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REGAL BELOIT CORPORATION
200 State Street
Beloit, Wisconsin 53511

Notice of 2014 Annual Meeting of Shareholders
To Be Held April 28, 2014

To the Shareholders of Regal Beloit Corporation:

You are hereby notified that the 2014 Annual Meeting of Shareholders of Regal Beloit Corporation will be held at the James L. Packard Learning Center located at the Company’s corporate headquarters, 200 State Street, Beloit, Wisconsin 53511, on Monday, April 28, 2014, at 9:00 a.m., Central Daylight Time, for the following purposes:

1.                                      To elect three Class C Directors for terms expiring at the 2017 Annual Meeting of Shareholders.

2.                                      To consider a shareholder advisory vote on the compensation of the Company’s named executive officers as disclosed in the accompanying proxy statement.

3.                                      To ratify the selection of Deloitte & Touche LLP as the independent auditors for the Company for the year ending January 3, 2015.

4.                                      To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

The Board of Directors has fixed the close of business on March 5, 2013 as the record date for the determination of the shareholders entitled to notice of and to vote at the annual meeting.

We hope that you will be able to attend the meeting in person, but if you are unable to do so, please complete, sign and promptly mail back the enclosed proxy form, using the return envelope provided.  You also have the option to vote your shares by the Internet or telephone by following the instructions printed on the enclosed proxy card.  If, for any reason, you should subsequently change your plans, you may, of course, revoke your proxy at any time before it is actually voted.

Beloit, Wisconsin
March 27, 2014

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on April 28, 2014.  The Regal Beloit Corporation proxy statement for the 2014 Annual Meeting of Shareholders and 2013 Annual Report to Shareholders are available at www.proxydocs.com/rbc.

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PROXY STATEMENT

This proxy statement and accompanying proxy card are being mailed to holders of Regal Beloit Corporation (“we” or the “Company”) common stock beginning on or about March 27, 2014.  The Company, on behalf of its Board of Directors (the “Board”), is soliciting your proxy to vote your shares of the Company’s common stock at the 2014 annual meeting of shareholders and all adjournments or postponements thereof (the “Annual Meeting”).  We solicit proxies to give all shareholders of record an opportunity to vote on matters that will be presented at the Annual Meeting.  In this proxy statement, you will find information on these matters, which is provided to assist you in voting your shares.

COMMONLY ASKED QUESTIONS AND ANSWERS

ABOUT THE ANNUAL MEETING

Q:                                   What am I being asked to vote on?

A:                                   ·      The election of directors;

·                  An advisory vote on the compensation of our named executive officers as disclosed in this proxy statement; and

·                  Ratification of the selection of Deloitte & Touche LLP as our independent auditors for the year ending January 3, 2015.

Q:                                   Who can vote?

A:                                   Holders of our common stock as of the close of business on the record date, March 5, 2014, may vote at the Annual Meeting, either in person or by proxy.  Each share of common stock is entitled to one vote.

Q:                                   How do I vote?

A:           By Proxy—Before the Annual Meeting, you can give a proxy to vote your shares of common stock in one of the following ways:

·                  by telephone;

·                  by using the Internet; or

·                  by completing and signing your proxy card and mailing it in time to be received prior to the Annual Meeting.

The telephone and Internet voting procedures are designed to confirm your identity, to allow you to give your voting instructions and to verify that your instructions have been properly recorded. If you wish to vote by telephone or Internet, please follow the instructions that are printed on the enclosed proxy card.

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If you mail to us your properly completed and signed proxy card, or vote by telephone or the Internet, then your shares of common stock will be voted according to the choices that you specify. If you sign and mail your proxy card to us without making any choices, your proxy will be voted:

·                  FOR the election of all persons nominated by the Board for election as directors;

·                  FOR the approval of the compensation of our named executive officers; and

·                  FOR the ratification of the selection of Deloitte & Touche LLP as our independent auditors for the year ending January 3, 2015.

Other than the election of directors, approval of the compensation of our named executive officers and the ratification of the selection of our independent auditors, we are not currently aware of any other matters that will be brought before the Annual Meeting.  However, by giving your proxy, you appoint the persons named as proxies as your representatives at the Annual Meeting.  If a matter comes up for a vote at the Annual Meeting that is not included in the proxy materials, then the proxy holders will vote your shares in accordance with their best judgment.

In Person—You may come to the Annual Meeting and cast your vote there.  If your shares are held in the name of your broker, bank or other nominee and you wish to vote at the Annual Meeting, then your broker, bank or other nominee will provide you with instructions for voting your shares.

Q:                                   May I change or revoke my vote?

A:                                   You may change your vote or revoke your proxy at any time prior to your shares being voted by:

·                  notifying our Secretary in writing that you are revoking your proxy;

·                  giving another signed proxy that is dated after the date of the proxy that you wish to revoke;

·                  using the telephone or Internet voting procedures; or

·                  attending the Annual Meeting and voting in person (attendance at the Annual Meeting alone will not revoke your proxy).

Q:                                   Will my shares be voted if I do not provide my proxy?

A:                                   It depends on whether you hold your shares in your own name or in the name of a brokerage firm.  If you hold your shares directly in your name, then they will not be voted unless you provide a proxy or vote in person at the Annual Meeting.  Brokerage firms or other nominees generally have the authority to vote customers’ uninstructed shares on certain “routine” matters.  If your shares are held in the name of a brokerage firm, the brokerage firm has the discretionary authority to vote your shares in connection with the ratification of our independent auditors if you do not timely provide your proxy because this matter is considered “routine” under the New York Stock Exchange (“NYSE”) listing standards.

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However, if you have not provided directions to your broker, your broker will not be able to vote your shares with respect to the election of directors or the approval of the compensation of our named executive officers.  We strongly encourage you to submit your proxy card and exercise your right to vote as a shareholder.

Q:                                   What constitutes a quorum?

A:                                   As of the record date, March 5, 2014, 45,106,563 shares of our common stock were issued and outstanding and entitled to vote at the Annual Meeting.  To conduct the Annual Meeting, a majority of the shares entitled to vote must be present in person or by proxy. This is referred to as a “quorum.” If you submit a properly executed proxy card or vote by telephone or the Internet, then you will be considered present at the Annual Meeting for purposes of determining the presence of a quorum.  Abstentions and broker “non-votes” will be counted as present and entitled to vote for purposes of determining the presence of a quorum.  A broker “non-vote” occurs when a broker or other nominee who holds shares for another person has not received voting instructions from the owner of the shares and, under NYSE rules, does not have discretionary authority to vote on a proposal.

Q:                                   What vote is needed for these proposals to be adopted?

A:                                   Proposal 1—The affirmative vote of the holders of a majority of the shares of our common stock represented in person or by proxy at the Annual Meeting is required to elect each director (assuming a quorum is present).  Withhold votes, abstentions and broker “non-votes” will have the effect of votes against the election of director nominees.

Proposal 2— The affirmative vote of the holders of a majority of the shares of our common stock represented in person or by proxy at the Annual Meeting is required to approve the compensation of our named executive officers (assuming a quorum is present).  Because this vote is advisory, the results of the vote are not binding on our Board of Directors or our Compensation and Human Resources Committee.  However, if there is a significant vote against the compensation of our named executive officers, then our Board of Directors and our Compensation and Human Resources Committee will carefully evaluate whether any actions are necessary to address those concerns.  Abstentions and broker non-votes will have the effect of votes against this proposal.

