UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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:

 

 

HARRIS CORPORATION

(Name of Registrant as Specified In Its Charter)

 

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

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HARRIS CORPORATION
1025 West NASA Boulevard
Melbourne, Florida 32919

 

 

September 18, 2009

 

Dear Fellow Shareholder:

 

You are cordially invited to attend the 2009 Annual Meeting of Shareholders of Harris Corporation. The meeting will be held at the Harris Customer Briefing Center located at 1025 West NASA Boulevard in Melbourne, Florida, on Friday, October 23, 2009, starting at 11:30 a.m., local time.

 

The accompanying Notice of the 2009 Annual Meeting and Proxy Statement describe the matters to be acted on at the meeting, which include:

 

 

Your Board of Directors believes that the election of its nominees for director and the ratification of the appointment of our independent registered public accounting firm are in the best interests of Harris and its shareholders. Accordingly, your Board of Directors unanimously recommends a vote FOR the election of its nominees for director and FOR the ratification of the appointment of Ernst & Young LLP as Harris’ independent registered public accounting firm for fiscal year 2010. Your Board of Directors believes that an amendment to our By-Laws requiring an independent chairman of the board is unnecessary and not in the best interests of Harris and its shareholders and accordingly unanimously recommends a vote AGAINST such shareholder proposal. These matters are discussed in greater detail in the accompanying Proxy Statement.

 

Following the voting, I will report on our operations and future plans. There will also be an open discussion period during which your questions and comments will be welcome.

 

The attendance of shareholders at our annual meetings has been helpful in maintaining communication and understanding. We hope you will be able to join us. Whether or not you plan to attend, it is important that your shares be represented and voted at the meeting. You can ensure that your shares are represented at the meeting by voting over the Internet, by telephone or by using a traditional proxy card. Instructions for these convenient ways to vote are set forth on the enclosed proxy/voting instruction card.

 

Cordially,

 

Howard L. Lance

Chairman, President and

Chief Executive Officer

 

 

 

HARRIS CORPORATION

1025 West NASA Boulevard

Melbourne, Florida 32919

 

Notice of
2009 Annual Meeting of Shareholders
to be held on October 23, 2009

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY

MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON

OCTOBER 23, 2009:

The Proxy Statement and 2009 Annual Report to Shareholders

are available at

www.harris.com/proxy/2009

 

TO THE HOLDERS OF COMMON STOCK
OF HARRIS CORPORATION:

 

NOTICE IS HEREBY GIVEN that the 2009 Annual Meeting of Shareholders of Harris Corporation will be held at Harris Corporation’s Customer Briefing Center located at 1025 West NASA Boulevard, Melbourne, Florida, on Friday, October 23, 2009, at 11:30 a.m., local time, for the following purposes:

 

 

The accompanying proxy statement more fully describes these items. We have not received notice of other matters that may be properly presented at the Annual Meeting.

 

Only holders of common stock of record at the close of business on August 28, 2009 are entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements thereof. No ticket is required for admission to the Annual Meeting. For security purposes, however, you will be required to present a valid, government-issued photo identification, such as a driver’s license or passport, to gain admission to the Annual Meeting. Packages, boxes, handbags and briefcases may be inspected.

 

By Order of the Board of Directors

Scott T. Mikuen

Vice President, Associate

General Counsel and Secretary

 

Melbourne, Florida

September 18, 2009

 

 

 

 

 

HARRIS CORPORATION

 

2009 ANNUAL MEETING OF SHAREHOLDERS

 

PROXY STATEMENT

 

TABLE OF CONTENTS

 

 

Proxy Statement

for

2009 Annual Meeting of Shareholders

to be held on October 23, 2009

 

GENERAL INFORMATION ABOUT THE ANNUAL MEETING

 

Why am I receiving this
proxy statement?

 

We are furnishing this proxy statement to you in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Harris Corporation (which we refer to as “Harris,” “we,” “our” or “us”) and the solicitation of voting instructions by the Harris Corporation Retirement Plan Trustee, in each case for use at the 2009 Annual Meeting of Shareholders to be held on October 23, 2009, and at any adjournments or postponements thereof.

 

On September 18, 2009, we commenced mailing and made available electronically to our shareholders: (1) the notice of the 2009 Annual Meeting of Shareholders and this proxy statement, (2) the accompanying proxy/voting instruction card, and (3) a copy of our 2009 Annual Report to Shareholders, which includes our Annual Report on Form 10-K for the fiscal year ended July 3, 2009 and our audited financial statements.

 

What is a proxy?

 

A proxy is your legal designation of another person to vote the shares you own. That other person is called a proxy. If you designate someone as your proxy, the document in which you make that designation is also called a proxy.

 

What is a proxy statement?

 

This document is a proxy statement. It is a document that we are required by law to provide to you when we ask you to name a proxy to vote your shares. We encourage you to read this proxy statement carefully.

 

What is the purpose of the meeting?

 

The purpose of the 2009 Annual Meeting of Shareholders is to obtain shareholder action on the matters outlined in the notice of meeting included with this proxy statement. These matters include: (1) election of the four nominees for director named in this proxy statement for a one-year term expiring at the 2010 Annual Meeting of Shareholders; (2) ratification of the appointment by our Audit Committee of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2010; and (3) consideration of a shareholder proposal requesting approval of an amendment to our By-Laws to require an independent chairman of the board, if such proposal is properly presented at the 2009 Annual Meeting. This proxy statement provides you with detailed information about each of these matters. In addition, management will report on our operations and respond to questions from shareholders.

 

What is a record date and
who is entitled to vote at the meeting?

 

A record date is a date, as of the close of business of which, shareholders of record are entitled to notice of and to vote at a meeting. The record date for the 2009 Annual Meeting is August 28, 2009. The record date was established by our Board as required under the laws of Delaware, our state of incorporation. Thus, owners of record of shares of Harris common stock at the close of business on August 28, 2009 are entitled to receive notice of and to vote at the 2009 Annual Meeting and at any adjournments or postponements thereof.

How many shares can be voted and
what is a quorum?

 

You are entitled to one vote for each share of Harris common stock that you owned as of the close of business on August 28, 2009, and you may vote all those shares. Only our common stock has voting rights. On the record date, there were 130,708,023 shares outstanding and entitled to vote at the 2009 Annual Meeting and approximately 6,350 holders of record.

 

A quorum is the minimum number of shares that must be represented in person or by proxy in order for us to conduct the 2009 Annual Meeting. The attendance in person or by proxy of holders of a majority of the shares of common stock entitled to vote at the 2009 Annual Meeting, or 65,354,012 shares of common stock based on the record date of August 28, 2009, will constitute a quorum to hold the 2009 Annual Meeting. If you grant your proxy over the Internet, by telephone or by the accompanying proxy/voting instruction card, your shares will be considered present at the 2009 Annual Meeting and counted toward the quorum.

 

What different methods can I
use to vote?

 

You have a choice of voting:

  • Over the Internet;

  • By telephone;

  • By mail; or

  • In person at the Annual Meeting.

 

Even if you plan to attend the Annual Meeting, we encourage you to vote over the Internet, by telephone or by mail. Please carefully read the instructions below on how to vote your shares. Because the instructions vary depending on how you own your shares and the method you use to vote, it is important that you follow the instructions that apply to your particular situation.

 

If you vote over the Internet or by telephone, you should not return your proxy/voting instruction card.

 

What is the difference between
a “record holder” and an owner
holding shares in “street name”?

 

If your shares are registered in your name, you are a “record holder.” You will be a record holder if you hold a stock certificate or if you have an account directly with our transfer agent, BNY Mellon Shareowner Services. If your shares are registered or held in the name of your broker or bank or other nominee, your shares are held in “street name” and you are considered the beneficial owner of such shares.

 

How do I vote if my shares are

held in my name?

 

Voting over the Internet

 

Voting over the Internet is easy and fast and is available 24 hours a day. Read your proxy/voting instruction card and follow the directions. You will be able to confirm that the system has properly recorded your vote. Your vote will be counted immediately, and there is no need to return your proxy/voting instruction card.

 

Voting by telephone

 

Voting by telephone is also simple and fast and is available 24 hours a day. Call the toll-free telephone number on your proxy/voting instruction card and listen for further directions. To respond to the questions, you must have a touch-tone phone and will need your proxy/voting instruction card in hand. The telephone voting system allows you to verify that the system has properly recorded your vote. Your vote will be counted immediately, and there is no need to return your proxy/voting instruction card.

 

Voting by mail

 

If you are a shareholder of record, you can save us expense by voting over the Internet or by telephone. Alternatively, you can vote by mail by completing, signing, dating and mailing the enclosed proxy/voting instruction card in the postage-paid return envelope provided.

 

Voting in person at the meeting

 

If you plan to attend the Annual Meeting, you can vote in person. To vote in person at the Annual Meeting, you will need to bring with you to the Annual Meeting a valid, government-issued photo identification, such as a driver’s license or passport, and evidence of your share ownership.

How do I vote if my shares are
held in “street name”?

 

Voting over the Internet, by telephone or by mail

 

If your shares are held in the name of your broker, bank or other nominee, you have the right to direct your broker, bank or other nominee on how to vote, and you should vote your shares using the method directed by your broker, bank or other nominee. In addition to voting by mail, a large number of brokerage firms and banks are participating in Internet or telephonic voting programs. These programs provide eligible “street name” shareholders the opportunity to vote over the Internet or by telephone. Voting forms will provide instructions for shareholders whose brokerage firms or banks are participating in such programs.

 

Voting in person at the meeting

 

If your shares are held in the name of your broker, bank or other nominee and you plan to attend the Annual Meeting and to vote in person, you should contact your broker, bank or other nominee to obtain a broker’s proxy and bring it with you to the Annual Meeting, together with a valid, government-issued photo identification, such as a driver’s license or passport, and your account statement or other evidence of your share ownership.

 

Can I revoke my proxy or change my vote?

 

As long as your shares are registered in your name, you may revoke your proxy or change your vote at any time before your shares are voted at the Annual Meeting. There are several ways you can do this:

 

 

If your shares are held in street name, you must contact your broker, bank or other nominee to revoke your proxy or change your vote.

 

What are my voting choices and what is the
required vote on the matters proposed?

 

By giving us your proxy, you authorize Harris management to vote your shares at the 2009 Annual Meeting or at any adjournments or postponements thereof in the manner you indicate.

 

Proposal 1: Election of Directors

 

With respect to the proposal to elect four nominees for director for a one-year term expiring at the 2010 Annual Meeting of Shareholders, you may:

 

 

Pursuant to our By-Laws and Corporate Governance Principles, the voting standard for the election of our directors in uncontested elections is a majority voting standard. In contested director elections, the plurality standard will apply. We have nominated four directors for election at the 2009 Annual Meeting, and because we did not receive advance notice under our By-Laws of any shareholder nominees for director, the 2009 election of directors is an uncontested election. To be elected in an uncontested election, a director nominee must receive more “For” votes than “Against” votes. Abstentions and any broker non-votes will have no effect on the election of directors because only votes cast “For” or “Against” a nominee will be counted. If an incumbent director nominee does not receive a greater number of “For” votes than “Against” votes, he or she must promptly tender his or her resignation following certification of the vote. The Corporate Governance Committee shall make a recommendation to the Board regarding action to be taken with respect to such offer to resign. If the Board does not accept the resignation, the nominee will continue to serve until the next annual meeting and until his or her successor shall be duly elected and qualified, or until his or her prior resignation, death or removal. For additional information regarding the majority voting standard, see “Majority Voting for Directors” on page 18.

 

 

With respect to the proposal to ratify the appointment by our Audit Committee of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2010, you may:

 

 

The affirmative vote of a majority of the shares represented at the Annual Meeting and entitled to vote on this proposal will be required to ratify our Audit Committee’s appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2010. Abstaining from voting on this proposal will have the effect of a vote against ratification of the appointment of our independent registered public accounting firm. Any broker non-votes will have no effect on the ratification of the appointment of our independent registered public accounting firm.

 

 

With respect to the shareholder proposal requesting approval of an amendment to our By-Laws to require an independent chairman of the board, you may:

 

 

The affirmative vote of a majority of the outstanding shares of our common stock entitled to vote as of the record date of August 28, 2009, or 65,354,012 shares of common stock based on 130,708,023 outstanding shares of our common stock entitled to vote as of August 28, 2009, will be required to approve the amendment to our By-Laws to require an independent chairman of the board. Abstentions and any broker non-votes will have the effect of a vote against approval of the amendment to our By-Laws to require an independent chairman of the board.

 

How do I vote shares held in
the Harris Retirement Plan?

 

If you are a participant in the Harris Retirement Plan (“Retirement Plan”) and you own shares of Harris common stock through the Retirement Plan, the proxy/voting instruction card sent to you may also serve as a voting instruction card to the trustee of the Retirement Plan for all shares of Harris common stock you own through the Retirement Plan. If you do not provide voting instructions for such shares, as directed by the terms of the Retirement Plan, those shares will be voted by the trustee in the same proportion as the shares for which other participants have timely provided voting instructions.

