2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 294 COMPENSATION DISCUSSION AND ANALYSIS COMPENSATION DISCUSSION AND ANALYSIS Table of Contents Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Pay for Performance Overview . . . . . . . . . . . . . . . . . . . . . . . . . 15 Other Key Compensation Practices . . . . . . . . . . . . . . . . . . . . 17 Corporate Governance and Decision-Making . . . . . . . . . . . . 18 Components of our Executive Compensation Program . . . 20 Compensation Setting and Elements of Compensation . . . 20 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Post-Termination Compensation . . . . . . . . . . . . . . . . . . . . . . . 29 Clawback Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Insider Trading Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Impact of Tax on Compensation Decisions . . . . . . . . . . . . . . 30 Introduction This Compensation Discussion and Analysis describes the principles and material elements of our executive compensation program, how we applied those principles in determining the material elements of the compensation for our Named Executive Officers (“NEOs”) for 2017 and how we use our executive compensation program to drive performance. Our executive compensation program is designed to align the interests of our executive officers with those of our shareholders by providing market-competitive compensation opportunities to our executives upon the achievement of a variety of short-term and long-term objectives. The Compensation Committee reviews at least annually all elements of executive officer compensation and makes changes as needed to remain competitive, fair, reasonable and consistent with our goals of pay for performance and alignment with shareholder interests. We believe that our actions in 2017 and in prior years effectively link pay to performance. Executive Summary 2017 was a transformative year for us—we focused on building positive momentum in revenue and earnings growth through realigning our operating structure in order to enhance business processes and improve execution. We successfully executed on a smooth transition to a new Chief Executive Officer and strengthened our leadership team by appointing a new Chief Financial Officer and a new Chief Human Resources Officer. In addition, effective January 1, 2018 we realigned our business operations from six segments to three operating business units. Our 2017 executive compensation program reflected our objective of effectuating an operating realignment to establish a foundation for building consistent long-term revenue and earnings growth, and we invested to recruit new additions to our management team and retain existing key leadership in an extremely competitive marketplace to install a senior management team that we believe best positions us for sustainable long-term growth. Our Business and Strategy We are a world leader in sensor systems that enhance perception and awareness. Our advanced sensors and integrated sensor systems enable the creation, gathering, and analysis of critical data and images for use in a wide variety of applications in commercial, industrial, and government markets worldwide. Our operational task is to consistently exceed shareholder commitments with integrity. And our purpose as an entity is to innovate the world’s sixth sense to save lives and livelihoods. We will operate with these in mind all the time and will drive our strategies with the intention to succeed in the eyes of our customers, employees, and shareholders. During 2017 we developed a better articulation of our core values so they are more actionable, more aspirational, and can be better owned by our employees: Be Ready, Be Bold, Be Brave, and Be Ambitious. First is Be Ready, which speaks to prioritizing speed and agility in reacting to an ever- changing technology landscape; Second is Be Bold, by pioneering and innovating to continue pushing the boundaries of what is possible in both our technology as well as our daily operations. Third is Be Brave in our actions to exhibit the utmost integrity and ethics in our daily decision-making – not usually, but always. And Fourth is Be Ambitious with a will to win, a tenacity to find the best ways accomplish our tasks, and collaborate with the utmost respect for our teammates and our customers. These core values will serve as the standards by which our people operate and behave at FLIR. We expect our teams to feel accountable for upholding these values each and every day, and by doing so, we expect to see tangible results in our business performance. During 2017 we also introduced a continuous business improvement initiative that we are calling The FLIR Method. While implementation began during the fourth quarter of 2017, this is a long-term investment that we expect will better enable organic growth, increase our profitability, and generate excess cash to utilize in ways that enhance shareholder returns. Each of our newly constituted Business Units for 2018 will have dedicated FLIR Method Leaders at various facilities globally who will lead the focus on enhancing our productivity, refining our product pricing strategy, 12 FLIR 2018 PROXY STATEMENT Total of 02 pages in section FLIR SYSTEMS, INC.