Proposal 3—The affirmative vote of the holders of a majority of the shares of our common stock represented and voted at the Annual Meeting (assuming a quorum is present) is required to ratify the selection of Deloitte & Touche LLP as our independent auditors for the year ending January 3, 2015.  Abstentions will have the effect of votes against this proposal.

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Q:                                   Who conducts the proxy solicitation and how much will it cost?

A:                                   We are requesting your proxy for the Annual Meeting and will pay all costs of soliciting shareholder proxies.  In addition to soliciting proxies by mail and through the Internet, we may request proxies personally and by telephone, fax or other means.  We can use our directors, officers and regular employees to request proxies.  These people do not receive additional compensation for these services.  We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket and clerical expenses for forwarding solicitation materials to beneficial owners of our common stock.

Q:                                   Are the Company’s proxy materials available on the Internet?

A:                                   Yes.  The Company’s proxy statement for the 2014 Annual Meeting of Shareholders and 2013 Annual Report to Shareholders are available at www.proxydocs.com/rbc.

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PROPOSAL 1:  ELECTION OF DIRECTORS

The Board is currently comprised of ten directors, divided into two classes of three members each and one classes of four members, with the terms of one class of directors expiring each year.  The Board has nominated Thomas J. Fischer, Rakesh Sachdev and Jane L. Warner, each of whom is currently serving as a director, for election at the Annual Meeting as Class C directors to serve until the 2017 annual meeting of shareholders and until their successors are duly elected and qualified.  Ms. Warner was appointed to the Board in July 2013 in connection with an increase in the size of the Board from nine to ten directors.  Pursuant to the terms of our Corporate Governance Guidelines, Carol Skornicka, who is currently also a Class C director, is retiring as a director at the expiration of her term at the Annual Meeting as a result of reaching the mandatory retirement age.  Upon Ms. Skornicka’s retirement, the size of our Board will be reduced to nine directors, with each of the three classes to be comprised of three members.  All of our other directors are expected to serve on the Board until their respective terms expire as indicated below.

Unless shareholders otherwise specify, the shares represented by the proxies received will be voted in favor of the election as directors of the persons named as nominees herein.  The Board has no reason to believe that any of the listed nominees will be unable or unwilling to serve as a director if elected.  However, in the event that any nominee should be unable or unwilling to serve, the shares represented by proxies received will be voted for another nominee selected by the Board.

The following sets forth certain information, as of March 5, 2014, about each of the Board nominees for election at the Annual Meeting and each director whose term will continue after the Annual Meeting.  Except as otherwise noted, each nominee has engaged in the principal occupation or employment and has held the offices shown for more than the past five years.

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Nominees for Election at the Annual Meeting

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THE BOARD RECOMMENDS THE FOREGOING NOMINEES FOR ELECTION AS CLASS C DIRECTORS AND URGES EACH SHAREHOLDER TO VOTE “FOR” ALL NOMINEES.

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Directors Continuing in Office:

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BOARD OF DIRECTORS

Corporate Governance and Independent Directors

The Board has in effect Corporate Governance Guidelines that, in conjunction with the Board committee charters, establish processes and procedures to help ensure effective and responsive governance by the Board.  The Corporate Governance Guidelines are available, free of charge, on our website at www.regalbeloit.com.  We are not including the information contained on or available through our website as a part of, or incorporating such information by reference into, this Proxy Statement.

The Corporate Governance Guidelines provide that a majority of the members of the Board must be independent directors under the listing standards of the NYSE.  The Board has also adopted certain categorical standards of director independence to assist it in making determinations of director independence and which are contained in the Corporate Governance Guidelines.  The categorical standards of director independence adopted by the Board are available on our website at www.regalbeloit.com.

Based on these standards, the Board has affirmatively determined by resolution that Messrs. Burt, Doerr, Fischer, Foate, Sachdev and Stoelting and Ms. Warner have no material relationship with the Company, and, therefore, each is independent in accordance with the NYSE listing standards and with the categorical standards of director independence adopted by the Board.  The Board will regularly review the continuing independence of the directors.

Code of Business Conduct and Ethics

The Board has adopted the Regal Beloit Corporation Code of Business Conduct and Ethics, which applies to our directors, officers and employees. The Code is available, free of charge, on our website at www.regalbeloit.com.

Board Leadership Structure

Our Board does not have a policy on whether or not the roles of CEO and Chairman should be separate.  Our Board reserves the right to vest the responsibilities of the CEO and Chairman in different individuals or in the same individual if in the Board’s judgment a combined CEO and Chairman position is in the best interest of our company.  In the circumstance where the responsibilities of the CEO and Chairman are vested in the same individual, or where the Chairman is not considered independent, the Board will designate a Presiding Director from among the independent directors to preside at the meetings of the non-employee director executive sessions.

Our Board believes that Mr. Gliebe, as Chairman of the Board, best serves the needs of the Board and our shareholders.  Our Board made this determination in part because it believes that Mr. Gliebe’s extensive experience and qualifications within the electric motor industry and in-depth knowledge of our markets and customer base allows him to provide strong leadership and act as a unified spokesperson on behalf of the Company.  Our Board also believes that having Mr. Gliebe

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serve as both our Chief Executive Officer and our Chairman of the Board will allow him to leverage the information gained from both roles to lead the Company most effectively.

Presiding Director

To supplement the combined Chairman and CEO position, our Board created a Presiding Director role.  The position of the Presiding Director rotates periodically among the non-employee directors as determined by the Board upon the recommendation of the Corporate Governance and Director Affairs Committee.  Mr. Stoelting currently serves as the Presiding Director.  The Presiding Director is an independent and empowered director who is appointed by the independent directors and who works closely with the Chairman.

In addition to serving as the principal liaison between the independent directors and the Chairman in matters relating to the Board as a whole, the primary responsibilities of the Presiding Director are as follows:

·      Preside at all meetings of the Board at which the Chairman is not present, including any executive sessions of the independent directors, and establish agendas for such executive sessions in consultation with the other directors and the Chairman;

·      Review and approve proposed Board meeting agendas;

·      Review and approve Board meeting schedules to help assure that there is sufficient time for discussion of all agenda items;

·      Have the authority to call meetings of the independent directors as appropriate;

·      Participate, with the Chair of the Compensation and Human Resources Committee, in communicating to the CEO the results of the Board’s annual review of the CEO’s performance; and

·      Be available, as deemed appropriate by the Board, for consultation and direct communication with shareholders.

Oversight of Risk Management

Our full Board is responsible for the oversight of our company’s operational and strategic risk management process.  In furtherance of the Board’s risk management oversight goals, the Board has created a Risk and Compliance Committee comprised of senior management and key managers of each of our company’s business units and functions around the world.  The Risk and Compliance Committee is charged with, among other things, identifying, assessing and developing a mitigation strategy for significant risks that could impact our ability to meet our objectives and execute our strategies.  The management-based Risk and Compliance Committee identifies and clarifies significant risks that may impact our company and assesses those risks, resulting in the establishment of a plan response/mitigation strategy for significant risks.  The management-based Risk and Compliance Committee delivers a summary of its activities and findings directly to our CEO, the Audit Committee, and our full Board.  Our Board relies on our Audit Committee to address significant

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financial risk exposures facing our company and the steps management has taken to monitor, control and report such exposures, with appropriate reporting of these risks to be made to the full Board.  Our Board relies on our Compensation and Human Resources Committee to address significant risk exposures facing our company with respect to compensation programs and incentives, also with appropriate reporting of these risks to be made to the full Board.  Our Board’s role in our company’s risk oversight has not affected our leadership structure.