 

How do I vote shares held in the Harris
Dividend Reinvestment Plan?

 

If you are a participant in the Harris Dividend Reinvestment Plan (“DRIP”) administered by The Bank of New York Mellon, your proxy/voting instruction card covers the Harris common stock held in your DRIP account. The Bank of New York Mellon, as the DRIP administrator, is the shareholder of record of Harris common stock owned through the DRIP and will not vote those shares unless you provide it with instructions, which you may do over the Internet, by telephone or by mail using your proxy/voting instruction card.

 

What are the Harris Board’s voting
recommendations and what happens if I
return an unmarked proxy/voting
instruction card?

 

If you properly execute and return your proxy/voting instruction card with no votes marked, your shares will be voted as recommended by the Board. The Board’s recommendations are set forth together with the description of each item in this proxy statement. In summary, the Board unanimously recommends a vote:

 

 

 

With respect to other matters that may properly be brought before the Annual Meeting or any adjournments or postponements thereof, your shares will be voted at the discretion of the proxy holders.

 

How will my shares be voted if I do not
provide instructions to my broker?

 

It is possible for a proxy to indicate that some of the shares represented are not being voted with respect to certain proposals. This occurs, for example, when a broker, bank or other nominee does not have discretion under the New York Stock Exchange (“NYSE”) rules to vote on a matter without instructions from the beneficial owner of the shares and has not received such instructions. In these cases, non-voted shares will not be considered present and entitled to vote with respect to that matter, although they may be considered present and entitled to vote for other purposes and will be counted in determining the presence of a quorum. Under NYSE rules, brokers, banks or other nominees have discretionary voting power to vote without receiving voting instructions from the beneficial owner on “routine” matters, but not on “non-routine” matters. Under the rules of the NYSE as currently in effect, routine matters include, among other things, the election of directors in an uncontested election and the ratification of the appointment of an independent registered public accounting firm. This means that if you hold your shares through a broker, bank or other nominee, and you do not provide voting instructions by the tenth day before the Annual Meeting, your broker, bank or other nominee has the discretion to vote your shares on the proposal relating to the election of the four nominees for director named in this proxy statement and the proposal relating to the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2010. Under the rules of the NYSE, the shareholder proposal requesting approval of an amendment to our By-Laws to require an independent chairman of the board is not “routine” and your broker, bank or other nominee will not have the discretion to vote your shares on such proposal if you do not provide voting instructions by the tenth day before the Annual Meeting.

 

What does it mean if I receive more
than one proxy/voting instruction card?

 

If you receive more than one proxy/voting instruction card, it means you own shares in multiple accounts with brokers and/or our transfer agent. Please vote all of these shares. We recommend that you contact your broker and/or our transfer agent to consolidate as many accounts as possible under the same name and address. Our transfer agent is BNY Mellon Shareowner Services, which may be reached by telephone at 1-888-261-6777 or over the Internet at www.bnymellon.com/shareowner/isd.

 

Who pays for the solicitation of proxies?

 

We actively solicit proxy participation. We will bear the cost of soliciting proxies, including the cost of preparation, assembly, printing and mailing. In addition to this proxy statement, we request and encourage brokers, custodians, nominees and others to supply proxy materials to shareholders, and, upon request, we will reimburse them for their expenses. Our officers, directors and employees may, by letter, telephone, electronic mail or in person, make additional requests for the return of proxies, although we do not reimburse our own officers, directors or employees for soliciting proxies. We have also engaged Georgeson Inc. to assist in the solicitation of proxies for a fee of $8,500 plus reimbursement of out-of-pocket expenses. We will also reimburse brokers and other custodians, nominees and fiduciaries for forwarding proxy and solicitation materials to our shareholders in accordance with the fee schedule approved by the NYSE.

 

May I access this year’s proxy statement and
annual report over the Internet?

 

The notice of Annual Meeting, proxy statement and our 2009 Annual Report to Shareholders, which includes our Annual Report on Form 10-K for the fiscal year ended July 3, 2009, are available by accessing our website at www.harris.com/proxy/2009.

 

Will there be a webcast of the
Annual Meeting of Shareholders?

 

Our 2009 Annual Meeting of Shareholders will be webcast live on October 23, 2009. You may visit the Investor Relations section of our website at

www.harris.com/investors to access the webcast of the Annual Meeting. The webcast will enable you to listen only. You will not be able to ask questions or vote your shares via the webcast. A replay of the webcast also will be available on our website through November 21, 2009. The information contained on our website is not incorporated by reference into this proxy statement.

 

Who will tabulate and oversee the vote?

 

Representatives of our transfer agent, BNY Mellon Shareowner Services, will tabulate and oversee the vote.

 

Do I need an admission ticket to
attend the Annual Meeting?

 

No ticket is required for admission to the Annual Meeting. Since seating is limited, admission to the meeting will be on a first-come, first-served basis. If you attend, please note that you may be asked to present a valid, government-issued photo identification, such as a driver’s license or passport. For the safety of attendees, all packages, boxes, handbags and briefcases are subject to inspection.

 

Where can I find the voting results
of the Annual Meeting?

 

We intend to announce the preliminary voting results at the Annual Meeting and to publish final results in our quarterly report on Form 10-Q for the second quarter of fiscal 2010, which we will file with the Securities and Exchange Commission (the “SEC”) and make available through the investor relations section of our website at www.harris.com/investors.

PROPOSAL 1: ELECTION OF DIRECTORS — TERMS EXPIRING IN 2010

 

Our Restated Certificate of Incorporation provides that our Board shall consist of not less than eight or more than thirteen directors, the exact number of directors to be determined from time to time by the Board. The authorized number of directors is presently fixed at eleven. Prior to our 2008 Annual Meeting of Shareholders, our Restated Certificate of Incorporation classified our Board into three classes of approximately equal size with three-year terms of office ending in different years. At the 2008 Annual Meeting, our shareholders approved an amendment to our Restated Certificate of Incorporation that provides for the phased-in declassification of our Board of Directors and the annual election of our directors commencing with the class of directors standing for election at the 2009 Annual Meeting. As a result, the class of directors standing for election at the 2009 Annual Meeting will stand for election for a one-year term expiring at the 2010 Annual Meeting of Shareholders. The classes of directors whose three-year terms are due to expire at the 2010 Annual Meeting of Shareholders and at the 2011 Annual Meeting of Shareholders will continue to hold office until the end of the terms for which they have been elected and may stand for election for one-year terms thereafter. Commencing at the 2011 Annual Meeting, all directors will be elected on an annual basis.

 

This year, the terms of Ms. Kenne and Messrs. Growcock, Rickard and Swienton expire at the 2009 Annual Meeting. Based upon the recommendation of our Corporate Governance Committee, Ms. Kenne and Messrs. Growcock, Rickard and Swienton have each been nominated by the Board for a new one-year term expiring at the 2010 Annual Meeting of Shareholders. The current terms of our other directors will expire at subsequent Annual Meetings of Shareholders in 2010 or 2011, as the case may be. In accordance with our Restated Certificate of Incorporation, a director holds office until the Annual Meeting of Shareholders for the year in which that director’s term expires, and until that director’s successor is elected and qualified, subject, however, to his or her prior death, resignation, retirement, disqualification or removal from office. Vacancies may be filled by the remaining directors.

 

Proxies will be voted for the election of each of Ms. Kenne and Messrs. Growcock, Rickard and Swienton to serve for a one-year term expiring at the 2010 Annual Meeting of Shareholders, unless otherwise specified in the proxy/voting instruction card or Internet or telephone voting instructions. Each of the nominees has consented to stand for election. If any nominee becomes unavailable for election, which is not currently anticipated by us, proxies instructing a vote for that nominee may be voted for a substitute nominee selected by our Board or, in lieu thereof, our Board may reduce the number of directors.

 

None of our directors, including each of the nominees, is related to any other director, or to any executive officer of Harris or its subsidiaries, by blood, marriage or adoption.

 

Biographical summaries of the nominees and of our continuing directors appear on subsequent pages, and data with respect to the number of shares of our common stock beneficially owned by them as of July 31, 2009 is set forth in the table on page 24.

 

NOMINEES UP FOR ELECTION —
TERMS EXPIRING IN 2010

 

Terry D. Growcock, 63, is retired Chairman of the Board and Chief Executive Officer of The Manitowoc Company, Inc., a diversified industrial manufacturer of cranes and foodservice equipment and a provider of ship building and ship repair services. He joined Manitowoc in 1994 as Executive Vice President and General Manager of Manitowoc Ice. He became President of Manitowoc Foodservice Group in 1995 and served in that capacity until his promotion to President, Chief Executive Officer and a member of the Board of Directors of The Manitowoc Company, Inc. in 1998. He was named Chairman of the Board of Directors and Chief Executive Officer of Manitowoc in October 2002. Mr. Growcock retired as Chief Executive Officer of Manitowoc in May 2007 and as Chairman of the Board in December 2008.

 

Mr. Growcock has been a member of our Board since August 2005 and is a member of the Business Conduct and Corporate Responsibility Committee and the Management Development and Compensation Committee.

 

Mr. Growcock is also a director of Carlisle Companies Incorporated and Harsco Corporation and an advisory member of the Kelley School of Business at Indiana University.

 

Leslie F. Kenne, Lieutenant General USAF (Ret.), 61, retired in September 2003 from the U.S. Air Force, where she had most recently been Deputy Chief of Staff for Warfighting Integration at Air Force headquarters in Washington, D.C. Previously, she commanded the Electronic Systems Center at Hanscom Air Force Base in Massachusetts. She also directed a number of major procurement programs, including the F-16 and Joint Strike Fighter programs. Following her retirement from the U.S. Air Force, Ms. Kenne became President of The Kenne Group, a private independent consulting firm for various defense companies and/or agencies.

 

Ms. Kenne has been a member of our Board since April 2004 and is Chairperson of the Business Conduct and Corporate Responsibility Committee and a member of the Corporate Governance Committee.

 

Ms. Kenne is also a director of Unisys Corporation.

 

David B. Rickard, 62, is Executive Vice President, Chief Financial Officer and Chief Administrative Officer of CVS Caremark Corporation, a retail pharmacy chain and provider of healthcare services and pharmacy benefits management. He has held this position since joining CVS in September 1999. Prior to joining CVS, he was Senior Vice President and Chief Financial Officer of RJR Nabisco Holdings Corporation from March 1997 to August 1999. Previously, he was Executive Vice President of International Distillers and Vintners Americas.

 

Mr. Rickard has been a member of our Board since October 2001 and is Chairperson of the Audit Committee and a member of the Finance Committee.

 

Mr. Rickard is also a director of Jones Lang LaSalle Incorporated.

 

Gregory T. Swienton, 59, is Chairman and Chief Executive Officer of Ryder System, Inc., a logistics and transportation services company. He joined Ryder in June 1999 as President and Chief Operating Officer, and was named Chief Executive Officer in November 2000 and Chairman in May 2002. Prior to joining Ryder, he was Senior Vice President-Growth Initiatives of Burlington Northern Santa Fe Corporation (“BNSF”). He held senior positions with BNSF and the former Burlington Northern Railroad from 1994 to 1999, and various executive and management positions with DHL Worldwide Express from 1982 to 1994.

 

Mr. Swienton has been a member of our Board since February 2000 and is Chairperson of the Finance Committee and a member of the Audit Committee.

 

In addition to being a director for Ryder System, he is also Chairman of the Board of Trustees of St. Thomas University in Miami, Florida.

 

Recommendation Regarding Proposal 1

 

To be elected in an uncontested election of directors, a nominee must receive more “For” votes than “Against” votes. Abstentions and any broker non-votes will have no effect on the election of directors because only votes cast “For” or “Against” a nominee will be counted.

 

Our Board of Directors unanimously recommends that you vote FOR the election of each of the nominees in this uncontested election of directors.

CURRENT DIRECTORS NOT UP FOR ELECTION

 

Biographical summaries of our current directors whose terms continue to run until the 2010 or 2011 Annual Meetings of Shareholders appear below.

 

Terms Expiring in 2010

 

Howard L. Lance, 53, is our Chairman, President and Chief Executive Officer. Mr. Lance joined Harris in January 2003 as President and Chief Executive Officer and was appointed Chairman in June 2003. Prior to joining Harris, Mr. Lance was President of NCR Corporation, an information technology services provider, and Chief Operating Officer of its Retail and Financial Group from July 2001 until October 2002. Prior to joining NCR, he spent 17 years with Emerson Electric Company, an electronic products and systems company, where he held increasingly senior management positions with different divisions of the company. In 1999, Mr. Lance was named Executive Vice President with operating responsibility for its Electronics and Telecommunications businesses. Earlier, Mr. Lance held sales and marketing positions with the Scott-Fetzer Company and Caterpillar, Inc.

 

Mr. Lance has been a member of our Board since January 2003.

 

Mr. Lance is also a director of Eastman Chemical Company and Stryker Corporation and serves on the Board of Governors of the Aerospace Industries Association and on the Board of Trustees of the Manufacturers Alliance/MAPI, Inc., the Florida Council of 100, the United Way of Brevard County and the Florida Institute of Technology.

