number of beneficial owners of the Common Stock for each member of the Board of Directors, including the four current nominees for election to the Board, as of the record date for the Annual Meeting. The table also shows the beneficial ownership of the Company’s Named Executive Officers (defined on page 39) on the record date. The table also includes the aggregate number of shares owned beneficially, as a group, by 18 directors and corporate officers. The following table assumes that an individual beneficially owns any shares which he or she may acquire by exercising options which are exercisable within 60 days after the record date, by converting stock equivalents or by withdrawing from an employee benefits plan, even if that individual has not yet made the exercise, conversion or withdrawal of the stock.

 

Except for David J. Shea who owns 1.1%, no individual listed in the following table beneficially owned more than 1% of the Common Stock outstanding on the record date (including for this purpose shares subject to stock options which will become exercisable within 60 days after the record date). The number of shares listed in the following table as beneficially owned for all directors and officers as a group is 7.3% of the Common Stock outstanding on the record date.

 

Notes:

 

 

 

 

The Compensation Committee has overall responsibility for approving and evaluating the director and executive officer compensation plans, policies and programs of the Company. The Compensation Committee recommends to the independent members of the Board compensation for the Chairman and Chief Executive Officer and recommends to the Nominating and Corporate Governance Committee compensation for directors. Members of the Compensation Committee are appointed by the Board, on the recommendation of the Nominating and Corporate Governance Committee. Compensation Committee members may be removed and replaced by the Board.

 

In 2008 the Compensation Committee consisted of three directors — for the period from January to May 22, 2008 the Compensation Committee consisted of Vincent Tese, Chairman; Gloria M. Portela and H. Marshall Schwarz. On May 22, 2008, Marcia J. Hooper replaced Mr. Schwarz on the Compensation Committee. All four directors have extensive management and/or Board experience in managing, overseeing, and/or researching in the fields of employment and/or executive compensation. As determined by the Board, all four directors meet the independence requirements of the Exchange and other legal requirements for the proper administration of the Company’s compensation plans and programs, including requirements under the Federal securities laws and the Internal Revenue Code of 1986, as amended. In addition, each Compensation Committee member is neither a current nor former employee of the Company.

 

The Compensation Committee operates under a charter, which is posted in the “Corporate Governance” section of the Company’s website (www.bowne.com). The Compensation Committee Charter was approved by the Board of Directors on November 20, 2003 and was most recently reviewed and updated on March 6, 2008.

 

The Compensation Committee’s authority and responsibilities include the following:

 

 

 

In 2008 the Compensation Committee met seven times. With the exception of four meetings, all meetings were regularly scheduled to coincide with Board meetings. The Compensation Committee Chairman and the Company’s Senior Vice President, Human Resources determined the agenda for each meeting. Compensation Committee members generally received agendas and discussion materials several days in advance, to provide them with time for adequate review and preparation for the meetings.

 

In 2008 the Compensation Committee engaged Watson Wyatt Worldwide as its independent compensation consultant to advise the Compensation Committee. In March 2009, the Compensation Committee selected PricewaterhouseCoopers, LLP (“PwC”) as their independent compensation consultant. The Compensation Committee regularly provides guidelines which give direction to the consultants, and delegates certain interaction with the consultant to the Company’s Senior Vice President, Human Resources. Services provided by the consultants include competitive compensation benchmarking of executive officer positions, industry research on competitive design of compensation and employment programs, presentation and analysis of long-term incentive design alternatives, compliance with tax laws and regulations governing compensation and benefits, and other technical advice. The consultants did not provide recommendations on compensation decisions for individual executive officers.

 

At the Compensation Committee’s request, from time to time members of management attend portions of Compensation Committee meetings. During 2008 they included the Chairman and Chief Executive Officer; Senior Vice President and Chief Financial Officer; Senior Vice President, General Counsel and Corporate Secretary; and Senior Vice President, Human Resources.