Executive Sessions

The Board will have at least four regularly scheduled meetings per year at which the non-employee directors will meet in executive session without members of our management being present, and at least one regularly scheduled meeting per year at which the independent directors will meet in executive session without members of management or other directors present.  The non-employee directors may also meet without management present at such other times as they determine appropriate.  Members of the Company’s senior executive management who are not members of the Board will participate in Board meetings to present information, make recommendations, and be available for direct interaction with members of the Board.

Communications with the Board

Shareholders and other interested parties may communicate with the full Board, the Chairman of the Board, non-management directors as a group or individual directors, including the Presiding Director, by delivering a written communication to Regal Beloit Corporation, Attention: Board of Directors, 200 State Street, Beloit, Wisconsin 53511, or by sending an e-mail communication to board.inquiry@regalbeloit.com.  The communications should be addressed to the specific director or directors whom the shareholder or interested party wishes to contact and should specify the subject matter of the communication. The Company’s Secretary will deliver appropriate communication directly to the director or directors to whom it is addressed.  The Secretary will generally not forward to the director or directors communication that he determines to be primarily commercial in nature or concerns our day-to-day business activities, or that requests general information about the Company.

Concerns about accounting or auditing matters or possible violations of the Regal Beloit Corporation Code of Business Conduct and Ethics should be reported pursuant to the procedures outlined in the Code of Business Conduct and Ethics and in our policy regarding Reporting Ethical, Legal and Accounting Concerns, both of which are available on our website at www.regalbeloit.com.

Committees

We have standing Audit, Compensation and Human Resources, and Corporate Governance and Director Affairs Committees of the Board.  Each committee is appointed by and reports to the Board.  The Board has adopted, and may amend from time to time, a written charter for each of the Audit, Compensation and Human Resources, and Corporate Governance and Director Affairs Committees.  We make copies of each of these charters available free of charge on our website at www.regalbeloit.com.

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Audit Committee.  The Audit Committee consists of Messrs. Fischer (Chairperson) and Stoelting and Ms. Warner.  Each of the members of the committee is independent as defined by the NYSE listing standards and the rules of the Securities and Exchange Commission (the “SEC”).  The Board has determined that each of Messrs. Fischer and Stoelting qualifies as an “audit committee financial expert” as defined in SEC rules and meets the expertise requirements for audit committee members under the NYSE listing standards.  The principal functions performed by the Audit Committee, which met six times in person in 2013, are to assist the Board in monitoring the overall quality of the Company’s financial statements and financial reporting, the independent auditor’s qualifications and independence, our accounting controls and policies, the performance of our internal audit function and independent auditors, and our compliance with legal and regulatory requirements. The Audit Committee has the sole authority to appoint, retain, compensate and terminate our independent auditors and to approve the compensation paid to the independent auditors.  The Audit Committee has presented to shareholders for ratification at the Annual Meeting its selection of independent auditors for 2014.  See “Proposal 3: Ratification of Deloitte & Touche LLP as the Company’s Independent Auditors for 2014.”

One member of the Audit Committee, Mr. Fischer, serves on the audit committees of three other public companies.  On January 24, 2014, the Board of Directors considered what it believes to be all of the relevant facts and responsibilities relating to such simultaneous service by Mr. Fischer and affirmatively determined that the simultaneous service would not impair Mr. Fischer’s ability to serve effectively on our Audit Committee.

Compensation and Human Resources Committee.  The Compensation and Human Resources Committee consists of Messrs. Doerr (Chairperson), Foate and Burt.  Each of the members of the Compensation and Human Resources Committee is independent as defined by the NYSE listing standards.  The principal functions of the Compensation and Human Resources Committee, which met five times in 2013, are to help develop our overall compensation philosophy; administer our incentive compensation plans (including our equity incentive plans); determine and approve the compensation of the Chief Executive Officer and the other principal corporate officers; review and monitor succession and leadership development planning; and review, formulate, recommend and administer short- and long-range compensation programs for the principal corporate officers and key employees.  A more complete description of our Compensation and Human Resources Committee’s practices can be found in the Compensation Discussion and Analysis section of this Proxy Statement.  The Compensation and Human Resources Committee from time to time uses independent compensation consultants to assist the Committee in the performance of its responsibilities.  As part of its evaluation of potential compensation consultants, the Committee considers all factors relevant to the consultant’s independence from management and potential conflicts of interest in accordance with applicable SEC rules and NYSE listing standards.  After selecting an independent compensation consultant, the Committee periodically meets with that consultant throughout the year at such times as the Committee deems appropriate, and receives reports and advice from the consultant on matters of executive compensation.  In 2013, the Committee selected Towers Watson & Co to serve as its independent compensation consultant.  The Committee also engaged Stern Stewart & Co. in 2013 to assist with the setting of goals under our Shareholder Value Added (SVA) Plan.  Neither Towers Watson nor Stern Stewart & Co. perform any other services for us or our named executive officers other than the services provided at the direction of the Committee.

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Corporate Governance and Director Affairs Committee.  The Corporate Governance and Director Affairs Committee consists of Messrs. Sachdev (Chairperson) and Burt and Ms. Skornicka.  Each of the members of the Corporate Governance and Director Affairs Committee is independent as defined by the NYSE listing standards.  The principal functions of the Corporate Governance and Director Affairs Committee, which met five times in 2013, are to develop and recommend to the Board a set of corporate governance principles applicable to our company, including matters of Board organization, membership, compensation, independence and function, and committee structure and membership; take a leadership role in shaping our corporate governance; identify directors qualified to serve on the committees established by the Board; and to recommend to the Board the members and the chairperson for each committee to be filled by the Board. This Committee also serves as the nominating committee of the Board and is responsible for identifying individuals qualified to become directors (consistent with the criteria approved by the Board) and to recommend candidates for all directorships to be filled by the Board or by our shareholders.

Nominations of Directors

The Corporate Governance and Director Affairs Committee will consider persons recommended by shareholders to become nominees for election as directors in accordance with the criteria set forth in the Corporate Governance Guidelines under the heading “Director’s Qualifications.”  The Corporate Governance and Director Affairs Committee will only review recommendations for director nominees from any shareholder or group of shareholders beneficially owning in the aggregate at least 5% of the issued and outstanding shares of our common stock for at least one year as of the date that the recommendation is made.  Recommendations with respect to the 2015 annual meeting of shareholders must be submitted by November 19, 2014 for the recommendation to be considered by the Corporate Governance and Director Affairs Committee.

In identifying and evaluating nominees for director, the Corporate Governance and Director Affairs Committee believes that all directors should be financially literate and must be committed to understanding the Company and its industry, and must also possess the highest personal and professional ethics, integrity and values, and commitment to representing the long-term interest of the shareholders.  Directors must also possess a diverse set of skills and experience with a background in areas that are relevant to our activities. Directors should also be inquisitive and have an objective perspective, a practical wisdom and mature judgment. Directors must be willing and able to devote whatever time is necessary to carry out their duties and responsibilities effectively. Directors will not be nominated unless they are willing to serve for an extended period of time.

While the Corporate Governance and Director Affairs Committee does not have a formal policy relating specifically to the consideration of diversity in its process to select and evaluate director nominees, the Committee does consider diversity of viewpoint, background, industry knowledge and perspectives, as well as ethnic and gender diversity, as part of its overall evaluation of candidates for director nominees.  Specifically, our criteria for director nominees, included as Appendix A to our Corporate Governance Guidelines, provide that directors should be selected so that our Board represents diverse backgrounds and perspectives.