 

Thomas A. Dattilo, 58, is an advisor and consultant to various private investment firms. He served as a Senior Advisor for Cerberus Operations and Advisory Company, LLC, a unit of Cerberus Capital Management, a private investment firm, from June 2007 until June 2009. Prior to joining Cerberus, Mr. Dattilo was most recently Chairman, President and Chief Executive Officer of Cooper Tire & Rubber Company, a company that specializes in the design, manufacture and sale of passenger and truck tires.

 

He joined Cooper in January 1999 as President and Chief Operating Officer and was Chairman, President and Chief Executive Officer from April 2000 until August 2006. Prior to joining Cooper, he held senior positions with Dana Corporation. His last position with Dana was President of its sealing products group.

 

Mr. Dattilo has been a member of our Board since August 2001 and is a member of the Corporate Governance Committee and the Management Development and Compensation Committee.

 

Mr. Dattilo is also a director of Alberto-Culver Company. He is past Chairman of the Rubber Manufacturers Association and past Chairman of the Board of Trustees of the Manufacturers Alliance.

 

Dr. James C. Stoffel, 63, is a retired Senior Vice President, Chief Technical Officer, and Director of Research and Development of Eastman Kodak Company, a film and digital imaging company. He held this position from 2000 to April 2005. He joined Kodak in 1997 as Vice President, Director Electronic Imaging Products Research and Development and became Director of Research and Engineering in 1998. Prior to joining Kodak, he was with Xerox Corporation where he began his career in 1972. His most recent position with Xerox was Vice President, Corporate Research and Technology.

 

Dr. Stoffel has been a member of our Board since August 2003 and is a member of the Finance Committee and the Management Development and Compensation Committee.

 

Dr. Stoffel is also a director of Harris Stratex Networks, Inc. and a trustee of the George Eastman House museum. He serves on the Advisory Board for Research and Graduate Studies at the University of Notre Dame and is Chairman of the advisory board of ASTRI, Hong Kong.

Terms Expiring in 2011

 

Lewis Hay III, 53, is Chairman and Chief Executive Officer of FPL Group, Inc., a public utility holding company, and is Chairman of FPL Group’s two primary subsidiaries, Florida Power & Light Company and NextEra Energy Resources, LLC (formerly known as FPL Energy, LLC). He became a director, President and Chief Executive Officer of FPL Group in June 2001 and Chairman of FPL Group and Chairman and Chief Executive Officer of Florida Power & Light Company in January 2002. Mr. Hay relinquished the title of President of FPL Group in December 2006 and Chief Executive Officer of Florida Power & Light Company in July 2008. He joined FPL Group in 1999 as Vice President, Finance and Chief Financial Officer. From March 2000 until December 2001, he served as President of FPL Group’s competitive energy subsidiary, NextEra Energy Resources LLC.

 

Mr. Hay has been a member of our Board since February 2002 and is Chairperson of the Corporate Governance Committee and a member of the Audit Committee.

 

In addition to being a director of FPL Group, Mr. Hay is also a director of Capital One Financial Corporation and the Institute of Nuclear Power Operations, a member of the Florida Council of 100, the Business Roundtable and a member of the Business Board of Advisors of the Tepper School of Business at Carnegie Mellon University.

 

Karen Katen, 60, is a senior advisor to Essex Woodlands Health Ventures, a healthcare-based venture capital firm. She joined Essex Woodlands in October 2007. Ms. Katen recently was Chairman of the Pfizer Foundation. Ms. Katen retired in March 2007 as Vice Chairman of Pfizer Inc., a research-based, global pharmaceutical company. Ms. Katen joined Pfizer in 1974 and held a series of management positions including serving as President of Pfizer Human Health, the company’s principal operating group.

 

Ms. Katen has been a member of our Board since December 1994 and is a member of the Business Conduct and Corporate Responsibility Committee and the Corporate Governance Committee.

 

Ms. Katen is also a director of The Home Depot, Inc. and Air Liquide and a member of the Takeda Advisory Board. In addition, she serves on the Catalyst Board, the RAND Corporation’s Health Board of Advisors, ARMGO Pharma, Inc.’s board of directors and the Economic Club of New York Trustees. Ms. Katen is a trustee for the University of Chicago and is a council member of the Booth Graduate School of Business at the University of Chicago.

 

Stephen P. Kaufman, 67, has been a Senior Lecturer of Business Administration at the Harvard Business School since January 2001. He is a retired Chairman and Chief Executive Officer of Arrow Electronics, Inc., a distributor of semiconductors, peripherals and components. He became President and Chief Operating Officer of Arrow in 1985, Chief Executive Officer in 1986, and Chairman in 1994. He retired as Chief Executive Officer in June 2000 and reassumed that position in June 2002 on an interim basis until September 2002.

 

Mr. Kaufman has been a member of our Board since December 1999 and is Chairperson of the Management Development and Compensation Committee and a member of the Finance Committee.

 

Mr. Kaufman is also a director of KLA-Tencor Corporation and Thermo Fischer Scientific Inc.

 

Hansel E. Tookes II, 61, retired from Raytheon Company, a company engaged in defense and government electronics, space and airborne systems, information technology, technical services and business and special mission aircraft, in December 2002. He joined Raytheon in September 1999 as President and Chief Operating Officer of its Raytheon Aircraft Company subsidiary, a commercial, military and regional aircraft manufacturing company. He was appointed Chief Executive Officer of Raytheon Aircraft Company in January 2000 and Chairman in August 2000. He became President of Raytheon International in May 2001. Prior to joining Raytheon in 1999, he served United Technologies Corporation as President of its Pratt & Whitney Large Military Engines Group since 1996. He joined United Technologies Corporation in 1980 and held a variety of senior leadership positions. Mr. Tookes was a Lieutenant Commander and pilot in the U.S. Navy and later served as a commercial pilot with United Airlines.

 

Mr. Tookes has been a member of our Board since April 2005 and is a member of the Audit Committee and the Business Conduct and Corporate Responsibility Committee.

 

Mr. Tookes is also a director of BBA Aviation plc, Corning Incorporated, FPL Group, Inc. and Ryder System, Inc.

 

 

Board of Directors

 

Our business, property and affairs are managed under the direction of our Board. Members of the Board are kept informed of our business through discussions with the Chairman and officers, by reviewing materials provided to them or requested by them, by visiting our offices and plants and by participating in meetings of the Board and its committees.

 

Corporate Governance Principles

 

Our Board has long been focused on and committed to responsible and effective corporate governance. Our Board has adopted Corporate Governance Principles which trace their history to 1960 and which have evolved and been revised over time. Our Corporate Governance Committee is responsible for overseeing the Corporate Governance Principles and reporting and making recommendations to our Board concerning corporate governance matters. Our Corporate Governance Principles address matters including Board composition, director independence, responsibilities of our Lead Independent Director, selection of Board nominees, Board membership criteria, majority voting for directors, director compensation, mandatory retirement, meetings, executive sessions of non-management directors, evaluation of the performance of our Chief Executive Officer, committees, succession planning, director responsibilities, orientation and continuing education, and self-evaluation of the Board and Board committees. A copy of our Corporate Governance Principles is available on the Corporate Governance section of our website at www.harris.com/harris/cg/.

 

Director Independence

 

The NYSE listing standards and our Corporate Governance Principles require us to have a board of directors with at least a majority of independent directors. Our Board has, and has had for many years, a substantial majority of independent directors. Our Board has adopted Director Independence Standards to assist in the evaluation of the independence of each of our directors. A copy of our Director Independence Standards is available on the Corporate Governance section of our website at www.harris.com/harris/cg/.

 

For a director to be considered independent, the Board must affirmatively determine that a director does not have any direct or indirect material relationship with us, other than as a director, that will impair the director’s independence. A director will not be considered independent if, within the preceding three years:

 

The Board has determined that the following relationships will not be considered to be material relationships that would impair a director’s independence:

 

 

Pursuant to our Corporate Governance Principles, the Board undertook its annual review of director independence in August 2009, which included a review of the responses of the directors to questions regarding each director’s commercial, industrial, banking, consulting, legal, accounting, charitable and family relationships, and discussions with the directors and nominees. Based upon the NYSE listing standards and our Director Independence Standards, our Board has affirmatively determined in its business judgment that all of our directors (including each nominee for election), with the exception of Mr. Lance, our Chairman, President and Chief Executive Officer, are independent and have no direct or indirect material relationship with Harris, other than as a director, that will impair the director’s independence.

 

Related Person Transaction Policy

 

In August 2007, our Board approved a written policy and procedures for the review, approval and ratification of transactions among Harris and our directors, executive officers and their related interests. This policy supplements the conflicts of interest policies set forth in our Standards of Business Conduct and our Directors’ Standards of Business Conduct and our other internal procedures. Under the policy, all related person transactions (as defined in the policy) are to be reviewed by the Corporate Governance Committee. The Corporate Governance Committee may approve or ratify related person transactions if, in its business judgment, it determines that the transaction is in, or is not inconsistent with, the best interests of Harris and its shareholders. This may include situations where we provide or receive products or services to or from related persons on an arm’s length basis on terms comparable to those provided to or received from unrelated third parties. Any director who participates in or is the subject of an existing or potential related person transaction may not participate in the approval or ratification decision-making process of the Corporate Governance Committee.

 

Under the policy, and consistent with SEC regulations, a related person transaction is any transaction, arrangement or relationship in which Harris was, is or will be a participant, where the amount involved exceeds $120,000 and in which a related person had, has or will have a direct or indirect material interest. A related person includes any of our directors, nominees for director or executive officers, any person who is known to be the beneficial owner of more than 5% of any class of our common stock, an immediate family member of any person described above and any firm, corporation or other entity controlled by any person described above. The policy requires each director and executive officer annually to complete a questionnaire to identify their related interests and persons, and to notify us of changes in that

information. Before entering into a proposed related person transaction, the related person or involved business area of Harris is requested to notify our Secretary of the facts and circumstances of the potential transaction. If the Secretary determines the proposed transaction is a related person transaction, it shall be submitted to the Corporate Governance Committee for review and consideration. A related person transaction entered into without the Corporate Governance Committee’s prior approval will not violate this policy or be unenforceable, so long as the transaction is brought to the Corporate Governance Committee promptly after it is entered into or after it becomes apparent that the transaction is covered by this policy and is ratified by the Corporate Governance Committee.

 

Based on its holdings reported on a Schedule 13G/A filed with the SEC, Bank of America Corporation beneficially owned more than five percent of our common stock as of July 31, 2009. Certain affiliates of Bank America Corporation provided asset management services for our Retirement Plan for which participants paid approximately $1,160,000 in fiscal 2009. From time to time, we also enter into customary commercial and investment banking relationships with Bank of America Corporation and its affiliates on arms-length terms.

 

Lead Independent Director

 

In 2003, we created the position of “Presiding Independent Director” which included the functions of chairing the executive sessions of independent directors and acting as a liaison between our Chairman and independent directors. In 2009, we changed the title of our Presiding Independent Director to “Lead Independent Director” and more formally defined the enumerated duties of the Lead Independent Director position. Our independent directors designate one of our independent Board members to serve as Lead Independent Director, which position will be rotated annually among the chairpersons of each of our standing committees. The duties and authority of the Lead Independent Director include: presiding at all meetings of our Board at which our Chairman is not present, including executive sessions of the independent directors; serving as liaison between our Chairman and our independent directors; in consultation with the Chairman, approving the information sent to our Board and the meeting agendas for our Board; in consultation with the Chairman, approving meeting schedules to assure there is sufficient time for discussion of all agenda items; to call meetings of our independent directors; and, if requested by major shareholders, to ensure that he or she is available, when appropriate, for consultation and direct communication consistent with our policies regarding shareholder communications. The designation of a Lead Independent Director is not intended to inhibit communications among the directors or between any of them and the Chairman. For additional information regarding the duties of our Lead Independent Director, see our Corporate Governance Principles and the discussion on page 66.

 

The position of Lead Independent Director is currently held by Mr. David B. Rickard.

 

Board Meetings and Attendance

 

General. In fiscal 2009, our Board held six regular meetings and two special meetings, and the standing committees of our Board met a total of 24 times. Each director attended at least 75% of the meetings of the Board and of those committees of which he or she was a member. All of the directors taken together attended an average of 98% of such meetings of the Board and committees on which they serve.

 

Attendance at Annual Meetings of Shareholders. We typically schedule a Board meeting in conjunction with our Annual Meeting of Shareholders. In the absence of unavoidable conflict, all Board members are expected to attend the Annual Meeting of Shareholders. All eleven of our Board members attended the 2008 Annual Meeting of Shareholders.

 

Executive Sessions of Independent Directors

 

Our Board and its committees meet throughout the year on a set schedule and also hold special meetings and may act by written consent from time to time as appropriate. Executive sessions of independent directors are provided for in the agenda for each regularly scheduled Board meeting. Our Lead Independent Director chairs these executive sessions of independent directors.

