UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

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

Filed by the Registrant þ
Filed by a Party other than the Registrant o

Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12

THE TIMBERLAND COMPANY

(Name of Registrant as Specified In Its Charter)

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

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THE TIMBERLAND COMPANY
200 Domain Drive
Stratham, New Hampshire 03885

 

 

April 12, 2011

 

TO THE STOCKHOLDERS:

 

The Board of Directors and Officers of The Timberland Company invite you to attend the 2011 Annual Meeting of Stockholders to be held on Thursday, May 26, 2011, at 9:00 a.m., at the Company’s headquarters located at 200 Domain Drive, Stratham, New Hampshire.

 

Your vote is important. Instructions on how to vote are contained in our Proxy Statement and in the Notice of Internet Availability of Proxy Materials. Please cast your vote by telephone or over the Internet as described in those materials. Alternatively, if you requested a copy of the proxy card by mail, you may mark, sign, date and return the proxy card in the envelope provided.

 

Cordially,

 

Sidney W. Swartz
Chairman

 

THE TIMBERLAND COMPANY
200 Domain Drive
Stratham, New Hampshire 03885

 

 

NOTICE OF 2011 ANNUAL MEETING OF STOCKHOLDERS

 

 

 

Purposes for Meeting:

 

 

Holders of Class A Common Stock will vote separately as a class to elect three directors. Holders of Class A Common Stock and holders of Class B Common Stock will vote together as a single class to elect the remaining seven directors and on all other proposals listed above.

 

You will receive notice of and may vote and act at the Annual Meeting only if you were a stockholder of record at the close of business on Friday, April 1, 2011.

 

Important Notice Regarding the Availability of Proxy Materials

for the 2011 Annual Meeting to be held on May 26, 2011

 

Our Proxy Statement and Annual Report to Stockholders are available on the Internet at www.edocumentview.com/TBL. We intend to begin mailing our Notice of Internet Availability of Proxy Materials to stockholders on or about April 14, 2011. At that time, we will also begin mailing paper copies of our proxy materials to stockholders who request them. Please see page 1 of this Proxy Statement for more information on how these materials will be distributed.

 

By Order of the Board of Directors

 

Danette Wineberg
Secretary

 

April 12, 2011

 

THE TIMBERLAND COMPANY
200 Domain Drive
Stratham, New Hampshire 03885

 

PROXY STATEMENT

 

April 12, 2011

 

TABLE OF CONTENTS

 

 

The Board of Directors of The Timberland Company, a Delaware corporation, is sending you the enclosed proxy in connection with its 2011 Annual Meeting of Stockholders (the “Annual Meeting”) and any adjourned sessions of the Annual Meeting. The Annual Meeting will be held on Thursday, May 26, 2011, at 9:00 a.m., at the Company’s headquarters located at 200 Domain Drive, Stratham, New Hampshire. Throughout this Proxy Statement, we will refer to ourselves as “The Timberland Company”, “Timberland”, “we”, “our”, “its” or the “Company”. The purposes of the Annual Meeting are to:

 

 

You may vote at the Annual Meeting only if you were a stockholder of record as of the close of business on Friday, April 1, 2011, which we refer to as the record date. As of the record date, the following numbers of shares of the Company’s Common Stock were outstanding:

 

 

We intend to begin mailing our Notice of Internet Availability of Proxy Materials (the “Notice”) to stockholders on or about April 14, 2011. Stockholders may then access our Proxy Statement and our Annual Report to Stockholders (including our Annual Report on Form 10-K) on the Internet and vote over the Internet or by telephone, or request delivery of a full set of materials by mail or e-mail. The proxy materials will be posted on the Internet, at www.edocumentview.com/TBL, no later than the day we begin mailing the Notice. If you receive the Notice, you will not receive copies of the proxy materials by mail or e-mail unless you request them in the manner set forth in the Notice.

 

The Notice contains important information, including:

 

 

We bear all costs of solicitation of proxies. We may solicit proxies personally or by telephone, mail, telegram or the Internet. None of the Company’s directors, officers or employees will be specially compensated for soliciting proxies. The SEC has adopted rules that allow us to send in a single envelope our Notice of Internet Availability of Proxy Materials or a single copy of our Proxy Statement and other required

Annual Meeting materials to two or more stockholders sharing the same address. The envelope must contain a separate Notice for each stockholder at the shared address and each Notice must also contain a unique control number that each stockholder will use to gain access to our proxy materials and vote. If we are mailing a paper copy of our proxy materials, the rules require us to send each stockholder at the shared address a separate proxy card.

 

We believe these rules are beneficial to both our stockholders and to us. Our printing and postage costs are lowered anytime we eliminate duplicate mailings to the same household. However, stockholders at a shared address may revoke their consent to the householding program and receive their Notice in a separate envelope, or, if they have elected to receive our proxy materials in the mail, receive a separate copy of these materials. If you are a registered holder and consented to the householding program and wish to revoke your consent for future years, or if you are a registered holder and have elected to receive proxy materials by mail at an address shared by more than one stockholder and want to receive a separate copy of these materials for our 2011 Annual Meeting, please contact Computershare by telephone at (877) 282-1168, by Internet at www.computershare.com, or in writing at P.O. Box 43078, Providence, Rhode Island, 02940-3078. If you are a beneficial owner of shares held in street name, please contact the holder of record directly if you have questions, require additional copies of the Notice, Proxy Statement or Annual Report, or wish to receive multiple sets of materials by revoking your consent to householding.

 

If you received more than one Notice or set of proxy materials, you may have multiple accounts in which shares of the Company are held. You should vote all of the shares represented by such Notices and proxy materials. Certain brokers and nominees have procedures in place to discontinue duplicate mailings upon a stockholder’s request. You should contact your broker or nominee for more information. Additionally, our transfer agent, Computershare, can assist you if you want to consolidate multiple registered accounts existing in your name. You may contact Computershare by telephone at (877) 282-1168 or by Internet at www.computershare.com.