For a timely recommendation submitted by a shareholder to be considered by the Corporate Governance and Director Affairs Committee, the candidate recommended by a shareholder must be “independent” as defined in the NYSE independence standards and the SEC regulations, and meet

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the minimum expectations for a director set forth in the Company’s Corporate Governance Guidelines.  The Corporate Governance and Director Affairs Committee will have sole discretion whether to nominate an individual recommended by a shareholder. As to any candidate identified by the Corporate Governance and Director Affairs Committee to become a nominee, the candidate must possess the requisite qualifications, although the Corporate Governance and Director Affairs Committee need not require such nominee to be independent. Nevertheless, we strive to have all directors, other than those directors who are current or former members of our management, be independent as defined by the NYSE independence standards and the SEC regulations.

Policies and Procedures Regarding Related Person Transactions

Our Board of Directors has adopted written policies and procedures regarding related person transactions.  For purposes of these policies and procedures:

·      a “related person” means any of our directors, executive officers, nominees for director or greater than 5% shareholder, and any of their immediate family members, as well as any entity in which any of these persons is employed or is a partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest; and

·      a “related person transaction” generally is a transaction in which we were or are to be a participant and the amount involved exceeds $120,000, and in which any related person had or will have a direct or indirect interest.

The related person, the director, executive officer, nominee or beneficial owner who is an immediate family member of a related person, or a business unit or function/department leader of the Company responsible for a proposed related person transaction must notify our General Counsel of certain information relating to proposed related person transactions.  If our General Counsel determines that a proposed transaction is a related person transaction subject to the policy, then he will submit the transaction to the Corporate Governance and Director Affairs Committee for consideration at the next committee meeting or, if expedited consideration is required, to the committee chairperson.  The committee or chairperson, as applicable, will consider all of the relevant facts and circumstances available regarding the proposed related person transaction and will approve only those related person transactions that are in, or are not inconsistent with, the best interests of our company and our shareholders.  The chairperson is required to report to the committee at the next committee meeting any approval granted under the policy.

The policy also provides for ongoing review by the General Counsel of any amounts paid or payable to, or received or receivable from, any related person.  Additionally, at least annually, the Corporate Governance and Director Affairs Committee is required to review any previously approved or ratified related person transactions that remain ongoing and have a remaining term of more than six months or remaining amounts payable to or receivable from us of more than $60,000.  Based on all relevant facts and circumstances, the committee will determine if it is in the best interests of our company and our shareholders to continue, modify or terminate the related person transaction.

If any of our Chief Executive Officer, Chief Financial Officer or General Counsel becomes aware of a pending or ongoing related person transaction that has not been previously approved or ratified under the policy, then the transaction must be disclosed to the Corporate Governance and

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Director Affairs Committee or its chairperson.  The committee or the chairperson must then determine whether to ratify, amend or terminate the related person transaction, or take any other appropriate action.  If the related person transaction is complete, then the committee or its chairperson will evaluate the transaction to determine if rescission of the transaction and/or any disciplinary action is appropriate.

In 2013, there were no proposed, pending or ongoing related person transactions subject to review by the Corporate Governance and Director Affairs Committee under the policy.

Meetings and Attendance

The Board held four quarterly meetings and three special meetings in 2013.  Each director attended at least 75% of the aggregate of (a) the total number of meetings of the Board and (b) the total number of meetings held by all committees of the Board on which the director served during 2013, in each case during the period in which the director was serving on the Board or the applicable committee.

Directors are expected to attend our annual meeting of shareholders each year.  All of our directors attended the 2013 annual meeting.

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STOCK OWNERSHIP

Management

The following table sets forth information, as of March 5, 2014, regarding beneficial ownership of our common stock by each director and nominee, each of our current named executive officers as set forth in the Summary Compensation Table, and all of the directors and current executive officers as a group.  As of March 5, 2014, no director or executive officer beneficially owned one percent or more of our common stock.  On that date, the directors and executive officers as a group beneficially owned 1.8% of our common stock.  Except as otherwise indicated in the footnotes, all of the persons listed below have sole voting and investment power over the shares of our common stock identified as beneficially owned.

(1)         Includes shares subject to currently exercisable rights to acquire common stock and options exercisable within 60 days of March 5, 2014 as follows: Mr. Colvin, 51,280 shares; Mr. Gliebe, 237,340 shares; Mr. Hinrichs, 22,000 shares; Mr. Sachdev, 7,000 shares; Mr. Schlemmer, 48,700 shares; Mr. Stoelting, 13,000 shares; Mr. Underwood 16,800 shares; and all directors and executive officers as a group, 429,220 shares.

(2)         The amount shown for Mr. Knueppel includes 12,522 shares that are held in a non-Company sponsored individual retirement account. The amount shown for Mr. Knueppel also includes 216,357 shares held in a trust account.

(3)         The amount shown for Mr. Stoelting includes 9,202 shares held in the Curtis W. Stoelting 1994 Revocable Trust over which Mr. Stoelting retains sole voting and investment power during his lifetime and 805 shares held by Mr. Stoelting’s wife as custodian of Trusts for the benefit of their children.

(4)         Amounts shown for Messrs. Colvin, Gliebe and Schlemmer include 1,493 shares, 789 shares and 992 shares, respectively, held in trust under the Company’s 401(k) plans as of December 31, 2013.

(5)         This column includes shares of restricted stock or restricted stock units that are subject to forfeiture until they vest on the third anniversary of the date of grant.

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Other Beneficial Owners

The following table sets forth information, as of December 28, 2013, regarding beneficial ownership by the only persons known to us to own more than 5% of our outstanding common stock. The beneficial ownership information set forth below has been reported on filings made on Schedule 13G with the SEC by the beneficial owners.

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COMPENSATION DISCUSSION AND ANALYSIS

Our Approach to Compensation

Regal Beloit Corporation (“we” or the “Company”) is a leading manufacturer of electric motors, mechanical and electrical motion controls and power generation products serving markets throughout the world.   Our overall compensation philosophy is to offer the opportunity for our management team to earn competitive pay, with total compensation having a direct connection to our financial performance and the creation of shareholder value.  We believe this to be a conservative approach to executive compensation.

Our compensation philosophy dictates that a significant portion of our executives’ total potential compensation be dependent upon the Company’s performance and tied to the creation of long-term shareholder value.  This was the case in 2013, creating a close alignment between the interests of our executive officers and the interests of our shareholders.  The questions and answers below are designed to explain how our compensation programs for our management team are structured and the reasons for those structures.

What compensation policies and practices reflect our compensation philosophy?

What We Do

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What We Do Not Do

What specific actions did the Company take with respect to compensation for 2013?

Some of the key actions and decisions that our Compensation and Human Resources Committee (“Committee”) of our Board of Directors took with respect to our executive compensation programs for 2013 were:

·                  Adopted and received shareholder approval of a new 2013 Equity Incentive Plan (“2013 Plan”) incorporating “double trigger” vesting of awards on a change of control, no “gross-ups” for excise taxes on golden parachute payments and clawback provisions.

·                  Recalibrated our current long-term incentive mix to include performance share units that vest solely on the basis of our relative total shareholder return performance versus the peer group.

·                  Assessed the competitiveness of our overall compensation and benefit programs for our officers.