 

On an annual basis, the Senior Vice President, Human Resources presents to the Compensation Committee a summary of the Company’s Management Continuity System including performance evaluations and development plans for each of the Company’s senior executive officers and a review of the talent profile of the Company.

 

In addition, on an annual basis the Compensation Committee reviews and approves increases or changes to each element of the total direct compensation package of each individual executive officer, with the exception of the Chairman and Chief Executive Officer. The Compensation Committee Chairman presents recommendations for the Chairman and Chief Executive Officer for review by the Compensation Committee. The Compensation Committee’s recommendations are then presented to the independent Board members for approval.

 

The 2008 review included comparisons to competitive levels of compensation based on peer groups as approved by the Compensation Committee, as well as year-over-year comparisons. The Compensation Committee concluded that total direct compensation levels, as well as individual elements of compensation, were reasonable for all executive officers in light of Company performance, business unit performance, individual performance, and competitive practice.

 

At each meeting in 2008 the Compensation Committee held an executive session. No members of management, consultants, or other outsiders attended these executive sessions. Among other topics, discussions and decisions regarding performance, succession and compensation of the Chairman and Chief Executive Officer took place during these executive sessions.

The Compensation Committee took the following key actions at its meetings in 2008:

 

 

In addition the Compensation Committee took the below actions in the first quarter of 2009:

 

 

 

 

The Compensation Committee has reviewed the compensation discussion and analysis, discussed it with management and recommends its inclusion in the Company’s annual report on Form 10K and this proxy statement.

 

Vincent Tese, Chairman
Gloria M. Portela
Marcia J. Hooper

 

Key objectives of the Company’s executive compensation programs are as follows:

 

 

Principal components of ongoing compensation for our executive officers include the following:

 

 

The Company believes that its executive compensation policies, plans and programs advance the objectives listed above and adhere to high standards of corporate governance.

 

The Company’s executive compensation programs have four key objectives described above in the Executive Summary. To accomplish these objectives, the Company’s executive compensation programs are based on the following guiding principles:

 

 

 

The Senior Vice President, Human Resources provides support to the Compensation Committee to carry out its responsibilities including executive compensation programs for Named Executive Officers.

 

To help inform the Compensation Committee’s decisions and monitor the Company’s executive compensation programs, each year the Compensation Committee commissions a benchmarking study of compensation levels for the executive officer positions. As in previous years, the benchmarking study was conducted by the Compensation Committee’s independent compensation consultant Watson Wyatt Worldwide. Comparisons were made to executive compensation levels at 13 publicly traded companies generally viewed as comparable in size and/or industry. These are: Cenveo, Inc., Consolidated Graphics, Inc., Deluxe Corporation, Dow Jones & Co., Inc. The Dun & Bradstreet Corporation, Ennis Inc., Interactive Data Corporation, M&F Worldwide Corporation, Paxar Corporation, R H Donnelley Corporation, The Standard Register Company, Valassis Communications, Inc. and John Wiley & Sons. The Compensation Committee also considers data obtained by the Compensation Committee’s independent compensation consultant from a general industry sample of similarly sized companies, particularly for positions that must be competitive with employers across a wide spectrum of industries.

 

In 2008 the Compensation Committee conducted a total compensation review and benchmark study to confirm the Company’s compensation philosophy and pay is consistent with the Company’s compensation philosophy and performance. The study was presented at the March and April 2008 meetings. The Compensation Committee amended the compensation philosophy to benchmark base salary to the 50th percentile of the market and to retain the benchmark for total cash compensation and total direct compensation at the 65th percentile of the competitive marketplace since the incentive components of the Company’s compensation plans are tied directly to the annual and long term performance of the company. The Compensation Committee

did not commission an updated compensation benchmark study for 2009 discussions since the recommendation of management was to not increase base salaries, AIP targets or LTIP targets. The March 2008 study indicated that:

 

 

The following section provides details on each of the Company’s executive compensation programs. It demonstrates how these programs — individually and in total — accomplish the objectives established for them and follow the guiding principles set forth above.