 

You may vote your shares prior to the Annual Meeting by following the instructions provided in the Notice of Internet Availability of Proxy Materials, this Proxy Statement and the website, www.edocumentview.com/TBL. If you requested a paper copy of the proxy materials, voting instructions are contained in the proxy card enclosed with those materials.

 

 

By Internet (www.envisionreports.com/TBL): Use the Internet to transmit your voting instructions until 11:59 p.m. EDT on May 25, 2011. Have your Notice of Internet Availability of Proxy Materials with you when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form.

 

By telephone (1-800-652-VOTE (8683)):  Submit your vote by telephone until 11:59 p.m. EDT on May 25, 2011. Have your Notice of Internet Availability of Proxy Materials with you when you call and follow the instructions you receive from the telephone voting site.

 

By mail:  If you requested delivery of a copy of the proxy materials by mail, mark, sign and date the proxy card enclosed with those materials and return it in the postage-paid envelope provided. To be valid, proxy cards must be received before the start of the Annual Meeting.

 

 

If you are a registered stockholder, you may vote any shares registered in your name in person at the Annual Meeting as the stockholder of record as of the record date.

 

If your shares are held in street name, you are not a holder of record of those shares and cannot vote them in person at the Annual Meeting unless you have a legal proxy from the holder of record. If you plan to

attend the Annual Meeting and vote your street name shares at the Annual Meeting, you should request a legal proxy from the holder of record and bring it with you to the meeting.

 

If you properly return your proxy but do not specify how to vote your shares, then your shares will be voted to fix the number of directors at ten and to elect all ten nominees, to ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm, to approve the compensation of our named executive officers, and to approve holding future advisory votes on executive compensation every year.

 

You may revoke your proxy at any time before the Annual Meeting by either:

 

 

If your shares are held in street name, you should contact the holder of record about revoking your voting instructions and changing your vote prior to the meeting.

 

The Board of Directors knows of no other matters to be presented at the Annual Meeting. If any additional matters should properly come before the Annual Meeting, the persons appointed as proxy to vote on such matters intend to vote in accordance with his, her or their judgment. If a nominee for director is unable to serve as a director, the persons appointed as proxy may, in his, her or their discretion, vote for another person as director or vote to reduce the number of directors to less than ten, as the Board of Directors may recommend. The Company believes that all of the nominees will be available to serve.

 

A quorum of our stockholders must be present, whether by proxy or in person, for the Annual Meeting to occur. Consistent with Delaware law and under the Company’s By-Laws, a majority of the voting power of all stock issued and outstanding and entitled to vote at the Annual Meeting constitutes a quorum.

 

To determine the presence of a quorum, in addition to shares voted for or against any matter, the following will count as shares present:

 

 

You are entitled to one vote for each share of Class A Common Stock you hold and ten votes for each share of Class B Common Stock you hold. Holders of Class A Common Stock will vote separately as a class with respect to the election of nominees Edward W. Moneypenny, Peter R. Moore and Terdema L. Ussery, II as directors. Holders of Class A Common Stock and holders of Class B Common Stock will vote together as a single class with respect to the election of nominees Sidney W. Swartz, Jeffrey B. Swartz, Catherine E. Buggeln, André J. Hawaux, Kenneth T. Lombard, Bill Shore and Carden N. Welsh as directors, the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered accounting firm, the approval of the compensation of our named executive officers, and the advisory vote on the frequency with which future advisory votes on executive compensation should be held.

 

We will appoint one or more inspectors of elections who will count the votes cast by proxy or in person at the Annual Meeting. Under our By-Laws, the ten nominees for election as directors who receive the greatest number of votes properly cast at the Annual Meeting will be elected. Under our By-Laws, an affirmative vote of a majority of the votes properly cast at the Annual Meeting is necessary to ratify the appointment of

Deloitte & Touche LLP as the Company’s independent registered public accounting firm, approve, on an advisory basis, the compensation of our named executive officers, and approve, on an advisory basis, the frequency with which future advisory votes on executive compensation should be held. For the advisory vote on the frequency with which future advisory votes on executive compensation should be held, if none of the frequency alternatives receive a majority vote, we will consider the frequency that receives the highest number of votes properly cast by stockholders to be the frequency that has been selected by stockholders.

 

For purposes of the vote required under our By-Laws, we will not treat abstentions or broker non-votes as votes cast. Therefore, they will have no effect on the voting for any matter to be voted on at the Annual Meeting under our By-Laws. A broker non-vote occurs when a broker submits a proxy card for shares held in a fiduciary capacity (often referred to as being held in street name), but does not indicate a vote on a particular matter because the broker has not received voting instructions and does not have discretion to vote on that matter without such instructions. Under the rules that govern brokers who are voting shares held in street name, brokers have the discretion to vote those shares on routine matters but not on non-routine matters. At this year’s Annual Meeting, the only routine matter is the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm.

 

The directors elected at each Annual Meeting serve for the following year and until their respective successors are duly elected and qualified. The Company’s By-Laws specify that the Board of Directors or the stockholders may determine the number of directors of the Company. The Board of Directors or the stockholders may increase the number of directors fixed at the Annual Meeting and may fill any vacancy arising on the Board of Directors.

 

The current Board of Directors consists of twelve members. The incumbent directors were elected at the 2010 Annual Meeting of Stockholders, except for André J. Hawaux, who was appointed by the Board of Directors on December 2, 2010. Ian W. Diery, John A. Fitzsimmons and Virginia H. Kent will not stand for re-election as they have served on the Board of Directors for 15 years in the cases of Mr. Diery and Mr. Fitzsimmons and 12 years in the case of Ms. Kent (as of the 2011 Annual Meeting of Stockholders). The Board of Directors recommends the following nominees for election at the Annual Meeting. These nominees were recommended to the Board by the Governance and Nominating Committee.

 

The names, ages, principal occupations during the past five years and certain other information with respect to the nominees for election are as follows:

 

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE

 

FOR

 

THE ELECTION OF ALL 10 NOMINEES FOR DIRECTOR.