In May 2013 (after the 2013 executive compensation actions described in this Compensation Discussion and Analysis had taken place), we held our annual advisory shareholder vote on the compensation of our named executive officers at our annual shareholders’ meeting, and, consistent with the recommendation of the Board, our shareholders approved our executive compensation, with more than 97% of votes cast in favor.  Consistent with this strong vote of shareholder approval,

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we have not undertaken any material changes to our executive compensation programs in response to the outcome of the vote.

How was corporate performance and the creation of shareholder value reflected in 2013 compensation?

Executive compensation in 2013 aligned well with the objectives of our compensation philosophy and with our corporate performance. Our company achieved record free cash flow despite  difficult economic conditions in many of our markets.  We paid our 214th consecutive quarterly dividend and increased the dividend again in 2013. Our total shareholder return for the fiscal year ended December 28, 2013 was 8.3%.

These operating results led to annual cash incentives earned in 2013 at 69% of target, compared to 84% in 2012 and 144% in 2011 (although bonuses for our named executive officers were decreased to approximately 43% by action of our Compensation and Human Resources Committee as described below).  We use a shareholder-approved Shareholder Value Added (“SVA”) Plan, which we refer to as our SVA Cash Incentive Plan, to determine annual cash incentives for our executive officers.  SVA attempts to approximate the value executives add to our company above our cost of capital, and is calculated by subtracting a cost of capital charge for the average net capital employed from the net operating profit after tax that our company generates during the year.

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We believe our compensation of our named executive officers aligns well with our performance, but we also believe that this alignment is not always reflected in the Summary Compensation Table in the same way we view the alignment for our internal purposes.  This is because the Summary Compensation Table values are required by Securities and Exchange Commission rules to include the full grant date fair value of equity awards in the year the awards are granted.  The grant date fair value is an accounting value that projects the potential value of awards based on assumptions about, among other things, certain future events.  The grant date fair value is different from the economic value of the awards to our named executive officers, which may be lower or higher than the grant date fair value depending on the price of our common stock.  For this reason, we are including in this proxy statement, as a supplement to the required Summary Compensation Table, a comparison of our named executive officers’ realizable pay for 2013 with their total compensation as shown in the Summary Compensation Table.

The realizable pay disclosure in the table above is the same as the compensation shown in the Summary Compensation Table except that it values equity-based compensation based on the price of our common stock at fiscal year end.  Restricted stock units are valued as the product of the number of shares granted to the officer during the year multiplied by the year-end stock price, assuming for purposes of this disclosure that the grants were vested.  Stock appreciation rights are valued as the product of the number of rights granted to the officer during the year multiplied by the excess, if any, of the year-end stock price over the grant price of the rights, assuming for purposes of this disclosure that the grants were vested.   In addition, the performance share units granted to the named executive officers in 2013 have been valued at zero, since they would have no value if the company’s total relative total shareholder return for the entire applicable performance period is the same as it was for 2013.

To illustrate how the compensation of our CEO has aligned with our total shareholder return, we are also including the following supplemental graph, which compares our total shareholder return with

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our CEO’s compensation (as shown in the Summary Compensation Table and on a realizable basis as described above) over our fiscal years 2011 through 2013:

CEO Pay vs TSR

How do we set executive compensation?

Our Board, our Committee and our CEO each play a role in setting the compensation of our named executive officers, with the exception that our CEO is not involved in setting his own compensation.  Our Board appoints the members of the Committee, which consists entirely of independent directors who are “outside directors” for purposes of Section 162(m) of the Internal Revenue Code and “non-employee directors” for purposes of the Securities Exchange Act of 1934.  The current members of the Committee are Messrs. Doerr (Chairman), Burt and Foate.  The Committee is responsible for determining the components of our executive compensation program, consistent with the compensation philosophy determined by our Board, and the executive compensation packages offered to our named executive officers.  The Committee determines executive salaries, administers our SVA Cash Incentive Plan and administers our long-term equity incentive plans and makes awards under the plans.

The Committee reviews data from market surveys and proxy statements from our established peer group and retains an independent compensation consultant to assess our competitive position with respect to total executive compensation, including annual compensation, benefits and perquisites.  In reviewing data with respect to annual compensation, the Committee assesses the following components of executive compensation:

·                                          Base salary;

·                                          Annual cash incentives;

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·                                          Long-term incentive compensation; and

·                                          Any other benefits and perquisites.

As described below under “What are the elements of total compensation?”, the Committee takes various factors into account in setting compensation levels and does not use a formulaic approach, but generally seeks to closely align target total direct compensation (i.e.,. the sum of base salary, target SVA opportunity, and target long-term incentives) with the peer group and survey median.

In its decision-making process, the Committee receives and considers the recommendations of our CEO with respect to compensation to be paid to our executive officers other than himself.  Our CEO makes no recommendation with respect to his own compensation.

Based on the foregoing information, the Committee reviews and makes determinations concerning our compensation and benefit programs, with the objective of making our executive compensation and benefit programs consistent with our overall compensation philosophy.  The Committee makes decisions regarding adjustments to base salaries, annual cash incentives and long-term incentives all concurrent with the assessment of the executives’ individual performance for the year.

The Committee periodically solicits proposals from a variety of independent compensation consultants to assist the Committee in the performance of its responsibilities.  As part of its evaluation of potential compensation consultants, the Committee considers all factors relevant to the consultant’s independence from management and potential conflicts of interest in accordance with applicable SEC rules and NYSE listing standards.  After selecting an independent compensation consultant, the Committee periodically meets with that consultant throughout the year at such times as the Committee deems appropriate, and receives reports and advice from the consultant on matters of executive compensation.  Our CEO has access to the independent compensation consultant only at the direction of the Committee.

Towers Watson & Co. (“Towers Watson”) served as the Committee’s independent compensation consultant for 2013.  In July 2013, the Committee reviewed the independence of Towers Watson and the individual representatives of Towers Watson who served as the Committee’ consultants in light of the  independence requirements, considering the following specific factors:  (1) other services provided to us by Towers Watson; (2) fees paid by the company to Towers Watson as a percentage of Towers Watson’s total revenue; (3) policies and procedures maintained by Towers Watson that are designed to prevent a conflict of interest; (4) any business or personal relationships between the individual representatives and any member of the  Committee; (5) any company stock owned by the individual representatives; and (6) any business or personal relationships between our executive officers and Towers Watson or the individual representatives.  The Committee also re-engaged Stern Stewart & Co. in 2013 to assist with the setting of goals under our SVA Cash Incentive Plan.

The Committee concluded, based on the evaluation described in the preceding paragraph, that both Towers Watson and Stern Stewart & Co. were independent and that no conflict of interest was raised by the services performed by Towers Watson or Stern Stewart & Co.  Neither Towers Watson nor Stern Stewart & Co. perform any services for our company other than the services provided at the direction of the Committee.

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In setting compensation for 2013, the Committee directed Towers Watson to assemble compensation data for our named executive officers and compare the data against aggregated data for persons holding similarly-situated positions in our peer group and from a general industry published survey.  Every three years, the Committee makes revisions to the peer group in light of acquisitions, changes in our size, or other factors it deems appropriate.  The Committee last updated our peer group in late 2011, selecting  companies  that it believed to be comparable to our company by generally using the following criteria:

·                  Comparable revenue (target companies with annual revenues ranging from approximately 0.5 to 2.0 times our annual revenues and with an overall median revenue that approximates ours ); and

·                  Compete in an industry similar to ours and/or have the level of complexity and business model similar to ours.