 

Board Committees and Committee Charters

 

Currently our Board has five standing committees to assist in the discharge of its responsibilities. These committees are the Audit Committee, the Business Conduct and Corporate

Responsibility Committee, the Corporate Governance Committee, the Finance Committee, and the Management Development and Compensation Committee. Our Board has adopted a written charter for each committee, copies of which are available on the Corporate Governance section of our website at www.harris.com/harris/cg/. The charter of each of the Audit Committee, Corporate Governance Committee and Management Development and Compensation Committee complies with the NYSE corporate governance requirements. There are no NYSE requirements with respect to the charters of the Business Conduct and Corporate Responsibility Committee or the Finance Committee. Copies of all such charters and our Corporate Governance Principles are also available to shareholders free of charge upon written request to our Secretary at Harris Corporation, 1025 West NASA Boulevard, Melbourne, Florida 32919. The principal functions of each committee are summarized below.

 

Audit Committee

 

The Audit Committee assists our Board in fulfilling its responsibilities to oversee, among other things:

 

 

The purposes and responsibilities of the Audit Committee also include:

 

 

Our Board has determined in its business judgment that each member of the Audit Committee is independent within the meaning of the NYSE listing standards, the Sarbanes-Oxley Act of 2002 and related SEC rules and our Director Independence Standards.

 

Our Board has also determined in its business judgment that each of the members of the Audit Committee satisfies the “financial literacy” requirements of the NYSE and has “accounting or related financial management expertise” and that David B. Rickard, Chairperson of the Audit Committee, satisfies the “audit committee financial expert” criteria as that term is defined by regulation of the SEC and is independent of Harris.

 

The Audit Committee held eight meetings during our fiscal year 2009, including meeting regularly with Ernst & Young LLP and our internal auditors, both privately and with management present.

 

Business Conduct and Corporate Responsibility Committee

 

The purposes and responsibilities of the Business Conduct and Corporate Responsibility Committee include:

 

 

 

The Business Conduct and Corporate Responsibility Committee held two meetings during our fiscal year 2009.

 

Corporate Governance Committee

 

The purposes and responsibilities of the Corporate Governance Committee include:

 

 

For additional information regarding the role of the Corporate Governance Committee and our director compensation process and procedures, including the role of compensation consultants relating to director compensation, see the “Director Compensation and Benefits” section of this proxy statement beginning on page 19.

 

Our Board has determined in its business judgment that each member of the Corporate Governance Committee is independent under the rules of the NYSE and our Director Independence Standards. The Corporate Governance Committee held four meetings during our fiscal year 2009.

 

Finance Committee

 

The Finance Committee is authorized to review periodically our financial position, capital structure, working capital, capital transactions, debt ratings, and bank and lender relationships, and the financial and investment aspects of our benefit plans. The Finance Committee also reviews our dividend policy, capital asset plan and share repurchase policy and makes recommendations to our Board relating to such plan or policies. Our Board has determined in its business judgment that each member of the Finance Committee is independent under the rules of the NYSE and our Director Independence Standards. The Finance Committee held two meetings during our fiscal year 2009.

 

Management Development and Compensation Committee

 

The purposes and responsibilities of the Management Development and Compensation Committee include:

 

 

 

For additional information regarding the role of the Management Development and Compensation Committee and our executive compensation process and procedures, including the role of executive officers and compensation consultants in recommending the amount or form of executive compensation, see the “Compensation Discussion and Analysis” section of this proxy statement.

 

Our Board has determined in its business judgment that each member of the Management Development and Compensation Committee is independent under the rules of the NYSE and our Director Independence Standards. The Management Development and Compensation Committee held eight meetings during our fiscal year 2009.

 

Committee Membership

 

The current committee members for each of the five standing committees of our Board of Directors are as follows, with the chairperson listed first:

 

 

Director Retirement

 

It is our policy that a director will retire from our Board effective at the end of the month in which he or she reaches age 72. In the event that a director’s 72nd birthday falls within twelve months of the Annual Meeting at which such director would stand for re-election, such director shall not stand for re-election. A director is also expected to tender automatically his or her resignation in the event of retirement or other significant change in status from the employment position held when last elected or appointed to our Board, and our Board will then determine whether such director’s continued Board membership is in the best interest of Harris and our shareholders, free from conflicts of interest and otherwise appropriate.

 

Communications with Members of our
Board of Directors

 

General. Shareholders and other interested persons who wish to communicate with a member or members of our Board, including the Lead Independent Director, the chairperson of any standing committee of the Board or the independent directors as a group, may do so by sending an e-mail message to the intended recipient or recipients c/o Corporate Secretary at corporate.secretary@harris.com. Shareholders and others may also write to the intended recipient or recipients, c/o Corporate Secretary, Harris Corporation, 1025 West NASA Boulevard, Melbourne, Florida 32919. Our Secretary will review each such communication and if it is related to the duties and responsibilities of our Board and its committees, it will be forwarded to the appropriate recipient or recipients. Our Board has

instructed our Secretary not to forward communications the Secretary deems unduly hostile, threatening, illegal or similarly inappropriate (such as surveys, spam, junk mail, resumes, service or product inquiries or complaints, solicitations or advertisements). Our Secretary will periodically provide our Board a summary of all communications received that were not forwarded to the intended recipient or recipients, and will make those communications available to any director upon request. The Lead Independent Director or other director in receipt of a communication for which he or she was the intended recipient will determine whether it will be sent to our full Board or a committee. If a communication is determined to be a complaint or concern pertaining to accounting, internal control or auditing matters, it will be handled in accordance with the procedures discussed below under “Accounting, Internal Control or Auditing Matters.”

 

Accounting, Internal Control or Auditing Matters. Our Audit Committee has established procedures for the receipt, retention and treatment of complaints and concerns regarding accounting, internal control or auditing matters. Any of our employees may communicate concerns about any of these matters to such employee’s supervisor, manager or business standards advisor, or to the Vice President, Internal Audit and Compliance or the Director of Business Conduct or certain other individuals, or on a confidential and anonymous basis by way of e-mail or our toll-free hotline numbers listed on our website and in our Standards of Business Conduct. Other persons with such complaints or concerns may contact our Vice President, Internal Audit and Compliance or Director of Business Conduct at 1025 West NASA Boulevard, Melbourne, Florida 32919. Upon receipt of a complaint or concern, a determination will be made whether it pertains to accounting, internal control or auditing matters and if it does, it will be handled in accordance with the procedures established by the Audit Committee.

 

Standards of Business Conduct

 

All Harris employees, including the Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer and other senior financial officers, are required to abide by the Harris Standards of Business Conduct, originally adopted in 1987, to help ensure that our business is conducted in a consistently ethical and legal manner. All directors are required to abide by our Directors’ Standards of Business Conduct. These standards of business conduct form the foundation of a comprehensive business conduct program that includes compliance with all laws, corporate policies and procedures, an open relationship among employees that contributes to good business conduct, and an abiding belief that we should conduct all business dealings with integrity, honesty and responsibility. Our business conduct policies cover many topics, including employment issues, confidentiality, environmental, health and safety, insider trading, corporate opportunities, antitrust, export control, boycotts, government contracts, international business practices, entertainment and gifts, and use of company assets. Employees are required to report any conduct they believe in good faith to be a violation of any of our business conduct policies.

 

Our Standards of Business Conduct and our Directors’ Standards of Business Conduct are posted on our website at www.harris.com/business-conduct and are also available free of charge by written request to our Director of Business Conduct, Harris Corporation, 1025 West NASA Boulevard, Melbourne, Florida 32919. Any amendment to, or waiver from, our Standards of Business Conduct will be posted on our website within four business days following such amendment or waiver.

 

Director Nomination Process and Criteria

 

Our Board is responsible for approving nominees to stand for election as directors. The Corporate Governance Committee assists the Board in this process and identifies individuals it believes to be qualified to become Board members and recommends nominees.

 

It is a long-standing policy of our Board to consider director nominees recommended by shareholders. A shareholder who wishes to recommend a nominee for the Corporate Governance Committee’s consideration must include at least the following information about the proposed nominee: the proposed nominee’s name, age, business or residence address, principal occupation or employment, and the written consent of the nominee to be named in the proxy statement as a nominee and to serve as a director if elected. The required information should be sent to our Secretary at 1025 West NASA Boulevard, Melbourne, Florida 32919. The Secretary will forward properly

submitted shareholder-recommended nominations to the Chairperson of the Corporate Governance Committee for consideration at a future Corporate Governance Committee meeting. Individuals recommended by shareholders in accordance with these procedures will be evaluated and considered by the Corporate Governance Committee in the same manner as it evaluates other proposed nominees.

 

In addition to recommending nominees for consideration to the Corporate Governance Committee, shareholders may also directly propose nominees for consideration at an annual meeting of our shareholders. The requirements and procedures to be followed by shareholders for directly nominating directors are discussed on page 68 under “Shareholder Proposals for the 2010 Annual Meeting of Shareholders.”

 

The Corporate Governance Committee also has a process for considering, reviewing and evaluating incumbent directors up for re-election. Pursuant to this process, prior to the annual meeting of shareholders at which an individual director’s term will expire, such director meets with our Chairman to discuss participation on our Board and its committees and other relevant matters. Such director is also requested to discuss any concerns or issues regarding continued membership on our Board with the Chairperson of the Corporate Governance Committee. In addition, the Corporate Governance Committee reviews such director’s tenure, experience, contributions, other directorships, attendance record, any changes in employment status and other information it deems helpful in considering and evaluating the director for nomination.

 

Our Corporate Governance Principles contain Board membership criteria that apply to nominees for a position on our Board. Our Board, based upon the recommendation of the Corporate Governance Committee (which recommendation will be based on the criteria set forth below, regardless of whether the nominee is recommended by shareholders or is identified by the Corporate Governance Committee or otherwise), will select new nominees considering the following criteria:

 

 

Our Corporate Governance Committee has as a general matter retained a third-party search firm to assist in identifying and evaluating potential nominees, and all of our current independent directors have been identified using this process.

 

Majority Voting for Directors

 

Pursuant to our By-Laws and Corporate Governance Principles, the voting standard applicable for the election of our directors in uncontested elections is a majority voting standard. An uncontested election for directors is an election where the number of properly nominated directors does not exceed the number of director positions to be filled. In contested director elections, the plurality standard will apply, which means the nominees receiving the greatest numbers of votes will be elected to serve as directors.

 

To be elected in an uncontested election under the majority voting standard, a director nominee must receive more “For” votes than “Against” votes. Abstentions and broker non-votes will have no effect in an uncontested election of directors since only votes cast “For” or “Against” a nominee will be counted. If an incumbent director nominee does not receive a greater number of “For” votes than “Against” votes, he or she must promptly tender his or her resignation following certification of the vote. The Corporate Governance Committee shall consider the resignation offer and shall recommend

to our Board the action to be taken. Our Board shall take action within 90 days following certification of the vote, unless such action would cause us to fail to comply with NYSE independence or other legal requirements, in which event our Board shall take action as promptly as practicable while continuing to meet such requirements. Our Board will also promptly publicly disclose its decision and the reasons therefor. If our Board does not accept the resignation, the nominee will continue to serve until the next annual meeting for the year in which his or her term expires and until his or her successor shall be duly elected and qualified, or until his or her prior resignation, death or removal. If our Board accepts the resignation, then our Board, in its sole discretion, may fill any resulting vacancy or may decrease the size of our Board.

 

The election of directors at the 2009 Annual Meeting of Shareholders is an uncontested election and thus the majority voting standard applies.

 

DIRECTOR COMPENSATION AND BENEFITS

 

Our Board compensation program is intended to attract and retain directors with demonstrated ability, integrity, judgment and experience to fulfill their responsibility to oversee management and to develop and oversee the implementation of strategies aimed at creating sustainable long-term value for our shareholders. The program is also intended to recognize the time commitments and liability associated with serving on the board of a public company.

 

The form and amount of director compensation is periodically reviewed and assessed by the Corporate Governance Committee. The Corporate Governance Committee reviews broad survey data concerning director compensation practices, levels and trends for companies comparable to us in revenue, businesses and complexity, which data is requested by or on behalf of the Corporate Governance Committee from compensation consultants, including Towers Perrin LLP. Changes to director compensation, if any, are recommended by the Corporate Governance Committee to our Board for action. Employee directors are not separately compensated for service as a director.

 

Retainer and Attendance Fees

 

Directors who are not employees of Harris currently receive the following fees, as applicable, for their services on our Board:

 

 

The cash retainer payable for a quarter is pro-rated, based upon period of service, if a director does not serve on the Board for the entire quarter.

 

Equity Awards and Deferred Compensation

 

Under the Harris Corporation 2005 Directors’ Deferred Compensation Plan, as amended (the “Directors’ Deferred Compensation Plan”), on January 1, April 1, July 1 and October 1 of each year, we currently credit each non-employee director’s account with a number of Harris stock equivalent units having a fair market value equal to $26,500 (for an annual rate of $106,000), which amount may be changed from time to time by our Board. In August 2008, on the recommendation of the Corporate Governance Committee, the Board approved a $2,500 increase in this quarterly amount from $24,000 (which represented a previous annual rate of $96,000) to the current quarterly rate of $26,500.