 

Base Salary Program.  Base salary represents, on average, approximately one-third of an executive officer’s total direct compensation package. This approach is consistent with industry practice, as demonstrated by the competitive benchmarking commissioned by the Compensation Committee.

 

In 2007 the Compensation Committee (and, in the case of Mr. Shea, the independent Board members) approved the following base salary increases effective January 1, 2008 for the Named Executive Officers:

 

 

The Compensation Committee did not approve any salary increases for the Named Executive Officers or any other executives of the Company for 2009. The base salaries remain at the 2008 level for 2009.

 

Annual Incentive Plan.  The Company’s AIP is formula-based and designed to reward executive officers based on the following:

 

 

The financial factor is based on Bowne’s consolidated EBITDA for several reasons. It is a stable measure of the Company’s operating cash flow, is a key measure in the Company’s planning and budgeting processes, is a measure that is regularly monitored in the Company’s management reporting, and is easily calculated for the total Company. Threshold, target, and maximum levels of respective consolidated EBITDA for use in the AIP calculations were approved by the Compensation Committee at the January 2008 meeting based on the Company’s 2008 budget and on historical Company and peer performance and revised in March 2008 to reflect the acquisitions of GCOM² Solutions and Rapid Solutions Group.

 

Strategic initiatives are quantifiable measures of operating performance that are aligned with the Company’s operating and strategic plans and are critical to the Company’s success. For 2008 the selected metrics are related to improvement in days outstanding of receivable balances, operating efficiencies and productivity gains in continuing businesses and attainment of integration of synergies of acquired companies. The selected strategic initiatives are approved by the Compensation Committee based on the strategic and operating plans for the Company and on the recommendation of the Chairman and Chief Executive Officer. Strategic initiatives for the Chairman and Chief Executive Officer are reviewed and approved by the Compensation Committee. The Compensation Committee sets AIP targets at levels designed to challenge the Company’s management to achieve operating and strategic plans to improve year over year performance.

 

The financial factors and strategic initiatives for a fiscal year are approved by the Compensation Committee in January of that fiscal year subject to adjustments for significant corporate events, and are based on the Company’s strategic and operating plans approved by the Board of Directors in December of the prior year. The Compensation Committee (and, in the case of Mr. Shea, the independent Board members) reviews and approves the target AIP awards for executive officers, including all Named Executive Officers, in December of the prior fiscal year.

 

The Compensation Committee then confirms the fiscal year results against the financial and strategic targets previously established and approves payments of the AIP awards during the first quarter of the following year, after completion of the Company’s audited financial statements and assessment of strategic initiatives.

 

Each Named Executive Officer has a threshold, target, and maximum AIP award as approved by the Compensation Committee (and, in the case of Mr. Shea, the independent Board members) in December of the prior fiscal year, which is reported in the “Non-equity incentive plan compensation” column of the 2008 Grants of Plan Based Awards Table.

 

These incentive formulas directly link each Named Executive Officer’s incentive payment to the financial performance of the Company and/or the business unit for which the Named Executive Officer has principal responsibility, and to strategic initiatives that are critical to the Company’s overall success. Also, these awards are intended to be fully deductible expenses on the Company’s tax returns.

 

The Company did not meet any of the financial goals established for 2008. A minimum level of the strategic goals was attained. On the recommendation of management, no AIP awards were approved or paid for the Named Executive Officers or for any other participants in the AIP with the exception of a small number of awards to employees who were guaranteed a minimum payment upon hire.

 

Long-Term Equity Incentive Plan and Long Term Incentive Plan.