 

The Board of Directors has established corporate governance principles for the Board of Directors and committees thereof to follow regarding effective corporate governance and compliance with laws and regulations. The corporate governance principles require the Board of Directors to appoint a Lead Director if the Chairman of the Board of Directors is not independent. Therefore, because Sidney W. Swartz, the Chairman of the Board, is not independent, the Board of Directors appointed John A. Fitzsimmons as the Lead Director. The Lead Director, among other duties, acts as the presiding director at executive sessions of the non-management members of the Board of Directors and assists the Board of Directors and management in setting the agenda for each meeting of the Board of Directors. In addition, the Company has chosen to separate the positions of Chief Executive Officer and Chairman of the Board. The Company believes this separation results in a diversity of viewpoints and better balances the responsibilities incumbent upon each position.

 

The Board and its committees oversee all aspects of the Company’s business, including risk management. On a continual basis, the Board assesses risks to the Company’s business by evaluating the Company’s strategic plans in light of market and economic conditions. In addition, the Board receives reports from each of its standing committees regarding each committee’s particularized areas of focus, as further described below under the heading “Committees of the Board of Directors and Board of Directors Independence.” On an annual basis, the Audit Committee reviews, analyzes and provides feedback on a comprehensive enterprise risk assessment prepared by management. The assessment includes identification and analysis of key enterprise risks and related controls and other mitigation measures. The Audit Committee also meets regularly in executive sessions with the Company’s independent auditor, General Counsel and Director of Internal Audit, and reports any findings or issues to the full Board.

 

We have also adopted a Code of Ethics that applies to all directors, executives, and employees of the Company to deter wrongdoing and promote ethical conduct, compliance with laws and internal reporting of wrongdoing. The corporate governance principles, the Code of Ethics and the charter for each of the

committees of the Board of Directors are available on the Company’s website, www.timberland.com, and may also be obtained by writing to the Company’s Secretary at 200 Domain Drive, Stratham, New Hampshire 03885.

 

Stockholders and other interested parties may send communications to the non-management members of the Board of Directors. Stockholders may send their written communications to the Secretary of the Company at 200 Domain Drive, Stratham, New Hampshire 03885 and all communications will be given directly to the non-management directors unless they would be more appropriately addressed by other departments within the Company, such as customer or vendor services.

 

Committees of the Board

 

The Board of Directors has the following standing committees: Governance and Nominating Committee, Management Development and Compensation Committee, Audit Committee, and Corporate Social Responsibility Committee. As noted above, each of these committees has a charter, a copy of which is available on our website at www.timberland.com or by writing to the Secretary of the Company at 200 Domain Drive, Stratham, New Hampshire 03885.

 

During 2010, the Board of Directors and its committees held the following numbers of meetings:

 

 

 

All directors attended at least 75% of the total number of meetings held in 2010 of the Board of Directors and the committees of the Board on which he or she served. The Company expects all nominees for the Board of Directors to attend the Annual Meeting of Stockholders. All members of and nominees for the Board of Directors attended last year’s Annual Meeting, except for Mr. Lombard.

 

The membership and responsibilities of each of these committees is described in greater detail below.

 

The members of the Governance and Nominating Committee are Terdema L. Ussery, II, Chair, John A. Fitzsimmons, Virginia H. Kent and Bill Shore. The Governance and Nominating Committee’s responsibilities include, but are not limited to:

 

 

 

The Governance and Nominating Committee has established a process for identifying and evaluating nominees for director. Although the Governance and Nominating Committee will consider nominees recommended by stockholders, the Committee believes that the process it utilizes to identify and evaluate nominees for director is designed to produce nominees that possess the educational, business and personal attributes that are best suited to further the Company’s mission. The Committee may identify nominees through the use of professional search firms that may utilize proprietary screening techniques to match candidates to the Committee’s specified qualifications. The Committee may also receive recommendations from existing directors, executive officers, key business partners, and trade or industry affiliations. In accordance with the Company’s governance principles, the Committee will consider the following factors, among others, in evaluating the composition of the Board and its committees as well as Committee or stockholder recommended nominees: a candidate’s experience, skills, and other qualifications in view of the specific needs of the Board and the Company; diversity of background, including but not limited to viewpoint, professional experience, education, skills, race, gender and national origin; and high ethical standards, integrity and proven business judgment. The Committee thoroughly considers each of these factors in light of then current and anticipated Board structure and needs. The Company’s Chief Executive Officer discusses all prospective nominees with the Committee. The Committee further evaluates each nominee based on the criteria described above prior to approving a nominee for election to the Board. In accordance with the Committee’s charter, the Committee periodically evaluates the overall composition and effectiveness of the Board and its committees.

 

To be considered by the Governance and Nominating Committee for nomination and inclusion in the Company’s Proxy Statement for its 2012 Annual Meeting of Stockholders, stockholder recommendations must be received by the Company’s Secretary no later than December 14, 2011. Stockholders should write to the Company’s Secretary at 200 Domain Drive, Stratham, New Hampshire 03885 and such recommendations must include: (i) the name and address of the candidate, (ii) a brief biographical description as well as qualifications, taking into consideration the criteria described above, and (iii) a signed consent from the candidate indicating his or her consent to be named in the proxy statement and serve if elected.