 

In addition, under the Directors’ Deferred Compensation Plan, prior to the commencement of a calendar year, each non-employee director may make an irrevocable election to defer all or a portion of his or her cash compensation for the subsequent year or years. The Directors’ Deferred Compensation Plan replaced the 1997 Directors’ Deferred Compensation and Annual Stock Unit Award Plan (the “1997 Directors’ Plan”). Effective December 31, 2004 no further deferrals of director compensation were permitted and no further annual awards were made under the 1997 Directors’ Plan.

Amounts deferred at the election of a non-employee director under such plans are invested in investment alternatives that mirror those available under our Retirement Plan or in Harris stock equivalent units based upon the fair market value of Harris common stock on the date of deferral. Such Harris stock equivalent units are equivalent in value to shares of our common stock. A non-employee director may not transfer or reallocate amounts deferred into other investments into Harris stock equivalent units. Amounts credited in Harris stock equivalent units may be reallocated into any other investment alternatives provided director minimum stock ownership guidelines are satisfied. Deferred amounts and investment earnings on such amounts are payable in cash following the non-employee director’s resignation, retirement or death. Each Harris stock equivalent unit is credited with dividend equivalents equal to the dividends paid on our common stock, which are deemed reinvested in additional Harris stock equivalent units on the dividend payment date. Harris stock equivalent units outstanding on May 27, 2009 were credited with the per unit value of the shares of Harris Stratex Networks, Inc. distributed to our shareholders in connection with the spin-off of Harris Stratex Networks, and such value was deemed to be reinvested in additional Harris stock equivalent units.

 

A non-employee director may elect to receive deferred amounts either in a cash lump sum on a date certain within five years after his or her resignation or retirement, or in annual substantially equal cash installments over a designated number of years beginning on a date certain within five years after a director’s resignation or retirement, provided that all amounts are fully paid within ten years after resignation or retirement.

 

Within 90 days of a change in control and to the extent permitted by Section 409A of the Internal Revenue Code, each non-employee director (or former non-employee director) will receive a lump sum cash payment equal to the then-remaining balance in his or her deferred accounts.

 

Amounts credited to directors’ accounts in the director deferred compensation plans may be partially or fully funded by a grantor trust, also known as a “rabbi trust.” Following a change in control, we are required to fund such “rabbi trust” with amounts credited to the directors’ accounts. In all cases, the assets in such trust are subject to the claims of our creditors, and directors are treated as our unsecured general creditors.

 

Reimbursement, Insurance and Charitable
Gift Matching

 

We reimburse each non-employee director for travel and out-of-pocket expenses incurred in connection with attendance at Board and committee meetings and other meetings on our behalf and for the costs and expenses of attending director education programs. Spouses or guests are invited occasionally to accompany directors to Board-related events, for which we pay or reimburse travel and related expenses. In addition, we provide each non-employee director with accidental death and dismemberment insurance in the amount of up to $200,000 and business travel insurance of up to an additional $200,000 in the event that he or she is involved in an accident while traveling on business relating to our affairs. We pay the premiums for such insurance, and the total aggregate premiums for coverage for all non-employee directors during fiscal 2009 was $312. We also provide liability insurance coverage for all of our directors and officers.

 

Non-employee directors may participate in the Harris Foundation charitable gift matching program available to all employees, where the Harris Foundation matches contributions to eligible post-secondary educational institutions and charitable organizations up to an annual maximum of $10,000 per employee or director.

 

Fiscal 2009 Compensation of Non-Employee Directors

 

The following table sets forth information regarding compensation to each of our non-employee directors for fiscal 2009. We do not currently have a non-equity incentive plan or pension plan for directors.

 

 

 

 

Stock Ownership Guidelines for
Non-Employee Directors

 

To further align the interests of members of our Board and shareholders, our Board has previously approved stock ownership guidelines for our non-employee directors. In August 2008, on the recommendation of the Corporate Governance Committee, the Board increased the stock ownership guidelines from four times the basic annual cash retainer to five times the basic annual cash retainer. As a result, our directors are expected to own, within five years after election or appointment to our Board, Harris stock or stock equivalents having a minimum value of $275,000 (based upon the current $55,000 basic annual cash retainer). As of September 18, 2009, all of our non-employee directors met the increased stock ownership guidelines.

 

Indemnification

 

We have entered into indemnification agreements with each of our directors and Board-elected officers, including the executive officers named in the Summary Compensation Table on page 41. These agreements require us to indemnify these directors and officers with respect to their activities as a director, officer or employee of Harris, or when serving at our request as a director, officer or trustee of another corporation, trust or other enterprise, against expenses (including attorneys’ fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred by them in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative to which they are, or are threatened to be made, parties as a result of their service to us.

 

Under the indemnification agreements, each director or officer will continue to be indemnified with respect to suits or proceedings arising from his or her service to us, even after ceasing to occupy a position as an officer, director, employee or agent of Harris.

 

The rules of the SEC require disclosure regarding any persons known to us to be a beneficial owner of more than five percent of our common stock. The following table sets forth as of July 31, 2009 the beneficial ownership of our common stock by each person who has reported to the SEC beneficial ownership of more than five percent of our common stock, based on the reports filed by these persons.

 

 

 

 

 

The following table sets forth the beneficial ownership of shares and equivalent units of our common stock, as of July 31, 2009, by (a) each director, including the nominees for election at the 2009 Annual Meeting, (b) our Chief Executive Officer and each other named executive officer, and (c) all our directors and executive officers as a group. Except as otherwise noted, the named individual had sole voting and investment power with respect to the securities. As of July 31, 2009, no individual director, nominee for director or named executive officer beneficially owned 1% or more of our common stock. As of July 31, 2009, our directors and executive officers, as a group, beneficially owned 1.48% of our common stock.

 

 

REPORT OF THE AUDIT COMMITTEE

 

The following Report of the Audit Committee does not constitute soliciting material and the Report should not be deemed filed or incorporated by reference into any other previous or future filings by Harris under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent Harris specifically incorporates this Report by reference therein.

 

The role of the Audit Committee is, among other things, to assist the Board in its oversight of:

 

 

The Board has determined that, in its business judgment, all members of the Audit Committee are independent within the meaning of the listing standards of the NYSE, the Sarbanes-Oxley Act of 2002 and related rules of the SEC and Harris’ Director Independence Standards.

 

Management of Harris is responsible for the preparation, presentation and integrity of Harris’ financial statements and the effectiveness of Harris’ system of internal control over financial reporting and disclosure controls and procedures. Management and the Internal Audit department are responsible for maintaining and evaluating appropriate accounting and financial reporting principles and internal controls and procedures designed to ensure compliance with accounting standards and applicable laws and regulations. Our independent registered public accounting firm for fiscal 2009, Ernst & Young LLP (“E&Y”), is responsible for auditing the consolidated financial statements and expressing an opinion as to whether such financial statements are presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States. E&Y is also responsible for auditing the effectiveness of Harris’ internal control over financial reporting. The Audit Committee has met and held discussions with management, the head of Internal Audit and E&Y. The Audit Committee discussed with the internal auditors and E&Y the overall scope of, and plans for, their respective audits. The Audit Committee also met with E&Y, the head of Internal Audit, the Principal Accounting Officer and the Chief Financial Officer, with and without management present, to discuss the results of its examinations, the reasonableness of significant judgments, the evaluations of Harris’ internal control over financial reporting and the overall quality of Harris’ financial reporting. Management has represented to the Audit Committee that Harris’ consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles.

 

In the performance of its oversight function, the Audit Committee has:

 

 

 

In reliance upon the reports, reviews and discussions described in this Report, the Audit Committee has recommended to the Board, and the Board has approved, that the audited financial statements be included in Harris’ Annual Report on Form 10-K for the fiscal year ended July 3, 2009, for filing with the SEC. The Audit Committee also has appointed, and has requested shareholder ratification of the appointment of, E&Y as Harris’ independent registered public accounting firm for the fiscal year ending July 2, 2010.

 

Submitted on August 27, 2009 by the Audit Committee of the Board of Directors.

 

David B. Rickard, Chairperson
Lewis Hay III
Gregory T. Swienton
Hansel E. Tookes II

 

 

 

Overview

 

The Compensation Discussion and Analysis section of our proxy statement is intended to help our shareholders understand our executive compensation program and the basis for the compensation paid with respect to fiscal 2009 to Howard L. Lance, our Chairman, President and Chief Executive Officer (“CEO”), Gary L. McArthur, our Chief Financial Officer, and Messrs. Henry, Thorsteinson and Pearson, our three other most highly compensated executive officers for fiscal 2009 (our “named executive officers”), detailed in the Summary Compensation Table on page 41 and in the other tables and narrative discussion that follow.

 

Overall Philosophy and Objectives of Our
Compensation Program

 

Harris is an international communications and information technology company serving government and commercial markets in more than 150 countries. We are dedicated to developing best-in-class assured communications^® products, systems and services for global markets, including RF communications, government communications, and broadcast communications. In fiscal 2009 our annual revenue was approximately $5 billion and we have more than 15,000 employees. Our common stock is listed on the New York Stock Exchange.

 

The overall objective of our executive compensation program is to encourage and reward the creation of sustainable, long-term shareholder value. The following principles provide a framework for our executive compensation program:

 

 

 

Our Executive Compensation Process

 

The philosophy, objectives, elements, policies and practices of compensation for our executive officers are set by the Management Development and Compensation Committee of our Board (the “Compensation Committee”). In approving compensation levels, individual objectives and financial targets for our named executive officers, the Compensation Committee reviews the relationship between our executive compensation program and the achievement of our financial goals and strategic objectives, with an emphasis on creating a “pay for profitable growth” environment.

 

In fiscal 2009, the Compensation Committee directly retained Pearl Meyer & Partners, an independent executive compensation consulting firm, to provide objective analysis, advice and information, including competitive market data, to the Compensation Committee related to CEO compensation and the compensation of other executive officers. Pearl Meyer & Partners performs services at the direction and under the supervision of the Compensation Committee and does not provide any services to Harris other than those provided to the Compensation Committee. In addition, the Compensation Committee has also utilized the services of Towers Perrin, LLP in the limited area of retirement benefits for our CEO. Our management uses Towers Perrin to provide executive officer compensation, actuarial and benefit plan consulting services and provides the Compensation Committee with the details of the work performed by Towers Perrin and its fees. The Compensation Committee has determined that providing these services to management does not impair the ability of Towers Perrin to render impartial services to the Compensation Committee in the limited area of CEO retirement benefits.

 

The Compensation Committee considers recommendations from our CEO in making decisions regarding our executive compensation program and the compensation of our other executive officers. As part of the annual compensation planning process, our CEO recommends targets for our incentive compensation programs. Following an annual performance review process, our CEO also recommends specific compensation for our other executive officers, including base salary adjustments and incentive and equity awards. Our CEO also presents to the Compensation Committee his evaluation of each such executive officer’s contributions during the previous year, including strengths and development needs, and reviews succession plans for each of the executive positions.

 

After input from our CEO, as well as from Pearl Meyer & Partners and the assessment of compensation trends and competitive market data, the Compensation Committee determines what changes, if any, should be made to the executive compensation program and sets the level of compensation for our executive officers, other than our CEO. As part of this process, the Compensation Committee reviews each executive officer’s three-year compensation history, including base salary, annual cash incentive and equity awards and also reviews the types and levels of other benefits such as change in control severance agreements, retirement plans and perquisites. In the case of our CEO, the review and final compensation decisions are made by the independent directors of our Board, giving due consideration to the Compensation Committee’s recommendations.

 

In setting the levels of compensation at the start of the fiscal year, the Compensation Committee also establishes the short- and long-term financial measures, weighting and targets for performance-based, at-risk compensation. For our CEO, such measures, weighting and targets are established by the independent directors of our Board, giving due consideration to the Compensation Committee’s recommendations. The specific financial measures, weighting and targets are intended to encourage and reward the creation of sustainable, long-term value for our shareholders and are aligned with our Board-approved, long-term strategic growth plan and our annual operating plan.

At the end of each fiscal year, the independent directors of our Board meet in executive session without the CEO present under the leadership of the Chairperson of the Compensation Committee to conduct a performance review of our CEO. During such review, the directors evaluate the CEO’s achievement of agreed-upon objectives established at the start of the fiscal year, our overall performance, the CEO’s personal self-evaluation of his effectiveness over the past year and other accomplishments. At the end of the fiscal year, the Compensation Committee also receives a specific compensation recommendation from our CEO for the other executive officers, which recommendation is based upon an assessment of each executive’s performance, achievement of objectives established at the start of the fiscal year for the executive and his or her business unit or organization within the company, contribution to our performance and other accomplishments.

 

While compensation levels may differ among our named executive officers based upon competitive factors and the role, responsibilities and performance of each named executive officer, there are no material differences in our compensation policies or the manner in which total direct compensation opportunity is determined for any of our named executive officers. The material elements of our executive compensation program applicable to our named executive officers also apply to our other executive officers.