 

The Company’s average ROIC during the first two years of the performance period (2006 — 2007) exceeded the pre-determined maximum level, therefore in accordance with the plan, the LTEIP awards granted for the 2006-2008 performance cycle were calculated at the pre-set maximum level and settled in the first quarter of

2008. The Audit Committee reviewed and approved the calculation of the average ROIC. The Compensation Committee (and, in the case of Mr. Shea, the independent Board members) approved settlement of the LTEIP awards at 200% of target as provided in the LTEIP. A total of 938,000 shares of Company Common Stock was distributed to the LTEIP participants in March 2008 in settlement of the awards. The Named Executive Officers received shares as follows:

 

The Compensation Committee and the Board approved a new LTEIP during 2008 for a one-year performance cycle. A one year performance cycle was selected to complete the three year strategic performance period that was established under the 2006-2008 LTEIP which was settled per the plan design after two years due to the attainment of the maximum performance goals as of the end of the second year of the three year cycle. The LTEIP rewards progress against the Company’s current strategic plan. Further, since the awards are denominated in RSUs and settled in shares of Common Stock, the LTEIP directly rewards the creation of shareholder value and assists in the accumulation of significant equity stakes for participating executives.

 

Under the LTEIP for 2008, executives, including the Chairman and Chief Executive Officer and all other Named Executive Officers, were granted a targeted number of RSUs. The aggregate number of target RSUs granted to all executives was approximately 205,000 shares. The RSUs would have been convertible into shares of Common Stock at the end of a one-year performance period based on the Company’s three year average Return on Invested Capital (“ROIC”). The actual number of shares which would have been awardable in the first quarter of 2009 ranged between zero (for average ROIC performance that was less than the pre-determined threshold level) and two times the target RSUs (for average ROIC performance that exceeded a pre-determined maximum level). The Company chose ROIC as the principal measure for the LTEIP because it comprises both growth in profitability and capital efficiency and believes it is a primary driver of shareholder value. The 2008 ROIC targets were calculated based on a three-year average of the ROIC for fiscal years 2006, 2007 and 2008. Attainment of an 11% average ROIC would have been funded 50% of the LTEIP awards, 100% payment of the LTEIP awards would have been made upon attainment of a 13.5% average ROIC and the maximum payment of 200% of the LTEIP awards would have been made if the three year average ROIC was 16% or higher.

 

The Compensation Committee (and, in the case of Mr. Shea, the independent Board members) approved all awards to the Chairman and Chief Executive Officer and other Named Executive Officers and approved the threshold, target and maximum levels of ROIC based on the Company’s strategic plan, and historical and peer analysis.

 

The minimum level of average ROIC was not attained and at its December 2008 meeting the Compensation Committee determined that no LTEIP awards would be paid for the 2008 cycle. The 2008 LTEIP grants are included in the 2008 Grants of Plan Based Award Table, but are not included in the Outstanding Equity Awards at Fiscal Year End Table as they were cancelled prior to December 31, 2008.

 

At its March 5, 2009 meeting, the Compensation Committee (and in the case of Mr. Shea, the independent Board members) approved a new Long Term Incentive Plan (“LTIP”) for a three-year cycle beginning January 1, 2009 and ending December 31, 2011. Any awards earned at the end of the performance cycle will be settled in the first quarter of 2012. The LTIP is similar to the prior LTEIP, incorporating the same individual award targets,

and requiring achievement of specified levels of ROIC performance. However, the LTIP awards were made, and will be settled, in cash rather than awarded in RSUs and settled in shares of Common Stock as under the LTEIP. The primary reason for the change in the form of payment is the current and anticipated future volatility of the Company’s stock price over the three-year cycle. Granting and paying these awards in cash will serve to avoid the commitment of a large number of shares and the possibility of corresponding gains from a subsequent share price rebound. The ROIC targets are calculated based on a three year average of the Company’s ROIC for fiscal year 2009, 2010 and 2011. Attainment of a 9.0% three-year average ROIC will fund 50% of the LTIP awards, 100% payment of the LTIP awards will be made upon attainment of a 10.5% average ROIC over the three years, and the maximum payment of 200% of the LTIP awards will be made if the three year average ROIC is 13.5% or higher. If the Company’s average ROIC during the first two years of performance cycle (2009-2010) exceeds the predetermined maximum level of 13.5%, then the awards will become vested and paid at a maximum of 150%, but will still be settled in the first quarter of 2012. In addition, the LTIP design for 2009-2011 allows for participants to earn reduced awards for average ROIC performance over any two consecutive year period during the cycle, or for ROIC performance in any single year of the cycle. The Company again chose ROIC as the principal measure for the LTIP because it comprises both growth in profitability and capital efficiency and it is a primary driver of shareholder value.