 

The members of the Management Development and Compensation Committee are Kenneth T. Lombard, Chair, John A. Fitzsimmons, Edward W. Moneypenny and Peter R. Moore. The Management Development and Compensation Committee’s responsibilities include, but are not limited to:

 

 

The members of the Corporate Social Responsibility Committee are Bill Shore, Chair, Virginia H. Kent, Kenneth T. Lombard and Peter R. Moore. The Corporate Social Responsibility Committee’s responsibilities include, but are not limited to:

 

 

Edward W. Moneypenny, Chair, Ian W. Diery, John A. Fitzsimmons, Virginia H. Kent and Terdema L. Ussery, II are the members of our Audit Committee. The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. All of the members of our Audit Committee are independent (as defined in the New York Stock Exchange’s listing standards). The Board has determined that there is at least one audit committee financial expert serving on the Audit Committee. Mr. Moneypenny is the named audit committee financial expert. The primary purpose of the Audit Committee is to assist the Board in its oversight of the Company’s financial reporting process and its responsibilities include, but are not limited to:

 

 

The Audit Committee Report

 

The Audit Committee has (1) reviewed and discussed the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2010 with the Company’s management, (2) discussed with the Company’s independent registered public accounting firm, Deloitte & Touche LLP, the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board (the “PCAOB”) in Rule 3200T, (3) received the written disclosures and the letter from Deloitte & Touche LLP required by applicable requirements of the PCAOB regarding Deloitte & Touche LLP’s communications with the Audit Committee concerning independence, and (4) discussed with Deloitte & Touche LLP their independence as the Company’s independent registered public accountants.

 

Based on the review and discussions referred to in the preceding paragraph, the Audit Committee recommended to the Board of Directors, and the Board of Directors recommended, that the audited consolidated financial statements for the fiscal year ended December 31, 2010 be included in the Company’s

2010 Annual Report on Form 10-K for the fiscal year ended December 31, 2010 for filing with the Securities and Exchange Commission.

 

Audit Committee:
Edward W. Moneypenny, Chair
Ian W. Diery
John A. Fitzsimmons
Virginia H. Kent
Terdema L. Ussery, II

 

Audit and Non-Audit Fees

 

The aggregate fees billed by Deloitte & Touche LLP, the member firms of Deloitte & Touche Tohmatsu, and their respective affiliates (collectively “Deloitte”) for professional services rendered in each of the fiscal years ended December 31, 2010 and December 31, 2009 were as follows:

 

Audit Fees:  $2,540,725 and $2,559,721, respectively, for professional services necessary to perform an audit in accordance with the standards of the Public Company Accounting Oversight Board, including services rendered and expenses incurred for the Company’s annual financial statements (including services in connection with rendering an opinion under Section 404 of the Sarbanes-Oxley Act of 2002) and for reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q. Such fees also include fees for services that are normally incurred in connection with statutory and regulatory filings or engagements, such as comfort letters, statutory audits, attest services, consents and review of documents filed with the Securities and Exchange Commission;

 

Audit-Related Fees:  There were no audit-related fees for 2010 and 2009 that are not included in the preceding paragraph;

 

Tax Fees:  $90,758 and $117,995, respectively, for professional services rendered for tax compliance, tax advice, and tax planning; and

 

All Other Fees:  $53,167 and $44,507, respectively, for products and services other than the services specified under Audit Fees, Audit-Related Fees and Tax Fees. These products and services primarily consisted of tax services for Sidney Swartz.

 

In accordance with the Sarbanes-Oxley Act of 2002, the Audit Committee has established policies and procedures under which all audit and non-audit services performed by the Company’s independent registered public accounting firm must be approved in advance by the Audit Committee. During fiscal 2010 and 2009, all audit and non-audit services performed by Deloitte were pre-approved in accordance with these policies and procedures.

 

Audit Committee Pre-Approval of Audit and Non-Audit Services

 

As part of its responsibility for oversight of the independent registered public accountants, the Audit Committee has established a pre-approval policy for engaging audit and permitted non-audit services provided by the Company’s independent registered public accountants. In accordance with this policy, each type of audit, audit-related, tax and other permitted service to be provided by the independent registered public accounting firm is specifically described and each such service, together with a fee level or budgeted amount for such service, is pre-approved annually by the Audit Committee. The Audit Committee has delegated pre-approval authority to its Chair to pre-approve additional non-audit services (provided such services are not prohibited by applicable law) up to a pre-established aggregate dollar limit. All services pre-approved by the Chair of the Audit Committee must be presented at the next Audit Committee meeting for its review and ratification.

Board Independence

 

We believe that all of the members of our Board of Directors, other than Sidney Swartz, Jeffrey Swartz and Carden Welsh, are independent. While we believe, therefore, that the majority of the members of our Board of Directors are independent, the Company is exempt from the listing standards of the New York Stock Exchange requiring that a majority of the Board be independent and that all of the members of the compensation and nominating committees be independent. The Company is relying on the “controlled company” exemption provided by the New York Stock Exchange rules based on the fact that more than 50% of the voting power of the Company’s outstanding voting stock is held by Sidney Swartz and The Sidney W. Swartz 1982 Family Trust.

 

The Board has not adopted categorical standards with respect to director independence as it believes it is more appropriate to make independence determinations taking into account all factors and circumstances that it considers relevant. In May 2010, the Board concluded that no proposed member of the Audit Committee, including any family member, had any personal or financial relationship with the Company that would affect the independence of the Audit Committee member. In making this conclusion, the Board considered the Governance and Nominating Committee’s independence recommendation, and the directors’ and officers’ questionnaires completed by Board members. With respect to the Securities and Exchange Commission and New York Stock Exchange requirements that all members of an Audit Committee be independent, the Board has determined that all current members of, or members who have been nominated to serve on, the Audit Committee, qualify as independent based upon such requirements.

 

DIRECTOR COMPENSATION FOR FISCAL YEAR 2010

 

 

 

 

 

Additional Information to Understand the Director Compensation Table

 

In 2010, we paid fees to our non-employee directors in connection with their service as a director as follows: $50,000 annual retainer to each director; an additional $15,000 annual retainer to the Lead Director; $2,000 for each Board of Directors meeting attended; an additional $12,500 annual retainer to each committee chairperson; and $1,000 for each committee meeting attended.