 

Competitive Considerations

 

Each element of our executive compensation program is addressed in the context of competitive practices. In general, the Compensation Committee sets total target compensation for our CEO and other executives to approximate the 50th percentile of our comparison group. While the Compensation Committee reviews survey data, it uses discretion in setting an executive’s compensation after considering experience, position, tenure and contributions. For fiscal 2009, the Compensation Committee engaged Pearl Meyer & Partners to assess the composition of our comparison group, median pay levels for our CEO and other executive officers, the competitive position of the compensation for our CEO and other executive officers and the mix and elements of such compensation. The comparison group used for our CEO and other executive officers consists of companies with one or more of the following attributes: business operations in the markets in which we participate; similar revenue and market capitalization; and businesses that compete with us for executive talent. For fiscal 2009, the comparison group consisted of the following 22 companies:

 

 

The Compensation Committee annually reviews the composition of the comparison group used for assessing the compensation for our CEO and other executive officers and makes changes it determines are appropriate based on changes to the attributes of each such company and whether it continues to make its compensation data available. Pearl Meyer & Partners, our CEO and other executive officers provide input to the Compensation Committee as to changes to the attributes of companies in the comparison group.

 

Elements of Our Compensation Program

 

During fiscal 2009, the compensation program for our executive officers consisted of the following elements:

 

 

 

The Compensation Committee believes that the elements of our executive compensation program are competitive and further our objectives of motivating achievement of our short- and long-term financial goals and strategic objectives, rewarding superior performance and aligning the interests of our executives and shareholders.

 

Named Executive Officer Fiscal 2009 Target Direct Compensation Mix

 

The following bar graphs set forth, for our CEO and for our other named executive officers on average, respectively, the percentage of fiscal 2009 total target direct compensation represented by each major element of target direct compensation, indicating the percentage of fiscal 2009 target direct compensation that was at risk in the form of performance-based awards and equity awards. The percentages are based upon the fiscal 2009 target levels for each element at the time of approval. A description of the valuation and how each major element is determined is discussed below.

 

 

Base Salary and How Base Salary is
Determined

 

General Considerations

 

We provide executives with a base salary for services rendered during the year. The Compensation Committee reviews executive base salaries on an annual basis as well as any time there is a substantial change in an executive’s responsibilities or in market conditions. The Compensation Committee generally targets an executive officer’s base salary to be within ten percent below or ten percent above the median of the market for base salaries for comparable positions at companies in our comparison group. However, the specific base salary for an executive is also influenced by the executive’s experience, position, changes in responsibilities, tenure and contributions, and by current market conditions and our outlook.

 

In general, executive officers with higher levels of responsibility have a lower percentage of their compensation fixed as base salary and a higher percentage of their compensation at risk.

 

2009 Base Salary for Named Executive Officers

 

In August 2008, the Compensation Committee conducted its annual base salary review for our CEO and other named executive officers considering the factors noted above. Based upon such review, the Compensation Committee, and in the case of Mr. Lance, the independent directors of our Board, determined that increases in base salary were appropriate. The base salary increases for fiscal 2009, which were effective August 30, 2008, were as follows: Mr. Lance-5.0%; Mr. McArthur-25.0%; Mr. Henry-2.8%; Mr. Thorsteinson-2.3%; and Mr. Pearson-24.0%. Information regarding base salaries in fiscal 2009 is set forth in the Summary Compensation Table on page 41 under the “Salary” column.

 

2010 Base Salary Actions

 

As a result of current business conditions, the global recession and current economic uncertainties, the Compensation Committee, and in the case of Mr. Lance, the independent directors of our Board,

determined that neither our CEO nor any of our other executive officers will at this time receive a base salary increase for fiscal 2010. This decision may be re-evaluated at a later date and is not reflective of the contributions to our performance made by our CEO or any of our other executive officers.

 

Annual Cash Incentive Pay and How Annual
Cash Incentive Pay is Determined

 

Annual Incentive Plan

 

Under our Annual Incentive Plan, which was approved by our shareholders in October 2005, at the start of each fiscal year the Compensation Committee sets an annual cash incentive compensation target for each executive officer and recommends to the independent directors of our Board the target to set for our CEO. The Compensation Committee and independent directors of our Board, as applicable, also establish specific financial performance measures and targets, including the relative weighting and thresholds, as well as individual performance objectives for payouts under our Annual Incentive Plan. In certain instances, financial performance targets established at the start of a fiscal year are adjusted by the Compensation Committee, and in the case of Mr. Lance, the independent directors of our Board, to take into account items determined not to be reflective of normal, ongoing business operations.

 

Our CEO’s annual cash incentive compensation is subject to a maximum set by the independent directors of the Board at the start of the fiscal year based upon an earnings per share (“EPS”) target. The EPS target is used to assist in meeting the requirements of Section 162(m) of the Internal Revenue Code. The actual amount of Mr. Lance’s annual cash incentive compensation is based upon actual performance for the year compared with financial performance targets and individual objectives established at the start of each fiscal year.

 

 

For each financial performance measure, there is no payout for performance below the threshold, which in fiscal 2009 was 80% of target performance. Payout calculations established at the start of fiscal 2009 were based upon the following table with straight-line interpolation applied based upon the actual percentage of target financial performance:

 

% of Target Financial Performance		Payout
<80%			0	%
80%			50	%
90%			80	%
100%			100	%
125% and above			200	%

 

For fiscal 2009, the maximum 200% payout was achievable for financial performance that exceeded 125% of target financial performance. This compares with the fiscal 2008 maximum 200% payout for financial performance that exceeded 120% of target financial performance.

 

2009 Annual Cash Incentive Awards for Named Executive Officers

 

Fiscal 2009 approved adjusted financial performance measures, targets and weighting, participant’s annual cash incentive compensation targets and actual annual cash payouts, which also reflect an assessment of individual objectives, for the named executive officers under our Annual Incentive Plan were as follows:

 

								Participant’s
								Annual					Actual Annual					Actual
								Incentive					Cash					Payout
Named			Fiscal 2009 Adjusted Financial Performance					Plan					Incentive					as a % of
Executive			Measures, Targets and					Compensation					Compensation					Compensation
Officer			Weighting					Target					Payment					Target
Howard L. Lance			• Revenue-$5.691 billion		50%
Chairman, President and CEO			• Operating income-$847 million		50%			$	1,155,000				$	1,225,000					106%
Gary L. McArthur			• Revenue-$5.691 billion		50%
Senior Vice President and Chief Financial Officer			• Operating income-$847 million		50%			$	360,000				$	416,000					116%
Robert K. Henry			• Revenue-$5.691 billion		50%
Executive Vice President and Chief Operating Officer			• Operating income-$847 million		50%			$	505,000				$	534,000					106%
Timothy E. Thorsteinson*			• Broadcast Communications		50%
President, Broadcast			Revenue-$690 million
Communications			• Broadcast Communications Operating income-$55 million		50%			$	310,000				$	140,000					45%
Daniel R. Pearson			• GCS revenue-$2.630 billion		50%
Group President, Government Communications Systems (“GCS”)			• GCS operating income-$274 million		50%			$	300,000				$	450,000					150%

 

 

 

These financial performance measures and targets represent internal measurements of performance, and, while the calculations are based upon our financial results calculated in accordance with generally accepted accounting principles in the United States (“GAAP”), our results may be adjusted by the Compensation Committee to take into account items determined not to be reflective of normal, ongoing business operations. The Compensation Committee has adopted guidelines in making specific decisions for these purposes on which items to include or exclude from our financial results, including that any adjustment must be objectively measurable under GAAP.

 

In addition to incentives payable under our Annual Incentive Plan, annual cash incentive opportunity also includes amounts payable under the Performance Reward Plan which is described below. Under the Performance Reward Plan the target payment was 3.5% of eligible compensation if we achieved operating income of $847 million.

 

During fiscal 2009, we completed the spin-off to our shareholders of our ownership interest in Harris Stratex Networks, our majority-owned publicly-traded subsidiary. As a result, the Compensation Committee changed the fiscal 2009 financial performance target for Harris’ revenue and operating income to exclude the results of Harris Stratex Networks for the portion of fiscal 2009 that it was not part of our consolidated results. The overall revenue and operating income targets and results thus include the revenue and operating income of Harris Stratex Networks, which were included within our reported financial results as discontinued operations.

 

For purposes of calculations under the Annual Incentive Plan and the Performance Reward Plan, the Compensation Committee adjusted Harris’ fiscal 2009 operating income results to exclude: unforecasted charges for goodwill and other impairments, restructuring charges, severance costs, acquisition-related costs, and income from the Public Safety and Professional Communications business acquired from Tyco Electronics for the five weeks of fiscal 2009 that it was part of Harris. In addition, the Compensation Committee adjusted Harris fiscal 2009 revenue results to also exclude the revenue from the Public Safety and Professional Communications business.

 

The Compensation Committee adjusted the Broadcast Communications segment operating income results to exclude unforecasted charges for goodwill and other impairments, restructuring costs and severance costs. The Compensation Committee also adjusted the revenue criteria for the Broadcast Communications segment as a result of the

unprecedented market conditions that occurred during fiscal 2009 and the manner in which the management team responded to those market conditions. This resulted in a 90% payout for the revenue financial performance measure for Mr. Thorsteinson.

 

Mr. Pearson’s financial performance measures for the Government Communications Systems segment do not include operating income and revenue of our IT Services business because Mr. Pearson does not have direct responsibility for such business unit. Also, the Compensation Committee adjusted the Government Communications Systems segment operating income results to exclude acquisition-related costs and severance costs.

 

Results and adjusted fiscal 2009 performance results were as follows:

 

 

For fiscal 2009, Mr. Lance’s annual incentive payout under the Annual Incentive Plan, as calculated based upon the financial performance measures and adjusted results, was adjusted upward by 10% based upon the assessment by the independent directors of our Board of Mr. Lance’s performance against the following individual objectives established at the start of the fiscal year: technology development; international business development; organization development and succession planning for key executives; and interaction with the Board and leadership as Chairman of the Board.

 

Annual incentive payouts under the Annual Incentive Plan for the named executive officers other than the CEO were subject to an upward or downward adjustment ranging from zero to 20% of the financial calculation. For fiscal 2009, annual incentive payouts under the Annual Incentive Plan for the named executive officers other than the CEO, as calculated based upon the financial performance measures and adjusted results, were adjusted from zero to 20% higher. The adjustments made were approved by the Compensation Committee based upon our CEO’s recommendation as a result of his assessment of individual performance versus the pre-established individual objectives.

 

The annual cash incentive payouts under the Annual Incentive Plan in respect of fiscal 2009 are also set forth in the note to the “Non-Equity Incentive Plan Compensation ” column of the Summary Compensation Table on page 41.

 

2010 Annual Incentive Plan Actions

 

In August 2009, the Compensation Committee, and in the case of Mr. Lance, the independent directors of our Board, approved the financial performance measures, targets and weighting, and participants’ annual cash incentive compensation targets for fiscal 2010. For the same reasons discussed above under “2010 Base Salary Actions,” the fiscal 2010 annual cash incentive compensation targets for our CEO and other named executive officers have not at this time been increased from the fiscal 2009 levels set in August 2008. This decision may be re-evaluated at a later date and is not reflective of the contributions to our performance made by our CEO or any of our other executive officers.

 

Broad-based Profit Sharing Plans

 

We maintain broad-based cash incentive plans, available to most of our U.S.-based employees who have at least one year of service on the last day of our fiscal year. Our executive officers, other than Mr. Thorsteinson, participate in the broad-based “Performance Reward Plan.” Under this plan, if we are profitable, we will make a minimum cash payment of 2% to a maximum cash payment of 6% of an employee’s eligible compensation. The actual payment is based upon our performance against financial targets. For fiscal 2009, the target payout

was 3.5% of an employee’s eligible compensation if we achieved operating income of $847 million. For amounts of eligible compensation above the social security wage base, the payment is increased up to an additional 5.7% of such eligible compensation above the social security wage base. Based upon the adjustments to operating income approved by the Compensation Committee in substantially the same manner as discussed above regarding our Annual Incentive Plan, a payout of 3.33% of eligible compensation plus an additional 3.33% of eligible compensation above the social security wage base was approved for fiscal 2009 under the Performance Reward Plan. Participants may elect to defer either half or all of the payment into the Retirement Plan or the SERP. The amounts earned by our named executive officers under the Performance Reward Plan in respect of fiscal 2009 are set forth in the note to the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 41.

 

Long-Term Compensation —

Equity Incentives and How Long-Term

Compensation is Determined

 

We provide long-term incentives through a combination of stock options and performance share awards. The long-term compensation elements of our executive compensation program are designed to motivate our executives to focus on achievement of our long-term financial goals and strategic objectives. The Compensation Committee awards different types of equity compensation because it believes that each type rewards shareholder value creation in a different way. Although the value of all forms of equity-based compensation is directly impacted by both increases and decreases in the price of our common stock, performance share grants motivate our executives to achieve our multi-year financial and operating goals because the number of shares ultimately earned depends upon the level of our performance over a three-year period. Under such grants, each new fiscal year begins a new three-year performance cycle for which the Compensation Committee establishes financial performance targets and award targets. Stock option grants motivate our executives to increase shareholder value because the options only have value to the extent the price of our common stock on the date of exercise exceeds the stock price on the grant date, and thus compensation is realized only if our stock price increases over the term of the award. Equity awards are also intended to retain executives, encourage share ownership and maintain a direct link between our executive compensation program and the value and appreciation in value of our stock.