·                  Contains companies that we compete with for executive talent

·                  Consistent with its typical cycle, the Committee expects to approve a revised peer group in 2014.

For the 2013 benchmarking, eighteen companies in our peer group for purposes of named executive officer benchmarking were:

Towers Watson benchmarked our executive compensation opportunities using (i) the above referenced peer group, (ii) an eleven company subset of our peer group from Equilar’s Top 25 Management Survey (typically used by the Committee in order to benchmark compensation for non-proxy officers but occasionally used to supplement its review of compensation for named executive officers), and (iii) general industry data from Towers Watson’s Executive Compensation Database.

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The eleven companies in the peer group who participated in Equilar’s Top 25 Management Survey were the following:

In reviewing and analyzing these data, Towers Watson considered information for each named executive officer position with respect to the following elements of compensation:

·                                          Base salary;

·                                          Target SVA annual cash incentive;

·                                          Target total cash compensation (salary and actual annual cash incentive);

·                                          Grant-date value of annual long-term incentives; and

·                                          Target total direct compensation (sum of target cash and long-term incentives).

In keeping with the Committee approved methodology, Towers Watson analyzed each element of target total direct compensation for our named executive compared to the market median from the three different data sources.  Towers Watson reported on the methodology that it used in its analysis, provided a summary of its findings, and its observations on our programs relative to the data and market trends in executive compensation.  In connection with this review, Towers Watson also analyzed our annual share utilization rate and dilution relative to market practice.

In 2013, the Committee also reviewed peer group data relating to supplemental benefits and perquisites as part of its triennial review of such benefits and perquisites provided to our executive officers and, based on this review, made the change described below under “What other benefits do we provide to our executives?” The Committee used the same peer group and benefit survey provided by Towers Watson for purposes of this benchmarking study.

How do we determine total compensation?

Consistent with our overall compensation philosophy, we tie a majority of our total compensation directly to our corporate performance and structure it to ensure that there is an appropriate balance between our long-term and short-term corporate performance, and between the individual performance of our executive officers and the creation of shareholder value.  We benchmark the individual elements of total compensation in comparison to our peer group and do not separately target total compensation at a specified percentile of our peer group.  Based on the Committee’s analysis and the advice of Towers Watson, however, we believe that the compensation we paid our named executive officers was reasonable in its totality as compared to our peer group and is consistent with our compensation philosophies.

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What are the elements of total compensation?

We achieve our executive compensation objectives through the following ongoing programs.  All of our named executive officers participate in these programs.  A more detailed discussion of each program is provided below in this Compensation Discussion and Analysis.

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Base Salaries.  We believe that the purpose of base salary is to provide a competitive fixed rate of pay, recognizing different levels of responsibilities within our company.  We determine base salaries for our executives based upon job responsibilities, level of experience, individual performance and expectations with respect to contributions to our future performance as well as comparisons to the salaries of executives in similar positions as compared to our peer group.  The

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Committee generally seeks to offer approximately median levels of base salary compensation as measured against our selected peer group.  In setting the individual base salaries of our named executive officers based on the factors identified in the preceding sentence, the Committee generally considers salaries within a 15% range above or below the fiftieth (50th) percentile of peer group data to be at approximately the median level.

In April 2013, except for the CEO, the Committee increased the base salaries of our named executive officers in accordance with the factors identified in the preceding paragraph.  The CEO’s salary did not change.  Effective as of April 1, 2013, the base salaries of our named executive officers were as follows:

The Committee compared these adjusted base salary levels to the salary levels of the executive officers in our peer group based on proxy statement data as well as data from Equilar’s Top 25 Management Survey and general industry data from Towers Watson’s Executive Compensation Database.  Compared to the median base salaries of similarly situated executive officers in the data reviewed by the Committee, Mr. Gliebe’s salary for 2013 placed him 7% below the median, and the salaries of Messrs. Hinrichs, Schlemmer, Underwood and Colvin for 2013 placed them 4%, 6%, 4% and 3% below median, respectively.

SVA Annual Cash Incentives. Our SVA Cash Incentive Plan is designed to promote the maximization of shareholder value over the long term.  We chose SVA as the basis for annual cash incentives for the following reasons.  First, we believe it is the corporate performance measure that is tied most directly, both theoretically and empirically, to the creation of shareholder value.  Managing for higher SVA is, by definition, managing for long-term increasing shareholder value.  Second, it is a framework developed for setting goals and measuring performance that rewards participants for both short and long-term results.  Finally, by focusing on our financial performance as a function of invested capital, management is incented to make prudent investments in assets that are capable of providing strong returns.  In summary, we believe that SVA, as we use it, best recognizes the value that members of our management team deliver to increase long-term shareholder value.

We intend the SVA Cash Incentive Plan to provide a competitive amount of compensation for the executive officers based on their individual participation levels when we achieve the SVA targets as approved by the Committee.  The SVA Cash Incentive Plan provides annual cash incentive

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opportunities based on a comparison of actual annual SVA to target SVA for the year in question.  Performance above target SVA earns an annual cash incentive greater than the target annual cash incentive, while performance below target SVA earns an annual cash incentive less than the target annual cash incentive or no annual cash incentive at all.  In years of strong corporate performance, the annual cash incentive amount that an executive can earn may be positioned above the median level for our peer group, and the annual cash incentive amount that an executive can earn would be below the median level for our peer group in years when we are below the target.  We have capped the maximum annual cash incentive that may be earned in any year at 200% of the target annual cash incentive established for that year.  In addition, any annual cash incentive amounts earned above 100% of the target amount are deferred and are paid in installments over a three year period. Amounts earned under the SVA Cash Incentive Plan are also subject to our clawback policy, which would require recoupment of any amounts earned under the SVA Cash Incentive Plan on the basis of financial results that are subsequently subject to a restatement.  To benchmark and determine target annual cash incentive amounts, and to determine an annual improvement factor and leverage factor that impacts the target annual cash incentive amount, the Committee retains nationally-recognized independent compensation consultants every three years, or more frequently as deemed necessary.  The 2013 targets for the SVA Cash Incentive Plan were approved in January 2013 based on a formula that we established in 2010 with the assistance of Stern Stewart & Co. and that we modified in 2013 as described below.

SVA is a calculation that attempts to approximate the value executives add to our company above our cost of capital.  SVA is calculated by subtracting a charge for the average net capital employed by us during a fiscal year from the net operating profit after tax that we earn during that same year.  The cost of capital we use for this purpose is our weighted average cost of capital, which is determined based on our cost of equity and our after-tax cost of debt.   Pursuant to the terms of the SVA Cash Incentive Plan, all calculations of financial results for purposes of SVA exclude the impact of new acquisitions for the first 12 months following the closing of the acquisition. To encourage improved performance in accordance with the SVA Cash Incentive Plan, the Committee establishes an expected improvement factor that is used to set a target SVA amount. Once the Committee establishes the expected improvement factor, the SVA target amount for the year is set by formula. Under the formula, the new target set each year is calculated as follows:

The 2013 SVA target was established by the formula at $62.8 million.