 

Under the Company’s 2007 Incentive Plan, newly elected or appointed non-employee directors receive an initial award on the date of the annual meeting of stockholders at which the director is first elected (or, if the director is first elected or appointed by the Board, on the date of the first annual meeting of stockholders occurring after such director is elected or appointed) of restricted stock units (“RSUs”) having a value equal to $200,000 on the date of grant based upon the closing price of the Company’s Class A Common Stock quoted on the New York Stock Exchange on such date, which grant vests in three (3) equal annual installments. Re-elected directors receive an award, on the date of the annual meeting of stockholders at which such directors are re-elected, of RSUs having a value equal to $100,000 on the date of grant based upon the closing price of the Company’s Class A Common Stock quoted on the New York Stock Exchange on such date, which grant vests in full on the first anniversary of the date of grant.

 

See the section of this Proxy Statement entitled “Security Ownership of Certain Beneficial Owners and Management” for information regarding ownership of the Company’s securities by directors and any nominees for director.

 

In accordance with its charter, the Audit Committee has selected the firm of Deloitte & Touche LLP, an independent registered public accounting firm, to be the Company’s independent registered public accountants for the year ending December 31, 2011 and, with the endorsement of the Board, recommends to stockholders that they ratify such appointment. Deloitte & Touche LLP served in this capacity for the fiscal year ended

December 31, 2010. Its representative will be present at the Annual Meeting, will have an opportunity to make a statement and will be available to respond to appropriate questions.

 

THE BOARD OF DIRECTORS AND THE AUDIT COMMITTEE RECOMMEND THAT YOU VOTE

 

FOR

 

APPROVAL OF ITEM 2.

 

Section 14A of the Securities Exchange Act of 1934, as amended, requires us to allow our stockholders to vote to approve, on an advisory and non-binding basis, the compensation of our named executive officers as disclosed in this Proxy Statement. This vote is commonly referred to as a “say-on-pay” vote. As discussed in detail below under the caption “Compensation Discussion and Analysis”, we are dedicated to a pay-for-performance culture that maximizes stockholder value. Our executive compensation philosophy supports these objectives by attracting and retaining the best management talent and by motivating these employees to achieve business and financial goals that create value for stockholders in a manner consistent with our values.

 

To achieve our objectives, our pay-for-performance philosophy incorporates the following guiding principles:

 

 

In 2010, we demonstrated our commitment to these principles and illustrated how our program responds to business challenges and the marketplace. Key compensation decisions made by the Management Development and Compensation Committee (which is comprised of independent members of our Board of Directors) included:

 

 

In 2010, our named executive officers earned compensation above target levels reflecting the Company’s strong performance as we achieved double digit improvements in revenue, gross margin, operating contribution, net income and earnings per share.

 

The Board of Directors is committed to sound corporate governance practices and shares the interest of our stockholders in maintaining effective executive compensation programs. The Board of Directors believes that our executive compensation program effectively drives financial performance, aligns pay with performance and attracts and retains highly talented executives.

 

Accordingly, the Board of Directors recommends that stockholders vote FOR the following resolution:

 

RESOLVED, that the stockholders of the Company approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K in the

Compensation Discussion and Analysis, compensation tables and other narrative disclosure in this Proxy Statement.

 

As this is an advisory vote, the results of the vote will not be binding on our Board of Directors, although our Management Development and Compensation Committee will consider the outcome of the vote when evaluating the effectiveness of our compensation principles and practices and our Management Development and Compensation Committee and our Board of Directors will review and consider the outcome of the vote when making future compensation decisions for our named executive officers.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE

 

FOR

 

APPROVAL OF ITEM 3.

 

Recently enacted rules also allow our stockholders to vote, on an advisory and non-binding basis, on how frequently we should hold future advisory votes on the compensation of our named executive officers (such as Item 3 above). By voting on this Item, stockholders may indicate whether future advisory votes on executive compensation should occur every year, every two years or every three years.

 

After consideration of this Item, our Board of Directors has determined that holding future advisory votes on executive compensation every year is the most appropriate alternative for the Company at this time. Although our Board of Directors believes that our compensation program is appropriately balanced, it is aware that executive compensation remains a topic of great concern to investors. Accordingly, voting every year allows our stockholders to provide their direct input on our compensation philosophy, policies and practices most frequently.

 

Therefore, the Board of Directors recommends that stockholders vote to approve, on an advisory basis, holding future advisory votes to approve the compensation of our named executive officers every year.

 

Notwithstanding the Board of Directors’ recommendation, you may cast your vote on the preferred voting frequency by choosing the option of every year, every two years, every three years or abstain when you vote in response to the proposal set forth above. The frequency that receives the highest number of votes properly cast in connection with this proposal will be considered to be the frequency preferred by stockholders.

 

Additionally, although the outcome of this advisory vote on the frequency of the advisory vote on executive compensation is non-binding, our Board of Directors will review and consider the outcome of this vote when making determinations as to when the advisory vote on executive compensation will again be submitted to stockholders for approval at an annual meeting of stockholders.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE

 

1 YEAR

 

ON ITEM 4.

 

Executive Summary

 

Our executive compensation programs are developed and approved by Company management and the Management Development and Compensation Committee (the “Committee”) with the advice of the Committee’s independent compensation consultant to ensure that:

 

 

When preparing, reviewing and approving our executive compensation programs for 2010, we anticipated that achieving the Company’s approved financial and operational objectives for fiscal year 2010 would be challenging given the uncertainty of the global economy and the fact that the objectives represented significant improvements over 2009 performance.

 

The following highlights the Committee’s key compensation decisions for 2010, as reported in the 2010 Summary Compensation Table. As mentioned above, these decisions were made with the advice of the Committee’s independent compensation consultant and Company management, and are discussed in greater detail below in this Compensation Discussion and Analysis. In 2010, the Committee:

 

 

During 2010, we observed a surge in demand for many of our product categories including Earthkeepers, Classics, women’s footwear, and international apparel. We met the regional consumer demand with a favorable product mix that maximized our sell through and kept our obsolete and excess inventories at low levels. This success was demonstrated through double digit improvements in revenue, gross margin, operating contribution, net income and earnings per share. Based on the improved financial results in 2010, our named executive officers (“NEOs”) earned total direct compensation (as reported in the Summary Compensation Table) that was above targeted levels commensurate with the Company’s strong performance. We believe that this level of compensation is consistent with our pay-for-performance philosophy.