 

Equity Compensation Mix

 

In determining the appropriate mix of equity compensation elements, the Compensation Committee considers the mix of such elements at competitors and our comparison group, the retention value of each element and other factors important to us, including tax and accounting treatment, and the recommendation of the Compensation Committee’s independent compensation consultant. The total value of long-term compensation for our executive officers is typically set by reference to a multiple of such executive officers’ base salary, which equity-based multiple is assessed using our comparison group. For fiscal 2009, the Compensation Committee determined that 50% of the value of long-term equity incentive opportunity at the time of award would be allocated as stock options and 50% of the value would be allocated as performance shares or performance share units. Generally, a higher Harris stock price results in the award of fewer shares, and a lower Harris stock price results in the award of more shares.

 

Stock Options

 

Stock options granted to our named executive officers and other employees during fiscal 2009 were made pursuant to our Harris Corporation 2005 Equity Incentive Plan, which was approved by our shareholders in October 2005. Stock option grants made in fiscal 2009 have the following terms:

 

 

 

A listing of the stock options granted to our named executive officers in fiscal 2009 and information relating to the terms and conditions of such stock options appears in the Grants of Plan-Based Awards in Fiscal 2009 Table on page 44 and

the related notes. For additional information relating to the terms and conditions of stock options, see the notes to the Outstanding Equity Awards at 2009 Fiscal Year End Table on page 46.

 

On May 27, 2009, we completed the spin-off to our shareholders of our ownership interest in Harris Stratex Networks, our former majority-owned publicly-traded subsidiary. In order to preserve the intrinsic value of our stock options, the Compensation Committee, after consultation with investment advisors and attorneys, approved an anti-dilution adjustment increasing the number of shares subject to outstanding stock options by 5.7% and correspondingly reducing the exercise price for such stock options by 5.7%. The anti-dilution adjustment was based upon the relationship between the closing price of our shares on the day prior to the ex-dividend date for the spin-off dividend and the closing price of Harris Stratex Networks shares on such ex-dividend date. The anti-dilution adjustment was made pursuant to the terms of our equity incentive plans.

 

Without the approval of a majority of the votes cast at a meeting of our shareholders, stock options granted by us may not be repriced, replaced, regranted through cancellation or modified by us, other than in connection with a change in our capitalization, including spin-offs, if the effect thereof would be to reduce the exercise price of such stock options.

 

Performance Share Awards

 

Financial performance measures for performance shares or performance share units granted in fiscal 2009 covering the three-year performance period of fiscal 2009 through fiscal 2011 include the achievement of three-year cumulative operating income for the fiscal 2009-2011 period and average annual return on invested capital against targets, weighted equally. The Compensation Committee also reviews our performance over the three-year period compared with the Standard and Poor’s 500 and Midcap 400 indices and may adjust the payout based on this review of our relative performance. The actual performance share award payout with respect to fiscal 2009 grants can range from 0% to 200% of the target number of performance shares or units. The Compensation Committee believes that the focus on operating income and return on invested capital financial performance measures should improve earnings and capital management over the long term and that such measures motivate financial performance that management can more directly influence. For additional information relating to the terms and conditions of performance shares and performance share units, see the notes to the Grants of Plan-Based Awards in Fiscal 2009 Table on page 44 and the notes to the Outstanding Equity Awards at 2009 Fiscal Year End Table on page 46.

 

For fiscal 2009, the Compensation Committee, and with respect to Mr. Lance, the independent directors of our Board, approved the grant of performance shares or performance share units to our named executive officers for the three-year performance period covering fiscal years 2009 through 2011 as set forth in the Grants of Plan-Based Awards in Fiscal 2009 Table on page 44 and related notes.

 

In August 2009, the Compensation Committee, and for Mr. Lance, the independent directors of our Board, determined the payout of performance shares for the three-year performance period covering fiscal years 2007 through 2009. Financial performance measures for awards made in fiscal 2007 for the fiscal 2007-2009 performance period were three-year cumulative EPS and average return on invested capital for each fiscal year of such period. Such measures were equally weighted. In determining the performance share award payouts for the fiscal 2007-2009 performance period, the financial performance targets and our actual results were adjusted by the Compensation Committee, and in the case of Mr. Lance, the independent directors of our Board, in substantially the same manner as the adjustments under our Annual Incentive Plan for our financial results for the fiscal years in the fiscal 2007-2009 performance cycle, except that the results were adjusted to eliminate only 50% of the fiscal 2009 goodwill impairment charge for our Broadcast Communications segment. These adjustments were made in accordance with the same guidelines for annual cash incentive compensation awards adopted by the Compensation Committee as discussed above. As a result, the three-year cumulative EPS financial performance measure on which performance was measured for purposes of the fiscal 2009 performance share payout was $9.40, or approximately 110% of the $8.54 target. Also, as a result, the average return on invested capital financial measure on which performance was measured for purposes of the fiscal 2009 performance share payout was 15.4%, which was higher than the 12.0% target set at the start of fiscal

2007. The Compensation Committee determined that such results were above plan and that our average EPS growth and return on invested capital performance, which approximated the 50^th to 60^th percentile compared to the Standard and Poor’s 500 and Midcap 400 indices, warranted a payout at 125% of target. See the Option Exercises and Stock Vested in Fiscal 2009 Table on page 48 and related notes for additional information regarding these payouts for our named executive officers.

 

Restricted Stock

 

As part of long-term incentive compensation, the Compensation Committee may also grant shares of restricted stock primarily to facilitate retention and succession planning and as a mechanism to replace the value of equity awards that may have been forfeited as a result of leaving a former employer. The restrictions typically expire at the end of a three- to five-year period. The restrictions provide that the shares may not be sold or otherwise transferred, and the shares will be immediately forfeited in the event of the recipient’s termination of employment for any reason other than death, disability or retirement; provided that for restricted shares granted after June 28, 2008 the Compensation Committee may determine otherwise in its discretion in the event of involuntary termination for other than misconduct. For information related to restricted stock granted to our named executive officers in fiscal 2009, see the Grants of Plan-Based Awards in Fiscal 2009 Table on page 44 and Outstanding Equity Awards at 2009 Fiscal Year End Table on page 46 and related notes.

 

Recovery of Executive Compensation

 

Our executive compensation program permits us to recover all or a portion of any performance-based compensation if our financial statements are restated as a result of errors, omissions or fraud. The amount which may be recovered shall be the amount by which the affected compensation exceeded the amount that would have been payable had the financial statements been initially filed as restated, or any greater or lesser amount that the Compensation Committee or our Board shall determine. In no case shall the amount to be recovered by us be less than the amount required to be repaid or recovered as a matter of law. Recovery of such amounts by us would be in addition to any actions imposed by law, enforcement agencies, regulators or other authorities.

 

Treatment of Incentive Awards Upon

Change in Control

 

Under our Annual Incentive Plan and equity incentive plans, upon a change in control and irrespective of employment status:

 

 

 

Information regarding severance payments and obligations to named executive officers for termination of employment following a change in control is set forth below in the “Change in Control Severance Agreements” section of this Compensation Discussion and Analysis and the “Potential Payments Upon Termination or a Change in Control” section of this proxy statement beginning on page 53.

 

Post-Employment Compensation

 

Severance Arrangements

 

As a general matter, most of our employees are “employees at-will” and only a limited number of our executive officers have contracts requiring us to pay amounts to them upon termination of employment. Mr. Lance’s employment and payments upon termination of employment are governed by an employment letter agreement discussed below. Pursuant to his employment letter agreement, Mr. Thorsteinson is entitled to receive a cash severance payment equal to the aggregate of (i) his then-current annual base salary and (ii) the annual cash incentive paid to him for the fiscal year prior to

termination in the event his employment is involuntarily terminated without cause. While Messrs. McArthur, Henry and Pearson do not have severance agreements, we have a long-standing practice of providing severance compensation for terminating an executive’s employment other than for cause. The specific amount may be based upon the relevant circumstances, including the reason for termination, length of employment and other factors.

 

We also have a severance plan for all full-time, U.S.-based employees who are terminated as a result of a reduction-in-force. Amounts payable under this plan are based upon length of service.

 

Employment Agreement with our CEO

 

We are party to a letter agreement with Mr. Lance that provides for his continued employment as our CEO and president and his continued service as a director and the Chairman of the Board. The agreement provides for certain benefits in the event Mr. Lance’s employment is terminated by us without “cause” or by Mr. Lance for “good reason” (as defined in the agreement). Obligations in the event of a termination following a change in control will be governed by Mr. Lance’s change in control severance agreement. The Compensation Committee and the independent directors of our Board approved Mr. Lance’s employment agreement in the belief that such agreement assists in retaining Mr. Lance’s valued service. In addition, Mr. Lance’s agreement also binds Mr. Lance to certain non-compete and non-solicitation undertakings which are valuable to us. In December 2008, the Compensation Committee and independent directors of our Board approved changes to Mr. Lance’s employment letter agreement to comply with Section 409A of the Internal Revenue Code relating to deferred compensation and certain other changes discussed in the “Potential Payments Upon Termination or a Change in Control” section of this proxy statement beginning on page 53.

 

Change in Control Severance Agreements

 

Each of our Board-elected corporate officers, including the named executive officers, is party to a change in control severance agreement with us. We believe that such agreements align the interests of our officers and shareholders during the period of an actual or rumored change in control and are also necessary in some cases to attract and retain executives. Under these agreements, our officers are provided with severance benefits in the event the officer’s employment is terminated without “cause,” or by the officer for “good reason,” within two years following a change in control. These agreements are designed so that benefits are provided only if there is both a change in control and a termination of employment, a “double-trigger.” Such severance benefits are designed to preserve the focus and productivity of our officers, avoid disruption and prevent attrition during a period of uncertainty. These agreements also are believed to facilitate the objectiveness of an executive’s assessment of a potential transaction that may be in our shareholders’ best interests notwithstanding the potential negative impact of a transaction on an executive’s future employment.

 

If triggered, the lump-sum severance benefit payable under the change in control severance agreement equals the sum of: (a) the executive’s unpaid base salary through the date of termination, a pro-rated annual bonus (as determined under the change in control severance agreement), any unpaid accrued vacation pay and, to the extent permitted under Section 409A of the Internal Revenue Code, any other benefits or awards which have been earned or become payable pursuant to the terms of any compensation plan but which have not been paid to the executive; and (b) a multiple of one to three times the executive’s highest annual rate of base salary during the 12-month period prior to the date of termination plus a multiple of one to three times the greatest of the executive’s highest annual bonus in the three fiscal years prior to the change in control, the executive’s target bonus for the year during which the change in control occurs or the executive’s target bonus for the year in which the executive’s employment is terminated. Payment multiples are three times salary and bonus for Messrs. Lance and Henry, which for Mr. Lance was agreed upon in his employment letter agreement, and two times salary and bonus for Messrs. McArthur, Pearson and Thorsteinson. The change in control severance agreement also provides for a tax gross-up payment to the executive in the event that payment of any severance benefits is subject to excise taxes imposed by the IRS on “parachute payments” under Section 4999 of the Internal Revenue Code. The tax gross-up payment is included because it is the Compensation Committee’s intent to provide an officer with the compensation the officer expected to receive, absent the change in control, without

reduction. All other applicable taxes remain the responsibility of the officer.

 

The Compensation Committee annually reviews the terms of the change in control severance agreements and potential compensation and payouts resulting from a potential change in control in light of competitive practices and market trends. The Compensation Committee has determined, in its business judgment, that the substantive terms of these severance agreements are competitive and reasonable.

 

A description of the material terms of the change in control severance agreements, Mr. Lance’s employment letter agreement, and Mr. Thorsteinson’s employment letter agreement, as well as a summary of potential payments upon termination or a change in control for our named executive officers, is set forth in the “Potential Payments Upon Termination or a Change in Control” section of this proxy statement beginning on page 53.

 

Retirement Programs

 

Retirement Plan

 

We maintain a Retirement Plan, which is a tax-qualified, defined contribution retirement plan available to most of our U.S.-based employees. Subject to applicable Internal Revenue Code limits, employees may generally contribute up to 25% of eligible compensation, with named executive officers and other highly compensated employees limited to contributing 12% of eligible compensation. After one year (or, in certain cases, six months) of service we will make a matching contribution of up to 6% of eligible compensation. In addition, employees generally may contribute into the Retirement Plan up to 100% of cash payments made under our Performance Reward Plan, subject to Internal Revenue Code limits.

 

Supplemental Executive Retirement Plan

 

To the extent contributions to the Retirement Plan are limited by the Internal Revenue Code, certain of our salaried employees, including the named executive officers other than Mr. Thorsteinson, are eligible to participate in our nonqualified SERP. In addition, the Compensation Committee may, in its discretion, provide for the deferral of other compensation under the SERP, including equity awards.