In addition to setting target SVA, the Committee also sets the target annual cash incentive percentage amount for each of our participating executive officers.  This amount is based on a percentage of the base salary paid to the executive officers.  For 2013, Messrs. Gliebe, Hinrichs, Schlemmer, Underwood and Colvin had target annual cash incentive percentage amounts of 105%, 70%, 70%, 55% and 45%, respectively, which, as applied to the base salary levels that took effect April 1, 2013, equated to target annual cash incentive amounts of $971,250, $325,000, $392,000, $211,750 and $150,750, respectively.  The Committee, in consultation with Towers Watson and our CEO (other than with respect to his own compensation), set annual cash incentive targets under our SVA Cash Incentive Plan near the median level with respect to each respective position held by our

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executive officers relative to our peer group.  As a result, our executives were given the opportunity to earn above-median annual cash incentive awards for generating improvements in our SVA while at the same time facing below-median awards (or no awards at all) for failing to meet that objective.  The Committee believes that tying above-median incentives to generating increasing returns in excess of our cost of capital is a disciplined way to reward our named executive officers for creating shareholder value.

In the fourth quarter of fiscal 2013, the company recorded a goodwill impairment charge of $74.7 million, net of tax.  The Committee considered whether to include the impairment charge in the SVA Plan calculation of net operating profit for 2013.  In that context, it considered the impact that including the charge would have on (i) 2013 SVA payouts and (ii) the 2014 SVA target.

·                  With respect to the impact on 2013 payouts, the Committee determined that (i) if the charge was excluded from the calculation, the 2013 SVA amount would be $53.1 million, yielding payouts of approximately 69% of target, and (ii) if the charge was included in the calculation, the 2013 SVA amount would be negative and therefore payout amounts would be zero.

·                  With respect to the impact on the 2014 SVA target, the Committee concluded that if the charge was included in the calculation the SVA target amount for 2014 would be artificially low due to the impact a negative SVA would have on the target formula, which averages the prior year’s actual and target SVA to determine the current year’s SVA target.  The Committee determined that this artificially low 2014 target would likely result in the maximum possible payouts for 2014 and possibly 2015, even if the company’s performance did not meet expectations.

Following this analysis, the Committee determined to exclude the impairment charge from the calculation of net operating profit for 2013.  The Committee felt this was the appropriate treatment to avoid what it believed would be

·                  an artificially low SVA target for 2014 and 2015; and

·                  an unwarranted elimination of SVA payouts for 2013.  The Committee felt such an elimination would be unwarranted since the impairment charge was non-cash and would not negatively affect the company’s future cash flows, and since in its view management achieved several significant accomplishments in 2013 that merited some amount of bonus including (i) the fourth consecutive year of improvement in customer survey scores relating to responsiveness, innovation and overall value; (ii) the fourth consecutive year of improvement in quality scores (measured in defects per million); and (iii) excellent progress in the pursuit of the Company’s simplification initiative.

Giving effect to the exclusion of the impairment charge, we achieved actual SVA of $53.1 million, or approximately 69% of the target annual cash incentive.  The Committee believed that, given the comparative company performance year-over-year, the named executive officers’ SVA bonus payouts for 2013 should be substantially reduced from the payouts in 2012.  As a result, the Committee determined to reduce the 2013 payouts to the named executive officers to a level of

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approximately 35% of the target annual cash incentive.   Messrs. Gliebe, Hinrichs, Schlemmer, Underwood and Colvin were paid annual cash incentives under the SVA Cash Incentive Plan of $334,693, $112,167, $135,083, $72,967 and $51,948, respectively.  For Mr. Gliebe, this amount  represented a bonus payment reduction of 45.5% compared to 2012.  For our other named executive officers, these amounts represented reductions of at least 30%.

The goodwill impairment charge also reduced the amount of goodwill reflected on the company’s balance sheet.  The Committee analyzed the impact this reduction in goodwill would have on the calculation of the SVA target amount for 2014 and concluded that the reduction in the capital base would, regardless of the company’s financial performance in 2014, result in the addition of approximately $6.4 million to the total SVA amount in 2014.  To offset the positive impact of this increase on total SVA, the Committee increased the improvement factor for 2014 by an additional $6.4 million, resulting in an improvement factor of $12.5 million for 2014.

Long-Term Compensation.  We believe that equity-based compensation ensures that our executives have a continuing stake in the long-term success of our company and allows our executives to earn above-median compensation only if our shareholders experience appreciation in their equity holdings.  In 2012 and previous years, the Committee granted stock appreciation rights, or SARs, restricted stock units, or RSUs.  However, in 2013, following a detailed review of the use of performance shares among general industry companies and our peer group, the Committee determined to add performance shares to our long-term incentive mix in 2013.  The performance shares were added by modifying the overall long-term incentive mix from its previous form of 60% stock appreciation rights and 40% RSUs to a mix of 40% SARs, 40% RSUs and 20% performance share units, or PSUs.

Consistent with our overall compensation philosophy, the Committee, after consultation with Towers Watson, granted long-term compensation awards at levels approximating the median level of these awards granted by the companies in our peer group.  On an individual level, the total fair value, as of the grant date, of the SARs, RSUs and PSUs granted to each of our named executive officers placed them at approximately the median level of the value of long-term compensation awards granted to persons holding similarly-situated positions by the companies in our peer group.  We value stock appreciation rights using a Black-Scholes formula and PSUs using a Monte Carlo methodology.  In 2013, the Committee granted stock appreciation rights, restricted stock units and PSUs to each of our named executive officers in 2013 in the amounts indicated in the “Grants of Plan-Based Awards Table for Fiscal 2013” and the narrative following the table.

Other than in the case of newly hired executives, we generally make determinations concerning long-term equity-based awards in April of each year coincident with the completion of annual performance reviews.  In any event, we grant all equity-based awards effective two days after the release of either our quarterly or annual company financial results.

Stock Appreciation Rights (SARs).  The Committee set the base price per share of all of the stock appreciation rights that it granted in 2013 equal to the closing market price of our common stock on the date of grant so that the stock appreciation rights will have value only if the market price of our common stock increases after the grant date.  In addition, the Committee made the stock appreciation rights subject to vesting over five years (with the SARs vesting 40% on the second anniversary of the grant date and 20% on each of the third, fourth and fifth anniversaries of the grant

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date) to provide additional incentive for our named executive officers to remain in our employment.  The Committee granted stock appreciation rights rather than stock options because it views stock appreciation rights as less dilutive to our shareholders.

Restricted Stock Units (RSUs).  A restricted stock unit gives the holder a right to have us issue a share of our common stock upon the conditions or date specified in the award.  In addition to providing competitive compensation and an incentive to create shareholder value, these awards are intended to align management and shareholder interests as well as provide a retention incentive for the executive to remain employed by our company.  The Committee made the restricted stock units subject to forfeiture until the third anniversary of the grant date, at which time they cliff vest, to provide an additional incentive for our named executive officers to remain in our employment.

Performance Share Units (PSUs).  The performance share units granted to our named executive officers in 2013 have a three-year performance period and will be earned or forfeited based on a performance metric of total shareholder return relative to our peer group.

What other benefits do we provide to our executives?

We have certain other plans that provide, or may provide, compensation and benefits to our named executive officers.  These plans are principally our 401(k) Plan and our Target Supplemental Retirement Plan.  We also provide life, medical and long-term disability insurance, and short-term disability benefits as part of our benefits package.  The Committee considers all of these plans and benefits when reviewing total compensation of our executive officers.