 

What information will be presented in these materials?

 

This Compensation Discussion and Analysis (“CD&A”) explains how our compensation programs are designed and how they reward our NEOs. Our NEOs include our Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and the three other most highly compensated executive officers of our Company. This CD&A describes our compensation philosophy and examines how each of the primary components of our compensation programs is designed to support that philosophy. We also explain the results of our pay-for-performance programs in 2010. Finally, we discuss other benefits and perquisites that we provide to our NEOs and describe several of our key executive compensation policies.

What is Timberland’s Executive Compensation Philosophy?

 

Our executive compensation philosophy centers around two primary objectives: to pay for performance that maximizes stockholder value and to provide an externally competitive pay package. These two objectives are described in further detail below.

 

Pay-for-Performance:  We promote a pay-for-performance culture at Timberland and design our executive compensation packages to align executive pay with the interests of our stockholders. Therefore, a significant portion of our executive pay packages is “at risk” to the executive and directly linked to the overall financial performance of the Company in the short- and long-term.

 

Competitive Pay:  We believe that a competitive compensation package is instrumental in attracting and retaining top executive talent. Our objective in developing an executive pay package is to provide an overall level of pay that is competitive within our peer group and the broader industry assuming that targeted levels of performance are achieved. We aim to deliver compensation through a combination of base salary and incentive compensation awards, with an emphasis on incentive compensation which is “at risk” based on performance.

 

Who is involved with executive compensation decisions at Timberland? And what role do they play in the process?

 

The Committee, its independent compensation consultant, and Company management all influence the design and effectiveness of our executive compensation package. Below, we will discuss the role of each of these groups in making executive compensation decisions in further detail.

 

The Role of the Management Development and Compensation Committee

 

During 2010, the Committee was responsible for providing oversight of our executive compensation program and management development plans which included the compensation of our CEO, CFO, and any other executives in salary grade 12 or higher. The Committee annually reviews and evaluates the effectiveness of our executive compensation program to ensure that it is aligned with our compensation philosophy. The Committee retains the discretion to reduce the size of any award earned under our incentive plans. The Committee is also responsible for formulating and presenting all compensation recommendations for the CEO and Chairman to the Board of Directors for action. The “Committees of the Board” section of this Proxy Statement above discusses the duties and responsibilities of the Committee in further detail.

 

The Role of the Compensation Consultant

 

The Committee has retained Meridian Compensation Partners, LLC (“Meridian”) as its independent external compensation consultant. As such, Meridian assists the Committee in its review of executive and director compensation practices, including executive compensation design issues, the competitiveness of pay levels, market trends, and technical considerations. Meridian does not formulate executive compensation strategies for the Company or recommend individual compensation. Meridian is not engaged by the Company for management consulting or any other projects. The Committee annually reviews the performance of Meridian and has the sole authority to hire and terminate its consultant.

 

The Role of Company Management

 

The CEO makes recommendations to the Committee concerning the compensation of the other NEOs and members of senior management. In addition, the CEO and CFO are involved in establishing the business objectives that are used as the performance goals for the short- and long-term incentive plans. Timberland’s compensation and benefits staff work closely with the Committee, Meridian, and management to: (i) ensure that the Committee is provided with the relevant information and data to make its decisions; (ii) propose succession planning, compensation, and benefit program and policy recommendations for the Committee to consider; and (iii) communicate those decisions made by the Committee to management for implementation.

What factors are considered when making a decision about executive compensation?

 

Our management and the Committee examine and design the executive compensation programs to be linked to performance, reasonable from the perspective of the stockholder, competitive in relation to other companies, and fair with respect to internal equity. We believe the resulting mix of compensation allows us to attract and retain the executive talent that we need to run our business successfully.

 

Performance and Stockholder Interests:  The Committee, representing the stockholders’ interests, evaluates all executive compensation programs based on attracting and retaining the talent we need to run the business while allowing us to maintain a competitive position with respect to our compensation expense relative to our peers. We promote a pay-for-performance culture at Timberland and design our compensation programs to align our executives’ pay with the interests of stockholders.

 

External Competitiveness:  Management and the Committee evaluate external competitiveness using two primary sources of compensation data: a competitive peer group and broader market data gathered from published salary surveys and reports. The Committee annually reviews and approves a list of companies, as recommended by Timberland’s management, to serve as the peer group. Our peer group consists of publicly-traded companies with which we may compete for talent, which reasonably approximate our financial and market performance, and which are in related industries. For 2010, management recommended, and the Committee approved, removing two companies (Estee Lauder and Jones New York) and adding three companies (Collective Brands, Phillips Van Heusen, and Under Armour) to more accurately represent the group of companies with which we compete for talent and business. The current peer group of companies includes:

 

 

As part of the competitive analysis, we examine all elements of pay, including base salary, total cash compensation (base salary plus annual bonus opportunity), and total direct compensation (total cash compensation plus the value of long-term incentives). This data, combined with compensation survey data from Hewitt Associates and Mercer, LLC, is used to establish a range and mix of pay that we believe to be competitive in the marketplace. For the purposes of our analysis, all competitive compensation data is adjusted to reflect our Company’s revenue size through regression analysis. While we do not target a specific data point in the range, such as the average or median, to determine an executive’s pay, we do evaluate each executive on an individual basis and use the data to guide our specific recommendations for amount and mix of compensation.

 

Our external competitive analysis also includes a comparison of our financial performance to that of the other companies in our peer group based on a number of financial metrics, such as revenue growth, operating contribution margin, net income margin, and total stockholder return over 1-, 3-, and 5-year periods.

 

Internal Competitiveness:  We also examine how each of our NEOs is compensated relative to one another and other executives within the Company. We consider factors such as the executive’s experience, past performance, current level of performance, level of responsibility and any anticipated changes in such responsibilities, potential to make significant contributions, and succession planning retention strategies.

