Pitney Bowes (PBI)

Role of Management in Determining Executive Compensation

At the end of each year, each named executive officer completes a written self assessment of his or her performance against his or her objectives. The chief executive officer evaluates the performance of his direct reports and recommends compensation actions to the Committee. The executive vice president and chief human resources officer is also consulted in developing recommendations regarding executive compensation.

The chief executive officer recommends individual ratings for each named executive officer other than himself and the executive chairman and these ratings are considered in determining annual merit salary increases. The Committee recommends to the independent directors of the board an individual rating for the chief executive officer and the executive chairman. The independent directors use these ratings to determine any merit increases for the chief executive officer and the executive chairman. In making its recommendation for annual merit salary increases, management uses market data, to the extent available, and the Committee reviews the recommendations and determines the actual merit increases, if any, that will be awarded.

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Role of Management in Determining Executive Compensation

Senior management recommends annual salary increases and actual payout levels for annual incentive compensation that are aligned with the company’s performance against the pre-established objectives. For CIUs, the recommendation is based on pre-established objectives and a total stockholder return calculation.

The chief executive officer recommends individual ratings for each executive other than himself and the executive chairman and these ratings are considered in determining annual merit salary increases. The Committee recommends to the independent directors of the board an individual rating for the chief executive officer and the executive chairman based upon the company’s performance in relation to its objectives. In making its recommendation for annual merit salary increases, management uses market data, to the extent available, and the Committee reviews and approves the merit increases.

Effective May 14, 2007, Mr. Martin was promoted to president and chief executive officer and Mr. Critelli was appointed to the newly created position of executive chairman. On April 27, 2007, Mr. Monahan assumed responsibility for the management of the mailing solutions and services business and Ms. Abi-Karam assumed responsibility for the management of the company’s marketing services business in addition to the document messaging technologies business.

At the end of each year, each senior executive completes a written self assessment of his or her performance against his or her objectives. The chief executive officer evaluates the performance of his direct reports and recommends compensation actions to the Committee and the independent directors of the board. The senior vice president and chief human resources officer is also consulted in developing recommendations regarding executive compensation.