401(k).  In 2013, our named executive officers participated in our 401(k) plan that covers a group of eligible hourly and salaried employees.  In 2013, salaried participants in the 401(k) plan, including Messrs. Gliebe, Hinrichs, Schlemmer, Underwood and Colvin, were eligible to contribute a portion of their compensation on a pre-tax basis, up to the limits imposed by the Internal Revenue Service, and we made a matching contribution equal to 100% of the first 1% and 50% of the next 5% of base salary contributed by the employees into their 401(k) accounts.  We also contributed an additional 2% of Mr. Schlemmer’s base salary to his account under our 401(k) plan pursuant to an arrangement established when the Marathon Electric Salaried Employees’ Pension Plan, in which he participated, was frozen at the end of 2008.

Target Supplemental Retirement Plan and the Management Plan.  The Target Supplemental Retirement Plan limits participants to officers and other key employees recommended by our CEO and approved by the Committee.  All of our named executive officers currently participate in this plan. The Committee’s intent in offering benefits under the Target Supplemental Retirement Plan is to provide a competitive retirement package to participants in the plan by extending retirement benefits without regard to statutory limitations under tax-qualified plans.

When the Target Supplemental Retirement Plan was approved by the independent members of the Board in January 1994, the benefit amounts were benchmarked against a group of then peer companies in consultation with a compensation consultant.  The Committee periodically reviews these benchmarks to determine if the benefit amounts are still appropriate.  These benefit amounts were included in the benchmarking of our benefit programs described above under “How do we set

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executive compensation?”, and, based on that review, the Committee determined not to modify the current Plan.

What perquisites do we provide?

We provided a modest level of personal benefits to named executive officers in 2013, as summarized below:

·                  Each of the executive officers had use of a company car for business and personal travel.

·                  Our executive officers are provided with enhanced short-term and long-term disability benefits compared with our other salaried employees.  For salaried employees who are not executive officers, the short-term disability benefit provides up to six months of base salary replacement in an amount between 60% and 100% of the salaried employee’s base salary depending on the salaried employee’s credited years of service with our company.  For our executive officers, base salary replacement is 100% regardless of credited years of service.  For salaried employees who are not executive officers, the long-term disability benefit commences following six months of disability and provides a benefit of 60% of base salary (which base salary is capped at $300,000 for purposes of calculating the long-term disability benefit).  For our executive officers, the same formula applies but there are no caps.

·                  We provide our executive officers with company-paid term life insurance.  The premiums paid for each of our named executive officers for this life insurance in 2013 are included below in the “Summary Compensation Table for Fiscal Years 2011-2013” in the column entitled “All Other Compensation.”  Following the benchmarking of our benefit programs described above under “How do we set executive compensation?”, the Committee increased the life insurance benefit amount for each of our named executive officers (other than Mr. Gliebe) to the market median of $750,000.  We do not provide a tax gross up in connection with this benefit.

How do we assure that compensation keeps our executives focused on long-term success?

Our long-term success depends on excellent financial and operational performance year after year.  Therefore, to focus on both the short and long-term success of the Company, our named executive officers’ compensation includes a significant portion—approximately 65%, on average—that is “at risk” because the value of such compensation is determined based on the achievement of specified results or subject to forfeiture.  If short-term and long-term financial goals are not achieved, then performance-related compensation will decrease.  If goals are exceeded, then performance-related compensation will increase.

In addition, compensation paid in the form of equity awards, such as RSUs, SARs and PSUs, instead of cash is at-risk because its value varies with changes in the stock price.  By creating a total compensation package where a considerable percentage is paid in equity awards, our executive officers have a significant stake in the long-term success of the Company and gain financially along with our shareholders.

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As shown in the following charts, in fiscal 2013, 69% of the CEO’s total compensation and, on average, 59% of the other named executive officers’ compensation was at-risk dependent on performance.  Sixty-three percent (63%) of the CEO’s total compensation and, on average, 52% of the other named executive officers’ total compensation was paid in RSUs, SARs or PSUs.

Chief Executive Officer

2013 Compensation Distribution

Other Named Executive Officers

2013 Compensation Distribution

What are our executive stock ownership requirements?

To underscore the importance of linking executive compensation and shareholder interests, we have implemented stock ownership requirements for certain executives, including our named

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executive officers.  Executives subject to these stock ownership requirements must own a certain dollar value amount of stock before they are permitted to sell shares (other than shares sold to pay option exercise prices or shares sold or surrendered to cover taxes).  Executives who sell shares in violation of these requirements may be ineligible for future long-term incentive awards.  The stock ownership policy requires our CEO to hold shares with a value five times his base salary.  For our Chief Operating Officer and Chief Financial Officer, the ownership threshold is three times base salary and for all other executives the ownership threshold is one times base salary.  Each of our named executive officers are in compliance with this policy either because they own the target value of stock or because they have not sold shares.

What severance and change in control benefits do we provide?

We have no employment agreements with any of our named executive officers that provide benefits prior to a change in control of our company. However, we have entered into change in control and termination agreements with Messrs. Gliebe, Hinrichs, Schlemmer, Underwood and Colvin.

The Committee believes the change in control and termination benefits under the change in control and termination agreements and our equity incentive plans are consistent with the Committee’s overall objective of building shareholder value and contain terms that are similar to those offered to executives of comparable companies.

The purpose of the benefits is to focus our named executive officers on taking actions that are in the best interests of our shareholders without regard to whether such action may ultimately have an impact on their job security, and to avoid the loss of key managers that may occur in connection with an anticipated or actual change in control.

All of our change in control agreements contain “double trigger” provisions, which means that, for an executive officer to receive severance benefits under the agreement, in addition to the change in control there must be some adverse change in the circumstances of the executive officer’s employment. The Committee selected the triggering events for change in control and termination benefits to our named executive officers based on its judgment that these events were likely to result in the job security distractions and retention concerns described earlier in this paragraph.

Other than the change in control and termination agreements, we have no formal severance program in place for our named executive officers.

In 2011 the Committee adopted a policy eliminating tax gross-ups from all new change in control and termination agreements that we enter into with our executive officers.  This policy was applied to the change in control and termination agreements entered into with Messrs. Hinrichs and Underwood in 2010 and Mr. Schlemmer in 2011, as well as one additional executive officer who is not a named executive officer, which contain no tax gross-ups.

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EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth for each of our named executive officers: (1) the dollar value of base salary and annual cash incentive earned during the years indicated; (2) the full grant date fair value of RSU, SAR and PSUs granted during the years indicated, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718; (3) the dollar value of earnings for services pursuant to awards granted during the indicated year under non-equity incentive plans; (4) the change in pension value and non-qualified deferred compensation earnings during the years indicated; (5) all other compensation for the years indicated; and (6) the dollar value of total compensation for the years indicated.  Our named executive officers are our Chairman and CEO, our Vice President and Chief Financial Officer and each of our three other most highly compensated executive officers as of December 28, 2013.  In accordance with the rules of the SEC, the table includes information for the fiscal years ended December 31, 2011, December 29, 2012 and December 28, 2013 for each named executive officer.

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SUMMARY COMPENSATION TABLE FOR FISCAL YEARS 2011-2013

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Grants of Plan-Based Awards

The following table sets forth information regarding all incentive plan awards that the Committee made to our named executive officers during 2013, including incentive plan awards (equity-based and non-equity based) and other plan-based awards.  Disclosure on a separate line item is provided for each grant of an award made to a named executive officer during the year.  The information supplements the dollar value disclosure of stock, option and non-stock awards in the Summary Compensation Table by providing additional details about these awards.  Non-equity incentive plan awards are awards that are not subject to ASC Topic 718 and are intended to serve as an incentive for performance to occur over a specified period.

GRANTS OF PLAN-BASED AWARDS TABLE FOR FISCAL 2013