 

What are the key elements of our executive compensation program?

 

The primary components of our Executive Compensation Program in 2010 include base salary, our annual, cash-based Short-Term Incentive Plan (“STIP”) based on the Company’s financial results and our Long-Term Incentive Plan (“LTIP”) which includes performance stock options to align the interests of the NEOs with stockholders, and performance stock units to provide incentives consistent with stockholder returns

and to supply a strong retention incentive. Our executive compensation program is more heavily weighted toward performance-based variable pay, rather than fixed base salary, in order to promote a pay-for-performance culture. During 2010, approximately 80% of our CEO’s total compensation opportunity consisted of performance-based variable compensation. For the other NEOs, performance-based variable compensation made up 50-75% of total compensation opportunity. We believe that this mix of pay provides our NEOs with significant upside earning potential for the achievement of actual results above expectations, and significantly lower earning potential for results that are below expectations.

 

The following chart summarizes the key elements of our executive compensation programs and actions taken in 2010 to implement the program. Actual 2010 performance results and additional detail on these elements follow this chart.

 

 

What were the results of our 2010 Executive Compensation Programs?

 

After reviewing the final operating budget for 2010, we concluded that achieving the financial objectives in the Company’s operating budget would not support a full target-level payout for our STIP and LTIP programs. Rather than reducing the total incentive opportunities for our NEOs, we designed the incentives so that achieving the Company’s budgeted financial objectives would instead result in a 70% payout of our STIP and 60% payout of our LTIP. Our executives would only receive target-level payouts under the incentive plans if the Company’s budgeted performance was exceeded. Further details about the incentive plan designs are discussed below.

 

Short Term Incentive Plan

 

For 2010, our STIP was based on Company earnings and asset management. Company Operating Contribution, generally measured as total revenues, less cost of goods sold and operating expenses, excluding items such as restructuring charges and other one-time, nonrecurring expenses, represented 75% of the incentive opportunity of the 2010 STIP. This measure was heavily weighted because it directly impacts stockholder value through profitability and is a measure over which management can exert influence. Asset management, measured as operating assets as a percentage of revenue (“OAR”), represented the remaining 25% of the incentive opportunity. OAR measures the successful management of our inventory and cash flow

and is generally defined as our quarterly average of accounts receivable plus inventory, divided by total revenue. Management can affect overall OAR performance through the effective management of accounts receivable and inventory. Successful asset management creates stockholder value by reducing the Company’s investment requirements and increasing the Company’s return on investment.

 

For 2010, the STIP structure, performance targets, and actual results were as follows:

 

 

Based on the actual results, the payments made under the 2010 STIP were as follows:

 

 

Long Term Incentive Plan

 

Our LTIP represents a significant portion of potential compensation for our NEOs. These equity-based awards are provided to retain and motivate our executives and focus their efforts on activities that enhance stockholder value over the long term. Long-term incentives are structured so that rewards are earned in line with performance, with above-market rewards for superior performance and below-market or no rewards for inferior performance.

 

The awards granted under our 2010 LTIP were, and are, subject to the Company’s future performance, and consist of performance stock units (“PSUs”) equal in value to one share of the Company’s Class A Common Stock, and performance stock options (“PSOs”) with an exercise price equal to the closing price of the Company’s Class A Common Stock as quoted on the New York Stock Exchange on the date of grant. The awards were granted so that 60% of the award value is allocated to PSUs and 40% of the award value is allocated to PSOs. The Committee sets the performance metrics and the value of the awards based on: (i) what it believes will maximize stockholder returns; (ii) what will represent a desirable mix of long-term compensation; (iii) the impact of the individual within the Company; and (iv) external and internal pay equity.

 

The PSUs earned, as determined by the Committee and, in the case of the CEO, the Board of Directors, will be converted into shares of Class A Common Stock and will vest following the applicable performance period. The performance metrics for the 2010 PSUs are the Company’s revenue growth rates and cumulative earnings before interest, taxes, depreciation and amortization (“EBITDA”) during the three-year period from January 1, 2010 through December 31, 2012. Stock ownership and stock-based incentive awards align the interests of our NEOs with the interests of our stockholders, as the value of this incentive rises and falls with our stock price, consistent with stockholder returns. The PSUs promote executive retention as unvested PSUs held at the time an NEO’s employment is terminated are forfeited.

 

The PSOs earned, as determined by the Committee and, in the case of the CEO, the Board of Directors, will vest in three equal annual installments following the end of the applicable performance period. The performance metric for the 2010 PSOs is the Company’s earnings during the twelve-month period from January 1, 2010 through December 31, 2010. Executives are rewarded only if Company performance exceeds the threshold target for the performance period and the market price of our stock rises. Executives do not earn

any PSOs if Company performance falls below the threshold target. Additionally, if awards are earned and the stock price falls below the exercise price, the PSOs have no value. This is designed to align the interests of the Company’s executives with those of stockholders by encouraging executives to enhance the value of the Company on a long-term basis.

 

The payout of the PSOs was based on the Company’s achievement of certain levels of EBITDA, with threshold, budget, target and maximum award levels based upon actual EBITDA of the Company during 2010 equaling or exceeding such levels. No awards would have been made or earned, as the case may be, unless the threshold goal was attained, and the maximum payout could not exceed 200% of the target award.

 

For 2010, the PSO structure, performance targets, and actual results were as follows:

 

 

Based on the “Total Payout as a Percent of Target Opportunity,” the PSOs earned by our NEOs under the 2010 LTIP were as follows:

 

 

Annually, the Committee reviews the effectiveness of our pay-for-performance programs by examining the total direct compensation earned by our NEOs. We compare this value against the earnings opportunity at various levels of performance. Based on the Company’s financial results in 2010, our NEOs earned total direct compensation that was above targeted levels, commensurate with Company performance. We believe that this level of compensation is consistent with our pay-for-performance philosophy considering the Company’s overall performance.

 

What is Timberland’s equity granting practice?