 

The Compensation Committee (and, in the case of Mr. Shea, the independent Board members) approved all awards to the Chairman and Chief Executive Officer and other Named Executive Officers and approved the threshold, target and maximum levels of ROIC based on the Company’s strategic plan, and historical and peer analysis. The estimated compensation expense to be recognized for the 2009 LTIP at the target performance metric for the years ended December 31, 2009 through 2012, is approximately $2.3 million, $3.0 million, $3.0 million and $0.8 million, respectively and is intended to be fully tax-deductible by the Company.

 

Restricted Stock, RSUs and Stock Option Grants.

 

Any stock option grants are made with exercise prices that are no less than the FMV of the Common Stock on the date of grant. The FMV is defined as the mean of the highest and the lowest trading prices reported on the Exchange on that day. The grant dates of the restricted stock, RSU and stock option grants correspond to pre-determined meetings of the Compensation Committee and Board, respectively, during which the awards are approved. Compensation expense related to the receipt of restricted stock, RSUs and the exercise of non-qualified stock options is intended to be fully tax-deductible by the Company. Grants of RSUs were approved by the Compensation Committee in January 2008 (and, in the case of Mr. Shea, by the independent Board members in March 2008) and are reported in this proxy statement. In 2007, the Compensation Committee deferred the regular grant of stock options normally made at the Compensation Committee’s annual December meeting and requested that management, with the assistance of the independent compensation consultant, recommend whether the 2007 equity grant should be made in the form of stock options or RSUs. The recommendation with which the Compensation Committee agreed, was to grant RSUs to provide for additional full share ownership for the Named Executive Officers and the other senior officers. In December 2008, the Company returned to the historical normal practice of granting stock options. The Compensation Committee (and, in the case of Mr. Shea, by the independent Board members) approved total grants of 500,000 options to the Named Executive Officers.

 

Stock Ownership Guidelines.

 

During the first quarter of 2009, based on changes in the Company’s stock price, no senior executive was in compliance with the established stock ownership guidelines. The Compensation Committee therefore, approved

new ownership guidelines in the form of net share retention guidelines, which were based on dollar values equal to multiples of their base salaries. Under this approach each member of the Board of Directors and senior executive will be required to hold at least 50% of any net shares acquired through the Company’s Board of Directors compensation programs or executive equity incentive plans until they leave the Board of Directors or employment with the Company. Net shares are defined as shares acquired net of any shares used to pay required exercise price and/or tax liability. The Compensation Committee believes this approach, which does not depend on the underlying stock price, will be more durable than the previous approaches to executive stock ownership, while ensuring long term alignment of executive and stockholder interests.

 