 

The value of our contributions to our named executive officers under our Retirement Plan and SERP are set forth in the Summary Compensation Table on page 41 under the “All Other Compensation” column and related notes. Additional information regarding the SERP and credits to accounts under our SERP are set forth in the “Nonqualified Deferred Compensation” section of this proxy statement beginning on page 50.

 

Supplemental Pension Plan for Mr. Lance

 

In October 2006, we entered into an agreement to provide Mr. Lance with a defined retirement benefit. The Compensation Committee and independent directors of the Board determined in their business judgment to provide a supplemental retirement benefit to Mr. Lance because of the stage of his career during which he joined us and because he did not have a retirement benefit believed to be competitive with those of other chief executive officers. In December 2008, the Compensation Committee and independent directors of our Board approved changes to Mr. Lance’s supplemental pension plan to comply with Section 409A of the Internal Revenue Code and certain clarifying and other changes. The intent of the plan is to provide sufficient funds so that Mr. Lance’s annual retirement benefit in the aggregate, including our presumed level of additional contributions to the Retirement Plan and SERP and benefits under the Social Security Act and retirement benefits from prior employment, equals 50% of his final annual base salary and annual cash incentive target at retirement following age 60. The terms of Mr. Lance’s supplemental pension plan are believed to be competitive and result in a retirement benefit consistent with those provided to chief executive officers of our comparison group. Additional information regarding Mr. Lance’s supplemental pension plan is set forth in the Pension Benefits in Fiscal 2009 Table and related discussion on page 49.

 

Health, Welfare and Other Benefits

 

We maintain health and welfare benefit programs for our U.S.-based employees, including medical and prescription coverage, dental and vision programs, short-term disability insurance, group life insurance, supplemental life insurance and dependent life insurance as well as customary vacation, leave of absence and other similar policies. Our executive officers are eligible to

participate in these programs on the same basis as our other salaried employees. We also offer a long-term disability plan to all U.S.-based employees. The plan is self-insured and funded through employee contributions. The plan provides a benefit of 60% of eligible compensation before offsets for Social Security and other company or government provided disability benefits. Eligible compensation for the purposes of the long-term disability plan is currently limited to $245,000 per year. For employees with eligible compensation in excess of $245,000, we provide an additional long-term disability benefit of 50% of eligible compensation above $245,000 up to $800,000, for a maximum annual additional disability benefit of up to $277,500. We provide Mr. Lance a life insurance benefit at two and one-half times eligible compensation, subject to a limit of $10 million in coverage, and also reimburse him for any federal income tax obligation resulting from this benefit.

 

Perquisites

 

We provide a limited number of perquisites to our Board-elected officers, including our named executive officers. The Compensation Committee annually reviews the types and values of the perquisites and believes perquisites provided in fiscal 2009 were reasonable, competitive and consistent with our overall compensation philosophy. Such perquisites generally consist of the following: reimbursement of the costs of tax preparation and financial planning services of up to $7,000 (or $13,500 in the case of our CEO) per year; annual physical examinations; reimbursement of the costs of the initiation fees and ongoing dues in one approved social or country club; and personal use of company-owned aircraft for the CEO, and in very limited instances as approved by the CEO, other executives.

 

In consideration of the time demands on our CEO and to minimize and more effectively utilize his travel time, the Compensation Committee has authorized the personal use of the company aircraft by our CEO and his family when traveling with him. Such personal usage is subject to limits on the number of hours for personal usage which are set by the Compensation Committee and reviewed annually. Personal use of aircraft includes travel undertaken by our CEO to participate in outside board meetings, which is considered personal use under SEC rules, but which we view as having a useful business purpose. For fiscal 2009, Mr. Lance’s personal use of company aircraft, excluding usage for outside board meetings, was below the 50-hour guideline set by the Compensation Committee at the start of the fiscal year. In addition, our CEO is responsible for paying the tax on income imputed to him for personal use of the aircraft.

 

We also provide Mr. Thorsteinson a car allowance and certain tax equalization payments in respect of Canadian taxes pursuant to the terms of his employment letter agreement.

 

These perquisites represent a small portion of the total compensation of each named executive officer. The dollar values ascribed to these perquisites are set forth in the Summary Compensation Table on page 41 under the “All Other Compensation” column and related notes.

 

Policies Relating to Our Common Stock

 

Stock Ownership Guidelines

 

To further promote ownership of shares by management and to more closely align management and shareholder interests, the Compensation Committee has established stock ownership guidelines for our executive officers. Executives are expected to own Harris stock having a minimum value, denominated as a multiple of their annual base salaries, which can be accumulated over a five-year period from the date of hire or promotion into a covered position. The Compensation Committee annually reviews the stock ownership guidelines, including reviewing the stock ownership guidelines of our comparison group.

 

The current stock ownership guidelines, which were increased in August 2008, are as follows:

 

 

Shares that count toward the stock ownership guidelines include shares owned outright or jointly by the executive, shares owned in our Retirement Plan,

share equivalents represented by amounts deferred in the Harris stock fund account of our SERP, restricted stock and restricted stock unit awards. Stock options and unearned performance shares and performance share units do not count for the purpose of measuring compliance with the ownership guidelines. Executives age 62 or older are no longer subject to the guidelines. An annual review is conducted by the Compensation Committee to assess compliance with the guidelines. As of September 18, 2009, the named executive officers met their applicable ownership guidelines, or were on track to achieve their ownership guidelines within the applicable compliance timeframe.

 

Our Equity-Based Compensation Award Practices

 

As described above, the annual grant cycle for executive officer stock option grants and other equity awards typically occurs at the same time as decisions relating to salary increases and other annual cash incentive awards. This occurs at the start of each fiscal year, typically in late August, following the release of our financial results for the preceding fiscal year and the completion of the audit of our financial statements. The dates for the meetings at which such grants are typically made are set well in advance of such meetings, typically one year or more. For the past several years, the annual equity grant date for our eligible employees has occurred on the same date as the grant to executive officers. The Compensation Committee may also make grants of equity awards to executive officers at other times during the year due to special circumstances, such as new hires or promotions. We have not repriced options and if our stock price declined after the grant date, we have not replaced options. The exercise price of stock options is the closing market price of our common stock on the date of grant or, if the grant is made on a weekend or holiday, the closing market price of our common stock on the prior business day. Our Compensation Committee or Board also has the discretion to set the exercise price of stock options higher than the closing market price of our common stock on the date of grant.

 

In June 2007, the Compensation Committee approved a formal policy on equity grant practices. The policy re-affirmed many of our equity grant practices and also provides that the grant date of equity awards made outside of the annual grant cycle, whether for promotions, recognition or for new hires, shall be the first trading day of the month following the promotion, recognition or hire date, provided if such trading day is during a “quiet period” under our insider trading policy, the grant will be made on the first trading day following the end of such period. We do not time equity grants to take advantage of information, either positive or negative, about Harris that has not been publicly disclosed.

 

As permitted by the terms of our 2005 Equity Incentive Plan, our Board has delegated to our Chairman, President and CEO the authority to make certain equity grants under our 2005 Equity Incentive Plan to employees who are not executive officers. Such grants are subject to our equity grant policy. The maximum number of shares that can be awarded pursuant to this delegation is set by the Compensation Committee, which periodically reviews these awards.

 

Insider Trading Policy

 

Our insider trading policy prohibits directors, employees and certain of their family members from purchasing or selling any type of security, whether issued by us or another company, while such person is aware of material non-public information relating to the issuer of the security or from providing such material non-public information to any person who may trade while aware of such information. This policy also prohibits directors and employees from engaging in short sales with respect to our securities, or entering into puts, calls or other “derivative” transactions with respect to our securities. We also have procedures that require trades by directors and executive officers to be pre-cleared by appropriate Harris personnel.

 

Tax and Accounting Considerations

 

Tax Deductibility of Executive Compensation

 

Section 162(m) of the Internal Revenue Code generally prohibits a public company from deducting compensation paid in any year to any named executive officer in excess of $1 million. Certain compensation is specifically exempt from the deduction limit to the extent it is “performance-based.” In evaluating whether to structure executive compensation components as performance-based and thus, tax deductible, the Compensation Committee considers the net cost to us, and its ability to effectively administer executive compensation in the long-term interest of shareholders. Stock option grants and performance share or performance share unit

awards made to executive officers under our equity incentive plans and cash payments under our Annual Incentive Plan and Performance Reward Plan are structured generally to be fully deductible under Section 162(m). The Compensation Committee believes, however, that it is important to preserve flexibility in administering compensation programs in a manner designed to promote corporate goals. Accordingly, the Compensation Committee from time to time has approved elements of compensation that were consistent with the objectives of our executive compensation program, but that may not be fully deductible. For example, grants of restricted stock or restricted stock units are not performance-based under Section 162(m) and, in certain instances, deductibility of such compensation may be limited. Additionally, in fiscal 2009 a small portion of Mr. Lance’s base salary is non-deductible.

 

Nonqualified Deferred Compensation

 

Section 409A of the Internal Revenue Code requires that “nonqualified deferred compensation” be deferred and paid under plans or arrangements that satisfy the requirements of the law with respect to the timing of deferral elections, timing of payments and certain other matters. If such requirements are not complied with, amounts that are deferred under compensation arrangements will be currently includable in income and subject to an excise tax. In general, it is our intention to design and administer our compensation and benefits plans and arrangements for all of our employees so that they are either exempt from, or satisfy the requirements of, Section 409A. We believe we are currently operating such plans in compliance with Section 409A. We amended impacted compensation plans and arrangements prior to December 31, 2008 to make them either exempt from, or in compliance with, Section 409A.

 

Accounting for Share-Based Compensation

 

Before we grant share-based compensation awards, we consider the accounting impact of the award as structured and other scenarios in order to analyze the expected impact of the award.

 

The following Report of the Management Development and Compensation Committee does not constitute soliciting material and the Report should not be deemed filed or incorporated by reference into any other previous or future filings by Harris under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that Harris specifically incorporates this Report by reference therein.

 

The Compensation Committee has reviewed and discussed with management the “Compensation Discussion and Analysis” section of this proxy statement. Based on its review and discussion, the Compensation Committee has recommended to the Board, and the Board has approved, that this Compensation Discussion and Analysis be included in this proxy statement for the 2009 Annual Meeting of Shareholders and incorporated by reference in Harris’ Annual Report on Form 10-K for the fiscal year ended July 3, 2009.

 

Submitted on September 10, 2009 by the Management Development and Compensation Committee of the Board of Directors.

 

Stephen P. Kaufman, Chairperson

Thomas A. Dattilo

Terry D. Growcock

Dr. James C. Stoffel

 

The following table summarizes the compensation paid to, or accrued on behalf of, our named executive officers for the fiscal years ended July 3, 2009, June 27, 2008 and June 29, 2007. The named executive officers are our CEO, our Chief Financial Officer, and our three other most highly compensated executive officers based upon their total compensation as reflected in the table below for the fiscal year ended July 3, 2009 (reduced by the amount in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column).

 

 

 

 

Fiscal 2009 All Other Compensation Table

 

																												Harris Stratex
								Tax					Company					Company					Perquisites					Networks
								Reimbursement					Contributions					Credits					and Other					Spin-off
			Insurance					Payments					to Retirement					to SERP					Personal					Dividend
			Premiums					(Gross-Up)					Plan					(nonqualified)					Benefits					Equivalent
Name			(a)					(b)					(c)					(d)					(e)					(f)					Total
Howard L. Lance			$	7,435				$	8,902				$	9,231				$	127,961				$	240,316				$	137,857				$	531,702
Gary L. McArthur			$	1,682				$	0				$	8,423				$	46,075				$	8,922				$	48,139				$	113,241
Robert K. Henry			$	2,165				$	0				$	8,746				$	57,385				$	17,905				$	27,225				$	113,426
Timothy E. Thorsteinson			$	1,599				$	324,563				$	11,042				$	0				$	39,421				$	27,967				$	404,592
Daniel R. Pearson			$	1,400				$	0				$	8,619				$	42,929				$	0				$	31,185				$	84,133

 

 

 

 

 

 

Salary and Bonus as a Proportion of 2009 Total Compensation

 

Using the amounts shown under the “Salary” and “Bonus” columns and the amounts shown under the “Total” column in the Summary Compensation Table, the salary and bonus of each of our named executive officers as a proportion of their respective 2009 total compensation was as follows: Mr. Lance-12.4%; Mr. McArthur-21.5%; Mr. Henry-18.8%; Mr. Thorsteinson-25.0%; and Mr. Pearson-22.6%.

 

The following table provides information about cash (non-equity) and equity incentive compensation awarded to our named executive officers in fiscal 2009, including: (1) the grant date of equity awards; (2) the range of possible cash payouts under our Annual Incentive Plan and Performance Reward Plan for fiscal 2009 performance; (3) the range of performance shares or performance share units that may be earned in respect of the performance share or performance share unit grants for the three-year performance period covering fiscal 2009 through fiscal 2011; (4) restricted shares granted to Messrs. McArthur and Pearson; (5) the number and exercise price of stock option grants; and (6) the grant date fair value of the grants of performance shares, performance share units, restricted stock and stock options computed under FAS 123R.