 

The Board of Directors retains the sole authority to grant equity awards to our CEO, while the Committee has the sole authority to grant equity awards to our other NEOs under their purview, and delegates granting authority to our CEO for equity awards to all other employees. All equity awards are generally granted on the same date as one of the five regularly scheduled meetings of our Board of Directors. The exercise price for all stock option awards is the closing price of the Company’s Class A Common Stock on the New York Stock Exchange on the date of the grant. In March 2010, our NEOs received PSU and PSO awards under the 2010 LTIP.

 

What benefits and perquisites do the NEOs receive?

 

NEOs participate in medical, disability, and life insurance benefits and annual contributions to qualified savings plans on the same basis as all salaried employees based in the United States. The Company does not provide pension arrangements (supplemental or otherwise), post-retirement healthcare coverage or similar benefits to such executives.

 

Due to the scope of the Company’s international operations, the NEOs may use a Company-owned aircraft for business travel. The aircraft provides increased security for the NEOs and increases the efficiency with which they can conduct Company business. The CEO may use the aircraft for personal travel. For security and efficiency, the CEO is provided with transportation to and from work in a Company-owned vehicle driven by a Company-paid driver. Further, the CEO is provided the use of administrative assistant services for personal matters. Additional information on perquisites can be found in Note 3 of the “Summary Compensation Table” section of this Proxy Statement.

NEOs, along with other highly-compensated, key management employees based in the United States, are also eligible to participate in the Deferred Compensation Plan (“DCP”). In this program, eligible employees can defer up to 100% of their base salary and 100% of their cash bonus subject to the Company’s withholding for applicable taxes and contributions to employee benefit plans. The Company does not make matching contributions to the DCP. The DCP is offered, in addition to the Company’s 401(k) plan, to provide NEOs with an additional opportunity to defer compensation which may assist them with their retirement planning. Benefits under the DCP will be paid no earlier than six (6) months following the participant’s retirement or termination. Additional information on the DCP and the participation of NEOs in 2010 can be found in the “Nonqualified Deferred Compensation Plan” section of this Proxy Statement.

 

What severance benefits and change of control agreements are in place for the NEOs?

 

The Company has entered into Change of Control Severance Agreements (the “Agreements”) with each of the NEOs and other key employees. For NEOs and key employees who entered into such Agreements prior to December 2008, including Mr. Swartz, Mr. Harrison, Mr. Welsh, Mr. Pazzani and Ms. Wineberg, the general terms of the Agreements described below were designed to promote stability and continuity of senior management if a triggering event occurs in order to align the interests of executives and stockholders. If a change of control occurs, executives would receive certain compensation if their employment is terminated by the Company without “Cause” or by the executive for “Good Reason” within 24 months following the change of control. This compensation is intended to retain the executives. The benefit encourages them to remain with the Company, despite uncertainty, with guaranteed financial protection upon loss of employment. In addition, under the terms of the Agreements, executives may voluntarily terminate their employment during the 13th full calendar month after the change of control and receive certain reduced compensation. This provision increases the likelihood that key executives will be retained during the critical first year transition period.

 

NEOs and key employees who entered into such Agreements after December 2008, including Ms. Teffner, have similar terms as described above. However, these agreements do not provide any payments to executives who voluntarily terminate their employment during the 13th full calendar month after the change of control.

 

Additional information regarding the Agreements, applicable payments thereunder, and other plans for the covered executive officers is provided in the “Potential Payments upon Termination of Employment and Potential Payments upon a Change-In-Control” section of this Proxy Statement.

 

Impact of Regulatory Requirements on Compensation (Tax Considerations)

 

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to a public company for compensation over $1.0 million paid to the company’s NEOs. However, eligible performance-based compensation awards are not subject to the deduction limits if certain requirements are satisfied. The Committee takes the limitations of Section 162(m) into account in determining the design of incentive awards made to these executive officers. Neither base salary nor other non-performance based compensation programs exceeded $1.0 million in 2010 for any of these NEOs.

The Management Development and Compensation Committee Report

 

The Committee has reviewed and discussed the Compensation Discussion and Analysis found in this Proxy Statement with the Company’s management. Based on this review and discussion, the Committee recommended to the Board of Directors, and the Board of Directors recommended, that the Compensation Discussion and Analysis be included in this Proxy Statement and the Company’s 2010 Annual Report on Form 10-K for the fiscal year ended December 31, 2010 for filing with the Securities and Exchange Commission.

 

MANAGEMENT DEVELOPMENT
AND COMPENSATION COMMITTEE,

 

Kenneth T. Lombard, Chair

Ian W. Diery

John A. Fitzsimmons

Edward W. Moneypenny

Peter R. Moore

 

The following table and footnotes discuss the compensation awarded to, earned by, or paid to the Chief Executive Officer, the Chief Financial Officer and the three other most highly compensated executive officers of the Company who served as such at December 31, 2010 (together, the “NEOs”). The table and footnotes also discuss compensation awarded to, earned by, or paid to Mr. Pazzani who was not serving as an executive officer of the Company at December 31, 2010, but who remains employed by the Company.

 

 

 

 

The following table sets forth information for each of the NEOs as to grants of non-equity and equity incentive plan awards, stock and option awards, the exercise price of option awards and the grant date fair value of stock and option awards made to each of such NEOs in 2010.

 

 

 

 

 

The following table sets forth information for each of the NEOs as to options exercised in 2010, the dollar value realized upon exercise, the number of shares of stock that vested in 2010, and the dollar value realized upon the vesting of stock.

 

 

 

 

The following table sets forth information for each of the NEOs (i) as to each outstanding option award, the total number that were exercisable, unexercisable, and unearned held at December 31, 2010 (columns (b) (c), and (d)), each option’s exercise price and its expiration date (columns (e) and (f)) and (ii) as to the total number of shares held at December 31, 2010 that were not then vested or earned and the total market value of those shares based on the closing price of the Company’s Class A Common Stock on December 31, 2010 ($24.59) (columns (g), (h), (i), and (j)).

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END