Benefits and Executive Perquisites.  It is the Company’s policy to provide limited executive perquisites and special benefits, most of which are business-related. The Chairman and Chief Executive Officer and the other Named Executive Officers participate in the Company’s tax-qualified 401(k) Savings Plan, on the same basis as all other U.S. based full-time employees. The 401(k) match on employee contributions is currently suspended due to the severe economic environment. If a contribution the Company makes under the 401 (k) Savings Plan for the benefit of an executive who is a participant in the LTIP would exceed the limit imposed by the Employee Retirement Income Security Act (“ERISA”), then the Company makes only the allowable contribution to the executive’s account and converts the balance into DSUs. In the latter case the Company’s Excess ERISA Plan provides for income taxes on the disallowed portion by awarding DSUs equivalent to 140% of the amount by which the contribution would have exceeded the allowable limit. Beginning with the 2008 contribution (made in March 2009), the Excess ERISA Plan contributions and tax allowance will be not be converted to DSUs and will be credited to a deferred account in cash which will be credited with interest at the rate of 120% of the long term applicable federal rate as published by the IRS. The Chairman and Chief Executive Officer and most of the other Named Executive Officers participate in the Company’s Pension Plan on the same basis as all other U.S. based full-time employees. The Compensation Committee recommended and the Board approved a redesign of the Company’s pension plan to a “cash-balance” plan that is further described following the 2008 Pension Benefits Table. The Chairman and Chief Executive Officer and other Named Executive Officers also participate in a Supplemental Executive Retirement Plan which is intended to provide benefits that cannot be provided under the tax-qualified plans due to limits on compensation under the Internal Revenue Code, and to provide competitive retirement benefits to executives who joined the Company at mid-career. The various pension plans are discussed in more detail, and benefits for the Chairman and Chief Executive Officer and each Named Executive Officer are included in the 2008 Pension Benefits Table.

 

The Chairman and Chief Executive Officer and other Named Executive Officers also receive an auto allowance or the use of a company provided car, which benefit is also provided to a wider group of executives in the Company. In addition, the Company provides business-related perquisites in the form of payment of membership fees in a country club to some of the Named Executive Officers which may be used for both personal and business functions.

 

All amounts related to perquisites for Named Executive Officers are disclosed in the “All other compensation” column of the Summary Compensation Table, along with details on their valuations.

 

Termination Protection Agreements.  The Company has Termination Protection Agreements (“TPAs”) with the Chairman and Chief Executive Officer and other Named Executive Officers (as well as certain other officers of the Company). The TPAs are designed to:

 

 

A more detailed description of the benefits payable under the TPAs, as well as estimated payments that would be paid to the Chairman and Chief Executive Officer and other Named Executive Officers if a change-in-control related termination had occurred on the last business day of 2008, are included following the tabular disclosures below.

 

The Company does not have any specified termination plans or policies related to terminations not in connection with a change in control, nor does it have employment agreements in place for the Chairman and Chief Executive Officer or any of its other Named Executive Officers.

 

In making executive compensation decisions, the Compensation Committee is mindful of the impact of regulatory requirements on those decisions. In particular, regulatory requirements affect the Compensation Committee’s decisions in the following ways:

 

 

The Company and its Compensation Committee regularly consider ways to improve the ability of its total direct compensation program to meet the objectives established for it. The Company believes that its executive compensation programs are reasonable, appropriate, and in the best interests of shareholders. Key reasons for this conclusion include the following:

 

 

 

The table below summarizes the total compensation paid or earned by each of the executive officers of the Company whose name appears in the table (“Named Executive Officers”) for the fiscal year ended December 31, 2008. The Company has not entered into any employment agreements with any of the Named Executive Officers. When setting the total compensation for each of the Named Executive Officers, the Compensation Committee reviews total compensation which includes the executive’s current cash compensation (base salary and annual incentive awards), long-term and equity-based compensation.

 

Amounts listed under column (e), “Non-Equity Incentive Plan Compensation” for 2008 were determined by the Compensation Committee at its March 5, 2009 meeting in accordance with previously approved financial and strategic goals established in January 2008. No awards were paid for 2008.

 

Based on the FMV of equity awards granted to Named Executive Officers in 2008 and the base salary of the Named Executive Officers, “Salary” accounted for approximately 34% of the total compensation of the Named Executive Officers in 2008. Because the value of equity awards included for 2008 is based on the amounts recognized in 2008 under FAS 123(R) rather than the grant date fair value of shares granted in 2008, this percentage cannot be derived directly using the amounts reflected in the table below.

 

Notes: